October 12, 2008

Bits Bucket For October 12, 2008

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Comment by diogenes (Tampa,Fl)
2008-10-12 07:56:52

Here’s a short article from SouthWest Florida, showing why housing prices Won’t recover anytime soon.
Look at the Chart on all those “underwater” buyers.
It’s almost unbelievable.


Oh. And …………have a nice day!

Comment by Michael Viking
2008-10-12 10:18:53

It’s not clear to me whether that chart showing the percent of buyers underwater includes serial refinancers. It strains my credulity to think that only 3.2% of the people who bought in 2003 are underwater. Maybe it’s the echo chamber in here, but I feel a lot more people are serial refinancers than 3.2%, and I think all serial refinancers must be underwater regardless of when they bought.

Comment by Ann
2008-10-12 17:18:47

I agree I think the number is much higher..when we lived in SFL we had purchased in 03 and many of the people around us did refi..I would say at least 80% and of course they pulled money out…

Our house which we sold early last year, when we grabbed the last freight train out of price un-reality has now gone down in value to what we paid for it back in 03 and is expected to go even lower! The guy who bought from us has seen his overinflated purchase go down by 40%!

Comment by Pondering the Mess
2008-10-13 09:12:48

And yet if one compares salaries to prices, I bet they have ever further to fall!

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Comment by implosion
2008-10-12 10:20:15

Here’s a link to another recent tidbit. Someone may have already posted this. The comments just lay into Fishkind.


Comment by Matt_in_TX
2008-10-12 10:55:38

They could spend part of the 700B for the local courts to man up for more deficiency judgments ;)

Comment by aladinsane
2008-10-12 07:57:15

“Money is your means of survival. The verdict you pronounce upon the source of your livelihood is the verdict you pronounce upon your life. If the source is corrupt, you have damned your own existence. Did you get your money by fraud? By pandering to men’s vices or men’s stupidity? By catering to fools, in the hope of getting more than your ability deserves? By lowering your standards? By doing work you despise for purchasers you scorn? If so, then your money will not give you a moment’s or a penny’s worth of joy. Then all the things you buy will become, not a tribute to you, but a reproach; not an achievement, but a reminder of shame.”

Francisco d’Anconia

Comment by combotechie
2008-10-12 08:02:20

“Money is your means of survival.”

Yep, that’s what I’ve been saying for a long time, such as “cash is king”.

Comment by aladinsane
2008-10-12 08:04:05

“Whenever destroyers appear among men, they start by destroying money, for money is men’s protection and the base of a moral existence. Destroyers seize gold and leave to its owners a counterfeit pile of paper. This kills all objective standards and delivers men into the arbitrary power of an arbitrary setter of values. Gold was an objective value, an equivalent of wealth produced. Paper is a mortgage on wealth that does not exist, backed by a gun aimed at those who are expected to produce it. Paper is a check drawn by legal looters upon an account which is not theirs: upon the virtue of the victims. Watch for the day when it bounces, marked, ‘Account overdrawn.’”

F d’A

Comment by aladinsane
2008-10-12 08:08:12

Trarians the world over are convinced that cash is king…

Cash best remedy for depression

Veteran investors in New Zealand are cautiously guarding what cash they’ve got in the wake of a global financial crisis they fear will be worse than any the country has seen.


Comment by combotechie
2008-10-12 08:32:33

“Cash best remedy for depression”

It also comes in handy when paying your bills.

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Comment by aladinsane
2008-10-12 08:37:39

“Money is the barometer of a society’s virtue. When you see that trading is done, not by consent, but by compulsion–when you see that in order to produce, you need to obtain permission from men who produce nothing–when you see that money is flowing to those who deal, not in goods, but in favors–when you see that men get richer by graft and by pull than by work, and your laws don’t protect you against them, but protect them against you–when you see corruption being rewarded and honesty becoming a self-sacrifice–you may know that your society is doomed. Money is so noble a medium that is does not compete with guns and it does not make terms with brutality. It will not permit a country to survive as half-property, half-loot.”

F d’A

Comment by Lost in Utah
2008-10-12 08:28:06

I want to thank both combo and the lad for the excellent entertainment!

Comment by aladinsane
2008-10-12 09:22:57

I’d like to thank combo for being such a willing foil…

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Comment by awaiting wipeout
2008-10-12 17:29:59

You’re all great contributors. Complimentary flavors.Credit Unions are in trouble too.

Los Angeles Times Front Page Article Oct 12, 2008

Financial troubles spread to credit unions

Comment by diogenes (Tampa,Fl)
2008-10-12 07:58:54

Link to Florida underwater buyers:


I have tried to post, but failed.

Comment by Diogenes (Tampa)
2008-10-12 08:31:33

“We are so upside down,” said Michelle Nacua of Lehigh Acres. Nacua and her husband, Lani, bought their house in 2004 for $112,000. They refinanced twice and now owe $161,000, far more than the $114,000 the three-bedroom, two-bath house is assessed for by the county Property Appraiser’s Office. “It is our fault, but I hate it.”

Another serial refinance artist cries over lost “income”.
I’ve never seen so many people that took out cash FROM their house, so soon after “buying” it.

Look at the chart of percentage of underwater buyers and tell me this is going to turn-around anytime soon.


Comment by Jas Jain
2008-10-12 08:56:27

I must have been on my optimistic streak when I forecasted 25M under water about a year ago. Once an area has price decline of more than 20% from the peak the foreclosures seem to bring it to 40% down, from the peak, over the next 12 months or so. Sacramento area is a good example. FL was early but CA is now the leader in declines and everything else.

Right now, the fastest declining metro (tracked by Radar Logic) is San Fran at 45% Annual Rate for all the sales that have originated since June 2008 and have completed. L.A. is next with 34% and San Jose at 33%. Yes, all three are still the most expensive of the 25 metros and falling at a faster rate than all others (Ooops… New York just took over L.A. in last week’s data by a fraction of 1%). Coincidence?

CA is heading fast into depression.


Comment by laughing boy
2008-10-12 09:07:09

And yet you wouldn’t believe the state of denial here. Was at a party last night in an Oakland house that had been on the market for $750,000. The best offer the owner had had was $740,000 and they turned it down, took it off the market and are now renting it to some friends.

Got into an argument with some people at the party. They think the “value” will hold because they are homeowners in the area and believe that “everyone wants to live here”, ie Bay Area. That’s pretty much their reasoning. We (my friend the renter/potential buyer and myself) argued that in 2 years, the price would drop by at least another 30%. The bets were on.

Lot of people here in CA/Bay Area just don’t get it, but you can tell they are very, very touchy and defensive about the subject. People panicking, then checking zillow to calm their nerves.

Comment by Diogenes (Tampa)
2008-10-12 09:28:59

You are obviously misinformed. I’ve talked to a number of Realtors ™ here in Florida.
They have all told me, without reservation, that the reason the prices got so high here is that “everyone wants to live here”> quit simply DEMAND had outstipped supply.
You must be wrong. Everyone can’t want to live there when everyone wants to live HERE!!

I have professional opinions to back this claim. Ask David Lereah. He should know!

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Comment by tiger
2008-10-12 09:54:05

You are both wrong. Everyone wants to live in LA.

Comment by bottomfisherman
2008-10-12 10:31:41

Everyone wants to live in East Palo Alto, it’s *different* here.

Comment by Bub Diddley
2008-10-12 10:43:45

But it’s different in Austin, too! What’s happening in CA and FL could never happen here.

Some Australian friends were in town this weekend. Apparently, everyone wants to live in Melbourne, too. It’s also one of those places that will never go down.

Just how many of those places are there, again?

Comment by AdamCO
2008-10-12 12:10:03

No you are all wrong. Everyone wants to live in southwest colorado!

Comment by Xenos
2008-10-12 14:22:07

Everyone who who is of any significance already lives in Boston, Hub of the Universe. The fact that some people choose to live elsewhere, at greater or lesser prices, is a quaint epiphenomenon of their barbarian proclivities. It does not matter, not to the people who matter.

All this money business is so vulgar. The value of giant piles on the North Shore inherited from Mumsy’s mater is that no-one has had to put a price on it for three generations. So there is no way that price is going down.

Now where the hell is that trust account statement from Bear Stearns?

Comment by novawatcher
2008-10-12 19:09:03

No, all of you are wrong: everyone wants to live in North Arlington. Or was it McLean? Or maybe they meant Georgetown?

Comment by Pondering the Mess
2008-10-13 09:31:03

Everyone wants to live in Baltimorgue!

Or so I’ve been told… by people who were selling $290,000 2 bed, 2 bath BASEMENT condos, under other condos… near coin-operated laundry mats, an adult book store, and other “questionable” businesses and empty husks… Oh, yes - price and income no longer matter!


Comment by BanteringBear
2008-10-12 09:47:57

It really doesn’t matter if people want to buy, the loans aren’t there anymore to prop up the absurd prices, so down like a led balloon they go. I doubt many of the loudmouths at the party could pony up cash for the houses whose “values” they defend.

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Comment by Pondering the Mess
2008-10-13 09:36:44

That was always my favorite part of the Bubble:

Bubblebrain: “Housing always goes up!”

Me: “Could you afford your house if you had to buy it today?”

Bubblebrain: “Oh, heavens no! Nobody can afford that!”

Me: “Then how will housing prices keep going up if nobody can afford to actually BUY the houses?!”

Bubblebrain: (sound of system crash and rebooting leading too..) “Housing always goes up!”

Comment by exeter
2008-10-12 10:07:24

“Lot of people here in CA/Bay Area just don’t get it, but you can tell they are very, very touchy and defensive about the subject.”

You better believe they’re defensive. At least here in the northeast. The psychological stage is ANGER right now and it tells me we’ve still got a long way down folks. There is no more denying the truth given recent events and the duped, dumb and stupid are PISSED OFF. If you were told that the best investment ever is real estate and you bet your entire future and that of your offspring and now you realize you were lied to, wouldn’t you be pissed too? I screamed from the top of mountains that REALTARDS ARE NOT YOUR FRIENDS and nobody listened.

Eat it bish.

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Comment by bottomfisherman
2008-10-12 10:34:53

Mortimer Duke: Now, you listen to me! I want trading reopened right now. Get those brokers back in here! Turn those machines back on!
[shouts - it echoes pathetically throughout the trading hall]
Mortimer Duke: Turn those machines back on………………

Comment by Jas Jain
2008-10-12 10:43:25

Some friends of my son live in Santa Monica (by the beach) and Glendale and they tell my son that the prices in their areas are flat. I have the data and PPSF for resale SFH are down 30% in both from the peak roughly a year ago.


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Comment by James
2008-10-12 11:34:29

Got to remember most kids just look at the interent/paper and are not tracking solds vs listing. Nor do they keep track of $ per square foot.

Hence, we look to case shiller. I think prices have come down in the southbay; hower not enough and properties are still selling.

I think people are still getting bridge loans. Hard to believe it but I think its true.

Comment by packman
2008-10-12 11:18:49

There’s a lot to be said for the platitude:

“Don’t wrestle with a pig. You both get dirty, and the pig likes it.”

My preferred method is to smile and nod along.

Religion and politics may be worth arguing about. Real estate is not, IMO at least.

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Comment by aladinsane
2008-10-12 12:11:50

I like to pick at the scab that is religion, and it’s invisible means of support.

Comment by ex-nnvmtgbrkr
2008-10-12 15:43:30

I like to pick at the scab that is science, and it’s unsubstantiated theories it uses for support.

…..oh wait, I forgot science was a religon.

Comment by Olympiagal
2008-10-12 15:52:33

‘My preferred method is to smile and nod along.’

MY preferred method is to make a little note of the event, so later on I can say ‘I told you so’. I love to say ‘I told you so’, and happily for me, I get to say it sooooo oftennnnnn…I mean, what’s the point of being right, if you can’t remind others? Of how they were so very wrong?

Comment by Martin Gale
2008-10-12 16:34:35

“I like to pick at the scab that is science, and it’s unsubstantiated theories it uses for support.”

Surely, then, you’d care to name a few of these “unsubstantiated” scientific theories, and we can have a little debate on the blog, right? Is that you, Sarah Palin?

Comment by SteveH
2008-10-12 17:27:35

Thanks for that Martin. At least with science you can test the theory and if it doesn’t hold up, change it.

Comment by Professor Bear
2008-10-12 21:40:57

Only a non-scientist would mistake science for a religion. For an example of a fundamental distinction, religion allows for no doubt, while science embraces it as a modus operandi.

Comment by AppleEye
2008-10-12 22:20:43

I like to pick at the scab that is religion, and it’s invisible means of support.

That says more about you, than your ‘targets.’

Comment by Lionel
2008-10-12 13:13:17

Just give them this Newsweek article…


Down in the Valley
The storm is on Wall Street, but it’s rippling out to Silicon Valley and causing investors to be more cautious.

As if waking from a dream, Silicon Valley has suddenly realized that the collapsing economy means trouble for tech companies, too. Especially at risk are the new startups created in the wake of the last dotcom crash in 2001. The signal traits of these Web 2.0 companies are cutesy logos, odd-sounding names—Twitter, Zooomr, Digg, Ning, Loopt—and flimsy business plans based on a vague notion of luring millions of people to free Web sites and someday selling advertisements. Most lose money. Some have raised enough venture-capital funding to survive for a year or more. Some may be able to raise more from venture backers, albeit at onerous terms. But many are going to flame out.

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Comment by llcarlos
2008-10-12 17:01:06

I bought a new Intel processor for 150-bucks. I must be out of my mind because it will only cost 75 bucks in 3 months, maybe less.

Comment by James
2008-10-12 11:31:01

Damage is already done. Will take time for symptoms to manifest openly. Should see these over the next year.

1) Budget crisis at all levels of local governments along with slowdowns in critical industries.

2) High tech that is “neat” but not needed will get pounded.

