Bits Bucket For August 21, 2008
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The Great Consumer Crash of 2009
* by James Quinn
* August 19, 2008
James Quinn is senior director of strategic planning, the Wharton School, University of Pennsylvania.
“It is easy to ignore the storm if you look at the opposite horizon. When the storm reaches your location there can be no more ignorance.”
I hate to tell you, but the storm has reached your location and it is a Category 5 hurricane. The levees are leaking. Ignore it at your own peril. The 6,000 sq ft McMansion buying, BMW leasing, $5 Starbucks latte drinking, granite countertop upgrading, home equity borrowing days are coming to an end. The American consumer will not go without a fight. For the last seven years the American consumer has carried the weight of the world on its shoulders. This has been a heavy burden, but when you take steroids it doesn’t seem so heavy. The steroid of choice for the American consumer has been debt. We have utilized home equity loans, cash out refinancing, credit card debt, and auto loans to live above our means. It has been a fun ride, but the ride is over. We can’t get steroids from our dealer (banks) anymore.
How Did I Get Here
And you may find yourself behind the wheel of a large automobile
And you may find yourself in a beautiful house, with a beautiful wife
And you may ask yourself-Well…How did I get here?
And you may ask yourself
Where is that large automobile?
And you may tell yourself
This is not my beautiful house!
And you may tell yourself
This is not my beautiful wife!
- Talking Heads, David Byrne lyrics to Once in a Lifetime
http://www.prudentbear.com/index.php/commentary/guestcommentary?art_id=10098
The graph with GDP with and without MEW was quite telling:
http://tinyurl.com/5p4tmy
MEW added nominally to growth prior to 2000. Since 2000, there would have been virtually no growth without MEW. We’ve added massively to debt to maintain the illusion of a functioning economy. What happens when the debt crutch is taken away? GD II?
By that graph one might think that the decider inherited an already kaput/burnt out economy.
Mind you, that’s not to defend him - but I’ve always cringed when folks tell me the 1990s were so perfect. Because the truth is, if one cared to look, the damage was already well underway.
“Mind you, that’s not to defend him - but I’ve always cringed when folks tell me the 1990s were so perfect. Because the truth is, if one cared to look, the damage was already well underway.”
Debt has grown steadily since the early 80’s. An exception during this period was in the mid to late 90’s when expansion of Federal debt slowed, then briefly declined, only to explode under the current administration.
As for private debt, the days of borrowing to cover stagnant wages are ending. There is going to be great pain for many.
“An exception during this period was in the mid to late 90’s when expansion of Federal debt slowed, then briefly declined,”
I believe that was due to the artificial gain in tax revenues caused by the Tech Bubble. Please don’t give any person credit for that drop in the deficit. It was just the by-product of another financial mania brought on by loose monetary policy.
It was due to two things actually -
- The tech bubble as you say (inordinate tax revenue gains)
- Significant reductions in military spending
Both of those went bye-bye coincidentally nearly simultaneously in 2000/2001 due to unrelated events.
- Tech bubble popped - well, because it was a bubble that was due to pop.
- Military spending, plus homeland security increased significantly in part due to new administration but more just due to 9/11.
comment from the other side of the pond: the debt economy in my country started around 1990, clearly as a result of government efforts to remodel the Dutch economy after the ’successfull’ US debt-based model.
Within about ten years, the Dutch changed from a nation of savers to a nation of debtors, with all the fun like a spending binge and skyhigh homeprices that goes with that. Our housing bubble started just a few years after Easy Al got behind the wheel (late eighties around the financial capital Amsterdam, early nineties in most other areas). Some other EU countries followed suit in the early nineties, when easy credit became the solution to every problem.
perks for renters in manhattan
woo hoo
http://www.amny.com/am-rent0821,0,2890841.story
nhz:
I sometimes ask on here, how many people do you know that could come up with $5,000 tomorrow(not too many), but how many Dutchmen do you know, that could come up with 5,000 Euros tomorrow?
aladinsane: the average Dutchman has about 60.000 euros in cash (on a savings account). But it is clear that this money is not evenly distributed among the citizens, as the Netherlands also has a huge personal debt load (even higher than the US).
Quite some people have taken out a maximum mortgage without needing it (say for 1 million euros) and parked the money in a savings account for a riskfree annual gain of 2% or so, thanks to the tax office (because of our 50% HMD). And I know many, many people who depend on such tricks and (second) home appreciation for their current lifestyle.
But I guess a significant chunk of the Dutchies (20% maybe?) can still come up with 5000 euros tomorrow; that will change for sure when our bubble pops.
The mother of all bubbles has yet to pop. It’s the standard of living bubble. That one is going to be a lot more painful than the .com or real estate bubble. Gonna get interesting when folks will have to downgrade from a BMW to public transportation and from Whole Foods to dog food. The rest of the world will be snickering as gluttonous Americans get their’s.
the rest of the world … also has a severe standard of living and debts bubble (and an even bigger entitlement bubble, certainly in Europe).
How do you think the E.U. will hold up in the face of this? How much patience will the north have with the south - and vice versa?
Europe will not hold up forever, but I have no idea when the final day of reckoning will come. The recent 10% plunge in euro (after desperate request from southern euro countries for special condition from the ECB, although there were some other factors) is a warning shot. I wouldn’t be surprised to see the euro desintegrate within 1-2 years. The ECB does not have the balls to maintaint a sound monetary policy, we are going down the inflation route just like the US (even though some northern euro countries are officially against easy money policies).
The south has severe problems with their national debt/budget, the north (except Germany) has severe problems with personal debt loads and housing bubbles that are even worse than the US. The only easy ’solution’ for both these problems is inflation, so inflation it will be. The remaining wars will be within countries, between debtors and savers, between workers and renters/people on social security benefits etc.
That mirrors what we’ve heard from our extended family in Austria. Europe is facing some monstrous challenges and the it sounds if the people are much closer to wit’s end than most Americans realize.
Tell that to the people of Malawi, Chad, and Bangladesh.
I would rather be here, than most other parts of the world except europe. The US by far still has some pretty decent manufacturing and production facilites, that needles to say, need to get dusted off, but we can become great again.
With that said, for far too long we have been punting the problems that got us here, and it is time to pay the piper, and get the pitchforks and oil lamps ready. It is time to take back our country, and make it great, instead of waiting for the roof to cave in, but that is just my thinking…..
“The US by far still has some pretty decent manufacturing and production facilites, that needles to say, need to get dusted off, but we can become great again.”
They got dusted off, just before being loaded onto a slow boat to China…
The US is still the world’s largest manufacturer by a pretty sizeable margin.
Bluto, In dollar volume, by weight? What is the unit? And how much of that is passenger auto?
Now I’m going to struggle w/my source but just last week one television news source (Probably ABC nightly news) was reporting that China had 16% of world marketshare in manufacturing and the US had 15%. The report went on to say that by 2012 the Chinese would be responsible for 40%.
On a related note, Bloomberg is reporting that China has replaced the US as Japan’s largest exporter.
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=alNAZJHgTmp8
Aug. 21 (Bloomberg) — Japan’s exports rebounded in July as China replaced the U.S. as the nation’s largest customer.
Shipments overseas rose 8.1 percent from a year earlier, after declining for the first time since 2003 in June, the Finance Ministry said today in Tokyo. Exports to China climbed 16.8 percent and shipments to the U.S. slumped 11.5 percent.
Bluto,
According to this article, China will surpass the US in value added manufacturing output by next year.
From the article:
“China will account for 17% of the world’s manufacturing value-added output next year, versus the United States’ 16%, the FT reported”
I’m not sure how this is all measured, but if it is strictly in dollars, the gap could be even bigger.
This is in responce exeter`s question. I believe it`s in dollar value. ie, one ship container of woopy cushions cost less than a fuel control for a jet engine that you could put in a shoe box. At least on a c-130 it about $30,000.
Lane
We still have pretty good farmland, ie. we can provide enough food not to go hungry and will still have sufficient resouces to keep the lights on. That’s better than most parts of the world, I would agree. The problem is that we are very slow to adjust as compared to many other places. In Europe they’re actually doing something about the energy crisis. In the US we blame speculators, oil companies, evil dictators, hurricanes, terrorists and the Easter bunny for our problems.
The credit binge and “My McMansion is bigger than your McMansion” craze is coming to an end. We will be forced to live within our means which is an entirely novel concept for the vast majority of us.
As far as the rest of the world is concerned, some will fare better than others, of course. Russia, Europe and South America will do better than India or China I would think. A high population density, high pollution and a lack of natural resources will prove to be a huge burden.
Europe has technology and good infrastucture, that might be enough to somewhat dampen their fall.
One of the 1st things i’d encourage people to do, would be an updated version of the Victory Gardens of World War 2.
It’s a win-win, as it gets people outdoors again and unlike a video game where you can just hit the replay button if things aren’t going your way, folks will learn about perseverance, and many for the first time will experience the tastes of their own labor.
I agree lad. Gardening is a good way to supplement the income. The wife and I had pickles with dinner last night which came out of the garden and she made. Those are some good pickles.
Stuff tastes better fresh. Meat too. If you’ve never had meat from an animal you raised and slaughtered you’re missing out (unless your a vegetarian, in which case I guess it don’t matter).
I suspect this would be one of the major drawbacks of living in a large city. Around here even if you don’t grow your own, there are places you can go to get food picked fresh and ripe that day or week. And its usually inexpensive.
They better take up Square Foot Gardening, as a square foot is just about all the lawn space they have in those packed neighborhoods. And condo owners — well, better stock up on container pots.
I’m afraid gardening (for food) is not really an option in most of Old Europe, because of the small lot sizes and often heavily contaminated soil in/near cities.
On the other side, I doubt how well the big agri companies will be doing in the US when global warming and peak oil sets in. Their farming procedures (heavy use of energy/fertilizer/pesticide/water/genetic engineering etc.) will be out of date pretty soon.
Locally grown produce keyword= Inexpensive, but hey….. everyone can get rich “farming” even though the clueless sloths who think farming is a great idea couldn’t repair a bailer if I gave them an instruction manual and 6 months to fix it.
I suspect this would be one of the major drawbacks of living in a large city.
In a Midwestern city, you’re surrounded by farms — and farmers get premium prices by trekking to the city. If one is willing, locally sourced organic vegetables, meat and dairy are available most of the year, ’cause that’s where the margins are for small farmers.
(That said, I wish I had room for a garden. There’s nothing like growing your own tomatoes.)
ET-good news for tomato lovers. You can grow them in an 18″ pot on the deck! My in-laws enjoy lovely tomatoes grown that way. A good friend in MA grew them in pots along her walkway in a yard that was about 30×15. She grew some wonderful herbs too. Her fresh hot peppers are dangerous!
Carrie Ann, I’ve grown tomatoes that way in the past with some success.
In my current place, however, my back deck doesn’t get enough sun. I have a large glassed-in sunroom in front, but my three cats hang out there, and they tend to destroy any plants that aren’t succulents (with the exception of rosemary, for some reason).
“…The report went on to say that by 2012 the Chinese would be responsible for 40%”
Ha, that means China will not have any more pollution problems right? …Right?
The Chinese Gov’t is very concern about the toxicity of it’s 1 Billion peoples…in fact, their health & well being is of #1 concern…can you imagine the problems they would have with their Gov’t “social security system” …if everyone started living until they were 93 years old?
My guess is that in 25 years…China goes with the “Soylent Green Tea” solution.
good news for tomato lovers. You can grow them in an 18″ pot on the deck!
