Bits Bucket For October 26, 2008
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The Housing Bubble
Examining the home price boom and its effect on owners, lenders, regulators, realtors and the economy as a whole.
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Name:Ben Jones
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A Surfeit of Spec Mansions
http://www.nytimes.com/2008/10/26/realestate/26wczo.html?ref=realestate
“Such is the state of the market for high-end speculatively built houses in lower Fairfield County’s priciest suburban communities. Sales are so slow that many of the new homes for sale aren’t so new anymore,”
Boo f—ing hoo. And yet we still hear that the high-end won’t get hurt. The high-end is probably the most overbuilt in the last few years because you could make huge dollars on every project. The high-end is toast and the CityBoy is smiling.
If you only knew the number of times I had heard the Greenwich and New Canaan were “special”…
They’re special alright, specially f*cked.
Dont forget Darien Westport Wilton Weston not cheap either
Downtown Stamford has rents like NYC…
There are a few fundamental factors in favor of Stamford that make it go against the grain.
They are kinda one-off unique, not unique as in “we’re so special” but unique as in event-based.
Basically, lots of employers are leaving Greenwich in favor of Stamford. RBS being the biggest one. So you have a huge imbalance of demand-supply in the short-term so rents spiked.
FPSS, a question for you: a poster on CR, rich, was suggesting the other day that parking some money in PMs, as through PMPIX, might pay off over the next 2-3 years, as people flee currencies and seek safer havens. (Plus, I believe he posited that hedgies, or what was left of them, might hit this market hard.) I get his reasoning, but won’t there be powerful deflationary forces pushing in the other direction?
PS - always appreciate your insight.
Complicated question which I will probably provide a very unsatisfactory answer to.
As a general rule, I like PM’s for all the obvious reasons but I am not indoctrinaire like some posters (they know who they are.)
The deflationary currents are powerful indeed, and will be met with a suitably inflationary response. However, would I buy PM’s or commodities? Or both?
Not sure yet but I think we have time. There’s rarely an overwhelming urgency in these things.
Very satisfactory response. Thanks, FPSS. Although I am convinced the market has a long way to go down, I still sense that there could very well be an upsurge at any moment, which leaves me paralyzed. Was just looking for something I could hold longer term without the nausea-inducing ups and downs of the short ETFs.
Thanks.
I will also observe that what’s good for me is not good for the average person so I am loathe to provide advice.
For better or for worse, I am cold-blooded. If I take a loss, and I am genuinely wrong, I cut my losses ruthlessly. If I am completely convinced that I am right, I hang on.
(How to distinguish between two is a “work-in-progress”. Even Buffett doesn’t have the answers. Nobody does.)
I know that the average person’s emotional response doesn’t work like that. They hate losses. I couldn’t care less. I just need to be more right than wrong.
The world would prefer a scenario where they are safe all the time. I suggest cash split across banks. They don’t like my response. What to do?
“The 10,000-square-foot house was developed on speculation — without first lining up buyers — by Tristar Partners.”
Was building mansions on spec a part of the newfangled home building sector business model that I somehow missed?
Yesterday I had posted about a 401k conference call we had last week. I stated that my co-workers looked very fearful. I also typed that I felt bad for them. The putty-tat had asked why I would feel bad for them. I had been half joking about feeling bad for them. They didn’t seem to feel bad when they laughed at my warnings of the past couple years.
The problem here is that I don’t know how to perform brain surgery. But I would expect somebody could perform it on me if I ever had a tumor. I don’t know how rebuild a transmission but I would expect somebody else could do that for me, if I owned a car. There are a lot of things that I don’t know but I have faith in society that others know how to do these things.
The people around us have been told time and again that there are teams of experts that know how to manage money, run an economy and keep their money stable. Every time they turn on the TV they can find somebody that will attest to that. That is a big part of the reason that they didn’t believe us on the HBB when we warned about the systemic collapse that we knew was bound to take place.
Societies are built on trust. It is unfortunate that much of that trust is being destroyed right now. The people around us really didn’t believe that they couldn’t trust their president, their senators, their congressmen, their bankers, their real estate agents and even their nearest neighbors.
In a sense I do feel bad for the people around me. They just wanted to go about their lives, trusting that society wasn’t a complete cesspool. Those illusions have been shattered once again. And nothing The Masters, such as Paulson and Bernanke and Dodd and Frank and Bu$h, are doing is designed to rebuild that trust. It is only going to diminish it further. Yes, people need to wake up but how many people could have really imagined it would get this bad?
Outstanding post, NYCityboy,
At the heart of the matter, Ponzi schemes take advantage of that trust that people innately have in each other.
This is an excellent post.
There is something to be said for trust but “sheep get sheared”. That’s how the world works.
What’s my point? I have a hard time feeling sorry for them when all the data was in their face. Surely they could figure out what they could afford, right? That was not too hard.
Somewhere you have to bring in their own foolishness. They were speculating; they got burnt.
You’re assuming that they could add, subtract, multiply, and divide. I’ve discovered that most people, including highly educated people (other than those trained in math or hard sciences), cannot. Even on this blog we see blunders like “property taxes in my town are .2%,” and people here seem more on the ball than many.
Yes, I think hundreds of thousands, perhaps millions, of people were swindled, cheated, lied to, and manipulated, but instead of bailing them out, why isn’t the government going after the bad guys? Let the crooks pay the tab, with interest. They, at least, did seem to know exactly how to calculate to their own advantage.
If they can’t look out for their own self-interest, they deserve to be swindled.
You can’t mollycoddle people all day long. At some point, they have to accept some modicum of responsibility.
They’re adults not children.
“If they can’t look out for their own self-interest, they deserve to be swindled.”
While you write some very intelligent things, I can’t agree with this statement. The playing field is not level. A past girlfriend’s brother was starved of oxygen at birth. He looked completely normal, a handsome guy in fact, but he had the mind of a 4 year old. He’d trade a moped for a candy bar. Does he “deserve” to lose his moped?
Look, be reasonable.
I’m not against regulation. I have no doubt in my mind that the regulators threw the average person under the bus. I know that they are rewarding bad behavior and swindling the taxpayers in open daylight.
I know all of this (and am not exactly unsympathetic.)
But I also know that people gambled. They bought 2-10-12-24 houses and are gonna default on them. This is blunt fact not some theoretical hootenanny.
So get a grip. At some point in time, someone has to look out for their own self-interest.
In your above example, what exactly would you do (theoretically speaking) if your ex-girlfriend swindled her own brother? Would you lead a crusade? Would you quit your job and become a spokesman for “disabled rights”? Where would you draw the line?
The playing field is not level. Life is not fair. Half of the entire adult population has a below average IQ.
What this financial fiasco teaches more than anything is that we’re all in this together. The stupid actions of a few, whether from greed or ignorance, can affect everyone. It’s not enough to “just take care of yourself” as the oft-repeated mantra goes. Our fantasies about “rugged individualism” just don’t work in the modern, global economy.
Perhaps, though, we could have each deceitful CEO and mortgage broker share a cell with someone who fraudulently completed a mortgage application. Maybe they could learn from each other…
Look, I’ve got a grip. In fact, I could probably crush your hand if I wanted to.
I think we’re mostly in agreement, as I do believe that a lot of people deserve what they get. Heck, I’d never blame anyone but myself should I lose a house, get swindled, etc. But, when we allow some of the most brilliant minds the opportunity to devise and implement elaborate schemes which strip the wealth, in an unabated fashion, of the less sophisticated, there’s something seriously flawed about our society. There need to be protections in place. Just sayin’.