3) Aerospace spending will go way down. The big 4 will get hammered

4) Oversupply will crush prices (set in the margin) or keep sales from occuring while pressure builds. Empty homes decay further attracting crime that will not be effectively prosecuted at any level.

5) Movies/Hollywood companies will cut back as loans for big productions will be in short supply

6) Areas where real estate was driver hit hardest. All fringe areas.

7) Anti-california sentiment around the US because of bailout. All ready hearing it from various corners. Will make tourism go down.

Comment by SDGreg
2008-10-12 15:50:45

“7) Anti-california sentiment around the US because of bailout. All ready hearing it from various corners. Will make tourism go down.”

The anger is more at Wall Street. Those who want to visit California and can will still do so. Tourism will drop for other reasons related to the economy, not due to any misplaced anger at California over the bailout.

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Comment by Muir
2008-10-12 09:19:48

Went to Miami yesterday and checked out two condos and 5 houses.
I do not care how much you read here or how intelligent you think you are, unless you see the mountains of high-rises, go inside one and talk to the concierge to find out what the true rentals are going for ($1500 for condos that sold well North of 400K) see a note written in black magic marker that valet service has been cancelled because of money shortages, see teenagers that are the inhabitants of these condos (think UM renters and their roommates) until you ask and talk to the builders’ Realtor (sales office closed months ago) and find out that the supposedly sold out building is really only 75% sold, and then find out that 25% of the building is in some stage of foreclosure, and finally when you realize that just in Miami this represents 10s of Billions, and this is but one city, then, the concept of a mania is easy to understand.
By the by, these were Coral Gables condos that I saw. The real massacre is in Brickell.

Comment by mrktMaven
2008-10-12 08:01:59

If you live in Ft Myers / Cape coral, are you buying? Oh, the humanity! The area is decimated. $75K will get you something decent.

Comment by mrktMaven
Comment by Diogenes (Tampa)
2008-10-12 08:38:25

A great big house, in the middle of nowhere, 25 miles from Ft. Myers and probably 15 miles to the nearest store. It looks to be closer to Immokolee, than Ft. Myers.
A great place to live, if you like living alone, away from all the hussle and bussle of the city-life. …just one problem. The yard isn’t big enough for your own farm, so you still need to go shopping…which will cost about $8 to go get a $1 Wendy’s value burger.

Comment by mrktMaven
2008-10-12 08:57:40

Buy a Prius.

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Comment by mrktMaven
2008-10-12 09:01:42

Buy sirloin and a Weber. Heck, bake your own buns.

Comment by Muir
2008-10-12 09:29:14

Comment by Diogenes (Tampa)
2008-10-12 08:38:25
“A great big house, in the middle of nowhere, 25 miles from Ft. Myers and probably 15 miles to the nearest store. It looks to be closer to Immokolee, than Ft. Myers.”
13 miles to Immokolee WinnDixie. (Middle of nowhere)
40 years of living in Fl, just hard to communicate to people exactly how insane to build this house (and 10s of thousands) in the middle of nowhere.

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Comment by intheknow
2008-10-12 09:09:29

More info on your posting: Purchased 5/06 for $250,000. Tax assessed value last year - $276,990; tax assessed value this year - $158,410.


Comment by mrktMaven
2008-10-12 09:37:14

There are many more like this. I don’t know the area but OMG! Everyone should do their own research and buy wherever and whenever they want. It’s stunning, however.

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Comment by exeter
2008-10-12 10:13:53

These prices are nothing new in that area. In fact I believe I saw that same shack on an REO site 6 months ago. Yes, I was stunned then. Not so much anymore.

Comment by 45north
2008-10-12 10:25:25

re Genoa South: red kitchen! best thing is to take the gyprock, better yet don’t buy it.

Comment by REhobbyist
2008-10-12 15:40:09

I like the fact that it’s spaciuos.

Comment by mrktMaven
2008-10-12 08:37:54

Here is one in Port St Lucie. 95K will get you 2600 SqFt. You can tell by the yard and holes in the walls throughout the home that it’s definitely a foreclosure. My sister is going to hate me.


Comment by Left LA
2008-10-12 09:44:05


In honor of FPSS -


Comment by Professor Bear
2008-10-12 09:47:00

Ya forgot something:


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Comment by Faster Pussycat, Sell Sell
2008-10-12 10:24:58


Comment by BanteringBear
2008-10-12 13:32:49

Why, is it your sister’s old house? All that builder beige and white is hideous. The house is sterile looking, completely devoid of style. The price seems very inexpensive, but I know nothing about Port St. Lucie. A similar sized newer home around Seattle would run $600k-$700k, easy.

Comment by mrktMaven
2008-10-12 15:48:50

No, it’s not my sister’s house. She bought two smaller homes (under 2000 sqft) in the area for around 250K in 05/06. They are both cash flow negative, mortgages about to reset, etc. etc. If I buy at these prices, she is going to hate me.

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Comment by eastcoaster
2008-10-12 08:02:27

All the madness going on in the financial markets. All the bail out talk/plans. All the MSM broadcasting “crisis” mode news.

And yet house prices in my area stay stuck. And most people still believe they will not drop.

What is going on? Seriously, it cannot be “different” here in the Philly burbs.

Comment by Tim
2008-10-12 08:39:46

Ummmm. The madness in the financial markets happened just in the last two weeks. That would have chilled the volume with respect to homes under contract in the last two weeks, but not have any immediate impact on sold numbers in terms of volume or sales amount. Volume will be seriously down for high priced homes while stocks tank. It wont show up significantly in the sales until next year. There is only one direction housing is going, and it is not up. I am expecting over a 15% drop nationally, and over 50% in some markets, and thats just YOY. The great thing about the stock market crash is that it will finally tilt huge downward pressure on the luxury market.

Comment by Bill in Maryland
2008-10-12 15:16:37

Agreed for the most part. Yet don’t assume only wealthy people buy stocks. 401ks and IRAs are popular to most engineers I work with.

This fact will make sales stall even more than you think. High end and medium priced house sales will get drier by the month.

Now let’s add option ARM resets, which peak in 2011 and 2012.

Better invest in Orville Redenbacher. Neil is going to eat lots of popcorn the next 4 years.

Comment by safe_as_apartments
2008-10-12 08:43:35

I’m sure transaction volume has completely dried up at the top end. It’s what’s going on in many areas of the NE with an older population–relatively few people who own their homes have a mortgage (in MA its only 40% in many established towns). This means many owners don’t have to “give it away”. Instead, it will be a slow grind down for over a decade, if not longer, as poorer replace richer generations.

You should consider moving. My wife and I have saved several hundred thousand dollars while renting and working relatively lucrative jobs in Boston. We’re considering moving to a small city in the South and paying cash for a house. Anybody buying in the NE is in for a rough ride these next five years.

Comment by bluprint
2008-10-12 10:52:20

You don’t wanna come down here, you wouldn’t like it. It’s all-deliverance all the time. Nothing but rednecks and hillbillies and everyone always up in your business.

Maybe upstate new york would be nicer.

Comment by safe_as_apartments
2008-10-12 12:41:05

I’ve lived for three years in the South. I like it.

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Comment by flint 'burbs
2008-10-12 12:52:01

Yes, I think anyone from somewhere else (!) will be at risk during the Anger phase of this meltdown. It may take many years to outgrow (some never will grow out of it). Changing neighborhoods was never such a challenge - now is not the time to move (giving up on my Hawaiian house residency, myself, and staying on my Michigan farm).

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Comment by aladinsane
2008-10-12 08:02:41

Govt offers banks total cover on all retail deposits

“The Government is offering to guarantee all retail bank deposits, Finance Minister Michael Cullen said today.

Dr Cullen said he would use his powers under the Public Finance Act to introduce an opt-in retail deposit guarantee scheme.

“The scheme will cover all retail deposits of participating New Zealand-registered banks and retail deposits by locals in non-bank deposit-taking entities. This would include building societies, credit unions and deposit-taking finance companies,” he said.”


“The scheme will cover all retail deposits of participating New Zealand-registered banks and retail deposits by locals in non-bank deposit-taking entities.”

What about if you aren’t a “local”?

Little NZ is making a dash for the lifeboats…

Comment by Professor Bear
2008-10-12 08:49:43

Won’t guaranteeing all these other accounts have the (possibly unintended) consequence of driving up yields on traditionally guaranteed Treasuries?

Comment by aladinsane
2008-10-12 08:58:48

Going from no insurance coverage yesterday on all accounts, to total coverage today, seems a bit of a stunning turn of events…

Stay tuned.

Comment by Comrade lainvestorgirl
2008-10-12 10:12:38

Seems all the governments suddenly have guarantees for everything. Wonder where all that money is coming from, and what people will do when they realize it isn’t there.

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Comment by Professor Bear
2008-10-12 10:37:34

I think the idea is to convince everyone that the universal insurance for almost everything is real and free, and hope that markets never move in a direction that tests the assertion.

Comment by packman
2008-10-12 11:20:59

“I think the idea is to convince everyone that the universal insurance for almost everything is real and free, and hope that markets never move in a direction that tests the assertion.”

Hmm… now why does that sound familiar?

Comment by SteveH
2008-10-12 17:45:26

Actually, this is good news for me, as I have considerable cash in an NZ bank. I had emailed my bank last week about this issue, and find out today that our deposits are covered. But this isn’t free. The banks are having to pay for this insurance if they have more that $2.7 Billion in deposits. Say what you will, but the thought of losing all your cash in a bank failure is not a pretty thought. There will be a cost associated with this, but it will be small when spread out over all depositors. Imagine how you would feel if there were no FDIC coverage in the US. Sweating bullets. On another topic, we have lost (on paper) quite a bit in the exchange rates drops of NZD vs USD in the last month or so. But (for reasons I will not go into) we will remain in NZD. It is very possible that long term the USD will tank as a currency. The NZD hovered around the .5 USD range for a long time and then shot to .8 USD and stayed in the upper and high .7 range until a month or so ago. Who knows what will happen? But other reasons drive our staying in NZD, beside the high interest rate we are earning.

Comment by aladinsane
2008-10-12 08:12:21

Mexican marijuana cartels sully US forests, parks

Weed and bug sprays, some long banned in the U.S., have been smuggled to the marijuana farms. Plant growth hormones have been dumped into streams, and the water has then been diverted for miles in PVC pipes.

Rat poison has been sprinkled over the landscape to keep animals away from tender plants. And many sites are strewn with the carcasses of deer and bears poached by workers during the five-month growing season that is now ending.

“What’s going on on public lands is a crisis at every level,” said Forest Service agent Ron Pugh. “These are America’s most precious resources, and they are being devastated by an unprecedented commercial enterprise conducted by armed foreign nationals. It is a huge mess.”

Millions of dollars are spent every year to find and uproot marijuana-growing operations on state and federal lands, but federal officials say no money is budgeted to clean up the environmental mess left behind after helicopters carry off the plants. They are encouraged that Sen. Dianne Feinstein, D-Calif., who last year secured funding for eradication, has inquired about the pollution problems.

Huffington Post

Comment by aNYCdj
2008-10-12 08:16:49

Well Golly gee willikers batman

Maybe if we allowed Americans to grow their own there would be no need for this to happen….

Still make it a felony to SELL pot…….and i haven’t smoked one in many many years

Comment by aladinsane
2008-10-12 08:29:39

Here’s the skinny…

There’s millions of stoners in California, a consumer bonanza if there ever was one.

You can already buy it @ the dispensary of your choice, provided you have some serious previous malady, such as a paper cut, as evidence of your ongoing need for weed.

The Golden State can kill 2 birds with one, stoned…

You’ll get rid of the Mexican drug cartels that are poisoning our fresh-water supplies. (they are the equivalent of the scourge of 19th century, hydraulicing*)

You’ll get rid of California’s messy deficit.


Comment by palmetto
2008-10-12 08:36:06

Yep, they should just legalize it, already. And then let those that want to imbibe live in “Doobie Acres”.

Comment by Lars39
2008-10-12 09:52:54

Maybe the next bubble is ganja farms.

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Comment by Bill in Maryland
2008-10-12 15:23:42

Yeah we’ve been through this. I want to decriminalize drugs, prostitution, abortion (if Palin gets into VP maybe it will be criminalized), porn, free speech, etc.

But the sindicates give kickbacks to too many politicians and want to continue the criminalization of victimless crimes.

BTW: I (a resident Arizonan) voted out Joe Arpaio and voted for the Libertarian Party candidate for Maricopa County sheriff. Yes, a Libertarian is running for Arpaio’s job!

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Comment by palmetto
2008-10-12 08:23:40

“armed foreign nationals.”

Don’t get me started.

Comment by palmetto
2008-10-12 08:44:15

Americans are going to get a good education in “globalization”, without having to travel. Gonna be interesting.

Comment by Michael Fink
2008-10-12 08:44:37

Another huge waste of govt resources and time. And, to boot, has some great nasty environmental consequences. Will they ever realize that the “War” is lost?

Comment by palmetto
2008-10-12 08:48:59

“Will they ever realize that the “War” is lost?”

Never. The two sides of the “war” are having a ball and raking in the $$. Both sides have an interest in keeping the “war” going.

Comment by aNYCdj
2008-10-12 09:03:27

and don’t forget THE LAWYERS think how many lawyers take drug money for legal fees.

The ABA will oppose legalization because for lawyers its a wallet issue, not a legal one!

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Comment by palmetto
2008-10-12 09:13:45

Yep, kinda like the housing industry, the drug “wars” have all sorts of juicy, $$ producing ancillary “industries”: re-hab, accessories, bling, legal, munitions, political grandstanding, etc.

Comment by palmetto
2008-10-12 09:19:46

Of course, that’s one thing Monsanto could be good for. They could produce gen-mod marijuana seeds to take the high out of it. That’d destroy the drug “wars” pretty quick.

