Bits Bucket For July 31, 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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The shameless Boston Globe … “Mass foreclosure cases plummet.”
Yep, on day 89 of a 90 day moratorium.
http://www.boston.com/business/articles/2008/07/31/mass_foreclosure_cases_plummet/
First, several days ago they reported .01 (May) and .1 (Jun) month over month sales gains, never once mentoining what percent of those might have been prior foreclosures, or the YOY comparison. I’m used to it so I let that one go.
But now this morning. Any wonder the foreclosure cases plummeted? I know for sure that if the floodgates open with the pent up backlog and foreclosures quadruple in August that they will trumpet that (sarcasm off). And yes, I’m sure in this case they’ll use the YOY figures conveniently ignoring the 5000% gain MOM.
My letter to the Globe (also posted at their Real Estate Blog):
Was the news really that good (if you’re for higher home prices) on the Case-Shiller Home Price Index?
Not really. It turns out that the Case-Shiller Index has shown an April-to-May increase in Boston area home prices every single year since 1990. Even more telling? The fact that the May 2008 numbers represent the third straight year - and worst of the current home price declines - in which the May year-to-year numbers show a decline - of nearly 5.8% compared to May 2007 (the May decline from 2005 to 2006 was 1.4%, in 2006 to 2007 it was 5.3%).
In fact, the May to May decline for Boston area home prices according to the Case-Shiller Index is the greatest since the May 1990 to May 1991 time period, when prices declined 10.3%.
Should the headline read “Good news, then some bad”? Or should it avoid assigning qualifiers to news and instead report: “Boston home prices show record 27th straight month of year over year declines”?
========================================
The Response:
Yes, thank you for the email. I did say in story that it rose in that time frame in 2007. I could’ve put past years too but didn’t.
Nevertheless, given the depth of the downturn, that trend has managed to maintain which may (or may not) show something.
Thanks for writing!
Sincerely, Kim
Great info Bad Chile. Where can I find details like the April to May increase for Case-Shiller going back to 1990? I know I could piece it together myself, but is there someplace online that is already doing this?
The best location is direct from Standard & Poors:
http://www2.standardandpoors.com/portal/site/sp/en/us/page.topic/indices_csmahp/0,0,0,0,0,0,0,0,0,1,1,0,0,0,0,0.html
(warning: links at S&P site are Excel files).
Enjoy.
“”How many billions of dollars does the U.S. banking system have to lose? OK, how many tens of billions? Hundreds of billions? When you add in the toxic derivative instruments, it adds up to trillions of dollars. And it looks like the nation is on the hook for a lot of it.
Where can things go from here, what with all that worthless paper floating around? I understand that the Fed does not want to raise interest rates. That would just plain hit the economy in the gut with the left fist. The politicians would scream. But when the Fed wimps out, the dollar declines in value. And the cost for foreign imports rises. That hits the economy in the gut with the right fist. One way or the other — a left or a right to the gut — our U.S. economy is getting beat up. I’d prefer it if we just took our own national medicine and stabilized the dollar.”"
It will end with 15% mortgage interest rates (like in the early 1980’s).
I’ve mentioned before that, in the spring and early summer, it was strange to see relatively few “For Sale” signs around Boston.
I don’t know why that was the case back then but things have sure changed. Signs are, again, littering the area.
Boston’s down at least 20% from peak (nominally) and should have another 15-20% to go.
So if you forbid foreclosures, the number of foreclosures go down? Fascinating. Thanks Boston Globe!
Drove around in Chester County PA yesterday. For the past 10 years it has been build, build, build. Now almost all the strip malls boast “Space Available” banners. I did see one lot with dozers blazing on rt 322 on the way to Exton. I guess they didn’t get the memo.
“Now almost all the strip malls boast “Space Available” banners.”
And how will all those spaces get filled?
National chains, Walgreens, CVS, etc. must have reached maximum saturation by now - witness the SBUX retrenchment.
So, it will be small business that will fill these empty spaces - but how in this climate of a cowering consumer, rising minimum wages, absurd gov’t interference, etc.? The pols just don’t get it - they need to restore confidence so people can and will start new businesses - yet their actions only look to the past and so appear as anything but confidence building to sensible business minds.
RE: absurd gov’t interference…
It’s a spendthrift socialist free-for-all now.
A Bloomberg article today notes that Hartford Financial Services Group of CT CEO Ramani Ayer is calling for the US government to back insurance companies providing coastal homeowner’s protection, so they don’t get wacked by another Katrina.
So now, the US taxpayer has to cover all those idiot, snotty shoreline dwellers who CHOOSE to park their collective azzes on a rising ocean.
EAT MY SHORTS!
So now, the US taxpayer has to cover all those idiot, snotty shoreline dwellers who CHOOSE to park their collective azzes on a rising ocean.
While I essentially agree with your point, those homeowners choose to live in high-risk coastal areas after the local government made it an option through zoning and after insurance companies made the foolhardy decision to cover homes in those locales.
Without either of those two antecedents, there would only be a fraction of those “idiot shoreline dwellers” — either via zoning or insurance disincentive, most of them wouldn’t (or couldn’t) choose to live there.
In other words, those shoreline dwellers should never have been allowed there in the first place, at least not in their current numbers. The insurance companies should take the hit.
RE: there would only be a fraction of those “idiot shoreline dwellers” — either via zoning or insurance disincentive, most of them wouldn’t (or couldn’t) choose to live there.
ET~Chi-Town
Why would government want to limit shorefront development via zoning with the massive property taxes derived from coastal prop owners?
Plus, here in the Northeast there’s been the McMansion “teardown” phenomenon, where big dollar homes get placed in the footprints of previous low buck “grandfathered” seasonal shacks and cottages.
Local govies aren’t gonna stop this process. They be in court forever fighting lawsuits.
Again-It’s one’s PRIVATE choice to live in a particular location.
But thanks to the housing bail-out it’s all a continuation of the new financial paradigm. Privatize the benefits of shorefront living; while socializing the risks attendant to the securing property insurance.
It’s all total BS.
People really need to stop paying taxes to get this all under control.
I believe the year after Katrina the Insurance industry recorded record profits.
In fact, I don’t know if Senator (former) Trent Lott ever did get State Farm to pay for the damage to his house(you know, so Pres Bush could come sit on his front porch).
Oh they’re still building like crazy around here (I live in West Chester). But you see, we’re different here.
on a tangent, was up in Sullivan County for a little vacation, really have always wanted to buy a small plot or a small cabin up there. But the prices are completely nuts still! Everyone I spoke to up there was very stressed about money, lots and lots of stuff for sale, but GOD FORBID they “give it away!” So I guess I’ll keep waiting and watching.
Where we stayed used to be a large town - with industry and even a train going thru - now it’s a few houses and the tannery ruins at the edge of state gamelands (and really lovely). Goes to show how quickly things did change with the Depression. From vibrant town to ghost town to forest in only a little over 50 years.
OK, I’m calling the bottom!!!!
The foreclosure bus tour has reached Elizabeth, New Jersey. It would be hard for me to describe Elizabeth for those of you not familiar with the Garden State - but let me try anyway: It is the absolute pits of the earth. It stinks, figuatively and literally. It is so gross I think if I had a choice between living there or having to go back to live in England in the winter, I’d hop across the pond.
The article refers to children being on the bus, I’m calling DYFS since this is clearly child abuse, no minor should be permitted within these city limits.
Enjoy this classic.
http://www.nj.com/news/ledger/index.ssf?/base/news-13/121747899740810.xml&coll=1
Maybe, I’m wrong, but it sure looks like the NJ REIC is looking to use women and children to fill the breach. The quotes from some of those bus riders seem to indicate that they are not in a position to be making deliberate and well-reasoned purchases - some are even living in hotels for Pete’s sake!
This quote summed up gov’t interference quite well though:
” –which led President Bush to sign a $318 billion bill yesterday in support of cheaper mortgages — “
I wince when I see quotes like this:
For municipalities, keeping homes occupied means property values and ratables won’t decline.
Why should our governments be involved in price-fixing scams and Ponzi schemes?
RE: Why should our governments be involved in price-fixing scams and Ponzi schemes?
Kickbacks from developer special interests and votes from the “something for nothing” scratch ticket lotto crowd.