And what I’m sayin’ is it ain’t gonna work.
Brilliant minds don’t work for free, and generally the most unscrupulous element of society is ALWAYS going to pay up to get them to negate the regulations.
In fact, I’ll even go as far as to say there isn’t a regulation in the world that I can’t negate with a smart mathematician and a brilliant legal lawyer well trained in world finance.
You have far too much optimism and confidence in “regulation”.
“You have far too much optimism and confidence in “regulation”.”
I was more thinking “retribution”. Pitchforks, lamp posts, dull blades, screaming crowds, and scared, weeping pigmen, soiling themselves in their final moments…
Yeah, well, that’s called fantasy.
On a probabilistic scale, I’d argue the pigmen and pigwomen have made out like bandits, no?
You want your fellow Americans to revolt? Why? We can issue them a $600 check and man the helicopters.
Give it up, kiddo! My uncle was full of these fantasies for 40 years. Next year, there was going to be a revolution “for sure”. Then he died. Twenty years later, still no revolution.
I’m thinking more revolt, than revolution.
The playing field is not level. Life is not fair. Half of the entire adult population has a below average IQ.
Isn’t the whole point of the IQ test to make a level playing field for determining intelligence?
The playing field is not level. Life is not fair. Half of the entire adult population has a below average IQ.>>>
this is not accurate. half of population has a below MEDIAN IQ. And since the deviation on the upside median is not bound, but deviation of downside is bound, that suggests that MORE then half of entire population has a below average IQ.
NYCityboy, what you are saying reminds me very much of the line of reasoning used by the ordinary Germans after WWII to justify their compliance with the regime.
NYCB,
My family and friends pretty much thought i’d self-lobotomized myself until most recently, and now they’ve elevated me to financial deity status-which is nice, but I wish they had just heeded my warnings instead…
Now they say things like “how did you know?”
Common sense and an open mind are a valuable combination. Very few possess these two qualities in quantities that are even detectable. In a society of fools common sense is often mistaken for genius, or madness, depending upon the day.
“Common sense and an open mind are a valuable combination.”
A-f’n-men!!
Perhaps it should be called ‘uncommon sense’
“Now they say things like “how did you know?””
Last February I was speaking with someone who was a colleague at the college where I used to teach, and told him I was uncomfortable with the financial picture for the rest of the year and was moving all of my 403b and most of my other investments to cash. I specifically told him what I was doing felt right for me, and that I’m not in the business of advising others, but that he ought to read up on what was going on and use that as a basis for whatever investment moves made him comfortable. I received an email from him a couple of weeks ago effusively thanking me for warning him–he had moved all of his money to money markets early last summer. So now he thinks I’m some kind of financial genius. I told him my level of genius was attained largely by reading this blog for the last couple of years!
On a sadder note, I was having dinner with some friends in August, and mentioned that I had moved to cash etc. etc. They thought I was being silly, and said their financial advisor had put them in solid blue chip stocks (you know, like General Motors), and was a wonderful person who was always asking them if they were comfortable with their risk level and would NEVER mis-advise them on anything etc. etc. I haven’t had the chance to speak with them since then, but my resistance to saying “I told you so” or, more snarkily, “So, how are those blue chips doing for you?” may be severely tested the next time I see them.
You should.
Drive up in your (rented) Ferrari with a bottle of wine and three to “celebrate” how well your portfolio is doing.
Never do things by halves. If you’re gonna rub it in, rub it in. Don’t be an amateur about it.
Three years ago I was having an argument with a guy at work. He was sure home prices would always rise, so he HELOC’ed his Santa Clara condo to buy a $90K fancy-pants Mercedes sports car (not the cheapie one). My rebuttal was that we were walking up to a cliff in home prices (late 2005) and that he should concentrate on frugality. For my part, I quit my well-paying job to prepare my San Jose house for sale and relocation out of the area.
I’ve been reticent to contact that guy, as I already know the outcome. I’m sure he’s a bankrupt foreclosee, back to driving a used clunker and living in a rented apartment.
I’ve been asked the same question - “how did you know”. Now I don’t say anything as I fear one or two of the folks I’ve been talking with think I’m partly to blame for not beating them over the head with a bat last November / December and telling them to move their 401Ks out of stocks. Sounds strange, but the 401Ks are what eveyone’s working so hard to fund so they can someday retire and these folks are mad as hell.
At least you had some success in warning people about the current collapse. I tried advising a couple of co-workers against buying houses this past year, but to no avail.
I also talked with my elderly father about the uncertainty of being so exposed to losses in the stock market, this past year. He figured some sort of “correction” was due & even sounded somewhat bearish, but he had a lot of faith in his investment advisor. My brother, who assists my parents with some of their financial dealings, told them not to worry about selling out their positions after the first 15% of downturn. I have to admit, I wish I had said more…. not that they would of heeded my advise, but I regret not trying harder, for my own peace of mind.
Outstanding post, NYC. I have, from time to time, posted on this blog about fiat currency being based on trust. When that trust is gone, so is the value of the money.
It is up to us (those of us who understand the game, at least to some degree) to speak up and try to do something where we can, even if it is something as small as telling a friend about the state of affairs, without seeming to lecture them.
I’ve actually been inspired by this election cycle, because I’ve been watching the alternative candidates like Nader, Paul, Barr, Baldwin, etc. Not a fan of Barr, particularly, but as citizens, we have a responsiblity to confront the situation and DO something about it. Local elections are where we can be most effective. Going forward, I plan on doing my small part to spread the word in my community and among friends and family about the importance of engagement at the local level. It is time for other parties to have a profile in the US.
I don’t go getting apocolyptic on us.
Yeah, the government is a mess. Yeah, there is going to be some inflation.
Are we about to abbandon the dollar? Probably not.
It won’t be us who abandon the Dollar, it will be the rest of the world that abandons us to our feckless fate.
Good. Then we will have decoupled.
Honestly…
Do you think Saudi is going to abbandon us? Saudi is an extension of the United States as a protectorate.
What about Europe? That happened a long time ago.
I guess everyone will flee to the sancutuary of the yen in Japan. The guys with the 0.5% interest rate and phantom profits.
Maybe China? In a state of decline as we speak. Watch central planning go in to “help” any day now. Think your wealth is safe there?
Of course there is canada.
I’d guess a lot of people would buy gold. Or course who is the worlds largest holder of gold?
I disagree that the dollar will be dumped. Even if it is “abbandonded” we will still be trading and the capital will flood back here and keep the financial system from imploding.
The Kenseyians would say that fixes the savings glut that is causing the problem.
As for dumping of treasuries. So, they decide to sell off treasuries. Rates go up when the govt has to roll over the debt. We have to curtail spending to handle it. The govt might be forced to monitize some of it.
If you are comparing things; remember the debt situation was worse in WW2. Its currently 2.5x the GDP for Japan.
Maybe there is a collapse. Maybe not. I doubt it.
So abandon is one “n”. Sigh.
You sure have a ‘n’ for it. (sorry!)
also one “b,” while you’re at it..
Palmetto,
Agree about the local politics. I was just telling my 11yo son today that I was more concerned with our local election than the national one because we have a real opportunity to have an impact on our community as we move ahead.
The “trust” is about to take the next leg down.
