Bits Bucket For August 1, 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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Paulson Says Stimulus Worked,
But Housing Still Correcting
By MAYA JACKSON RANDALL
July 31, 2008 1:16 p.m.
WASHINGTON — U.S. Treasury Secretary Henry Paulson Thursday said new economic data prove that the economic stimulus plan has successfully propped up the U.S. economy, but said it will take additional months for the housing market — the biggest risk to the economy — to fully recover.
That said, his focus going forward will be on the housing and capital markets, he said in a speech at the St. Regis Hotel in Washington.
“Our first and most urgent priority is working through the housing downturn and capital market turmoil and that will be our priority until these situations are resolved,” said Mr. Paulson.
Interesting how he already frames the stimulus in the past tense. Why? Is this to declare victory (a mission accomplished thing) - or - is it to lay the foundation for a second package?
They’re grabbing cred for the positive 2Q number before it gets revised down and at the same time positioning themselves take more action.
It’s either that or we now know that all we have to do to avoid economic hardship is to keep handing out money - amazing it took until 2008 for mankind to figure that one out.
“Major combat operations in the housing market rescue have ended.”
The government has decided that our bloated financial companies are “too big to fail”. As a result, the government is lending billions/trillions of taxpayers’ dollars to bail out Wall Street and the mortgage industry.
Can you say stagflation?
Corporate earnings are declining.
The Dow Industrial trailing P/E is 75!
This is the real 12 month trailing number not forward 12 month estimate. Check out the ‘Wall Street Journal P/Es & Yields Page on Major Indexes’.
Also check out the Gold/Dow ratio on ‘Gold as an investment’ on Wikipedia.
I am definitely adding to my holdings of inflation hedges during this deflationary phase of the post-bubble bust. But I think housing will keep deflating longer than less lumpy inflation hedges; hence I plan to keep my powder dry in that area, either until prices are more reasonable, or else forever if they remain on a permanently high plateau. Given home price- and rent-to-income ratios, I don’t anticipate getting priced out forever from either the rental market nor the owner-occupied housing market any time soon.
Thanks, Prof.
your comments are always interesting and thought-provoking-and it just so happens that I agree with you!
A co-worker of my husband’s is selling his house in Southborough, MA, Where The Housing Bubble Began. It is on two acres and has eight rooms. He originally priced it about six months ago at $405,000. When told this I told my husband, “Nix. They wouldn’t write a loan for Jesus Christ for over $400,000K these days” He said he would relay the news. The price was duly lowered to $353,000. The house still sits there. I told my husband I would give the man $150,000 for it, cash on the barrelhead.I would even provide my own barrelhead. This message was also relayed but regarded as humor, which it is not. Any RE geniuses out there who can come up with a good price for this car barn? I don’t think any house without a drawbridge and a moat is worth any more than this, whether it has two acres or no.
RE: Southborough, MA,
Pardon, my ignorance, but where da fook is Southborough?
If it’s Metro West or South Shore, $150k is a pretty damn good offer.
Man, those areas suck.
Absolutely horrific traffic to go ANYWHERE!
Sold my 20 year Torrance CA home for 3 1/2 times the purchase price in 2004 (children grown). Invested in inflation hedges (metals and energy funds) and have been renting for 4 years.
The real estate markets in CA have a 10 years up and 5 years down pattern. We are only 1 year into the 5 year down phase so not looking to buy (for cash) until at least 2012.
Have been reading Peter Schiff’s and Jim Puplava’s websites since 2001 (great information).
Still think the mortgage interest rates will hit 15% (like in the early 1980’s) before it is time to buy for cash!
The Dow Industrial trailing P/E is 75!
To be fair, if you don’t count the mega money losers (banks, GM, etc.) the P/E is about 14-15.
Colorado, how is that fair? Sounds like the way some companies keep their books “if you don’t look behind the curtain, we were actually super…”
How does the P/E look if we’re continuing the fairness and we pull out all the mega money winners?
What I mean is that 90% of the Dow components have P/E’s of about 15. People keep throwing the 75 number around, implying that all are absurdly overpriced, when in reality it is only a handful that are.
So while the average P/E is 75 the median is about 15.
Colorado, “To be fair, if you don’t count the mega money losers (banks, GM, etc.) the P/E is about 14-15.”
Ha Ha Ha!
There is no question of the economy being in an intensifying inflationary recession unless you don’t count the losses of the banks, auto companies, etc. We’re using the US Government Bond printing press as a solution to not having enough money to cover obligations. 15% mortgage interest rates here we come! 2012? 2015?
Check out ‘The Shadow Government Statistics’ website!
I see where you’re coming from, but it’s still a package deal. It’s pretty well known that adding 10% fecal matter to yummy ice cream makes it inedible. It can’t be too different for the DOW, can it?
The issue here is massive write-offs, writedowns, and so-called non-recurring expenses, which deflate current earnings but are really a misstatement of earlier earnings. For example, most of GM’s loss can be thought of as a sudden acceleration of depreciation of previously capitalized assets, which are therefore an understatement of depreciation for all past reporting periods.
Bogle of Vanguard addressed this recently, saying (roughly) that these charges subtract now on average about 20% of total S & P earnings, meaning that the true P/E ratio is much higher than the pie-in-the-sky-don’t-count-one-[time-charges ones that normally gets used.
This was his main rationale for considering the market to be somewhat overvalued earlier in the year - well-called.
Common sense accounting principles would require companies to restate earlier earnings when these massive write-offs are taken, thus spreading out the losses and reducing earnings in all previous years.
Jim Puplava … great information, now have something very valuable to enjoy my daily commutes (with his audio podcast). Peter Schiff, didn’t know him. Thanks.
Exactly.
Just keep on printing money - why stop at $600 or $1,200? Why not print a million for each citzen. Then, we can all be rich, and those extra (overpriced) houses will vanish as buyers rush out to buy them. And, with hyperinflation, we know housing will always go up! It is working so well in Zimbabwe, we should try it here! *gag*
“…it will take additional months for the housing market — the biggest risk to the economy — to fully recover.”
That’s right, several month and the housing market will have fully recovered. We’ll be right back to 2005 pricing with specuestors camping out to make their 20% down payment for a piece of the pie in the sky.
Maybe we could all invest in something like fariry dust or some other purely imaginative commodity…with borrowed money of course.
“We’ll be right back to 2005 pricing with specuestors camping out to make their 20% down payment for a piece of the pie in the sky.”
Who was putting down 20% in 2005?
Specuvestors had to put 20% down to get a contract on a condo in Miami. These days the builders and failed flippers are sueing each other.
Nobody, because nobody smart enough to have any money was buying then.
I foolishly did in NoVA, but I sold again in 2006 for 40K more than I bought.
test
Months, yes I can see that………. as in a car loan kind of number of months - you know 60 months at least.
“but said it will take additional months for the housing market — the biggest risk to the economy — to fully recover.”
Yeah, like 60 additional months (better known as, 5 years) at a minimum. These people just keep peddling the “it will be better soon” line, over and over again. How about just telling it the way it is; the correction might happen faster, and, either way, you at least won’t look like such an idiot (to anyone who’s watching, that is).
Much like people with serious illnesses, they hang onto the most optimistic prognosis. Neccesary attitude for someone with what could be a terminal illness, but not always a good thing when it has to do with financials:
“The odds of us getting together are a hundred to one? ”
“More like a million to one.”
“So you’re saying that I have a chance???? ”
The BIG question………what is going to happen when millions of Americans realize that they are financially SCREWED for the forseeable future? I suspect you are going to see a lot more of the “jingle mail” plan, not just on houses, but on all kinds of debt.
RE: what is going to happen when millions of Americans realize that they are financially SCREWED for the forseeable future?
Just came from a Wal-Mart after buyin’ a quart of Mobil 1.
What on earth would ever give you the impression that millions of American consider themselves financially screwed?
From the looks of the shoppers at Wally World, everybody has gotta be pullin’ a government check in some form or another.
No way are a majority of these people employable.
So as long as the entitlement (especially DSS-disability) and welfare agencies keep printing their checks-nobody gives a rat’s azz because the majority today cannot understand simple finance and economics.
You can thank LBJ’s Great Society for where we find ourselves.
Henry Paulson Thursday said new economic data prove that the economic stimulus plan has successfully propped up the U.S. economy.
Is it just me, or did a supply-side economist just say that supply-side economics don’t work as well as demand-side economics?
WE have all become “Kremlinologists”, just like the old 1960’s Soviet Union days where a small group of powerful bureaucrats ran the entire empire and the rest of the peasants simply sat idly around and watched the show.
Welcome to the modern-day U.S. Soviet Society.
Yep. That’s the way to lick inflation, deflation, stagflation, and Osama bin Laden- just run to the mall with those good ol’ stimulus checks.
I also agree with the Wal-Mart shopper- one day I was in the bank on the day the government checks came out. The lines were out the door- and I saw very few people who looked disabled to me. They were all on two legs and looked relatively sane. I read a statistic once that if more than 50% of a society has no stake in its survival, then it will not survive. But then who would send them checks….
I agree. It hasn’t recovered fully yet.
“the economic stimulus plan has successfully propped up the U.S. economy”
Well, so does a credit card. What’s his point?
Yes, the housing market is correcting, but they just don’t get it. A correction will entail house prices coming down to around 2.5 to 3 times income. Even if a buyer can make mortgage payments, if he has to change his whole life style (eat ramen, sleep on an air mattress) to make those payments, the market is still out of whack and has further to fall.
Test
It’s still different there on lawn guy land…
Beating the bust: Where housing sales prices rose
BY JULIE JANOVSKY | Special to Newsday
August 1, 2008
Good real estate news seems hard to come by these days, as industry analysts wax on about subprime mortgage losses, the credit crunch and foreclosures on the rise. But on Long Island, there have been glimmers of hope in the first half of 2008.
According to the Multiple Listing Service of Long Island, an agency that tracks reported home sales and closing price data (excluding data on bank short sales and for-sale-by-owners), there are at least a half dozen local communities showing signs of “beating the bust” in 2008.
While the number of home sales dropped in these three Nassau and three Suffolk villages and hamlets, their average sale prices (a tabulation of all closing prices divided by the overall number of sales in a specific time period) rose - in two cases, by more than 10 percent.
“Real estate is inherently local,” says Rachel Drew, research analyst for Harvard University’s Joint Center for Housing Studies. “Some places remain desirable no matter how the economy is doing.”
Larry Kudlow spins his numbers? I’m shocked! Shocked! I tell you!
http://www.cnbc.com/id/25849157
(Watch video.)
Roidy
P.S. Jim Cramer has called a stockmarket turn around. Thank goodness! I was getting worried.
