Bits Bucket For August 13, 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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Bob Toll believes there is pent up demand, but wont speculate into the future concerning it’s effects.
Interesting………
“Our third-quarter results for revenues, contracts and backlog reflect the continued weakness in most of our markets,” said Robert I. Toll, chairman and chief executive. “However, we believe there is growing pent-up demand from those who have postponed buying during the past three years.”…….
Toll Brothers said it was not comfortable giving guidance “given the state of the market.”
Yes, there is “pent-up demand”. It is only exceeded by pent-up supply. Like 30,000 brand new empty condos in downtown Miami for example. All the pent-up demand is irrelevant unless accompanied by pent-up supplies of cash…that’s where the rubber hits the road.
So true. In reality I think there actually *is* some pent-up-demand, e.g. many people on this blog have been saving up to buy at some point. However you hit the nail on the head that this pent up demand will only be willing to buy not only when prices get to normal (i.e. affordable) levels, but in many cases will wait until even after that when they actually bottom - below normal levels. No one actually wants to knowingly catch a falling knife, even if the price is reasonable.
Packman, you’re referring to sane demand where potential buyers aren’t willing to commit financial suicide just to keep up with Mr. FB Jones. I’d say that would be most people on this blog. Personally, I cannot forecast my earnings for the next 30 years as I don’t even know where or what I’ll be doing for income this time next year. It is the nature of my stock in trade. Therefore, I refuse enter into an agreement where I may get my head handed to me 5years from now and find myself and my family living in a refrigerator box because I “did what everyone else was doing”, namely buying a damn shack. And I won’t ever buy unless that risk is minimized by way of a couple of scenarios. 1) Prices fall in such a way that I can afford to pay cash. 2) My income can be accurately forecast for the next 15 years (doubtful).
I believe that the economic future is so uncertain for most people (1 percenters excluded) that committing to even a modest mortgage payment is suicide. Besides, I’ve managed to leverage mobility to my advantage in a very profitable way over the last 5 years. The importance of mobility, which we’ve stressed and discussed on this blog, has been conducive in ones economic survival in a big way and I don’t see that changing.
RE: I “did what everyone else was doing”, namely buying a damn shack.
This trend has been very evident in the complete frenzy to purchase “waterfront” properties here in the Northeast.
I use to go out and look at the places for comparable use and never ceased to be amazed.
Seasonal uninsulated shacks with haphazard owner built construction quality; no central heat; collapsing or non-existent septics; wood post foundations; crummy road access-all for a cool quarter mil.
Many were located on marginal quality water bodies which are now infected with mil-foil and degraded water quality.
Of course 95% of these properties were purchased by out of state buyers only too happy to part with a substantial sum of “equity” in their first home, for bragging rights of “owning” Maine recreational property!
On a recent weekend river canoe run on Lovell Pond in Fryeburg, ME I would estimate only 30% of the properties on the lake were in use.
And the middle of August is prime vacation time.
A fool and his money is soon parted.
HD, SPOT ON regarding construction quality of these seasonal use dumps. I’m guilty of calling every house a shack but I know of no better definition of the camps and “summer” “homes” than S-H-A-C-K. The foundation plans for most of these places were never put on paper, designed or approved and they are downright scary. One can wing it on walls and most of the time roofs too. People just don’t get it when it come to frost either. In VT and upper NY, the frost line is 48″ on an average winter. Frost *will* move ANYTHING, I don’t care what it is because I’ve seen frost move some structures you’d think only a R10 earthquake could touch. Yet, time and time again I see hackers, dopes and Metro Fools get talked into cheesy pier foundations, grade beams or frost walls that never make it below the frost line because they want to save a few thousand on an excavator. First winter, BANG! Vertical cracks at inside corners of sheetrock in all four corners of the house by May of the following winter. Beautiful!!! I laugh at the stupidity of equity bandits and metro fools. They throw good money after bad, 4x and still have an oversized POS when they’re done.
Milfoil? It overtakes every last body of water in the NE and you never seem to get rid of it. In my early days, I’d run the paddle wheel harvester all summer long in the countys efforts to contain it. It did no good. I guess you could say I spent my entire summers on the water. haha. It’s was better than jerking cows all summer though.
Hey HD, you were canoeing in the next town over from me (I’m in conway/bartlett/jackson, nh area). The money goggles are still firmly in place over in my neck of the woods. Everyweek I see inventory added and very few pendings but prices remain sticky. Every once in a while I see a “price reduced” sign but still pretty rare. I still think that the tourism action is strong up here, I’ve not heard anything to the contrary, your lake shack occupancy report notwithstanding. This may be why folks are not reducing even in the face of national news stories evidencing huge price declines.
Given the wet summer we’ve had up here I fully expect a decent fall foliage for the leaf-peeping crowd so unless the world gets hit with some major crisis I guess it will take a while longer for reality to set in with the ass-hats trying to sell their houses for 7X median wages. I get jealous of the other HB’rs that get to watch local prices waterfalling!
exeter,
My thoughts exactly. I’ve been employed at 6 different companies over the last 6 years. The job market is often completely unpredictable. Yet people out here in California buy homes as if they can regularly count on outright full employment with little margin for error in relation to the often more than 50% of their incomes that go to the mortgage alone.Bottom line: I don’t trust the job market here enough to put my faith into buying a house here.
As far as savings, well I’m in the mind to assume that most people simply don’t save. I had a conversation with some friends this weekend. The husband makes a very good income, as in well north of 100k. Yet he was complaining that he wasn’t able to save the now required down payment for a house here, let alone enough for a new car. Simply amazing.
I’ve been saving my pennies since the day I got here 9 years ago. I “could” put down a sizable down payment on a home in this area… but I don’t trust the economy or job market enough to make such a large commitment. So Our plan is to save up to buy a home completely elsewhere in another state and have some leftover for savings and retirement. That way one large liability is removed from the equation and the job situation would be less dire. But the majority of people around me here are impatiently waiting for the day they can buy something here is only the banks would let em’.
People just don’t get it when it come to frost either. In VT and upper NY, the frost line is 48″ on an average winter. Frost *will* move ANYTHING, I don’t care what it is because I’ve seen frost move some structures you’d think only a R10 earthquake could touch.
Expansion and contraction because of frost is truly amazing. It wasn’t something I’d ever thought about until an architect friend explained the sheer power of the forces involved.
The topic came up because of a farm house he was renovating in Michigan — the original builder had planned for it well, fortunately. I’d hate to own a house without a frost wall / foundation that was up to the task — you might as well build a bonfire with your hard-earned savings.
An old construction guy who built out structures at Stratton and Killington, VT would say “I don’t give a %$# what it is. If frost is under it, it’s gonna move”. Subsequently, he was proven right based on some of the stuff I’ve seen. You tend to develop an eye for it once you understand it.
Jetson, Would it be fair to say your past 6 years of employment were far more lucrative with multiple employers as opposed to schlepping it out with one outfit? That is certainly the case for me. I’ve had 3 since 2002 and have no regrets…. so far.
RE: Hey HD, you were canoeing in the next town over from me (I’m in conway/bartlett/jackson, nh area). The money goggles are still firmly in place over in my neck of the woods. Everyweek I see inventory added and very few pendings but prices remain sticky.
Auger-In…
My expectation is the area in which you are located is gonna withstand any major collapse simply because the region is essentially Boulder East for urban escapists from southern New England.
Anyway ya cut, the area is a nice place to hang your hat-if you can make an economic go of it.
It is also my understanding, an economic coalition between NH/ME is trying to get the rail line from Portland to North Conway operational again which will connect to the AmTrac Northeasterner coming from Boston which was the way tourists accessed all the northern New England grand hotels back before auto’s were invented.
Saw a huge bald eagle on Lovell Pond while boating.
Saw typhoons in NC Sunday night!
“Given the wet summer we’ve had up here I fully expect a decent fall foliage for the leaf-peeping crowd so unless the world gets hit with some major crisis I guess it will take a while longer for reality to set in with the ass-hats trying to sell their houses for 7X median wages. I get jealous of the other HB’rs that get to watch local prices waterfalling!”
I hear yah, Auger-Inn!
Try visiting Maryland - we have all of the joys of overpriced housing with none of the natural beauty (at least very little within about 50 miles of the only places with jobs!) It’s “great” - and prices are barely moving down at all, but we do have higher taxes and lots of crime!
I was in Hong Kong for Typhoon Ike’s appearance in 1984, in my room on the 17th floor of the Holiday Inn, torn between wanting to watch Mother Nature’s furry @ the window or cowering in the bathroom, with the door locked…
And the building swayed for awhile, not unlike an 4.0 earthquake in California~
The day after, junks were tossed 200 feet onshore from where they used be be anchored before on the coast.
http://en.wikipedia.org/wiki/Typhoon_Ike
I always had plenty of “pent-up demand”. I was in love with 1/2 of the HS Varsity Cheerleaders on my older cousin’s HS Squad when I was 11 yrs old.
