Bits Bucket For August 25, 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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The Olympics of Finance
And so, the GSE watch has become the financial world’s version of the Olympics—no one can take their eyes off it. Part of this is practical, as banks hold enormous amounts of Fannie and Freddie preferred shares and subordinated debt on their balance sheets. If the preferred equity is wiped out, banks will have to take more capital writedowns, adding to their already enormous troubles, says Dory Wiley, CEO of Dallas-based Commerce Street Capital.
Fannie and Freddie make up about half of the U.S. mortgage market, and with them on the ropes, there’s little chance for a housing recovery. Without a housing recovery, the credit markets will continue to be jammed up. And things promise to get worse before they get better. Fannie and Freddie have about $250 billion in debt to refinance in September, and everyone will be watching to see if they’re successful. As long as their futures are uncertain, much of the credit market will remain in the doldrums. “They’re the pivot point of the whole credit market,” says Samson Capital Advisors’ Benjamin Thompson.
Of course, there’s one simple solution to the GSE problem: nationalize them, says analyst Chris Whalen of Institutional Risk Analytics. He says the Treasury should go ahead and wipe out the common equity, which the market has pretty much done on its own anyway, and promise to make holders of preferred stocks and subordinated debt whole. And financing? If the two mortgage financiers are taken over by the government, notes Whalen, “you don’t have to worry about financing.”
And financing? If the two mortgage financiers are taken over by the government, notes Whalen, “you don’t have to worry about financing.”
Do I hear the sounds of printing presses and helicopters warming up?
“Do I hear the sounds of printing presses and helicopters warming up ?”
The noises that you hear must be the Wall Street bankers and the Bush Gang preparing to… Get Out of Dodge
“there’s one simple solution to the GSE problem: nationalize them”
This was one of William Greider’s solutions when Moyers interviewed him. I wholeheartedly agree. I also agree with him about bringing back the usury laws.
I also agree with him about bringing back the usury laws.
I second that — predatory loans and interests rates need to be quashed, whether it’s home loans or the corner check cashing store.
That would be one real benefit of nationalizing Fannie and Freddie. Unless subsequent administrations decicded to use it to do social engineering.
Oh, that would NEVER happen… right…
In many ways, the bullion market presently is similar to what the Hunt Brothers were all about (they wanted physical delivery of Silver, not paper that said so), but the difference being, that they and a Saudi Princeling or 2, were really the only buyers of consequence, and there were lines as long as 50 people outside of coin stores in late 1979, almost all sellers, cashing in on Silver’s absurd rise from $6 to $48 in less than the course of a year.
Back then, coin dealers had continual cash-flow problems, as 10x as much was coming in, as was going out, inventory up the ying-yang, and the Silver refiners were backed up months (Silver had to be .999 fine to be salable, everything else sold for discounts of 20 to 50% of spot price) turning anything less than pure, into pure.
Now, it’s a different story…
Instead of a few high-powered players, the whole world wants physical delivery, and there is much more going out, vs. coming in.
The cupboards are bare.
I posted this yesterday…at essentially 99:1 leverage 7mil can move the entire market. Much like what happened when D. Gartman sold his position….
http://seekingalpha.com/article/91357-the-disconnect-between-supply-and-demand-in-gold-silver-markets
SLV will eventually trade to a $5 premium over spot.
Might even go more.
Every corrupt bucket shop and bank that has sold silver short should go broke.
it this really is FED gameplay, then they must be having a heck of a time with this updated version of the Roosevelt Gold confiscation …
Take a load off Fannie, take a load for free
Take a load off Fannie, and you can put the load right on me.
Is this just a way for the FED to justify letting the little guy fall off a cliff while the institutional investor class (Banks and the elite ??? China) get a FED bailout.
If it quacks like a duck and walks like a duck, it’s probably a duck.
If this follows suit with Student Loans we could soon see the end of the Statute of Limitations on Home Loans …
Paycheck to paycheck: Dearth of work uproots her dreams
By John Pendygraft, Times staff In print: Sunday, August 24, 2008
Maria Juhasz, 46, is selling her garden, plant by plant, before the bank forecloses on her home. She bought the 756-square-foot home in 2006 for $153,000. A bank appraiser values it at $113,000.———->
http://www.tampabay.com/news/article779946.ece
Well, once it was an REO the plants would die anyway.
I have respect for this woman: it’s not as bad as being a refugee, indeed. But it’s pretty bad, all the same.
She has a 30 year fixed rate mortgage on a reasonably priced small house: there’s just no work to pay it.
I hope that both she and the plants flourish in their new homes.
a reasonably priced small house
This is part of the problem with this whole housing debacle. Assuming a house is reasonably priced. It has gotten to the point now that prices below $300 seem cheap because we are bombarded with mega prices all the time. $300 is not cheap at all, you need to be bringing in at least 100k to buy it.
This house ( 756 sq ft @ 153k) seems expensive to me since that makes it $200/ sq ft.
countries to invest in ??
Malaysia ?
or
The US, but not until next year. Or maybe the year after.
IMHO.
Buy the dip?
It could be the best time to buy the US stock market that many of us will see in our lifetimes.
It could be the best of times, it could be the worst of times.
In all likelihood, it will just be an average time to buy a mediocre market with mediocre companies.
It was a dark and stormy night…
The night was sultry…
Thunderous clouds were off in the distance.
Having seen a much better time (DJIA 600, Dec 1974), I am spoiled. I could get interested at DJIA 6000 or maybe even 8000.
“It has not paid to sell America short since 1776, and the time to start is not in 2008.”
- Warren Buffett
I doubt it paid to sell the Roman Empire short for a long time either, but one day it did. America has some serious financial problems today the nature of which makes today different from the past 232 years.
Empires in debt don’t stay empires historically, do they? Spain, Sweden, Rome?
Were they in debt anything like this?
L4 - Hm, I’m on L of a guy !
Don’t know about Sweden so much but they did over expand themselves in Baltic wars especially with Polish.
Yes they were in Debt. For Spain, the new world discoveries bombed the price of precious metals. Not only that but their Religious expulsion of the Jews and Moslems drove out their mercantile and industrial societies. And we thought our religious right was bad..
Rome expanded by conquest until they overstreched themselves.
No disrespect meant, but I’ll give Mr. Buffett’s words a little more weight than yours. Unless you’re also over 70 years old and a master’s degree in economics from Columbia, that is - then I’d reconsider.
In addition, if you received shares when the Roman Empire spun off, you might have still done well being long…
that is “spun off the Catholic Church”…
I believe Merrill (of Merrill Lynch) made his fortune shorting during the stock market crash of ‘29. So… some people apparently do win selling America short.
And now people have been making money selling Merrill short! …it may STILL be a short. My ML guy was explaining to me today that, while ML’s CDO exposure has officially declined to zero, because they sold all their CDO’s and took the write-down, nevertheless what they GOT for their CDO’s was not cash, it was a promissory note from a hedge fund. When that hedge fund goes BK, ML has more red ink coming. Today I had my ML guy take my $$ out of ML’s “institutional money market fund” and put it into one of their FDIC-insured money market funds (insured up to 2.5 mil per person). No yield to speak of, but I rest easier. I don’t worry so much about my holdings of ML corporate debt, as I believe the Bear Stearns bondholders will be paid, and I believe the most likely fate of ML is a takeover that wipes out the common stockholders but not the bondholders.
Lender… did exactly the same thing a couple weeks ago. Sleep has a value that can’t be measured.
Although we did lose a little cachet of losing “institutional” fund mailings, since it is for a smallish family biz.
One must always pay attention to what Warren Buffett DOES, not to what he SAYS.
Warren Buffett recently claimed he would be buying stocks even if the economy were collapsing. Yet as of 6/2008, only about half of Berkshire Hathaway’s assets were invested in equities–the rest was in cash and bonds. This year, Warren Buffett has been buying far more bonds than he has stocks.
Keep the popcorn popping,
Red Baron
You can listen to Buffet or you can listen to Peter Schiff who asks… if a company was leveraged to the hilt with declining revenues and absolutely no savings would you invest in it? Then why would you invest in a country with the same balance sheet? Basically he says that the U.S. markets are now more risky than foreign markets. So, to be conservative, he advocates a strong weighting in non-US stocks in countries.
Why Malaysia ? It is a civil war waiting to happen.
“We in America today are nearer to the final triumph over poverty than ever before in the history of any land. The poor-house is vanishing from among us. We have not yet reached the goal, but, given a chance to go forward with the policies of the last eight years, we shall soon with the help of God be in sight of the day when poverty will be banished from this nation.”
Mr. Herbert Hoover
1928
Credit has never equalled wealth.
Not now, not ever no matter what the Samuelson crowd would like to believe.
But a massive credit expansion has portended massive loss of wealth. Witness the 1920s and the 1990s for leading historic examples.
Perhaps one need look at how many auto manufacturers there were in the 1920’s, and how few were left by the time World War 2 rolled around?
This is not at all a good example.
Economic historians have provided numerous explanations for the Great Depression, one of which is that companies in general failed to shift into consumer products. This is obviously not the single reason for the depression, but there is a lot of evidence to back it up. Companies that did produce consumer goods, like GM and Ford, were profitable throughout the depression. The other auto manufacturers failed because they could not compete price-wise with GM and Ford, both of which had perfected assembly line production.
In 1930, as now…
Car dealers were choked with inventory of unsold cars, with no prospect of selling them.
Cars have always been the 2nd most expensive item most people own, so they are an excellent barometer of what’s what.
But a massive credit expansion has portended massive loss of wealth.
And/or a massive redistribution of wealth.
Here’s a little ditty on “Credit” that you may find interesting in it’s historical perspective.
http://news.goldseek.com/GoldSeek/1219644120.php
Perhaps the greatest quote ever to sum up the detestable, despicable nature of a greedy human being:
“In 1991, [Lawrence] Summers issued the following memo while serving as Chief Economist at the World Bank:
“…developed countries ought to export more pollution to developing countries because these countries would incur the lowest cost from the pollution in terms of lost wages of people made ill or killed by the pollution due to the fact that wages are so low in developing countries…the economic logic behind dumping a load of toxic waste in the lowest wage country is impeccable and we should face up to that.”"
There is a difference between being right and being just.
Friday, August 22, 2008 | Modified: Monday, August 25, 2008 - 8:21 AM
Inner Loop
Arlington County Treasurer plays hard ball
Despite a spike in delinquent residential property taxes in June, Arlington County managed to lower its uncollected taxes to a record-low 0.8 percent of the $576.6 billion annual total.
How’d it do that? Not through busted knee caps, though Treasurer Frank O’Leary does get pretty aggressive.
O’Leary says he tries to give strapped residents solutions. He has arranged for personal loans at a local bank, and he guarantees them, making no credit check necessary. His collectors are also authorized to set up payment plans.
But if you ignore his letter asking why you haven’t sent in the taxes you owe on your property, car or inventory — watch out.
In the 22,000 delinquent cases in a typical year, up to 3,000 go to extreme enforcement. The county puts a lien on your bank account and doesn’t just garnish your wages — it takes your whole paycheck to satisfy the debt. It also will repossess your car.
“I’ve often said we are not nice people,” O’Leary says with some note of satisfaction. In 25 years, he has reduced the outstanding debts from 9 percent to less than 1 percent.
“Once you develop the reputation and the word gets out, the workload goes down,” he says.
http://washington.bizjournals.com/washington/stories/2008/08/25/story17.html?b=1219636800%5E1688424
Staight Shootin’
Leigh
I thought LBJ won the war on poverty. Or was that Vietnam? Anyway, he won something.
He won the presidential election in 1964. IIRC, that was due in large part to a lingering sympathy vote for the late JFK.
America has never won a war on anything unless the enemy has been described by a proper noun.
LBJ won my derision.
- The true conservative is the man who has a real concern for injustices and takes thought against the day of reckoning.
