Bits Bucket For September 4, 2008
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The Housing Bubble
Examining the home price boom and its effect on owners, lenders, regulators, realtors and the economy as a whole.
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Name:Ben Jones
Location:Northern Arizona, United States
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Toll Reports Fourth Straight Loss on Housing Slump (Update1)
By Brian Louis
Enlarge Image/Details
Sept. 4 (Bloomberg) — Toll Brothers Inc., the largest U.S. luxury homebuilder, reported its fourth straight quarterly loss as credit restrictions and the deepening housing recession deterred buyers.
The fiscal third-quarter net loss was $29.3 million, or 18 cents a share, compared with a profit of $26.5 million, or 16 cents, a year earlier, Horsham, Pennsylvania-based Toll said today in a statement. The loss was smaller than the average estimate of 35 cents a share from 13 analysts in a Bloomberg survey.
Chief Executive Officer Robert Toll said he couldn’t predict when the housing market will recover. Sales have declined and foreclosures increased in the more than 20 states in which Toll offers homes, including California, Florida, Nevada and Arizona.
“Once the supply of foreclosed inventory is exhausted, we believe that favorable demographics will kick in,” Toll said.
http://www.bloomberg.com/apps/news?pid=20601087&sid=ab6863KPpkeA&refer=home
They may be exhausted before the inventory is.
Robert Toll is the most trussed man in the industry, so once those favorable demographics kick in, in 2020 hindsight, he will definitely have the desirable inventory that people will crave a dozen years from now.
According to many posters here his inventory won’t even make it halfway to 2020.
Things might get better for Robert? Ha Ha HA, Ho Ho HO
In July, Moody’s Investors Service cut Toll Brothers Inc.’s senior unsecured rating to junk status, saying falling home prices and lower absorption rates continue to have an impact on margins.
http://online.wsj.com/article/SB122052340720299039.html?mod=hps_us_whats_news
Sales have declined and foreclosures increased in the more than 20 states in which Toll offers homes, including California, Florida, Nevada and Arizona.
Wow. Think about that. More than 20 states are in the… And those are only the ones Toll does business in…
Got Popcorn?
Neil
I thunked about it some. If foreclosures are up and sales are down in all the states where Toll offers homes, then clearly a bottom is at hand. Toll’s stock should go up today on the good news.
‘April 18, 2005: Every Sunday, his company’s divisions e-mail Toll, his top brass, and other managers the sales figures for each of his 220 developments around the country. After digesting the data, Toll himself makes the final decision on whether to raise home costs. On this night he’s so confident that people will keep buying that he lifts the prices on projects in Florida, Las Vegas, and other markets by 1%. That amounts to about $10,000 for each house over the list price from the previous week.’
‘It’s nothing new; he’s been hiking prices Monday after Monday. At Toll’s Frenchman’s Reserve community in Palm Beach Gardens, the price of a Florida rococo confection called the Signature has jumped $200,000 just since January, to $1.4 million. That’s an average increase of $15,000 a week. “People just keep buying anyway,” Toll marvels. “I’ve never seen anything like this in almost 40 years in the business.”
‘Toll argues that even with increased construction in some markets, the flow of new houses won’t keep up with the ferocious demand that is a natural outgrowth of demographics. He points to the 80 million baby-boomers who are reaching the prime age for moving up to fancier homes and securing their havens for retirement.’
‘Meanwhile Toll continues to look for every angle that might give him a competitive advantage–or allow him to charge extra for the houses he sells. It turns out that the West Windsor project near Princeton is popular with a lot of Asian-American buyers who work in the area’s high-tech corridor. And Toll Brothers has found that one of their main concerns is buying homes with façades that face east or south so that the house will have the best possible feng shui, or good luck brought by the spirits.’
‘Does that mean Toll Brothers will soon be charging special lot premiums for eastward facing homes? “Why not, if that’s what tickles your bippy!” bellows Toll. “One man’s feng shui is another man’s golf course. I think feng shui is worth a lot more.”
I guess Toll ran out of feng shui?
Hubris, then just bris.
Thanks for the blast from the past , Ben!
“He points to the 80 million baby-boomers who are reaching the prime age for moving up to fancier homes and securing their havens for retirement”.
How’s the boomer trade up working out for you Mr.Troll Brother?
LOL
Didn’t he say people will live with their parents into their 40’s?
what d-bag
i hope they go kaput
“boomer trade up working out”
I imagine lots of folks who did the boomer trade up thing over the last couple of years will need mortgage loan work outs going forward.
Wife and I are boomers. We just paid off home and HELOC. We wouldn’t mind trading down a little, but not up, for a little extra retirement money.
“We wouldn’t mind trading down a little, but not up, for a little extra retirement money.”
That is plan A for a tsunami wave of baby boomers who will retire over the next 20 years. Got McMansion glut?
“Wife and I are boomers. We just paid off home and HELOC. We wouldn’t mind trading down a little, but not up, for a little extra retirement money”
Now that’s what I call good planning!!!!!!!!!!! HELOC= extra retirement money
Sorry, I did not state clearly. We just paid off the home and also paid off the HELCO (part of kids college/med school).
“we believe that favorable demographics will kick in,” Toll said.”
With thinking like that…Toll should run out and “snap up” all those foreclosed toll homes at penny’s on the dollar…then he can just turn around and sell them…easy
In reality Toll’s losses are a pittance compared with most homebuilders - so far at least. They’re typically losing in the 10’s of millions per quarter - only about 1-2% of their assets per quarter, whereas most other homebuilders (Pulte, Centex, Lennar, etc.) are typically losing 5-10% of their asset value every quarter.
In that respect - TOL is much healthier than the bulk of homebuilders, and does not look to be bankrupt in the near or even distant future, short of almost complete financial armageddon.
However the question is - how much as Toll written off relative to the others. There may be a higher portion of write-offs still to come.
Also - TOL’s revenue is still dropping like a rock (same as the others). It’s down 35% from last year, and about 60% from the peak, and still dropping fast. How long can revenues drop so dramatically while having such a minimal impact on the bottom line? Not much longer, I think.
The big wahooza homebuilders business model must surely be much more bloated than all of the smaller homebuilders, most of which have already exited the game, with their tales between their legs intact, and not much else.
Tales….. I like it.
I believe Toll Bros will morph itself into a government contractor, rehabbing the millions of foreclosures we will soon collectively own.
I would bet Cerberus wishes they had a “do-over” when it comes to this savvy investment…
Investments Are Faltering in Chrysler and GMAC
By MICHAEL J. de la MERCED and VIKAS BAJAJ
Published: September 3, 2008
Stephen A. Feinberg, one of the country’s most powerful — and secretive — financiers, hoped to make a fortune out of the detritus of the American auto industry. Instead, he seems to be losing one.
Mr. Feinberg’s giant investment fund, Cerberus Capital Management, is racing to salvage multibillion-dollar investments in Chrysler, the smallest of the Detroit automakers, and GMAC, the financing arm of General Motors.
But for Cerberus, named after the mythological three-headed dog who guards the gates of hell, the news keeps getting worse.
On Wednesday, Chrysler, which owns the Jeep and Dodge brands, said its sales in the United States fell by a third in August — nearly twice the industry average — as the downturn in the auto business dragged on. Honda eclipsed Chrysler as the nation’s No. 4 seller of cars, and Nissan is closing in fast.
http://www.nytimes.com/2008/09/04/business/04lend.html?_r=1&ref=business&oref=slogin
I don’t know if my earlier post was eaten, but check out this “form letter” to hedge fund investors. Priceless.
http://nihoncassandra.blogspot.com/2008/08/dear-investor.html
The roads here are choked with those new Chargers. They must be giving them away. The Charger appears to be replacing the ‘Slade as the low brow chariot of choice.
Ah so that’s what those are! I’ve seen em here, rollin’ on 24″ rims. Remind me of the Chrysler 300 (Bently Wannabe). My friend moved from Silicon Valley back to Norfolk….. I remember the conversation, “So you don’t have ex-police Caprices on 26″ or larger rims with the sports team flags?” “Uhhh no” “Wait till you get back to Virginia Beach!”
Spay what you will, but this dog won’t hunt.
No worries — the automakers are already rebounding after yesterday’s gloomy reports. A bottom is at hand.
More Business
Signs of skid’s end for auto industry
Monthly gains for most car sellers indicate worst could be over
By Tom Krisher
ASSOCIATED PRESS
DETROIT – Nearly every major automaker saw its U.S. sales drop in August, but many are seeing signs that the worst slump in recent history may have bottomed out.
Yeah, but those new anti-loan-brakes aren’t going to help a prolonged skid…
This type of reporting ticks me off. On what basis is the “worst over” - can anyone point to ANY FACT that shows this is the case? Argh… oh, wait - gas prices are down, so it must be time to buy a Hummer!
The worst thing ever to happen to the US automotive industry was the Chrysler Bail out of the early 1980’s. This allowed the US auto industry to continue to decline, even though the rest of the world pulled up in terms of quality, and cost. Now the Koreans, and soon the Chinese will be at par with the US automakers, and the Japanese and European will be far ahead.
If Chyrsler had failed in the ’80s it would have kicked the other 2 into overdrive, revamped their product lines, improved quality, and made better looking cars (remember how nice those ’80s chevys and fords were?). As it is today, all 3 might not make it, and the incubator for innovation is dead. The big 3 have been putting out drecks for quite some time, and need to be taken back and shot. Management should all be fired, and claw back clauses enforced. Unions should be disbanded, and a culture of cooperation, and competition instilled.
I think that there is not the political will to just let the chips fall where they may, and the US will try to bail these dogs out yet again, instead of letting them die, and new companies take its place. I shed no tears for them, as they are long dead corporate entities. May they rest in peace.
I’m not defending the Chrysler bailout. But I think it had little to do with the behavior of Ford and GM. Who with the help of the Reagan Administration(changing mileage and safety regulations) , made the SUV the main profit centers for their line.
