Bits Bucket For August 8, 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
Location:Northern Arizona, United States
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Royal Bank of Scotland posts the biggest HY loss British banking has suffered in decades
http://biz.yahoo.com/ap/080808/earns_britain_royal_bank_of_scotland.html
LONDON (AP) — Royal Bank of Scotland Group PLC on Friday reported a half-year loss of 802 million pounds (US$1.5 billion), forced deep into the red by 5.9 billion pounds (US$11.4 billion) in write-downs as the U.S. subprime credit crisis exacted more pain fully a year after it began.
Why is it still being referred to as the “subprime credit crisis? Isn’t it time to call it the “poor bank management crisis,” or the “unscrupulous lending crisis,” or the “need for greed crisis,” or even the plain old “credit crisis”?
Because that reflects on “us”, subprime is used as a code for “the problem was caused by them lowlifes”.
Considering the source, however, subprime might not be just a code word for “us” so much as “U.S.”.
There is a housing bubble all over Europe too, however. Spain, UK, and other places. The U.S. doesn’t get all of the blame for this mess..
I was referring to an article out of Scotland a few weeks back that took a rather haughty tone on the matter - a few commenters here took notice of their implied message that it was our problem.
Very well, if we Americans are such great unwashed rebel scum lowlife trailer trash hoi polloi, then why did they buy our paper?
Because they trusted Moody’s bogus ratings? Very well, that just shows them up as poor fact checkers.
They are caugh both ways.
Oxide:
“Very well, if we Americans are such great unwashed rebel scum lowlife trailer trash hoi polloi, then why did they buy our paper?”
Ex-zachary!
The current Prime minister of England Gordon Brown sold all of their gold around $250 per lb. at the exact bottom of the market in 2000.
He thought he could get a better return on US dollar securities.
As you know gold is now up near $900.
Politicians and big bankers only know what helps them in the short term. They don’t care about their countries.
I hope you meant $250/oz.
question for ozajh,
Any thoughts on why the Aussie Dollar has been weakening vs the US Dollar?
Because Aussie dollar is strongly tied to the commodity boom and lately commodities have been killed.
I suspect though this is just a correction (a big one at that) but long term trend should hold.
‘Why is it still being referred to as the “subprime credit crisis? Isn’t it time to call it the “poor bank management crisis,” or the “unscrupulous lending crisis,” or the “need for greed crisis,” or even the plain old “credit crisis”? ‘
Because the “subprime” crisis means its the fault of the stupid, little people who should have known better if not for the fact that they aren’t that bright. The rest of us are blameless.
The “lending” crisis means the smartest guys in the room screwed up while we* stood by and let them and even applauded.
*the general public/hbbers and certain assorted economists, businessmen excepted
How `bout the “Hubris Crisis”? Or, the “Karma Crisis”?
Can you say Stagflation?
Dow Industrial trailing P/E NIL
Russell 2000 trailing P/E NIL
These are real 12 month trailing numbers not forward 12 month estimates.
Check out these P/Es at ‘The Wall Street Journal Market Data Center P/Es & Yield on Major Indexes’ webpage.
When the Dow trailing P/E is under 10, stocks are cheap.
When the Dow trailing P/E is over 20, stocks are expensive.
When the Dow trailing P/E is NIL, stocks are _________?
Dotcom?
Best Wishes!
Oh, we all know the answer to this one: Accoding to Komrade Paulson, the answer is “only going to go up!”
Now, get out there and buy SOMETHING today - the kleptocrats need more of your money, so do your duty! And don’t short any stocks since that’s unpatriotic!
Pondering the Mess,
In Stagflation the Dow trades in a range (say 9000 to 13000) while the value of the dollar falls, and falls, and falls (like in the 1970’s). This will continue until the US Fed. raises the interest rates above the level of inflation (like in the early 1980’s) to save the dollar.
At that point it will be a good time to buy both the Dow Stocks and Real Estate for cash!
Best Wishes!
No such thing as NIL right - that would require that stocks be priced at 0 right? I think what you really mean is P/E of infinite, which is what happens when E gets to 0 (or negative).
packman,
Nil is the word that ‘The Wall Street Journal Market Data Center P/Es & Yield on Major Indexes’ webpage is using for none or infinite.
http://online.wsj.com/mdc/public/page/2_3021-peyield.html?mod=mdc_h_usshl
Best Wishes!
The Market Ticker by Karl Denninger
“”Fannie’s “regulatory capital” is $47 billion. Sounds like a lot, right? Uh, except that they have a $3 trillion book, between credit and retained. That’s an enterprise leverage ratio of 63:1, or roughly double Bear Stearns was just before it blew up.
The bigger news was embedded in the series of flash news releases - Fannie is ceasing the purchase of ALT-A paper. Huh? ALT-A eh? I thought we were told by the politicians that Fannie and Freddie were providers of liquidity to “conforming” mortgage holders; that is, fully-documented, even if they’ve redefined “prime” in recent years.
Ah, grasshopper, now you are starting to understand the lie that you’ve been told, and why its a problem. See, the truth is that Fannie and Freddie have been buying both ALT-A (liar loans, interest only, etc) and subprime. That’s right, they’ve been playing “hedge fund” along with mortgage originator and guarantor! Fannie and Freddie have an enormous amount of exposure to both subprime and ALT-A on their credit book, nearly all of it purchased from others, not originated for them. In other words, the firms went out into the marketplace and bought this paper.
People wonder why I’m rabidly opposed to any taxpayer-funded support of these clowns? This is not a firm providing market support and liquidity for borrowers on loans they originated and controlled, directly or indirectly; they literally have been going into the market and buying this paper on their own for investment purposes!””
Ah, grasshopper, now you know!
Best Wishes!
I agree with you wjk .
http://www.usatoday.com/money/economy/housing/2008-08-06-realtors-quit_N.htm
Sinking real estate agents…… I just can’t muster any compassion for these charlatans.
Point # 1: Note the trend of agents leaving to pursue “in home” marketing ventures. So, while no longer in RE, this ensures they will still be annoying to friends, family and coworkers.
Point # 2: Note also how some agents think that moving to another state will fix things - obviously unaware of that they and their ilk have dumped on the entire nation.
Point # 3: Every family has had illnesses to contend with at one time or another. (Pops had a dibilitating stroke when I was 10, the rest of his life wasn’t so great) So, MSM - how about giving the sob stories a rest and focusing on the real issues - at a time as important as this.
“Jack Jentzen never saw it coming. Four years ago, as a real estate agent in Elgin, Ill., he was enjoying the rewards of the most frenzied U.S. housing market in decades, and money poured in.”
Let’s see - no education or skills required, almost no barriers to entry, money pouring in - if he couldnt see that train coming to an abrupt stop in the near future I don’t think he is capable of meaningful employment.
“Jentzen is interviewing for a host of jobs outside of real estate to try to continue making his mortgage payments. But so far, he continues to be turned down as overqualified.”
Overqualified. I never could understand this concept. I can see how a person could be underqualified, meaning he couldn’t do the job, or unqualified because he wasn’t suited for the job, but how is a person overqualified?
If underqualified means he can’t do the job, would overqualified mean he can do the job too well and thus shouldn’t be hired?
“…he continues to be turned down as overqualified.”
Combo, this is New Age codespeak - this is what one tells friends, family and (most importantly) mates - when all one’s salary/wage offers are far below one’s expectations.
It finds its heaviest usage amongst folks holding graduate degrees but still working in the food service industry.
So edgewater,
Are you suggesting degrees may not replace experience and wisdom gained from years in an industry?
How nostalgic. It’s been so long since I’ve heard that song.
True or not, it is well on its way to becoming nostalgic. At the moment, those years of experience are the only thing keeping the 55-year-old guys with BS’s ahead of the 35-year-olds with the Master’s and PhD’s. In 10-15 years, now your 50-year-olds will have years of experience AND Master’s and PhD’s. The only thing that will top that is a good golf handicap.
And the Master’s and PhD’s will be smart enough to get good at golf too. You are all sunk.
While everyone’s experience varies, mine has shown me that the skills that have always put food on my table have been the skills acquired from: actually working, traveling, parents/mentors, hobbies, and recreational reading.
I get the degrees because they unlock new opportunities and they do spur me to do more reading on my own. Other than that, between you, me and the fence post - higher ed borders at times on being a complete scam. It’s one thing to have to stroke your boss for a raise - but it’s a whole other matter to have to stroke a prof. just so they “objectively” read your papers.
Higher ed will be much more valuable to this nation if their “discourses” are smashed. (they also need to quit humping Marx - but that’s another argument)
“You are all sunk.”
