The Housing Bubble

Inflation.

Canned tuna. Target brand.

January 2008. 6 oz $0.52
October 2008. 5 oz $0.79.

Where’s the deflation?

At that rate it won’t be long before a can of tuna is $4.00.

I don’t eat out often and I’ve never bought a motorcycle. Utilities, taxes, food, gas. More expensive. Wages are flat.

At $10 an hour he’s still paying more for everyday essentials.

When is ComEd going to lower my electric rates? When is People’s Energy going to cut gas delivery rates? When will it cost $2.00 a gallon for gas? When will my sales tax rate return below 10%? When will Target lower the price of tuna?

The cheap guitars is a supply demand issue, not a deflationary issue. Less people want to pay $500 for a guitar. They’re using the money instead on gas, food, energy, taxes.

We have the bulls right where we want them, no?

The pain comes to Chicago. The Trib ran this article yesterday.

http://www.chicagotribune.com/business/chi-upside-down-mortgage-monoct13,0,2329863.story

With gasoline prices spiking downwards, I believe a fair price for a gallon of regular unleaded ought to be $2.70 a gallon, but they have played this trick in the past. It takes them a year to get the price down and the public is smiling the whole time because they’re getting some sort of reduction.

Oct. 14 (Bloomberg) — Iceland’s benchmark stock index plunged 77 percent, the biggest decline on record, as trading resumed after a three-day suspension and the nationalization of the country’s largest banks.

A little more for the deflation side of the argument:

http://www.nytimes.com/2008/10/14/business/economy/14commodities.html?ref=business

“Since the spring and early summer, when prices for many commodities peaked amid fears of permanent shortage, wheat and corn — two cereals at the base of the human food chain — have dropped more than 40 percent. Oil has dropped 44 percent. Metals like aluminum, copper and nickel have declined by a third or more.’

“The swift turnaround is the brightest economic news on the horizon for consumers, putting money into their pockets at a time they need it badly. Gasoline prices in the United States are falling precipitously — by about 24 cents over the last five days, to a national average of $3.21 a gallon on Monday — and analysts said they could go below $3 a gallon nationally this fall, down from a high of $4.11 a gallon in July.”

“Prices for most commodities remain elevated by past standards, and they rose a bit on Monday amid the broad market rally. But the trend seems to be downward as traders weigh the prospect that the global economic crisis will lead to sharp drops in demand. The big question is whether prices will drop all the way to long-term norms or whether Asia’s continuing economic boom has set a floor.”

Credit cards are the next shoe to drop. Who didn’t see this one coming?

http://redtape.msnbc.com/2008/10/credit-cards-at.html

Dow +936 = 48 hour Free Market intervention = Global Financial Problem’s solved = time to dismantle TARP.

Paulson (loud whistle): “Hey, Goldilocks…quick get on the train, it’s leaving the station!
Goldilocks: “But there’s just the engine…where is the rest of the train cars?”
Paulson: Well, we’ll worry about that later…right now there is only room for one passenger…and you’re the lucky gal!

I was reading “Hard Times” by Studs Terkel, about the great depression.

Back then, when foreclosing on farms, the banks were getting deficiency judgements against people with no assets, no job, no home, no food. Many spent a decade trying to pay them off. There were mass protests to stop the deficiency judgements.

There’s a dog that hasn’t barked, given the multiple years and tens of millions of dollars the financial industry spent to get the right to collect part of people’s salaries for years after bankruptcy. Anybody hear anything about deficiency judgements? I haven’t seen examples posted here.

I wonder if, politically, the financial industry feels it had better not dare. Or, because it isn’t the mortgage servicers money, they don’t care.

PBS Newshour had some squawking experts on last night, talking about the economic crisis. http://www.pbs.org/newshour/bb/business/july-dec08/globaleconomy_10-13.html

I’m posting some excerpts from Martin Feldstein (Harvard). Emphasis is mine:

======
MARTIN FELDSTEIN: Well, simply injecting equity by itself isn’t going — there isn’t going to be enough equity injected to make other financial institutions and other investors in the commercial market willing to provide lots of additional funds to the major banks that are holding impaired securities.

What the Europeans are doing that we’re not doing is providing some kinds of credit guarantees on top of that.

But the fundamental thing in my mind about the situation in the United States that makes us very different from Europe is that our bad mortgage paper, our bad assets in these financial institutions, is being driven by the foreclosures and defaults in the residential real estate market.