“Why should our governments be involved in price-fixing scams and Ponzi schemes?”
If you ask them, they will tell you it is for your own good as well as that of the FBs. That’s because the gov’t just assumes you’re an owner and that you are shaking in your boots too over declining prices.
What they don’t count on are 1. renters and 2. owners who did not bet everything on their primary residence.
I have to agree! I spent three years working at the Bayway refinery and I had to live out in Chatham.
Mariam Jukuku’s article sounds promising - what’s with all the skepticism? I guess it depends on how much the banks are willing to discount their mortgages? Who was the Wall Street firm that just sold its CDOs for cents on the dollar? Seems to me an 80% discount would be very attractive but that would make the banks the arbitrators of price. So be it.
US of A does not seem to be capable of going into a recession as defined by the US of A government definition. Hmm…..
As soon as the drilling for oil starts in and off US of A land and water the SUV will be king again. This is inevitible. Best, 41Cadillac
Stocks head for higher open ahead of GDP reading
Thursday July 31, 8:11 am ET
By Tim Paradis, AP Business Writer
US stocks head for moderately higher open as investors await reading on gross domestic product
NEW YORK (AP) — U.S. stocks headed for a moderately higher open Thursday as investors await a key reading on the nation’s economic output to determine whether a two-day rally will continue.
Wall Street expects the Commerce Department to report that gross domestic product advanced in the second quarter as consumers cashed tax rebate checks. Economists polled by Thomson Financial/IFR predict, on average, that GDP will have increased at a 2.4 percent annualized rate. The report is due at 8:30 a.m. EDT.
“US of A does not seem to be capable of going into a recession as defined by the US of A government definition. Hmm…..”
“stimulus” checks were a contrived act…… we’d have had negative gdp without them but a certain someone couldn’t allow that to happen on his watch, hence the smoke and mirrors stimulus checks.
“certain someone couldn’t allow that to happen on his watch”
that and prior to a watershed election
Yep. Swiftboating is a two way street.
They keep going by the technical definition of the word. As long as they can make the numbers reflect an avoidance of that technical definition, they can claim “success.”
Oops, guess not 2.4%…
And GDP for 4Q 2007 revised down to -0.2%. Are we on our way to an official recession call?
What a most beautiful rectification. This is Wintson’s best work to date. Back then the markets rallied on positive GDP growth. Bloomberg:
The annual benchmark revisions showed the U.S. may have slipped into a recession in the last three months of 2007 as consumer spending slowed more than previously estimated and the housing slump worsened. The economy shrank 0.2 percent in the fourth quarter last year, compared with a previously reported 0.6 percent gain.
Real
estateGDP always goes up.What amazes me is everyone’s fixation on having a positive GDP number. The fact is, even by the government’s grossly understated inflation measure, real GDP has been declining for some time. If you use appropriate inflation numbers (such as shadowstats’), inflation-adjusted GDP is down about 10% per annum. Although you wouldn’t suspect that where I live (in Eureka, Ca, where house prices are only down 10% from the peak and multitudes of sheeples continue to buy houses), it is definitely believable elsewhere with all the foreclosures and stores closing. I am just waiting for it to be reflected here.
News Flash
All markets set to open lower due to disappointing GDP and jobs numbers.
Don’t worry about that. The guys at MinRec and their many, many, minions in media will rectify your interpretation of negative GDP growth. Pretty soon they will all start chirpping in unison:
Recessions, if we are in one, usually last 6-9 months. Since GDP was negative in the last quarter of 2007, we are probably already out of it, if we ever were in it in the first place.
Winston
Apparently the US has a lot more natural gas reserves than previously thought. And what does Congress want to do? Provide incentives for infrastructure for cars that run on Compresssed Natural Gas, of course.
http://www.pbs.org/nbr/site/onair/gharib/080730_gharib/
They can’t be serious…
Yes they are. CNG has been used for years in mass transit, in industrial forklifts, and other industrial applications. It burns clean compared to gas, and generally does not need catalytic converters. The only problem is that it only generates 70% of the power that gas provides, so you need larger engines to run it on. If you take your average hybrid and power it with CNG, you would get a really nice environmentaly friendly car, although you might not go anywhere in a hurry…:-)
Honda makes a Civic that runs on CNG. If you have gas in your house there is a kit to fill it up in your garage.
I think the main problem is not speed, but distance. IIRC, 200 miles was the limit between fill ups for the Honda.
The Gov of Utah spend $12k converting his Suburban to CNG. Claims he only pays $.68 gallon.
http://www.deseretnews.com/article/1,5143,695274154,00.html
I think converting Hummers/Surburban’s to CNG might be a growth market.
drill baby drill
congress sneaks out this weekend - even ried was pretending to be ready to drill
I got a note from my natural gas supplier on Monday saying my natural gas rate for the coming year will go from $9.90/mcf to $17.70/mcf. Add on distribution fees and sales taxes of course.
“I got a note from my natural gas supplier on Monday saying my natural gas rate for the coming year will go from $9.90/mcf to $17.70/mcf. Add on distribution fees and sales taxes of course.”
Where do you hail from again tresho? (that was an oh shit moment for yours truly? ;-o )
Someone I know has a cabin up in the Poconos somewhere. Recently natural gas was discovered on their property. They have been offered $250,000 for the drilling rights and 15% of the profits for the next 20 years. Cha-ching!
“It may be the best time in more than a decade to buy a country house”.
http://tinyurl.com/6jbqhb
Funny, my understanding is that the brand new housing rescue bill just eliminated the tax deductibility of a second home and the second home market is about to see carnage. But what do I know?
For the mortgage deduction, it phases out once your income exceeds $150K. You’d think that only people making way more than $150K would be buying second homes.
The lower-class scamsters (your typical “single mom” and her live-in boyfriend) probably each buy a home and declare it as their “primary” home. Second home sales may not plummet any more than any other impractical or useless real estate product will (McMansions, hasty condo conversions that only a flipper would buy, condo-tells, etc.)
Reuven,
You frequently express contempt for those who appear to be less fortunate.
Why is that?
exeter -
You have a screwed up sense of “less fortunate” if you think Reuven should not pick on $150K annual income second house buyers who use loopholes to scam their way out of paying taxes.
It would make sense that you, of all people, would enjoy someone who points out those who avoid paying taxes… since you seem to think that governments know better what to do with taxpayers’ money.
Nice strawman but you know they don’t work so why try?
Reuven said:
“The lower-class scamsters (your typical “single mom” and her live-in boyfriend) probably each buy a home and declare it as their “primary” home.”
Where does groovin’ Reuven reference anything about 150k wage earners? Jack? Hello Jack. Jack?
Strawman who?
What - you don’t favor bigger government and bigger tax bills?
“For the mortgage deduction, it phases out once your income exceeds $150K. You’d think that only people making way more than $150K would be buying second homes.”
What he’s saying that some of your typical couple scamsters are making in the neighborhood of $150K (not “way more”), but are still able to take advantage of the deduction because they each claim primary residence of one of the houses.
exeter? exeter? exeter?
Direct your attention to what he said, not your strawman..
“The lower-class scamsters (your typical “single mom” and her live-in boyfriend) probably each buy a home and declare it as their “primary” home.”
smarten up kiddo.
No. He said:
“The lower-class scamsters (your typical “single mom” and her live-in boyfriend) probably each buy a home and declare it as their “primary” home.”
You said: BS
“less fortunate?” I don’t consider greedy get-rich-quickers to be “less fortunate”. These are very clever people, who would rather work the system with whatever scam they can figure out than get a real productive job.
Here’s my point about the elimination of mortgage interest tax deduction on second homes.
1. “Wealthy” people probably aren’t getting it anyway. It phases out after $150k of income.
2. Your typical low-class houseflipper will scam their way out of it by putting one home in “single mom’s name” and the other home in “live-in boyfriend’s name”, etc. Don’t forget a lot of these low-monthly-payment “affordable” mortgages were supposed to be for primary residences, too. Yet people used them to buy 5 or 6 condos at a time….
I should add that “less fortunate” people are those who have serious illness, are widows or widowers, or have to compensate for a physical disability, etc.