- The hopes of the Republic cannot forever tolerate either undeserved poverty or self-serving wealth.
Franklin D. Roosevelt
The greatest stop on the DC night tour: the FDR monument. The second greatest thing: talking to one of the knowledgeable Park Service Rangers.
There’s an FDR monument? I lived most of my life in the DC area and have never heard of it. Isn’t the FDR monument all those edifices with alphabet soup names on them?
Oh wait, now I remember it. I took my FDR-loving parents there once. But to be honest, I don’t remember exactly where it is.
I wasn’t aware that ARM’s, MEW’s, I/O’s, SIV’s, CDO’s, CDE’s and the like, had been so honored already…
There is nothing to fear but fear itself.
Regardless of one’s feelings on FDR, the monument itself is nicely done. It is down at the far end of the mall, past the Washington Monument, and on the south side, if I recall.
I thought the Social Security system was FDR’s “monument”
If you walk from Jefferson Memorial to Lincoln Memorial, you walk right through the FDR monument. It’s not a big building. It’s a series of stone panels, fountains, and a few statues. Lots of Depression-era carved images.
And while I’m at it, Teddy Roosevelt has a monument too, although people know about it. It’s the island in the Potomac River. It has NO development at all, just hiking trails. There’s just one statue and a small plaza, and no monument at all. The wooded land itself — probably worth millions in non-existant luxury condoze — is the monument to Teddy’s conservation efforts.
That was an FDR monument? I thought it was about Jesus.
Yes, FDR monument is really nice. made of all the gold that he confiscated from us! lol
just kidding. all that gold was given to the Federal Reserve dontcha know…
da bear
Cash: It’s where the money is.
we have a Roosevelt University in my Dutch hometown; the guy has his roots somewhere in the area, but in reality its a more of a monument for the unlimited USA worship by our political and financial elite. They also award yearly ‘Four Freedom Awards’ in his name, of course some of the nominees are real bandits like FDR himself.
Wasn’t R-Eisenhower the pres who built the nations freeways?
Asset bubble crash check list:
1. Double top in price chart — CHECK
2. Large price decline on huge volume — CHECK
3. True believers attacking doubters as the price goes down — CHECK
If you hated it at 600, you must really hate it now.
If you loved it at 1000, you really love it now.
I am not a hater — merely an objective commentator.
he was baiten ya, not haten ya.
and ya fell for it.
Now I get it — watcher is a gold baiter baiter…
Wow -look at that volume.
I’m still keeping on to my small insurance policy though.
gold is interesting.
i saw a gold chart two weeks ago at jsmineset.com. went back 38 years. gold possibly ended a huge bear market rally from its 1980 high. i think a final a-b-c elliott wave decline will end gold’s bear market. wave a down could have ended at $786. gold’s b top could go to $870. (look at that chart just posted).
da bear
Cash: It’s where the money is.
P.S. Gold needs to hold above $800, otherwise it could go a lot lower.
Does it strike anyone else as odd to see gold selling off along with stocks? What is Mr Market thinking anymore these days?
mr market is telling me that the seasonal september lows in Natgas were achieved in August.
As a result…Im back in the game baby.
NGAS at 5.50, its part of my vertical integration strategy along with WPT.TO (now trading on the NASDQ: WPRT) and CLNE…
but dont buy the WPRT, again, yet, its still looking for a short term bottom, and its volume is very thin on the NASDQ.
not investment advice, im just a dumb hillbilly.
Agree on natgas. I’m getting back in.
from Sundays Meet The Press:..”Nancy Pelosi’s investment in Clean Energy – between $50,000 and $100,000 – is a tiny fraction of the speaker’s assets, as she pointed out on Sunday. “That’s not the point,” she added. “I’m investing in something I believe in.”
She is specifically talking about CLNE, Clean Energy. A natgas delivery systems for urban transportation….all the Democrats are doing it, Im not a Democrat, but occasionally you have to do what they do.
Change you Can Believe In? I just cant make it any easier to understand.
tiny bubbles…
The trend has significant long-range implications for U.S. consumers and businesses. A sustained increase in gas supplies over the next decade could slow the rise of utility bills, obviate the need to import more gas from elsewhere around the globe, including liquefied natural gas delivered in tankers, and make energy-intensive industries more competitive.
nobody is getting this yet…..but your gonna.
It looks like the powers that be are using the power of their paper-driven Auric Vacuum Cleaner to push down computer blip gold, while buying up Ne Plus Ultra…
I think I have to check with my bank the details of their ‘gold account’. Officially they buy the gold for the client and store it in a vault, the account can be converted into physical for a 1-2% charge. I wonder if that still applies under ’special conditions’ like we have now… maybe its going to be a good time to stock up.
It’s called Deflation. Though not many people on this blog believe in such.
Before I get hassled. To all the inflationists out there: “Markets don’t top all altogether at once” - nuff said.
Agree, Wheatie.
Signed,
A Fellow Deflationist
If the US dollar is being devalued, gold is a good place to be.
If global financials are going down the toilet, gold is a good place to be.
If you’re worried about inflation, gold is a good place to be…
I’ll leave the technical bafflegab to the those who specialize in analysing chicken intestines…
Gongloff = Anti-bottom-caller
AHEAD OF THE TAPE
By MARK GONGLOFF
Housing Story Still Has Many Chapters
August 25, 2008; Page C1
Children born when the housing-market collapse began have since learned to walk and talk and eat with utensils. By the time it is over, they probably will be reading and writing.
“Plunging home construction should help. But there are still untold numbers of houses being held off the market by wary sellers. There are millions of foreclosures and other bank-owned properties not yet available.”
Good point. Just as there are knife catchers buying houses because it’s at the opont in their life when they have to buy, so there are knife throwers who are at the point in their life (or after) when they have to sell.
Just as the bubble stole from future demand, so the bust is deferring future supply, except from home builders and (perhaps now) banks.
All those people saying they want to sell but they are going to wait for the market to “stabilize” before they do it.
Yup. It will be easier for your purchaser to get financing when the market stabilizes, but you will be getting 50% of the cash you would have gotten last year when you decided to wait.
I felt like Wiley Coyote 2 ft out over the abyss trying to close at the start of August. What are these people waiting for? The wooshing noise to get louder?
Reading and writing? They’ll probably be taking calculus.
Just what I was thinking.
they might have even learned what an “oxide” is
latest news
[FNM] Fannie Mae shares fall 11% in early trading
Financial crisis enters new, uncertain stage
Losses expected to double, while Fed remains under microscope
By Greg Robb, MarketWatch
Last update: 11:49 a.m. EDT Aug. 24, 2008
A previous version of this story misidentified the London School of Economics. The story has been corrected.
JACKSON HOLE, Wyo. (MarketWatch) — The financial crisis has entered a new phase and will likely bring total credit losses above $1 trillion, according to a leading academic who has been studying the turmoil since its beginning a year ago.
Princeton University economics professor Hyun Song Shin says the subprime mortgage crisis has already cost financial institutions roughly $500 billion. Now, however, the problem has spread to the real economy, and losses on credit cards, consumer and business debt should match or exceed those from subprime mortgages and the like, he said.
Don’t forget foreclosure losses to come on prime and Alt-A adjustable rate mortgages whose resets will not peak until 2010 or so.
Daffy: “Hey Bugsy, why do those fancy suit boys always go to Jackson Hole?”
Bugs: “eh, because a “hole” is something taxpayers can relate to these days. I think they stole the idea from us “wasscaly wabbits” …I find a hole very useful, especially when Yosemite Sam is off his med’s and blasted everything in sight.”
Daffy: “doesn’t that guy EVER run out of bullets? page 23…Daffy gets blasted again!
The truth comes out! The Chineese created the housing bubble! I new it!
China has $370 billion invested in Freddie and Fannie
Libor signalling credit crisis return.
http://www.bloomberg.com/apps/news?pid=20601087&sid=aa9qsN2KBb0Y&refer=home
How about this thought. We are going into recession. Absent the housing bubble and bust, there would be financial losses in the future. But the financial sector is already reeling from the subprime and Alt-A disaster. The normal recession losses, in addition to more housing-related losses, are ahead of us.
“Banks are charging each other a premium of 77 basis points over what traders predict the Federal Reserve’s daily effective federal funds rate will average over the next three months to lend cash. The spread is up from about 24 basis points in January, and may widen to 85 basis points, or 0.85 percentage point, by mid-December, prices in the forwards market show.”
So what will the Fed do?
The world’s bankers are like a bunch of gunslingers in an Old West saloon, playing a game of poker with their pistols sitting out on the table, ready to shoot suspected cheaters who make a wrong move.
And never sit with your back to the door, Wild Bill Hickok’s fatal mistake. He was holding what looked to be a nice hand when Jack McCall shot him from behind (in Deadwood in 1876). Aces over eights, like Florida condos, forever hence to be called “the dead man’s hand.”
There was no over. The dead mans hand was two pair.
Maybe a lot of recent home buyers thought they had a full house too.
Turns out they might have two pair and they are sittin with thier backs to the door.
Wild Bill had a Queen or Jack kicker, same as a lotta couples in finacial straights.
The only thing they can (or want to) do: lower rates and try to achieve hyperinflation to “save” the economy.
That is my fear. Oh, and we don’t get cost of living raises either.
Soak the sheeple to save the wolves.
Wolves love sheep thrills
Tom Petruno: Market Beat
Too big to fail? We’ll see about that
The calamity in the financial sector will be remembered for the household names it damaged or took down.
Tom Petruno, Market Beat
August 23, 2008
The mess in the U.S. financial system is making me nostalgic for the dot-com collapse of 2000-2002.
That, too, was a cataclysmic bursting of an insane market bubble.
But, as we are painfully learning, it’s one thing for the economy to lose Pets.com and a few hundred, or thousand, similar start-ups; it’s another thing entirely to watch the market bet on the demise of, say, the nation’s two largest providers of mortgage money.
The U.S. credit crunch turned 1 year old this month, and the situation clearly isn’t improving. Major financial companies continue to reel from huge losses on defaulted home loans. Barring a dramatic turnaround in the economy, commercial real estate loans could become the next black hole — although the banks will say, as they did initially with home loans, that commercial losses should be “manageable.”
The unwinding of any market mania takes time, of course, and produces many casualties. That’s the ugly side of capitalism at work.
“We are approaching a solvency crisis that we think is about to result in an avalanche of asset sales,”
Cheney-Shrub Legacy List # 72: How, after 8 years of being the “Decider’s” …we left the Taxpayers & “Our” Nation in great financial health, and the “future” has even better prospects…in the “near term”.
“Laura, did you already pack my Yale cheer-leading megaphone? & where is that oversize bag of pretzels I kept in the Oval Office, I need something to chew on, Cheney’s already on his way to Georgia, & Karl’s busy with his television commentary’s…I feel so…alone.”
So let’s see…what would the asset values of homes be if mortgage interest rates were at 14.5%? …Home many “sales” would there be? …How would banks balance sheets look?
And last week, Paraguay swung hard left, politically…
This could complicate a Devout-Neo-Con’s getaway ranch scenario plans?
And last week, Paraguay swung hard left, politically…
This could complicate a Devout-Neo-Con’s getaway ranch scenario plans?
Oh Lordy, I hope so.
If there’s justice in the world, that whole rotten cabal of nincompoops (from Head Cretin on down) will be looking over their shoulders any time they attempt to travel outside the US.
Pursued by prosecutors with indictments in hand, and hopefully it will happen in the US also. So many crimes it boggles the mind. Let’s see if justice is really served or just conveniently ignored.
Makes GW’s purchase of 80K acres between the Prime Minister of Paraguay, and SunYung Moon look kinda precarious…
Can you imagine being in ’ssshrubery’s shoes?
Having to put on the brave face in public, knowing on the inside what a prisoner of his convictions he became, and how he led a country down the primrose path, to his latest and hopefully last, business failure.