I’ve grown them in 5-gallon buckets outside. It works well regardless of how much land you have, just because you don’t really have to worry much about weeding. Don’t know if that would work for city dwellers or not (maybe also on a deck or something)
The place I buy wine making supplies from also sells hydroponic equipment which they ostensibly sell for use for growing vegetables. I’m sure they have other purposes, but that aside, the guy I talk to in there seems to like it for the vegetables. The other day I was in there he had some kind of greens (I don’t remember now if it was lettuce or what) with his lunch which he grew.
I don’t know how the energy costs (and whatever else is required, like plant food) compare to the costs of buying, but it might be a neat way to get fresh veggies and you get the benefit of having plants indoors, which can help make the air fresher.
Cold roll steel mill in Cleveland was sold for 10 cents on the dollar and got shipped lock stock and barrel to central China about 8 to 10 years ago; you’ll need to brush up on your Mandarin to get permission to dust that baby off.
Kaiser Steel in Fontana, CA was shipped piece by piece also.
China has dormant/mothballed capacity for steel and aluminium equal to our active output. Saudi Arabia is building the largest smelter in the world.
In China vertical integration literally follows the map. The entire production process for garments actually start at the top of a road and runs step by step from one town to the next, ending at a seaside port.
In the US parts zig zag from all over to make a widget. Great when diesel is cheap. Not so much benefit when the parts for a GM car travel more miles than the warranty of the finished product.
Ford’s River Rouge plant is a shadow of its’ former self. Dusting off depends heavily on trucks using imported diesel hauling products from one favored tax haven to the next. Don’t even get me started on the defense industry. They are forced to make parts for one product in every single congressional district.
There is another bubble associated with this: the expectation of our nation’s young people that you can get something for nothing. I have seen too many college students and young professionals who have no concept of saving, cannot handle delayed gratification, are overconcerned about prestige and status, or have no concept of the meaning of an honest day’s labor.
This comes from bubble-era parents who gave them everything they have ever wanted, and “protected” them from any hardship whatsoever. These folks are in for a hard landing.
I am always floored when I see reasonably intelligent people who have no concept of money. They just buy what they want when they want it. $200 dinner? No problem. $500K house, new luxury car, designer clothing, big vacations, etc.
Then I find out that those people making less money than I do. WTF? They have to be in debt up to their eyeballs with no hope of ever paying back the money they owe. If they get sick or loose their job, game over. They don’t have a penny saved for retirment. For them long term financial planning doesn’t extend past the next paycheck.
I was rather meekly hit up for money by an ex-middle class homeless type, in the Central Valley last week.
I knew he was new to the game, as hardcore homeless people have deep tans that make them look more like Angelo Mozilo, than the pasty white look of Casper the friendly ghost.
As one of these young people you are referring to, I completely agree with you. I would say over 50% of my friends are financially incompetent, and most of them are college-educated. Fortunately, I was either intelligent enough or had enough common sense to realize that spending 100% of my paycheck was incredibly stupid. I save anywhere between 25-50% of my paychecks, rent a house with three others when I could afford to live by myself if I wanted to, never go out to eat…etc. I wish I could say the same about my peers, but the savers of this group are few and far between.
Is it really painful to switch from Starbucks coffee to McDonalds? Or from buying a new car every 2 years to every 5 years?
Maybe painful for people who’s “jobs” rely on people buying cars every 2 years…?
I guess my New Years prediction that who even gets sworn in on Jan 20,2009 would have wished they didn’t win. Unfortunately might come true
And then the big question comes up–do they continue the policies of yesteryear which brought us to this place? Do they make the tough sacrifices needed to get the US back on level ground? It may mean a 4 year term…
And that goes for the new Congress as well.
Sadly we have two seriously pathetic choices running. No matter who gets in they will spend their term blaming the previous administration. Wash,rinse,repeat…
And don’t forget the 535 scumbags on Capitol Hill whose approval rating is approaching single digits (lowest EVER), and who have passed fewer bills to this point than any other recent Congress.
Harry Reid? Nancy Pelosi? I feel the need to barf.
I’ll take a lifetime of Harry Reid and Nancy Pelosi and their pinko commie friends over another 4 years of George W. Bush any day of the week.
Worst. Administration. Ever. He almost singlehandedly brought this country from world power to third world debtor nation in only 8 years…
Both of them are party hacks that nobody would have ever dreamed of being leaders, as there isn’t much there, is there?
Combined with the Pachyderm party’s “ALL -IN” position, in jackbooted lockstep with our leader, hoping that a pair of 2’s never lose…
The House of Reps passes plenty of bills. Then the bills are killed in the Senate by a small group (15-20?) of minority party Senators who effectively fillibuster every single bill with the sole intent of disrupting legislation. Reid just doesn’t have enough D votes to get anything through, and the Bush Republicans is too polarized to compromise.
This is what Pelosi told the PBS News Hour in an interview.
I can’t remember if it was Ron Paul or Ross Perot that said we have the government we deserve.
Having watched both of those men ridiculed for daring to speak the truth, I think it is true.
“Sadly we have two seriously pathetic choices running. No matter who gets in they will spend their term blaming the previous administration. Wash,rinse,repeat…”
They could always remind the American people that collectively a lot of poor decisions have been made in the past 25 to 30 years and explain that things are going to have to be done very differently in the future. That typically isn’t a recipe for electoral success.
We have seriously pathetic choices running because our modern criteria for choosing a president involves mostly who is more photogenic, “experienced” (i.e. career politicians), their religion, their sexual history, their ability to fundraise, etc.
None of these things has anything to do with economic stewardship, honesty, or administrative skills.
And it will stay that way as long as we assume that the best way to fund our government officials is through private donations.
Jon,
You cannot stop private citizens or organizations from advertising for themselves or others without violating free speech.
Further more, the alternative is to TAX (rob) me to support candidates running.
The problem is not a money problem (Ron Paul had more money than any one else) the problem is the mass media cartel owned and operated by big business/banks. It is this media that prevents open discussion and quality choices.
“Further more, the alternative is to TAX (rob) me to support candidates running.”
How many federal legislative races could be funded by one bridge to nowhere?
“…they will spend their term blaming the previous administration”
Cheney-Shrub = The most innovative & dynamic political administration in the entire history of America. Never have so many citizens been uplifted into prosperity while simultaneously having our Nation fighting in x2 wars that threaten the very existence of the greatest military in the history of mankind. Transforming Islamic Nations into Democratic States in the span of 7 years, the single greatest achievement in at least 2,000 years.
Hey Condi, you have just 3 months for that eternal “Middle East Peace” agreement…let’s get ‘er done.
A storm victim’s plight is document in this headline SD Union-Tribune story:
Homeowners left in the lurch
As property values drop, lenders cut home-equity loans
By Emmet Pierce
STAFF WRITER
August 21, 2008
When he took out a $206,000 home-equity line of credit in 2007, Kevin Hall thought he’d secured all the funding he’d ever need for a major remodeling project at his Carlsbad home.
That’s why his heart skipped a beat when he went online in February to transfer money from his account. He discovered that his credit line had been slashed to $72,000. Formal notification wouldn’t arrive in the mail for several weeks.
“I got sucker-punched on the thing,” said Hall, who manages a ReMax real estate office in La Jolla. “I was at the point in construction where the drywall was going up. I was flabbergasted.”
Deep into his project, which included kitchen remodeling, landscaping and the construction of a granny flat, Hall contacted his lender to find out if there had been a mistake. There hadn’t.
Like thousands of borrowers, Hall was a victim of falling real estate values. In Washington Mutual’s judgment, the home equity used to secure the credit line had significantly declined. And under the terms of the agreement, the bank had the right to pull the plug.
It is pretty stunning, really. And I still run into people who don’t see anything wrong with all of this giant pyramid of debt.
Some of these same people will treat the inevitable nasty hangover in the aftermath to the debt binge as a black swan that randomly dropped out of the sky with no explanation whatever.
Old Worry: Black Helicopters
New Worry: Black Swans
A good summary of a ridiculous era.
RE: The Great Consumer Crash of 2009
3 years ago I returned to my hometown in Mazzland to take care of a couple of aging parents, who have resided at the same address in a small northshore town for 50 years.
The town is a true liberal NIMBY paradise and not a whole lot has changed over those 50 years.
The other night my 85YO mother asked me what I was going to do for dinner.
So, I tell her, “I’m goin’ down to the “Riverview’, which is the local pizzeria & beer joint which has been in business since time began.
So she says-Where is the “Riverview”?
To which I respond, just where it’s always been for the last 50 years.”
Just goes to show you how many times my Depression-era folks were accommodative to our family of 6 casually dining out.
The practice wasn’t even on the radar.
I don’t recall a lot of casual dining out when I was growing up. And it wasn’t just in the frugal Slim household. There weren’t a lot of diner-outers among our friends and neighbors.
It was a rare treat to go to McDonald’s when I was a kid.
When McDonald’s opened up near us, I got a job there. One day, I invited my mother and a neighbor to come to lunch. The neighbor ordered a hamburger, then sampled it. Her opinion? “You can make ‘em better at home.”
BTW, it was at McDonald’s when I first made the connection between food and health. I was a pretty healthy kid before I started there, but after a few months of that food, oh, brother, did I have some problems.
The manager fired me after about six months, and, in retrospect, that was a big favor. It didn’t take long for my health issues to clear up, and to this day, I avoid fast food in general, and McDonald’s in particular.
Me too Skip. For the five of us kids, the rare treat was McDonalds.
When I was a kid in the 60’s I lived the little rural town of San Clemente, CA. The nearest McDonalds was in Carlsbad. Dad used to drive us down there about every Sunday - it was quite the treat.
Even the sometimes lonely drive down the 2 lane along the beach was nice.
The same. It is worse now with my wife having grown up in the Philippines. A $25 dollar dinner is still 1125 PHP (Philippine pesos) to her (that is: almost 4 days pay for a carpenter). Plus she is small and doesn’t eat much so the value equation is even farther skewed.
When we’ve spent $30 total on eating out it’s been at a Chinese buffet where by-the-pound takeout lasts 6 meals.
At least I don’t have to drive wistfully by my favorite steak house otw to the grocery store anymore
“…We can’t get steroids from our dealer (banks) anymore.”
Read my lips: “Reverse mortgages”
same hook, same line, same sinker…same one’s holding the pole…different bait…different location on the pond.
“Reverse mortgages”
My 91 y/o grams received a postcard for a reverse. Promised the world (on a little postcard).
She read it to me over the telephone yesterday, and asked me what she should do with it - It sounded so important.
In the shredder grams. And if ya get any letters of promise, do the same.
I’m angered that these slick promo’s are out there targeting our grams.
Grrr…
Leigh
Escrow = 36 pages of …signatures & initials
Reverse Mortgage = “just sign here..see, isn’t that easy?”
Dunno. To me it seems that reverse mortgages are about spending the kids inheritance inefficiently.
Something I really don’t begrudge my mother. I just hope the lender doesn’t go bankrupt on her before she stops enjoying the spending money.
I’d have more sympathy for my broke 45yo brother’s inheritance, if he wasn’t back living at home eating my mother’s reverse mortgage money.
“James Quinn is senior director of strategic planning, the Wharton School, University of Pennsylvania.”
These economists from these prestige univerisites
have absolutely NO CREDITABILITY. Where were they in 2005 and 2006, taking on the FED and Greensapan with research that said we were in big trouble. Monday morning quarterbacks that should be mocked instead of promoted
This is what we all waited for…let see how many of those cheaply thrown together newly built homes & kondozes could stand up to this amount of rain, or flooding
or Have i got a mold problem for you.
