Bits Bucket For August 23, 2008
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The Housing Bubble
Examining the home price boom and its effect on owners, lenders, regulators, realtors and the economy as a whole.
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Name:Ben Jones
Location:Northern Arizona, United States
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Food Makers Scrimp on Ingredients
In an Effort to Fatten Their Profits
http://online.wsj.com/article/SB121945357145165595.html?mod=googlenews_wsj
Another ingredient supplier, NutraCea Inc., a small publicly traded company based in Phoenix, reports seeing an increased demand from food makers for its rice bran, a rice-milling byproduct that until about 20 years ago used to be fit only for animal consumption. Rice bran is the outer layer of the brown rice kernel that remains after the husk has been removed.
I can see the advertising on the box changing to something like, “Kids will love the new recipe! Now made with more filler and less quality ingredients!”
Ive stopped buying ice cream. Ice cream went form 2 quarts to 1.75 quarts to 1.5 quarts. I now make it 1 gallon at a time cost $4.50, take that Dryers, Bryers, and what ever ice cream maker. It tastes better too.
The shrinking of the size of food products (while keeping the price the same) was a common them during the 1970’s.
Stealth Inflation
I noticed the dreyers ice cream shrank again here lately.I also notice starkist tuna dropped to 5 oz vs 6 for others.They screw you one way or another.
Your comment made me look in my pantry. The Starkist tuna I bought a week ago was 6oz….I’ll have to keep an eye on that next time I buy some.
Steal Inflation 101:
I’m an admitted addict of sunflower seeds (in the shell) and here it is, in a nutshell.
2 years ago, a 99 Cent bag of Frito Lays contained 5 1/2 oz’s.
Today, a 99 Cent bag of Frito Lays contains 4 3/4’s oz’s.
My cost went from 18 Cent per ounce, to almost 21 Cents per ounce.
“They screw you one way or another.”
They do? I hope you remember your own quote the next time you personally try to sell something - anything - for a profit.
Wow, this is EXACTLY what we’ve just done recently.
I don’t mind them raising the price. Milk, cream, and sugar cost more, gas prices make the distribution more costly, etc. So prices must go up. Fine.
What I absolutely loathe is the sneaky heh-heh-you-dumb-consumers-will-never-notice downsizing of the products you just mentioned.
Plus, when you make your own ice cream, you know exactly what’s in it AND it tastes much better.
I wonder if it is a Govt. mandate.If prices stay the same the inflation numbers stay the same no? PPI which is the wholesale producers number did go up, but what you,and I buy didn’t, or hardly did…”See inflation is only 5%” no worries..
This is what i have been saying for months They DO NOT use Unit pricing but Retail pricing
Its the only way the numbers can work.
It’s just a subtle message for most Americans to lighten up…
This is an excerpt from an e-mail I received from my cousin in Seattle, their only son is off to College and they are thinking of moving to Montana. This RE person sounds fairly reasonable to me.
We had a very nice real estate lady come by. She’s a bit older than us
and has had 30 years experience selling and marketing homes. I didn’t
know she was coming over–Tina invited her. She zeroed in on all the
stuff we’d need to work on if we hoped to sell. Trees and bushes need
removing or trimmed, we need a new roof and a new furnace (I knew
that) and our home needs to be de-cluttered. She understood perfectly
that our home was our office and how we’ve accrued so much stuff in
over 20 years of residence. She suggested we rent a storage unit and
store away books, book shelves…and basically everything else. It
would make the home easier to show and it would help us get a jump on
moving and also lessen the emotional attachment.
I have been less than enthusiastic about moving but there is one thing
motivating me now: Money. She expects the market here to drop 10
percent further. Homes in Montana are MUCH cheaper and the cost of
living is much cheaper also. If we sell we could 1. Buy a home and pay
it off right from the start. 2. Get completely out of debt in one fell
swoop. 3. Ian’s college would be completely paid for and 4. We’d have
a big chunk of money to live off of and invest, and finally 5. We
could rent to start and wait for home prices to fall still further and
buy at a ridiculously low price.
She said it was a buyer’s market and it wouldn’t be easy to sell now,
but we do live in a quiet and desirable neighborhood that’s also close
to the interstate and the mall. If we didn’t sell now, she said the
value would continue to decline over the next few years. There’s no
easy way out of the banking mess we’re in and she said banks were no
longer being spendthrifts. They would not make a loan to whoever buys
our place unless they’re completely checked out and putting something
down AND they would not allow the loan if something is wrong with our
house (roof, furnace, etc).
Typical- they want the seller to spend lots and lots of money to make it easier to sell, hence for the agent to make their nut. They’ll push to make their own job easier at the seller’s expense.
Tell the agent they are the re professionals- let them figure out how to sell the house as-is and get maximum for it. Otherwise, exactly what is their value?
On the other hand, if they want to chip in themselves to move bushes, great, we can work something out.
You’re being too cynical. You can’t hand a total dump to a RE agent and expect her to market it competitively for a good price. An agent shows her value by giving good advice about remedying a house’s deficits, working hard at marketing, having good negotiating skills, and potentially preventing an expensive legal disaster simply by maintaining due diligence and by having “malpractice” insurance.
I have no love of realtwhores whatsoever, but this one seems relatively reasonable and professional. If the bloated profession had a shakedown of about 90% of its dead-weight employees, I think the remainder would be worth it to people who would like them around to help buy and sell homes.
farther down:
Analysts who closely follow the Treasury have said that no action to rescue ailing mortgage giants Fannie Mae and Freddie Mac appears imminent this weekend.
Whew. They are safe this weekend: only 4 to 8 more weekends to go!
If the roof & furnace doesn’t need fixing TODAY, then just lower the price by that much and let the new owner worry about it later…..
Sometimes i find people are willing to buy scratch and dent items at a good discount today…simply because that is all the money they have today.
———————————
we need a new roof and a new furnace
We did it the realtors way, getting ready over the course of the last year. We sold in Texas in a month and a week (closed earlier this month). Got our offer after dropping the price 5% after the first month with 10 showings. We spent $5000 on a new fence and new outside paint to match the new inside paint we had done ourselves.
Not sure I would have sprung for a new roof. But if I was in Seattle and trying to maximize those crazy prices on a paid off house… Get it sold.
Obviously, we thought our house was properly priced. It probably was, based on the results, just not enough below the other deals to be interesting enough to buy. After moving, and a few weeks later, I looked online more dispationately and found several houses I would have bought myself before ours, even with the incredibly nice virtual tour our realtor put up. We dropped the price a bit and became the “comp” because of it.
The problem I see in this national market with FNM so shaky is that things could change completely over any given weekend. The month it would take to get it done on even an expedited schedule would have me sleeping badly.
Our buyers evidently put in around 8.5% down. I suspect their kind won’t be around much longer.
My wife found (online) an inexpensive house in a bad neighborhood (most expensive house in a neighborhood with a lot of foreclosures. Otherwise OK, still…). Likely very hard to resell. My own “rent a big house for the same price for a couple years” plan didn’t last long. We ended up having to seriously look for a house to buy to get her off her attachment to that dead end house. We bought a less expensive house than the one we were selling in 10 days (mid range in a much older but still nice neighborhood) and showed ours vacant, paying both mortgages for awhile. It was not a pleasant time.