For us, we have to get at the fundamental cause of all this, which is the rapid decline in house prices, which is causing individuals to default on their mortgages, leading to foreclosures and a further downward spiral in house prices.

Yes, I do, because while it’s true that they’re going to try to help some of those who are already with negative equity, that is, have loan, mortgage loans that exceed the value of their homes, nothing in this plan deals with those people who today have some positive equity, have loans less than the value of their home, but are seeing house prices fall and are being pushed into a situation where it will be attractive to default.

So there’s no firewall. There’s no circuit-breaker to stop what Joe Stiglitz described as hemorrhaging from the loss in the prices of homes, leading to defaults, leading to foreclosures, and thus creating a downward spiral in house prices.

And even if we were to do everything in the U.S. that the Europeans are doing, it wouldn’t be enough, because we have this fundamental problem in the housing sector that’s driving our own and, indeed, also, to the extent that the Europeans are holding U.S. mortgage-backed securities, that is driving the problems there, as well.
======

Within 8 minutes [with two other guys talking too], this guy says three times that we need to keep house prices artifically high. And oh by the way, government is not putting enough money into the banks!

And he’s not the only expert I’ve seen asking to keep house prices up. Geez, talk about bunch of “whiners.” With one side of their mouths they deplore “nationalization” and “socialization” and lament the “fall of capitalism.” On the other side they beg for more taxpayer bailout dollars to keep house prices up (so banks can privatize the profit later, of course). Greed on all sides.

We went garage sale-ing on Saturday. As we drove around, I began wondering how the economic problems will affect garage sales and thrift shops. Will the available stock go down because more people can only afford used goods? Will it go up because more people need to sell their junk to pay bills? Or will the two balance each other out?

Where is the public outrage? The bailout was voted on based on specific parameters regarding exact allocation of the public funds. Now Paulson somehow gets to just try whatever scheme he wishes with all of the hundreds of billions of dollars? What was the purpose of the senate and house votes on the bill if they can just rewrite it after the fact? Wouldn’t that be like getting money appropriated for a war on Iraq and then using it to attack Canada instead? Please tell me I am the idiot here? I am really scared.

How nice it was to see my friend HAL making an appearance on the Colbert Report, last night

I know a gazillion people who were upside down on their mortgages in the early 1990’s - don’t recall anyone walking because of it. A nation of sissys IMO.

Where in the U.S. Constitution does it authorize the federal government to go into the banking business? It doesn’t, but the Treasury Department is going to nationalize parts of several big banks in an attempt to restore confidence and get the credit balloon blown back up again.

The big question is: Can American consumers be lured back into their habit of spending money they don’t have on things they don’t need?

OK here it comes, courtesy of the boyz at the Fed.
“The greatest sucker punch ever thrown.”TM

An engineered slaughter of the multitudes and a wipeout by the Fed. Thousand Point UP day

Fake rally, dead cat rally, uptick, spike…no matter. It always fades back to bad news, sell at the market and here come new lows…

Comment by edgewaterjohn
2008-10-14 05:36:56
GM closing two Midwest factories way ahead of initial plans. UAW jobs (and wages) leaving spells…wage D E F L A T I O N.

Yes, things are going well in Rock County and Dane County, WI.

Local auto dealer is laying off several employees at each of its 22 locations. GM is stopping production earlier than anticipated – people outraged, as they thought an earlier announcement of the plant being closed by the end of 2010 guaranteed the plant would run until Dec. 31, 2010.

GMAC is raising its credit requirements for auto loans and increasing interest rates on those loans.

Bergstrom Motors To Layoff Some Employees

http://www.channel3000.com/news/17708850/detail.html

GM to end local SUV production in December
http://gazettextra.com/news/2008/oct/13/gm-close-janesville-plant-december/

GMAC Tightens Lending To Borrowers Of Auto Loans
http://money.cnn.com/news/newsfeeds/articles/djf500/200810131756DOWJONESDJONLINE000661_FORTUNE5.htm

“The greatest sucker punch ever thrown.”TM
and “You should expect prices to fall faster than a crowbar down a well!”TM may be considered Public Domain for HBB’ers. See BenJonesCo for internet access.

The US government is spending billions it doesn’t have and I don’t see whos going to pay for it ? You can tax me and every other middle class worker 100% and not even put a dent in it.