That was harsh.
I was hardly attacking people w/higher degrees. I just think they need experience too before assuming a leadership position. That’s a belief I’ve held ever since they replaced the great marketing guru w/20 years experience that cheerleaded our dept to numerous successes w/a 29 year old guy who was clueless to group dynamics, had no idea how the industry worked, and sat in his office all day writing e-mails. (I think he knew his managers under him outgunned him and just decided to stay out of their way)
He lasted about a year. They eventually replaced him w/the head copywriter who was a master at humorously balancing all the egos in the dept. and who really always ran the show anyway. I don’t know what degree he held. But he knew enough to work well w/the VPs to break us into new markets in Asia, Europe, and Latin America throughout the 90s.
Besides look at your post. You said soon the PhDs will have experience. Yeah, that’s the concept I was referring to: That one is given a management positon after they understand the ins and outs of their industry and not the first day they show up w/nothing but the classroom behind them.
Btw, people w/BS degrees can go on and get their higher degrees too so that whole “sunk” concept was kind of humorous.
Other than that, between you, me and the fence post - higher ed borders at times on being a complete scam.
Even though I’m usually a proponent of higher learning, that’s my experience as well. Many degrees are the contemporary equivalent of getting one’s union card — jump through some hoops, learn how to play the game, and we’ll reward you.
In many cases, one’s higher education is largely irrelevant — my own job, IT for graphic design, is a case in point. No one in my department has a classic technical background — most of us went to art school or have English degrees. We learned everything on the job or through trial and error. One of my superiors never went to university; he says he was “too busy running around naked in the woods with all the other hippies.” Nonetheless, he’s very good at what he does.
Experience is extremely valuable, but formal education is irreplaceable in some fields such as science or engineering. Try to learn by trials and errors if you work in a field where you error may instantly cause tens of millions of losses and loss of human lives on the top of that – electrical engineer in a power plant for example.
I’m playing devil’s advocate here, disillusioned, but much of science and engineering “education” is either on-the-job training (field work, residencies, research positions) or trial and error (computer modeling, the “scientific method” of research and experimentation).
I can see how science and engineering would be different. Perhaps also the necessary trial and error part takes place pre-degree in the form of heavily supervised internships?
If science and engineering is so different why are we outsourcing those jobs to China/India.
Do they really have better science and engineering schools there?
“Do they really have better science and engineering schools there?”
No just employees that are a lot cheaper.
My company has a target ratio - generally about 2:1 or 3:1, in regards to productivity (e.g. it takes 2 or 3 times as many foreign bodies to do the same amount of work). This is cost effective because their salaries are about 1/5 that of Americans. The gap is closing though.
If science and engineering is so different why are we outsourcing those jobs to China/India.
My previous employer tried outsourcing to India. It looked good on paper until the contract company there raised rates. They took a bath on the whole experiment.
Next was Poland. This time, they opened an office and the poeple there are employees not contractors. That experiment was still going (and expanding) when I left in June. Even if they don’t save any money, it will be good having the timezone diversity for several operational reasons.
“The only thing that will top that is a good golf handicap.”
It is absolutely amazing how far a good golf handicap goes in the business world. I believe I’ve observed a number of “golf gods” in the Fortune 500 company I work for leapfrog to much better positions than they merit.
Overqualified usually means your skill set would be greater than that of your future boss if you accepted the job. Thus, you are a threat to those in charge of hiring and/or they think you will only stay until you find the job you deserve elsewhere. Seeing that Realtors have no skills other than being selfish and pushy, I just dont see it. I think its code for the job doesnt pay close to what he was used to making in the past. My mom had an substance abuse problem. She went from job to job in a downward spiral. She used to tell everyone she cant find and keep work because she was overqualified and everyone was always out to get her. I dont think anyone bought it.
My ex-neighbor had a substance abuse problem and was also bipolar. She got fired, and couldn’t find or keep another job. She said that employers told her she was overqualified. The real reason was that she was nuts.
What could a Realtor be overqualified for? These are some of the most obnoxious people on Earth, and employers know it. Employers are also not hiring out-of-work mortgage brokers, and I don’t think it’s out of fear that the ex-brokers will make them look stupid by comparison.
BOY am i running into that EVERYDAY here in NYC.
A simple job with housingworks.org to work on their auction website…. they help aids and homeless people.
The job ad was very minimal skills almost like they wanted a 19 year old who was barely functional. And here i am with 700+ ebay feedback, 10 Auction up on Ebay due to the 25 cent listing fee…plus all my people skills….and no answer to my resume or phone calls
So i decided to walk over..yes it was 4 BLOCKS from my apartment…incredible no commuting costs…
And i asked for the guy i send my resume to, and after waiting a half hour in an un-air conditioned warehouse… he went BALLISTIC………claiming i did’t’ send in a cover letter, and the ad stated no phone calls, and then you actually walked in and asked him for a job.
I was never so talked down to and offended in my life When did asking for a job in person turn out to be Breaking the Rules as opposed to Showing Initiative?
Hi aNYCdj,
If you are looking for a good career you can email thomas @cell-plus.com and tell him Darren sent you. You are obviously intelligent and if you are willing to work 6 days i can get you into a business that will be way more satisfying.
Count yourself lucky. If the place was worth working for, they would have appreciated the can-do initiative. Soldier on.
Thanks:
But the truth is i get 20-30-40 Job Opportunities a week, all are NO PAY commission only sales jobs. they are flooding CL everyday.
Very seldom does any Real Employer ever answer a resume anymore. One that can state the pay, benefits, so you can plan on paying your bills on time….that is rare today.
Have you read “Bait and switch”? It by Barbara Ehrenreich. She went undercover as an unemployed, middle aged professional and also found that the only jobs offered to her were for comission only positions.
IMO overqualified usually means one of two things:
1. You are genuinely overqualified. Even if you are having a tough time of it right now, things will turn around eventually and you’ll probably manage to get a better job six months from now. It makes sense for a company to hire someone with lesser qualifications who is more likely to stay over the long term. If you want the job anyway, just tell the interviewer that you are looking for a long-term position. They might not believe you, but there is a good chance that they will be comforted enough to offer you the job.
2. You have an attitude. This is common with a lot of older, experienced, smarter workers. You get used to doing things your own way. You are no longer accustomed to sucking up to, and taking guff from, the boss. Unfortunately, the workplace often requires us to eat poo sandwiches and get along with quarrelsome co-workers. In this situation, some companies will refuse to hire you because they perceive that you will be too hard to get along with, even though you are obviously qualified. The key here is to humble yourself and bow down before your future boss. Self-abasement is one of those things we all have to do, and if you do it you’ll have an easier time at getting the job.
Well Said Joe!
Years ago (when he was still cool after the ‘92 victory) James Carvel said on meet the press:
“Just about every job is political. Unless you can run faster than anyone else in the world or you are the most gifted painter, get rid of your ego and just bend over and take it, Hoss.”
Hey Sam…
Agree with the comment about ego.
I recall hearing Bill Gates talking on a college campus. He was asked what qualities he was looking for in new hires.
Gates said a little bit about fundamental skills: writing, some but not much about tech background.
His answer: “I want people who are willing to learn and who have a passion for it.”
Willingness to learn = code for people who don’t think they know everything, regardless of degree.
Of course, Gates’ abbreviated college career is well known.
My two cents…
On the other hand, Gates is also quoted on the back cover of Knuth’s “The Art of Computer Programming” as saying “If you think you’re a really good programmer. . . read [Knuth's] Art of Computer Programming…. You should definitely send me a resume if you can read the whole thing.” I doubt that most Ph.D.’s in computer science have assimilated more than a fraction of the contents of that series of books.
Well I’ve been on the hiring end and “attitude” is right. Applicants seem more interested in ego-tripping than getting hired. My company will give almost anyone a try but sheesh, you’ve got to show some kind of class and humility in your first week on the job. But people want to impress Everyone with Everything they’ve done that makes them so hot…they make too much noise. “I’m going to knock this marketing dept into shape - why, when I was at my last job in Seattle blah blah blah..” Gone three days later. Others are so high-maintenance..who needs it. Some people come here and throw their resumes around and if they don’t get enough fawning offers they just move on to some other scenic spot.
Advice: If you really want to work, put your head down and STFU for the first 6 months at least. One guy who used to work for Loral came here, didn’t even have a degree, but was so quiet and competent he was a VP within 3 years.
“Advice: If you really want to work, put your head down and STFU for the first 6 months at least.”
That’s good policy for more than 6 months. Your typical asswipe still doesn’t get that concept, even late into their career.