Comment by Skroodle
2008-10-12 11:37:14

It already exists, they call that plant ‘ditch weed’ in Missouri.

Comment by James
2008-10-12 11:39:46

Oh, we could put landmines on the borders and use attack hellcoptors to shoot any illegals we see in the deserts.

Death penalty to drug smugglers.

Launch preemptive strikes against drug lords across the borders.

You can either fight to win or just screw around. We are pussy footing around for now.

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Comment by palmetto
2008-10-12 13:01:48

“We are pussy footing around for now.”

Exactly. Our so-called friends and neighbors are in total, complete and utter denial regarding the situation. Even when it hits home, as it did recently here in my neck of the woods, people turned a blind eye. I guess people are just too decadent to realize that Mexico is at war with the US, it is just being waged differently.

Comment by Muir
2008-10-12 13:52:47

Too late.
You lost.
By 2030 you are the minority.

Viva la vida loca!

Comment by palmetto
2008-10-12 14:55:54

“By 2030 you are the minority.”

So says NBC Nudes, based on information from the guvmint, which of course we know is always accurate, LMAO! But, supposing for a brief moment that it IS accurate, this figure does preclude man-made and natural disasters affecting populations. Could go either way.

Comment by BanteringBear
2008-10-12 10:09:02

This is, IMO, one of the most despicable situations we’re currently facing. These Mexican druglords need to die. That’s right. We need to send in some troop with guns blazing and dispose of them. They are armed, and in our country illegally. Of course, those in charge are too spineless and incompetent to do such a thing. They’ll wait until a young married couple decides to go on a day hike and never returns, only to have been murdered for accidentally stumbling upon some grow operation. We can’t even safely enjoy our own outdoors anymore without the risk of armed foreigners gunning us down. Nice.

Comment by palmetto
2008-10-12 10:37:02

I couldn’t agree more, these Mexican drug cartels mean business. Law is irrelevant to them and holds no threat. Should some politician or journalist object, NO PROBLEMO! They just execute, cut off the heads and leave them on the steps of a town hall somewhere. Or kidnap the children. Whatever it takes. People think these are exaggerations. Nope. Happens all the time in Mexico.

Comment by CA renter
2008-10-13 02:13:23

Happens all the time in Southern California, too…but you don’t hear about it in the news.

Not sure if it’s silenced to keep the “anti-immigration” types down or so tourists aren’t scared off. Maybe because they are afraid of vigilanteism?

Agree that legalization of marijuana and protecting **our own** borders (as is Constitutional duty of our Armed Forces), would quickly end a great deal of the street/gang crime in major U.S. cities.

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Comment by 45north
2008-10-12 10:38:08

These Mexican druglords need to die.


Comment by bottomfisherman
2008-10-12 10:43:20

Legalizing would accomplish the same thing and the gubmint might actually make some good dough off of it instead of wasting more billions we don’t have on the military.

Comment by aladinsane
2008-10-12 10:45:37

dude, those aren’t druglords toting ak-47’s…

That’s the job of the hired hands, lowly peons from Michoacan, mere campesinos.

They are probably 5 levels removed from anybody that knows anything.

Comment by Skroodle
2008-10-12 11:40:03

He is correct, the true drug lords live in Mexico and never set foot in the US ( ’cause we have that pesky death penalty thing) and when they are caught, live like kings in Mexican prisons.

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Comment by ButImNotDeadYet
2008-10-12 15:54:10

Hi Guys,
I live in Wisconsin and I have virtually no idea what you guys are talking about. I’m just sharing my perspective (which seems like ignorance to me as I’m sitting here). It just doesn’t seem like a high priority to me to learn more about it…

Comment by Otis Wildflower
2008-10-12 15:02:50

Some geneticist grad student needs to graft THC genes into kudzu and let it loose…

Comment by ahansen
2008-10-13 00:08:17

That’s GREAT Wildflower!

Comment by Tim
2008-10-12 08:13:47

Many of us have been waiting for major price movements in higher priced homes. Given the recent 40% drop in equities, I cannot wait to see the sales volume in connection with this bracket for the rest of the year. At least one person has already noted that, in the $800k and above price bracket in DC, volume dropped 50% from the same period in the prior two weeks [blog.franklyrealty - add the dot come as my links kill my posts]. Those in this market should (although nothing surpises me anymore) have at least $200k in retirement savings and other monies set aside. Given we are talking ppl that are in the market for a home now, they are probably the same ppl that didnt realize equities would crash. Thus, in the last few weeks they took a 80k plus direct hit, and references to the Great Depression and us sliding into a deep recession are all over the media. I assume that this will chill the house buying mood for many, even those that drank the Kool-aid.

I do see some opportunties in equities now, but am getting in slowly. I am hearing many stories about hedge funds getting collateral calls and forced to sell large volumes. Since this doesnt have to do with the underlying value of the subject companies, but more to do with overleveraged hedge funds, theoretically we should overshoot on the downside.

Comment by Professor Bear
2008-10-12 08:47:24

Tim — My view is that if you have a twenty-year time horizon and money you know you won’t need for paying living expenses over that period, there should be good opportunities going forward.

I admit to being very conservative in my approach to investing.

Comment by implosion
2008-10-12 10:44:46

What’s the worse that can happen? In 10 years you’ll be about right back where you are now.

Comment by implosion
2008-10-12 10:46:28

Uhhhh, worst..

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Comment by combotechie
2008-10-12 08:56:30

” …theoretically we should overshoot on the downside.”

Agree, but we are too early for this overshoot, IMO. Wait another year.

Comment by mrktMaven
2008-10-12 09:17:05

A 50 to 75 pct downward adjustment is increasingly probable.

Comment by Professor Bear
2008-10-12 09:25:33

Why wouldn’t a flood of liquidity into asset markets produce another stock price bubble in a few months (like after Black Monday in 1987)?

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Comment by Faster Pussycat, Sell Sell
2008-10-12 10:29:29

I posted this yesterday:

There are two factors against this:

[1] The earnings of most companies came out of leverage. As leverage declines, so do the earnings. As go the earnings, so go the prices.

[2] The multiples that people will willing to pay for earnings increased due to leverage. With deleveraging, so go the multiples.

Professor, try and tune in to the real world from time to time! :-D

Comment by Professor Bear
2008-10-12 10:59:34

“Professor, try and tune in to the real world from time to time!”

I did back on Black Monday. See what happened thereafter, as I described in another post.

But I will allow that perhaps things were “different” back then in a way I don’t understand. (Acquisition of knowledge comes from wiping away successive layers of ignorance.)

Comment by Faster Pussycat, Sell Sell
2008-10-12 11:02:47

Well, I, for one, am arguing “it’s different this time” compared to 1987.

I posted the reasons below.

Comment by Don't Know Nothing About Buyin No House
2008-10-12 11:07:27

[1] The earnings of most companies came out of leverage. As leverage declines, so do the earnings. As go the earnings, so go the prices.

How is this true for companies that produce tangible products?

Comment by ButImNotDeadYet
2008-10-12 11:20:24

[1] yes, the earnings of many (most) companies were augmented by leverage. As companies are forced to de-lever, they will sell chunks of themselves off and this will create opportunities for NEW companies who will pick up the pieces at fire-sale prices. I believe over the next 5 years we will see a bonanza of NEW small-cap and mid-cap companies on the scene. Yes, a significant portion of these will be privately held (thus shares not accessible in the public markets), but still, there should be another significant portion that will pop up as publicly held small cap stocks. The point is, there will be opportunities there. Exactly where, remains to be seen.

[2] why would people be willing to pay more for companies with levered earnings? I would argue the opposite. There is more risk of failure, so the investor should demand to pay LESS for a levered company than the same company without leverage. If an investor seeks levered earnings, they can go the “do it yourself” route by levering up their own balance sheet, then buying more shares of the un-levered company using other people’s money.

Comment by Faster Pussycat, Sell Sell
2008-10-12 11:52:41

You are arguing what people “should do” (something I agree with.)

I’m arguing what they have “already done” (hard to deny this one either.)

The E’s are coming down, and the multiples are coming down too.

I wouldn’t stand in front of the tsunami.

Call it Livermore’s Law — be bearish in a bear market, and bullish in a bull market.

Comment by Faster Pussycat, Sell Sell
2008-10-12 12:12:40

How is this true for companies that produce tangible products?

They have debt too.

Just because you produce a tangible product doesn’t mean you’re not levered.

Comment by Mary Lee
2008-10-14 22:47:42

GM, Ford, et al are perfect examples of this…..

Comment by Tim
2008-10-12 09:30:08

Are you referring to peak (as to which we are already down 40%) or from current prices? If you are referring to current prices, it would represent the biggest opportunity of my life time and should be able to invest my house fund and retire. Yet, I would see a world of misery from my windows. It is times like these that you have to be careful what you wish for (as offering shelter to my extended family and friends out of necessity and moral obligation is not exactly my dream retirement).

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Comment by Professor Bear
2008-10-12 09:17:53

My personal view is that the epic clash between the worst financial panic since at least the 1930s and a flood of liquidity into financial markets to offset its effects will result produce unpredictable and chaotic future stock price dynamics going forward. These conditions seem to me to be more favorable for dollar cost averaging than for market timing.

Comment by combotechie
2008-10-12 09:27:28

I’m not thinking in terms of market timing, I’m thinking in terms of market pricing. When the market is priced as if the world is going to end then that is the time to go all in. We’re not there yet, IMO.

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Comment by Tim
2008-10-12 09:36:43

I agree we may not be there yet, but remember when even some HBB’ers would place us in the tin-foil hat category if we made references to the Great Depression. Now it’s all over the main stream media. Those at work that couldnt believe I wasnt “smart enough” to buy a house when I moved here in 2005 or any point since then now talk around the water cooler about going all cash in their 401k and how they wouldnt even think about buying a house right now. Most panic I have seen in my lifetime. I am not sure how much more I can take.

Comment by Professor Bear
2008-10-12 09:42:55

The point of maximum investor gloom coupled with large piles of cash sitting on the sidelines waiting for a safe entry point will set the stage for a bottom. However, I have no way to predict when investors have collectively reached that point.

Comment by combotechie
2008-10-12 09:52:37

“However, I have no way to predict when investors have collectively reached that point.”

If you are fully prepared then you’ll know it when you see it.

Comment by Professor Bear
2008-10-12 10:06:33

“If you are fully prepared then you’ll know it when you see it.”

I remain unconvinced. I was working in the financial sector on Black Monday (Oct 19, 1987) and saw firsthand the ashen expressions on coworkers’ faces. My boss commented to me on that very day, “Now is the time to buy if you have the nerve.” Other coworkers expressed concerns that we were entering another Great Depression.

A year later, many were surprised to see the stock market in strong rally mode. Alan Greenspan claimed (and received) a great deal of credit for restoring confidence to the stock market by supplying liquidity in the period immediately following the crisis. Many investors who were awaiting and expecting a clear entry point for buying stocks found themselves left on the sidelines by the onset of the rally. My boss’s statement proved correct through the lens of the rear view mirror.

Are you suggesting it is different this time? I personally can see that the scale of magnitude of this crisis is much greater, but I am not sure the same qualitative results will not obtain from an apparently similar policy response.

Comment by Tim
2008-10-12 10:20:36

I agree. Buy on the plunges with a 12-18 month time frame from 0 to 100% invested, and I believe you will be glad you did in the long run.

Comment by Faster Pussycat, Sell Sell
2008-10-12 10:33:01

Are you suggesting it is different this time? I personally can see that the scale of magnitude of this crisis is much greater, but I am not sure the same qualitative results will not obtain from an apparently similar policy response.

I am.

The size of the derivatives market then was nowhere near as large. The size of the US debt was nowhere near as large compared to GDP. And interest rates hadn’t hit the 0% boundary.

So yes, it is different!

The first point (derivatives market) is the crucial thing. This is zero-sum, and it’s melting down. The size is beyond anything that the PTB can do.

I don’t think you understand the problem at all.

Comment by Tim
2008-10-12 10:41:25

Question for you Faster - unlike the housing market, the stock market can correct immediately as soon as it understands the true scope of the problem (the timing of the actual turn around is asset valuation is irrelevant if you know when it will occur and price in accordingly). What time frame are you looking at for this to occur and why? Do you think 1yr to 2yr period is too short? I am not doubting your words, just want to take your thoughts into account.

Comment by Tim
2008-10-12 10:49:52

“is asset” = “in asset” - Also i realize that an immediate bottoming upon recognizing the true scope of the problem would require there is cash available to flow in to set the floor, but I think there is a lot on the sidelines right now. Thoughts?

Comment by Faster Pussycat, Sell Sell
2008-10-12 11:00:16

My guess is late 2009 to early 2010.

Even if the current correction is panic, the earnings story posted above is real.

Earnings drive valuations.

Once again:

[1] Earnings of companies were based on leverage. With deleveraging, earnings come down, and with that prices come down.

[2] The multiples people will willing to pay were dependent on leverage. With less leverage, the multiples will come down.

I would wait. There is a ways to go.

And no, I don’t believe that equity markets correct instantaneously. The credit markets correct instantaneously. The equity markets are “stupider”.

Comment by Professor Bear
2008-10-12 11:04:38

“I don’t think you understand the problem at all.”

If I gave the impression that I thought I had any understanding of the financial picture, I must have misled you. But I am happy to hear that you have it all figured out. Perhaps you should apply for the Treasury Secretary position in the new administration.

Comment by Professor Bear
2008-10-12 11:11:52

FPSS - Are you on this short list?

If not Tom Brokaw, then who?
Handicapping the next Treasury secretary
By Darrell Delamaide
Last update: 1:13 p.m. EDT Oct. 8, 2008

WASHINGTON (MarketWatch) — When Tom Brokaw asked the presidential candidates Tuesday evening who they would name as secretary of the Treasury, he probably didn’t expect John McCain to retort, “Not you, Tom.”

