Bits Bucket For July 26, 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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International Herald Tribune Business with Reuters
2 more U.S. banks fail
Bloomberg News, The Associated Press
“”WASHINGTON: Federal regulators closed two small Western banks Friday, bringing to seven the number of U.S. banks that have failed this year.
The banks, owned by First National Bank Holding Co. of Scottsdale, Arizona, will have their deposits and some assets transferred to Mutual of Omaha Bank, according to the Federal Deposit Insurance Corp., or FDIC.
One bank, First National Bank of Nevada, based in Reno with $3.4 billion in assets, also operates as First National Bank of Arizona. The other, First Heritage Bank, based in Newport Beach, California, had $254 million in assets and primarily served businesses. The banks were undercapitalized, the Office of the Comptroller of the Currency said Friday.
Bill Uffelman of the Nevada Bankers Association called the FDIC action “a reflection of the times for the banks.” The world’s largest banks and securities firms have announced more than $468 billion in writedowns and credit losses since the start of 2007.
Sheila Bair, chairwoman of the FDIC, has said bank failures will increase as foreclosures rise and home sales slump.
On July 11, regulators closed IndyMac Bancorp, a California-based mortgage lender with more than $19 billion in deposits. Bair said the federal government might offer to share in the losses to entice buyers to pay a higher price for IndyMac’s assets.
Uffelman cautioned against the sort of consumer concern that prompted many customers of IndyMac branches to wait for hours in line to withdraw funds in the past week. Bank deposits are guaranteed by the FDIC up to $100,000, he noted.
Felecia Rotellini, superintendent of Arizona Department of Financial Institutions, expressed optimism in the face of the bank failures.
“It’s very important that Arizonans know that their deposits are secure,” Rotellini said. “They are well-managed and the First National Bank of Arizona issues should not cause any panic in Arizona.”
Governor Jim Gibbons of Nevada said the bank takeover there would be closely monitored “to ensure there’s minimal disruption to business and that employees’ jobs are protected as much as possible.”
Calls to First National were referred by a receptionist to Joe Martony, an executive vice president in Scottsdale. Martony didn’t return repeated calls to his office.
Mutual of Omaha Bank, based in Omaha, Nebraska, will gain some assets in addition to all deposits, and their 28 offices in Arizona, California and Nevada will open Monday as branches of the Omaha bank, the FDIC said.
“We would first like to reassure all customers of First National Bank of Nevada and First Heritage Bank that all their deposits are safe and accessible,” Mutual of Omaha Bank Chief Executive Officer Jeff Schmid said in a statement. “We will be open for business on Monday morning.”
The FDIC said the takeover of the failed banks was the least costly resolution and that account holders would be able to obtain funds over the weekend from cash machines.
Lenders on the FDIC’s “problem list” grew to 90 in the first quarter from 76 in the fourth quarter of 2007, the FDIC said in May. The FDIC insures deposits at 8,494 institutions with $13.4 trillion in assets. The Office of the Comptroller of the Currency is an agency of the Treasury Department that regulates national banks.”"
This will end well. Oh, the days ahead.
Leigh
Leigh,
Like all great banana Republics, the US does not do major economic rescues and policy shifts until Sunday.
heh.. we’re a banana republic?
That’s what short selling will do to ya if you’re not emotionally equipt to deal with it.. You’ve gotta remain above the game or it will suck you down with it.
More like a…
Banana Split
O M G!!
Those poor depositors.. it’ll be years before they see their money!
And why didn’t those idiot banks just get a loan from the Fed?They are printing it up and passing it out like candy! Can you spell i-n-f-l-a-t-i-o-n?
And the FDIC’s fund is even further depleted.. woe.. woe is us.
where are you guys today.. this is big news.. comeon.. back me up here.
From what I read this one doesn’t seem like that big a deal. The omaha bank gets all the deposits and even those with money over the FDIC limit don’t lose anything.
F&F will more than likely take the non-performing assets at a discount and the FDIC won’t lose much on this one.
City and State Brace for Drop in Wall Street Pay
By PATRICK McGEEHAN
Published: July 26, 2008
“”Government officials in New York are preparing for what could be the biggest single-year decline in pay on Wall Street in history and with it a vexing shortfall in city and state revenues…
It is already clear that employees whose jobs survive the deep cutbacks will, as a group, take home much less money than they did last year or the year before. The latest financial statements from the remaining six of the seven largest firms show that their compensation costs declined by a total of $9.5 billion in the first half of this year, compared with the first half of 2007. Along with JPMorgan Chase, they are Citigroup Incorporated, Goldman Sachs, Morgan Stanley, Merrill Lynch and Lehman Brothers.
Analysts familiar with those companies said the cuts so far implied an aggregate decline in pay and benefits, including bonuses, of more than $18 billion for the full year. About half of that amount would have gone to people employed in New York City, they said.
The impact on the state and city budgets is likely to be severe because the financial-services industry provides almost one-fourth of all income earned in the city. That pay accounts for about 10 percent of the city’s tax revenue and about 20 percent of the state’s, said Kenneth B. Bleiwas, deputy state comptroller for New York City.
“One of the things that highly compensated people do is they
Not true. I’ve been told by People here that New York RE will hold up because our economy is so strong and it’s different here.
hehe.
Hey -
At least in NYC you have Mayor Mike, who for at least the last couple of years has warned (and perhaps acted) as if he knew an economic downturn was coming.
In SF, it’s completely the opposite. Nobody on the Board of Supervisors or in the Mayor’s office has grasped any of this ahead to time, as they all have had their heads in the sand, fighting meaningless local turf battles with each other… spending $8,300 per citizen on the budget, and paying 1/3 of all city employees, 8,180 of them to be exact, more than $100,000 a year (that’s not a misprint, it works out to one city staffer making $100K for every 99 residents - our streets should be paved with gold!).
Very few of any elected politicos in the Alt-A Bay has talked about impacts on local budgets, except when the media publishes public sector salaries and small cities get in financial trouble because of such (see: Vallejo, CA).
The leadership in San Francisco is terrible.
City and State Brace for Drop in Wall Street Pay
By PATRICK McGEEHAN
Published: July 26, 2008
“”Government officials in New York are preparing for what could be the biggest single-year decline in pay on Wall Street in history and with it a vexing shortfall in city and state revenues…
It is already clear that employees whose jobs survive the deep cutbacks will, as a group, take home much less money than they did last year or the year before. The latest financial statements from the remaining six of the seven largest firms show that their compensation costs declined by a total of $9.5 billion in the first half of this year, compared with the first half of 2007. Along with JPMorgan Chase, they are Citigroup Incorporated, Goldman Sachs, Morgan Stanley, Merrill Lynch and Lehman Brothers.
Analysts familiar with those companies said the cuts so far implied an aggregate decline in pay and benefits, including bonuses, of more than $18 billion for the full year. About half of that amount would have gone to people employed in New York City, they said.
The impact on the state and city budgets is likely to be severe because the financial-services industry provides almost one-fourth of all income earned in the city. That pay accounts for about 10 percent of the city’s tax revenue and about 20 percent of the state’s, said Kenneth B. Bleiwas, deputy state comptroller for New York City… (Cont’d)
Wow. Just wow.
Leigh
http://www.nytimes.com/2008/07/26/nyregion/26pay.html?em&ex=1217217600&en=dcbfe44add9bbeb2&ei=5087%0A
I guess the rich DO pay a lot of taxes.
Don’t forget some of those hedge fund guys make $1 Billion a year. Even at the 15% rate they pay taxes at, its $150 million each. It doesn’t take too many of those guys having a bad year to effect the local budgets.
It’s all relative, isn’t it? One could make an analogy between candle shops catering to middle class consumers and luxury goods stores catering to Wall Streeters.
One thing I noted in the article was the ever-present sell-job on how Wall Street declines ripple through the rest of the economy. In other words, you have to save Wall Street so that people all over the country can live. I call BS on that. Oh, and the bonuses, heaven forfend the BONUSES should be cut. Instead of bonuses, just give ‘em a boning.
Luxury goods makers are doing well.
But any city taking an $9 Billion hit is pretty huge.
In the 1970’s Wall street struggled. They will also during the next decade.
Got Popcorn?
Neil
Luxury goods makers are doing well.
Because of bling-conscious Russians and Chineses. Luxury good makers rely less and less on Americans.
Chineses? 3rd cup of coffee… Odd.