I wouldn’t call “less fortunate” people who took an impossible bet, and then want you and me to cover their losses.
Yeah I was going to bring that one up.
What they are talking about is the second mansions of the super-rich. Let’s just say next year’s Wall Street bonuses will make it an even greater time to buy one.
But for those of you outside the Great Northeast, there is another second home market here, one that is middle class. Instead of a 2,000-square-foot suburban house, lots of people pack into an 800-square-foot two-bedroom apartment during the week and also have a 1,200-square-foot cottage for weekends and summer. It’s a longstanding pattern here, one we consider for ourselves before settling on a rowhouse in the city.
That middle-class second home market has rolled over and died. My in-laws have retired to such a house on top of a hill in the Catskills. They are getting on in years, and might be better off in an apartment in town. But I doubt they could sell the thing at ANY price.
When 20% of the workforce is unemployed, its not going to look so smart to have a vacant house in the country all week long; nor to leave your city townhouse vacant every summer weekend.
It kind of brings to mind a far side cartoon with a polar bear looking at an Igloo. “I love these things, crunchy on the outside and a chewy center”
In an extreme recession, you need 1 home that it occupied and secured.
In the 70s recesssion, a lot of my town’s businessmen took their famiies up north to the lakes for the summer.
Course a summerhome at that point might not be properly heated and the kids and all their friends might be in a single bedroom. Entertainment would consist of the lake, the boats/waterskiing, a well worn pack of cards, a ping pong table and our own wacky personalities. We’d stay up there all week and the business owner Dads would show up on Thursday or Friday evenings.
There were some major differences between then and now. One is many built their camps w/their own hands and therefore had no mortgage. Taxes for these places were low relative to today. Many of these camps were truly “roughing it”. Furniture and decorating were minimal. Appliances were often hand me down. But most important of all, friends were happy to be invited and didn’t turn up their noses if certain foods, furniture, or entertainment were not provided for them. I don’t remember one friend ever saying no to an invite.
I truly hope we can back to enjoying each others’ company that way again.
It’s quite sad that for some, a big vacation home or a big primary residence is simply another way to give everyone the middle finger.
“It may be the best time in more than a decade to buy a country house”.
Ah yes, more bait for more FBs. This “drill drill drill” thing is what’s causing oil prices to fall. It’s all temporary.
With those country houses, one should buy two Ford Expeditions or Chevy Suburbans with all the power options of course. LOL.
Make sure that’s no closer than 50 miles to the job. Consolation: 7-11 selling potato chips ’round the corner to feed the fat lards who pay $15,000 per year in gas alone to drive to $60,000 salary jobs. Ha!
Oil will go above $200 per barrel, but perhaps not this year.
XOM has record profits this quarter! I hope Congre$$ doesn’t try to pass some “windfall profits” tax to take away any bright light in my domestic equity portfolio.
But they still missed market expectations. Stock is down 2.5% in pre-market trading.
Well, typically any stock goes up on anticipation, down on announcement, no matter how good the announcement is…
It single-handily took S&P500 futures down 10pts almost instantly.
Well, typically any stock goes up on anticipation, down on announcement, no matter how good the announcement is…
Except for iBanks, which seems to be opposite.
Take a look at insider selling
Take a look at how much of this profit is going to stock purchases and dividends rather than increased drilling.
The oil majors are being hollowed out IMO.
The oil majors are being hollowed out IMO.
The trend internationally is that of nationalization of oil/gas companies and resources. Look at the mess BP is in with their Russian partnership. I think the head of that operation (an English chap) for BP was forced out of Russia and now is supposed to “manage” operations from a remote “undisclosed” location. Another example is China… using the government’s economic resources to build infrastructure (like roads) in places like Sudan in order to secure natural resource rights for it’s state-run oil and gas companies.
My gut feeling is management of big private oil is using this “windfall” for stock buybacks to make as much money for themselves in stock options and bonuses as possible prior to a government takeover of the industry within a decade.
Of course, I could just be paranoid…
chavez has one
so did jimminy carter
any good STAGflation ideas
gold to volatile and shtsky divs
TIP uses inflation rate of big gov
whatta ya got ?
It occured to me that the inflationists strategy amounts to what in an old-time NY accent is girl. Goil.
Commodities in general, including agriculture, minerals, etc. Tangible stuff that can’t be created from thin air.
“whatta ya got?”
Cash? If the values of assets are declining as measured in dollars, then the value of dollars is increasing as measured by these assets.
True, but
a) Only certain assets are declining and these are historically way overvalued now: Housing and equities. Commodities are spiking.
b) Again you are pimping Uncle Buck without any consideration how the Gubment/Fed will and have dealt with the devaluation of these assets: Firing up the printing presses on all cylinders. Just look at how the Fed has extended its emergency lending facilities for the Investment banks next January (read forever).
Don’t get me wrong. I believe if you are looking at making some killer deals on depreciating assets in the next few years, then having ready cash on hand will be in your best interest.
“…then having ready cash on hand will be in your best interest.”
And what is to stop one from converting non-devaluing assets (i.e., gold) into cash at the time of need for making purchases?
Now you got it, Prof!
“And what is to stop one from converting non-devaluing assets (i.e., gold) into cash at the time of need for making purchases?”
Of course nothing….except the underlying assets liquidity.
If you can sell your non-devaluing assets before the next guy grabs the good deals then I guess you’re all set.
“I believe if you are looking at making some killer deals on depreciating assets in the next few years, then having ready cash on hand will be in your best interest.”
You just made my point.
No I didn’t. You didn’t classify what types of assets (depreciating, appreciating).
Food, fuel, and most consumables are gonna go through the roof. What you can buy with a dollar today is far less then what you’ll be able to buy tomorrow. The same will most likely apply to other luxury goods.
If you want to buy a house then that’s a different story. What do you intend to do with all this ‘cash’ you have on hand?
“What do you intend to do with all this ‘cash’ you have on hand?”
Buy top quality stocks at clearance sale prices.
Should we worry about the $800 bn increase in the Federal debt ceiling that comes with passage of the housing rescue plan, or the Fed’s acceptance of MBS as collateral for loans to investment banks?
I would suggest buying stocks, but I seem to recall the U.S. stock market lost roughly 1/2 its nominal value during the 1973-74 stagflation episode.
Foreign currency-denominated CDs might not be a bad choice (made 20 pct on one last year)…
Perhaps the next few years will offer good opportunities to buy the dip?
I’m still waiting for a sufficient dip to be worth buying on.
Start-up banks. Over the next two years, I hope to find some start-ups with brand new balance sheets and good management.
I hope one of two things will happen:
1. They will create a solid bank at a good time that can be a solid long term investment or
2. Hurting regional banks will buy them up to strengthen their own balance sheet.
BTW if anyone knows of any coming up, I’d love to hear about them.
Large ncreases of the interest rates.
Look at RRPIX, RTPIX, PST and TBT to bet on that.
VIPSX and WIP can be used as TIPS.
Cash in short term money market accounts
Bunker, yummy spam, and canned pineapples.
i like international stocks, natural resource and energy companies.
Check out the Vanguard Energy ETF, the Vanguard Materials ETF.
Even if you are skeptical about gold, it is prudent to have a minimum of 10% your net worth in physical gold, i like coins.
How about using your money for a dept of mens affairs in your county?
Savings bonds, municipal bonds, and gold.
More California news
Budget mess leaves rural hospitals dry
Medi-Cal delay prompts rush for emergency loans
By Ed Mendel
U-T SACRAMENTO BUREAU
July 31, 2008
SACRAMENTO – Small rural hospitals are scrambling to get unprecedented emergency loans as California’s monthlong budget crisis deepens.
Gov. Arnold Schwarzenegger is expected to lay off up to 22,000 temporary and part-time workers today and trigger a legal clash with state Controller John Chiang by trying to slash the pay of 200,000 state workers.
Legislative deadlocks that leave the state without a budget after the new fiscal year begins July 1 are routine – it has happened 17 times in the past 21 years. The record was set six years ago when a budget was signed Sept. 5.
But as legislators struggle to close a $15.2 billion gap in a general fund of more than $100 billion, the impasse is beginning to have an unusually severe impact.
“Lay off”?
C’mon UT, they were terminated.