The country’s anxious to heal itself, but the cancer can’t be cut out until 5 more of the longest months you’ve ever imagined, have passed…
Amen Lad.. 5 of the longest..
if there was any justice in the world, shrub and all his neocon friends would be in the Scheveningen special prison, awaiting their trial by the International Court of Justice in the Hague. Will never happen of course, despite the fact that they are (together with Tony B. Liar and some of his friends) the biggest war criminals of our time. The Dutch government would rather dismantle the Court than have their best friend on trial.
even in the new Paraguay these crooks will be safe (at least from official justice).
If the anonymous hedge fund manager quoted in this article is correct, then asset fire sales are soon to begin…
‘For Fannie Mae and Freddie Mac, a bailout of some magnitude already is baked in the cake, thanks to the authority Congress gave Treasury Secretary Henry M. Paulson Jr. last month. “Too big to fail” is synonymous with Fannie and Freddie, given that they own or guarantee nearly half of all U.S. home loans.
But if regulators are ready to play tougher with other financial companies in jeopardy, they are likely to have plenty of opportunities to demonstrate their resolve.
That’s because the banking and brokerage businesses have entered a second phase of the bad-asset workout, according to one large hedge fund manager whose views circulate on Wall Street but who doesn’t seek or want publicity.
The first phase, the manager says, involved attempts by loss-ridden financial companies to raise fresh capital from investors. Some were successful, some were not.
The second phase, now underway, involves fire sales of assets by banks and brokerages that have no choice but to shrink themselves because there isn’t enough willing and able capital out there to buttress every damaged balance sheet that needs it.
And as assets are dumped at fire-sale prices, that will trigger markdowns of similar assets, further weakening the finances of banks and brokerages across the board.
“We are approaching a solvency crisis that we think is about to result in an avalanche of asset sales,” the hedge fund manager says.’
“Making a Deal for an ‘As Is’ House
By LAUREN BAIER KIM
Many people assume “as is” means a home is in serious disrepair, but that’s not necessarily true. A house advertised “as is” can be anything from near-mint condition to a derelict.
A homeowner may sell “as is” because he or she doesn’t have the time or money to make repairs.
Lenders may list bank-owned properties “as is” because they don’t want to make further improvements on houses that they are already losing money on. Heirs may sell “estate condition” (read: “as is”) inherited houses because they are in a hurry to settle an estate and don’t want to spend money on a house they have no financial interest in.”
Houses have gotten so expensive that the cost of rehabbing them is prohibitive for the average income earner.
http://online.wsj.com/article/SB121954615871966757.html?mod=googlenews_wsj
This is nothing new. Foreclosure properties have always been “as is.” You just get an inspection. Only thing new is the number of foreclosure properties, and the extent of the damage, as houses sit unoccupied, or worse yet occupied by squatters and/or visited by vandals and copper strippers, for months if not years.
Tim,
This may not be new to you theoretically, but the advice in the article might be of interest to someone else who is actually considering one. Asking whether or not a particular “as is” property is a good buy in a market overwhelmed by foreclosures is not a question that can be answered by a simple inspection (which is often not available at a foreclosure auction).
It is my understanding that banks usually bid the value of the mortgage at the auction. Why not just buy for less from the bank afterwords? Why not get an inspection by someone you trust? It’s not like it will be gone tomorrow in most cases. I wouldnt buy any propety without a inspection. Let the bank own it, and get desperate. Then get an inspection, show them all the problems that need to be corrected, and drive a hard bargain.
Heirs may sell “estate condition” (read: “as is”) inherited houses because they are in a hurry to settle an estate and don’t want to spend money on a house they have no financial interest in.
This strikes me as curious, and it seems very poorly worded for the WSJ. Heirs most obviously DO have a financial interest in most cases! What they should have said is that they either have no time, no means, or no inclination to cooperate with the other heirs to improve the house before the sale.
And on a side note, is it only paranoid me, or has the editing in the WSJ gone downhill since the buyout? Lot more typos, and something like the statement in question here should have been caught by a good editor (who probably has no time to check these things anymore).
The idea behind an as is listing is that the seller wasn’t an occupant so they don’t have as much insider knowledge as most sellers. When you’ve lived in a house, you know all the little things (good and bad) about the house and because there would otherwise be a lemon problem, the seller becomes responsible for disclosing these things to potential buyers.
And on a side note, is it only paranoid me, or has the editing in the WSJ gone downhill since the buyout?
No, it’s not just you.
The WSJ is still above average in the copy-editing department (IMO), but I think there’s been some slippage as well.
Something reeks of diluted urine, over at the WSJ…
Yellow-Journalism-lite
If the WSJ has editors, they are the last remaining U.S. newspaper to have them. Elsewhere, “Spell Check” is the only editor.
Too bad there are no “homonym check” or “grammar check” programs!
Lately I’ve seen a lot of misspellings in the SF Chronicle (at least the web site version) that would have been caught by a spelling checker, so apparently some newspapers don’t even do that anymore.
I think most newspapers are slipping, not just the WSJ. Nothing unusual. However, newspaper revenue these days doesn’t depend on the quality of writing, but the quantity of the advertiising.
I like the Patek Philippe watch ads in the usedpapers…
Pateks cost a bunch more than Rolexes, so it’s like double the smug appeal, if you will.
The ads tell you, you will have a legacy to pass on to the next generation, in not so many words.
The fact that the quartz watch that comes free with your kids happy meals, tells exactly the same time as the Überwatches, notwithstanding.
Libor Signals Tighter Credit as Banks Balk at Lending
By Liz Capo McCormick and Gavin Finch
“…“It’s like an ongoing nightmare and no one is sure when we’re going to wake up,” said Thomson, a money manager in Glasgow at Resolution, which oversees $46 billion in bonds. “Things are going to get worse before they get better.”
In a replay of the last four months of 2007, interest-rate derivatives imply that banks are becoming more hesitant to lend on speculation credit losses will increase as the global economic slowdown deepens. Binit Patel, an economist in London at Goldman Sachs Group Inc., said in an Aug. 21 report that nations accounting for half of the world’s economy face a recession. …
Losses and writedowns on securities related to home loans to people with poor credit now exceed $504 billion at financial institutions. …
“The problem is much more systemic than was widely anticipated a year ago,” said Michael Darda, chief economist for MKM Partners LLC in Greenwich, Connecticut. “Not only bank balance sheets but home balance sheets are under pressure due to falling house prices.” …
The crisis is “not over and I’m not exactly sure when it’s going to end,” Nobel Prize-winning economist Myron Scholes said Aug. 21 at a conference in Lindau, Germany, featuring 14 Nobel laureates in economics.”
http://www.bloomberg.com/apps/news?pid=20601109&sid=aa9qsN2KBb0Y&refer=home
It was pointed out to me (painfully by baseball bat) the writedowns that Bloomberg and others report EXCLUDES - Insurance (AIG et al), GMAC residential et al, Mortgage insurers, bond insurers and Hedge fund losses. Back to the paper and pencil.
Has the PPT turned an efficient U.S. stock market into a mentally retarded stock market? For example, why should the WSJ have to beat market participants over the head with news that bond spreads have widened before a slow-motion stock price correction can even begin?
MORE
ABREAST OF THE MARKET
Bond Market Flashes Caution Signals for Stocks
By E.S. BROWNING
August 25, 2008; Page C1
Stock investors trying to see the market’s future have begun monitoring indicators from the bond market — and they don’t like what they are seeing.
Until the current bear market, stock investors often paid little attention to credit markets. But as troubled financial companies and bad mortgages have pulled the stock market down over the past year, stock investors have begun looking for signals from the mortgage market, the corporate bond market and even the interbank market. And lately, the signals have been flashing yellow and red.
Most stock investors are stupid. The total stock market valuation in the US is ~$13T, the total US bond market is approximately $29T. To be ignorant of the bond market and to just look at stocks is asking for a beheading. The currency markets are even larger and it is stupid to ignore the top 25 currencies in the world.
Maybe $$200B in stocks changes hands during the day. $2T+ in bonds and currencies changes hands every day. The bonds have been screaming US corporate BK. The currencies have been screaming world wide BK.
You puts your moneys down, you takes your chances.
I think of stock investing like gambling. It is a speculator’s market which is rife with insider trading and false valuations by rating agencies that don’t disclose their conflicts of interest. It is a broken system.
Only people who can’t read a balance sheet and are generally clueless about macroeconomic trends think that all investing is “gambling”.
Your ignorance doesn’t mean anything.
Read again what hoz said above. Then hie your sorry @ss to a library, and start reading.
Sticks and stones my break my bones, but lame ad hominems make me laugh my ass off.
Home heating furnace throttles full on, Captain!
What? It’s not even October!
Mayday! Mayday!
Disposable Income going down!
http://www.jsonline.com/watch/?watch=1&date=8/24/2008&id=45208
Fannie, Freddie Woes Vex Experts And Leave U.S. Hard Choices
By SUDEEP REDDY
August 25, 2008; Page A2
SOME OF THE nation’s top economists figure the government’s response to Fannie Mae and Freddie Mac has come to a critical turning point: They expect Treasury will be forced to inject funds into the two firms, but they’re not sure whether pulling the trigger will be enough to bolster the sagging economy.
The woes of the two mortgage-lending giants were the talk of the Federal Reserve Bank of Kansas City’s annual mountainside conference here in Jackson Hole, Wyo. When the central bankers, academics and Wall Street economists met a year ago, the housing-market troubles had just begun to deepen global-credit problems.
Since then, government officials around the world have repeatedly intervened by injecting liquidity into markets. Their actions may have prevented a much deeper financial meltdown, but they haven’t ended the crisis.
The fundamental problem: Home prices continue to decline sharply. That is leading to more homeowner defaults and foreclosures, which further knock down real-estate values. The price declines are hitting banks that hold mortgage-related securities, ultimately restraining credit and slowing the overall economy.
“It’s simply not clear — at least not clear to me — what will stop this self-reinforcing process,” Harvard economist Martin Feldstein told conference participants.
Hint to experts: It is mathematically impossible for double-digit housing price declines to continue indefinitely.
Not necessarily. As long as prices are infinitely divisible, that is.
You are right in theory. But in practice, houses are real assets with a value greater than $0, except for in certain crime-ridden inner city neighborhoods or in certain states of post-foreclosure dilapidation.
You guys are killing me !! I will be reading this stuff all morning…:)
If you slice & dice on the way up…can’t you slice & dice on the way down?
Bugs: “eh, Daffy, did you just hit the “population inversion” button?
Daffy: “Well Bugsy, they kinda all look the same to me.”
Foghorn: “I tell ya…that boy is as smart as a # 2 pencil made in China”
Foghorn Leghorn: Lookit here son, I say son, did ya see that hawk after those hens? He scared ‘em! That Rhode Island Red turned white. Then blue. Rhode Island. Red, white, and blue. That’s a joke, son. A flag waver. You’re built too low. The fast ones go over your head. Ya got a hole in your glove. I keep pitchin’ ‘em and you keep missin’ ‘em. Ya gotta keep your eye on the ball. Eye. Ball. I almost had a gag, son. Joke, that is.
Shrub: “Why are we invading Iraq?”
Cheney: “They’ve got weapons of mass destruction”
Shrub: “Oh, yeah, is that good enough?”
Cheney: “They’re helping a Saudi Prince & his terroist gang in Afghanistan”
Shrub: “Yeah, yeah, anything else?”
Cheney: “We’re going to make the Islamic behave like Christians and convert their society into Democratic clones.”
Shrub: “Excellent, what a laundry list! Any thing else we can hand to Colin?”
Cheney: “Saddam tried to kill your daddy, a former US President, ex-us military, an investor in the Carlyle group.”
Shrub: “Oh Dick, quit pulling my leg now!”
Cheney: “Remember, stay on message…not a word about no-bid contracts!”
Cheney-Shrub Legacy List item # 13: “eternal” Middle East Peace agreement by Jan 20th 2009.
