Bits Bucket For October 21, 2008
Please visit the HBB Forum. Post off-topic ideas, links and Craigslist finds here.
The Housing Bubble
Examining the home price boom and its effect on owners, lenders, regulators, realtors and the economy as a whole.
About Me
Name:Ben Jones
Location:Northern Arizona, United States
To donate by mail, or to otherwise contact this blogger, please send emails to: thehousingbubble@gmail.com
PayPal is a secure online payment method which accepts ALL major credit cards.
Links
-
May 2025 M T W T F S S « Sep 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31
Photo Submission: hbbphotos@gmail.com
View the HBB Photo Gallery *updated 4/13/2008
These people are going off the deep end.
http://www.msnbc.msn.com/id/27244465
How many End of The World cycles have you seen? These people remind me of the MotherEarth crowd after the fallout of the late 60’s hippy movement.
The issue of whether this is an overreaction aside….if the guy thinks the worse case scenario is going to happen, why would he accounce on a national forum (with his picture included) that he has stores of food?
Too logical, mon. Here, smoke some ganja.
But seriously, Americans are unique in terms of the sheer quantity of apocalyptic fanatics that it produces.
Everything from Timothy McVeigh to the Unabomber to the Heaven’s Gate cult (who castrated themselves and decided to hitch a ride on the comet Hale-Bopp.)
Try reading a book on 19th century Kansas sometime. You might really be surprised at both the revolutionary foment and the wacked-out jobs that Kansas produced. It was the “Berkeley” of the 19th century.
No other country produces this range of wackos. It’s downright impressive when you think about it, and it dates all the way back to the founding of the nation.
“Heaven’s Gate”
They tried to get into their containers and take off from the launch pad of a lovely home in Rancho Santa Fe.
I always thought Nike missed an excellent opportunity for advertisments, with each cultist attired in their name-brand foot-ware…
The caption, but of course:
Just Do It.
aladinsane,
by any slim chance, have you ever read Viktor Pelevin? The “Just Do It” idea exactly in this context is from one of his books.
Hi Max,
Never heard of him, sorry.
You obviously haven’t been around…………
Technically, Kansas didn’t “produce” them……….they all moved here from wherever they pi##ed off their neighbors, and set up shop. Being a territory at the time, they could practice their brand of whako (and not so whacko) political/religious beliefs with minimal government interference.
Basically, a Libertarian’s paradise.
It’s funny how this tendency seems to cut across all political, religious, and socio-enconomic strata. It must be that a percentage of us humanoids are simply wired for this type of standard response to the crisis du jour.
It’s a survivalist bubble! Buy your beans now or be priced out forever!
I got paranoid about it back growing up in the 80s. You’d be amazed how your picture of how sturdy civilization is changes after you’ve woken up a few times in stark panic until you remember that this is the day of the month they test the air raid sirens down the street. Stupid “Day After” movie.
Funny that on a blog that predicted our current financial disaster you would deride those who prepare.
Granted, I’ll agree with you that preparing for TEOTWAWKI is a little goofy… but having a month or two of food and supplies seems totally reasonable to me.
Granted, I’ll agree with you that preparing for TEOTWAWKI is a little goofy… but having a month or two of food and supplies seems totally reasonable to me.
To me, too. Where I live, it would be stoopidized squared to not prepare thusly. I live near the end of a peninsula with one access road in and out and we often lose power for days, last winter one time it was 8 or 9 days? The road was open, too. When the Nisqually quake happened the highway junction was not open. The old timers on Carlyon Beach were taking boats to Olympia to get medicines and stuff. Most people are pretty prepared for power loss, out here; have generators, wood, canned goods. Only the newer idjit CA imports aren’t ready. I expect this winter will show them the value of preparation.
Anyway, when the power goes out it’s no big deal. I mostly heat my little house with wood anyway, I have a zillion candles, plenty of stores. It’s fun. I even enjoy hauling in my big galvanized tub thingie and having baths from water heated on the woodstove. Like Laura Ingalls! Laura Ingalls with rose scented soap, a bath pillow, and a big pink loofah.
RE: a big pink loofah.
I confess I had to look up what a loofah is.
Now you can genuinely say that you experienced a TEOWATKI moment.
You’ll never be the same again.
‘I confess I had to look up what a loofah is.’
You man, you.
Jeeze, hd, don’t you want to exfoliate and beautify your skin during Armageddon?
Careful with that wood stove. Laura’s first home as Mrs. Almanzo Wilder was destroyed by a fire.
“Granted, I’ll agree with you that preparing for TEOTWAWKI is a little goofy… but having a month or two of food and supplies seems totally reasonable to me.”
The guy is storing 1-2 YEARS quantity of food. Nobody said anything about “a month or two of food”.
Read the article.
Mormons put up a two year store.
An ungodly amount of settlers died of starvation when food ran out, somewhere not so far from the Great Salt Lake long, long ago…
That’s a motivator.
And so are swarms of locusts mentioned in the Bible.
Nothing wrong at all with preparedness for difficult times. It’s one of the five or six major reasons my wife and I chose to go rural after a life in the cities and burbs.
So much of the survivalist acctivity is penny-wise and pound foolish. Just another market niche for entrepreneurs to stimulate consumption, of another sort. I was a part, for five years, selling off-grid solar PV. I’m a strong believer and advocate of solar, but so many of the residential systems will end up just going to waste.
Survivalism is OK so long as it doesn’t become your idol. Once it becomes your master, it will be harsh taskmaster, which to me is the exact opposite of what you should be trying to accomplish.
‘An ungodly amount of settlers died of starvation when food ran out, somewhere not so far from the Great Salt Lake long, long ago…’
Not that long ago, not really. I got born and grew up in southern red-rocks Utarr, and my ancestors walked across the plains as they was some of the first Saints. Singing hymns and praying and dying and stuff. As an exciting bit of trivia to share with you all– I’m related to Ol’ Horndog Joe Smith the Profit! Hooray! (Aren’t we all, though? Man got around. He realllllllly liked those 13 year old sister-wives. Hahahaha!)
Anyway, my great-great+ grandma Evangeline made the trip as a lass. Her small journal is a family treasure. That particular trip was an expecially hard one, and a lot of the kids died on the way. Heck, a lot of the adults died on the way.
The stories of the Mormon migration to Utarr are fascinating. The courage and determination of the first settlers is just astounding.
I sometimes think that that sort of genetic heritage leaves a mark that goes right down to the bones, because I don’t feel relaxed and safe unless I’ve got food and water stores to hand.
Olygal,
would you move back to utar?
Where if anywhere would you set up for good in that state?
I know Lost- by the way, where is she?Lost?hehe-
likes it in utar, or is it CO?
Trying to plan for relocation, but when the evenings are in the 60s, it is hard to think seriously of somewhere else.
Lad, where are you?
Lost is in Green River.
I saw a documentary on the Mormon migration that was pretty interesting. Very much the same thread - alot of courage and stamina. (For instance, wagon trains would not stop for women giving birth - broken wheels yes, newborns, no.)
Random factoid: VT was one of the first places to throw out the Mormons leading (eventually) to that long trip across nowhere to nowhere else, uh, I mean to the Great Salt Lake. One of the original Moron leaders was also born here.
I don’t really feel safe without at least some provisions, either. Since my French Canadian ancestors hardly ever moved after the boat trip (Quebec to VT was quite the migration), I’m not sure the unease of no larder is entirely genetic.
I liked this tidbit…
“People keep asking when this (economic crisis) is going to clear up,” says Hagmahani, who agreed to be interviewed on the condition that he be identified only by the pseudonym he uses for his survivalist blog, or by his first name, Rob.”
LOL - It reminds me of the Robin Williams/Walter Matthau/Jerry Reed film “The Survivors”.
For those that didn’t live through the economic malaise of the late 70’s/early 80’s it shows what the mood of the country was at the time and it pokes fun at those that predicted a complete economic collapse (and its a great flick).
You only look like a fool if it doesn’t come to pass, but a genius if it does. My friends called me chicken little in regards to the housing bubble last year. Now I tell them buy some dried food (at least 3 mos. worth ), Some Silver, and some protection. Guess time will tell who’s the kook, or the sage. Matters not, as I sleep soundly that I don’t have to rush around at the last minute if indeed things unwind.
dried food (at least 3 mos. worth ), Some Silver, and some protection.
Protection? condoms?
dried food/silver/ condoms. This is an interesting picture.
Lost in translation:
A friend was an aid-worker in India in the late 60’s, and they went to some town way back in the outkush, and showed them how to use condoms, by using the end of a broom handle, in lieu of keeping up with the johnsons…
A year later they came back to the town, and there were boucoup new babies, and my friend was distraught, and asked the people there if they had followed his instructions, and somebody dutifully brought out a broom, festooned.
Somehow I think “protection” means guns and such but I could be wrong….but hey nothing wrong with really being prepared!
Trojan whores?
Thanks for the laugh.
Brooms? hahahahaha
So sad for those womenfolk in the outkush.
hahah
Makes me think of those folks using cucumbers as props, and we still have teens getting preggers. ‘gee doc, of course I use them on all my salad stuffs/cukes etc, why do you ask if I use them’…
The Hunt
Life After Rent Control
http://www.nytimes.com/2008/10/19/realestate/19hunt.html
“I wanted something permanent in my life,” she said. “The melancholy part is that this is something I wanted to do with him.” Still, “it was time to grow up, whatever that looks like. When I look at friends my age, lifestyle-wise, they have children in college already and have been divorced eons ago, maybe hitting their second marriage.”
Buying a home, she said, would “represent a certain level of maturity. It allows you to put a check mark on the list of things you desire.”
Yesterday a poster said that he was going away from SoCal due to the impending disaster, and that has lead me to think about possible scenarios. How will cities with little wiggle room fare? How will Boston, NY, LA, San Fran, fare with a markedly lowered tax base, enourmous pension plans, and lots, and lots of people with little to no money?
Where would the best place be to ride this out. This is just the beggining of the resets, and it almost collapsed the world economy. How about the resets from the Alt-a and Primes starting next year? How will those affect the world economy?
I am thinking about a place that meets these criteria…
1. Small population.
2. Lots of land good for agriculture
3. Water.
4. Little to no government
5. Mild Seasons.
This would leave out my current place (New England) and a lot of the US, but it does not mean that it has to meet all criteria…
IMO it all comes down to money flow. If money flows into a community the community will prosper. If it doesn’t, it won’t.
Real estate prices - as will all other prices - will respond to this money flow.
“If money flows into a community the community will prosper. If it doesn’t, it won’t.”
Dead on again Combo.
“If money flows into a community the community will prosper. If it doesn’t, it won’t.”
Define “money”.
Do you think if the FED prints up 2 trillion more “dollars” that will create a great new prosperity? If so, I suggest you look at places in history that tried this maneuver. You can start here in the U.S. of A. where the expression, “not worth a Continental” was derived following the first experiment with the First National Bank of the U.S.
Remember why Jefferson was so opposed to a Central Bank??
Money??
That begs the question, what will cause money to flow into an area? Which areas will have money flowing into them?
Even with money flowing in, crime and poverty will reach record highs in this country.
Call me Mr. Optimist, but I’m pretty sure whatever poverty increases we see will be nothing like what we saw earlier last century. Crime will bump up, but again, I’d hesitate to say it’s going to be at a “record high”.
There’s still people with wealth. Follow those people and you’ll know where money will flow.
For the last decade or so, it’s been retirement/2nd homeowner dollars pouring in. But as is now become evident, that type of “development” simply isn’t sustainable in the long term. More often than not, it just creates more suburban wastelands with their inevitable junk retail strips, even if there’s no “urban” to at least center and anchor the new “suburban”.
We used to complain so hard in this country about “heavy industry”. I surely did, and it was wrong to develop in the environmentally destructive ways it was done 50-100 years ago. But I fear that the places we’re creating now are even worse. They’re certainly will have even a shorter shelf life than did factorytown USA.
Money will always flow into the area where the government is, so DC.
will always flow into the area where the government is, so DC ??
Yep…And if it does not increase (unlikely) it wil remain relatively stable…Cutting jobs are not in the vocab…Furlough maybe one day a month like the terminator just did in Cali but cut jobs ?? No way…
Yeah, no crime there…
If money flows into a community the community will prosper ??
Its the main driver here in Silicon Valley IMO…That combined with old legacy money…We have one piticular developer here that does not borrow any money to build..
Jobs, manufacturing jobs. Industry.
6. Employment opportunities
Long ago, I too thought about escaping to the countryside, in fact as a kid my father implored to leave the city as soon as I was able.