There is a similar problem in California where the biggest contribution to tax revenue is income tax on earners of $200k or more which plunges in every downturn, thus unleashing all the budget chaos that had been stored up to that point.
Regarding the talking points, some states offer long term welfare, but the Federal government ended those programs back under Clinton. Women’s affairs are critical because gender equality strongly correlates to various measures of peace and prosperity. The military is very macho and overall dominated by men and male leadership and it is sucking up all the revenue nowadays, so asserting that the government is spending too much on women’s issues is silly since the amounts are lower and the payoff is greater. Capitalist societies value return on investment, not strident posturing.
Governments at all levels seem to spend everything they get on a yearly basis, make extravagant future promises based for pensions and other benefits - and then are shocked when a slowdown of economic activity and resulting tax revenue occurs.
What government out there is any better than someone who spends 105% of their income every year, and expects 5%+ raises and no unexpected expenses as a matter of course in the future?
If the U.S. govt. was an individual, it would have either been kicked out of the house - or forced to sell the family heirlooms - years ago. The United States of Subprimerica !
seem to spend everything they get on a yearly basis
“Seem” is a way too weak term, “Try” is a better term. Govt departments make an effort to spend every penny, it is a major focus of their day (I’m not exagerating).
I just started working at a state university, been there a month now. My boss has been there a year and previously worked at the same company I came from. He told me that the month before I go there (I started June 23, year-end is June 30) they had a meeting about how the department had an extra 500,000 dollars that needed to get spent. This isn’t a large university by any stretch. I mean, it’s ok, but I’m pretty certain its a good deal smaller than average. 500k is a LOT of money.
Another story, I was in a meeting recently where one issue was about how some payments between departments would be handled. As soon as that came up, one response was about how “those departments will get mad if we do it that way because they will suddenly have extra money and won’t have time to spend it by the end of the year.”
Spending every penny is a priority.
The issue of course, is that if you do not spend your entire budget, then next year they will cut your budget by the amount you didn’t spend.
Now if they changed that and allowed your budget to go up by a % of what you didn’t spend the previous year, you might be able to change those attitudes.
It’s true at both the state and federal level. It’s kind of understandable till you see the crap they spend it on. Entire buildings full of $700 Aeron chairs, $12 dollar pens, etc. At least I try to spend the money responsibly, buying items I know we’ll need next year so when the budget cuts come we won’t be too far behind. Now if I could just get my bosses to quit hiring their lazy, lame brained relatives at twice my salary!
You said: “Capitalist societies value return on investment, not strident posturing.”
I say: “A perfect illustration of why Obama shouldn’t be elected president.”
The GSEs Need Adult Supervision
July 26, 2008; Page A8
As a fiscal conservative who believes in the power of the free market and the associated risks and rewards, I disagree with your assertion in the editorial “Fannie and Freddie’s Enablers” (July 21) about my position. I had a 30-year career in banking and real estate before coming to Congress in 2003 and gained a pretty good understanding of the positive and negative roles played by Fannie Mae and Freddie Mac during that time.
Their roles and size require that they have a much stronger regulator with greater authority to set capital, management and portfolio requirements. I support creating this regulator, which is why I cosponsored the bipartisan amendment that 383 House members voted for last year.
This amendment simply clarified that the regulator must consider any risks posed to the government sponsored enterprises by their portfolio holdings, among other criteria, when setting standards governing those holdings. If the enterprises’ portfolios are properly regulated from the standpoint of safety and soundness, any systemic risk is addressed. A regulator responsible for only two enterprises would not have a broad enough view of the full economy to adequately judge risks to the financial markets at large, and decisions based on an incomplete assessment would negatively impact the availability of housing financing.
Congress is going to have a lot of debate about modernizing financial market regulation, and much of that debate will be about whether we should empower an overall systemic risk watchdog and who that regulator would be.
Right now, however, with the taxpayers’ money on the line, we must finish the job of creating a new GSE regulator focused on the safety and soundness of the enterprises. In completing our work, we must also drop the proposed Housing Trust Fund that would siphon capital away from Fannie and Freddie at a time when they need it most and limit taxpayer exposure that would come with expanding the explicit federal guarantee to these entities.
Rep. Randy Neugebauer (R., Texas)
Lubbock, Texas
http://online.wsj.com/article/SB121703079128486511.html?mod=googlenews_wsj
Back to regulation?
Leigh
“Their roles and size require that they have a much stronger regulator with greater authority to set capital, management and portfolio requirements. I support creating this regulator, which is why I cosponsored the bipartisan amendment that 383 House members voted for last year.”
Lets see,…Fannie & Freddy CEO’s get paid $200 million $$$$$$$$$$$$$$$$$$$$$$$$ dollars regardless of results…
Regulator Czar of Fannie & Freddy gets: $175,000 and a Ford Focus with a cassette player.
Sounds like a “Long Term Capital Idea” to me.
Hmm, they pay OFHEO something like $30M/yr, Why don’t they just attach an auditor to Fannie’s CEO by the wrist for 200K.
The GSEs Need Adult Supervision. That’s an understatement.
Hell, the ENTIRE US Gov’t needs Adult Supervison from Bush on down.
Ground the lot of them, send them to their rooms indefinitely and take away their access to all their Taxpayer Pocket Money NOW.
Oh…and NO PLAYING with their bad influence Corporate Lobbyist friends for the next 30 years
“Sen. Jim DeMint, R-S.C., slowed the measure’s final passage because Democrats refused to allow a vote on his proposal barring the two mortgage companies from lobbying and making political contributions.”
http://biz.yahoo.com/ap/080726/congress_housing.html
does anyone know if he was sucessful in getting this added on to the bill?
I was hoping but found nothing regarding DeMints proposal. More than likely political posturing like the WhiteHouse initial veto threat. More smoke and mirrors.
But it seems to me that under capitalism ,the market would dictate
the budget on any enterprise . Right now the market demand for loans is off by 50% or more (it’s meaningless that a bunch of vacant houses are for sale ).
In addition ,its a declining market in value which would tend to
make it more risky to loan until a stabilization in price takes place ,and more important ,a foreclosure supply of homes are absorbed .
So in light of all the above I mentioned ,the fact that the powers want to increase the supply of loan funds to F&F and raise the loan limits ,it’s rather strange to say the least .If the objective of the government is to meet the needs of the credit markets ,than if you just look at that market ,the needs of the market are not in line with all this money availability that the government wants for F&F . So you have to go to the government not talking about ‘New money needs” ,but “old money needs “,(meaning current loans on the books )is what
the government wants extra money for .
Business Spectator
Commentary
Robert Gottliebsen
NAB will shock Wall Street
“”The National Australia Bank’s decision to write off 90 per cent of its US conduit loans will have dramatic repercussions around the world. Wall Street will be deeply shocked when they understand the repercussions of what NAB has done. It is clear global banks have nowhere near provided for their exposures to US housing loans which in the words of John Stewart are experiencing a “meltdown”…
“NAB says that it is suffering a 55 per cent loss on American housing loans – an event that has never happened in the history of a developed country in recent memory. This is an unprecedented event and means that the cost of bailing out the US financial system is now far beyond the highest estimates. A US recession is now locked in, but more alarmingly, 55 per cent loan losses point to the possibility of a depression… (Cont’d)
Look out below,
Leigh
http://www.businessspectator.com.au/bs.nsf/Article/NAB-will-shock-Wall-Street-GV4M7
Wow and double WOW!!!
That was a great find and chilling post about NAB analysis Leigh. Parts of that commentary are worth highlighting.
“We are now way beyond sub-prime. NAB says that it is suffering a 55 per cent loss on American housing loans – an event that has never happened in the history of a developed country in recent memory. This is an unprecedented event and means that the cost of bailing out the US financial system is now far beyond the highest estimates. A US recession is now locked in, but more alarmingly, 55 per cent loan losses point to the possibility of a depression.
It means the cost of bailing out housing exposures to the two mortgage insurers will be so great that it will leave no room to bail out anything else and there are several US banks that are now in big trouble. NAB says that the dislocation in the residential market is separate from the corporate market, but the flow on is inevitable”
Thanks Leigh
Americans are finally realizing that the depression has already started. The scale of the rot in the financial sector is so enormous that even the federal government cannot prevent the depression from happening. The bailouts of Bear Stearns and Fannie/Freddie as well as the new short selling rules will only make the economic collapse take longer–they will not prevent it from happening.