“The two sides formally relaunched the peace process after a seven-year hiatus at a US-hosted conference in November, with the goal of signing a full peace deal by the time President George W. Bush leaves office in January 2009.
But they have made little tangible progress on resolving the core issues of the conflict, including final borders, the status of Jerusalem and the fate of the 4.5 million UN-registered Palestinian refugees.”
See how fast Condi booted out those pinko Russian commie’s!…now get those Caterpillar bulldozers and split Jerusalem into .5% Palestine control 99.5% Israel control , throw in a 35 foot cement wall and let Israel slap those pesky Iranian’s nuclear “program” promoters in the face. Oh, and Condi, make sure we get those stolen x4 hummers back from Russia before the end of the year will ya.
Rice admits tough task to reach Mideast deal by year-end:
http://afp.google.com/article/ALeqM5jkbinW4162FLE-xUyKxpfKscd12A
I’d gladly indulge in a pay-per-view of Condoleeza Rice & Dana Barnett wrestling in their birthday suits, in a water soaked dirt floor setting…
When is it scheduled?
So wtf are you buying ?
Gold Silver Agriculture Water Minerals … basic economy materials
I was thinking about “impact fees”, a fancy way of the local government saying, “we’ll take $50k to $75k per new house from the homebuilders, and invest it in the infrastructure and however we see fit.”
I wonder how many of these “impact fees” were counted as done deals by said local governments, in a Mark to Model fashion?
The debris of failed housing projects in the Central Valley of California oftentimes has 25 house lots, graded and electricity in, but no further development.
There are hundreds of failed housing projects like this, up and down Appalachiafornia…
If these local governments spent the $1.25 Million they had expected to get from just one of these Fate acCOMPli’s, they are waste deep in big muddy, but imagine the impact of a dozen failed 25 packs, if you’d spent the “impact fees” thinking it was money in the bank?
In the desert, 3 empty developer tracts.
1@ 21 vacant lots, 12 empty homes, and 10 finished.
1@fenced with flags, idled parked water trucks, nothing else.
1@3/4 built, several empty lots, gated community, several framed but nothing else nearby to indicate ongoing building.
DR Horton Sign wavers with Zerodown signs.
Quiet everywhere really really quiet. Streets pretty vacant.
Walked across the fwy/111 and could have sat in the middle for a minute or two without worrying about traffic.
Grocery stores at less than usual post church/bbq crowds.
Grocery carts really empty.
You should take the fencing and sell it as scrap metal. Also, those grocery carts.
Stores here wont let you take them out of the store, …you have to get your groceries delivered…. they are really cracking down on cart theft.
They need to do that here in Tucson. Damn things are all over this neighborhood.
And this was the “American Dream” that has been promoted for the whole Bubble - lots of overprices, useless McMansions, rotting in a desert, miles away from any source of employment or anything of value.
“Mission Accomplished!”
It was unreal this weekend - dead everywhere. Streets empty like I’ve never seen before. El Paseo empty on Sat night. Unheard of. Most longtime locals I know are all seeing it. It’s nice, but very eerie. I see no construction anywhere anymore.
Aretheycrazy, you are so right.
Drove down Palm Canyon and nada.
zip.
I actually drove from here to Indian Wells in 20 minutes and at the speed limit, not one mile over.
No traffic.
Amazing.
Eery or eerie? Definitely nice and weird.
Spending money you don’t have…in America? That never happens!
Imagine no police or fire department?
It’s easy if you try…
All the cops do in our town is write speeding tickets. Once in a blue moon they bust a meth lab, which probably means that 99 other meth labs are never busted.
The fire chief just resigned and it was very hush, hush as to why.
FWIW, these are are the only city jobs here that provide defined pensions. All other city workers just get 401(k) type plans, which are more generous than most privatre sector 401(k)s (employee contributes 5% and the city kicks in another 8%).
Along those lines, who’s the Honda or Toyota of the gun world? I’ll bet they’ll OK. Good gun at a good price.
I don’t know didley about ‘em. Is Smith and Wesson on the high end of the market?
I might like to watch their stock price, for recreational purposes only, not to make a killing.
A shotgun is probably the best home defense aparatus. The Remington 870 express is one of the best shotguns (if not THE best) around. It’s also relatively inexpensive.
RE: shotgun is probably the best home defense aparatus. The Remington 870 express is one of the best shotguns (if not THE best) around. It’s also relatively inexpensive.
Pumps are somewhat obsolete actions
Check out the Saiga 12…It’s a 12 gauge Russian made shotgun with a Kalashnikov AK-47 semi-auto bolt action fed from both high capacity and clip or drum.
Price $599.00-if you can find one.
http://www.youtube.com/watch?v=zwIITTwh1DY
Looks cool. Would be illegal in duck season though. And I’m not sure the barrel is long enough. (I watched most of it on mute so maybe they gave that spec and I just missed it)
For the purpose of home defense, I think my Remi would make ‘em just as dead. Plus I have the added benefit of what just might be the most intimidating sound on earth.
And I’m not sure about the pump action being obsolete. I know of cases where folks with their high dollar benelli automatics not able to shoot b/c of ice on the action while the guys with the much less expensive remington pumps are knocking birds outta the sky.
Simple is often better for very subtle reasons.
But anyway, it’s a cool looking gun. If I had an extra bunch of cash lying around and absolutely wanted to blow it and had everything else I could want, I just might buy one for the novelty. I like cool guns.
Impact fee’s is a fancy word for “Tax”…They have nothing to do with infrastucture since the developer is required to bond for all the infrastructure…Those impact fee’s are to pay those hords of people stuffing their face with donuts you see behind the counter of your local planning and building department along with those crews in the field you see reading the paper in their truck…
More than likely some of those impact fees allowed for the building of a couple of Starbucks (both since closed), which of course, paid impact fees, as well.
It’s a vicious circle jerk…
The median price for a home sold in July dropped to $212,000, down 7.1% from a year ago.
The NAR said sales rose to a seasonally adjusted annual rate of 5 million units. Sales had been expected to rise only 1.6%, to a 4.90 million-unit pace, from the 4.86 rate initially reported for June, which was downwardly revised to 4.85 million.
Still, home sales were 13% lower than a year ago.
And the inventory of homes for sale rose to a record 4.67 million homes or a 11.2 months’ supply at the current sales pace, matching a record set in April.
If just confirms the ignorance of the proposition that there is a housing crisis or slowdown, and underscores that houses were just priced too high. It’s not the end of the world. We just need to get back to historic norms and we can recover. We just need another 20-30% fall in most areas, and 50-60% in some.
Hell has frozen over:
“Despite the rise in sales, Lawrence Yun, the Realtors’ chief economist, was reluctant to conclude that the housing market had hit bottom.
While buyers are pouncing on lower prices — especially in places like California, Florida and Nevada — sales are sluggish in formerly stable states like Texas.
“People are responding to lower prices,” Mr. Yun said, but there is “too much uncertainty” about the housing market’s future to mark a definite bottom.”
I’m not sure. Maybe he misunderstood the question.
AP’s article title: “Realtors say existing home sales rose in July”
“Realtors say…”
That’s a funny qualifying phrase. Like they said it, but we don’t believe it. A year ago the article title would have just been “Existing home sales rose in July”. Maybe the press has had enough of their bull.
Diana Olick on CNBC; ” The number that truly stands out is that over 40% of those sales were from Distressed properties. ( Foreclosure, short sale etc ). ..But what is not counted is REO sales by banks that never make it to the MLS. they are not included in that 40% number. “
At least there is one organization that gives an honest assessment:
“People are responding to lower prices,” Yun said, but there is “too much uncertainty” about the housing market’s future to call a bottom.
Sarcasm Off
Appraisal question:
It’s easy to value a home simply based on the materials and labor that go into a home, as well as the value of the land based on the neighborhood. How do you “value a neighborhood”?
Schools, crime, appearance of other homes, amenities, etc. are of variable importance depending on the target consumer. Families, singles, DINKs, retirees all have different priorities and incomes.
RE: It’s easy to value a home simply based on the materials and labor that go into a home, as well as the value of the land based on the neighborhood. How do you “value a neighborhood”?
According to textbook, the value differentials which can be abstracted from market place via Paired Sales and a Regression Analysis.
However, the methodology is time consuming and requires a level of expertise not accommodative to the lender requirements of: 1.) How fast can you get this appraisal done? 2.) How cheap will you work?.
The advent of the computerized MLS system facilitated the evolution of appraiser’s operating outside what you might call their “realm of knowledge”, meaning appraisers before the evolution of FIRREA and federal licensing largely confined their practice to perhaps a 30 mile radius. When licensing unleased the hordes of trainees, many desperate for business would travel vast distances in markets they didn’t have a clue about.
But with shoddy underwriting by the lenders, nobody cared.
But the easiest means to fudge the numbers on an appraisal report is to take comparables from a dramatically superior neighborhood. Local lenders, familiar with the territory of course
would say BS. But idiot underwriters in CA looking over an appraisal for a property in NJ wouldn’t have a fookin’ clue.
right on the money HD…
hd74man - very well put. As we both know this is all too common, and that is cherry picking sales data. It happens all the time.
As of late I am doing about 60% forensic review work and the latest scam is to use data in condo conversion projects that is all developer supplied data. Somehow these guys are keeping the Realtards out of the projects and the only data is FSBO or developer driven.
Most are kicking back cash at closing with guarateed rental income for say 2 yrs. Total scams.
I alerted our property appraiser offices and they are now listing all non MLS sales as unqualified. MLS sales that are confirmed can still be misleading as they seem to have memory lapses too but at least it is a start.
From the field- I am finding sales prices in many moderate housing areas of central Fl. back at 2000 and there is no bottom, whatever that is, in sight.
I was thinking about what represents a bottom. It seems to me that as long as money is scarce, jobs are lost, and the market is frozen for all practical purposes we are re-establishing market parameters.
It is not all about real estate at this point but about macro factors as well. IMHO there is no such thing as a bottom. We are redifining socioeconomic factors that will revalue our world from tomaters to houses.
As an appraiser I can say unequivocally I am uncomfortable every time I sign my name. Someone has to make a call but there is little semblance of data reliability at this point.
I write reports every day and the bold highlighted phrase is in every one.
” Lender-note that the market is declining and there is excessive inventory. This is a fluid market and the value reflected herein is valid and supportable as of the date of inspection based upon the best available data on that date. You should not rely on the value contained herein for a period of more than 30 days, if that, based upon the ever changing market in which we find ourselves.”
You might think a lender or two would call to ask why I include this. Not one call.
Thank goodness I specialize in forensic work.
Oh I have lost all but one lender client. Maybe that explains it.
Sheesh!!!!!!!!!!!!!!!!
RE: Oh I have lost all but one lender client. Maybe that explains it.
I’ll tell ya DimeD…Your tenacity sure is impressive.
I pretty much dropped out out of the appraisal game in ‘03, as I saw it all as an exercise in futility. How anybody can survive and keep his or her sanity intact in this environment is beyond my comprehension.
Have you heard of an appraiser by the name of Patricia Crowley? She was a regular contributor on the Appraisal Forum and I guess a pretty big gun in the FL appraiser network.
According to one of Ben’s postings, her appraisal biz was destroyed. Plus, she had received a couple death threats
and was now carrying a gun.
Only those directly involved in the professional know how bad and dirty all of it really is.
Not that it helps but DD you have my utmost respect. I’d hire you to appraise my house, if I lived there and was selling (or buying).
I think what you say is very true - not just now but always, but even moreso now. There are so many other factors in play it’s not funny.
Trying to rely on a house appraisal right now is kind of like asking a boat seller if a boat is sea-worthy, having him say yes - then driving it right into a hurricane only to have it sink, then going back to the boat seller and saying “I thought you said it was sea-worthy!!!”.