Wall Street Journal

* MAIN STREET
* OCTOBER 14, 2008

Shouting ‘Fannie!’ in a Crowded Congress
Advice from the man who foresaw the GSE collapse.

Richard Baker says that he’s not in the business of advising presidential candidates. That’s too bad. The candidates and the American taxpayer might be in a better place if he were.

Mr. Baker, of course, is the former Louisiana Republican who spent nearly a decade crying in the wilderness . . . er, Congress . . . that Fannie Mae and Freddie Mac were ticking time bombs. Earlier this year he was named CEO of Managed Funds Association, a lobbying firm that represents the hedge-fund industry. And amid the financial carnage, he is somewhat bemused to hear people say they are shocked, shocked to learn that someone had predicted it all.

“Everyone writes as though there were just one hearing or one piece of legislation,” says Mr. Baker. “I think I must have had eight bills and maybe 40 hearings going back to 1996.”

Mr. Baker’s interest in Fan and Fred grew out of the savings-and-loan debacle. “My background was in real estate and home building,” he says. “At the time I ran for Congress, we were dealing with the S&L problem — lax lending standards, and the American taxpayer on the hook for risks other people were taking. I saw how destructive that was to the personal wealth and businesses of many of my friends and associates. And when I looked into Fannie Mae and Freddie Mac, I saw the same problems — only a lot bigger and a lot more dangerous.”

Mr. Baker declines to comment on any of the proposals put forward by either Barack Obama or John McCain. But he does outline some general principles that should have some resonance with each of the candidates. Sen. Obama, for example, might like Mr. Baker’s idea of returning the mission of affordable housing to a revitalized Department of Housing and Urban Development (working with the Federal Housing Administration and the Department of Veterans Affairs).

There are several advantages to such a reform. First, the risk to the financial sector would be removed. Second, the congressionally protected monopoly that Fan and Fred exploited would be gone — and with that the obscene salaries enjoyed by its top executives. Finally, HUD might actually get more housing built for low-income Americans, as opposed to the $200,000 to $300,000 loans that Mr. Baker says characterized a good chunk of Fan and Fred’s portfolios.

For Sen. McCain, Mr. Baker’s distinctions between deregulation of the private sector and the lack of oversight for a federally backed enterprise might help him push back on the Democratic talking point that the whole mess was caused by GOP-inspired financial deregulation.

“My starting principle is this,” says Mr. Baker. “The closer an enterprise is to the taxpayer’s wallet, the more congressional oversight it requires. The further away you get from that wallet, the more freedom you should give people, because they are risking their own money, not the taxpayers’.”

I like much of what Mr. Baker suggests, but I call BS on this point about privatization and distance from the taxpayer’s wallet. $700 bn in bailout monies plus myriad other capital infusions to prop up the financial sector says that it is impossible for too-big-to-fail financial corporations to distance themselves from the taxpayer’s wallet when a boom goes bust.

It appears that the only way to avoid putting the taxpayer at risk is to repudiate the too-big-to-fail doctrine. A more competitive financial sector would result and America could get back to work.

Oct. 14 (Bloomberg) — The financial crisis in the icy northern European country was worsening. Banks were failing, the unemployment rate was 20 percent and a decade-long housing boom had turned bust.

This was Finland in 1991….

In 1991, the government took control of more than 40 small savings banks and moved the non-performing assets off their books to a company run by the central bank. In 1993, it set up an independent authority to monitor the financial services industry. The number of bank employees fell by half during the 1990s, according to the Bank of Finland.

http://www.bloomberg.com/apps/news?pid=20601109&sid=a5q9KWDZwFyg&refer=home

Time to kill the messenger that bears bad news? It seems like more accurate, rather than less accurate, accounting standards is what the banking sector needs to heal. Why do these fooks think banks don’t trust each other enough to make an overnight loan?

WSJ.com
* BUSINESS
* OCTOBER 14, 2008

FASB Rules Come Under Fire by Banks
By MARK H. ANDERSON and DAVID REILLY

Mark-to-market accounting came under fire on both sides of the Atlantic, with banks pressing for relaxation or suspension of the practice, which has been criticized as exacerbating the financial crisis.

The American Bankers Association asked securities regulators to override recent guidelines from the Financial Accounting Standards Board on mark-to-market accounting, contending the proposed rule changes don’t address bank concerns about the practice.

The group also argued in a letter to Treasury Secretary Henry Paulson that government officials also should consider changes to mark-to-market rules relating to bank mergers.