Keep the popcorn popping,
Red Baron
Do the following to get through the depression: 1. Get and keep a job 2. Rent a place or live in an RV so you can be mobile for your job 3. Save at least 25% of your after-tax income 4. Eliminate debt unless you could pay it off if you lost your job.
Your Welcome Mikey!
My computer was down for a few hours.
The above post had me hiding under the blankets and shuddering!
Leigh
Bbbbbut I keep hearing there is “no recession” on the tv.
who’s zoomin who?
“How did NAB get caught in $1.2 billion mess? They had a number of big clients who wanted to invest in these US housing loans. They were sucked in by the ‘triple A rating’ given to the securities by the rating agencies.“
Same greedy folks who fed salt to their animals before being at the market?
Good Morning!
Hey lady!
Churchill Downs Inc
Louisville, KY
Louisville-based Churchill Downs Inc. confirmed yesterday that it is eliminating an unspecified number of jobs across the company, a spokesman said. Company spokesman Kevin Flanery gave no details, except to say that it involved the elimination and consolidation of some jobs. “It’s unfortunate. It’s always difficult when you have to say goodbye to co-workers,” he said, adding that it is not a reflection on their performance. Flanery said the reduction is part of a continuing evaluation of staffing levels, and the overall economy is a factor. “This is part of just our ongoing review of our ability to be competitive in the market, in the horse industry business and how we can best deliver our product to the horse racing fan and continue to be a viable company,” he said.
The Courier-Journal - July 18, 2008
and
The Great Eastern Mussel Farms Inc
Tenants Harbor, ME
Reaction to the shutdown Monday of Great Eastern Mussel Farms was glum because of the loss of so many jobs. The mussel farm, located on Cove Road in the village of Tenants Harbor, announced Monday morning that it is shutting down its business, eliminating 40 full-time jobs. The company cited competition from Canadian mussel farms, regulatory obstacles and rising energy costs as contributing to the its demise. A sign posted in the front door window at the main entrance read Monday afternoon: “Do not enter. Building under surveillance.” Three large commercial trucks, including two tractor-trailers bearing the Great Eastern Mussel Farms logo, were parked in the yard of the main building. “I think it’s too bad,” said Bill Stuart, owner of Farmers Restaurant, a popular eatery on Route 131 in the village. “It’s going to hurt our economy. There aren’t too many businesses here.”
Bangor Daily News - July 22, 2008
There were a lot of layoffs last week, these 2 just struck me hard. Churchill Downs is not a very good track, but it does have the K Derby and I have eaten a lot of lobsters from Tenants Harbor.
“…gave no details, except to say that it involved the elimination and consolidation of some jobs.”
So Juan & Juanita, ….who rakes the stalls, drives the field tractor, empties the the trash, sweeps up the the betting tickets, welds the starting gate equipment, washes the limo, replaces the stadium light bulbs, reads bedtime stories in Spanish to calm the nerves of inbred high strung thoroughbreds…now is being told to build a mulch pile & recycle old horse shoes…while his twin sister is handed a pink slip?
Filed under: “Straight from the horses mouth”
mussel farms: funny, in my area of Netherlands debate is raging in the press regarding problems for the mussel fisheries. They have the same problems as in the US (foreign competition, regulatory obstacles, rising energy cost and most of all environmental depletion). But over here they simply blame the environmentalists for all the problems, and the public believes it.
Price for mussels is up 50% or so this year, it is becoming luxury food just like shrimps (1-2 generations ago they were the food for the poor).
http://robertreich.blogspot.com/
” The Heart of the Economic Mess
The Federal Reserve Board’s “beige book” for June and July offers a clear explanation for why the economy has slowed to a crawl. It shows American consumers cutting way back on their purchases of everything from food to cars to appliances to name-brand products. As they do so, employers inevitably are cutting back on the hours they need people to work for them, thereby contributing to a downward spiral.
The normal remedies for economic downturns are necessary. But even an adequate stimulus package will offer only temporary relief this time, because this isn’t a normal downturn. The problem lies deeper. Most Americans can no longer maintain their standard of living. The only lasting remedy is to improve their standard of living by widening the circle of prosperity….”
Mr. Reich has the problem correctly identified, not sure I agree with his solutions. Nor would it be possible to implement his solutions.
“…typical Americans have run out of coping mechanisms to keep up their standard of living.”
A gov’t voucher for x3 Starmucks coffee & a copy of: “rich dad poor dad” ….ought to get the economy back on track.
Bob’s a funny guy…an “economics cowboy” modeled after Jack Palance as Curly in city slickers.
No, Mr. Reich has the symptoms correctly identified. The problem is we ate our seed corn (future capital) and must now suffer the consequences.
What in the world does “widening the circle of prosperity” mean anyway?
The normal remedies of printing money will only further destroy our seed corn in the mistaken belief that more eating will yield to more production.
“…more eating will yield to more production.”
“The more you eat …the more you sh!t” ….Woody Guthrie
Like I said a few days ago…in Marin, CA…the folks living there…don’t use toilet paper…they’re…”special”
The answer lie in planting the seeds (creating jobs and
production for things needed ),which will result in a crop . Or, you can just sit around waiting for a false bubble or inflation or a number of other faulty answers to postpone the crisis.
“…It is standard practice to report that the bill will aid 400,000 homeowners facing foreclosure, based on the Congressional Budget Office’s (CBO) estimate. However, CBO estimates that 140,000 of these homeowners will face foreclosure a second time and lose their home. So, should we say that a person who struggles with high mortgage payment for 2 to 3 years (likely much higher than the rent on a comparable unit) and then ends up getting foreclosed, with zero equity, has been helped?”
Mr. Dean Baker
http://www.prospect.org/csnc/blogs/beat_the_press_archive?month=07&year=2008&base_name=if_a_bailed_out_homeowner_gets
you are the man, hozie… do you do this 24/7 - educate yourself with interesting finds?
Plummeting Resale Values Lead Chrysler to End Leases
http://www.nytimes.com/2008/07/26/business/26auto.html
Lease payments are calculated according to how much of its value a vehicle is expected to lose during the length of the lease, and often have little correlation to the car’s actual price. Most of the larger vehicles under lease are now worth far less than they were expected to be worth, meaning lenders will lose money when they sell those vehicles after the lease ends.
In the last year alone, resale values dropped 12 percent for large pickup trucks and 11 percent for large S.U.V.s.
Ford and GM will also be cutting back on or eliminating leasing.
On Thursday, the Ford Motor Company took a $2.1 billion write-down in the second quarter, part of an $8.7 billion loss for Ford over all, related to unprofitable leases held by its finance arm, the Ford Motor Credit Company.
Analysts expect GMAC to take significant write-downs on its lease portfolio either when it reports second-quarter results or in a later period.
SUV’s also seem to be the black sheep for rental car agencies too. I was browsing rental car prices for a possible trip to TN in Aug and the SUV rentals were cheaper than compact cars. SUV’s and minivans used to be more expensive to rent than luxury cars. Not so much anymore!
Rental agencies offer free “upgrades” to SUVs and minivans.
Car dealers are also turning down SUVs and minivans as tradeins. Will we be seeing “walk-aways” for recently financed SUVs?
Gas will be $3.2 by the end of the year, early next — get a great deal on a pickup or SUV now while they’re giving them away.
I kid you not.
“Will we be seeing “walk-aways” for recently financed SUVs?”
This version of jingle mail will be to park the SUV at the bank’s parking lot and drop the keys off on the counter.
And lots of suspicious carbeques.
For every SLOBurban, Ford Excretion and TaWhore I see parked on a lawn with a for sale sign, I see one of the new style SLOBurbans/TaWhore pigmobiles lumbering down the road. It makes no sense. I’m not sure why these monstrosities haven’t been legislated out of existence by now.
Gas will be $3.2 by the end of the year, early next
No disclaimer? If you are wrong, are you willing to subsidize me the difference between what I pay and that $3.20?
The elves underneath Kansas must be making more oil.
Who benefits from anti-deflationary dinosaur juice prices?
Struggling college students turn to food banks
http://ap.google.com/article/ALeqM5iLeii_M8rZQaUMMJnPi8gdbmmSMAD9251RT00
Deirdre Wilson, a junior at Francis Marion University in Florence, S.C., applied for food stamps in November because her paycheck from a work-study job didn’t stretch far enough to cover her expanding grocery bill.
“Before, when I lived in the dorms, I was on the meal plan,” the 20-year-old said. “Now that I’m in the apartment, I have to pay for food, and I have to pay my cell phone bill. I don’t make enough to pay for both.”