——————————————-
Fay could dump 30 inches of rain in some areas of Florida and the National Weather Service said nearly 25 inches had already fallen near Melbourne, just south of Cape Canaveral on the state’s central Atlantic coast.
As Fay gallivants around Flatlantis, spreading floods in it’s wake, it might be the only out for upside-down insured homeowners…
Have any citizens been spied @ prayer vigils, calling on a higher power not to spare them?
I’m not sure how that works, exactly. I think you just about have to rebuild or repair, although I’ve heard in a few cases about people settling with the insurance company, plowing under the building and selling off the lot.
Anyone know how this works?
Most, if not all, policies in FL are written to cover an amount enough for “rebuild cost”, which as you know is nowhere near what market price is, and even less then most mortgages. So the scenario you are describing might be valid for some outright owners without mortgage.
True story: Last month, I was in Mississippi, doing a week of post-Katrina reconstruction. One evening, I met a lady who had been living in Pascagoula. This town was heavily damaged by the storm, and this lady and her husband lost e-v-e-r-y-t-h-i-n-g.
Know what the homeowner’s insurance settlement check on their total-loss house was? It was $6,060.
Pascagoula - isn’t there where Trent Lott lost his house? You know when State Farm is willing and able to screw over a senior Republican Senate leader they would not hesitate to screw over anyone less powerful.
Pascagoula is indeed where Trent Lott lost his house. And he did all of the right things — building the house on stilts, etc.
But, sorry to say, when that storm surge came ashore, goodbye Trent’s house. And just about everyone else’s. You can walk right across slabs where the houses were, and that’s all there is. For many miles in either direction.
Wouldn’t that damage be filed under “flood” insurance since it wasn’t a hurricane? How many are covered by “flood” insurance?
I seem to remember that the insurance companies were using semantics to get out from under the coverage from flooding of NO from the levee’s breaking although I can’t remember the exact circumstances or how it worked out for them? Anyone with any info in this area?
“I seem to remember that the insurance companies were using semantics to get out from under the coverage from flooding of NO from the levee’s breaking although I can’t remember the exact circumstances or how it worked out for them? Anyone with any info in this area?”
This was problematic for people in storm surge areas, especially the Mississippi coast, where both wind and flood (storm surge) damage occurred. The owner could be covered for both, but the coverages and deductibles are different. Insurance companies mostly wanted the damage to be considered flood-related rather than wind-related because coverage for flood policies was typically less and deductibles higher.
When you’ve got a total loss with both types of damage and you don’t know which occurred first and to what degree, I’m not sure how you determine how much of the total damage is covered by each type of policy.
“…the insurance companies were using semantics” lol
Socrates argued that the wind & water damage inferred a hurricane had past by.
Insurance companies & language…now there’s a perfect example of american kids exercising their creative writing skills to the benefit of our fellow citizens.
Same thing happened in MS, Greg.
My comment (see above) about the lady in Pascagoula was a case of an insurance company wiggling out of coverage because they *claimed* the house was damaged by flooding. My comment (to her): “Hello, those floodwaters were being pushed by 125 mph winds.”
I’m typing this from the Emergency Operations Center just North of Melbourne. Large number of neighborhoods underwater. Alligators and snakes in front yards. Nobody has flood insurance. Gonna be a learning experience for many out of staters buying in paradise.
Whoh. Thanks for the first-hand information.
I guess we weren’t kidding about being underwater and feeding alligators.
Keep yourself safe.
I’m writing from Jupiter Island and make just one prediction: fraud.
RE: Alligators and snakes in front yards.
When I was doin’ some FEMA disaster inspections back after Ivan in the Niceville/Cedarview, FL area, the alligator and snakes stories left me gaping!
No native Floridian will ever have to worry about this Northern weenie headin’ south to dilute the social mix.
Ha Ha hd,
I was there for Ivan. That was one mean storm.
Ivan formed on 9/2/04 hit the gulf, ran up into the Atlantic and reformed, looped back into the gulf to hit Louisiana on 9/23/04 as a tropical depression.
One of the reasons we left FL - to many hurricanes.
We lost some fruit trees and two roofs.
The insurance covered our loses.
Leigh
I could have sworn that the 1926 real estate Bubble in Florida was finished off by a hurricane as well.
Fay seems the perfect “solution” to the state: not enough destruction (wind, etc.) to get out of hand, but an even spreading of flooding all over to make a total mess of the houses in the area. The foreclosures = mold pits, and the slapped together McMansions built by illegals = new foreclosures on their way to being falling apart piles of stucco and mold.
“Mission Accomplished!”
Fannie and Freddie goin’ down.
http://finance.comcast.net/www/news.html?x=http://www.origin.comcast.akadns.net/data/news/2008/08/20/1039492.xml
The information cascade over the fate of GSEs is deafening.
RE: The information cascade over the fate of GSEs is deafening.
Only 4 weeks left for the grasshopper’s to summer fiddle.
Go read the Stone Soup comic strip for the past week.
Ah, the days of August! Not a care in the world.
Gonna be interestin’ where we’ll be come Halloween.
The bad news is incredible-and that’s notwithstanding what’s being swept under the rug!
Real estate loans bring two indictments
http://www.startribune.com/business/27207099.html?elr=KArks:DCiU1OiP:DiiUiD3aPc:_Yyc:aUU
Krahnke manipulated the bank’s loan approval processes to fund the loans, yielding more than $724,000 for Striker personally at the closings, the indictment says.
I wonder how long it will take to capture some big dogs from the major banks.
It took years to bring the enron miscreants to justice, and on the surface their version of fraud seems easier to explain than the shenanigans currently in vogue.
“…yielding more than $724,000 for Striker personally at the closings”
“Community service & a $2,500 fine?…or…Felony & orange jump suit?”
Setting up house:
In most affordability calculations, only the principal, interest, taxes, and insurance are discussed. However, maintenance, furnishing, landscaping, and utilities are not. Would it be useful for banks to include these calculations in determining loan eligibility? This should also include potential income boosters such as renting and energy saving technologies.
I continue to assert that the only calculation that really matters is LTV. The recalcitrance of the banks in the face of a good deal of govt pressure to do workouts does mean that home buyers of the near future will know foreclosure is a real possibility. (This is good.) Thus, I believe it will be safe to count on the buyer to know whether the house is affordable or not…but he MUST be taken for a large down payment.
Let’s see how much flak I catch for this assertion.
I agree with you, but think LTV is possibly not as important as debt to income. I think FICO is vastly overrated…the alt-A and prime borrowers who are defaulting were “predicted” by their FICO scores to be safe bets, but they will walk away just like the subprimers.
Mortgage lending risks will have to be recalculated in a whole new way once this debacle is over. Relying on FICO as the primary criterion is stupid, particularly since FICO can be ruined by relatively minor issues or inaccuracies in reporting.
I would bet that lenders understand your last point very well and revel in it. The “late pay” at Blockbuster for an overdue movie allows them an extra .25 point on a 30-year loan - a killing, in other words. Insurers love the odd 33 MPH speeding ticket in a 30-mile zone for the same reasons - premiums go up disproportionate to the actual risk increase.
AZ Lender is right. Substantial downpayment virtually eliminates lender risk, as the borrower will fight to the death to keep the house, and, if he fails, the downpayment equity covers the lender’s foreclosure costs, allowing loan capital to be repaid in full.
Trust and FB to “know” what affordable? Not me. Rather than look into and FB’s eyes to find his soul, it’s better to look in his checking account to find his down payment.
I don’t know about furnishings or landscaping, but HOA fees really should figure in, as should PITI before the mortgage tax deduction.
Well, it’s for sure that an “FB” is someone who did NOT know what was affordable. However, my few dozen B’s, none of whom is F, appear to have known what monthly payment they could regularly make. Of course I have to repeat that I don’t do ARMs, I/O, neg-am or any of that stuff.
Update on the current problem B (skipped Jul payment, made Aug on time). I told them they could either make up the missed payment by year-end or else suffer an increase in the reg monthly amt (to keep the maturity date just where it was before). Stay tuned.
Anyone have any opinions/input regarding the “Pentagon Federal Credit Union”?
Oops. One missed payment is seriously F-ed. It means they’re living paycheck to paycheck.
Global view of the BUBBLE, Chapter VII
Japan Developers’ Woes Grow
TOKYO — Japan has seen a raft of property developers go to the wall this year as banks have refused to refinance their loans. Analysts say the bankruptcy filings are likely to set off a vicious cycle that will weigh on the sector’s shares in the coming months.
The reason: Real-estate firms that have run into financial difficulty are selling off assets at fire-sale prices, which will put the value of properties under strain.
So far this year, 8,916 companies have filed for bankruptcy in Japan, a third of which were in construction or real estate, according to data compiler Tokyo Shoko Research Ltd. Big blowups include real-estate management firm Reicof and condominium developer Suruga. Just last week, Urban Corp., a Hiroshima-based condominium developer and sales agent, filed for bankruptcy.
Banks are likely to clamp down even harder on lending to property firms, and loans granted are likely to be on more onerous terms, potentially resulting in more bankruptcies. Recent earnings reports from Japanese banks have shown a sharp increase in bad debts amid an economic downturn.
http://online.wsj.com/article/SB121925009806256941.html?mod=hps_us_inside_today
Wow, it was right around the time of my last visit there (in the spring of 2006) that they reported the first modest increase in real estate prices since the big crash. And now two short years later they’re already on the way back down!
I’ll be there later this fall, it’ll be interesting to see how things feel now - the economic news from Japan this summer is souring quickly.
yes, looks like a dead cat bounce. Keep in mind that RE is still very expensive in the big Japanese cities, so there is still plenty of downside risk.
I am currently in Japan and it is insane, the population is shrinking, and they dont have very lax immigration rules to off set it. Yet every where i looked in osaka and nagoya I saw houses and condo buildings going up, I would think that housing for a country with with an aging population would be going down. It doesnt
And there is a nasty amount of corruption on all levels, i am surprised banks wouldnt refinance, hell they have done so this far.
The new age of authoritarianism
http://www.ft.com/cms/s/0/a4447236-67aa-11dd-8d3b-0000779fd18c.html?nclick_check=1
Yet today, in much of the world, the spread of freedom is being checked by an authoritarian revanche. That shift has been most obvious in the petro-states, where oil is casting its usual curse. From Latin America to Africa to the Middle East, the black-gold bonanza has given authoritarian regimes the currency to buy off or to repress their subjects. In Russia, oil has fuelled an economic boom that prime minister Vladimir Putin, and some of his foreign admirers, mistakenly attribute to his careful demolition of the chaotic democracy of the 1990s.
The Russians in Georgia is just another example of how our insatiable oil appetite promotes war. Iraq and Georgia are just two examples of the war for oil.
Russia and Georgia: All About Oil
http://www.fpif.org/fpiftxt/5462
All of this, needless to say, was viewed in Moscow with immense resentment. Not only was the United States helping to create a new security risk on its southern borders, but, more importantly, was frustrating its drive to secure control over the transportation of Caspian energy to Europe.
Thomas Friedman wrote an article a few years ago talking about how oil wealth destroys democracy. The elite can make more money by domination than by creating a vibrant economy which requires democracy and the rule of law.
“…Iraq and Georgia are just two examples of the war for oil”
bizarroworld, you would not last 8 seconds with Cheney in a public debate.
Or on a duck hunt.
No one would, Cheney makes up data.