Mark-to-market accounting involves the use of market prices, as opposed to initial costs, for a variety of financial instruments. Banks have argued that the practice has worsened the financial crisis because downbeat market values have forced banks to recognize big losses that they believe will one day reverse.

Ask not what you can do for your Country, but what your Country can do for you.

Wall Street Journal
* THE GAME
* OCTOBER 14, 2008

Street’s Demands May Stir Public Wrath

You would have thought the Street’s last surviving chieftains would be a contrite bunch by now, eager to reform their industry and help rebuild their country.

At least until you heard Goldman Sachs Group Inc.’s Lloyd Blankfein, J.P. Morgan Chase & Co.’s James Dimon, Blackstone Group LP’s Stephen Schwarzman, BlackRock Inc.’s Larry Fink and Silver Lake’s Glenn Hutchins assemble for a panel session at the New York Stock Exchange last week organized in part by The Wall Street Journal.

To the 75 Wall Street titans there nodding in agreement, the discussion must have seemed banal. But any outsider, from Washington or the dismissed realms of “flyover country,” would have been amazed at the goings-on.

While America buckles in for years of sacrifice, the five chiefs took a different approach. The group pulled straight from the what-government-can-do-for-you school of 2006, lobbying for Wall Street tax breaks, the repeal of Sarbanes-Oxley and against the distraction of class-action lawsuits.

Some of this may be sensible. But in light of a bailout already approaching $1 trillion — including direct taxpayer injections into bank shares — it also seemed politically suicidal.

***WARNING*** Stock market advise ahead.

Sell every rally. (to the tune of Climb Every Mountain)

Citi analysts sometimes prove rather prophetic. I believe one of them first put out the $100+/bl oil forecast a couple of years back, at a point when it seemed outlandish?

Citi analyst issues dour outlook for U.S. economy
By John Letzing
Last update: 4:15 p.m. EDT Oct. 13, 2008
…
“We believe large company profits will now fall 27% peak-to-trough, and the unemployment rate to peak above 8 1/2%,” Wieting wrote.

The tragicomedy of errors known as Wall Street is best viewed without the ownership of any stocks, as things are much more clear, when you have no stake in the outcome…

(I envision myself being a later day-Pliny the Elder with laptop on a ship in bay of Naples, far enough away from the carnage to be safe, but close enough to see the damage wrought by Vesuvius)

Saw this article recently. The author is comparing the current meltdown to the Panic of 1873. I was wondering what others here thought of the comparison, I’m not really sure what to think. http://chronicle.com/temp/reprint.php?id=477k3d8mh2wmtpc4b6h07p4hy9z83×18

The Iceland situation is serious and alarming. The Prime Minister advised everyone to go fishing. I don’t know much about north Atlantic fishing seasons but it seems like a risky endeavor as winter comes on. According to the Icelandic writer of an ongoing thread I read on a gold blog, the country will run out of food in 2 weeks. The currency is not being accepted for food imports.

How long before the Decider tells us to ‘go farming’? In winter.

From better than ezra

American dream

For twenty years he worked corporate
He planned to early retire
His CEO he stole a billion dollars
Now he’s working at Denny’s
Hoping for a raise
He thinks

Where did the time go
When everything was simple and free?
I want to know what happened
Somebody woke me before I could
Have my American Dream

What I now rent for $1500 / month, plus utilities. Which is about $300 / month.

This from Zillow.

http://tinyurl.com/54a6cg

Big fires raging down in L.A., most every drop of water used to fight it, being fresh-water from reservoirs already depleted beyond historic recorded lows, already.

Peter Scheer
Posted October 7, 2008 | 10:43 AM (EST)
Lack of Disclosure the Root Cause of the Financial Crisis

Economists and historians will be debating for years the causes of the financial crisis that, like a global array of dominoes, now threatens to take down the “real” economies of countries big and small, both “developed” and “emerging,” in a massive flight from investment risk unlike anything experienced since 1929.

To the experts’ lists of causes, let me add a lack of information–specifically, the systemic failure of lenders to disclose ample information about the risks of the mortgage loans being made to thousands of borrowers whose homes have since tanked in value, resulting in unprecedented rates of default. These defaults leave the holders of the affected mortgage investments–primarily banks around the world–with sizable loan portfolios that they can’t value and for which there is no functioning market.