The Chrysler bailout was in 79. The Big 2 were quite healthy and it’s hard to find where the bailout changed their business model.
Ignoring the energy crisis and not making good fuel efficient cars is much more to blame.
In the early part of this decade the GM CEO said that the Hummer was their future. What does the Chrysler bailout 30 years ago have to do with that nonsense.
I seem to recall in ‘79 that inflation over was over 10% on its way to 14% the following year. Simply add that together and the price of a new car jumped 24% in the three years from ‘78 model year to the ‘81 model year. I believe that is when they coined the phrase “sticker shock”.
Anyone buy a car in ‘79 or ‘80 and remember what you paid for the loan?
Pinch, there is a bit more to it than your post suggests. Yeah, Chryco shouldn’t have been bailed but from a competition perspective, Detroit can re-tool, shift focus and eat Japans lunch if survival is at stake. Remember, there is no manufacturer on the planet who can outproduce heavy framed, big iron, work-centered platforms except Detroit. There isn’t one out there. Japan can’t $hit on Detroits lawn if they tried. The auto biz isn’t only about retail outlet commuter wheels.
That is complete nonsense. Toyota can meet or beat GM on any product, no problem. You do not see half the models that Toyota has because they don’t import them into the US.
Oh really. So the reason Detroit has 100% market share of heavy hauling iron is because Toyota just doesn’t want those profits?
BWHAHAHAHA.
Ok. I will bite.
1. Repercussion of chrysler bail out is that now all 3 are looking for one. http://www.cnbc.com/id/26348390/
If chrysler had been allowed to fail, even though the other 3 were not in not too bad a shape, they were losing ground to Japanese and European cars. (btw, lets not forget AMC).
2. Even though they have the abilty to produce anything ( they can even produce tanks, and during WWII they did) a lot of their production has been slowly and steadily offsourced to Mexico and Canada. To the point that my Honda is mostly built and assembled here from US parts, but my Montecarlo was 70% foreign parts, and assembled in Canada.
3. They have massacred their suppliers. By pushing out the QC and cost savings away from their internal inefficiencies, they have made companies like Delphi bankrupt. In order for you to guarantee quality, you need to have quality partners, but also do your own QC…
4. The business model has changed. The US car consumer is unique. Infrastructure is built for full size cars/trucks. This is not true anywhere else. Europe needs small cars, because cities have small streets, and Asia is even worse. This has lead the US carmakers to lean too heavily on large cars/trucks for their profit. Nowhere else is a gigantic SUV a status simbol… Well, maybe in the middle east…
5. Management really missed the queue… In the mid 90’s oil was at 15 a bbl. That is why Hummer was considered the car of the future… Little did they expect it to jump 10 times in 10 years, but this was not the first time that oil did this, right? I remember seeing lines around blocks in the ’70s for some dino juice, and what does GM do… Make bigger, and least efficient cars, instead of better quality, more fuel efficient, and prettier cars… but those would not have been bought by the hordes of flippers and RE agents, would they?
I do not disagree with your analysis of the current state of the Big 3. But the current bailout talk has everything to do with the bailout of Bear Sterns, Freddie and Frannie and almost nothing to do with the 79 Chrysler bailout.
I don’t see how you accredit the behavior of the Car Maker today with the bailout 30 years ago.
Again I see much more influence of Reagan’s policy vis a vi fuel economy and regulation then on the 79 bailout.
If you don’t recall, under Reagan SUVs were deemed a special class that did not have to meet rules for regular cars.
I can’t stress enough the magnitude of point #3. Much bigger than you can see from the outside and still going in the wrong direction. It has increased considerably within the last 6 months.
It’s not any better on the inside either. Very adversarial relationship between engineering groups. This will not change any time soon.
I find it interesting however that much of the innovation in cars in the late 80s early 90s came from American automakers…. cab forward design, anti-lock breaks, etc. With the exception of Honda’s CVT transmission, I think almost all of the real improvements were American.
Side note - my 88 Toyota Corolla was the absolute worst car I’ve ever owned. I don’t see what others like in Toyota’s. I’ll take cheap Mazda, Honda, or GM over it any day.
Sorry to say that my 1976 MB came with ABS as an option… My 1987 had an airbag, and is the same chasis as the Chrysler300 of 2005. Take a look at a late ’80s Mercedes or BMW, and compare that with a late 80’s Chrysler, gm or Ford, and you would see a world of difference. BMW and Mercedes were offering Fuel Injected cars in the ’70s, while US cars still were on carbs, and TBI.
Also a 3.4L US based engine developed 200HP, while a 3.5L engine developed closer to 300HP. We just forget how unremarcable US cars of the ’80s were… Chevy caprice anyone?
“BMW and Mercedes were offering Fuel Injected cars in the ’70s, while US cars still were on carbs, and TBI.”
Huh? TBI..? As in, throttle body (fuel) injection? Maybe I misunderstand you.. At any rate..
‘63 Corvette offered a fuel injected 327 V8 engine as an option.
As for you comparison of HP, the domestics use the V8 as a performance option. They don’t necessarily have to ring out every last bit from their v6 line because they already have that covered..
The worst thing that happened to Detroit was the US Government allowing totally unrestricted market access to every Tom, Dick, or Harry Car Company in the world, without obtaining anything in return. In fact, US manufacturers usually had to pay to get into foreign markets. Anyone remember “trade-offsets”?
My unscientific, unresearched list-off-the-top-of-my-head of car manufacturers that had (esssentially) NO presence in the US market, but are major players now:
Toyota, Nissan, Honda, Subaru, BMW, Mitsuibishi, Mazda, Suzuki, Kia, Hyundai, Audi, Lexus, Infiniti, Acura……others?
This was great for the consumer, lots of choices. But all these little 5-10% pieces of the market came directly out of the Big 3’s hides.
Building cars used to be a high-margin business, but it turned into a low-margin business, and the Big 3 management and UAW did too little, too late to deal with the market realities. As they have gotten weaker, their marketing mistakes are magnified.
RE: Mr. Feinberg’s giant investment fund, Cerberus Capital Management, is racing to salvage multibillion-dollar investments in Chrysler, the smallest of the Detroit automakers, and GMAC, the financing arm of General Motors.
A financier-arbitrage type running a car company.
LMAO!
The bean-counters having sway over the product engineering guys are what got the Big 3 into the mess they’re in now.
One BMW 1-series for me, sir!
Adios, Chrysler.
Adios, Chrysler.
I miss my 1955 Studebaker truck, which someone stole… while I was spending the summer in Alaska in 1979
This takes first place in how to waste tax dollars…High School Division.This crowd didn’t realize that L.A. was earthquake prone until after the fact. Wow,just the folks you want running around with your check book.
$350 million high school finally opens in LA
Sep 3, 8:40 PM (ET)
By CHRISTINA HOAG
LOS ANGELES (AP) - A decade behind schedule, a $350 million downtown high school finally opened on Wednesday after years of environmental, seismic and legal troubles.
http://apnews.myway.com/article/20080904/D92VIUS02.html
“School grounds are dotted with tall light poles topped with mushroom-like caps - vents to let underground methane and hydrogen sulfide gases escape. Sensors monitor subterranean levels of the gases. When a gas buildup is detected, a blower is activated to push out the gases more quickly.”
You’ve gotta be kidding me. This is sooo over the top, I don’t even know what to say, but I guess they need a place to warehouse all the progeny from south of the border. Wait’ll the calls for reparations for health problems get started.
” You’ve gotta be kidding me. This is sooo over the top, I don’t even know what to say, but I guess they need a place to warehouse all the progeny from south of the border. Wait’ll the calls for reparations for health problems get started.”
The location of that new HS is gangland central, and the surounding neighborhood is 95% poor hispanic immigrants-that is a fact. Their progeny spend more time flirting and cavorting in the hallways that in actual learning stuff. Dropout rates among mostly inner city minority students is 50-60%.
Another CA -LAUSD taxpayer ripoff and boondooogle.
Although there are some areas of Los Angeles that have heavy gang activity, Downtown is not one of them. I also think that your “95% poor hispanic immigrants” description of the surrounding neighborhood is anything but factual. And to declare that all children of hispanic immigrants “spend more time flirting and cavorting in the hallways tha[n] actual[ly] learning stuff” is blatantly racist and hateful. I have many hispanic students who, unlike you, would easily recognize a hasty generalization.
I really enjoy this board but have been shocked by how utterly inappropriate postings go unchallenged.
Although there are some areas of Los Angeles that have heavy gang activity, Downtown is not one of them.
———————-
As a native Angelino, I have a hard time believing this. Are you being specific and only calling the business district “downtown”?
There has always been gang activity in what most of us call “downtown” and many (if not most) large/dangerous gangs across the nation actually have their roots in LA.
RE: Another CA -LAUSD taxpayer ripoff and boondooogle.
Callous heathen!
Don’t you know… IT”S FOR THE CHILDREN!
“underground methane”
Shakes head. Oh man, a home in our town blew a few years ago. They had already had one less extreme explosion a few years before but “experts” said it was the propane tank so after recovering from their injuries, the couple switched to oil and repaired the home on the same site.
The 2nd explosion killed one on impact, left the other to suffer a slow death and left the house looking like an explosion from a Road Runner cartoon. Only the outside walls were left peeled outward and blackened.
I can’t believe someone built on that knowingly.
There are a few housing developments built on top of old dumps in the city of angles, including one just off the 405 freeway in tony wanta-be Bel-Air.
Trashergeist
You know, I’m having a hard time trying to feel bad for poor Mr. Feinberg.
I guess that three headed dog bit off more than it can chew.
F*ck em.
Mike
Amen, brothah!
RE: I’m having a hard time trying to feel bad for poor Mr. Feinberg.
You know damn well the guy drives German.