Montana may look so inexpensive in comparison as to be completely “different there”. By the word we have seen here, however, it isn’t. Same themes playing out everywhere. Take your struggles selling to heart and carefully consider before buying again. And don’t buy before selling this one.
RE: If we sell we could 1. Buy a home and pay
it off right from the start. 2. Get completely out of debt in one fell
swoop. 3. Ian’s college would be completely paid for and 4. We’d have
a big chunk of money to live off of and invest, and finally 5. We
could rent to start and wait for home prices to fall still further and
buy at a ridiculously low price.
LOL~
Talk about totally dated thinking.
So where does your cousin think he/she is going to find the person(s) who is willing to assume the INVERSE obligations of their lofty financial goals?
The sucker pool is fished out.
The way I see the economy goin’ at the moment, I’ve changed my valuation drop levels back to to pre-late ’80’s levels.
Screw ‘98.
Shoulda got out in ‘03.
“So where does your cousin think he/she is going to find the person(s) who is willing to assume the INVERSE obligations of their lofty financial goals”?
I guess you missed the KEY word in his statement… IF… Small word with big implications!
RE: IF… Small word with big implications!
LOL-What a wonderful world “IF” all our “IF’s” were granted!
HDman:
In the Great Mogambo style the new mantra will be:
200 THOUSAND DOLLARS IS A LOT OF FREAKIN MONEY FOR A HOUSE !!!!!!!!!!
RE: In the Great Mogambo style the new mantra will be:
200 THOUSAND DOLLARS IS A LOT OF FREAKIN MONEY FOR A HOUSE !!!!!!!!!!
A big Roger One, Red Leader! on that, NYCdj!
These chucks w/ $500k mortgages leave me slack-jawed!
It’s funny how in 2001 most white collar professionals never hoped to live in $500,000 houses. Then in the last few years they take out liar loans and get into them. Back in 2001, $200,000 houses were considered for the dual income upper middle class types. In 2000 I could qualify for a $150,000 loan on a house at most.
The housing price deflation which obviously started in all the hot areas in early 2006 is merely the punishment that reality imposes on massive fraud by individuals and businesses. It’s fun to watch this justice.
maybe in the US, for sure not in Netherlands. For that amount of money you can’t even buy the worst POS. Even beach shacks (size a little over 100 sqft I think) are selling for more here, and that price doesn’t include any land ownership. But you can buy a decent garage over here for about $200K …
Oh great, more fools coming to MT…yes our houses are soooo much cheaper here! Look, honey, only $379k! Let’s buy two!
I have no idea where they are looking to buy in Montana, and have my doubts that will even happen. They have lived in Seattle for over 20 years and are ready to go. Selling their house is the big IF.
P.S. I feel the same way about all the Yankees moving to S.C. and stinking up the place. They all say the same thing, houses, land and taxes are so cheap down here. Let’s buy two, no three, no four, and two for the kids and Grandkids!
Montana is WAAAY different than Seattle. Good like finding work.
Another hand that wants to dig into our wallet…
By Jeff Green
Aug. 22 (Bloomberg) — General Motors Corp., Ford Motor Co., Chrysler LLC and U.S. auto-parts makers are seeking $50 billion in government-backed loans, double their initial request, to develop and build more fuel-efficient vehicles.
The U.S. automakers and the suppliers want Congress to appropriate $3.75 billion needed to back $25 billion in U.S. loans approved in last year’s energy bill and add $25 billion in new loans over subsequent years, according to people familiar with the strategy. The industry is also seeking fewer restrictions on how the funding is used, the people said today.
http://www.bloomberg.com/apps/news?pid=20601103&sid=amGc6ZPSzRLM&refer=usGM, Ford Seek $50 Billion From U.S., Double Request (Update3)
sure, why not. Taxpayers are now throwing money to reward idiocy and boneheaded mismanagement at the investment banks. Now the mismanaged automakers figure they are just as qualified for free, no-strings-attached money.
This is one of 2 areas that I believe will be in the next major bubble.
If people don’t spend the government will spend. I doubt very much the auto industry came to this request without government assistance and a sweetheart deal in place. In floor parlance ‘done’.
RE: Taxpayers are now throwing money to reward idiocy and boneheaded mismanagement at the investment banks. Now the mismanaged automakers figure they are just as qualified for free, no-strings-attached money.
The gov of Mazzland initiated legislation touting the giving of a $1 billion to an ad hoc ” bio-tech committee” to develop “job initiatives” (can we say in cheap imitation of the Big Dig development trathole) despite the fact the industry only employs 2.5% of the workforce.
Everybody’s got their hand-out now-it’s a buzzard feed on what’s left on the rotting carcass of American initiative and self-sufficiency.
NO! a company screws up, privatizes the profits and the taxpayer bails them out, wash, rinse, … repeat
At least congress has not released a dime on the scheme … yet
One big step for the automakers came Friday afternoon, when McCain said he would support funding some of the loans the Detroit automakers and their suppliers seek. Noting that Congress had approved $25 billion in such loans last year but failed to fund them, the Arizona senator said the automakers deserved some of the same support that the government had offered to Wall Street.
http://www.freep.com/apps/pbcs.dll/article?AID=/20080823/BUSINESS01/808230304
Wow, like, I totally thought McCain was, um, a free market Conservative?
After 8 years of GWB, you know now the Republican Party (less Ron Paul) is anything but free market.
Parties have shifted their politics a few times since the founding of this Republic. We are merely seeing a shift toward Bible thumping socialism in the Republican Party. Nothing in the Republican Party appeals to me.
Yay for me!
Just received books - one of which is The Revolution by Ron Paul.
Leigh
“We are merely seeing a shift toward Bible thumping socialism in the Republican Party. Nothing in the Republican Party appeals to me.”
Really appreciate your honesty, Bill.
Funny, I thought he was The Maverick.
You thought wrong.
Funny, I don’t know of a single Republican, Conservative, Libertarian that thinks McCain is conservative.
I’m surprised you did.
From this, I can only conclude that you spend all of your time bowing to the closed-minded, intellectually bigoted, group-think of the Left. You know, those who take their marching orders from George Soros, moveon.org, network and cable news and the like.
‘Tis no one with a more narrow mind than a moveon.org adherent. And unlike you, I’m not trying to be a bit sarcastic. Nor funny.
There W.once was a decrepit man that talked a certain style, straight-talk he called it, but you could see through his lies, all the while.
LOL…
“Noting that Congress had approved $25 billion in such loans last year but failed to fund them, the Arizona senator said the automakers deserved some of the same support that the government had offered to Wall Street.”
Ford/GM/Chrysler deserve as much support as Wall Street - less than none. If McSenile thinks those companies are so well run as to deserve support of taxpayer funds, why doesn’t he instead sell one or two of his houses and buy stock in those companies?
Or maybe, instead, we should let Ford/GM/Chrysler die and let the Honda’s and Toyota’s of the world produce superior products at no cost to the taxpayers.