Financial Crisis Suicide Numbers Mounting
KELLI KENNEDY | October 14, 2008 09:00 AM EST | AP
Read More: Bailout, Economy, Financial Crisis, Financial Crisis Suicides, Mortgages, Suicides, Wall Street Crisis, Business News

An out-of-work money manager in California loses a fortune and wipes out his family in a murder-suicide. A 90-year-old Ohio widow shoots herself in the chest as authorities arrive to evict her from the modest house she called home for 38 years.

In Massachusetts, a housewife who had hidden her family’s mounting financial crisis from her husband sends a note to the mortgage company warning: “By the time you foreclose on my house, I’ll be dead.”

Then Carlene Balderrama shot herself to death, leaving an insurance policy and a suicide note on a table.

Across the country, authorities are becoming concerned that the nation’s financial woes could turn increasingly violent, and they are urging people to get help. In some places, mental-health hot lines are jammed, counseling services are in high demand and domestic-violence shelters are full.

A quick check of RealtyTrac shows that the frequency of distressed properties here in (It’s different her because of the University) Gainesvile, FL has been hovering around 37-40% since early summer. We are way behind the rest of the coutry but the market is cracking big time right now. My big-shot RE agent landlord (previous) has fled the area after serving as the local cheerleader. My old apt (vacant for a couple months) is still on the market with 40% reductions in rent and asking price. She has several other rentals and specs (flips) on the market too. She told us that she was in big trouble and didn’t know how she could make the payments anymore… then asked if we were interested in buying in this once-in-a-lifetime buyers market. It was like watching a nervous breakdown… nah, it was EXACTLY like watching a nervous breakdown. I cannot possibly explain how happy I am to be living in a dinky little efficiency right now.

Oct. 14 (Bloomberg) — Investors advised by “Black Swan” author Nassim Taleb have gained 50 percent or more this year as his strategies for navigating big swings in share prices paid off amid the worst stock market in seven decades.

Ooops! We got them on the run again.

I had to share this article:

“Just Stop Paying Your Mortgage” by Peter Shiff

http://www.signonsandiego.com/uniontrib/20081010/news_lz1e10schiff.html?ref=patrick.net

Sums up everything, and makes a good case for taking and spending as much home equity as you can, if you have any, and then stopping to pay the mortgage entirely.

“Apple Reduces MacBook Price to $999″

There is your deflation. Apple laptops under 1,000 is a big deal as far as I am concerned. They have always wanted the high price not only for margin, but for the status. I bought a new toshiba laptop for 499 this year at best buy.

Look for all the i-whatever to drop as the Heloc money is history for a few years and CC charges are going to be second guessed before you pull out that plastic.

Thoughts on this? (warning PDF)

http://www.patriarchpartners.com/Lynn_Tilton_WashPost_NYT.pdf

A proposal to create a “provisional Federal Bank”, providing direct lending to all businesses.

While I’m firmly against central banking, I wonder if this might be a good way to “fight fire with fire” per se - create a bank that is:
- Explicitly government controlled (not having the pretense of being a private organization as is the Federal Reserve)
- Mandated as equal-opportunity lender, not lending only to large-cap banks but to all business types and sizes.
- Provisional*

* I’m not sure how this would be done - in her proposal Lynn just states “Incentives should be structured such that market forces gradually overtake the provisional infrastructure.”. In general it sounds hugely risk to become just another central bank but with wider scope - but given proper restrictions perhaps this could be ensured to be not the case.

Thoughts?

Seems like it may be a good idea - kind of like when the forest service does controlled burns to help prevent and/or stop forest fires. However sometimes these “controlled burns” get out of control themselves and do more harm than good.

Nice to see the IMF getting into subprime now…

(and using the U.S. as a precedent)

Small Nations, Big Test for IMF
Fund’s Role May Be to Contain the Crisis as It Hits Places Like Iceland

With global turbulence now threatening to cause smaller economies at various stages of development to implode, analysts said, the fund may now be charged with containing the crisis on the margins through targeted lending. The fund’s managing director, Dominique Strauss-Kahn, speaking ahead of the annual IMF meeting in Washington yesterday, has already acknowledged a surge in requests for assistance in recent weeks. He said the fund, armed with about $200 billion for loans, would streamline the often-lengthy approval process to as little as two weeks. He suggested that it would also be more flexible on the notoriously tough conditions it attaches to such loans.