Later on I was able to experience small town life as a student. As a student the small town folks didn’t view me as a threat because they knew I’d be on my way someday. So, I was able to learn that outsiders aren’t particularly welcome - especially if they can’t support themselves without chipping into the existing economy.
My guess is that probably 5% of urban dwellers could make a go of it in rural locales. For most its just a nonstarter.
Edge:
Here is the problem with small town/rural locations Everything you buy is the same price as in the big city but if wages are 1/2 you either work double or live with less.
The trick is to buy everything and have it paid off before you move to a rural low pay area.
If i moved to say South Carolina i could dj tomorrow at 1/2 of what i get in NYC and be ok with it. But to start a service type business from the ground up, its better to start in a high wage area.
That’s not exactly true, I can attest as a city boy gone rural. Taxes and and basic services tend to be way cheaper. I mean incredibly so, at least in many places.
If you’re a fairly minimalist consumer, then non-discretionary taxes and services make up a much greater percentage of your monthly budget, and you really notice the reduction in cost of living. Further, if you’re willing to sensibly harvest a portion of your own food and energy needs, and do a lot of stuff for yourself that you’re used to paying for, it can get significantly better.
And remember, for most of us, a dollar saved is not a dollar earned, it’s more like $1.50-$2.00 earned, when taxes and other overhead of earning money (communting costs, etc) are taken into account.
If you’re among today’s faithful debt-laden American consumers, you wouldn’t want to move rural anyway, not enough places to shop.
Shoe I think you are missing my point:
As a part time dj cd’s speakers amps laptop even a small car is the same price as a big city but if i get 1/2 the money…it would be really hard to start from scratch and buy everything needed to start a business
But if i move there with my stuff and its all paid off…then 1/2 the money works ok.. plus the lower rent utils etc.
dj,
You’re right about that, and we operated on that principle ourselves in many ways. Everyone where we live always says to bring as much as you can with you.
My point is that rural economics is a two sided coin, and you can really use it to your benefit, but a lot of things need to be rethought. The general prinicple of time=money still prevails, but since the market value of your time is worth much less to others, it follows that it’s worth relatively more to you, so it makes sense to spend more time on yourself to offset living costs.
in greenwood, ms i rented a two bedroom remodeled town home for $ 375 a month.
moved to northern va in 1999 and got a one bedroom apartment in a crappy part of arlington for $ 1,000 a month.
some things are cheaper in the small towns.
Food, same cost/unit
vehicle, same cost/unit
fuel oil, same cost/unit
gasoline, same cost/unit
In most cases, since the advent of the housing bubble, property taxes are remarkable equal in NY and VT, either rural or city. Also, transportation costs are higher in rural areas because of the obvious.
Speaking from experience, I can confirm everything edgewater said. For the outsider, culture shock is nearly insurmountable. I’ve watched these people come into very small villages, hamlets and 4 corner type areas, attempt to assimilate and ultimately fail for a couple reasons. Most of the time, it is their money that make it glaringly obvious they aren’t natives and it’s when that money runs out is when they crash, burn and dump their shacks at a loss. Surviving in economically distressed areas depends on an interdependent family network. Outsiders enter at their own risk without that network.
How does one build trust in a small town?
You have to get to know one-another…
Our nearest neighbors would all come through for us in a pinch, and we’d do the same for them.
It’s funny, in the big city our neighbors didn’t really want to know us, and we’d catch fleeting glimpses of them driving their cars, as they left their castles and raised the drawbridge (garage door), but we only knew them from around the shoulders on-up, as they sped by our lives.
Lad, do you think that’s more of a Big-Western-City phenomenon? Wherever I’ve lived in Chicago, I’ve gotten to know my neighbors and had good relations with the vast majorities of them. I’ve got friends out in Phoenix, and I do get the sense that the prevailing attitude is as you describe: build your 10 foot wall, keep out the neighbors, and avoid seeing anybody.
Steve W,
I lived all over L.A., and it’s a very anonymous city, but it wasn’t always that way. Growing up in the 1960’s we had block parties all the time, but over time, people retreated into tv-land, which informed them how scary the world outside their door was…
The powers that be wanted people only to come into contact with one-another while driving or shopping, it seems.
It’s funny, in the big city our neighbors didn’t really want to know us, and we’d catch fleeting glimpses of them driving their cars, as they left their castles and raised the drawbridge (garage door), but we only knew them from around the shoulders on-up, as they sped by our lives.
Perhaps our definition of big city is different. In my version of a big city, nobody has individual garages attached directly to their home. I see my neighbors in the elevator - some head to the garage and drive to a far off job but most end up on the sidewalk walking into the city center for their job. I make eye contact with at least 100 different people on the way to work. I say good morning to dozens of people. There’s a panhandler that is across the street from the Boeing HQ every morning, and at least 3 times a week when I walk past there is someone in business attire chatting with him. When there isn’t he’ll say good morning young man and I’ll say good morning back. Sometimes I give him the fruit from my lunch.
This is part of what annoys me about Palin and what’s she’s been doing lately. Talking about how the real Americans are in small towns and rural areas. I grew up in a small town and I’m pretty sure I know what I’m talking about when I say that good people exist in every city in America and that people help each other out just as much in the big cities as in the small towns. In my experience, the ratio of jerks to good people is higher in the smaller towns. Mainly because jerks don’t like other people that much; there’s a lot of people in big cities, so the jerks tend to settle in less-populated areas.
The thought that people in the big city will leave you to die is an urban stereotype that some people in smaller towns use to create a division between Americans where none exists in reality.
It depends. My brother lives in the OC and it is very friendly, lots of block parties, people walking around and talking to one another. And this is in bubble central.
“This is part of what annoys me about Palin and what’s she’s been doing lately. Talking about how the real Americans are in small towns and rural areas.”
Did anybody catch the piece last night on th eDaily Show where they have the guy from Wasilla saying that 9/11 affected people in small towns more than in the big cities (you know places like NY, NY).
Palin is an imbecile.
“This is part of what annoys me about Palin and what’s she’s been doing lately. Talking about how the real Americans are in small towns and rural areas.”
Did anybody catch the piece last night on the Daily Show where they have the guy from Wasilla saying that 9/11 affected people in small towns more than in the big cities (you know places like NY, NY). Personally I think if the terrorists wanted to really hurt us, they would have attacked five smaller cites on the same day instead of one large city. Can you imagine the bickering over who would get a handout first?
Talking about how the real Americans are in small towns and rural areas.
“Real Americans” is just another Republican code phrase for white people, and the people Palin is talking to know this perfectly well.
““Real Americans” is just another Republican code phrase for white people, and the people Palin is talking to know this perfectly well.”
Their angry, divisive tactics are abhorrent and outrageous but this is a good thing. Because of their strategy, the gop will rest in a way the makes RipVanWinkle look like an insomniac. These thieving slimebuckets will be revealed as the very plutocrats they’ve denied they are for decades.
What’s that saying “Never put both feet in your mouth at the same time, because then you won’t have a leg to stand on” pretty much sums up Palin. Just get out her way and she’ll take of the rest!
As far as ‘friendliness’ in neighborhoods, I’ve lived in new neighborhoods and old neighborhoods. Big towns and small. Prefer the small town living. You matter here. Others notice if you’re not around or looking down. They call you for help and you call them. You see everyone on the only road through town. I do have to admit though, they have bickering down to a science around here!
I do hav eto mention that it still amazes me how many “small” towns there are in San Francisco. Both my sister and sister-in-law have many long term friendships with neighbors and business owners in their respective neighborhoods.
That’s very true. You can live there for 50 years, and at least in some senses you’ll always be a “move-in”.
The thing is, so many never really attempt to assimillate, preferring to hold the customs and beliefs and ways of their new rural neighbors largely in contempt. And believe me, it shows. Particularly if one blends a good degree of political activism in with the mix. Getting up in town meetings and throwing one’s weight around, trying to enlighten the rural schmucks on one’s superior, metro/educated views of How Things Should Be is the classic non-starter. Plan on living quietly in the area for a decade or so, and show you’re for real and intend on hanging around, before trying this.
Helen and Scott Nearing spoke very pointedly about assimilation in their classic, “Living the Good Life”, which was the bible of the 60’s back to the earth movement, but their admonitions in this regard have largely been dismissed or forgotten.
iftheshoefits -
The thing is, so many never really attempt to assimillate, preferring to hold the customs and beliefs and ways of their new rural neighbors largely in contempt.
It’s so true. I’ve had more than 1 conversation here that essentially dissolved into a rural vs. urban conversation. Things such as potluck dinners and some of the social community gatherings of small towns were viewed as some sort of quaint, “leave it to beaver” type throw back. Progress and the future of humanity was to be found in Starbucks and urban LA (heh, heh, heh…)
I think what many born and bred urbanists don’t get is that living in a rural area requires a different set of skills and priorities than urban living and that naturally leads a different viewpoint on life. Rural folks tend to be more conservative, I think, because they have more of an intimate view of life, both with people and the forces of nature.
How does one build trust in a small town?
Pretty simple answer IMO…Volunteer….Give your time….
Good thing the culture of recent generations has worked so hard to destroy the family (no-fault divorces, etc.) so that more people will end up dependent upon the goverment vs. friends and family members… almost as if that was the plan all along!
“Mission Accomplished!”
Oil City, Pennsylvania, of course!
But of course, how could I forget it!!!!!
Try Mexico.
You won’t have to move to experience “mexico”. The same economic and governmental forces that created the mexican poverty are at play in our own country.
Not to mention the kidnappings by the drug cartels.
Severed heads delivered to Mexican police station.
El Jefe: I will pay one million dollars. Bring me the head of Alfredo Garcia!
Move to Michigan!! j/k. I think Socal has a long way to fall before it gets to our economic state. With talks of a GM/Chrysler merger things are looking bad. Half of Chryslers 60k+ employees could be let go as well as closing their headquarters and countless plants throughout the US. I can’t remember the number that have fled MI for greener pastures in the past 5 years. The taxes communities are losing can be felt for sure. They are selling homes for 15k in the Detroit burbs. Everyone I know that left is fleeing south.
But I am gonna ride this out. Most of my neighbors seem to be doing the same thing.
Are you in Michigan somewhere??
Michigan has incredible unemployment and welfare benefits compared to any state in the South. I predict those moving to the South will be sorely disappointed once they arrive.
Chryslser only has 65k+ employees now. How small can a company be to be “too big to fail” any how?
I am sure monthly “stimulus checks” will fix everyone’s woes - no need for a job when everyone in ‘merika ends up on what amounts to welfare! This plan surely can’t have some drawback, right? Argh…
Will we be stimulated soon?
Just wondering when to watch for the stimulation to arrive.
NY will do fine — as long as you don’t have children to send to public schools, can ride a bicycle to work, live near a park where there is enough rich people to “donate” to it, do not rely on public assistance, etc.
Basically, the higher taxes will be offset by a collapse in real estate values if they go too far, and the safe neighborhoods will remain so. But you’d better be prepared to get together with other parents for some kind of joint home-schooling arrangement.
I think there will be bigger problems in the suburbs, which have never faced real problems before.
I agree WT….
Actually you canget your child a very good education in the NYC public schools IF you are persistent enought to get your child tested into a “gifted and talented” or other special program. But it takes a lot of time and willingness to figure out the bureacracy.
the older folks that made living in the countryside great are dying. Also, there are alot of Meth labs in the country as well, so be careful what areas you pick. I know this because I have some family members who are addicts and use to be cookers themselves. Its very hard to do in populated areas.
Btw, i quit socializing with them after my fathers death. My Dad believed in them for some unknown reason, he never saw who they really were. It was only on his death bed that he opened his eyes, when it was to late to change his decisions. My Mother is now having to live in the Hell he left behind much to my dismay.There’s not much a girl can do in a family full of men!
“the older folks that made living in the countryside great are dying. Also, there are alot of Meth labs in the country as well, so be careful what areas you pick. I know this because I have some family members who are addicts and use to be cookers themselves.”
Truer words were never spoken. It is the rural areas in WA state which have been devastated by meth. The Mexican drug cartels are now setting up shop, which is quite disconcerting. The older folks you speak of are/were good people, and hard workers. Their children and grand children are, in many instances, NOT cut from the same cloth. They are the meth heads, producing NOTHING, while living off their family, and the neighbors they rip off.
Meth is cheap, nasty and addictive.
Marijuana is around $400 an ounce, and none of the above.