The government needs to do it old style. Step in, clean out management & labor, wipe out the shareholders, break up the companies into smaller, manageable units and turn them over to the engineers who know how to make things.
Same thing with Wall St. Step in, clean out the debt, wipe everybody out, and sell real assets to people who know how to properly invest. Be done with it already.
“General Motors Corp., Ford Motor Co., Chrysler LLC and U.S. auto-parts makers are seeking $50 billion in government-backed loans, double their initial request, to develop and build more fuel-efficient vehicles.”
If they’re really serious, they should have no problem agreeing to much higher CAFE standards as a condition of the loans.
Olympics disappoint China business owners…
He had expected his Sichuan restaurant, a couple of miles from the Olympic village, to be packed with tourists during the Games. But it’s been unusually quiet. One day this week, business was so slow that Li let two of his seven staff members go home in the middle of the lunch hour. Three others sat in the corner watching television.
“Everybody thought the Olympics would be great for business,” he said. “It turned out differently.”
Many owners of small restaurants, hotels and shops in Beijing are wearing long faces this summer, especially those who poured their life savings into buying businesses or sprucing up their shops ahead of the Games.
http://www.latimes.com/business/la-fi-olympics22-2008aug22,0,4581747.story
The olympics seems like a rather has-been event, and once the corp’se runs out of money to sponsor it, who’s gonna step up to the plate?
We watched about 30 minutes of it on the telly, and perhaps there was 5 minutes of actual sport shown.
The olympics seems to have morphed into a sort of sad, tawdry series of corporate-sponsored events loaded with bad karma. For me, though, as a result of some of the documentaries about modern China (not the BS corporate shilling from NBC) I have come to respect and like the Chinese people while I despise their government and businesses.
Gee. Kind of how I feel about the US.
I haven’t watched the Olympics in earnest since it became a virtual corporate infomercial.
Mike
You guys really need to get a dual-tuner DVR to record the events so you can just fast forward through all the crap. I’ve records about 100hrs over the last couple weeks and have watched about 10hrs of it — the rest of the qualifying and commercials I just blow through on my way to semis and medal events.
rob
I did the same with the old VCR!
I just ignore advertisements and banners. I enjoy everything about this Olympics. This has been one of the best I watched.
It seems this is an old story- almost nobody gets as rich of the olympic games as they expect
You can always make money when you have a captive audience-locked in a stadium, but apparently the Chinese really goofed things up in a few ways…
In a country of 1.3 billion human beans, oftentimes there were vast clumps of unoccupied seats for many events, and sometimes the only food available from the concessionaire, was potato chips & saltine crackers…
(As per James Fallows, on PBS Newshour yesterday.)
RE: In a country of 1.3 billion human beans, oftentimes there were vast clumps of unoccupied seats for many events, and sometimes the only food available from the concessionaire, was potato chips & saltine crackers…
The city of Montreal made the last payment for the bonds used to construct the facilities for their “Olympics” held in 1976.
The only thing I’ve watched from Chinaland is a quarter of a US women’s water polo game.
Oh yeah-and I think I tuned in to see what the brou-ha was about concerning the US female team beach volleyball attire.
Gotta say-those gals would give Olympiagal a run for top bum wiggler.
Ed McMahon finds home buyer, avoids foreclosure
Fri Aug 22, 2008 8:49pm EDT
LOS ANGELES (Reuters) - Television celebrity Ed McMahon has finally found a buyer for his multimillion-dollar Beverly Hills mansion, avoiding a foreclosure that would have made him among the most high-profile victims of the U.S. housing slump.
The buyer of the six-bedroom, five-bathroom home was not disclosed, but McMahon spokesman Howard Bragman said on Friday it was not billionaire Donald Trump. The New York developer had said last week he was in discussions to buy the house and lease it back to McMahon after widespread publicity about the celebrity’s default on his $4.8 million mortgage.
“It’s a confidential deal, and the buyer wants anonymity, but I can tell you it is not Mr. Trump — and it’s not John McCain,” Bragman said, joking about the Republican presidential hopeful’s admission this week that he did not know how many houses he and his wife own…(cont’d)
http://www.reuters.com/article/entertainmentNews/idUSN2244611120080823
Trumped!
Leigh
I bet it’s the mafia, or maybe some closet Johnny Carson fanatic.
I heard a Publisher’s Clearinghouse Sweepstakes Winner was the buyer…
The guy was going to get foreclosed, but he can still afford a spokesman? Ed McMahon - clearly a contender for the top no-talent hanger-on.
In tinsletown, to not have a spokesman would imply that you are really hard up, even if you were really hard up.
Appearance is everything…
“Then you will see the rise of the men of the double standard - the men who live by force, yet count on those who live by trade to create the value of their looted money - the men who are the hitchhikers of virtue. In a moral society, these are the criminals, and the statutes are written to protect you against them. But when a society establishes criminals-by-right and looters-by-law - men who use force to seize the wealth of disarmed victims - then money becomes its creators’ avenger. Such looters believe it safe to rob defenseless men, once they’ve passed a law to disarm them… And then that society vanishes, in a spread of ruins and slaughter.”
Francisco d’Anconia
Amen, brothah! I was watching a program on the History Channel about the Goths and how and why they, a formerly peaceful people, came to rebel against Rome in a big way. I had also recently watched Goodfellas again (love that flick) and it struck me that the whole Mafia method of making people pay for protection and then looting them is nothing new and has its roots in ancient Rome. The Goths became known as the bad barbarians, but they were provoked for sure. Cautionary lesson for the US and also for US corporations.
Sure, the Goths and Visigoths were peaceful until they migrated into Southern Europe, displacing by force and absorbtion the Gallic natives already there (who had themselves done the same generations earlier).
They readily accepted Roman culture, civilization, and mores, and considered themselves as Roman as anyone. They had been part of the Roman camp for centuries until the turn of events in the 5th centry. Until they themselves wanted a little more power, and their generals and armies (part of the Roman army) wanted to get paid.
Point is, these are vast movements, and when tv shows try to declare one side good or bad, there is a lot of simplification and revision going on, often.
Ronin,
Shhhhhh….. It’s the political narrative that’s important.
Proud holder of a BA of Hist.
It’s the vast hordes of Northern-Extremists I fear the most…
You’ll know their among us, when you start seeing tell-tale signs like: flavour flav, bi-lingual wording in a language only spoken in exactly 1 state, and 222’s* become accepted as the ultimate headache cure.
*over-the-counter aspirin with codeine in them.
It was Christianity that caused the downfall of Rome. Which sent most of what today we call Europe into chaos and the Dark Ages. I say beware of Christianity!
Why do you attribute the quote to a fictional character? That is pure Ayn Rand. Her philosophy works if there weren’t so many ‘virtuous’ producers who also try to gild the lily by also parasitizing off of the ignorance or work of others. Ayn never counted on the rise of the Speculation Nation.
I’m thinking the Section 8 program needs to be eliminated, as it is yet another government boondoggle that keeps housing prices propped up, in a way, by keeping rents artificially high. It’s interesting to cruise the Tampa Bay craigslist and read ads for various rentals and “investment” property and wow, it’s amazing how much Section 8 property there is. The words “Section 8 OK” is a big turn-off for me.