I can’t believe they passed on that opportunity.
Come with me if you want to be employed.
Yet one more reason I may take the job I was offered at Loyola and bail out on the UC. Could you imagine…minimum wage haha. Half of the people working at UC would suddenly go into default not getting their normal amount of cash flow.
Just curious, but is that a standing offer or something? When I’ve been offered jobs in the past, I’ve always felt obliged to respond in a reasonable period, say a couple days or whatever.
This slowdown (not recession) is becoming very economically painful to some U.S. households. Perhaps some of those Manhattan investment bankers who pocketed buhzillions in bonus monies over recent years could be asked to chip in a few pence to a “share the wealth” fund to help ease the collective pain?
More U.S. workers forced to go part time
Loss of hours may be precursor to layoffs
By Peter S. Goodman
NEW YORK TIMES NEWS SERVICE
July 31, 2008
The number of Americans who have seen their full-time jobs chopped to part time because of weak business has swelled to more than 3.7 million – the largest figure since the government began tracking such data more than a half-century ago.
KEVIN MOLONEY / The New York Times
Ron and Ali Temple of Aurora, Colo., lost more than half their monthly income when his full-time job for United Airlines in Denver was scaled back. Gone, too, are benefits such as overtime.
The loss of pay has become a primary source of pain for millions of American families, reinforcing the downturn gripping the economy. Paychecks are shrinking just as home prices plunge and gas prices soar, furthering the austerity across the nation.
“I either stop eating, or stop using anything I can,” said Marvin Zinn, a clerk at a Walgreens drugstore in St. Joseph, Mich., who has seen his take-home pay drop to about $550 every two weeks from about $650, as his weekly hours have dropped to 37.5 from 44 in recent months.
Zinn has run up nearly $2,000 in credit card debt to buy food. He has put off dental work. Zinn no longer attends church, he said, “because I can’t afford to drive.”
Another point for the deflationists.
Until there is wage inflation most things will deflate. The gov will run into riots if too many people can’t afford food and housing.
Cash
Food
gold
utilities with a hedge
some foreign/global stocks
hybrid car, electric scooter, bikes, food stockpiles
oil at some point in the future.
Plus …. a job.
“”Zinn no longer attends church, he said, “because I can’t afford to drive.””
Another benefit of the recession!
Walt, you beat me to it!
“Zinn no longer attends church, he said, “because I can’t afford to drive.”
has anyone ever heard of walking or riding a bike?
No kidding.
Or public transit, if available.
And God forbid (no pun intended) he should get a ride with another churchgoer.
RE: Gone, too, are benefits such as overtime.
Wait until the health insurance bennies start disappearing.
Then you’re gonna hear some howling!
City of Peabody, MA is payin’ BC/BS $21k for family coverage for their public employees who contribute 10% fo the cost.
That must be a gold plated policy. My family health plan costs about half as much.
Gone, too, are benefits such as overtime.
Whoever wrote that does not know business.
Overtime is not a benefit. If a work schedule is tight, the company would certainly want to meet the schedule and encourage overtime.
The company is not paying welfare to employees. Good grief.
If a particular type of labor is in high demand, there will likely be overtime, recession, depression, or not.
Potential weekend topic: How will the newly-explicit GSE debt guarantee affect the picture going forward? And will any Californians qualify for refinancing, given that the C.A.R. last Friday reported a 38 pct YOY drop in median used home sale price?
Housing relief bill made law by Bush
Troubled homeowners, Fannie, Freddie to benefit
By David M. Herszenhorn
NEW YORK TIMES NEWS SERVICE
July 31, 2008
WASHINGTON – President Bush signed into law yesterday a huge package of housing legislation that included broad authority for the Treasury Department to safeguard the nation’s two largest mortgage finance companies and a plan to help hundreds of thousands of troubled borrowers avoid losing their homes.
The law authorizes the Treasury to rescue the mortgage finance giants, Fannie Mae and Freddie Mac, should they verge on collapse, potentially by spending tens of billions in federal monies. Together, the companies own or guarantee nearly half of the nation’s $12 trillion in mortgages.
Partly to accommodate the rescue plan for the mortgage companies, the bill raises the national debt ceiling to $10.6 trillion, an increase of $800 billion. The bill also creates significant liabilities and risks for taxpayers that are virtually impossible to calculate.
“We look forward to put in place new authorities to improve confidence and stability in markets, and to provide better oversight for Fannie Mae and Freddie Mac,” said Tony Fratto, the deputy White House press secretary. “The Federal Housing Administration will begin to implement new policies intended to keep more deserving American families in their homes.”
A half-dozen top advisers to Bush, including Treasury Secretary Henry Paulson, a leading advocate of the legislation, attended the signing. But it was not a particularly auspicious occasion given the precarious state of the nation’s financial system.
I guess if they are posting their first loss, a bottom must be at hand?
Starbucks posts first loss
Chain says it will be able to meet 2009 profit target; stock gains 4%
REUTERS and ASSOCIATED PRESS
July 31, 2008
Coffee chain Starbucks Corp. posted its first quarterly loss as a public company yesterday and said it will open fewer locations in the year ahead. But the Seattle-based company stuck by its profit target for 2009, and investors sent its shares up 4 percent.
“…minimal price increases.” Their experimental $1.00 /6oz cup of coffee is how they maintain inflation?
Starmucks….their future looks as sweet as Krispy Kreme’s
Krispy Kreme was great till they went super-national about ten or fifteen years ago and changed their glaze formula from thin and light to heavy and nauseating (apparently to accomodate Northern, especially midwestern, tastes). The old glazed donuts melted in your mouth, and one person could eat a bunch of them (megaprofits), but the new sugar encrusted, sickening sweet ones caused diabetes after two or three bites. How the management could have made such an error of judgement is amazing. It was the original formula that made their product popular, and they changed it in order to broaden their market.
I’ve noticed that the same thing happens when people buy out successful restaurants and grocery stores. They change the menus or product-lines, and poof! nor more success. Ditto for New Yorkers flocking to Florida beauty spots, and destroying the very beauty that attracted them in the first place. Sometimes it’s better to just leave things alone.
HUD local aid not much help, officials say
Foreclosures in county nearly 8,500 this year
By Roger Showley and Lori Weisberg
STAFF WRITERS
July 31, 2008
San Diego cities and the county are expected to receive several million dollars from the housing bill that President Bush signed yesterday to buy foreclosed homes and resell them to needy families.
But with $4 billion to be allocated nationwide through the Department of Housing and Urban Development’s community development block grant program, local officials said the effort will not be nearly enough to solve the spreading blight of empty houses and their dying front yards.
In the first half of the year, nearly 8,500 homes were foreclosed on in the county, according to DataQuick Information Systems. If area agencies received $2 million in the program, that would be enough to buy and rehabilitate eight homes at $250,000 each.
“A few million dollars is not going to do much in this market,” said San Diego City Councilman Tony Young.
I’m on the road this week (staying at a hotel owned by my Client, one of the few companies whose earnings were up and exceeded estimates this quarter, no doubt due to my excellent consulting work). Anyway, I’m reading the USA Today that’s delivered to my room.
There were three anti-bailout letters-to-the-editor printed. And, while most of my evidence is anecdotal, there seems to be a huge amount of anti-bailout sentiment among the general population. While maybe 10-20 million people were busy buying houses they couldn’t afford, the rest of us weren’t.
What puzzles me is why aren’t the Republicans seizing this opportunity? Why did Bush flip-flop? Why is McCain not taking a hard line against irresponsible banks and greedy houseflippers? This could be a great opportunity for them to take back Congress over the next few years, and they’re squandering it.
Perhaps a pundit might opine that the GOP is happy to concede 2008 and then mount a 1994 coup a la Newt in 2010?
Their choice is a one term weakling who’s out in 2012 with possibly eight after that for the opposition - or - give up a very stormy 2008-2012 and angle for eight of their own later on.
The role of choice for 2008-2012 will be to play up the image of an embattled, but fiercely resistant, minority opposition. That’s true for both parties - we’ll see who figures that out.
From Boston, anecdotally, I’m meeting a lot of super-libs who are really worried about the amounts of money being tossed around here. It seems even they have limits to how much of the gov’t money is going to be used to help people keep their homes.