Comment by Faster Pussycat, Sell Sell
2008-10-12 11:33:37

Don’t confuse authority with knowledge.

Comment by mrktMaven
2008-10-12 11:34:27

They are rolling with the dilution solution. Surely we’re due for a bounce, however. If OTH we break through Friday’s lows, (mbeep!, mbeep!) look out below.

Comment by Professor Bear
2008-10-12 14:34:17

“Don’t confuse authority with knowledge.”

I don’t. However, I do link people who pretend to know everything with authority.

Comment by mrktMaven
2008-10-12 12:56:19

“These conditions seem to me to be more favorable for dollar cost averaging than for market timing.”

Is that you BIM? My god, man. What have you done with the professor?

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Comment by Professor Bear
2008-10-12 15:03:31

“When the facts change, I change my mind.”

–J.M. Keynes–

Comment by Bill in Maryland
2008-10-12 15:41:28

“When the facts change, I change my mind.”

Facts never change. Market cycles are natural and unpredictable when it comes to the stock market.

Comment by Professor Bear
2008-10-12 21:48:50

Facts do indeed change. For example, back about a year or so ago, when BiM was saying to continue dumb dollar cost averaging, some of us skeptics were thinking it was not the best time to go long into stocks. Now that they are 40 pct cheaper, I am thinking it is a better time to dollar cost average, as the facts have changed.

Comment by Bill in Maryland
2008-10-13 17:23:59

The market fact that has not changed is the cyclical nature of stocks. Combine that with the creativity of the human mind (also a fact) to make better widgets at lower costs and yuo have the fascination of buying stocks, but more importantly, the unpredictability.

Throw in time and that makes dollar cost averaging the best strategy of investing in stocks.

Comment by Bill in Maryland
2008-10-12 15:31:07

These conditions seem to me to be more favorable for dollar cost averaging than for market timing.

Careful, this is my cue, and there are more than a handful of people on this blog who seriously hate me.

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Comment by Professor Bear
2008-10-12 21:50:42

Bill —

I believe you are merely paranoid. Nobody hates you so far as I can tell. As for myself, I some times give you and certain other posters a hard time, but I don’t mean any harm by it. Please do not take it personally…

Comment by Leighsong
2008-10-12 16:50:49

P’Bear - I love ya baybee!

“I remain unconvinced. I was working in the financial sector on Black Monday (Oct 19, 1987) and saw firsthand the ashen expressions on coworkers’ faces. My boss commented to me on that very day, “Now is the time to buy if you have the nerve.” Other coworkers expressed concerns that we were entering another Great Depression.”

Time out of mind - living in Clovis NM in 1987.

First house hubby and I purchased.

It all seemed so er…normal to me.

Raising a family, loyal wife, cutest (ever) 2 y/o son (the only one).

Life was good!!

I had no idea why folks were speaking words of the soon to come finacially meltdown?

(Yeah, perhaps ignorance is bliss).

My point, oh, sorry about the tangent.

My Grams, my Godess, I will die for her not to experience the tragedy of another great depression.

She is the calm in my storm. Squeeze a nickle to the buffalo poos - that’s my Grams!

I called her today, we both like to cook, and out of the blue she says “Looks like another depression.”

Loving someone who traveled the road, I tend to believe her.

So I question her further: Gram, “What would you do?”

Hoard cash, hide wealth, dress down (paraphrasing).

::clink:: Here’s to Grams.

Best Always,

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Comment by CA renter
2008-10-13 02:26:30

Thank you for your post, Leigh!

My late father (passed away last year) had bought us some farmland just before he died, “in preparation for the depression.”

Though he was young during the Great Depression (depression baby) the effects of it never wore off. He pinched every penny and lived far below his means all his life.

He was utterly convinced we were heading for a depression, possibly worse than 1929++. I tend to agree with him.

Comment by REhobbyist
2008-10-12 12:06:03

Hi Tim. We went and looked at two Sacramento houses this morning. Still ‘way overpriced. Came home and bought shares of Ford ($1.98), Alcoa ($11) and Wendy’s ($4.) How do you think I’ll do?

Comment by Tim
2008-10-12 15:14:08

Unlike Jim Cramer, I try not to provide comment unless I have done my own research or have personal knowledge. I am just getting into mutual funds (S&P Index, etc.). I would enjoy spending more time doing research on particular companies and will probably do so if I lose my job during the slow down.

Comment by Professor Bear
2008-10-12 08:21:56

Four out of five front page articles in today’s SD Union Tribune are about the financial crisis. That’s gonna put everyone in a more relaxed state of mind.

My favorite relates to an idea we discussed here maybe two years ago. I can only hope that our discussion inspired someone to act.

Blight-prevention law emerges as a national model
Chula Vista forces lenders to maintain foreclosures
By Emmet Pierce

October 12, 2008

Some lenders think there must have been a mistake when they see the hefty fines they have received for violating Chula Vista’s blight-prevention ordinance for foreclosed homes.

“I had one lender call and say, ‘I got a $13,000 bill and I want to know what you did for $13,000,’ ” said Doug Leeper, the city’s code-enforcement manager. “I said, ‘I didn’t do anything. We’re not property managers. We fined you because you didn’t do anything.’ ”

Comment by JP
2008-10-12 08:57:03

I love it. If there’s one thing that is going to cause lenders to move inventory (and fire-sale prices), blight-prevention laws are it.

Comment by Kim
2008-10-12 14:44:09

It will certainly help any town or city’s treasury replace declining tax revenues too. $850K levied so far in one town - I am all for that, even if they don’t collect all the money until these properties actually sell.

Comment by CA renter
2008-10-13 02:28:28

Yep. This is something I’ve been suggesting for a long time. Good to see they are going through with it.

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Comment by Frank Giovinazzi
2008-10-12 09:56:18

I tried to interest our town supervisor in this concept when it first appeared and got no response — and this town includes Brentwood, the jurisdiction with the highest number of subprime foreclosures in NY State.

Comment by jimbo
2008-10-12 08:23:42

From Atlantic City, NJ, a few “boots on the ground” observations concerning the effects of “The New Frugality”:
1. Went to The Donald’s Taj Mahal last night for a Lindsey Buckingham show in a 2500- seat theater. Great show, $40 tix– 1000 empty seats.
2. It wasn’t just the theater; the whole place was deserted on Sat. of Columbus day weekend; half the people milling about were employees.
3. Went out for pizza and more beer after the show to the very popular, family owned Baltimore Grill– place was deserted at 11:00 pm.
4. Casinos on Fri. reported 15% decline in Sept. yoy revenue. City council is delaying for one year law making casinos 100% smoke free (currently 85%).
I think there is something to this “New Frugality,” but I don’t think it is voluntary on consumers’ parts. When those teaser rates expire, seems like entertainment bucks are first to be sacraficed. AC’s in for a brutal ‘09.

Comment by combotechie
2008-10-12 08:29:51

Seventy percent of our economy is consumer based and the consumer is not consuming?

Fasten your seat belts.

Comment by vozworth
2008-10-12 10:05:49

its not just the little sheeples pulling back.

Brunswick, parent of Bayliner…..shuttering factories. Mass layoffs.

steady as she sinks…

Comment by aNYCdj
2008-10-12 08:44:11

Linens ‘n Things Asks to Begin Liquidation at All Stores
October 09, 2008

Clifton, N.J.-based Linens ‘n Things, which filed for bankruptcy protection in May, has requested permission from the U.S. Bankruptcy Court to begin liquidation sales at all of its 371 remaining stores, according to The Record. The retailer said that it plans to soon reveal the “stalking horse” bidder, which has reportedly proposed to liquidate the company. “There’s a number of other bidders who’ve expressed interest, and there will be a court-supervised auction on Oct. 14, and that’s when the other bidders have an opportunity to emerge,” a company spokeswoman added. “This isn’t a done deal.” Analysts expect the company’s owners “will decide that it’s time to throw in the towel, rather than keep the struggling company alive,” The Record reported. Linens ‘n Things was taken private in 2006 in a buyout by private-equity firm Apollo Management LP.

Comment by aNYCdj
Comment by sm_landlord
2008-10-12 11:35:58

Heh, they were raped by Apollo Mgmt. This happened to a couple of companies that I worked for in the 1980s, so it’s almost comical to see it happening again. Here’s how it works:

1. Buy company
2. Extract all cash, load on massive debt
3. Pay enormous dividend to new owners
4. Watch the company implode.

After working at two companies like this in a row in the late 1980s, I decided to found my own business - something that I could control. One of the most important life lessons you can take away from stuff like this: there is no security in being an employee.

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Comment by James
2008-10-12 11:44:35


Just another Fookin retailer; we have plenty of retailers.

We could use some manufacturing.

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Comment by hd74man
2008-10-12 16:59:28

RE: Just another Fookin retailer; we have plenty of retailers.

Been divorced, yet James?

My -ex grabbed all the houseware shit in my divorce.

I thought the store offered a great one stop shopping point for men who have better things to do than stooge around looking for pots, pans and other assorted sundries.

I am sorry to see them go.

Comment by LehighValleyGuy
2008-10-12 09:22:08

“They’ll decide that it’s time to throw in the towel…”

.. so to speak.

Comment by pressboardbox
2008-10-12 09:09:56

I was there two weeks ago midweek at midnight and the place was a ghost town. Just imagine the light bill!!

Comment by In Colorado
2008-10-12 09:23:16

My sis is at Disneyworld right now. Apparently its packed to the rafters.

Comment by Kim
2008-10-12 15:01:39

I posted before (I think it was Friday), that Disney World is pretty much booked through Christmas.

Comment by sleepless_near_seattle
2008-10-12 11:00:31

Both football games on right now have sellout crowds (according to the announcers). New Frugality seems highly variable.

Comment by aNYCdj
2008-10-12 11:19:03

All Season ticket holders just wait till NEXT year…and see if they can still afford it
Both football games on right now have sellout crowds

Comment by Bill in Maryland
2008-10-12 15:37:13

I’m hoping for less crowded roads and restaurants and coffee shops in late February when I return to my time share in Hawaii. I think I will see that.

Comment by Professor Bear
2008-10-12 08:24:51

Bush team overhauling rescue plan to aid banks
Buying distressed assets now put on back burner
By Edmund L. Andrews and Mark Landler
October 12, 2008

WASHINGTON – As international leaders gathered to grapple with the global financial crisis, the Bush administration embarked on an overhaul of its own strategy for rescuing the foundering financial system.

Two weeks after persuading Congress to let it spend $700 billion to buy distressed mortgage-backed securities, the Bush administration has put that idea on the back burner in favor of a new approach, which would have the government inject capital directly into the nation’s banks – in effect, partially nationalizing the industry.

While the Treasury Department says it still plans to buy up distressed assets, the scope of that plan is unclear. The federal government meanwhile has directed Fannie Mae and Freddie Mac, the government-controlled mortgage giants, to ramp up their purchases of troubled mortgage bonds, in what could be a speedier and less formal process than the reverse auctions proposed by the Treasury.

The Federal Housing Finance Agency, which last month seized Fannie Mae and Freddie Mac and placed them into a conservatorship, has ordered the companies to buy substantially larger amounts of mortgage securities – mostly subprime or other classes of mortgages in default.

The new plan to buy stock in banks, which has become the administration’s primary focus, brings the country closer to a partial nationalization of the banking system than at any time since the Depression. In exchange for providing capital, the government would demand some kind of nonvoting minority stake.

The surprising turnaround by Treasury Secretary Henry Paulson, announced Friday as part of a coordinated plan to rescue the financial industry, has raised questions about whether he squandered valuable time by trying to sell Congress a plan that he and other administration officials had failed to think through in advance.

Comment by Professor Bear
2008-10-12 08:28:23

I am wondering if this article may have implications for San Diegans’ future willingness to buy homes priced above $300,000?

Credit squeeze literally hits home as card limits, equity lines pared
By John Wilkens and Jennifer Davies
October 12, 2008

The credit crunch buckling Wall Street and the world economy used to seem like distant thunder. But more and more San Diegans are feeling the vibrations where they live.

It’s the letter that arrives in the mail from MasterCard, announcing a cut in your credit limit.

It’s the plans for a new Toyota Camry that have to be reconsidered because the only way to get a manageable car loan is to put more money down, and you don’t have it.

It’s the order for drywall at Home Depot that has to be canceled because your home-equity line of credit has been slashed.

It’s the dream of going to a top university that has to be delayed, or worse, because dozens of lenders are getting out of the college-loan business.

And it’s the calls that Gary Symington and his crew receive every day at Debt-Free America, a local nonprofit counseling service that tries to help people keep their financial heads above water.

“I’ve been doing this since 1996, and this is the worst I’ve ever seen it,” he said.

Comment by Fresno Dude
2008-10-12 09:15:18

The Republicans are going to loose at the state and national level because J6P does not want his beer money going to bailing out investment banks too big to fail, and hockey moms see the price of fuel more than they can afford for their SUVs. We can also blame J6P for buying the big house, or the hockey mom for buying the big SUV, in both cases most likely too big for their needs. However, a marketing class and a class in basic law are what the average person now needs to survive, plus the realization that entitlement is based on productivity. It used to be that if a person did not qualify for a loan, they would be denied, but the rules ceased to exist thanks to the Republicans. Businessmen and the average person fleeced each other; not caring about whether a payback was possible. Now those businessmen, home and SUV owners cannot sell anything and money for loans to sell anything is no longer available. Everything that goes around comes around. Maybe the rhetorical question is, were the conservative Republicans basically honest people, an honest day’s pay for an honest day’s work.