Would you rather have the later being grown freely, and get the tweakers off of processed drugs, or allow the walking undead heads to continue their downward spiral, by pushing them to the only drug they can afford?
It’s nothing personal, it’s economic.
Agreed, laddie.
Between the two, twigs and seeds seem better than violence
and thievery cooked from toxins.
I think that #4 if probably one of the most important things to consider. Government is the cause of the bubble and they will prolong the downturn by imposing more controls and taxes.
Few have mentioned the possibility of martial law as a result of social unrest. If you value your freedom it is best to move to the country because government thugs will be patrolling the cities and imposing curfews and confiscating guns and other “preps”.
The city is utterly dependent upon the country. It isn’t like there are a ton of factory jobs in the city any more. I would find an area with natural resources and industry potential. It is only through production the goods neglected during the bubble that we will get out of this.
Prepared neighbors are good neighbors, starving neighbors will kill you to get a bite to eat.
And Here in Long Island City lots of factory buildings close up at 6pm and its dead on weekends holidays….
why cant anyone see the value of giving tax breaks to business that employ workers 24/7…the more 2nd 3rd shift workers you hire the more tax breaks….sort of prime time pricing….NO discounts from me on June weddings but 50% off in January..
=========================================
It isn’t like there are a ton of factory jobs in the city any more.
The city is utterly dependent upon the country. It isn’t like there are a ton of factory jobs in the city any more. I would find an area with natural resources and industry potential. It is only through production the goods neglected during the bubble that we will get out of this.
What would the country do if the city wasn’t buying 95% of their agricultural products?
Every little area of this country is dependent on every other area of the country. We need you and you need us. Get used to it. The sooner everyone realizes that our fates are linked the sooner we can fix things - it’s going to take both of us to get rid of the corruption in Washington and on Wall Street.
Pitch-a-penny:
We moved away from the big city a number of years ago, and found a place that met all of your 5 criteria, except for the good land for agriculture part, so we built a greenhouse and now are growing our own veggies.
The most important equation is # 3. Water.
We have 3 sources of freshwater on our property, including riparian rights. In essence, we are water fail-safe, non-flouridated
I spent years looking for the right little town, so it isn’t as if one can just move to any old place and make it happen, but I will assure you, there were a good many places that were worthy of contention in our search, and our parameters were limited to just the Golden State…
When looking for that perfect place, make sure it’s around a tank of gas away from suburbia, in distance.
Laddie, what makes a “tank of gas away” the right distance? Seems in times of turmoil (which I believe you expect) the further away the better; in times of stability, close is certainly more convenient.
There are tempting choices near big cities, but everybody knows about them, so it’s no place you want to be…
A tank of gas is far enough away for people living in the big smoke, not to know.
Wrong idea. If times get bad, you want to be close to people who know you. Isolated areas receive much more vicious crimes because there are no authorities or neighbors nearby. You don’t want criminals attacking your homestead miles away from the nearest neighbour. Lots of bad things will go down once they’re inside…
Isolated areas receive much more vicious crimes because there are no authorities or neighbors nearby.
I remember seeing that trucker get pulled out of his truck in L.A. and beat nearly to death…with cameras rolling. Its seems all the people around didn’t prevent what amounted to a pretty vicious crime.
Once you recognize that police do not prevent crimes you can adapt appropriately.
Isolated areas receive much more vicious crimes because there are no authorities or neighbors nearby.
In occasional local brazen attacks by wayward bruins, isolated cases of car trunks being viciously clawed open in search of picnic baskets, have been reported by those that didn’t thunk and left food in said trunk, the authorities in the dark as to what shade of Black Bear was the culprit..
‘Tank of gas away’ towns or living situations, probably could get your Big dogs to protect to some degree. Seems to help when there are bears around too.
Everglades. 4 out of 5 isn’t bad.
Idaho is horrible. Stay away.
So is North Dakota. The climate is miserable. You won’t like it.
I looks like Texas would be an ideal state, along with Tennessee & North Carolina. It seems as though there are job opportunities there. Cities like Austin, Nashville, Raleigh-Durham might be ideal. I know Texas and Tennessee do not have state income taxes.
Yet.
Texas will never have a state income tax. Property taxes may be 3%/yr and sales tax 8.5%, but never an income tax. It would be political suicide just to get an constitutional amendment on the ballot. Getting enough people to vote for it would be virtually impossible.
Getting enough people to vote for it would be virtually impossible.
Dunno bout that one. TX used to be democratic …and then…
The state of Delaware might be a good location. no income tax, no sales tax, very little property tax if you are over 55 and have no kids in the school district. There are 2000 sq ft new homes being sold for about 200K. Climate is not as bad as NY and is not far from the ocean.
DE is a smokin’ state for limited taxes. How long it will last is the big question. Slower Lower Delaware has been on an economic rocketship since 1997 and considering housing has been their main economic powerhouse it will be interesting to see what plays out there in terms of maintaining revenue streams for services. I fail to see the agricultural component as part of an prioritized criteria but lower delaware has plenty of ag in all 4 directions for those who seem to require it.
Exeter,
As a political commentator you seem to be strongly in favor of higher taxes and larger government, but in discussions about places to live, and regional government spending, you take the opposite tack. How do you resolve the two? I’m not trying to score political points here, I’m genuinely curious. Do you think we should have larger federal government and smaller state and local governments?
I would not be reluctant to see state governments raise their taxes (and in relative terms, their services) if it was done in conjunction with a lowering of responsibilities and taxes on the federal level. States and municipalities ultimately have to balance their books, seeing that they can’t print their way out of their debts. And at the regional level, groups of interested citizens at least stand a chance of having an effect on how the government is run.
I’m not being capricious, I just don’t have alot of time
1) “you seem to be strongly in favor of higher taxes and larger government”
Must organizations grow to provide the same level of service? Must revenues increase numerically to keep pace with inflation? I say yes to these two questions.
HDMan post below speaks directly to the organized crime like tactics of municipalities and those municipalities are dead wrong. I have no problem with generous pay and benefits. EVERYBODY who works hard DESERVES them. However, they are dead wrong in that those who must pay for the extras aren’t afforded the same compensation and benefits as those people they are funding.
I don’t mean to be curt and I appreciate your perspective.
RE: This would leave out my current place (New England) and a lot of the US, but it does not mean that it has to meet all criteria…
Interestingly, Jim Kunstler rates New England as one region of the country which would maintain stability in the event of a major societal upheaval.
He bases his opinion on the region’s continued maintenance of the traditional town meeting form of government which embraces small scale and immediate resolutions to problems vs. the faceless, big scale unionized bureaucracies of major urban and metropolitan centers which may cease to function ala NO, if the SHTF in a major way.
Personally, I think the northern tier states incorporate all the major attributes of your list aka-water; land for agriculature; small populations; limited government-including the ability to own firearms, et. el.
However, I wouldn’t give you a pair of plugged nickels for the ability of the disarmed, smug, locust-denizens inhabiting the “Land of the Big Dig” southern portion of the region on their ability to cope with anything.
I run my Town’s annual town meeting. It is true democracy though almost comical at times…. The SHTF is here in our state with interim cuts, more cuts coming for this FY and next year state aid to local towns/cities will be down 10-15% which translates into firing teachers, police, DPW workers and such. It will be very painful.
My town RTM just voted down any raises for any public employees, even though the Teacher’s union is threatening a dearth of candidates for the town. RTM just told them that it is a trickle down effect as the town residents have not seen raises themselves, so they can’t grant raises…
And so it begins..
RE: My town RTM just voted down any raises for any public employees
Peabody MazzLand cops just got a 15% pay raise.
And to stick it up the wazoo of every burdened taxpayer,
their union even got the Mayor to go along with a rider which declared “9/11″ an official “Cop and Fireman” paid holiday with time and half for all the bums who want to work.
Vote Yes on #1
Traditionally our non-union employees pay rasies have been tied to the Soc. Sec. COLA. At 5.8% that may be a bit much for taxpayers to absorb this year….
Question 1 - the elimination of MA stat income tax would cause a financial Armageddon and is a TERRIBLE idea. Local Aid would be cut by 72% so say good bye to your school systems, sports/band/drama, whatever, police and snow plowing…..
HD, it is the hard winters that make the NE a less than ideal place. I can barely tolerate a 3 day winter visit back home (VT) and I was born, raised and worked in it for 20something years.
RE: HD, it is the hard winters that make the NE a less than ideal place.
Exeter-I’ve found it’s always been easier to throw on another sweater than swelter in 100 degree Texas heat or FL humidity.
However…
What HAS become the pits weather-wise, is the climate transition which now results in ice and slush storms rather than simply snow.
And of course here in “Risk-free Society Land”
the crap they have to dump on the roads to insure EVERY worker drone is not impaired in his commute, will rot the brake lines out of a new Chevy Silverado in the course of a couple seasons.
But I must admit, when hacking a layer of ice off my auto ( I lost my garage amenity in my divorce), I now find myself asking-WTF am I doin’ here. Life is way too short for this stuff.
Go look at a rich suburb of Guayaquil, Ecuador or Lima, Peru (or Tijuana for that matter). Guard gated community islands in the midst of chaotic squalor. Not pretty.
hawaii
I live there….and a railroad runs thru it
I read last night that John Boehner would like to extend the $250,000/$500,000 capital gains exemption to second houses. That should really help to revitalize the economy. Both sides are still so clueless. I guess they don’t understand that their micro-management of housing is what caused this whole mess.
I look forward to another round of stimulus. Maybe I will get something out of this round. But I doubt it.
So, it just needs another $150B and it’ll be back to normal, right?….Right?
Anybody else notice a high level of fear in their co-workers? It’s so thick you can almost smell it.
I notice a high level of ignorance as to most do not have a clue as to what is in store for them down the road a bit.
Ignorance is what I’m getting. We recently hired back a retiree who was selling RE part time. He hates working here and is going around saying that the market will be back in the spring. “Everyone is saying so”. (I assume “everyone” is from the NAR).
I won’t waste my time arguing with him.
Yes - my most head-in-the-clouds coworker greeted me Monday morning with, “Are the credit markets loosening yet?”
A few months ago he scoffed at me for paying attention to economics. Last month he called me when he was on the road for a few days for work to ask if his bank had gone under yet (WaMu).
If this guy is freaking out, I can only imagine what less optimistic and increasingly informed folks are going through.
A lot of my patients are hurting economically. One very well dressed lady who owns an auto leasing company with her husband told me that she can’t afford a followup appointment with me. And my followups are pretty cheap.
RE: Anybody else notice a high level of fear in their co-workers? It’s so thick you can almost smell it.
When I pick up my morning coffee on the way to the gym, at this little elitest foodstore which I patronize because it’s on the way , I’m noticing the distinct scowls and deep frown lines on all the Mercedes-Benz, BMW, Volvo, SUV female driver crowd who are entering or waiting in the check-out line in front of me.
hehehe…a recent marriage survey, indicated that 50% of married women think about leaving their husbands EVERY SINGLE DAY.
Plus get a load of this new form of “bad-times” entrepreneur-”the financial divorce consultant!
http://www.boston.com/business/articles/2008/10/21/niche_companies_make_the_most_of_the_crisis
Of course there’s much money to be made in times of misery: encouraging divorce (which doesn’t take much effort these days!), booze, gambling, etc.
Maybe that’ll be the next Bubble - we gotta have a Bubble since the alternative is people doing real work, saving their money, and investing soundly, and that is just unAmerikan!
What I’ve noticed is an unwavering faith in the power of the government amongst my coworkers/friends. They will indulge me and listen for a bit - but every conversation must ends with an obligatory variant of: “but the government won’t let that happen”.
I don’t care how bad I’m flamed for saying this, but one of the worst things to come out of popular U.S. history is the mythology that surrounds Roosevelt and the New Deal. As a result, the idea of an omnipotent government has thoroughly lodged itself in the contemporary brain.
Until Katrina, the government would always come through for it’s citizens, in the wake of natural disasters, so why shouldn’t it treat us the same way in regards to the ongoing financial disaster?
We could have rebuilt New Orleans for a measly couple hundred billion and there was no urgency, but when the political majordomos decided they needed $840 Billion to squander on themselves and like-minded financial majordomos, it only took a week for them to get their cash-call…
My grandfather spent his 20’s in rural Illinois during the GD. Has voted Dem his whole life because of FDR. Why? Because he, my grandmother and mother were literally starving to death when he got a gov job with the CCC. Hadn’t had food in days. Saved his life and hundreds of thousands of others (in his opinion).