P.P.S. We are “diverse” on this blog, and I am up-to-date on my annual “diversity” training. Heck, I’m even on the company “diversity committee”. So, for those of us who are “sarcasm challenged”, I respectfully request that Olympiagal explain the jokes.
When has Cocaine Larry Kudlow and co-host Jerry BoyLover ever been known to be truthful? The failure of their supply side mantra is self evident. Spin it, weave it and recast it, future tax revenues are never fully recovered after lowering the top margins.
So, how productive is your “diversity community”? Does its existence add value to the economy” Does its activities add justification to staff salaries, some or much of which is likely greater than $100K annually?
Yet more people being paid a wage for no reason.
Do many of your fellow committee members return to their desks after said meetings to surf the ‘Net? Of course they do.
And I bet they whine about $4 gasoline, too.
GM Swings to Loss
By MIKE BARRIS
August 1, 2008 7:24 a.m.
General Motors Corp. swung to a $15.5 billion second-quarter net loss amid $9.1 billion in charges and write-downs, stung by strikes at a major supplier and collapsing truck and SUV sales.
The company had warned early in July that it would post “a significant second quarter loss.”
In premarket trading, GM shares were at $10.40, down 6.1% from Thursday’s close.
“The automaker lost $27.33 per share in the quarter, compared to a profit of $784 million, or $1.37 per share, a year ago.”
$27.33 per share when the share is only trading at $11.07.
What I don’t get is, how often can you have higher operational losses than your entire company is worth?
Their entire market cap is about $6.3 billion and they manage to lose $15.5 billion. 6.3 - 15.5 = -9.2
So they’re bankrupt right? Is any private entity going to lend them money? Look for the auto bailout straight ahead.
If Ford and GM go under things will get a lot uglier than Bear Stearns or Fraudy Mac going under. This time there’re 100s of thousands of real jobs in the line.
The Federal Reserve can lend GM money. fact
Ford and GM will be deemed too big to fail and be bailed out, just like Chrysler was in 1979.
Chrysler was bailed out in 79 primarily because of their Army tank division, not to save their crappy cars.Their cars were really bad back then. They deserved to fail IMO.
Technically they may be insolvent, but they do still have the capacity to borrow to stay alive . . . for awhile.
I would be really surprised if GM and Ford went under. Chrysler not so much, given what Mercedes did to them before selling them to a company that has never been required to actually operate a company under their control.
GM and Ford have enough operational capital to last a few more years at this pace, but that wont be necessary. Both have been cutting capacity and staff, necessary items to survive a period of reduced auto sales. And don’t forget that their major competitors have made some very big mistakes at a time when they could have killed GM and Ford. Toyota has more SUVs in their lineup than Ford. When Ford announces that they are turning a truck factory into a car factory we say that Ford is dead. What about Toyota? They’re doing it too…
I keep hearing about how smart the Toyota guys are…….
Hows that multi-gazillion dollar new truck plant in San Antonio working out?????
My family has been driving Toyotas since 1973. Great Company and smart people…..UNTIL I heard about the heavy duty pickups plans. Couldn’t believe it or understand it. They had commercials in Nevada touting their higher gas milage ratings back in 2004 (Gas $2.25-2.50/gal then), as they were bringing on that plant.
One division not talking to another??
RE: GM shares were at $10.40, down 6.1% from Thursday’s close.
Go take a cruise thru the Big 3 websites and look at their offerings.
Save for Chevy’s Corvette; Ford’s Shelby’s; and Chysler’s new ‘Cuda (none of which is financially touchable by anyone without a massive worker’s comp settlement) there ain’t squat to purchase.
And even these latter vehicles are niche market throw-backs to the muscle car glory days and totally anachronistic in a period of $4.00 per gallon petrol.
So…is GM, Ford gonna bet bailed ala Chrylser in ‘79?
I figure Chrylser is already dead meat. They had their turn once.
JQP as stupid as he is, can easily figure out that what’s good for the Wall Street gangsters in good for Flint UAW workers.
LMAO-state owned auto manufacturers…if quality and innovation suck now, imagine what happens when the Feds run the show.
Looks like the Commies won after all.
The Corvette: GM needs to give the sloopy, pushmepullyou groovy stretch hood a rest.
Ford: J Mays et al did a great job on the Mustang and the GT40.
Chrysler: Pre-designed muscle cars aren’t muscle cars. Tricking out a conservative sedan is a muscle car. Chrysler needs to retire the crosshairs, aspecially the fat ones on their balloon-shaped, soapbar pseudo-muscle cars.
RE: The Corvette: GM needs to give the sloopy, pushmepullyou groovy stretch hood a rest.
Ford: J Mays et al did a great job on the Mustang and the GT40.
EM3~
Such totally niche cars with acquisition costs thru the roof!
Never even seen a GT40 on the road!
But to me this is a reflection of the Big3 today.
A miscroscopically small group of auto engineering talent, completely overshadowd by legions of complete incompetants with corporate goals driven by quota hiring and legacy health care and pension costs.
Everybody employed by these dinosaurs are now just surviving and countin’ the days before retirement.
One thing I’ve found out (from my daughters and their boyfriends):
They LOVE old American Muscle/Pony cars; oldest daughter just bought a new Mustang coupe……the youngest wants my oldie but-goodie Dodge when she turns 16
(Can you say “Fat-effing chance??? LOL).
They are willing to put up with a gas mileage penalty to own one. THE BIG 3 OWN THIS MARKET……..a Japanese or Korean made car just wouldn’t be accepted.
The problem is that the Big 3 can’t/won’t build a car for this market.
The problem is:
-Other than the Mustang, GM and Chrysler seem hell-bent on making them too big, and loading on so much crap, they price them out of the market……then letting their dealers turn-off/discourage future owners with their attempts at price-gouging.
(like the PT Cruiser……..it was originally intended for the kid’s market, but around here, the dealer’s priced gouged on the first ones so bad, that only us old farts with money could buy one……eventually became perceived as an “old guys car”, the kids wouldn’t be caught dead driving one)
-They refuse to offer a V-8 (even a small one) in anything but their top of the line offerings. One of these cars without a V-8 of some kind just doesn’t work.
-The insurance companies continue to get away with murder. Insurance is what killed these cars in the early 70’s, and I’m sure that they will end up killing that market again.
RE: oldest daughter just bought a new Mustang coupe……
GS-fixer~
Just tell me she didn’t buy a V6 with an auto tranny!
Consumers pizz and moan because domestic auto makers can’t make a small car.
The problem is, people in this country are too fookin’ stupid and lazy to learn how to drive a standard-which is the preferrable transmission for a small displacement/fuel efficient engine. So the standard numbers fall and now Detroit won’t spend the $$$ to certify the transmissions thru the EPA.
What I don’t understaind is how come the Europeans & Nippons don’t have this problem?
Instead they go out and buy a 4-banger hooked it up to an auto trans (no choice anymore-thank you Big3 losers); never do the specific maintenance, and then whine and cry because the car goes down in flames at 60k.
Nope……got a V-6 with a manual. Taught her to drive a stick as soon as she had her license.
I can see where some might opt for an automatic if they are stuck in traffic jams 80% of the time……which doesn’t apply around here.
It was a real eye opener for the oldest one when I showed her what they charge for an automatic, when the automatic is optional (usually $1000 bucks plus). Add onto that what they cost to fix if they ever crap out (2000 bucks plus).
Onto that you have to add the discount you get by buying one with a manual……..she got a real good deal on her new Mustang, because it was a manual, and nobody seems to want a manual anymore.
There is life after the Big 3 America!
Why do certain industries, utilities for example, get so much flak from American consumers? Meanwhile so many still keep cutting the Big 3 slack and still buy their garbage? I never understood that.
RE: many still keep cutting the Big 3 slack and still buy their garbage? I never understood that.
I’ve bought Big3 all my life. 3 F-150’s; an ‘88 Mustang GT; and a ‘98 Pontiac GTP.
I put Mobil 1 synthetics in all of them. I ordered every one except the Pontiac with standard transmissions.
The Mustang and Pontiac are still on the road.
I have no complaints.
It pains me to see it all collapsing.
My parents stopped buying Big 3 products back in 1963. Poor gas mileage and shoddy workmanship were the reasons.
In fact if Ford would just give a little more thought to garish application of chrome on their front ends, they’d be the closest to emulating the most imaginative, well proportioned retro designs from the East. (And their more businesslike sedans are well styled too.)
I’d consider buying one, except it’s a Ford. (They made a real bad impact on me in the 70s.)
I’ll consider buying a vehicle that will haul as much as a Ford Ranger and get 40+ mpg. Don’t give tinker’s damn about styling, imagination or proportions. I want functionality, economy & durability.
The last vehicle I owned was a 1991 Chevy S-10 with a 2.8 liter engine. You opened the hood and their was all of this clear airspace and in the center was this small engine that was just powerful enough to haul whatever was in the bed, and it barely sipped gas.
The last vehicle I bought new that I still have is a 1983 F250 HD with 6.9L IDI diesel engine. At 5000 lb empty, it gets 25 mpg driving around town. Detroit can supply great stuff, question is, will they?
Their turn:
They were the 1985 Chicago Bears. They owned the industry for 2 or 3 years after 1993. The cab-forword Intrepid platform and 1993 Ram. Nobody could touch them.
To big to fail.
The only failures in the future will be the taxpayers as they are crushed under all the debt… until we start getting monthly “stimulus checks” offset by borrowing more moneythat we can never pay back. After that trick runs out - CRASH!
Hank Paulson’s Fannie Gamble…
Our housing finance system has been broken for quite some time, creating perverse incentives for borrowers and lenders. We have now reaped the consequences, and a major financial bailout of the system is probably inevitable.
Conservatives can rightly argue that had Congressional Democrats not blocked the various initiatives of the Bush administration to reform Fannie Mae and Freddie Mac for the past five years, we would not be sitting at the precipice like we are today. But that does not change the need for a government injection of funds to fill the financial hole in those two enterprises. The institutional arrangements in the American mortgage market cannot be changed overnight, and the risks of a breakdown in that market at some point over the next 18 months are still quite real.
The trouble is, the legislation that just passed Congress indicates that Washington has learned nothing from our recent troubles. And, as this bailout bill is likely to be followed by at least one additional bill next year, the evident inability or unwillingness of Congress to move up the learning curve and abandon its past practices will make the ultimate cost to the taxpayer far higher than it might have been.
The 700 pages of legislation, which I doubt many members of Congress have even attempted to read, contains many egregious provisions, some of which are unrelated to the trouble at hand. But the pork designed to buy votes for the legislation pales before the blunders directly related to the problem at hand.
http://online.wsj.com/article/SB121754567926302543.html?mod=todays_us_opinion
Still unresolved: Who pays for the bailout and how. Try to make sure that you and your children are not the primary payers if you possibly can.
