Bits Bucket For October 7, 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
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Is it me - or are there a lot of newbies on the boards the past few weeks?
(Welcome to newbies - just an observation - perhaps you can enlighten?)
I’m a newbie, so yes!
I was thinking this maybe an contrarian indicator?
newbie poster but longtime lurker. I’m actually starstruck when I get a reply from Lost in Utah or get a whipping from FPSS for mentioning the wrong name.
Favourite thread of all-time: the FB lady with the bad poetry/novel online who you guys tore apart. I think that was last year.
ValVerde, nice to see you posting more, and if you want to be starstruck, you shouldda seen the stars last night up here at 8500 feet, no light pollution. I had to go into my camper and read some James Joyce to regain my sense of balance (of course you know Joyce, famous for the use of interior monologue and references to a character’s psychic reality rather than his external surroundings).
Off to Utah today. Wahoo!! Glad I don’t have a house tying me down (put in that last line so it wouldn’t be totally OT).
thanks - will keep my eyes open
Sounds like you were in my neck of the woods. We got a few inches above 11k feet. Saw an insane skiier climbing a 65-70% talus slope today covered in only 4-8″ of snow. I hope he made it down okay…
just to clarify, i mean a 65-70% grade, not 65-70% talus.
Astronomy is a hobby of mine, one that is sadly hard to enjoy in the grossly overpopulated state of Maryland, where the housing is unaffordable and the sky is full of light pollution.
*sigh*
OK, This is just frackin hilarious. Starting about minute 2, they start in on a housing skit. This is an allegedly banned SNL skit! This is a MUST SEE!
http://patdollard.com/2008/10/it-is-here-the-banned-snl-skit-cannot-hide-from-louie/
That is the best SNL skit I’ve seen (other than the Sarah Palin ones).
Those writers are on the ball!!!
Dang - yanked again!
Grrr…
Leigh
Welcome aboard the tin-foil-hat Express. Tickets! Tickets, please!
Gold tickets?
been lurking for years . . . . just starting posting - a little bit.
Cramer scaring J6P again; this time on Today show. Says the financial world is collapsing (really big Jim?). Defends his call to ’sell everything’. And now for the weather…
Hey, he is only a year late on that call. Isn’t that a big improvement for him?
if you’re going to predict, predict often
Predict many outcomes at many different points in time.
Later on, only talk about the predictions that turned out right.
It was a year ago when he lost it and said it was financial armageddon and that the Fed don’t know anything.
is it his followers that are selling the bounces today and keeping the markets from making a comeback? Lol!
I guess that means we’ve hit bottom!
Either that, or we will hit bottom quite soon…
Yesterday I closed out my 9500 “put” on the Dow (150% profit, but it was a tiny position). I believe that means the Dow must go much lower, since I am almost always wrong about stocks.
I still like the saying I saw in the WSJ, perhaps a year ago now.
“There is a small god in the trading pits who allows each of us to call the top correctly once, call the bottom correctly once, and be wrong as many times as we’d like.”
Anyone who’s followed Cramer’s “advice” over the past year is getting their bottom hit, all right - DELIVERANCE style.
Cramer was on the Colbert Report last night. He toned down a little — he was trying to seem witty and seer-like, I guess (and failing at both).
At one point, Cramer said “You won’t be able to get money out of your ATM,” and a little shock ripple went through the crowd. He backpedaled a minute later. I had hopes that Colbert would call Cramer on his ridiculous boosterism and repeated bad advice to the masses, but Steve-o soft-pedaled through the interview for the most part.
Citibank in Argentina turned off the ATM’s, in 2002.
If it worked in one ex-middle class country, why not try it here?
I was speaking more to the irresponsibility factor of a loudmouthed douche saying that in a public forum, especially given his history of unmitigated market cheerleading — not the question of whether it could actually happen.
I hope it doesn’t happen, but I concede that it’s a possibility.
So how many middle class people did there end up being after it all went bad there? Sign of things to come here. A thrid world country with super rich and super poor?
People took to the streets of Buenos Aries with pots in hand, banging away all day and night with spoons, trying to get an ineffective government that had already given away the spoils and was bankrupt, to give them something, anything,
Also, if it’s any consolation, Argentina recovered after that, their middle class is still there.
I bet they don’t keep all their money in the bank any more.
Now, now, there’s nothing similar between our crumbling national economy, run-away debt, and attempts to hyperinflate and an ex-middle class country… oops… oh, wait…
Well, maybe another rate cut will help! Or, maybe not…
I think he was right. All it would take would be a few large banks to fail at the same time. If EDS can’t verify the accounts have money, no money will be dispensed.
Last night on Colbert was the first time I agreed with Cramer.
Next thing you know, cats and dogs will be living together…
They do. Ask Lost in Utah
I believe the bottom of the stock market will occur when Cramer breaks down and cries on Mad Money. When he is brought to tears I am buying. Not watery eyes either. I need to see real tears!
Watching every day for the buy sign!
Not good enough for me. I am waiting for him to piss his pants then I’m in!
Depends?
Leigh
(For you Alad)
Isn’t it ironic that yesterday’s doomsdayers (that would be us) are today’s rational, level-headed people.
Disclaimer: I suppose it’s easier to be rational when you’ve been all cash for a while.
I had a boyfriend who would swill 6 beers in an evening, and he was a drunk. So tell me again why JoeSixPack is a term of endearment?
So tell me again why JoeSixPack is a term of endearment?
——————
Ummm, it isn’t.
BTW, we were probably dating the same guy…best learning experience in the world (never dated a drunk after that).
Er…
JP6…
In the day -
Ribs baybee!
Hunk of Hunk of…
Yummy. (There is a song in here…hunk of hunk of ____).
And some of those fine…er…ones built homes.
And put out fire(s) -
Ah, fainting bed.
Leigh
So you were dating him too, Leigh?
Yep, those are the ones.
I was in a gun store in FL yeseterday. Holy crap! The place was extremely crowded with all walks of life scrambling to buy assault rifles, shotguns and lots of ammo. The store owner told me that business had really picked up like this in the last two weeks. He was having a ball! He attributed the phenomenon to fear over lawlessness in severe economic conditions as well as a degree of uncertainty over our political future (Obama). Definitely experienced a palpable sense of panic in the air - pretty creepy.
The Roaving Hoardes of Starving Masses are trading in their pitchforks for Uzis?
It’s kind of funny…
We fell in love with the legend that everybody was armed and dangerous in the 19th century, and force-fed this tall-tale first through Dime novels, then moving pictures and finally onto the tv screens in our homes.
Everybody seemingly was shooting somebody else, all the time.
And now we are about to go back to the 19th Century, real or imagined…
Got body armor?
At the St Louis Arch earlier this year, I picked up a reprint of the popular book that was sold to settlers heading west in the 1850s. It really is a pretty interesting book, and describes what you need, what you can expect to encounter, how to deal with it, the various routes to take, etc. There was a section in it about which guns to bring along and mentioned how foolish it was to not have one.
Maybe the NRA added that section when they reprinted the book.
Professor Roger McGrath had access to a near complete run of 1870-80’s newspapers from one of California’s most supposedly lawless towns, Bodie.
It turns out that violence on the American frontier was vastly overrated, and crime was the exception, not the rule.
Read his book: “Gunfighters, Highwaymen, and Vigilantes: Violence on the Frontier” and see how we used the powers of myth to turn the old west into what we wanted it to be like, not what it really was.
Hey I had Prof. McGrath at UCLA! Best class EVER (and I was a History major).
I hope the store owner is throwing in complementary road maps to DC to said Roaving Hoards. Maybe a prepaid gas card too.
If a Liberal is elected President, his first order of business will be to take away your guns. Obama is a Liberal, and he is leading in the polls. Therefore, everyone is stocking up on weapons before Obama gets elected and bans them all on his first day in office. I read a magaine article by a gun expert listing exactly which guns are likely to be banned, and therefore which guns we should all buy before the election.
If Obama gets elected, I’m not sure he’ll have time to go after guns. In a threatening Depression, guns/god/gays are luxury issues.
There’s hundreds of millions of handguns that aren’t going anywhere, are they?
As if Obama or any other president could request that the citizenry turn in their hand cannons voluntarily?
This gun confiscation gambit is sadly what the republican party is reduced to, a party of FEAR…
For once, I completely agree with you. McCain aren’t gonna win this thing with fear mongering about who Obama had as a co-boardmember in a NGO years ago. Smells of desperation and scorch earth.
You want to know something that’s scary? Sarah Palin. The woman knows absolutely nothing about international affairs. Give that Mr. Mccain is older with less than perfect health, the thought of Mrs Palin handling potentially serious international affairs is a hell of a lot scarier than the prospect of people having their guns taken away.
I believe it has been a done deal for a long time now that Obama would be the next US pres. There seems to be a great deal of influence behind him from somewhere. One friend told me this was the first election he hoped no one would win, and I have to agree.
She’s taken over as mudslinger extraordinaire, and there is something just plain awful about an attack dog without a leash, let loose on the country.
One thing Palin doesn’t have to worry about is witches. Does that count as a qualification?
The latest info is that Palin’s husband was a member of the ‘Alaska Independence Party’, a secessionist group that hates the Federal government. She gave a speech at their convention.
” ‘Alaska Independence Party’, a secessionist group that hates the Federal government.”
Bunch of wackos, no doubt. You wouldn’t happen to have their 800 number would you?
BTW, I bought my “ugly black gun” a few weeks ago. I call her “Hillary”.
GH-
I’m not convinced of an Obama win, it seemed something was up with McCain’s switch to Bush loving, religious right courting maneuvers a couple years ago, like someone told him if he played ball he would be rewarded. Then his supposed ‘comeback’ in the primary.
However, I remember how even as Obama made it to state senate he was obviously being carefully groomed for better things. All those ‘present’ votes to keep him from coming out on one side or another of issues when his vote wasn’t needed. His speaking spot at the last convention. The entire sketchy dem primary. A lot is happening and it’s a little too convenient.
Last time I looked, Obama had over 1 mil in donations from Goldman Sacs, JPMorgan, Citigroup and Lehman Bros.
Unfortunately, we’re looking at 3 supreme court justices over 70, and this seems to be 1 of the few areas where Dem vs Repub might actually differ.
‘I call her “Hillary”.’
Hillary w/o smarts or experience…
Governor Palin seems to scare the bejezus out of you left wing elitists. You just assume that your view is “normal” and anything to the contrary is reserved for hillbilly nut jobs. Get a clue.
YOU’RE a hillbilly nutjob.
(just kidding, let’s get back to our regular programming, shall we?)
“Governor Palin seems to scare the bejezus out of you left wing elitists. You just assume that your view is “normal” and anything to the contrary is reserved for hillbilly nut jobs. Get a clue.”
Lets try to get a grip on reality:
She f’ked up every public job that she was involved in.
She is an idol worshipper that believes in witchcraft
She believes that all forms of stem cell research are an abomination. (The only reason many are alive today)
She thinks that global warming has nothing to do with the use of fossil fuels.
These are facts, not fantasies. She is ignorant and as a result evil.
I am not a left wing elitist, I voted for George Bush. She is a heartbeat away from possible presidency. No friggin way. I liked McCain before this. I am not happy with Sen Biden either.
Sir Hoz,
Not a left or right wing anything -
Perhaps cashedin05 - well - perhaps (not sure) may be a er…neoCON?
My point?
Happy to see you again.
Curtsey,
Leigh
“the republican party is reduced to, a party of FEAR”
Now that is the pot calling the kettle black.
Without fear mongering, democrats would lose in a 45 to 5 state route.
Republicans are no prize but lets be honest here.
Dang -
And howmuchamouth (er…month) does a domicile cost?
Just saying ~
Leigh
Why would you buy a gun now only to have it taken away after the election? Buy a bow and arrow.
Make sure you buy wooden arrows for the bow.
yeah, but it’s only CHILDREN’S arrows that are exempt from the excise tax.
For anyone interested, I’m planning to go into the “children’s” arrow business. Don’t tell anyone - they’re really adult sized arrows but painted bright colors to blend in with the other children’s arrows on the market.
If you get your order in with me now, I’ll get you a discount.
Why do we have a near 100% “excise” tax on childrens arrows? Why do we have an “excise tax” on arrows at all?
“If a Liberal is elected President, his first order of business will be to take away your guns.”
I don’t know how many on the HBB are as righty tighty as me, but I don’t believe that for a second.
I don’t believe it either, but that’s a talking point that gets spread among the rural/homesteader/survivalist crowd every four years. That rumor was repeated to less than a month ago by a gun-toting friend of mine.
(I guess I should have used a snark tag of some sort.)
There are people who believe it, and they are the ones who are patronizing the gun shops.
A roomate used to get those gun magazines that come with various subscriptions, perhaps the NRA. I was reading one of them in the morning while eating my fruity pebbles before work, and it had some very very bad articles about Y2K. So called computer experts talking about doom and gloom and how all the gun nuts needed at least 4 gats each. I assume this is where these rumors come from, which in turn drives gun sales, which helps magazine (the print kind) sales.
The true sheeple. Them thar libruls are a gonna take away yer gun! And they iz gonna take away all yer money with taxes! And make you marry a hummusexual! Vote Republican and buy a house now! the bottom is in! They ain’t makin’ anymore land for that $20K double-wide and $40K Ford F250!
“(I guess I should have used a snark tag of some sort.) ”
Yes, please!!!
I don’t doubt that there’s a few, still as one whose relatives are by and large that crowd, I don’t hear it at all.
That would be real funny Jon if there wasn’t some truth to what you suggest…
So guns will get cheaper in 6 months after this all blows over?
You could pick up a generator for 75% off after Y2K was a non-event. Guns tend to hold their value, tho! Doh!
Got a nice Coleman generator that looks brand-new for $150 today. Cash. LOL.
Gun control is a total non issue.
Throw the BS flag.
Anything will do to distract voters from the painfully obvious reality that one R-can candidate is too old and the other is woefully unqualified.
It’s not BS. Obama spent 8 years as a director of the Joyce Foundation, a group that is throwing a lot of money around, esp at law reviews willing to run legal scholarship undermining the 2nd Amendment.
http://pajamasmedia.com/blog/obama-and-the-attempt-to-destroy-the-second-amendment/
After the Heller decision it’ll be difficult, but they’re very patient. It will take a few years and a couple new supreme court justices. It won’t happen right away.
Any kind of “assault-weapon” ban like the 1994 one that expired also puts a premium on high-cap mags and certain rifles. So there’s money to be made in buying these up now. Reminds me, could use an extra 6-8 mags for my Glock.
Yep, the R candidate is too old and the D candidate is woefully unqualified.
That may be true, but have you thought of the horror of Pelosi and Frank getting free reign from Obama. Kind of makes the skin crawl, doesn’t it?
Bill, Palin is a republican, not a democrat.
“Bill, Palin is a republican, not a democrat.”
So far as I am aware, party affiliation does not alter basic reality.
I’m more concerned that he’ll take away my hard-earned MONEY to give to a deadbeat. This is an EXPLICIT PROMISE of his. He’s up front and uses the term “redistribution.” While I’m probably going to vote for him (!), it’s distressing to hear him talk of “wealthy people vs working people” as if the two groups don’t intersect. (Google for his Las Vegas speech to see him say this about a dozen times.)
However I have a plan to pay zero tax the next few years! I’m going to stop working. There are a number of projects I’ve wanted to work on and I may as well take the time out to do them now, when I’m 45, than later. With a paid-up house in a moderate climate, walking distance to all the shopping I need to do, with solar electric, I don’t need much money to sustain myself.
Way to go, reuven!
Well, to be fair, Bush did just “redistribute” $700 billion. Whose pocket it ends up in is anyones guess except for that Kashcari guy, but I have faith that Goldman Sachs and their employees with end up ok after all this is over.
Reuven, I wish your plan would work, and indeed it would, if the taxes were going to be raised to cover the cost of this financial fiasco in total. Alas, this bailout is being paid for by inflation, which means that money you saved up to live is going to be worth up to 50% less in the next 8 years. There will be higher taxes, but the real tax is the inflationary tax.
Well, he printed it. And that, at least, taxes everyone equally by devaluing all our money at the same rate.
I’m no libertarian, and I’m not against taxes. But I’d feel a lot better if lawmakers had the balls to say: We need to raise taxes, so EVERY bracket is going to go up 1 point.
Gotta be one of the more dumb ideas you’re gonna run across, that’s for sure.
Ain’t gonna happen. It would be like taking candy from a baby.
Sorry, oxide. Can’t be done. Remember Congress? How about the Supreme Court? It would never fly…..
The Supreme Court? Oh right, those are the guys that shut down all of the illegal stuff that was going on in the executive - wiretapping, Guantanemo, renditions, etc. Oh wait, they actually haven’t shut that stuff down yet.
Oh boy, looks like oxide wants to play the poor victim card….sorry, but I don’t think Obama will make banning guns his first order of business, but nice try.
It’s the default psychobabble of an electorate desperate to maintain power at any cost by using Hitlers scorched earth strategy. And they’re dumb enough to believe it will work.
Sorry guys, I was half-snarking. See above.
I sensed that your were half-serious, and afraid.
And conservatives are supposed to shrink government. I guess Bush still has some time left to do that.
Shrink government? Heck, shrub wants to shrink the entire country and everyone in it.
Ha Ha Ha - I love that one ! Yes, we’re all having an interesting time. However, since we got almost 100 percent out the stock market 14 months ago ( flight to quality ? ), I feel better than a lot of people. The groans of pain emanating in my department at work today from the manager on down, re: their 403b’s (401k’s non-profit institution ) are palpable on several levels. At least 3 retirements got put off after yesterday. Dang. I was in line for a promotion based on one of them. Oh well. Wait, wait, wait…..
bush is no conservative
more like a socialist christian democrat progressive
SPEND-a-HOLIC
like american people just all
SPEND-a-HELOC
Don’t try to tag that Dead Fish Walkin’ with words like “progressive,” taxmybootay — the conservatives picked that nimrod, the conservatives voted that nimrod into office, the conservatives own that nimrod.
Whether he actually turned out to be a conservative is an entirely different question.
‘Whether he actually turned out to be a conservative is an entirely different question.’
To which the answer is: a resounding ‘F*ck, no’.
Right on ET….
Haw haw!
“Dead fish walking”…”Weekend at Bernies crowd”. You guys are really on today
in reference to “oxide’s” comments about guns…
OMG! With the economy in the toilet… THIS is what you are worrying about????
Please… get informed about the REAL issues.
Placing the tin foil hat on right now…
Financial disasters do not happen in a vacuum. Very severe social distortions will happen concurrent with the financial distortions.
When poor people (and we have lots of them!) are no longer able to feed their families, they will resort to whatever means necessary to obtain food, medicine and other valuables.
Crime and a poor economy go hand-in-hand.