Whether FDR’s long term policies made sense or not are difficult to discern because we don’t know what would have happened had he not taken the course he did. However, the GD was far worse for many than we can imagine these days and at least some of his short term programs made all the difference in the world to folks.
My grandparents were dirt poor farmers in what was then a very rural Cary, NC. Didn’t have a pot to piss in or a window to throw it out of. They didn’t know they were poor because everyone else was in the same boat GD or not. Country boy can survive if you catch my drift. But most folks in the South voted Dem because of segregation not FDR. My how times have changed in North Cackalacky! If TSHF tomorrow it’d be funny to see how all the metro’s and relocated locusts would cope.
Jon,
Here’s what a really smart guy named Isaac Asimov thought of the Great Depression…
“No one can possibly have lived through the Great Depression without being scarred by it. No amount of experience since the depression can convince someone who has lived through it that the world is safe economically.”
Jon,
My dad grew up during the Great Depression, and he’s always said the same thing.
FDR’s work programs were the very best thing that could have happened back then. People were lining up for those jobs, and were very grateful to have them. Lots of public works that we still use today are a result of FDR’s policies. I think he was one of our greatest presidents.
I had an interesting conversation with the janitor yesterday. We talked about the current financial situation and I mentioned Studs Terkel’s “Hard Times”. He had not only read it, but was comparing the situation in the 30’s to current conditions pretty astutely.
On the one hand, it gave me some hope for humanity, that maybe the electorate may not be so dumb after all. On the other hand, I was depressed that a guy who seemed pretty intelligent was doing janitorial work.
I don’t know this particular janitor very well, so I can’t speculate on his life story. But I have considered before that being thoughtful or reflective seems to be detrimental in many ways to “succeeding” in the current system. You can be dumb as a box of rocks, functionally illiterate, and still make a killing financially. At least you could up until pretty recently. Intelligence, morality, or self-reflection are not positive attributes in our financial system. Andrew Lahde’s recent farewell letter to Wall Street comes to mind.
I only need about 750K to be completely covered. Then I can pay off all my debts and replace my car and all my crummy furniture and take a well earned vacation for mental health reasons.
This is all in the best interests of the country, you know.
Needless to say, the huge capital gains from this measure would only accrue to the small minority of U.S. households who are sufficiently wealthy to be able to afford second homes. Leave it to a Republican Congressman to propose a tax giveaway to the wealthy right at the moment when a Republican presidential candidate’s prospects are on the ropes.
There is really more wrong with this idea than just the fact that it would concentrate still more wealth in the top 1 pct of the wealth distribution at a point in history when the wealth distribution is already at its greatest level of concentration since the Roaring 20’s. Any kind of subsidy for people buying residential properties as investments is going to provide encouragement for the very problems which created the housing mess, such as adding to an excess supply of McMansions that nobody wants or needs.
Might such a move have the unintended consequence of lowering prices because those who would have been underwater with the tax are able to lower their price and still break even?
This wouldn’t affect new sales because people still expect prices to go down so what good does a capital “gain” exemption do in a falling market?
Not that I support taxes, but perhaps all refinancing (above your original purchase price) should be treated like a “sale” to yourself. This would trigger a tax event and you would have to realize capital gains on the way up in order to “cash out”. That one rule might have been enough to prevent people from refinancing like they did.
Economists believe as a matter of credo that handing out subsidies will increase demand for a good (housing), and that an increase in demand will result in higher prices.
Treating a re-fi like a regular sale would also be good in CA where Prop 13 dictates a property tax amount predicated on the most recent “sale” amount. Take out lots of cash - prepare to pay a whopping property tax increase.
how many homes did casey serin have?
i didn’t think he was sufficiently wealthy.
Another boner of a bad idea from none other than John Boner(r).
How many people does this apply to? Who bought a second home that’s not underwater?
This capital gains argument is really a red herring. Who has capital gains lately?
I do. Not a home, but property. It’s 100% paid for, and I’m staring at a significant capital gain if I sell and don’t do a 1031 land trade. Even with heavy discounting in today’s market. I’d sell cheaper and sooner without the gain, for sure.
But, like most of us on this blog, I suppose I’m a bit of an odd duck.
No kidding, all I’ve seen lately are capital losses. My 401K is now a 201K!!!
Boehner’s plan would only apply to 2nd houses purchased after the bill went into effect. I think it would help encourage people/investors with money purchase another house. But, I think that it would help drive down house prices much quicker as banks would foreclose sooner and not allow houses to sit empty for 2 years.
“I think that it would help drive down house prices much quicker as banks would foreclose sooner and not allow houses to sit empty for 2 years.”
This is not a coherent argument; sorry.
Another politician tips his hand, shows himself to be feckless and venal.
Boehner was one of the primary forces blocking the the first bailout. But even from the beginning, his objection sounded like it was ego-driven, not because he thought the bailout was a bad idea. His response to the initial negotiations was, “”I don’t know what games were being played at the White House [meeting] Friday, the ‘gang up on Boehner,’ but if they thought they were going to roll over me they are kidding themselves,” he said. ”
http://www.nydailynews.com/money/2008/09/26/2008-09-26_bailout_talks_are_moving_again_but_bitte.html
Feckless and venal.
Ultimately though, the voters get what they want.
Hey, everyone. I’ve been a little MIA recently. Got a new assignment at work (co-lead on a big project) and it is going to keep me on my toes for a bit. Actually, it will probably keep my busy beyond belief for a few weeks, then be quiet for a while, then back to crazy busy, etc. I’m actually delighted because I’m very interested in the industry and it is always nice to be told that the bosses trust you. And as it is one of the many ones financed by debt, I may be able to share a few obscure insights from time to time.
In the mean time, getting rumors that lots of hedge fund/otherwise agressive investors are looking to borrow against their holdings for cash rather than sell and “lock in” the losses. I keep wanting to ask these lawyers what makes their clients think the losses are going to go away, but it is inappropriate, so have to keep my mouth shut.
Hope springs eternal. We just spend almost a trillion bucks in the last month to help out the “market psychology”. After all, the economic collapse is really just all in our heads.
Welcome back, btw.
Glad to know that I have just been imagining all the news stories I read last year about the collapse of the subprime lending sector, or more recently, about the shut down of Wall Street’s investment banking sector.
Don’t forget that Phil Gramm actually believes this. Hopefully he won’t get anywhere near a Cabinet position, ever.
Go easy on Phil. He is a trained economist, you know…
All it took was 1 Gramm, and UBS was hooked like an junkie-bond, always searching for a better high rate of return.
Lobbyist for UBS was the only private sector job Phil ever had. All his previous jobs were working for the State/Fed government. I am sure he is eager to return.
If he has his way, we will all be working for the government soon.
“Hope springs eternal.”
Mrs. George is a life coach and a good one at that. She says hope is a dirty word. It means inactivity. You hope your house goes back up, you hope you win the lotto, all the while you are doing nothing.
The HBBers have action instead of hope. Writing and talking about things and selling our homes before the crash. Making adjustments…action.
Hope as a strategy is useless.
However, hope as an attitude is not.
With regard to stocks and bonds, there could be a short term relief rally. After all, most of the bad news on fundamentals hasn’t even happened yet.
We’re in the fourth inning in the real economy, but the chaos in the financial markets got to seventh inning levels. A basis for a rally? Maybe. A basis for me to buy stocks and bonds? No.
Do you have an estimate for the time it will take for the sh!t to roll down from Wall Street to Main Street?
It seems to be rolling now.
I look at it this way. The sh.t started on Main Street and rolled toward Wall Street. Other parts of the country have had housing price declines, job losses, etc. In NYC, they are just hitting now.
Wall Street has served as an amplifier. Now it’s heading back toward Main Street having revved up by a factor ten, with the Fed and Treasury blowing out money through a fire hose to keep it from hitting.
This appears to be the financial equivalent of the San Diego firestorms of last October. Though the San Diego firemen were very brave and did much to limit the damage, the extent of the damage was immense, and the fire ultimately ended due to the whims of Mother Nature. Similarly, I expect market fundamentals to be the ultimate limiting factor in the extent of damage due to this financial firestorm.
Fires burn themselves out eventually when they run out of combustibles, but how does a computer blip burn itself out?
It looks to me as though the FIRE* has burned itself out, alright…
*FIRE = finance, insurance and real estate sectors
Polly:
NOTHING is inappropriate for lawyers. That’ what you get paid for. That’s what you spent $100K+ on law school for, that’s what they taught you in law school. Inappropriate is what you need a lawyer for.
I told a lawyer a few months ago “How dare you take money from dying Aids patients to fund your luxurious lifestyle?”
Needles to say they called that inappropriate, but then they never pursued suing me…so it worked
A lawyers Achilles heel: force them into doing pro bono work. oh they get so mad at you.
I was going to file and age sex discrimination complainant against a aids/homeless non profit company
But that statement rocked the 70 attorney law firm $400 hr going to their pockets instead of dying aids patients…its not over yet But the head of the firm is pissed at me
I even sent them the forms for Pro Bono work so they can get LE credits… with the NYbar association….
Lets see what the EEOC does….
———————
but it is inappropriate
Thats Funny.
Too many attouneys in the United States already.
the biggest criminals are the class action lawyers. good example: John Edwards
I would say the ones that get murders off on technicalities and back on the streets are much worse than people who sue tobacco companies.
Good point, Skip. But at least they are serving their client. The class action lawyers are only serving their own pocketbooks.
Bronco,
Gee, then what happens to you and me and the rest of the folks we know who are drinking polluted waters from some corp? Cancer you name it. And you call a trial attny ‘inappropriate ‘ then? Erin Brockovich?
Sometimes we get and we need someone to fight for us, cause we are to poor, ill, you name it. So, when someone in your family gets injured or sick or ? who ya gonna call, “ghostbusters”?
Trial lawyers are just like men/women, you can’t live with them, you can’t live w/o !!!!
No issues here. Honest. Just joshing.
In some cases the cause is noble (rarely), but the payoff is not: the lawyers make millions and the plaintiffs get pennies on the dollar.
I get shareholder class action suits in the mail all the time. You have to opt-out if you don’t want to participate. If successful, the lawyers make tens of millions, whilst you will get a check for $16.75. I ask, whose interests do they have in mind?
The system of “partnership” by most major US lawfirms is broken. Watch as more and more firms go the way of Heller Ehrman.
The partner track is SO LONG, and SO GRUELING, that the smartest attorneys have more attractive options elsewhere. I am seeing this over and over again with my wife’s friends (who are attorneys from very good law schools). They work for 7-8 years, busting their butt, and once they have a good option to go in-house or elsewhere, they split, because making partner means 2-3 more years, then you get to work more hours for less pay, until you’ve been at the firm for a total of ~15 years.
The smart ones see the madness in that work/reward equation, and head for the exit ASAP…
On an hourly basis, they get big raises once they leave for a position as an in-house attorney.
It wasn’t inappropriate for me to say because I am a lawyer. It was inappropriate for me to say because I am a government employee. We have no business giving advice on the market from my office and ZERO information to support any such advice anyway, but a real whack job of a conspiracy theorist might think we did, so no casual joking about such things for me.
I have to get that pleasure here.
always glad to help make your day go easier…LOL
Laugh damnnn it…
LOL LOL LOL….but very quietly…..so L L L (skip the OL’s)
Glad you have an interesting, new assignment, Polly.
Thanks for your insight, and hope you don’t get too overworked again.
“A wise and frugal government, which shall leave men free to regulate their own pursuits of industry and improvement, and shall not take from the mouth of labor and bread it has earned - this is the sum of good government. ”
“I hope we shall crush in its birth the aristocracy of our monied corporations which dare already to challenge our government to a trial by strength, and bid defiance to the laws of our country. ”
“I sincerely believe that banking establishments are more dangerous than standing armies, and that the principle of spending money to be paid by posterity, under the name of funding, is but swindling futurity on a large scale. ”
“I predict future happiness for Americans if they can prevent the government from wasting the labors of the people under the pretense of taking care of them. ”
Thomas Jefferson
Note: Why do always repeat history?
“A wise and frugal government” - oxymoron
Treasury Secretary Henry Paulson is urging banks that plan to take part in the government capital initiative to “deploy, not hoard” their capital.
Hank says: “Lend, or no TV!”
Beggars can’t be choosers, I guess.
I think the correct quote is:”Take this money and give it away OR ELSE.”
“Give it away” is right. You can recapitalize the bank, but if they don’t think anyone can pay back a loan, why should they give any out? I see this as a good sign. Bankers care about getting their capital back with a reasonable rate of return. That is their job.