That means support the NAR in their endless quest of encouraging knifecatchers to plunge into RE.
“Still unresolved: Who pays for the bailout and how. Try to make sure that you and your children are not the primary payers if you possibly can.”
And how does one actually do that? In the end we’ll all pay through the worst hidden tax of all. Inflation.
Maybe someday people will wake up to how the system works and scream bloody murder but not until someone takes away all their Americantitlements.
“In the end we’ll all pay through the worst hidden tax of all. Inflation.”
Got gold?
Got commodities?
Why not buy a few investment homes, as their values will only go up with inflation.
Dang Prof, If I recall from your previous posts you were all anti-goldbug and all that.
Anybody know how long gas lasts before it spoils? I’d love to slap a 100 gallon tank in the backyard for the future.
There are some gas treatments that will extend the life of stored gas. Most gas stations carry it. FYI
“Dang Prof, If I recall from your previous posts you were all anti-goldbug and all that.”
I am agnostic. But goldbugs react with great violence if I ever dare to question their religious beliefs.
Prof Bear plays the martyr. That sounds like religious belief to me.
You can get a 100 gal tank and cycle it through. 100 gallons is at most a 2-3 month supply of gas for most families and it will not go bad in that time. Get 2 50 gallon tanks and alternate which you you fill your car from.
The higher octain gas has a longer shelf life.
Diesel has an even higher life, but you will want to add chemicals to it to kill bacteria that like to grow and then periodically “pollish” it to remove water that condenses inside the tank.
Get a propane conversion for your car because propane will store “forever”.
Info much appreciated!
RE: Anybody know how long gas lasts before it spoils?
For the first time in like 30 years one of my Stihl pieces of yard maintenance machinery failed to start.
So I trucked over to the local dealerhip to score a new spark plug and air filter. After explaining the problem to the owner, he said he gotta stay on top of your gasoline age because the refining quality today is garbage.
A 3 month storage age-with no additives is tops.
So much for survivalist tanks.
Bear, your sarcasm is not helpful and based upon a faulty assumption that the dollar cannot go down “forever”. It is also based on the assumption that “all prices rise and fall equally with inflation”.
If you want to be anti-gold, anti-commodity and pro-dollar then fine, but please make arguments/sarcasm that don’t depend upon obviously false assumptions.
In the end wealth is “having what you need and an abundance of what others need/want”. The person who can correctly identify what they will need and others will need/want will be rich.
I am anti-gold because it is not what people will “need” when the dollar crashes. While an oz of gold may have significant value, what you need is barter-able items and “alternative” money. copper jacketed lead, pre-1965 dimes, food, energy, etc.
When we were on the “gold” standard, pre-1913, a teachers salary was only 1.5 oz of gold per month and it was a respectable middle-class job at the time. Imagine trying to barter when your smallest unit of value is 2/3’s of a “middle-class” monthly income?
Remember that every transaction you make is a “barter” transaction, it just happens that the commodity you are bartering is federal reserve notes. All “money” is is the “most marketable commodity”.
“If you want to be anti-gold, anti-commodity and pro-dollar then fine, …”
I am primarily anti-bullsh!t, which specifically refers to your post.
I realized I never put a metric on storage life:
“unstabilized” gas has a 3-4 month shelf life. It may be usable after a year but eventually it will not start your car and will damage the fuel filter.
“stabilized” 93 octane gas can store up to 2 years.
“well maintained” diesel can store for 5+ years.
Buy gas in the winter because the chemical mix is different and contains more of the ingredient that helps start your car. This is one of the ingredients that breaks down over time so having more to begin with is helpful.
And how does one actually do that?
Leave the country?
One thing I’ve learned from all this: The real estate industry is a cartel, like OPEC.
It’s not very free market at all. Between the Federal government’s credit line, the NAR, the NAHB, and the financial companies, it’s a cartel.
There are certainly market forces at play, but there are a lot of other factors acting on real estate. This is an interesting data point, going forward.
“In effect, Treasury Secretary Paulson now has an open-ended mandate to bail out the nation’s troubled housing finance market, the largest single capital market in the world.
If any other country announced that its finance minister could print unlimited debt to do something similar, financial markets around the world would dump both the country’s debt and the country’s currency. It may well be different because this is the United States of America. But certainly, to take such a risky and unprecedented step, a better crafted and considered piece of legislation should have been created.”
‘The 700 pages of legislation, which I doubt many members of Congress have even attempted to read’
I remember way back hearing how no member of congress read the phone-book thick Nafta bill. And the same with the Patriot act, 1 and 2. I used to worry about a police state. Then it started to look like a Keystone Cop state, with stern looking stooges looking into my shoes at the airport.
Have you ever worked for a company that went under? Everybody shows up for work, day after day. Memos are put out. Names are on the doors and all pretend that nothing is amiss until one day it just stops.
How many people in this country or the congress know that we have $50+ trillion in obligations, and there is no mathematical way it will ever get paid? We used to laugh at people who said they ‘didn’t know’ they had an adjustable rate loan. But now it’s so common it is taken as a truth. And a congress of people that don’t read the bills are what the financial system is counting on?
Anyway, some thoughts from pre-dawn Arizona.
I met one of my neighbors brothers at a party last week. He works (worked?) for IndyMac in New Jersey. He was not in the party mood. He said that 3 days before the big implosion the higher ups had a big meeting at his branch. They claimed everything was ok, it would just be a few branches closing and they would all get through this rough patch just fine. He said everyone took them at face value and were stunned when the news came out.
One thing I learned early on in my professional life is that when management starts telling you everything is ok, it’s time to update your resume. If things are ok, they speak for themselves and nothing needs to be said.
It also helps to pay attention to certain type of rumors.
when management starts telling you everything is ok it’s time to bail out, too late to circulate your resume.
In 2000 right before Polaroid went under my husband and I found ourselves in a Chinese restaurant filled with Polaroid workers. The tables were close together and on all sides we heard people saying “it’ll be OK, it’ll be OK” As we left I remarked “Now I know what they meant when they talked about rearranging the deck chairs on the Titanic” We never went back to that restaurant. Too bad, the food was good too.
No rumor is true until it is officially denied.
If those in charge say something won’t happen, that is EXACTLY what will happen (or something worse.)
“Everybody shows up for work, day after day. Memos are put out. Names are on the doors and all pretend that nothing is amiss until one day it just stops.”
That’s exactly why, in the collective social conscience at least, this will be seen as a “crash”.
Don’t worry Ben, I still laugh at people who “didn’t know” they had an ARM (or even better, negative am) loan. All is still well with the world, there are still idiots out there, and fortunately, there are also still very smart people out there.
Govt is a topic I don’t understand. I know that the people in leadership positions are smart. So I don’t understand why they continually make very, very stupid decisions.
“Govt is a topic I don’t understand. I know that the people in leadership positions are smart. So I don’t understand why they continually make very, very stupid decisions.”
1) I’m beginning to question whether or not some or all of these people are smart. Sometimes intelligence has little to do with people rising to leadership positions. Charisma (which many fools possess) and ass kissing can take a person far these days.
2) I’ve known lots of people that are book smart/common sense dumb. These were people that could read a book and ace a test, usually getting them high grades in school. But when you talked to them face to face for any length of time you’d realize that they lacked ‘the sense God gave a dog’.
3) Finally, people will do just about anything for money. That’s the biggest reason this country/this planet is in the mess it’s in now. No one cares about long term anymore, it’s more along the lines of ‘will it make me money right now’.
I’m still convinced that people use “common sense” as an attack on intellectualism and to make themselves feel better. “Common sense” is only “common” to the person and his or her peers; when you run in different circles, what is “common sense” change quite a bit.
I thought they called it “common sense” because it was so obvious you didn’t need anyone to explain it to you.
I disagree; I would argue that “common sense” is just a narrative shared by a group (however defined) and confined to a cultural and temporal context. Outside of such a group and context the narrative would have either no meaning or prone to misinterpretation. A simple and relevant example – 30 years ago in the US it would have been common sense that buying RE is always better than renting, because in that context it was a shared belief that RE purchase led to wealth building. In a way, it was accurate during that specific context.
My father in law has always told me that I have all the book smarts and no common sense because I don’t share his beliefs in military spending or his passion in football. I could argue to him that his “common sense” is only specific to his social group and cultural context, but instead I would just take another sip of beer and ask “So how’s the Cleveland Browns doing this year?”
“I’m still convinced that people use “common sense” as an attack on intellectualism and to make themselves feel better.”
BULLSEYE
The war on intellectuals and thought provoking speech seems to be coming to an end given the end result. Buzzwords, three word sentences and angry rhetoric doesn’t align very well with a populace that figured out that simplistic solutions don’t solve very large and/or complex problems.
The “simple answer” is, there is no simple answer.
Yes and no…
The problem is that “common sense” has been warped into nonsense or very specific sets of believes.
It is “common sense” that one should read one’s mortgage documents before signing them, or that one shouldn’t buy a house one cannot afford, but look how well all of that worked out during the Bubble. What was once “common sense” was changed into something totally different.
When the lie is believed by all, it may as well be true… until reality comes crashing in.
Yet another person (in addition to Sammy) who needs to seek out Evan Sayet speeches online and give them a lsiten.
Pondering, what you say here is brilliantly covered by Sayet. Seek him out and lend an ear. Fascinating stuff.
.
“Everybody shows up for work, day after day. Memos are put out. Names are on the doors and all pretend that nothing is amiss until one day it just stops.”
FUNNY… REMINDS ME OF THE STORY ABOUT THE GUY JUMPING OFF THE 60TH FLOOR OF A BUILDING… AS HE RACES PAST THE 30TH FLOOR… HE SAYS TO HIMSELF… “GEE.. THIS ISN’T SO BAD AFTER ALL”
.
“Everybody shows up for work, day after day. Memos are put out. Names are on the doors and all pretend that nothing is amiss until one day it just stops.”
FUNNY…
REMINDS ME OF THE STORY ABOUT THE GUY JUMPING OFF THE 60TH FLOOR OF A BUILDING…
AS HE RACES PAST THE 30TH FLOOR… HE SAYS TO HIMSELF… “GEE.. EVERYTHING IS FINE SO FAR… THIS ISN’T SO BAD AFTER ALL…”
I know that the people in leadership positions are smart.
They’re just regular people. No one is smart enough to “run the whole thing”, that’s why they consistantly fail.
Unfortunately, they all think they are smart enough to do what can’t be done and there are plenty of folks who believe them. So they keep trying. The really smart people in the world know their own limitations.
I think it is a little more than smart people making stupid decisions. People want contradictory things which makes coherent policy making difficult for a political class that cares about nothing but perpetuating it’s own power.