As sure as the sun will rise, expect the losing party on November 4th to immediately shift their rhetoric to nothing short of doomsday scenarios - as they already eye 2012 (2010 too).
The public should be enjoying this little pre-election interlude - because it’s going to be quite some time again before both parties are whispering sweet economic nothings into their ears.
Even when both parties are whispering sweet economic nothings into their ears, the roar of collapsing houses of cards will drown those nothings out.
Well done NYCityboy,
I’m going to use this post as part of a lecture to my students tomorrow in the classroom. My students, inner-city ignorant kids, have enough sense to sit up and listen when truth like this gets deseminated.
I touch so many lives. Our cats will be proud of me.
Well, knowing cats, they’re more likely to want an upgrade on their chow or will demand even more attention.
Anyway, nice post, and my dogs are proud of you.
You touch yourself daily too. What’s your point?
“Societies are built on trust. It is unfortunate that much of that trust is being destroyed right now.”
A nation’s status in the global financial system is also built on trust.
Very often I am a speaker at various conferences and seminars; When ever I have a small group of Americans I will ask the question if they trusted the Govt. I have found 100 percent of the time people in the audiences without thinking or pondering will very quickly say no.
It is a shame we Americans do not trust our own government.
It’s a long American tradition. Read some Mark Twain sometime.
The amazing thing is that with end-of-year bonuses that are planned for Wall Street crooks, the shearing continues while we all sit back and do nothing. When will we stop rewarding people for imcompetence?
When i start getting Multiple Real job offers because i am smart and not a jerk off moron….thats when….
so whats your time frame ? not much time left for me
—————————————
When will we stop rewarding people for imcompetence?
I guess I’m an “imcompetent” speller/typist.
Big reward for YOU!
RE: I guess I’m an “imcompetent” speller/typist.
Guess you work for government.
“The people around us have been told time and again that there are teams of experts that know how to manage money”.
Fortunately I found that team at thehousingbubbleblog.com.
This site saved my butt and I am thankful for it.
Same here, Peter. Thanks to HBB we are financially secure. For now at least.
“Societies are built on trust. It is unfortunate that much of that trust is being destroyed right now.”
Bear in mind that this trust was misplaced. Actually, IMO the destruction of this trust is good for the average citizen and for the country as a whole. It will teach people to be more skeptical.
Bear in mind that this trust was misplaced. Actually, IMO the destruction of this trust is good for the average citizen and for the country as a whole. It will teach people to be more skeptical.
Great post NYCityBoy. I think it speaks to a larger point that to some extent the social contract is coming unwound at least on the margin.
For instance, in this country we have a defacto social contract with the illegal immigrant labor. If they come here, work for less than prevailing labor rates, they will be able to get by and even be able to send some money back to their families in Central America or wherever. For this they generally stay out of sight and are mostly law abiding except for labor laws. Certainly there are exceptions, but mostly they congregate only with people in their same situation and huddle together to save money with multiple families to a house.
My wife works for a Fortune 100 retailing company in the area and they are seeing an explosion of cental americans coming into stores shoplifting. It wasn’t like this even two months ago. Construction jobs are drying up, they are having trouble affording food. I fear for when they grow more bold.
RE: they are seeing an explosion of cental americans coming into stores shoplifting.
Diversity is good eom.
Many here have at one time or another waxed nostalgic about a time in the past when there was integrity, honesty and the US was a bastion of Liberty.
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This was never the case.
Ever.
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It is a fictionalized History of something that never was.
Bah.
At least we had religious freedom and freedom of the press.
Since slavery/civil rights movements things have been pretty equal.
If you are expecting that in politics and personal level that we are much different than anyone else… you’d be wrong.
The situation with the Fed will come to an end eventually. Just give it a few more years.
The credit complex is crumbling. The crooked credit card deals will get hammered and bankruptcy laws will get changed again.
Its going to get better.
James,
I was born in a Communist country; when I arrived in the US, I remember as a child, thinking how wonderful were libraries, even then I knew it was not something to be taken for granted.
My point is disagreement with a romanticized History of the US domestic & foreign policy.
There’s a horseplayer term called “past class”, meaning a formerly good thoroughbred that is now dropping in class, to be able to be competitive with horses of lesser ability.
The USA is running on “past class”
The trust issue:
I don’t really regret the loss of trust in the average person. I think it’s probably a good thing. As I have mentioned, I grew up in southern Utarr, red-rocks fundamentalist land, Land of Joe Smith the Horndog Profit, raised by deeply devout Mormon parents. Nice scenery, but a fairly wretched childhood. Wait, make that extremely wretched.
I remember when I experienced my first ‘burning in the bosom’ spiritual enlightenment. I was in Sacrament meeting and sitting on the hard wooden pew in my shabby little dress and looking up at all the august personages, the Bishop, his first counselors, smiling benevolently upon us all as we sat there eagerly awaiting their fulsome words of insider knowledge, and then enlightenment burst upon me. I thought ‘Look at those men sitting there. They are either:
1. In a state of self-denial.
2. Don’t know anything more than I do about Sweet Baby Jeebus. Or anything else, come to think of it, but won’t admit it.
3. Deliberately deceiving everyone in this room.
4. Varying combinations of the above.
I believe I was about 9 or so. Anyway, it changed my life. MUCH for the better. Look at me now, relaxed and full of scrambled eggs and bacon on a Sunday morn, with a mortgage I can easily pay, savings, a house full of books and art, a fun weekend behind me, a fun work-week ahead of me. And it’s all thanks to Olygal’s personal motto:
‘Never trust clean-cut white men in suits who say they know what’s best for you. That ends badly.’
Now, that doesn’t mean you have to avoid or spurn the type, heavens, most of my boyfriends are lobbysists, lawyers, stuff like that, and I like them very much and have a great time. Clean-cut white guys in suits and big ideas make the world go round. They’re all over the place, busy like big ants with big ideas. Sure.
That doesn’t mean I believe a single word they say. And before all you people who match that description out there get all mad about my shameless sterotyping, think about it: is there even ONE situation, think about the government, the Wall Street pigmen, evangelicals, con-men all across the freakin’ ages, is there ANY situation where my motto does not fit? Oh, what’s that you say? Hmmm? That I’m right? I am right. Trust, schmust.
‘Never trust clean-cut white men in suits who say they know what’s best for you. That ends badly.’
Words to live by, baybee. And everyone would live much the better if they had the same motto, too.
Awesome post! Skepticism is the best antidote to a world bereft of trustworthy leaders…
I’ll just amend your statement a tad:
Never trust clean-cut people in suits …
I dropped the “white”, and I dropped the “men”.
This is both a reasoned and rational response to reality. Oooooooh, alliteration, my favorite “figure of speech.”
‘I dropped the “white”, and I dropped the “men”.
This is both a reasoned and rational response to reality. Oooooooh, alliteration, my favorite “figure of speech.”
Well, okay Faster, I don’t object to your fiddling with my motto.
It’s not like I walk up to someone and announce ‘Hey, look! You’ve got brown skin and/or b00bs, so here’s my house keys, account information and social security number’.
You can broaden the scope of ‘entities to be skeptically observed’ all you want.
I am not sure people will live better if they are more skeptical, but it will not live worse. I am originally from Eastern Europe. People there are extremely skeptical to authorities, still it does not help much to live a better life. The PTB always find a way to fool the masses and to get their money.
Nearly thrown out of catechism class for repeatedly asking,
‘why are we to believe these stories that were written so long, ages after the original supposed story happened’, and ‘why aren’t there more stories about women in this book?’