OR ELSE you are SOL the next time you come around looking for a below-market-rate loan.
I wonder how many people really understand what is going on here. Essentially, this money is “created” out of thin air by the FED, loaned to the banks with guarantees from the taxpayer (Treasury), the theory being that the banks will now loan to businesses, people, etc., who theoretically “produce” and pay the money back up the chain. It is the production that actually makes the money valuable, since up until that point it is meaningless and not backed by anything but “faith”. The “money” is or will be stuck in the sewer pipe of the banks and financial institutions. A buddy of mine who is sort of in the know on these things commented on that when the “Paulson Plan” got cranked up. He said (rather contemptuously) that the banks would just sit on the money, hoard it, etc.
+1 for the deflationistas, unless the banks succumb to Hank’s threat
I expect the banks will be first to take their money out from under the mattress and sink it into investments in devalued assets, once a bottom is in…
Today (10/21) is the day of reckoning for Lehman’s CDS settlements.
Some $400 billion notional is said to be at stake and we’ll soon know who’s holding the bag.
Other than AIG, who wrote credit insurance on anything that fogged the mirror and has already choked on it, several formerly high-flying hedge funds are also said to be on the hook.
I am looking forward to todays beat-down….as well as, other assorted failed business models getting “pantsed”.
I call todays forced selling, “bye-bye bagholder” thanks for the buying opportunity…
so many deer,
so few headlights
It’s been at least a couple weeks now… aren’t we due for a couple new, big BKs, or do you think PTB have successfully forestalled until after the elections? I guess, $700B has to buy you something, even if it’s only for a while.
$700bn ought to be enough to purchase lots of forbearance.
Market futures are noticeably jittery this morning. I think because of the Lehman CDS issue. Nobody really knows how this will all settle out. A lot of hedge funds stand to make a lot of money today, but at the expense of whom? If it all comes back to AIG, then the taxpayer get stuck with the tab again. And that’s probably the best-case scenario, isn’t it?
How can one tease out the Lehman BK shtf effect on today’s stock market behavior from the ambient massive amplitude wave motion associated with periods of high volatility?
Bear:
You’re sounding like our old friend Alan whats his last name you know the old head of the fed?
geez, PB..
ask it like you were talking to Dubya.
You can potentially model these perturbations as a linear combination of Hamiltonian-like vector fields:
y = f(n· r ± vt)
where y is price, n is a unit vector pointing in any direction and r is a position vector from an arbitrary origin such as the normative stock price. These solutions are waves of arbitrary shape whose surfaces of equal phase are planes, moving in any direction at speed v…assuming v is a scalar “fudge factor” accounting for both the irrationality of market psychology and political expediency.
Cool! The medium through which this wave is propagated is populated by countervailing buoyancy particles (aka bulls) and
gravity particles (aka bears).
How does one explain baryonic asymmetry - bull particles are more prevalent than bear ones?
Volatility is amplified by the rising tension between market fundamentals and political expediency.
Ooooo…math talk is sexy.
Ok PB, NYC, and NSO,
That is fine hypothetical construct. However, can I conduct an experiment on it? If not, then it’s not physics.
Roidy
Economists love to borrow (steal?) metaphors from physicists, but there is no possibility of performing controlled experiments to test any theories that result.
Oh, ok. I see. Then it really isn’t physics.
Sorry.
Roidy
P.S. It’s just too big, and it’s gonna hurt.
IMHO the Lehman CDS are a non event.
Today is just handing over the cash. There are no defaults.
I missed the westport by a penny yesterday, now they are running it away from me……sons a bitches..you leaning into it? or are you wating out a test of the 4 on the naz?
looks like CITIC had a bad day ot the Forex office on the asian front.
MMIFF…
how many we up to?
I sure hope these dont go up to eleven.
Pretty big payouts on Lehman CDS’s, no? I believe PIMCO’s Total Return fund was one of the biggest bagholders, and might have to fork over something like $80-90 BILLION. Correct me if I’m wrong! But I moved my 401K outta there when I heard of that small obligation, which is around half of their total assets, I think.
Wall Street Journal
* OCTOBER 21, 2008
Indonesia Got Soaked When The Seaweed Bubble Burst
Prices Soared as Traders Dived In; Farmers Cancel Pilgrimages to Mecca
By PATRICK BARTA
BANTAENG, Indonesia — Something fishy happened to seaweed last summer on this tropical island.
Easy to grow and prized for an ingredient used in making toothpaste, cosmetics and chicken patties, tropical seaweed has helped poor fishermen to offset the waning fishing industry.
Sinking Seaweed Prices
But a few months ago, parts of the $14 billion global seaweed market started soaring. The price for a key type of Indonesian seaweed suddenly more than tripled, to as much as 18,000 rupiah (or $1.80) per kilogram, from about 5,000 rupiah.
Then, just as quickly, the seaweed bubble burst, adding the spindly plant to the long list of the world’s assets — including oil, stocks and houses — that have tumbled in value. By early September, prices skidded to 12,000 rupiah. By October, they were down to 10,000, and they may be headed lower.
“Nothing like this has ever happened before,” says Asu Hasna, a 42-year-old seaweed farmer in this coastal community on the island of Sulawesi, which, along with parts of the Philippines, is a tropical seaweed hot spot. Before, she says, seaweed prices never fell. “These are bad times.”
Will history refer to this episode as the South Seaweed Bubble?
Nobody Expects the Seaweed Liquidation.
Why are these bad times? Seaweed went from 5K to 18K back to 10K — still higher than normal. If they survived on 5K just a year or two ago, surely they can survive on 5K now?
I guess I could ask the same of homebuilders and furniture stores that folded after 50 years of ups and downs. They survived before the boom, why not after?
What am I missing??
Inflation.
I don’t know how poor these farmers are, but if things got really good, they may have had a few extra kids or decided to send a few of the existing kids to school. That could be a big change in lifestyle for a small producer who is just holding on - equivalent of us buying Mcmansion, several expensive cars, etc. Or, and I guess this is more likely, the cost of entry to be a seaweed farmer is pretty low, so lots of people started doing it. Now the demand is down and they are in trouble. Like realtors.
Debt
Good God! Was EVERYTHING a bubble?
Unfortunately, yes. Common sense was the limiting factor in all of them.
Heh… To have lost your fortune in seaweed. Awesome. Waaay better story for parties than getting foreclosed on a stucco box in Turlock.
It is the same with everything and people everywhere. Price tripples in a short time = nothing unusual + “I am smart”. Price starts to revert to normal but still above normal = “These are bad times.”
Don’t let Uncle Buck’s appearance of health and vigor fool you. Any day now he will retire to his death bed so that physical gold can step in as the one world currency. (Sarcasm tags off…)
Wall Street Journal
* FOREIGN EXCHANGE
* OCTOBER 21, 2008, 8:41 A.M. ET
Dollar at 19-Month High Against Euro
By DAN MOLINSKI
NEW YORK — The dollar hit a fresh 19-month high against the euro early Tuesday in New York as U.S. stock market futures slide, leading investors to once again deleverage from riskier bets and seek refuge with the buck.
The euro dropped to as low as $1.3177 as the North American session gets underway as equity futures decline reversing Monday’s sharp rally, ahead of company earnings and persistent worries over money markets.
“I think equities and risk sentiment are still leading forex in general and we’ve seen North American equity futures drop in the past hour or so,” said Dustin Reid, director of forex strategy at RBS Global Banking and Markets. “It’s a flight to safety, which is benefitting the dollar.”
OK. Just finished re-reading Peter Schiff’s “Crash Proof”. How does this dollar strengthening jive with his assertion that the dollar is headed to the toilet?
Is it a short term movement until everyone realizes that the US may not be able to pay back the huge debits just added to their books?
The capn’
It’s a liquidation cycle as all the stock, carrytrade, emerging market, etc. trades got unwound. Gold is at all time highs in all currencies except USD and euro. Patience.
The Euro is toast. There are two sinking ships. One is just sinking faster than the other.
The dollar is currently ‘flight to perceived safety’.
We’re the Titanic and they are all tethered to us. If we go down, they go down.
Uncle Buck is too big to fail.
That’s not what I said. If they started trading amongst each other, Uncle Buck’s relevance would decrease. It’s simply cheaper (less research, marketing, and distribution costs) to direct your wares at one or two homogeneous markets than it is at 50.
This run by the dollar really is quite incredible, especially given that the source of the current economic troubles is primarily the U.S. housing market. The dollar index is almost up to 84 this morning - after being at 72 a mere 3 months ago. Wow.
http://quotes.ino.com/chart/?s=NYBOT_DX&v=dmax
Comments:
- I hammered some folks yesterday for rehashing the same arguments. Sorry perhaps I went a little overboard - it’s worth discussing definitely, given the rapid changes that are underway. Let’s just try and keep it constructive though shall we?
- It really seems like we’re in a “dollar bubble” right now - the rapidity of this upturn to me reeks, especially given that it seems counter to what’s going on. Having money flooded into the system by the Fed and Treasury should be having the reverse effect. Does not compute for me. Can someone please explain? I know combo you’re harping on how this great unwind is supposedly destroying dollars, making the ones left worth more - that kind of makes sense, but if that’s true then why didn’t the dollar absolutely fall through the floor during the “great winding” period of the housing bubble? It didn’t start falling until 2007, after the great unwind started.
The dollar fell through the floor as measured against the price of houses.
That’s only one commodity though (albeit a big one of course). The dollar didn’t fall relative to most goods and commodities, nor relative to other currencies, including currencies from countries that didn’t have a housing bubble.
Oil, gold, agricultural commodities, housing, medicine/healthcare expenses, education, etc.
The dollar lost ground against all these things during the housing boom.
Not to get between combo and aladinsane, because they both have very good points, but tend to agree with combo — at least for the short-term. Cash is king.
The USD is the world’s currency. Much global trade, and almost all petroleum purchases, are settled in USD before switching to local currencies.
In times of deflationary expectations, everyone hoards cash. It is financially the right thing to do. And the USD is the ultimate cash.
This is not surprising at all.
The US dollar value is a relative measure. Have you seen what’s been going on in Europe? Does anyone understand how this will impact the developing world? When there used to be jobs in Detroit, US slowdowns crushed that town. Same thing now, except that Detroit of the 70’s/80’s is India/China of today.
I heard a guy from Citi the other day (bond specialist) note that he thought the US was in the 7th inning of the credit mess, but that Europe was in the 1st/2nd inning.
Don’t know if the innings are right, but the lag sure seems to make sense. So, the US dollar tanks first, other currencies follow, making the US dollar appear stronger…the US economy is going to suffer bigtime since our goods are getting more expensive for the increasingly troubled rest of the world…
Is the dollar really rising? Or are other currencies falling, as people realize what idiots that Britian/Iceland/etc were to buy American subprimes without even the most cursory due diligence? Moody’s ratings or no, you don’t need a doctorate in high finance to recognize a ponzi scheme or see a red flag raised by a strawberry picker.
Some other currencies - especially the Euro - are indeed falling. However note that the three European countries that have been most affected by the housing downturn - Iceland, England, and Switzerland - coincidentally (?) do not use the Euro.
The dollar is rising against other non-Euro currencies as well - Swiss Franc, Yen, Aussie (hugely so), Rupee, etc.
Seems… weird.
Perhaps it can be chalked up to whiplash effect. Many (or perhaps all) of the economies of those countries have been propped up lately by the U.S. housing bubble, to some extent at least, and thus now the bubble pop is actually impacting them worse than the U.S., even though the U.S. is ground zero. Seems counter-intuitive, but perhaps that’s what happening.
Flight to safety. BTW, USD isn’t rising against the Yen.
Also noteworthy is that the RMB (CNY/Yuan) has remained fairly stable over the past few weeks.
Der Spiegel says that Germany is sliding into a recession. Germany is now bailing out banks left and right.
Spain/Italy/France have also announced plans or are in the process of bailing out banks.
I think this just means that they have more printing presses in Europe than in Washington DC.
After Iceland showed the poker world what could happen unless we all guaranteed ourselves against future failure, the industrialized world went All-In and somehow were allowed to draw more cards in an effort to bettor their hands…
Little did they know that Gold is holding 5 nines fine. (.99999)
…How does this dollar strengthening jive ”
That was my thought. I know other currencies were worse,but wouldn’t all those foreign US$ holders want to bail on this run-up?
If I had Billions of dollars I would be selling into strength, but then into what? Still, why hold Fed notes when the apparent SHTF? Anyway my gut says a harsh snap back at some point…soon?.