No Joe 3 Things:
New 2008 Corporate Doublespeak:
“OVERQUALIFIED ” really means: “WE WANT TO HIRE A MORON!”
————————————–
IMO overqualified usually means one of two things:
I believe rejection based on “overqualified” status is illegal if I remember correctly. But put more accurately aNYCdj, the bottom line meaning is, “we don’t want to pay what you’re worth… we need a wage slave”.
Having been on both sides of the interview/hiring process, and having heard as well as used the “overqualified” phrase, here’s my take.
You’re overqualified if you’ve had more responsibilities or made more money in prior jobs, and the hiring manager knows that while you make take the job being offered, you’ll continue to look and will bolt as soon as you find something better. I never used that phrase about someone fresh out of school or just out of the military.
“1. You are genuinely overqualified. Even if you are having a tough time of it right now, things will turn around eventually and you’ll probably manage to get a better job six months from now. It makes sense for a company to hire someone with lesser qualifications who is more likely to stay over the long term.”
Bingo. It costs quite a lot of money and time to advertise, sort resumes, interview, process the hiring paperwork, and finally train the new hire. Once upon I time I was doing the job of an HR department in addition to my many other (more ordinary) responsibilities. Usually I felt bad for those overqualified people - at least they had enough of a work ethic to be willing to do what it takes to feed the family and pay the bills. However, if I made the wrong choice - i.e. hiring someone who would leave the minute a better opportunity came around - it would mean even more work for me (usually sooner rather than later) and cost the company money.
HAS IT EVER OCCURRED TO YOU
That maybe there is a good reason to take a job i am overqualified for????
This job was 4 BLOCKS away from home….no commuting costs, no new clothes no parking no gas, not even lunch…
plus it opened up other opportunities since it was a M-F job.
But when you have serverly stupid HR people who cannot think or answer a phone or email properly, how would you know….?
This is what i am so pissed at…This was the First time in my life the hiring person was so freaking dumb, that having a quality employee 4 blocks away from the job would have been a godsend, since its quite a walk from the subway stop…
You might try leaving your business cards at every small mom and pop style business on the blocks surrounding you. You might get lucky and find someone else within walking distance needs you.
Most businesses hire people who show the initiative to walk in.
Maybe the business you visited wasn’t really planning on hiring anyone from outside and just placed the ad to satisfy corporate rules.
“Others might pursue the rank of CIPS, for certified international property specialist.”
Impressive. A CIPS realtor, truly a competitive advantage - I’m sure…lol. Does that mean sellers can get their wish price now?
no sympathy at all for these jackasses
save for a rainy day dipsh*t
this will only get worse for these bottom feeders
I spend my time when I’m not working writing angry letters. One thing I’ve tried to get some reaction from my local reps is to make sure that any housing “bailout” proposal (all of which I oppose!) specifically excludes licensed R-E agents! These people had the means and knowledge to know better, and a large percentage of them now hold mortgages they can’t pay.
Seeing sob-stories about R-E agents as I’m sitting here eating my breakfast is making me nauseous.
I never got a single response to this suggestion. Most often, whenever you send a letter to a politician, their computer (or intern) finds a keyword and tries to send the most appropriate form letter back. Which is usually something like “Anna Eshoo is doing everything she can to keep your home values high!”
http://money.cnn.com/galleries/2008/fortune/0808/gallery.whosawitcoming.fortune/9.html
Mozilo, once a regular on the business TV channels, has been less visible lately. Last year he offered a tart response to critics. “Remember, we didn’t reach out to home buyers,” he said. “They came to us.”
——————————————————-
Buyers went to him? Some logic huh? The street corner crack dealer is an innocent soul too. /sarcasm off
“Remember, we didn’t reach out to home buyers,” he said. “They came to us.”
Chris Dodd sure did, in search of a sweetheart deal.
So Countrywide never ran any ads, ever? Or, those ads weren’t reaching out to buyers but were run merely to enrich media outlets at the expense of Countrywide?
What about VIP home buyers? Did Mozilo reach out to them?
“Did Mozilo reach out to them?”
i think that was more of a reach around.
“Remember, we didn’t reach out to home buyers,” he said. “They came to us.”
Au contraire-wasn’t CW engaged in coldcalling and re-mortgaging?
I know Chase was.
Guess they researched we had a major piece of equity they needed to extract. They were brutal. One reason to be glad to be out of my home. The phone calls and semi weekly mailings finally stopped.
Mozilo has been around long enough to know the difference between a risky loan and a good loan. Mozillo was pumping up his stock by fee income ,just so he could dump before the shit hit the fan . CountyWide’s default rate is very high with the loans in the last years of the boom . For Mozillo to say that the borrowers came to him is so insulting ,as most of the BS defenses he comes up with .Mozillo’s Company was a major force in the market place and IMHO his own self-serving desire to exit at the top without caring what damage he was doing is the true story .
Beazer Homes fiscal 3rd-quarter loss narrows, home closings and backlog shrink
http://biz.yahoo.com/ap/080808/earns_beazer_homes.html
The loss for the June quarter was $109.8 million, or $2.85 a share, compared with $118.7 million, or $3.09 a share, a year earlier. The company booked a $95.5 million charge as it walked away from land option contracts and the value of its unsold homes declined.
FBs walk away from home buying contracts and big builders walk away from land buying contracts. Better to walk away than stay and pay these days.
test
Here, Ben?
Welcome back to the blog.
Welcome back!
Mike
Wow! Welcome back. Tell us how you are doing.
Welcome back and bask in the recuperative powers of the HBB!
Nice to have you back. Best wishes for your quick recovery. Hope your dogs are ok too.
Hope you are feeling better. We are so glad you are back.
So good to see you are back!
From what I saw on TV and read in the papers, you are one heck of a woman!
Best of luck and hope you have a speedy recovery.
Wait, what happened?
Another HBBer here who is glad to see you’re back!
Yes, please tell us how your doggies are doing.
Welcome back.
Good morning ahansen
Nice to have you online this morning.
I, too, am delighted to see you, ahansen. Howdy from ole’ Palmetto.
Hope all is well at your end, ahansen!
Adding my voice to the chorus: Welcome back!
Welcome back! : )
Fannie -$2.54 instead of -$.68 expectations.
Market Watch bloggers were funny last night. W/Opening Ceremonies taking place on what could be a market’s day of pain, they joked that these could come to be known as the Depression Olympics.
Ok, let’s keep a tally: how many stories this morning will feature contradicting headlines about the Fannie expectations/results?
Winston obfuscates!
Bloomberg isn’t talking about it, but NPR said that China’s overall market was down 4.5% today? Not very lucky 8/8/08 this century I guess. Maybe they shouldn’t count their lucky days based on a western measure of years, months and days…
San Diego in recession
http://tinyurl.com/6chgul
This is hardly news to anyone with a pulse. Do San Diego economists have pulses?
“For the first time in 15 years, San Diego County’s economy has entered a regional recession, local economists have reluctantly acknowledged.”
“A key measure of the local economy’s health — job growth — dipped negative in the first half of 2008 compared to the first half of 2007. That hasn’t happened since 1993. The job growth measure is the local equivalent of how recession is calculated on the national level. Economists who ardently argued even in recent months that the San Diego region would steer clear of a full-blown recession have now reluctantly allowed the ‘r’-word to cross their lips.”
Maybe those lips were too firmly attached to developers back sides.
“Basically, the real estate-related jobs, the losses there were much larger than I’d expected,” Gin said.
Why wouldn’t one expect large housing sector job losses from the biggest housing depression since the Great Depression? This shouldn’t be a surprise to any competent economist.
Here’s what gets me about this stuff:
‘For years, the economists who study the region have contended that without significant job loss in a major sector like manufacturing or defense contracting, the region would avoid recession. Housing market malaise, argued University of San Diego economist Alan Gin, wouldn’t be enough to drag the region into anything more than a “San Diego-style recession’
‘Usually the real estate markets will kind of follow or trail what’s happening in the rest of the economy,” Cunningham added. “But the real estate market dragged us into this recession, which is not the usual way it’s happened.’
How do these ‘economists’ get away with this crap? RE almost always leads the economy into recession.
I do believe, however, that most times real estate has had down cycles it was the result of job losses unrelated to real estate that drove down demand. It was historically a localized occurence except for major events such as the Great Depression. In this instance, however, it was the rapid appreciation of home values notionwide which put homes out of the affordability range that triggered a freeze in the capital markets and resulted in job loss and downward pressure on prices. This beast is a different animal from my perspective. So different that I dont even think that past U.S. real estate cycles are even relevant as far as predicting the final outcome.
“So different that I dont even think that past U.S. real estate cycles are even relevant as far as predicting the final outcome.”