Form letter from a hedge fund manager. Priceless!
http://nihoncassandra.blogspot.com/2008/08/dear-investor.html
Sorry, double post. But if you missed it above, please give it a read. It is an awesome send-up, I wish I had that blogger’s ability to satirize the hedge fund industry.
i just emailed that to my friend at Cerberus
lets see if he thinks it is funny
the gmac deal has been a real disaster for them
karma i guess
Was this the same-same contact that told you how rosy things were going, not so long ago?
si senor
dog gone it.
Florida Real Estate Bottom Signaled by Sale of Distressed Condo
http://www.bloomberg.com/apps/news?pid=20601109&sid=afUCiNEO.5yo&refer=home
“There’s a purging going on,” McCabe said. “It’s my belief that the vulture buyers would form the bottom of the real estate market, and we’re almost there. That bottom may last for three years as foreclosure sales go on.”
McCabe estimates that at least $30 billion has been earmarked by funds to buy distressed Florida real estate. Some investors have been waiting almost three years to buy, he said.
Time to stock up on Miami condos?
Hey Combo - there’s another $30 B for ya!
Yep.
$30B is a generous amount of money to spend subsidizing rents.
Got Popcorn?
Neil
ps
Yea, at some point it will be a great investment to buy into Miami condos. But that will be after the rent collapse.
Bottom is an ass.
LOL - love the double entendre (or maybe triple or more?)
This is from a condo listing in South FL with 49 days on the market.
These are the BROKERS comments in the MLS listing (not what you see in realtor.com)
Without further ado, for your viewing pleasure:
GREAT LANDLORD OPPORTUNITY! NEEDS A LITTLE TLC-PAINT/CARPET. CASH BUYERS ONLY! COMMUNITY IS IN RECEIVORSHIP-BUYER ACCEPTS ANY AND ALL SPECIAL ASSESSMENTS IN THE FUTURE! PLEASE SEE BELOW FOR MORE INFO THIS ONE IS PRICED WAY BELOW ASSESSED VALUE-THE ASSOCIATION IS IN RECEIVORSHIP. WE HAVE BEEN INFORMED THAT THERE WILL BE A SPECIAL ASSESSMENT IN THE FUTURE BUT DO NOT KNOW THE AMOUNT. (ROOF REPLACEMENTS, ETC). THE SUBJECT ROOF IS ALMOST COMPLETED BUT ALL WORK WAS CEASED ON IT FROM THE CONTRACTOR THAT WAS HIRED BY THE ASSOCIATION. WE HAVE BEEN INFORMED THE ASSOCIATION DOES NOT CURRENTLY HAVE INSURANCE AND THERE ARE SOME LAWSUITS IN THE WORKS BUT STATUS IS UNKNOWN. WE HAVE NO FURTHER INFORMATION AT THIS TIME
So should I put in an offer, they’re asking about 17% of what they sold for in 07.
Neil: Hope you REALLY stocked up.
From the same link posted by bizarroworld:
Fifteen percent of the real estate loans written by closely held, Miami-based Ocean Bank weren’t being paid in the second quarter of 2008, compared with 2.4 percent a year earlier, according to the bank’s filings with the Federal Deposit Insurance Corp.
WOW!!!
From BBC, two days ago: Hard talk with Jon Moulton.
In a perfect gentlemanly manner he delivers a scathing assessment of the “inventions” of the banking sector.
http://www.youtube.com/watch?v=_iD2496Iz6o
That is an awesome vid. Clear and calm, backed by obvious intelligence, which makes it scarier than it otherwise might be.
Real estate buyers stumble upon marijuana processing operation
http://www.canada.com/vancouversun/news/story.html?id=cc2269cd-4863-4d15-8c28-963e693b460f
Langley RCMP have busted a marijuana grow operation in Langley after 2,000 pounds of pot was found by a group of prospective property buyers.
That property will be worth a lot less without that processing operation. Mmmmm…donuts.
little boxes on the hillside little boxes made of ticky tacky
Sicily mayor offers bargain homes
A scene from a small town in Sicily
London too expensive? How about a home in small-town Sicily
A small town in western Sicily has come up with a revolutionary solution to solve its property problems.
They are offering houses in the town, which sits between two rivers, for just a single euro (81 pence; $1.44). …
“We’re thinking of people who have the sensibility and economic resources to embark on this adventure,” Mr Sgarbi said.
“In exchange for a token payment of one euro we will offer them one of these houses and ask that they undertake to restore them within two years while respecting their original characteristics.”
BBC
http://news.bbc.co.uk/2/hi/europe/7596341.stm
Buy it for some pesos and spend real money to repair. Some beautiful villas. oh well
sounds like an offer I can refuse.
The best part would be dealing with the Mafia-run remodeling and “restoration” contractors.
No, the best part would be running into the “mafia” after the restoration is finished.
You might end up selling it for 1 euro too!
Beautiful as it is, it’s Sicily, what else is there to say?
Sometimes I dream of being in Agrigento again, eating a 5 course dinner al fresco @ night, with 2500 year old Greek Temples floodlit, not too far away…
Sicily is a very cool place~
“Sicily is a very cool place~”
……………….. to rent!
I’d be up for that if it was Terrasini - not too far from there. That’s where my grandparents are from.
(ahem)
One of the weirdest things driving around Sicily is, there are WW2 pillboxes built by the Duce & Co. all over the place, still intact.
Sounds like an awesome deal! I can buy it, live in Sicily for 6 months (until my visa expires) and then leave. If anyone asks, I’ll just tell them that conducting a very sympathetic restoration requires a lot of planning and not to worry - construction will start very soon.
Aside from the location, this is another example of the many homesteading programs we will be seeing everywhere there are more vacant homes than residents.
Forget about buying at the bottom, there will be free houses available in many parts of this country, outside of Detroit and parts of Ohio.
Agree to pay the taxes and rescue the home from disrepair and it’s all yours.
While I agree there will be some bulldozing, especially of incomplete developments, the sheer number of displaced Americans is going to call for something a little smarter than knocking it down to let the builders screw the masses again.
Emerging Markets Take the Stage as Latest Hot Real Estate Investment
While U.S. REITs and Funds are Doling Out Hundreds of Millions of Dollars, CalPERS Is Considering Putting in Billions
“The California Public Employees’ Retirement System (CalPERS) is contemplating taking a considerable piece of its real estate investment pie and allocating it outside of the United States into emerging international markets such as China and Brazil.
If approved, CalPERS would become one of the largest of a growing number of players to target real estate investments in markets outside of traditional European and Asian developed countries. …
The saying used to be, “When the U.S. sneezes, Latin America catches a cold.” In the past, investors have viewed Latin America as a perpetual crisis and a technical bet. Things have changed - definitively and decisively, according to Manuel Balbontin, CEO of Compass Group, a New York-based investment advisor focused on Latin America.
“There is a lot of evidence that emerging market investors are under-weighted when it comes to Latin America,” Balbontin said. “While Asia will clearly continue to be a huge driver of growth in the world, it will be negatively affected by all three economic crises the world is facing - credit crunch, oil shortage and food shortage. Latin America will actually benefit from two of those crises - oil and food — and be less affected by the third. Further, Latin America, specifically Mexico, Peru, Colombia, Chile and Brazil, is now largely investment-grade or near-investment grade. In fact, Latin America is a stability story: Uncertainty has dissipated, and the region has de-coupled from the U.S. economy. There’s an opportunity to invest relatively early in stability….”
CoStar
Another way for CalPers to lose money.
Calpers as the new contrarian indicator???
“Further, Latin America, specifically Mexico, Peru, Colombia, Chile and Brazil, is now largely investment-grade or near-investment grade.”
LMAO! Didn’t the poster In Colorado post recently about Mexico’s near failed-state status? And riddle me this: If these countries are doing so well, why so much illegal immigration to the US from these areas? With the exception maybe of Chile, which is the only Latin American country I’d even consider moving to.
As we are busy erecting fences to keep them out, they are headed back down under…
Immigrants are a sure-fire way of figuring out how your economy is doing.
There are hardly any decent wages in Mexico, and it appears to many a Mexican, that there aren’t any here, anymore.
The typical Mexican cube farm dweller takes home on average between $1000 and $1500 US a month. The situation does improve if one is in management.
I have a cousin who is a CPA down there. She works for a financial institution managing a fraud detection group. She earns the princely sum of $3000 US a month.
Real estate in Mexico City is insanely expensive. She and her husband live in a hand me down house from his parents that they share with one of his siblings (and his family). They have given up hope of ever having their own place, and instead spend their spare pesos on nice clothes, vacations to Cancun and a pair of late model cars.
In the last year the Real has appreciated 17% against the dollar and is up 8% YTD. In the last 5 years the Real has appreciated 100% against the dollar. In the next 5 years (if Brazil maintains its current fiscal policy) it will appreciate another 100%.
The greatest thing to happen to SA is George Bush. He has kept the US focused on a crusade in the Middle East and has completely forgotten about Latin America.
There is not very much illegal immigration from Brazil. From Mexico most assuredly.
The real and Brazilian economy depends on the commodity boom more than anything.
There used to be substantial illegal immigration from Brazil, mostly to the east coast of USA but it has reduced in the past few years.
The commodity boom has not died out. Iron ore is up 100% from a year ago. Oil is up 30%. Grains are up 35% from last September.
And regarding emigration from the US back to Brazil, look at Framingham, MA - its in a death spiral partially from Brazilians leaving.
“There is not very much illegal immigration from Brazil.”
The citizenry of some areas of Massachusetts and Connecticut might disagree with you. Danbury had a tough time with Brazilians literally erecting practice soccer fields in their backyards, complete with night lighting for evening games. And then there was a post on this blog a while back about areas like Lowell and Lawrence in Mazz being extensively populated with Brazilians. However, many started a “mass” exodus last year, because of the economic opportunities drying up. So indeed there was illegal immigration from Brazil, it’s just that they appear to have been quicker on the uptake regarding the downturn and left. Strictly opportunistic.