Too bad they don’t have any cell phone banks, too, so there wouldn’t be such a difficult choice of what’s more important.
Hey, that’s cool. I’m glad college students can get food stamps. Making it on your own is tough in college - especially if you are trying to study. However, I now wish that the food stamp agency could look at a budget and see if there is superfluous spending, such as on cable tv and cell phones!
By the way, all, as soon as my T-mobile contract is up, I’m switching entirely to VOIP. I have a Nokia N95 that automatically connects to wi-fi networks at my home and work, as well as most of my friends’ homes. I estimate I can save almost $600 a year for not talking in the car. When I traveled to Europe there was almost always a free wi-fi place I could make calls - for $0.01 a minute!
We baby our 6 year old cell phones because Verizon won’t continue our $15/month per phone prepaid plan when we get new ones.
The minutes roll over each month, and I’d be embarrassed to say how many hours we’ve accumulated.
Do any of you “share” your cell phone costs with a relative or neighbor by adding as many phones at $10/month as allowed?
T-mobile prepaid seems to be the best deal I’ve found.
For light cell phone usage, it can be a real bargain.
Target sometimes puts $50 prepaid cards on sale for $45. Anyway, once you get $100 in credit on the account (two $50 cards combined) you get “Gold status”.
Once you get Gold Status - your minutes do not expire for 1 year. so you are going to have 1000 minutes to use for 12 months. So the phone number will stay valid for 12 months, EVEN if you don’t pay another dime (beyond the $100 invested) and never even use the phone.
Even better, if at any time you add more minutes (say a $25 purchase), it extends the 1 year to time of most recent purchase. So if in 12 months you add $25, you get that number for another 12 months. So your total investment could be only $125 for 2 full years of having the number. Assuming you don’t burn up your 1000 minutes (or SMS text, etc).
Plus GSM and removable SIM card makes it flexible to move between phones.
For very light phone users, a real bargain. At $100 for 12 months, $8.50 a month… less the 2nd year.
I bought my wife a tracphone in 2001 and our annual cost is $13/month for 7 years running. For light duty calling, say 1 or 2 5 minute calls per day, it’s a bargain. I refuse to give the telecom pirates and tax thieves $50+/month. If we had no child, we wouldn’t have the tracphone either. And if my employer won’t give me one, then we ain’t got a cell phone, period. Also, you’ll save $$$ by not activating tracphone voicemail.
Actually, you can leave voicemail on, but call it from another phone. Hit * when you hit your voicemail.
Verizon Prepaid plan works best for me, too. Since I never use the phone except for ’special’ purposes, I just keep accumulating minutes.
I got a letter from Verizon a few weeks ago that said they were going to add an annual $100 prepay option! (I currently pay $30 for two months at a time.) $100 per year appeals to me - I know people who pay $100 per month.
This is so despicable. I worked my way through college; at one point I had three jobs, working 40 hours per week, during the academic year. During the summers I put in 70-100 hours pwer week. Something tells me that wretched wastes of flesh aren’t doing the same.
College is more expensive today than it was in the early 90’s when I attended. It’s probably harder to work your way through. But if you are faced with the choice of going to the food bank or taking a semester off to work and save money, it’s time to take a semester off.
The trend described in the article probably isn’t a major one. The media is probably just printing a sensational story. I remember a story that my own college newspaper carried regarding “homeless” students some years ago. It had lurid details about how one student earned money for textbooks by selling his blood, while another became a connoisseur of the various soup lines that served the homeless population in his college town and would different shelters on different days in order to sample the menu of each. I wanted to scream at the kids in the article: get a f-ing job! There is your solution! But this thought didn’t seem to occur to the reporter.
This article is probably more of the same. Still, I find it very, very disturbing when presumably healthy middle-class kids are actually willing to accept charity. Has our society become that decadent? Have people’s attitudes of entitlement really go that far? It seems to me that what these kids need is a job, some Prozac, or a bullet to the head, in that order.
And I ate a LOT of ramen.
Spoiled kids.
Somehow, as a kid, I managed to get this JOB for on university hospital department as a stealth “technician” in ICU, OR and ER. I was always in blood covered scrubs, booties, mask, borrowed staff MD coat with a stethescope and dangling hemostat standing in the hospital cafeteria lunch line. God…all the single young nurses and the hospital freebies
The Head of Hospital Food Service always thought I was a MD, visiting Fellow or an On Call Med student at the time because they feed me 24/365 for FREE for two years.
None of the department heads, attendings, my staff MD’s, nurses or others ever broke my cover as I was good at my job and everything else, the pay was low and they really needed me. Sheesh..it was a teaching university and those people wanted to show, teach and have me do everything.
The university also provided me with free books and tuition for 6 semester hours of courses per term with all undergrad Student Priviledges as a hospital staff member to boot. Most of the hospital outside of my dept. was uncertain of who what I was but I LOOKED and ACTED like a real doctor of some sort, so I brought up meals and extra food for everybody
The Dean of the School of Anesthesia did have a little fatherly chat me when I tried to get an coverted free assigned parking space and didn’t even have a car. He said “NO” and wanted to know which RN I was in love with…this time
I even had an unofficial bunk in the 2 man doctors rooms to crash in when I was on call or doing a double shift. When I finally accepted a position as a real student for advanced med training at another college, word finally spread like wildfire through the university and hopital.
I tried to keep a low profile until I departed as I was afraid I’d get a very large bill for 2 years room, board and excellent medical training and experience now that everyone finally realized …I was just an “undergrad nobody” tech working on a Gov’t Funed Grant Program for the University Anesthesia Dept. Staff.
Sheesh…they even paid me a little bonus at Christmas time…What a really COOL racket I gave up
Good story. Do you work in the medical field now?
I did become an Nurse Anesthetist and thoroughly loved it but eventually I had to give it up my spinal nerve damage and auditory injuries from the Nam continued to worsen with age and over time made it impossible to continue. I worked in other fields and I am now retired
I wonder how much cheaper college would be if there wasn’t as much E-Z Financing for college? I think credit has caused tuition to bubble. Once colleges realized that people will gladly pay for their college tuition for the next 20 years, they jacked up the prices.
When I went in the early 80s, the tuition at my small private college was 2600/semester. I had a scholarship for about 1/2 of that (awarded on merit), and I was able to pay for the rest by working part time.
The changes to the bankruptcy code in 2005 also made student loan virtually impossible to discharge, thus giving schools even less incentive to rein in their costs. The rise of housing values (now revealed to be illusory) also encouraged a lot of Helocing for junior’s education.
There is so much bureaucratic waste in univeristies that they make the federal govt. seem like a model of streamlined efficiency. Each one of them could reduce administrative staff by 20% and no one would notice the difference.
IIRC, it was Reagan who ended the ability to discharge student loans, and/or ignore them. His admin made it impossible to get a mortgage with outstanding student loan liens and I remember Dad scrambling to help/make people clear those dings in order to close RE deals.
I wonder how much cheaper college would be if there wasn’t as much E-Z Financing for college? I think credit has caused tuition to bubble.
Exactly.
The price of higher education has far outstripped the pace of inflation (even ShadowStats inflation). There are a number of reasons, but easy credit is probably the prime mover, IMO.
I agree that easy credit caused tuition costs to bubble. Just as homes went up in value to reach the maximum amount that buyers were able to borrow, so did college tuition go up to reach the maximum amount that students could borrow.
in Netherlands I read more and more stories about college students who are buying homes, instead of renting a student flat. Why live in a small student flat and wait till you have a job with owning that huge luxury home, if you can have it now for the same monthly cost? Banks are more than willing to provide them the loans (usually with the parents home as collateral). Todays children are extremely spoiled, that is for sure.
Entitled.
Because this generation of people under 40 ish give or take, and especially the children that have gotten everything their little hearts desire in the last 10 years, they are
ENTITLED. So don’t forgit it. I have found few who are respectful, hardworking, industrious (same thing? more or less)
interested in others, etc.. Certainly there are some, but most have enjoyed the fruits of this past dotcom bubble/real estate bubble by parents/grandparents who gave them everything, trips, cellphones, credit cards of their own, you name it they got it. And still expect it.
I suspect they will be in for a rude awakening when this recession gets full underway.
More and more people are coming to the realization that a standard college education is not a very good investment.
Now, many students who have already racked up $50,000 and more in student debt find that they can’t get loans to finish schooling to get the degree to pay back the loans. The whole house of cards is coming down.