He was on Meet the Press pushing the Mohammed Atta met Iraqi agents in Praque story long after the CIA and other intelligence agencies had proven the story false. Ron Suskinds new book suggests taht Cheney’s office ordered the CIA to create a letter from one of Sadams team that would link Al Queda to Sadam. Suskind claims to have tape recorded interviews with CIA officers supporting his story.
http://www.cbsnews.com/stories/2008/08/20/politics/politico/thecrypt/main4368604.shtml
For Dick Cheney Facts are something you create. There is no debate with this type of person.
Democracy is DICTATORSHIP where the dictators know they have to get as much personal gain out of their temporary position as they can with no care about the future.
A vibrant economy can flourish under a dictatorship wherein the people are ready to rebel against even the slightest abuse by the dictator of his power because the people recognize that the dictator is only ruling by force and for his own benefit.
Quite frankly, democracy is the worst form of government because the dumbest 51% of the population is easily bamboozled by the corrupt .1% which results in the .1% “elite” operating with a “mandate” and a claim to “legitimacy” that is no more valid than the claim of a dictator to “divine right”.
This is why only LAND OWNERS were allowed to vote in our “constitutional republic” because land owners are the only ones with authority over their land and therefore are the only ones in a position to delegate / make laws about what happens on their land.
Besides, to be a land owner meant that you probably were not in the dumbest 51% of the population and had significant interest in keeping the government OUT of your business and off of your land.
Even so, no majority of land owners has any “divine right” over the minority of land owners and therefore the whole premise of democracy/voting is no different than dictatorship without the use of guns to settle who is in charge.
The point is that democracy needs to be condemned where ever it is used to give “legitimacy” to any government. The only just government is with the consent of the governed. If you do not consent then the government has no just authority over you.
I do not consent to being robbed of 40% of my income, do you?
You know people are desperate when one of the local take and make dinner places just advertised:
“Bring in all unwanted 10kt, 14kt, and 18kt white or yellow gold and sterling silver in any condition for cash on the spot!
The Gold and Silver Exchange is a licensed precious metals dealer.
Stones will be removed and given to you.”
So you can hock Grandma’s jewelry at our store and take home our overpriced meals to feed your family.
Yeesh.
Banks and dealers caught short silver in another financial debacle.
Some large banks and dealers in PM have sold silver short; now, where to find it?
A silver default looming? Oh my.
http://preview.tinyurl.com/68me4x
Good article, thanks.
This statement:
The majority assumes that banks, like Morgan Stanley, are honest, and would not issue fake paper claims.
Why would people assume that banks are honest? What serves to provide that credibility?
The link does not work.
Please explain your position on silver.
My position is that some very large banks are short silver. They are also short silver IOUs that cannot be delivered with available supplies.
Demand has outstripped supply to the point that banks and dealers are trying to keep a lid on prices in a collusion that is starting to unravel.
This could bankrupt some and leave others holding a broken promise of timely delivery.
http://seekingalpha.com/article/91357-the-disconnect-between-supply-and-demand-in-gold-silver-markets
I’l hand you the scenario from the outlook of a coin dealer (in this case, more accented on the bullion end of the business) with a street retail location…
One bit of psychology to throw into the mix, is the idea that most, if not all coin dealers are natural born Goldbugs, and believe that it affords the best honest policy, when everything else financially, is dishonest.
Most keep a sizable inventory of bullion on hand, which doubles as their investment, and the idea is to get to a level of inventory, and then adjust it up or down, keeping things static, a hedge.
When it gets to the point where you can sell Gold, but can’t replace it, is when the coin dealers close up shop and head off to Galt’s Gulch…
Useful members of society going away, just like in Atlas Shrugged?
Yes but where do they go? Switzerland?
Seriously, where do they go?
And when they go on vacation, are they forced to use cash like the plebs, or does the gold elite have special arrangements?
“Yes but where do they go? Switzerland?
Seriously, where do they go?”
===================================
They just melt into society, no longer providing their service as go-betweens between buyers & sellers.
Gemco has spent the last 2 weeks (3/4 full page adds in the Boston Globe daily) advertising buying of silver (in any form), etc. at local hotels.
As a note, I tried to buy 500 onces of silver on friday….none to be had. My local coin and silver dealer wasn’t selling, because all his silver he purchased at 16-17 dollars…he wasn’t about to seel for 13 dollars…
I might have 500oz to sell. But you might not like the house policy.
My policy? Every thing is for sale, not all prices reasonable.
It works — you have to click through from the TinyURL page.
Now all the talk is about aiding the would-be rescuers of the US housing market. Who will rescue the rescuers? I guess it is all up to the giant tortoises whose backs support our housing finance system?
Mortgage giants may see changes
Aid plans suggested for Freddie, Fannie
By Vikas Bajaj
NEW YORK TIMES NEWS SERVICE
August 21, 2008
As policymakers work to ease the strain on mortgage giants Fannie Mae and Freddie Mac, a consensus is emerging that the two companies will have to look substantially different in the long term.
Leading figures from across the ideological spectrum say the companies, which were created by Congress to support the housing market, must be restructured so they do not threaten the financial system. These voices include Republicans, many of whom have long been critical of the supersize roles of Fannie Mae and Freddie Mac in the mortgage market, and some Democrats, who have generally been more supportive of the companies.
Proposals for the companies include making them government-owned and breaking them into smaller firms, phasing them out of existence entirely, or simply limiting their operations to certain core areas like affordable housing as well as limiting their ability to borrow money.
DAVID WEIDNER’S WRITING ON THE WALL
Forgetting Freddie (and Fannie)
Commentary: It’s time to start thinking about the impact of a GSE bailout
By David Weidner, MarketWatch
Last update: 12:01 a.m. EDT Aug. 21, 2008
NEW YORK (MarketWatch) — Financial bailouts are supposed to save institutions. So why does the imminent takeover of Freddie Mac and Fannie Mae seem like a Russian peacekeeping mission in Georgia?
LOL. What the heck is that supposed to mean? David should really stay away from geopolitical similes. What an idiot.
Besides all that, everything the financial guys do are fake. It’s a construct; game theory rules! It can be torn down and recreated in any form. Why do people accept treasuries? Well they do have a bankrupt governments backing and that seems to be good enough for most investors. Why? I have no freaking idea anymore except that IMHO the big boys want to protect their bond prices and don’t care about little guys that buy on yield. Why ANY small investor would want a bond that pays 5% less than inflation is beyond my ken.
So why not nationalize the Macs? It’s all just a stupid numbers game anyway. It will work until it won’t, but then just start again with a new game with an updated set of rules but with the same people playing.
Well, I still like my old Bubba Mac idea. Just combine them into one gigantic monolithic stupid government institution that is completely opaque to the public in how it works. Use good old Hank’s bazooka to threaten anyone that dares question it’s solvency going forward, and just keep pumping money into that dying goose for as long as possible. Deficits don’t matter, right?
Why can’t Bubba Mac be run like the NSA? Trust us, everything is gonna be fine. You’ll just have to take Bubba’s word for it.
So was Bazooka Hank bamboozling us by blowing a big bubble with a wad of double-bubble-speak?
“…as well as limiting their ability to borrow money.”
Mr Bear, if you said that in the 1950’s, people would call you a commie and say you must have just fell off that UFO passing by in the night sky.
“limiting their operations to certain core areas like affordable housing”
This is freakin nuts. If their operations are limited, they should be limited to providing _conventional_ boring conforming loans to the prime segment. In other words, provide guaranteed liquidity in the part of the market that is safe enough to qualify for government backing.
Who gets to fund this newly-announced government mortgage rescue plan? Or is it another free program, which magically works out bad loans at $0 cost?
FDIC to modify troubled IndyMac borrowers’ loans
Rescue plan will offer fixed-rate mortgages
By Marcy Gordon
ASSOCIATED PRESS
August 21, 2008
WASHINGTON – Thousands of troubled home borrowers with loans from IndyMac Federal Bank will be able to switch to fixed-rate mortgages under a new plan from federal regulators, who seized the bank last month after it became the largest regulated thrift to fail.
A few days before my father passed away about 5 years ago, he was in a hospital intensive care unit with about 25 cords attached to him, little cash registers whirling away.
He was a goner quite honestly, but the hospital kept him alive for a few days, for their benefit…
Keeping iffy IndyMac mortgages going, reeks of 25 cords being attached to them.
“… reeks of 25 cords being attached to them.”
I read yesterday the restructured mortgages are supposed to bring hh mortgage service payments down to 38 pct of income. It sounds like the plan is to attach the cords to the loanowners’ future income streams.
Sounds dumb when a quick bankruptcy can severe all those cords.
Ladies and Gents - from the Loudoun Times Mirror - I give you quite possibly the funniest quote of the housing bubble:
http://tinyurl.com/5llzot
County’s July foreclosure rate 2nd highest in state
I think he means home buyers that otherwise would not have considered buying rather than buyers of new homes.
Yeah, I guess. Can’t I revel in the moment though?
“I’m hearing every day about people being laid off,” said Roxane Dinkin, a psychologist in Bradenton (Florida). “I’m hearing every day about homes going into foreclosure. Sometimes, I hear it every hour. It’s affecting people from all walks of life.”
http://www.heraldtribune.com/article/20080821/ARTICLE/808210379/2055/NEWS&title=The_slip_is_pink__the_funk_a_deep_blue
There is a growing low rumbling of suggestions that the GSEs should be dismantled. But why stop there? Why not dismantle any firm whose “too-big-to-fail” status poises a Sword of Damocles of systemic risk over the global financial apparatus?
Fannie, Freddie shares tumble on bailout fears
Thu Aug 21, 2008 8:22am EDT
NEW YORK (Reuters) -
…
In an research note, Ladenburg Thalmann’s analyst Dick Bove said the government should recruit financial industry leaders to oversee dismantling of the two companies.
“The only rational action” to be taken relative to Fannie and Freddie ‘is to get rid of them,” Bove wrote in the note.
Fate of Fannie and Freddie Hinges On $225 Billion
By Prabha Natarajan, Anusha Shrivastava and Deborah Solomon
Word Count: 1,056 | Companies Featured in This Article: Fannie Mae, Freddie Mac, Fannie Mae, Freddie Mac
Mortgage companies Fannie Mae and Freddie Mac are facing a $225 billion question.
That is the amount of debt the companies need to refinance by the end of September. Thus far, they have had little trouble persuading investors to buy debt with maturities of a year or less. But investors say the mood could change as long as details of any potential government bailout remain murky.
New mantra in high finance circles: Break up the GSEs…
Former FDIC chief urges breakup of Fannie, Freddie
Government should bail out GSEs, then sell them to private investors: Seidman
By John Spence, MarketWatch
Last update: 2:07 p.m. EDT Aug. 21, 2008
BOSTON (MarketWatch) — The former chairman of the Federal Deposit Insurance Corp. who played a key role in healing the U.S. banking system after the savings and loan crisis said Thursday he advocates a breakup of struggling mortgage buyers Fannie Mae and Freddie Mac.
“We need a plan for breaking up Fannie and Freddie and selling them to private investors, so that the government isn’t the biggest backer of the housing market,” said Bill Seidman in an interview with MarketWatch in Boston’s financial district on Thursday.
Here is a story to warm the hearts of those who love the shiny yellow metal…
The Eagle Has Been Grounded
By Ianthe Jeanne Dugan
Word Count: 575
As gold prices tumbled from their highest level ever, investors and collectors loaded up on one-ounce “American eagle” gold-bullion coins. The buying spree came to an abrupt halt this week after the U.S. Mint stopped selling the coins for the first time since production began 20 years ago.