Hoz,
When I lived in Hyannis, on Cape Cod, this white Irish girl was definitely in the minority in an increasingly Brazilian neighborhood. I always felt they didn’t mix w/us because of legality issues. They pretty much hung w/each other. They had taken to putting Brazilian flag stickers in the windows of their businesses to signal they were Brazilian to others in the area.
I have read in CC Times that officials were stepping up legal pressure on illegal aliens a couple of years back. If I remember the article correctly it seems the Brazilian community may have been specifically targeted.
A friend’s neighborhood in South Norwood, MA was pretty heavily Brazilian too. The numbers of teenage, 20 somethings hanging out with their cars was enough to keep the tricycle riders inside w/Mom. The scene was very reminiscent of a James Dean movie only with foreign actors. She has since left that neighborhood for her hometown of Needham.
Sounds like you’ve got a Brazillion of em’ over there on the right coast…
Here over in the left bottom corner pocket state of being, I know not a one.
I guess my experience differs — all the Brazilians in the Midwest I’ve met are smart, talented and motivated. They’re here for education or work, but grateful for the opportunity.
“all the Brazilians in the Midwest I’ve met are smart, talented and motivated”
I’m sorry. I didn’t mean to imply the Brazilians around us were not. Only that the population was significant.
The James Dean scene I described may have appeared different in a culture where children are raised on play dates. (Not a real fan of them myself. Kids should learn to get along w/all types.) Although I didn’t at that point in time, I had recently lived on the other side of Norwood for years and never saw groups of kids even remotely that size unless it was at a school or town get together. This group was 30+ boys/young men and my friend said the gathering in the narrow street was a weekly event. It stood out. But the intentions were probably only to be together.
I will admit as a white Irish girl in the Boston area the realization that I was the minority did come to me as a bit of a shock.
LMAO! Didn’t the poster In Colorado post recently about Mexico’s near failed-state status?
Yup. It used to be that the Feds were able to at least keep the pease in central Mexico and the beach resorts, but from what I am hearing from back there its completely falling apart.
Protesters are marching in Mexico City chanting “if you can’t (restore order), resign!”. Who would have ever thought that someday Mexicans would miss the good old days when there was a defacto one party system and the PRI ruled the country with a tortilla fist. It almost makes the 70’s (when I lived there) seem idyllic.
There was a recent high profile kidnapping of a rich teen (very common these days). He was returned alive (lucky for him) after the ransom was paid and his mother went on national TV proclaiming that it was unsafe to live in Mexico and that they were leaving.
There IS no illegal immigration problem. All the industrious only-Spanish speaking students have been here for 15 years…. studying English
BWAH!!!! COLOMBIA….. I think that now I know why one of the fugliest, dirtiest, and crummiest cities I have ever seen has stratospherically high RE values… It is the dollars flooding in.
BTW, I grew up there, and hated every moment I was there. You could not go out anywhere without fearing for your life, limb or property, and life was dismissed with a casual wave of the hand, and a 9mm to the head.
It had minor good points, but traffic is about the worse there is anywhere, and the level of corruption makes Mexico City pale. RE was generally dirt cheap ( a house in the best part of the city would generally go for 100K).
Last time I was there, it seemed like they had built thousands of “high end” condos in the middle of impoversished slums, the type of slums that have open sewage… and stolen tin roofs.
The country is still in the middle of a brutal war that is financed on both sides by the US… On one side the “plan Colombia” and on the other by the sales of illegal drugs to mostly the US… NICE, and they are going to invest there? I hope that they lose their shirts!
There were 1,512 Mass Actions filed in the month of July involving laying off over 151,000 workers.
Jobless claims jumped unexpectedly to 444,000, reversing 3 weeks of decline
http://biz.yahoo.com/ap/080904/economy.html
The Labor Department reported that new applications for unemployment insurance rose to a seasonally adjusted 444,000, up 15,000 from the previous week. Economists had expected claims to drop to 420,000.
Jumped unexpectedly? Was there a hiring boom last month? As a non economist, I predict unexpected expectations to continue.
Last night at Trader Joe’s, my eleven year old son was shocked at the price of Swiss cheese (an item he normally purchases). I enjoyed the teachable moment, as I explained the concept of inflation to him for the first time.
High prices continue to stifle economy
Federal Reserve official offers gloomy forecast
By Jeannine Aversa
ASSOCIATED PRESS
September 4, 2008
WASHINGTON – The country is stuck in a slow-growth rut, the Federal Reserve suggested yesterday.
Higher prices for energy, food and other things are pinching people and businesses – reasons enough for the economy to be Americans’ top concern heading into the presidential election.
“The country is stuck in a slow-growth rut…”
They just can’t leave the “g-word” out of a single dispatch, can they?
I’m waiting for the dispatches after the negative numbers start showing up.
“Last night at Trader Joe’s, my eleven year old son was shocked at the price of Swiss cheese (an item he normally purchases). I enjoyed the teachable moment, as I explained the concept of inflation to him for the first time.”
====================================
Trader Joe’s is an excellent business, loved by most, if not all.
They’ve had to adjust their business model (less product from overseas, more TJ generic brands) and they seem to be doing fine, but if they start closing stores, that would be the retail canary in the coal mine, as far as i’m concerned.
I remember back in the late 80s when the US dollar was strong. Trader Joe’s was was like a candy store: $2 european wines and cheap imported everything, especially the cheese and chocolates.
It is one of the few things I miss from California (no TJ’s out here).
Trader Joe’s is an excellent business, loved by most, if not all.
Yep, and I think you’re right, if something bad were to happen to them that would certainly be a signal for all other less loved institutions.
How about unit pricing too?
Wow. GMAC is shutting operations.
in 2007, GMAC was the seventh largest mortgage originator in the US…now closed. Originated 26,000 sub-prime loans in the first half of 2007, yet the first half of 2008 only originated only 13 sub-prime loans.
Ka-thunk.
Think about it: if the seventh largest mortgage originator in the US - a division of an automobile manufacturer - views the market in such light as to simply close up shop, you have to stop and think about what it says about the future. What does this mean for home prices? Is the bottom really in? Would GMAC close shop if the board of directors believed that home prices were on the verge of returning to 10% per year growth or if mortgage applications were to return to the high levels seen in 2005-2007?
Of course not.
The gut check now comes from the other mortgage brokers. Do they see this as an opportunity to grab market share, or do they say to themselves, “What does GMAC know that we don’t?”
Wow.
Thank you God. Now we can say goodbye to the endless stream of sanctimonious GMAC TV commercials.
No worries — the GSEs and the FHA are there to shore up the mortgage lending sector.
Professor:
I’m suffering from chronic-acronym-fatigue…
Is there anything you can prescribe for my condition?
Get a government job.
LOL
Sept. 2 (Bloomberg) — Why are the bonds priced that way?
That’s an unpromising start to a municipal-market mystery, I’ll grant you, but it’s how a new whistleblower intends to make his case.
The whistleblower used to work at a big securities company, and asked that I identify neither him nor the firm. Since late last year he has been talking to the Internal Revenue Service, the de facto regulator of the municipal market.
And this is what he is telling them. Take a look at how these bonds are priced, he is saying. Why are there coupons of 6 percent-plus on bonds due in a year?
http://www.bloomberg.com/apps/news?pid=20601039&refer=columnist_mysak&sid=axFmtPnLE9xg
Biggest fallers: Year-on-year house price change to Q2 2008
Latvia -24.1%
United States -16.8%
Estonia -16%
Lithuania -9.9%
Denmark -9.6%
Ireland -8.1%
UK -3.9%
Malta -2.7%
Germany -2.5%
New Zealand -2.2%
Guardian UK
Wow! Affordability is improving all over the planet. Pretty soon there really will never be a better time to buy a home (but few will be interested and qualified at that point).
ROTFL
Yea… not too far in the future it will be *smart* to buy again and the sheeple will panic. But for now, its still knife catchers as few properties cash flow with a positive ROI. Certainly not a high ROI.
Can we expand the list and add:
Spain
Australia
Dubai
Korea
Thailand
and anywhere else there is data!
Got Popcorn?
Neil
I was surprised to notice Japan missing from the list, as I thought they were the reigning housing price deflation champion. Did their housing bubble finally finish deflating (over the period from 1990-2008)?
Perhaps not.
S&P puts MGM Mirage ratings on ‘negative,’ sees potential for covenant violations
NEW YORK (AP) — Standard & Poor’s Ratings Services said Wednesday it may lower its ratings on MGM Mirage on concerns that the casino and hotel operator may violate the terms of its bank lending agreements.
S&P gave MGM’s ratings a ‘negative’ outlook, which implies the rating may be lowered over the next six months to two years. S&P rates MGM at “BB,” which is a noninvestment grade level.
The agency said it is “concerned” that MGM may not be able to maintain enough earnings before interest, taxes, depreciation and amortization to be in compliance with the terms of its lending agreements.
7 out, line away.
KERPLUNK!
It turns out Paul Krugman was wrong when he said the Fed had run out of bubbles to inflate. He forgot about the possibility of bubble recycling — lather, rinse, repeat.
Hedge fund closes after commodity stocks tank
By Stevenson Jacobs
ASSOCIATED PRESS
September 4, 2008
NEW YORK – The deflating commodities bubble is claiming its first casualties as large investment funds absorb staggering losses from bad bets that prices for oil, precious metals and grains would keep going up.
Hedge-fund operator Ospraie Management notified investors Tuesday that it is closing its flagship fund after it suffered losses in August on positions in energy, mining and other natural-resource-related stocks that left the fund down nearly 40 percent year to date. It is believed to be the first hedge fund to go bust in this latest commodities boom as prices come crashing down after a historic bull run earlier this year.
The bloodletting may have only begun. Wall Street analysts say similar trouble looms for other funds that got caught up in the exuberance of the boom but were too late in getting out.