I have read that countries on the Euro must keep their debt to GDP ration under 60%. Looks like Germany, France, Portugal, Greece and Italy were past this by the end of 2007. Obviously, their debt is increasing rapidly as they do their bank bailouts.
Will this be what breaks the Euro treaty?
Yeppers.
They will soon realize that bailing out Ireland and Spain and Greece and Italy and the Baltics and the Balkan states is not possible (but it’ll take a year or two to get there.)
Watch out below!
Bubbles are strange things, often easy to spot at a distance they become harder to see close up. For those with a financial interest in their continuing existence they become invisible. This was true of the internet bubble, the housing bubble, the recent commodities bubble. And now its true of the US$ bubble. For most Americans it will remain invisible until it bursts.
SmartMoney.com - housing markets that aren’t so bad as the rest:
http://tinyurl.com/5rwrh9
Home Prices: Now for the Good News
Fire away.
Well, we can start with this misnomer:
the overbuilding…that inflated the bubble
Building doesn’t create bubbles it is a response to them. If building stops it won’t make prices stop coming down.
No firing here. We are beginning to hear rumblings from builders that in certain markets they are concerned that in 2009/2010 there will be a shortage of lots to build upon.
Other markets will take a LONG TIME to correct, but there are definitely some markets that have hit (or are rapidly approaching) bottom with respect to pricing…
This is not a Beanie baby bubble, folks. This is a Mega-Bubble. The is the Big One. We won’t be able to simply walk-it-off. It maims or completely destroys any and every thing in its path. Its list of victims circles the globe.
Some of you are trying posts that are way too long. Just summarize and link, or if it is something you wrote, put it on a website and link it.
Sorry — mea culpa.
The disconnect between physical gold and silver prices and prices quoted on exchanges is curious to me.
Without starting another thread arguing if “gold is currency”, could the difference be because physical gold (and even more so in silver) is in such short supply only temporarily until new coinage can be minted? If so what happens to the price when physical gold supply catches up?
Or, is it possible the holders of physical gold are in the “inflation is rampant” camp and the holders of paper gold (etf’s etc.) are in the deflation camp? This would suggest that they (physical and paper PM’s) have become two different products to two different types of buyers?
The cap’n
I see two possibilities:
1. Paper gold is essentially being counterfeited, and some significant portion of contracts floating around aren’t really backed by gold. Or, to put it another way, multiple contracts are backed by the same physical gold. This could have the effect of “inflating” paper gold making it worth less than it’s physical brethren.
2. Physical gold coins will always sell for a premium over spot if only b/c of the coining/distribution costs. If you consider these as two seperate markets (the gold market, and the coining service), then its possible that a change in either the supply or demand (in this case, probably a shift in the demand) curve of the coining service portion has shifted to increase the price of that service. This would account for a higher margin over spot.
They are two different products.
Physical supply of PMs is limited, cannot be leveraged, is no ones liability and is unimpaired. If you have gold it doesn’t matter if a gold miner goes bust.
Paper PMs are limitless and therefore manipulated, leveraged, defaulted on, traded and generally treated like paper. ETF shares are subject to exchanges, market makers, lenders, custodians, governments, etc. etc. ETF holders have learned a harsh lesson the last 6 months.
I know dozens of bullion dealers, many for as long as 30 years, and not one of them can ever remember when physical metal was mostly not available, as it is now.
You make money dealing in old money on turnover, and there is none right now. The market is toten hosen.
A friend has 32 1 oz CML’s in stock @ $100 over spot. That’s his entire Gold inventory for sale.
2 months ago, you could have walked into his establishment and bought as many as you’d like of that particular coin, or Eagles or Krugerrands or what-have-you, not a problem.
I can’t emphasize just how important this news is, compared to the usual criteria of watching the spot price…
Tulving Maple Leafs spot plus is coming in. It was spot plus $89 2 weeks ago, $79 for a while, $59 last week and today is spot plus $49. Lad, last week or so you said your Gold buddy wasn’t going to sell his stash, but he is now at spot +$100
Is the spot plus margin coming in and Lad’s buddy willing to sell a sign of easing in the physical PM market??? Are folks getting nervous that the spot price is starting to erode??
Something you ought to know about Hannes Tulving…
==============================================
Hannes Tulving Rare Coin (X900050) A consent order was signed by the court on June 22, 1992. The financial records for this case show that the defendant complied with the order and made all payments between 1992 and 1997. There has been no payment activity since December 1997. As of 09/30/99, there was $245,309 in the account. According to the FTC attorney, because so little was collected relative to the value of the scam (estimated at $10 million or more), redress was never considered.
http://www.ftc.gov/oig/agingmemo.shtm
Tulving has minimum order of 20. Try to buy just one for $49 over spot and report back.
Check out APMEX, you can get as little as 1 coin for $69/59 over spot, which came in from $79 over spot. Is the trend your friend? That’s what I was posting about, sorry you missed my point. Anyway, the precipitous drop in spot has (all but) erased the plus/margin in the last week or so. Thanks again for the friendly tone of your posts
Nobody can outrun their past ponzi schemes, thanks to google..
“hannes tulving rare coins ftc”
Interesting, I guess they are not the “gold standard” or the phrase may have lost some of its lustre.
With as much information available at people’s fingertips, i’m always amazed @ how little effort is made to see if somebody’s been naughty or nice?
I can’t spend all day correcting your errors, skeptic, but maples were never 79 over spot, eagles were and still are. The canadian mint has never stopped production of maples. The premium on maples and eagles has held steady. Sorry but the blog software limits my ability to draw you a picture…
You said the same thing 2 months ago and have been saying the same thing since I can remember on this blog.
Semi Quote “All my gold dealer buddies are out of gold”
But you have also been pushing this out of gold stuff since I came to this blog and gold was a little over $600 per oz.
In short,
Its hard to believe you,
its hard not to believe you.
Not true…
I actually told you all what was going to transpire a few years ago, and you can go look it up.
I told of the “Gold Window*” shutting down, and at some point there’d be no physical supply available for purchase.
That’s precisely where we are at, right now.
* 1975-2008, rest in peace.
Gold exchange prices are inflated due to leverage. The problem is a large number of people are selling gold to get dollars, then using those dollars to pay their debts; whether they’re hedge funds covering redemption, or traders getting a margin call, etc.
The thing is, very few people want to or need to take delivery of their gold. People actually trying to take possession of physical gold are having a hard time sourcing it. Also its impractical and not that liquid to handle gold bars in your basement.
things were way better when the government had the gold and we used dollars backed by gold. then governments could take delivery if they didn’t believe us.
People who have recently rushed into gold coins are in a johhny-come-lately flipper mentality panic. Panic can take anything off the shelves, without changing its fundamental value. It is interesting to see this happening many months after the price for the raw material started to crash. The raw material is plentiful and readily available in other forms, and the price is still going down. The fundamentals are still screaming down as well, with energy prices falling off, production costs drop. Gold follows production cost much better than it follows currency fluctuations.
The real bet is; will the US government default on its debt. If not, building bunkers is a waste of effort. The US government isn’t at much of a spectacular debt to GDP ratio, it’s been higher and the country didn’t end or default. This is a crisis of private debt of unprecedented proportion. Private defaults are now increasing rapidly. Today’s game is destruction of private debt.
There is nothing the government can do to stop the implosion of the largest private credit expansion in history. It has nothing to do with hyper inflation or collapse of our currency.
Today, anyway.
I probably won’t believe that hyper inflation is knocking until the housing crash is complete, bankruptcies and foreclosures peak off, employment and wages rise and gas goes back up.
Interesting take. Thanks.
This is a crisis of private debt of unprecedented proportion. Private defaults are now increasing rapidly. Today’s game is destruction of private debt.
And the US government is in the process of guaranteeing that private debt on a scale never before seen. It has backed up Fannie and Freddie, thus Federalizing the private mortage market. It bailed out out AIG and facilitated the acquisition of Bear Stearns. It has offered to buy level 3 assets from financial institutions at above market rates. Direct equity stakes in major banks and financial institutions are next.
This has everything to do with the potential collapse of the currency as the US government is broke and has to borrow the money from foreign lenders or inflate the money supply. If you doubt the “broke” part, ask yourself what it means when the US economy has a trade deficit, the US government has a budget deficit, the average American is broke and in debt and our economy is contracting (aka negative economic growth)?
At the time of the first Bretton Woods in 1944, the US was the only major industrialized nation untouched by the ravages of a global war with a manufacturing base surpassed by none. What advantage does the US have when the next global financial summit occurs? The US dollar should have collapsed in 1971 when Nixon closed the gold convertability window. Instead, more time was bought by reaching a deal with OPEC to price oil in dollars. As long as the paradigm of oil/dollars and trade surplus recycling was in place, the dollar’s value and status as global reserve currency was ensured…
As that paradigm breaks down, what will ensure it’s status today? More importantly, what will replace it?
Breton Woods was a masterful piece of work that guaranteed American hegemoney until 1971.
Those 37 years between then and now, was like everything else-borrowed time…
Northeasterner,
I understand what you are saying. I thought the dollar would collapse in the 70s too, but it didn’t. It just hissed for 30 years. I’m not saying what we expect (the obvious) won’t happen, but that it will take longer than we would expect. Other things are happening at the moment.
If we do stick with the dollar for a while, it is going to be very painful for a lot of people. Very little discussion here of what might/could happen if we do stay with the dollar for a while. I’d like to be prepared for that too.
It’s tough to be a good Boy Scout these days.
Snippet from a CNBC blogger:
But I bumped into an MBA type here on my way to Starbucks, who told me he was chatting up a loss mitigation type from Freddie during one of the closed sessions over the weekend, and this Freddie guy said part of the trouble is that in a full 45 percent of the delinquencies, they’re finding nobody home.
That’s right. 45 percent!
These folks have either up and left or never lived in the homes to begin with. They’re just walking away and frankly have no interest in modifications. That leaves the banks and investors holding the bag, which you could say is kind of poetic justice, given how the mortgage bankers caused much of this mess with their loosey-goosey lending.
My question: In the above mentioned scenarios are the stuck banks required to pay property taxes on these homes?
My question: In the above mentioned scenarios are the stuck banks required to pay property taxes on these homes?
Heck yeah!
Would love to see some “official” stats about all of this. I strongly suspect the gubmint is just reacting to crisis after crisis, instead of someone coming up with a good public policy based on real world observations.
Yes and no. They are required to but often don’t do it until the house is sold.
Federal Government does not pay property taxes.
HUD repossessed homes pay property taxes.
wonder if they will burn them?
Not a bad idea really, pick out the really nasty ones, burn them for firefighter practice . . . marshmallows optional.
“My question: In the above mentioned scenarios are the stuck banks required to pay property taxes on these homes?”
Does the grass keep growing ?
Do the HOA fees keep adding up ?
Do the pools turn into green mosquito breeding grounds ?
Who is responsible when someone gets hurt or killed on the abandoned properties ?
Liability is a good question. What happens when the house blows up because someone stole the copper gas pipes?
Just was down in Biloxi, I talked to a local builder that was showing me several huge apartment complexes going up…actually sveral within a mile radius. I would estimate 1000+ units that were being built as a response to condition of Casino build out. Casinos are reporting layoffs,and Margaritaville casino is on hold now that foundation was poured. Looks like the proverbial rush to the stop sign.
I guess they don’t have to pay it. But the sheriff will sell for back taxes and the mortgage holder is SOL.
Around here anyway, tax liens are first position.
Palm Beach Post.com
Monday October 20
Zalewski said 17,065 homes in Palm Beach County went into foreclosure during the first nine months of 2008. Those defaults threaten to drag down home prices for the next five years, he said
Too Big To Fail: The Hazards of Bank Bailouts
2007 Annual Report: Excerpts from the 2004 book by Gary H. Stern and Ron J. Feldman.
http://www.minneapolisfed.org/publications_papers/pub_display.cfm?id=3472
I am awaiting Mr. Sterns speech today. It should be fascinating.
Gary H. Stern became president and chief executive officer of the Federal Reserve Bank of Minneapolis in March 1985.
Excellent piece. Good to see at least somebody is trying to address the problem of “too big to fail”. Thank you, Hoz.
I read on marketwatch that the treasury is starting to buy Fannie and Freddie bonds to help push down mortgage rates. I’m sure their are some mortgage brokers here that will go get their refi hats on and help save all the lost souls.
the treasury is almost out of ammo, if this doesn’t work and save all the lost souls what will become of us all?