I agree that lifes experiences were learnt at the hand of
“clean-cut white men in suits who say they know what’s best for you. That ends badly.’ ” and a few nasty women.
Most if not all big financial lessons were learnt by ‘trusting clean cut white men’. In my life.
skeptically yours!
Olygal: your comments are usually wonderful, but your descent into “pigmen” and “white guys in suits” is over the top.
Funny how, when it comes to who has been responsible for society’s glories–literature, philosophy, architecture, etc. (where is the female Shakespeare? the female Kant? the female Beethoven? the female Henry Ford?)–feminists always argue that women have been distinctly, um, “underrepresented” because they have been excluded from the playing field. In other words, their historical absence from the stage of human genius is not because women themselves lack innate genius or the ability to produce glorious things; it’s just that men–mean men–have kept them from doing so.
When it comes to society’s F-ups, though, no such sophistication is employed in assigning blame. It is, of course, the responsibility of the “pigmen” and the “white guys with suits”. Get a grip, or at least get consistency.
Do I have to come after you AGAIN?
Please don’t post any more drivel like this. Ever.
“Yes, people need to wake up but how many people could have really imagined it would get this bad?”
Though I was often accused of being a gloomster a couple of years ago, I failed to anticipate the magnitude of the wreckage we now see.
speaking of wreckage and clean-cut people, I have never seen so many middle class panhandlers in my life. They are everywhere now. Just yesterday one walked up to me and I thought he was going to ask for directions and instead asked for money! It blew my mind. Its getting bad on the streets of Bakersfield!
RE: speaking of wreckage and clean-cut people, I have never seen so many middle class panhandlers in my life.
There are scores of raffle ticket beggars at your local Friday night high school football games now.
Fook-all I want to do is watch the game, not have this endless line of cheerleader mommies in my face for $5 so their 14YO precious can go on a field trip to China in the spring.
Gimme a break.
That’s my situation too. I knew that the housing prices were walking up to a cliff, but what I failed to realize was that they would take so much of the stock market and general economy with them. I sold out my San Jose house in May 2006 and captured cash at the peak of the market. I only wish I had unloaded my stock position back in fall of 2007.
Agree that City Boy is right on.
FPSS: two of your responses are out of line.
1) That a person may act stupidly does not, under any moral, religious or legal code of which I am aware, mean that they “deserve” to have a criminal act perpetrated against them.
Forget PB’s example, which involved a mental incompetent. And assume that “swindle” means exactly that–an act of fraud, not simple lethargy on the part of the perpetratee, who otherwise is mentally competent and has in front of him or her the correct, complete terms of the deal.
Not to dwell in PC-land, which I generally abhor, but if a woman gets drunk, goes to a fraternity party and gets raped–does her stupid decision to put herself in harm’s way mean that she “deserved” to get raped? We can and do heartily criticize her judgment, but I doubt that society wants to tell her that she ought to shut the F up and that she should have no recourse to the legal system, because she “deserved” what she got.
2) Regulation does sometimes work.
Merde–and they say that we Christians are unable to deal with uncertainty and ambiguity. Brilliant minds don’t always work for the bad guys. Sometimes the regulators win, and sometimes the bad guys win. That’s the nature of life–the ongoing struggle. There are no clear victors.
Point in case–and an area I know something about. Tax shelters were big in the 90s, and the IRS has cracked down heavily. Many of those who thought they got away with a coup are now finding their nuts in a vise. They relied, in many cases, on a reputable tax lawyer from a big, prestigious firm to write opinions justifying their excesses. Now, that lawyer is under indictment.
Sure, there will be a “next generation” of brilliant people trying to circumvent regulation. And there will be a counterthrust from the brilliant regulators. What I do know is that while it would have been better if the “regulators” (the IRS, Department of Justice) had been riding herd in the 1990s, it would be disastrous if they were not doing so now. And so it goes…..
Well stated NYC. Thanks for the reminder that not everyone operates on greed and deceit.
More pesky facts from a friend in Ilinois:
Please read and consider the following.
Body count: In the last six months 292 killed (murdered) in Chicago; 221
killed in Iraq.
Sens. Barack Obama & Dick Durbin, Rep. Jesse Jackson Jr., Gov. Rod
Blogojevich,
House leader Mike Madigan, Atty. Gen. Lisa Madigan (daughter of Mike),
Mayor Richard M. Daley (son of Mayor Richard J. Daley)
…..our leadership in Illinois…..all Democrats.
Thank you for the combat zone in Chicago. Of course, they’re all blaming
each other.
Can’t blame Republicans, there aren’t any!
State pension fund $44 Billion in debt, worst in country.
Cook County (Chicago) sales tax 10.25% highest in country. (Look ‘em up if
you want).
Chicago school system rated one of the worst in the country.
This is the political culture that Obama comes from in Illinois. And he’s gonna ‘fix’ Washington politics for us!
And McCain is on Meet the Press saying, “we will buy up those bad mortgages and give people the mortgages they can afford. We will do this instead of bailing out the banks.” This clown doesn’t even know that buying up the mortgages IS buying up the banks. This clown criticizes Obama for saying he would “spread the wealth around” but he would buy up mortgages for people, thus redistributing wealth.
Don’t Republicans have a “strong border” policy? How strong is that border in Arizona? Who is their senator? Didn’t Arizona have a massive housing bubble built on all of the fraudulent lending that was going on? Who is their senator? That is the political culture from which John McCain arrives on the scene.
I would expect a partisan post like that from Exeter. No offense Exeter but you are a complete partisan, whether you admit it or not. All of you partisans criticize one side but fail to criticize the other. That is partisanship and it is killing us.
None of us on the other side like McCain, either. I supported Ron Paul, but he is no longer in the running.
Obama vs. McCain? It’s not much of a choice.
Yes, McCain has failed us at the border, sponsored an illegal to legal immigrant bill that was voted down.
This issue has NEVER been discussed on the “debates.”
We know McCain will support legalizing illegals. The problem is that Obama not only supports it, he will want to provide free housing, free healthcare, jobs training, free college to all, and a partridge in a pear tree.
McCain says he will Constrict the budget.
If he does, then all these “programs” will be impossible.
Both candidates are working against the best interests of the American people, but McCain will take us down the path to total damnation at a slower pace.
I wouldn’t vote for Obama for dog-catcher. He isn’t “qualified” to do anything but criticize other people, which is about all he’s done his entire life.
Dio-
I just quoted your post and sent it to an EXTREMEly pro-Obama friend of mine because I could not agree more with every word that you just wrote. I think there is a huge segment of our population with just the same concerns. We can only hope that sensibility does not get trampled at the polling booths by irrational self-serving propaganda-led masses.
Look, the Mexicans are already here and the world didn’t come to an end. I just went to a B-day party for a classmate of my child. Mexican kid. Family is very nice and hard working. It was a great party and all went well. Tacos were amazing.
I don’t want to get into spreading hate.
The job training and college makes plenty of sense. We could all use that. As for free healthcare and housing… we have a big honKing surpluss of housing.
As for destructive and regressive welfare policy. Well, I’m all against the stance that Obama is talking about.
Just trying to sepperate the issues. Almost all of the mexicans I see are here trying to find work. Not sit on their backsides. Most of the people sitting on their backsides have been here a while.
The main “issue” in this election is that the current leadership (all parties) are out to lunch, as is the proposed leadership (all parties). The question is, how much more damage will they inflict on the general welfare?