…
The losses left the fund down 38.59 percent so far in 2008.
“As the fund’s performance deteriorated, we made the decision – despite continued confidence in the fund’s positions – to reduce risk and de-lever the portfolio significantly due to concern of incurring even greater potential losses,” Anderson told investors.
The fund, of which embattled investment bank Lehman Bros. owns a 20 percent stake, was closed after the losses exceeded a threshold that would have allowed investors to pull out money without restriction, Anderson said. Hedge funds are pools of capital that cater to institutional investors and wealthy individuals.
…
The fund’s collapse has fed speculation that it was liquidating large positions in recent weeks, possibly adding to the severe downward pressure weighing on commodities in recent days.
Peter Holst, managing director at Delta Global Advisors in Huntington Beach, expressed surprise at the rapid demise of the highly regarded fund but said it serves as a cautionary tale about the too high, too fast commodities cycle.
“It’s disturbing to see the smartest guys in the room losing so much money in commodities,” Holst said. “The problem is when your holdings are in a momentum sector, your stocks aren’t based on fundamentals, so you need to be one of the first ones out, not the last.”
I don’t think commodities reached bubble proportions. Overpriced? Sure. But not a bubble.
Futures contracts are (implicitly) levered 20:1.
Add to that the fact that funds themselves are levered, and most funds are momentum players.
You don’t need much of a retracement to wipe you out.
You might be right. The race in oil prices to $145 bl and back to under $120 bl may well only be a correction in a long-term trend.
Non-bubbly oil prices look destined to soon drop under $100 bl. Certainly this must approach a record crash in crude, in terms of the time it took for prices to retrench by 30 pct?
From my admittedly financially unsophisticated observation, it looks like the big money is running harder, chasing weaker and weaker returns.
For us J6Ps that don’t have the time/inclination to manage investments full time, that mattress for stuffing cash into is looking better all the time.
Korean suitors appear to have a case of cold feet, possibly due to questions about the actual value of the prospective brides’ trousseaus.
FINANCIAL STOCKS
Financial stocks slip, Lehman, Merrill highlight
By Greg Morcroft, MarketWatch
Last update: 10:18 a.m. EDT Sept. 4, 2008
NEW YORK (MarketWatch) — Shares of U.S. financial stocks slipped in early trade on Thursday as reports that Lehman Bros. and Merrill Lynch were facing possible difficulties in working out deals to clear their balance sheets weighed on the sector.
The report said the firms are having trouble agreeing to a price for the assets. See Subprime Today report
Shares of Merrill Lynch (MER 27.02, -1.31, -4.6%) fell 2.2% to $27.70 after Bloomberg News reported that the firm is hitting a snag in talks to sell troubled assets to Korea Asset Management.
Shares of Lehman Bros. Holdings (LEH 15.84, -1.10, -6.5%) fell 2.4%, to $16.54 after the Wall Street Journal reported that the firm has its own Korea problem.
Even the Koreans couldn’t figure out a way to wok the dog, that is Lehman.
On the other hands, Vietnamese folks may know how to wok dogs.
Some investment banks seem quite capable of draining liquidity faster than the Fed can pump it back in…
Some Lehman hedge funds post losses in July
Thu Sep 4, 2008 11:41am EDT
BOSTON (Reuters) - Lehman Brothers’ LibertyView hedge funds lost money in July, when tumbling financial markets left many hedge fund managers nursing their biggest declines of the year.
The LibertyView Special Opportunities Fund, which invests $214 million, declined 4.71 percent in July, slightly less than its 4.92 percent drop in June. For the year through the end of July, the fund was down 17.12 percent, according to a note to investors detailing the fund’s performance. The note was obtained by Reuters.
A Lehman spokesman declined to comment.
The average U.S. hedge fund lost 3.5 percent in July, according to data from Hedge Fund Research, which is expected to soon release data on how the $1.9 trillion industry fared in August.
While hedge funds’ July losses are less than the Standard & Poor’s 500 stock index’s 12.7 percent decline, the industry fell short of many managers’ promises to make money in all markets.
Is it a safe assumption that some investment banks took the Fed’s efforts to shore up liquidity with below-market-interest loans from special lending facilities as tacit encouragement to gamble in commodities, residential real estate and hedge funds?
As long as the executives make money, they consider it “Mission accomplished.”
These guys are great proponents of capitalism until they run into trouble. Then they turn into communists, wanting the government to bail them out.
Privatize the profits, socialize the losses.
I wonder how long that can go on until the currency is totally debauched.
Unfortunately, I suspect we may find out.
I see that 87% of Boeings machinists have voted to go on strike if their demands aren’t met in 48 hours. I don’t think their timing is too swift in today’s economy. It seems ever time I fly lately it’s on an Air Bus. The union mentality is hard to understand at times.
Delivery commitments mean everything. Presumably Boeing has a quantity of units to be delivered by a specific date or be forced to pay liquidated damages in the event they can’t or won’t and the union knows it.
My brother tells me there is a condition in the agreement that if work is stopped by a strike Boeing does not pay penalties, a circumstance beyond its control. So what better way to catch up but with a strike? Boeing is far behind because its overseas suppliers are late this gives them time to catch up. Thats his theory and he works in the industry.
So of course there will be a strike.
My brother tells me there is a condition in the agreement that if work is stopped by a strike Boeing does not pay penalties, a circumstance beyond its control.
Depends on the sales contract, but a firm order requires money up front to Boeing and to allow Boeing to hold onto your money indefinitely would not be prudent.
It looks like 87% of boeing’s machinists jobs will be outsourced in 48 hours. I’m not anti-union, but timing is everything.
“timing is everything”
It sure is. And the executive board of the machinists hit it like a swiss timepiece.
RE: The union mentality is hard to understand at times.
The small town beat cops here in Mazzland with their $43.00 per hour flag-men detail work contributing to $150k incomes are doin’ just fine!
Boing has outsourced most of their “unskilled” work. Their plan is to buy sub-assembles from all over the world, but keep control of the “final assembly/systems integration” process.
Ask them how this is working out on the 787……….
The only people they have on the payroll now are the people that would be difficult to replace.
Most of the guys I know in aerospace have something going on the side, doe to the boom-bust nature of the industry.
Boeing has 76,792 employees in Washington state as of Aug 31, 2008. Mostly in the Seattle greater metropolitan area.
The BECU (Until recently, called the Boeing Employee’s Credit Union) has a lot of assets. $8.5B, loans $7B, reserves 0.7B. 550K members (anyone in Washington state can join now.) Kind of pedestrian, I imagine, as banks go these days. They didn’t make home loans at all at one point (perhaps they stopped after the early 1970s crash?). They started to do so again in the last 10 years or so, IIRC.
New product: The “Jumbo 5/1 Straightforward ARM”.
Not too long ago, the president felt he had to write a note explaining that the CU wasn’t in any danger like all those other institutions you read about because they didn’t engage in making “subprime” loans.
I don’t see the point of making any real estate loans in a bubble market when a significant proportion of your members are in a cyclic industry with three year contracts and a recent history of strikes. But that’s just me. We’ll see how it all turns out.
Bill Gross, still pimping:
Sept. 4 (Bloomberg) — The U.S. government needs to start buying assets to stem a bourgeoning “financial tsunami,” according to Bill Gross, manager of the world’s biggest bond fund.
http://www.bloomberg.com/apps/news?pid=20601087&sid=aaVfH47UrqgA&refer=home
And who would be the current owner of the assets the government needs to start buying?
And what would we buy these assets with? More fiatsco printing? More debt?
cerebrus for one…gotta keep dan quayle happy.
Everyone desperately needs money.
I’m throwing a penalty marker(Bills could dominate this season) on this mixed-metaphor…
Wouldn’t a tsunami douse that unchecked forest fire?
10 yard penalty and loss of down, for homeowners.
=====================================
“Unchecked, it can turn a campfire into a forest fire, a mild asset bear market into a destructive financial tsunami”
10 yard penalty and loss of down, for homeowners.
Maybe a red card is a better metaphor?
The “supply side/”trickle-down” theory obviously doesn’t work. The money ended up being hoarded, or invested overseas.
Maybe we should throw money at the bottom of the totem-pole, and see if the “trickle-up” theory works any better.
They can start by throwing 30 or 40 thousand bucks at me…..:)
like these guys dident know what would happen when the world is overleveraged, and depending on joe sixpack to pay his debts! i call bull-s@*^ on this crazy idea of his!
Gross was also on CNBC today, promoting the same idea. You have to wonder how much trouble PIMCO is in.
…not just PIMP-CO. The wave is a’comin’
http://www.kitco.com/ind/Hommelberg/sep022008.html
…
Also anyone see the news AGR-Matthey was stopping silver production? Apparently they “borrowed” a bunch from Perth mint’s allocated stash, and now default?…should be interesting.
http://silverstockreport.com/2008/nadler.html
Bill Goss want’s a bale out
http://www.bloomberg.com/apps/news?pid=20601087&sid=aaVfH47UrqgA&refer=home
What else is new.
I foresee another busy bloody numbers day ahead for the PPT. They did a nice job of piloting the DJIA in for a soft landing at the opening bell level yesterday after a scary triple-digit selloff earlier in the day.
all these wonderful headlines this morning is sure to spark a rally on wallstreet! Up is down and down is up.
DOW down over 300 pts. maybe they forgot to put on their rose colored glasses today.
Serial bottom callers clearly do not believe in overshooting. Rather, they believe in undershooting.
Sep 4, 2008
THE BEAR’S LAIR
Blind to overshooting
By Martin Hutchinson
The Case-Shiller Index of US house prices announced last week, down 17% in the top 10 markets, was greeted with rapture by the stock market, because its rate of decline had slowed somewhat compared to the previous month.