These pretty older girls were very always nice to me, even thought I was “cute” but unfortunately my experience with “pent- up demand” didn’t really …AMOUNT TO VERY MUCH in those days:)
Morning Edition interviewed a Miami realtor this morning and he said there are 50,000 empty condos there. When asked if there weren’t 50,000 people wanting to live in Miami, he said “Sure, but not at those prices!”
I think Morning Edition doesn’t have podcasts, but from this page you can open listen to today’s show and then choose the story “Economy: Realtor, Miami’s Housing Slump is Worsening” and listen.
http://www.npr.org/templates/rundowns/rundown.php?prgId=3
“we believe there is growing pent-up demand”
Oh, I believe him. I know it’s true, because I’ve got some growing pent up demand right here. I’ve got pent-up demand to see Toll and his brethren get the a$$-pounding they so richly deserve. I’ve got pent-up demand to start plowing under developments built around here in the past few years. I’ve got pent-up demand to see Yun and Liareah preach a postive attitude to hordes of realtors and mortgage brokers standing in line at soup kitchens. I can go on, but, yep, I gots plenny of pent-up demand.
Beautiful Palmy.
Outstanding.
Let everybody know……..
“I’ve got pent-up demand to…”
I’d like to see some serious prosecutions with real sentences. Maybe Dubya could authorize some mass-graves.
Palmy, that was just plain poetic. Why’d you stop, though? I wanted more.
At this stage in the bust he may be right, as there are still far, far too many people out there who think houses are still the path to effortless riches. Time is needed to convince them, and of course time takes time.
“… as there are still far, far too many people out there who think houses are still the path to effortless riches.”
Be grateful this is so. These are the people who will willingly sacrifice their money to help save our cash-starved economy.
Well the problem is that percent of households that are homeowners statistic. That went up what 4-5% during the bubble? Some of it because people were able to use reduced downpayment requirements to buy houses at younger ages than had been the norm, pre-bubble. Many of these people are in line for foreclosure. With that “scarlet F” branded on their credit reports, they won’t be in any position to buy for the next several years, even when they reach the age, income, and maturity level when that would be appropriate. Even worse, much of it was, IMHO occupancy fraud. Which is to say, households that owned several homes that they told their lenders were “owner occupied.” The Casey’s of the world made it appear that there was a greater demand for owner occupied housing than their actually was.
Both of those forms of demand during the bubble have since disappeared. Most of those units will move from the demand to the supply side of the equation. Yes, there are sideline sitters and knife catchers out there, but IMHO in much smaller numbers than the current level of demand destruction.
Precisely. There is a difference between demand and desire. Desire is cheap. Demand requires the financial position to back it up, and that commodity is getting rarer.
I’ve got the desire. I had waited for 5 years to buy a home, thinking the market was going to cool off and stabilize. I have no choice except to wait now, but if and when I see something that I really like that I can also afford, I’m buying it (like a well priced foreclosure).
There’s no way to time the bottom for an entire market, but there is a time to use common sense based on your own longevity geographically and financially, as well as your realistic ability to pay for a particular home.
” but if and when I see something that I really like that I can also afford, I’m buying it (like a well priced foreclosure).”
I’m with ya there however considering how glacially slow RE markets are, I’m confident I will when we’re at the bottom. And we’re no where near it yet.
A very fine basis of common sense is a comparison with rental costs.
With that “scarlet F” branded on their credit reports, they won’t be in any position to buy for the next several years,
Good. With all these young yahoos forced into renting (no painting walls in “HGTV bachelor” brown or “match the plastic plant” green for you!), that will just drop prices even more for the rest of us.
Sadly, if nobody had been willing to make loans to these FBs when they weren’t able to make the payments, prices wouldn’t have risen so high and they might well have been able to afford the payments by the time they had a downpayment saved up. Yes, those who declined to buy with funny-money loans will have their pick a few years from now, but they’re less numerous than those who borrowed every penny somebody would lend them. Most people are constrained by the amount of money that somebody is willing to lend them, not the amount that they are willing to borrow. Schadenfreude aside, the net effect of the Bubble then Bust will be fewer people able to enjoy the long term benefits of owner/occupation.
There is pent-up demand, all right — at prices at least thirty percent lower than the levels they have already reached.
You incorrigible optimist, you!
My pent-up demand is at 50% lower, and my dad can beat up your dad too.
The housing market problems are all about confidence. Never mind recession, affordability or McMansion glut concerns — the problems are all in consumers’ heads.
latest news
U.S. July petroleum import prices rise 4%
Toll Brothers reports lower revenue, home orders
By John Spence, MarketWatch
Last update: 9:06 a.m. EDT Aug. 13, 2008
…
The preliminary numbers “reflect the continued weakness in most of our markets,” said Chief Executive Robert Toll in a statement.
“We believe the consumer’s confidence in the housing market is the key to its recovery,” Toll said.
“We believe the consumer’s confidence in the housing market is the key to its recovery,” Toll said.
“There is the dangerous cliché in the financial world [that] everything depends on confidence. One could better argue the importance of unremitting suspicion.” JK Galbraith
It seems that Messrs. Toll are confidence men.
Toll Brothers said it was not comfortable giving guidance “given the state of the market.”
In plain english he means that the market is toast and they have run out of ideas to try and BS the public into believing now is the time to buy. There is always plenty of pent up demand for the knife catchers. In fact more than 25% of the knife catchers who bought in 2007 are now upside down on their mortgages.
For those who have listened to the NAR, “Now is not a good time to buy, it’s a great time to buy” advertisments will soon join the group of upside down buyers!
BUY NOW, FORECLOSE LATER!
When are these idiots in the real estate market going to realize that “pent up demand” means NOTHING if people cannot AFFORD the house?!
Arrgh… just because somebody wants something doesn’t mean they are entitled to it or that they can afford it! Yeah, how “un-Amerikan” of me to say such things!
More “realism” has entered the UK housing market, with sellers dropping their asking prices for properties last month, surveyors have reported.
But the number of people moving house still fell to its lowest level since the Royal Institution of Chartered Surveyors’ (Rics) survey began in 1978.
http://news.bbc.co.uk/1/hi/business/7553880.stm
MADRID, Aug 12 (Reuters) - Spanish house prices fell 3.9 percent in July from the year ago month, marking the fifth month of decline after the global credit crunch burst Spain’s housing bubble, an industry report showed on Tuesday.
The drop was steeper than the 2.5 percent year-on-year fall which the report publishers, real estate valuation firm Tinsa, recorded for June.
Hardest hit was Spain’s Mediterranean coast where prices slid 6.2 percent due to high exposure to the second home market, Tinsa said.
Prices in metropolitan areas slipped 4.7 percent while those in regional capitals and large cities declined 4 percent, Tinsa said.
The report was in line with recent data from property website Facilisimo.com which showed asking prices for existing Spanish homes dropped 4.7 percent in the first 7 months of 2008.
Spanish house prices are expected to fall between 20 and 30 percent in real terms over the next four years due to chronic oversupply and a prolonged economic slowdown, according to banks and real estate companies.
http://www.guardian.co.uk/business/feedarticle/7718686
OTTAWA - The extended slide in the Canadian dollar and domestic stock market continued Monday, greased by falling commodity prices and news that the pace of housing construction has plunged and that new home prices are now rising at their slowest pace in more than six years.
http://www.canada.com/vancouversun/news/story.html?id=f38eefe7-286d-4650-967f-9fe79a229f97
And finally Denial isn’t just a river in Africa,
http://news.hotproperty.co.uk/House_prices_to_return_to_boom_18704965.html
Aug. 13 (Bloomberg) — The Bank of England cut its forecast for U.K. economic growth and held out the prospect of lower interest rates as unemployment rose the most in almost 16 years.
http://www.bloomberg.com/apps/news?pid=20601068&sid=avkAUhJjukFo&refer=economy
Guinea Pigs…
Aug. 13 (Bloomberg) — Uno Restaurant Holdings Corp., owner of the Uno Chicago Grill chain of pizzeria restaurants, will have its credit ratings cut to “default” if it goes ahead with a plan to miss a bond payment due this week.
http://www.bloomberg.com/apps/news?pid=20601103&sid=aBQ.bkv0omtw&refer=us
Anybody try their new Deep Default Debt Dish Pizza?
Laddie,
That was funny!
Mike
“Anybody try their new Deep Default Debt Dish Pizza?”
Let me guess… it has no dough?
No, the dough has been submerged far below the base line.
And extra layers of debt!
And the payment terms are extra cheesy.
It can only be enjoyed by using a falling knife.
No cash = no bond payments = no more business.
Are Moody’s and S&P trying to redeem their sullied reps by beating up on a pizza joint?