I take it Section 8 is some kind of government rent assistance. What are the basic features?
(I’m not in or from the US.)
The Section 8 Wiki
Generally speaking, Section 8 housing in my area (DC) is the cheapest neighborhoods where it’s hard to find a good tenant. Section 8 is supposed to provide a basic guarantee of on-time payment and quality of tenant. In my experience, you still find plenty of tenants in Section 8 that will ruin your house. That being said, it’s entirely voluntary on the part of the landlord.
I had a friend who rented out a townhouse near DC to a Section 8 tenant. They decided they didn’t care to take out the trash. The entire backyard was full of black plastic trash bags rotting in the sun. Eviction was not an easy process.
Section 8 was created in 1937 during the FDR recession.
Don’t you mean the Hoover recession?
Roosevelt started his second presidential term in 1936. Unemployment creeped up to 20% in 1937.
http://www.hud.gov/progdesc/voucher.cfm
RE: I take it Section 8 is some kind of government rent assistance. What are the basic features?
Section 9-Federal government subsidized rent program.
Market prevailing rent is $1000.00.
The welfare recipient(usually) gets it for anywhere from $0 to $300. and the US taxpayer gets the bill for the balance.
Program allows slumlords to profiteer from dirtbag slums which outta get torn down, while the welfare crowd gets a roof over their head for nothing.
Some more section 8 info:
http://www.theatlantic.com/doc/200807/memphis-crime
Indeed.
I’ve read some articles on London slums like St Giles and the East End.
Different country, different century, different ethnicity.
But same basic diagnosis; poverty breeds criminals and criminals don’t (as a statistical group) change their attitudes when they change their circumstances.
I don’t have a solution.
It is high time to recognize the entire suite of Uncle Sam’s demand-side low income housing subsidies have contributed to putting housing prices out of reach of all Americans except for the super-rich, sparking a foreclosure crisis in the process, and scrap every last one of them.
I wish our political class would re-examine many of the assumptions about the usefulness of housing subsidies, but I think that may be to much to ask for. What I don’t understand is why some aspiring politician doesn’t at least make a populist case for eliminating the mortgage interest deduction, at least on second homes.
The delusions that fed this mania are still alive and well. We have had decades of government making housing more “affordable” and yet no one seems to care that all of the government’s efforts have contributed to what is becoming an economic disaster.
eliminating the mortgage interest deduction, at least on second homes ??
Its been on and off the table for a very long time now along with a large reduction in the max loan limit (1-mil)… I expect the following to occur in the next few years;…Elimination of 2nd home interest deduction that exceeds rental income….A reduction in the cap on interest deductable loan limits to 500k…Elimination of the 250/500k tax free gain and go back to the old roll over rule…
The old roll over rule was America @ it’s simplest and smartest.
A self-enforcing way to make people move up, after selling their home.
Vs., The current 250/500k tax exemption, which caused many a Californian to head off to the wilds of somewhere else in the other 49 states, buying up 2 or 3 houses for what they sold their completely unremarkable L.A. tract home for, contributing to the delinquency of a market, and the housing bubble, in general.
It’s interesting while cruising Craigslist to take note of the specific areas of Tampa Bay where there are loads of cheap older homes people are trying desperately to unload. Holiday, Port Richey, New Port Richey, certain parts of St. Pete and West Tampa. Yucko! I’m just wondering if bloggers in other parts of the country are noticing the same thing, areas where houses are cheap, people are trying to unload, but you wouldn’t want to live there.
Hi palmetto
I like to glance through Wisconsin and surrounding states RE Craigslists. I have noticed RE agents have swarmed most of the larger cities postings with their agency listings.
Lots of (I suspect) lower end flip or starter homes in larger cities still with Dream Prices being peddled by both agents and private owners. I imagine the potential for falling home values plus bank pressures as well as impending winter energy prices and raising taxes is affecting this surge.
On note on Wisconsin and some Illinois banks. Many larger midwest banks are really expoused and getting hurt by their bad loans in Az, Fl and Ca. Even the bigger newspapers are beginning to talk of shakey banks, mergers and possible defaults on everything from cars to houses.
Here in the conservative midwest, it is really different. We have used the time tested “Australian Bomb Containment Method” in Boom/Busts for years.
We simply bend over with our butts high in the air, place our heads into the sand and wait for the EXPLOSION to Go Away
I am not in or from the US, so forgive me for not being alert to all the nuances of the current FNM/FRE debate. It just seems amazing to me that the situation has been allowed to reach such a staggeringly dangerous (according to several commentators) point.
So what is their basic problem?
Offhand, I can think of five possibilities:
A Solvency issue,
A Liquidity issue,
A Capitalisation issue,
A Profitability issue,
A Political issue,
or of course some combination of the above.
Any thoughts?
An influence issue.
A quid pro quo issue.
A corruption issue.
A blind leading the blind issue.
A timing issue — The GSEs increased market share while the housing industry collapsed. In other words, as home prices fell and loan losses increased, they expanded operations. Thinly capitalized lending models only work when RE prices go up.
I would say the real problem has been a transparency issue. A lack of transparency about how thinly capitalized they were, about the quality of loan underwriting, about the compensation and conflicts of interest of their corporate structure, and the fact that they vastly strayed from their primary mission of providing funding for affordable housing for first time primary homebuyers.
A political issue.
The GSE regulators were trying to get their capitalization rates up over the past few years.
Each time, the politicians would whine and “force” them back down, because all the “victims” needed the GSEs to (re)finance their loans. Really, they just wanted the GSEs to assume the risks of the big financial firms/banks. Once that paper was off-loaded, make the GSEs public and, voila!: you have just privatized the profits and socialized the losses…all “for the children.”
What i find is we have so dumbed down out country, people cant think reason ask questions anymore..
I almost rear ended a car the other day, off the Grand Central, BQE exit it was bright sunlight and went into a tunnel that under a bridge it was pitch black at 7 am….i was scared i couldn’t see the road i hit my brakes and almost hit the car in front of me who did the same thing
This is the kind of moron stuff that goes on everyday….does anyone in guvmint know how to think or drive or are they that clueless.? .and people get hurt and killed by this dumbing down of america
I’m confused here, aNYCdj. Are you putting forth the other driver’s behavior as being moronic? If so, didn’t you do exactly the same thing?
???? You can see you are going into a dark spot and don’t have the reflex to switch the headlights on? And what about that crucual two second distance? I think your anecdote proves you have been asleep.
Sarbanes-Oxley Upheld By Court as Constitutional
By David S. Hilzenrath
Washington Post Staff Writer
Saturday, August 23, 2008; Page D01
Snips…
An appeals court yesterday upheld the Sarbanes-Oxley Act of 2002, dismissing arguments that the government’s attempt to protect investors from repeats of the scandals at Enron and WorldCom gave federal overseers unchecked power.
The U.S. Court of Appeals for the District of Columbia Circuit rejected a challenge to the heart of the act, the creation of a nonprofit board to set auditing requirements and police the accounting firms that audit public companies.