Reams of analysis were written about how house prices were nearing the bottom, which was taken to be the level at which the ratio of house prices to individual earnings was the 3.2 times average over the last 30 years, rather than the 4.5 times shown at the peak. However, analysts were as usual over-optimistic - haven’t they ever heard of overshooting?
For the life of me, I can’t figure out the Republican’s position on the Economy.
Mitt Romney, for example, when he wasn’t complaining about “pornography in public schools” said this:
“Mortgage money was handed out like candy, speculators bought homes for free — when this mortgage mania finally broke, it slammed the economy. And stratospheric gas prices made things even worse,” he said.
He starts out right here, but then complains about stratospheric gas prices instead of the actual sinking dollar!
Mike Hukabee, apparently, wants the Republicans to do something to help houseflippers and irrepsonsible borrowers. He said:
“If you’re a young couple losing your house, your credit rating, and your piece of the American dream, you want something to change.”
It’s a shame that nobody stands for anything these days. Now I have to have a talk with my niece and tell her it’s not OK to get pregnant and drink, even though she sees photos of pregnant Bristol Palin and her sister Swallow drinking on the internet. Some “family values.”
“Mortgage money was handed out like candy, speculators bought homes for free — when this mortgage mania finally broke, it slammed the economy. And stratospheric gas prices made things even worse,” he said.
There is no Fed in the Republican model of the economy, and hence no regressive inflation tax on po’ folks juxtaposed against perpetual asset price wealth effects for rich folks — just tax and spend liberals trying to expand the government sector and thereby kill the economy.
There is no Fed in the Republican model of the economy????????????????????????????????????????????????
Really, they sure seem to have been active over the last 8 years.
“just tax and spend liberals trying to expand the government sector and thereby kill the economy.”
As opposed to borrow and spend Republicans. Remember inflation is a tax.
GW and crew greatly expanded gov spending, the size of gov, and the power of gov over the people.
Perhaps I was unclear. What I meant is that there is no Fed ever mentioned in Republican campaign rhetoric. It is hard to perpetually run large fiscal and trade deficits and reduce taxes without having a man behind the curtain to levy an inflation tax.
I’ll take what’s behind the curtain, Monty.
Your implication that pregnancy and drinking was condoned is laughable. If your niece ignores you, will your attitude be the same?? I bet not.
It absolutely *was* condoned! She and her “fiancee” made a decision to publish photos of them laughing and drinking for all the world to see on MySpace.
You must have been a boring youth! I went to so many parties and did so many stupid things before I discovered maturity, that I’m amazed I didn’t know all of the local police force on a first name basis. It’s not my parents fault that I was pain in the azz. They tried their hardest to teach me the things that would eventually mold me into the responsible person I am today. I was just being a typical teenager, which, not surprisingly, have been getting into trouble (against their parents wishes) since the dawn of time.
I can’t think of a single time that I partied or did something else stupid and had my parents tell me “that was a great idea, or Right On!”
So, blaming the parents for their childrens indescretions seems a bit senseless knowing that teenagers think that they know everything and most don’t listen to their parents.
Well, my question is why can’t politicians nut-up and say that, instead of painting this slanted picture of family serenity and cohesion.
JRinUT: When you went out drinking and cavorting, did you publish photographs of it in a place where the entire world could see it?
Never took a camera with me. Compare that with today, where every phone is a camera.
CHECK! Reuven, it’s your move.
I wasn’t being 100% serious. Still, it is annoying that when we’re at war, and our house-of-cards economy is starting to tumble, Mitt Romney finds time to complain about “pornography in schools” and Mike Huckabee gets his panties in a knot about same-sex marriage (”[McCain] doesn’t want to change the definition of marriage from what it has always meant throughout recorded human history. “)
Was it just me or did Mitt Romney come across as slightly unhinged last night?
I noticed he didn’t have the entire crowd with him either. Saw some sour faces on the crowd sweeps.
The Romney speech was amazing
After 8 years of GOP rule, 6-7 of which was absolute he called washington liberal????????
Then he went and pointed out all the overspending and failures by the GOP. It was like calling everyone at the convention liberal????
Unintentional humor is the best kind.
It’s a common argumentative tactic. I’ve seen people on this board for example who are in the “government apologista” crowd label any negative consequence of govt as a free-market failure.
Like the other day when you claimed the FDIC was a freemarket failure.
‘Some “family values.”’
How about Larry Craig(r) trolling public bathrooms for gay sex? Or Vito Fosella(r) with his “2nd family”? Or maybe predator Mark Foley(r) copping a feel on your young boys you send to DC for summer internship? Are people really so stupid as to wait until they don’t have two dimes to rub together before they begin to vote with their wallets? Yep….. gotta protect that flag. You’ll be stitching pieces of it together for a shirt eventually.
Vote for who? The minority-protecting party which includes the only known member of the KKK in the Senate?
When are people going to realize both parties don’t really stand for the things they claim to stand for?
“When are people going to realize both parties don’t really stand for the things they claim to stand for?”
About the same time those same people stop making excuses for them.
The LAST thing the Republicans want people talking about is the economy, and they are doing their best to try to change the subject.
Even putting a GIL# / VPIL# on the ticket………..:)
Exactly Gulf. Their own strategist called Johnnys VP selection a “gimmick” and “bull$hit”.
And it’s working so far. The only thing anyone is talking about today is the knocked-up daughter.
The Obama camp isn’t much better……lots of talk about “change”, but no specifics…….as if “change” is automatically a better thing.
They are both sticking to the script.
You can’t go wrong as long as you have huge tracks of land to play with.
tracts of my tears…
Is it time to start the “Down Below 10,000″ pool?
Are you talking about stock prices? The stock market always goes up, in the long run. And a big selloff today is a sure sign that a bottom is at hand.
LOL! Dang, Prof-man, you’ve said that so many times now, I’m having trouble determining if you’re being sarcastic or if you’ve effectively been adopted by the dark side.
“I’m having trouble determining if you’re being sarcastic…”
I am not sure myself.
It will probably get there. Seems like there are more than enough “other” shoes left to drop.
Would the technical analysts say the S&P is about to “break support?”
What I truly can’t understand is:
Nearly everyone has taken a financial hit! Careful savers are losing money to low interest rates and inflation. People with the most conservative stock portfolios have lost at least 10% over the last year. Anyone with exposure to bank and housing stocks have lost more.
And yet, the only people I see Democrats and Republicans trying to help are houseflippers, people who borrowed too much money, and people who made poor housing choices and now can’t afford to commute 100 miles each way to work.
This is aggravating, to say the least. I haven’t either McCain or Palin suggest, for example, that we eliminate taxes on dividends to reward SAVING. That, to me, would be a stimulus package that sends the right message.
Homebuilder Hovnanian Enterprises reports wider 3Q loss on declining home sales, land values
The builder lost $202.5 million, or 2.67 a share, for the quarter that ended July 31. That compared with a loss of $80.5 million, or $1.27 a share, in the same period last year.
The CEO, however, expressed optimism that a recently enacted tax credit for first-time homebuyers will help spur sales in the short term.
http://biz.yahoo.com/ap/080903/earns_hovnanian.html?.v=6
these guys are toast!!!
At least the CEO is still optimistic.
The Debt Cord is lit, and the sparks are sputtering to life…
How the Housing Crash Hurts Your Retirement
http://finance.yahoo.com/focus-retirement/article/105679/How-the-Housing-Crash-Hurts-Your-Retirement?mod=retirement-preparation
just stating the obvious, but articles like this have to be changing the mindset of people, and that is not good for wallstreet.
Wow! $2.5 trillion in home equity wealth gains went down the drain on a six year consumption binge, which ended abruptly this year in a housing price crash. That comes out to over $400 bn a year in economic stimulus which has vanished into a black hole of debt.
Too Much Debt Can Compound a Crisis
Many homeowners exacerbated the damage done by falling prices by borrowing heavily from their homes. Federal Reserve economist James Kennedy estimates that from 2002 through 2007 owners pulled $2.5 trillion in equity out of their homes via cash-out refinancings and home-equity loans.
That’s nearly a third of the increase in home values over that period. While there are many valid reasons to borrow against your home, it can also be comforting to know that your home equity will be there later in life for emergencies.
“That comes out to over $400 bn a year in economic stimulus which has vanished into a black hole of debt.”
$400 Billion in economic stimulus that, in theory, has to be paid back. Operative words being, “in theory.”
American car companies have no choice but to build those big, expensive vehicles everyone likes to make fun of. GM has 100 years of history providing good jobs and benefits and retirement payments to Americans. That comes with a price tag, about $4000. per vehicle. You can’t compete building $10k economy cars with companies like Toy and Nissan who do not have that heavy financial burden.
Japan has national healthcare, all developed countries save the US do. If we had NHC GM, Ford and CHry. would not have this burden that stiffles their ability to compete in the small car market.
Don’t be so quick to slam American products and good American employers.
Better check you facts, Brian. Japan doesn’t have national healthcare.
Medical costs in Japan, however, are much lower than in the U.S. because medical malpractice lawsuits are largely considered “inappropriate.” As a result, medical costs haven’t been inflated to cover the expense of malpractice insurance and associated legal fees. Since the cost of medical care in Japan is quite low, it may appear that there is a national healthcare system.
AustinDude
Actually, AustinDude, Japan *does* have a national healthcare system and has had such for a very long time and is based on ability to pay, so many lower income folks (i.e. seniors) essentially have free healthcare. Lawsuits and malpractice suits or the relative lack thereof definitely help to the costs, but it also has much to do with the relative fitness levels, diets, and lifestyles of the typical Japanese vs. the typical American that also helps to keep costs down. That being said, there are some f****d up policies such as Japanese health insurance companies (under the government’s direction) having strict limits on how much doctors can collect from the insurance companies from a single patient visit, which has led to the ridiculous practice of seeing as many patients as possible and making them all come back several times vs. just doing everything in one visit. Case in point: my MIL had to go to the dentist 7 separate times for a root canal that should have taken 1-2 visits max.
svf - yes, I agree with your clarification. However, just as you described, the “employed salaryman” has the ability to pay, and therefore receives health insurance coverage that is paid/subsidized by their employer.