“Due to the unprecedented demand…our inventories have been depleted,” the Mint — part of the U.S. Treasury Department — told its dealers Friday. “We are therefore temporarily suspending all sales of these coins.”
… and please buy our highly esteemed Treasury Notes instead
I wonder if it occurred to whoever engineered the massive decline in physical gold prices that a shortage might develop? The same thing can happen to currency — if you price it too low (as in loaning out large quantities at below market equilibrium interest rates), a liquidity shortage may result.
A $100 Banknote costs around 40 Cents to print.
A $50 1 ounce 24K Gold Buffalo costs around $831(spot price) to mint.
The former costs 1/250th of face value to make, while the later costs nearly 17 times face value…
To produce 1 oz #79 Eagles, you need inventory in the form of planchets of 24k #79.
These are the very same planchets the mint hasn’t run out of, minting Cents, Nickels, Dimes, Quarters, Half Dollars and Dollar coins, all of which share a shallow base metal existence.
#79 is a very demanding metal, so much so, it lives a cash and carry lifestyle, when it is transfered from one entity to another.
It appears the U.S. Mint supplies of #79 are 86′d…
http://en.wikipedia.org/wiki/Planchet
The word from dealers is that the gove stopped selling, because they didn’t want the real price of gold to go up. fact is, the mint has no owned gold and for them to go to the market and buy, would send the price thru the 1k dollar an ounce mark….gove manipulation of the market to keep the dollar up!
CURRENCIES
Financial fears spur dollar retreat
By William L. Watts, MarketWatch
Last update: 6:45 a.m. EDT Aug. 21, 2008
LONDON (MarketWatch) — The U.S. dollar retreated against most major currencies Thursday, losing ground amid ongoing financial sector worries and a rebound in oil prices.
The Financial Times on Thursday reported that U.S. investment bank Lehman Brothers held secret talks earlier this month to sell as much as half of its shares to South Korean or Chinese parties but failed to reach agreement with either.
Sharp drops Wednesday by beleaguered U.S. mortgage giants Fannie Mae and Freddie Mac “and talk of more problems at Lehman have rekindled fears about the financial services industry, supporting demand for safe-haven currencies and government bonds,” wrote strategists at Lloyds TSB.
That’s boosted the Japanese yen and Swiss franc.
Not one bank or financial firm got into this mess looking for risk. They all thought the trades were low risk high reward.
Flight to perceived safety (incl US Treasuries) has the same risk characteristics that CDOs carry
Surely you jest.
You are telling me that cash has the same risk characteristics as a leveraged derivative?
C’mon, hoz, we all exaggerate a little to make our points, but surely this is the most tortured one yet!
Ever consider applying for NAR’s Chief Economist position?
Misunderstood me due to lack of command of the English language. Sorry good buddy.
The operative comparison is flight to perceived safety. The characteristics are the same.
Banks fled perceived risk and bought CDOs (low risk, high reward); Banks now flee corporates including Fannie and Freddie and buy US Treasuries. The implicit is flight to safety, but there is no more safety in any investment at this time relative to the reward. However banks are allowed to mark to par on any US Treasury purchase which can give a feeling of stability if not profit.
The basic premise of all investment is currency, commodity or equity all of the same risk characteristic. Returns may be different, risk has the same traits.
My office building has those flat-screen TVs by the elevator banks that show little financial blurbs provided by Dow Jones/WSJ. As I waited for the elevator this morning I was reading the screen and a blurb about the US Mint came up. It mentioned that Gold Eagles were no longer for sale (as was mentioned here last week).
The blurb said that the falling price of gold had caused people to buy them in such quantities that the Mint simply ran out. No conspiracy. Just plain old supply and demand.
OK fine.
But on the elevator ride up, something just didn’t make any sense. If gold is a commodity, then the price is set by the supply/demand curve. If the Mint is unable to keep up with demand, then demand is exceeding supply, and the price should be heading up. What the WSJ just described doesn’t follow the rules. I expect more from a respected financial news organization. I wonder how many other people saw that this morning and gave it a big WTF?
I’m not taking any sides in the aladinsane vs. combotechie debate, just pointing out a mainstream news piece that doesn’t make any sense.
just pointing out a mainstream news piece that doesn’t make any sense.
Had to look hard for that I bet.
Seriously, the article linked by Morman_Tea above (search for “silver default”) proposes price manipulation as an answer to your question.
“If the Mint is unable to keep up with demand, then demand is exceeding supply, and the price should be heading up. What the WSJ just described doesn’t follow the rules.”
Ditto for low (below market) interest rates and a shortage of liquid monies. If prices (of gold or currency) are allowed to adjust, then quantities supplied and demanded tend to quickly equilibrate.
So you’re saying that the Fed in all its infinite wisdom doesn’t know how to price money?
SHOCKER.
It makes perfect sense if only you understood that there are two gold and silver markets….paper and physical. Physical is being viciously bought while paper is being viciously sold. Why? Because the fiat currency crowd(central banks) do not want people to see gold and silver as a legitimate store of wealth so that they will continue to use the store money(frn’s).
This should help explain better:
http://news.goldseek.com/GoldSeek/1219039500.php
I see Kitco is out of silver or has very limited quantities.
Could a massive upward repricing be in the works?
Just got off the phone with one of the largest retail coin dealers in L.A.
He says JM 100 oz Silver bars are simply not to be found anywhere in the USA, and 2008 Silver Eagles now cost him around $3 over spot on a wholesale basis.
He’s now selling old school Gold bullion (100 Coronas, 50 Pesos, Sovereigns, etc) as it’s all that is easily available in the marketplace.
The ratio of buyers to sellers in his store this week has been @ 10 to 1.
I asked if it was possible to cover physical metal by buying it overseas from wholesale sources?
He said demand was the same world-wide, as in no bargains.
The reason 1 oz Krugerrands have gone up so much (like $50 over spot on a wholesale basis) is a European consortium buying up all they can get…
We are so very early into this never-ending endgame that is the financial bubble, I wonder what other twists and turns are just around the corner?
p.s.
A Tale Of 2 Markets:
We were comparing things to 1979-80, when the Hunt Brothers & Saudi princelings manipulated the price of silver up 9x in the course of less than a year…
My friend said that 1979-80 was all sellers (as in the public) and there was a tremendous backup getting less than pure Silver refined into .999 pure, as the refineries were working 24/7, and the public was selling everything they had.
As opposed to present day’s action, which is all buyers, and instead of tons of inventory, the shelves are bare.
This Tale of Two Markets thing is really interesting…
The thing I’m having a hard time wrapping my head around, though, is why the commodities futures markets don’t force the two markets to equilibrium.
Couldn’t someone who wants physical metals buy paper futures contracts and stand for delivery?
Nobody I know in the bullion business can ever remember such a disconnect between the futures market (computer blip metals) and the physical market.
The beginnings of a 2-tiered market?
You were thinking. Just listen to the TV, go to your office and start working. Don’t try to apply economic principles on your own. You should be letting the “professionals” handle that.
Now please go to your nearest retail store and buy something.
/sarcasm off
Shared Interests: Communities built around ‘themes’ are getting more popular — and require more homework
By KELLY GREENE
For increasing numbers of older adults, you are where you live. For decades, older golfers have congregated in developments devoted to golf, and in recent years, college alumni have flocked to retirement communities close to their alma maters. Now the interests, or themes, bringing empty nesters and full-fledged retirees together are specializing further. At least two communities are catering to Nascar fans, others focus on specific types of art or music — and “active adult” developments centered on ethnicity or sexual orientation are coming together, as well.
Communities defined by special interests have given rise to the term “affinity housing, where we all have a certain something that we share,” says Elinor Ginzler, senior vice president for livable communities at AARP, the Washington-based advocacy group. “The traditional [housing] models won’t go away, but they will be enhanced by new creative models for how we decide to live. That will include gathering around a group of people with shared interests.”
http://online.wsj.com/article/SB121259385427045245.html
So, just exactly where will the first “Reverse Mortgage” Theme community be located? Orlando?
I’m wondering why there is not yet a “FB” theme community - should prove extremely popular, but maybe there is insufficient land in the US to build all the required dwellings?
Interesting. Sounds like a whole new economic paradigm.
Buy two retirement homes, one to fit each spouse’s interests. Half a year at the NASCAR ranch and half a year at the knitting commune.
Isn’t all of the US south of the Mason-Dixon just a conglomeration of NASCAR-themed communities?
For the Ron Paul supporters:
The Long Tail of Entitlement Trumps Self-Reliance and Intelligence
L-t T-bond yields are taking flight this morning.
You can see in the graph the footprint of the announcement about the “larger-than-expected” drop in the Index of Leading Economic Indicators.
Market taking it in stride though, as it has been with recent bad news.
BULLETIN
U.S. LEADING ECONOMIC INDICATORS POINT TO SLOW GROWTH FOR REMAINDER OF 2008
U.S. leading indicators fall 0.7% in July
By Rex Nutting
Last update: 10:00 a.m. EDT Aug. 21, 2008
WASHINGTON (MarketWatch) - U.S. leading economic indicators fell 0.7% in July, pointing to “slow growth the rest of the year, and possibly an economy grinding to a halt,” the Conference Board reported Thursday. “If there’s a second-half recovery, it’ll be the second half of 2009,” said Ken Goldstein, labor economist at the private research organization.
Here is a rare bearish headline from the MarketWatchers… and the headline U.S. stock market indexes merely shrug.
August 21, 2008 12:21 P.M.ET
BULLETIN
Make that leaden indicators
‘If there’s a second-half recovery, it’ll be the second half of 2009.’
— Ken Goldstein,
Conference Board
Leading indicators point to slow U.S. growth for the rest of 2008 — and possibly an economy grinding to a halt. Building permits and stock prices are among the report’s weakest metrics.
Bank of America is laying off and 1,361 employees at 4901 W. Irving Park Road in Chicago starting this month; and 78 employees at 1600 Golf Road in Rolling Meadows on Sept. 9.
Elkay Manufacturing Co. is discontinuing a product line at its Broadview manufacturing facility at2700 S. 17th St. and laying off 254 employees on Sept. 15.
Indymac Bank is laying off 64 employees on the sixth floor of 20 N. Martingale Road in Schaumburg on Sept. 7.
Neiman Marcus is closing a store at 9501 Winona in Schiller Park and laying off 83 employees on Sept. 26,
Pivotal Staffing Services LLC is laying off 278 workers at several locations throughout the Chicago area starting this month.
Servisair is laying off 55 employees at the end of the month at 10600 W. Higgins, Suite 610, in Rosemont.
Standex ADP is closing down and laying off 107 employees at 4500 Entec Drive in Bartonville on Sept. 24.
Just a few tasty tidbits from Illinois: Bank of America wields its axe on the hapless folks from LaSalle. And the city of Chicago is reporting a 450MM deficit budget next year?
Yea but we all know its temporary. Jobless claim fell according to the government, and the government would never lie to the people.
http://news.yahoo.com/s/ap/20080821/ap_on_bi_go_ec_fi/jobless_claims
“Bank of America is laying off 1,361 employees at 4901 W. Irving Park Road in Chicago starting this month”
This building was an old Talman Home S&L - before it was bought by LaSalle - before LaSalle was bought by ABN AMRO - and before LaSalle spun off to B of A.
This was our family’s bank in the 1970s-1980s. It’s located just west of Six Corners - the once bustling northwest side shopping area of my youth. It’s hitting the old neighborhood.