Any sea-worthy boat can sink under the wrong conditions, and there’s a heck of a storm out there right now. The big question is at what point we are in the storm. IMO we’ve just gotten some of the outer bands so far. The eye wall is yet to come.
‘85 or so, had to do a appraisal on my appraisers #s and they were off /down 100k.
That told me then that appraisers don’t always know what they are doing.
I was a rookie but compared my casa to exact houses in same type neighborhood, not houses right next to a apt complex/condo complex,blks away.
A different animal in those days.
I just knew Cheney-Shrub was not going to stand for those pinko Russian commies taking x4 of our taxpayer paid for hummers.
The “Decider” is sending in …the “Shadow Terminator”
Cheney heading to Georgia war zone:
“…The vice president’s office described Cheney’s trip only in the broadest terms, saying Bush wants his No. 2 to consult with key partners on matters of mutual interest.”
Egad! They dragged Cheney out of his spider hole?
“They dragged Cheney out of his spider hole?”
Yup. And he’s taking his shotgun with him. Ruskies beware!
How come the only countries enthusiastic about us nowadays, are places like Albania and Georgia, complete and utter backwaters, B.F.E.’s in the scheme of things.
As far as I know, ’ssshrubery’s only time he walked out amongst the general public in the past 7 years, was in Albania, where they snatched his watch right out from under his wrist, last year…
http://www.youtube.com/watch?v=pyImedRzI3A&feature=related
I can imagine the thief after the fact: Its a lousy Timex! I thought Americans were rich!
Maybe next time we can rip off someone like Putin/
Please specify whom you mean when you say “us”…a lot of Western Europe was fairly enthusiastic about Barack Obama a few weeks back.
Nearly a quarter of a million Germans placed a come bet on him by showing up, a bold wager considering that all he has is potential right now, and potential is French word that means you haven’t done a damn thing yet…
That’s how desperate our peers are, for change.
http://www.youtube.com/watch?v=2g3HuKp4×28&feature=related
The watch wasn’t really stolen, lad =P
Oh man, snap ‘em up! what are we back to 2003-2004 prices in Sacramento?
Only the savvy need apply.
Sacramento prices in many areas are already off 50%.
I just returned from a trip to the home office, where there have been two rounds of layoffs in recent months.
The whole state looks like a basket case…which is why I am now starting (just starting) to look at houses.
I am very concerned about the “shadow inventory.” There are currently 14,000 homes on MLS but I read on Sacrealstats.com that there may be as many as 30,000 additional homes now owned by banks that are not listed on MLS.
In Antelope, there are so many for sale signs and the neighborhoods now look so run down, it is sad. Affordable houses, but not sure I would want to live there now.
Natomas Park seemed better, with prices down about 30-35% and the neighborhoods still looking nice with fewer For Sale signs.
I can see one of two things happening: Another two years of slow grind down as the Option Arm resets start to explode. Or, a massive federal bailout in which homebuyers/average Americans are given approx. $25,000 to buy a house.
Or, a massive federal bailout in which homebuyers/average Americans are given approx. $25,000 to buy a house.Or, a massive federal bailout in which homebuyers/average Americans are given approx. $25,000 to buy a house.
I should get into the printing press biz. Sounds like the Fed will have to buy some new ones.
10 year treasury at 3.77 and CPI at 8%. No disconnect there…
Bond traders expect the inflation rate to fall soon, which is also what the Fed chairman says will happen soon. Where is the disconnect?
Real yield of -4+%. Only Jas would think that is a good deal.
You can send me your money; I will pay the prevailing real interest rate of -4.23%. Please make your interest payments to me promptly.
Why don’t you just take it out of the principal?
Bond traders are buying GSEs and selling USTs. Firms are selling corporate debt and buying USTs.
The basic trade is short the yield curve. Not a disconnect, but dysfunctional.
HA! PB you play a great devil’s advocate sometimes. Is there a difference between expecting and hoping for these guys?
The Professor has a provocative fly in the ointment buzz about him.
Wooooooooooooohoooooooooooooo
Reuters
Fed’s Plosser: hike rates sooner not later: report
Mon Aug 25, 2008 9:04am EDT
CHICAGO (Reuters) - Philadelphia Federal Reserve President Charles Plosser favors a fast reversal of the Fed’s low interest rates, given worries about rising inflation, according to the New York Times.
“If we don’t reverse our accommodative stance sooner rather than later, we will face rising inflation, which may be costly to deal with,” Plosser said in an interview published on Monday…
He dissented twice in favor of tighter policy, in March and April, but voted with the majority in June and August to hold benchmark rates steady at 2 percent after an aggressive rate-cutting campaign that started in September 2007.
Financial markets currently see little chance that the FOMC will raise benchmark rates at its mid-September meeting, and only a one-in-three chance for a rate hike before the end of 2008.
Fizzzzzzzzzz.
Leigh
“…which may be costly to deal with” lol
Now with words like that, Limpbaughs slaughter house five & the “young” Republican “True Believers” with revolt & scream at your face:
All together now:
“WE represent the “FISCAL CONSERVATIVE GOP REPUBLICAN PARTY!”
“WE are the TRUE patriots!”
“GO McSame! Go McSame!… you’re our man!”
*Background voices courtesy of the Cheney-Shrub “Evangelical Chorus” from the Hampton’s NY:
They will change the statement but will not raise prior to the election IMO…BUT, after the election its a different story…Don’t be surprised if BB Morphs into a Volker….That’s the way I am betting…
We’ve had falling interest rates since 1981 so in what direction do you think they’ll go? And duration? I’m being rhetorical but c’mon folks. Cheap $$ days are behind us. I’ll wager on your side scDave.
And all the Credit Cards rates will go up 4-5-7%…(most people have variable rates) …..that would be the tipping point for millions to declare BK.
“Don’t be surprised if BB Morphs into a Volker”
LMAO!
The interest rates need to nudge up, even a .25 point would help IMO.
Leigh
Chicagotribune
What does Tom Cruise and Merrill Lynch have in common?
Snip…
…Almost two years ago, Cruise and Wagner had taken over the studio with ambitious plans to bring it back to its roots as an artist-run haven. MGM honcho Harry Sloan was able to negotiate a $500 million film fund for the pair from Merrill Lynch, which required them to release four films a year for five years with budgets between $40 million to $50 million. Yet Wagner’s inability to greenlight pictures was threatening to jeopardize the Merrill Lynch money…
Jeesh.
Leigh
http://www.chicagotribune.com/features/lifestyle/chi-tom-cruise-0825aug25,0,6596428.story
Risky Business, eh?
Not a worry, if that funding fails… Tommy can get a loan from Travolta & Scientology, it’s an e-meter alien brotherhood thing.
Things that make ya go hmmmmm…
Reuters
Snips…
China Construction Bank eyes faster loan growth
Mon Aug 25, 2008 6:42am EDT
By Eadie Chen and Victoria Bi
BEIJING/HONG KONG (Reuters) - China Construction Bank , the country’s second-largest lender by assets, said on Monday it expects local currency lending to grow 10 percent this year, implying stepped up activity in the second half, but warned of slowing profit growth.
Construction Bank, which on Friday posted a 71 percent jump in first-half net income to 58.7 billion yuan ($8.6 billion), said growth in lending would be driven in part by loans to small and medium-sized enterprises and agricultural businesses…
…Construction Bank, which is about 11 percent owned by Bank of America, saw domestic currency lending rise 7.6 percent in the first half…
Leigh
An important post Leigh. And unduly ignored.
Brazilian Focus: Inflation Threat
By Antonio Regalado in São Paulo, Brazil, and Joanna Slater in New York
During one of Brazil’s many past bouts of high inflation, Henrique Meirelles recalls, he and his maid had a deal. On payday, she didn’t have to work. That way, she could rush to the store and spend her entire month’s salary before it became worthless.
Mr. Meirelles is now head of Brazil’s central bank, and the country’s inflationary past is a big reason why he now ranks as one of the world’s toughest inflation fighters. Even as the global economy slows, the Banco Central do Brasil has acted more aggressively than many of the world’s central banks against inflation, raising short-term interest rates to 13%. The bank is expected to raise rates again in September.
Brazil “isn’t waiting and won’t wait for other central banks to act and make decisions to fight inflation pressures,” says Mr. Meirelles, a former president of BankBoston Corp. Mr. Meirelles (pronounced may-RELL-es) has shown before that he means business; a series of rate increases in 2005 ground economic growth to a crawl.
Central bankers in developing economies face an agonizing decision in the months ahead. The global economy is slowing and commodity prices have eased, but inflation shows signs of becoming entrenched in many places. In Brazil, Mexico, India, Egypt, Indonesia and elsewhere, central banks have unleashed a wave of interest-rate increases in recent weeks. But if they keep raising rates, they could choke off economic growth, a painful consequence in countries with high poverty rates.
Mr. Meirelles, a 62-year-old with a Cheshire-cat grin and a throaty laugh, is on one end of the global debate over how aggressively banks need to act. He and many economists argue that central banks let the world economy get overheated during the past few years of growth and created price pressures that will be hard to eradicate.
“While each country needs to make its own decision, we can clearly see that the more central banks act decisively to control inflation, the easier the job is for everyone else,” Mr. Meirelles said in an interview.
But many other central banks, particularly in Asia, haven’t been as tough, figuring the recent slowdown in commodity prices will help solve the inflation problem for them.
“Far and away, across the globe, the central bank that’s been ahead of the curve is Brazil,” says Michael Gomez, co-head of emerging markets at Pacific Investment Management Co., which manages $80 billion in these countries. He calls the decision by some banks to act less forcefully to tame inflation a gamble. If it turns out to be right, it’s “no harm, no foul,” he says. “If you get it wrong, you’re in a tough place.”
Central banks in developed economies also face the trade-off between growth and inflation. In places such as the United Kingdom, on the brink of recession, interest-rate cuts could be on the horizon. But the inflation problem is more acute in many developing economies.
Headline and core inflation, which excludes food and energy costs, stood at 8.6% and 4.2%, respectively, in emerging economies in May, their highest levels since around the start of this decade, according to a report last month from the International Monetary Fund. By contrast, core inflation remained steady at about 1.8% in advanced economies, even as headline inflation increased to 3.5%. Wages and labor costs are accelerating in the developing world, risking new price increases.
The Asian Development Bank in July warned that “”failure to respond decisively to rising prices risks repeating the mistakes industrialized countries made prior to the Great Inflation of the 1970s.”"
With few exceptions, such as Venezuela and Argentina, central bankers are mindful of this in Latin America. Brazil, Chile, Mexico, Colombia and Peru have tightened monetary policy since early July. J.P. Morgan Chase expects rates in the region to rise an additional percentage point by the end of this year to 11%, on average, after rising more than a percentage point in the past year. Latin America is the only region in the world where bank rates currently exceed inflation, according to Gray Newman, chief economist for Latin America at Morgan Stanley.
If Mr. Meirelles and others in the region are now hawks on inflation, that is because it wasn’t long ago that the region was losing the fight. Between 1980 and 1994, inflation averaged well over 100% a year in Brazil, hitting a peak of more than 2,000% in the early 1990s. The price increases sapped household spending power and wreaked havoc with business plans.
Mr. Meirelles, who comes from Brazil’s state of Goiás — grain and cattle land — rose through the ranks of the former BankBoston Corp. to become one of the highest-ranking foreigners at a major U.S. bank. He left in 2002 for a successful run for Brazil’s Congress in his home state but resigned to take his current position.
Since taking over the central bank in January 2003, he has helped steer a Brazilian economic boom in which interest rates and inflation fell to historic lows, consolidating his place as a key power broker who has the ear of the country’s president, Luiz Inácio Lula da Silva, a former labor leader whose election in 2002 caused financial markets to panic.
On paper, Brazil’s central bank is one of the region’s least independent. A branch of the finance ministry, its governors are political appointees. Half a dozen candidates turned down the central-bank job before Mr. Meirelles accepted it, according to local reports. Mr. Meirelles says that Mr. Da Silva guaranteed the bank “fully independent” decision-making and has kept the promise.