If one were to believe the TFH conspiracy theorists (who have had it right the past few years), prisons have been constructed in the deserts to house????
If things get as bad as they could, there will be increasing violence and a gun ban is absolutely possible under these circumstances. This would open the door for whomever wants to control this country to do so without any real obstacles.
Whether the American sheeple are stupid enough to turn their guns in is another question.
I live in Michigan and have met more people that own guns than those that don’t. Just about everybody hunts. And Mcain gave up on us so it will be Obama all the way. Even if he does try to take guns away it is not usually the guns an average citizen would have anyways. Even a hunter. I probably won’t be able to buy a 16 round clip for my nine anymore. Just a 10. Oh well. Guess I will only have 9 rounds left after I shoot that intruder instead of 15
Now if I had a nice carbine with 30+ round clip I might be worried.
“Just a 10. Oh well. Guess I will only have 9 rounds left after I shoot that intruder instead of 15″
Unless there are 11 intruders. Invading/occupying soldiers usually have bigger numbers. One time only 19, though.
15 is damned convenient when you’re out target shooting.
Any argument that starts with the term “Liberals”, “McSame”, “Nobama”, etc. is lazy thinking, causing me to automatically tune out and disregard the messenger.
Same here. Tired of all this “that party’s to blame” stuff. Really, really sick of it.
Soon all of America might be as gun free as the south side of Chicago.
Where only the outlaws have guns?
I believe the Supreme Court put the “right to bear arms” issiue to rest recently…No President can “Ban” guns….
Maybe while they’re at it, they should go ahead and make drugs illegal, since that’s supposedly a big issue.
Make guns illegal, and I’ll be opening a gun shop in Tiajuana.
If a Liberal is elected President, his first order of business will be to take away your guns.
But Biden specifically told the rubes that he owns and lovingly fondles his shotgun, and that he’d never stand for Obama “pulling my gun.”
Wait a minute….
This is my weapon
This is my gun;
This is for shooting
This is for fun…
Obama’s “pulling Biden’s gun” (Beevis & Butthead chortle).
Bad image! Bad image! Undo, undo! Brain bleach over here, NOW!!!!! Ewwwww!!!
I think the courts finally rulled on gun ownership and decided the second amendment was quite clear. They affirmed our right to won guns. Strange that the former ACLU lady on there was in the disent.
Basically, if Obama tries something like that he will get stuck in the senate and probably end up running afoul of the constitution.
Anyhow, congress and the senate actually vote on the laws so it has to start with them.
I figure Obama is going to be very busy fighting leagal problems typical of a Chicago politician.
After a few years of a depression; we will put his out. I’m sure by then it will be just fine to bash the dude. I can wait.
My big question is, who will take up the banner against the Fed after Ron Paul retires?
You cannot possibly be serious
From the Remington Arms 2nd quarter conference call:
“Second quarter of 2008 sales of $131.9 million were up from the second quarter of 2007 by $22.1 million or 20.1%, of which $10.2 million was associated with price increases realized across all our segments.
The change in net sales from the prior year was primarily due to higher sales in both our firearms and ammunition segments of $20.0 million and $3.1 million respectively, offset and part by lower sales in our all other segment of $1 million.
Net sales in our firearm segments were higher than the prior year by $20 million. This increase was in certain rifle and shotgun categories up $15.9 million and $3.9 million respectively.”
It’s on their site under the investor relations section. They mention a situation where metal costs are falling and sales are increasing. That’s not bad for the bottom line.
Holy Nutjobs, Batman…They really do cling to their guns, religion and antipathy to people who aren’t like them!
As Alaska’s governator would probably say: if you can’t win ‘em over with your book smarts, at least you can put the fear of God and country in ‘em.
I don’t think it’s too irrational. I’ve listened to people at my job (who I can’t picture even having a toy gun) speak about getting a gun to protect their food storages. Along with them, their family members are doing the same. I was intrigued, so I kept quiet and listened. Normal water-cooler conversations with this group are seldom serious, but you could see the seriousness in their faces and hear it in their voices when they talked of buying guns.
“I was in a gun store in FL yeseterday. Holy crap! The place was extremely crowded with all walks of life scrambling to buy assault rifles, shotguns and lots of ammo.”
Looks like J6P’s confidence in Dubya’s leadership is waning.
Didn’t Oz ban guns and take them away, or is that just an urban legend…Ajazh (sp) out there?
Both Australia and Britain passed laws requiring the registration of all firearms after particularly bloody mass shootings by lone psychopaths. Their politicians and lawmen vowed that mass mandatory registration would not lead to banning and confiscating firearms.
They lied.
Crime rates, including gun crimes, have since soared among the disarmed populations in both countries.
Learn something, America.
Like “gun-safe” D.C. with its gun ban.
Lowest crime rates are in places where everyone is allowed to own a gun — and protect themselves and others who are in imminent harm.
When my mother and her friends — who all lived through WWII in Europe — talk about what happened and why nobody could stand up against the Nazis, they always mentioned the gun bans.
An unarmed populace is a tyrant’s wet dream.
No need to buy any guns and ammo.
There are usually plenty of FREE ones lying around after the idiots have their first major battle
“I was in a gun store in FL yeseterday. Holy crap!”
(Sound of a large light bulb being switched on.)
I pass a small gun shop on my way to a grocery store once each week, and its parking lot was nearly full last week. Usually there’s just one or two vehicles.
Uh-oh.
Good for the gun makers. Good for the ammo makers. Hell, good for the gun store. For the rest of us…. eh…
I saw the same thing in Specialty Sports, a big sporting goods store here. The clerk told me semi-autos with large-capacity magazines, both rifles and pistols, were flying off the shelves. His explanation: Obama - if he wins, gunheads are expecting much more restrictive gun control laws. The sharp economic downturn might be feeding paranoia, too.
Restrictive? Dang, when you see the FBA raids on survivalist types in suburban San Diego, the garage is a friggin’ arsenal. A magazine. An armory. This isn’t self protection, it’s a fetish.
WASHINGTON — As pressure built in the credit markets and stocks spiraled lower around the world on Monday, the Federal Reserve was considering a radical new plan to jump-start the engine of the financial system.
Under a proposal being discussed with the Treasury Department, the Fed could buy vast amounts of the unsecured short-term debt that companies rely on to finance their day-to-day activities, according to officials familiar with the discussions. If this were to happen, the central bank would come closer than ever to lending directly to businesses.
http://www.nytimes.com/2008/10/07/business/07markets.html?_r=1&adxnnl=1&oref=slogin&ref=business&adxnnlx=1223381296-MP9uVmdj3CNW+K0QYcDBWA
Now I am running off to the Fed window to stuff my pockets (and socks, and shoes) with worthless fiatscos, since the Fed is now the lender of last resort…and first resort. And every other resort. Green rectangles may not be money but maybe they can insulate my ragged, threadbare clothes against the chill wind that is blowing in the economy.
“unsecured short-term debt”
This sounds a lot like credit card debt.
Don’t they need another $700bn (at least) to pay for this?
They’re backing up the Commercial Paper market. I suggested this was needed a couple of weeks ago (when TARP was originally proposed). I was pooh-poohed by somebody on here.
In my opinion, this was badly needed, and will help stave off a major business slowdown. Non-financial businesses of all sorts need access to commercial paper to take care of short-term swings in Accounts Payable, payroll, etc. This is basically just taking care of business in the non-financial economy.
I guess, since I don’t have any real skin in the Financials game, I’m of the opinion that I don’t really care if the financial institutions in this country survive or not. As long as somebody (the Fed, in this instance) is there to back-stop the “real economy” so that companies can buy inventory, finance receivables, make payroll, etc then we’ll all be okay. But then again, I live in a state (Wisconsin) that doesn’t have huge employment in the Financial sector, and has a HUGE non-automotive manufacturing base.
As Rick Santelli just said on CNBC: A+ for the Fed this morning…
Yes, the local media has been full of new about small business closings, layoffs, restaurants shutting down, etc. This economy, such as it is, runs on credit.
There is no “real” and “fake” economy. There are only scarce resources that need to be allocated to maximize economic benefit to the most people possible.
If the Fed backstops businesses that no longer make sense or are unable to survive through this financial storm on their own then they are misallocating resources. Every action by the fed has an equal and opposite reaction because the only thing the Fed can do is reallocate resources from one group (those holding dollars) to another group those that need a bailout (err… loan that the market would not provide) and then taking a cut (interest) in the process.
All of the bailouts etc are designed to preserve the “status quo” and as far as I am concerned the “status quo” is the elite exercising near monopoly power in almost every industry.
Votes in a tight race are very expensive!
Why the big bail-out if the Feds could of just injected the commercial paper market ,and again, maybe the lenders felt it was prudent to cut back on these loans .God knows the Feds were giving billions of short term loans to banks . Does commercial paper also cover construction loans I wonder ,anyone know ?
So far, the Fed has not proved very adept at picking winners (automakers, banks, homebuilders, etc) and losers (anyone they don’t choose to favor as a winner).
Kind of a strange idea, and I don’t know the details. If the Fed doesn’t backstop the commercial paper market, potentially hundreds of good companies could fail. Leading to higher unemployment, further demand destruction and a shiny new depression.
But how does the Fed determine which companies paper it should buy and at what interest rate? This is really a major step towards corporatism. The article says the Treasury is making a “deposit” in the Fed to fund this. With what funds? The government has none.
We have reached the point where 2 guys, Bernanke & Paulson, are borrowing trillions from communists and terrorists and determining what private sector companies survive and die at their whim.
The ultimate results of libertarian Republicanism, the frantic takeover of the American economy as a result of a completely failed ideology, are amazing to watch.
What does a frantic takeover of the American economy have to do with libertarianism?
The end result of deregulation is a race to the bottom, in this case in creditworthiness. Collapse must follow. And the government must stave off collapse, or collapse itself.
libertarian Republicanism
That phrase doesn’t make any sense. Libertarians believe that there shouldn’t even be a Federal Reserve. I can’t decipher what it is republicans believe in, but it’s definitely not that. You should learn what words mean before you use them.
Or not. I look forward to your future missives about Assault Pinatas and Racing Cake.
what made you think they are borrowing that money. most likely it is coming from thin air.
Yes, I need money market funds for my cash alternatives at work, and the major corps who issue the paper need the short-term funds. People (treasury staff in corps) need to stop freaking out and just let it ride.
Sorry, I’m really dumb and incompetent, but my question is why do companies “need short-term funds”? What, they don’t have any in cash reserves to smooth-out knicks and knacks of payables-receivables?
It’s like if my household needed “short term funds” - is it like paycheck advance or something? I’ve worked for a couple of technology businesses, never heard of us borrowing short-term anything. (Well, we do have corporate VISA cards, etc, but those are just for convenience)
Having listened to This American Life last weekend, I’ve sort of got my head around the Commercial Paper Market (at least in macro terms).
So, my stupid question(s) of the day are:
Is this injection of money into the CPM on top of the $860 Bailout Bill passed last week, or included in the Bill?
And, if this was the problem in the first place, why didn’t the FED just cut to the chase and fund this first?
Why all the faffing around with trying to find a ‘price’ for the MBS/CDSs, when the CPM was the ‘real’ problem?
Sorry for sounding dense
I’ve learnt more about economics and finance in the last month than I have in the rest of my lifetime, but I still know diddly in the Grand Scheme of Things.
but my question is why do companies “need short-term funds”? What, they don’t have any in cash reserves to smooth-out knicks and knacks of payables-receivables?
While listening to This American Life (great show BTW) I also wondered that same question.
Basically, without credit, the economy collapses. But does it have to be that way? Geez, it’s been a long time since I took Economics 101 as an undergrad.
I’m still trying to wrap my head around someone praising This American Life. I’ll listen to anything on NPR but that.
Please explain why any company would regularly have to borrow money for their payroll. If they can’t generate enough money for payroll, then how can they be “in business?”
Exactly.
Any company that absolutely needs short-term credit to survive should simply not be in business, period.
Iceland was the favored carry-trade outlet for Europe and it’s in the process of falling apart…
Are the other carry-trade countries going to be in deep doodoo soon?
check out this headline (no I didn’t make it up)
Terror as Iceland faces economic collapse:
The Icelandic Government seized control of the country’s biggest banks last night in an attempt to fend off wholesale economic collapse.
Queues formed at petrol stations as Icelanders rushed to fill up before reported fuel shortages, while savers who tried to withdraw money from banks or sell bank shares on the internet found websites were not working. The country’s state surgeon even warned politicians and the media to ensure that they did not alarm old people.
http://business.timesonline.co.uk/tol/business/industry_sectors/banking_and_finance/article4894904.ece
Don’t worry, it could never happen here…we’re different.
ALL IS WELL! ALL IS WELL!
I think the first quesiton should be, why would someone live in Iceland?
Answer: Because we all can’t live in California.
blondes. lots and lots of blondes.
+1
Because they are Icelanders?
Bjork?
Living there may be a way to “good-bye depression” without all the clenching involved with other methods. From and adaptation of “The Jungle Effect” by Daphne Miller, M.D. (Collins, 2008):
Iceland: A cold spot for depression
Why are Icelanders less depressed than Finns?
It’s the fish. Scientists believe omega-3 fats, found in high levels in the ocean fish that dominate an Icelanders’ diet, benefit the brain and nervous system. They also may be linked to lower rates of depression. (Note: Omega-3 fats are most effective as a complement to, not a replacement for, standard antidepressants.)
And, uniquely, Icelanders get omega-3 fats in nearly everything they eat, from organic milk, cheese and yogurt to lamb and wild game. It seems that the moss consumed by native sheep, cows and sea birds is loaded with the stuff.
Sounds like as good a place as any to experience a huge crash. They knew they were in for an adventure when they set sail on the north atlantic.
Check out the author’s names:
Hildur Helga Sigurðardóttir in Reykjavik, Helen Power and Peter Stiff
Hope he doesn’t get the shaft because of all the excitement
So, our buddy Peter Shiff is already picking up some Icelanding booty?
Iceland, then the philippines and this place….
Murry Head
The Australian $ has gone from 1.05 to the US$ to 1.40 in less than 3 months, most of that in the last couple of weeks. The countries may not be suffering just yet but the carry traders sure are. Now, I wonder who it was who lent them the money to do the trades?
Australia & New Zealand are a 2 for 1 carry-trade package, as most of the banks in Enzed are owned by Aussie banks.
Australia just dropped their interest rates to 6% from 7%. So long for the last great bet on inflation. Now it seems pretty universal that the Central Banks are going with widespread deflation for 2009. I think many here at the HBB mostly had a consensus on that back in January or so.
used to be a stop over to London
it’s like the moon there
add socialism and it’s no wonder they they drink so much
They drink because they’re descendents of Vikings and that’s what Vikings do. I studied Old Norse in college so I could read the sagas in the original. One thing led to another, and I learned Icelandic.
All on government grants.
(Just pulling your chain, flat)
‘They drink because they’re descendents of Vikings and that’s what Vikings do.’
‘Sright! (Hiccup) Oh, wait, it’s only 9 a.m. here. I won’t actually be hiccuping until, oh, like…11 or so.
Whaet we Gardena, in dagum yorum…drankum aet dawnum… geez, for some reason, I can’t remember the rest of the story…
Australians get “socialized medicine”.
Americans get an over inflated military.
Yep…I take the medicine…
smells like rate cut:
Oct. 7 (Bloomberg) — The Federal Reserve may have trimmed borrowing costs yesterday without actually saying so.
The central bank used power granted under last week’s financial-rescue legislation to effectively set a floor under its main interest rate that’s lower than the 2 percent target set by policy makers last month.
“Absolutely, it’s a stealth easing,” said John Ryding, founder and chief economist of RDQ Economics LLC in New York and a former Fed researcher.
http://www.bloomberg.com/apps/news?pid=20601103&sid=a2KRwOfPJk58&refer=us
Smells like trying everything but nothing is working, because the market mechanism is broken due to an excess of intervention.
… and an excess of debt.
“Smells like trying everything but nothing is working,”
The system has reached its limit and seems irretrievably busted.
It’s like trying to steer a car that has gone off a cliff. Turning the wheels, accelerating and braking have no effect. Economic gravity is not controllable by the Treasury, the Fed or Banks.
An excess of intervention too late is better than a lack of it for years and years earlier on.
The problem is years and years of earlier intervention in the form of fiat money and creating the Federal reserve. No amount of intervention can fix this problem… the fastest way out of this mess is to:
1) Repeal all legal tender laws and the Federal Reserve
2) Outlaw fractional reserve banking (where deposit nodes and debt notes are indistinguishable)
3) Repeal the income tax
4) Repeal all “money laundering” laws
Then let the free market sort out the rest.
Endlessly repeating the same mantra is not going to get anyone to do this. These thing will never happen in modern industrial economy that has done any of these things. You need to come up with something new.
Amen Cosgrove.
These things have nothing to do with “modern” and a “modern” society does not need these things (income tax, central bank, fiat money). These things will be the undoing of our “modern” society and will fall under their own weight because they are unsustainable, oppressive, and immoral.
So, while I may repeat that this is the solution it is mostly to highlight “non-solutions”. If you do not understand the cause of our problems no amount of intervention (read regulation) will be able to control the frankenstein banking system and fiat monetary monster that we have created.
You claim they will never happen, but we already know that it HAS happened in the past and so it could happen in the future. The only way to work toward helping it happen again is to EDUCATE people. So you can “give up” on educating people on this topic and attempt to educate people on “less evil non-solutions” if you like, however, I think that we need to understand the basic principles of the problem if we want a real solution.
Most Americans think the Fed is God and they run to it when financial armageddon is threatening. Of course they fail to realize their God has caused their suffering.
I’m totally anti-fed but the only way the Fed will disappear is when it’s played all it’s cards and the current Fiat ponzi scheme fails.
I’m with VTD,
Now, I’ve got a chicken, and I’m looking for 1/4 of a cow. Any takers?
Al, I hope you don’t think I was promoting going back to barter, only going to free-market money.
Hey VTD,
You gave 4 steps of repealling, but what takes its place? Free market money is a bit vague.
Al, private issue of money without government mandates or legal tender price-fixing. Think gold-money or silver or what ever else the free market adopts. You can still use credit/debit cards except that all money is ultimately redeemable in something tangible and of limited supply (that cannot be created from nothing).
Before we had a central government a silver coin became the defacto “standard” and then the federal government simply “embraced and extended” it.
Shrink government down to a constitutional size and you do not need an income tax.
Money laundering is not a real “crime”, it is a “derived” crime that simply adds charges to the “real crime” of either theft or fraud. No need for those laws as they only serve to deny legitimate business and allow the government to intrude into your business. These laws ultimately block free-market alternative money systems because they “enable” money laundering.