Online degrees seem to be the way to go. Not sure yet how employers view them, but it’s clear that college tuition does not provide a good return on investment in 2008.
I would like to see the attitudes shift. So much snobbery out there about having a college degree. I can’t tell you how many people I deal with on a daily basis that have their blessed degree(s) and yet are morons. But they think they are so superior. Ugh.
I do have a college degree, but never have I felt “above” anyone who does not. In fact, I know of many people who didn’t go to college and yet make a crapload more than I do. One guy runs his own business doing residential and commercial clean outs and hauling. Another repairs applicances. Another is just an all around handyman. And the list goes on.
Another difference between then and now, though, is when I (and all my friends) graduated from college we expected entry level wages. We didn’t assume the diploma meant big money out of the gate. These days, that’s absolutely the assumption.
Smug.
“didn’t assume the diploma meant big money out of the gate. These days, that’s absolutely the assumption.”
Exactly. But it’s a false assumption. The wages, in real terms, simply aren’t there to compensate for the amount of debt being taken on. The debt is going to end up drowning young people in the current economic environment. Someone who says “To hell with the degree” and instead finds an apprentice-type job, such as plumber, pipefitter, etc. out of high school will probably end up doing much better financially.
But just as “owning a house” is just something that everyone does, “getting a degree” is just something that everyone does, regardless of whether the numbers make economic sense or not. It’s herd behavior and the herd is going over the cliff.
That doesn’t match the data. People lacking college degrees have much reduced job security, especially in downturns. The trades such as plumbing are not necessarily a good example because of various factors such as apprenticeship, physical demands, and pervasive discrimination against women and gay men. Retail and basic service jobs like carpet cleaning are picking up most of the slack. Job security is the biggest issue for many nowadays. Choice of degree very closely tracks hiring and wages.
The difference in earnings between degreed and non-degreed people sometimes has to do with intelligence level rather than the actual degree. A degree definitely helps people earn better income when working a job for someone else, if for no other reason than the fact that formal credentials open doors. But anyone who intends to set out for themselves as a small business owner may be better off skipping college.
That’s true. College, just for a BA, didn’t do a lot for my earning power at a job. 5 years after college, I went to a trade school for something I was actually interested in with the goal of working for myself. I ended up having an Ivy Leager with multiple degrees call me up for my opinion and making 3 times per hour what I did before. Part of the problem with BAs is that they are basically an advanced high school education that leaves you without any skills of real value. A lot of people would be better off working as something like a welder or plumber right out of high school. You lose 4 years or earnings and all the cost of college, just to earn low wages. All that money could pay for half or all the cost a house in some parts of the country.
Right on tiger. Also, Community colleges have failed at keeping pace with changing economies and technologies. Someone mentioned it before but the degree only means you’re capable of a certain level of thinking. It gives no indication of skill sets specific to a job or task. It is much of the reason why you see pure design and engineering firms struggling with keep field positions staffed.They presume a chemE or civE can execute the design. Most civE’s don’t want to be bothered with field work even though it is more lucrative.
Where you get your degree from is important for the first few years after college. But after five years, a less expensive college, perhaps state college, is no less advantageous than having sheepskin from a costly private college.
Also you get higher pay right out of college while high school educated people are stuck at a lower income level, in general, for the first few years.
The pay gap is one thing. The net worth from regular savings investments is another. A smart 22 year old starting out in her field would invest enough of her income to get full company match in stock mutual funds in her Roth 401k. Free money. Eventually she would contribute to her limit and then start in a Roth IRA. Based on market cycles, by the time she’s 42 she would have a substantial advantage over some of her friends who got their college degrees and are working, but did not invest. She would have an incredible advantage over her friends who did not go onto college. They would be voting for politicians to have her taxed to pay for their health care, etc.
“Part of the problem with BAs is that they are basically an advanced high school education that leaves you without any skills of real value.”
Actually, a good BA or BS degree requires quite a bit of research skills (learning how to seek out, sift and utilize information) in order to complete documented essays and position papers.
IMO research skills and critical analysis of compiled information to make choices and/or support assertions is huge, and not necessarily something that comes with a high school degree.
I’m not sure I wouldn’t have made bad economic choices, i.e., bought during the housing bubble had I not developed and polished these skills because of my Bachelor’s degree.
DOC
We didn’t assume the diploma meant big money out of the gate. These days, that’s absolutely the assumption.
Ah, I don’t think that’s the assumption these days, at least among the kids I know. Then again, I tend to know “creative types” and avoid B-schoolers religiously.
What you do when in college is very important in deciding if the degree was worth it. A computer engineering degree has different roi than a history major, yet most american kids keep piling into liberal arts majors. The media keeps blaring about how tech jobs are leaving US, the truth is that computer science employment is well above dot com levels today and the only reason jobs are leaving is because the critical mass of qualified talent is unavailable.
Somewhere in my collection of clipped articles is one newspaper article written in the Billy Idol days. It said computer science skills will be in high demand for the next 20 years. Sometime I will find that article that I cut out long ago. I got into the field at the time the article was written. Still going strong.
The artificial intelligence research is the most intriguing part of computer science. I loved this field from the first time I grasped programming languages. That was in 1978.
Still going strong and the sky is the limit. There is just a bunch of lazy people (of all age ranges) who cannot cut it. The secret is that not have the fascination I have. This gives me a tremendous advantage over my competition. I met some bright people along the way (again, of all ages) and I think well of them still.
One of the biggest educational tragedies for the last 3 decades has been the systematic steering away of kids from science and math in the western world. The misinformation campaign by main stream media about science and especially computer related sciences is amazing. Enrollment in CS is dropping in double digits every year while job demand (both replacement and new) is out of control. I have had to go to shanghai/pune for multiple teams NOT because of cost (our shanghai engineer costs more than an average US engineer) but simply because there aren’t enough people here.
At this rate, this wil become a self fulfilling prophecy simply because its too hard to find enough people.
Bullsh!t!!!
“More and more people are coming to the realization that a standard college education is not a very good investment.”
For the right people, a 4 year college degree is a great investment. But that’s only 20-30% of the population, not the 50%+ that some wish that it was.
And we waste a lot of taxpayer money preparing kids on the left hand side of the bell curve to be ready for college, when it’s pretty clear that their time and our money would be better spent on vocational training. By 8th or 9th grade, it’s pretty clear which kids have a future in higher education and which do not. Why live in a fantasy world that they are going to benefit from a college prep curriculum?
“For the right people, a 4 year college degree is a great investment. ”
Who?
For those who will become CEOs making 500x typical salary, and the like, yeah, I’m sure it does make sense. But I’m curious exactly who is your 20% for whom it would make sense? My guess is it would be lawyers, university professors, and other bloodsuckers on the economy, not typical working people.
As you mentioned, business managers and other professionals (lawyers, accountants, doctors, etc.). But also:
- Engineers
- Teachers
- Pharmacists and other biotech research
The problem is that too many spend tens of thousands of dollars on liberal arts or general business education and wind up in sales or administrative roles for which a four year college education is hardly needed. Total waste of money. But the economy still needs 10-20% of the workforce to have specialized training in certain fields (particularly science and engineering), and about 10% to be well-trained managers and professionals.
But its a tremendous waste of money for well over half of those pursuing higher education, especially those with only average or below average intelligence.
I think college is pretty smart choice for non bloodsuckers: Doctors, nurses, engineers, architects, physicists, chemists.
Computers are one areas that only a narrow field (computer science) seems to really require. Much of it is business and self learning. See: Bill Gates and Paul Allen.
Definitely disagree about Business Managers. No degree really needed. Experience and working up from the bottom is key. IMO.
If we only prepared people for their vocations, they might succeed in find employment and making money, but then they wouldn’t be savvy enough to see a real estate bubble occurring… Wait a minute!
I’m a big proponent of vocational training, which took a beating for many years but seems to have regained some momentum in the past couple of years.
There are plenty of great jobs out there — machinist, HVAC, plumbing, carpentry, radiology tech — that require a specific skills but no four-year college degree.
“By 8th or 9th grade, it’s pretty clear which kids have a future in higher education and which do not. Why live in a fantasy world that they are going to benefit from a college prep curriculum?”
Good point. Some folks on the lower slope of the bell curve will not be able to tackle college no matter how hard they work at it–eventually they hit the wall. The difficult thing is carefully articulating this fact to them (and/or their parents) without causing an uproar.