That is why folks who are looking to past cycles as an indication of how this one will play out appear so foolish. The past is a poor guide to the future when one is facing unprecedented circumstances.
“The past is a poor guide to the future when one is facing unprecedented circumstances”
O.K., Mr. Bear….quick…when was the last time…mortgage interest rates were below 4.5%? Now, What was the National family income average for said year?
“Socrates argued that a statue inferred the existence of a sculptor”
Sir Greenspent: master of the “marble”
“That is why folks who are looking to past cycles as an indication of how this one will play out appear so foolish. The past is a poor guide to the future when one is facing unprecedented circumstances.”
Some of this seems to be a matter of convenience. Using obviously inappropriate comparisons allows one to forecast a purposefully understated decline.
I think you’re right. A slump in real estate used to be a result of job losses. Now it’s a cause of job losses.
We’ve gone over the reasons for the switch repeatedly: no standards to meet to get a mortgage, and no intent to actually pay the mortgage back.
More direct evidence on the “San Diego regional” recession follows below. Remember that San Diego is the bellwether for the U.S. national real estate market. I expect in retrospect that San Diego will play a similar role for the U.S. macroeconomy in this cycle.
As families tighten belts, school attire gets cut too
By Jennifer Davies
STAFF WRITER
August 8, 2008
JOHN R. McCUTCHEN / Union-Tribune
With school in mind, fifth-grader Chloe Cline, 10, tried on some boots yesterday at Target in the Plaza Bonita Mall in National City.
Kids are getting schooled in the hard lessons of Economics 101 – long before the first bell rings.
A tumbling housing market and soaring gas and food prices have all forced families to trim their budgets. That means less money for the all-important back-to-school shopping spree.
Already retailers are feeling the pinch, as weak July sales figures show consumers are cutting back on everything except the sheer necessities. Even discount outlets such as Wal-Mart and Target were not immune, missing estimates and warning of future weakness as the stimulus spending begins to evaporate.
Todd Slater, a retail analyst for Lazard Capital Markets, said July’s numbers are a bad sign for August and September sales, when families typically load up on back-to-school gear.
Slater said simply that “back-to-school is not going to happen.”
It is more than the biggest housing depression….it is the biggest lending implosion. People, business, and government borrowed trillions and trillions of dollars on assets not worth a fraction of what they borrowed. Not only that….much of the borrowing went to consumable spending.
Now much of the money is gone, the assets are crashing in value, and the debt remains.
What is insane is the system is trying to portray this is almost over……it has barely started.
Business is shutting down all accross America.
We had one major casino project, Eschelon, shut down last week mid construction and this week another, the newer Cosmopolitan, is about to be foreclosed. When if Vegas’ history has two casinos on the strip fail in a week?
In the end, we margined up TRILLIONS, yes TRILLIONS of dollars, and now we have to figure out a way to pay it back……
The problem is that income and revenues are evaporating all over America….there is no simple way to pay it back and just printing money in an insolvency situation won’t help the cause.
Are you trying to suggest the sky is falling?
No, but the situation is a little more serious than the spin doctors would like to think.
Not to worry. Ben Stein said that we’re absolutley NOT in a recession. Who’rya gonna believe? Ben Stein or your own lying eyes? [/sarcasm]
Got MREs?
“Business is shutting down all accross America.”
No kidding. There was a story on the local news about a woman who had a small manufacturing business (wish I could give more details, but it was something that was on TV in the background while I was online, so I only listened with half an ear.) that had been around for a while and on occasion she would need to tap her line of credit on a temporary basis to get materials, etc. I have a buddy with a T shirt business and this is not at all uncommon. And back in the day when I was working in Boston, the boss used to go downstairs to the bank every once in a while for a temporary loan to make payroll and then pay the bank back as soon as the money came in from his accounts. Anyway, she can’t get the credit now. Not because she’s having problems, she just needs the money to fulfill orders she’s got. But the money just isn’t there. She’ll probably end up having to go to a factor, which sucks big time.
I don’t get it. I still see building going on around here and it is completely useless. They’re getting money, but a lady who has a nice little business that has been around for a while and employs a few locals can’t get the credit she used to.
Can’t fulfill her orders, loses customers, then has to lay off employees or even shut down. Really sucks.
“I don’t get it. I still see building going on around here and it is completely useless.”
The news announced 4 new retail businesses that Clay, NY officials have lured to the area. Expectations were that there would be more to follow. The closing line to the newspiece was that the officials’ attitude was “Full speed ahead!”
An announcement that Marriott would be building a hotel in downtown Syracuse was made last week.
With all the lay-off announcements going on simultaneously, the irony is amazing.
I’m anticipating a lot of “Grand Opening Going Out of Business Sale” signs.
That’s perfect
http://tinyurl.com/5h5evu
Armory Square Marriott Planned
Wednesday, August 06, 2008
By Meghan Rubado Staff writer
[snippet]
The Marriott, scheduled for completion in 2010, would look to cash in on the 50 to 60 weekly out-of-town visitors that O’Brien & Gere brings to Central New York, Driscoll said.
“It’s really nice timing to have this hotel going up right next door,” the mayor said.
[snort--snort-snort!!!]
The city has arranged for a payment-in-lieu-of-taxes agreement and a $500,000 grant from the Syracuse Industrial Development Agency, Driscoll said. The Common Council and SIDA still must vote on the in-lieu-of-taxes deal, and SIDA has yet to vote on the grant. The state has agreed to a $2 million, low-interest loan.
Common Councilor Kathleen Joy, chairwoman of the Economic Development Committee, said she anticipates the council will support the in-lieu-of-taxes deal, which would hold steady the property assessment at $2.4 million for 15 years before phasing to full assessment. Her committee will meet at 1:30 p.m. today to discuss the project.
“This is very exciting. It’s a real project that’s ready to go,” Joy said. “The nice thing about this location is its proximity to high-end retailers, entertainment and sports. Business visitors will see all that and, hopefully, come back with their families.”
[end snippet]
I’d say the unbridled otimism is amazing, too.
Reminds me of the “Skyscraper Effect”. It’s the theory that the building of the tallest skyscrapers is coincidental with business cycles, in that the building of the world’s tallest building is a good indicator for the onset of a major economic downturn.
a lady who has a nice little business that has been around for a while and employs a few locals can’t get the credit she used to.
Can’t fulfill her orders, loses customers, then has to lay off employees or even shut down. Your basic credit crunch, is all. Multiply that 1000s of times, spread it all over the country & you have big time trouble for everyone.
“…spread it all over the country & you have big time trouble for everyone.”
There is in America…1 % of the population that will not have ANY troubles…but they are rare & in the minority, so let’s just ignore them.
“In the end, we margined up TRILLIONS, yes TRILLIONS of dollars, and now we have to figure out a way to pay it back …”
Or write it off, which now seems to be what is happening.
At the current pace of writedowns, in $3 bn — $10 bn drips, it will take years and years to write down $trillions (= $1000 bns) of loan losses.
Are you suggesting that we’re doing a Japan?
I have often suggested this.
Me too. We’re headed towards Japan.
Strange how they finger-wagged at Japanese institutions and asking them to eat their medicine but abanadoned that kinda advice here in a hurry.
Strange how they finger-wagged at Japanese institutions and asking them to eat their medicine but abanadoned that kinda advice here in a hurry.
It’s a lot tougher when you’re the one that has to swallow two fingers of cod liver oil.
The difference with Japan is that the people didn’t walk on their mortgages for most part in spite of being up-side down for years . The walk-a ways and FB’s is what is going to make this loss in the USA more in all our faces .
The stock market almost up 300 points and oil down about 5 bucks .Interesting ,I give up on trying to figure the stock market .Just let me know when it’s down to about 800 and I might bite .
Fannie Mae reports $2.3 billion second-quarter loss as defaults and foreclosures mount
http://biz.yahoo.com/ap/080808/earns_fannie_mae.html
Mortgage finance company Fannie Mae swung to a second-quarter loss that was more than triple what Wall Street expected as conditions in the housing market continued to deteriorate.
Since it’s only triple what “Wall Street” expected, it should portend a good day for the market. After all, it wasn’t as bad as bad as a 4x loss that could have occurred!
“The company also said it would hike fees, cut operating costs by 10 percent by the end of next year and stop purchasing so-called Alt-A loans, made to borrowers with solid credit but little proof of their income, or small or no down payments.”
wow, i would have thought they had stoped making those kind of loans.
The PPT appears to have their liquidity fire hose turned on full blast to offset the stock market response to Fannie’s “bigger than expected” loss.