Isn’t that what bullies do? They would never take on the big boys.
Yeah but they may get more than they bargained for with a Chicago pizza joint. Spatz Mahoney will be after them for sure!
Could that be construed as a “2 for 1″ offer?
WHAT? Why isn’t Uno pizza too big to fail? Where is Paulson on this one???
So is it me - or do there seem to be an inordinately high number of household names going bankrupt this time around, already?
In the early 90’s we had a couple, like Sunbeam and such. I’m amazed at how many are already going 6-feet-under now though. We should keep a running list:
- Linens & Things
- Bennigans
- Pizzeria Uno
Who else am I missing? I think there are some more that I can’t think of off the top of my head. (retail places and/or household products - not talking banks and homebuilders and such)
packman:
These corp’se all put a bullet into the head of mom & pop stores a generation ago, and now they are all going away.
Where are we going to buy stuff from, in the future?
Not to start a big immigrant thread, but I live in a town packed with great family run restaurants. Most of which are run by families who immigrated to the US. I hope they survive because they are great restaurants.
The Intarnets..?
Mervyn’s
Shoe Pavillion (?)
Boscov’s can be added to the list of the dead (or nearly dead.)
They did indeed file bankruptcy the other day. (Though I had never heard of them)
Sharper Image.
Some others:
Lilian Vernon
Bombay Co.
Tropicana
Several small airlines (ATA, Aloha, Frontier, etc.)
Thanks for the others - I’m keeping a running list. If anyone doesn’t believe we’re in the midst of a severe general economic downturn, giving them such a list is one way to help the impact hit home. Of course companies go bankrupt all the time even in good times, but not normally this many in bulk.
Truth be told, the chain “Uno’s” is cheap, gross, yucky pizza. Way different from what you get at Uno or Due here in Chicago. Good riddance, your food sucked.
Yeah, the chain is (was?) an embarrassing attempt at our particular style of over-the-top pizza.
City of angles pizza tip….
The pepperoni @ Joe Peeps in North Hollywood is muy good, and eat it there, amongst all the walls chock full of grafitti.
IIRC, its on Magnolia, a few blocks west of Laurel Canyon. My mother lives in that area. Thanks for the tip.
I grew up around “Valley Village” (a euphemism), and at one time is was nice. Lots of celebs live(d) around there.
Now its full of non-Americans, and has taken a dive.
It’s nearbye the funky post office, and yes…
English is a 2nd language there.
I used to live off magnolia near hazeltine park in van nuys. I had to move there because, drumroll, it was the only place that would take pets.
Burbank, Victory Blvd… family owned Pork/Beef sandwich place, crowded with people lined up during lunch hour…still there?
Best Shredded beef or pork sandwiches around.
Oklahoma family owned for 2-3 generations.
Dang, I am hungry now. Is a 2.6 hr drive too much for one sandwich?
Wouldn’t be suprised to see Round Table go bye bye. Just paid $19 for a (not very) large, not very tasty cheese pizza last week. There’s just not that much HELOC money left in the system to support $19 cheese pizzas.
Now that made me laugh LL.
Aug. 13 (Bloomberg) — European Central Bank President Jean- Claude Trichet may look beyond a likely contraction in the euro region’s economy and keep interest rates at a seven-year high to avert a wage-price spiral.
http://www.bloomberg.com/apps/news?pid=20601068&sid=a9WrbX8uWj3A&refer=economy
We are seeing more and more crazy people getting foreclosed on. There was a standoff with a 60 year old guy with a 22 trying to stop the sheriff from throwing out his 88 year old mother…
http://www.nj.com/news/index.ssf/2008/08/foreclosure_of_88yearold_leads.html
Combine tens of millions of upside down Americans, with hundreds of millions of guns, and nobody should be surprised by the outcome.
Red Dawn
Wolverines!
Wolverloans!
“Avenge Me! Avenge Me!”
Man, that movie was fun when I was 11. A bit less so now, but funny as hell to watch and, geez, everyone was in that movie.
The Cuban generalisimo cruising for a bruising in a Caddy convertible(the Blue Shark?), was always my favorite scene…
I’m just waiting for some disgruntled home evictee to to flip some sheriff the keys to his empty house just as he flips his cigarette back into the gasoline soaked shack.
Ooops !…Tell the bank to “Have a nice day”
What is the name of that movie?
Kind of appropro since the Russians are marching through Georgia.
I saw Dubya talking to Putin at the olympics the day after Russia invaded Georgia.
I swear Duyba conceded Georgia, but said “Like hell you’ll get past Kentucky”
W.ar is Hell!
“In America, anybody can be president. That’s one of the risks you take.”
Adlai E. Stevenson, Jr.
Crazy or desperate? Desperate is worse.
Why not be both?
Financial 5150?
(say it 5 times fast)
Bank Stocks Drop Anew Amid Worry
Over Falling Home Prices
Stuck with a growing glut of foreclosed houses, banks and investors are shedding them at increasingly steep losses, potentially adding to the banking industry’s red ink this year.
Banks are selling foreclosed homes in some cases for less than half the price they fetched two or three years ago. The cuts are coming as the U.S. banking sector, slogging through its worst crisis in decades, bites the bullet out of fear that prices will keep falling.
Financial stocks fell sharply Tuesday, following J.P. Morgan Chase & Co.’s warning late Monday that it expects “a continued decline in U.S. housing prices.” The dour assessment included a roughly $1.5 billion trading loss related to the largest U.S. bank’s holdings of mortgage-backed securities.
http://online.wsj.com/article/SB121858407824434917.html?mod=hps_us_pageone
Danny Mudd sez: Banks move those houses!
Half the price!? Try 1/4 the price in Miami. Just looked at a place yesterday. Sold for $280K in 2006. Now it’s REO with an asking price of $95K. Place has termintes, needs new roof, HVAC, flooring, bathroom, water heater, electrical, paint, general repair and foundation work. Total of probably around $40-50K in upgrades. The realtor seems to think that it’s worth $120K AFTER all the upgrades. “It’s probably going to sell for right around $60K, interested? Got to pay cash, no bank is gonna loan you a dime on that place,” was his assesment of the situation.
RE: Sold for $280K in 2006. Now it’s REO with an asking price of $95K. Place has termintes, needs new roof, HVAC, flooring, bathroom, water heater, electrical, paint, general repair and foundation work.
This is the type of shit housing all the banks want to dump on FHA and you the taxpayer.
And it’s out there by the boatload.
The key point here is capitulation on the REOs.
For three years banks and mortgage servicers have been taking back houses for the the mortgage rather than having them sell for less in foreclosure auctions, to avoid taking losses on their books. They’ve been putting them up for sale and hoping to get their money back.
Now they are dumping the houses at market, according to the article, realizing that if they don’t the prices will just go lower. Too bad for mortgage bondholders and prospective first time homeowners it took them two years to figure that out.
The 2Q NAR figures are coming out tomorrow. But after this article, I’m really looking forward to 3Q, due in mid-November.
“The 2Q NAR figures are coming out tomorrow. But after this article, I’m really looking forward to 3Q, due in mid-November.”
Seems like we are on a roll here. For instance, the latest C.A.R. figures reported a 37.7 percent YOY decline in “the median price of an existing home” from June 2007 through June 2008. With another year or two of price declines at this pace, the free market will have fixed the affordability problem, in spite of massive government intervention to prevent this scenario!
Precisely.
If it wasn’t for “affordability products” (toxic loans) and government meddling, we’d have affordable housing.
But if that were true, how would the kleptocrats get rich?
It’s remarkable that, while the government supposedly supports broad home ownership, that it works to hard to keep prices high.
One would think it would work to lower the barriers of entry to owning RE. Instead, it encourages the use of “Affordability Products”
I have a simple solution for any corporate or individual entity stuck with houses that will not sell: MARK DOWN THE ASKING PRICE TO MARKET VALUE.
They can’t. They’d go bankrupt instantaneously.
Prices will come down only as fast as they can grow their reserves. This should be reasonably obvious to any smart observer of banking practices.
As some of my posts likely make obvious, I am largely ignorant of banking practices.
C’mon, you’re an economist. This is the “magic” of fractional reserve banking.
Banks are finally starting to put a price on their mortgage assets. Mother Merrill and the National Australian Bank are leading the way. From the looks of things, the securitized toxic waste is currently selling for 10-22 cents on the dollar.
There is now growing pressure for the big banks to start writing down their level 3 assets. I’m guessing that by early 2009 we will see the financial sector capitulate as their capitalization ratios finally become known to the market. Fannie and Freddie will likely be at their most vulnerable around then.
“There is now growing pressure for the big banks to start writing down their level 3 assets.”
T’aint gonna happen. The losses are to staggering.
Yeah. and those people that paid National Bank of Australia 10 cents on the dollar for their US toxic waste holdings probably already feel that they overpaid
March of Dimes?