Cartoon by Scott Stantis, Birmingham News; each of four frames shows a talking elephant wearing a GOP sweat shirt:
“WE FEDERALIZED CREDIT.
NATIONALIZED THE BANKS.
GREW THE GOVERNMENT TO ITS BIGGEST SIZE EVER.
NOW IMAGINE WHAT THAT SOCIALIST OBAMA WILL DO!!!”
What with the partisan BS??? NYCB, I can take it but you’re way off. When was the last time the party of Jefferson ran the congressional table for a full term and had the executive branch simultaneously? It’s been decades. And who supports divided government? You hear it everyday from creepy apologists for the wealthy wall street elite who pose as “financial journalists”. These slimeballs float this divided government line of BS on cable finance news and the dumba$$es on main street believe them. We’ve seen the destructive power of the gop than ran the entire federal govt. for 6 miserably long years. I don’t have faith in any of these people but I have even less confidence in a divided govt and the gop has proven unequivocally that they’re a plutocracy of the nth magnitude. Don’t interpret my lack of faith in a divided govt and/or plutocracy as partisan.
Question:
When I read about the $billions in unfunded debt that some of these states have, I can’t help but wonder: at what point are they going to come a-begging to the Federal government?
California and Massachusetts have already made overtures.
Is it my duty as a citizen of the state of Wisconsin to bail out dip-$hits in California, Illinois, and Massachusetts who don’t know how to say “no” and who give generous pensions and medical benefits to government civil servants?
At what point do citizens pick up pitchforks in revolt?
At what point does the Union disintegrate?
Abraham Lincoln would not be proud of me for thinking these thoughts…
Oh don’t be silly. They blame guns for all of this.
Its other states where guns are legal causing Chicago to have problems.
This is sort of true and sort of not true.
Strangely, no one contemplates the root cause of what makes Chicagoians want to murder one another.
I doubt that guns, from in State or otherwise, are the motivating drive behind the killings.
I should mention Detroit is another big party for the Dems.
Or you could go to my old stomping grounds of Newark, NJ.
Can’t blame Republicans, there aren’t any !
Well, I don’t live in Ill. and pay tax there so I can’t comment on that but I do pay federal tax and THE republicans had control of ALL branches from 2000-2006 while running up 4 trillion in debt…
Amen. Scdave.
And james, it seems that one side never ever looks in the mirror. I think that would be the r’s.
Thats cause Cook co is one of the most crooked, next to queens etc/jersey in the U.S.
Gotta go way back to figure out who greases whose palm in Cook Co.
Friend, psychiatrist( prominent) said never ever get divorced in Cook Co. Has pretty good clientele from said Co.
How is it that even with all of the smart people in this board and those at mises.org no one can clearly identify what is and isn’t inflationary/deflationary to the point of knowing clearly which way we are going.
My theory is that the price of dollars in terms of everything else is no different than the price of a stock. Only the dollar stock has been heavily shorted by just about everyone (anyone in debt).
So even though real demand for the dollar is falling (due to the printing presses) there are many people caught in a short squeeze that are attempting to unwind their short position on (just about everything else, housing, stocks, etc). Very few people are “investing” in the United States right now and most people realize that the dollar is about to lose its reserve currency status. (They would not be talking about that if it were fundamentals of the US economy that were strengthening the dollar).
So, once this short squeeze on the dollar ends, then what?
Am I the only one that has no idea what you are trying to say in your post?
Actually, I “get” it.
It’s a very convoluted way of saying the obvious but I’m too hung over to translate. Sorry lads and ladies, this is just a repeat of the obvious so just read the archives.
RE: How is it that even with all of the smart people in this board and those at mises.org no one can clearly identify what is and isn’t inflationary/deflationary to the point of knowing clearly which way we are going.
OCDan-
As NYCB notes in his post above…
If TRUTH and TRUST in the past and present have been completely compromised at ALL levels, how the fook can anyone suppose a guess at what the future will bring relative to Anything which transpires in the course of day to day existence.
The character qualities of ethics and honesty arent’ rocket science
Right now they want people to buy houses. Soon outside my window they’ll be setting up open house signs - again. I’m sure those sellers would love someone like me to commit their resources and get them off the hook.
There’s one problem - buying RE requires a whole lotta of that TRUST you all are talking about. TRUST - that the price is fair, the neighborhood is decent, the local governance is competent, that contracts are upheld no matter what.
So what have we seen so far to inspire that all too necessary trust?
The harder they try to keep people in their houses, the more I want to stay out of them.
“Right now they want people to buy houses.”
Therefore be greatful the NAR is spending their own money to perusade people to buy.
Relax and learn to love the NAR.
The NAR: The American taxpayer’s new best friend.
This is a point to which I am in agreement. Some of your other points, less so, but that’s okay. Disagreement usually makes us smarter.
remember the NAR radio commercials from last year. “Its never been a better time to buy a house.” They have a new version out now. “Its never been a better time to buy commercial real estate, blah blah blah, talk to a commercially licencsed member of the NAR.”
We will see how that works out in 1 or 2 years.
“If TRUTH and TRUST in the past and present have been completely compromised at ALL levels,…”
To put a finer point on it, the rules of the game that have been in place for decades have recently been compromised and sometimes twisted beyond recognition in an expedient and nonchalant fashion on short notice with little apparent concern for long term consequences. This seems to be driven by a mindset that banking is a branch of mechanical engineering, which should perhaps not be that surprising given the large number of top economists who were trained at a certain very reputable engineering school in Massachusetts. Somehow the rush to fix the plumbing system lost site of the fact that trust is the essential form of capital in the banking system, and it is trust which is destroyed by rogue actions that pretend the rules of the game were made to be broken.
The consensus here seems to be that we will have first deflation (caused by credit contraction), then later severe inflation, even hyperinflation (caused by excess government spending/debt), in terms of the US$.
The interesting question is the timing of all this. For example, we hear the the US government has total debt of $54T, $60T or higher, counting off-balance sheet liabilities such as Medicare, SS, etc. So we need some smart economist to help figure out more specifically when these liabilities fall due, so we have a time frame for when the hyperinflation will start.
I.O.U.S.A. movie (made by ex-Comptroller of the Currency Walker, so I guess we trust him)) said 2010-2011 the social security surplus turns into a deficit and Congress can no longer borrow from it to pay current obligations. So, we either (a) cut spending, (b) cut benefits for the few (social security recipients), (c) print money and cut benefits for everyone (by reducing the value of a dollar while wages stagnate).
Hows about ending the illegal war/occupation and use that money for the Gov paying back to SS what it has “borrowed” for years. And then paying for caring for the troops, education and getting jobs back to the states.
Well, last one is probably like a wild cat being caught.
Comment by VirginiaTechDan
2008-10-26 06:32:24
“So, once this short squeeze on the dollar ends, then what?”
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Yeap.
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“My theory is that the price of dollars in terms of everything else is no different than the price of a stock. Only the dollar stock has been heavily shorted by just about everyone (anyone in debt).
So even though real demand for the dollar is falling (due to the printing presses) there are many people caught in a short squeeze that are attempting to unwind their short position on (just about everything else, housing, stocks, etc). Very few people are “investing” in the United States right now and most people realize that the dollar is about to lose its reserve currency status. (They would not be talking about that if it were fundamentals of the US economy that were strengthening the dollar).”