DOC
Back to the Inflation/Deflation debate …
If an employer pushes the burden for health insurance onto the employee, is that not in effect a wage cut and thus deflation?
The employee would deem it inflation because his cost of living would have gone up, but is inflation really the correct term for him to use?
If inflation produces rising prices because more money is available than goods and services, wouldn’t deflation result in falling prices because less money is avaliable for these goods and services? Isn’t that what we are now seeing all around us, less money to pay for goods and services?
During periods of high inflation, such as the Seventies, prices kept going up but so did wages. Interest rates were high buy still money was avaliable to borrow, it was expensive money but nevertheless avaliable.
Today prices are going up (some of them at least) but wages aren’t, which leads to less money avaliable to finance these higher prices. Interest rates are low, unlike the Seventies, but also, unlike the Seventies, money is unavailable for borrowing for most people, at least for most people who need to borrow.
Less money equals deflation, no?
There is more money available now than 2 years ago or 5 years ago.
Stop thinking just in terms of the 10% of the world population that lives in the US. Think instead of the 60% of the world population that has dollars and wants to spend.
“…Think instead of the 60% of the world population that has dollars”
lol, O.K., here’s my free joke for Jay Leno:
Your Momma’s so fat…after she sits on a US Dollar…. it’s only worth x1 mexican peso
forgot the link:
Mexican peso strong against dollar:
http://cnnwire.blogs.cnn.com/2008/07/25/mexican-peso-strong-against-dollar/
“Stop thinking just in terms of the 10% of the world population that lives in the US.”
Actually 300 million people divided by 6.6 billion people works out to be 4.5%; our glutenous country currently uses about 25% of the world’s energy. That percentage will be decreasing steadily in the future as the dollar continues sinking and Chindia continues developing (wait until they develop their ponzi credit scam bubble), as America has just began a crash diet starting in 2008. Standard of living will continue sinking for the all Americans, but the effects will hit the middle class hardest. Big houses, cars and bellies will be going the way of the dodo bird.
Got diversified assets?
Yeah, but ~3B live on less than $2/day and therefore are completely irrelevant when talking about the global economy.
I just love these statements that suggest the Americans have no other option but to go along with allowing their jobs and life-styles to decrease . How about we get productive again and become a big productive Country ,that gives jobs to our own people ,and those people than spend the money in this Country .And if we are really creative ,we can go ahead and move toward cheaper energy
sources and become self-reliant ,like we were for so many years .
Is this THE Diet?
The majority of our “production” jobs have been sent to china and in China they are experiencing wage inflation. We are in a global economy where the productive engine is unevenly distributed. As a result of this uneven distribution, you should expect that inflation/deflation would be uneven. Workers in China are making more dollars for their productive effort while workers in the US have few “productive” jobs (with international demand).
Wether you call it inflation or deflation the real question you have to ask is, “what do I do that justifies my share of world resources?” Then you will see that most americans borrow (or are paid by those who borrow) to buy their current “share” of world resources. Take away the lending and most americans have very little to offer in trade for their share of food/energy.
The international community has stopped lending us money by refusing to accept dollars. We can print up all of the dollars we want at home, but they wont buy any more of the worlds resources. Regardless of inflation/deflation, the international community is in the process of revaluing the US downward.
To be fair to Americans ,what do you expect out of them when all
their jobs and opportunity to be productive , that is usually provided by corporations or businesses , has been outsourced to the lowest wage bidders and cheap production cost locations ?
Huh? All? Health care field is booming. IT is booming. Here in America. Where are you?
Military contractors are booming. Energy/resource sectors are booming. ….
Health care will contract as fewer and fewer can afford it. IT jobs are being outsourced at an ever-increasing rate….
Lemme know how this works out
Eight things not to ask foreigners at the Olympics
1.
Don’t ask about income or expenses.
2.
Don’t ask about age.
3.
Don’t ask about love life or marriage.
4.
Don’t ask about health.
5.
Don’t ask about someone’s home or address.
6.
Don’t ask about personal experience.
7.
Don’t ask about religious beliefs or political views.
8.
Don’t ask what someone does.
Courtesy of Foreign Policy Passport
http://blog.foreignpolicy.com/node/9331
I guess we can talk about Barbie dolls.
9. Don’t talk about Mao’s 500+ wives or their ages.
Rumor has it that… Mattel has a signed deal to re-create their images on “barbie like” dolls and pass them out to foreigners during the Olympics.
“Wall Street got drunk, it got drunk, (it’s one of the reasons I asked you to turn off your tv cameras.) It got drunk and now it’s got a hangover. The question is how long will it sober up, and not try to do all these fancy financial instruments…”
President George Bush
July, 2008
http://abclocal.go.com/ktrk/media?id=6282405
A video of 1 minute of a MORON SPEAKING.
Wall Street got drunk and now the country will suffer the hangover.
Four years ago it felt like a hangover. Now it’s progressed to liver cancer. Thanks, W.
“Four years ago it felt like a hangover. Now it’s progressed to liver cancer.”
Cirr-houses ….?
“What do you call someone who can’t drink & chew a pretzel at the same time?”
“Shrub”
I am shocked with the level of understanding of economic issues by the collective knowledge of white house.
wall street was DUI’ing and now we taxpayers have to pay for it. Before any taxpayer money goes out business types who caused this should be sh*tcanned and new fresh blood installed. I don’t see how a newbie could do any worse of a job than the morons that are in there now. I suppose it’s who you know and not what you know is very true. Now for sure I know that the financial markets are not free and are a scam. All these fraudulent securities being sold and not one person has yet gone to jail. The thugs on wall street could have taught John Gotti a helluva lot about being a gangster.
I tend to look at ’ssshrubery’s accomplishments as death knells for the religious right, conservatives and arch anti-environmentalists…
A Pyrrhic Victory, of sorts.
“…In an effort to trim costs, Pentair Inc. will shut down a facility in Wisconsin, laying off 350 workers, the Associated Press reported. Golden Valley-based maker of water storage and treatment systems Pentair (NYSE: PNR) will close a plant in Sheboygan, as well as a Sheboygan Falls distribution center by next June. A spokeswoman for the company told the AP that work which was performed in Sheboygan will be moved to other plants in the United States, Mexico and China. Some of the affected workers may be offered jobs at the company’s other facilities. Pentair has 16,000 employees in more than 20 countries….”
Florence Morning News -
July 23
International trade is great when it is between separate entities, but when it is a trade between different divisions of the same multinational company; it is obviously harmful. I believe 80% of all international trade is multinational - division to division.
From today’s Austin American Statesman:
Out-of-state homeowners add to foreclosure woes
Absentee landlords lured to Central Texas by prices find investments soured by high taxes, too-easy credit.
By M.B. Taboada
AMERICAN-STATESMAN STAFF
Saturday, July 26, 2008
A few years ago, investors from California and other boom markets flocked to Central Texas, looking for homes to buy. Many bought several houses, hoping to cash in by renting out the homes.
But now some of those investors are defaulting on their mortgages and becoming a growing factor in the rising foreclosure problem in Central Texas.
In the past two months alone, foreclosures of homes owned by out-of-state residents have surged 236 percent in Travis County since last year, compared with a 51 percent increase in overall foreclosures.
Peter Sajovich, a real estate investor and broker/owner with Re/Max Austin Advantage, said many of the out of state buyers were naive.
“They came in in 2005 and 2006 thinking our values were going to double like they did in California, and they borrowed every penny they could,” Sajovich said.
David Buttross, an Austin investor in foreclosed properties, said many of the out-of-state buyers joined real estate clubs or went to investment seminars where they were told they could make a quick buck.
“They were bombarded with bogus information,” Buttross said. “They paid more for the properties than they were worth. They don’t have the financial wherewithal. They are smart people, but they haven’t done it, and they didn’t know the pitfalls.”
Buttross predicts that foreclosures will keep rising as out-of-state investors leave the market.
“You are going to see a full-fledged retreat,” he said.
What was the draw of Central Texas for out of state speculators? Why did they think that house prices would double there? What other areas had a similar draw for speculators?
“What other areas had a similar draw for speculators?”
For starters, California Central Valley, including the Inland Empire and Sacramento. Dimwits from the Bay Area couldn’t believe these “bargains” and helped drive the market into a mania (loose lending standards and overbuilding were responsible for the rest of the mania).
the same is still happening all over Europe, with bubble country buyers (UK, Netherlands etc.) buying up all the foreign RE they can get their fingers on because it is soooo cheap! Most of that foreign RE is financed with equity gains from the first rounds of the game, leverage on leverage …
in many cases it remains to be seen who is going to pay the price for all this stupidity; my guess is that in both cases the taxpayers will pay by far the largest chunk.