The legislation, adopted in response to a wave of corporate accounting abuses, was meant to restore public confidence in the stock market, make executives more accountable and improve the audits on which shareholders depend to keep companies honest…
Though the lawsuit focused on constitutional issues, the parties behind it had other grievances. A leader of the Free Enterprise Fund, Mallory Factor, has argued in print that the act damaged the economy and made it possible for chief executives to be sent to jail for honest mistakes…
Under Sarbanes-Oxley, consulting was restricted, and the new board replaced the lobbying group as the auditors’ overseer. In the years since President Bush signed the law, corrections to corporate financial statements became more commonplace, as have disclosures that companies had serious weaknesses in their internal controls. Accounting firms received consolation in the form of expanded audit work–and bigger audit fees…
Leigh
The easiest way around the SOX problem is for companies Board of Directors to approve any and all actions even illegal by the companies officers. “The president gave herself a 200% raise and this was approved by the BOD”. The same is true for hiring consulting firms, accounting firms and law firms. Prior approval from the BOD and the SEC filing is a no brainer.
Since the SOX was passed, the vast amount of BOD actions that have changed corporate structure in ways detrimental to shareholders is amazing. Mopes that believe the corporations are working for the shareholders need to get a better grasp on reality.
was meant to restore public confidence in the stock market
Mopes that believe the corporations are working for the shareholders need to get a better grasp on reality
Being so heavily regulated gives lots and lots of credibility to publicly traded companies. But as you point out, all the regulation doesn’t really do much good to ensure the corporations are really working in the best interests of shareholders, customers or employees.
But as long as its regulated, everyone will think the water is safe.
Talk of Russia-Cuba ties seen as warning to U.S.
http://news.yahoo.com/story//nm/20080823/wl_nm/cuba_russia_dc
You’re either with us or against us, and it looks like the Russians are leaning against right now. All that oil wealth is going to create a much stronger Russian military machine. The new cold war, brought to you by the Bush admin!
RE: All that oil wealth is going to create a much stronger Russian military machine.
Yup-those pic’s of T-72’s and armoured infantry carriers rollin’ down the road in Georgia sure say the nature of the game has changed.
Not to fear though…Nancy Pelosi & Co. will save us all.
You brand Iran as the evil empire and then invade and execute the leader of the country they share a border with. All the while you have 150,000 troops across their border and you expect Iran to not try to defend itself?
Iran saw that we sat down and talked with North Korea once they developed nuclear weapons. Why should we expect another country to something different?
In short Bush has created so many problems in the world today.
we play in their backyard, they will play in ours…
“A top Russian general said Friday that Poland’s agreement to accept a U.S. missile interceptor base exposed the ex-communist nation to attack, possibly by nuclear weapons, the Interfax news agency reported. ”
http://www.msnbc.msn.com/id/26203430/
“We can evade reality, but we cannot evade the consequences of evading reality.”
Ayn Rand
I substitute my reality for your reality.
I’d trade you my reality for your reality and a 1st round draft pick.
BTW, how does raising the GSE conforming loan limits to $730K or so in some of the most expensive housing markets in the U.S. square with the “affordable housing mission”?
Talking Business
A Mission Goes Off Course
By JOE NOCERA
Published: August 22, 2008
Whenever the mortgage finance giants, Fannie Mae and Freddie Mac, find themselves in a tough spot — and boy, are they in a tough spot now! — they always seem to find a way to blame their problems on “the mission.” “We exist to expand affordable housing,” says Fannie Mae on its Web site, and although it also lists its other mission — providing liquidity for the American housing market — it is the former that has long been the companies’ trump card.
That mission of creating affordable housing is the reason that Alan Greenspan, the former Federal Reserve chairman, could testify, year after year, that Fannie and Freddie had become so large, and took so much risk, that they could one day damage the nation’s financial system — only to be utterly ignored by the same members of Congress who otherwise hung on his every word.
The mission is why Representative Barney Frank, the powerful, and usually clear-eyed, chairman of the House Financial Services Committee, will defend Fannie and Freddie even now, when their misdeeds are so clear. The mission is why the two companies were able to run roughshod over their regulator for years, and why the Bush administration was unable to rein them in, even after an accounting scandal.
The mission is why their two chief executives, Daniel Mudd at Fannie and Richard Syron at Freddie, could take home a combined $30 million last year, while presiding over one of the great financial disasters of all time, posting billions of dollars in losses with no end in sight.
Thus it was that a few weeks ago, Mr. Syron gave an interview to The Boston Globe that was at once astonishing and completely predictable. The day before, my colleague, Charles Duhigg, had written a devastating story in The New York Times, describing how Mr. Syron, shortly after becoming the C.E.O. of Freddie Mac in 2004, had been warned by David A. Andrukonis, then the company’s risk officer, that that Freddie Mac was buying loans that “would likely pose an enormous financial and reputational risk to the company and the country.”
The article continued: “Mr. Syron was also warned that the firm needed to expand its capital cushion, but instead its safety net shrank. Mr. Syron was told to slow the firm’s mortgage purchases. Instead, they accelerated.”
And what was Mr. Syron’s response the next day in The Globe? You guessed it: “If you’re going to take aid to low-income families seriously, then you’re going to make riskier loans,” he said. “We have goals to meet.”
As for the claims made by Mr. Andrukonis to The Times, Mr. Syron said that Mr. Andrukonis had “disagreed” with the chief executive’s decision to reorient Freddie Mac “towards the housing mission.” The major source of friction between the two men, he strongly implied, was that Mr. Andrukonis just didn’t care enough about affordable housing.
And if you believe that one …
We’re on an affordable housing mission, from god.
(with apologies to Jake & Elwood)
I keep hearing reports about farmers having big problems with metal thefts, all over the Central Valley of California…
Oftentimes these farms cover a vast territory, and typically have no fences, and the heavy metal being stolen is merely their pumps, well covers and anything else the not-so-precious metal dealers can pry off.
Perhaps the thieves make off with a few hundred bucks for their effort, but the cost to the farmer is around $10k to get things fixed, and many times he’s out of water, and potentially-out of business.
Farmers & prison overseers are about the only large clump of people making more than $10 an hour, here in Left-Coast-Appalachia
If I was a farmer and caught someone in my fields stealing my gear, they’d be fertilizer.
Imagine having hundreds or thousands of acres, with pumps dispersed widely, so you could never really be more than one place @ one time, to stop the perps in the act?
That’s what the farmers are up against…
Sounds like an opportunity for a farm security business.
Hate to say it, but bear markets are a result of fear (as bull markets are a result of hope). Fear is what security firms sell, and as such, should do relatively well versus other endeavors.
As I said before, you’ll never see a fence around any of these orchards or farms, and to employ armed guards or man-fridays to watch over the crops, adds more cost to already inflated food, more financial fuel on the fire.
I doubt you are allowed to shoot pump and cover rustlers in CA. So what the security people would be doing is a bit of a mystery.