Yeah, I’m in that camp. How could anybody not be worried by the amount of money being tossed around? But it’s not like the Republican’s put up much of a fight against the housing bill. I’m not about to switch parties.
Another fairly liberal person here (economically-speaking). 100% against any kind of bailout.
While helping people who are truly deserving of help (sick, disabled, those who come upon hard times not of their own doing, etc.) is a good thing, bailing out gamblers and thieves is not.
What puzzles me is why aren’t the Republicans seizing this opportunity? Why did Bush flip-flop?
Republcans have of late caught the Democrat disease - Be all things to all people in order to get the vote.
The Republican Party is not the party of the Goldwater types. That’s long gone. The Republicans are owned by religious right organizations who do not give a darn about whether or not we have a Capitalist society or socialist. They don’t care about economics anymore. They just want to shove the Bible down everyone’s throats and put cops in every bedroom.
Often brilliant, occasionally incoherent, the WSJ’s Holman Jenkins has officially lost his mind. Destroying excess goods to raise prices worked so well in the Depression, so why not now?
How to Shake Off the Mortgage Mess
http://online.wsj.com/article/business_world.html
Accelerated Creative Destruction. Yeah, this is the kind of stuff you’d expect to hear a crazed dictator scream from his crumbling bunker.
An environmental disaster in terms of wasted resources.
Rather than “demolish”, I suggest “dismantle”. Meaning Fannie and Freddie sell all the cabinets, countertops, copper pipes, hardwood floors, patio bricks, Refridge, Oven, Microwave, doors, HVAC system, windows, lighting fixtures, Stair railings,
At this point, maybe the sum of the parts is greater than the whole.
Unless all the parts have already been stolen. In which case you’re only left with the “real estate”. (At which point maybe the people who stole everything could buy the land and just bring everything back)
I’m starting to think a great investment would be one of those companies that can pick houses up and move them somewhere else. Move them to places people actually want to live.
i bet the shotty work done on these homes will make them impossible to transport very far if at all.
Transportation costs on those moves are usually equal to the cost of the home which is why its usually a historic home and/or one sold for pennies on the dollar that you see actually moved.
Unless all the parts have already been stolen. In which case you’re only left with the “real estate”. (At which point maybe the people who stole everything could buy the land and just bring everything back)
In an industrial complex I had a unit in.
I saw these guys rebuilding a car from the frame up, so I asked my neighbor what they did for a business.
He told me that they had stripped the car then reported it stolen. They bought the shell back from the insurance company and were now putting it back together.
from Bespoke:”The S&P Retail ETF (XRT) has a short interest figure that is more than 6 times its shares outstanding.”
this is whats known as a “known known”…. when a trade gets this crowded because it has worked…well, it works till it doesn’t. When the crowd crowds into a working trade, it blows up.
this is a follow up on my call last night that is against the grain of this trade.
”The S&P Retail ETF (XRT) has a short interest figure that is more than 6 times its shares outstanding.”
It’s like fiat money velocity. In reverse.
Weird.
It is a fully hedged position that is margined at 33:1. The profit is made by time decay on the ETF and interest collected .
hoz, can you explain what you mean by “time decay on the ETF”? Thx…
All ETFs have a fee that you pay to management. In volatile markets the fee gets to be pretty large over time. If the ETF is worth $30 on Monday and none of the stocks change on Tuesday, the initial opening price might be $29.99.
It may not seem like a lot, but in the case of SKF the last time the indices were at this level the ETF was $140 not $120. That is $20 of profit short ETF + short stocks plus interest on investing in bonds. All riskless, all in 2 months. If you are legally margined 30:1 that is a shitload of profit.
Wow, good to know… Thanks!
Sounds kind of like arbitraging atomic decay–nice and predicatable.
I sure hope that I have not swayed anyone to play into any particluar ETF. I do believe this is a stock pickers market.
To begin to identify the stocks, you dig for basic information. This particular information was on Naked Cap links section…
When something sounds too good to be true, it usually is. I am simply talking about going against the grain. The volatility is sqaurely on the NSADQ, you have seen the Amazon numbers….people are buying, and they will continue to buy.
as an individual, you gotta be in it to win it.
looking for double down Friday bank closure short gasm on the SKF, spilling into the Mon/Tue session….I wont be going back into the banks…however…might be some other sectors about to make a run at “it cant be so”, and “Shirley, you cant be serious”…melt-up drama.
Remember, the consumer is dead in the water.
I would be surprised if retailers didn’t still have a long way to fall. The recession is just getting started, and by the time it’s over, consumer spending will be impacted much more significantly than it has to date.
“The recession is just getting started, and by the time it’s over, consumer spending will be impacted much more significantly than it has to date.”
I don’t think that’s right. My medical research friend told me I’ve been all wrong about this whole downturn thing….after all their investments are all doing really well. (All I said was people were going to be changing their spending habits.)
I swear to Gawd they’re trying their hardest not to pat me on the head when they say that.
/snark off
Uncle Buck doesn’t look so good today.
latest news
[FNM] White House doesn’t expect Fannie Mae, Freddie Mac need aid
ECONOMIC REPORT
U.S. economy suffers fourth-quarter contraction
Revisions show spending slower, profits higher than previously thought
By Rex Nutting, MarketWatch
Last update: 9:01 a.m. EDT July 31, 2008
WASHINGTON (MarketWatch) — The U.S. economy contracted in the fourth quarter of 2007, the first quarter of negative growth since the 2001 recession, the Commerce Department said Thursday in its annual revision to gross domestic product.
Real GDP fell 0.2% in the quarter; a 0.6% increase had previously been reported. Many economists who think the economy is in recession believe it began in the fourth quarter.
Growth in the first quarter of 2008 was revised down a tenth of a percentage point to 0.9%. The economy grew 1.9% in the second quarter, the department said. See full story.
The revisions encompass better and more up-to-date data from sources not available when the government fixes its quarterly estimates. Read the full report.
Recession redefined
It’s a common (but mistaken) belief that a recession is defined by two consecutive quarters of negative GDP.
The actual working definition is “a significant decline in economic activity lasting more than a few months,” usually seen in GDP as well as monthly data on job growth, income growth, industrial output and business sales. All four of the monthly indicators are flashing recession signs.
b b b b but!!!! The economy is *roaring*…. recession???? How can this be?
Copied and pasted from above:
Don’t worry about that. The guys at MinRec and their many, many, minions in media will rectify your interpretation of negative GDP growth. Pretty soon they will all start chirpping in unison:
Recessions, if we are in one, usually last 6-9 months. Since GDP was negative in the last quarter of 2007, we are probably already out of it, if we ever were in it in the first place.
Winston
Over here in Japan, on CNN the news is bright for the US.
Gosh, based on what they are spouting on the Asia version of CNN, all things are going well, despite layoffs. Absolutely NO recession.
Gee, seems that this information wasn’t passed onto the masses bank accounts. So many folks are talking of having already cut back, and more to come.
Oh, that is where their lost financial reports are. On the presidents desk somewhere.
RECESSION WATCH-Corporate confidence crumbles, growth risks rise
Thu Jul 31, 2008 1:10pm BST
latest news
Paulson: Housing correction will only last months, not years
White House says U.S. avoided recession
By Robert Schroeder, MarketWatch
Last update: 11:10 a.m. EDT July 31, 2008
WASHINGTON (MarketWatch) — The U.S. has avoided a recession, President Bush’s budget director claimed Thursday, but he said challenges including energy costs remain.
“I think we have avoided a recession,” White House Budget Director Jim Nussle said in an interview on CNBC.
Nussle and other top White House economic officials spoke shortly after the Commerce Department reported that real growth in the U.S. economy accelerated in the second quarter to a 1.9% annual rate.
Can anything out of this Whitehouse be trusted? When have they ever told the truth?
A triple whammy for the housing market??
Tide of illegal immigrants to be reversed:
http://news.yahoo.com/s/csm/20080731/ts_csm/adepart
I’ve wondered recently if we might see a lot of illegals and legals going back to Mexico. The economy is one thing. But I remember around 2005, there was an article in the Modesto Bee about Mexican immigrants were giving the housing bubble it’s second wind, as multiple families were buying into single homes. One such house down the road from us, was one of the first to foreclose. I wonder how many of those going back to Mexico are leaving behind foreclosed homes? Either way, if you have so many millions of people leaving (either leaving homes in foreclosure or not renting) what kind of affect will that have on a housing market that’s already in the middle of a nose dive?