Fractional Reserve lending where the bank fraudulently issues receipts that are not 100% backed would be outlawed as the “fraud” it is. If a bank wishes to lend money on margin, then it should borrow from person A and lend to person B where person A knows that person B only has a fraction of the wealth put up as collateral. I have no problem with a bank issuing “negotiable debt instruments” so long as they are marked as such and not marketed as “redeemable on demand”.
Why let VTD spell it all out when you can just go to http://www.themoneymasters.com and read all about it.
Or you can try to catch the video on public access. I’ve seen it like 5 times. Good stuff - too bad the steps outlined will not take place until WW III goes down. … which will really suck by the way.
“Absolutely, it’s a stealth easing,”
Was the the FED or the “Shadow” FED?
Where’s M3 hiding? Under the green rug with the elephant?
Aussies cut 1% - settin’ a precedent downunda. Chairman Gross echoes the sentiment.
Pushin’ on a string.
VW up 50% today, more than 100% up since September. But why? Expiring call options? A short squeeze?
The German government probably guaranteed its continued existence, kinda like we just did for Detroit dinosaurs.
Heh, I’d almost guess a VW might fall apart before a Ford car.
I haven’t noticed any dealers shutting down in my area. At least, it hasn’t made the news at all. Most of the dealerships are owned in force by a small group of families. Lots of Navy folks, so lots of scummy dealers trying to take advantage of the young and employed as well.
Heh, I’d almost guess a VW might fall apart before a Ford car.
It depends on where they are built. The European built ones hold up OK. The Mexican built ones, no so much. And they sell a lot a Mexican VWs in the US.
I haven’t noticed any dealers shutting down in my area ??
There are plenty around here and they are all multi generation family businesses…
One of the most crowded short trades with hedge funds in Europe. Guys were shorting common and buying preferred looking for spread to converge. Spread going the other way. Shorts being squeezed big time. Also hear LEH collapse affecting this as LEH largest lender of shares to the shorts. Stock now completely detached from fundamentals, has larger market cap than Toyota.
Thanks, that’s probably it. Short squeeze, big time. VW common stock will plummet soon, but when…?
Thanks to lefty.
How is the decoupling theory holding up nowadays? And I am wondering how the Fed will go about underwriting loans to any and every business? Aren’t they already lending directly to Megabank, Inc on shaky collateral, with no apparent mitigative effect on the credit crisis?
Expanding credit crisis has ‘gone truly global’
Fed considers large purchase of unsecured short-term debt
By Edmund L. Andrews
and Michael M. Grynbaum
NEW YORK TIMES NEWS SERVICE
October 7, 2008
* More markets slip; investors fear a worldwide recession
* Bailout no quick fix for wide financial crisis
WASHINGTON – As pressure built in the credit markets and stocks spiraled lower around the world yesterday, the Federal Reserve was considering a radical new plan to jump-start the financial system.
Under a proposal being discussed with the Treasury Department, the Fed could buy vast amounts of the unsecured short-term debt that companies rely on to finance their day-to-day activities, according to officials familiar with the discussions. If this were to happen, the central bank would come closer than ever to lending directly to businesses.
While the move would put more taxpayer dollars at risk, it underscores the growing sense of urgency felt by policymakers in a climate where lending has virtually dried up.
The plan was being formulated amid cascading losses in global stock markets as the banking crisis spread across Europe and investors feared dire consequences for the world economy. The Dow Jones industrial average fell as much as 800 points before a late recovery, finishing down 369.88, below 10,000 points for the first time since 2004.
Is the Fed going to make small business loans? Or will they limit their cut-rate loans to organizations deemed “too-big-to-fail?”
Paulson’s pals is going to show the same symptoms of his master…daisy petalitis:
Neel Kashkari, throwing daisy petals in the air… walking down the halls of the US Treasury:
circling to the left:
“I don’t love you”
circling to the right….
“I love you”
Goldman Sachs will save America! And bring fresh water without the plastic bottles to everyone within the Iraq “Green Zone”
“But Kashkari’s introduction to Washington was in 1990, when he came with his father, who had won a presidential award for helping get water supplies into 10 African villages.”
Former adviser to Paulson takes bailout post:
http://www.usatoday.com/money/economy/2008-10-06-kashkari-rescue-bailout_N.htm
Is Kashkari now the de facto Treasury Secretary appointment for the next administration?
Kash and Karry, ObamaNation, and McSame. Are they all in on the New World Government, Amero, and relocation camps?
That’s exactly the problem.
More to the point, the Fed isn’t going to lend to businesses that don’t exist yet, and probably isn’t going to be able to identify those businesses that have no reason to exist going forward. They’ll calcify the economy, locking in existing winners and making the future a loser.
But they may have no choice, because otherwise viable businesses may collapse.
if the business is viable then it won’t collapse.
Given the right conditions, It is possible to have no viable businesses. See Somalia, Afghanistan, Zimbabwe.
“if the business is viable then it won’t collapse.” = tautology
Jon,
There are always viable businesses in the
freeblack market. Those opportunities probably evolve around providing security against the government theft.Still running after thirteen months, this story is getting a little old. At least the stock market futures are up, even though Cramer is telling people on national TV to “sell everything.” The stock market is very resilient!
Wall Street Journal, p. A1
*OCTOBER 7, 2008
Markets Fall on Doubts Rescues Will Succeed
Fed, U.K. Weigh More Action as Initial Salvos Fail to Rally Confidence; Dow Closes Below 10000 in Wild Day for World Exchanges
By JON HILSENRATH and CARRICK MOLLENKAMP
The global financial crisis has taken a perilous turn: As government efforts to tame it grow more aggressive, markets are becoming less confident those efforts will succeed.
On Monday, the Federal Reserve and European governments stepped up relief efforts, above and beyond the $700 billion rescue package approved by the Congress last week. But markets around the world responded with a massive vote of no confidence. European stocks saw their biggest drop in at least 20 years, and the Dow Jones Industrial Average dropped below the 10000 mark, a stark sign that the crisis may be outpacing policy makers’ ability to contain it.
The deepening malaise illustrates how the financial crisis has moved far beyond U.S. subprime-mortgage troubles to a much more fundamental breakdown of trust. The best efforts of U.S. and European officials haven’t solved the central problem: Nobody knows which firms will go under, making almost everybody afraid to lend.
The explanation from the administration last night was that it would take until early next year to start feeling the effects of the bailout. Shades of Iraq. The sky is falling and the economic system will collapse if we don’t act now or so we were told two weeks ago. Real experts say the administration plan won’t work and when it doesn’t the explanation by the administration of what will happen next changes.
Some have likened the ongoing events as cardiac arrest of the financial system. If true, waiting until early next year is much too late. What’s next, throwing a “surge” of money at the problem (not what we’re doing, what we call what we’re doing)?
Let’s just declare victory!
Mission Accomplished!! We’re broke!!
It is not a problem of trust. It is a problem of asset deflation and the leverage against those assets. All asset classes are declining. Just like it is stupid to loan money against someone’s house that is deflating in “value”, it is stupid to loan money to a bank whose own assets are deflating in value, due to rapidly increasing loan losses
You have 2 choices: monetize the debt at a pace that pushes against the deflation, or force the deflation and destruction as fast as possible so you can hit the reset button.
The Fed is trying to monetize the debt with more debt. But that won’t work. The Treasury actually has to print money to stop the deflation.
It is a problem of asset deflation and the leverage against those assets ??
Yep and it is taking even zero levered assets with them…Systemic contagion
October 7, 2008 9:03 A.M.ET
BULLETIN
FEDERAL RESERVE TO PURCHASE COMMERCIAL PAPER
Picking up the pieces
Stock futures are jumpy as investors guard against turmoil. Dilution fears take Bank of America lower, stunting blue chips’ growth.
Now’s the time to put your money into MM funds if you haven’t already.
King,
I’m going to mentally take your advice to stick all of my wealth into a money market account, so I can play along with your scheme.
I have to tell you though, i’m worried about ever seeing the fictional money that I will leave in their trust, again.
Your doubts lend comfort to my decisions.
It’s good to be the king.
I love it when you two do your yin/yang thing.
LOL!
“Now’s the time to put your money into MM funds if you haven’t already”
I can shift more $ into Vanguard prime MM or US treasury MM very easily. At this point i am 85% invested in bonds, most of it short term.
Cd rates, MM’s do seem to be going up. B of A has a 7 month cd for 3.75 % .
I’m seeing 4% on six month CDs around here. I trust the FDIC to (more or less) support the banking system, but I’m not trustful of any individual bank enough to lock in for that long.
BAC is losing in after hour(s) trading -
Not looking good.
Leigh
First it was the investment bankers used shoelaces…
Then it was the bankers used shoelaces…
Now the CEO of Starmucks/Krispy Kremee is turning in their used shoelaces…
The FED cash window is open…however, please note: we’ve removed the 4-slice toaster from the “collateral list” we have to many of them.
“I am a free-market Republican,” Kashkari said in the presentation on mortgage alternatives. He spoke about trying to help people keep their homes as the mortgage crisis unfolded.”
“If a company’s commercial paper is not backed by assets or other forms of security acceptable to the Fed, the company could pay an upfront fee, the central bank said.”
“The Federal Reserve has announced a radical plan to buy massive amounts of short-term debts in a dramatic effort to break through a credit clog that is imperiling the economy. The Federal Reserve said Tuesday it will buy “commercial paper,” a short-term financing mechanism that many companies rely on to finance their day-to-day operations, such as purchasing supplies or making payrolls.”
Fed to Buy Massive Amounts of Short-Term Debt:
http://biz.yahoo.com/ap/081007/financial_meltdown.html
I have a whole garbage can of “commercial paper”. Comes every fooking day in the mail. Right now it lays right there, together with empty beer bottles and pizza boxes. The Fed reserve is welcome to come by and take it, every week at a predetermined schedule. Take the bottles too.
I know zillow is not reliable, but c’mon, they’re showing home prices in Southern California being up, on their already overstated prices, in the last 30 days. Oh, yeah, you can always sell a house for more money in October than you can in September, didn’t you know that? Even better, wait for November! argggghh…
FPSS is on vacation, so I will have to do my best to fill in for him:
BwaHaHaHaHaHaHaHAHAHAHAHAHAAAA!!!!
Our former home showed an increase of $8K in a little over 2 weeks. Yeah, right. Our home before that showed a drop of $2K. (Both in same area.) I’ve been tracking them. Zillow is sinking to a new low.
I am wondering if the B of A / countrywide deal is doing this. Does anyone know anything about that deal and what it will mean for house prices?
” am wondering if the B of A / countrywide deal is doing this. Does anyone know anything about that deal and what it will mean for house prices?”
It smells like countrywide fb’ers homedebtors are getting their loans modified. Anotherwords the Fed/B o F/CW are giving these Fb’ers reworked lower affordables mortgages , reworked lower rates , reduced principle owed, ect.
This is total crap and and a slap to all the responsible savers and homeowers who have been paying faithfully on their loans and have not gotten loan mods courtesy of the fed/BofA/Cw.
It may slow down foreclosure rates in lower-end areas of LA and perhaps keep a few more folks in their homes but I doubt it will do much. The fast rising unemployment rate here in CA is the key to how much farther homes in CA will still fall - we will be at 10% UE if not there already by end of 2008. If you Include discouraged workers (U-6 )make it 12 % + CA UE.
The fast rising unemployment rate here in CA is the key to how much farther homes in CA will still fall…
—————-
Absolutely!
BTW, if I were a responsible homeowners, I’d begin defaulting today.
No way the FBs should get a freebie (written-down principal, is there equity sharing?) while responsible owners keep paying what they originally agreed to.
As far as us renters go…not sure how we can extract our piece of the “giveaway” pie. We’ll have to think something up!
My house has a value and there are no comparables. What does that say about zillow?
DAVID WEIDNER’S WRITING ON THE WALL
Take the garbage out on Wall Street
Commentary: Enough with propriety. The U.S. should demand full disclosure.
By David Weidner, MarketWatch
Last update: 1:28 a.m. EDT Oct. 7, 2008
NEW YORK (MarketWatch) — The gorilla of Wall Street doesn’t seem to be as smart as a trained monkey.
Dick Fuld, the head of whatever is left of bankrupt Lehman Brothers Holdings Inc., was dragged Monday to Capitol Hill, where he argued that the company’s demise was the result of some bad calls and rumors, that his management team “did everything we could to protect the firm” and that a “lack of confidence” ultimately felled Lehman.
“With the benefit of hindsight,” he said in his testimony, “I can now say that I and many others were wrong.”
For this he earned $480 million in pay since 2001? Forgive me while I roll around on the trading floor laughing.
I have a simple suggestion. Take some back pay from some of these Wall Street execs as part of the Wall Street rescue package, in order to reduce the Republican tax burden on Main Street.
I think most Americans would be in favor of this (I sure am).
But then again, we’re a “Nation of laws” where employment contracts can’t be voided and corporations are used as a means of concentrating large amounts of wealth in the hands of a few people. So, would it be “un-American” to go after these guys in the manner you’ve suggested?
If we violate individuals’ rights to enforce the will of the people (in the name of democracy) what kind of country does that make us (an equitocracy?) Is this socialism? What happens to capital under such conditions — does capital flee the country, never to return?
It’s un-Republican to go after Americans for a one-time $700 bn bailout tax.
I saw a clip of Fuld — looking appropriately hangdog — saying he took “full responsibility” for the the failure of Lehman. I was just waiting for some Congressman to ask if Full Responsibility included paying back all his bonuses, in full.
Not THAT of responsibility, silly.
That kind of responsibility - real responsibility - means something more than words, it means bearing the consequences of their actions.
That’s never going to happen voluntarily.
“…in order to reduce the Republican tax burden on Main Street.”
America fear the Democraps…they are unpatriotic and will destroy the Republican invention of: “Global Free Markets”
Save America: Vote McSame/McVague
What’s the difference between Dennis Rodman & Ann Coulter?
Lipstick!
‘What’s the difference between Dennis Rodman & Ann Coulter?’
Lipstick!’
No, the difference is: Dennis Rodman looks PRETTIER in lipstick.
They don’t call her a “shemale” for nothing. ( Ann that is. With Rodman, well, ya never know. )
I thought the most interesting part of the hearings was when the representative from Vermont was asking why Fuld thought that other entities, like AIG, were getting assistance when Lehman wasn’t. Fuld was really pissed, like he knew but couldn’t say, he kept sidestepping the question.
I have wondered that myself.
What did Lehman do to not get a bailout?
All I can think is that maybe Fuld slept with Paulson’s wife or something.
I just read two articles about Lehman at Bloomberg.
The first said that Lehman, due to bankruptcy, had been forced to cut off severance packages and stop paying on extended health care benefits for ex-employees.
The second said that “key” Lehman money managers will split $400,000,000 in retention bonuses when their unit is bought by Bain Capital.
“Bain Capital.”
Stay away from anyone or anything connected to Bain. One of its alums, John Donahoe, is really screwing up ebay big time.
Romney?
Romney, Donahoe, Meg Whitman, et al. I had no idea Bain had such tentacles, but it would seem, at least judging by Donahoe’s performance, and even Romney’s (despite all the PR, didn’t do all that well for Mass. Like Florida, the gov’t was all sizzle, no steak, and as soon as Romney and Jeb moved on, the camouflaged holes in their states started showing up) that Bain alums aren’t what they’re cracked up to be.
OMG, that’s hilarious. My fellow GOPers have an almost religious belief in Romney’s financial acumen because of Bain. I guess compared to the average person he does.
But I don’t think any of these clowns understands what’s going on, in either party.
“There are no clouds on the horizon. I’m touching wood as I say that.”
June, 2007
Sir Fred Goodwin CEO RBS
“As long as the music is playing you’ve got to get up and dance. We’re still dancing.”
Chuck Prince ex CEO Citigroup 2007
If I get time later I’ll pull up my fav quotes from all the mopes.
Last of the Mopehecans?
“This is far and away the strongest global economy I’ve seen in my business lifetime” U.S. Treasury Secretary Hank Paulson summer 2007
Some estimates are in the order of between $50 billion and $100 billion of losses associated with subprime credit problems - Ben Bernanke July 2007
“Wait, what did you just say? You’re predicting $4-a-gallon gasoline?” George Bush Feb 2008
NEW YORK (Reuters) - As part of a settlement with state attorneys general that could be worth as much as $8.6 billion, Bank of America Corp (BAC.N: Quote, Profile, Research, Stock Buzz) said on Monday it would cut interest rates and principal on some troubled mortgages originated by Countrywide Financial Corp.
Bank of America, which bought Countrywide in July, reached a deal with attorneys general representing 11 states in which it will offer more affordable and sustainable mortgage payments for borrowers who had financed their homes with subprime loans or adjustable-rate mortgages serviced by Countrywide.
“This is good,” said Christopher Whalen, managing director at Institutional Risk Analytics, a provider of analysis and ratings for banks. “I hate to say we’ll need to see a lot more of this, but we will. Banks have no choice because the economy’s getting so flat. They’re going to become increasingly aggressive about keeping homeowners in their homes
I have a CD with Bank of America that comes due Oct. 15 , I will be finding another home for that $90,000 , I am not helping them bail these people out.
Can’t remember where I read someone proposing that there be a 1% “transaction tax” on all financial Wall Street stock transactions until the bailout is paid off.
Sounds good to me. Let the street pay for itself. It would also discourage leveraging.
Uhm, that would also deny capital markets of capital…. in time of capital dire straits. This is not the right way to punish Wall St as 50% of American own stocks and they would be the ones paying too.
That policy is no different than a load on a mutual fund, except that the government gets the money. It may be worth considering as a way of increasing holding times, and making the financial markets more like investing and less like a casino.
But if I buy a MF I am hiring a manager for my money and I can understand if I am charged a load for that service. If I am buying a stock myself I used only my own judgement and utilized no services of any professional money managers. So why should I pay a fee for that?
There’s no way out of Wall Street’s mess without “Americans” suffering too. The two aren’t mutually exclusive.
I really don’t understand posts where people try to pretend that the American people aren’t themselves complicit in this whole Ponzi scheme. This didn’t just happen to us, and we are not just innocent bystanders. The housing bubble was a national mania and Wall Street was like a crack dealer, but ultimately we were the end users and our willingness to live beyond our means (and elect a government with the same mentality) was the ultimate cause of the problem.
Speaking of
creditcrack addiction, going cold turkey is not “punishment”, it is treatment. It will hurt, it will change our comfortable lives, but it will ultimately make us better off. I TRULY believe that.Yes yes I agree with all that. But if I buy a stock and sold it without making any money or even a loss, why should I have to pay a transaction fee (if I made money I pay cap gain so that’s a different story) other than payng the broker who conducted the purchase/sell on my behalf? The capital market should be about efficient allocation of capital to the extent possible and I don’t see how adding a national transaction tax on every single stock purchase / sell is suppose to punish people who flipped houses and binge on credits they shouldn’t have. If you are for going after people who did all those thing, impose a marginal tax on returns in excess of certain percentage for leveraged assets (much like long vs short term cap gains) and disallow writeoff of loss on certain leveraged assets. That would put a stop to credit binging.