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Seems nicely worded, but as I said yesterday, yourself, voz, nhz, professor, James, SPFF… (too many to list, sorry) are the guys I think the rest on us rely on (at least I do)
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My only accomplishment is that I understand what you are saying (something that I would have been unable to do so a year ago.)
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James posted something yesterday on this that left the window open on what direction this could all take. Similar statements from SFPP and others.
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I’m still gloomy
research + stlouisfed.org/publications/usfd + 20081023/usfd.pdf
All narratives, including those about inflation and deflation, are fixed by the viewpoint of the narrator, so the only mistake you can make is believing that there is a stable, universal grand narrative about such economic conditions.
You know, sometimes it’s like we have a dead horse here and we keep flogging it hoping it will get up and eat manure while sh*tting hay.
Uncharted Territory
1. There’s never been a financial depression where women were as common as their male counterparts, in the workplace.
2. There’s never been a financial depression where every country stood on a bedrock of blind faith, in lockstep.
3. There’s never been a financial depression in which almost nobody in our country lives on a farm.
4. There’s never been a financial depression where the information flow is virtually instantaneous.
5. There’s never been a financial depression where computers have played any role whatsoever.
6. ?
5. There’s never been a financial depression where computers have played any role whatsoever.
Are you suggesting ‘HAL’ is playing a part in this particular Odyssey?
I fully expect people to turn against technology in a later-day Luddite fashion…
I fully expect people to turn against technology in a later-day Luddite fashion…
A “Butlerian Jihad” if you will?
Why?
Technology was the driver that made all these bubbles possible, and a good many people are tethered to it (cell phones-satellite tv-computers, etc) at a tremendous burden in both time and money.
In lieu of video games that are so life-like now, I think people will retreat back to real life, which doesn’t need a reset button.
I just had a house full of religious fundamentalists from a church that regularly schedules schisms years in advance that historically lops their membership by 90%.
They have been pretty good in the last 10-20 years at getting rid of the stuff in their catechism that makes them look silly.
But I can imagine what the more devout members will do with this kind of current turmoil. I winder if a back-to-basics movement/spirit will take over and send them back to the shredder.
6. There has never bee a financial depression where life did not go on after it came to an end.
King,
Sorry, that’s charted territory.
Good. That means there are maps that show the way.
Yes, just start a world war and that will fix the problem.
Scoreboard:
Citizens of the Soviet Union killed: 26 million
United States soldiers killed: 330,000
Total human beings killed: 40 million
Nuclear weapons used during war: 2
That is how we ended the last Depression.
What ended the Great Depression wasn’t the war; What ended the Great Depression was the government spending that financed the war.
Are you f—ing kidding me?
Nope.
By your logic our adventure in Iraq should be a huge boost for our economy. We are spending a ton of money on that war. Too bad we’re not creating a manufacturing advantage unparalleled in human history.
Here’s my take, and I don’t know if this puts me in the deflation or inflation camp: a bunch of people treated cash like a commodity. They placed “orders” for a certain amount to be delivered at a certain time. Nobody can deliver anybody cash because their own orders for it resulted in no deliveries.
Is musical chairs a game of deflation or inflation? To me, it’s neither, and that’s what I see right now. The value of chair keeps getting greater, but there are less people playing.
I never said financing a war is a good thing; what I said is financing a war is what brought us out of the Great Depression.
Were weren’t in a depression when the Iraq war started therefore our economy didn’t need a huge boost.
“By your logic our adventure in Iraq should be a huge boost for our economy. We are spending a ton of money on that war. Too bad we’re not creating a manufacturing advantage unparalleled in human history.”
I suspect our ongoing 2-front war debacle will herald the end of our long journey into the abyss of being a munitions profiteer, which started on December 8, 1941.
Good riddance…
Combo, much of the world was in smoldering ruins when World War II ended. That is what made our economy the miracle it was. Our competition was non-existent. Your post wreaks of The Broken Window Theory. I believe we emerged so strong after WW II because of the All of My Neighbors Houses Were Burned Down Theory.
What brought us out of the great depression is the competitive advantage of having our factories in tact while the rest of the world is destroyed and needs to rebuild.
Savings drives an economy, government intervention and “consumption” hinders an economy. Imagine if we never consumed ANYTHING and yet still produced, we would be incredibly wealthy. Spending money to build bombs to blow up factories reduces overall prosperity.
What brought us out of the Great Depression started Dec 7, ‘41. After that day there was a sudden shift in National Will. Before Dec 7 the National Will was split.
This new National Will involved sacrifice the country was willing to make and the citizens were willing to do without a lot of things to support the war effort. This new National Will invloved a lot of borrowing and spending, caused a lot money to flow, and when the money began to flow prosperity soon followed - prosperty compared not to the prosperity we enjoy today but prosperity compared to what existed before Dec 7.
It was the spending caused by the war that caused the money to flow.
Something similar happened in the late Fifties when the U.S. decided there was a missile gap with the Soviet Union and a national commitment was made to close this gap which led to enormous funding to put a man on the moon.
As far as the rest of the world being destroyed and the U.S. remaining intact, this is what kept up the spending and kept us from sliding back into a depression.
Add to this the pent-up demand caused by the lack of cars and houses and such being built during the war years and the formula for continued prosperity was set into place.
1. There’s never been a financial depression where women were as common as their male counterparts, in the workplace.
I know this is politically incorrect, but it needs to be said: Is it a coincidence that consumer spending has become the main engine of economic growth since the early 80’s? We’ve gone from being a nation of savers to being a nation of consumers.
Would we be a nation of McMansions and granite countertops if we were still predominately a nation of one-income households?
Just sayin’
I see your point, but don’t agree. Two income households are a response to a larger problem - not it’s cause.
Globalization of wages - the end of Fordism/Gold Standard/Bretton Woods are the root causes. Consumerism was on the rise before these recent decades - what we’ve seen since ~1980 is the “blow off top” of consumerism. JMO.
Even so, future athropologists will have a field day when they study this epoch.
I am one of the few that still believes that we did not go to two income families out of necessity. We did it out of want. Americans wanted a higher standard of living. Remember, we had one income families when our families were still much larger.
I can’t get flamed on this since I lived it. I was the youngest in a large, single income family. Here is what a single income meant. It meant we lived without. Our house had less than 150 square feet per person. You drove one car and you drove it until it died. We did not buy school lunches, even when they were 80 cents. That was far too expensive. Clothes were handed down. There were no name brands. Kids had a few toys and took care of them or had nothing. Our furniture was old. Our carpets were worn. We never took big family vacations. We went to Iowa once when I was a kid. There were no trips to Cancun, Europe or Florida.
Women stayed home with the kids until the kids were all old enough to pretty much look after themselves. Then the mothers got part-time, or full-time jobs. That is when the standard of living for the family increased. It was after the kids were out. And none of that money went to daycare.
Two incomes came with the Betty Friedan liberation movement. That movement should be criticized. I don’t think they made life easier for women. They made it so women could have full time jobs, and full time families, or even be single moms and full time jobs. They clearly made life worse for many women and families as a woman staying home to take care of her kids became a source of ridicule.
The one thing that women in the workplace did for women is to give them a bigger safety net. They weren’t tied to some a–hole to bring in the bacon and tell them to, “get out your f—ing pans”. That was the best thing that happened for women. They could fend for themselves, if necessary.
A single income family is predicated on a couple staying together. That used to happen much more. It was not always to the benefit of the family if the marriage was a train wreck.