Mom’s going to freak out when she hears this has hit so close to home. She spoke with some former LaSalle employees at their Loop office last month - they are all quaking in their boots.
Mayor Daley is deeply concerned - and to hear his recent speeches one would think he lurks on the HBB.
Mayor Daley is deeply concerned - and to hear his recent speeches one would think he lurks on the HBB.
He certainly has been bearish lately.
But every time I think, “Hey, good for him, he’s thinking realistically,” he pulls something like giving raises to people with plum patronage jobs (as I mentioned below). It’s the curse of a mayor who honestly wants to keep improving the city under difficult circumstances, but was genetically bred for classic Machine Politics and cronyism.
Gee our old LaSalle ran great…
Those were the days!
NO KIDDING. BoA is the pits now.
So who still banks at Bank of Aliens anyway?
And the city of Chicago is reporting a 450MM deficit budget next year?
There was a public hearing last night where the mayor and other top officials heard from the local citizenry — suffice to say the citizenry didn’t sound too happy. Daley said, “This is the most difficult budget that we ever had to deal with since 1989. It’s very simple. We have a huge recession.” The real estate market was a big culprit: the real estate transfer tax will pull in about $51 million less this year than it did in 2007.
As Daley contemplates layoffs of city workers and ways to nickel-and-dime the local populace via parking tickets, car boots, and fee increases, he’s giving raises to 50 politically appointed Streets and Sanitation ward superintendents.
They’re going kicking and screaming just like Taxachussetts.
And if that tax revolt passes (how appropriate that it should be in Massachussetts), expect similar laws all over the country.
The game is still evolving.
Chicago better tighten its belt real soon.
This winter will be Chicago’s turning point for the man on the street.
Just a few tasty tidbits from Illinois: Bank of America wields its axe on the hapless folks from LaSalle. And the city of Chicago is reporting a 450MM deficit budget next year?
I know a few former LaSalle employees and they all jumped ship months ago. A couple of them were fairly high up in the HR technology area and went down to the Charlotte HQ just a little bit after the takeover.
Weird and cult-like were how they described it. Many of the BoA employees at HQ were quite offended that most of the LaSalle contingent visiting weren’t wearing the BoA lapel pins they were given.
Both of them quit very soon afterwards. The others slowly left over the course of this summer.
RE: Lapel pins
You’ve seen how important they allegedly are to the voting bloc. You’re either with us or…
[to Flounder] You will report to the stable tonight and every night at 1800 hours. And without that pledge pin! Do you understand?
Arson watch:
http://tinyurl.com/6gmpzv
“A two-story house in Lake Murray burned early this morning.”
“The blaze on Wallsey Drive, near Mulvaney Drive, was reported just before 2 a.m. Police and firefighters said they arrived to find the house engulfed in flames. The fire caused about $800,000 in damage.”
“Two vehicles parked in the driveway were also damaged, a San Diego Fire-Rescue dispatcher said. No one was hurt and the cause of the fire is under investigation by the Metropolitan Arson Strike Team.”
I thought of that, too. I’m just surprised at the amount of the damages. I lived in that area for years and from what I saw most houses are mid-range.
Greg,
It WAS arson. Just saw it on signonsandiego. Fire also damaged next-door neighbor’s house, $45K.
I think this is pretty damn funny. I thought Obama was suppose to be the elitist?
“McCain unsure how many houses he owns”
http://www.politico.com/news/stories/0808/12685.html
It’s one thing to say you’re not an economic expert, it’s another to not know how many homes you own.
Is it worse to portray him as an old guy that can’t remember things very well any more or to portray him as a guy so rich he can’t tell you the extent of his wealth/investments at any exact moment without looking into it?
It sure seems like America cares more about the latter.
McCain not remembering important details in his speeches is not a “portrayal”…there is plenty of video evidence of this on YouTube! He offers a combination of Ronnie Reagan’s “senior moments” combined with Dubya’s gaffes. Pure comedy!
Seriously, the PTB need someone who is easily manipulated to be the next POTUS. Life got too easy under Dubya, so McCain is the next best choice.
And there’s the effects of repeated Traumatic Brain Injuries for you. You don’t want to have someone with this kind of disability in the hot seat.
A while back I was asked, under oath, how many guns I owned. I replied honestly: “I don’t know”
Hey, c’mon, stop with the class warfare. The McCains are salt of the earth.
(Snicker.)
I wonder if he bought any of them from B.O.’s embezzler buddy Tony R.
Senility, or ignorance feigned or true, there’s not a chance in hell I’d ever vote for that angry, hypocritical, senile moron.
That’s fine. You won’t find me voting for an elistist “messiah” who has essentially no experience.
Instead of electing the usual rabble of experienced good-for-nothings, why not try an intellectual elitist on for size?
We already tried to pander to the lowest common denominator (’ssshrubery) and look where that got us?
I wouldn’t have expected any less from you, Bill. In fact, I picture you as just another one of the herd who bahhhhhhdly wants to continue on the current collision course, naively unaware of the dire consequences of such a choice.
Indeed…anyone with greater than a high school diploma is considered an ‘elitist’ in this country. Idiocracy.
McSame = Busch Lite
Guess the “young” Republicans prefer old, flat & stale ale… freshly made at Limbaughs micro-brewery.
You realize, of course, that this doesn’t matter. Once people have made up an image of somebody that fits them, that’s who that person becomes, double standard be damned.
Besides, that would actually make them have to THINK about the choice they have to make rather than just looking for the (R) or (D) after the name.
He’s got a big spread in Sedona, AZ, a big condo in Phoenix, a condo in the D.C. area, two condos in the Coronado Shores towers (San Diego), and Cindy or her foundation also owns a condo in La Jolla where here elderly aunt lives. That’s the one where the McCains’ property taxes were delinquent. I don’t know where the other two properties are.
“He’s got a big spread in Sedona, AZ”
bayparkwatcher, I believe I read in the AZ Republic that this property is more of a cabin on a few acres in the town of Cornville, a far cry from Sedona. McCain’s combined military retirement and Senate salary give him a fairly substantial annual income considering he is 72 yrs old and still working. I would be surprised if anyone from AZ would consider him an elitist.
To whoever mentioned Disciplined Minds by Jeff Schmidt the other day, many thanks. I started it yesterday and I’m halfway through. This guy is blowing my mind. Very informed, unconventional look at how the contemporary world actually works.
I’ve gotten quite a few good book recommendations from the posters on this blog. Thanks, and keep it up.
I love the sub-title:
“A Critical Look at Salaried Professionals and the Soul-Battering System That Shapes Their Lives”
I suspect my soul of being battered daily.
–
US Housing: White Men Have Been the Most Sober
It has been obvious for the past four years as to who have been buying homes and condos disproportionately – Asians, blacks, Hispanics and women, especially, single women. Women’s itch to own a house doesn’t always leave much room for rational financial considerations.
Recently, immigrant Asians (lot of Chinese and Indians) have been heavily involved in buying foreclosures, at least in Southern California (worse the area more the foreclosures, obviously). They can’t wait to harvest the riches of America! They have no clue as to how tough land lording is going to be during the depression, especially in not-so-good areas where deadbeats would increasingly flock to. These suckers for “good deals” don’t know that rents can fall a lot and with huge inventory of vacant homes the properties are going to be vacant for 20-40% of the time. Many of them are levered up and might be forced to sell at the worst time.
The housing problem has barely begun. It will keep on claiming victims for years to come and most of the victims would be minorities, including single women. California led the boom and will also lead the bust. Bubble mentality is most common in California, especially, among Asians (success breeds excess).
Jas
Got any data on this one?
–
I have been reading housing related articles for years, where these were documented, some in stats (single women) and some in stories (Hispanics), and I know many cases of Asians disproportionately buying foreclosures. I also know of more cases of women, including realtors, buying multiple investment properties in SoCal. I realize that newspapers don’t like to report on sex and ethnicity related issues.
Haven’t you read descriptions on HBB posts that corroborate some of this? Other people are free to share impressions. I am open to counter evidence.
Jas
I don’t have to prove I’m right, you have to prove I’m wrong!
–
It is always nice to hear from you, Bill. I don’t post on HBB to get into legalistic arguments. I post what I have observed.
Jas
“Other people are free to share impressions. I am open to counter evidence.”
In S. CA I would guess you are not wrong in your observations
You might want to look at my replies to jas last night on cali thread.
I’ve been conducting a financial autopsy for the southern antelope valley for June and Jas’ statement most definitely hold water, and carries it long distance.
I’ll post my stats in a week or two when I’m done, and while I hadn’t planned on it I’ll post ethnicity stats as well as gender as long as nobody wants to pick nits as to whether someone is portuguese or spanish or mexican or etc.
Actually, if they want to pick nits and misunderstand the market then that’s their perogative, screw ‘em.
East Asians are nutty about real estate and gambling. The availability of mortgages satisfies both urges. Recall that the Japanese real estate market collapsed 90% in nominal terms from its peak, meaning that a 100m yen home 20 years ago is now worth 10m yen in non-inflation-adjusted terms. Hong Kong real estate is down 60% from its peak around 1997, and you need about 1/3 down to buy there. East Asians do have high savings rates. But that just means they generate bigger asset bubbles.
Cheap money
going going Gone
http://www.bloomberg.com/apps/news?pid=20601213&sid=aceszTIv9Mpg&refer=home
I keep hearing that we need to maintain low interest rates to help the housing market recover. It sounds like this means we need low interest rates forever to help prop up housing prices; any large rise in rates, then it will always be “game over”. How does this then help affordability, inflation, and not fuel another bubble?
Enough is enough, we can’t keep going from bubble to bubble and pushing out the day of reckoning and making the problem that much bigger in the future. The dinosaurs had their day and then it ended. If they didn’t go exinct humans wouldn’t be here today. Let the financial institution dinosaurs of today go extinct, what will rise from their demise will be new financial institutions that will make yesterday’s seem like the pea-sized brain dinosaurs of Earth’s ancient past. We can have a wonderful future, but we first must let go of the past.
“Oil’s on fire”
“…said Neal Ryan, a managing partner and owner of Ryan Oil & Gas Partners. “Since the $110 level wasn’t broken, the bears don’t have the momentum trade on their side anymore and we’re moving back to a market dominated by supply/demand data and geopolitical news…”"
I see. So sometimes it’s fundamentals, sometimes it’s not. Let’s just call it what it is, market manipulation by pigs.
Yeah, I’m sure Ryan has NO personal interest in the price of oil - I seriously DOUBT he personally made any bad bets when oil was $147 and everyone said it would be $200 by the end of the year.
Sure….
The truth is that a slowing economy - MASSIVELY slowing - is going to mean less travel, less shopping, less aimless Saturdays spent tooling around between malls looking for something to buy on the credit card.
Gas demand is down between 2 and 9 percent YOY depending on who you believe, and it’s only going to go lower.
From my little corner of the world I can say there is a very noticeable lack of construction and tradesman vehicles on the road anymore - with 1/10th of the amount of work available as just a couple of years ago, all those 8mpg gas hogs are parked.
My prediction is $99 oil by September 30.
“…My prediction is $99 oil by September 30″ lol
As soon as it hits $99.98 …Chavez will invade Columbia, and revitalize the National fruit: Coca Cola …for free distribution back in Venezuela.
“Don’t cry for me Argentina”
As soon as it hits $99.98 …Chavez will invade Columbia, and revitalize the National fruit: Coca Cola …for free distribution back in Venezuela.