Gold and oil are getting hammered again. It svcks to be long gold today, whether of the black or yellow variety.
and it was the worst week ever for being long the euro; 6% down against the dollar in two weeks and 4% down within a few days, quite spectacular. I think the market is now seeing Trichets ‘new inflation fighting clothes’ for what they really are, just the same bs that Bernanke is using.
of course the central banks are using the opportunity to trash their own currencies, and in the case of B-52 Bernanke an opportunity to reload the ratecutting gun. Nowhere to hide, this could get ugly
Europe is toast.
Among the damaging news was Russia’s invasion of Georgia. Acts of desperation, troubling times, governments insolvent and banks holding the bag.
Hi Hoz. Can you tell us if there are any negative consequences to what I think is a long overdue crash in commidities? On CNBC they warned that it would be painful. I don’t see it. Can you give your views? Thank you.
I’m interested in that info too, RE.
I’ve also been sitting back waiting for the direction of that outflowing cash to become obvious.
(Or is it going to shoring up reserves?)
The euro is very interesting. Watching the money come out of it, I have to wonder where it will go to? Not the USD, probably, though the CBs are doing a prop job on it.
On July 16, 2008 (the closest date of the weekly reports to the July 15th low in the Dollar Index), the Federal Reserve reported holding $2,349 million of US government paper in custody for central banks. In its report released today, this amount had grown over the past three weeks to $2,401 million, a 38.4% annual rate of growth. To put this phenomenally high growth rate into perspective, for the twelve months ending this past July 16th, assets in the Federal Reserve’s custody account grew by 17.3%, which is less than one-half the growth rate experienced over the past three weeks.
So central banks were accumulating dollars over the past three weeks at a rate far above what one would expect as a result of the US trade deficit. The logical conclusion is that they were intervening in currency markets.
The gold trade is over for probably the next two years, the dollar is only going to climb from here. The ECB is done raising rates, their next move will be cutting rates and the Fed’s next move will be raising rates. Plus, the economies outside of the U.S. are slowing down, so those investors will move into a relative safe haven known as the U.S. Oil will probably be around $80-$90/barrel by the end of the year as all economies slow down. The dollar has bottomed for the foreseeable future.
Oh the humanity — oil and gold are getting hammered while the U.S. stock market is only going up again. Do Watcher and Aladinsane want to weigh in here on how this move will soon give way to a collapse of the U.S. financial economy?
President…er, Professor Bear declares mission accomplished? And where did you park your aircraft carrier? The bull market in crude oil started in 1999, and in the last nine-years the oil market has gone down over 40% three times. Was that the end of the bull market? If oil over 100 is victory to you, I would hate to see defeat.
Agreed, on all counts.
yes, very interesting how we haven’t heard a peep from aladinsane.
This is exciting. I am getting my wish prices for GLD and SLV. I do not try to time the market - only try to get the best deal when I buy - you make most of the money when you buy it right. I could start buying today. Hopefully I could get even better deals. Not happy about GFI - that is the only one that has lost me money. Not sure if I will buy some more of it. I kind of like what the new CEO is saying and doing, though. I read a report how they have the largest reserves of AU and how Barrick is much more of a copper miner than acknowledged. Everytime I listen to someone else, it is not that good. As for the oil - it comes down to 110 and turns around on its heels.
One month annualized rate of decline crude oil price (NYMEX light sweet pit):
((115.15 / 147.20)^12) - 1 = -94.7 percent annualized.
But don’t worry — anything which cannot go on forever will stop.
“President…er, Professor Bear declares mission accomplished?”
I said nothing of the sort, but feel free to put words in my mouth if it mitigates the pain of losing your shirt on your anti-dollar bets.
P.S. Hint for Watcher: Don’t fight the Fed.
I don’t fight the Fed; I bet on them consistently. Perhaps you should read Mr. Bernankes’ ‘Deflation: Making Sure “It” Doesn’t Happen Here’, available online. Deflationistas have been fighting the Fed, and losing, for decades.
PS :- Actually, you can fight the Fed going into the collapse as long as you realize that their goal is a “controlled” deflation.
Never been a time where the debtors overwhelmed the creditors politically. Dream on, FDR-lovers.
FPSS, you think that’s their aim or are you being sarcastic?
If they really contract the money supply, how are they (the govt) going to maintain the debt service as the total debt becomes a larger percentage of GDP/tax base/tax revenues? Are you suggesting the U.S. is likely to default at some point?
Yep, strategic defaults.
Already happening to the munis as we speak.
The US has already defaulted multiple times. They haven’t even paid back WWII debt. Gimme a break. They will inflate eventually but not yet.
“Deflationistas have been fighting the Fed, and losing, for decades.”
Just because I posted evidence that oil is dropping at a 95+ pct annualized rate at the moment does not make me a deflationista. You are misconstruing my data displays as religious beliefs. I am agnostic.
(tried to post this twice but got bounced. Sorry if you see this thrice).
I guess the elves must be making more oil. No problem for me. The yield on PGH is 16%. I predicted at the beginning of 2008 that oil will average $100 per barrel for this year. I guess I was wrong. But looks to me we’re headed in the direction. I think we’ll see $100 per barrel at some point this year.
September will be a good time to buy more PGH.
As for gold, I’m getting interested in buying more again. I keep a watch on the ten year note yield. The figures have been on both sides of the 4% line. That’s the line where I consider it a hold for gold Above that line I would start buying 3 month T-bills and just hold gold. Above 6% yield on the ten year I will start selling gold.
Still bullish on the yellow metal. The fact is no matter if Obama or McCain is President the next 4 years, we have a lot of inflationary spending coming our way, more bailouts, more entitlements, and that means gold prices will continue to skyrocket.
As for oil, the bears like to ignore the fact that deman is increasing at a 3% clip while production is increasing at 2%. They also conveniently ignore that tens of millions of new drivers in China and India are competing for gasoline (which you all think you have a right to cheap prices, dontcha?).
Gold above $2000 per ounce within 5 years, oil above $250 per barrel same time frame. But I won’t own much gold when ten year notes yield over 10%.
UPDATE 6-Gold slides to three-month low as dollar rises
http://in.reuters.com/article/goldMktRpt/idINL860224520080808?sp=true
BULLETIN>>
CRUDE CLOSES AT $115.20 A BARREL, DOWN 7.9% FOR WEEK
A one-week decline of 7.9 percent occurs at an annualized rate of
((1-0.079)^52-1)*100 = -98.6 percent.
I would suggest this will stop soon, but I repeat myself…
Well, nobody’s home over a the “Shadow Gov’t Offices”…I wonder if Cheney imports live bait worms from Iran to catch his trout?
DJIA = 11,600 or bust…
prof. bear,
do you think this is a bear market rally? i stepped away for a couple of hours and the upward movement of the dow shocked me! especially after the fannie mae results.
Poofy article about the Chicago Spire (apparently 30% sold), but Trump had a good line in it.
“Some real estate experts predict the Chicago Spire will not generate enough sales to fund the construction to completion.
“I wish them [Spire developers] well, but I give them two chances — slim and none,” real estate mogul Donald Trump told the Sun-Times.”
http://searchchicago.suntimes.com/homes/1096681,cover08.article
Three back to back daylight bank robberies around the Loop yesterday morning…no wonder the rich want to hole up in a giant schlong.
“The Penthouse” is priced at $40 million — that’s about $4,000 per square foot for the two-story, 10,000-square-foot unit.
As expected, the pricey penthouse will have a totally awesome 360 degree view of the city and Lake Michigan.
That’s some totally awesome puffery by Ms. Celeste Busk.
Did you notice this line toward the bottom?
… Shelbourne executives are guaranteeing buyers a 7.5 percent price appreciation.
Oh … really?
Nobody commented yet on the fact that the Chicago Spire is in the shape of the largest screw on Earth?
When all you’re doing is getting reamed–everything looks like a big screw! [Har!!]
Toyota skids, sees tough times ahead
Automaker forecasts first drop in annual profit in 7 years
By Yuri Kageyama
ASSOCIATED PRESS
August 8, 2008
TOKYO – Toyota said yesterday that its fiscal first-quarter profit plummeted 28 percent, and the automaker stuck to its forecast that full-year earnings will fall for the first time in seven years as it faces more problems from the weakening U.S. market.
Toyota, which had been riding on the success of its fuel-efficient cars, has consistently posted growing profit since it started reporting under U.S. accounting standards. And there are no previous comparable data that show its annual profit has ever fallen.
But sliding North American sales, a strong yen and rising material costs have battered the earnings of Japan’s top automaker, which is on track to end ailing General Motors’ 77-year reign as the world’s top automaker.