Ok, I won’t bore you with details but that would just be horrifically bad and almost unimplementable. Heck, charge them directly, but a percentage based transactional fee is just wrong on so many levels and would cause the collapse of way too many things, consider even buying a CD? Rate: 3%. You get charged tax and a 1 percent transactional fee at purchase…. ummm, return 0.
Well, I don’t know if it has to be 1%, but there should be some charge. Anyone who does business with Wall Street is not “innocent” and “undeserving” of having to pay to get out of this mess. As a taxpayer, you are already on the hook anyway.
“…I will be finding another home for that $90,000…”
Our family bank was LaSalle, until BoA bought them. We are doing likewise - BoA is one scuzzy outfit.
The PPT is explicitly announcing more and more of its previously stealth interventions. Now that I know for certain that the PPT is backstopping the stock market, I feel much more confident.
latest news
[BAC] Bnak of America remains weak in pre-open, off 8% at $29.76
U.S. stock index futures shoot higher on Fed move
By Kate Gibson
Last update: 9:10 a.m. EDT Oct. 7, 2008
The PPT may now retire; please stop by the front desk for your bonus checks. The Office of Financial Stability reigns supreme.
Those troopers sure fought the good fight, didn’t they?
off with their heads
They say a lot of people are just 2 missed paychecks away from being homeless, so what happens when those paychecks stop coming, like what will happen to California state employees in a couple of weeks, if we can’t scrounge up $7 Billion?
They sell their gold teeth?
I guess that is why Arnold was first in line with a funding request when the $700 bn rescue was passed…
I’m thinking because the governator has been in pretty tight with the extended ’ssshrubery clan for a long time, we get our 7 Billion.
Or maybe not?
When I listen to news about the elections, the economy seems to dominate and McManchu is losing ground to O’Bama. If Johnny-boy doesn’t win, you’ll see one pissed Senator looking to get even.
I dunno why O’Bama doesn’t take the gloves off. The best way to defeat the Weekend at Bernie’s movement is to get under McCain’s notoriously thin skin, so he goes nutz with some really ill-advised comments. Really, it wouldn’t take much. The Dems were handed a real gift with the economy, courtesy of the repubs. But maybe the economy is their entire strategy at this point.
I don’t think Obama has to do anything. Mccain’s latest attempts looks desperate. Even to his fellow Republicans.
‘I don’t think Obama has to do anything. Mccain’s latest attempts looks desperate. Even to his fellow Republicans.’
It’s true. I have to look away from the screen in embarrassment for him. Poor old eager guy, give him a damn apple or something and pat his head kindly, but just make it STOP.
I couldn’t watch ‘Borat’ either. On the other hand, while I looked away from the actual Palin/Couric interview in sympathy, I LOVED watching the SNL Tina Fey version of Palin and simply laughed my bum off while watching closely.
I don’t understand myself.
“I have to look away from the screen in embarrassment for him. ”
ha ha ha! you have ella disease, or I have Oly disease. I used to “watch” the UK version of the Office from the other room. I would stand outside the living room, where our TV is, all hunched over, saying “I can’t take it anymore!” Yet I watched the whole series. Twice. And then I watched the American one. Hours of hilarious torment.
I get so embarassed and nervous before the debates, for everyone, even the moderator! What if they have to go to the bathroom part way through! That would be terrible! However, now that they’ve started getting mean and accusing Obama of being a terrorist when he was 8, or whatever they’re talking about, my sympathy is getting dried up. I don’t like mean.
PS. Tina Fey does an awesome impression of Sarah Palin, but I think that Reese Witherspoon’s in Election is almost as good…
“They say a lot of people are just 2 missed paychecks away from being homeless, so what happens when those paychecks stop…”
I just now paid:
–Jan 2009 mortgage payment
–Property taxes until March 2009
–Credit card to zero balance
–Another donation to my alma mater
–Ben Jones, Paypal
That reminds me! I’ll drop Ben Jones a few bucks right now even though he FLAMED ME a few days ago!
Why do I suddenly feel the urge to use the word ‘taxpayer’ in a post?
He flamed you ’cause you were being a pouty grouchy grumblebum. And now we learn you hold grudges, too. Lovely.
Why pay everything so far ahead? Why not put it in the bank and draw the interest…
oh wait, I forgot…there isn’t any…
I once paid everything 6 months ahead and then pretended I was wealthy and had a finance manager taking care of everything. It was great.
Not going to happen….Cali will just offer what ever rate of return necessary to keep those state paychecks comming…Tack it on to the deficit…Pay later…pretty typical really…
MARK HULBERT
Capitulation watch continues in vain
Commentary: Market timers actually became more bullish on Monday
By Mark Hulbert, MarketWatch
Last update: 12:01 a.m. EDT Oct. 7, 2008
…
So the fact that Monday felt like capitulation tells us little about whether it indeed will mark the final low of the bear market.
To determine whether it will, therefore, we have to go beyond our subjective feelings and focus instead on the hard data: Did sentiment really and truly drop far enough on Monday to constitute genuine capitulation?
From where I sit as monitor of several hundred newsletters, I’m afraid my answer is “no.” Believe it or not, the editor of the average short-term market-timing newsletter actually reduced his bearishness Monday.
No, no bottom yesterday. The volume just wasn’t high enough. The sellers really need to be exhausted. Buyers, too. Yesterday was just another stop over until the end.
We’ll get there. I think that it is near points wise. I heard on Tech Video that the long term nominal market level (DJIA) was 9400 or thereabouts. ( Someone please give me a more creditable number than the one I have from those clowns. Pretty please!)
I would think that we still have a ways to go to “revert to the mean” in the stock market as it were. Yes, I’m just using that as a illustrative comment. I know that it is not a “mean” type of number although it could get “mean” after a while. If you get my meaning. Know what I mean?
Roidy
P.S. It’s just too big, and it’s gonna hurt.
9,400 is way too generous IMO. In the GD the market finally hit bottom at -89% of peak.
However in the GD the stock market *was* the bubble. IMO the stock market in 2007 was high, but not really “bubble” high - certainly not relative to P/E ratios like it was during the late 1920’s.
The big thing now is how low is the ‘E’ part of that equation going to go.
FWIW - here’s what I posted on this blog on 7/10/08. Seems about right still IMO, though may end up being high given the size of the crash that’s happening.
Here is why I don’t think we are at bottom yet. People have been conditioned to buy the dips, and don’t panic. Every time they have done it they ended up losing. So this time they are being firm. The problem is every once in a while the market can collapse, so this strategy of buy the dips and ride it out doesn’t work every time.
The fact that people have the attitude to ride it out tells me this sucker is going much lower.
On a side topic, I am getting ready to buy more PMs if my upside targets get hit. I see the dollar weakening, which is another buy sign.
Watch the dollar and gold. That will tell you when the market decides it is time to go all in to hard assets. Silver, and even palladium will rocket if this happens.
How are you going to buy PMs? The PM window is closed. You are too late.
Wrong. Buying all I can afford from Kitco and moving them to a vault offshore. All held in my name, with no counter-party risk.
Anything else?
it’s official; free money, no collateral required:
WASHINGTON (AP) — The Federal Reserve announced Tuesday a radical plan to buy massive amounts of short-term debts in a dramatic effort to break through a credit clog that is imperiling the economy.
The Federal Reserve will buy “commercial paper,” a short-term financing mechanism that many companies rely on to finance their day-to-day operations, such as purchasing supplies or making payrolls.
The Fed said it is creating a new entity to buy three-month unsecured and asset-backed commercial paper directly from eligible companies.
http://biz.yahoo.com/ap/081007/financial_meltdown.html?.v=7
“The money would not come from the $700 billion financial bailout President Bush signed into law on Friday.”
“They refused to say how much that might be, but they noted that around $1.3 trillion worth of commercial paper would qualify.”
“The lending lockup is a key reason why the U.S. economy is faltering. Unable to borrow money freely or forced to pay a high cost to borrow, employers are cutting jobs and reducing capital investments. Consumers have retrenched.”
I love backwards logic. How about:
Consumers are in the ditch because they can’t borrow. Business is bad since because “consumers” aren’t spending money the don’t have, so there isn’t enough money to make payroll. Banks won’t lend to businesses who cannot make payroll.
Solution: Have Guido give money to the busiesses and then collect it from the scumbag consumers. If we consumers don’t spend our money to get something, we will spend it to get nothing.
Bingo!
Oct. 6 (Bloomberg) — The Federal Housing Administration has grown so large that by the end of the year it will guarantee mortgages for three in 10 U.S. borrowers, many of whom have bad credit or loans that required no verification of income.
Congress wants FHA to do more. The Hope for Homeowners program, unveiled Oct. 1, authorizes the agency, part of the cabinet-level Department of Housing and Urban Development, to guarantee up to $300 billion of 30-year, fixed rate home loans for struggling borrowers over the next three years. The Congressional Budget Office estimates that 400,000 households will get FHA- insured loans and about one-third of those will fall behind again on their new loans.
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=a0PEnjbC3YMI
“…and about one-third of those will fall behind again on their new loans.”
These guys need to get out of the office more often - and see for themselves how people really behave with regards to their finances.
Here’s a great source of income for the United States! Before they take over any mortgage, get the original mortgage application and make sure they’ve paid income tax on their stated income.
FHA = last vestige of the subprime lending sector
RE: FHA = last vestige of the subprime lending sector
BINGO!
And getting bigger every second.
Will low-income-housing advocates answer later on to justifiable charges that they encouraged low income households to financially hang themselves by purchasing falling knife housing assets with FHA-sponsored subprime loans during a record-setting residential real estate crash?
RE: Will low-income-housing advocates answer later on to justifiable charges that they encouraged low income households to financially hang themselves by purchasing falling knife housing assets with FHA-sponsored subprime loans during a record-setting residential real estate crash?
FHA/HUD has always been politically controlled.
Witness the abolition of the autonomous FHA fee panel appraisal system.
My expectation is that when the hue and cry about losing out on the “American Dream” aka “getting something for nothing”, reaches a crescendo; watch for massive contract rewrites with a reversion to a Section 8 system whereby the mortgage payments on agency mortgages are based income, race, and gender.
Taxpayers will be further on the hook for federal subsidies, waivers, and outright grants for all the mundane items like fuel, electricity, property taxes, and maintenance.
In essence, the goals and objectives of the Community Recovery Act will have been completed.
You know, it would have been better if the FHA had survived all of this. Too bad.
You could argue that a minimal intervention with sane lending standards wouldn’t push prices very much. That is depending on the elasticity of the market.
So, a small organization like FHA was not a problem for a long time. Attempts to make it the market will only create greif.
While all the GSEs through fuel on the fire along with other things; FHA was a very minor contributor.
Voters were in economic distress in 1932, not unlike voters of 2008. Democrats promised in 1932 that, if elected, they would cut back the size of federal government.
The first three planks of the 1932 Democratic platform were:
“1/ An immediate and drastic reduction of government expenditures by abolishing useless commissions and offices, consolidating departments and bureaus and eliminating extravagance, to establish a savings of no less than 25 percent in the cost of Federal government.
“2/ Maintenance of the national credit by a budget annually balanced. . .
“3/ A sound currency to be maintained at all hazards. . .”
Franklin Roosevelt was elected and promptly did the opposite of what had been promised.
Neither party is making any such promises in 2008. Balanced budgets are dreams for the sweet bye and bye. Sound currency is never mentioned. Politicians have no idea what that means. (With the sole exception of Rep, Ron Paul of Texas,)
Between the convention in 1932 and March 1933 when he became President, the banking system collapsed. Roosevelt did get passed in the first 100 days a cut in the Federal Government Budget.
The budget deficits began under Hoover. Roosevelt inherited that problem. The currency was sound. There was still a gold standard but it was devalued in 1933 to stop deflation. Roosevelt kept his promises.
As Economy Slows, Deflation Could Loom
Analysts Point to Slow Spending, Tight Credit Months After Inflation Scare
“…The confluence of trends has some economists worried that the country could be headed for a debilitating cycle of deflation: a period in which weak consumer demand, falling prices and tight credit ignite a downward spiral of still weaker demand and still lower prices. Under this scenario, as some businesses are strangled, joblessness increases, feeding the cycle.
“It was just a few months ago that everyone was obsessed with inflation. Now it’s deflation,” said Bill Gross, co-chief investment officer at Pimco, an investment management company. “I think it’s a possibility.” …
“Right now, the declining supply of money for investment and credit is a reality,” said Jacen A. Dinoff, managing partner of KCP Advisory Group, a financial consultancy. “We have lending institutions who are being very careful. They are closely scrutinizing new loans and tightening belts on existing ones. Could deflation be around the corner? It could be.” …
In the United States, policymakers have been much quicker to respond to deflationary threats. Five years ago, as inflation approached 1 percent, spawning deflation concerns, Alan Greenspan, then the Federal Reserve chairman, cut the Fed’s benchmark lending rate to 1 percent and the threat was never realized. It is an outcome that gives assurance to some economists.
“As long as governments print money and run deficits, you cannot have deflation,” Lerrick said. ”
(Mr. Adam Lerrick, an economist at Carnegie Mellon University)
WaPo
Isn’t there an easy way to defeat deflation? Just print lots of money and the the gov’t spend it. Of course, like with all those miracle drugs that are peddled on TV, there could be serious side effects.
Another great post hoz…..
hoz I get the inflation stuff, but you gotta admit we are currently seeing an across the board decrease in prices, indicating overall deflation (even if its just some sort of “credit deflation”).
Right now I’ve been leaning toward short-term deflation with longer term inflation to kick in at some point.
A fair and good question deserves more than a flippant response.
The possible confusion might be solved by instead of looking at a fixed price at a fixed time (Oil is down $50 as of today), but to look at moving averages of prices.
The average price of oil this year will be $30 more than the average in 2007. The average price of gasoline will be $0.45 more than last year. The average heating cost this winter will be 15% more than last year. The average price of milk and cheese will be 55% more than last year.
What we are currently experiencing is called disinflation. A slowdown in the increase in the rate of inflation. Mr. Bernanke is correct in that inflation is going to show up in numbers in the future. The reason is that commodity prices do not always reflect contract prices that were signed 6 weeks ago.
No reasonable person believes oil will be $55/bbl in 3 yrs. Forget about Merrill’s recent analysis, their math is wrong. They were off by a factor of 3. Oil consumption is not going to drop by 17%. Is $200/bbl much of a stretch?
Deflation is always a possibility, but disinflation followed by massive inflation (possibly hyperinflation) is more likely. It is rarely wise to ignore the Federal Reserve. It is stupid to ignore the Federal Reserves actions when the head of the fed is the most knowledgeable individual alive today with regards to deflation and has unlimited resources to draw upon. He can print whatever he needs. He has done so, he will continue to do so.
The Fed is going to hand out hundreds of billions a day with no collateral required. Welcome to Weimerica.
Sounds like deflation fears may be overblown by a liquidity tornado.
I have to agree with Jas on this one. There will be no inflation.
The reason is simple - the money that is being “injected” has already been spent.
Let me give you an example. Say I sold you my doublewide for 500k in 2006. Say you took a liar i/o loan which is now owned by the government via one of its bailout schemes. The toxic loan whose fair market value is only say 150k has been further liquefied by the government who paid the last asset holder say 300k for it. Say you are being forgiven debt for 100k (foreclosure bailout or whatever) so you owe 400k. Regardless, on your side of the transaction, there is a net removal of money to the tune of 100k.
On my side, I got 500k for a 150k house. What did I do with the additional 350k? Of course, I went to Vegas, bought junk from Walmart, got my Lasik surgery and leased a Lexus. I bought a timeshare and took a couple of vacations to boot. With the remaining money going to fund my kids in college, I have nothing left.
Basically, the money that is being “created” has already been spent. Ergo, no inflation.
The money is getting hoarded instead of spent. If the money isn’t chasing assets, it doesn’t count. Deflation is still coming for now.
The hoarded money loaned out to any financial entity which is too-big-to-fail enough to qualify for below-market-rate lending represents tomorrow’s inflation.
Does that mean you think that things are going to turn around tomorrow and those banks will start lending? The liquidity injections have only replaced a portion of the write downs. I’m still expecting deflation.
i posted this about 2 years ago….10 before 14 for the dow. That violent swing may signal a close bottome folks. dollar cost average from here on in.
I figured Jimbo saying to sell all stocks signaled a close bottom?
Pass. We’re going below 8K. Terrible earnings are about to hit the street. The Fed is low on ammo. Election uncertainty. Plus, Mr 6Pack is now beginning to tighten the belt. What’s more, he’s about to sell the market as requested.
Stocks have a LONG way to go before the bottom is reached. Think 1929-1932… -89% from peak.
I’d go with gold, cash (treasury mm & cds) and bearx.
Any other ideas?
I suspect we go much lower. The bottom will come with a 1000+ plus loss, followed by another big drop early the next day. Cramer will also be crying that day on TV.
All you need to know.
For those of you that own US Gov Treasuries, there is a wonderful trade on the 10Yr. Sell your long 10 yr treasuries and buy the 10 yr TIPS. The spread is narrow. Japan, during the 90s, averaged 1.25% inflation. (Current Japan inflation is 2.4%).
If you are convinced deflation is going to happen, then not a good trade.
Not a good inflation trade either. The .gov understates inflation by a wide margin. Why not get real inflation protection?
Gold is off by over 10 pct from its recent peak. How does that stack up against non-understated inflation since then?
Hoz, I remember we had a discussion some months ago about base metal performace vs. PMs. You pointed out that the base metals had outperformed, and singled out cobalt. I repeated the old mantra that PMs perform when nothing else does. Looking at the charts, the market seems to have lost some love for base metals. You agree?
Buy what China buys, sell what China sells.
China sells gold and Platinum etc and buys base metals. China’s only concern is employment. China needs to create 5MM jobs every year. China has the ready reserves to support selling at lower prices.
China is not rational and instead of forcing domestic consumption and letting the Yuan appreciate will revert to undercutting prices of competitors. Export away.
IMHO 2 more years before China busts.
So…anything big happen while I was gone the past 2 weeks?
No SNS…nothing much….just paper shuffling!
Nah, same old same old.
LOL!!
Good interview with Chris Martenson, creator of the “Crash Course.”
In this interview recorded yesterday, he explains how the current financial crisis is a predictable outcome of an economic system that requires infinite growth on a finite planet.
)
It does require never ending population growth. Agent Smith was correct….we are a cancer.
And it isn’t even the finite planet that is starting to strain things, just culture and technology.