Mr. Meirelles inherited interest rates of 25% and an inflation rate of 12.5%. By February 2003, he had lifted rates to 26.5% — an unpopular step blamed for slowing Brazil’s economic growth. But inflation gradually came under control, hitting its lowest rate in decades, 3.1%, in 2006. That let the bank push rates lower.
Lower interest rates sparked a consumer boom. Consumer demand was expanding at a rate of 8.5% by the end of last year, faster than the country’s gross domestic product, which grew just over 5% in 2007.
Starting this April, Mr. Meirelles’s bank took another sharp hawkish turn, saying it needed to cool fast-growing consumer demand inside Brazil. It took rates up a half-percentage point then, and has raised twice more since, in all by 1.75 percentage points. One reason to keep inflation under control: Most labor contracts and apartment leases contain inflation-adjustment clauses, based in part on food prices.
Mr. Meirelles’s stance has provoked pointed criticism, even within the government. Brazil’s vice president, José Alencar, in early August called Mr. Meirelles’s higher rates “the path of death” for Brazil’s economy. Brazil’s influential former finance minister, Delfim Netto, called Mr. Meirelles’s policies “infantile.”
Some economists insist inflation in Brazil is being imported through commodities and that domestic rate increases won’t alter that. In April, Guido Mantega, the current finance minister, said if one discounted the rising price of beans, the main ingredient of feijoada, Brazil’s national dish, inflation was still a reasonable 4.2%.
Exporters complain that higher rates drove up the value of Brazil’s currency, making exports less competitive.
There are signs, though, that Mr. Meirelles’s strategy is paying off. Inflation expectations have eased a bit recently, according to a weekly central-bank survey of economists and market experts. The survey shows economists expect Brazil will flirt with its cap of 6.5% inflation this year. Mr. Meirelles says his goal is to get 2009’s inflation figure back to 4.5%.
Mr. Meirelles doesn’t see much room for leniency. When there is disequilibrium between supply and demand, he says, it will be corrected in one of two ways: higher prices or higher rates.
“The big advantage of using the interest rate is that you have someone in the driver’s seat. When inflation is taking care of it,” he says, “no one is driving.”
WSJ
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The only concern one might have about Brazil is their next election. 8 yrs of fiscal prudence could go out the door. (In the US, we don’t have to worry. We don’t believe in fiscal prudence.)
short-term interest rates to 13%.
How does one get those kinds of rates? I looked at CD’s from http://www.everbank.com and their Brazilian denominated CD’s (3 mth) are 6.4%.
What exactly is paying 13%?
If I had opened a 12 month cd in New Zealand, 6 months ago, I could have gotten 9% apr pretty easily…
Herein lies the rub, though.
The NZ $ was worth .77 U.S. then, now it’s worth .705 U.S.
Adios 9%.
p.s.
Meet your very first “mortgagee sale victim”
(Kiwi-speak for foreclosure)
====================================
“Stressful!”
That’s how Lagi Auimatagi described the pressure of being a mortgagee sale victim, as she backed out of the driveway of the Papatoetoe house she is losing.
She was heading for her 2pm work and was worried about being late and what her boss might say.
She doesn’t know where her family will go, but they’re looking.
http://www.nzherald.co.nz/section/8/story.cfm?c_id=8&objectid=10528599
What I noticed, from a social standpoint, that everyone was ashamed and embarassed….what a difference from current US.
Sounds like pre 1980 USA, this Kiwi attitude towards foreclosure.
They used to joke that the airline pilots would announce to the passengers, upon landing in N.Z., that everybody should set their clocks back 20 years…
Shame still exists there.
Since when do you measure things in dollars? What would it be worth in gold?
Anyway, I get there is risk with currency. I just want to know what they are talking about when they say they “lowered short term interest rates”. What exactly rates are they talking about?
sure, pretty risky stuff … I’m still hoping to get a good entry point from euros into Kiwi dollars. The euro/kiwi currency moves are so huge lately that they more than offset the higher rates.
Nice post Hoz…..
“…We don’t believe in fiscal prudence.”
Boy Hoz, you’re on a death mission with words like that…Limpbaughs chewing, coughing…spitting you out, …let-overs for the young Republican hyena’s circling about
Re: Fannie and Freddie bailout.
Why do bondholders need to be made whole? If future generations are going to have to pay for this debacle three times over with interest, shouldn’t they at least be forced to take some hit to ensure they think twice next time? How about 10 percent?
Because bondholders are foreigners, and if we burn them they won’t buy more of our ponzi paper; they might even start to sell it. Better to shackle our children to debt slavery than anger our foreign masters, or so the thinking goes.
Hear Hear!
News flash, bonds contain risk!!
If anything, 99 cents on the dollar, just out of principle.
If government-backed bonds lose principal, then how good is the .gov AAA rating?
To add some spin, we say we’re protecting the integrity and AAA rating of Treasury bonds. If we back everything with the full measure of the treasury then we diminish the Treasury Bond’s value and place in the markets. And if we pay 99 cents, we are still backing the bonds. Turn it around on the other guy, “you didn’t think you were buying a treasury bond did you?”
Trading AAA treasuries for wothless debt tranches is already destroying the Treasury dept. balance sheet, but they will be the last to admit it.
“Why do bondholders need to be made whole?”
It’s about foreign creditors who constitute the source of loanable funds which are the lifeblood of the U.S. credit system. If the blood stopped flowing, the lending market would die.
Was that really a Turniquite that Hank’s got in his pocket, and not a Bazooka?
If China, Europe & the ME aren’t made whole on their bonds from the GSEs they stop lending to us. They stop lending to us and we can’t finance our trade & budget deficits. If we have to pay real prices and real taxes, the middle class will require the wealthy to make them “whole”. The wealthy aren’t as wealthy any more.
This, of course, must never, ever be allowed to happen. The wealthy bought and paid for the politicians, the politicians will do as they are told.
They don’t need to be made whole. They weigh the risks against trading benefits. So what if they don’t buy our paper? We need to start somewhere. It’s time for a return to sound dollar and economic policies. Produce and save NOT borrow and spend.
Limpbaughs just ordered “brown rice” to go with his 3″ mini sausages dipped in horseradish sauce. Remember to take your x3 blue pills Rush…from the bottle that has…your name on it.
Rice praises Biden as “true patriot”:
http://www.reuters.com/article/politicsNews/idUSN2550974520080825
I’ve been reading the HBB for years and don’t post often. The politics on this board is becoming real annoying. Yah, it’s the Bit’s thread, but it also shows up in the others quite often. Just sayin……..
Don’t worry Mo, it will all be over in a couple of months. They’ll be no need to b*tch once the savior is in the white house.
If you mean the Messiah™, then I suggest you learn how to use capital letters unless your wrists strain under the threat of capital letters.
Which Messiah are we talking about? There’s two of them, and they’re both posers.
About when the pendulum turns is when when I hear a whole lot of squealin’ about the political content.
I guess I should point at that both sides of the spectrum bother me. This is after all the HBB, Housing Bubble Blog. I love the in site and articles everyone posts. As long as they aren’t swayed to the right or left, it’s all good. I’m here for the nitty gritty and some of the brightest minds around. This was just an observation that has been on my mind for a long time.
i haven’t listened to Rush in several months. He can get monotonous at times.. but he must be having major fun with Obama/Biden these days.. Biden is the perfect target.
Thanks for reminding me to tune in tomorrow.
Bernanke, Buiter, Draghi Diverge on How to Forestall Crises
By Scott Lanman and John Fraher
Aug. 25 (Bloomberg) — One year into the financial crisis, central bankers and scholars at the Federal Reserve’s annual retreat this weekend couldn’t agree on how to prevent a repeat.
Fed Chairman Ben S. Bernanke, European counterpart Jean- Claude Trichet, former officials and economists meeting in Jackson Hole, Wyoming, split over whether central banks should be made responsible for financial stability and how closely to heed the concerns of Wall Street.
“We shouldn’t delude ourselves into thinking we are going to build a panic-proof system,” former Fed Vice Chairman Alan Blinder, who attended the conference, said in an interview with Bloomberg Television. “But there are choices between less and more panics, more virulent ones, less virulent ones, and that is the way we want to push the system.”
Cheney-Shrub have their own “Time Horizon” to deal with: Jan 19th 2009
The faster the price of oil goes down…the faster Iraqi pokes Shrub in the chest…get out town pilgrim and take those “blackwater wranglers back to Crawford with you!
“…Iraq remained adamant that the last American soldier must leave Iraq by the end of 2011 — regardless of conditions at the time.”
“…We’re optimistic that Iraq and the U.S. can reach a mutual agreement on flexible goals for U.S. troops to continue to return on success — based on conditions on the ground — and allow Iraqi forces to provide security for a sovereign Iraq,” he said in Crawford, Texas.
“We find this to be too vague,” a close al-Maliki aide told The Associated Press on Monday. “We don’t want the phrase ‘time horizons.’ We are not comfortable with that phrase,” said the aide, who spoke on condition of anonymity because of the sensitivity of the ongoing negotiations.
“…the Iraqi government has “stopped talking about the withdrawal of combat troops. We just talk about withdrawals,” including trainers and logistics troops.
Iraq demands deadline for pullout of all US troops:
http://news.yahoo.com/s/ap/20080825/ap_on_re_mi_ea/iraq_us_pact
‘time horizons’
1984 wasn’t 24 years ago…
Bud, I’m no Bush fan, but the “Shrub” jokes are getting tiresome.
It was funny maybe one time, like 8 years ago.
Now it just sounds adolescent…
The Home Stretch to Retirement
Question: I’m 58 years old. At the beginning of June, my 401(k) was worth $482,000 and now it’s worth $430,000. How can I stop the bleeding?
Conversely, if you can tolerate swings in your portfolio’s value - or you have other resources to fall back on, such as a pension, sizeable home equity, etc……..
http://finance.yahoo.com/focus-retirement/article/105574/The-Home-Stretch-to-Retirement?mod=retirement-401k
why are people still looking at home equity as income? isent that just a loan that has to be paid back?
It is income. The income is the rent you don’t have to pay, which is important for seniors, because it is guaranteed to keep up with the overall cost of housing — the rent stays zero.
Of course if you borrow against it…
You can’t spend your home equity and live in it too, except with a reverse mortgage, which won’t provide much income for a 58-year-old. Double counting a single depreciating asset.
Dimedropped, I learn so much from you posts! Keep’em coming. I live in Atlanta now but was born and raised in Florida. I moved to the Tampa area five years ago but could not make enough money. Not many jobs and the pay is low in Fla. I don’t plan to ever buy in Fla. If I moved back I would rent. I think it might be years for all of this madness to correct. I don’t know if the fraud will ever get better. I can see that your job is very difficult now by your descriptions. But you seem to be flexible enough to make lemonade out of lemons.
So many targets…so few Predator’s
“…The move came after the Islamic militant group claimed responsibility for twin suicide bombings against one of Pakistan’s most sensitive military installations that left 67 dead.”
Build a nuclear bomb or steal one?
Cheney: “We’ve got them on the run now”
Shrub: “Musharraf, you were doin’ a heck of a job”
Limpbaughs: “Obama just gave Billary the Cheney wave”
McSame: “houses or mansions? I’ll have my staff get back to you on that”
Putin: “Hummers are a piece of crap & they use to much petro”
Greenspent: “I tried to tell you, but you misinterpreted my meaning”
Clarence Thomas: “I don’t really have anything to say”
Katherine Harris: “Is Condi still single? I’m into something new these days”
Ann Coulter: “I’m not dating anyone at the moment, Rush is just so small these days don’t you think?”