It’s very likely that crowd has already figured this out: Go back home, wait for the bottom, and come back and get even better houses for less. At least that’s forward looking - unlike our pols who think they can reflate.
“Some 1.3 million illegal immigrants have left the United States since Congress failed to pass comprehensive immigration reform in the summer of 2007. If the trend continues, according to a new study, the nation’s illegal population will drop by half in the next five years.
Moreover, reports the Center for Immigration Studies, young Hispanic immigrants began heading south before the nation’s economy did – a clue that what’s driving the new outmigration is a stepped-up border and workplace enforcement, not a souring US job market.”
Corporate America used these people and now is done w/them w/o having to pay any pesky unemployment costs. The gov is now ready to assume its former status as protector of all things legal.
The CIS drives me crazy with those emails. They want to say it’s enforcement and not the job market. I wish someone would figure it out.
Don’t worry, business has a plan B ( actually H2-B )to deal with this problem.
Indian Workers Decry Recruitment Tactics Protesters Cite ‘Lifetime Settlement’ Offer
Vijay Kumar was working as a contract welder in the sweltering United Arab Emirates two years ago, far from his wife and family in southern India, when he spotted an advertisement offering welders and pipe fitters “permanent lifetime settlement in the USA for self and family.”
Kumar answered the ad to find that workers were being recruited to rebuild oil rigs in Mississippi and Texas destroyed by Hurricane Katrina. He returned to India, signed a contract and paid a recruiter $20,000 to travel to the United States. He told his wife, who had just given birth to a son, that he would send for them as soon as he could.
In addition to the hiring process, the workers complained about their treatment in the United States. They said they were squeezed into crowded bunk rooms with too few toilets, given bad food and little freedom to leave the work site and had to labor in hot and dirty conditions, cleaning and repairing the damaged oil rigs.
http://www.washingtonpost.com/wp-dyn/content/article/2008/06/11/AR2008061103445.html
Chicago Housing Bubble Blog Meet & Greet
Version 2.0
Thursday, August 7th, 6pm
The first one was a bit of a mess since I landed at O’hare late and showed up to the meet & greet late, so it was a bit tiny in number (Thanks ET-Chicago and whoever else showed up, though!)
I’m hoping to try it again, possibly at the same place. Do you live in Chicago and like to hang out or meet people who have the same attitude as you about housing, and likely did a few years back?
We met at Relax Lounge at 1450 W. Chicago Ave. Quiet, great burgers, decent service, lots of place to sit. Come hungry, come full, bring friends, bring realtors.
If you’re interested, e-mail me and I’ll keep a running list. As of July 30, we have a total of 4 RSVPs expected. There’s room for many more!
Reasons to come to the Chicago HBB Meet & Greet:
1. They’re not making any more Meet & Greets.
2. Everyone wants to Meet & Greet.
3. Meet & Greets only get larger.
4. Meet now or be Greeted out forever.
5. Why hear about it from someone else when you can own the memories yourself?
6. Now is a great time to Meet & Greet.
From the National Association of Meetandgreeters (NAM)
let me know when you want to meet in the burbs. I can’t stay to city after dark I have horses at home :-0 (and kids, too)
I am mostly interested in exurb activity, anyhow.
I have noticed that one doesn’t see as many lumbar tattoos and belly button studs these days. I presume they’re still there, but it seems that styles have changed and the bare midriff look no longer prevails.
So I started wondering - is there a correlation between the years that midriff-baring clothes were in style and the years of the housing bubble?
Isn’t there an economic “mini skirt” barometer theory?
I vaguely remember something about mini-skirts and the stock market - and sunspots I think - from years ago.
Hemline theory of the stock market is quite old (and tongue in cheek).
I remember the coeds wearing halter tops in the late 70s in college. My memory is sharp - I have a pornographic memory.
Oh, and some of the same women would not let their daughters today wear skimpy clothes. Go figure!
One gal in one of my humanities classes wore a skimpy bikini that was so tiny I could see the tattooed butterfly on the bottom of her right breast. 2008? No. 1983. I loved her wardrobe!
Gawd, I loved my halter tops. Very comfortable to wear during the summertime.
Actually, I know quite a few people who are part of the “Indie” scene (think: 20-somethings who don’t shower, don’t really work, and drink $1 beers 6 nights a week), and many of them wish they never got as many tattoos as they did. Some have even shaved their long locks off, and the girlies are wearing long flowing skirts rather than tight jeans.
Recessions are always visible in the underbelly of society. And yes, some of my friends are part of this underbelly.
A.B., what’s your current buy price for the AU?
Also, I’ve been looking at a mexican fast food place ala Chipotle that closed just a couple months after opening. It looks like they spent a lot on fixtures and then ran out of capital. The location is very good and the demographic favors this type of establishment.
What are some of the questions I should be asking to see if this may be a winner? I would be seeking to benefit from the previous owner’s sunk capital while undercutting competition on pricing.
Recessions are always visible in the underbelly of society. And yes, some of my friends are part of this underbelly.
On the other hand (coming from someone who lived this way for a long while), that demographic is fairly well suited for a downturn — young, relatively healthy, mobile, used to working sh!t jobs, used to living on the ultra-cheap.
Quote of the day? “… never take a recommendation from a real estate agent.”
http://money.cnn.com/2008/07/31/real_estate/NY_needs_more_lending_ovesight/index.htm?postversion=2008073111
“It may add to the expense a little,” she said, “but when people go to buy a home, they should have a trusted attorney and they should never take a recommendation from a real estate agent.”
Larry King’s “LIVE” foreclosure special last night HAD to have been a re-run, or else his entire panel was insane and/or utterly dishonest. All noted real-estate flippers and hucksters, they unanimously proclaimed themselves completly optimistic, and said that if one had the money, now was a wonderful time to buy because it would, among other things, help the economy and the real estate industry, and put a lot of people back to work. This sounded like Bush after 9/11 asking Americans to please use their credit cards. Why anyone should risk losing tons of money to supposedly benefit the corrupt real estate industry is beyond me.
Nobody on the panel seemed aware of the new law that eliminates income tax on forgiven mortgage debt.
Larry King must have property he can’t unload, since he keeps beating the real estate drum. I wonder how many members of Congress are upside down in their mortgages, and how many voted for the bailout to benefit themselves.
A few days ago, someone here posted from an article which claimed the bailout was utterly unconstitutional for several specific reasons. Has anyone heard of any suits being filed to block it till a court decides? Also, has anyone heard of any official investigations into the financial dealings of the senators and representatives who voted for the bailout (as well as their staff members)?
I’ve been trying to push this angle for some months now. Other than that sorry sack poster girl hack from Cali, there hasn’t been much investigation of real estate dealings by members of congress.
I would guess better than half of congress or immediate family stands to benefit from the package, although I’d say the biggest benefit will be in the form of campaign contributions from grateful bankers!
Larry King is my hero, my idol. He should have more shows promoting real estate.
More of other people’s money committed to the system means less drain on the rest of us.
They probably decided to re-run it because it was such a great, upbeat show! LOL
Mass. regulators accuse Merrill Lynch of fraud
New York-based Merrill Lynch denied it defrauded investors.
“We are disappointed that Massachusetts filed this action because it ignores the only reason our advisers sold auction rate securities: they believed they were good investments for clients willing to trade some liquidity for higher return,” the company said in its statement.
“The inarguable fact is the number of auctions that had failed in nearly two decades of (auction-rate securities) sales was small. In 2007 there were no failed auctions of securities sold to retail clients and, in fact, none to these clients until late January 2008.”
The complaint cites a personal e-mail written by one Merrill Lynch executive on Nov. 19. “Market is collapsing. No more $2k dinners at CRU,” said the e-mail, referencing a Manhattan restaurant.