I love to read between the lines, and when the brain-trust @ Drudge decides this is today’s important news, “Kenya Detains Anti-Obama Reporter” and worthy of headline status, you know they are trying to hide something.
If homeowners everywhere are getting bailouts with taxpayer dollars, how long until stock victims get a bailout?
How hard would it be to raise the loss ratio from 3k to 10k or something.
Does obama hate people with portfolios too?
I’m going back to hunting and gathering.
If you own stocks, you’re obviously a saver. The government HATES savers. Why, all that hoarding is what is getting our economy into the position its in today! The only patriotic thing to do is borrow & spend and repeat into oblivion. And then they’ll bail you out, but only if you promise to start doing it over again.
Voting for Ron Paul on the buddy system:
I keep seeing republicans and democrats who want to vote for Ron Paul, but feel they need to vote defensively for they’re respective candidates to prevent the opponent from winning.
OK, so here’s the deal:
If you are planning to vote for Obama, but truly want to vote for Ron Paul, find a trustworthy person who plans to vote for McCain, but truly wants to vote for Ron Paul.
If you are planning to vote for McCain, but truly want to vote for Ron Paul, find a trustworthy person who plans to vote for Obama, but truly wants to vote for Ron Paul.
Make a gentleman’s/gentlewoman’s agreement that you will both vote for Ron Paul. Thus, you can both vote your consciences and vote offensively instead of defensively. Wonder what would happen if enough people did this?
LOL! Why not just vote for Ron Paul if you want to vote for Ron Paul?
Frankly, the only people who matter are a slim minority of independent voters in swing states willing to vote for either O’biden or McPalin. Everyone else will wind up being totally irrelevant.
And as far as I can remember my incedulity at the time, BOTH McCain and Obama are the nominees because hordes of useless voters in states that should go the other way gave them enough delagates to win. (e.g.: McCain winning CA, etc.)
I’d like to get into a discussion of how the macro events of the past month are going to effect the housing market in the short term. My personal opinion is that is will in a big way hasten the decline in sales and hence prices.
The wild card is explicit government efforts to prop up prices. I doubt these will succeed, but who really knows?
Even if the govt buys up all the foreclosed homes, what do they plan on doing with them? I have heard they would sell them to low/middle income people, implying they would be sold at affordable prices, hence price drop anyway, since who would buy anything else? Still raises the question as to down payments, financing etc, which gets harder on both sides every day. the crazy thing is there would be no price drops if prices had not been encouraged to climb so high using bogus financing schemes.
“…what do they plan on doing with them?”
Some guesses:
1) Overpay to purchase them, in a futile effort to prop up prices.
2) “Discover” later on that they overpaid, when they cannot sell them at anywhere near the prices for which they purchased them.
3) Either lower the price to levels where they will sell, undercutting other sources of local supply (builders, used home sellers, flippers with latent inventory they have not yet marketed, etc), or else hold on to the homes indefinitely, either using tax dollars to maintain them or else letting them deteriorate (two different ways to waste societal wealth).
It’s hard to fight explicit.
If gov wants high housing prices, so be it.
How much for that 600k fixer upper?
The worst case scenarios raise the possiblity that housing prices will collapse to next to nothing, but no one will be able to buy because mortgages are unavailable, or that prices will stop falling on dollars but the dollar will collapse.
The more likely scenario is that prices will continue to fall back to, and perhaps somewhat below, affordabilty by traditional metrics with traditional loans.
Meanwhile, the “it’s different here” fantasy may finally die in Manhattan and other close-in parts of New York City. Believe it or not, however, I still expect it to die hard. We are still early in the first phase — sellers holding out for unrealistic prices that buyers are unwilling or unable to pay, so the number of sales (not prices) collapses.
I agree WT Economist that sellers in general are still holding out for near peak prices in many markets, here in Chicago, we are off maybe 10 to 15%, when in reality it should and will be 25-35% off. The question is when it will get there. I’m still amazed at how little you can buy for half a million dollars. Sold our place for about that much over a year ago and renting.
Why are you talking about houses?
still amazed at how little you can buy for half a million dollars ??
And therein the problem…Ben was right on the money long ago…When will ½ million mean something again ?? I say in a year or two…It will be a time where you can say “ yes, it makes sense to buy this”…
Agree.
Prices in the more desirable n’hoods here in San Diego are still too high. Funny to watch the new listings come on, as they are always overly-optimistic.
“My personal opinion is that is will in a big way hasten the decline in sales and hence prices.”
Agreed. End of discussion.
I will also suggest that propping up insolvent companies will hasten the demise of solvent ones.
Give money to the loosers until noone has any.
Talked to a friend yesterday and she’s plenty scared (stocks -40%) and told me she was putting everything in T-Bills.
Cashter’s Last Stand…
Wow, that is a terrible move. T Bonds are the biggest, last bubble left. They are primed to pop.
I so wanted to warn her about the wooden arrows…
You guys need to learn the distinction between T-bills (short-duration end of the yield curve) and T-bonds (long-duration end). Not all fiats are created equal.
I am betting she got into the market when the Dow was at 14K. Too late.
A lot of us, I’m sure, are sitting on a lot of cash, bonds, etc.
Obviously, nobody has a crystal ball, but what criteria would you use to pick up any stock ‘bargains’ in this climate.
Should the usual Debt-to-income, P/E and other criteria apply to picking value stocks, or should we be even more selective and only buy companies sitting on a huge pile of cash and other holdings….
I would first of all view any investments through the prism of Peak Oil. Very few businesses and industries are going to see their profits increase in post-peak oil world.
Energy, whether in the form of food or fossil fuels, is the original currency.
“Energy, whether in the form of food or fossil fuels, is the original currency.”
And will be that most desired if things go south, whatever means is used to obtain it, whether gold, guns, barter, or fiat.
Come to think of it, isn’t that how it’s always been, bubbles excepted?
Actually, I have an Idea! I’ll see what companies recovered first after the “Little Depression of 1929″ (as it will be called in 20 years)
Miniature Golf did well.
Liquor manufacturers also did very well.
INVESTMENT ADVICE
If you purchased $1,000 of Delta Airlines stock a year ago, you would have $49.00 left today;
If you purchased $1,000 of Enron stock, you would have $16.50 left today;
If you purchased $1,000 of WorldCom stock, you would have less than $5.00 left today;
If you purchased $1,000 worth of beer a year ago, drank all the beer and returned the aluminum cans for recycling, you would have $214.60 today.
This is called the 401-Keg;
Based on this example, the best current investment advice is to drink heavily and recycle.
I don’t know, in a sort of primal game of rock,paper,scissors I think Guns gets food. Food gets gold. Gold gets oil and other things. I don’t think oil gets guns or food…..
I remember watching a guy filmed by a news crew during the Bosnian war thumbing out a few rounds from a AK mag to pay for bread. Could that be the new currency?
Got 7.62×35?
RE:Got 7.62×35?
7.62×39…or 7.62×54
My bad! 7.62×39
so you’re thinkin the oil bubble has popped ?
maybe, but they’re finding plenty of NGAS
Energy has never been a form of currency nor an active medium of exchange. Energy that is stored in any form is temporary and must be used in a set period of time before it is useless or inefficient or lost.
I’ve studied the energy trade market going back almost 500 years. Simple things such as harnessing river power, etc, to complex energy creation (nuclear, etc) show one thing only: markets tend to move based on the need for new sources of energy.
We will never have to worry about peak energy. Anyone who says “peak oil” is clueless, because not only is oil cheaper now than almost every in history, it is still readily available in many forms. Our biggest impediment to more oil is regulation of the oil industries at every level.
But peak oil means nothing as long as there is more energy available. I recently made a small gamble investment on a tiny company researching solar cell efficiency. I have a feeling that my gamble will pay off in the thousands of percent return on investment. I may lose it all, but it was money I would have spent in Vegas anyway.
Storing energy in an efficient mechanical mean is also not expensive, and there are many current processes we perform daily as a society that can be converted to energy stores.
I have absolutely, positively no concern about energy. Investing in companies by only looking at one facet of their expense profile is ridiculous. The most important thing, to me, is “Have they made money in slow periods?” and “Do their books seem accurate?”
Profit-sharing in the form of dividends, preferably over 15% annually, are my main guideline for investing in businesses or people. I believe that by year’s end my business investments, including my own, will issue on average 27% for the year. Not too shabby, and taxed lower than my income, to boot.
We will never have to worry about peak energy. Anyone who says “peak oil” is clueless, because not only is oil cheaper now than almost every in history, it is still readily available in many forms. Our biggest impediment to more oil is regulation of the oil industries at every level.
If we as a species are smart, innovative, and forward-thinking, you’re right, we’ll never have to worry about peak energy. (The jury’s still out on whether we’ll measure up.)
Peak oil is a different proposition altogether. A finite resource cannot be stretched indefinitely. Extracting ever-smaller returns by increasingly exotic means is a fool’s errand — why are we so focused on fossil fuels, anyway? Those who who fixate on oil instead of sustainable, manageable alternatives are clueless.
Today’s ‘Let’s Imagine’ game. Imagine today’s world without black gold.
Can’t do it.
Yesterday’s Imagine Game: US oil production peaked in 1970. By 2005 imports were twice production.
Tomorrow’s Imagine Game: A once-proud superpower consumes 25% of the world’s energy supply, but only produces a fraction of that energy itself. It is hamstrung domestically and internationally because of energy gluttony, beholden to other nations because it could not because become more energy-efficient.
My car, which is strictly average and nothing special, can perform the work of 100 horses on just a little dinosaur juice.
It’s going to be hard to go back to horses, eventually.
‘If we as a species are smart, innovative, and forward-thinking, you’re right…’
Well, shucks. That is one very big ‘if’.
Well, shucks. That is one very big ‘if’.
Exactly.
A person can be “smart, innovative and forward-thinking”. People, in the aggregate, are stupid.
Unfortunately most smart people are like Ferrari’s in L.A., cool to look at but stuck behind a bunch of SUVs.
aladinsane - the population is so much larger than the horse drawn days.
peak hay?
AB : What solar co. are you investing in? Always like to hear insights whether I play or not…
“I recently made a small gamble investment on a tiny company researching solar cell efficiency.”
You found a small research company that is paying 15+% dividends?
Personally, I’m beginning to think all of the boasts of 15 percent dividends, hiding silver bullion in the bottoms of pizza ovens, having secret knowledge of which rival businesses won’t be making their payrolls so their key employees can be picked off at super savings, making 1400 percent on a silver bullion deal for a silver buying pool, is so much bull-hockey. But, it’s like the Rich Dad, Poor Dad guy. No way to prove any of it, is there. A lot of it all seems strange to me, though. Probably believes he has connections with La Cosa Nostra as he becomes the pizzeria king of Milwaukee. I don’ believe most of the boasts.
Energy is the currency, which is why Hollywood chooses to power itself with Pretty Young Things. Collapse predictions were also common when we hit peak whale oil, but civilization barely skipped a beat.
view any investments through the prism of Peak Oil ??
I would view any current investment through the prism of 8% + unemployment and staggering Muni, State and Federal debt…
10%++ unemployment and municipal, state and federal defaults.
Just thinkin’ happy thoughts.
How about cash flow? Does anybody trust “profits” anymore?
You would have to base their value on their dividends as a percent of stock price. A not-so-long time ago people use to buy stocks based upon the dividend return and not on “speculation”. Companies would pay a portion of the profits to the share holders.
Tax laws have made dividends less “profitable” and so now companies must “grow forever”. As companies get bigger they get less efficient.
So, you want to value a stock based on price to estimated future earnings. I would say that 25% unemployment is baked in the cake and that those that are employed will have less discretionary income. Therefore, expect future earnings to fall significantly for most companies (making todays earnings higher than tomorrows). Therefore, most stocks will continue to fall until we can reasonable expect tomorrows earnings to be greater than or equal to the then current day’s earnings.
25% unemployment ??
Most if not all of that would come out of the private sector..I read here on the blog that something like 30% of all employment is Muni, State or Fed….If your correct, whose left to pay taxes ??
scdave,
You’re forgetting that govt jobs can indeed be lost, and they can get pay cuts as well!
Don’t believe me? Just wait…
“usual Debt-to-income, P/E and other criteria apply to picking value stocks”
Are you still believing these numbers are “real”. They create whatever “books” CNBC wants, and then let Crammer lead the sheep over the edge. Accounting firms are the next Moody’s.
Exactly, CEO was on CNBC last week saying we are solid, capitalized,and AOK…2 days after that they begged Buffett to lend ,and willing to pay 10%. Nope all is well……
I’d love the answer to that as well.
After reading all the posts, it doesn’t seem that your question was really answered.
I posted this elsewhere:
“Obviously we are in a deflation, metals, commodities, housing, even oil.
Yesterday, I was ecstatic as the market was going 500 then 600 then 800 points down. True bliss.
Trillions of dollars no longer exist. This makes the few that I have more valuable.
Considering an economic slowdown, people will have even less dollars available and the few that they have will go towards basic needs, the dollars I have (in certificates of deposit and in safety deposit box) will be even more valuable.
Yet, at some point with two wars, trillions in debt and monster deficits, inflation will set in and wipe out my cash position.
Yes, I can buy a lot more today with my cash than I could 4 months ago, whether that be a condo or a boat (steeply discounted.)
So, there’s the game, at which point to buy something real (solid) even as those are increasingly more attractive buys.
None of us can predict the future. The nicer condos under $200 sq/ft? Very likely. Under 150? Under 120?
What may seem like a screaming buy today may seem like a fools gold in 3 months. Yet, there’s that dagger of inflation/hyper inflation in the future.
Well, these are interesting times.”
-
The market declining does not “destroy dollars” in the same way as the appraisal on your house going up doesn’t create dollars. It can only change the perception of “wealth” of those around you. They feel poorer so spend less.
On the other hand, destroying dollars can make the market go down and creating of dollars can cause the appraisal of your house to go up.
Well, those around me feel a lot poorer. They were infested in the Stock Market and definitely are not smiling as much.
The people around me cannot get financing to buy. That’s real, others see it and I do too.
Whether the dollars were destroyed or are hibernating, I do not see a lot of people with the wherewithal to buy.
You cheating on us with another blog, Muir!? Tramp!
But that was a good post anyway.
As it happens, I don’t want a condo, but indeed I am fondling my little green paper thingies today and wondering if I should buy a boat now. I want a very little sail boat, and I see some listed that look like good bargains compared to 4 months ago.
But I think I’ll wait just a bit longer and let my dollars get more precious. Also, I bet if I wait til mid-December, after 3 months of solid rain, no one will be thinking of sailing and will also need money for Christmas. Instead of a good bargain, I could get a double-plus-super-dooper-good bargain!
IMHO I’d be careful doing any P/E analysis. A lot of the “E” is based on the housing ponzi scheme. There was so much “money” around that people were buying stuff left and right, thereby improving earnings of companies. As this unwinds and people quit buying so much stuff, earnings are going to go down. As earnings go down, stock prices go down. As stock prices go down, people get afraid and buy even less stuff. I think we’re in a positive feedback cycle that’s heading on down as fast or faster than it headed up. Without some miracle, earnings are going to be way, way down over the next year or more. What looks like a good P/E ration today might look quite bad in 6 months.
By Matt Viser, Globe Staff
Treasurer Timothy P. Cahill announced today that he would again delay floating a $750 million revenue bond because of the continued uncertainty of credit markets despite the federal government’s $700 billion economic bailout.
The state had planned to seek the bond to cover day-to-day operating expenses. The state treasury has been stretched thin after making $1.3 billion in local aid payments last week. Cahill had initially delayed seeking the bond last week in hope that the federal bailout would unfreeze credit markets.
“We’re not going to sell into a bad market when we don’t have to,” Cahill said today in a statement. “The state’s cash position is solid. We will be patient and seek this additional liquidity when we have more confidence that we will get the best price for taxpayers.”
The Department of Revenue reported last week that revenue for the first quarter had come in $223 million below expectations without counting nonrecurring payments. Counting those one-time payments, revenues were lagging $143 million behind what was expected. September was the worst of the three months, with revenues dropping $188 million. Nearly every type of state tax collection is down - including corporate, sales, and excise.
Day-to-day state operations will continue, according to Cahill’s spokeswoman. The treasurer’s office is determining how long the state can go without the $750 million bond, and when it will be safe to return to the credit market.
The $750 million bond would be taken out against future revenues. Late last month, the state borrowed $51 million in a short-term loan from investors at an interest rate of 6 percent for a practice that normally charges 2 percent interest. Cahill told the Globe at the time it was “like going to the loan shark for money.”
I’m quite certain the WSJ knows better
http://online.wsj.com/article/SB122307486906203821.html?mod=googlenews_wsj
(”The problem is still falling house prices”)
Why do they keep running these articles. It’s quite clear that the problem *was* _rising_ house prices and now the problem is going away! And I know the WSJ knows this.
It’s one of the most annoying things being said these days. I’ve written in to CNBC, telling them that we will never solve this “crisis” if they can’t properly identify the crisis in the first place.
Are people really this stupid? Do they really believe housing prices should be forever high so that foreclosures can just go on an on for eternity?
observations from Austria today:
I’m surprised the banking fear has spread all the way here.
a.) Articles in all the newspaper today about how the money is safe in bank accounts even though insurance is only good to up to 20k. or 35k, don’t remember.
b.) On the hourly news on the radio: the main gold merchant in Vienna (I think they actually cast bars) has five times as much business these days as usual.
c.) And still no kangaroos - the last batch froze again
Trying to avoid capital flight into German banks.
Kangaroos? In Austria or Australia….
I think ValVerde was just making clever word play
Not the kangaroos! NoooooooOOOOOOOOO…oh, the humanity! Or, the, the…kangarooness, look, whatever. That’s sad!
‘I think ValVerde was just making clever word play’
Oh. This is not a base play upon my emotionalism and girly fondness for little furry animals?
Well, then, FOOK the kangaroos, and the Austrians as well!
Say, Nosingley, how’s your new house and your new doggie coming along? Has your new doggie peed on the carpet of your new house yet? Have you picked out curtains? Have you designed your garden yet? I say, do the garden first, you can be working on composting and amending and building raised beds all winter long, ready to grow a bumper crop in the spring. A bumper crop of…rocks and Eskimos. Hmmmm. Do they grow other stuff up there in Palin-Land? I suppose they must.
Hey Oly,
I just moved into the house yesterday. The dog went to her first day of doggie daycare, and had a meltdown without me, but other than that just lots of soreness and worry over the movers busting my stuff. Both of us slept like a baby…we had our first real snowfall of the year last night in Anchorage.
This is not the the ideal climate to grow pineapples, but Bonsai trees, ferns and rhubarb grow pretty well. So does weed, apparently, but I wouldn’t know from experience or anything.