Comment by Bill in Maryland
2008-10-12 15:46:46

The Republicans are going to loose at the state and national level because

If you’re thinking about California, it don’t matter. There are no republicans in California. “Republican” is just a phoney label to sucker in voters for more California socialism. Lived in Fresno half my life so I’m well aware of California Politics. Ken Maddy, for example. He’s long gone from politics (1970s) but was no more capitalistic than John McCain and we know McCain is a class warfare socialist. That’s California Republican politics.

The most Capitalistic California Republican is more socialist than the most socialist Georgia Democrat.

Comment by dude
2008-10-13 08:37:27

You must have never heard of McClintock, the one who would have governed if AHnold hadn’t gotten into the mix.

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Comment by Robin
2008-10-12 18:12:15

Please, God!!! Don’t let another apparently intelligent poster seem unintelligent by using “loose” in places where they really mean “lose.” You win, I lose. The credit market is now very tight because it got too loose.

Don’t lose your cred!


Comment by takingbets
2008-10-12 20:06:19

Lol, i see that mistake all the time on the net!

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Comment by In Colorado
2008-10-12 09:26:46

<iIt’s the dream of going to a top university that has to be delayed, or worse, because dozens of lenders are getting out of the college-loan business.

Boohoo. So the kids will have to go to State.

Comment by edgewaterjohn
2008-10-12 09:28:55

“They have no equity, no savings, and nobody’s sending them offers for more credit cards. They’re stuck.”

Schadenfruede meter pegged. (again)

Maybe congress needs to create and hand out national credit cards - put a big ol’ screamin’ eagle on them for effect - no limits - and with each purchase you can earn points towards a trip to DC to see your favorite congresscritter in action.

Comment by implosion
2008-10-12 11:13:41

At that point, it sounds like bankruptcy is a logical choice.

Comment by Bill in Carolina
2008-10-12 09:54:05

“It’s the dream of going to a top university that has to be delayed, or worse…”

How ’bout a 3-year delay, as in, “You made them strong, we’ll make them Army strong!”

Comment by Matt_in_TX
2008-10-12 13:24:36

I’m not sure the coastal states could survive the reality shock.

Comment by In Colorado
2008-10-12 16:17:47

No thanks. I don’t want my kids shipped back in a body bag.

Comment by Professor Bear
2008-10-12 08:39:42

I heartily disagree with the Economist writers on their assertion that “Confidence is everything in finance.”

Assets need to be priced at levels where market participants are willing and able to pay for them, or there will be no liquidity. If asset prices become hopelessly overvalued, there will be no sales. A dearth of sales makes it impossible to price off the comps, and hence there is no way for market participants to agree on fair market value. No sales — no confidence. The direction of causality is fully obvious.

In short, asset price bubbles ultimately destroy confidence.

Stopping the bleeding in world markets
From The Economist
October 12, 2008

Confidence is everything in finance.

Comment by Blue Skye
2008-10-12 09:32:49

There is a very fine line between confidence and competence.

Comment by ACH
2008-10-12 09:49:34

Oh, I completely agree with the “confidence is key” crowd. I mean, someone like a future homeowner or a corporation wants to borrow money, the lender gets disclosure and does due diligence, if all comes back ok, then voila! The lender has confidence that the borrower will pay the loan back and the loan gets made.

Otherwise, the lender tells the applicant to go pound sand. At least that is the way it used to work. Maybe it does that again - soon.


P.S. It’s too big, and it’s gonna hurt.

Comment by Professor Bear
2008-10-12 09:56:50

How would this confidence concept work nowadays for a Central Valley strawberry picker who wanted to purchase a $700,000 home on $30,000 of household income? It worked just fine circa 2005.

Comment by ACH
2008-10-12 21:04:27

Ok Prof, let’s see:
Mr. and Mrs. Strawberry Picker has 20% down and needs to finance $560,000 @ 6% for 30 years. This means that the Strawberry Pickers will need to make a payment of $4217.41 which includes principle, interest, taxes, etc.

See? No problem. The Lender has done due diligence and makes the loan. The Strawberry Picker’s will need to make $50,607 worth of house payments and fees a year on yearly earnings of $30,000.

P.S. It’s too big, and it’s gonna hurt.

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Comment by Professor Bear
2008-10-12 21:56:15

Maybe homes will soon start going up in value by $20,607 a year or more? Then they could use HELOCs to cash out the equity needed to pay off the loan going forward…

Comment by darthrealtor
2008-10-12 14:29:07

“Confidence is everything in finance.”

Damn straight. It’s all one big confidence game.

Comment by waiting in_la
2008-10-12 21:06:55

hmmm … what do confidence and arrogance have in common?

Comment by aladinsane
2008-10-12 08:51:18

German gold dealers have stopped taking new orders for the precious metal as demand has skyrocketed. Gold is seen as a safe investment during the market turmoil.

“Demand has exploded in the past few days,” said Stephan Henkel, a gold broker at Umicore, which presses gold bars and coins and puts them on sale. Delivery times were running at two to four weeks.

“Currently, demand is about 10 times what it is at normal times,” he said.


Comment by combotechie
2008-10-12 08:59:05


Comment by aladinsane
2008-10-12 09:05:30


Lehman assets brought a princely 9 Cents on the Dollar the other day, almost exactly the opposite demand, as for the real deal.

(light bulb moment finally, perhaps?)

Comment by combotechie
2008-10-12 09:11:28

Your light bulb told me billions of dollars disappeared into thin air with Lehman’s demise which makes any remaining dollars in circulation more scarce and thus more valuable.

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Comment by aladinsane
2008-10-12 09:15:52


Any joker with state of the art printing equipment can knock off promise-sorry notes that pass muster, and that’s unauthorized printing…

Just imagine what the authorities are capable of?

Comment by combotechie
2008-10-12 09:20:00

We are in the midst of discovering what the authorities are capable of.

Comment by combotechie
2008-10-12 09:21:09

… and are incapable of.

Comment by aladinsane
2008-10-12 09:26:41


It’s like the government went All-In on the Raiders winning the Superbowl, and they just got the bet down yesterday, @ juicy 2 to 1 odds.

Doesn’t that scare you just a little bit?

Comment by combotechie
2008-10-12 09:37:50

What would scare me would be the contuation of the phony debt expansion we’ve experienced over the past several decades. A year or so ago this debt expansion screeched to a halt.

Now we get to experience the reverse of this expansion, which is a contraction. This contraction will be painful to those unprepared and profitable for those who are.

Whatever the government(s) do or don’t do really won’t make all that much difference in the grand scheme of things. Events will be played out as always, and life will go on.

Comment by aladinsane
2008-10-12 09:40:19


What are you backed by, exactly?

Comment by waiting in_la
2008-10-12 09:33:41

Yep - that behavior marks a perfect time for those who accumulated gold at low prices a few years ago, to dump into vulme at a high price. :)

Just another bubble.

Comment by LehighValleyGuy
2008-10-12 09:42:53

OK, I’m honestly not trying to start a flame war here, but since this keeps coming up, I’d like to make a few points about gold here. I think gold actually has a lot more in common with fiat currencies than you guys admit.

First, gold, like fiat currency, relies on widespread societal acceptance in order to be valid as money.

Second, while fiat currency requires the infrastructure of paper mills, printing presses, etc., using gold requires foundries, scales, assayers, and the like.

For both of these reasons, in a truly primitive society, gold gets you nowhere.

I understand that gold is scarce and limited in supply (although the supply is subject to erratic and unpredictable increases when new sources are found). But so what? Scandium is much scarcer than gold, are you guys running around trying to find every available bit of scandium?

The reason I don’t buy gold is that there is really very little fundamental *use* for it. It looks good to wear some as jewelry, as long as you don’t overdo it. Tiny amounts are used in some industrial processes. And that’s *it*. I don’t see that gold is inherently more like money, or more a store of value than anything else.

The real problem is government meddling in the money business. Paper money might actually be OK if it were issued by truly private banks.

Comment by aladinsane
2008-10-12 10:33:29

” Paper money might actually be OK if it were issued by truly private banks.”

The USA has been there, done that already.

By 1860, an estimated 8,000 different state banks were circulating worthless currency called “wildcat” or “broken” bank notes, so called because many of these banks were located in remote regions and frequently failed or “went broke.” The era ended in 1863 with the passage of the National Bank Act.


Comment by Professor Bear
2008-10-12 10:35:08

“I think gold actually has a lot more in common with fiat currencies than you guys admit.”


Comment by aladinsane
2008-10-12 10:42:14

Let’s compare production costs of current Federal fiat currency and Gold coinage…
Exhibit 1. $100.00 Banknote.

Production cost: 40 Cents

Exhibit 2: $50.00 1 Troy Ounce Gold Buffalo coin.

Production cost: $850.00

The former costs 1/250th of face value to create, while the later costs 17x face value to create…

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Comment by Bill in Maryland
2008-10-12 15:49:44


Comment by Professor Bear
2008-10-12 21:58:53

Narrowly-measured production costs are a red herring in this story. Gold has always been much more expensive to extract from the earth than the cost of printing the equivalent amount of fiat currency that it takes to purchase it — unless you include the price tag of national defense expenditures required to enforce the fiat as part of the printing cost.


Comment by Garrett
2008-10-12 11:52:54

Those in India and Asia LOVE gold. Their currencies are on the ascendancy and ours doomed to the toilet? Their appetites will keep the market afloat?

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Comment by waiting in_la
2008-10-12 21:09:58

It takes dollars to buy gold, after all. LOL.

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Comment by bluprint
2008-10-12 10:45:59

Note: I own just a single gold coin, I think it’s a half ounce. It’s pretty neat and one day I’ll own more, but I’m not exactly heavily invested in the stuff.

Having said that, there are some distinct reasons to believe that gold is a more “natural” or better money than fiat paper, and therefore has more longevity.

First, gold (and silver) has a long history of being a natural place for people to turn to for a monetary function. Paper only has such a history when it’s backed by something, or when it used to be backed by something. The Dollar, for example, gained “widespread social acceptance” while (and because) it was backed by gold.

Fiat paper in contrast has a well-established track record of ever-decreasing interest.

Gold also has the advantage of not being easily duplicated. It’s true that more gold can be mined or discovered, but the catalyst for that activity (mining) will be a natural result of whether there is currently enough gold to support the monetary needs. If so much wealth has been created in the world as to make gold extremely valuable, mining will increase to expand the supply of gold as needed. There is not an equivelant feedfback mechanism for fiat currency.

The criticism with “printing presses” doesn’t really have anything to do with technology or primitive society or whatever, it is associated to fact that there is not a natural control to limit the supply of paper money, i.e. “it is only limited by the number of printing presses”. In contrast, to increase the supply of gold requires a great deal of investment in time and resources, thereby creating a sort of natural control mechanism to how the supply will be expanded.

The thing about gold, is that even though it’s uses may be limited, they are certain. In fact, if it had no use (even jewelry) it likely would not have acquired a status as money. It’s primary use is the start of where its value is derived. After that, it can be traded always with the knowledge that there are people out there who want it for reasons other than money. There are lots of things which people use or desire, but gold’s physical properties are ideal for monetary use aside from it’s other uses.

Fiat dollars do not share that attribute, when a money’s only value is as money, it’s value will diminish over time.

Comment by ButImNotDeadYet
2008-10-12 11:37:01

You can’t “create” more gold or silver with a few clicks of a mouse, like you can with fiat currencies.

At least, that was the case before COMEX got involved…

Comment by Big Bubble Popper
2008-10-12 12:27:17

You are correct about gold. With the gold market as manipulated as it is, we end up with either gold not making sense as an investment (assuming we can even truly call gold an “investment”) or only being useful with net hyperinflation. In other words even with lots of inflation there has to be more inflation than deflation for investing in gold to even make sense. This is why gold doesn’t make sense right now. So much deflation has happened and a lot more is coming, that the “printing presses” of paper money will have enough trouble keeping up with that so there won’t be much in the way of inflation if any.

Some people think there is a third scenario for gold that makes sense, but that’s a TSHTF (the sh** hits the fan) scenario where no one is accepting paper money for food or fuel. A friend of mine was thinking this was a while back and was planning to buy gold coins. In such a scenario gold isn’t going to get you anywhere because YOU CAN’T EAT GOLD. If you’re trying to trade something for food or fuel in a TSHTF scenario, then it’s going to have to be something really useful which gold is not. If you’re worried about TSHTF then buy guns, ammo, water, and freeze dried food. Don’t worry about gold.

Comment by aladinsane
2008-10-12 12:35:51

I doubt that anybody is going to accept MRE’s, in lieu of the real deal for some choice real estate in the Southern Alps…

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Comment by Big Bubble Popper
2008-10-12 18:54:08

Yes, but under the scenario where you start buying MRE’s (and guns and ammo), property in the Alps is the least of your worries unlike where your next meal is coming from. And you can’t eat gold.

Comment by aladinsane
2008-10-12 19:06:20

Guns and ammo in the Southern Alps is limited to rifles and shotguns, no handguns though.

The long bore weapons are for hunting, and one of the prized kills in the Alps is a “Captain Cooker”, an oinker no doubt descended from some of the pigs Captain Cook let loose on the island, almost 240 years ago…

Comment by Robin
2008-10-12 19:00:58

Thanks for some sanity from the gold bugs who are right in projecting future value but ignoring liquidity. “Hey dude, wanna buy a bar?” - :)

Comment by Professor Bear
2008-10-12 10:43:04

Aladinsane — Here is a story that a western classical music lover like yourself should truly appreciate…

Austria witnesses new gold rush
By Bethany Bell
BBC News, Vienna

There’s a new gold rush.

The financial crisis is prompting people to look for safer forms of investment than stocks and shares.

[Gold bars produced in Austria

Both international speculators and ordinary Austrians want to get their hands on gold]

The interest in gold coins is so great that many of the world’s major mints are struggling to keep up with demand, including the Austrian Mint, which produces the Vienna Philharmonic - one of the best-selling bullion coins worldwide.

Sales of Vienna Philharmonic gold coins have gone up by more than 230% since last year.