In the earlier post, Brian was suggesting that Japan automakers were more competitive because they were freed of the burdon of healthcare expense due to Japan’s national healthcare system. My point (which I think you validated) is that this is not the case.
Malpractice is driving insurance costs? Is there really anyone left dumb enough to believe that worn out lie?
Yes — I’m dumb enough to believe it, along with 99% of the physicians currently paying malpractice insurance in the U.S. today.
Japan has no national health insurance, health insurance premiums have quadrupled because of “malpractice”. Care to come to grips with facts?
exeter — if you would be kind enough to share some of your facts/alternate views, I would be happy to consider them. Merely suggesting that I’m “dumb” isn’t a persuasive argument.
Does this news imply that Mr Market believes it is roughly a 50-50 bet the GSE preferred shares will get wiped out?
UPDATE 1-Valley National:
Market value of GSE preferreds halved
Thu Sep 4, 2008 9:22am EDT
(Recasts, adds details)
Sept 4 (Reuters) - Valley National Bancorp (VLY.N: Quote, Profile, Research, Stock Buzz) on Thursday said the market value of its investments in Fannie Mae (FNM.N: Quote, Profile, Research, Stock Buzz) and Freddie Mac (FRE.N: Quote, Profile, Research, Stock Buzz) preferred stock more than halved in the third quarter, leading to a potential impairment charge.
Investors have been concerned over the fate of holders of Fannie and Freddie preferred stock because a possible bailout of the government-sponsored enterprises could partly or wholly wipe out the value of investments if bondholders are put first.
In a regulatory filing, Wayne, New Jersey-based Valley said the fair value of the preferred securities declined by about $40 million from June 30. The bank held securities with a cost basis of about $79 million in the second quarter.
The decline in value, if recognized, could lead to a impairment loss of $25.7 million, or about 19 cents a share, in the third quarter, Valley National said.
The Bills look to be big, this season.
Rams will make some noise too.
Alad-
You would be wise to carry your pessimism of the US Bill to the Buffalo variety. I predict the Buffalo Bills won’t be worth much more than (face value of) a Buffalo head nickel come December.
The Problem with Hedge Funds
Tsachy Mishal posted on: September 04, 2008
Before I outline what I think is wrong with the hedge fund industry today, I would first like to mention that some of the investors I aspire to the most are or were hedge fund managers. People like Michael Steinhardt, Steve Cohen, Julian Robertson, George Soros and Doug Kass. At the time these mangers started in the hedge fund business, they were mavericks who were fighting against the institution. The problem is that hedge funds have become the institution.
Twenty five years ago, hedge funds were not on too many people’s radar. Most people invested through mutual funds or brokers. The pioneers of hedge funds believed that there was a better way and made money by setting themselves aside from the crowd. Their successes brought much attention and popularity grew over the years.
Throughout history, investors chased returns and this time was no different. Today, there are thousands of hedge funds. It is estimated that 40% of the volume on the stock exchange is attributed to hedge funds. How can hedge funds beat the market when they are the market?
Is that in US Dollars…or Euro’s?
Me thinks some terrorist boys are supplementing their “poppy field” incomes:
“In Azizabad and other small villages where civilians are reported killed in combat, the Afghan government and international militaries pay about $2,000 for each person killed, giving villagers incentive to file false claims. U.S. officials acknowledge that payments have been made for people who never existed.”
“President Bush told President Karzai that he grieves anytime innocents die,” White House national security spokesman Gordon Johndroe said Thursday.
Karzai said that following the raid “our relation with the foreigners got worst,” according to the statement from his office.
Afghan leader vows punishment for deadly US raid:
http://news.yahoo.com/s/ap/20080904/ap_on_re_as/afghanistan
http://bloomberg.com/apps/news?pid=20601087&sid=ar1DI6579EhA&refer=home
ECB Will Tighten Lending Rules to Stop Bank Abuse (Update1)
By Christian Vits
Sept. 4 (Bloomberg) — European Central Bank President Jean- Claude Trichet said the ECB will tighten its lending rules to stop them being exploited by financial institutions stung by the year- long credit crisis.
Trichet said today the bank will increase the gap between the face value of most asset-backed bonds and how much can be borrowed against them. The ECB will apply an additional 5 percent discount for securities that have only theoretical pricing. Unsecured bank bonds will have a 5 percent discount. The new rules will take effect on Feb. 1.
The ECB is concerned its money-market rules are being abused by banks trying to unload securities damaged by the credit rout in return for central bank funds. Europe’s financial institutions stepped up their borrowing from the ECB, whose lending rules are looser than the Bank of England’s, after the U.S. subprime mortgage collapse derailed financial markets a year ago.
*************************************
Rick Santelli wondered aloud on CNBC why we couldn’t do something similar on this side of the pond. Go get ‘em, Rick!
Sep 5, 2008
Dry times for hedge funds
By Julian Delasantellis
…
So where did all that extra money that bid up stock prices and make hedge fund managers the avatars of the new millennium come from?
Part of it was undoubtedly from the massive popularity of the so called “carry trade”, where money was created out of thin air by borrowing in low-interest-rate currencies, usually the Japanese yen, which had short-term interest rates under 0.25% for most of this decade, converting the proceeds into US dollars, and then buying stocks with it. There is substantial economic research that correlates day-to-day falls in the yen, making the carry trade even more profitable, with rises in world, particularly US, stock prices, and vice versa.
But an even more powerful firehose that drenched the markets was a result of the world’s central banks sanctioning the essential privatization of money creation. This happened when they allowed private financial institutions, such as commercial and investment banks, virtually unlimited license to use their existing collateral to engage in ever and ever larger successive rounds of lending and borrowing that, when the liquidity reached the equity markets, with their relatively fixed amount of stock, were the afterburners that rocketed markets ever upward until this year.
The key to the massive returns achieved by the hedge fund traders was leverage; they soon learned that it was a gross mistake to borrow $10 million to buy stocks and get a nice return, when they just as easily could have borrowed $1 billion for a truly astronomical return.
As Tobias Adrian and Hyun Song Shin wrote in the January-February edition of the New York Federal Reserve Bank’s “Current Issues in Economics and Finance”:
Increased demand for the asset tends to put upward pressure on its price, there is the potential for a feedback effect: the stronger balance sheets lead to greater demand for the asset, and this outcome in turn raises the asset’s price and further strengthens the balance sheets. Having come full circle, the feedback process goes through another turn.
But this year we have learned that all the hedge fund managers’ outsize performance was due not, as we were told in the good times, to their superior ability to find a new investment opportunity at the bottom of a haystack 300 kilometers away, but on all the money creation based on rising US real estate prices. Now that the money is not so easily available, neither are those hedge funds’ easy millions.
According to Adrian and Shin, the mechanism on the downside is just about the same as that on the upside - just a lot less fun.
During downturns, the mechanism works in reverse. Consider a scenario in which asset prices decline. Then, the net worth of institutions will fall faster than the rate at which their assets decrease in value. As the institutions’ balance sheets weaken, their leverage will increase. Since these institutions are targeting pro-cyclical leverage, however, they must attempt to reduce leverage in some way - in some cases, quite drastically. How do these institutions reduce leverage? One way is to sell some assets, then use the proceeds to pay down debt. Thus, a fall in the price of the asset can lead to an increase in the supply of the asset, overturning the normal supply response to a drop in asset price.
And that’s what to tell the Maserati dealer when he wonders why all his leases are coming back. He, too, much like Insana, is a victim of the current imperative to “sell some assets, then use the proceeds to pay down debt”.
This article is chock full of financial wisdom for the ages.
In the Frank Herbert science fiction series Dune, a class of humans called “Mentat” were specifically bred to be able to serve rulers with awesome and breathtaking feats of mental agility. Reading the financial press up to about a year ago, you might have thought that a spaceship full of Mentats had landed in hedge-fund central in Greenwich, Connecticut, to rule that business as a first step towards the conquest of the world.
We now know that nothing of the sort was happening. What we saw in the rise and current fall of the hedge-fund empires was just another example of Gresham’s Law, that bad money drives out good. By allowing paper money to be debased through unregulated structured finance, the world’s central bankers drove out the good money, stock certificates, and the actual physical goods represented by such, driving up their prices.
Gresham’s Law is named after 16th century English financier Sir Thomas Gresham. In 1551, in the service of King Edward VI, Gresham stabilized the value of the pound, for which he received an annual grant of royal lands worth about 400 pounds. Hedge-fund managers received much much more, for delivering much much less.
In Dune, Mentats were created in the distant past because of some problem with uppity AI computers, leading to rules against such. No doubt after Mentat participation at high levels in intrigue, there would be a law made against them too
Gresham’s Law is named after 16th century English financier Sir Thomas Gresham. In 1551, in the service of King Edward VI, Gresham stabilized the value of the pound, for which he received an annual grant of royal lands worth about 400 pounds.That’s a pretty substantial annual grant of land. Consider that a police constable in the 18th century made 5 pounds a year. 400 pounds would be 80 years of that police constable’s salary. Assuming the average cop today makes $50,000 a year, Gresham’s compensation would be the equivalent of getting paid $4m a year in the present. Even on Wall Street, that’s not a shabby amount of compensation for all but the top people at the bulge bracket firms.
There is substantial economic research that correlates day-to-day falls in the yen, making the carry trade even more profitable, with rises in world, particularly US, stock prices, and vice versa.
Japans deflation become America’s inflation
lol
As every trader knows, 99.9% of all hedge funds don’t hedge - it is always a one way bet.
Here is something for the anti-dollar posters on this board to read and digest.
What did the person who sold you the stock get for his share? Paper money.