People want cheap gas, but want to save the environment. We want to “save” social security, but not raise the payroll tax or means test it or anything else that might make it solvent in the long term. We want affordable housing, as long as poor people don’t live in our neighborhoods. We want balanced budgets as long as our favorite programs or government agencies don’t have their budgets cut.
Our political class is just reflecting these conflicting and irreconciable priorities.
“How many people in this country or the congress know that we have $50+ trillion in obligations, and there is no mathematical way it will ever get paid?”
It’s fiat currency in action baby. If the debts ever get paid then we have no financial system.
How many people know what comes after a trillion?
Quadrillion. It’s got such a nice ring. Bernanke better start practicing it.
Have you ever worked for a company that went under? Everybody shows up for work, day after day. Memos are put out. Names are on the doors and all pretend that nothing is amiss until one day it just stops.
I’ve seen it happen two ways, and yours is the first. The second version is that everyone is well aware of trouble but is doing their best to turn it around. Of course, “doing your best” involves lots of distractions like making sure you land a job elsewhere, so the folks with kids, mortgages etc tend to leave quickly.
Naturally, when the remaining team pulled it off they were rewarded handsomely. (Juniper eventually bought the company, working is optional.)
But the above requires great leadership and a great team, so we’re screwed. Don’t even know why I mention the story.
Probably, I haven’t hit the acceptance phase…
It’s always about the next election.
A moving target is harder to hit.
People are shocked, shocked that the State of New York is going broke, when every special interest has gotten everything it wanted for 20 years. Nobody cared.
I just sat down w/the New York State budget this morning. I think I’m coming around to your way of thinking. That Grants to Local Governments Dispersement* of $39,237,000,000 was pretty eye opening. Oh yeah, and by 2011-2012 it’s the projected Grants budget is over $50 bil. (a 20% increase in 3 fiscal years?)
*Medicaid/State Insurance, Education, Mental Health/Social Services
“2011-2012, the projected Grants budget is….”
My apologies
Count me among the nobody. I don’t care either.
–
Ben,
Over time we have managed to create a very bad and complex system and people really have no solution to the problem of bad political leaders and appointees (replacing one with another is not a solution, IMO). Therefore, the problems should continue and things should get worse over time.
Jas
Here’s an excellent article that outlines the dollar hegemony game.
http://www.atimes.com/atimes/China_Business/JG30Cb01.html
Here are a couple of key excerpts:
“In a global market operating under dollar hegemony, the world’s interlinked economies no longer trade to capture Ricardian comparative advantage. The theory of comparative advantage as espoused by British economist David Ricardo (1772-1823) asserts that trade can benefit all participating nations, even those that command no absolute advantage, because such nations can still benefit from specializing in producing products with the lowest opportunity cost, which is measured by how much production of another good needs to be reduced to increase production by one additional unit of that good.
This theory reflected British national opinion at the 19th century when free trade benefited Britain more than its trade partners. However, in today’s globalized trade when factors of production such as capital, credit, technology, management, information, branding, distribution and sales are mobile across national borders and can generate profit much greater than manufacturing, the theory of comparative advantage has a hard time holding up against measurable data.”
“Despite all the talk about globalization as an irresistible trend of progress, the priority for the United States in the final analysis has been to advance its superpower economic objectives, not its obligations as the center of the global monetary system. This superpower economic objective includes the global expansion of US economic dominance through dollar hegemony, reducing all domestic economies, including that of the US, to be merely local units of a global empire. Thus when the US asserts that a healthy and strong economy in Europe, Japan and even Russia and China, all former enemies, is part of the Pax Americana, it is essentially declaring a neocolonial claim on these economies.
The concept of “stakeholder” in the global geopolitical-economic order advanced by Robert B Zoellick, former US deputy secretary of state and now president of the World Bank, is a solicitation from the US to emerging economic powerhouses to support this Pax Americana. The device for accomplishing this neo-imperialism is a coordinated monetary policy managed by a global system of central banking, first adopted in the US in 1913 to allow a financial elite to gain monetary control of the US national economy, and after the Cold War, to allow the US as the sole remaining superpower controlled by a financial oligarchy to gain monetary control of the entire global economy.”
Go back and re-read the last two paragraphs. Did you catch that?
The whole purpose behind this NAFTA/CAFTA?global trade push wasn’t for American citizens to prosper, as it was advertised. It was for the banking system and for those global elites who understand how to use it for monetary gain. Everyone had better understand that little tidbit, if nothing else.
‘Up until this week, Arizona Title Agency’s 22 workers felt secure about the financial health of their employer. But in a matter of hours Tuesday, the company was shut down by its Colorado-based parent, Mercury Cos. Inc. ‘I think there are a lot of us that are trying to sober up to this,” Robles said, with emotion, at his company’s 2502 E. River Road office Wednesday evening.’
‘As he spoke, a locksmith arrived to change the door locks.’
‘Up until this point, there haven’t been any major layoffs in the title business, said Jim Mize, a consultant. Tucson employees of Arizona Title said they don’t expect to see paychecks for work in July, and their health insurance benefits have been canceled. In light of that, Robles said he was impressed when he saw his entire staff show up to work on Wednesday.’
‘There was a “99 percent chance I could have been here all by myself this morning,” he said Wednesday.’
‘One former branch manager said none of the agency’s 29 Valley employees received paychecks for the last two weeks of work and that the final round of expense checks bounced.’
‘Mercury-owned title agencies in Texas and California also were shuttered this week. ‘We were all told of our misfortune at 4:30 p.m. Tuesday evening, giving us no time to do anything but watch our computers become frozen, and unable to assist our clients with the chaos they may be facing,’ said Sherry Johnson, former manager of Arizona Title’s escrow and resale branch at 3131 E. Camelback Road in Phoenix.’
(slow exhale)
Thanks for that story Ben. It exemplifies why everyone needs to prepare for that possibility ahead of time.
RE: Robles said he was impressed when he saw his entire staff show up to work on Wednesday.’
SCREW UNTO OTHERS-THEN BOUNCE THE CHECKS AND SPLIT!
USA no more NUMBA #1, GI!
GMAC’s Loss Spurs Ripples
By Sharon Terlep
Word Count: 653 | Companies Featured in This Article: GMAC, General Motors, Ford Motor, Toyota Motor, Nissan Motor
Financial giant GMAC LLC reported a $2.48 billion net loss for the second quarter amid a dramatic reversal of fortune in its auto-financing business, underscoring the deep trouble facing U.S. auto makers and setting the stage for General Motors Corp. to report a massive loss of its own Friday.
” … dramatic reversal of fortune …”
As in “Nobody could have possibly seen this coming”.
See, there’s the “crash” theme again, it’s everywhere this summer.
“GM, turning 100 this year, in 2007 reported its largest annual loss, $38.7 billion, after a tax-accounting change. It hasn’t posted a profit since 2004.”
GM is starting to sound like the government. Just issue more debt….more debt…more debt…
RE: GMAC LLC
The GMAC loan originator in my neck of the woods always utilzed the most notorious and crooked number hitting appraisers who would sell their own mothers down the crapper if they could turn an extra buck.
The fact GMAC Mortgage is losing billions brings tears to my eyes.
More Sectors Look Ripe For Job Losses
By Mark Gongloff
Word Count: 488 | Companies Featured in This Article: GMAC, Honda Motor, Ford Motor, General Motors
A hot-and-cold job market might be getting colder.
The Bureau of Labor Statistics releases July unemployment and nonfarm payroll data Friday. Economists expect to see the jobless rate tick higher to 5.6% and payrolls shrink by 65,000 jobs, the seventh consecutive month of losses.
The job market clearly isn’t booming. New unemployment claims have surged to recessionary levels, and 3.28 million people have been drawing claims for a week or more, the most since 2003. Consumer angst about the labor market is at its highest in four years, according to the latest Conference Board survey.
Verizon is going on strike in Syracuse today. Not the non-union wireless workers but the unionized former Ma Bell side. They are trying to stop the company from asking them to contribute to their health plan and to stop jobs from being outsourced.
I am aware that this company formerly would keep a great number of contract workers in their positions for up to 10 years rather than hire them. It was up to their temp firm to cover their insurance, retirement plans and other items which Verizon would pay double the workers base pay for.
Lease and desist
Published: August 1 2008 03:00 | Last updated: August 1 2008 03:00
Just as subprime mortgages allowed people to buy houses they could not afford, so auto leases brought fancy cars within the reach of many who could otherwise only ogle them. Now, Detroit’s big three - General Motors, Ford and Chrysler - are, to varying degrees, curtailing the practice.
So far this year, a quarter of US vehicle sales have involved leases. Instead of paying, say, $36,000 in one go for a new Lexus, the driver can cruise the neighbourhood in one for four years for about $600 a month, funding little more than the car’s depreciation and token interest.
Huh. I’m actually surprised that number isn’t much higher. 1/4 of all vehicles are leased, so I am assuming the other 3/4s are purchased (financed or cash).
That seems like a lot to me. But, then again, I live in poserville (S. FL), so perhaps that’s part of my shock. When I went to buy my car, the guy looked at me as if I had 2 heads when I told him I didn’t want to lease it.
RE: 1/4 of all vehicles are leased, so I am assuming the other 3/4s are purchased (financed or cash).
Geez, Mike the lease numbers have gotta be way higher.
What’s the av. auto price now $33k?
No way are all those yup’s boppin’ around in 5-Series $55k Bimmers payin’ the full load.
All the news rag car advertisements in the Beantown GLOB today never,ever quote purchase terms-it’s always a per month payment based on a lease.
Crimmony jickets! The idiocy just continues on and on…
$600 a month, eh? Gee, after 4 months you own outright a low-end yet fully serviceable vehicle.
I guess the need for bigger titties and penises has yet to be sated.
This talk, talk, talk about housing to recover. No one really wants the recovery to outlandish prices that a young couple cannot afford for a home.
All the news people and government leaders want a recovery.
I would like to buy a house I can afford.
Actually there will be no “recovery” prices will fall eventually and inevitibly. Look what the Gov of California did yesterday. Cut jobs. Look what the Car Industry is doing cutting jobs. Time is also irrevocably connected to truth. So not to worry. 41Cadillac
BMW adds to carmakers’ gloom
By Daniel Schäfer in Frankfurt
Published: August 1 2008 09:16 | Last updated: August 1 2008 10:01
German luxury carmaker BMW added to the rising gloom in the car industry on Friday as it issued a profit warning and reported a sharp drop in second quarter profit.
…
“Business conditions for the automobile industry deteriorated sharply again in the second quarter due to further ongoing steep rises in oil and raw material prices, the weakness of the US dollar, the impact of the international financial crisis and a weaker US economy,” Mr Reithofer said.
I guess that’s what happens when your business model is predicated on selling cars that cost $50K (or more).