It is funny that the government is buying its own bonds to push down rates. I wish I could buy my own mortgage debt to push down rates.
ummmm how does that work? how can you buy your own debt? you promise to pay your self? or is this just moving money from one hand to another?
The feds sell treasuries to folks fleeing the stock market with a 1% yield and buy agencies from fannie & freddie at 2% who loan it to banks at 3% who loan it to you at 6.5%.
That works as long as people are willing to buy treasuries for next to no return, and people pay back those 6.5% loans…
“how can you buy your own debt?”
Pay off your mortgage early. Pay down your credit cards.
Debt monetization is not funny; it is the path to Weimerica.
The markets must be pretty irrational, then, as gold is falling and Uncle Buck looks stronger by the day…
Dollar looking like we could imagine taking a run over to England to visit in-laws and make a stop in France, as well! For the next, what, 5 minutes or 3 months?
But I see it’s not gaining on the yen … which was where I’ve been thinking of stashing some savings, now that the gold window is rumored to be closed.
I guess they want to create a new bond bubble.
Actually, the govt’s buying bonds pushes down interest rates on both bonds and mortgages. Sadly for you, the effect only applies to new mortgages, not existing ones (unless you are lucky enough to have an ARM).
Happily for me I do not have a mortgage, but if I could play the same financial games the government does with its debt I probably would start buying up the world with debt I purchase from myself and insure myself against default.
It is so funny when economists treat the “government” as an independent entity capable of providing insurance / safety nets for the general population. Everyone is losing money, good thing the government can “bail them out”…. oh wait, the government is funded by “everyone”.
When looking at government debt/guarantees we need to focus on debt-per-capita. Look at every move they make as giving to you with their right hand what they take with their left hand minus a “service fee” of near 80%.
‘…oh wait, the government is funded by “everyone”.’
Which gets to the heart of the matter, which is that policies that use public monies to prop up housing prices are basically a wealth subsidy in the form of a stealth regressive tax on some combination of non-homeowners (generally the poorest segment of the populace) and future generations with no say in the matter. Are either McCain or Obama smart enough to recognize a stealth regressive tax when they see one?
They think they are a governmental innovation
Bloomberg: The Federal Reserve Board invoked emergency authority to purchase assets from money market mutual funds that are having difficulty meeting redemptions from their investors.
Are there any major asset classes the Fed does not intend to prop up?
So far the Fed hasn’t invoked emergency authority to buy vacant houses directly.
How do you know they don’t have some kind of stealth real estate price support program in place?
Looks like we’re going to find out.
Up to $600 billion of assets will be involved.
I nearly spit out my coffee when I heard the clueless folks on NPR introduce a story this morning.
(Paraphrasing)
“There’s an unexpected benefit to the housing crisis” [pause for dramatic effect while the audience wonders what it could be] “affordable houses!”
People still don’t get that this is the way it should have been all along.
Do you think the high muck-a-mucks of economic policy will ever catch on to the great benefits of affordable housing prices in major urban markets before the resulting boom that results from the ability to recruit a highly qualified labor force hits them in the face during the recovery phase of the housing bust?
No! Our economy is now based on house prices. Houses have become bank accounts.
“I nearly spit out my coffee when I heard the clueless folks on NPR introduce a story this morning.
“There’s an unexpected benefit to the housing crisis” …“affordable houses!”
Yes, between that and the seaweed bubble story, it was interesting financial news coverage this morning. I prefer the Adam Carolla show in the mornings, and only switch to NPR during ad breaks.
It’s turning out to be one of those red number days on the Street.
There is something potentially misleading with this price data: The only related asset categories whose value is rising when all these numbers are red are the 10-yr and 30-yr T-bonds. You can think of them as fixed future nominal dollar denominated payment streams. A rising l-t bond price suggests a bet by investors that the dollar will strengthen over the next 10-30 years.
Check out the AMEX price chart: major bungee jumping action!
If california had so many homes sell recently, what kind of people are buying? 50% foreclosures sounds risky.
My guess: Flippers and specuvestors. There cannot possibly be much end-user demand when the San Diego economy is into the fifth month of a nasty recession.
There is a lot of pent up demand as a result of the bubble. Not too many normal people bought on the coasts from 2003 to 2007, except with suicide loans.
I can’t speak for NYC (it’s different there), but the SD median hh income is somewhere in the low $60K range, and we have a bad recession underway currently. With a median home price still north of $300K, most SD hhs are not qualified to buy at current price levels, and many who are qualified might justifiably have cold feet at this point.
Seems being in a recession for five months doesn’t affect anything from OB to O’side and over to Poway. Are those scripps ranch homes plummeting?
I didn’t think so.
Why is that, Ann?
I, like a few others, drive around, and see signs everywhere, but the prices are sticky, in the
up-ish mode.
I did see a Rancho Mirage home, near Tamarisk CC that 2 yrs ago would have been high 6’s and now on Craigslist for 474k, 11,000 sf lot, older 63 home, but nice lot. But still, the house should be around 245k at most. Overhaul massively.
$150 billion? We’re good for it
For a brief moment, in the days after the September 11 terrorist attacks, banks were nice to each other. Or that’s what some big-wig from a Swiss financial institution told me once.
He explained that instead of the usual cut-throat inter-bank lending practices - where any perceived weakness in a rival was met with high interest rates or a refusal to lend - the competitors eased off the pressure, handed over billions to each other more or less free of charge with a ‘we know you’re good for it’ handshake.
My Swiss friend claimed the temporary suspension of capitalism averted a systemic credit crunch.
Capitalism resumed shortly after and whatever inter-bank solidarity forged in the post-terror crisis has been forgotten. Wracked with debt paranoia the world’s banks now lie in the intensive care unit hooked up to permanent ‘liquidity’ drips and periodically ‘pumped’ up with government cash.
But for the next two years at least New Zealand taxpayers will have to carry an $150 billion ‘contingent liability’ on their books. The government ‘guarantee’, for what it’s worth, is a promise to ourselves that if we go broke, we’ll pay ourselves back.
http://blogs.nzherald.co.nz/blog/inside-money/2008/10/16/150-billion-were-good-it/?c_id=1502776
Say it isn’t so Joe
” downturn in property prices, homes in north and south Dublin and Meath are on the market for the same or lower prices than similar homes under the affordable housing scheme.”
http://www.irishtimes.com/newspaper/frontpage/2008/1020/1224454388516.html?via=mr
“Affordable housing” is always just a way to give your tax dollars to land developers, construction companies and real estate agents in return for campaign contributions. Has nothing to do with helping regular folks. Ever.
I think there are thousands of $50k wage earners in mountain towns with a median price north of $1.5 million who might disagree with you.
How did that happen?
NASDAQ moves to prevent mass delistings.
I suggest reverse (100-1) splits…makes penny stocks instantly morph into dollar stocks.
Somebody talk me down…More and more I find myself thinking that a week or so ago was the bottom of the market and it’s time to get back in. Even if it’s not the bottom, it’s “close enough” as far as long term goals. Thoughts?
It’s definitely not the bottom of the housing market, though.
Well, the S&P 500 has a 3% dividend yield based on trailing earnings. I want 4% in a typical year. Was the past 12 months typical, in that the dividends were the average that can be expected?
Seems like we need a little lower price for the small amount of real (as opposed to accounting) earnings left after executive bonuses.
Then there is the possiblity of an overshoot on the downside.
I’d like to see the global recession actually hit, and make sure teh damage is priced in, before buying. To me the market is too high to buy, too low to sell.
Speaking of dividends:
http://www.marketwatch.com/news/story/meager-growth-foreseen-sp-500/story.aspx?guid=%7BF2151476%2DB9B8%2D4B1F%2DB43A%2DE1FE57A1F947%7D
“Standard & Poor’s cut its estimate for 2008 dividend growth in the S&P 500 by nearly three percentage points, as the credit crunch and a slowing economy pressure corporate earnings.
The 1.2% projected increase would be the lowest growth rate since 2001, in the aftermath of the technology bubble. ‘The prospects for dividends remain extremely cautious,’ said Howard Silverblatt, senior index analyst at S&P. Fourth-quarter payments are expected to fall 10%, a performance that would be the worst pullback since 1958, S&P said.”
Who has been screwed more by the shift of national wealth to executive compensation? Workers or savers? Less executive pay, more dividends. Then we’ll buy.
I jumped back in (after sitting on the sidelines for 2 years) in a small way. Enough to make a little better return than sitting it out if things begin moving up, but if they move down I can live with the loss. If there is a sustained move up, I’ll put a little more in. If there is a big leg down, I’ll lose a little but continue to wait it out.
I have the perfect system for never getting rich.
Don’t listen to those clowns on CNBC. They are selling knife catching hope.
The volatility kinda freaks me out. I’m on the sidelines.
There has never been a better time to DCA (ask BiM!)…
Who is BiM?
Bill in Maryland???
Bill in Maryland (don’t get paranoid, Bill — I don’t mean any offense, but I recall you are a big dollar cost averaging fan)
LOL.
Hello there. Yeah I’m a huge dollar cost averaging fan. The stock market bottom will be sometime in the next 4 years. The poor soul (pun intended) who will win as president will have only one term and be less popular in 2012 than GWB in October 2008.
Dow 20,000 in 2025. Start DCAing.
Outside retirement I invest like an old man. Treasury notes, TIPS, savings bonds, municipal bonds, and gold bullion coins.
I’m giving myself a pay cut every year the next 4 years. $250,000 and over higher tax? No worry for me. Vote for Obama! LOL. Let’s quicken this ride to the bottom of the hill.
It could be the bottom. I find myself thinking the same thing.
And then I remember that the layoffs haven’t hit. That the earnings being reported now are for last quarter. That the freeze in credit and spending only started a few weeks ago, and next quarter’s reports will be dismal.
This is not the bottom. There may be trading opportunities– certainly with this wonderful volatility there are opportunities to make money. But don’t go long yet. Commercial RE still has yet to implode.
This will take some time. Trade, don’t invest. You are sensing at most a rally — not a bull market.
Step away from the edge!
General “Buck” Turgidson: Mr. President, we must not allow a mindshaft gap!
Gold is rapidly approaching its August 2007 (credit crunch onset) price level. Is it just my imagination, or are these bubbles rising higher and faster over shorter and shorter durations?
its within 10% of the 690 August numbers.
I like goldi-mellow-hard-money old fellow below, 600.
sorry laddy.
just my 2 pence.
This train goes there, but it is not the end of the line.
Credit is rolling faster and faster over various asset classes.
Remember that most “infestors” (retail, mutual fund, pension fund, hedge fund) are basically momentum players. They are all chasing each other, and the money is rolling through asset class by asset class while the credit pedestal is slowly crumbling.
It’s really entertaining.
Your thesis is both logical, credible and obvious. You will NEVER be able to demonstrate it with a regression though.
I think of it as a giant tsunami wave of liquidity washing up any asset class that lands in its path — even seaweed!!!
This is the main reason that extreme volatility and a crash are synonymous.
I note that water flowing over a waterfall appears quite volatile when viewed at close range. But viewed from the distance, it is apparent that its generally trend is to move straight down.
P.S. I do not fall into the class of academics who were successfully browbeaten by their peers into believing that the only valid standard of empirical evidence is a regression with high R^2 and significant t-statistics.
Duly noted.
And that seaweed article was too too delicious.
here’s an eye opener about how everything is going faster and faster…
hint: it has to do with the “hockey stick” graph aka exponential compounding.
the Crash Course
Watching the paper price recede is like watching the precursor of a tsunami wave taking the ocean out with it, before it comes back, with a vengeance…
It’s best to be on high ground and comfortably numb, at this point of the proceedings.
Gold will boom sometime in the next four years. A Democrat Congress and Democrat President. I doubt that Republicans will win control of Congress in 2010. People are damn well (and understandably) p.o.’ed at Republicans for becoming kitties (I mean the slang for that).
For those who reminisce about the stock boom under the last Democrat. You can dream on, please invest all your money into growth stocks! LOL. The Republicans controlled Congress from 1995 to January 2000 in Clinton’s term. They did not have huge spending bills for the hapless hand wringing socialist to sign.
You think that idiot Bush was bad? Wait until the traditional big spenders take control and steal your wallet.
I say stocks will suffer the next 4 years until the budget is balanced and savers are rewarded. That will be in 2013 when Democrats change their philosophy to free market and small government or Republicans do that.
American voters are starting to tighten their belts. Once they understand how that feels, they will elect a Congress and President who does the same. It will take a few years. Scumbag socialists for now.