Pakistan’s ruling coalition collapses amid dissent:
http://news.yahoo.com/s/ap/20080825/ap_on_re_as/pakistan
Are you better off than this guy?
http://www.ireport.com/docs/DOC-65779
“We are taking advantage of the economy and purchasing more land and developing new shopping centers so that we will be positioned well when the economy comes around again.”
Seriously, do we really need one more new shopping center? Howzabout buying old dilapidated ones and refurbing those?
Well, at least he knows how to make ends “meat.” How is ends meat prepared, anyway?
Danish central bank takes over big bank, hobbled by bad loans and unable to find buyer
Monday’s move came because an audit of Roskilde Bank’s interim report over the weekend revealed additional losses of a least 1 billion kroner ($198 million).
“That means that Roskilde Bank no longer could live up to the law’s demands about solvency,” Nationalbanken governor Nils Bernstein said. “There was a lenient credit culture in the bank.”
Bernstein described the situation as “a threat against financial stability in Denmark,” adding that the takeover was a move to guarantee that stability.
The governor didn’t specify how the 4.5 billion kroner would be used, but told reporters that shareholders had “possibly” lost all their money.
Nationalbanken said that it has the backing of the government and would get a guarantee to cover any losses it might suffer in the takeover. Roskilde Bank’s operations will continue in a new bank under the same name, it said.
Bailouts are rare in Denmark. Nationalbanken has only rescued a few banks in crisis, most recently in 1984.
http://biz.yahoo.com/ap/080825/denmark_bank_rescue.html
havent i heard this same story before?
bailouts are rare in Europe, but most countries already had a few in the last years. And the EU bubble hasn’t even popped …
Hoz posted the Swedebank (aka Hansabank story a few weeks ago)…it really portends the end of the Euro as a viable currency, IMHO.
Vozzie, I trust you not to interpret what I do for others!!!!!!!
God gave us all brains, some diddle with them - some use them. When I am with Lars I diddle.
just a similiar story hoz….thought I would chime in.
Thats really how I see it though.
Ill tell ya right now, sometimes when I dig for dirt….some sort of blackout occurs on some of your posts.
I dont know why, and yes it freaks me out. I generally associate those times when Im really close to really great long call. Everyones supposed to be losing money, and when a guy like me is winging it…..it upsets the balance of power.
again.
apologies hoz, Im sure it has nothing to do with SWDBY.PK being off over 5% today.
I still search your posts out.
Swedbank: Changes in Swedbank’s Swedish Management
Monday August 25, 4:22 am ET
STOCKHOLM, Sweden–(BUSINESS WIRE)–Regulatory News:
Anders Ekedahl has been named a new member of Swedbank’s Swedish bank management and at the same time is taking over responsibility for the cooperation with Sweden’s savings banks. He succeeds Göran Theodorsson, who is retiring.
…Swedbank’s vision is to be the leading financial institution in the markets where we are present. Swedbank has 9 million retail customers and 600,000 corporate customers with more than 459 branches in Sweden, 300 branches in the Baltic countries and another 190 branches in Ukraine. The group is also present in Copenhagen, Helsinki, Kaliningrad, Luxembourg, Marbella, Moscow, New York, Oslo, Shanghai, St. Petersburg and Tokyo. As of December 2007 the group had total assets of SEK 1,600 billion and approximately 22,000 employees. For more information about Swedbank, please visit http://www.swedbank.com.
————–
300 branches in the Baltics…thats the key. That and a dollar peg….peg it the the Euro and sink it in the sea of Japan.
I have no position, nor have I advised others.
helluva page turner.
Just ask the Irish, they get to vote again on the Euro thingy, and they get to keep voting till they get it right.
In the past, i’ve wondered if it was only Americans that went to great lengths to destroy their soon to be foreclosed on homes?
It’s happening in New Zealand, as well…
========================================
Credit controllers in major banks are becoming increasingly familiar with mortgagee sales.
Still, some are shocked at the reaction they have been getting. One banker told of his dismay at distraught owners who rip places apart before the bank gets its hands on their houses.
“It was like they were saying to us, `Cop this, you pricks!’ and they even stripped out the fireplace,” said one senior lending official.
http://www.nzherald.co.nz/section/8/story.cfm?c_id=8&objectid=10528598
That’s infuriating. It wasn’t their place to begin with.
The level of pride and sense of entitlement displayed is really astonishing.
JPMorgan takes $600 million hit on Fannie, Freddie
http://biz.yahoo.com/rb/080825/jpmorgan.html
yeah, but did they inhale?
How’d JP Morgan only inhale a 50% loss on Humpty & Dumpty in the 3rd quarter?
Haven’t both stocks fallen substantially more than that?
depends on what your definition of credit default whipsaw is.
I was trying to set you up for something more exciting, like:
They did not have sexual relations with Freddies Fannie.
or
In hell, JPM book of business Ch. 6 Verse 66
US Home Buyers Hold Fate Of Economy in Their Hands
Reuters
| 25 Aug 2008 | 11:04 AM ET
http://www.cnbc.com//id/26390675
The willingness and ability of Americans to come back into the housing market over the next few months will determine whether the U.S. economy experiences a mild downturn or the deepest recession in 30 years. Many economists say that home prices have another 10 percent to fall to bring them into balance with rents and incomes. A fall of that magnitude would elicit a huge sigh of relief from Wall Street and Washington. But it wouldn’t take much—a further clampdown by private lenders or a meltdown at mortgage finance companies Fannie Mae and Freddie Mac —to push home prices down much more severely, perhaps more than 20 percent. “That’s how you could quickly get into this darker scenario,” said Mark Zandi, chief economist with Moody’s Economy.com. If banks tighten lending standards further, denying loans to borrowers with good credit histories, affordability won’t be enough to keep people buying homes.
“The willingness and ability of Americans to come back into the housing market…”
Tsk, tsk - too bad - because those that are willing are not able and those that are able are not willing.
All in all, it sounds like a dire shortage of hard money.
Americans will spend any money they are given that they don’t have to pay back.
Those that want… no longer qualify.
Those that qualify look at the price to rent ratio and wonder who’s gone insane!
I did a spreadsheet… after 30 years I watch the investments doing better than buying. Prices still haven’t gone inline. Oh… rents declining too.
Got Popcorn?
Neil
Doubleplus good news: the gold ration is being increased, per the Ministry of Truth.
NEW YORK (Reuters) - The U.S. Mint said it must allocate the American Eagle bullion coins among dealers to cope with overwhelming demand as it resumed taking orders for the popular coins on Monday.
The Mint said that it will equally divide its Eagles inventory available for sale each week into two equal pools, with the first allocated equally among all authorized dealers, and the second pool distributed according to the dealers’ past sales performance.
http://www.reuters.com/article/ousiv/idUSN2539668920080825?rpc=401&
The article fairly drips with contempt, referring to gold coins as ‘novelties’. Not mentioned is the fact that rationing is not seen during deflation. But if you like rationing in gold, you will love it in food and fuel.
There is only ever one reason to ration a “luxury” non-essential item like gold… the price is too low! Let them sell to the highest bidder and establish a market price… except that would expose the fraud in the spot price!
The Mint really knows how to get people all wound up..
To sum it up simply, The American consumer was drained of all their wealth via their homes. The purchasing power of the US citizen is now weak, and no attempt from the powers at be will solve this problem other than allowing for a painful, albeit humbling recovery process.
“…and no attempt from the powers at be will solve this problem other than allowing for a painful, albeit humbling recovery process.”
“I will not take $100.00 less than what the house was appraised in 2005″
“Oh great, you have a 520 fico & $1,500.00 gov’t stimulus check”
“We’ll make an offer…as soon as we sell our home in Hemet”
“We’ll make an offer… as soon as we sell our vacation home”
“We’ll make an offer…as soon as my spouse gets settled into a new job”
“We’ll make an offer…as soon we win the Nov election” by anonymous “young republican”
latest news
U.S. July existing home sales rise 3.1% to 5.0 million pace
MARKETWATCH FIRST TAKE
Pent-up supply
Commentary: Any hint of a housing rebound draws anxious sellers back
By MarketWatch
Last update: 11:16 a.m. EDT Aug. 25, 2008
CHICAGO (MarketWatch) — Nobody in their right mind would put a home up for sale in the market that exists in most parts of the country these days, nobody who wasn’t forced to out of job or personal circumstances, that is.
Declining home prices and intense selling competition over the last year have created a climate where folks who don’t have to move won’t contemplate the idea and those who do have to move shudder at the prospect. Throw in a credit crunch that grows worse by the day, limiting mortgage options, and you can see why staying put is replacing mobility as a hallmark of the American homeowner.
…
Home builders and developers have been working to curb inventory, holding back on housing starts and permits. See Economic Report.
But the bigger threat to the market is from the inventory of existing homes. Even if sales hold up, those inventories can be expected to climb in the coming months as more homeowners face financial difficulties that force them to put homes up for sale or fall into foreclosure, which will force their lenders to put their homes on market.
And since lenders do not like to hold property, they won’t hesitate to dump houses on the market as fast as they can — and since they’ve shown they are willing to write assets down to virtually nothing, they also won’t hesitate to cut prices even more.
You can see the inevitability of that downward spiral.
“And since lenders do not like to hold property, they won’t hesitate to dump houses on the market as fast as they can.”
I think this is a dubious statement. Or maybe as fast as they isn’t very fast and way too many properties are backlogging in the banks books.
World must brace itself as the US banking sector ‘fesses up’ to losses
By Liam Halligan
Last Updated: 10:15pm BST 23/08/2008
Page 1 of 2
…
The latest Federal Reserve data shows that between April and June, American banks significantly tightened their lending standards and are about to do so even more - across all types of credit.
What started, just over a year ago, as a squeeze on the dodgy end of the mortgage market has now spread to all forms of household and corporate borrowing.
A net 62 per cent of US banks turned the screw on the prime mortgage sector during the second quarter - with almost 75 per cent signalling a further tightening in the third. A similar pattern prevails across credit cards and other consumer lending, as well as commercial and industrial loans.
This credit contraction has had a serious impact on economic activity - an impact that’s about to become more severe. Some stock ramping Wall Street institutions and their pet in-house economists have suggested lately that the US “will avoid recession”. Ignore them. In many cases, they’re the same institutions that used to make hay ramping “mortgage-backed securities” - those toxic packages of sub-prime waste which caused this crisis in the first place.
The on-going credit crunch - combined with America’s huge overhang of unsold homes - explains why US house prices will keep falling.
The futures market has priced in a further 14 per cent decline in the S&P/Case-Shiller 10-city composite house price index over the next year.
What’s more, once American house prices do hit rock-bottom, it will take a long time for them to come back. Prices will only recover once US households are willing and able to start buying homes again, which means taking on more debt. But that won’t happen soon - with consumers nervous, and banks more nervous still.
The financial sector’s paranoia is rooted in the on-going reality that there are still a lot of nasty mortgage-backed securities out there, burning holes in bank balance sheets - holes which many banks continue to deny are there.
As US house prices keep falling, repossessions rise and defaults increase, banks will eventually have to “fess up” to the scale of their losses. So far, this sub-prime debacle has seen US banks endure around $505bn - some £270bn - in “write-offs”. There is a lot more to come - as defaults spread to credit cards, auto loans and other consumer debt, to say nothing of corporate debts going bad as the recession really kicks in.
Not known for hyperbole, the International Monetary Fund suggests total write-offs by all US banks could reach $1,000bn before this episode is over. Serious industry experts think $2,000bn is more likely - four times what we’ve seen so far.
Good article, i especially love this part:
“Some stock ramping Wall Street institutions and their pet in-house economists have suggested lately that the US “will avoid recession”. Ignore them.”
Ok.
“Serious industry experts think $2,000bn is more likely - four times what we’ve seen so far.”
…shudder…
What is the opposite of a “serious industry expert”?
a Realtor
Good one, cactus!
Nice “months of used home inventory” graph there — shows we are back to maybe 1986 levels, and headed straight towards 1982 levels (15 mos on the market?).