The complaint also alleges that Merrill Lynch “co-opted” its research department by allowing its sales and trading managers to push for written research to be published “endorsing the safety and high quality” of auction-rate securities.
http://biz.yahoo.com/ap/080731/merrill_lynch_fraud.html
It’s finally hitting me in Mexico. (Maquiladors in Tijuana)
Clint Engel — Furniture Today, 7/31/2008 6:59:00 AM
Company cites competition from imports
EL SEGUNDO, Calif. — Douglas Furniture’s sales fell sharply before its Chapter 11 filing July 25, and its lender cut off its financing, according to court documents.
Douglas, once the world’s largest producer of dinette sets, said it wasn’t able to find a buyer willing to pay more than its lender was owed — about $9 million.
Its two large factories in Mexico have ceased operations and Douglas is asking the court to authorize its use of collateral cash to preserve the value of its business while it continues to seek a going-concern buyer or liquidates.
The California company filed for Chapter 11 bankruptcy in Los Angeles July 25. It listed assets of between $1 million and $10 million and debts of $10 million to $50 million. Its Las Vegas Market showroom was closed last week.
From 2000 to 2004 the company’s gross revenues ranged from $124.5 million to $134 million, but dropped to $92.4 million in 2005 and $89.4 million in 2006. Last year, they fell to $68.7 million, according to the documents.
The sales decreases and operating losses continued in the first half of this year. Douglas officials cited “the general poor state of the economy, particularly the terribly troubled housing market.”
Its lender, Heller Financial, a subsidiary of GE Capital, told the troubled company several months ago it was no longer willing to finance the business after the Heller debt matured June 30, according to a court document. That left Douglas with no options other than selling or shutting down, it said.
Douglas could not find anyone interested in buying the company as a going concern for more than the $9 million owed Heller, or for less with Heller’s approval, the documents said.
Douglas is “still attempting to put together a deal,” court documents said, but will remain shut down and “in liquidation mode” until or unless such a deal is done.
Norwest Equity Partners acquired a majority stake in the company in 2000. A year later, Douglas saw a rapid decline in its dining sales because of pressure from Asian imports, the company said. It said its upholstery business came under the same kind of pressure in 2005 because of imports.
In addition, Douglas went through several CEO changes during that period, which also hurt the company, it said.
Douglas implemented an import program in response, but “this was still not enough to offset the decline in sales and operating margins,” it said in the filing.
Gordon Hitt, who has been the company’s chief financial officer and now is working in that capacity as a consultant, told Furniture/Today last week that Douglas has been meeting with its current banking group, and other potential investors and lenders, interested in possibly acquiring all or part of the company.
“I think we’ve got a shot at it,” he said, adding that the meetings were ongoing.
Hitt is authorized to handle the bankruptcy filing and assist the company with respect to any possible sale of assets and in attempting to confirm a reorganization plan, according to the bankruptcy petition.
Among Douglas’ largest unsecured creditors are Baillie Lumber, with a $453,713 claim; Leggett & Platt, owed $338,911; and Morgan Fabrics, owed $300,851.
Senior Editor Gary Evans contributed to this story.
How “Point Blindness” Dilutes the Value of Stock Market Reports
Lupia, Arthur, Krupnikov, Yanna, Levine, Adam Seth, Grafstrom, Cassandra, MacMillan, William and McGovern, Erin (2008):
Abstract
The stock index “point” is a focal component of financial news reports. While much attention is paid to changes in stock index point totals, few people realize that the value of a stock index “point” varies (and has recently declined). We call this perceptual phenomenon “point blindness” and explain its threat to investors. Simple changes in media presentations of stock index information can counter point blindness. These changes are easy to implement and can help audiences make better financial decisions. An experiment on over 2000 participants shows such changes significantly altering their perceptions of the stock market.
http://mpra.ub.uni-muenchen.de/9604/
“…Layoff events in June were the highest they have been for that month since 2003, and associated initial claimants reached its highest level since 2002.
In June, employers took 1,643 mass layoff actions affecting 165,697 workers on a seasonally adjusted basis.
In June, 541 mass layoff events were reported in the manufacturing sector, seasonally adjusted, resulting in 76,514 initial claims. Both measures were at their highest monthly levels since August 2003.
Government accounted for 16% of mass layoff events and 13% of associated initial claims in June, primarily from educational services.
Of the four census regions, the highest number of initial claims in June was in the West (56,177). The Midwest had the second largest number of initial claims among the regions (39,391), followed by the South with 38,453 and the Northeast with 32,721. All four regions experienced over-the-year increases in average weekly initial claims. …”
CoStar
Mass layoff actions are required by law when 50 people are going to be laid off or when a government lays off employees.
“Four new power brokers—Asian sovereign investors, petrodollars, hedge funds, and private equity firms—are having a growing impact on global capital markets. In this update to a 2007 report, MGI examines how the new power brokers have fared since then, during the turmoil of skyrocketing oil prices, evaporating liquidity, and disappearing leverage.
MGI finds that the financial and economic events since mid-2007 have, if anything, accelerated the trends identified earlier: The power brokers’ wealth and clout have grown. They have adapted by expanding their investment strategies. And they have increased the use of private financing as an alternative to public markets. Their actions have brought clear benefits in containing the financial market crisis but also have highlighted the risks associated with their rise.
MGI reveals that all four power brokers grew in 2007, with their combined financial assets rising by 22 percent, even faster than before, to $11.5 trillion. …”
http://www.mckinsey.com/mgi/publications/Power_Brokers_Gaining/index.asp
Whats a few trillion between friends? And somebody wonders where the money is coming from to buy commodities. lol
“…The Federal Reserve’s July summary of current economic conditions (aka Beige Book) reported that loan growth was generally restrained across the country, with residential real estate lending and consumer lending showing more weakness than commercial lending.
Most districts also reported a further tightening of credit standards, especially for residential real estate and construction loans. Dallas reported that lenders were tightening non-price terms and boosting loan spreads in response to increases in their cost of capital. Tighter standards for construction loans were reported in the Atlanta and Chicago districts and San Francisco indicated that credit standards remained quite restrictive for both residential real estate and construction loans.
Tighter standards for business loans were reported in three districts, but banks in the Atlanta district were reported to be competing more intensely for business customers with good credit histories. Kansas City and Boston reported that tightened standards were especially prevalent on commercial real estate loans.
Overall loan demand was reported to have weakened in the New York, Kansas City and San Francisco districts and was described as sluggish in the Philadelphia district. St. Louis reported slightly positive overall loan demand.
A number of districts reported sluggish growth or slowing demand for residential real estate loans and San Francisco described demand for such loans as very weak.
Reports on business lending were generally more upbeat. However, slight to moderate declines in business lending were reported in the New York, Kansas City and San Francisco districts.
Consumer loan demand was reported to have declined in the New York, Chicago and Kansas City districts and grew more slowly in the Philadelphia district.”
CoStar
FASB Rule Delay: Impact Goes Beyond GSEs
American Banker | Thursday, July 31, 2008
By Harry Terris
“In the weeks preceding Wednesday’s decision by the Financial Accounting Standards Board to postpone changes to accounting rules for securitizations, attention tended to focus on the changes’ ramifications for Fannie Mae and Freddie Mac.
But observers say the changes, if and when they are adopted, could have more of an impact on credit card businesses than they would on mortgage operations.
The changes being contemplated by FASB could lead financial institutions that securitize loans to take billions of dollars of assets back onto their balance sheets. The rulemaking body said a narrowing window to complete the process under the existing timetable was among the reasons for the delay.
At a meeting to consider the schedule, Robert Herz, FASB’s chairman, made it clear he supported the delay reluctantly. “It does pain me to allow something that basically has been treated or abused by certain folks, to let that go on another year,” he said….”
American Banker
Why does it pain you? JUst because it gives the banks a chance to become solvent instead of booking credit card losses and kept one bank from putting $500B in off balance sheet items back on the book (Citigroup).
Unless it was phased in VERY gradually, the implementation of this rule would destroy some very large financial institutions. The consequences on the markets would be cataclysmic.
Russia says cut investments in US agency debt by 40pct
MOSCOW, July 31 (Reuters) - Russia has reduced its investments in U.S. agencies’ debt by about 40 percent since January 1 2008, central bank First Deputy Chairman Alexei Ulyukayev said on Thursday.