Palin-land, is that how you warmies think of us?!? Yikes, excuse me while I puke…
As an Austrian living in CA*, I’ve been getting a lot of mileage out of my ol’ “it’s too cold for kangaroos, they all froze” when people get it wrong yet again.
* I know I know, please don’t start, hey at least I don’t pronounce California like cauliflower. It used to be a fantastic accent to get cops to let you go without giving a ticket (euro-idiot).
Alrighty, two questions:
First question, I have asked probably 3 times since I first started reading this blog long long ago… found a house, this time a foreclosure being sold by the bank. Bought for 540K in 9/03, bought by the FBs in 3/05 for 646K. Currently, bank listing for 425. Was considering putting in an offer of 400, just a bit short of 40 percent off from the bubbly peak… but, I still haven’t seen a whole sale unwindingly that would be necessary I think for balance to be restored so I’m not sure we’re yet at an optimal point to consider buying again. Opinions?
Second question, a while ago I set a goal to ride the market down, shorted the dow at 14030, covered at 10450 or whatever the close on the -778 day was. Wasn’t sure what was going to happen so exited and still don’t feel confident there’s any more fundamental value imbalance present, feel that there’s just fear and negativity left and that will control pricing for the forseeable future. Tempted though to feed on that fear and reestablish my short. Opinions?
1. How does the house compare to the “median” house in the County. Is it say worth twice as much? What is the median income? You might be able to compare the market value of the house to the median an your property appraiser’s website. If it is twice as much, then you should pay around 6 times the median income. That might still be high for the medium term, but it shouldn’t be a killer.
2. Here’s the wild card: The Asians and Arabs have been willing to trade manufactured goods and oil to us for bad debt. If they continue to be willing to do that even after this debacle, then we should be getting close to the bottom. If they don’t, the U.S. economy goes into the toilet and the bottom drops out. I’d look out for signs going one way or the other and be ready to move quickly.
ok i’ll bite on number one. Don’t do it.
Lets use the oldy but goody rule of 20% down and let’s say 2.5x income? 400k is a lot of money. even with 20% down you should have a hefty salary to cover that 320k. I just bought a house a couple of months ago but it was for a pre 1998 price and 1.5x my income (mine alone not even counting my wife’s income). And that was before the down payment. Now if typical salaries in your area can support that kind of mortgage (doctor?) and you plan on staying there for 10-15 years go for it.
Planning on putting more then 20% down? Are you crazy? How about sending that money to me
In my part of Brooklyn, at least, the market started inflating in 2000. I thought 9/11 would stop it — it didn’t. By 2003 I thought prices already were out of hand.
If you believe the sky is not falling, find out what the median family (not household) income of the town was in 2000, from the Census Bureau. Multiply by 3.5. And then add inflation since then. That’s the typical house. Then adjust by comparing the house you are interested in to the typical house.
But remember, things could get rough in the Northeast. In 1982, the median existing home selling price in the NY-NJ area was lower than the national average, even though per capita incomes were higher. While unlikely, it could happen again.
“If you believe the sky is not falling, find out what the median family (not household) income of the town was in 2000, from the Census Bureau. Multiply by 3.5. And then add inflation since then. That’s the typical house. Then adjust by comparing the house you are interested in to the typical house.”
I like the way you think. I just bought a house and I calculated its “value” the same way. I think I still overpaid (by ~20% using your criteria), but negotiated a deal that I can live with, since I plan to be here long term, and pay it off in 5-10 years (the longer term depending on how bad the economy gets).
I would wait until those RIF’d on Wall*Street are forced to liquidate their property holdings. They may not own any property in the area of NJ you are in, but if Manhattan/Connecticut prices fall dramatically, it will make people think twice about the valuations in your neck of the woods.
What was the price for a comparable house pre-bubble?
1997?
One could buy a really nice house in NJ for $100K back in 1980 (pre bubble).
personally, i think there’s one big FED rate cut left to stimulate the markets short-term. Don’t know if they’ll wait until the 10/29 meeting or do an emergency cut of anywhere from 50 to 100bps. 500 to 1,000 point rally for a few days and then . . . reality sets in even prior to year end and we’re down to the 8,500 level by spring ‘09.
i went long yesterday after 750 down, but don’t believe for a minute that the bottom has been established.
Yep, just one more big rate cut to go and BB is out of bullets. Then what? Look out below!
Ty all for the insight. Yeah, definitely not time to move forward with the house bit. While it seems like a not so bad price, no one has started liquidating houses due to the layoffs and this would be prime wall st home territory (we have several ferries w/in driving distance, and I take the train in simply bc the ferry is just ridiculous in price).
I think I’ll sit back and watch the markets for a bit to see if something obviously can make itself known to me and then reenter.
Don’t do anything, sit tight, fear is not a fun companion, especially when it’s riding shotgun.
#1…I assume you have done your homework regarding the value…If for investment NO…If for owner occupant Yes as long as you plan on staying for a long period of time…
#2…Ask hoz or combie or bear and a number of others…
Daily Horrorscope:
Libra: (Sept 23 to Oct 23)
You may be helping people that find difficulty in listening or grasping what is told to them, but don’t worry, they’ll disregard you.
yup, especially so if they’re related to you.
Totally. Least likely people to listen to you on the planet: your parents. 2nd least likely: siblings. I’ve had surprising luck with grandparents, however. Wish they weren’t dying off…
CME Group, Citadel to launch CDS trading
CME Group and Citadel Investment Group said on Monday they are creating a platform for electronic trading of credit default swaps, amid calls by regulators to migrate trading of the securities onto exchanges
The pair will launch a joint venture for the platform within 30 days, and are offering major participants in the $55 trillion market equity stakes in the company to encourage them to support trading on the exchange.
http://www.reuters.com/article/marketsNews/idINN0744987120081007?rpc=44
I’d buy. Like any gold rush, the only people who make money selling increasingly worthless things are the middleguys. If I werre them I’d rent though, with a 1 year lease.
“BOSTON (AP) - Rep. Barney Frank said Monday that Republican criticism of Democrats over the nation’s housing crisis is a veiled attack on the poor that’s racially motivated.
The Massachusetts Democrat, chairman of the House Financial Services Committee, said the GOP is appealing to its base by blaming the country’s mortgage foreclosure problem on efforts to expand affordable housing through the Community Reinvestment Act. . . ”
” ‘. . . They get to take things out on poor people,’ Frank said at a mortgage foreclosure symposium in Boston. ‘Let’s be honest: The fact that some of the poor people are black doesn’t hurt them either, from their standpoint. This is an effort, I believe, to appeal to a kind of anger in people. . . ‘ ”
http://www.breitbart.com/article.php?id=D93LAKT01&show_article=1
This is an effort, I believe, to appeal to a kind of anger in people ??
I agree…From here on out it will be “Veiled racism”…
Barney Frank is slime of the lowest order.
I would turn the argument back at him and say - basically he’s using the poor and minorities as human shields, to protect himself from justified attacks by the Republicans (well - attacks by pretty much anyone actually).
The dude used his partner (not talking about business partner) for undue influence in Fannie Mae - to push them to increase their volume of risky loans in the 90’s. Sorry - but he has no right to throw stones at anyone.
The most common term of all in the recent reports has been “distressed” or “troubled” assets. Try as I may, I cannot picture how all of these worthless IOUs piled in the safe deposit boxes of banks and other lending institutions can feel distressed or troubled – the bankers themselves, maybe, but that’s not what’s being said. I keep imagining a mortgage-backed security or some other type of collateralized debt obligation lying on a psychiatrist’s couch, as the shrink asks: “what’s troubling you, Oliver?” Or perhaps the worthless security is sitting in the confessional, saying to the priest, “Father, forgive me, for I have promised to pay and offered security for my promise, but I am not paying and my security is worthless.” You can easily imagine how many Hail Marys that will get the wayward financial instrument. Distressed and troubled, indeed.
Metaphors Reveal the Economic Ignorance of Politicians and Journalists
Financial Times
The Short View: Market crash?
By John Authers, Investment Editor
Published: October 6 2008 21:10 | Last updated: October 6 2008 21:10
“Crash” is a sensitive word in markets. By common consent, there have only been two in the stock markets of the developed world: in October 1929 and October 1987. Must we now add October 2008 to the list?
…
This is plainly different. At the peak a year ago, stocks were overvalued but at nothing like the extremes of 1929; stocks have been falling for almost a full year; and the problem lies in bubbles in credit and housing markets, not stocks.
Also, the word crash is not that useful. After 1929, those buying immediately after the crash days would have lost almost 80 per cent over the following three years. After 1987, the gains over the following five years were nearly 50 per cent.
But on balance, it does seem that history should label what we are living through as a crash. The latest capitulation in the markets that had boomed in the past two years, thanks to theories that they would benefit from measures in place to fight the credit crisis, is total.
Financial Times
Wall St volatile after Fed liquidity plan
By Alistair Gray in New York
Published: October 7 2008 14:03 | Last updated: October 7 2008 15:55
Wall Street stocks were in and out of positive territory as investors weighed Federal Reserve plans to create a commercial paper funding facility with the absence of rate cuts by world central banks.
By mid-morning in New York, the Dow Jones Industrial Average teetered around the psychologically significant 10,000 barrier breached in the previous session after a four day-run of heavy losses.
…
Investors were likely to keep an eye on Ben Bernanke, Federal Reserve chairman, who was due to address the National Association for Business Economics. Consumer credit data were due to be released later in the session.
“By mid-morning in New York, the Dow Jones Industrial Average teetered around the psychologically significant 10,000 barrier”…
So much for that…….
Dow down 237 onlatest Fed moves. What’s next?
“In latest attempt to ease frozen credit markets, Paulsen is promising to give everyone with investments or a mortgage a pony…”
Remember when a 200 pt drop on the DOW was news? Ben asks us to focus on ways to profit rather than whining. I dont even whine about my 3.5% CDs anymore considering the alternative. The confirmation of my suspicions has saved me from losing 25% of my life savings, and the savings mount daily.
I think America has realized we are about out of ammo and the threat isnt any less real than it was previously. It’s an “Oh cht” moment.
If the central bank works long and hard enough at propping up asset prices, eventually investors catch on and drive prices to overvalued levels. It has happened twice in the past ten years — first to tech stocks, then to houses.
We need a better game plan going forward, one that respects the wisdom of markets instead of trying to perpetually fool markets.
Hmm, I’m starting to smell it… a bottom! The questions is: how much lower? and longer until we get there?
I’m going to wait some more. Not there yet.
Roidy
P.S. It’s just too big, and it’s gonna hurt.
“Hmm, I’m starting to smell it… a bottom! The questions is: how much lower? and longer until we get there?
I’m going to wait some more. Not there yet.
Roidy
P.S. It’s just too big, and it’s gonna hurt.”
I don’t know if you meant to write it this way or if it just came out that way but it’s hilarious.
Stinky fingers, gross. picking bottoms ugh.
See the rain comin’ down and the roof won’t hold ‘er
Lost my job and I feel a little older
Car won’t run and our love’s grown colder
But maybe things’ll get a little better, in the mornin’
Maybe things’ll get a little better.
Oh! the clothes need washin’ and the fire won’t start
Kids all cryin’ and you’re breakin’ my heart
Whole darn place is fallin’ apart
Maybe things’ll get a little better, in the mornin’
Maybe things’ll get a little better.
Refrain:
Pickin bottoms in the market - whadda ya get?
( Whoo-whoo ) Stinky Fingers - Stinky Fing-gers.
I think you should give it the bum’s rush for being such an ass.
I cannot catch up with you all.
Libertarian Republicans in power for the past few years? Can anybody say Propaganda Team?
This Amhurst Finance prof. has it figured out. Mad Doctors indeed.
From the Lewrockwell blog:
Federal Reserve Board members know nothing special
Posted by Michael S. Rozeff at October 7, 2008 11:51 AM
Beside all else that can be said about the Federal Reserve Board, one other thing should be clearly stated: They know nothing special about money, banking, finance, or the economy.
There is no special or higher level of expertise, no great wisdom and experience, that is lodged in the brains of these men and women.
I have known two of them personally who were average academics and had no preparation, if there were such a thing, for manipulating the money supply, much less what the Fed is doing now. Likewise for Bernanke, Greenspan, Volcker, and William McChesney Martin, Jr. with his stop-go policies.
Faced with decisions that no single person or committee can possibly make and hope to be “right”, they fall back on the lame models that are in their heads, expediency, and the pressures of the day.
From the Lewrockwell blog:
Inflationary depression or depflation
Posted by Michael S. Rozeff at October 7, 2008 11:03 AM
Depflation: A more intense form of stagflation (stagnation + inflation) with inflation in consumer prices accompanying a severe business slowdown.
The Fed’s latest move is to lend directly to business firms by buying the commercial paper that they are unable to roll over except by paying higher interest rates.
Thus does the Fed bypass any market discipline and subvert the market for commercial paper, a major once-free and no longer free market for capital of maturity 1 year or less (usually 6-9 months.)
This move is inflationary. But since it props up (finances) companies that should not be getting capital at the rates it will charge them, it distorts business activity. I think it prolongs the depression because it prevents capital from flowing to entrepreneurs who may expand employment and gives it to those who apparently cannot.
Hence: depflation or stagflation is the scenario I see happening.
NEW YORK, Oct 7 (Reuters) - Unprecedented demand for
precious metals and volatile markets forced the U.S. Mint to
cease production for the half-ounce and quarter-ounce popular
American Eagle gold coins for the rest of this year and to
supply other bullion coins on an allocation basis.
http://www.reuters.com/article/fundsFundsNews/idUSN0744712920081007?rpc=401&
Orwell would be proud of that statement; ‘unprecedented demand forces mint to stop production’.
Watcher,…”and stopped production for the rest of the year of platinum coins last week.”
Also, ……30 day lease rates are going skyward on gold. What exactly might that mean? Current shortage issue, or…?
It is not too hard to figure out. If they are telling the truth, they don’t have enough sheet stock.
“”The U.S. Mint has worked diligently to attempt to meet
demand, however, blank supplies are very limited and it is
necessary for the U.S. Mint to focus remaining bullion
production primarily on American Eagle Gold one-ounce and
Silver one-ounce coins,” the Mint said.”
I wonder if they will increase supply for next year.
If the demand is so high and the supply so limited then why don’t the raise the price until they can keep up with production? Make them more profit and there would be no shortages…. people seem to think that something has a “price” regardless supply…. idiots!
Profit?
The lawmakers are really to busy to consider such things!
BB’s hint about a rate cut has sent the stock market selloff into overdrive…
October 7, 2008 1:47 P.M.ET
BULLETIN
Bernanke hints about a cut
Fed Chief says the greater concern is slowing growth given the worsening economic outlook due to financial crisis. He says the Fed should rethink its neutral stance toward monetary policy.
Worth noting: The tech stock bust of 2000 had many false bottoms before the final real bottom…
got gold?
People have been talking about it for a while here, but today’s the first day I’ve noticed that the shop I use for gold/silver doesn’t have much for sale. Their web page looks quite strange with so many blank entries in the for sale column.
Very confusing how it doesn’t shoot up in value given that they are still buying but not selling. If they’re buying, why not sell it? There must be *some* price where they’d sell what they have.
morgan stanley down 8 dollars and change. I thought we rescued the banks.
Bah, I am sick of the bottom calling. The Dow was at 100 in 1925 and didn’t get out of the 100 range for good until the 1950s. We could easily go back to the 3000-4000 range we were in during the early 90s. So everybody so eager to go pick up nickels on the freeway at Dow 9000 just hold onto your fiatscos. Or don’t, it doesn’t matter to me whether you lose your wealth in stocks or through the power of the printing press.
5% of the people owned stock in 1950. A lot more than that own stock today. What’s the mean? Not sure, but it does point out - to me - that comparing the stock market of 1950 to the stock market of today is like comparing apples and oranges.
Would that mean more potential sellers today (don’t forget about retiring Boomers, too!)?
At a 5% ownership rate, there was a lot of potential demand from the other 95%.
Is that what you’re alluding to?
This home is in my rental area.
It’s been for sale for the one year I have lived here.
Anybody wanna make a bid?
http://www.realtor.com/search/listingdetail.aspx?zp=92054&typ=1&sid=314814f759e44bc4886c09c9ce138796&pg=10&lsn=95#Photo
Bid on the house or Sortino ??
Hey Ben. If I can locate one of Seymour’s merry holiday cards on ebay, I get it for ya.
Cheney-Shrub Legacy List Item #86: “We did it “Dickey Boy”…we blew up the “Debt Clock”!
“…But less than a decade ago, the clock itself was turned off when the national debt decreased.
“…In light of a then-improving debt situation and with the clock being technically unable to display a sinking number.”
“…By tomorrow, the digital dollar sign now on the clock will be switched to a number one - the “1″ in $10 trillion - until the sign can be redone.”
“…again turned to the National Debt Clock as a symbol and metaphor, particularly highlighting the fact that the clock ran out of digits when the U.S. public debt rose above $10 trillion on September 30, 2008. Another digit is currently, as of October 6, 2008, being added to the clock’s display
“…Seymour Durst had been toying with the basic idea of drawing attention to the growing national debt since at least 1980 when, according to his son, during the holiday season he sent cards that said “Happy New Year. Your share of the national debt is $35,000″ to senators and congressmen”
http://www.nypost.com/seven/10052008/news/nationalnews/1_big_tick_is_due_for_debt_clock_132227.htm
http://en.wikipedia.org/wiki/National_Debt_Clock
Good article on NPR about rural foreclosures.
http://media.npr.org/news/images/2008/oct/07/map_full.jpg
Does anyone know if in the process of creating the Euro currency they also created a systematic way to unwind/eliminate it? If things get much worse (and they probably are) I can see it coming apart and countries looking to get out of the pact and get their “old” currency back. Germany, in particular, could be an issue as it seems their not so distant bout of hyperinflation still guides much of their thinking…..
The big issue here is people are questioning all currencies. Expecting an explosion in PMs soon as people realize there is only one safe currency on the planet.
Apparently you and a few posters here think they are the only ones with the inside scoop on the coming PM explosion bonanza?
Lately it looks like the fuse on this powderkeg is wet or something.
That won’t stop the true believers in the Church of Gold from preaching on and on about how they own the one true currency…
Gold requires no faith, no prop job, no government support. Fiatscos, on the other hand require faith in the politicians and the government to do the right thing. How’s your faith?
Gold does require faith. You just seem to be blind to that fact. Can you eat gold?
“Gold requires no faith, no prop job, no government support.”
Creating a financial crisis or a military crisis both suffice to provide government support to gold.
All I was offering was my opinion. Something wrong with that?
bananna,
You might be right, but if “people” were truly enlightened, they might go the next step.
IMO, “people” are in debt, and will be struggling to deal with that issue for a very long time. “People” can’t afford to buy “money” right now.
‘“People” can’t afford to buy “money” right now.’