I am wondering if 1982’s level was the record? Too bad the graph starts there…
Having gone through all of them starting in 1974 I would guess that 1982 was the record year…This one is different in some ways but very simular in many others…
Probably higher than anything since WWII anyhow, since 1982 was when interest rates were through the roof - no one was buying then unless they were willing to pay cash.
WWII and GD may have been higher - maybe not though.
OK, here’s an interesting experience. I subscribed to an email alert from a RE’s website. They usually send me a listing of houses based on my criteria. I get this every day. I finally found one that interests me. (it was a short sale) Price was at $85 sq ft. Huge place and looks prestine. I emailed back the realtor several times. He finally calls back and gives me the shpiel on the property. Then he says it was priced at 100K more than the previous price at MLS. I told him it was at a lower price stated at the MLS. Well, low a behold the price at the MLS is at the new price which is 100K more.
I laughed incessantly. I told him to call me back when the price actually goes down another 100K in two months because that house is going into foreclosure by then. Oh yeah, he said the owners HELOC’d $300K out of that pig.
The thing that strikes me is that RE’s purposely display a great price on a house, then when they get ton’s of interests or inquiries, they quickly up the price in MLS. This whole RE business is the biggest scam ever.
But for a few, choice deals here and there, it’s way too early to buy, imo. While things are getting somewhat tempting, we gotta let this play out a little longer.
Once all the GFs are finally spent there will be upwards of a million properties to pick and choose from at one’s leisure…
Got Orville Redenbacher?
Yep, and think of all the pocket listings these shysters hold close to their chest.
How is it that a group that is so lacking in talent is able to have so much power over information?
In this week’s mail, I got a letter and form from my county assessor’s office. They were asking me to declare my property as residential owner occupied within 15 days or they would reclassify it as a rental.
Well, being the curious type that I am, I called them and asked why I’d received such a letter. They said that they send such letters to the owners of recently purchased properties, just in case someone makes an inquiry about the ownership. Apparently, someone had inquired.
Curiouser and curiouser, methinks.
After all, I’ve been here at the Arizona Slim Ranch since 2004. That doesn’t exactly make me into a recent purchaser. I told them that. And, BTW, I just sent the form — which was on the reverse side of the letter — back to the county assessor’s office. With the “residential owner occupied box” checked.
They said that they couldn’t tell me who had inquired, which is per their policy. Oh, well. I’d love to know who’s so interested in the classification of my abode, but that’s another rant.
Okay, since I had the county assessor’s office on the line, I decided to have some fun. I pulled up this website:
http://www.dot.co.pima.az.us/gis/maps/landbase/parsrch.htm
and started searching on nearby properties…
Since reporting on misclassified properties can be done without the assessor’s office telling the owners who was doing the reporting, I informed them of several properties that are listed as residential owner occupied, but are actually rentals. (Rental property tax rates are higher than residential owner occupied rates.)
I encourage other HBB-ers to report misclassified properties. It’s as easy as doing a little research, then contacting your local taxing authorities.
Is there a website where the violent propensities of such property owners is listed? Reporting people in that manner is not likely to make friends or favorably influence people. A guarantee of anonymity from a government agency is worth little.
That would mean more money to the government. Why would you want that? Every penny that the gov gets is wasted without fail!
You little RAT Slim! I wouldn’t let any taxing authority know anything. The only way we can control the beast is to starve it of money. Let’s get Joe Arpeo to reduce costs and run things.
The California used home comps are royally screwed.
State home sales soar while prices plummet
James Temple, Chronicle Staff Writer
Monday, August 25, 2008
(08-25) 12:20 PDT SAN FRANCISCO — Home sales surged and prices plunged across the state last month, as buyers show increasing willingness to pick up foreclosed or distressed real estate, according to an industry trade group.
The number of existing, single-family properties that traded hands in July leaped an estimated 43.4 percent from a year ago, the California Association of Realtors reported. The median price, however, dropped to $350,760, a record 40.3 percent decline.
Associated Press
Home sales, prices drop in Midwest
By ALAN ZIBEL 08.25.08, 3:20 PM ET
…
While prices in St. Louis were down only 6 percent to a median of $150,000, sales were still down by nearly 50 percent from last year’s levels - the largest sales drop among the 55 cities surveyed in the AP-Re/Max report.
Tyler Olsen, a local agent who specializes in city properties, said he recently lost four for-sale listings when potential sellers decided to rent out their homes instead.
Olsen says the local housing market is “coasting along the bottom” at the moment, but expects a modest recovery next year. “It’s not going to come jumping out real quick,” he said.
…
It remains to be seen how much government intervention will stem the nation’s housing crisis.
President Bush last month signed a bill that aims to prevent foreclosures by allowing an estimated 400,000 homeowners to swap their mortgages for more affordable loans, but only if their lender agrees to take a loss on the initial loan.
However, consumer advocates fear that lenders will simply put their highest-risk loans into the program, and borrowers will default anyway, leaving taxpayers on the hook. The Congressional Budget Office estimates that about 35 percent of borrowers refinancing through the program will default.
Even with government help, nearly 2.8 million U.S. households will either face foreclosure, turn over their homes to their lender or sell the properties for less than their mortgage’s value by the end of next year, predicts Moody’s (nyse: MCO - news - people ) Economy.com.
Bravo Slim!
Thank you, Ouro Verde! Perhaps I should take a moment to explain why reporting misclassified properties is so important.
In some cases, there may be a simple oversight on the part of the property owner. In other cases, more than a few of which have been described on this blog, properties were purchased by “investors” who had no intentions of living in them.
But the public records show these properties as being what my county calls “residential owner occupied.” Which means that they’re taxed at a lower rate than they should be.
I, for one, don’t think that this is right.
Since most taxing jurisdictions have their ownership records online, it’s easy to search and find out how properties are classified. The next step is to make your report. The lady I spoke with this morning was happy to take my report over the telephone, but she advised sending a letter if there are more than six properties to report.
How is that plan to restart housing price inflation by raising the conforming loan limit in high-priced markets working out?
C.A.R. July 2008 Sales and Price Report
For release: Monday, Aug. 25, 2008
C.A.R. reports sales increased 43.4 percent; median home price fell 40.3 percent in July
LOS ANGELES (Aug. 25) – Home sales increased 43.4 percent in July in California compared with the same period a year ago, while the median price of an existing home fell 40.3 percent, the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) reported today.
“Sales improved significantly in July 2008 and remained above the 400,000 level for the third consecutive month,” said C.A.R. President William E. Brown. “Deeply-discounted, distressed sales continue to drive volume in many regions of the state. July also was the first full month during which the effects of higher $729,000 conforming loan limits likely had an impact on closed sales.
…
The median price of an existing, single-family detached home in California during July 2008 was $350,760, a 40.3 percent decrease from the revised $587,560 median for July 2007, C.A.R. reported. The July 2008 median price fell 4.5 percent compared with June’s revised $367,130 median price.
4.5% drop in one month in the state of California! That may be the largest one-month drop in real estate in a large region of the world ever in human history. I love watching and even better making history.
Something fun to pass the night away:
http://valleywag.com/5036162/cerns-large-hadron-collider-explained-in-rhythm-and-rhyme
Excellent. That was more fun than the Democratic Convention.
I dont know why, but a Hoz comment got taken down, he was talking about how the banks were the ones bidding the GSE note auction today:
from DEALBREAKER:
Here’s how it works. A bank that bought the six month notes from Freddie this morning could also bid to borrow from the Fed’s Term Facility, which held an $75 billion auction today. As collateral for the borrowing, the bank could offer the newly purchased Freddie notes, for which the Fed would give them credit for 97% of their market value. Recently, the TAF pricing topped out at 2.35 percent for 28-day borrowing. So a bank buying $100 million of Freddie paper yielding 2.858% could flip it to the Fed, borrowing $97 million at around 2.4% (assuming the pricing will be slightly higher this time around).
At the end of the day, a credit desk could buy $100 million of Freddie debt for just $3 million down. On that $3 million, the desk would receive a 17.7% annualized return, or 8.8% over six months, for paper that is explicitly backed by the Treasury Department. Not a bad deal at all..
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This is what is happening, this is exactly what happens when the system gets gamed for the big money…..now everyone just sit back and watch the banks get well. I smell a rally…credit event be damned. Smartest guys in the room….blah, blah, blah….
“There are also signs that mortgage-backed securities are beginning to trade again. That’s what we need to fix the problem. Don’t hyperventilate yet but this report is OK, Dog.
JR”
JR is Dr. John Rutledge
http://rutledgecapital.com/rutledgeblog/
sorry that was from April 08, he’s been on vacation ever since.
but you wondered….I know you did.
…on paper that is explicitly backed by the Treasury..
explicit? I didn’t know we had reached that point..
My last FNM puts sold when I was vacationing in the mountains near Yosemite last week and I have been traveling a lot lately, with little time to check the blog.
But I am not dissappointed by the week’s news. I am still grappling with the idea of selling my place in Paris, France. Anybody with real market knowledge, please e-mail me at the address below.
I was thinking that it would be nice to have some kind of quarterly meeting with folks who follow stuff this closely. As anyone can see from my screen name, I’ve been posting here for a few years and have followed and profited from the crash for the past two years. I read the blog less and less lately as it now seems overrun by cutesy posts or opinionated bits that contain little or no useful insights. I am a long term guy and don’t want to meet people who post every month saying “are we there yet!?” We are years from a bottom and inventory is still rising, but there will be a bottom, probably around 2011-2014, and a pretty rare chance to acquire cash flow real estate that will appreciate someday, probably by 2020 or later. If anybody else is interested in this idea, and if you know what a GRM and CAP rates are, please e-mail me at hikerdadlvp at yahoo and maybe we can start a meetup to exchange ideas and market info. I am primarily interested in California, but will also consider Colorado and Florida. Again, I really don’t want to interact with the people who got hyped up by some seminar, put up “I buy houses” signs or got in too deep on the one time boom thinking they were very smart, but those who have a long term perspective and a realistic outlook.
Could this be the first time that Yun hasn’t called a bottom?
http://afp.google.com/article/ALeqM5jAX4R6BxZZha2zTV5R5d7EdFrovQ
Lawrence Yun, NAR’s chief economist, said that home prices in some regions could soon increase, citing a strong jump in sales in Florida and California, two of the hardest-hit states in the worst housing slump in decades.
“Sales have picked up significantly in several Florida and California markets. Home prices generally follow sales trends after a few months of lag time,” Yun said.
NAR said the inventory of unsold homes at the end of July rose 3.9 percent to 4.67 million units, an 11.2-month supply at the current sales pace, up from a 11.1-month supply in June.
The rise in supply was mainly from a spike in condominiums on the market that offset a decline in the inventory of single-family homes.
“Inventory remains high in many parts of the country and will require time to fully absorb. We expect more balanced conditions in 2009 and will eventually return to normal long-term appreciation patterns,” Yun said.
I think I remember something similar from him…maybe a year ago or so. It was “this is a bottom”, “this is a bottom”; then, as if he were trying to regain some cred “this may not be a bottom” followed the next quarter by “now we’re on the way back up”.
I don’t remember when exactly, but I recall him doing something like this once before.
I hope he realizes that “normal long term appreciation patterns” means that houses will track wage inflation….hardly making them an “investment”.
Barney Frank on CNBC today said he would like to see home prices go lower. I don’t think he understands the problems with the system if he thinks that way. Or maybe he was telling a lie.
I’m amazed he said that! Maybe tomorrow he’ll announce he likes girls!
Of course, I would love home prices to go lower (and I’m a 100% paid-up homeowner!) because I feel that bubbles are bad.
But most lawmakers want to make houses more “affordable” with wacky tax breaks, downpayment assistance, crazy teaser rates, etc,. all which serve to make house prices higher.
all which serve to make house prices higher.
—————————–
…and banks wealthier.