Comment by aladinsane
2008-10-12 12:00:41

Dvořák is my favorite of all Romantic period composers…

Meet me in the Silent Woods


Comment by Professor Bear
2008-10-12 14:37:38

I also love Dvořák, though confess partiality to Brahms (the Brahmin of Romantic composers).

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Comment by Bill in Maryland
2008-10-12 15:51:32

Boring. I’m listening to Rap and Hip Hop the next 4 years because that will be the executive mandate.

Comment by Professor Bear
2008-10-12 22:21:42

BiM —

When I was much young and idealistic, I used to believe that any reasonably intelligent person could be educated to appreciate classical music. Now that I am curmudgeonly and cynical, I have concluded that this is not the case. Rather, I recognize that there is no accounting for taste…

Comment by ValVerde
2008-10-14 14:31:40

“I’m listening to Rap and Hip Hop the next 4 years because that will be the executive mandate”

There’s almost no style of music I hate as much as rap - very little good stuff and they managed to produce more crap in a few years than thirty years of bad pop.

BUT, dear Bill, I think we can do without latent racist comments here, thanks very much!

Comment by ValVerde
2008-10-12 15:55:23

Dvořák is fantastic, you’re right.

But Herr Wolfgang is not regarded as belonging the romantic era.

HAH - I got to correct aladinsane! What gives??

Might pick up some Philharmonics just for the hell of it while I’m over here.

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Comment by ValVerde
2008-10-12 15:57:11

note to self:

read stuff before posting smugly

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Comment by Professor Bear
2008-10-12 09:11:21

Wasn’t it just three years back that used home sellers driving Escalades were clogging major San Diego thoroughfares? Housing is still generally overpriced in San Diego, but the traffic is greatly improved over a few years back. Not sure whether used home sellers are riding bicycles around here, though…

Biking real estate agents apply some mettle to the pedals
By Whitney Malkin
October 12, 2008

Clad in a purple helmet with plastic flowers dangling from her handlebars, Portland’s Kirsten Kaufman is part of a new generation of agents eager to replace the stereotypes of hauling clients around in fancy sedans or SUVs.

Comment by In Colorado
2008-10-12 09:30:06

Realtors are trying this stupid gimmick in Ft. Collins as well.

Another realtor opened a “house store”. Come in to the office and preview homes on big screen TVs while sitting on a couch (gee, I can already do that at home…just plug the Mac into the TV and voila!)

Comment by edgewaterjohn
2008-10-12 09:32:13

Leave it to the agents to be amongst the first to get in on that $240 bike-to-work tax credit.

Comment by sleepless_near_seattle
2008-10-12 11:18:32

Yeah, great idea in the city of perpetual rain!

BTW Bear, you’d have loved the Lexus SUV I saw yesterday with plates, I kid you not, that read:

(that was you whose ire was raised at realtors in Lexus SUVs, wasn’t it?)

Comment by Professor Bear
2008-10-12 14:40:43

I used to drive on SD freeways in constant fear that my fuel efficient automobile would get smashed in a collision with a four ton hunk of iron. Those have largely disappeared from the road over the past three years, leading me to believe my driving risk has dropped considerably.

Comment by pressboardbox
2008-10-12 09:13:02

What idiot would be interested in lehman assets? I am shocked they could sell them at all.

Comment by Professor Bear
2008-10-12 09:20:15

Gamblers and bottom fishers…

Comment by pressboardbox
2008-10-12 09:17:45

“Greed got us into this mess and by god greed is going to get us out.” -Hank Paulson

Comment by edgewaterjohn
2008-10-12 09:33:38

Faith-based economics at its finest.

Comment by David Cee
2008-10-12 09:21:19

.Bye! Bye! Investors..
Fannie plans to load on extra fees across the board for investor loans purchased after December 1st because of market conditions. Freddie Mac is imposing similar fees, but its increases take effect November 7th.

Making things even tougher, some large private mortgage insurers plan to stop underwriting investor loans altogether, effectively cutting off financing support for low-downpayment, high leverage rental home deals, no matter where the property is located.

Fannie’s new fees will hit the full range of investors, from those with low downpayments to those who are able to put down substantial cash. As of December 1, investor applications where the downpayment is between 10 and 15 percent, can expect a 3.75 point adverse market fee — that’s up from two and a half points currently.

Loans where the investor put down 20 to 25 percent will be subject to a three point add- on, and even investors making hefty downpayments of 40 percent or more will have to pay one and three quarter point add-ons.

The new fees come on top of earlier Fannie Mae restrictions, including limiting investor applicants to no more than four rental properties, plus a variety of restrictions on condos, including bans on mortgages in projects where more than 49 percent of the units are owned by investors.

FHA just announced a new rule change involving conversions of homes into rentals that you ought to know about as well. Though not aimed at bona fide investors, the policy change prohibits consideration of rental income on applications where an owner of an existing home proposes to acquire another unit as a principal residence using FHA financing while renting out the first home.

In a directive to lenders, FHA said it wants to avoid situations where home owners factor rental income from a vacated unit into their applications, and then don’t — or can’t — come up with the rent money needed to support the vacated house, which may then go into foreclosure.

FHA announced two key exceptions to the new policy: Relocations required by an employer where the applicant can show that there’s already a one-year lease on the vacated home, or where applicants have at least a 25 percent equity stake in the property they are leaving behind.

Comment by Professor Bear
2008-10-12 10:34:00

We are all GSE investors now.

P.S. Bad things I may have said about HC earlier this year notwithstanding, I would greatly prefer her to occupy the WH than Sarah Palin.

Comment by aNYCdj
2008-10-12 10:41:38

scary thought HC would have been the best choice to handle this mess…..who knew? well we got the candidates we deserve

Comment by Professor Bear
2008-10-12 10:45:09

I don’t agree with that. I was narrowly comparing HC to SP.

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Comment by implosion
2008-10-12 11:27:17

Saw that announcement. Pretty hefty fees. Fees even depend on the number of units (1-4). Wonder if many of the sellers realize this is coming? Sellers where I am still in fantasyland pricing mode. This might snap them out of it a bit.

Comment by Eudemon
2008-10-12 16:06:54

Well, SOMETHING will have to cover Barney Frank’s looming legal fees. Might as well be Fannie/Freddie fees.

Comment by mrktMaven
2008-10-12 09:29:11

So, I woke up this morning and set my doom clock to sheer-utter-pan!c. What were they thinking? We are on Bunker Standard Time now. Future posts will appear erratic.

Comment by aladinsane
2008-10-12 09:32:04

Dr. Strangelove: Sir! I have a plan!

Comment by mrktMaven
2008-10-12 09:46:20

We have a new plan. Everyone agrees it’s better than the old plan. We’ll let you know more about it from the bunker.

Comment by Professor Bear
2008-10-12 09:54:03

As financial leaders from around the world hold hands and sing Kumbya to support an ill-defined top-down master-of-the-universe rescue plan, markets are very gradually healing themselves in a slow-burn mass deleveraging.

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Comment by aladinsane
2008-10-12 10:05:04

Kumbaya, my Loan, Kumbaya,
Kumbaya, my Loan, Kumbaya,
Kumbaya, my Loan, Kumbaya, oh, Loan, Kumbaya.

Someone`s singing, Loan, Kumbaya,
someone`s singing, Loan, Kumbaya.
Someone`s singing, Loan, Kumbaya, oh Loan, Kumbaya.

Someone`s praying, Loan, Kumbaya,
Someone`s praying, Loan, Kumbaya.
Someone`s praying, Loan, Kumbaya, oh Loan, Kumbaya.

Someone`s crying, Loan, Kumbaya,
someone`s crying, Loan, Kumbaya.
Someone`s crying, Loan, Kumbaya, oh, Loan, Kumbaya.

Someone`s sleeping Loan, Kumbaya,
someone`s sleeping, Loan, Kumbaya.
Someone`s sleeping, Loan, Kumbaya, oh, Loan, Kumbaya.

Comment by Otis Wildflower
2008-10-12 15:10:03

Mr. President, we must not allow.. A MINESHAFT GAP!

Comment by Professor Bear
2008-10-12 09:34:39

Oh, promises, their kind of promises
can just destroy a life
Oh, promises, those kind of promises
take all the joy from life
Oh, promises, promises, my kind of promises
Can lead to joy and hope and love
Yes, love!!

Financial Times
Pressure grows for details of stabilisation plan
By Chris Giles and Krishna Guha in Washington
Published: October 12 2008 01:17 | Last updated: October 12 2008 01:17

Pressure mounted at the weekend on the world’s leading economies to spell out the specific “urgent and exceptional” steps they have promised to take to stabilise financial markets before they open on Monday.

It came as the International Monetary Fund “strongly endorsed” the group of seven leading economies’ action plan to prevent any more important banks failing, unfreeze money markets, recapitalise banks, restore confidence of depositors and reopen markets in securitised assets.

Comment by sm_landlord
2008-10-12 11:59:19

Promises: Oh, Man. The lyrics only need a little tweak, not much at all:

Never again, isn’t that what you said?
You’ve been through this before
And you swore this time you’d think with your head
No one, would ever jack you again
And if takin’ was gonna get done
You’d decide where and when
Just when you think you got it down
Your charts securely tried and sound
They whisper, Promises To The Mark

Armed and ready, you fought those battles to the heights
But too many opponents made you weary of the fight
Blinded by passion, you foolishly bet just to win
All the warnings went off in your head
Still you had to give in

Just when you think you got it down
Resistance nowhere to be found
They whisper, Promises To The Mark

But promises, you know what they’re for
It sounds so convincing, but you heard it before
Cause talk is cheap and you gotta be sure
And so you put up your guard
And you try to be hard
But your chart says try again

You desperately search for a way to conquer the fear
No line of attack has been planned to fight back the tears
Where brave and restless dreams are both won and lost
On the edge is where it seems it’s well worth the cost
Just when you think you got it down
Your chart decreases - under ground
They whisper, Promises To The — Mark

Comment by Professor Bear
2008-10-12 09:38:26

Sarah Barracuda gives me the heebie-jeebies.

12 Oct 2008 12:03 pm
“Truly Peculiar And Creepy”

Hilzoy has a useful and devastating post on the Alaska legislature’s finding that governor Palin abused her power to go after and ruin a former family member against whom she had a grudge:

Comment by Professor Bear
2008-10-12 10:30:11

I was thinking last night that if she becomes VP, she could set back political prospects for women by quite a few years, as the ignorati will attribute the logical consequences of her lack of qualifications to the pool of female leaders who are actually qualified to hold higher office.

Comment by bulwark
2008-10-12 16:09:05

She’s more qualified than Biden. Read “Pull the hair plug on this guy” and you’ll see how the MSM gives him a pass: http://www.anncoulter.com/

Comment by Mary Lee
2008-10-14 23:18:39

Ann Coulter? Is she out on a pass?

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Comment by Eudemon
2008-10-12 16:11:24

Gee, and I thought Nancy Pelosi had already accomplished said feat!

Comment by NoSingleOne
2008-10-12 11:46:15

She actually was a maverick here in Alaska. She was the only Republican who wasn’t associated with the deeply corrupt party that has been in power here for so many years, and has had a long simmering grudge match with her party boss, Randy Ruedrich.

However, she brings her own kind of corruption, and other than oil and gas issues she doesn’t know or care much about anything outside of the filter of her church. At least she would still be a welcome respite from the politics as usual around here, if she returns as governor. Thankfully, Alaska has term limits for the governorship.

Even though I think she would make a terrible Veep, I obviously have mixed feelings about her as a governor, but feel that if she stays in that role she has more positive qualities than negative.

Comment by Bill in Maryland
2008-10-12 15:55:59

Not to worry. We’ll get Camelot back again since Obama will be Pres. the next 4 years. But one of the least popular presidents.

Bubbles pop. And this will be another fun bubble pop.

If you think house prices will stay stable and not fall anymore inauguration day because my man is elected (Obama), I have a big bridge to sell you. What I mean is the politicians (both left and right) think it is very important to keep house prices high. The alternative, low prices means they will be voted out.

Democrats will control the politics from those two branches. When the economy is bad the incumbent gets voted out with his party. Just like 2008 will be. 2012 will be back to the other useless party - Republican unless people get smart and vote Libertarian.

Comment by Professor Bear
2008-10-12 10:17:25

Economic signs pointing down
Consumers, housing, factories all dropping further in September
By Rex Nutting, MarketWatch
Last update: 6:00 a.m. EDT Oct. 12, 2008

WASHINGTON (MarketWatch) — The U.S. recession has been nearly forgotten in all the anxiety about the financial meltdown in the past few weeks. For those who care about the fundamentals, however, the coming week will feature a lot of data about the economy, much of it rather depressing.

The U.S. has slipped into a rare consumer-led recession this year. It looks increasingly likely that real consumer spending will decline for the first quarter in 17 years during the third quarter, and the fourth quarter isn’t likely to be any better. The only thing that kept spending up in the first half of the year was the infusion of about $100 billion into consumer’s bank accounts courtesy of Uncle Sam.

Comment by Brett
2008-10-12 10:46:34

He lives in a two-bedroom house hard by the highway in Boston, with flowers out front and a grill in the back. He has raised two children, bought two cars, and filed federal and state income taxes every year.

He blends seamlessly into his neighborhood, except for one thing: This particular homeowner, with his 1,875 square feet of US soil, is an illegal immigrant from Colombia, one of possibly hundreds of thousands of such people nationwide who have grabbed a piece of the American dream.

The Boston homeowner from Colombia said a convergence of events allowed him to buy a $400,000-plus home through a Spanish-speaking broker in 2004.

First, he said, he obtained a real Social Security number and Massachusetts driver’s license from the government in the early 1990s before security crackdowns. Then, he worked three jobs: making pizzas by day, cleaning office towers at night, and delivering soiled hotel linens to the laundry on weekends. To build credit, he opened a bank account and applied for Bank of America and Discover credit cards, which he always pays in full.