So that begs the question:
Will Chinese companies soon face the same?
Do you think China & Japan will ever become friends…and help each other build cars &… submarines?
Sure, they will. Just like the Koreans will become friends with the Japanese.
FWIW - it’s happening. For instance Japan paid for a significant portion of the new Shanghai airport. Japanese and Chinese trade is increasing rapidly. They’re not the enemies they had been.
There are no permanent alliances or enemies. There are only permanent national interests.
Cue Henry Kissinger.
As long as you can manipulate the sheep, it’s all good.
Tough choice for middle-class U.S. consumers: Should I buy that McMansion for over $500,000, or keep feeding my kids?
Food Giants Race to Pass Rising Costs to Shoppers
By Scott Kilman
Word Count: 1,644 | Companies Featured in This Article: Sara Lee, Schawk, Mosaic, Monsanto, Deere & Co., Tyson Foods, Dean Foods, Kellogg, Pilgrim’s Pride, General Mills
Companies throughout the food chain are changing the way they do business in response to soaring grain costs, and consumers are likely to bear the brunt in the form of rising food prices.
Farmers are making the broadest cuts to their livestock herds in decades, meaning meat at the supermarket will likely cost more in coming years. Middlemen are trying to shorten the duration of supply contracts to 90 days from one year so they can pass on higher costs more quickly. And food brands are shrinking the contents of their packages, from ice-cream cartons to beverage containers.
“Everyone’s adjusting,” …
I picked up some low P/E, dividend paying food stocks last year (only about 25% of my portfolio is in U.S. equities…a hand-picked set of low P/E dividend stocks), thinking they’ll do well.
I suppose they did “well” compared to the overall market, but Conagra, for example, is down 7% YTD, Hormel down 4.16% YTD, etc. (There were some exceptions, like General Mills, up 17% YTD!)
So maybe people are skimping on food so they can stay in their McMansion and lease that Mercedes for one more month!
So maybe people are skimping on food so they can stay in their McMansion and lease that Mercedes for one more month!
On vacation in SoCal and semingly surrounded by BMWs and Benzes while driving our paid for Staurn Vue (the 2005s have a Honda powertrain).
I have to admit that it makes you feel poor to be driving a 3 year old car that’s worth 15K at best while surrounded by middle class “millionaires” in their brand new 325s.
I’m one of these “buy American” nutjobs. So the car I drive is a 2007 Saturn Vue (with Honda engine and transmission). It replaced my 11 year old Saturn SL2.
Of course, I only drive about 3000 miles/year, so my car isn’t that important. It basically runs errands around town.
I have never financed a car in my life. Cars were never very important to me. But a lot of (lower class) people look at a person’s car and try to gauge the persons class by it. This can be very misleading. There are a lot of wealthy people that drive old pickups around town. (They may have a Jaguar in the garage, but its only used when they want to take “a drive”, etc.)
Retailers Catch Teenage Blues
By Amy Kaufman, Nicholas Casey and Jennifer Saranow
Word Count: 1,066 | Companies Featured in This Article: Abercrombie & Fitch, Hot Topic, Pacific Sunwear of California, Wal-Mart Stores, J.C. Penney, Kohl’s, Saks, Nordstrom, Target , Quiksilver, Aeropostale
Teens may dread going back to school, but the retail chains catering to them eagerly await this season for a reliable boost from kids who need new clothes. In this slow economy, however, teen retailers are showing signs of stress and beginning to worry that the late-summer boom might not arrive this year.
Yeah, a lot of parents are going to have to learn to say “no” out of necessity, they don’t have a choice. Wonder how that’s going to affect kids who aren’t used to it. Well, the current administration talked a lot of smack about “family values”, lol, that’s how to bring about “family values”.
As for Yours Truly, I was such a non-fashionista that I would have worn the same duds for years. It was my mother who would insist that it was time for something new.
A silver lining of this mess may be the the imposing of some much-needed humility onto some of our younger folks.
I’m expecting we’ll be hearing some creative saving face stories in the next few years as some parents will find their newfound need to say no beyond their abilities.
I mean when your self worth has been wrapped up in the material, the mental switch is not going to be easily made.
Is it safe to assume all of Citi’s bad news is behind it now? And how many other megabanks will have to pay back billions and billions of auction rate losses to duped investors, thanks to Citi’s and Merrill’s move? And does it seem to anyone besides me that these behemoth banks have infinitely deep pockets? I would think that after $10 bn here and $10 bn there, the vault would start to appear a bit empty?
Citi, Merrill to Pay $17 Billion
To Defuse Auction-Rate Case
By AMIR EFRATI, KARA SCANNELL and DAVID ENRICH
August 8, 2008; Page C1
Pushing to put one of the biggest debacles of the credit crisis behind them, Citigroup Inc. and Merrill Lynch & Co. agreed to buy back $17 billion in auction-rate securities.
The moves were aimed at defusing a regulatory and legal showdown about their sales practices for securities that were touted as safe but then couldn’t easily be sold and in some cases lost value after the auction-rate market froze in February. The agreements also reflect Wall Street’s growing determination to climb out of the morass left by a variety of soured securities, even if that comes at a steep cost.
Case in point…
UBS to pay nearly $20 bln to settle probes: report
By John Spence
Last update: 7:55 a.m. EDT Aug. 8, 2008
BOSTON (MarketWatch) — Swiss banking giant UBS has reached a $19.4 billion agreement with state and federal regulators to settle charges the firm misled investors who bought auction-rate securities, the Boston Globe reported Friday.
“…to settle charges the firm misled investors”
What possible reason would a Swiss bank have a need or a desire to mislead it’s own investors?
Bugs: “eh, Daffy the director wants to see you”
Daffy (Nervous): “What’s up bugsy, what’s he really want?”
Bugs: ” I think he wants to redo that last scene with Yosemite Sam… (whispering into Daffy’s ear)…”But this time Daffy, the prop guys are loading….real bullets”
Daffy: “page 39…Daffy gets blasted again!”
The strategy described below sounds like accounting gimmickry to hide devalued loans off the main bank balance sheet; why is it not illegal?
I can’t help but jump to conclusions about what the initials FB stand for…
Trivia tidbit: I carpooled with Dierberg family members when I was in grade school (I believe they are James’ niece and nephew)…
The Return of ‘Good Bank-Bad Bank’
By Dan Fitzpatrick
Word Count: 1,022 | Companies Featured in This Article: Ambac Financial Group, MBIA, Wells Fargo, BankAtlantic Bancorp
James Dierberg, the 71-year-old chairman of First Banks Inc., is dipping into an old playbook to deal with the U.S. banking industry’s worst crisis in a generation.
Mr. Dierberg and his family, which control the St. Louis bank, recently pledged $100 million to a new subsidiary that will absorb the most troubled loans now dragging down First Banks, allowing the bank to strengthen its capital levels and shed the distractions of its souring portfolio. The new unit, called FB Holdings LLC, will try to liquidate the problem loans “at a more opportune time,” says Terrance McCarthy, president and chief executive …
FB Holdings LLC
FB- in this case I don’t think it means, what you think it means.
LMAO
I guess the Dierberg family does not spend much time in the blogosphere…
“The strategy described below sounds like accounting gimmickry to hide devalued loans off the main bank balance sheet; why is it not illegal?”
Why indeed? But every large corporation in the country is allowed to do this stuff. We learned nothing from Enron except how to cover up losses better. But don’t try it as an individual debtor. The system is definitely broken on many levels and we no longer have the moral backbone to do anything except carp about the Japanese/Russians/French having an advantage because their governments participate in the economy. Hmm, maybe all that talk will cease now that our government has decided that all our businesses are “too big to fail.”
OT, I can’t speak to the facts of the article but if accurate it seems that the US is posturing for war, not that you’d know it from the lamestream media. H.CON.Res 362 is still stuck in committee last I read, although it is difficult to find info on it. This is the resolution authorizing an act of war (blockade) against Iran. The only webpage I could find on it showed 262 cosponsors though. You might want to look to see if the dolt from your district is on the list and ask whether he/she read the darn thing. You know, is aware that they are authorizing an act of war and such.
I guess authorization to do something like go to war is just one of those annoying little formalities that go overlooked when congress doesn’t move fast enough for the Neo-con timetable.
So if we goad someone into attacking us then we are absolved of any wrong doing, is that about right? Just trying to get onboard with the program here.
http://europebusines.blogspot.com/2008/08/massive-us-naval-armada-heads-for-iran.html
Nothing the current cast of criminals occupying the royal palace and the neo-creeps surprises me. These monsters know no bounds. If things get tight, they’ll think the Romanovs were treated respectfully.