Or Putin will invade Georgia
Oh wait that already happened.
“From my little corner of the world I can say there is a very noticeable lack of construction and tradesman vehicles on the road anymore…”
Awesome! Invariably, if I’m stuck in traffic it’s behind one of these guys or a minivan. Or one of those little delivery trucks.
I swear I’m living the Truman Show. I can be driving alone at 3AM and outta nowhere 5 people will get in front of me and trap me at every stoplight.
Oil’s on fire
Calling Prof Bear for an emergency extrapolation…
Now would be a good time to get short oil, as this current price move is a blip in a downtrend due to the current bout of saber rattling between the U.S. and Russia.
So you are shorting here? Or do you lack the courage of your convictions?
“Billionaire Sam Zell said the housing market could start recovering as early as next year and he’s focusing on investing in debt rather than equity.”
http://www.bloomberg.com/apps/news?pid=20601087&sid=aNplg30MvTi4&refer=home
Notice he didn’t say this year, or “no later than” next year.
It could be, depending on how fast the carnage happens.
Mayor Kwame’s prosecutor has a few problems of her own:
http://www.detnews.com/apps/pbcs.dll/article?AID=/20080821/METRO/808210364/1409/METRO
Thursday, August 21, 2008 - 9:48 AM MDT
Fannie Mae opens satellite offices to sell foreclosures
Fannie Mae is rethinking how it will handle the tens of thousands of properties being repossessed as the real estate market continues to slide.
To that end, it is opening two satellite offices, one in California and another in Fort Lauderdale, Fla., to manage and sell its foreclosed properties in those states, said Marilyn Kornfeld, a spokeswoman for the D.C.-based mortgage financer.
Nationwide, Fannie Mae has repossessed more than 54,000 homes as of June, exceeding all of last year’s repossessions.
“Forty-eight percent of our credit losses were from four states: California, Arizona, Nevada, and Florida. These states saw the most dramatic run-up in prices, and are now seeing the most rapid declines,” Fannie Mae CEO Daniel Mudd told investors during a conference call earlier this month.
Paulson’s Fannie-Freddie `Bazooka’ Shakes Investors (Update2)
By Brendan Murray
Aug. 21 (Bloomberg) — U.S. Treasury Secretary Henry Paulson’s “bazooka” may be intimidating the same investors he intended to reassure.
Bazooka Hank’s chewing gum has lost all it’s flavor, and now awaits a ride on a sole journey.
LARGE STOCK FOCUS
Financials Falter, Oil Shoots Up
By KEJAL VYAS and ROB CURRAN
August 21, 2008 12:15 p.m.
NEW YORK — Another sell-off in the financial sector pushed U.S. stocks down Thursday as oil prices gained on a weakened dollar and tensions between the U.S. and Russia.
With more wild swings for shares of mortgage buyers Fannie Maeand Freddie MacThursday morning, investors are grappling with what the markets and economy may look like after a potential wipeout of their stock-market value.
Hi Gang-
I received this reply letter from Senator Norm Coleman (R-MN); I also wrote to Senator Amy Klobucher (D-MN); no reply to date.
“Thank you for taking the time to share your opposition regarding federal support for the government-sponsored enterprises (GSEs), Fannie Mae and Freddie Mac.
While I am very sympathetic to your point of view, I believe that given the current circumstances it is in our broader economic interest to provide, if needed, financial support for the two GSEs. As you may know, President Bush signed into law on July 30, 2008, the Housing and Economic Recovery Act (H.R. 3221), comprehensive housing legislation that gives the Department of Treasury temporary emergency authority to provide financial support for Fannie Mae or Freddie Mac in the event they become insolvent. Should Treasury be called upon to provide support, H.R. 3221 requires Treasury to do so in a way that puts taxpayers ahead of shareholders.
Given their major role in the U.S. mortgage market and importance to the U.S. economy, a failure by the GSEs would make the current housing crisis worse, further destabilize already rattled financial markets and cause greater damage to an economy currently suffering from a serious downturn. In short, given the present circumstances, I believe that we would be worse off if we did not offer this sort of support. In addition to this federal help, H.R. 3221, provides for meaningful and long-overdue reform of the GSEs by creating a much-needed, independent regulator to ensure their safe and sound operation.
Going forward you have my commitment that I will be closely following the work of the new GSE regulator to ensure that American taxpayers and the U.S. economy are never again put at risk as they currently have been by the actions of Fannie Mae and Freddie Mac.
Thank you once again for sharing your thoughts with me. If I may be of further assistance to you in the future, please do not hesitate to contact me.”
Sincerely,
Norm Coleman
United States Senate
You don’t even have to “read between the lines” to get a feeling that the politicos are scared shiiteless!!
I’ll post anything else I get…
The thing that amazes me is that the letter is actually responsive to your concerns. The last few times I’ve written to legislators, I’ve gotten obvious form letters that bore very little relation to the issue I was writing about, and sometimes even ignore which _side_ of the issue I was addressing!
Nice work, Norm…
That was also a form letter. What it indicates is that they are getting enough anti-bailout letters that the person in charge of correspondence actually got around to writing and getting approval for one that addresses those concerns. Kudos to the constituents for writing enough anti-bailout letters and to the peons who open the letters for complaining that they couldn’t keep sending the “we are protecting the value of your home” letter to the anti-bailout crowd.
I agree. This one has my nomination for the Pulitzer Prize, form letter category.
Dear Norm,
Thank you for taking the time to respond. Unfortunately, my list of entities and individuals that I wish to burn in hell has just expanded to include you. Again, thanks for your time.
“…It is now evident that speculators in the energy futures markets play a much larger role than previously thought, and it is now even harder to accept the agency’s laughable assertion that excessive speculation has not contributed to rising energy prices,”
Daffy: “That’s dissssssssssssspicable.”
Wall Street = “Financial Innovation”
“they” are getting gov’t ants in their pants…time for a nuclear fart!
Report: One trader held 11 pct of Nymex contracts:
http://biz.yahoo.com/ap/080821/oil_markets_speculation.html
McSame: Drill for more oil…right now!
“By June 6, Vitol had amassed contracts equal to 57.7 million barrels of oil, about three times the amount the United States consumes daily. On that day, the price for a barrel of oil spiked $11 to settle at $138.54, per barrel, valuing Vitol’s oil holding at nearly $8 billion.
Commission documents do not show how much Vitol had put down to acquire that many contracts. Nymex allows traders to acquire contracts by putting up margins, which can amount to a fraction of the actual worth.
So-called “swap dealers” operate in oil markets by investing on behalf of hedge funds and wealthy individuals who have no plans to take delivery, or buy an actual contract for oil.
The commission’s data show that at the end of July, just four swap dealers held one-third of all Nymex oil contracts that bet prices would increase.”
Let’s start off the coast of Hilton Head or what’s that “Island” community that “I wanna be like Shrub” …brother Jeb lives in somewhere in Florida?
Report: Speculators may have played larger role in oil market swings that once thought:
http://biz.yahoo.com/ap/080821/oil_markets_speculation.html
Irate IndyMac’rs see Chucky as the bringer of their horror story, but couldn’t the stock dropping around 90% the past 6 months, have also been a factor?
No, that was why it “was a sure thing bargain”!
This is really funny!!!
http://tinyurl.com/5vb3pb
Only 17,990,000! In beautiful Trona CA.
Somebody’s “0″ button got stuck.
Very funny. Trona may be the one place that makes Palmdale look like paradise.
I won’t bid unless they fix the wilted mailbox. Ruins the curb appeal.
shortage confirmed in real money, paper rectangles still easy to get:
NEW YORK (Reuters) - A shortage of American Eagle bullion coins following a recent sharp retreat in gold prices has forced the U.S. Mint to suspend sales of the popular coins temporarily, dealers said on Thursday.
Rand LeShay, senior vice president of A-Mark Precious Metals, an authorized purchaser for the U.S. Mint, confirmed that the Mint told dealers in a memorandum it was halting all sales of American Eagles, a novel item among collectors and investors.
http://www.reuters.com/article/ousivMolt/idUSN2140103820080821
“…paper rectangles still easy to get:”
Oh really?
I wonder then why all these people whose homes are going into foreclosure can’t just catch paper rectangles as they drop out of helicopters and use them to pay off their mortgages?
I can trade as much gold as I want for fiatscos, but I can’t trade fiatscos for gold. Why is that, if paper is king?
..a novel item among collectors and investors.
a novelty.. a collector item.. a speculative investment.
Think Beanie Babies..
I guess I could wait for the temporary suspension to end if I wanted to buy American Eagles, or I could find some other form of gold to purchase. But I am not interested in buying physical gold.
A friend that “owns” a couple of houses and is an number 1 handyman, was just over and we were discussing things and got around to the financials…
He told me he’s $5k behind on mortgages and has a $20k credit card bill with amex, and no savings, just bobbing in the open sea with his head above water, not much else.
Amex has been hounding him for about a year, and he told me they said they’d settle for $10k, about a week ago…
Not knowing anything about being behind the 8 Ball, when it comes to credit card debt, is this common practice for the credit card company to try and cut deals, get something, anything?
Yep, you might as well get some fraction of the debt. If he enters bankruptcy, chances are they will get even less.
Plus, they’ve probably long since made up the money they loaned him via interest and fees.
BANK OF AMERICA CORPORATION
$235,464,577,000 Economic Capital
$110,399,517,000 Tier 1
2.133 EC/Tier 1
$38,161,588,176,000 OTC Derivatives exposure (OTCD)
The source is Institutional Risk Analyst and the FDIC. This is not meant t’imply that Bank of America is toast (most banks look just as crappy). This is to give an idea of the magnitude of leverage that remained to be unwound. This is Q1 data, Q2 is next week. What changes shall we see.
(a 3/8pt change in BofAs OTCD value wipes out the company =Tier1.)
Now that is leverage!
OMG!
Speaking of which, hoz: do you think BAC will be a good short at some point? I’ve been tempted for a long time, and doubly-so when they picked up Countrywide, but thought it might be a long time before it started to crack.
Thoughts?
Do your homework and then decide for yourself if the risk/reward is justified. Have a profit potential and a loss point. An acceptable loss point for a beginner is a few cents above the upper band of a 20:2 BB 30 Day Average (currently around 35). Bank of America like most falling stocks rides the lower BB down.
Man, I really wish I knew what the he– you are talking about!
Bollinger bands are curves drawn in and around the price structure that define high and low on a relative basis. The base of the bands is a simple moving average. A measure of volatility, standard deviation, is used to set the width of the bands making them fully adaptive to changing market conditions. The defaults are bands spread above and below a 20-day simple moving average by two standard deviations.
Bollinger Bands are used in numerous ways. They can be used to aid chart pattern recognition. They can be combined with other indicators to identify entry and exit points. They can be used to identify areas of compression and to spot the ends of extended moves.
John Bollinger, CFA, CMT
http://www.BollingerBands.com
http://finance.yahoo.com/echarts?s=BAC#chart2:symbol=bac;range=20080416,20080717;indicator=bollinger;charttype=line;crosshair=on;ohlcvalues=0;logscale=on
In this chart of Bank America, the upper band is ~30 the lower band is ~19 (this is a 90 day chart) the band is calculated as a 2 SD move. Notice on the band how BAC rides the lower band down, this is a characteristic of collapsing stocks and stock markets. Few rising stocks ride the upper band on the way up.
I am not a technical trader. I look at the BBs for entry/exit points for stocks that are going to go up and stocks that are going to go down based solely on fundamentals.