“This is an additional measure of precaution which the central bank, as a conservative institution, is taking, although we understand there was no risk there,” Ulyukayev told the Ekho Moskvy radio station.
Russia held about $100 billion in U.S. agencies Fannie Mae (FNM.N: Quote, Profile, Research, Stock Buzz) and Freddie Mac (FRE.N: Quote, Profile, Research, Stock Buzz) and Federal Home Loan Banks at the start of 2008. Russia said earlier this month it had cut exposure to Fannie Mae and Freddie Mac debt to less than $50 billion.
http://www.reuters.com/article/marketsNews/idINL170800420080731?rpc=44
They’re going to wait until they dump the remaining $50B before calling it complete crap.
From the Adolph Greenspan Bunker
http://www.bloomberg.com/apps/news?pid=20601087&sid=a4jioRRKzw5s&refer=worldwide
LMAO!! He is the best rectifier out there.
There is “at least a 50 - 50 chance we might be in recession.” That’s just completely meaningless. F & F are a “major accident waiting to happen.” Everything is o-kay in the present. And, my favorite of the day per CNBC — He is ’surprised’ by the good economic news. It’s mighty much better than expected.
The Last Hurrah for the Banking System:
http://www.informationclearinghouse.info/article20373.htm
This is very interesting.
http://www.informationclearinghouse.info/article20385.htm
Off-topic, but on board with more doom & gloom:
James Kunstler’s latest venom directed at America’s fall from grace:
The Coming Re-Becoming
“Everywhere you turn in this nation, you see a society primed for implosion. We seem unaware how extraordinary the American experience has been, especially in the last hundred years. By this, I don’t mean that we are a better people than any other society — these days, ordinary people in the USA make an effort to appear thuggish and act surly, as though we were a nation of convicts — but for decade-upon-decade, we were very fortunate. Even the Great Depression of the 1930s may seem like a relatively peaceful and gentle “time out” from a frantic era of hypertrophic growth, compared to the storm we’re sailing into now.
We were fortunate to inhabit a New World filled with productive land, lots of minerals, and plenty of coal, oil, and gas; and the land itself was insulated physically from the great theaters of 20th century conflict, though we fought in wars “over there.” That experience itself, especially our victory over manifest evil in the Second World War, left us with a dangerous mentality of triumphal exceptionalism. Even now, we think we are immune to the epochal hazards of history. The notion that nothing really bad can happen to us is reflected in the blind carelessness of our current news media and their simple failure to report what is now happening.
I drove up along an obscure stretch of the upper Hudson river on Sunday, starting in the old factory town of Cohoes, north of Albany, where the Mohawk River runs into the Hudson. There is a powerful waterfall there, and along the high bank the massive old red-brick Harmony Mill still stands with its Victorian towers and mansard roofs, like a vision from an Alfred Hitchcock movie. Behind them are streets of red-brick, three-story worker row-housing from the same period. Today they are inhabited by a different kind of poor people, not necessarily working, and probably suffering from a sheer lack of structure in their lives as well as plain poverty of means. These are people who probably don’t follow the Bloomberg financial bulletins, and their experience of a cratering economy may only be the rising cost of cigarettes and beer.
The tattoo quotient among both men and women there is impressive. In the days when the Harmony Mill was built, only South Seas cannibals and sailors wore tattoos. You wonder: are tattoos now the only way left for this class of Americans to assert their selfhood? And what exactly are they proclaiming? I am a warrior. Or is it: I am a television (I display pictures, too) !? The expanding class of the poor-and-idle has been remarkably passive in the face of their dwindling prospects. Perhaps they passed the point years ago (a generation or two ago!) when there was any sense of sequential improvement for the family’s station-in-life. The destiny of their everyday lives must seem totally beyond their control. They are subject to the fate of distant corporations who sell the staple corn-syrup byproducts and gasoline on which daily life is based. Where government is concerned, they are all potential victims of Katrina-ism, awaiting their own personal disaster.
North of the junction of the Mohawk and Hudson was the old town of Waterford, where the Erie Canal began its journey west — bypassing those powerful waterfalls. The locks are still there and still in operation for the infrequent tanker ships and ore barges that come and go to the Great Lakes. But the operation of the canal system is automated to the extent that it requires only a handful of people to run the locks now, and the town around them has deteriorated into slum and semi-slum garnished with a few convenience stores and pizza shops. There is no other commerce there. No matter how poor, the denizens are required to drive a car to a giant chain store for groceries or hardware or clothing.
As you leave Waterford, the river road becomes a suburban corridor of 1960s-vintage ranch houses and stand-alone small retail business buildings which, if used at all now, are mostly hair salons, chiropractic studios, and other services not generally rendered by the chain stores. All this stuff was deployed along the road with the expectation that Americans would be driving cars cheaply forever. Now that this is distinctly no longer the case, corridors like this are entering their death throes. The awfulness of the design and construction of these buildings is now especially vivid as the plywood de-laminates, and the vinyl soffits fall off, and the dinge of neglect forms a patina over it all. Hopelessness infects this landscape like a miasma. Whatever young adults remain in these places are not thinking about a plausible future, only looking to complete their full array of tattoos and lose themselves in raptures of sex, methedrine, and video aggression.
Eventually, after running through the disintegrating towns of Mechanicville (once a place of earnest labor, just like it sounds, now a morass of sinking car dealerships and Quik-stops), and Stillwater (smaller version of the same), the road turned completely rural and few other cars ventured up there. The decisive Revolutionary battle of Saratoga was fought near there on the bluffs and hills overlooking the Hudson in 1777. You wonder what the heroes of that battle would think of what we have become. What would they make of the word “consumer” that we use to describe our relation to the world? What would they think of excellent river bottom-land that is now barely used for farming — or, where it is still farmed (dairying if anything), of farmers who will not even put in a kitchen garden for themselves because it might detract from their hours of TV viewing?
The sclerosis of American life is shocking. If you go further north up the Hudson River, to Fort Edward and Hudson Falls, you’ll see a nation that seems ready to crawl off and die. There, it appears too far gone to even put up a proxy fight on a video screen. Frankly, I don’t want that version of America to survive — the America of chain stores, and muscle cars, and grown men obsessed with video games, drugs, and pornography, and women decorated like cannibals, and the vast, crushing purposelessness of it all. I have no doubt we’re heading into a convulsion that will wring much of this junk and dross into the backwaters of history. We’re capable of being something better than this, of putting our time on earth to better use, including a more respectful treatment of the land we inhabit. This year and the next will be the years of letting go, and out of that we’ll commence a re-becoming.”
For those of you with the cajones, watch Werner Herzog’s film “Stroszek” and see if you recognize any people like those depicted in the movie.
” Farewell then Bennigans…
Farewell then
Bennigans -
Bringer of
faux-Irish
to American
Suburbia,
Amazingly,
you wrung
huge margins
from the cheese-slathered skin
of
the humble
potato.
You were
the first
of your kind
to arrive,
and now,
the first
to depart.
Your green-roofed
carcasses
will litter
dead retail
centers for
years to
come.
Oh yeah, and
my first flame
was once
a server
for you…
and even way back then,
thought (rather articulately)
that “you
sucked!”. ”
Cassandra
hozzie baby,
get ready for She-nanigans
I’m thinking all the roach coaches that are no longer serving the buidling trades are gonna descend on the hollowed out shells and just spray paint the signs. If its good enough for Rod Farva, its good enough for me.
hat tip, broken lizard..
Nice ride: was $687,500 (7/7/05) -> now in foreclosure $295,900 = -57% within three years.
http://www.zillow.com/aerial/DualMapPage.htm?zpid=2142732096
http://sccounty01.co.santa-cruz.ca.us/ASR/asrtransfer.asp?apn=051-543-10
“Fat Cat Is Victim Of Foreclosure”
“BLACKWOOD, N.J. — Turns out, the economy is the reason a 44-pound cat found lumbering the streets of New Jersey became homeless.
The Camden County Animal Shelter said the cat’s owner came forward to say she had to abandon the tubby tabby because her home was foreclosed. . .
. . . In a week with headlines about presidential politics, suicide bombings in Iraq and big baseball trades, the cat has also captured the nation’s attention.”
http://www.wnbc.com/news/17049831/detail.html