Funny how their Mini division is doing great (go to any Mini dealer, they have no inventory). Must have something to do with them starting at $18K.
Anyone remember when BMW had base models with 4 cylinder engines which a working stiff could afford?
“…on
sellingleasing cars that cost $50K (or more).”I looked at a used 328 the other day (a 2000 model). I wasn’t impressed. Of course, it “only cost” $12,000. Then I thought about how much it would cost to fix it when it would inevitably break, and ran away as fast as I could.
Economy
Economy Starts To Sink Florida Boating Industry
by Greg Allen
(Photo: At National Liquidators, a boat repossessor in Fort Lauderdale, Fla., the upsurge in boat repos has filled the parking lot and six docks.)
All Things Considered, July 30, 2008 · The economic downturn is taking a toll on the boating industry in Florida. With high fuel prices and expensive boat payments, many Floridians are finding it harder to use, sell — and keep — their boats.
Take Black Point Marina, south of Miami on Biscayne Bay. Marina officials say as fuel prices have risen, traffic here has gotten lighter.
For boater Hank Banalewicz, fuel costs about twice as much as last summer. On a recent morning, he says it cost him $250 to take out a boat. Last year, when gas was cheaper, it cost about $100 or $120.
“Oh, it’s totally ridiculous,” he says.
And as for boat traffic on the water?
“Hardly any boats . . . at all,” he says.
I’m still waiting for the wave of sailboat repossessions so I can get one cheaply. I probably will be waiting a long time; I have a feeling that it’s a different demographic that buys a sailboat, not to mention that it might go through 20 gallons of diesel in an entire season, so fuel prices aren’t too important.
I was out on Lake Michigan on Wednesday. It was a gorgeous night, perfect for boating. It was the first time I have seen a decent number of power boaters actually out motoring around, although I only saw one that really opened it up and was planing. Seemed most others were just cruising around inside or near the break wall, getting into position to watch the Navy Pier fireworks.
I spent 2 weeks on the shore of Lake Michigan in the NW lower peninsula, ending last Sunday. Very, very few power boats away from the marina. Marinas were mostly full with little activity in or on the boats. The majority of craft in motion away from shore were under sail or were personal watercraft. I saw a man walking from the marina to a local gas station carrying an empty 5-gal gas can, I assume to save a few cents a gallon on fuel over the marina’s price.
in Netherlands plummeting consumer confidence and high fuel costs have very little influence (up to now) on the boating industry. The yacht harbours near my city are fuller than ever before, and it looks like the size of the average yacht has nearly doubled in just a few years time…
I think the people who buy and use this stuff are still profiting hugely from what is going on in the world (and besides, in Netherlands buying a luxury yacht is an excellent way to avoid paying income taxes). The only sign of trouble is that second hand boat sales are bad - but apparently that’s just the second hand market, sales of new boats are better than ever (especially the most expensive models).
A boat is a hole in the water into which you throw money… or, the happiest 2 days in a boat-owners life are the day he buys it and the day he sells it!
Thursday, July 31, 2008
Credit card users cutting back
Visa and MasterCard are still making plenty off our credit card use, but both companies report we’re slowing our swiping of the plastic. Amy Scott reports.
Kai Ryssdal: It’s Thursday, the last day of July, and that means a lot of us are going to be getting our bank and credit card statements in the mail pretty soon.
Both Visa and Mastercard made plenty of money off of us pulling the plastic out of our wallets, but both companies also said they saw signs of slowing growth in credit card use.
Our New York bureau chief Amy Scott reports.
Overall use might be slowing, but the take away point is that plastic is now increasingly being used for necessities. Uh oh.
Is overall use cut back b/c people have maxed out their cards??
Or had their credit lines reduced.
Dwindling credit being exhausted on inflated commodities - talk about putting things into fast forward!
In our case, we use plastic for food and gas purchases because the card pays back 3% of those purchases in cash. That’s the equivalent of $3.88 per gallon for gas instead of $4.00 if we paid in cash. It’s even remarkably easy to collect your rebate, which must accumulate to at least $50 before you can claim it.
Of course we pay in full each month.
i use the Costco AMEX, pays 5% cash back on gas, 5% cash back on dining, 3% on travel (air/hotel) and 2% on everything else. Check comes every Feb. Last year I got $600.00 back, this year on track to get over $1000.00 back. I use it for work expenses, which are reiembursed then pocket the cash. Make sure I pay off balance every month….
The word “cash” rhymes with “crash”, and if you don’t have the first word you’ll end up with the second one.
Part of it is just that people are just now remembering that money doesn’t grow on trees and that busts can happen with the same frequency as booms.
Earlier this week there was a story on CNN (both TV and web) about an older couple (late 50s, early 60s). Husband was a college professor and I believe the wife was a career professional as well. Anyway, they related that just recently they became concerned about their $8k CC balance based on all the doom and gloom being reported in the MSM (and that’s the G-rated version!). So for the first time in years they have taken steps to curb discretionary expenses, budget, and make paying off the balance within a year or two a priority.
I think there’s a whole segment of the population that’s pretty much financially stable but have allowed their spending to run slightly out-of-control in recent years. They’re not on the verge of BK or deadbeats, they’re just otherwise intelligent, hard-working people who were blindly spending on non-essential stuff.
Unfortunately for the economy as a whole, that type of spending on worthless doodads with borrowed money is what has maintained corporate profits for the last six or so years. Some people went way overboard (HELOCS, etc), but there’s a large subset that were only “modestly” irresponsible. Those are the people that the government is trying to nudge toward greater irresponsibility (eg, pimping reverse mortgages to people just for the helluva it) and it’s refreshing that at least some are smart enough to realize that a $8k CC balance is not a trivial amount, especially when you’re approaching or in your golden years.
More California news
Governor signs order to slash pay, positions; faces defiance
By Ed Mendel
UNION-TRIBUNE STAFF WRITER
August 1, 2008
SACRAMENTO – Acting to avoid a “full-blown cash crisis,” Gov. Arnold Schwarzenegger yesterday ordered the immediate layoff of an estimated 10,000 temporary and part-time state workers, saving at least $80 million a month.
NANCEE E. LEWIS / Union-Tribune
State employees in Chula Vista protested the governor’s order to lay off 10,000 temporary and part-time state workers and cut the pay of 200,000 workers.
But state Controller John Chiang said he will not comply with the part of the order needed for bigger savings – more than $1 billion a month by cutting the pay of roughly 200,000 state workers to the federal minimum wage of $6.55 an hour.
only smart thing the governator has done lately
folks will be amazed how little the state workers accomplished
He came into office promising better organization and more efficient spending. So far he hasn’t been able to organize much, some of the biggest bond sales ever have the state in record setting debt, and the structural deficit is intact. Most of these workers will be rehired and this little dance will cost more money than doing things reasonably ever could have.
California had its taxes locked long ago and has been squeezed for a long time, so the government as a whole runs lean. Most of the critics have never seriously investigated what it takes to run the state and would be just as overwhelmed and useless as the governor if they tried.
Maybe the US taxpayer can bail Clownifornia out. Worked great for the Financial industry and soon the automobile industry. Hell, just send everybody a million $$ stimulous check, that should get things hopping again.
The gov’t runs lean? You talking about the 6 figure cops and firemen? Or the 3 generations collecting pensions because they can retire at 90% of income after 20 years of service? Not to pick on these two groups since they actually serve the public. There are probably lots of relatively unknown 6 figure job descriptions that could disappear tomorrow and no one would ever know the difference. The level of 6 figure jobs in the california gov’t is staggering. I doubt the median job holder in Ca. thinks the gov’t is “running lean”, IMO.
Augur, I contend it is this group of publicly funded pensioners that drove the vacation/retirement housing bubble. There has to be an end to $100k plus retirements for cops at age 40 while new guys start out at 25k, all funded by property owners. And many of those tax payers are eeking by with small pensions (if any) and SS. This issue is a ticking bomb from my perspective.
I blame Cal-Fire and law enforcement in California for the state’s fiscal woes. Of course, many of these people have no marketable skills and have “invested” the money in real estate, especially in other states which are now tanking. Ever since their Unions pushed their weight around in the 1990s to grant ever more salary and OT increases, the pay has become something of a joke. I’ve worked with a few…and like I said, battalion chiefs making $250K/year is pretty typical, and we’ve all heard about the beat cops in now-bankrupt Vallejo starting at $120K/year. And, of course, most get $80%+ of their retiring salary after only 20-25 years of “work.”
I knew I should have been a fireman–spend 99% of your time doing nothing but washing the engine, retire at age 45 with $150,000+ per year guaranteed (eventually) by the U.S. taxpayer.
And many firemen, at least here in AR, spend their off time with a side business of some sort, since they are off 3-4 days a week.
Okay, take responsibility then. Negotiate better contracts. It isn’t so easy when you try to actually do it.
“Most of these workers will be rehired and this little dance will cost more money than doing things reasonably ever could have.”
Direct hit!
Come do the civil service shuffle - you up for it, booty?
Local tourism more fizzle than fireworks
Officials hope freebies, ads can save summer
By Penni Crabtree
STAFF WRITER
August 1, 2008
San Diego’s tourism industry is scrambling to shore up the rest of the fading summer season, after a troubling downturn in hotel occupancy last month – including a July Fourth holiday weekend that lacked its usual sizzle.
“NEW YORK (CNNMoney.com) — General Motors reported a huge second-quarter net loss Friday of $15.5 billion after restructuring and other charges.
The automaker lost $27.33 per share in the quarter, compared to a profit of $784 million, or $1.37 per share, a year ago.”
Question: At a $6.3 billion market cap (GM), how often can you lose $15.5 billion before you’re bankrupt? Can somebody please explain that to me? I mean they lost more money than the whole place was worth to begin with. How is that possible?
I mean they lost more money than the whole place was worth to begin with. How is that possible?
Prepare to see the same with the banks.
(And the answer to your Q is that stock valuation is only loosely related to what a place is worth.)
Sure and in 1970 Penn Central traded at $20 with a book value of $140, it pissed through book in 4 months on La Via BK.
Value and Price are not equals.
Market cap is almost entirely unrelated to value of the underlining assets.
And it works both ways. In the dotcom era, we had Pets.com and the like with market caps a hundred times what their actual assets were worth. Now, we have one of our largest manufactures with a market cap that is most likely below net assets.
America’s Economic Free Fall
By William Greider, The Nation
Posted on August 1, 2008, Printed on August 1, 2008
http://www.alternet.org/story/93509/
Washington can act with breathtaking urgency when the right people want something done. In this case, the people are Wall Street’s titans, who are scared witless at the prospect of their historic implosion. Congress quickly agreed to enact a gargantuan bailout, with more to come, to calm the anxieties and halt the deflation of Wall Street giants. Put aside partisan bickering, no time for hearings, no need to think through the deeper implications. We haven’t seen “bipartisan cooperation” like this since Washington decided to invade Iraq.
In their haste to do anything the financial guys seem to want, Congress and the lame-duck President are, I fear, sowing far more profound troubles for the country. First, while throwing our money at Wall Street, government is neglecting the grave risk of a deeper catastrophe for the real economy of producers and consumers. Second, Washington’s selective generosity for influential financial losers is deforming democracy and opening the path to an awesomely powerful corporate state. Third, the rescue has not succeeded, not yet. Banking faces huge losses ahead, and informed insiders assume a far larger federal bailout will be needed — after the election.———————->
Fourth, the policy upheaval sparked by the unprecedented Wall Street bailout measures will create a great deal of uncertainty going forward, likely resulting in follow-on ripple effects that will drag out this credit market malaise for a much more longer period of time than pundits expect.
Oh man, he nailed it. I cannot wait to read the book I assume he will write about the Greedspan era:
‘The fast-acting politicians may hope to cover over their past mistakes before the public figures out what’s happening (that is, who is screwing whom). But the Federal Reserve has a similar reason to move aggressively: the Fed was a central architect and agitator in creating the circumstances that led to the collapse in Wall Street’s financial worth. The central bank tipped its monetary policy hard in one direction — favoring capital over labor, creditors over debtors, finance over the real economy — and held it there for roughly twenty-five years. On one side, it targeted wages and restrained economic growth to make sure workers could not bargain for higher compensation in slack labor markets. On the other side, it stripped away or refused to enforce prudential regulations that restrained the excesses of banking and finance. In The Nation a few years back, I referred to Alan Greenspan as the “one-eyed chairman” [September 19, 2005] who could see inflation in the real economy — even when it didn’t exist — but was blind to the roaring inflation in the financial system.’
I like Greider’s plan here:
“Nationalize Fannie Mae and other government-supported enterprises instead of coddling them. Restore them to their original status as nonprofit federal agencies that provide a valuable service to housing and other markets. Make the investors eat their losses. Buy the shares at 2 cents on the dollar. Without a federal guarantee, these firms are doomed anyway.
Resolve the democratic contradiction of “too big to fail” bailouts by dismantling the firms that are too big to fail — especially the newly created banking conglomerates that have done so much harm. Restore the boundaries between commercial banking and investment banking. In any case, market pressures are likely to shrink those behemoths as banks sell off their parts to survive. For the remaining big boys, revive antitrust enforcement. Set stern new conditions for emergency lending from government — supervised receivership, stricter lending rules to prevent recidivism and severe penalties for greed-crazed shareholders and executives.
Assign the Federal Reserve’s regulatory role to a new public agency that is visible and politically accountable. Make the Fed a subsidiary agency of the Treasury Department and reform its decision-making on money and credit to restore an equitable balance between competing goals and interests — seeking full employment but also stable money and moderate inflation.
Begin the hard task of re-creating a regulated financial system Americans can trust, one that recognizes its obligations to the broad national interest. This requires regulatory reforms to cover moneypots like private-equity funds and to clear away the blatant conflicts of interest and double-dealing on Wall Street, and also to give responsible shareholders, workers and other interests a greater voice in corporate management and greater protection against rip-offs of personal savings.
Re-enact the federal law against usury. The details are difficult and can follow later, but this would be a meaningful first step toward restoring moral obligations in the financial sector. People would understand it, and so would a lot of the money guys. Maybe in the deepening crisis, Washington will begin to grasp that money is also a moral issue.”
“Socialism!”
And long overdue, too.
“Washington’s selective generosity for influential financial losers is deforming democracy”
Is? …define IS
And Mr. Bear…that’s SIR Greenspent… to you and the rest of your minion
HBB quiz…how many former Federal Reverse Chairman have been Knighted by the Queen of England?
My Kingdom for a horse!…the one that’s branded with the 1% mark
Yep
but we need to concentrate wealth even more.
More tax cuts for the elite
More inflation for the rest
You on board blueprint?
Sure.
Should I be voting red or blue this time?
Let me know so I can get that flag out. I would hate to mix them up.
More seriously, I’m not sure how you can say I support inflation, as I’m one of the few people here that support a hard money.
You are the one who supports the status quo. Corporate veil for the rich, banker-elite control of our money, deficit spending, inflation to cover the deficit, bread and circus for the masses, and so forth.
Thanks, Key Lime. I really like Greider.
Yes, that was particularly excellent commentary.
July 31, 2008, 2:30 pm
Don’t Blame the Shorts. Blame the Longs.
Posted by Dennis K. Berman
“We present, without comment, excerpts of testimony from a House Judiciary Committee hearing on short selling. The main actors: New York Congressman Frank Oliver, and New York Stock Exchange President Richard Whitney. The date: Feb. 24, 1932.”
There is truly nothing new under the sun, and we are in the worlds biggest rerun.
The more things change, the more things remain the same.
Lots of good info here on the blog this AM, but what I’m braced for right now is the back to back media coverage of the Olympics followed by the election. Now, that’s really gonna suck for a non-cable TV viewer like me. I don’t watch TV that often, but there are certain things I like to see every once in a while and they’re either gonna be pre-empted or interrupted ad nauseum by sh*tty political advertisements. I’m already sick of the Obamacain show, and it hasn’t even really gotten cranked up. Even worse are all the local political ads that are sure to come.
The Olympics are a joke now, IMHO. I’d rather watch a Japanese game show. LOL, foreign journalists are blocked from getting into areas of the internet that China has censored and China responds with a statement saying that foreigners are subject to national laws. Athletes have to go elsewhere to train because of the air. I don’t understand why they just don’t walk away and refuse to compete. You can walk on water in China because of the green sludge, I guess that’s a real miracle. I’m waiting for Richard Engel on NBC to just be honest and broadcast through a face mask.
Yep, TeeVee August through mid-November is really gonna suck. But I’m sure the REIC can’t wait for people to be diverted from all the bad housing news.
Rant off.
Hey, there’s always Big Brother
Palmetto, do you ever watch television on your computer? There are bunch of programs, some free, for doing this, and you can access hundreds of channels around the world. Also, the major networks all have back episodes, movies, etc. available free on-line at their web sites. If you belong to Netflix, you can watch thousands of movies on-line.
don’t believe too much of the garbage the US (and EU) media is telling you about China.
Their environment is about as clean as Europe was in the eighties, big deal. Environmental scientists from my country with lots of experience have been working and teaching in China over the last years to help them clean up; they are much better informed about the situation than the average (very biased) US or EU journalist or politician. It will take the Chinese a lot of effort to clean up, but at least they realise the problem and are working hard now on solving the problem. They will be cleaning up way faster than Europe and the US did in their times of industrial expansion. For them the economy still has the highest priority, but I don’t think that is anything new either.
As for internet access, journalists etc. again have unlimited internet access today, except for a few websites (e.g. organisations that are considered a threat to the state). Do you think the public and journalists in countries like e.g. Netherlands have unlimited internet access? No way.
And don’t get me started about what the newspapers write, because I’m pretty sure those we have here contain even more lies then those in China (I’m not talking about the very important things that the general public likes to read like the latest soccer match details etc.).
Here in the USA, tens of thousands of dogs and cats were poisoned (nobody knows how many died) last year by pet foods made with deliberately contaminated wheat gluten from China (the Chinese companies responsible added malamine to the gluten to give false higher protein content readings). Hundreds of different toys and other items made in China have been recalled in the USA just this year because of lead paint and other toxins. Indepent consumer protection groups have noted through random checks that a huge percentage of items coming from China are contaminated with lead and various poisons, even though the US Consumer Protection Agency (a misnomer) only reports on those it happens to discover and can get the sellers/manufacturers to VOLUNTARILY recall. Who knows how much poison from China is here, because there aren’t enough inspectors to test, and because the USCPA is heavily politicized.
As for censorship, journalists can pretty much go anywhere available on the internet in this country; we don’t have government censorship of the internet. Yet, the American Press is anything but objective. Articles are almost always slanted to reflect the bias (or ignorance) of the reporter or medium, and advertising revenues are always a suspect influence. One can get the same result by lying by omission as by fabricating facts, and without any of the risk, so it’s a very popular way of spreading disinformation and manipulating opinion. Not reporting, or under-reporting, the toxic crap from China so as to avoid offending business interests (and losing advertising), or the Chinese themselves, is still lying, and with potentially horrific results.
At midnight, my bank stripped me of my trillionaire status - the Z$5 trillion sitting in my account will become Z$500.
So no more talk of trillionaires, quandrillionaires and quintillionaires.
At least, not for another six months or so.
http://news.bbc.co.uk/2/hi/africa/7535782.stm
look at it from the bright side: everyone will have a chance to become millionaire or trillionaire one again, probably within the next few months!! Talk about opportunity …
…Easy come, easy go…
Another article describing how the home ATM has an “Out of Service” sign on it.
http://www.heraldtribune.com/article/20080801/ARTICLE/808010348/2055&title=Tapping_home_equity__Good_luck
When HELOCs get frozen:
“He suggests those homeowners should challenge the decision to the bank or even to its federal regulator.”
Challenge what? If there’s no equity, there’s no equity. Challenge the valuation of the house - sure - but do these owners really want to know the answer?
Does anyone else find the steady drip of monthly nonfarm payroll contractions this year unbelievably smooth?
August 1, 2008 9:23 A.M.ET
BULLETIN
AMBAC PAYING $850 MLN IN CDO SETTLEMENT
Wall Street takes data in stride
Nonfarm payrolls off 51,000
U.S. unemployment rate noses up to four-year high at 5.7% for July, although nonfarm payrolls contract by a narrower-than-anticipated 51,000. But 2008’s cumulative job losses signal recession.
Will today be a good day to buy the dip?
The porcine beauticians appear to really have their hands full today with the employment report.
” AMP Capital, the investment management arm of Australia’s biggest life insurer, froze NZ$420 million ($307 million) in a New Zealand property fund as investors sought to pull out amid a real-estate slump.
The AMP Capital NZ Property Fund stopped allowing redemptions and accepting new investments, AMP Capital’s New Zealand unit said today in an e-mailed statement.
“We’ve taken this action as a prudent response to the current extraordinary market conditions,” AMP Capital New Zealand Managing Director Murray Gribben said in the statement. No other AMP investments are affected, he said. …”
http://www.bloomberg.com/apps/news?pid=20601081&sid=aSSxnrMp5c2E&refer=australia
Another property bust….
I’m waiting for a pronouncement like this from Calpers. I read someone mentioned they still have BearStearns on their books at $135…LOL, it’s that’s really true. Much like all these geniuses they still have tons of crap in their bed, and not wanting to pull down the sheet for fear of what mommy might say.