The key to single income homes is a solid marriage. That is a big question mark. This is a subject that can be debated endlessly. But don’t think families couldn’t go back to single incomes if they wanted to. They would just have to go back to living the way we did in the “good old days” which weren’t always so good. It generally requires a lot of sacrifice That is something few Americans would make. Soon, they might not have a choice.
BINGO! We have a winner….
Susan B. Anthony
One of Susan B Anthony’s quotes is “women should have their own purse”. In our culture 60 percent of women will become a single family household. Women should be taught if they decide to have kids that the likelihood of them raising the kids on their own is about 60 percent. Society has changed and will always keep changing. Going back to the good old days is perhaps only wishful thinking.
Some of Susan B Anthony’s other quotes are:
• Independence is happiness.
There is not the woman born who desires to eat the bread if dependence, no matter whether it be from the hand of father, husband, or brother; for any one who does so eat her bread places herself in the power of the person from whom she takes it.
• Modern invention has banished the spinning wheel, and the same law of progress makes the woman of today a different woman from her grandmother
• [T]here never will be complete equality until women themselves help to make laws and elect lawmakers
I can’t say that the college-bred woman is the most contented woman. The broader her mind the more she understands the unequal conditions between men and women, the more she shafes under a government that tolerates it.
• The religious persecution of the ages has been done under what was claimed to be the command of God.
• I always distrust people who know so much about what God wants them to do to their fellows
http://womenshistory.about.com/cs/quotes/a/qu_s_b_anthony_2.htm
A couple of years ago, I thought about several of my long-time friends who have continued to work full-time even as they had children. We’re all in our early 50s, so perhaps it’s a generational thing. But ah yes, there’s one other thing they have in common–they all lost a parent early (as did I). Funny thing, that. Talk about creating an in-your-bones need for a safety net, an understanding that you need to be prepared to take care of yourself….
Women fought to be in the workplace, and now all the women I know in their early 30’s/late 20’s wish they could afford to ba a stay-at-home mom.
I, too, am also just sayin’.
My beloved stay-at-home mom constantly pushed her daughters to find careers in order to have the choice she didn’t have.
“My beloved stay-at-home mom constantly pushed her daughters to find careers in order to have the choice she didn’t have.”
Yeah, same with mine. Now both of my sisters wish they didn’t HAVE to work to afford a family.
Regardless of renumeration, I and I believe many other women, want to work to exercise their creativity, skills, and intelligence, in order to learn, grown, attain personal fulfillment and a sense of self-worth and meaning from their achievements and a sense of contribution to society that goes beyond raising the next generation (albeit also a laudable contribution). We want to use the talents we have. Many women may find most of their fulfillment in the home. That’s great. But nowadays, I know few educated women who find all of this, always, in the home.
More women working outside the home isn’t just about the greed of having two incomes. Its not just about money, consumerism or having the security to leave a bad marriage. Its about half of the human race coming into their own and engaging in their own development and that of their society, contributing ideas and talents on par with men. I would see it as a tragic loss if women had never had that option. Same as I would see it as a great loss if men were kept at home and could only achieve their destiny through being fathers.
Just wanted to get that out there. It’s not all about greed. It’s about choice and and pride in ones talents and contribution to the greater world.
Bingo
We have a winner. Great post.
I think what we’ll see in the future in terms of employment, is not discrimination against women in the workplace, but a bias against those lacking ability.
Just my personal experience….It cost us a great deal to have my wife work while the children were growing. All thrift left our house. Thrift returned when she refocused her energies on managing the household.
I do not mean this as a gender thing, I think it is business and human nature. I’m on my own now, but I see the same in myself. When I worked 70 hours a week, I pissed away more money thoughtlessly than I do these days.
RE: 3. There’s never been a financial depression in which almost nobody in our country lives on a farm.
This is the “biggie”.
No matter what historical debacle you study-the misery index always revolved around what was available for food.
There is a section of town where I live, which is known as “Great Neck” which is an elevated quasi-island with expansive ocean views. When I grew up, the development consisted of a hodgepodge of 40’s era cottages and seasonal homes situated on postage stamp lots, with many of those lots involving steep gradients due to the topo fall-off to the water.
Back in those days the water view amenites really never commanded that much interest. The location was regarded as somewhat isolated and subject to coastal storm batterings. Prices were in the range of $20 to $30k. Market regard was exceedingly average.
FAST FORWARD TO TODAY…An ccean view amenity is what’s wanted no matter what the cost.
All the little cottages acquired for $19k have been torn down and replaced with $$$ million dollar high amenity residences which literally cover the entire site.
However-my point is this…Because of the McMansion building-most of these places haven’t the room for ANY type of food cultivation.
A $$$million dollars for the view and the architect to put the picture windows in the right place-but a big fat zippo for the ability to sustain yourself exclusive to the bread truck showin’ up at local food store. Add the dependance on the home heating fuel oil truck to show up, and all in all, it’s a pretty thin line out there today.
Amazin’ how much the lemmings take the system for granted.
In their hearts, people putting up mansions believe that there will always be serfs to provide them their daily bread, no matter to whom they spout their daily prayers. Every four years, however, they return to the fields to beg the serfs forgiveness for their historically miserable treatment and to allow them one more stay in that great White mansion on the Potomac. Be afraid, nobles, be very afraid.
Speaking of serfs and those 9 digit income mega families, the NYTimes had good article on Sat regarding said families who employ a firm to look out after their mega investment fortunes and family squabbles, and in a little nugget, some firms are downshifting focus.
Lots of mega super wealthy seem to be worried about their fortunes.
Gee too bad.
Interesting article hidden in back of Sec 1.
Just came back from a 3-week vacation trip in the Middle Atlantic (Mostly VA-eastern TN) to visit family and friends. We grew up in MD but have lived in the intermountain west for 20 years now.
While there’s still lots of fantasy-land pricing in the east, based on the usual reasons, there is also much property being offered in the rural east at significantly lower prices than the west at this point in time. No, I’m not running out to buy, it’s still overpriced - but much less so, considering that it produces bounty much more readily than land out here in the west. I’m not just talking about availability of water either; the normal temperature variances in the west are much wilder due to the lack of moisture and clouds to hold air temperatures more constant as the prevailing patterns change. And eastern land brings forth trees in abundance, useful for a multitude of living needs, and entirely replenishable.
Given the comments above, I wonder how many others are looking at the same issue. Development all over the west has been crazier than anywhere else IMO, and the spaces being developed are completely unsustainable without massive ongoing infusions of fossil-based energy. I’ve worked in solar PV for the last 8 years, and finally had to admit to myself that solar ain’t going to make a dent in sustaining what we’ve built up in the west. Nor are any other alternate sources, at present. They’re all good, but they don’t scale enough to make a difference, with the exception of a handful of smart people that know how to employ them effectively at an individual level.
My point is that while eastern rural areas are just as dependent at the moment on cheap energy, the means are readily available in the east to adapt without a lot of difficulty if things get seriously worse. And in relative terms, this is not factored in to rural eastern real estate pricing, relative to the west. Or in shorter terms, the west is seriously fooked.
Morning, Shoe.
John Wesley Powell was right. He told us not to settle in these arid regions. Then along came Marc Reisner and gave us more proof of the folly.
And prices here are still astronomical. Moab’s like a little town lost in a time capsule. They have an article in this week’s paper saying all is well, it’s different here. quoting realtors as their source. The Moab Valley is underlaid with about 10,000 feet of salt. It’s sinking and nobody even notices, they just keep pouring water down the hole.