On the day he bought the home, he said, he paid $4,000 as a down payment, plus fees. Because of the low down payment, he said, he had a high interest rate of 7.8 percent, which he later lowered by refinancing.

Now, he just cleans office towers from 5 p.m. to 6 a.m. five days a week, netting $3,000 a month. He said he covers the $2,400 monthly mortgage with his salary, rent from a tenant, and help from family members who live with him.

Comment by aladinsane
2008-10-12 10:54:48

This could have easily been a story from 1908…

Just change the names and origins and amounts of money.

Immigrants have always been the backbone of our country, and they have one clear advantage over us, should things get really nasty here, and we decide to take out our wrath on them.

They can always go home. We don’t have that option…

Comment by James
2008-10-12 12:02:32

Do you honestly think going back to Colombia represents that great of an advantage?

This guy has been here since 90. Making little wages and apprently actually had some small savings.

Unlike you and I in out unibomber shacks with our small safe full of gold and silver bars and AK47 over the stove; this guy is actually doing some work.

His crime here was getting taken advantage of by lenders.

I’m all for forcing this family to navigate the minefield on the way to our Mexican speaking neighboor’s country. Not willing to send him all the way to Columbia.

Comment by aladinsane
2008-10-12 12:18:13

I suspect the public will be wanting to play the blame-game, and we can’t touch the bullies upstairs on Wall Street, but we can make immigrants lives so miserable that the cream of the crop takes off, and we are left with the dregs.

That’s what will happen.

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Comment by James
2008-10-12 12:28:54

Mr President; We cannot allow a mineshaft gap!

Comment by aladinsane
2008-10-12 12:37:47

Mindshaft gap, but you get the idea.

Comment by Matt_in_TX
2008-10-12 16:45:00

How is getting a loan at 80% income getting taken advantage of by lenders?

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Comment by AppleEye
2008-10-12 22:29:49

Illegals are not “immigrants” they’re criminal trespassers.

Once foreign nationals go to a US embassy, and abide by our immigration process, only then do they become “immigrants.”

Comment by Left LA
2008-10-12 11:14:19

You know, I was getting a bit misty reading this story about an (illegal) immigrant working hard to get ahead, doing the right thing, etc…

And then I read about the 1% down payment.

No skin in the game = take the house away.

Comment by Skroodle
2008-10-12 12:44:47

Exactly, 1% down and we are supposed to help bail him out? Thanks John McCain!

Comment by Ernest
2008-10-12 13:51:36

Another sob story that the masses can’t get enough of. The MSM just has to emote and it’s all over but the crying.

Comment by Professor Bear
2008-10-12 10:47:36

World financial leaders seem determined to throw the kitsch-and-sink at the financial crisis.

World rolling out emergency financial moves
U.K., Germany, France, Australia, Gulf nations all reported preparing measures
By Michael Kitchen, MarketWatch
Last update: 12:48 p.m. EDT Oct. 12, 2008

NEW YORK (MarketWatch) — Nations across the globe moved on new emergency measures Sunday to recapitalize banks, guarantee bank deposits and stabilize the world banking system amid fear of a global financial meltdown, reports said.

France, Germany, the U.K., Australia, the United Arab Emirates and Portugal were among the countries reported readying of fresh efforts to protect depositors and their banks.

Comment by Faster Pussycat, Sell Sell
2008-10-12 11:57:03

What “emergency” moves?

They agreed to do “something”. What exactly? Not a clue.

Well, I’m in favor of world peace too!!! Let’s go.

WOOOOOOOOO!!! I just solved world peace.

Comment by Professor Bear
2008-10-12 14:47:26

What “emergency”? How can something that started back in August 2007 and hasn’t yet ended qualify as an emergency?

Comment by PontiacMI
2008-10-12 16:12:09

Reminds me of a Twilight Zone episode: ” To Serve Man”

Comment by Professor Bear
2008-10-12 10:54:36

W’s tenure in office was very much about using scare tactics to erode basic individual rights which were written by the founding fathers into the Constitution. When you go to vote this November, think hard about which candidate is more likely to continue this trend, and which is more likely to reverse it.

P.S. I would personally count on a pair of candidates who actually read the Constitution to be more inclined to defend it.

Comment by lainvestorgirl
2008-10-12 11:30:51

Oh please, Obama is on Goldman Sachs’ payroll more than any other candidate, the idea that we really have a choice here is an illusion.

Comment by Professor Bear
2008-10-12 14:50:47

What does your point have to do with who read the Constitution?

Comment by exeter
2008-10-12 15:29:39

Nothing at all. Just more demonizing. Expect nothing less from RNC nutjobs.

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Comment by Eudemon
2008-10-12 16:37:27

Reading the Constitution is all well and good. How about pro-offering someone that actually follows it, PB? Or, are you fresh out of such individuals from your side of the aisle?

Your concerns seem misplaced, given the Left’s preoccupation with throwing out all sorts of constitutuional provisions via the Supreme Court.

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Comment by Professor Bear
2008-10-12 17:52:13

I am on neither side of the aisle. I take sides against whomever I believe will do the most damage, which currently appears to be McCain & Palin.

Comment by Eudemon
2008-10-12 21:30:34

Fair enough.

But please don’t pretend your favored candidates this time around could be bothered with adhering to constitutional principles.

Comment by Bill in Maryland
2008-10-12 16:00:58

Actually you are close to the point. Bob Barr’s or Ron Paul’s web site shows both McCain and Obama received huge contributions from the banking/finance industry, but Obama clearly got much more contributions from them. Think I’m lying? Go to the websites yourself frigging exeter.

Comment by exeter
2008-10-12 17:55:47

“Think I’m lying?”


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Comment by Eudemon
2008-10-12 21:42:47

The 2nd largest contributor to Obama’s political campaign has been none other than….Freddie & Fannie.

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Comment by exeter
2008-10-13 05:37:55

“The 2nd largest contributor to Obama’s political campaign has been none other than….Freddie & Fannie.”

Call the cops! Hurry!

Comment by AppleEye
2008-10-12 22:39:35

There was a “whole lotta scarin’ goin’ on” before GWB took office:


Or do people only remember things which occurred after January 2001?

Comment by aladinsane
2008-10-12 10:59:06

I thought of a name for tomorrow…

The Columbus Day Massacre

Comment by darthrealtor
2008-10-12 14:39:11

Bet the DOW goes up tomorrow.

Comment by Tim
2008-10-12 16:33:28

Pre-market is showing a 3% upward pop. We all know the last few weeks it’s only been the last hour that matters though.

Comment by Michael Viking
2008-10-12 16:52:43

I’m with Darth. I think it will go up, but you’re right, I’ve seen the futures be wildly unrelated to what happens during the day. Lots of volatility.

I think stocks have a long ratchet downwards to go. We all think houses should go to 2001 prices or whatever, why should stocks be any different? Some stocks I was looking at buying appear to be back to 2005 prices. No thanks.

Disclaimer: stocks that I don’t buy always go up so there’s never been a better time to buy the stocks I was researching.

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Comment by Matt_in_TX
2008-10-12 17:03:42

I think it will go sideways. Just a hunch ;)

Comment by Professor Bear
2008-10-12 11:28:48

I wonder at what point politicians will notice that the world economy has bigger fish to fry than falling real estate prices?

Financial Times
Confidence on rocks in shipping sector
By Robert Wright, Transport Correspondent in Athens
Published: October 12 2008 18:37 | Last updated: October 12 2008 18:37

One topic dominated the thinking of worried-looking shipping executives in Athens last week for the Financial Times’ World Shipping Congress. On the conference fringes, all were examining the implications of a sudden breakdown of key networks of trust and mutual confidence that normally underpin the industry’s activity.

Tales abounded of charterers abandoning long-term contracts with owners or using routine problems such as port delays to break contracts.

Comment by Professor Bear
2008-10-12 11:31:50

Financial Times
US car crash
Published: October 10 2008 15:09 | Last updated: October 10 2008 22:17

The Dow was trading at a hair above 200 points, the Soviets had just declared themselves a nuclear power and the US population was half of today’s level. Much has changed since 1950, but the share price of the world’s largest car company, General Motors, is back to where it was in those heady days of American industrial supremacy and there is rampant speculation it is heading to zero, with Ford – which on Friday announced the departure of its chief financial officer – not far behind.

The collapse in domestic auto sales to the lowest level since 1992 and a poor outlook make it likely that Detroit’s big three, rounded out by privately held Chrysler, will burn through much of their cash by late next year. Bets on their debt in financial markets give low odds to their creditors getting all their money back over the next five years. CMA Datavision puts the probability of default for Ford and GM at 90 and 97 per cent respectively.

Comment by Terry
2008-10-12 11:32:44

It doesn’t matter who wins the presidential election. By March 1, of 2009, whoever it may be, will become the Herbert Hoover of this century. If you read, wickpedia, the great depression..go down the page to inequality of wealth and income…were doomed.
History is repeating itself. by the end of the year, this financial crisis will be down to Jsixpack and family. Jobless rate will exceed 10% and climbing. The dow will be at 6500. General motors will declare bankruptcy. Interest rates, if you can get a loan, will be at 8% for home loans. Credit cards rates will be in the neighborhood of 20%, with minimum payments equal to 20% of the balance. bankruptcy and foreclosure rates will skyrocket to 1930’s statistics.
Those that retired on the big three plans will be left with only social securityThose that invested retirement money in the markets, will never be able to retire.
We are no longer talking, a financial meltdown, we are talking a meltdown of the country. The US will become a third world socialist entity. The entire world, will be in a depression leading us back to where we were before 1939 and the advent of Adolf Hitler.
The next President, by June of 2009, will declare martial law and
confiscate the land that is used as collateral of all the bad debt, the government purchased. Those that live in foreclosed houses will be forced to work in CCC camps to pay their rent. Hospitals will close for lack of paying patients. health care will be reserved for the wealthy.
Greed got us into this and greed for power will destroy this country.

Comment by Professor Bear
2008-10-12 14:43:53

By March 1, of 2009, whoever it may be, will become the Herbert Hoover FDR of this century.

Hoover II’s term is almost up.

Comment by ButImNotDeadYet
2008-10-13 02:19:00

Comparing Bush to Hoover does a great disservice to Hoover. All Hoover had going against him was the economy. Bush did all that and then some:

1. Allowed terrorists to attack New York and Washington (and for this he co-opted the tagline “strong on terror”?)
2. FAILED to catch the man responsible for said attack
3. Spent $1 trillion invading a country which posed no genuine (only imagined) threat to us or our allies
4. Subverted the Constitution by instituting the Patriot Act, suspended the writ of Habeus Corpus, and allowed torture to be used by U.S. forces
5. Presided over the largest botched response to a natural disaster in American history (Hurricane Katrina)
6. Ran the national debt from $6 trillion to $10 trillion ($12 trillion if you include all the bailouts) in 8 short years.

The “cherry on top” of this national nightmare is the economic disaster we are now experiencing.

Comparing Bush to Hoover is really, really unfair to Hoover…

Comment by combotechie
2008-10-12 14:59:13

We’re doomed. There is no hope. Tell your friends.

Lol. I smell an intermediate stock market bottom in the making.

Comment by Professor Bear
2008-10-12 15:06:14

I see a killing in the making among financial market playas who were recipients of the Fed’s generous below market rate TARF/SCARF/BARF loans…

Comment by Bill in Maryland
2008-10-12 16:04:47

Our Constitution and Declaration of Independence are stitched into millions of Americans minds. Certainly we will go into the dark ages the next 4 years but there is no way that they could pass new spending increases without us ousting them. There is no way they could pass new tax cuts (without spending decreases) either. Both unfeasible.

The smart thing for Obama to do will be to veto all spending coming across his desk. My guess is he will rubber stamp everything, and yes, be the Herbert Hoover of our time.

Comment by Affordability
2008-10-12 17:26:28

Sloth was never good for anyone anyhow.

It will be good to have people productive and working. They will feel better and the world can be a better place if the rich got back to work in making jobs instead of lounging on golf courses bored out of their minds or sitting around complaining about the young.

Let them try working on $7 or $8 an hour and making ends meet.

Just as long as we don’t have any more of those tax cuts and spend type presidents we might have a balance budget again. They have wasted more money on wars and power grabs. They have just gone out and destroyed the planet with bombs, bullets and crap made cheaply and poorly

It is time we got back to taxing everyone their fair share and spending money on things that are good for people like libraries, parks, bridges, health care.

I have no desire to pay for government employee health care anymore until the rest of us get our health care paid for from our taxes. Enough of this separate system for some where their taxes are not paid into the whole pot either.

Comment by Professor Bear
2008-10-12 11:34:55

Financial Times
Why does IMF want to ratchet up pressure on poor?
Published: October 11 2008 03:00 | Last updated: October 11 2008 03:00

From Mr Rick Rowden.

Sir, If the International Monetary Fund is projecting that the world economy is now entering a major downturn in the face of the most dangerous shock in mature financial markets since the 1930s, and that “that global growth was likely to slow to 3.9 per cent growth in 2008 and 3 per cent in 2009, sharply down from 5 per cent growth last year” (”IMF forecasts global slowdown”, FT.com, October 8), then why is it still making its assistance to low-income countries conditional on the adoption of tighter fiscal and monetary policies?

Comment by Faster Pussycat, Sell Sell
2008-10-12 12:08:31

Yeah, the loose fiscal policies really led to wonders.

Like Iceland.


Comment by satan
2008-10-12 13:51:19

The IMF, WB and all other agencies populated by western elite are now the walking dead. They have lost their life (credibility), now all they can do is stagger around pretending to be relevant. They have no power (trusted money), prestige (”professionalism”) or leverage(demographic trends).