About 15 years ago, some banks in L.A. discovered that if they had a man-friday(imagine Forest Gump types, but without the charm & clothed in a faux security guard-looking uniform, a hybrid mix of wanna-be cop & valet parking attendant) or 2 hanging out in the bank parking lot, that bank robberies went down substantially in locales where they were so employed.
uh,….. “allowed”? At 3am in the middle of a thousand acre farm with a remington 870 you’re “allowed” to do as you see fit.
I thought you had to write your initials on every piece of shot first
There are lots of these ‘rural patrol’ firms around the country. I take it that you should take a ride in the farmlands one day and see that it would take a militia to keep crime down in many of those areas. The best way to stop this theft is to ban scrap yards from buying pumps and farm equipment without some kind of positive identification. The second best way is to put a couple .45 bullets into theives’ heads and have it in the front page of the local newspapers.
Wisconsin Farms Targeted by Metal Thieves
The price of copper and other metals has made agriculture a target for thieves, who view scrap metal as a way to make a quick buck. The Wisconsin Potato and Vegetable Growers Association recently announced establishment of a fund to offer rewards for information leading to the arrest and conviction of people stealing metals like copper or aluminum from WPVGA member farms.
… Up to $10,000 will be paid for information leading to the arrest and conviction of the person or group of people responsible for these thefts….”
It is now a large problem at every farm. (less of a problem at dairy farms - more activity)
Great. 10 years ago farmers had to worry about someone using their toolsheds to make meth during the night. Today they have to worry about someone stealing the roof off it to sell to scrap yards. How times have changed.
Joe Necera has taken the gloves off. Thank God for journalists who speak frankly.
August 22, 2008, 5:35 pm
What Should We Do About Fannie and Freddie?
By Joe Nocera
My column this Saturday is a mini-history of the sins of Fannie Mae and Freddie Mac, two entities that are supposed to help the country in times of financial duress, not add to its problems, as they have done. What got me going was an article I saw in The Boston Globe (which is owned by The New York Times Company), in which Freddie Mac’s chief executive, Richard Syron, made the absurd claim that the company’s troubles stemmed from his insistence that it reorient itself towards its mission of making affordable housing available to Americans. This — to put it nicely — is a crock, as I try to point out in the column.
Absurd must be the single word which best captures the notion that the GSEs are doing anything whatever to promote an affordable housing mission.
… unless one counts their roles in creating the worst episode of U.S. housing price inflation since the Great Depression. I guess we could count this accidental approach to creating affordable housing?
inflationdeflation(Of course, massive inflation came first before prices started crashing…)
“(Of course, massive inflation came first before prices started crashing …)”
And this massive inflation - this creation of massive amounts of money borrowed into existence - created an economy where $4.00 lattes and candle making stores sprung into being, along with the associated jobs.
Now this massive inflation has evolved into a massive deflation as this massive amount of borrowed money gets written off and thus disappears. Along with the disappearance of the money comes the disappearance of the latte and candlemaking economy this money financed.
Yesterday’s inflation produced an inflation-based economy. Today’s deflation will correct and mean-revert the economy back to basics.
Gas went from a buck-fifty to $4.50, and now is back in the high 3’s, so inflation is licked, and how come food keeps going up in cost?
These are today’s issues, not yesterday…
“These are today’s issues, not yesterday…”
These issues of today are residuals of what transpired yesterday.
I know of no clock that advances backwards.
All that house inflation money doesn’t want to just vanish without a fight so with the help of Heli-Ben it reappears vias treasuries loaned to banks and goes into commodities. The over large Banking industry needs some way to rip off the regualr worker if not bad loans then why not food and gasoline? And when that doesn’t work raid their SS trust fund ? Except thats already raided …………
http://www.safehaven.com/article-11040.htm
Money supply seems to grow but according to this article money was seeking safety before the sieze up
“Along with the disappearance of the money comes the disappearance of the latte and candlemaking economy this money financed.”
That makes it funny to see circumstantial evidence that the PPT includes SBUX and PEET on its stock market life support list. Anything to create the illusion that the party is still in full swing…
Crappuccino, on the house?
“Along with the disappearance of the money comes the disappearance of the latte and candlemaking economy this money financed.”
Went to Charbucks today; a rare occasion. I was quite surprised that it was the busiest I’ve ever seen, but it’s close to I-5 and gets many travelers. I’ve actually taken to making my own lattes now, and it’s much cheaper and I enjoy them. I wouldn’t say they’re as good as Char’s, but they’re tasty enough.
Anyway, I was quite amused by Charbucks latest gimmick. It’s called a gift receipt or something which, if you come back the same day, yes same day, you get another drink for $2. Huhhh? Do people actually go there twice a day? That’s like going to the same restaurant for lunch and dinner.
The GSEs are on a debt watch vigil.
Treasury’s Vigil On Fannie, Freddie
Paulson Watches Preferred Stock, Debt Sales for Signs of Trouble
By David Cho and Jeffrey H. Birnbaum
Washington Post Staff Writers
Saturday, August 23, 2008; Page D01
Analysts who closely follow the Treasury have said that no action to rescue ailing mortgage giants Fannie Mae and Freddie Mac appears imminent this weekend.
A top concern of Treasury Secretary Henry M. Paulson Jr. as he ponders whether to pull the trigger on a rescue plan for mortgage financiers Fannie Mae and Freddie Mac is the fate of its “preferred” shareholders, which include regional and community banks across the nation and central banks around the world, according to private analysts who closely follow the department.
Despite mounting financial woes, Fannie Mae and Freddie Mac have been paying an unusually generous dividend to owners of preferred stock — which is issued to a select class of investors — making the shares popular among banks. Treasury officials are worried that a sell-off of these shares poses serious risks to the broader financial system, the analysts said.
The value of the preferred shares, estimated to be worth $36 billion between the two firms, has taken a hit recently. Yesterday, Moody’s Investors Service significantly downgraded some of them, saying their dividends could be at risk as the firms falter. The Fannie shares that were downgraded have dropped 26 percent this week, but rose 2.1 percent yesterday. The Freddie shares have declined 36 percent this week, but increased 2.1 percent yesterday.
Sounds like damned if you do, damned if you don’t.
Can anyone explain to me why the gubmint thinks it is good low income housing policy to encourage low income families to financially hang themselves with the aid of subprime loans? I am stumped.
Move over Fannie and Freddie, Ginnie Mae eyeing first place
Thu Aug 21, 2008 4:00pm EDT
By Al Yoon
NEW YORK, Aug 21 (Reuters) - The U.S. government is on pace to unseat Fannie Mae and Freddie Mac as the biggest guarantors of new mortgage bonds in August as the two housing finance giants reel from losses.
Ginnie Mae, the only issuer of mortgage backed securities explicitly backed by the U.S. government, has issued more of the fixed-rate bonds (MBS) so far this month than either Freddie Mac or Fannie Mae, marking a milestone in a dramatic rise in market share this year.
It would be the first time in at least 15 years Ginnie Mae has topped both Fannie Mae and Freddie Mac fixed-rate issuance in the $4.5 trillion market, according to eMBS, a Tampa, Florida-based mortgage bond data provider.
“As far as percentage of issuance, Ginnie Mae has been on decline for over a decade, so this really has been a turn of events” said Todd Abraham, co-head of government and mortgage bond management at Federated Investors, Inc. in Pittsburgh, Pennsylvania.