“Yeah. and those people that paid National Bank of Australia 10 cents on the dollar for their US toxic waste holdings probably already feel that they overpaid”
10 to 22 cents on the dollar.
I wonder if by the time this all plays out, with the crushing job losses, rocketing debt, etc. if that is what houses will be selling for vs. peak Bubble price?
also from the WSJ rag
Stocks Under ‘Short’ Order Fell During Protection Period
By Judith Burns
WASHINGTON — A Securities and Exchange Commission emergency order to tighten short sales in 19 sensitive financial stocks appears to have backfired, a study found.
Shares in federal housing-finance titans Fannie Mae and Freddie Mac; Wall Street firms Lehman Brothers Holdings Inc., Goldman Sachs Group Inc. and Merrill Lynch & Co.; and others covered by the order saw declining prices and deteriorating market quality …”
They blocked ‘naked shorting’ and short sales and now there are only bottom pickers to buy. The bank stocks have no where to go but down. If you happen to be one of the lucky shorts, there is no reason to cover.
Banking losses and Dow earnings
Dow Industrial trailing P/E NIL
Russell 2000 trailing P/E NIL
Nil = none
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.
Combing incompetence with fraud has been a most interesting experiment.
Throw in lots of borrowed money into your mix of incompetence and fraud and the experiment REALLY gets interesting.
Don’t forget the financiolitical collusion between the banks and politicians.
(Hey, did I just make up a new word?)
Mirageconomy
Couple sentenced for defrauding real estate investors
http://www.bizjournals.com/albany/stories/2008/08/11/daily20.html
But what really happened, the Justice Department said, is the O’Briens “unlawfully enriched themselves and fraudulently obtained monies from … investors by operating a pyramid, or Ponzi scheme.” They used funds obtained by later investors, those at the bottom of the pyramid, to pay “dividends” or “returns” to early investors, those at the top of the pyramid. Those at the top of the pyramid helped attract additional investors.
“A typical agreement promised a 20 percent return on an investment within 90 days.”
That just screams legit investment. How do you defraud someone when it’s obviously a scam?
“In fact, the company had lost $700,000 in 2002. The Department of Justice said even when the O’Briens knew the company had failed, it entered into an agreement with an investor who sent them $50,000.”
How did they lose that much money in 2002? It was still early, but the party had already started.
“How did they lose that much money in 2002?”
Post 9-11 hiccup?
See, their mistake was that they failed to book the losses as “revenue” or “assets” and move them to Level 3 Accounting where nobody would ask any questions. Then, get access to the Fed Pawnshop Window and you can get free money for trash. So, their business plan had some flaws and wasn’t up to the level of the Big Boyz!
Ah. We got a local thing where a 100 million dollar ponzi scheme was busted. They apparently were going after the close Jew community in Norfolk, VA:
http://hamptonroads.com/2008/08/documents-ponzi-scheme-exploited-community-ties
“investors by operating a pyramid, or Ponzi scheme.” They used funds obtained by later investors, those at the bottom of the pyramid, to pay “dividends” or “returns” to early investors, those at the top of the pyramid. Those at the top of the pyramid helped attract additional investors.”
That is essentially the foundation of the US economy. The Fed and the big banks are at the top, the little banks in the middle and j6p at the bottom.
The Fed’s job is to keep the wheels greased and keep the thing forever expanding which never works. Eventually contraction occurs and recession occurs.
The money multiplier is the most inconspicuous yet blatant form of Ponzi scheme that ever existed.
Nearly 40% of Memphis homes selling at a loss
http://www.bizjournals.com/memphis/stories/2008/08/11/daily11.html
32.3 percent of local homeowners who have bought homes since 2003 are underwater on their mortgages, according to the second quarter Zillow Real Estate Market report.
I present to you, the ugliest house in Cape Town, only on the market for a cool ZAR12 500 000 (about $1 500 000).
Ugh - looks like my little brother could push that thing over.
Looks like someone put a pontoon/party boat on some rocks.
On behalf of Gold Hoarding Seditionists everywhere, and in the mumbled words of our unesteemed national decider, I say to Hankzooka and Bubbles Paulson, to foolish foreign Central Banks, to the fiat hoarders and fedophiles, deflationistas and maxed-out homedebtors everywhere, ‘Bring it on’. You can have our AU when you pry it from our pricy, pearly teeth.
Some people really take their investing decisions personally.
Gold seems to be exhibiting a dead cat bounce today, which is a bit odd given the deflation signal sent by plunging auto sales.
The stock market seems much lighter on its feet today compared to the gold market in response to plunging auto sales. What is it about signs of deflation that gold bugs don’t understand?
I read it to be more of a head fake by the financial powers that be…
I was shocked to see the stock market 600 points higher on the most dreadful news imaginable, when I arrived back at the world last Saturday.
As has been stated over and over again, Gold is the failsafe economic instrument, and as the price of the London 2nd fix is set by 6 men, the fix could be in?
If you were a Brahmin leaving the sinking ship of state and wanted to max out one last time @ the public’s expense, isn’t that the way you do it?
I talked to a friend that probably has the largest retail bullion store in L.A. yesterday and he told me buyers outnumber sellers by a margin of 6 to 1, in his store.
Premiums have gone wild on 1 oz Krugerrands, a coin that used to sell from just a few bucks over spot price, now wholesale cost is 3% over.
This indicates a shortage of physical metal, as KR’s are about the commonest 1 oz coin out there.
“Premiums have gone wild on 1 oz Krugerrands, a coin that used to sell from just a few bucks over spot price, now wholesale cost is 3% over.”
I think it depends on the store or region. I just bought some for 1% over.
I read it to be more of a head fake by the financial powers that be…
When it comes down to it, the market is basically one continuous series of head fakes.
Deflation has set in? Wake me when gasoline is $1 and a nickel buys a loaf of bread. Until then, what deflation?
“What is it about signs of deflation that gold bugs don’t understand?”
Hi proffessor maybe the fear the FED will lower interest rates again and again?
What comes after ZERO?
“I was shocked to see the stock market 600 points higher on the most dreadful news imaginable, when I arrived back at the world last Saturday.”
It is always curious to see the stock market falling up…
Japan, circa 1992 to present.
There are not too many “agains” left.
Deflation of luxuries, inflation of necessities.
I prefer to think of it as:
- Deflation in the buying power of your salary, savings, etc. and any assets you may own.
- Inflation in the cost of needs.
In other words, becoming poor, with poverty forced upon us by crooks who won’t feel any of the sting since they are so rich from years of looting.
“You can have our AU when you pry it from our pricy, pearly
teeth.”
Sounds like something one would hear from lines at the pawn shops.
That was funny, combo.
My late departed wisdom teeth are hurting, i’m laughing so hard.
turning japanese
bail the banks and big stimulus plans
what are we doing that’s different
http://biz.yahoo.com/ap/080813/japan_economy.html
“what are we doing that’s different?”
borrowing from the chinese to do it.
The problem with getting a loan from the Chinese is, 20 minutes later you are hungry for another one…
Law firm sued in real estate case
BY KATHLEEN KERR | kathleen.kerr@newsday.com
August 13, 2008
http://www.newsday.com/business/ny-lsbirth5797493aug13,0,5752132.story
Under the alleged scheme, Factor said, Cobalt operated a so-called “boiler room” - a bank of employees who phoned people, sent them glossy brochures and lured them into investing. But Cobalt didn’t own the buildings it was offering for investment and, in a classic pyramid scheme, used money it received from some investors to pay interest to others.
These are just the little guys. It will be interesting to see how many big dogs were involved in these schemes.
I pledge non-allegiance to the Boiler State of America, and to what it currently stands for, one nation under God’s jackboot, divisible, with liberty and justice forestalled.
Interesting situation back in the U.S.S.R.
It’s very similar to the Cuban Missile Crisis(not much emphasis on things nuclear, so far), except flip everything around.
The Soviets used proxy Cuba as an irritant just 90 miles from our shores, and we used proxy Georgia in the same role…
Georgia’s alwaayss on my my my mind…
http://www.youtube.com/watch?v=4-2LQGigK-0
That was one of my favortist songs, till you ruint it Lad!