There is a simple but profound truth, and here is another: The price of gold is denominated in dollars, and when there is a dollar shortage (aka liquidity crunch), it is hard to come up with the money to bid up the price of gold.
Or is the price of dollars denominated in gold?
“Or is the price of dollars denominated in gold?”
Whatever. We are talking reciprocals here. Unless the value of one or the other asset goes to zero, they are equivalent.
“Or is the price of dollars denominated in gold?”
I dunno. I denominate everything in a much older currency.
Sorry if double post. Those filters.
That is a real possibility, but I am looking at it from another angle. The government is pumping massive dollars into the system. Some of that money will be chasing return. Where can you get return today?
I don’t expect the BK masses to buy. No, they will be left even poorer than they are now because of inflation and unemployment. But for sure money will be going to safety, and there is a lot of it being passed around right now. I have a feeling that flight is going to start shortly, and yes, I am putting my money where my mouth is.
The market never does what you think it will, when you think it will. But it does act rationally in the end. Fundamentals win out every time.
bananna,
I agree with your sentiment, but detours and timing can mean everything in a person’s short lifespan. I have a very low cost basis in my stash of PMs, and I’ve held them since the 70s. They are still valuable, still an insurance policy, but over a thirty year haul I can say that they are not a defense against dollars being pumped into the system. They are sucky at that. If I’d bought almost anything else, I’d have done better. If the dollar is destroyed, good position. I don’t believe the country is all that dead yet or will be quickly, or first by any means. Be careful with the Y2K thinking.
Another thing is the bonzo speculators, not trying to preserve wealth, but placing high stakes bets on short term moves with leveraged money, big money. They are getting washed out as the deleveraging goes on, that is just getting started. Consider buying when they are crying. They made a commodity play and it will bite them. Consider that PMs are not presently breaking through the roof, when by all reason they should have. There is a huge counter current that you don’t want to get caught in.
We are in the biggest money panic in history and PMs are not rising. Everyone knows this and PMs are not rising. You should ask yourself why. It isn’t because they are all stupid (it isn’t because they are all smart either).
Anyway, if you put all your eggs in one basket, they are likely to get crushed together.
3:00 p.m.
U.S. Aug. consumer credit drop first since Jan. ‘98
3:00 p.m.
U.S. Aug. consumer credit down at 3.7% rate
3:00 p.m.
U.S. Aug. consumer credit down record $7.9 billion
The world is spinning sdrawkcab.
PAUL B. FARRELL
‘Paulson’s new ‘Global Banking Corp.’ IPO 2009
Forget Washington, forget Goldman: Our hero has global ambitions
By Paul B. Farrell, MarketWatch
Last update: 7:05 p.m. EDT Oct. 6, 2008
…
6. Paulson’s conflicts of interest favor his old buddies, 2008
Paulson owes a lot to Goldman; 24 years almost made him a billionaire. An analyst told Bloomberg News that Goldman and Morgan Stanley may be the two “biggest beneficiaries” of the Bailout Bonanza: They’ve already “written down the value of their holdings.” So they have much junk to dump on taxpayers, thanks to Paulson their, “inside man.” And he wanted no oversight. With several former Goldman staffers working with him at Treasury now, you wonder: Did they give their old buddies early hints of the bailout?
Five decades of evidence on financial crisis and recession: How long? How deep?
“…Crunches and busts: Often long and painful
The episodes of credit crunches and housing busts are often long and deep (Figure 2). For example, a credit crunch episode typically lasts two and a half years and is associated with nearly a 20 percent decline in real credit. A housing bust tend to last even longer: four and a half years with a 30 percent fall in real house prices. And an equity price bust lasts some 10 quarters and when it is over, the real value of equities has dropped to half.
Are recessions associated with crunches and busts worse than other recessions?
Contrary to the view of some commentators, the triple whammy of a house price bust, a credit crunch and an equity price bust has not always led to an eventual recession. What is true is that many recessions are indeed associated with credit crunches or asset price busts. In about one out of six recessions, there is also a credit crunch underway, and in about one out of four recessions a house price bust. …”
http://www.voxeu.org/index.php?q=node/2083
SPECIAL REPORT AMERICA’S MONEY CRISIS
AIG’s ex-CEOs blamed for crisis
House panel chairman says executives got undeserved riches, while ex-CEOs blame accounting rules for leading to $85B bailout.
By Aaron Smith, CNNMoney.com staff writer
Last Updated: October 7, 2008: 3:24 PM ET
AMERICA’S MONEY CRISIS
…
The ex-CEOs themselves blamed accounting rules and market conditions for the problems that led to the crisis.
In testimony for the committee hearing, ex-CEOs Robert Willumstad and Martin Sullivan said the rules forced AIG to take billions in writedowns and led to a downward spiral that led to the government action.
But Waxman put the blame for AIG’s troubles squarely on its past and present leaders, comparing them to the former Lehman chief executive Richard Fuld, who testified Monday about the investment bank’s bankruptcy.
“In each case, the companies and their executives grew rich by taking on excessive risk,” said Waxman. “In each case, the companies collapsed when these risks turned bad. And in each case, their executives are walking away with millions of dollars while taxpayers are stuck with billions of dollars in costs.”
McSame / McVague: Drill Now!…Drill Here! …Drill Now!
Geez, the oil boyz are shaking in their boots thinking of Sarah the “Barracuda” overseeing the US Energy policy, I can only wonder how low oil will go within the first 100 days of McDame’s policy whip lashing of Oil CEO’s.
“Gas is a little lower, but it doesn’t help us much,” the 33-year-old Los Angeles resident said. “It won’t make much difference, and we are down to one motorcycle and one car now.”
Little joy at slide in gasoline:
http://www.latimes.com/business/la-fi-gas7-2008oct07,0,119422.story
Visiting my elderly Aunt From Hell in Switzerland today (she’s lovely underneath it all, she just drives me up the wall. Feel guilty about that but can’t help it).
Anyhow, AFH just told me that she and her husband built their house when they were young. No loan, no debt whatsoever. He passed away a few years ago, she sold the house (must have been a good price, Switzerland looks bubbly too) and bought/moved (don’t know) into a supervised apartment.
Turns out that part of her portfolio was to put 100k CHF into USB bank who famously ended up buying toilet paper, losing her the full amount in the process.
to quote “aaargh, the humanity!!!”
Was it in stocks or deposits? No insurance or??
That’s very sad. Sorry to hear about your aunt.
Don’t know more details and didn’t want to dig but I’m sure she’s okay or otherwise I would have heard before.
Does a consumer credit drop mean people are using cash?
This does not sound like a very bullish take on anything…
Financial Times
View of the day: Bullish on credit
By Neil McLeish
Published: October 7 2008 17:34 | Last updated: October 7 2008 17:34
…
“However, we believe that credit markets are now pricing too high a likelihood of sustained debt deflation. Although policymakers have fumbled several times, we believe they will react more aggressively over the next few weeks and remind markets that the partial socialisation of credit risk should cushion the supercycle unwind for higher-quality credit.
“Nonetheless, we do not expect the real economy or earnings to trough until 2009. History suggests credit spreads reach their final peak only a couple of months before the final trough in the real economy, some time in the first half of 2009.”
Financial Times
Hoarding cash
Published: October 7 2008 09:39 | Last updated: October 7 2008 15:05
Money is normally so ubiquitous and free-flowing in a modern economy that it is often compared to water or, even, air. Lately, however, the world’s money markets have frozen into great ice-frosted chunks of fear. Bank A, for example, worries that, if it lends to Bank B, it might go bust overnight, and then Bank A could lose its money. Therefore, it wants a substantial interest rate premium, as can be seen in the huge spikes in interbank lending rates. However, Bank A also knows that, if it lends at that punitive rate, Bank B will probably go bust anyway. So it doesn’t lend. Result: a credit freeze.
As a result, central banks are starting to hurl everything they have at the problem, starting with Australia’s surprise one-percentage-point interest rate cut on Tuesday. The trouble is that this cash hoarding is a symptom, rather than a cause, of the credit crisis. In such an environment, interest rate cuts are just a drop in the ocean. That is why central banks will need to use more unorthodox measures to remove the chill.
The price of loanable funds is the interest rate. Can anyone who understands central banking please explain how lowering the price (interest rate) of a good (loanable funds) can possibly lead to higher supply (money taken out of the mattress and loaned to banks)? I am really confused on this apparently-basic point.
High interest rates are another way out of this mess but it means the end of our easy way of life and high growth. The level of social welfare will have to be increased to higher levels to stop rioting. It’s going to be a big change iether way.
I find it a bit curious that the smartest economists on the planet cannot figure out that suppressing the price of a commodity below market equilibrium might create a shortage.
That’s obvious: because policies that artificially raise prices of certain commodities to bubbly heights don’t create surpluses either! (Bwahaha)
As you know, PB, it’s not the lack of funds, but where they want them to go.
Just like a few years ago when Greenspan brought rates to 1% to “fend off deflation,” all the savers will try to reach for yield and move money to riskier investments.
While deflation certainly isn’t a good thing, I feel this constant fight to inflate our way out of things actually strengthens the deflationary undercurent…until it implodes and takes everything with it.
We never were allowed to recover from the “recession” of 2000-2002, IMHO. Greenspan just papered over the problems, which forced the misallocation of resources and bubbles in credit/housing.
He ought to be in prison right now.
False rumor #69:
McSame / McVague: “We’ll make the oil companies funnel 50% of their offshore oil revenue directly into Amercian’s 401-K accounts. Also, we’ll put that duplicate Air Force One 747 jet on eBay & sell it, you betchya, by golly!
“WASHINGTON - Americans’ retirement plans have lost as much as $2 trillion in the past 15 months, Congress’ top budget analyst estimated Tuesday.”
Retirement accounts have lost $2 trillion:
http://news.yahoo.com/s/ap/20081007/ap_on_bi_ge/meltdown_retirement
I’d hate to be the developer of a retirement community right about now.
OTOH, the company that makes those foldable “granny grocery carts” ought to be worth a look see.
Gropenator to Shrub: Here are my used shoelaces…I spit on them…might improve it’s resale value on eBay…it has my DNA babeeeeeee!
“…The U.S. government could buy California’s notes if a consensus emerges in Washington for deficit financing to assist cash-strapped state and local governments, said James Hawley of the Elfenworks Center for the Study of Fiduciary Capitalism at Saint Mary’s College of California in Moraga, California.”
“Otherwise, state and local governments may be forced to cut payrolls, which would make unemployment worse, or hike taxes, which would pull money out of consumers’ pockets. Either option is risky amid a frail economy, said Hawley, the center’s co-director.”
“It’s a very dangerous situation, given everything else that’s going on,” Hawley said.”
Shrub to answer California aid request soon:
http://www.reuters.com/article/domesticNews/idUSTRE4967WD20081007?sp=true
Instead of unemployment, why not “reemployment”? Put those government employees to work producing something that can be sold for money.
Better yet, just fire them.
Soylent Green.
The phone book, guys. Oh, the humanity. It’s a bloodbath!
You’d think the PPT could keep the Dow to a loss of less than 500 and the S&P above 1,000, but those levels were blown past in the last few minutes of trading.
I doubt that will go over well in Europe and Asia.
yeah, we finally got a capitulation close the smart money could sell into.
cant even set anyone up for a Value investor joke around here anymore.
lol
No reason to buy, until I can short again.
Down to the Banana Republic
Down to the tropical sun…
Down to the Banana Republic things aren’t as warm as they seem
When none of the natives are buying any second hand American dreams
Jimmy Buffet
airpockets are everywhere, and the plane is still failing from the sky, on fire….uhhhg
whose swimming buck ass nekid?
I thought the tarnish on the Mitsubishi UFG Morgan Stanley rumor was gonna take out Morgan…I was bidding a 0.50 into the close. Seemed like the news was all centered around the Japanese not having “control”….yeah, dont give them the reigns, they could possibly fall into some sort of a deflation. MTU is like 50 Morgan Stanleys. In fact, Im gonna short MTU to 2.
Somebody better give the unsecured creditors a hummer, and I dont mean an SUV.
1050 S&P was;however, my “all in” number.
funny how it all worked out so far.
of the 50% in, 75% of that money is in foreign equities and bonds…
Hoz, you seemed concerned the other night about my postings of the dangers, and being Eurocentric…c’mon young fella, you know I plays the game a different way.
I think we are gonna revisit the “decoupling” thesis, and in short order.
Retirement accounts have lost $2 trillion
Public and private pension funds and employees’ private retirement savings accounts — like 401(k)’s — have lost some 20 percent overall since mid-2007, he estimated. Private retirement plans may have suffered slightly more because those holdings are more heavily skewed toward stocks
A new AARP study found that because of the economic downturn, one in five workers 45 and older has stopped putting money into a 401(k), IRA or other retirement savings account during the past year, and nearly one in four has increased the number of hours he works.
http://biz.yahoo.com/ap/081007/meltdown_retirement.html
I cannot conceptualize a trillion dollars. Imagine a trillion apples: impossible.
bleep, bleep, bloop…1000000000000…does not compute…1000000000000…extehminate, extehminamte…smoke comes out of my ears…short circuit.
I need a currency that comes in demoninations under a million. After that, I lose count.
Look on the bright side: It would be a lot worse with privatized Social Security accounts.
Is McCain still pimping that idea?
If one would take the time to understand the idea of privatizing a percentag of the social security tax, one would learn that under the existing system, the government can and has used the money for other items. If a percentage of the tax was given to you directly to invest, would you use it for other items? The concept being that an individual should be able to make better decisions with the money and therefore guaranteeing a return. At present, the sysytem will be broke in 10 years. If you invested that money on your own, you control the final outcome.
So, the bottom line is who do you trust with your retirement money, yourself or uncle sam.
Just keep paying those social security taxes……and…then see if you ever collect it! McCain was right on !
August borrowing drops at 3.7 percent rate
The weakness reflected a big decline of 5.4 percent at an annual rate in the category that includes auto loans and a 0.8 percent rate of decline in the category that includes credit cards.
Consumer borrowing, which the Fed defines as all loans not secured by real estate, totaled $2.58 trillion at an annual rate in August, down by $7.88 billion from the July level. That was a much weaker performance than the $5.25 billion increase in borrowing that economists had been expecting.
http://biz.yahoo.com/ap/081007/consumer_credit.html
McSame, trying to throw mud on Obama’s economic adviser… says Phil & Wendy Graham have more combined “experience” than Warren, and that he can’t remember if he’s ever had a Dairy Queen ice cream cone, or if McVague shaves with a Gillette razor …but he’s certain that he uses Energizers AAA batteries, but declined to say for what.
Warren Buffett: National Treasure or Shrewd Moneymaker?
http://finance.yahoo.com/tech-ticker/article/90889/Warren-Buffett-National-Treasure-or-Shrewd-Moneymaker?tickers=brk-a,gs,ge,ceg
Ben, you need a negativity index attached to this thread. It’s evident that even with the economic downturn people are bored because housing prices in quality areas aren’t falling fast enough and many are turning their frustrations into fear mongering, doomsday scenarios, anti-establishment rhetoric in place of seeking opportunity. Never before in my life time has there loomed an opportunity to profit from one’s common sense, intellect, self-control and discipline.
The fear mongering is a bit ridiculous, but the conversations that follow it can be pretty interesting. It often comes down to: what has value, what is value? What does a person need versus want, etc. Those are big questions. I believe understanding how to assess value is a pretty great skill to develop and it’s the reason these forums are so great.
For me this really hits home (from an article in CNN Money “The Smartest Advice I ever Got”
“What I learned from Johnny Carson” from Bill Nygren, Manager, Oakmark Select Fund
Back when I was in college, I remember watching Johnny Carson interview Andrew Tobias, who was giving personal financial advice. Johnny asked: “What’s the best investment for someone who has only $1,000?” Mr. Tobias said, “Nonperishable consumer staples.”
Of course, the audience roared. But Mr. Tobias was being serious and said that if you purchase nonperishables when they are on sale, the return on investment is enormous. That answer focused me on the idea that investing wasn’t only about stocks and bonds but rather was a mind-set for making sense of all of the transactions a consumer engaged in.
This little piece has fundamentally changed the way I view investing and value. Doomsday scenarios, while often distracting and ridiculous, could lead to good insights, if you don’t let the panic affect you…
The banks blew it! Now most of them should be folded, especially the big banks, and the govt should make direct low interest loans to home-owners. Forget direct injection of capital into the banks now. They are broke.
From Kudlow, July 2007:
http://www.realclearpolitics.com/articles/2007/07/a_stock_market_vote_of_confide.html
http://tinyurl.com/3zmruy
” In just the past year alone, the Dow has gained a remarkable 30 percent. Meanwhile, Europe and Asia are up about 30 percent, Japan 23 percent, and emerging markets more than 60 percent. Clearly, the world is voting — with real money — for the American system of free-market capitalism. And it’s my strong suspicion that the majority of the global investing community supports the Iraq War and a steadfast U.S. commitment to stop terrorism. They seem to know that if the United States doesn’t do it, no one else will.”
“I have long believed that stock markets are the best barometer of the health, wealth and security of a nation. And today’s stock market message is an unmistakable vote of confidence for the president. Even the best low-tax, limited-government economic policies can be thwarted if the men and women going to work in the morning can’t get safely back to their homes and families at night.”
Based on Kudlow’s logic, what should we take away from the events of the past few weeks?
Based on Kudlow’s logic, what should we take away from the events of the past few weeks?
If you mean following the pattern of Kudlow’s logic, I would suggest that a person should take away nothing and keep responding to anything happening in the market at any given time as if that momentary trend has always been, and will always be the case.
PS, SD Greg! I don’t know if I missed you in the last bit bucket, but I wanted to tell you that I realized I searched for, and found, my wedding dress online! Ha on me. Hope your search engine development is going well.
For everyone who, like me is supposed to be working and not blogging, here is 2 hours of audio for you:
http://www.onpointradio.org/
Banks & Housing in Crisis, hour 1
Investigating the Subprime Scandal, hour 2
ET Chicago posted this yesterday: there is also a great hour on This American Life:
http://www.thislife.org/
Quick, the boss is behind you! Close the browser and put your headphones on. (My boss knows everything I do, because she is me
)
Cramer’s efforts to panic the stock market have sent the S&P500 selloff into overdrive. Heckuva job, Jimbo!
Mr. Cramer can not cause the market to go down any more than he can cause it to go up. If the stocks going down are good, somebody will buy - especially size orders. Mr. Cramers followers are odd lot traders. If they all acted in concert it would move the market less than 10 points in the DJIA.
When he puts out a ‘buy, buy, buy” does that cause that stock to go up 4%? Hell no. The average move is 2.3% and back to unchanged in 3 days.
There are always some good stocks to buy…the hard part is finding those few companies.