38 (puts pinky to corner of mouth) Trillion Dollars…
aint got nuttin on the 90 Trillion at JP Morgan…
OMG, Mr Bigelsworth just shat up his back!!!
The JP Morgan data is hard to evaluate since Bear Stearns was the counter party to most of Morgan’s risk. Unfortunately, Q1 data is all we have ergo I skipped Morgan and did BAC.
Next week buy to your hearts content, the Treasury auctions off $125B in notes.
$28 billion 3 month bills and
$27 billion 6 month bills on Monday.
$20 billion 1 year on Tuesday.
$30 billion 2year notes on Wednesday
$20 billion 5 year notes on Thursday
God it is great to run a Federal Deficit! I wonder what happens if the Chinese don’t buy?
how many billion is that?
125 Billion. Not counting the ones when you asked if Bernanke raided the Treasury balance sheet.
Do you want another Billion?
yes.
You got it Mister. You done?
no.
Another.
They’ve got me for the rest of my natural born life.
bendered,
but not broken
China is gonna buy, they are gonna keep buying.
When the Russian and Japanese dont buy…..then everyone will know.
Monroe Doctine,
part deux.
ok.. First, pick any point in the history of mankind. Next, lets assume that every dollar lent will never be repaid.
Conclusion: Every lender is bankrupt.
That was an interesting thought experiment.. not.
live from the Jackson “Make Bondholders” Whole.
“That was an interesting thought experiment.. not.”
pheeww….that wore me smooth out.
A mountain of worry for Fed at Jackson Hole
http://www.marketwatch.com/news/story/mountain-worry-jackson-hole/story.aspx?guid=%7B9A7EE483%2D8A70%2D499E%2DB552%2D8F8527D793C2%7D
What are these boobs (get it? - Jackson Hole –>Tetons –> boobs) doing going to Jackson Hole? Why not Des Moines?
Sounds like a boondoggle to me.
Boobdoggle?
Jackson Hole??! These @ssholes deserve a cold, drafty Holiday Inn in Detroit! What an outrage, Jackson Hole… To get to the root of the problem, look in the mirror you scumbags!
Malice in Wonderland’s masters of the universe might get sucked down a rabbit-hole…
I hope the hotels housing the Fed’s Jackson Hole conference make plenty of hand lotion available.
THE FED
A mountain of worry for Fed at Jackson Hole
By Greg Robb, MarketWatch
Last update: 12:19 p.m. EDT Aug. 21, 2008
WASHINGTON (MarketWatch) — In 1971 a local Jackson Hole resident named Bill Briggs decided to ski down the 13,770-foot Grand Teton mountain. His friends, watching from a safe location, were sure at one point that he had crashed only, to be flabbergasted when he turned up at the bottom in one piece.
Now, 37 years later, the U.S. economy is on a similar perilous course, and Fed officials, gathering for their annual retreat at the base of the Tetons, are watching with their hearts in their throats — aware of all the possible avalanches, crevices and cliffs that could send the economy dangerously off course.
“You don’t know what is going to break loose,” said former Fed Gov. Susan Phillips.
The theme of the Fed’s Jackson Hole seminar this year, ‘Maintaining stability in a changing financial system,’ seems more like a prayer to the mountain gods than anything else.
That area is one of the most astonishingly beautiful in the world, but one must actually walk a few miles uphill to really appreciate it.
The greatest hike of my life started at the tablerock trailhead on the Driggs, WY side of the Tetons and ended in Jackson Hole. A must do for any serious outdoorsman.
I was there once to hike the peaks. I got sick from from drinking bad water. I missed the hike but I saw the town. Antlers everywhere. Man, was I sick. I spent the entire time at the basecamp holding a bucket.
Did you eat the watermelon snow?
There is a red algae that grows in the snow at high altitudes in the rockies. It gives the snow a slightly sweet taste. If you eat too much it gives you the runs.
Warning: Do not fall for the old, “Hey look, I found some lemon snow!” trick.
Move over Fannie and Freddie, Ginnie Mae eyeing first place
Thu Aug 21, 2008 4:00pm EDT
…
The surge in Ginnie Mae volume shows it is doing the job that is seen as the primary responsibility of Fannie Mae and Freddie Mac — supporting the housing market as it works its way through the worst housing slump since the Great Depression. Fannie Mae and Freddie Mac are Congressionally-chartered private companies that guarantee MBS and purchase mortgages as investments.
The stunning rise for Ginnie Mae has come as subprime and other risky borrowers fall short of tighter lending standards and must turn to government programs.
Programs that back loans in Ginnie Mae securities, such as the Federal Housing Administration, are also growing after the U.S. Congress passed legislation expanding their reach.
Ginnie Mae in the month through Aug. 20 issued a record $27.2 billion in fixed-rate MBS, compared with $25.2 billion from Fannie Mae and $17.3 billion for Freddie Mac, eMBS data show. In adjustable-rate mortgages, Ginnie Mae is still behind Fannie Mae issuance.
COMMENTARY: FHA is riding to the rescue, taxpayers beware
Thu Aug 21, 2008 2:17pm EDT
(Ann Schnare is an economist specializing in housing and mortgage finance. She was former senior vice president for corporate relations at Freddie Mac and vice president, Housing Economics and Financial Research. She also served as chair of the Center for Housing Policy. Opinions expressed are her own)
By Ann Schnare
WASHINGTON D.C. (Reuters.com) — If you like what’s happened to Fannie Mae and Freddie Mac, you’ll love what could come next. With estimates putting the cost of a potential bailout to these government-sponsored mortgage giants at more than $25 billion, Washington is boosting its commitment to one of the riskiest segments of the mortgage business, rather than paring it back.
While Fannie and Freddie mainly serve middle-class borrowers who’ve been relatively slow to default on their loans, another entity, the Federal Housing Administration, caters to first-time buyers and those with poor credit, the same people that private lenders shepherded into the now notorious “subprime” market.
Now that subprime lending has all but ground to halt, the FHA is riding to the rescue, helping thousands of aspiring, but risky homebuyers secure financing they wouldn’t otherwise be able to get. As a result the FHA’s share has swelled to 10 percent of all new loans, up from just 4 percent at the height of the housing boom. Moreover, the recent Housing Bill will expand the FHA’s mandate significantly, permanently increasing the size of loans it is allowed to guarantee and creating a new program designed to help troubled subprime borrowers refinance into more affordable loans.
Finance & Economics
American finance
Still bleeding
Aug 21st 2008 | NEW YORK
From The Economist print edition
Fannie, Freddie and Lehman ensure August is anything but quiet
Illustration by S. Kambayashi
WITH blood stocks in New York City low, health officials this month issued an emergency appeal for donations. The lifeblood of financial institutions—confidence—is in equally short supply. Five months after the Bear Stearns debacle, and a month after America’s Treasury unveiled unprecedented steps to support the mortgage market, some whose share prices had only recently hinted at recuperation are again looking dangerously anaemic.
At the top of the critical list are Fannie Mae and Freddie Mac. The quasi-private mortgage agencies are in danger of being overwhelmed by losses on their holdings of mortgages and mortgage-backed securities (MBS).
http://us.lrd.yahoo.com/_ylt=AiYZTccAAzC66jd_Xem_nzm7YWsA/SIG=11segci62/**http%3A//biz.yahoo.com/ap/080821/merrill_lynch_cuomo.html
Did anyone else read this as, “Merrill, Goldman, Douche”?
Is anyone else besides me going to see this flick?
updated 9:25 a.m. EDT, Thu August 21, 2008
Movie paints picture of catastrophic future
* Story Highlights
* “I.O.U.S.A.” shows how U.S. has been weakened by tremendous debt
* Primary figures behind film: financier Warren Buffett, former official Pete Peterson
* Movie premieres Thursday evening with live panel discussion following
OMAHA, Nebraska (AP) — The catastrophe looming in the documentary “I.O.U.S.A.” isn’t romantic like the doomed young love in “Titanic,” but billionaires Warren Buffett and Pete Peterson warn it could break many more hearts.
Billionaire Warren Buffett has long warned that the nation’s trade deficit is a ticking time bomb.
The disaster they warn of could be bigger than any we’ve ever seen — bigger than an iceberg, bigger even than the current mortgage crisis.
If the U.S. doesn’t do something, and fast, to tame the federal government’s debts — now more than $50 trillion — the two Nebraska natives warn we will saddle coming generations with economic problems that will make this year’s financial turbulence look like a trip to the debt counselor’s office.
Premiering Thursday at 358 theaters nationwide, “I.O.U.S.A.” is part of Peterson’s campaign to give the ballooning debt a central role in the presidential campaign.
I would not see this movie if it were free. If Pete Peterson is involved, I want to be far away.
OK — you scared me away. I don’t think I can endure much more schadenfreude today, anyway. I am about on the verge of running out of hand lotion (again)…
…“I.O.U.S.A.” is part of Peterson’s campaign to give the ballooning debt a central role in the presidential campaign.
I predict it’ll be a flop..
“If you want to send a message, call Western Union.” (Sam Goldwyn)
“…campaign to give the ballooning debt a central role in the presidential campaign” lol
How does this compare with Limbaughs: “Operation Chaos”?
I’ll stick to “Looney Tunes” at least they make me & Mr. Cole laugh.
The Effect of Prayer on GodS Attitude Toward Mankind
James J. Heckman
University of Chicago - Department of Economics; National Bureau of Economic Research (NBER); American Bar Foundation; Institute for the Study of Labor (IZA); CESifo (Center for Economic Studies and Ifo Institute for Economic Research)
ABSTRACT
The Effect of Prayer on God’s Attitude Toward Mankind*
This paper uses data available from the National Opinion Research Center’s (NORC) survey on religious attitudes and powerful statistical methods to evaluate the effect of prayer on the attitude of God toward human beings.
from the paper
The technique— due to Singh (1977) — is briefly described here. Let Y be God’s attitude arrayed on a scale ranging from zero to one. This is an unobserved variable. Let X be the intensity of prayer in the population. It too is scaled between zero and one. The population density of prayer is summarized by a univariate density f(X) which has been estimated by Father Greeley (1972).
Accept on faith that the conditional density of X given Y is of the form
g(X Y) =a(Y)exp(XY) (1)
where a(Y) is an unknown, continuous, positive, and differentiable function. Singh demonstrates that
under his conditions
( | ) ( ),
( )
E Y X x f x
f x
′
= =
where f ′(x) is the derivative of f(X) at X = x . Thus, from the population distribution of prayer, we
can estimate the population regression function of God’s attitude as a function of prayer. For a derivation, see Singh (1977).
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1230823
Hoz,
What has happened to Greenspent “Box Index” & your distribution of unemployment stat’s from American companies? Being a Laoist…man your fallen into the mud.
Think fast — How many houses do you own?
Housing gaffe sparks campaign row
By Edward Luce in Richmond, Virginia and Andrew Ward in Washington
Published: August 21 2008 23:14 | Last updated: August 21 2008 23:14
The tone of the presidential race deteriorated from uncivil into open name- calling on Thursday as Barack Obama and John McCain directly questioned each other’s integrity and competence to govern.
The row was sparked by Mr Obama’s response to an interview that Mr McCain gave on Wednesday to Politico, the online news site, in which he appeared to forget how many houses he owned.
What does Cindy know about John…and how long has she known it?
yep its true silver is going for about 20 dollars an ounce on Ebay.
new Pan American silver 1 oz bars and others
whats the spot price 13.96 per oz
http://www.silverpa.com/pricing.php
pretty werid