Man you are on a roll today…lookout other word prankmeisters, Lad is bowling a perfect strike since vacation.
lol
It was really more about oil and reinvigorated Russian impirialism. They want to ‘protect’ (read ‘controll’) the oil and gas pipelines out of Kazahkstan and Azerbaijan. and send a message to any other nearby state that tries to buck Russian hegemony. Scarry stuff but completely typical (and yes, we do exactly the same shit kiddies)
It was really more about oil and reinvigorated Russian Imperialism than anything else. They want to ‘protect (read ‘control) the oil and gas pipelines out of Kazakhstan and Azerbaijan and at the same time send a clear message to other nearby states that try to buck Russian hegemony. Scary stuff but also completely typical (and yes, we do exactly the same shit kiddies, don’t fool yourselves)
It was really more about oil and reinvigorated Russian Imperialism than anything else. They want to ‘protect (read ‘control) the oil and gas pipelines out of
Kazakhstan and Azerbaijan and at the same time send a clear message to other nearby states that try to buck Russian hegemony. Scary stuff but also completely typical (and yes, we do exactly the same $hit kiddies, don’t fool yourselves)
1960’s: Nuclear Hegemony
2000’s: Oil Hegemoney
LOL, exactly!, and just as scary for the well informed among us.
Don’t you just love it when civic-minded hedge fund managers offer helpful advice for what the government should do to fix markets? Such outcries for government intervention smack of corporate socialism. Where were these guys when home prices were soaring to unprecedented levels of unaffordability a few years ago?
Securities trading stuck a year later
No letup in interest rates on horizon for borrowers
By Vikas Bajaj
NEW YORK TIMES NEWS SERVICE
August 13, 2008
A year after financial tremors first shook Wall Street, a crucial artery of modern money management remains broken. And until that conduit is fixed or replaced, analysts say borrowers will see interest rates continue to rise even as availability worsens for home mortgages, student loans, auto loans and commercial mortgages.
The conduit, the market for securitization, through which mortgages and other debts are packaged and sold as securities, has hardened and become almost totally dependent on government support. The problems, intensified by bond investors who have grown leery of these instruments, have been a drag on the economy and have persisted despite the exercise of extraordinary regulatory powers by policymakers.
“The mortgage finance system in the United States has been badly damaged,” said Anthony Lembke, co-head of investments at MKP Capital Management, a hedge fund firm that is a big investor in mortgages. “There is definitely some reinvention that will need to occur, and that will include some explicit involvement by the government.”
It sounds to me like hedge dude has his facts bass ackwards. It is up to private investors to reign in Wall Street’s and Washington’s excesses by refusing to invest until the situation changes. There is no way that politicians would do anything of the sort, given the flow of campaign contributions to them from their Wall Street sugar daddies.
Bond investors first stopped buying private home mortgage deals, then shunned commercial mortgages. Now, they are becoming wary of credit card debts and auto loans. In the first half, private securitizations reached just $131 billion, down sharply from $1 trillion in the same period last year, according to data compiled by Thomson Reuters.
Some analysts say investors are acting like the “bond vigilantes” of the 1980s and early 1990s. Those traders drove a surge in interest rates because they feared inflation and a mounting federal budget deficit. Their actions helped slow the economy and forced policymakers in Washington to rein in spending and raise taxes, at least for a time.
“The bond vigilantes took law and order in their own hands and pushed yields up, which would slow down the economy and bring down inflation,” said Edward Yardeni, an investment strategist who is credited with coining the term. “This time the bond credit vigilantes are refusing to go into the saloon and start drinking what Wall Street’s financial engineers are mixing.”
What I don’t get is with the flow of private securitizations for the first half of this year at 13 cents to the dollar for the comparable period in 2007, why haven’t interest rates shot up to reflect the dearth of loanable funds? I would think private sources of funding could quickly return to normal levels if interest rates were enabled to equilibrate to market conditions.
” … why haven’t interest rates shot up to reflect the dearth of loanable funds?”
There seems to be more a dearth of qualified borrowers more than a dearth of loanable funds.
Lenders are eager to loan money, but only to those who don’t need to borrow any.
Sounds like lenders may have to go back to 2005 lending standards (anyone who can breath qualifies for a loan)…
They have. Look at the spreads on munis or even junk bonds.
Fair ’nuff. There is also the LIBOR spread…
http://www.nytimes.com/2008/08/13/business/worldbusiness/13credit.html?ref=business
Mechanism for Credit Is Still Stuck
““The mortgage finance system in the United States has been badly damaged,” said Anthony Lembke, co-head of investments at MKP Capital Management, a hedge fund firm that is a big investor in mortgages. “There is definitely some reinvention that will need to occur, and that will include some explicit involvement by the government.”
Bond investors first stopped buying private home mortgage deals, then shunned commercial mortgages. Now, they are becoming wary of credit card debts and auto loans. In the first half, private securitizations reached just $131 billion, down sharply from $1 trillion in the same period last year, according to data compiled by Thomson Reuters.”
Yes, that’s “just $131 billion, down sharply from $1 trillion in the same period last year” OMG!
“Some analysts say investors are acting like the ‘bond vigilantes’ of the 1980s and early 1990s. Those traders drove a surge in interest rates because they feared inflation and a mounting federal budget deficit.”
I’m not a viginante. I just want a decent return on my hard earned and saved money. As in a positive return, after inflation, credit losses, and losses due to interest rate increases post-bond purchase.
Is anyone willing to offer that? No.
It sounds like there might be an interesting business plan somewhere in there….
Retail sales drop for first time in 5 months
The Commerce Department reported Wednesday that retail sales dipped 0.1 percent last month, the first decline since sales had fallen by 0.5 percent in February. It was a worse showing than the flat reading economists had been expecting.
Studies have shown that so far about only 20 percent of the stimulus checks have been spent with consumers choosing to save much of the rest of the payments. The administration argues that the checks will get spent in coming months, helping to lift economic activity for the rest of the year.
http://biz.yahoo.com/ap/080813/economy.html?.v=3
what a bold statement. is the administration thinking people will have to spend their stimulus checks due to unemployment? what other possible reason could they have for thinking that way?
The funny thing is that spending money is really just trading money for goods and the result does nothing but reallocate resources. Today I have a bike and you have $600 tomorrow we swap because you spent your “stimulus check” has anything changed in the economy?
Saving is the best thing we could do with that money because it will have to offset the equal debt created. Imagine if everyone just consumed all of their “stimulus checks” by burning them… now we have a 250 billion unsecured debt to pay back as a nation, I am sure that will help the economy!
Why would one want to exclude auto sales from headline retail figures? Aren’t auto sales pretty much one of the biggest chunks of retail activity?
August 13, 2008 9:18 A.M.ET
BULLETIN
Autos apply brakes for retail
Excluding automotive sales, July’s retail sales rise 0.4%, just slightly less than projected.
U.S. govt stats (Labor dept).
(though I’m sure it was a rhetorical question)
Auto-Errotic-Asfixthesituation
OK, you know it’s getting bad when stadiums are used for FB conventions:
‘Organizers of the Gillette event didn’t have an estimate on the number of people who showed up yesterday for the housing gathering co-sponsored by the Federal Reserve Bank of Boston and the New England Patriots [team stats] Charitable Foundation. But they said the number was easily in the thousands.’
‘Long lines of desperate homeowners, many of them with young children and friends in tow, snaked hundreds of yards along the Gillette parking lot at one point early yesterday afternoon.’
‘Many clutched manila envelopes filled with income, mortgage and other financial data. The diverse crowd included men, women and children of all ages and ethnic groups. “We’re never going to get in,” grumbled one man waiting outside.
FB’s get nicked @ shaving get together?
And how come they can’t figure out how many people are in a stadium, when the maim stream media can be so sure of how many war protestors there were @ rallies, 6 years ago?
It’s a far cry from 2005, when advertisers for KB Homes, Toll Bros, Countrywide, etc lined the walls of San Diego’s Petco Park. I can’t say I recall seeing any vestigial REIC advertisements the last time we went to a ball game (a month ago).
Gee, standing in a long line on a summer’s day - some kind of freedom house ownership brings, huh FBs?
Maybe next time they should tailgate first?
Talegate…
I’ve noticed that TLC now has a few new “heartwarming” poor-me shows for homeowners about to lose their homes. Of course the program portrays the owners as victims and in need of help. Once again, another network broadcasting the wrong message.
I’m still trying to figure out how exactly that show helps homeowners. Any idea?
Bread & Circus, updated.
S.P.Q.A.
A savvy repo man would be waiting in the parking lot with a fleet of tow trucks.
Trump is back in the Inland Empire to show ‘us’ how to make millions in the real estate foreclosure market this month.
The entrance fee is Free.. and then there is a special bonus.
Hmmm A lock of his hair?
Seriously, at this juncture, who is going to go, except to See the Don in action.
Beware of buying all the “this is the last time it will be offered” offers.
Commercial REITs
Ross lowered her price target on NorthStar to $9.50 from $14 and said in a note to investors that the company’s signs of liquidity coming back into the commercial real estate market “have not been met.” Shares closed at $8.09 Tuesday.
While the New York-based company reported strong second-quarter results, “We believe that it is appropriate to move to the sidelines and wait for stability in the credit markets, specifically price discovery in commercial real estate assets.”
http://biz.yahoo.com/ap/080813/commercial_reits_ahead_of_the_bell.html?.v=1
is this the next shoe to drop?