The smartest thing they could do is to make poor countries rich through trade and create new consumers. I doubt they will (at least willingly). They will try to hang around and keep talking in code words about western privilege, even though that corpse is now starting to stink.

Comment by Left LA
2008-10-12 12:02:23

From time to time in the last 5 years I made the mistake of typing in “theeconomist.com” instead of “economist.com” when trying to navigate to the magazine’s site.

“theeconomist.com” would bring up a single-paged site dedicated to the genius of Alan Greenspan replete with a close up portrait of that moron’s mug.

Today, I made the same mistake. This time, however, I was greeted with a
404 error. Seems that perhaps the toad-worshiper has finally figured out who got us into this mess.

Comment by Left LA
2008-10-12 13:23:43

Spoke too soon… it is back up!

Comment by James
2008-10-12 12:15:44

I kind of like the current plans that are being put out there now.

We are going to buy securities. Once we get some money. Maybe you will get diluted shares, maybe not.

Perhaps we will get prefered shares in your bank. Its probably insolvent anyway. Maybe we buy common stock too. Which bank to chose from? Hope that makes you feel more secure about your “investment”.

Freddie/Fannie are going to buy 20B a month in damaged securities. OK, are they going to buy them at par and be banrupt in a month? What about their insurance? Meanwhile their costs are increasing to the consumer to handle this.

Does this represent an increase in liquidity? Especially since people can’t afford to buy at todays prices, its past peak buying season and you are making it more difficult to qualify. Finally will this move make investors feel any better about the debt they are buying?

Finally, people holding stocks and money over seas are potentially going to get cooked by ECB deciding to back all interbank loans, deposits exc. So, this should have the effect of strengthening the dollar and treasuries.

The chaos of the next few weeks should be epic as people run for the exits.

Comment by frankie
2008-10-12 13:07:14

Lordy I’m buying some banks.

Four of Britain’s biggest banks will ask for about £40bn of taxpayers’ money as capital to boost their balance sheets, the BBC has learned.

Royal Bank of Scotland (RBS), HBOS, Lloyds TSB and Barclays are in talks with the Treasury, the Bank of England and the Financial Services Authority.


Comment by Professor Bear
2008-10-12 15:02:09

Here is an article that might help curb your enthusiasm.

Financial Times
Rules on debt and capital will be tightened
By Chris Giles in Washington
Published: October 12 2008 20:57 | Last updated: October 12 2008 20:57

Once the immediate crisis has passed, financial regulators are adamant that banks will not be allowed to imperil the world economy again. If the authorities are successful, financial institutions will be prohibited from ramping up as much debt with so few buffers.

Mario Draghi, the governor of the Bank of Italy and chairman of the Financial Stability Forum, said: “It has taken this crisis to understand we need less debt and more capital [in the banking system] . . . Profits are going to be lower in future in the financial services industry.”

Comment by frankie
2008-10-13 02:14:07

I don’t think enthuastic is the word that came to mind when details of this came out. A good anglo-saxon word starting with F and ending with ed is the first thing that entered my mind.

Comment by Professor Bear
2008-10-12 15:15:19

Perhaps the MSM should stop reporting on this story. By merely reporting on the status quo, they are most likely adding to the panic.

Financial Times
Scramble to avoid collapse
By Chris Giles and Alan Beattie in Washington and Ben Hall in Paris
Published: October 12 2008 01:17 | Last updated: October 12 2008 18:54

Financial crisis summit

World leaders are scrambling to finalise rescue plans for their banking systems before stock markets open on Monday, amid fears the global financial system is on the brink of collapse.

Comment by aladinsane
2008-10-12 13:19:40


Comment by combotechie
2008-10-12 17:51:46

Ah, yes, the private delights of Marion Davies.

Comment by Faster Pussycat, Sell Sell
2008-10-12 21:33:42

I just got back from seeing her bedroom.

Gorgeous but so absurdly modest you’d be surprised.

Comment by sleepless_near_seattle
2008-10-12 13:56:18

Where is all this inflation I keep hearing about? All I know is my Currency CDs are gettin crushed right now. Grr.

7% sounds great until the dollar surges by 20%+ (vs. Real)

Comment by Bill in Maryland
2008-10-12 16:06:40

Then buy gold!

VWESX - corporate bonds - yield is 7%.

Comment by Professor Bear
2008-10-12 15:19:37

I am guessing this reporter botched his story by forgetting to insert the word “growth” between “gross domestic product” and “grinds.” Things may get rough next year, but nothing like this story makes it sound.

IMF Says World Economy Heading for `Major Downturn’ (Update2)
By Christopher Swann

Oct. 7 (Bloomberg) — The global economy is headed for a recession next year, as U.S. gross domestic product grinds close to a halt, the International Monetary Fund said in reports ahead of a Group of Seven meeting this week.

“The global economy is entering a major downturn,” the fund said in a staff report, dated Oct. 4 and obtained by Bloomberg News. “Many advanced economies are now close to recession, while emerging economies are also slowing rapidly.”

Comment by Curt
2008-10-12 16:34:38

The whole world must love us. What a few over priced houses and the dreams of eternal riches can bring…..

Comment by Bill in Maryland
2008-10-12 16:25:35

Thinking about the phrase “war against savers,” I’m thinking that actually there is no war against savers in growth stocks, savings bonds, and muni bonds. Over the long run your net worth builds up. How could you be attacked if you do not incur a capital gains tax?

The real war is against people moving up the ladder in incomes. But there is no easier way to say that than “war against savers.”

I had a chance to sell my company stock at its peak in September, but I would incur a sharp capital gain tax. I’d rather have 50% losses in the value of my stock than to give any gain to the government. I’m at war against needlessly giving money to the government to waste.

In a few years we’ll be economically forced to get rid of the income tax, obey the Constitution (for what the Congress should allocate tax money to) and institute the Fair Tax, like the one Neil Boortz is pushing.

Comment by Matt_in_TX
2008-10-12 17:09:14

You mean, a few years after we try going to Rediculous Speed on spending first, just in case it might maybe work.

Comment by combotechie
2008-10-12 17:44:01

I rode my bike to Seal Beach this morning and encountered mass hysteria among some of the old folks that haunt Main Street.
One geezer was alarmed because the government was going to try to seize his neighbor’s house and he was going to fight them off with a gun if it came down to it. I asked him if the neighbor cashed out a lot of financing and he told me no, the house was paid off.
“Then why is the government going to sieze the house?”
“Because the she won’t be able to pay the taxes!”
“How much are the taxes?”
“Twelve-hundred dollars!”
“A year? That’s only a hundred dollars a month! Your neighbor can’t afford a hundred dollars a month?”
“Not on a fixed income!”
“What were the taxes last year?”
“Twelve-hundred dollars!”
“But if your neighbor could afford to pay twelve-hundred dollars last year what’s the problem with paying them this year?”
“I just told you, she’s on a fixed income!”

And so it went.

Comment by CA renter
2008-10-13 03:16:44

Well…considering the “War on Savers” with negative real interest rates on “safe” investments (CDs and Treasuries), he’s absolutely correct!

IMHO, the seniors are the ones who have been most damaged by this whole thing. The rise in house prices doesn’t really do much for them unless they re-mortgage their houses (I’m assuming they’ve been paid off). Any corporate bonds are suspect at this point, and if they were invested in the stock market, they’ve just lost 20-50% of that as well.

Never heard the AARP lobbying against artificially supressing interest rates…maybe because they are so heavily into insurance and have profitted from the ponzi scheme during the boom?

Comment by vozworth
2008-10-12 18:07:41

have not done this in quite some time, but a while back I mentioned a play, the play was long MTU into the hedge fund liquidations.

Well folks, last week we saw liquidations of a grand scale. I went long into the MTU, with full knowledge of the MS 9billion dollar capital injection for 21% of MS.

Friday, Hoz called for the nationalization of MS, coupled with the fact that the shorts were in full scale attack mode.

Tonight….MTU is renegotiating with MS, Japan is on market holiday. NYSE opens in about 12 hours in New York. So here’s what is about to happen.

1. MTU is going to get a preffered deal at a minumum of 10%. and a strike price on warrants at about 10 for 51% of the company.
2. MTU negotiators go back to playing sudoku, and MS goes to Nationalization and existing shareholders get diluted about 80%….

MS blinked.

good luck people.

Comment by ButImNotDeadYet
2008-10-13 02:20:44

Congratulations and well done on the Mitsubishi call…

Comment by vozworth
2008-10-13 06:00:47

not as good as I would have hoped.

FED backstopped the deal and announced unlimited liquidity measures.

This is all out- no holds barred inflation.

wave 3 up cycle is on.

Comment by Professor Bear
2008-10-12 21:33:29

Wall Street Journal
* OCTOBER 13, 2008
A Crash Heard Around the World
Financial Danger Zones Emerge in Many Corners as Investors Feed Global Downturn by Trying to Flee It

Investors are feeding a dramatic world-wide slowdown by trying to flee it, racing away from many corners of the globe they used to favor. The resulting tumbles in stocks and currencies have helped provoke a broader crisis in places such as Iceland, whose turmoil in turn is hitting bank depositors from London to Amsterdam.

In the tightly interwoven global financial system, countries large and small have been affected by the dramatic slow-down in economic growth.

As foreign capital flows out of a host of smaller economies, it’s laying bare the excesses built up during five years of strong growth and easy access to borrowing. Concerns are rising that such countries could prove weak links in the world’s tightly interwoven financial system.

Even as the world’s major economies are forced to move more aggressively to bail out their banks and markets, those danger zones are taking on outsized importance.

In highly indebted countries in eastern Europe, for instance, economic expansion went hand-in-hand with rampant borrowing, and imports far outstrip exports. That makes them dependent on financing from overseas to close the gap — at a time of maximum fear among global investors. It also means they risk a broader financial crisis that could reverberate back into other parts of Europe, darkening the already grim picture.

Comment by Professor Bear
2008-10-12 21:36:56

Wall Street Journal
* OCTOBER 13, 2008

The 1% Panic
Our financial models were only meant to work 99% of the time.

The Panic of 2008 is a crisis of trust. Investors don’t trust the value of bad debts enough to offer market-clearing prices. Banks don’t trust one another to stay in business long enough to do business together. And there’s definitely no trust that Washington can avoid creating costly new moral hazards as it attempts to bail out the system.

But the most paralyzing loss of trust may be in Wall Street’s system itself: How did the smartest people at the best banks running the most sophisticated financial models fail to forecast the collapse of mortgage-related securities? How did this unpredicted collapse devastate the system? And most of all, can we ever again trust the financial models on which value is supposed to be determined?

These questions matter because despite the current crisis, modern finance has delivered enormous benefits, from explaining to investors why they should diversify their investments to the creation of mutual and index funds. Related innovations helped financial institutions speed capital to its best use, fund new businesses and accelerate global prosperity. In other words, financial engineering worked beautifully — until suddenly it didn’t.

So what happened? Financial models take logic and historical data into account, but it’s now clear that these elegant models have a serious weakness: They can’t cope with illogical and uneconomic factors. Washington’s insistence for years on artificial subsidies for mortgages through Freddie Mac, Fannie Mae and other programs led to a loud “Does not compute!” that is still rocking the financial system.

Comment by Professor Bear
2008-10-12 22:04:32

Wall Street Journal
* OCTOBER 13, 2008

Keep Your Money in the Market
We’ve been through ups and downs before.

As the world economy reels under the weight of the worst financial crisis since the Great Depression, we have been left with a broken financial system. Financial institutions around the world have suffered life-threatening, self-inflicted wounds by purchasing over a trillion dollars of complex mortgage-backed securities backed by dodgy loans based on inflated real-estate values. These assets have been financed with enormous leverage and with short-term debt. Just prior to its “rescue,” Bear Stearns had a debt to equity ratio of over 30 to 1, making it susceptible to a “run on the bank,” although Bear was not a commercial bank but rather part of the “shadow banking system” built on derivatives.

The long-run solution to the present crisis must involve substantial deleveraging and a recapitalization of our financial institutions. In the meantime, credit has been essentially frozen and a world-wide recession seems almost inevitable.

But just because stock markets have panicked, investors should not. The best position for investors today is not “fetal and 100% in cash.” We are not going to have a depression, and we have survived financial crises before. A century of investing experience, as well as insights from the field of behavioral finance, suggest that investors who bail out of equities during times like these are almost always making the wrong decision.

Comment by Professor Bear
2008-10-12 22:09:54

Wall Street Journal
* OCTOBER 13, 2008

Investors’ New Mantra: Bye and Fold

The frenzy of selling that sent stock and bond markets into a downward spiral over the past two weeks saw investors abandoning anything with the tiniest hint of risk.

It was more than just a response to the credit crisis rippling around the globe. The severity and the scope of the downdraft may have scared many individual investors away from stocks for a long time to come.

Comment by Professor Bear
2008-10-12 22:11:26

Wall Street Journal
* OCTOBER 13, 2008

Iceland’s Blowup Adds to Panic

One of the world’s biggest hedge funds has just blown up. It’s called Iceland. And its demise is contributing to the downward spiral in which financial markets find themselves.

Comment by Professor Bear
2008-10-12 22:14:40

Wall Street Journal

* OCTOBER 13, 2008

Slow-Motion Crash Leaves Investors Scrambling

The vertiginous stock-market ride of the past two weeks has left investors from the skyscrapers of New York to the kitchen tables of California struggling with whether to hold, sell or, somewhat improbably, buy.

The scenes from the front lines of the carnage looked like this:

In a Manhattan high-rise, hedge-fund manager Peter Siris watched in shock as “no” votes cascaded from the House of Representatives on Sept. 29. Lawmakers were rejecting the financial bailout. Soon, he was purging vulnerable stocks.

In Berkeley, Calif., Yue Cathy Chang, a 28-year-old IBM software saleswoman, peeked at her portfolio that evening. “Oh, no,” …

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