Predictions from a blue-collar working man:
1. They may not call it a recession, but for many Americans it feels like one.
2. The purchase and consumption of ‘vice’ commodities will increase.
3. Prez Bush and Vice Prez Cheney will slip quietly back into their millionaire lifestyles. The speaking and book signing circuit pays better in a week what most Americans make in a year.
4. Mr. Fuld, ex-Lehman head, will have to make do with the hundreds of millions in compensation he receives, while unsophisticated small investors will have to make do having their Lehman stock holdings wiped out in entirety.
5. The government printing presses will get a never before seen workout printing currency notes.
6. No matter how much ‘trash’ paper Uncle Sam buys, home values will continue to decline in most markets.
7. Filling up the gas tank will continue to be source of anxiety.
8. More retail stores will, and more stores will advertise 40-60% off sales.
9. More people will be seen walking near intersections and out front of mall entrances wearing ’sandwich boards’ advertising super sales.
10. Newspaper, DVD, and CD sales will continue to decline.
Have a nice day!
I would not want to be Mr. Fuld.
Peter Schiff made an excellent point last night, which was that greed is normally balanced by fear, but govt has removed the fear of failure.
To his point, I will add the suggestion that the absense of fear is at best a temporary condition, which over a protracted period of time encourages imprudent financial decisions that ramp up systemic risk. When fear finally returns after an artificially long government-sponsored hiatus, it is truly terrifying.
Very well stated!
Given that I don’t want to put cash in the stock market the big question for me is, will the value of my cash be decimated faster than the decline in RE prices?
I’d love to put some cash in brick and mortar, it’s just that brick and mortar is still way, way too high.
I hear you. If housing prices nationwide declined as fast as stocks have, this crisis would be much closer to being over.
from the mouths of babes…
ping solutions….lower house prices….getting better.
solution,
higher interest rates.
its counter-intuitive.
Makes total sense, voz!
Just got notice from my credit union that the insure up $500000 per savings account with excess share insurance. Anyone hear of this?
Most of the fear in the financial markets is that the (50T$?) of “insurance” (CDS) out there is worthless if more than a infinitesimal fraction is called upon. And you suggest trusting an institution that (might) hold enough non-stupid assets to pay off only 5 to 10% of their deposits.
Then again, your name DOES begin with A.
If their payoff program is alphabetical, you might get yours.
Both credit unions I have been part of did carry insurance in excess of FDIC requirements, even before the FDIC raised the limits.
I still keep less than the maximums, however, since my current credit union pays lousy MM interest rates.
one CU I belong to goes up to 250K with added private insurance… kind of moot now though.
Financial Times
Public assistance must protect the taxpayer
By John Kay
Published: October 7 2008 18:41 | Last updated: October 7 2008 18:41
Government intervention in business usually has unintended consequences. The results of regulation are often disappointing but the scope and scale of regulation nevertheless expand. Regulation works best when it is narrowly focused on defined objectives. We now regulate airline safety, not the airline business, since prudential supervision of the industry created an elaborate panoply of controls that came to serve only the interests of established operators, and often not even them.
When governments intervene in the banking crisis, their objectives should be equally narrowly focused and on what matters to the public, not what matters to the banks. We have no reason to care whether the interbank market is functioning well, nor should it be a policy objective to revive the issue of mortgage-backed securities. The interbank market was many times larger than needed to secure its economic function, and the residential mortgage-backed securities market should probably never have come into existence: banks will be sounder and their lending decisions wiser if the loans they underwrite are on their own balance sheets.
However it feels on Wall Street and Canary Wharf, this is not the worst economic crisis since the Great Depression. Today’s problems are not only created by financial markets but largely confined to them. Compared with the wreckage of Europe’s physical infrastructure in the 1940s, or the threats to living standards and social order from oil shortages and accelerating inflation in the 1970s, these perturbations are minor. The greatest threat to the non-financial sector is the effect on business and consumer confidence that comes from apocalyptic headlines.
“Today’s problems are not only created by financial markets but largely confined to them.”
Any such separation will not last much longer as the underlying economy is not sound and is not sustainable. Now that the elixir of debt has been removed, the contraction that follows will hardly go unnoticed.
FDIC May Let Banks Hold More Fannie, Freddie Debt
Regulators plan to reduce capital requirements for banks holding Fannie Mae and Freddie Mac debt and mortgage bonds, potentially freeing up more money for loans.
The Federal Deposit Insurance Corp. today tentatively approved a rule, proposed by all four federal bank regulators, that eases capital requirements for federally insured depository institutions that hold large amounts of Fannie and Freddie corporate debt, subordinated debt, mortgage guarantees and derivatives. The so-called risk weighting for banks on Fannie and Freddie’s credit claims was cut to 10 percent from 20 percent.
The rule means banks including Bank of America Corp. and Wells Fargo & Co. may need to raise less capital through share sales or dividend cuts, allowing them to increase their lending and investing. Mortgage analysts at JPMorgan Securities Inc. estimate the change would free up about $15 billion in reserves
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aYwGPidQVTUs
Nobody else wants to buy F&F debt. Might as well let the banks buy it.
The US government has a real problem getting this quarters debts financed. $1.3T in bonds.
China regards the President, Secretary of the Treasury and The Chairman of the Federal Reserve as the customer service department.
I suspect the conversation went something like this :
Hu Jintao “We won’t buy any US Government debt unless you guarantee the F&F bonds we already own.”
Hank Paulson “We will guarantee the F&F debt you own, but you have to buy some more.”
Hu Jintao “Fugget about it. You sell us treasuries and then you can buy F&F debt.”
Hank Paulson “Ok, how many US Treasuries will you buy?”
Hu Jintao “How much will you help our exports to the US?”
Hnak Paulson “There is a resentment building in the US against exported jobs and importing from China.”
Hu Jintao “There is a resentment building in China against any investment in the US having a value for the price we pay. I think we’ll hold off buying any treasuries for a while.”
etc.
Are you implying the “unsecured” creditors do not feel safe?
Sheila, after the handling of WM preffered, you cant be serious?
Bronte getting disallowed on the short common and long preffered, may in fact be the best thing that NEVER happened to him.
thats a real “hedge”…all this hedge fund this and that, is leveraged long money getting thrown under the f-cking bus.
Dont call me,
Sheila
Hoz,
I’ve been trying to get my tiny brain to understand this whole currency issue, with my sticking point being why the Yen over the dollar?
Will the Chinese be buying Japanese treasuries instead of US treasuries at some point? Otherwise wouldn’t the maxim, “buy what China buys”, mean I should be buying dollars?
And a follow up, does the Swiss franc serve the same purpose in your eyes as the Yen, or is it subject to the same forces that are going to decimate the Euro?
“I’d love to put some cash in brick and mortar, it’s just that brick and mortar is still way, way too high.”
Many Property owners are still in deep denial. Repeat the seller’s rose-colored glasses mantra: Seller’s market will be better come Spring, seller’s market will be better come Spring..
I’m seeing lots more bling bling merchandise at a bigger discount on eBay. Gee! I wonder why that could be?
Got groceries?
S&P500 thoughts before the market got slapped this Mon and Tues:
Since 1995 the S&P500 has averaged 7% annually (including all dividends).
Since 2000 the S&P500 has averaged -2.2% (including all dividends).
The S&P500 are still overpriced by any reasonable valuation where there is an expected positive rate of return.
CNBC could not figure out the top and was still advocating buying until 1100 on the S&P500. CNBC is now screaming the end is near. Depression and deflation and soup lines and other garbage. I am almost ready to use them as a reverse indicator.
If he had done these trades on an exchange, Mr. Buffett’s sale of the S&P500 and other index Puts would result in a margin call of about $12B (app unrealized losses). If Mr. Buffett had sold the Credit Default Swaps on the dividend, his margin call would be around $500MM (the amount of dividends canceled or cut from the S&P500). Maybe he is the ultimate knife catcher. AT what price on the S&P500 does he puke?
If you do one of those yearly extrapolations I’m going to throw a beer bottle at you
Lienies Big Butt Por favor? And it better be full, no dippin’. Friggin Texicans always drink the beer and then throw the bottle atcha.
I don’t care if the market goes up down or sidewinders, but if they touch my beer….(Tonights dinner: Knockwurst, stuffed cabbage and Big Butt beer)
“those yearly extrapolations”
That’s my stueck. Will the bottle be full and cold?
I’ve been thinking along very similar lines regarding Mr. Buffet.
Thank you for expressing it so well.
CEO –Chief Embezzlement Officer.
CFO– Corporate Fraud Officer.
BULL MARKET — A random market movement causing an investor to mistake himself for a financial genius.
BEAR MARKET — A 6 to 18 month period when the kids get no allowance, the wife gets no jewelry, and the husband gets no sex.
VALUE INVESTING — The art of buying low and selling lower.
P/E RATIO — The percentage of investors wetting their pants as the market keeps crashing.
BROKER — What my broker has made me.
STANDARD & POOR — Your life in a nutshell.
STOCK ANALYST — Idiot who just downgraded your stock.
STOCK SPLIT — When your ex-wife and her lawyer split your assets equally between themselves.
FINANCIAL PLANNER — A guy whose phone has been disconnected.
MARKET CORRECTION — The day after you buy stocks.
CASH FLOW — The movement your money makes as it disappears down the toilet.
YAHOO — What you yell after selling it to some poor sucker for $240 per share.
WINDOWS — What you jump out of when you’re the sucker who bought Yahoo @ $240 per share.
INSTITUTIONAL INVESTOR — Past year investor who’s now locked up in a nuthouse.
PROFIT — An archaic word no longer in use.
Hoz,
Best post in 4 years.
I just listened to McCain’s first answer. He hasn’t finished the second, but I think he’s sunk.
Yee ha, McCain is going to buy your mortgage! Drill, baby, drill!
http://www.latimes.com/news/politics/la-na-assess8-2008oct08,0,6881351.story
America is sunk. I listened to both their solutions and they offer much more socialism. This is Frederick Hayek’s “Road to Serfdom.” McCain proposes to have the government renegotiate the mortgages. That’s a traditional Democrat solution. Obama still sticks with raising taxes on people with incomes above $200,000. Anyone who says that is not Marxist better look up the meaning “redistribution of wealth.”
More “out of stock” news of gold coins. CNI in LA is all but dried up. The shop probably has only rare coins but no modern BU bullion. You’d think that since this is multiplied thousands of times by thousands of shops coast to coast, the price of gold would go way up, like to $1500 spot.
I think we’ll see $3,000 spot, given the cluelessness of both of the Presidential candidates debating tonight. I’m an atheist but I have to say with what we have as the leader the next four years - “God Help Us!” Where is Ron Paul??????
Within a week, the news will filter to the public that there is no physical metal available @ any price, anywhere.
so, WTF are you gonna do with bunch of gold, eat ramen and soup while hitchhiking to New Zealand?
chinese steel makers are cutting production.
well….
OMG no metal!!!
not at any,
price?
Thats werid my Gold and Silver stocks have been pummeled but I keep tham because somthing seems very wrong with the price of physical Gold verus ETF Gold.
Still not buying stocks but I am starting to pay attention. Wife got her IRA rollover statement was not happy. I didn’t tell her the next one will be worse.
Paraguay to enforce ban on foreigners buying farmland.
http://www.buenosairesherald.com/the_world/note.jsp?idContent=535248&hideIntro=true
God, the debate…they both want to do something to “keep people in their homes”.
Obama wants to stop home values from dropping and McCain wants to force banks to do cram downs.
No mention of homes being unaffordable for people…assholes.
From the Buenos Aires Herald:
Farms off limits
Paraguay to enforce ban on foreigners buying farmland.
STRATEGIC FARMLAND!!
can a Russian naval base in Iceland be far behind?
farmland may bubble prior to the car that runs on emotion.
Well that’s just great………Obama said something I agree with.
I am really starting to doubt whether dollar cost averaging is a good idea about now. When the facts change, I change my mind.
Financial Times
It is time for comprehensive rescues of financial systems
By Martin Wolf
Tuesday Oct 7 2008 13:15
As John Maynard Keynes is alleged to have said: “When the facts change, I change my mind. What do you do, sir?” I have changed my mind, as the panic has grown. Investors and lenders have moved from trusting anybody to trusting nobody. The fear driving today’s breakdown in financial markets is as exaggerated as the greed that drove the opposite behaviour a little while ago. But unjustified panic also causes devastation. It must be halted, not next week, but right now.
The time for a higgledy-piggledy, institution-by-institution and country-by-country approach is over. It took me a while - arguably, too long - to realise the full dangers. Maybe it was errors at the US Treasury, particularly the decision to let Lehman fail, that triggered today’s panic. So what should be done? In a word, “everything”. The affected economies account for more than half of global output. This makes the crisis much the most significant since the 1930s.
All the brilliant brokers believe DCA works. (Puts the brokers kids through college = works.)
No. Greed will eventually balance out the fear grasshopper. Listen to your own advice.
Artificial stimulation will not help the situation short-term - only exacerbate the problem long-term.
Even if it means complete trashing of our financial system - this is likely better in the long run than any measures that would be strong enough to help in the short run. JMHO at least.
“John McCain:
I knew Teddy Roosevelt. Teddy Roosevelt was a friend of mine. And, Senator Obama, you are no Teddy Roosevelt!
I don’t think that worked.”
Mr. Brad DeLong
Or the email that was shown on CNN
“I don’t care who Obama had coffee with 20 years ago or which dinosaurs were roaming in McCains youth…”
Damn I love elections. Think of all the great jokes that we will have to wait for anew.
I wonder if the P/E of the S&P will get below 10 ?
Well below ten. Patience.
Oct. 8 (Bloomberg) — Asian stocks fell, sending Hong Kong’s Hang Seng Index below 16,000 for the first time in two years, on concern the credit crisis will topple more banks and slowing growth will cut demand for the region’s exports.
SSEC is now down 70% from its peak.
I wonder if Jim Rogers is still big on China (and commodities)?
FWIW - while Jim correctly called the housing bubble - I think he was wrong on the above two counts (and stated as such several months ago). A recent visit to Shanghai just confirmed it for me. The Chinese are still way too dependent on the U.S. economy, and in general just don’t have an innovative mindset. Almost everything produced over there is copies of western goods, from their DVDs and T-shirts up the line through their technology.
Maybe that will change - it wasn’t always that way. The Chinese were the innovation world leaders up until about 400 years ago. If it does change it is a long time coming yet - probably 20-40 years minimum to stop riding the U.S.’s coattails.
JohnMcCain.com - McCain-Palin 2008: 100 ECONOMISTS WARN THAT WITH CURRRENT WEAK FINANCIAL CONDITIONS BARACK OBAMA’S PROPOSALS RUN A HIGH RISK OF THROWING THE US ECONOMY INTO A DEEP RECESSION…
1. They only have 90 names on the list. Not 100. 90. They can’t count.
2. They only have 90 names on the list: that means that they could not find any more–and I assure you that they tried.
3. Shame on them for saying “Barack Obama’s proposals run a high risk of throwing the U.S. economy into a deep recession.” The economic considerations that can be advanced against Obama policies do not include “throwing the U.S. economy into a deep recession.” I cannot imagine what mechanism can possibly be contemplated by which Obama’s plans would reduce aggregate demand by enough to accomplish that result.
Yes, I am talking to you, Michael Bordo, Michael Boskin, Charles Calomiris, Kristin Forbes, Douglas Holtz-Eakin, Glenn Hubbard, Anne Krueger, Allan Meltzer, Kevin Murphy, William Poole, Kenneth Rogoff, Harvey Rosen, Anna Schwartz, George Shultz, John Taylor, and Murray Weidenbaum. You know better. And I know you know better.
No, I’m not talking to you, Kevin Hassett. I know that you don’t know better.
October 07, 2008 at 01:41 PM
Mr. Brad DeLong
Hire the McCain people at Merrill, they can’t multiply or divide.
McCain & Palin = stupidity ticket.
Hoz, quick question, humbly need advice…
I’m long some UYG. Should I sell on the open?
The price is about as low as its going to go. Might as well hold on. Should have about a 150 point rally in the S&P500 here and then ?
Mr. Bernanke is doing everything and then some to resolve much of the short term problems. The measures enacted are going to work provided someone is willing to buy treasuries.
Perhaps we will go the way of England and nationalize our banks, I don’t know.
Why would you want to own financials? Just curious.
Don’t want to own. Just thought on Monday we went as low as it was going to go for the moment (apparantely not, LOL), and was looking for a quick trade.
I can bear some pain no problem, but with double leverage this baby will wipe itself out very fast if the market continues to tank. Not sure if it’s time to hold or fold…
gawd thats funny,
I put on into the close on Wednesday….
15 is the sell number, proby your even money target.
Slash and burn downsizing at C…
Citigroup to slash its wholesale mortgage business
By John Letzing, MarketWatch
Last update: 9:39 p.m. EDT Oct. 7, 2008
SAN FRANCISCO (MarketWatch) — Citigroup Inc. has become the latest large bank to back away from the crumbling mortgage industry, slashing the number of outside mortgage brokers it does business with and cutting 500 related jobs.
Citigroup Inc. (C 15.15, -2.26, -13.0%) , which is locked into a pitched battle with Wells Fargo & Co. (WFC 30.60, -3.04, -9.0%) over Wachovia Corp. (WB 5.25, -0.53, -9.2%) , is cutting back on its wholesale mortgage business as part of a restructuring plan announced Tuesday.
A Citigroup spokesman stressed that the firm is not abandoning the wholesale mortgage business, but is “redefining” it.
Citigroup will cut the number of outside mortgage brokers it does business with around the U.S. to 1,000 from about 9,500. The plan also involves laying off roughly 500 sales and operations employees.
You just slip out the back, Jack
Make a new plan, Stan
You don’t need to be coy, Roy
Just get yourself free
Hop on the bus, Gus
You don’t need to discuss much
Just drop off the key, Lee
And get yourself free
Wall Street Journal
* OCTOBER 8, 2008
Housing Pain Gauge: Nearly 1 in 6 Owners ‘Under Water’
More Defaults and Foreclosures Are Likely as Borrowers With Greater Debt Than Value in Their Homes Are Put in a Tight Spot
By JAMES R. HAGERTY and RUTH SIMON
The relentless slide in home prices has left nearly one in six U.S. homeowners owing more on a mortgage than the home is worth, raising the possibility of a rise in defaults — the very misfortune that touched off the credit crisis last year.
The result of homeowners being “under water” is more pressure on an economy that is already in a downturn. No longer having equity in their homes makes people feel less rich and thus less inclined to shop at the mall.
And having more homeowners under water is likely to mean more eventual foreclosures, because it is hard for borrowers in financial trouble to refinance or sell their homes and pay off their mortgage if their debt exceeds the home’s value. A foreclosed home, in turn, tends to lower the value of other homes in its neighborhood.