Federal Deficit was $102.8 Billion in July, in part due to bank bailouts. That would be about $1,000 per household in just one month. Nice.
http://tinyurl.com/6lx9ld
Grand Theft Auto Destruct 4 us.
There comes a point where the funds to service the debt become so great that it becomes impossible to alleviate the debt. Beyond that there is only one possible outcome - default.
We are rapidly approaching that point, if we haven’t already passed it.
(And if anyone mentions that stupid “the debt is the same relative to GPD as it’s been for years” crock, I’ll shoot ‘em. That’s based on artificially-inflated GDP numbers, and doesn’t allow for the coming downturn in which GDP will be flat at best but debt is exponentially increasing - for years to come.)
The debt doubled during Bush’s presidency. Not even fake GDP numbers have done that.
No one here would make such a one-sided argument.
Not quite doubled:
Q1 2002: 5,900 B
Q2 2008: 9,500 B
Not too far off from GDP growth. However like I say - these are the “official” numbers.
Debt:
http://research.stlouisfed.org/fred2/fredgraph?chart_type=line&s1id=GFDEBTN&s1range=10yrs
GDP:
http://research.stlouisfed.org/fred2/fredgraph?chart_type=line&s1id=GDPA&s1range=10yrs
However despite their relative recent sameness, the latter is now dramatically flattening (St. Louis Fed doesn’t show the latest data), whereas the former is dramatically rising.
All right! Finally, we get home auctions in Montana. 15 high-end houses will be “selling” next month. Actually, they won’t be selling, because the builder will reject “low-ball” bids. Mmm-hmmm. We know how that ends.
Builder to auction homes
Strapped builder to attempt yet another fake-auction scam
Thanks for fixing the link.
“One dollar can get you a large soda at McDonald’s, a used VHS movie at 7-Eleven or a house in Detroit.”
http://tinyurl.com/5rdttv
“The fact that a home on the city’s east side was listed for $1 recently shows how depressed the real estate market has become in one of America’s poorest big cities. And it still took 19 days to find a buyer.”
“So desperate was the bank owner of 8111 Traverse Street to unload the property that it agreed to pay $2,500 in sales commission and another $1,000 bonus for closing the $1 sale; the bank also will pay $500 of the buyer’s closing costs. Throw in back taxes and a water bill, and unloading the house will cost the bank about $10,000.”
“Traverse” according to Webster:
Something that thwarts, crosses, or obstructs; a cross accident; as, he would have succeeded, had it not been for unlucky traverses not under his control.
Don’t forget to add the cost of the stamps used to send the foreclosure notices, that’s probably going to to wipe out any hopes of a profit there.
I will take the soda; you can have the house.
Wife and I pay $40 a year for a 12′x12′ plot of land at our community garden.
For 1 beefstake tomato, I could buy a house in Detroit… Just wait until the squash is ready baby! I’m gonna own that town.
How very confusing!
Don’t the folks in Detroit know that you don’t need jobs to have an economy? So, shouldn’t all those houses be selling for hundreds of thousands of dollars because of the “exciting urban living” in the area?
I am so confused! Haha…
There is that saying again, I wont give the house away!!!!
——————————————
“It doesn’t make sense in some neighborhoods to keep paying costs and costs,” Colpaert said. “It can make more financial sense to give it away.”
Best line in the story:
“The agent did say that the buyer agreed to pay the full list price of $1, and planned to pay cash.”
Bank Failures Rise but Critics Say Not Fast Enough
“…And some critics say the failures aren’t happening fast enough. They say regulators are keeping some troubled banks on life support by allowing them to spend money to stay in business that should be reserved to cover loan losses after the bank has failed.
“They are dragging their feet in forcing these banks to reserve realistically,” said Bert Ely of Ely & Co., a bank consulting firm in Alexandria. “Some of these banks could have been closed two or three quarters earlier.” …
WAPO
http://www.washingtonpost.com/wp-dyn/content/article/2008/08/12/AR2008081202998.html
Is that the very same Bert Ely that told Judy Woodruff how strong the American banking system was, just a month ago on PBS Newshour?
lol
Somebody actually listens to PBS. Its as bad as the WSJ.
I have had to read between and betwixt the lines for such a long time…
“James Chessen, chief economist at the American Bankers Association, said banks would “do what’s required to ensure the health of the FDIC.” But because the premiums are paid with money otherwise available for lending, Chessen said each one-cent rate increase would reduce the collective lending capacity of U.S. banks by about $5 billion.”
Collectively reduce lending capacity by $5 billion? Since when do we care about a measly $5 billion?
Let me know when you get to $30 billion and I might brush the nacho crumbs off my shirt and sit up a little.
Trader who lost $9bn bounces back
Brian Hunter, the trader who was blamed for the collapse of $9bn hedge fund Amaranth Advisors two years ago, has taken -advantage of last month’s plunge in commodity prices to help propel the year-to-date return at the fund he now advises to 230 per cent.
The Peak Ridge Capital Commodities Volatility fund, which Mr Hunter advises, returned 24 per cent in July as commodities prices fell 10 per cent for the month….”
FT
http://www.ft.com/cms/s/0/44a061e4-68ce-11dd-a4e5-0000779fd18c.html
Round Two?
The economy is ailing, but another dose of stimulus might be the wrong medicine.
“…So, is it time for a “second stimulus” — to follow the $168 billion economic injection, mostly in the form of tax rebates, that Congress and President Bush administered this year? House Speaker Nancy Pelosi has called for a $50 billion package, possibly including increases in food stamps and home heating assistance as well as more Medicaid money for states and new infrastructure spending. Fleshing out Ms. Pelosi’s concept, Senate Appropriations Committee Chairman Robert C. Byrd (D-W.Va.) has unveiled $24 billion in proposed energy, infrastructure and disaster relief money. The Democrats sense a no-lose issue: Either President Bush signs a bill, in which case they can take credit for a new flood of government cash, or he vetoes it, in which case they can accuse Republicans of neglecting the economy.
We understand the political logic of a second stimulus; the economic case is less convincing. Any fiscal stimulus must be targeted, timely and temporary. That is, it must put money in the hands of people who are likely to spend it quickly — while not committing the federal government to new long-term spending. Some Democratic proposals, such as an increase in food stamps or extended unemployment insurance, would meet these criteria, even as they help the neediest ride out the tough times. Infrastructure spending, by contrast, is dubious as stimulus. It takes too long and passes through too many hands. As you might expect, Mr. Byrd’s “stimulus” bill is chock-full of election-year goodies: $5 million for an FBI mortgage fraud investigation; $70 million for “improved business opportunities” in rural areas; $3.5 million for small-business development centers in the Midwest. …”
WAPO editorial
http://www.washingtonpost.com/wp-dyn/content/article/2008/08/12/AR2008081202742.html
Unfortunately “The Surge” set a bad precedent. Now anyone thinks that any problem can be solved if you just throw more resources at it.
Hoz, corn and soybeans are up more than 4% today.
They are getting smarter.
If they make the “Stimulus, Round 2″ in the form of non-money (food stamps, etc.) they can be sure it’ll be spent. Combine that with some funny accounting that ignores the sheer idiocy of the government taking our money and giving it back to us as a “gift” and/or just borrowing deeper into debt, and we can perhaps hide the Recession/Depression for another quarter, which will give the kleptocrats more time to make off with their loot.
I fully expect “Stimulus, Round 3″ will be in the form of gift cards to stores, but only ones that are nearly bankrupt. Spend them today since the store might not be around tomorrow!
Infrastructure spending makes sense to me. You have to spend most of it here in the US, it allows taxpayers a chance to see their taxes at work, and, well, basically all of those things the Works Progress Administration put together are falling apart and need to be fixed or replaced… and even beyond the WPA is the terrible state of so many roads.
Houses go for $1
And they’re still not worth it.
http://tinyurl.com/66ck3n
No deflation in food costs:
High crop prices and favorable weather are triggering bigger harvests world-wide, but grocery shoppers probably won’t see much relief anytime soon.
Farmers will produce record amounts of wheat and oilseeds this year. Based on Aug. 1 conditions, U.S. farmers are expected to harvest 12.3 billion bushels of corn, which would be their second-largest crop ever, trailing only last year’s 13.1 billion-bushel harvest.
But global demand for grain is rising so quickly that even bumper harvests can’t puncture the two-year-old grain-price rally that has been inflating retail food prices.
http://online.wsj.com/article/SB121854537937633263.html?mod=todays_us_page_one
Farmers in California planted crops based upon snow surveys in the High Sierra (I did one of them this year), that have always been used quite accurately for almost a century, as a predictor of water in the summer & fall.
They planted on the basis of it being 90-95% of normal, as per the combined surveys, but the warmest April-May recorded in a longtime, turned the snowpack into a fast melting resource, both too soon & too late.
As a result, 50,000 acres or more have been left to die of thirst…
Combine this with the Iowa floods of farmland and people used to overeating, and something’s gotta give?
Supply is only half the problem; demand is the other half.
no deflation in import costs:
Aug. 13 (Bloomberg) — Prices of goods imported into the U.S. rose more than forecast in July as a weaker dollar and higher fuel and food costs made foreign purchases more expensive.
http://www.bloomberg.com/apps/news?pid=20601068&sid=aE.H4wviKazc&refer=economy
Fannie, Freddie shares fall after SEC order ends
The agency says its order helped prevent stock manipulation, and the market turmoil that pounded the companies’ shares has eased in the ensuing weeks. But the SEC couldn’t say for certain whether the financial companies that were covered by the order still could be vulnerable to abusive market trading.
The SEC’s staff “does not have a basis for determining that the 19 companies remain especially vulnerable to the illegal ‘distort and short’ schemes that the emergency order prevented,” agency spokesman John Nester said Tuesday.
http://biz.yahoo.com/ap/080813/fannie_freddie_stocks.html?.v=1
dosent this say that these a-holes knew all along that there was a loop hole to manipulate the market? how do they expect to get long term investors to buy into this fraud? are they just going to use taxpayors money to keep this game going? wheres the angry crowd of people with their torches and pitchforks?
You’ll know the revoltlution is upon us, when Wal*Mart has pitchforks on sale @ 30% off.
One can only dream aladin. Although before the pitchfork treatment, I’d prefer to march a few of the corporatist/fascist/crony capitalist scum through some of the more unsavory neighborhoods, sweat shops and non-prevailing rate construction sites.
20% off is the best I could hope for?
Sort of like the Spanking lines?
Or a cotillion with dress blues/swords arching high?
Pitchforks on both sides.
That was either birthday spank lines or??lol
If there was such a high demand for pitchforks (revolution) then why would they be on sale?
Don’t know, don’t care but I have my top 10 list ready.
American Gothic Dream…
http://ericturner.files.wordpress.com/2007/07/americangothic.jpg
http://finance.yahoo.com/tech-ticker/article/47438/A-Bottom-in-Housing-You‘ve-Got-to-Be-Kidding;_ylt=AtJEC5CZC4g92xkUzCiK8qO7YWsA?tickers=
A Bottom in Housing? You’ve Got to Be Kidding
Many forecasters say just wait until early 2009 and home prices finally will start to pick up.
Not so fast says my guest Barry Ritholtz, CEO of Fusion IQ and financial blogger for The Big Picture.
Home prices rocketed well above trend in the past five years, says Ritholtz, and have only just begun to deflate to more normal levels. The housing market will either drop about 25 percent dramatically, or peter out for a decade.
Many forecasters say just wait until early 2009 and home prices finally will start to pick up.
I’d love to see one of these clowns define “pick up”.
Retail sales dip points to spending strain
A separate report showed a bigger-than-expected jump in import prices, underlining the pressure costlier oil was putting on the economy. Over the past 12 months, import prices have soared 21.6 percent — the biggest gain in 26 years.
It was the eighth month in a row driving declined. Since November, U.S. motorists have driven 53.2 billion fewer miles than they did over the same period a year earlier, topping the total drop of 49.3 billion miles seen in the 1970s.
The housing market is in its severest slump since the Great Depression and average 30-year fixed mortgage rates rose to 6.57 percent in the August 8 week from 6.41 percent in the previous week.
http://biz.yahoo.com/rb/080813/usa_economy.html?.v=7
gloom and doom!
“Inflation is the one form of taxation that can be imposed without legislation.”
- Milton Friedman
The Fed is the government entity which is above the checks and balances which constrain the constituents of America’s Constitutional government.
Robert Reich: Chinese authoritarian capitalism, on display this week in Beijing, has me thinking about America’s democratic capitalism, and how we practice it.
Start with the economy’s most powerful government agency: The Fed, of course. Its decisions on short-term interest rates will either prolong this recession or pull us out of it. But the Fed is not directly accountable to American voters, or even to Congress or the President.
Months ago, the Fed decided to bail out major investment banks. That put billions of taxpayer dollars at risk, without so much as a single act of Congress. Lately, the Fed has been looking into the capital assets of these banks and telling them how to bolster their liquidity. Probably a good idea, but here again, nobody authorized the Fed to do this.
Now the Fed is issuing proposed regulations governing the credit-card industry. They specify when credit card issuers can increase interest rates on existing balances and they bar late fees on customers who weren’t given a reasonable amount of time to pay.
Seems reasonable. But the Fed should also stop issuers from marketing credit cards to people under age 21 and imposing extra charges on customers for paying online.
But what I or you may want is irrelevant. The Fed’s proposal drew nearly 56,000 comments. Yet the Fed isn’t compelled to read a single one of them.
Again, the Fed is acting without any authorization by Congress. In fact, two weeks ago a congressional committee reported out a Credit Cardholder’s Bill of Rights but the banking industry mounted such a lobbying effort against it, there’s no way it will get enacted this year, or maybe ever.
Heres a quote that made my blood boil.
“The citizens deserve peace, that some infringement on constitutional rights is OK and we have not violated anything as far as the Constitution.”
http://news.yahoo.com/s/ap/20080813/ap_on_re_us/arkansas_town_curfew
..”We’ve had people call us, expressing concern for their children,” Fielder said. “They had to sleep on the floor, because of stray bullets.”..
Thank God the ACLU jumped in to support and defend the thieves, thugs, crack dealers, gangsters and assorted lowlifes inalienable, constitutional rights to make life miserable for everyone else..
Damn, ACLU and protection of constitutional rights. I can’t believe that they are always looking for ways to protect our rights as citizens. I always look forward to a good old fashioned unreasonable police search. I guess if the president doesn’t have to follow the constitution and no one cares, why should the police?
..always looking for ways to protect our rights as citizens..
Citizenship is optional. The ACLU seeks to protect foreign criminals as well..
http://www.aclu.org/natsec/gen/22371leg20051207.html
From your link:
Even as currently applied, expedited removal has resulted in terrible mistakes, including its wrongful application to genuine refugees and even to US citizens.
Expedited removal should be fixed, not expanded. Because there is no check on expedited removal, expanding it to any person a government official thinks is a recently arrived illegal immigrant within 100 miles of the border will inevitably result in the wrongful arrest and possible deportation of legal residents and even U.S. citizens who are of Mexican-American heritage or “look foreign” to a Border Patrol officer.
Conditions in these facilities are often inhumane.
“Mina Burhani,” an Afghan woman who faced persecution from the Taliban regime because she ran a school for girls (when in power, the Taliban opposed the education of girls), and because her sisters were Christian converts, described her detention after fleeing to the United States.
I was brought [to an INS detention facility] in handcuffs and shackled to another person . . . who as also seeking asylum. . . . [T]hey took away my clothes and gave me an orange prison uniform. I was treated like a criminal. I was kept in a room with 12 other women for 23 hours a day. There was no privacy. . . . . We were only taken out of the room for one hour a day; the outdoor recreation area was really like a cage . . . . We could not see the trees or anything other than a small patch of sky through the fencing. Every day, guards woke us up at 6AM and told [us] to stand in a line to be counted.[1]
Those snippets don’t sound to me as very radical. Immigration and crime are serious issues, but to disregard the document unto which this republic was formed is not the answer to either issue. I hate to wave Ben Franklin around, but I find this quote says it all: “They who can give up essential liberty to obtain a little temporary safety, deserve neither liberty nor safety.”
Now I understand.
My rights to life, liberty and the pursuit of happiness are subservient to those of the gangbangers who would kill me and/or make me a prisoner in my own home… and denying those social scum their constitutional rights in order to secure my liberty or safety means I deserve neither liberty or safety.
Thanks for clearing that up.
Performance anxiety about keeping up payments?
Loanagra*
*(Side effects too numerous to mention)
You should be in advertising.
Larry Tate was my role model.
Is SOMEONE getting all Lad’s quotes down today?
We need an archive..
Lad, what on earth did you have for breakfast?
Whew.lol
Where did Prof Bear go? I need an oil price extrapolation, posthaste.
ROTFLMFAO
I used a one-month time frame, as I am sure you realize one day’s price movement amounts to white noise.
BTW, I love the tail-chasing economic calculus suggested by this journalist (lower gas and oil prices will lead to higher demand resulting in higher gas and oil prices prices resulting in lower demand which will lead to…).
Gas, oil price declines feed wonder over renewed demand
BY TOM INCANTALUPO | tom.incantalupo@newsday.com
7:05 PM EDT, August 13, 2008
Declines since mid-July in crude oil and gasoline prices have led some to wonder not only how much lower they’ll go, but also whether significant further decreases at the pumps would lead to a resurgence in gasoline demand — and then another rise in prices.