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.
“Moral hazard” is a hot topic at this fall’s Jackson Hole Fed Bank symposium…Does anyone happen to remember how many months back we held our “moral hazard” symposium on this blog?
Fed chief calls for derivatives overhaul
By Krishna Guha in Jackson Hole
Published: August 22 2008 19:28 | Last updated: August 22 2008 22:00
Ben Bernanke on Friday called for a far-reaching overhaul of the giant credit derivatives and triparty repo markets as part of a push to strengthen the financial system and reduce systemic risk.
The Federal Reserve chairman, speaking at the start of the Fed’s annual retreat in Jackson Hole, said changes were needed to minimise the “moral hazard” that might otherwise result from the rescue of Bear Stearns and other efforts to combat the credit crisis.
Good job, Winston. After stoking moral hazard behavior he wants new actions to stop it. He is also asking for new laws to let big banks fail. Since when did we need a law to let an enterprise fail?
What’s more, apart from protecting your portfolio from these Winstons, why does anyone bother to listen to anything these guys say? Moral hazard is an effing joke.
Winston
Moral Hazard means about as much as a Golf Hazard, eh?
It’s all double-plus-good, and then some.
p.s.
I’d use a #3 would, for the next whole.
minimise the “moral hazard”
while maximizing the spread of the loses…….
“changes were needed to minimise the “moral hazard” that might otherwise result from the rescue ”
I guess he means more government (taxpayer) guarantees are needed, so moral hazard no longer materialises and WallStreet (plus probably the average american consumer?) can continue partying with riskfree bets, courtesy of the FED.
Benjamins Bernanke is like a wind-up academian toy, a mere puppet, whose invisible means of support aren’t so much anymore.
yes, I guess his only goal is to make it to the elections without a real crash; if he can do that, I’m sure he will be richly rewarded.
It’s somewhat of a moral hazard having this get together at Jackson Hole instead of someplace like Detroit, Cleveland, Tampa or even Las Vegas - someplace that has suffered financial pains.
“Under democracy one party always devotes its chief energies to trying to prove that the other party is unfit to rule — and both commonly succeed, and are right.”
H.L. Mencken
We should have a parliamentary system.
The Democratic party is trying to show they will be fit to rule by picking a VP candidate with a resume that makes Hillary’s look like a footnote.
Predictably, this pisses off half the party.
Inflation? never its just increasing prices
Duke passing on high fuel costs
Duke Energy Carolinas customers in North Carolina will see their bills rise as much as 8%
TVA OKs 20 percent rate increase
MLGW says typical customer will pay about $18 more per month
Tampa Electric Co. is asking the Florida Public Service Commission for its first base rate increase in 16 years.
We Energies rate increase approved
We Energies customers will see their third increase in electricity prices since the start of the year, after state regulators on Thursday authorized a boost linked to soaring natural gas prices.
Should oil drop back to $40 and Nat Gas go back to $3.; will power companies lower their rates? lol
Next year’s energy bill just got served, and a mandatory 20% tip is added on.
Today’s soup d’jour:
Electric Eel
From the how real is any award dept.
Fictitious restaurant wins Wine Spectator Award of Excellence
“…Goldstein, the author of The Wine Trials, has a posting up on a new web site describing how he invented a restaurant name, Osteria l’Intrepido, a riff on “fearless.” Then he typed up a menu (”a fun amalgamation of somewhat bumbling nouvelle-Italian recipes”) and then put together a wine list, and submitted both to Wine Spectator–along with the $250 fee. The list was approved and given an Award of Excellence (see screenshot). …
” “It’s troubling, of course, that a restaurant that doesn’t exist could win an Award of Excellence. But it’s also troubling that the award doesn’t seem to be particularly tied to the quality of the wine list, even by Wine Spectator’s own standards. Although the main wine list that I submitted was made up of fairly standard Italian-focused selections, Osteria L’Intrepido’s “reserve wine list” was largely chosen from among the lowest-scoring Italian wines in Wine Spectator over the past 20 years.” ” (Robin Goldstein)
http://www.drvino.com/2008/08/19/fictitious-restaurant-wins-wine-spectator-award-of-excellence/
People are stupid. “If it costs a lot, it must be good,” he profligately stated. (sorry)
Is there any coincidence that Marin, the Wine Country and San Francisco are considered the Axis of Smug, according to evidence smuggled out?
Maybe they thought “Intrepid” sounds authentically mob like.
http://www.safehaven.com/article-11057.htm
The basic problem is that without Freddie and Fannie the US mortgage market would go from crippled to moribund, if not dead. We have created a system that could not function in the short term without them, and the pain of allowing them to collapse would be another 1930s-style Depression, the era in which these firms were first created. They were never designed to take on the huge leverage they did, or to use hundreds of millions in lobbyist money and campaign contributions to create a massive payment scheme for management and shareholders. Congressional estimates are that this could cost US taxpayers $25 billion, a significant multiple of their current market caps.
So, after the $25 billion is paid, we’re good, right?
$25B per YEAR for an indefinite period of time. Read the report.
WAMU, Citigroup, Capital One , Commerce & Astoria Job Fair(citywide) (Citywide)Date: 2008-08-22, 2:54PM EDT
Bank Tellers and Personal Bankers needed immediately
Recruitment Event on Tuesday, August 26th, 2008
Washington Mutual, Capital One, Citigroup, Astoria Savings Bank & Commerce Bank
These Major Banks are looking for Part-Time and Full-Time Tellers who are Spanish, Cantonese, Mandaren, Korean, Greek & Russian Speaking to work immediately….but it is not required. Astoria Federal Savings bank is also looking for candidates who are willing to work in Nassau County. Aslo, Astoria Federal Savings Bank is seeking Personal Banker candidates.
Bilingual Candidates are highly desired but not required!
Requirements:
Must be dressed professionally.
Must have your resume.
Must have NY State ID and Social Security Card.
HS Diploma/GED
Must have at least 6 months cash-handling experience.
Must have exceptional customer service skills.
Salary: $10.00-$13.00/hour.
Recruitment Event on TUESDAY, August 26th, 2008
That just screams “we’re looking for the cheapest labor possible”. These sorts of low paying jobs certainly don’t put a floor under housing prices, but rather an elevator shaft.