As we travelled around various rural areas in SW VA and TN we teased ourselves a lot about the “grass is greener” attitude we humans so readily fall into (in this particular case, the grass really was greener!)
I still love the crystal clear skies of the west and the intense quiet and vast open spaces, at least when one gets away from the cities. But that’s about it. The thing that convinces us to stay put in little ol’ Torrey for the time being is the low cost of living. Everything’s paid for, there’s no economy to entice us to spend anything even if we had the inclination. I can’t come up with a better way to ride out the economic shitstorm. We’ll continue to enjoy it while we can.
On the other hand, the idea about living with any serious degree of self sufficiency off of western land and climate is a pipe dream, with the exception of a lucky few that happen into a handful of unusual situations. Lost, I’m sure you’re seeing what’s happening with the remain SW working ranches. Don’t plan on looking into one unless your real wealth totals up to 8 digits, or thereabouts.
Shoe, those ranches are toast. Nobody can afford them anymore. I don’t know if you know Holyoaks, they bought a big ranch on the Green, and they’re looking to sell, too low of a return. I really wish I could buy, though, my dream is a little alfalfa (water intensive), a garden (water), some cottonwoods (water intensive), and a HUGE swimming pool…
Just kidding about the pool. But it does all pretty much take water, as you know…
Actually, I’m not sure I agree entirely, at least with respect to the area around Boulder. A handful of very rich conservationist/preservationist types have bought up the ranches over there, and I think money is no object for these folks.
This at least is much better than the alternative (developments of “eco-sensitive” trophy homes that sit vacant 48 weeks of the year) but for the most part, forget about buying ranchland with sufficient water rights to produce. I’m doubtful that that situation will change much in So Central Utah no matter how bad things get, because of the tiny amount of irrigable land.
Moab seems to behave economically more like Western Co than anywhere else in Utah, and I’m at a loss for what’s going on over your way. Did a solar job in CV this summer (one of my last) and it’s really depressing to see the hodgepodge of stuff being built in such an incredibly unique and beautiful place. And the town won’t allow any local market to set up shop, so they could avoid the hour-long round trips to get eggs and milk. Pardon me, how is that “sustainable”?
But it does all pretty much take water, as you know… Plenty of available water in the Great Lakes states LOL
RE: I’ve worked in solar PV for the last 8 years, and finally had to admit to myself that solar ain’t going to make a dent in sustaining what we’ve built up in the west.
Ain’t gonna work for those myriad of Section 8 tri-deckers
in decaying urban centers either.
You’re right. I’m still very pro-solar over the long haul, but I’ve become a heretic in my own industry because I now seriously question whether solar even belongs on residential rooftops. Commericial installs make much more sense but to go into reasons why would be way OT for here.
Yeah, I know they did it Germany. So what? Come back in 25 years and see how many of those systems are performing as they should, if at all. There were better ways to allocate those limited PV resources. And all these incentives keep driving up the costs, for those with limited means and who could really utilize the technology effectively.
6. There’s never been a financial depression where McCain or Obama was the incoming president.
7. There’s never been a financial depression in a four digit year starting with 200.
8. There’s never been a financial depression where the superbowl score just before the depression was whatever it was this year.
9. There’s never been a financial depression where I have writen a post like this.
But things change, so this isn’t really too surprising.
On the verge of satire, but not so much…
26 Oct 2008: There has never yet been a depression in 2009, or 2010, or …
The difference between yours and alad’s points are that his might be correlated at least somewhat to real outcomes.
“The people around us have been told time and again that there are teams of experts that know how to manage money, run an economy and keep their money stable.”
Except, they didn’t know how.
I don’t think this is a recession.
I think we are headed for global depression.
This is financial deleveraging on a scale not seen in many generations. I have NO REASON to even think any of the idiots now in place or soon to be in place can do anything except to suggest even more massive campaigns of printing money.
The good news is; this is a big world, and life will soon be tough all over, for most. But life will go on.
The bad news is, unemployment CAN rise to 35 or 50 per cent in places. Grinding multigenerational POVERTY ensues. (Think Colorado = Bolvia, e.g.)
Other bad news is, this deleveraging can devalue intangible assets, like the value of a MBA from Harvard, or license to practice medicine in New Jersey. Remember, wealth is the ability to produce income, cash. If engineers can’t buy a job, what good is a degree? Financial panics result in lost income everywhere.
The other REALLY bad news is that the Boyz who actually run the presses have no clue what to do other than print more money faster.
At some point the hyper-inflationary cash and debt creation the world’s governments will be attempting, will cause a more severe panic than we have had already. Panics on this scale can result in disruptions leading to shortages of food, water, electricity, fuel, communications and transportation. We here in the States can be there in 36 months I think.
RE: We here in the States can be there in 36 months I think.
Too many parasites feeding off onion skin economies that produce essentially nothing of substance; all financed with debt.
Hi there, I’m Wanda…I’m the assistant to the assistant of the Dean of College Life Adjustment.
Your tuition bill is $57,0000 per year.
Man, you’ve got THAT right (the onionskin economy). All that talk about Will Ayers (friend of Obama’s in Chicago) rings true with me, as I live in a college town (i am an Obama supporter, BTW).
We had a despicable bastard for a preacher a few years back. He had a hobby of sleeping with the female members of the congregation. Eventually the church leaders catch on, and as this was his 2nd or 3rd offense, he was summarily fired.
What ends up happening to said preacher? He marries one of the local professors (who ditched her husband and kids for this “catch”). And she gets him a $70k a year job at the University as some sort of Nursing Advocate (he has no background in Nursing). So now he’s on the public payroll and will cash in with a public pension when it’s all said and done.
God has a sick sense of humor sometimes…
Nah, that’s the debil with his vastly underappreciated sense of humor…
RE: What ends up happening to said preacher? He marries one of the local professors (who ditched her husband and kids for this “catch”). And she gets him a $70k a year job at the University as some sort of Nursing Advocate (he has no background in Nursing). So now he’s on the public payroll and will cash in with a public pension when it’s all said and done.
Lots of this here in Mazzland, and people are right sick of it.
Pray for YES on Question 1 (repeal of state income tax)
Of course if you do, your house will immediately burn down;
the brigands will be at your door to pillage and rape your wife; your children will immediately be rendered illiterate oafs; and your pets will be mauled and killed right before your eyes by a maurading band of rabid bears because the animal control officer has been laid off…
-so say the mouthpieces of the public employee unions.
Never underestimate the rage of an out of work government employee!
“Pray for YES on Question 1 (repeal of state income tax)”
I’d feel more comfortable if they reduced it in stages. It seems like we’ll end up with a knee jerk reaction that could ultimately push taxes higher.
Personally I’m praying for Question 2 to pass. (Decriminalizing small amounts of marijuana).
I don’t know about all that MT.
The situation is already starting to equalize. I’d have prefered for the govt to make the plan happen in a different way but it is what it is.
Lots of discussion with FPSS about this. The government is inflating the money supply to deal with the deflation. Where that all settles out… I dunno. There is so much leverage in the system; financial firms were leveraged 30:1.
Thinking about that… if true the government could double or triple the money supply and leverage is still at 10:1. I’m not sure we’d see much of an effect on prices or wages because we have already felt much of the effects of this inflation.
How many times have we heard about people buying at 2001 prices on here? