Bits Bucket For August 16, 2008
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The Housing Bubble
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I was reading the Friday desk-clearing thread and I want to thank Big V and Housing Wizard for their insightful commentary on the US citizen and global “competition”. I agree with these posters.
I also saw the Peter Bracevich interview on Moyers last night. Spot on.
I second that, Palmetto.
If we ever hope to make this country great again, we need to restore power to the workers.
Too much power in the hands of either corporations OR labor is a bad thing. We need both to have relatively equal power to keep each other in line and avoid a severe misallocation of resources.
Agree. So, of the choices offered, which candidate should I vote for?
Neither.
Exactly!!
That’s my point.
combo, while I understand your point that neither presidential candidate is good for our interests here, I would argue that congress is where we should be looking with regards to these issues anyhow.
Not that you’ll necessarily find better candidates there…
The choice is obvious. Diversionary, intangible BS issues like flags, gays, etc will be set aside for real, populist, bread and butter issues like jobs, evaporating health insurance etc. The wealthy elite vote with their wallets, the poor/lower/middle classes will do the same.
What choice?
I think we’ve reached a point in time, in light of the absolute failure of both the administration and congress, where a third political party is needed. I believe that most Americans are middle of the road, and there should be a party which caters to that majority. It’s time to send the selfish leaches who’ve run this ship aground, packing. They never did have the interests of the common people in mind, only their own.
“we need to restore power to the workers.”
I agree. We need to get back to the UAW glory days. It makes me feel good that government workers (unions) have so much power. That is great for society. God bless the TWU, those poor victims of oppression.
We have all the laws on the books we need. We just need to enforce them. Enforce anti-trust laws (bye bye Fannie and Freddie and Microsoft and…..). We need better vocational training. We need less of a focus on pushing everybody into colleges. We need an auto industry that can create a better engine. We need energy self-sufficiency (that is where you can blast these worthless corporations and politicians).
And the American worker needs to stand up and take responsibility for themselves. I have yet to see any of the blame going to the American worker. I have worked with enough bad American workers to last me a lifetime.
I don’t think corporations are cuddly entities. But have some balance to your comments. Let’s go to any workplace in America and objectively look at the quality that is being given back by the worker. And save all of the, “oh, they are just doing that because they are treated so poorly” crap. I have worked side by side with these people and never fallen into their hole.
A hard working, responsible person can still get ahead in this country. I should know. I have passed up so many lazy, irresponsible people in my days. But I’m sure it wasn’t their fault. I know for a fact that their failures aren’t their fault because I’ve heard them say it a million times or more. Big business isn’t my favorite thing in the world but let’s give the Woody Guthrie impersonations a rest. There are still many Americans accomplishing a lot of great things.
Let’s go back to the unions glory days, from VJ Day to the 1960’s…
Europe was wrecked, South America a revolving door of pissant presidents and do nothing dictators, and Asia was what Africa is now.
In other words, no competition whatsoever.
Things Change…
That is part of my thinking, as well. That is why we really need to look at big business AND the American worker. There are problems with both. We now have “competition” unlike anything we’ve ever had before.
Instead of sitting around and boo-hooing we need to decide how we can better compete. The American worker must get better, not worse, as competition increases. We need to address how to make sure the American worker can improve their efforts. I read so often about the horrors of outsourcing to India. Instead we should be asking why that happened. It wasn’t just cost. I have worked in many support areas. Try to find Americans that even want to do that on a professional level.
I still think that in many cases the American worker has put themselves out of business. We can’t just blame government and corporations. We must blame all guilty parties. The American worker should be able to expect fairness in trade policies but they should also expect to hold up their end of the bargain. Many have not done this.
As Zimmerman said:
“Man is opposed to fair play
He wants it all and he wants it his way”
RE: The American worker must get better, not worse, as competition increases. We need to address how to make sure the American worker can improve their efforts.
While an onslaught of federal, state, county, local, commodity, property, personal property, excise, et. el., income confiscations in the form of taxes and fees are levied under the threat of gun and imprisonment by corrupt and ineffectual governmental forms, subsequently to be redistributed to the public employee unions and a burgeoning self-indulgent, incompetant, uneducated, promiscuous, drug addicted,welfare culture, you expect people to work harder?
Fat fookin’ chance.
“Gimme sum mo of dat dere freebee shite”.
So, in other words, we need to have a cataclysmic war with China and the rest of the low-labor-cost Orient so we could smash them down to the point where they would take a “golden age of American industry” length of time to rebuild?
You know, maybe peace _isn’t_ the answer, the American economy seems to do so well during times of war.. We can ship off surplus labor into battle to keep wages high…
I guess I forgot that we are not the workers paradise as in Ayn Rand’s “We the Living.”
The funniest part, for me, of this whole discussion over workers, corporations and trade policies is that we still haven’t hit on the most basic aspect of all of this. In a global economy the thing that would give us the best ability to compete with other countries would be to have truly affordable housing. If the average guy could once again buy a decent house for $70,000 then we would instantly become much more competitive.
The government, the NAR, our friends and neighbors still don’t understand just how destructive artificially high real estate prices are. The goal of this blog is to spread the word on the B.S. of the Housing Mania. The first goal of this nation, if it truly wants to be competitive in a global economy, should be to return the price of the most basic human need, that of shelter, to a reasonable level. With a foundation of reasonable real estate prices we would instantly be much stronger than we are now. But Bernanke, Paulson, Obama, Bu$h, McCain and the rest still talk about propping up the housing market. That is the real crime against the American worker.
As a former sucker for that Objectivist crap, I think Ayn Rand’s work is a bunch of self-serving fetishistic tripe that masquerades for religion and cronyism. Her “you’re with me or you’re against me” paranoia is almost more dangerous than Dubya’s.
NoSingleOne,
The funniest Objectivist strory I ever heard is that the son of a friend of my mother’s was going to get a PhD in business trying to prove Objectivism true somehow.
Where?
George Mason, one of Virginia’s public universities.
True story. Seriously.
Noted. Objectivism, as a philosophy, is mostly a plagiarism of Aristotle’s metaphysics, extrapolated to ethics, politics, epistemology, and arts. Nothing wrong with Aristotle’s metaphysics.
Also you are committing the common mistake of killing the message because you hate the messenger - Ayn Rand. I did not like Ayn Rand as a person. I disagreed with her views of sex, of smoking, of being too hawkish, and of her diatribes against libertarians. Her fiction books are awesome though!
I see this fallacy of Objectivist bashers all the time. They attack it because it was Ayn Rand’s philosophy.
NYCityBoy, I think the MSM will give in after 2012 when the brunt of the option ARMs reset. They will gush at all the advantages of affordable houses when they fall the next 40%. Again, you are early on the call, as a good HBBer is, but you are going to be proved correct.
NoSingleOne,
The son of a friend of my mother is getting a PhD from a business school with a proposed research concentration in Objectivism. OK, here’s the funny part. Which b-school? George Mason - one of Viginia’s public unniversities.
True story.
public provided goods do not fairly compete with private goods as they are not constrained by the performance requirements of the market and instead use force as a means of resource transfer. private institutions then are subject to unfair competition and artificially hampered in competition.
the public education system is a glaring example of how social programs perform poorly due to the lack of competition (meaning private, distributed decisions determining the assignment and transfers of resources).
Wrong.
Public schools underperform because they are forced to educate all the poor, drug-addicted, non-English speaking, mentally challenged people that the private schools won’t take.
Private schools are usually filled with children who come from educated, higher-class parents who emphasize the importance of education.
Public schools take everyone’s rejects (not meant in an offensive way).
Show me a private school whose students come primarily from the projects and whose parents are drug-addicted, chronically in jail, etc. and I’d bet it would UNDER-perform against a similar public school.
“we need to restore power to the workers”
Yeah..we have entered a real “Dark Ages” with THESE new American Business Models.
Anyone with a dry Candle and Match…Please step briskly FORWARD to the front of the line…Ouch!…Look out ..Hey!…whose hand is that on MY wallet
Empowering the workers might help, but it looks increasingly like the workers of the previous generation were both a symptom and a cause of the problem. Jobs became plentiful such that it was not necessary to strive to learn or even search around for them. Move to some great industrial city like Flint, Michigan and a good paying job is guaranteed. Don’t like learning? No, problem. Don’t like working either? Together you can learn to stop the line and break your machine to make a some time for you and the others to rest. The postwar industrial boom led to the most weak-minded, self-defeating behaviors being glorified.
It is interesting to contrast the industrial heartland of America and union hotspots with actual success stories. In Silicon Valley workers typically need good educations and drive just to get in the door, most work situations involve competition with other strivers, and downturns sweep away unfit corporations and workers aggressively on a regular basis. Now all over the world people are trying all kinds of crazy stunts to duplicate Silicon Valley for themselves. Nobody wants to recreate Flint in Indonesia, even with the high rate of unionization and willingess to support strikes and all the rest that Flint can offer.
Helping workers advance may be the key to improvement, but that most likely means time spent learning critical knowledge from books and also business that are allowed to fail when their time comes. The uneducated, strike-happy organized workers of yore no longer have any value. An unfortunate lesson I have learned over time is that, despite the illusion of values, most “hard workers” are semiliterate, ignorant, hateful shmucks who can’t even work a shovel safely and efficiently. Tough love can be ugly, but there is a good argument to be made that the best thing that we can collectively do for such folks is to let them fail hard so they learn their lesson.
I think you and I are alone on this one. Welcome to the club. We will have our first meeting next Wednesday at our secret clubhouse on Bleecker Street. You bring the pizza and I will bring my good friend Jack Daniels.
I developed a particular hatred for organized labor when I was very young and part of UN-organized labor. A little later, I became part of organized labor and developed an even greater contempt for its hypocrisy. Right now I am just delighted to be living essentially on the pensions of my clientele, largely govt retirees. So I’m feeding at the public trough indirectly. Because if you can’t beat ‘em you gotta join ‘em.
I lived in Flint for a little while Moleman.
City of ghost factories.
I’m not going to just take shots at unions because they did a lot for us. A lot.
Your charges are also correct against them as well.
However, we made those trade agreements with places where the workers are treated like crap, intellectual piracy is rampant and environmental regulation doesn’t exist. Not sure what the best way to unwind from the position is. Needs to be done slowly. Like to see demands for workers rights in places like China and increased environmental controls.
It needs to be a go slow approach. My goal is maintain trade while improving quality of life over seas. Hopefully, we will be able to balance out the trade problem as some of the cost advantages vanish.
Your comment is so one-sided though. I have seen many very hard-working people get screwed. It sounds like you are saying all americans are lazy workers and call themselves victims when their laziness gets called out. Your point seems to be if they would just work hard they would have nothing to complain about.
My guess is that if you have worked hard and that has worked well for you, and you have only seen or viewed others that you have passed up as lazy, irresponsible joe six packs, so you apparently can’t understand that there are many other sides as well.
I’m tempted to guess that you are a white male, but that would be too cliche. You just seem to have something emotionally invested in believing that we can all have the American dream if we would just work hard and produce.
A lot of success at work has to do with one’s emotional intelligence, the ability to suck up, social/political skills, etc. They don’t teach those in college, and many people don’t have these skills. It is often the least hard working and producing people that survive and thrive incorporate america.
“Your comment is so one-sided though.”
Are you joking? I am the one that is laying blame at everybody’s doorstep. You just want to hear “oh, those big bad corporations and governments”. When somebody writes something to challenge that it really kills that victim mentality and that seems to irk people.
peaceful,
The two propositions aren’t mutually exclusive. You can have a workforce with lots of lazy workers and have lots of hard working people get screwed over by other things. Sometimes these groups even overlap - a lazy not well educated person can, in fact, be doing enough to accomplish a job at an OK level and still get screwed over.
The biggest problems I have seen so far are crappy bosses, usually ones that can’t understand why I’m not a little clone of them (try to deal with a moderately successful female boss, especially one with a degree from a somewhat snobby school, if you are also a moderately successful female with a degree from a somewhat snobby school and are not a clone of her - hell on earth). I finally found a job with a good boss. He recognizes that he gets respect when I do well, so he gets a lot of crap out of my way so I can do my work. Bingo! Now it happens to be a union job, but the union has little to do with this part of it. The boss is the key. Hopefully the union would help out if the boss had been crappy to begin with, but it is awfully hard to put “no crappy bosses” in a union contract.
I am very happy to have the union get me other benefits that they are good at like flexible starting times (to make my commute easier), pretty good insurance, etc.
“We need less of a focus on pushing everybody into colleges. We need an auto industry that can create a better engine. We need energy self-sufficiency (that is where you can blast these worthless corporations and politicians).”
To create a better engine we need educated engineers. Educated scientist work on energy sufficiency models. Fuel cell technology can not be invented by UAW workers. I agree with you somewhat but lets no be so harsh on college education.
Education is good in itself. IMHO - Peace
It is good, but the truth is that not everyone is smart enough. People with IQs under 100 (by definition, half the population) have no business going to college.
So what will happen with these people? Will we give them the cold shoulder and let them eat 3rd world cake? Or will we have a society that provides vocational level jobs that pay a living wage?
I have lived in the 3rd world, and believe me, we don’t want to go that way.
“Education is good in itself.”
Yes, education does make perfect societies. The Germans of the 1930s were probably the most educated nation on the planet.
I am not being harsh on college education. I am being harsh on the belief that EVERYBODY needs to go to college. That is why I typed, “we need less of a focus on pushing everybody into colleges.”
Maybe we should have less of a focus on people studying French poetry and sociology in college. How about having advanced placement calculus being a prerequisite for entrance into college for ALL students?
” The Germans of the 1930s were probably the most educated nation on the planet.”
As per the account of a Dresden Jewish Professor in a book I recommended earlier in the week, “I Will Bear Witness”, just the opposite is true of 1930’s Germany.
The Nazis made a vaunted effort to destroy intelligent thought amongst the hoi polloi.
Sound a little familiar?
The CityBoy could agree to that.
I believe a year spent abroad would enlighten early adults about things, more than any college or university setting…
As a recent engineering grad, I have to say current US kids are the most spoiled of all. They don’t want to study to go college; someone told them they had to follow their wildest dreams and pick the ‘major’ they always wanted to even though there is foreseeable career choices. And what do they do? They go into Rhetoric, Sociology, Painting, Film, Dance, African American Studies.
What’s even worse is that those students end up asking for tens of thousands of dollars in student loans. When they graduate, they end up taking a job that pays 30k or 40k (max as a teacher here in TX); at that point, they ca barely afford to pay the students loans, credit cards, and car.
Someone needs to tell kids those careers do not offer a good future; not everyone can be a singer, dancer, writer, poet and make money.
We need more kids going into engineering, science, and medicine.
“The Nazis made a vaunted effort to destroy intelligent thought amongst the hoi polloi.”
That doesn’t mean they weren’t the most educated nation. That just means that a small group of sinister beings did everything they could to use that education for destructive purposes.
The dumbing down of the 3rd Reich came equipped with their most effective weapon in propaganda, the Radio.
And just think if Hitler had embraced the boob tube. It is still a mystery that the theatrical little egomaniac didn’t see the benefits of television for propaganda uses.
It is often the least hard working and producing people that survive and thrive incorporate america.
(Comments wont nest below this level)
It is also the people with the biggest chip on their shoulders who become the “boss/supervisor” and don’t know the first thing about motivating the people in their groups or business.
It is also not that people, 1/2 are under 100 IQ that should be moved to vocational schools, sometimes the smartest ones are the dumbest. And for gosh sakes, why wouldn’t one be smart but not be set up for college but turn out well after vocational school and run a successful business with successful employees who tax wise etc participate in the US economy???
After working with my corp for many yrs, I have seen people get awards and acknowledgement for the exact same things I do regularly since the beginning and yet, because of that same nitwit supervisor/boss, never get recognized. Or maybe I didn’t get recognized for serious contribution because so many of us do it and aren’t seen ,
forest for the trees aspect.
Not every over 100IQ is destined to be a smart decent productive human being. I have seen Union doing the right thing, I have seen the opposite. Now lets talk about Congress and the WH.
And yes, some of the kids and adults I have seen over the past 15+ yrs need remedial training in being civil, responsible, and caring individuals.. Oh, I am sorry, it is all about ME.
And the American worker needs to stand up and take responsibility for themselves.
And how is he supposed to do that? Is the displaced factory worker (union or non-union) supposed to go back to school and get a PhD in molecular biology?
There is a reason that so many people jumped on the easy money real estate bandwagon: realtors, mortgage brokers, construction, etc. The alternative for most was a $10/hr job.
A big European windmill company (Vestas) has announced its going to build another plant here in northern Colorado. The average wage will be $15/hr. The local media almost wet their pants with the excitement, but the truth is that $15/hr is not a middle class wage.
I would like to make the point that cheap slave labor produced foreign goods have created a monopoly in America .It was no different in earlier American history when the Railroad Fat Cats tried to eliminate the competition by lowering the fares ,than after all the other railroads went out of business ,than the
remaining Railroad would increase the fares after doing away with all competition . In effect , the cheap foreign goods lower labor costs is crushing the American workers ability to
compete .
They created laws in America against the monopoly ,yet in effect the American worker is being squeezed out by cheap labor produced products that have become a monopoly .
The US has laws against monopoly and yet doesn’t apply those laws, constantly invently loopholes.
One has to protect the few folks that own the millions and millions of shares privately.
401ks aren’t the be all end all. Not all of them are or were since inception, guided well, given enough options/funds as other corps were and were looked after by (my corp)the BOD and vps who don’t know the first thing about 401k funds etc.
Glad to hear you are your CEO, many of us lost money when so many were gainers. Not enough funds to chose from.
Umm…Due to my 401k and IRA, I am the corporation. So I cannot be against myself. I don’t urinate in my own beer.
Except the individual don’t have any real power. Stock ownership is concentrated in large entities like mutual funds and pension funds. If you own stocks as an individual, you don’t own enough to make your voice heard. The way to make corporations better is to change the pathetic culture of “what have you done for me this quarter” that has permeated the board room because the people who control the directors and therefore the executives let it happen.
You want better products? You have to spend money on R&D.
You want to spend money on R&D? You have to be willing to increase those costs for a while (actually forever, but we don’t want to scare anyone) even though it won’t add to the bottom line immediately.
You want to spend money that won’t add to the bottom line immediately? You have to restructure executive compensation to reward long term results instead of short term results.
You want to restructure executive comp? You have to elect boards of directors who will demand those changes?
You want to elect boards of directors who will demand those changes? You have to make the folks who determine who those directors are (the reps of the large shareholders who own the majority of the assets) care about the long term as well.
You want them to care about the long term as well? You have to change their comp to reflect long term results.
Etc.
I really think the anwer is to restructure exec comp to be based on a comparison of a company’s results against its peers (market segment) over a very long term. How do you get people to take on a very hard job when their rewards, if any, will only come 10 years later? No idea except that one very general suggestion above.
I don’t think that empowering the workers will help. Too many of the people on this board are engineers. They have an opportunity to have pride in actually creating a product. Most workers have much too small a contribution to a product (or are only in a support position and have nothing to do with a product) to feel any real sense of pride. It is a nice idea to say a administrative assistant in the accounting or HR department will be motivated by her company creating a superior product, but I don’t believe it.
The political and business analysis consistently presented on this blog is far beyond the analysis found in newspapers or from politicians lips. So why are we so complacent in permitting the status quo to destroy all vestiges of goodness? Oh yeah, they’ve got the nukes.
New York City Boy . I agree that the work force in America got increasingly non-productive and more and more demanding .
That would have to change ,and any dead weight in a Company should be fired . No more excuses for not being productive .At the same time the answer does not lie in reducing wages to
slave labor standards and not giving workers live-able wages and some protections from just being fired for no reason.There is a happy balance somewhere in the mix where the Worker or the Employer isn’t exploited .I have seen at times how some workers kept their jobs when they were not a asset to the Company they worked for ,and management was hog-tied for fear of firing such a worker, who might scream discrimination ,when they really weren’t productive .
But lets say a Corporation promises a employee a retirement and than fires them right before they retire . These sort of things use to happen in employment history to people before some laws were created to protect the workers .
I see your point loud and clear NYCB and it’s a valid one regarding what the expectations should be by a Employer of having a productive qualified worker that actually earns their pay .
“At the same time the answer does not lie in reducing wages to
slave labor standards and not giving workers live-able wages and some protections from just being fired for no reason.There is a happy balance somewhere in the mix”
Good god, when did I promote slave wages? I am the one saying that honesty about all parties is the only way we will find that balance.
You want to spend money on R&D? You have to be willing to increase those costs for a while (actually forever, but we don’t want to scare anyone) even though it won’t add to the bottom line immediately.
Has anyone ever seen Honda’s ASIMO robot? It truly is technical marvel, the result of many years of R&D. It’s also still not ready for prime time, but someday it will be. (you can see it at Disneyland).
Would any US corporation commit to something like this?
You never said that you promoted slave labor NYCB ,I just added that .Sorry ,I didn’t mean to imply that you were in favor of that .
Thank you for clearing that up. Let us be honest about this discussion.
- The left vilifies big business and glorifies labor.
- The right vilifies labor and glorifies big business.
I would glorify neither. I would vilify neither. I would hold them both accountable for any failures that to which they contribute. That is balance.
Yep, NYCB . I agree that the balance needs to be achieved .
Affordable housing. Livable wages, Health insurance.
All of these are against Big Business/pharma etc.
I dont’ know what they are teaching in business schools in the last 20 yrs, but it isn’t about balance.
Union dues are cheap and are a form of protection against not being paid. Which corps continually try to find ways to do that in the guise of ” being more productive”.
For those who travel on airlines.
There is this new gizmo that detects ‘movement’ and only then when there is a movement will the Pay clock get started..
Let me put it another way, I have friends in the airline industry, pilots get paid when they sign in, flight attendants do not get paid and when passengers are being boarded, the flight attendants are not being paid, although they could be fined huge amounts of money from the FAA if they don’t do something correctly during that hour of boarding.
Now the companies have designed, thanks to the ingenuity of engineers and inventors, a device that knows when the plane first moves away from the gate, even though the door is closed, the flight is ready, when the breaks are released by pilots then flight attendants start to get paid. But, this new sparkly computerized invention detects movement which can happen many minutes/hours past the time the door is closed.
Have you ever been on a plane sitting at a gate and unable to get off/door closed?
But what is happening now, is that airline companies are now not going to pay pilots/flight attendants until that movement of said airplane. So not only are passengers upset over a delay, so will the crew.
I think that’s pretty chicken-sh*it to not pay the airline workers just because the plane hasn’t moved yet . I don’t know ,I don’t like it when I see employees not getting protections they use to get .If anything ,I think the Employer would always have a advantage over a worker and just left to the law of the jungle ,
employees would end up getting the short end of the stick always (employment history has proven that ).
And that’s why we need unions.
In a free market, both sides should have some say in what price they are willing to buy and sell (labor).
Power begets money which begets power. The corporations have plenty of power and can manipulate laws to their advantage. At some point, this system will break as they will have sucked everything out of their workers, and the workers will have no money left to trade for goods and services.
It is a symbiotic relationship, and both sides need to establish enough power so they can negotiate the price of labor.
BiM:
How much of the work you do is defense industry related, what percentage?
I’d guess 50% I am helping to fullfill this part of the Constitution (see bold):
We the people of the United States, in order to form a more perfect union, establish justice, insure domestic tranquility, provide for the common defense, promote the general welfare, and secure the blessings of liberty to ourselves and our posterity, do ordain and establish this Constitution for the United States of America.
Unless you are an anarchist, you cannot argue with me that defense is a mandate and is proper for a minarchist Libertarian like me to be involved in. I’m no hypocrite. You asked me about this before. Apparantly Alad, you have a bad memory.
I never said no defense industry, did I?
We don’t want to get caught flatfooted, (in 1939 we had something like the 17th largest army in the world) but wretched excess for the sake of keeping you and yours employed in the last upper-middle class jobs in the country, seems silly.
On Bill Moyers last night, his guest Bracevich (retired colonel, Vietnam vet, professor) stated that the lowly i.e.d. did so much damage (the basic ones cost about the price of a pizza) and the freedom fighters were so able to change their methodology, that our vaunted technological modern army was always a step behind.
David (i.e.d.) vs. Goliath (mega-million $ weaponry)
Agreed. I’m in the camp where our defense should be literally defense and that we need to keep it all in the 50 states and its island territories and have space-based defense, as well as anti-missile defense (SDI).
I guess to be consistent with it, we would have properly waited until Hitler attacked America’s states and territories before we got involved in WWII. I think we properly retaliated against Japan in that war though. They attacked us first so we had to lob nukes at them in the end to save tens of thousands of lives of the G.I.s.
What we did in Afghanistan as a result of being attacked was justified. We zeroed in on the nest of the very organization responsible for the attack in New York. But the war in Iraq was/is not justified.
The problem as you say, is when government manufactures threats and creates a welfare industry military-industrial complex such as in Robert A Heinlein’s “Space Troopers.” We are rapidly becoming a Nationalistic Socialistic society. So many signs - bailouts of big corporations is part of it.
“Don’t be too proud of this technological terror you’ve constructed. The ability to destroy a planet is insignificant next to the power of the Force.”
- Darth Vader
Alad,
War we can do well. Nation building is another problem.
If we merely depopulated areas like Iran and Iraq we’d be fine.
Retirements are a bigger problem that IEDs.
“I don’t urinate in my own beer.”
Sheesh Bill…I hope you didn’t invest in 4 yrs in Engineering School studying Fluid Mechanic’s to learn THAT
I don’t urinate in my own beer. Well then, whose beer do you urinate in?
Sounds like we need to restore some countervailing power into the hands of individual American households and workers. Easier said than done in a world dominated by too-big-to-fail corporate entities and the politicians whose campaigns they fund.
I knew we had a really bad strain of politics going on, when like 15 years ago Michael Huffington spent something like $30 Million on an unsuccessful attempt to become a California Senator pulling down $100k a year.
The system allows those in power to have as much spoils as one can carry, currently.
PUBLIC FUNDING solely.
Would let each one of you run for something, putting us all behind our words!
Public funding is not the only unfortunate reality. The phrase “public funding” is also the euphemism for the no-bid/cost-plus DOD contracts, for the literally criminal churning of mortgages via HUD, for the $3 TRILLION known unaccountable by DOD, and who knows how much missing from HUD. Public funding is clearly the insurance umbrella for the failed banking system, including the privately-owned Fed, which, when Hanky gets his way, will have “oversight” over the entire FIRE sector.
My take is what is needed is a Constitutional Congress… necessitated by the bastardization of the perfectly good one we have. Start literally from scratch.
It’s critical to remember We outnumber THEM, in the sense of even the oafs having a commitment to the country we were introduced to in elementary school. At the same time, we must acknowledge humans do not play well when given unlimited autonomy. Sounds nice in prose, but the reality is it takes a saint not to yield to temptation on the level available.
On the criminal side, I have no idea who or what could or would counter the information capability, the under-the-radar capability, the physical/mechanical power of those who have no intention of curbing the Greatest Game Going.
But how on earth would anyone capture the attention, let alone the comprehension, of J6P?
Ok. I admit it. I’ll not see any of this in my lifetime.
GC,
How dare you suggest striking a balance at the expense of concentrated power and wealth! Oops…. It was Galbraith???… uhh umm.. err… He must have been a communist!!!!
I too agree. It never ceases to amaze me how the super rich have convinced the working poor that their low wages are their own fault.
Funny also how other countries jealously protect their job markets, while we are more than happy to export ours.
FBI Probes Unusual Incentives for Home Buyers
http://online.wsj.com/article/SB121884641242946145.html?mod=googlenews_wsj
“They didn’t care what you did with the money as long as the buyer paid the price they wanted for the house,” says Mr. DeWinter, who personally went into foreclosure in that same neighborhood on a $500,000 Beazer home. He says he received a $50,000 incentive from the builder, which he used for his down payment. Beazer didn’t return calls seeking comment.
Has anyone seen a dollar figure for the amount of fraud that may be out there or is that just being ignored like a lot of other damaging banking/housing facts?
It seems as if the Beazer hired Eddie Haskell as their loan prompt, from the looks of things…
“Why, yes, Mrs. Cleaver, I would like to come over and play with the beaver.”
Do you think the writers got the potential double entendre of naming a sitcom character Beaver Cleaver, or were the 1950s really that innocent?
Double entendre? What are you talking about?
My 80 year old pentacostal landlady back in college always gave me a double take whenever she would ask me if I would bring her “my big dic” as I walked by the large crossword puzzle dictionary.
Language changes with the times.
Chalk one up for the HBB legal team. When was it we had our discussion about questionable builder incentives — about two years ago or so?
At the time this was a hot HBB topic, I asked my sister, an attorney, about the legitimacy of incentive schemes that give back goodies at closing in excess of $50,000 in value, which are not part of the structure, but which nonetheless are financed as part of the principle balance on the mortgage. She did not see anything wrong with the practice. I have to send her this article post haste.
You are going to rub a lawyer’s nose in it? Beautiful!
Any time you walk away from buying something with more money in your pocket than you had before you bought it, something is terribly wrong in Denmark! Is that not just common sense?
Any time they try to give something back, like a car or a trip, no matter its value, something is wrong! Else why not just take that value off the price? Is this not obvious to everyone?
Maybe financial stuff like this is just too complicated for me.
Well,this cash back incentive was fraud by Beazer ,IMHO . Or ,I should say if the lender actually got the Contract documents that showed that kick back,and it was approved by the lender ,I would seriously doubt it .
I have said it time and time again that the fraud that was taking place on these loans was off the charts and it went a long way toward raising the prices in a false and fraudulent way . The entire industry was corrupt and the final victim was the secondary market who ended up with loans that were not what they were presented as being .
How do you think all those cherry pickers were able to afford those 3k payments a month for 2 years when they only made 2k a month . At some point in the housing boom the party continued by the industry seeking out the straw buyer ,who was promised untold riches and paid off up front with some cash back .
Heading for a soft landing
No need for panic in most of Canada over housing slowdown
http://www.nationalpost.com/life/homes/story.html?id=727849
But even if the boom is over, there’s no national bust in sight. Without the severe financial excesses and fraud that devastated the U. S. mortgage market, undermined that country’s banking system and brought soaring numbers of home foreclosures, Canada simply doesn’t have the conditions to trigger a housing collapse.
This reminds me of an NAR piece from about a year ago; all is well, it can’t happen here in the good ol’ USA. I’m no expert on the Canadian economy, but don’t boom and bust financial rules apply even to those north of the US border?
Can anybody give us a good report on downtown Toronto? I was there two years ago and couldn’t believe the amount of condo towers. That had disaster written all over it. How is that working out?
General maple leaf waving about the lack of financial excess and fraud would be a lot more meaningful if they included a comparison of how median home prices matched up with rents and median incomes at their peak. Also include an analysis of what will go on with the Canadian economy wih the US and EU going into recession. Also, please let me know if the areas of Canada that are in the process of getting gifted with a longer growing season have any reasonable topsoil. Oh, and were there any ARMS, option or otherwise, and any change in lending standards.
I’m going on vacation in Canada (Stratford, Ontario) in a few weeks. I will be facinated to see how much turnover there has been in the various shops that cater to the theatre festival goers. With the US and Canadian dollar near parity for most of the season and gas way up, I bet sales of expensive knicknacs is WAY down. Maybe I can get my niece that adorable raincoat with the ponies on it at a discount….
Canada’s real estate valuations were every bit as speculative and unjustified by fundamentals as the worst bubble markets in the United States (Florida, Las Vegas, etc)
The difference comes in that some of the “bubbly” markets in Canada were never able (and never will be able) to create the high paying jobs/industries. Vancouver especially is detached from any kind of rational valuations. The average income in Vancouver is ~38,000CAD per year.
You can’t buy a detached house in the Vancouver area for less than 600,000
Some places like NYC, Bay Area, Chicago… these locales have many head offices and or manufacturing centers that create high end employment and (to a certain extent) could conceivably justify slightly higher RE valuations.
Vancouver has no such employment opportunities.
For all the talk of “no exotic lending products” in Canada, we sure have a ton of them! Sure we don’t have the “liar loans” that plagued a lot of the RE build up in the US, but we had 40 year amortization mortgages, cash back mortgages, no money down mortgages.
What these RE apologists don’t realize is that it’s not the “exotic” nature of the lending that makes it dangerous, the problem is and has always been negative equity. Zero down + 40 year amortization means that you are essentially building zero equity for the first 5-7 years of your mortgage. If that property’s value drops even 5% then owners are a lot more likely to stop making their payments.
Now in Canada, owners cannot send in jingle mail like our friends Stateside can, but that’s actually WORSE in the long run for any kind of recovery. Owners will not be able to save up any money by walking away from the mortgage. They won’t be in a position to take advantage of lower prices after 2-3 years of price deflation because they will have no capital.
Canada’s housing story will be every bit as bad as the United States’, but instead of a massive crash in 2-3 years, it will slowly but surely deflate and last a heck of a lot longer.
The Strong Dollar Illusion
Peter Schiff
Aug 18, 2008
http://www.321gold.com/editorials/schiff/schiff081808.html
Mr. Insane, what is your take on the dollar? I would expect that you are still bearish. I am not the metal fan that you are but I do see periodic purchases of metals, for safety, as a prudent move. Do you see gold rebounding in the short-term or are the big boys going to continue to try to pound it down?
Something smells rotten in the state of Denmark right now, and it’s all about manipulating computer bits masquerading as money, another round of collusion and coercion, not necessarily in that order.
Think of what’s happening right now, as a leaky dam. There’s a myriad of cracks in the concrete, with small rooster tails of water cascading out of them. We have an endless supply of duct tape, to stop the ones in progress, but have no idea about the integrity of the dam itself.
Would you want to be downstream of that dam, knowing what you don’t know?
“Something smells rotten in the state of Denmark right now,…”
Alas poor Auric, I knew him well.
Darn. “Auric” is so good. Wish I’d thought of it.
Aladinsane thought of it yesterday, but I could not resist the temptation to repeat his brilliant quip in this context
Since neither one of my balls are crystal I can’t say what the future holds for the dollar or for metals. What I can do is watch for changes that may spook the public into a frenzy. The first one was placed on kitco.com yesterday in response to falling prices… Is it just a ploy? I don’t know that either, but I do live in silver country and our biggest coin shop that usually has 2000+oz silver is down to about 60 one oz rounds. Talked w/ the owner yesterday and he said that he ain’t buying more for awhile, and what I saw was all there would be for weeks if not longer. Gold was plentiful however. Hmmmm.
Here is the KITCO warning:
IMPORTANT NEW NOTICE: Due to market volatility and higher demand in the entire industry, we are anticipating delays in supply of all bullion products. Please note that you can continue to place orders and prices will be guaranteed; however, cancellation fees will still be applicable regardless of the length of the delay. Consequently once inventory is received there may also be delays in processing and shipping by our vaults.
Yet the price is falling- due to a stronger dollar. Um, supply is down, demand is up, and the price is falling. What gives?
Anyone w/ insight? I’d love to hear your theories!
I talked for an hour yesterday with one of the larger storefront coin dealers in L.A., and asked if he could locate 20 x 100 oz silver bars (any make) in all the coin stores el lay, and he laughed and said “no!”
He’s been getting a lot of new customers and has been steering them into meat and potatoes Gold bullion (1 oz eagle/buffalo, krugerrand, cml) and as long as the U.S. Mint was still cranking out new 1 oz Gold Eagles, he could cover his position (hedge) easily enough by buying replacements from master wholesalers, but that avenue temporarily doesn’t exist…
And as people always want the things they can’t have, and we are headed into the storm and the shelves are more than a little barren, it should get very interesting, very soon.
he could cover his position (hedge) easily enough by buying replacements from master wholesalers, but that avenue temporarily doesn’t exist
Again, if the mint is only getting 25 over spot for costs but they have lost >25 in costs and devaluation of the gold between the time it’s bought and sold to wholesalers, then it’s fine for the dealer to keep up this arrangement as the mint is effectively (as you point out) eating the hedge costs. This may very well be why the mint is stopping this activity.
Dealer I work with very low to none on silver / gold, purchase spreads increasing at alarming rate. He has 10 buyers to every seller. Eagles almost non existant and will be even harder to find now that mint stated yesterday no more production.
I agree with Schiff on this. I am maintaining positions in Australian dollars and Brazilian reals.
We recently took another shot at foreign currency diversification. We made a 20 pct gain on the Swiss franc-denominated CD we bought last year, including a sizable drop in hand lotion purchase expenses.
It seems that Tough Housing Market Complicates Divorce.
Who possibly could’ve predicted this?
Housing crash conundrum:
- Plummeting housing market values put a strain on the family budget, as the third income from home equity cashout financing turns into a financial albatross. The financial pinch strains relationships, increasing marital friction that can lead to a mutual desire to separate.
- But the same financial pressure that strains family budgets and marital relationships makes separation more expensive, particularly given the challenge of selling a shared home in a falling price market, or living in separate households in the wake of an effective reduction in income.
I expect many more cold wars at the hh level, as couples who would rather divorce cannot afford to do so. However, it did not stop my former BIL and SIL, who still jointly own a $500K+ McMansion they cannot manage to sell for a price that would allow them to pay off the mortgage, despite having divorced six months ago.
Frustrated again. Home prices around me did decline a bit, but are now stuck again. I guess this is the trend (drop, plateau, drop, plateau, etc.) but I’m ticked at still being priced out. And I’m getting sick of my rental, but I so don’t want to get into another lease (esp. since I’m month-to-month now).
Ideal plan - suck it up until next summer and buy then. Of course that plan depends on a lowball offer being accepted in mid-2009 because no way will prices be low enough to offer asking. I just think there will be more hungy sellers a year from now. And I know waiting longer is better, but I really want to settle in somewhere before my son starts Kindergarten in September 2009.
Damn greedy people. Even after all these years, I still harbor such resentment towards anyone who helped create this disaster.
But the price drops are continuing. Patience is a tough thing for we humans. I don’t pay much attention to Manhattan prices. I am never buying here. I do still pay attention to prices in my Minnesota hometown. There is one house in particular that I’ve been watching. It was priced at $233,000 about 6 months or a year ago. Even at that price I thought the people were much more realistic than most other listings. I have watched this house now fall to $180,000, as of this morning.
I won’t be moving back to Minnesota any time soon but reality is hitting there. That reality will continue to spread. Even Minnesotans were drunk on the housing bubbles. And now they are feeling the hangover. That hangover is spreading. We just need to be patient. Well, I don’t need to be patient. I still think I’m about the only one on this blog that doesn’t care if I ever buy again. The rest of you need to remain patient and let this thing work itself out before doing anything drastic.
The next couple of years will offer fantastic location arbitrage opportunities for coastal-dwelling Midwesterners relocating to the Heartland. We saw this in St. Louis in the early 1990s downturn, as Californian transplants snapped up West County McMansions that long-time Midwesterners could not afford.
There you are praying for the misfortune of countless greedy strangers… so you can save a few bucks
It was good to see a real troll last night, wasn’t it? I sometimes forget what they look like….
I like my troll meat medium rare. There must still be a little blood for flavor.
I missed a troll?!?
Damn, I take a day off and I miss a fun evening. Sniff.
“I’m getting sick of my rental, but I so don’t want to get into another lease (esp. since I’m month-to-month now).”
I’m in the same boat, minus the bambino. Renting might make a lot of sense right now financially, but it can suck the life out of any plans you might have to settle down and create a sense of permanence and control for yourself and your family.
I pay a below-market rate for my rented condo, and it feels like a pair of golden handcuffs. I watch my bank account grow by leaps and bounds every month, but my heart and mind are being shaped by four walls that are not my own, instead of the other way around. I know it’s not a popular position to take on this blog, but I continue to look and hope for a permanent home.
“I know it’s not a popular position to take on this blog, but I continue to look and hope for a permanent home.”
I am not sure this is an unpopular position. We are in a similar situation to yours, but it seems the choices in the retail market (in San Diego) are still very poor relative to fundamentals. My faith in the power of market fundamentals is sufficiently strong to lead me to wait a bit longer for the reality of the juxtaposition of a glut of housing against the backdrop of a recession to sink in to the collective psyche before we start looking around. I am thinking that after next year’s Souper Bowl might be a good time to start seeing what is available.
Bear, super bowl won’t cut it in the desert. Super bowl only means 3 more months of ‘winter’, rather snowbirds and even San Diegans. I think ‘Aretheycrazy’ and I will have to wait for any price changes during next summer, yr from now. At best.
I have better quality neighbors in both the large apartment complexes I rent in than many neighborhoods where houses were obtained with liar loans. It will be far off, 2013 or 2014, but after the option ARMs resets peak in 2011/2012, the riff raff will leave the SFHs and the rightful residents - quiet, productive, responsible savers who respect their neighbors will be the majority.
For now, quiet, productive, responsible savers are mostly in large apartment complexes.
I’d be tired of living with riff raff neighbors well before getting tired of renting.
I agree. Kids seem to mature at their own pace without any respect for the housing or employment market. I’m stuck renting in one town because I don’t want to move my kids around. By the time the dust settles, I feel like my kids will be so big that I don’t want a big house.
It completely sucks.
“I feel like my kids will be so big that I don’t want a big house.”
Look on the bright side: You won’t ever have to waste your time cleaning a big house. (We are in the same boat as you…)
Interest rates for home purchases in mid 2009 wil be higher or lower than today? Higher by how much? If you predict interest rates around 9% a year from today, would that affect your purchase decision?
I would be more inclined to wait if I knew interest rates would be at 9 pct by mid 2009, as I fully understand the implications for valuations (i.e., much lower).
It’s a good time to buy the stock market!
Dow Industrial trailing P/E NIL
Russell 2000 trailing P/E NIL
S&P 500 trailing P/E 26.10
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!
“Dotcom?”
How about cash?
combotechie, “Dotcom?” How about cash?
Cash in 90 day T-Bills?
Cash in Corp. , State and USgov 10 year Bonds?
Cash In Inflation Hedges?
Sold my 20 year CA home in 2004. Invested in inflation hedges and have been renting for 4 years. Still think the mortgage interest rates will hit 15% (like in the early 1980’s) before it is time to buy for cash.
For now Stagflation.
Best Wishes!
“For now Staglation” while I enjoy my staycation.
combotechie, “Dotcom?” How about cash?
Cash in 90 day T-Bills?
Cash in Corp. , State and USgov 10 year Bonds?
Cash In Inflation Hedges?
I still think the mortgage interest rates will hit 15% (like in the early 1980’s) before it is time to buy for cash.
Best Wishes!
“I still think mortgage interest rates will hit 15% (like in the early 1980’s) before it is time to buy for cash.”
I agree. Not only mortgage rates but short-term interest rates as well. This should occur in and/or cause a tanked stock market. Most people with cash will buying CDs and such at this time.
But this will be the wrong thing to do, IMO. What people should do instead is get out of cash and buy quality stocks while they are being offered at a discount. Interest rates will eventually decline but quality stocks will continuously add to their intristic value.
Buying quality stocks at fire sale prices and holding them is the lazy man’s road to riches.
Combo, that is classic contrarian and has worked for me for years. I too expect 16% yields but in many respects, that is a gamblers mentality. In other words, if I bet one more time, I’ll win. We can look to the past and prepare a strategy but I’m not 100% convinced this is going to play out like 1973-1981.
At 15%+ long term interest rates:
1. trailing P/E of the Dow30 will be 7
2. Dow30 div. yield will be 10%
3. Cash will be king!
It will be a good time to buy a house and the Dow30 for cash.
Best Wishes!
Yes, but how to allocate between the two…..
“Yes, but how to allocate between the two…..”
Houses are inherently lumpy purchases, making it far more valuable to avoid buying until the price trough. By contrast, one can dollar cost average into equities right through a depression, provided one has money to invest, and buy relatively more at the price trough than before and after, without worrying so much about market timing.
polly, “Yes, but how to allocate between the two…..”
At 15%+ interest rates, I’m planning to liquidate my inflation hedges and buy a retirement home for cash. With the remainder (75%+) invest in high div. yielding Dow stocks and USgov bonds (think early 1980’s).
Best Wishes!
P.S. You got to have a dream to have a dream come true!
You’ve got to have a screw loose to like cash + hate inflation hedges + expect rates to hit double digits. How’s that gonna work?
Some people know history, fewer understand it.
I just put 15% trailing stops on my health care staffing stock. Partly because it’s the owner of the company I’m in. But I’m bullish on that type of employment increasing here in the U.S. the next few years. Just want to lock in the gain to make my engineering gig out here on the E.C. worthwhile. Have a 74% short term gain if the stock finishes this month at the current price.
Bill in Maryland, “I just put 15% trailing stops on my health care staffing stock”
health care staffing stock = inflation hedge
Best Wishes!
Maybe right, but healthcare has been the 2nd most hit industry in the last 2 years. Don’t get sick in the US. 127 mass layoffs involving 100+ people this year. No state is immune. Particularly hard hit are the specialist hospital care eg. burn centers.
Do you mean NIL, or NaN?
nil = none
For the confused non computer engineers, http://en.wikipedia.org/wiki/NaN
Trailing PE’s are completely useless in determining a stock’s value.
You shouldn’t be trying to time the market by looking in the rear-view mirror.
Current PRICES are based on forward-looking earnings, and overall market conditions, which don’t look too good based on the financial insolvency of the banks and finance companies.
If FUTURE earnings are Down, then the PE’s will go Up, substantially, making the current prices a BAD deal, not a good one.
This is a crappy market, world-wide, with almost no safe havens.
You buy if you want, but i’d rather take the inflationary hit and hold the cash.
I think the down-side potential is still very high, so based on my outlook, stocks are still too expensive.
Real Estate was priceless when the mania got prices escalating for several years.
It turned out to be a bad bet if you jumped in. A lot of Realtors ™ are selling that pitch now, too. Real Estate is “on sale”. It won’t last. Hurry! Don’t miss these bargains!!
We are in an asset deflationary spiral, which includes real estate and stocks. Even commodities are getting hit now, including precious metals. Short-term, I don’t think there are any good plays. I am sitting on my hands.
“You buy if you want, but I’d rather take the inflationary hit and hold the cash. I think the down-side potential is still very high, so based on my outlook, stocks are still too expensive.”
Yep, you nailed it.
diogenes, “Trailing PE’s are completely useless in determining a stock’s value.”
The DOW30, Russall2000 and SP500 earnings are grossly overvalued on a forward-looking earnings basis! The Dow30 forward earnings are 12.89!
Forward 12 month estimates on stocks are made up wishing numbers. Trailing P/E are real numbers.
Check out these P/Es at ‘The Wall Street Journal Market Data Center P/Es & Yield on Major Indexes’ webpage.
Best Wishes!
P.S. Do you also beleve RE agent’s made up numbers?
“Dow Industrial trailing P/E NIL
Russell 2000 trailing P/E NIL
S&P 500 trailing P/E 26.10 ”
P/E stands for price/earnings ratio. In order for me to accept your premise that stocks are cheap priced on P/E ratiom. I have to
accept somebody’s acxcountant on the reported EARNINGS. Enron’s accounting should have taught everyone a lesson on how invaluable reported earnings are in making an investment decision. Or how about Moody’s Triple AAA rating for Alt-A loan packages.
I’ll pass on any formula using earnings as a standard.
Dow Industrial trailing P/E NIL
nil = none = overvalued = bad buy
This Cyberhomes.com link on this blog site is intriguing. I did not check out the whole thing but seemingly you can screen neighborhoods. There is another site rottenneighbors.com or something that reviews neighborhoods.
If there is enough input to those sites, you may discover that every neighborhood in the U.S. is rotten - too noisy, has sex offender(s), drug dealer(s), bad schools, high crime, nosy neighbors, too conservative neighbors, too liberal neighbors, neighbors who discriminate against your lifestyle or religion (or lack of).
If you sum up those factors and add in climate, transportation, and other issues, you are going to have to compromise. You may prefer to just keep renting until the government stops bailing out irresponsible people - and that’s going to have to happen eventually.
I love the places I rent (both here in Maryland and in Arizona). I selected them from apartment reviews on the web and threw in factors such as proximity to freeway and work. I suspect these large apartment complexes have more civilized people there than SFH neighborhoods nearby. It’s a perception that other renters have - you have no house then you have no wealth. It’s a myth, but let’s keep it that way!
Wouldn’t it be something if ’ssshrubery & Corp’se gets us into World War 3 because of Poland?
The same thing also occurred in Adolf’s 7th year of reign…
George Bush got us into World War II over Poland in 1939? I need to check this out on Wikipedia.
World War 3’s starting date is still T.B.A.
As somebody whose first love is history, I wish I could say, “you’re crazy to think that”. I sure wish I could.
Did you read Kevin Phillips’ “Bad Money” book yet? He covers in detail many of the topics which the troll brigade pilloried as tinfoil hat ramblings when we first aired them on this blog a couple of years ago.
Let’s change to a natural model of defense: throw the weak ones to the wolves first when the group is too weak to stomp them.
Be pretty funny if the muslims swarmed Europe just in time to speak Russian accented French.
Possible WWIII scenarios:
-Russia vs. US over Poland, Georgia
-US vs. Middle East over Israel
-US vs. China over Taiwan, North Korea, or oil
-US vs. US over stupid partisan crap, while the whole world jumps us.
You forgot the incident with our EP-3 spyplane and the mid air BUMP with the Chinese Mig that went down.
That was almost worth “Lighting Up the World” with nukes to the bush neo-cons and War Hawks
Please: that’s “a thousand points of light” in Bush 41 speak.
More like 1,000 cuts in the heart of Hemophilia
U.S. Mint dichotomy 101:
They still mint Nickels, which cost 8 cents each to manufacture, but have stopped making 1 oz Gold Eagles, which they have a locked in profit of 3% (around $25 a coin) each on, and could literally sell as many as they can mint, right now.
profit - An advantageous gain or return; benefit.
I would n’t sell Gold Eagles either.
“I would n’t sell Gold Eagles either.”
ROFL
The Mint: “Well, I’m certainly not going to give them away!”)
At the time of purchase, there is some limit to the premium dealers are willing to pay. If gold drops more than that amount between the time the mint buys the gold and gets it to the dealers then they will be operating at a loss.
Every bullion enterprise of size i’ve ever known hedges their position, and the U.S. Mint does as well.
And as the mint sets the rates for bullion coins they manufacture, it’s doubtful there will be any resistance to whatever premium they want to charge.
They’ve been selling to a select group of about a dozen master wholesalers for almost 30 years now…
I am finalizing my syllabus for an undergrad course on “Politics of International Economic Relations,” and want to add a week specifically on the housing bubble and collapse, focused on its origins and international effects. Any suggestions for good readings that cover the various explanations for the bubble and subsequent issues?
As background, the students will have done several weeks on currency movements, the formation and functioning of the IMF, previous intl financial crises (Latin America 1980s, East Asia, Turkey, Russia, Arghentina, etc), conditionality and debt relief, and debates over the future of Bretton Woods before we turn to the current crisis. I am especially interested in accesible readings that cover various explanations for the origins of the current crisis (Greenspan, “surplus asian savings,” current account imbalances, fiscal imprudence, etc) as well as analysis of the global implications.
If anyone can recommend any really good articles (30 - 50 pages or so) that sum all this up, I would be very appreciative. They will also be reading chapters from Kindelberger’s Panics and Manias and some reports from RGE that week.
Thanks!
Jer
The idea that there is a specific starting place (damn them!) and international “effects” (woe is us) because of it might be rethought as simplistic and economic-correctness-speak.
I guess I’m in the international grass roots mania camp as far as the housing bubble goes.
Being interested in teaching economic mechanics, it seems your interest/bias are toward finding economics issues that could well be important players, as examples for the students of how these economical things they have been learning interact internationally.
It has been awhile since I was in school. Do students understand the biases inherant in how the decisions concerning what is discussed or not discussed in a specific class are made? (I can’t really imagine I was.) Being econs themselves, they would perhaps naturally gravitate toward some plausible sounding cause and effect pattern that falls within the cool new stuff they have recently internalized in the economics area.
I suggest looking for something that includes the economic drivers you are most interested in, but doesn’t assume a priori that that is all there is involved here.
After all, one of the big economic drivers I expect you will find is models that worked too long making too much money but in the end turned out to be far too simple. Students of this mess shouldn’t be started off latching onto the first simple model that seems to match the experiments. Or we really will be doomed to repeat this mania in the next generation.
I teach international relations, not economics, but the class is usually about half plsc and half econ majors.
I like to present a variety of different viewpoints on the various topics (trade, finance, development). The econ majors get to read materials that may differ from the neo-classical ideas dominant in their department. The poli sci majors get to read materials that differ from the dependency/structuralist critiques so dominant in in the social sciences.
Any teacher has to deal with their own biases in presenting readings and ideas. I strive to include a spectrum of different ideas, acknowledge my own view as the not necessarily correct one, and let the students work out their own worldview based on their reading of different arguments.
I am constantly impressed at my studentss abilities to carefully evaluate various arguments and reach their own well thought out conclusions. In some cases, they know that they need to simply parrot a professor’s ideology in order to get a good grade, but I find that this is the exception, rather than the rule. It certainly is not true in any of my classes, nor most of my colleagues in the political science department. The worst departments in that regard seem to be Anthro and Soc (from the left) and econ (from the right).
“Any suggestions for good readings that cover the various explanations for the bubble and subsequent issues?”
BAD MONEY: RECKLESS FINANCE, FAILED POLITICS AND THE GLOBAL CRISIS OF AMERICAN CAPITALISM
By Kevin Phillips
This book is longer than 50 pages, but you could easily focus on chapters which are most relevant to your course.
yes, that is an excellent idea. I’m off to the library …
http://www.nytimes.com/2008/08/17/magazine/17pessimist-t.html?ref=business
A good article on Nouriel Roubini.
From the article:
For months Roubini has been arguing that the true cost of the housing crisis will not be a mere $300 billion — the amount allowed for by the housing legislation sponsored by Representative Barney Frank and Senator Christopher Dodd — but something between a trillion and a trillion and a half dollars. But most important, in Roubini’s opinion, is to realize that the problem is deeper than the housing crisis. “Reckless people have deluded themselves that this was a subprime crisis,” he told me. “But we have problems with credit-card debt, student-loan debt, auto loans, commercial real estate loans, home-equity loans, corporate debt and loans that financed leveraged buyouts.” All of these forms of debt, he argues, suffer from some or all of the same traits that first surfaced in the housing market: shoddy underwriting, securitization, negligence on the part of the credit-rating agencies and lax government oversight. “We have a subprime financial system,” he said, “not a subprime mortgage market.”
We no longer merely have a “San Diego style” recession.
County jobless rate reaches 13-year high
Experts blame bust in housing market
By Dean Calbreath
STAFF WRITER
August 16, 2008
Unemployment in San Diego County rose to its highest level in nearly 13 years last month, as job losses spread from construction firms and real estate brokerages into furniture stores and car lots.
Unemployment in the county jumped from 6.0 percent in June to 6.4 percent in July, the highest rate since October 1995. The county had 4,600 fewer salaried workers in July than in July 2007 – the fourth time in five months that the county had a year-to-year job loss.
San Diego County continues to perform better than the state as a whole, which had a 7.6 percent unadjusted unemployment rate, or 7.3 percent after adjusting for seasonal fluctuations. The county’s number is not seasonally adjusted.
“Things are really tipping fast and hard,” said Christopher Thornberg, co-founder of Beacon Economics in Los Angeles. “We already have higher unemployment rates than we did in the early 2000s, which means that the effect of the housing crisis has been worse than the tech bust.”
BTW, the number of unemployed San Diegans has nearly doubled at this point from 58,100 in December 2006 to its current level of 101,000. The last time the number unemployed exceeded 100,000 was June 1993, during a summer when the unemployment rate reached its cyclical peak above 8 percent, reflecting a smaller San Diego labor force (1.23m then versus a current level of 1.58m).
San Diego and other CA County employment data are publicly available here:
http://www.labormarketinfo.edd.ca.gov/?pageid=164
California county unemployment map
At 8.1 pct, LA County is toast.
That map is very telling. LA county stands out among all coastal counties.
I used to own an Olympic Gold Medal (1908 London Games, 18k Gold, not the Grisham’s Law junk they now give out) and it was awarded for “Pigeon Shooting”.
Hopefully no fowl play was involved…
Inbetween the size of a Half Dollar and Dollar coin.
In 1900 (Paris), they indeed did have a “live pigeon shooting” event.
According to my Olympics guide, it was won by Leon de Lunden of Belgium who successfully killed 21 birds.
It was never held again.
Ed McMahon got bailed out by The Donald. Apparently, the best insurance policy against your own stupidity is to become famous.
http://online.wsj.com/article/SB121884264285645877.html
For those of you wantabee F.O.F.I.’s (first out, first ins) wondering if your bank is gonna go tits up, there is still $39 Billion in the FDIC kitty, waiting for you @ a maximum of $100k per person.
This article thinks that energy stocks are a screaming buy right now. The article is a week old, so the stocks (and oil) are down even more. http://tinyurl.com/64n9rh
“It’s hard to find a sizable energy company that’s trading for more than 10 times next year’s estimated earnings. As the table below shows, the major oils — ExxonMobil (ticker: XOM), Chevron (CVX), BP (BP) and ConocoPhillips (COP) — now fetch five to seven times next year’s projected profits. The majors have rarely had such low price/earnings ratios.”
Here is an article, “The Endgame Nears For Fannie and Freddie”, http://tinyurl.com/6xr9vd
“It is growing increasingly likely that the Treasury will recapitalize Fannie and Freddie in the months ahead on the taxpayer’s dime, availing itself of powers granted it under the new housing bill signed into law last month. Such a move almost certainly would wipe out existing holders of the agencies’ common stock, with preferred shareholders and even holders of the two entities’ $19 billion of subordinated debt also suffering losses.”
I know a lot of people here are rooting for some big changes at fannie and freddie.
I found this illuminating- two excerpts and a link to the comprehensive article.
The Housing and Economic Recovery Act of 2008
An Analysis by Catherine Austin Fitts
With enough weaponry, it can keep going so long as the folks with the weapons want it that way. Dick Cheney gave us the heads-up when he said, “Deficits don’t matter.” We just have to use force to finance more economic waste. As we steal from the healthy to finance the unhealthy, there is more death—of people, healthy enterprises, communities, animal species, and our environment. The more we steal, the more dependent on stealing we become, which means the more we need to steal. The more that success at stealing (as opposed to productivity) defines the winners, the more people and organizations convert to stealing or to investing in those who do. It is the spiral down, not of markets but of life. It is, as one astute commentator on the environmental aspects described, “the death of birth.”
“Only one thing can cancel the day of reckoning, and that is a return to productivity—a reengineering of resources in households and communities; a revitalization of culture, education, and markets; a rebuilding of infrastructure; an integration of new technology and new process; and a shift away from warfare, centralization, financial fraud, and organized crime and those who lead and promote it.”
http://news.goldseek.com/GoldSeek/1218694140.php
Random thoughts:
On Democracy
“Congress is so immobilized we have to rely on the Fed — which operates mostly in secret, whose chair is appointed every four years but whose other governors have fourteen-year terms, and which doesn’t even depend on a congressional appropriation for its own funding but draws interest on the portfolio of Treasury securities it controls.” Robert Reich
on Markets
“Only a handful of 20th-century economists have even bothered to study financial panics. (The most notable example is probably the late economist Hyman Minksy, of whom Roubini is an avid reader.)”
NYT
on Banks
“A good third of the regional banks won’t make it” Nouriel Roubini
on corporate taxes
68% of all public traded companies paid no income tax, the only way to help is to give these companies a stimulus check.
International Economic Update
August 11, 2008
Challenging Times…
Weakening Growth
Global economic activity continues to expand, but at a slower pace (Chart 1). Sluggish growth in the advanced economies is expected to continue at least until the first half of 2009. The rapid growth in the emerging markets is likely to soften.
Chart 1: Growth Slowdown Is Expected
According to advance estimates released by the Bureau of Economic Analysis, U.S. real GDP growth was 1.9 percent in the second quarter of 2008. The contribution of net exports to U.S. growth was a robust 2.4 percent. In fact, net exports have partially offset the negative drag from private residential investment especially since 2007 (Chart 2), although this positive contribution could diminish as global growth slows.
Chart 2: U.S. Net exports contribution to growth compensates housing
For much of the past two decades, the U.S. has imported more than it has exported. After the 2001 recession, the widening trade deficit coincided with a period of low interest rates and a reallocation of expenditures toward residential investment (Chart 3). A misallocation of expenditures into residential investment might have contributed to excessive capital accumulation in the U.S. housing sector. The willingness of foreign investors to partly finance this spending may be the counterpart for the continued increase in the trade deficit, even after the dollar peaked around 2002.
Chart 3: U.S. residential investment and trade balance share of GDP
U.S. residential investment growth declined modestly in early 2004, but tumbled along with housing-price growth in late 2005 (Chart 4). The housing market correction has left a fraction of the U.S. installed capital underutilized, and now the country faces the prospect of a costly adjustment of its stock to other productive activities. The way we expect a hit to the domestic stock of capital to be propagated is not inconsistent (at least in theory) with a depreciation of the real exchange rate and a reversal of the trade deficit, as we have seen in the U.S., particularly since 2005. The U.S. trade deficit’s reversal might have somewhat cushioned the unwinding of expenditures out of the residential investment sector over the past 4–6 quarters.
Chart 4: U.S. Growth in housing prices, residential investment and GDP
Among developed nations, the U.S., U.K. and Spain are experiencing the sharpest housing corrections. Although housing-price growth peaked in the two European countries earlier than in the U.S., the crisis did not fully begin until after the first signs of strain in the U.S. housing market during 2005–06. Nonetheless, the experiences of the U.K. and Spain are quite different.
Similar to in the U.S., in Spain the deterioration of the trade deficit coincided with a period of low interest rates and a reallocation of expenditures toward residential investment (Chart 5). After the adoption of the euro in 1999, the trade deficit grew gradually as a share of GDP. When housing-price growth peaked in late 2003, residential investment growth became more stable and the trade deficit ballooned. The housing boom was then prolonged for too long, evidenced by the fact that residential investment did not respond to the signal of decelerating housing prices until late in 2006. Lacking the cushion of a trade deficit reversal, the decline in residential investment growth ended up leading the overall GDP growth decline by four quarters (Chart 6).
Chart 5: Spain - Residential investment and trade balance
Chart 6: Spain - Growth in housing prices, residential investment and GDP
Unlike in the U.S., the current phase of the business cycle in the U.K. is not characterized by a sizeable change in expenditures on residential investment (Chart 7). Hence, the recent housing slump in the U.K. is likely different in nature from that of the U.S. What we observe is that residential investment growth is quite responsive to housing-price growth, often anticipating it. Housing-price growth has remained elevated in the U.K. for quite a while but has been more volatile recently. In fact, while it reached its 10-year high in early 2003, its latest rebound peaked as late as 2007 (Chart 8). Residential investment growth, housing-price growth and overall GDP growth have been declining since then.
Chart 7: U.K. - Residential investment and trade balance share of GDP
Chart 8: U.K. - Growth in housing prices, residential investment and GDP
Rising Inflationary Pressures
Inflation rates keep rising around the world, and emerging economies are suffering the most (Map 1). Energy and food prices remain elevated, despite the recent drop in the price of oil. Emerging markets are particularly exposed to these price increases because food and energy expenditures make up a greater share of their consumption basket.
Map 1: Inflation rates May 2008 (year-over-year)
The gap between headline and core CPI has been increasing in the developed economies, with rising headline inflation rates and relatively subdued core rates (Chart 9).
Chart 9: Rising Headline inflation (OECD ex. Turkey)
The expectation that the global slowdown will bring inflation under control has yet to materialize. Several developments have contributed to the buildup of inflationary pressures. Among them:
* The prevalence of an implicit dollar-zone in parts of Asia and among commodity exporters may contribute to rising global inflation. Maintaining the zone has required monetary policy accommodation in the face of a commodity price shock and a weakening of the dollar.
* Wage indexation schemes around the world, even among countries with a free-floating exchange rate (the euro zone, for example), may contribute to second-round effects on wages from the commodity shocks and to rising labor costs.
* Signs suggest that the secular trend of decline in transportation costs may have stopped over the past years. The recent collapse of the Doha trade negotiations is also a missed opportunity to boost trade and reduce trade costs through lower tariffs.
A growing number of countries have tightened monetary policy, but capital controls, sterilization and manipulation of the reserve requirements (even price freezes, subsidies, tariffs and wage indexation) have been widely used as complementary tools to fight inflation. They are never foolproof; hence, some countries may be simply trading higher inflation for temporary exchange rate stability and/or growth.
Pressures on the exchange rate against the dollar and some signs of wage spirals in emerging markets are the consequences of growing inflation, which raises the risk of imported inflation for the U.S. Trade costs worsen the inflation outlook because they reduce foreign competition and give cover for domestic companies to raise their prices. If persistent enough, they may alter long-run production plans, reduce the benefits of offshoring and add to U.S. wage pressures. Second-round effects on U.S. wages cannot be discounted either….”
http://dallasfed.org/gmpi/update/2008/int0805.cfm
Aug 11
Corporation, n. An ingenious device for obtaining individual profit without individual responsibility.
Ambrose Bierce
Master; I marvel how the fishes live in the sea.
Why, as men do a-land: the great ones eat up the little ones.
Pericles
Too-big-to-fail, adj. An ingenious institutional design for privatizing profits during an economic expansion and socializing losses during the ensuing bust.
And the people said…
I have a great suggestion for how Fan and Fred can quickly achieve their affordable housing mission: Dump all those foreclosure homes in their possession on the market at fire sale prices.
COMMENT FROM breakingviews
The Accidental Landlords
Fannie, Freddie Portfolios
Of Foreclosed Homes Expand,
Adding to Cost Structure
August 15, 2008; Page C14
Add foreclosures to the woes besetting Fannie Mae and Freddie Mac. The number of houses in receivership is rising, and those held by the two mortgage companies have doubled in the past year. That is a bad omen for the market — and for the government-sponsored enterprises themselves, which must pay a bundle to maintain the houses they now effectively own.
Banks sent foreclosure notices to one in every 464 U.S. households last month, according to RealtyTrac. It reports that foreclosures rose 55% in July from a year earlier. That isn’t too surprising: Many of the low teaser-rate periods on subprime mortgages made in 2006 and the first half of 2007 have ended. Overstretched subprime borrowers, who have poor credit histories, have been faced with higher rates and falling home values.
…
In the first six months of the year, Fannie foreclosed on nearly twice as many properties as it sold. Fannie’s and Freddie’s expanding portfolios of repossessed houses are quickly becoming burdensome.
Analysts peg the cost of paying taxes, maintenance expenses and insurance at about 2% of the unpaid mortgage balance a month. That adds up fast. Fannie said the carrying value of the single-family properties it owns was $5.8 billion at the end of June. It typically buys loans that account for no more than 80% of the value of a house. If you lop another 10 percentage points off that to account for payments made before default it still would cost Fannie almost $1 billion a year to hold those properties.
In the short term, that may be preferable, for both the company and the market, to selling at fire-sale prices. But at some point the companies’ shareholders may tire of being inadvertent landlords.
A Bull on Energy, a Bear on nearly Everything Else: Barron’s interview with Interview with Eric Sprott, CEO, Sprott Asset Management
http://tinyurl.com/6h6c58
Just caught a bit on CNN called America’s Housing: Time to Buy? The expert was Christopher Mayor, Columbia Business School Professor, Real Estate. The CNN anchors threw out several scenarios and the expert gave his opinion on whether or not it was a good time to buy for each scenario. The scenarios included:
-If you’re looking for a foreclosure?
-If you’re looking to downsize?
-If you’re a first-time home buyer?
among others. The result? In each scenario I saw (I tuned in after the spot had started) the expert’s opinion was that is NOT a good time to buy.
Take THAT NAR!
Solar energy story for 2008:
We solared up about this time last year @ a cost of $250 a month (fixed rate HELOC loan) and the bills have been coming in at around a Dollar, so our yearly cost is around $3012.00.
So far this year, January through July, we have used just under $2300.00 worth of electricity, according to the electric company.
I’d guess our savings by converting to solar, will be around $1000.00 this year.
It’s a Win-Win. Good for the environment and wallet.
You are not only doing yourself a favor by going solar, you are doing me a favor as well. The less juice you draw from the grid the more juice left for me.
I just can’t get enough of Humboldt Housing Madness. It has now touched the rental market. For $3000 a month you get in:
Sacramento rental (http://tinyurl.com/6jhm7f)
Luxurious home with 5 bedrooms, 3.5 baths, 3 car garage on 1/2 acre lot. Grand entry with custom marble and granite checkerboard flooring, formal living room with soaring ceiling, and separate dining room.
Arcata (http://tinyurl.com/5ln2q9)
5 bedrooms, 2 bathrooms, carpet/vinyl laminate flooring, blinds/curtains, stove, refrigerator, washer/dryer included.
In Santa Cruz for $3200 (http://tinyurl.com/5gshyj)
Beautiful 4 bedroom, 2 bath home for rent in small coastal town of Davenport. Perfect student rental just 10 minutes (9 miles) north of Santa Cruz and UCSC.
So, Arcata is now more expensive than Santa Cruz… Whoa!