The fund may not have a choice but to relax loan conditions. The IMF in the past solicited promises from borrowing governments to not interfere heavily in their financial sectors and to control spending. Yet those arguments are now far harder to make given the massive bailouts and government interventions being orchestrated by the fund’s largest members in Europe and the United States.

Hmmm - sound familiar?:

“Latin America has been pretty resilient up until three weeks ago, but now we see signs of strain,” said Luis Alberto Moreno, IDB president. “This money is going to be used so that governments can support their commercial banks and extend credit as needed to export agencies for trade finance. We need to do whatever we can to preserve the gains that have been made in recent years.”

“Just Stop Paying Your Mortgage” by Peter Shiff

http://www.signonsandiego.com/uniontrib/20081010/news_lz1e10schiff.html

If you are a mortgage holder who is either struggling with crushing payments, bitter for having overpaid for your home during the bubble, or who has extravagantly refinanced when prices were rising, the government’s landmark $700 billion bailout package has an important message for you: stop making your mortgage payments . . . immediately. Furthermore, if you believe that with some planning and sacrifice you may be able to meet your mortgage obligations, the government’s message is clear: relax, don’t bother.

The government will have a lot on its hand, when a bunch of people figure out the game and stop paying.

Gilligans Iceland

Just sit right back and you’ll hear a tale,
A tale of a fateful financial trip
That started from this North Atlantic port
Aboard this tiny ship.

The mate was a mighty selling man,
The bankers brave and sure.
320,000 passengers set sail that day
For a three bank failure tour, a three bank failure tour.

The carry-trade started getting rough,
The tiny ship was tossed,
If not for the courage of the foreign exchange crew
Their savings would be lost, their savings would be lost.

The ship set ground on the shore of this uncharted financial denial
With Gilligan
The Skipper too,
The ex-billionaire and his wife,
The movie star
The professor and Mary Ann,
Here on Gilligans Iceland

The oil bubble has popped spectacularly and quickly. Next bubble, please?

I took some debt on a aerobics workout…

Give me 10 more A.R.M. Lifts, now 9 more, now 8 more

Feel The Burn!

Faith and persistence:

Not sure if anyone remembers - but I was sweating about 3-4 weeks ago, when the bailout plan was first proposed. The Dow jumped up 360 on Friday, my shorts (homebuilders mainly) were getting hammered, and I had some weird stuff going on in the middle of the night with my trading account that appeared to take my cash reserves to near zero (though this certainly isn’t my primary savings account - I didn’t relish the thought of getting margin calls though). I decided to hold on tight and fight goldilocks, and sold some longs instead of covering the shorts.

Well - fast forward to now. I’m up about 90% since then, with the general market being down about 30%. Sometimes persistence pays off.

FWIW I am closing out many of the shorts though - those stand to lose if we go into hyperinflation. Gotta keep the homebuilder shorts though - hyperinflation or not I think that most of them will be going bankrupt in the end. I’m amazed that more haven’t already.

I remember seeing a post that when Mexico bailed out its banks 15 years ago, that people holding mortgages thought that they should get a bailout and just quit paying their mortgages. People watching this bailout of banks are just not going to see the morality of continuing to pay their mortgages and will just stop. If the cause of the bailout was mortgages gone bad, then the bailout was a failure as it will cause more bad mortgages.

Alad’s PPT Cruiser pulled up to Wall St., yet again, this afternoon. Unfortunately, the aftermarket blower burned out the top end yesterday, and the engine’s smoking. They’re throttling up with everything they’ve got, but the hesitation in the motor is undeniable. It remains to be seen if it will survive till close.

There is something very odd about Fannie Mae’s stock chart today. Can anyone shed light on what is up?

Bulletin U.S. stocks finish lower; Nasdaq paces decline, down 3.5%

Lazy Portfolios
Build Your Own ‘Lazy Portfolio!’ 6 Rules
Yes, you can build a million dollar nestegg, its simple, you can do it

ARROYO GRANDE, CA. (MarketWatch) – “Investing should be dull,” says Nobel Economist Paul Samuelson, “investing should be more like watching paint dry or grass grow. If you want excitement, take $800 and go to Las Vegas” or Wall Street. Investing really is simple and easy, anyone can do it. You can. Here’s how.

Several years ago I started tracking the best portfolios I could find in America, simple portfolios being used by Nobel Prize winners, millionaires, conservative portfolio managers, neuroeconomists as well as average Main Street investors. We even found some in books like Investing for Dummies and The Idiot’s Guide to Investing.