Be careful what you wish for. Or maybe you will hasten the further economic slide.
latest news
S&P says S&P 500 payout decrease worst since 1958
PAUL B. FARRELL
Wall Street’s ‘Disaster Capitalism for Dummies’
14 reasons Main Street loses big while Wall Street sabotages democracy
By Paul B. Farrell, MarketWatch
Last update: 7:10 p.m. EDT Oct. 20, 2008
ARROYO GRANDE, Calif. (MarketWatch) — Yes, we’re dummies. You. Me. All 300 million of us. Clueless.
…
Why? The real “game changer” already happened. Democracy has been replaced by Wall Street’s new “disaster capitalism.”
I am shocked it took him so long to figure this out. Marx was always right about Capitalism. Brilliant.
Capitalism is capable of tremendous growth because the capitalist can, and has an incentive to, reinvest profits in new technologies and capital equipment. Marx considered the capitalist class to be the most revolutionary in history, because it constantly improved the means of production. But Marx argued that capitalism was prone to periodic crises. He suggested that over time, capitalists would invest more and more in new technologies, and less and less in labor. Since Marx believed that surplus value appropriated from labor is the source of profits, he concluded that the rate of profit would fall even as the economy grew. When the rate of profit falls below a certain point, the result would be a recession or depression in which certain sectors of the economy would collapse. Marx thought that during such a crisis the price of labor would also fall, and eventually make possible the investment in new technologies and the growth of new sectors of the economy.
Marx believed that this cycle of growth, collapse, and growth would be punctuated by increasingly severe crises. Moreover, he believed that the long-term consequence of this process was necessarily the enrichment and empowerment of the capitalist class and the impoverishment of the proletariat. He believed that were the proletariat to seize the means of production, they would encourage social relations that would benefit everyone equally, and a system of production less vulnerable to periodic crises. In general, Marx thought that peaceful negotiation of this problem was impracticable, and that a massive well-organized violent revolution would be required, because the ruling class would not give up power without struggle. He theorized that to establish the socialist system, a dictatorship of the proletariat - a period where the needs of the working-class, not of capital, will be the common deciding factor - must be created on a temporary basis.
This man was brilliant.
“Marx was always right about Capitalism.”
You appear to be dialectically confused. Disaster capitalism is something entirely different than capitalism as Adam Smith envisioned it.
Karl Marx?
The guy who invented communism?
How well is that system working, exactly?
Houston we have inversion.
6mo@ 1.61
2yr@1.58
Paging Señor combotechie, paging Señor combotechie.
Please report to the deflation tent.
I am in the tent with combo and jas.
It’s going to get crowded in here though.
We may have to have a tent camp.
I heard about some land over near the sequoias.
We’ll just charge for admission.
We’ll even take cash. LOL
Is it reasonable to conclude that bond traders are pricing in their subjective forecasts for two more years of economic gloom?
I was sure a bond diatribe on how the US curve only inverts at the long end was forthcoming.
chop chop,
posthaste
Had to call in to Thom Hartman show on Air America this morning - they are talking with a guy who wrote a book encouraging people to walk away from their mortgages.
Thanks to HBB I was able to sound like I knew what I was talking about. They agreed with me, so the tide is turning.
Choose Foreclosure, the Case for Walking Away (author anonymously calls himself The Postman: http://www.amazon.com/CHOOSE-FORECLOSURE-Case-Walking-Away/dp/0615224547)
“Special Offers and Product Promotions
Save $10 when you spend $50 or more when you pay with Bill Me Later®. Offer valid Oct 13, 2008 - Dec 30, 2008.”
Buy the walk away from your mortgage book and Amazon will bill you later. Ha! I am sure the walk-away people will be good for the money. It is not like they are irresponsible or. . . oh, wait.
Ha! I think I heard you. It sounded like an HBBer and I was grateful because most callers are SO clueless, on any given show.
Yeah, they cut me off before I could really get on my soapbox.
I heard you!
Dan? or were you the other guy. As I was listening, Postman and Thom Hartman were agreeing, and I though, gosh, wonder if this guy is from HBB>.
Cool. You did great! Made Ben HBB proud!
No the woman from San Francisco - that was me….saying that propping up home prices wasn’t going to work becaause home prices need to be in line with income.
I also mentioned that houses are for shelter - and when they become tools of speculation (coupled with easy credit), we get a bubble.
Let it crash.
Kinda sick of baseball analogies, so let’s switch to tennis.
Right now financially we are down 5-0, after losing the first 2 games 6-0 & 6-0.
40-Loan
Set Point
Nine innings is a very long game, but I know baseball scores much more than tennis score.
I thought it was love something.
I prefer badminton.
love and loan are both synonymous with zero, it’s quite a racket.
Sorry if this is a double-post, i dont remember seeing the link posted. The data is from Aug. 2008, its the most current i could find on the FED website.
Dynamic Maps of Nonprime Mortgage Conditions in the United States
http://www.newyorkfed.org/mortgagemaps/
oops, forgot to add-on this link:
Dynamic Maps of Bank Card and Mortgage Delinquencies in the United States
http://data.newyorkfed.org/creditconditionsmap/
Thanks….NY has more no doc loans than Az or FL!
Young hedge fund manager retires at 37, thanks all the idiots in the housing bubble that made him rich:
http://www.guardian.co.uk/business/2008/oct/18/banking-useconomy
We see these post-bubble transactions frequently on this board (and elsewhere), yet I still find them fascinating. The symmetry of the prices and dates tells the story.
House in Peoria, Arizona
http://www.zillow.com/homedetails/8583-W-Andrea-Dr-Peoria-AZ-85383/59268413_zpid
-Purchased new on 8/11/03 for $202,245
-Purchased by someone else on 9/23/05 for $440,000
-Trustee sale on 7/16/08, Bank of NY takes back house, $231,625
-Currently listed on MLS for $188,900
Current Zestimate of $274,500 is still way too high.
Looks to me like a round-trip flip…
Ladies and gentlemen, your latest knife catcher…….
http://www.detnews.com/apps/pbcs.dll/article?AID=/20081021/AUTO01/810210414
Wasn’t a double from 8 a sure thing???
Well…good news. My friend that was seeking advice about his CC bills ended up boning the CC companies to the tune of $30k. For those that missed it, he makes $500 per month, and lives on SS. The CC companies all raised his interest rates from 12% to 22% in the last 2 months. He hadn’t missed a payment, although he was basically working for free and giving some of his SS to make the CC payments. The Ivy League idiots on Wall Street let him ring up $30k in CC debt. He has stopped paying all of them, so they got a nice fat write-off coming. I guess the impacted include Providian, Capital One, and Bank America.
They knew the deal. They offered the credit. They knew his ability (i.e. inability) to repay. They were stupid. Now they have to pay for it. I only wish it had been more.
The one thing I found interesting was his comment about all the bailouts, and how he didn’t think it was fair that he had to pay these higher rates because banks had made bad bets in other places. This is what unravels a society. People feel so wronged by the system, they screw it right back.
I love it.
They can just add it to the tab of losses. Lol!!!
Bank of America Credit-Card Unit Loses $373 Million on Defaults
http://www.bloomberg.com/apps/news?pid=20601087&sid=aaCdPylW8B.U&refer=home
Is it 1929 all over again?
Some good bits in this one. For example,
“The Dow plunged 39 percent between October 23 and November 13, 1929, but it regained 74 percent of that loss by March 1930. Only when the economy failed to gain momentum in the spring did the market slip back.”
This is why I find the daily musings on where the market is headed to be somewhat misguided. Within 6 months things recovered, only to lose its footing again for the better part of 10 years.
So, what’s the point of all the short-term daily buzz, as if that somehow portends a longer term trend?
A note from Salinas:
It’s being completely overrun by gangs. The remnants from the popped bubble are compounding the problem.
At a Church sponsored rally in favor of CA Proposition 8 this past Sunday (which I am opposed to), it looked like a gangbanger convention
http://goteaminternet.com/show/34742
Today is the 140th anniversary of Hayward SF bay area quake. Fault runs North to South down along the east bay from Oakland down to Milpitas/North San Jose. News had these lovely computer generated views of how the shock waves will radiate from that particular fault - sickening to watch the shock waves hit were I live (rent) in NE. San Jose. I am at ground zero for the bigest brunt of the force according to the model. I feel somewhat better living on top floor of 5 story building. The front doorway of my apartment is steel. Only one layer of roofing material to fall on me. Last quake I was in (s. cal) the shaking was so bad I was unable to walk to the doorway - even though it was only 4 feet away from my desk. When I finally made it, the building was warping and I could not get the door open. Finally it opened and I felt pretty safe. S. Cal I must say did an excellent job with retrofitting older buildings in 1980’s. I recall watching them put the steel bars up on the 30 year old building I worked in and how ridiculously uneffective it looked. However, no cracks in that building at all after two larger quakes, so the structural engineers and city gov are not so dumb after all. I recall hearing that SF is lagging in older building retro fit compared to LA.
We will have a 7+ in either N or S. Cal in next 30 (insiders say likely in next 10) years. S. Cal has a slightly higher probability. Geologists say this is not an if situation, but a when. Can you imagine if this hits before an economic recovery? I suppose CA people kill two birds. Preparations for quake/ or economic ruin are pretty much the same.
I keep procrastinating. I need water, can food, cash, lots of batteries/flashlights - all that stuff and I should buy a bike. My car is parked in a garage underneath the building, so that will be toast. They say fill the bathtub with water right away before water lines go down/become polluted. Better yet, how about I just move? I like the S. AZ desert.
Wagering on when an earthquake is coming is a shaky proposition, a come bet that seldom pays off.
“They” have been saying the BIG ONE is coming since the late 60s and I recall during the early 70s that easter week vacation, family went to Phoenix, that was supposed to be the week that WAS! I recall everyone talking about buying boats, Phoenix would surely be the next coastal development.
I think we will have one, just don’t know when.
I am fully convinced at this point that the Fed is a bottomless money pit. Now I finally understand why macroeconomic models have no budget constraint.
Financial Times
Fed offers $540bn to prop up mutuals
By James Politi in Washington and Michael Mackenzie in New York
Published: October 21 2008 16:25 | Last updated: October 21 2008 20:57
The US Federal Reserve on Tuesday said it would finance up to $540bn (€410bn) in purchases of short-term debt from money market mutual funds to shore up a key pillar of the US financial system.
Can our country afford a guarantee gap?
Just about everything is guaranteed, which is no worry, as these guarantees are entirely free, as evidenced by the fact that there is no insurance program in place to provide them, there is no insurance fund, and no insurance premiums are charged.
This debacle could be a bit a game-changer for the definition of the word “guarantee”.
Guaranteeing is one thing; paying up is another.
Hello, Iceland!
Luckily lil’ Iceland was a F.O.F.I., and got first crack @ the IMF stash o’ cash.
Other countries might have to settle for leftovers…
WSJ: BUENOS AIRES — Argentina’s leftist President Cristina Kirchner proposed nationalizing the country’s private pension funds in what could be seen as a grab for cash and power amid the global economic crisis.
…
[T]he underlying motive would be to provide the government with about $5 billion in annual pension contributions that it needs to plug a gap in financing next year and avert a second debt default.
Oct. 21 (Bloomberg) — Treasury Secretary Henry Paulson advocated mergers and acquisitions to strengthen the banking industry, while reiterating that the aim of a $250 billion bank recapitalization plan is to stimulate lending.
Suicide Rate Rises in U.S. as More Middle-Aged Die
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aQQa1Yno1r0E
The Bailout Sparks Americans’ Anger
10/21/2008
MarketWatch’s David Weidner counts himself among those upset about the government’s giant bailout package, but he takes a closer look at how Wall Street has changed in the wake of the crisis. (Oct. 21)
If most of Wall Street is gone, who is still around to catch the bailout monies as they are dropped out of helicopters?
Imagine what one person and 1,000 crisp One Dollar banknotes could do, when allowed to flutter like manna from heaven, out the door of a helicopter, suspended mid-air thousands of feet above Wall Street?
Until they banknotes got reasonably close enough for people to make out the denomination, human nature will always hope for the best ($100 bills), and in the end be happy with the single-digit windfall…
If anybody is considering this action, please have as many cameras to record the folly from above, as humanly possible.
Just saw this (sorry if it was already posted over the weekend):
So long, suckers. Millionaire hedge fund boss thanks ‘idiot’ traders and retires at 37
http://www.guardian.co.uk/business/2008/oct/18/banking-useconomy
Exhibit G for my case that we’re still in denial:
http://blogs.tampabay.com/talk/2008/10/see-rays-in-pla.html