On the surface, it might seem that the guy who got the money got the worst of the deal. After all, he sold something real and tangible; who knows, maybe there was a photocopier or a cappuccino machine on the square meter he once owned. The paper money, in the case of the US dollar and all others, in no way guarantees you a share of anything at all, not since US president Richard Nixon “closed the gold window”, by suspending the government’s accepting of dollars for exchange into gold, in 1971.
In the small print on the dollar bill can be found the source of the dollar’s, or any other paper money’s, attraction. “This note is legal tender for all debts public and private,” it says. Paper money is, in economic jargon “fungible”; it is easily and readily accepted as a store of wealth. It is a lot easier buying a candy bar in a convenience store with a dollar bill than with that piece of office floor you owned with that stock certificate. The tension of paper money’s fungibility versus everything else’s tangibility is, and has been since the first appearance of paper money in China in the 7th century, the core dynamic of change in a market economy.
It’s one thing if the balance, like the weights on an apothecary scale, is stable, if the quantities on both brass platforms don’t change much. When they do, things get a lot more interesting.
In this analysis, it’s the value of the items on the scale, not the absolute quantities of money and goods, that are being measured. Thus, as happened in the United States this decade up to early last year, if homebuilders embark on a wild spree and go absolutely crazy building houses, then the weight of all those houses pushes that scale beam down, and the value of the money on the opposite scale beam goes up. In places like California, you can buy about 30% more house with the same amount of money than you could 18 months ago; in other words, that money is worth 30% more when you trade it for a house.
The eggs in Uncle Buck’s basket are not all they’re cracked up to be…
Blind Fate is no way to live~
Anyone who puts too many eggs in Uncle Buck’s basket at this stage of the game is asking for trouble.
for anyone interested in car and truck sales.the link below has a good layout on whats selling.
http://online.wsj.com/mdc/public/page/2_3022-autosales.html?mod=topnav_2_3024
It’s interesting, but not surprising that light trucks begin to sell better as soon as gas starts getting a little less expensive. Maybe this is a seasonal change in preparation for winter, yet trucks/SUVs will make a big comeback when gas gets below $3 a gallon.
Who is going to finance these SUV’s when gas drops??
“….light trucks began to sell better…..”
Stabilizing/falling gas prices, plus:
-Dodge is coming out with a new full sized truck for 2009,
-Ford has an updated F150 in 2009
Both are putting huge discounts on 2008s to get rid of them before the 2009s show up.
The charts were interesting. Sales of full size trucks are off 20% or so, but that is not translating in huge sales increases for cars (when you look at the actual numbers sold vs. the % increase from last year’s sales). Full size trucks are still four of the top ten most popular vehicles.
U.S. House Price Decline Could Be Worse than Great Depression
http://finance.yahoo.com/tech-ticker/article/53094/U.S.-House-Price-Decline-Could-Be-Worse-than-Great-Depression?tickers=%5Egspc,fre,fnm
U.S. House Price Decline Could Be Worse than Great Depression (Video)
http://finance.yahoo.com/tech-ticker/article/53094/U.S.-House-Price-Decline-Could-Be-Worse-than-Great-Depression?tickers=%5Egspc,fre,fnm
Home price declines are already approaching those in the Great Depression, when they plunged 30%t during the 1930s. With prices already down almost 20%, it’s not a stretch to think we might exceed that drop this time around.
There are about 10 million homeowners whose debt is higher than their home value, which has broad implications for how Americans feel about their wealth and spending habits (read: more pressure on consumer spending).
The current hopeful consensus — that house prices will bottom soon and then begin to recover — is most likely a dream. Housing markets don’t usually have “V-shaped” recoveries. And even if house prices stabilize in nominal terms, after adjusting for inflation, most homeowners will continue to lose money.
Wow, a realist!
If housing prices had not become so overvalued (as documented by Shiller’s own research), then their prices would not have to fall so far to return to normal equilibrium levels relative to incomes and rents. The idea that it is the government’s responsibility to shoulder the impact of the economic equivalent of a tsunami wave is somehow suspect.
Fed’s Fisher says not certain inflation will ease
http://biz.yahoo.com/rb/080904/usa_fed_fisher.html?.v=2
MARKETWATCH FIRST TAKE
Is that deflation we smell?
Commentary: Stocks and commodities are both plunging
By Mark Hulbert, MarketWatch
Last update: 4:01 p.m. EDT Sept. 4, 2008
ANNANDALE, Va. (MarketWatch) - What do you call it when both stocks and commodities are plunging?
Can you say “deflation”?
To be sure, the monetary authorities, led by Fed Chairman Ben Bernanke, are doing everything in their power to keep this word out of our lexicon.
But trading sessions like Thursday are making it a lot harder for them to get away with it.
Not only did the Dow Jones Industrial Average ($INDU 11,188.23, -344.65, -3.0%) drop some 350 points, commodities also had a bad day: Gold fell by $5 an ounce, for example, and a barrel of crude oil fell by $1.50.
Nor was Thursday’s market action all that different than the pattern we’ve been seeing with increasingly regularity over the last couple of months. Oil is now more than $40 per barrel below where it stood in mid July, for example, and an ounce of gold bullion is now nearly $200 cheaper. Yet, far from providing the boost to equities that many otherwise expected, the stock market is essentially no higher today than it was then.
“What do you call it when both stocks and commodities are plunging?”
A bubble popping. The stock market was at the highest level not seen since November 1999 in terms of P/E ratios.
And the commodities market had a spectacular run and pulled back.
Sensationalist journalism without facts. YOY Oil is up 35% , Exchange traded Metals are up 35%, non exchange metals are up 100% (Brazil has just demanded an additional 13% increase price in iron ore to China), and exchange traded commodities are 40%.
Nikkie off over 2%,
uhhh, did Soc Gen really post an “imminent collapse” in a memo for the record today?
We have reached meltdown scenario’s, again. Fingers on the buy button, but like the other fence sitters, Im still awaiting the lower prices.
Yes to soc gen
***Alert****Economic and equity market meltdown imminent****Alert***
Last week saw the publication of Q2 US whole economy profits data. They were shockingly bad. Core measures of profitability are in free-fall and have now reached a tipping point, where corporate activity could easily implode. We have also reached the point where companies give up ‘manipulating’ their profits higher and admit they are actually in free-fall. A combination of economic and reported profits slumping will catalyse the next equity downleg.
Also, I think it’s called wealth destruction..Deflation is contraction of money supply ( It is growing exponentially ). We are watching one side of trades being crushed..The US dollar is being propped up, but what will keep it up with the coming 10T debt coming due…Seems the only thing keeping it propped is foreigners, but how long will that last?
Precious metals prices are dropping yet every major retailer is out of almost every silver product. Kitco, Apmex, Tulving etc etc. Paper options are unwinding, but true store of value is shining through.
There is no shortage of precious metals. There is a shortage of willing retail sellers…the sellers are hoarding awaiting a panic run…pfft. keep dreamin the dream, ya saw a thousand an ounce on gold…..
Just like the big rice scare, there is no scarcity. just cold dead fingers.
No offence but a HELOC bubble popping IS deflation.
How does a massive dollar rally sound in the face of S&P500 at about 1150 sound?
hey, dollar rally, oil, gold. and equities all go lowering into the treasury bubble rabbit hole, away we go then…..ZIRP.
that aint a fart, its the blow-off top forming.
LOL
Tell Marketwatch that! They are incompetent. Better to have no news than faulty news.
And how come when commodities fall it is good for America, but when stocks fall it is bad for America? Our primary exports are commodities.
Is Gross trying to convince Uncle Sam to buy assets that Pimpco would like to unload? The tsunami of which he speaks is baked into the cards already, whether Uncle Sam or someone else ends up as the underwater bagholder.
U.S. Must Buy Assets to Prevent `Tsunami,’ Gross Says (Update3)
By Jody Shenn
Sept. 4 (Bloomberg) — The U.S. government needs to start using more of its money to support markets to stem a burgeoning “financial tsunami,” according to Bill Gross, manager of the world’s biggest bond fund.
Banks, securities firms and hedge funds are dumping assets, driving down prices of bonds, real estate, stocks and commodities, Gross, co-chief investment officer of Newport Beach, California-based Pacific Investment Management Co., said in commentary posted on the firm’s Web site today.
“Unchecked, it can turn a campfire into a forest fire, a mild asset bear market into a destructive financial tsunami,” Gross said. “If we are to prevent a continuing asset and debt liquidation of near historic proportions, we will require policies that open up the balance sheet of the U.S. Treasury.”
“The men the American public admire most extravagantly are the most daring liars; the men they detest most violently are those who try to tell them the truth.”
H.L. Mencken
Storm clouds over the oil market
Published: September 3 2008 19:33 | Last updated: September 3 2008 19:33
Bullish forecasters who predicted a few weeks ago that oil prices would soon top $200 a barrel may be feeling chastened. The price of US West Texas Intermediate is down almost 27 per cent from its July record of $147.27 a barrel, trading at $108 on Wednesday, a whisker above the five-month low it touched on Tuesday. Its decline should relieve some of the pressure on consumer prices and real living standards around the world. But the primary cause of the fall – fears of a global recession overcoming long-held supply concerns – is a reminder that the economic effects of the credit squeeze could yet be deep and long-lasting.
The scale and pace of oil’s retreat is all the more striking because of the disappointing supply response to earlier gains. Long before oil surged to its peak, Opec producers were already pumping as much as they could. Saudi Arabia, the cartel’s most powerful member and the only one with sizeable spare capacity, raised output in July to the highest in more than 25 years. But there are doubts over whether it can pump much more, while hawkish Opec members, notably Iran, are now talking of cutting production.
I guess my LINK didnt’ get posted.
Darn, it was the Graph on home sales for the past 30 yrs or so.
Really enlightening Graph.
Ben, if you see my link hiding somewhere.. please post. The charts/graph lovers will enjoy.