We discovered something amazing. They were all saying the exact same thing: All you need is a simple, well-diversified portfolio of just three-to-eleven funds, low-cost, no-load index funds that will create a long-term winner through bull and bear markets. And you do it with no market timing, no active trading and no commissions. “Lazy Portfolios” are that simple. So what about the other thousands of stocks, bonds and mutual funds being hustled by brokers? Forget them!

“The reasonable man adapts himself to the world; the unreasonable one persists in trying to adapt the world to himself. Therefore, all progress depends on the unreasonable man.”

George Bernard Shaw

At Indian call centers, another view of U.S.

As economy falters, debt collectors hear stories from the land of plenty

The subculture of call centers tends to foster a cult of America, an over-the-top fantasy where hopes and dreams are easily accomplished by people who live in a brand-name wonderland of high-paying jobs, big houses and luxury getaways.

But collection agents at this call center outside New Delhi are starting to see the flip side of that vision: a country hobbled by debt and filled with people scared of losing their jobs, their houses and their cars.

“Lately, 25-year-old Americans are telling me that they are declaring themselves bankrupt,” said Chaturvedi, raising her eyebrows in shock. “These days the situation is so emotional, so fragile. We have to have so much empathy and patience.”

Well, you all got what you wanted—Housing prices will decline….

So, now, who wants to buy a house?
Thought I would ask…

I am afraid that the govt. will pay you to buy a house, but is that what you really want?

rotflmao (rolling on the floor laughing my A@@ off)

Wish you all the best in your new home purchases, Knife catchers!!!

Hip Tips 2009

1. Grow your own weed and potatoes, corn, peas and tomatoes, spices, peppers, etc.

2. Live within your budget. Save money.

3. Try fasting more often

The first wave of foreclosures caused by the subprime mortgages resets, passed, leaving the world financial system in ruins. The second wave - the one caused by resets of the Alt-A mortgages, is coming soon.

What will the Alt-A crisis look like? It’s one thing to imagine the somewhat poor people being foreclosed on and evicted, but it’s a totally different thing to imagine the high-salaried middle class starting to default.

What will the smug SF Bay Area look like in 2010? I personally have friends and coworkers with fat-ass Alt-A morgages - what’s going to happen to them? They bought partly because of “future appreciation”, and now are underwater (granted, by a little), and the debt is crushing them. Will they stoically continue to give away their paychecks to the albatrosses?

Any ideas?

“This healing process is going to go on and on until it’s done and there isn’t a force on the planet that can stop it” Rick Santelli

Hard to believe CNBC did not have this censored.

Reshaping Wall Street
Insight on some of the big game changing events that have happened on Wall Street, with John Gutfreund, former Salomon Brothers CEO/Gutfreund & Co. president
Mon. Sept. 15 2008
http://www.cnbc.com/id/15840232?video=856528913

Considering he brought down Salomon and was accused of the same charges, this is funny. His analysis of Bank of America taking over Merrill is spot on.

Some of his other observations.”Would you want to think about this (economic collapse) as a possibility” No way did anybody think about the possibility.

For those of you who don’t watch tv,
broadcast shows are now buzzing all about socialism.

What exactly is socialism?
I was busy the year I took those classes.
How will socialism help me?
Is it good for house prices or what?

“…The terrible thing — after all this pain — is that the U.S. equity market is not even cheap. You would imagine that, given the amount of panic, that it would be. But it started from such a high level in 2000 that it still has not yet worked its way down to trend, although it is getting close. But the really bad news is that great bubbles in history always overcorrected. So although the fair value of the S&P today may be about 1025, typically bubbles overcorrect by quite a bit, possibly by 20%. That is very discouraging.

What about equities outside the U.S.?

Things are getting cheaper. We score the EAFE [the Europe, Australasia and Far East Index] as absolutely cheap, and it’s offering a 7% real annual return over seven years. Emerging-market equities are a bit cheaper, and we see a 9.5% annual real return over the same period….”
Jeremy Grantham

One very good interview.

http://online.barrons.com/article/SB122367853796824483.html?page=1

October 15, 2002

President Hosts Conference on Minority Homeownership
George Washington University
Washington, D.C.

http://www.whitehouse.gov/news/releases/2002/10/20021015-7.html

Who is to blame? Read this.