The subprime turmoil: What’s old, what’s new, and what’s next
Charles W. Calomiris
22 August 2008
“…Near-term implications: monetary policy, regulation, and restructuring
Dire forecasts of the near-term outlook for house prices and attendant macroeconomic consequences of subprime foreclosures for bank net worth and consumption reflect an exaggerated view of downside risk. Inflation and long-term inflation expectations have risen substantially and pose an immediate threat. Monetary policy should focus on maintaining a credible commitment to price stability, which would ensure the continuing stability of the dollar, encourage stock market recovery, and therefore assist the process of financial institution recapitalisation. …
What long-term structural changes in financial intermediation will result from the subprime turmoil? One likely outcome is the conversion of some or all standalone investment banks to become commercial (depository) banks under Gramm-Leach-Bliley. The perceived advantages of remaining as a standalone investment bank – the avoidance of safety net regulation and access to a ready substitute for deposit funding in the form of repos – have diminished as the result of the turmoil. The long-term consequences for securitisation will likely be mixed. In some product areas with long histories of favourable experiences – like credit cards – securitisation is likely to persist and may even thrive from the demise of subprime securitisation, which is a competing consumer finance mechanism. In less-time tested areas, particularly those related to real estate, simpler structures, including on-balance sheet funding through covered bonds, will substitute for discredited securitisation in the near term and perhaps for many years to come.”
http://www.voxeu.org/index.php?q=node/1561
One of the reasons that economists such as Mr. Calomiris call this “an exaggerated view of downside risk” is foreign investors are still buying US debt. The BRICs were more than happy to provide funding for the stimulus checks. Mr. Warren Buffet would not be happy with the risk.
FOR IMMEDIATE RELEASE November 9, 2001
Earnings of Berkshire Hathaway Inc. and its consolidated subsidiaries for the third quarter and nine months ended September 30, 2001 and 2000 are summarized below
“…A mega-catastrophe is no surprise: One will occur from time to time, and this will not be our last. We did not, however, price for manmade mega-cats, and we were foolish in not doing so. In effect, we, and the rest of the industry, included coverage for terrorist acts in policies covering other risks ¾ and received no additional premium for doing so. That was a huge mistake and one that I myself allowed.
There are three basic rules in running an insurance company:
1. Only accept risks you are able to properly evaluate (stay within your circle of competence) and confine your underwriting to business that, after an evaluation of all relevant factors, including remote loss scenarios, carries the expectancy of profit (though obviously every policy we issue carries with it a risk of loss, often significant);
2. Limit the business accepted in a manner that guarantees you will suffer no aggregation of losses from a single event or from related events that will threaten your solvency; and
3. Avoid business involving moral risk: No matter what the rate, you can’t write good contracts with bad people. While most policyholders and clients are honorable and ethical, doing business with the few exceptions is usually expensive.”
http://www.berkshirehathaway.com/news/nov0901.html
Greed rules
Some friends and acquaintances believe that a world record large mouth bass is worth $1MM to the person that makes the catch. Any state record of any fish is something to be proud of. That he did not give catch credit to his granddaughter is sad.
“Man uses Barbie fishing rod to make record catch
David Hayes’ granddaughter just asked him to hold her Barbie rod and reel while she went to the bathroom. He did. And seconds later he landed the state record channel catfish at 21 pounds, 1 ounce.
Alyssa’s father had bought the pink Barbie fishing rod for Christmas and she had caught a few bluegill before her grandfather hauled in the catfish.
The Winston-Salem Journal reported the catch Aug. 5 in eastern Wilkes County has been certified as a record by the North Carolina Wildlife Resources Commission.
Hayes and his granddaughter have been fishing in the pond behind his house since she was big enough to hold a pole.
Hayes said his granddaughter worried he would break her rod. He landed the 21-pound fish on a 6-pound test line. It was 32 inches long, 2 inches longer than the rod.”
I love fishing, I love taking my kids and grandkids out fishing. Over the years, I have helped them reel in Trout, Salmon, Northern and Muskies. They have always caught the fish. For me the pleasure for the kids, for others…
sorry my pissed off pills are kicking in.
In related Barbie News:
In yesterday’s L.A. Times, it was reported that the combined stock market value totals of Fannie Mae & Freddie Mac, is less than the capitalization of Mattel.
What Bratz!
Mattel is more profitable with greater prospects.
Make American Girl doll in China for $2; sell in US for $100. There are 156 countries Mattel can attack with ‘insert country’ Girl dolls. All from the same mold, all with accessories. Having bought a dozen American Girl dolls in the last 3 years, the potential market is huge.
Make loans on falling house prices and expect borrowers to pay back loan; initial profit 1.25%, losses 18% = negative profit. Use non-GAAP accounting to show small loss, Potential market is huge.
Guise & Dolls?
In the Ruins of the Housing Bust, the Price of an Illusion
WHAT THE BEEP! WERE THEY THINKING, The average dude living in Merced making 50K/yr can afford a 1/2 Mil home?
All of us who refused to take the plunge should suffer too (Fannie Mae / Freddie Mac bailout)?
ELLIE WOOTEN, the likable mayor of this likable Central Valley city, is on her way to the office when her cellphone rings. A constituent wants her mortgage payments reduced, and is hoping that the mayor has some clout with her lender.
Although Merced has one of the highest foreclosure rates in the country, this borrower isn’t in such dire straits. She’s not even behind on her mortgage. But her oldest daughter is turning 18, which means an end to $500 a month in child support. She just wants a better deal.
The mayor hangs up and shrugs: “It’s a surprise her daughter is turning 18? You’d think she could have planned ahead.”
But hardly anyone in Merced planned very far ahead.
Not the city, which enthusiastically approved the creation of dozens of new neighborhoods without pausing to wonder if it could absorb the growth.
Certainly not the developers. They built 4,397 new homes in those neighborhoods, some costing half a million dollars, without asking who in a city of only 80,000 could afford to buy them all.
Obviously not the speculators turned landlords, who thought that they could get San Francisco rents in a working-class agricultural city ranked by the American Lung Association as having some of the worst air in the nation.
And, sadly, not the local folk who moved up and took on more debt than they could afford. They believed — because who was telling them differently? — that the good times would be endless.
…
With as many as 2.5 million homes in the United States entering foreclosure this year and, at best, sales of only five million existing houses, the foreclosure price is becoming the rule in many areas.
http://www.nytimes.com/2008/08/24/business/24house.html?hp=&pagewanted=all
Interesting comments on section 8 housing and the government paying for it - so can we stop paying for all the military types who get subsidized housing where ever they move too - and
what about military retirement pay for people like John McCain who obviously doesn’t need it when he can’t even count how many houses he has - we are paying him for being in congress, giving him all his benefits for life, and giving him a pensions - now this is the type of government spending I would like to see curbed - much more than the poor people -
we could save a lot of money on these double dippers - they are making money in government jobs and collecting government retirements at the same time -
This is what I thought they would cut back when Reagan originally said we are going to cut government spending - they have cut parks, schools, etc but not this waste of our money
Who paid for the president and his family to go to the olympics, get the seats and then come back and go on vacation - this guy never works and when he does he makes a mess
So when people start looking at what needs to be cut - look where the money is and those who continually are raking it in - the oil companies have record profits - the airline industry has their hands tied with all this faux security that would not be needed if people had been doing their jobs - this is crippling our country
Keeping interest rates low, letting banks run wild and all this deregulation crap has shown their isn’t a grownup in business who is willing to do the right thing - they want it all - they can’t self regulate - it is screw the next guy first - like all those who sitting here heaping on those who are catching falling knives when they sold them the knives
now I realize not everyone here is like that but when I read the bully stuff against poor people or those who truly did not know they were were being scammed because they wanted to believe in human kind - that is frustrating as all get out - but I realize that is the way those types are - so rave how great you were in scamming some else by selling your falling knife to someone less knowledgeable - that does seem to be the way of the world