What are wasn’t a draw? What State? This was so global its scary.
Got Popcorn?
Neil
The draw is SFH that generally run around $100 a sq vs $300 in CA and the “Hill Country” has some of the best weather in TX. Austin has lots of state jobs, and UT jobs (among others) as well as tech in the NE and is decidely the most liberal part of the state ( personally, I am fine with any exodus of said political views.)
Why? upthread is the tuition chat. I submit the liberal viewpoint ( and for the last couple of decades, the conservative one, also) of government intervention in the markets is to blame.
1. Housing– the GSE’s ( and look at the CRA )
2. HUD S/8 and IRS Tax Credit apartment funding- places a floor on rents
3. Geov’t guarantees on student loans
4. Continuing increases in wealth transfer programs-
a) Medicare drugs for drug companies
b) Fed money and meddling in local schools
c) The full employment for lawyer acts that are continually passed because ALL government entities pass sloppily written laws
d) Subsidy programs which are full re-employment of Congress critters Acts
e) Yep, whiners is the correct word, how many of the posters spend HUGE dollars and TIME dealing with CFR’s and OSHA and the EPA and Fair Housing and the DOJ …..
Getting way too fired up,way too early on a Sat.since people are too dumb based on public education to think critically to change with a vote. Let’s just sit back and let the financial markets continue to kick us back into sanity.
Out
Read the story. central Texas (Austin) had a housing crash in 2003/2004 that kept prices low relative to much of the USA. Plus the high property taxes in Texas make holding an empty investment property expensive for long periods.
“What was the draw of Central Texas…?
At the time the investors and speculators and flippers (we use to call them locust because they would go anywhere ) was told by the MSM that this place or that place was the next great investment spot for real estate that was due to go up .
Usually the areas that were touted by the market makers were ones that had lower prices and usually they had
lower prices for a reason like ,no jobs, high property taxes, bad weather ,you name it . The “locust” would go to these areas and buy with short term investment in mind . They would deplete the area ,drive up the prices and destroy the market ,just like locust comes into a field and destroys it ,than moves on .
Buying created demand and it would cause the area to go up in value. In addition ,often times ,the locust was one of those liar loan borrowers and they would tend to go on toxic teaser rate loans.
Than the builders would want to build more units to meet that false demand .
Now we have a excess supply of housing with no buyers and a bunch of speculators wanting to sell their investment if they haven’t already gone into foreclosure .
That sounds like what happened, with the addition of constant and massive boosterism and hype by the city of Austin and its RE industry parasites.
“They were bombarded with bogus information,” Buttross said. “They paid more for the properties than they were worth. They don’t have the financial wherewithal. They are smart people, but they haven’t done it, and they didn’t know the pitfalls.”
I agree with Buttross 83%.
Austin apartment glut, rent cuts predicted
By Shonda Novak
AMERICAN-STATESMAN STAFF
Friday, July 11, 2008
Too many apartments are being built across the Austin area, and that means some tenants can expect rent discounts and other concessions by year’s end.
That’s according to apartment industry research firm M/PF YieldStar, which shows June occupancy at 93.4 percent, off 1.5 points since March and 1.8 points from mid-2007. The decline is especially worrisome for landlords, coming during prime leasing season, said Greg Willett, the firm’s vice president of research.
“I think it’s time to raise the flag,” Willett said. “I don’t think people have realized how big a hole we’re about to dig for this metro.”
Willett says occupancy is headed down and predicts rents will flatten this year, then decline 3 percent or more in 2009.
“The market remains in decent shape for the moment, but it’s concerning that the loss of momentum is so pronounced,” Willett said. “Plus, with so much additional product now under construction, it’s pretty easy to see the headlights of that train bearing down on you.”
RICHARDSON CAN GET HER HOUSE BACK
http://www.dailybreeze.com/ci_10003311
What kind of sweetheart deal is this? Hush money and a free house in exchange for /Congresswoman Richardson’s vote on the housing bailout bill? FBI and U.S. Attorneys where are you?
A repost from yesterday’s bit buckets…I think it is worth repeating for others who missed the original post…
——————————————————–
A picture is worth a thousand words…actually I have two for you…
Non-Borrowed Reserves of Depository Institutions
Total Borrowings of Depository Institutions from the Federal Reserve
Considering the time line starting from late 50’s these graphs pretty much says it all - This time, it is different after all
Yowza!
That’s amazing.
I see the trend ;-), but could someone tell me in words what those illustrate.
The virtual printing press must be running at warp speed.
1910? They charted back to a point even before the Fed was created, but the line that’s supposed to really grab your attention still isn’t quite vertical..
They shoulda gone back to 1776.. 1492.
Can anyone who fully grasps this development please comment on whether these data are as bad as they appear to be? It appears that the situation spun out of control last December and continues spinning faster every month:
Title: Non-Borrowed Reserves of Depository Institutions
Series ID: BOGNONBR
Source: Board of Governors of the Federal Reserve System
Release: H.3 Aggregate Reserves of Depository Institutions and the Monetary Base
Seasonal Adjustment: Seasonally Adjusted
Frequency: Monthly
Units: Billions of Dollars
Date Range: 1959-01-01 to 2008-06-01
Last Updated: 2008-07-25 8:13 AM CDT
Notes:
DATE VALUE
…
2006-08-01 42.595
2006-09-01 42.703
2006-10-01 42.510
2006-11-01 42.876
2006-12-01 43.147
2007-01-01 42.098
2007-02-01 42.425
2007-03-01 42.235
2007-04-01 42.497
2007-05-01 43.084
2007-06-01 43.186
2007-07-01 41.558
2007-08-01 44.046
2007-09-01 41.102
2007-10-01 42.184
2007-11-01 42.293
2007-12-01 27.263
2008-01-01 -3.520
2008-02-01 -17.375
2008-03-01 -50.261
2008-04-01 -91.876
2008-05-01 -111.624
2008-06-01 -127.864
It’s most likely the aggregate impact of the accounting games being played with regards to write-downs. As banks write-off bad assets, they are forced to shore up their cash reserves. Since they cannot raise that type of cash via new deposits, they’ve had to borrow the new reserves.
Also, I think that what it means is that there’s a huge disconnect between institutions that are holding deposits and the institutions that are making (or holding) loans. Although the aggregate effect looks really scary, my guess is that there is a subset of banks that are well-capitalized (in terms of deposits) along with a majority who are very under-capitalized. If regulators were doing their job, these insolvent institutions would have been seized a long time ago. Seems to me like the PTB are doing everything they can to wait until after the election before addressing these issues. Only the worst-of-the-worst are being allowed to fail this summer.
What these data foretell is that a dramatic increase in interest rates are inevitable. If they are going to remain solvent in the long-term, banks need to raise deposits dramatically and reduce their exposure to loan losses (ie, make and hold fewer loans). The trick is to raise that type of capital without triggering a deflationary spiral. I’m still not sure that Bernanke can navigate a safe path through that minefield.
What I am almost certain is that 2009 is going to be a lot more painful than 2008 has been for pretty much everybody.
A local observation from Loudoun County VA. As a setup - keep in mind this was fastest growing county in the country during the bulk of the boom, from 2000 - 20005.
“Supervisors Wrestle with Lean Road Funding Plan”
http://www.leesburg2day.com/articles/2008/07/25/news/loudoun_county/9851cplan062708.txt
Plans for road projects for the area are being severely scaled back as funding slows down. Most projects are being delayed 4-5 years.
i have read several articles that implicate market capitalism as the culprit in the mess we are in.
i cannot figure out for the life of me how a “too big to fail” mentality on wall street resulting in taxpayer funded bailouts of certain financial institutions and artificially low interest rates perpetrated by an over reaching central bank could be interpreted as a failure in free market capitalism.
i
LOL!
I agree.
Capitalism is nowhere to be found.
Brilliant post, michael. Thanks.
go out there and get a 3% down mortgage, and put it on the taxpayers bill:
With Flexible 97®, you can offer borrowers an option for low down payment mortgages and flexibility in their sources of funds for down payment and closing costs. With a Flexible 97 mortgage, the borrower can pay just 3% of the purchase price toward a down payment, and this amount can come from sources such as gifts, grants, loans from relatives or nonprofit groups; or employer-assisted housing.
https://www.efanniemae.com/sf/mortgageproducts/fixed/flex97100.jsp
Deflationistas will note that this is not an example of tight money making paper money rare and unique, like snowflakes.