Although crude oil futures rose yesterday by $2.99 in New York trading to settle at $116 after a U.S. government report showed the nation’s gasoline stocks lower than expected, many experts think prices will fall further in coming weeks, barring unforeseen climactic or political events.
At the pumps, the trend continued down. Regular gasoline averaged $4.009 a gallon on Long Island Wednesday, according to a survey done for the AAA, 32.4 cents lower than a month earlier and 33.7 cents below the record of $4.346, set July 8.
Here ya go:
((4.009/(4.009+.324))^12-1)*100 = -60.6 pct annualized rate of decline in Lawn Guy Land regular gasoline prices over the past month.
PB,
I was just thinking to myself, Ive got a pretty good profile…
I wonder what demographics differ from watcher…whom I do not have a quality profile…
how are PB and Watcher?
same same, but different…its a good question.
A troubling email landed in my box from Ye Olde Barbarous Relic dealer;
Due to the recent price fluctuations, XXXX is experiencing a temporary shortage on certain popular products.
If you have recently placed and order with us, you can be confident your items have been reserved for you and are awaiting your shipment date.
We are actively scouring our sources to locate additional inventory to satisfy the needs of our valued customers.
So I went to another source and found this;
The precious metals industry is experiencing a substantial surge in activity which may increase the possibility of logistical delays; including customer service response time, product processing (incoming and outgoing), and product transport/fulfillment.
Certain silver products are delayed as much as 2-4 weeks. Please review Catalog descriptions for notices regarding such delays.
I can only conclude that buggy whips will soon be back in vogue.
The barbarous relic dealer (storefront location for over 25 years) I mentioned previously, told me he’d never seen such fear in buyer’s faces, as in desperate to perform financial alchemy by exchanging their paper for his goods.
As long as Gold Eagles are available from mint wholesalers, supplies shouldn’t be a problem, but once the mint slows down to a crawl is when it will get interesting.
I plan on spending a few days in his store, helping him out, and getting the skinny on what’s what, when that occurs…
Silver eagles are wiped out. Only a handful available anywhere, at approx. $3 over spot.
Same thing here..Saw that headline at APMEX.com. Due to price dip apparently all their popular products are sold out…
…should be interesting if physical drys up as it did last month at Perth mint.
Plenty of Morgans and Peace Dollars around; at much lower prices.
Try $10 over spot in Hawaii (Oahu). Outer islands even worse if there’s any at all.
Shortages do tend to drive prices upwards…
It started with a simple announcement taped to the door: The new shipment of Beanie Babies–including the coveted Princess Bear–would be in on Monday…
The scene turned ugly when word spread that Princess and another beanbag collectible–kelly-green Erin Bear–were selling out. The store only had 12 of each…
The going street price: $50 for a $6.50 Erin with its Ty Inc. tag in mint condition.
Brill, who owns KC Kings Sportscards, offers the same toy at his store for $150. Both Erin and Princess toys can sell for as much as $300, he said…
http://articles.latimes.com/1998/mar/24/local/me-32262
On more important matters than beanie babies, howzabout that beating one of our devout neo-con partners in crime took(despite having been trained by our best and brightest military experts & armed to the teeth), exposing just how weak we’ve become, for the whole world to see, in ’ssshrubery’s reign of error…
i sense a distinct note of jubilation in your words..
I’m never not amused by the goings on…
hmmm.. easily amused.. i’ll let it slide.
You comparing Gold to beanie babies? I guess 3000 years of use by our ancestors trumps 60 years of “new paradigm” ….of course soon will just be electronic debits. I think I’ll stick with my physical…call me old fashioned.
CEOs gloomier than public on U.S. economy
http://biz.yahoo.com/rb/080813/ceos_outlook_survey.html
Some 90 percent of chief executives described U.S. economic conditions as fair or poor, up from 16 percent a year earlier, according to NYSE Euronext’s fourth annual CEO survey, “Managing During Economic Turbulence.”
I have the feeling that the people will become more gloomier than the CEOs once those gloomy CEOs start laying off those less gloomy people.
What’s entertaining about this is that at least one year ago, and really much longer before then, just about anyone with any sense here at the HBB could have told those CEO’s that the economy would be fair or slow in August 2008. And probably backed it up with rational arguments…
Barring some more Fed craziness a la helicopters and/or I-bank bailouts (perhaps we’ve seen the bulk of it?), I suppose it’s possible nearly as many CEO’s will say “fair or slow” to describe the economy in August 2009.
Personal tale of woe inflation…
I’m an admitted addict of Frito Lay sunflower seeds (in the shell)
2 years ago: 99 Cents for a 5 1/2 oz package, or 2- 2.75 oz packages for $
Last year: 99 Cents for a 5 oz package, or 2- 2.5 oz packages for $ (or 59 cents each)
Today: 99 Cents for a 4.75 oz package, or 2- 2.12 packages for $ (59 Cents each)
I recently bought a box of multi grain Cheerios and it seemed as if the packaging was heavier than the contents. The store brand will do next trip.
Does anyone know if the government’s inflation numbers take into account the size of packaging? I’ve especially noticed this “stealth” inflation with Ice Cream. Many packages are now 1.75 quarts instead of a half gallon.
Ben Jones, this is a sign of classic Austrian deflation, is it not?
Serial bottom callers are at it again. Notice the weasel wording: If prices continued to drift lower through 2009 and beyond, then they would not have bottomed out then, would they?
CAPITAL
By DAVID WESSEL
Greenspan Sees Bottom In Housing, Criticizes Bailout
August 14, 2008
WASHINGTON — Alan Greenspan usually surrounds his opinions with caveats and convoluted clauses. But ask his view of the government’s response to problems confronting mortgage giants Fannie Mae and Freddie Mac, and he offers one word: “Bad.”
In a conversation this week, the former Federal Reserve chairman also said he expects that U.S. house prices, a key factor in the outlook for the economy and financial markets, will begin to stabilize in the first half of next year.
“Home prices in the U.S. are likely to start to stabilize or touch bottom sometime in the first half of 2009,” he said in an interview. Tracing a jagged curve with his finger on a tabletop to underscore the difficulty in pinpointing the precise trough, he cautioned that even at a bottom, “prices could continue to drift lower through 2009 and beyond.”
It’s the new “beach entrance swimming pool” analogy.
Even when you’re first entering the 1-inch-deep water - you’re already at the bottom. Problem is - you can keep going deeper, and deeper, and deeper, and you’re still at the bottom.
By this same logic - we actually hit bottom the very month after the peak. We just keep finding a new bottom as we go deeper.
Then eventually we drown.
Robert Reich is really finding his voice during this Insolvency Crisis.
A Modest Proposal
Robert Reich , secretary of Labor under Bill Clinton, and author of “Supercapitalism: The Transformation of Business, Democracy, and Everyday Life”
Of course Fannie and Freddie are getting bailed out. They’re Bear Stearns to the 10th degree—way too big to fail, especially with the rest of the Street in turmoil. And of course taxpayers get stuck with the tab.
What worries me is the complete lack of accountability by Fannie’s and Freddie’s executives, as well as Wall Street investment bankers also now being insured by taxpayers. We’ve created the worst form of socialized capitalism—private gains combined with public losses. These executives and bankers are among the best paid in all of corporate America. Their organizations are treated as if they’re giant investor-driven private sector entities as long as they’re healthy. But when they start to go down the tubes they become public entities with public responsibilities, and the rest of us have to bail them out.
More conferred wisdom, from the same roundtable…
Failing to Learn the Lessons
Peter Wallison , general counsel for the Treasury and the White House in the Reagan administration, now Arthur F. Burns fellow in financial policy at the American Enterprise Institute
…
With Fannie and Freddie successfully, if temporarily, tucked away, the greatest danger we face is failing to learn the lesson they teach—that government backing for a private, shareholder-owned company will inevitably come to a bad end. Government backing creates moral hazard, inducing lenders to shed the wariness they usually display in lending to an ordinary company; the easier money thus obtained, and the lack of market discipline, permits managements to take extraordinary risks in pursuit of extraordinary profits. As with Fannie and Freddie and the S&Ls before them, these risks turn into losses that the taxpayers must absorb.
Congress and the Senate knew that the polls showed 2 to 1 that the public was not in favor of bail-outs ,yet they passed the bailout bills . So you tell me who controls the politicians these days .
I don’t know if it’s that people use to be more in touch with what the politicians were doing, or if there is just more PR campaigns by big business these days ,or maybe the population is stupid or
brainwashed ,but I have never seen big business and Wall Street have this much influence over the lawmaking and policy. Of course in American history there has been some cycles of corruption ,but
eventually the people would rebel in one way or another .
You know they warn about the military taking over government ,they warn about the communist trying to take over the government ,but they never have to much to say about the self-interest of big business taking over the government .