When the Romanovs were lined up against the wall of the Ipatiev House, I don’t think that the word “respect” crossed their minds. Heck, the shooters even blew the family dog away.
Exactly my point AZ.
Sometimes its not good to be the King…
Especially when the people are cold, hungry and tired of being abused by the royalty.
Ummm… okay. That’s going to happen any day now.
Those betting on the revolution, let me know if I can catch it on Youtube or not.
TIA.
PC, I don’t see where anyone said there would be. I said “if things get tight”.
FPSS,
I was not refering to the present, I was refering to the past.
Oh my word… gold is nearing a 6 month low…. lmao.
amoney, where you?!!
Corporate debt default rate ‘could hit 10%’
“…”The storm is gathering for default rates moving up,” said Kenneth Emery, Moody’s director of corporate default research.
Fellow rating agency Standard & Poor’s also warns that the credit conditions are deteriorating. “We have long been proponents of the view that the credit euphoria of the prior boom years beginning with 2003 would necessitate a shake-out and purge,” S&P said in a recent report.
“This would result in substantially higher downgrades and defaults, concentrated in the US, but not without repercussions in other parts of the world.” …
In the last few years of easy lending, issuers refinanced debt and obtained so-called covenant-lite deals, which don’t include traditional default triggers that safeguard lenders.
In the US, the consumer transportation companies, primarily airlines, will have the highest defaults, Moody’s expects, while in Europe durable consumer goods companies will be the most troubled.”
FT
http://www.ft.com/cms/s/0/58546902-64e0-11dd-af61-0000779fd18c.html
European vs US bank stocks
Published: August 7 2008 09:25 | Last updated: August 7 2008 19:11
It is easy to think US banks have been far and away the biggest dumping ground for credit losses since the subprime mess first exploded. It would also be wrong. European banks have lost almost as much money as their American peers. The scary part is that European banks have written off toxic credit left, right and centre while their domestic economies have done relatively well. As the European economy slows, they will have to take the hit from old-fashioned loan losses too. That does not appear to be fully reflected by share prices.
The cost of creditGlobally, banks have taken some $493bn of subprime-related credit writedowns since the start of last year. Of that, American banks account for $250bn and Europeans some $221bn. The bulk of these losses has been concentrated in Europe’s few truly global banks – the giant UBSs and HSBCs of this world. But more domestically orientated banks have suffered too. France’s BNP Paribas, for example, wrote down €542m on bond losses this week.
When the Europeans finish the summer reporting season, their total writedowns can only rise. Barclays, the UK bank, on Thursday singlehandedly added almost $5bn to the charge sheet. This has several consequences. Europeans will have to raise more capital than they have to date. So far, European banks – led by the UK – have raised $160bn of fresh money, against $177bn in the US.
More importantly, the US housing bust is more advanced than the property price collapse in Europe. Yet housing markets in Spain, Denmark, the UK and Ireland have been no less bubbly than in the US. Losses on secured and unsecured loans that European banks hold on their books will grow as the continent’s economy slows. Spain is already flirting with recession.
The US and European economies are of similar size, as are their banking industries, which both have market capitalisations of about $1,000bn. Yet European banking stocks have outperformed since the credit crisis began. So far, US banks have suffered most. The worst is yet to come in Europe.”
FT LEX
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Oh, and for those of you who believe this is still the land of the free and not a police state, I bring you this little story that apparently happens daily but only gets mention when they “hit” a well known (in this case the mayor) family. Unfrickin real!
http://www.baltimoresun.com/news/local/bal-mayor0807,0,4563211.story?page=1
the mayor arrived home from his full-time job as an executive with SEED Foundation, which establishes urban public charter schools
yeah, the guys moving the marijuana fooled the police too
I guess I need to rethink my plans for buying a giant box of weed as a hedge against inflation.
LOL
War on drugs = war on people
The village voice blames Andrew Cuomo for the housing mess.
How Andrew Cuomo Gave Birth to the Crisis at Fannie Mae and Freddie Mac
By Wayne Barrett
Tuesday, August 5th 2008
“…Andrew Cuomo, the youngest Housing and Urban Development secretary in history, made a series of decisions between 1997 and 2001 that gave birth to the country’s current crisis. He took actions that—in combination with many other factors—helped plunge Fannie and Freddie into the subprime markets without putting in place the means to monitor their increasingly risky investments. He turned the Federal Housing Administration mortgage program into a sweetheart lender with sky-high loan ceilings and no money down, and he legalized what a federal judge has branded “kickbacks” to brokers that have fueled the sale of overpriced and unsupportable loans. Three to four million families are now facing foreclosure, and Cuomo is one of the reasons why….”
http://www.villagevoice.com/2008-08-05/news/how-andrew-cuomo-gave-birth-to-the-crisis-at-fannie-mae-and-freddie-mac/
Impossible. Cuomo is a Democrat. He worked in the Clinton administration. Did Rupert Murdoch secretly buy out the Village Voice?
You’d be suprprised at how willing the Village Voice is to blame the parties at fault no matter what their party affiliation. It is a liberal paper, but not a partisan (dem vs. repub.) one.
But….but….it’s all Bush’s fault!
Even Buffett Isn’t Immune To This Bug
By Jeff D. Opdyke
“Berkshire Hathaway investors likely won’t find much to rejoice about when the company reports its second-quarter results Friday.
The insurance industry is soft, and losses from various derivatives contracts are expected. Meanwhile, Warren Buffett probably hasn’t discovered a fountain of youth. All signs point to earnings being down from last year’s second quarter, when the company posted per-share earnings of $2,018.
The insurance industry’s weakness doesn’t bode well for Berkshire, as insurance accounts for about half of the company’s operating income. As American International Group’s recent results showed, the core business of underwriting …”
WSJ
Fragile Finance: Debt, Speculation and Crisis in the Age of Global Credit (Palgrave Macmillan Studies in Banking and Financial Instiututions)
by Anastasia Nesvetailova (Author)
(Written before the credit insolvency hit last year.)
My week end reading.
Hoz — Did you check out Kevin Phillips’ “Bad Money” book yet?
Not yet, GS. I will check it out soon.
I have. It’s excellent.
Mexico impounding vehicles at border Personal vehicles of US tourists have been impounded when attempting to cross from Mexico back to the US after buying gov’t-subsidized fuel in Mexico. News articles mention a newly-passed Mexican law that authorizes this, but neglect to give any details of it. Diesel fuel in Mexico costs about 1/2 of diesel in the USA due to subsidies.
What does NAFTA have to say about border impoundments of U.S. fuel arbitragers?
NAFTA?? We don need no steenkin NAFTA!
Since the entire purpose of NAFTA was to hose the US, I don’t think it says much of anything about this.
Dutch bubble update:
latest official forecast for the Dutch housing market: Dutch homeprices will rise 3% yoy in 2008 and 2009, for the first time in quite some years the rise is lower than official inflation. We will see how realistic this estimate is. At this time Netherlands is about the only EU market where prices are still rising, thanks to 30 billion in annual homeowner subsidies. But with higher rates the government will quickly run out of money.
Dutch central bank president Wellink seems to be preparing the public for MUCH higher inflation numbers in the near future (rumour has it that next weeks numbers will be ugly). Current official EU inflation is 4.1%, Wellink now says that inflation can be kept under control as long as it is in the 5-10% range. Above 10% things would get really tough so that is undesirable. Wellink is also a spokesman for the ECB currently, so I guess 10% yoy inflation is now the new ECB target? No wonder that the Euro is crashing …
I have friends who thought they had an 80-20 loan with the 80 percent fixed and the 20% adjustable. Well, they just found out (3 years later) that in reality the 80% is adjustable and the 20% is a $30K balloon due in 2 years.
To top it all off they are at least 10K underwater on their house. I suggested that they look at selling their house a year ago, they ignored me. They just “voluntarily” went from two teacher salaries to one and forfeited a 20K educational loan forgiveness program to be a stay at home mom.
These are the nicest people in the world, but are so naive when it comes to finances and the market. Hope springs eternal and they are sure that some “greater fool” will come along (even they realize that they are looking for a fool).
I suggested that they stop paying their mortgage and bank $12K or more while the bank gets the foreclosure stuff in order. Because from my perspective they will end up in foreclosure in 2 years anyway.
The loan agent most likely told them the first trust deed was fixed ,but they failed to tell them that it was only fixed for a short time .To not know they had a balloon balance on a second trust deed tells me they just listened to the commissioned sales people and they never really read their paperwork .What a crying shame .
I would contact the lender and ask them if they will write down the
principal and allow them to get one of those government bail-out loans.
Also they could put the house on the market quickly and try for a short sale . Fat chance a greater fool will come along ,but they have to get this house on the market quick .
That balloon balance on the second is something to really worry about and its not that far away that its due ,( those notes can be nasty if your in a tight money market or your down on your equity ).
russia and georgia are at war:
A convoy of Russian tanks and troops is reportedly moving toward South Ossetia’s capital as Russian Prime Minister Vladimir Putin declares ‘the war has started’.
Putin’s spokesman Dmitry Peskov said: “War started today in South Ossetia when Georgia attacked Russian peacekeepers in the disputed region.”
http://www.belfasttelegraph.co.uk/news/world-news/georgia-russia-has-invaded-and-we-are-under-attack-13934899.html
Gee, Russia is sort of raining on China’s parade, don’t you think? Not very nice. Then again, we did it to them in 1980.
And then the mujehadeen did it to them in Afganistan, we helped finance them, then their successors, the Taliban, did it to us.
The skirmish should keep the Russkies distracted now that we’ve sent two carrier groups to the Persian Gulf and the Red Sea to join the other two naval battle groups already in the Gulf. Interesting times indeed.
I like the term “peacekeeper” instead of “invader.” It has a nicer ring to it.
Here’s an interesting article about leaders provoking war.
http://mises.org/story/3033
Good gawd, and with Bush on his euro-style August vacation. He’s in Crawford, right? No fair to start this now…lol.
Isn’t he in China at the Olympics?
http://lovelylisting.blogspot.com/
A Collection of Poorly-Chosen Photos from Real Estate Listings.
too funny!
This is from a giant ¾ page add in the Real Estate section of the Sacramento Bee today, I always love reading this garbage, I don’t know why. Visualize a picture of one of the Golden Girls smiling with arms folded next to the ad:
The End Is Near-
“A common comic strip punch line from years gone by featured a bearded and robed old guru carrying a sign saying, ‘The End is Near’. Now the real gurus are saying the same thing about the recent real estate slump and, if you are considering a new home, you should listen.
On his radio show, consumer watchdog Michael Finney said ‘you’ve got to live somewhere. If you think you may be buying a home in the next couple of years, now is the time to start looking. I’m not kidding you, this is a very good time.’
‘It’s just like stocks.’ Finney said. ‘You don’t want to buy high and sell low. You want to buy low and sell high. I think now is the time to be looking for a home.’
In a presentation to bankers, economist John W. Mitchell detailed how residential permits are hovering at a low point, mirroring the news of the shrinking supply of available homes, which has historically let to increasing prices. Add to that, a housing bill just passed by Congress that includes nearly $4 billion in grants to communities to buy foreclosed homes, which will further reduce the supply and increase prices.
To top it off, new legislation eliminates popular down payment programs and raises the FHA minimum down payment effective October 1. That same bill includes assistance for first-time homebuyers which may provide huge benefits to buyers who close escrow on their new homes before the bill takes effect.
Owning real estate always has been a smart move for most people and these temporary opportunities, coupled with historically low mortgage interest rates, mean today is the day you should be looking for your new home. “
-Jane Realtor
The article goes on to advertise the builders’ low financing rates and lame incentives for their lame communities, whatever.
I’m glad that there are still knife catchers out there to keep the host alive, still, it makes me a little nervous to be driving on the same roads as people who fall for this tripe.
“mirroring the news of the shrinking supply of available homes, which has historically let to increasing prices.”
WTF…. I had to read that 3x. Shrinking supply???? On what planet?
I didn’t really get that point either, it’s absolutely incredible, seems like they’re just outright lying at this point.
I especially love this bit:
“…bill just passed by Congress that includes nearly $4 billion in grants to communities to buy foreclosed homes, which will further reduce the supply and increase prices.”
Anyone who thinks that is significant should read that article from the San Diego paper about just how far $4 billion will go on a national level. Each community will receive a couple million if that, allowing them to buy and rehab like eight houses.
“Shrinking supply”
Did they start bulldozing vacant McMansions without notifying the press?
peter schiff:
http://www.safehaven.com/article-10940.htm
OMG he nailed it:
“Despite the sentimental hope that homes are worth what they cost to build, or what the last buyer paid, in reality they are determined simply by supply and demand. In this case the supply of homes on the market, and the number and motivation of potential home buyers.
First supply: In 2008 there are more vacant and “for sale” homes on the market than there have ever been. In the last few years, despite signs of a coming real estate bust, the nation’s largest home builders kept building. As a result, hundreds of thousands of unwanted homes were added to the market. These homes, combined with the existing homes that underwater mortgage holders are desperate to sell, add up to unprecedented supply. Inventory at the current sales pace is approaching one year.
The demand side is even worse. In real estate, a buyer’s expectations for future price gains and their ability to obtain a mortgage (with as little money down as possible) largely determines demand. It is telling that the price increase optimism of current home owners does not extend to current home buyers. Also, with lending standards finally being tightened, buyers do not have access to the cash to bid up prices. Many are taking advantage of a still attractive rental market to sit on the sidelines.
These dynamics are actually much worse than what were in place in the summer of 2000 when the home price boom was still in its opening innings. All of the factors that were in place to push home prices up to unsustainable levels (unlimited lending, massive speculation, widespread belief in the indestructibility of home prices) are all gone. Prices will continue to fall until all the gains sparked by these forces have been erased.”
Such enthusiastic support for the second half of his missive; and no mention of the first? Feel free to ignore any information that does not agree with your agenda.
I will leave it up to you to trumpet any evidence that supports your views.
very interesting the U.S. Dollar to Euro Exchange Rate is 0.6660 is that bad luck?
http://finance.yahoo.com/currency/convert?amt=1&from=USD&to=EUR&submit=Convert
Discover Financial Services consumer index flat in July; worries ease in final week
http://biz.yahoo.com/ap/080808/discover_index.html?.v=1
I am beginning to grasp the nature of HP’s strong dollar policy. It is the flip side of housing, oil and gold price deflation, as all of these assets are dollar denominated, at least from where I stand.
US stocks surge on ‘watershed’ dollar jump
By Peter Garnham in London and John Authers in New York
Published: August 8 2008 19:17 | Last updated: August 8 2008 22:16
US stocks soared on Friday as the dollar saw its biggest one-day jump against the euro in eight years and oil prices plunged.
The moves marked a key reversal of a trend that many investors had followed profitably for months – betting that high commodity prices would keep the dollar weak.
The dollar reached its highest in five months against a trade-weighted basket of currencies, while oil fell more than $5 to $114.87, 22 per cent below its record high of $147.27 last month. The S&P 500 closed 2.4 per cent higher in New York.
The shift in sentiment was triggered by Jean-Claude Trichet, president of the European Central Bank, who warned on Thursday that third-quarter eurozone growth would be “particularly weak”. This sparked talk that the ECB would be forced to abandon its hawkish policy stance and start cutting interest rates, thereby weakening the euro.
“This is the watershed week for the US dollar,” said Marc Chandler, currency strategist at Brown Brothers Harriman. “The magnitude of the dollar’s moves and the breaking of key technical levels suggest that a major shift in the outlook towards the dollar is occurring as massive positions are adjusted.” Other analysts described the widespread buying of dollars as “capitulation”.
The dollar hit a five-month high of $1.5055 against the euro and climbed 1.3 per cent to $1.9189 against the pound – its strongest since November 2006.
I told you so! Section 8′ers now being relocated to suburbs:
http://www.nytimes.com/2008/08/09/us/09housing.html?ex=1218945600&en=5a7e763e14e498fc&ei=5070&emc=eta1
taking advantage of all the empty housing stock!
A close friend used to live on the “east bay” for years, when a low-income housing project opened across the street from him. Being a liberal, he thought to himself “well, people need to live somewhere, and if you build nice housing, you give people a chance.”
A few months after it opened, his car was broken into. “This can happen anywhere” he thought.
A week later, his battery and catalytic converter were stolen
Then his apartment was broken into
Then he thought he heard gunfire
Then, a bullet went through his window
He moved the next day.
A Conservative is a Liberal who has been mugged.
(And a Liberal is a Conservative who has been arrested.)
aNYCdj,
Let me tell you something that I have learned over the years. Write this guy a letter. Apoligize for having inconvenienced him the other day. Explain your thinking on that day and why you walked in there. Put your name, address, phone on the letter.
This guy probably is left feeling bad about his attitude also. He may have just got out of a bad meeting. Don’t let pride get in your way. If he had a way to make it right, he would probably do it.
Never let emotion prevent you from getting what you want. Put that aside. The job is great for your circumstance. So go after it once again.