Also ” Fat Cat” found was from a foreclosed household…
http://news.yahoo.com/s/ap/20080801/ap_on_fe_st/odd_big_cat_found
same story in Europe, and those are often huge pension funds as well (like 0.5-1 trillion invested capital). Most of them are still marking to fantasy.
Anthrax scientist commits suicide. Interestingly, nowhere in the article do they talk about “Why?”. Has anyone heard any speculation about what the “motive” was in the anthrax attacks? I no longer am shocked that fundamental questions like this go unasked and unreported.
http://news.yahoo.com/s/ap/20080801/ap_on_re_us/anthrax_scientist
I no longer am shocked that fundamental questions like this go unasked and unreported. “Why” does not interest me at all in this case. “Who” and “What” along with “Who’s in charge” are the most interesting aspects of this story.
The news in this item is: Suicide committed by a man considered a suspect for about a year after the leadership of the investigation into the attacks changed in 2006. I have always thought the anthrax terrorism was an inside job, and the cover-up/nonfeasance of the investigators was either an inside job or official incompetence, take your pick. Preliminary reports indicate the suspect also played a role in the aborted investigation. I do not think 9/11 was an inside job, but nonfeasance of the authorities played a big part in allowing it to happen.
Revised data shows massive profit growth for U.S. companies overseas, drastic declines in the U.S. for the past two years — not even counting asset value declines.
http://www.nytimes.com/2008/08/01/business/economy/01profit.html?ref=business
“By the latest measure, first-quarter overseas profits were the highest they have ever been for American companies — up 25 percent from the third quarter of 2006, when domestic profits peaked.”
“Overseas profits, while important to shareholders, do not reflect the performance of the American economy or the prospects for employment in this country. Surveys show that both business executives and consumers expect declines in jobs in America in coming months.”
“The figures show that more than a third of profits earned by American companies are now made overseas. In the first three months of this year, the proportion was 35 percent, nearly twice what it was a decade ago.”
“The revised data shows that profits of American companies are down 7 percent over all, rather than the 2 percent previously reported.”
Uhhh, do you think this has anything to do with a falling Dollar?
Wal-Mart mobilizes against Democrats: report
In recent weeks, thousands of Wal-Mart managers and department heads have been summoned to mandatory meetings at which the retailer stresses the downside for workers if store workers unionize, the paper said.
About a dozen employees who attended meetings in seven states said executives stressed employees would have to pay hefty union dues and get nothing in return, and might have to go on strike without compensation, and warned that unionization could force the company to cut jobs as labor costs rise, the Journal reported.
The Wal-Mart human-resources managers who have run the meetings didn’t tell those attending how to vote in the November elections, but made it clear that voting for the presumptive Democratic presidential nominee, Sen. Barack Obama, would be tantamount to inviting unions in, the Journals said.
Wal-Mart could not be reached immediately for a comment.
http://biz.yahoo.com/rb/080801/walmart_democrats.html
WalMart is extremely anti-union, but what’s so galling about it is they are anti-union and they treat their employees like sh!t. The company actively games the government to “subsidize” their abysmal wages and benefits with Medicaid, food stamps, etc.
That story smells fishy. One would think that after years of shelling from the unions, WMT would be more tactful than that.
Last year they tried to unionize the tire shop at the Walmart here in Loveland. Just before the vote the store suddenly hired a horde of new guys into the tire shop, and they voted down the union.
This is hilarious. I have been following this girl’s blog for a number of months. A little about her. She is mid 20’s, thinks she is sophisticated, and comes across rather snobby.
She also thinks she is going to get rich by investing in real estate. So far she has 2 rentals. In this blog post she talks about her nightmares and she looks like she is pretty deep in the hole.
Go here if you want some entertaining reading : )
http://wealthisgood.blogspot.com/2008/07/new-rental-property-woes-already.html
What a twit. Casey Serin with boobs.
A boob with boobs.
Holy crap, she is an freaking imbecile. I just got done reading her 04/21/08 post on what she’s learned so far from her real estate investments. Some highlights:
“That you shouldn’t pay a contracter in full for work he’s done until a) it’s done and b) you’ve inspected it to see it was done properly.”
“How to open a business checking account, credit card, and PO box. How to file a business name with the state (It’s surprisingly easy! You just pick a name (have alternatives ready), go down to the courthouse, make sure no one has the name already by running variations through a public computer, fill out a 1 page form, pay $16, and you’re done!)”
“How mandatory a reserve fund is! I didn’t expect a vacancy and expensive renovation 1 month into ownership, but I had no choice. Thank goodness I had some money in the bank.”
“Keep Good Records! Save All Receipts! You can’t take the tax deductions without records, and they are very lucrative deductions. Your expenses may seem small (at times), but they add up. Keep track of your mileage, too.”
For those who watch Family Guy, I’m hearing Drew Barrymore’s “Jillian” voice as I read through her revelations.
http://wealthisgood.blogspot.com/2008/04/what-ive-learned-from-my-rental.html
The post where she discusses the relative merits of girls going to college before becoming housewives is equally groundbreaking in its insights.
“That you shouldn’t pay a contracter in full for work he’s done until a) it’s done and b) you’ve inspected it to see it was done properly.”
I thought SOP was you are supposed to open a line of credit with a bank and turn control of the whole thing over to a construction worker. What changed?
So much for her dreams of getting rich in rental real estate. Sorry, sweetie, but it’s a lot harder than it looks.
“I am a young professional on the road to wealth.”
Oh sweet poop….aren’t we all.
Up, down, up, down. It’s April 2000 again, and you remember what happened after.
Stock price deflation?
“Stock price deflation?”
Lol. Bring it on, Baby.
sky scraper deflation?
The Decider was close to ending Our Long National Nightmare Of Peace And Prosperity?
Alright, that’s just haunting.
Amazing how prescient it was, isn’t it?
Our social satirists seem to know more than the so-called punditry these days.
Exxon Mobile Texaco Chevron BP Shell Union 76 Sinclair
Quarterly profit = $75 Billion $$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$
GM Ford Chrysler
Quarterly loss = $40 Billion $$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$
How are these two related?… and for what duration of time can this “relationship” prosper?
for what duration of time can this “relationship” prosper? Until a barrel of oil becomes more expensive than an ounce of gold.
More Wall Street Gangsterism!
http://www.boston.com/business/articles/2008/08/01/state_charges_merrill_with_investor_fraud
And the hits just keep on coming!
Treasury Ex-Official Is at Center of UBS Probe
By Liz Rappaport
A former Treasury Department official is at the center of a civil complaint recently filed by New York Attorney General Andrew Cuomo against UBS AG, in which the firm is accused of fraud in the auction-rate-securities market.
David Aufhauser, general counsel for the Swiss firm’s investment-banking arm, is the individual described in Mr. Cuomo’s case against UBS as “Executive A,” according to people familiar with the matter.
The complaint, filed last week in New York City, alleges that he and six other UBS executives sold $21 million of their personal holdings in auction-rate securities in the months leading up to …”
WSJ
This is the same Treasury mope that shut off funding to Al Qaeda and was praised.
The Bush legacy will be the change of the national motto from ‘E Pluribus Unum’ to ‘Qua Est Mei’ (Where’s mine)
LEHMAN SHOPPING MORTGAGE SECURITIES
” In a move similar to what Merrill Lynch has done, Lehman Brothers’ CEO Dick Fuld is trying to shop tens of billions of dollars in mortgage securities on its balance sheet in order to reduce leverage at the embattled investment bank, The Post has learned.
Lehman is engaged in talks with prospective buyers about offloading some $30 billion in commercial mortgage assets and other hard-to-value securities that have dogged its balance sheet for months and ultimately resulted in the demotion of Chief Financial Officer Erin Callan and President Joseph Gregory. …”
http://www.nypost.com/seven/08012008/business/lehman_shopping_mortgage_securities_122558.htm
IMHO it is 6 months late and it will not help the Lehman bonds.
some
$30 billion$7 billionMoscow to seize grain export controls
“Russia plans to form a state grain trading company to control up to half of the country’s cereal exports, intensifying fears that Moscow wants to use food exports as a diplomatic weapon in the same way as Gazprom has manipulated natural gas sales.
The move by Moscow, the world’s fifth-biggest exporter of cereals, has been sharply criticised by US agriculture diplomats as a “giant step back” to the Soviet era.
The decision to control food exports is the latest sign of how soaring food prices are reshaping the agriculture industry. The recreation of Soviet-style state trading will aggravate anxieties of food-importing countries about their dependence on the international market, which has been severely disrupted this year after exporters, including Russia, imposed prohibitive foreign sales duties or export bans….”
FT
And you thought grain prices were high before.
And natural gas.
who thought that only the US was actively manipulating grain prices and using agricultural products as a political tool
U.S. ISM Manufacturing Index Fell to 50 in July (Update1)
By Timothy R. Homan
Aug. 1 (Bloomberg) — Manufacturing in the U.S. stagnated in July as orders slumped to the lowest level in almost seven years, signaling higher raw material costs and slower spending are hurting producers.
http://www.bloomberg.com/apps/news?pid=20601068&sid=a5AexgGhJErU&refer=home
U.K. Manufacturing Shrinks Most in a Decade in July (Update2)
By Svenja O’Donnell
Aug. 1 (Bloomberg) — U.K. manufacturing contracted by the most in a decade in July and prices charged by factories rose at the fastest pace since at least 1999, worsening the Bank of England’s dilemma as it tries to avert a recession.
http://www.bloomberg.com/apps/news?pid=20601085&sid=a3TBi.mL3lFY&refer=europe
I also saw something about China manufacturing slowing down last night on Bloomberg TV. Just can’t find it. Must have been seeing things.
Does a recovery depend on house prices rising up to unexplored heights?
Sounds like washington is waiting for another housing bubble to make things better.
Where is my shopping cart?
OV,
The US has lived in a bubble economy for the last 28 yrs. It does not have to be a housing bubble, it just has to be a bigger bubble than the housing bust. Current bubble suspects are alternative energy (potential is $30T) or infrastructure (potential is $40T) or a combination of both.
Commodities are to small to ever be a bubble solution.
July 29 (Bloomberg) — MGM Mirage and Dubai World are late in raising as much as $3.5 billion for their $11.2 billion CityCenter project in Las Vegas because banks saddled with debt to casinos and hotels are wary of making new loans.
http://www.bloomberg.com/apps/news?pid=20601109&sid=alHxxqo1pZ_Y&refer=exclusive
Yep. More evidence of a cash shortage.
The other day a post from the Chicago Tribune quoted Mr. Jeremy Grantham.
I have a great deal of respect for Mr. Grantham.
The link is to GMOs quarterly news letter July 25th. A 7 pg pdf.
“Meltdown! The Global Competence Crisis”
Jeremy Grantham
http://www.investmentpostcards.com/wp-content/uploads/2008/07/gmo-quarterly-letter-july-2008.pdf
link from Mr. Paul Kedrosky
Quick question for the HBB braintrust:
Have a friend taking out a student loan with Citibank. She’s having to redo promissory note papers, as they say the guarantor has changed. Isn’t the guarantor the U.S. Gubmint?
Any comments on what could be going on here? Are we being taken over by an alien gubmint from outer space or is my level of ignorance on such matters simply astronomical…
Federal loans (Stafford, PLUS, etc.) are backed by the US government. A private student loan is probably not.
Student loans are really no different from mortgage loans, car loans, or any other loans. Before the 1970s, there were generally no loans at all for students - only scholarships or grants. Who would want to loan a student money? The government kind of wandered in, made it into a massive subsidized program, and now they’re slowly wandering out, or at least reducing the subsidies.
Plus the economy in the 80s and 90s was night and day different from the 70s, which is what the current late 00s are starting to mimic. When I went to school (UVa., early 70s) - you could borrow up to $500 once a semester on your signature - an interest-free “Honor System” loan, which had to be paid back in order to receive your grades. If you ran out of money, you quit school and got a job until you could pay your tuition or you worked part-time - e.g., I worked in Medical Records at the Hospital for four or five semesters and did other odd jobs, as well as working during the summer, and managed to get a few small scholarships. Still partied every weekend and graduated in four years with honors (barely). No big deal.
line 3 grammatical mistake - “loan” should be “lend”
Chaco Sandles, a successful home-grown company in Paonia, Colorado, just closed their plant yesterday and outsourced everything to China.
Does that mean they won’t be one of the ‘best companies to work for in Colorado’ in 2008?
http://chacousa.com/Portal.aspx?CN=1336FE105263&MN=364E9F62F8DB
Technical Analysis Around the World: Does it Ever Add Value?
Ben R. Marshall
Massey University - College of Business - Department of Economics and Finance
Rochester H. Cahan
Macquarie Securities
Jared Cahan
Macquarie Bank Ltd
July, 27 2008
Abstract:
Technical analysis is not consistently profitable in the 49 countries that comprise the Morgan Stanley Capital Index once data snooping bias is accounted for. There is some evidence that technical trading rules perform better in emerging markets than developed markets, which is consistent with the finding of previous studies that these markets are less efficient, but this result is not strong. While we cannot rule out the possibility that technical analysis compliments other market timing techniques, we do show that it does not add value beyond what may be expected by chance when used in isolation. ”
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1181367
July 30, 2008
Watch money. Money is the barometer of a society’s virtue. When you see that trading is done, not by consent, but by compulsion - when you see that in order to produce, you need to obtain permission from men who produce nothing - when you see that money is flowing to those who deal, not in goods, but in favours - when you see that men get richer by graft and pull than by work, and your laws don’t protect you against them, but protect them against you - when you see corruption rewarded and honesty becoming a self-sacrifice - you know that your society is doomed…
Ayn Rand
RE: you know that your society is doomed…
Great post, Watcher!
The perfect words for the moment.
Thanks!
And those words were written 60 or so years ago .
Ayn Rand addressed Capitalism under siege. What we are seeing is Capitalism gone amok. We are going to need a whole new set of visionaries and disciplines to fix this mess.
Maui Land & Pineapple Company Inc
Kahului, HI
“Maui Land & Pineapple Co. said Thursday that is laying off more than a quarter of its work force to save money. “This is a difficult but necessary decision as we respond to higher energy-related costs in our operating units and sluggish conditions in the real estate market,” David Cole, MLP’s president and chief executive officer, said in the statement. The company, one of Maui’s largest private employers, will lay off 274 employees, or 26 percent of its workers, in order to save $11 million a year. Cuts are being made through attrition and retirement, where possible, the company said. The state Department of Labor and Industrial Relations announced it was sending a multi-agency rapid response team to assist employees who are losing their jobs. “This is a sad day for Maui Land & Pineapple Company employees and their families,” Maui Mayor Charmaine Tavares. “I’m sure it was a very difficult decision for the company, whose roots in agriculture in our community go back generations. “It is an unfortunate situation and the county will work with State Workforce Development services and our nonprofit community to offer support to those impacted,” she said. “We are concerned for everyone affected, and our community’s history of caring for each other during tough times will be very important.” The company’s agriculture segment will lose 204 jobs, about half its work force. “Skyrocketing costs for fuel, fertilizer, packaging and transportation have outstripped the company’s ability to increase prices,” Maui Pine said….”
The Associated Press
July 25, 2008
Another Ag firm slowly biting the dust.
also in Hawaii
Kaanapali Beach Club
Lahaina, HI
The Kaanapali Beach Club hotel time share on Maui has laid off 34 restaurant workers. According to reports, the employees, who were members of Unite Here Local 5, worked at the hotel’s North Beach Grill. The Honolulu Advertiser said the workers were told they would be losing their jobs on July 23 and that the layoffs were needed for financial reasons. The contract, which covered over 200 employees, had expired at the end of 2007. The layoffs came just two days before Maui Land & Pineapple announced it would be laying off 274 workers. The club is part of Sunterra Corp.
Pacific Business News
July 29, 2008
And from Louisiana
as reported
General Motors Corp
Shreveport, LA
“A prayer, if one is so inclined, probably is in order for the people who draw their paychecks from the General Motors Corp. assembly plant in Shreveport. Until last week, the total was 1,946 workers. But on Monday, as part of an additional wave of job cuts companywide, GM said it will eliminate a production shift in Shreveport, along with about 800 jobs. It wasn’t long ago that GM was expected to be a major economic player in Louisiana for years to come. The auto giant had pushed more than $1.5 billion in improvements into the plant and was building then-popular mid-size pickups and, for those not bothered by $2-a-gallon gasoline, the Hummer H3. This fall, courtesy of Shreveport, GM is supposed to roll out the Hummer H3T pickup. But $4-a-gallon gasoline has altered pictures of prosperity with warp speed. GM in Shreveport is a good example, perhaps leaving the 377 hourly workers there who recently took buyouts grinning from ear to ear, or at least breathing a sigh of relief. For GM, it’s been a summer of trying to retool and not in the sense of equipping an assembly plant to handle a new line of vehicles. It’s a case of trying to stay out of the corporate sinkhole. A previously announced cutback in truck production has been doubled along with the promise of more job cuts and GM is shopping its Hummer brand around to buyers.
The Associated Press
July 28, 2008
“A prayer, if one is so inclined, probably is in order for the people who draw their paychecks from the General Motors Corp. assembly plant in Shreveport.”
That just about sums up the news this week. A prayer and hope. But fewer pineapples for rum cocktails. Just means more Barbancourt 5-star (double distilled instead of single distilled).
and fewer natural ice’s for the kutcha-gundees on Aloha Friday.
Cheers Hozzie.
hozzie,
I put one of yer older posts in the weekend topics..
ya gotta keep looking back to see the future.
From the Atlanta Business Chronicle:
The housing crunch has claimed one of Atlanta’s largest developers.
Stephen H. Macauley, president of The Macauley Companies Inc., has filed for personal bankruptcy, reporting debts of $131 million.
In recent years Macauley has completed 32 communities with more than 11,000 homes both north and south of Atlanta.
Those projects include The Lakes of Holly Springs, a 545-acre mixed-use site in Cherokee County; Walden Park, a 591-acre, 806-home community in South Fulton; The Lakes at Cedar Grove in South Fulton, a joint venture with Cousins Properties Inc.; Le Jardin, a 1,100-acre community in South Fulton developed with former Braves player Brian Jordan; the 668-acre Legacy Park and the 88-acre Ridenour in Cobb County.
In 2006, Macauley submitted plans in Cherokee County to develop up to 12,000 homes on 4,000 acres in the western part of the county, but the plans for A Village in the Forest have since been withdrawn, said Margaret Stallings, a county planner.
Macauley on May 1 filed for a Chapter 7 liquidation of assets in U.S. Bankruptcy Court in Atlanta and now lists his occupation as unemployed. He earned $835,000 in 2006 and $434,000 in 2007, according to court documents.
He says he filed bankruptcy because the value of his assets today is about half of what they were underwritten for, so there was no way for him to pay the debt.
A 50-year-old husband and father of three young children, Macauley lists $291,205 in personal assets, including his $200 wedding ring, according to court documents. Macauley claims the stock in The Macauley Companies is worthless.
http://atlanta.bizjournals.com/atlanta/stories/2008/08/04/story1.html?b=1217822400%5E1677399
“…Our best estimate leads us to believe the S&P/Case-Shiller 10-city composite index will fall 28.6 percent on a peak-to-trough basis. We estimate that the OFHEO purchase only index will decline around 22 percent. Our forecast for the NAR median price series would be for a peak-to-trough drop of around 17 percent. As far as timing goes, it looks to us that at least one-half of the peak-to-trough price decline has already occurred and that we should see an outright bottom either late next year or in the first part of 2010. Please read our full report for more color….”
Wachovia Economic report
Aug 1, 2008
http://www.wachovia.com/economicsemail
I head back from Florida to CA tomorrow AM. Been interesting talking to people down here. Some funny conversations:
- People who tell me that there are 100 houses for sale in their 400 home subdivision but they’re not worried because “we’re not upside-down.” I’m sure if they tried to sell their house, they’d see how upside-down they are! With 25% of otherwise-identical homes for sale in a particular subdivision, you’d be lucky to get 5% less than the most recent lowest price for *your* house.
- People who tell me how terrible it is. How there are boarded up houses near them. How their HOA has stopped doing any maintenance because there’s no money. But, the women who was telling me all this said, “it’s still better to buy than rent, over the long term!” I tried to explain to her that I, a 100% paid-up homeowner, disagree with that, but she didn’t want to sit through the math I was about to work out for her.
- About 50% of the homes in Celebration, FL are either for sale, unoccupied, or “for rent.” People didn’t expect this Disney planned community to go down a death spiral….
Add hookers to the vandals and squatters of vacant homes:
Sacramento CBS 13 reports from Tracy, a town south of Stockton:
Local authorities are now using foreclosed homes as a prostitution ploy in the central valley.
CBS 13 went to one neighborhood where it’s happening, and some people are not happy about it.
“I wouldn’t want that around my neighborhood. I mean, that’s not good for my kids,” says Enrique Cardenas.”
Enrique didn’t know police used his neighbor’s foreclosed home last night as a place for a prostitution sting….
Tracy police say foreclosed homes are a good place to conduct a successful sting….
Last night, four suspected prostitutes were either arrested or cited on prostitution charges.