I believe banks require private mortgage insurance (PMI) for mortgages where the loan to value exceeds 80%. The existence of PMI is why banks continue to make loans where the downpayment is a mere 5% of the home’s current market value. The idea is that mortgage insurers providing the PMI will compensate them for the 15% difference if the home loan goes into foreclosure. The problem for the continued viability of loans with sub-20% downpayments is that some of these insurers are in the process of going bankrupt. They simply cannot afford to cover their underwriting losses on the basis of the skimpy premiums that they charged. From news reports, a lot of the purchases of defaulted homes is being done on the basis of 5% (or less) downpayments. What happens when PMI goes away, or becomes prohibitively expensive? Housing sales will crater even further.
That’s another reason why sub-prime low down loans ,or 80/20 loans ,without PMI insurance
should of never been allowed . The creative loan industry that came up with the concept of breaking up a 100% loan into a 80/20 so as to avoid PMI insurance on the first ,which lead to a demand for loans ,compromised the market that was insuring conforming loans .
OK,one of the reasons why the real estate market was so stable in the past was because any loan that exceeded a 80 LTV had PMI or some form of insurance put on it to protect against default losses . Some banks were self insured . Only if the property value went up could a borrower who was paying PMI insurance petition to have that insurance dropped because the loan to value went below the 80 or 90% requirement . The secondary market supplied money for loans knowing that they were protected and PMI type companies would underwrite the loans ,not wanting to take risks .
Also, the creative loan industry came up with a adjustable loan that had the potential of neg. amortizing in which the loan to value could exceed 100% with time ,meaning the risk increased with time ,where normal loans the risk decreases with time because of principal reduction . It makes it really funny when the loan sellers were passing this junk off with a one-year buy-back provision ,when in truth the loan risks increased with time on a faulty product like that ,(of course unless you had cash back fraud from the get-go or straw buyer fraud which defaults immediately ). So you get the lenders passing off the time-bombs to the secondary market .I don’t know who came up with these new-age models or who rated these risks on loan
paper but …….well…….looks like risks were ignored .Thank you Wall Street …..greedy pigs .
Housing Wizard,
The system of home mortgage broke down with the banks was due to “where the money is”, per Willie Sutton. Banks used to rely on a profit stream from homeowners paying their monthly mortgage payments. To make money for the banks, a stable long term customer was critical. When banks’ income shifted to short term fees/profits for writing, packaging and sending loans to the end buyers, the banks had no vested interest in whether the homeowner could make the payments or 30 yrs or even the average 7 years before they sold and moved on.
“Follow the money”!!!
Yeah,I agree lost control ,but I’m just talking about how the system use to be and why the loan market really wasn’t that much of a risk before . What was with this attitude of passing on junk to the secondary market . Didn’t the lenders or Wall Street or whomever think that it would come back to haunt them ?
Housing Wizard,
The bank management did not care. They got their money up front. Screw the purchasers of stock, the bond holders and the employees.
If you could receive 7 years of income as a management employee of a bank on the closing of a sale, would you take it? You take your income and plan your new job within a couple of years, you are still ahead of the game.
In my many years of working for corporations, have you noticed that those who screwed up in management seem to move on to bigger and better jobs, before the sh!t hits the fan?
I have and the damage left behind has to be cleaned up by someone, assuming that the place is not left in a total wreck!
Just one person’s experience in the business/corporate world.
Housing Wizard,
Did you ever run into the so called “super salesperson” who promised that he could make ungodly profits for the corporation if the corp. follows his vision? They, as a rule, are bullsh1ters. They have no intention of performing according to their promises. By the way, does sound familar with regard to the housing crisis?
These super salespersons are always looking for the next step up at a new work place.
How do I know?
Based on personal experience in the business and a brother who can’t sell a life preserver to a drowning man. I have listened to his dreams of success for 30 years. He is willing to falsify credentials, sweats bullets as to how he will perform and generally files a work comp claim the first week on the job before his boss realizes that he is a failure.
So, I am sorry to bore you to tears, but this is my experience.
MORE REVIEW & OUTLOOK
McCain to Fannie Mae: Go Away
July 26, 2008; Page A8
In the rush to bulldoze the Fannie Mae-Freddie Mac and housing bailout bill through Congress this week, scant attention has been paid in Washington to how the U.S. system fell into this hole. Thus it was refreshing to see Senator John McCain step up and speak rude truth to his colleagues about the fiasco in an op-ed piece this week.
“Americans should be outraged at the latest sweetheart deal in Washington,” the Republican presidential hopeful wrote in the St. Petersburg Times, stating the clear but all-too-often unspoken reality about this greatest of boondoggles.
First McNut is against it…then he is for it…now he is against it…
Just a another political Bullsh&ier.
I’m voting for Barr..don’t waste your vote on this nut job.
NevadaGal
Gonna Vote Libertarian in ‘08
The lost decade
Published: July 25 2008 19:59 | Last updated: July 25 2008 19:59
The S&P 500’s earnings season is in full swing, but for US equity investors, the outlook is hardly clearer than it was a month ago.
Investors who made short-term punts on financial stocks in the past fortnight could have made a killing, or been killed, depending on the day of the bet: financial shares had gained more than 20 per cent in 10 days, and then on Thursday suffered their worst fall since 2000. At such times it is tempting for amateur day-traders to ride the roller-coaster. That temptation is worth resisting: bear markets are unforgiving playgrounds.
I find it interesting that the every MSM seems to be warning people about the dangers of shorting. It seemed to start about six months ago and has increased considerably in the past three months.
Short/Ultrashort ETF’s have really leveled the playing field, as its now incredibly easy for J6P to assume a leveraged short position. For decades this was the near-exclusive purview of hedge funds, now the common man can take advantage of the market opportunities afforded by an imminent collapse of the stock market. Obviously this has frustrated the PTB to no end. It becomes a lot harder to profit from a declining market with fewer buy-and-holders to scam.
My guess… expect major regulation to eliminate leveraged ETFs within the next few years.
“That temptation is worth resisting: bear markets are unforgiving playgrounds.”
I’m not a sophisitcated investor at all….just someone who has been following this blog and Roubini, Fleckenstein, Charles Hugh Smith, et al for the last two years….and I’m so thankful that that these ETFs are available b/c I’ve never lost a penny on any of my ultra-short ETF trades (SRS, SDS, DUG).
Interesting realtard talk on a forum. It seems not all of them have their head up their ass. After reading some of these comments, it’s come clear to me that there actually maybe ethical realtards who are actually pro’s, ie, didn’t leverage up on junk and now have to get some insane price to be made whole.
http://rismedia.com/forums/topic/im-not-going-to-give-my-house-away
I ask you not to troll it. Seems like some good inside info on the RE sales community.
I do not what this family is “winning” about. Two spouses, one a doctor and one a writer. Spends half the year in Mexico.
While they are happy with their current situation, they do not believe its true with the rest of America. Talk about “spoiled”, this family is the classic case of same.
I would not classify them as suffering the “workman’s blues”.
“We were always optimistic when we were young. We thought that every year, things would get better,” says Mrs Brende. But now: “The bubble has burst. I think my generation [will be] the last to see a great America.” Her husband agrees. Standards are falling in schools, he frets. Young people are finding it harder to get ahead. “We’ve all been so greedy for so long and it has caught up with us,” says Mrs Brende. She hopes that Mr Obama may be able to do something about the national malaise, but fears that “It’s too late. The slide is on.”
I am not sure what they are complaining about or the author’s intent is. This is like D. Trump complaining that he lost so many millions of dollars on an investment, however he has more money than he can ever spend in his lifetime.
http://www.economist.com/world/na/displayStory.cfm?source=hptextfeature&story_id=11792366
I have a stupid question for anyone that is willing to respond…
What do people as a means of employement/income (to buy stuff) if our/world’s society becomes so efficient that people are no longer needed to produce goods?
Will that mean that we will all have service jobs? Will we all be selling houses to each other?
Like I said, it maybe a stupid question, however, labor/work was what mankind has strive to avoid.
What will our economic system be like once we reach this stage? Capitalism involves capital and labor. Sorry I am a stupid hick from CA, however, it seems that in a funny way, for the US anyway, we are getting pettry close to such a situation. The only ones manufacturing anything in the USA is done by illegals.
Any answers?
See WALL-E.