I talked to a stock broker friend of mine today about the market. He said that at mid afternoon last friday, there were no more buyers at any price. Over the weekend, a meeting was held at his firm to promote calling all their customers and convincing them the worst was over and some real buys were out there. He basically said they were setting up a suckers rally. UBS wasn’t the only broker promoting a buy attitude. It obviously worked. The main idea was to bring back in the buyers, so the last of the important investors could unload, before 7000 Dow again. Its a casino, with the odds stacked against the small investor.

Thanks a bunch Bush. Now we Canucks are going to have to give our banks 25 billion dollars. That’s 30 billion CDN dollars!

Palm Beach County will get millions to buy foreclosed homes
Palm Beach County will receive $27.7 million of the $4 billion the federal government plans to dole out to state and local governments to help them buy and rehab homes that were foreclosed or abandoned during the real estate crash.

It`s a bummer I have to compete with my own government to buy a house. I don`t even have a printing press.

COVER STORY: THE ECONOMY
There Is a Silver Lining

The crisis has forced the United States to confront bad habits developed over the past few decades. If we can kick those habits, today’s pain will translate into gains.

By Fareed Zakaria | NEWSWEEK
Published Oct 11, 2008
From the magazine issue dated Oct 20, 2008

Some of us—especially those under 60—have always wondered what it would be like to live through the kind of epochal event one reads about in books. Well, this is it. We’re now living history, suffering one of the greatest financial panics of all time. It compares with the big ones—1907, 1929—and we cannot yet know its full consequences for the financial system, the economy or society as a whole.

a ray of light…

believe in yourself, and try to do the right thing….

save.
plan.
act.
achieve.

expect more from yourself and even more from others.

You can lead a horse banker to water money, but you can’t make him drink lend. I personally have a hard time understanding how it can be in a banker’s interest to catch falling knives. In due time, when the deleveraging has brought asset prices back in line with affordability, I am sure the banks on whom money has been rained will gladly loan it to any and all qualified borrowers.

Paulson Lacks Leverage to Compel Banks to Put New Cash to Work
By Robert Schmidt and Rebecca Christie

Oct. 15 (Bloomberg) — Treasury Secretary Henry Paulson persuaded nine major U.S. banks to accept $125 billion in government investment. Getting them to lend it out may prove a tougher sell.

The equity stakes the government is purchasing in Citigroup Inc., Morgan Stanley and seven other big institutions come with no guarantee that the investments will spur lending and unfreeze credit markets. Nor do they give the government board seats or any other leverage to demand that that the firms actually use the money to help the economy.

“The truth of the matter is, they can’t put a gun to their head and say you have to lend this money,” said Charles Horn, a former official at the Office of the Comptroller of the Currency, part of the Treasury Department, and now a partner at the Mayer Brown law firm in Washington.

Treasury officials acknowledge they can’t force banks to get the taxpayer money into the hands of their customers. Instead, officials are betting that the government’s investment will create conditions where banks have a greater incentive to earn profits from lending than to hoard money to shore up their balance sheets.

“It’s in their economic interest,” said David Nason, the Treasury’s assistant secretary for financial institutions, in an interview with Bloomberg Television. “When you give them a stronger capital position and you also provide a certain amount of government backstop to their funding sources, it’s incumbent upon them to go out and continue to lend.”

There has never been a better time to be a surviving big bank. Free $bns to play with for all surviving megabanks on Wall Street!

Latest News: India Sensex drops 2% to 11,253.18 in early minutes

Treasury to invest $100 billon in 9 biggest banks
Citi, J.P. Morgan, Wells Fargo among institutions to get government investment
By Alistair Barr, MarketWatch
Last update: 7:21 p.m. EDT Oct. 14, 2008

SAN FRANCISCO (MarketWatch) — The Treasury agreed to invest more than $100 billion in nine of the largest U.S. banks, including Citigroup, J.P. Morgan Chase and Wells Fargo, in a move that effectively nationalizes part of the country’s financial system.

Treasury is investing $25 billion in senior preferred shares of Citigroup and another $25 billion in the same type of securities issued by J.P. Morgan.

Wells Fargo is getting $25 billion to $20 billion under the same deal, the Wall Street Journal reported.

Bank of America is getting $15 billion, while Merrill Lynch will receive $10 billion from the Treasury.

Morgan Stanley and Goldman Sachs each agreed to government investments of $10 billion, while Bank of New York Mellon will get $3 billion and State Street will receive $2 billion.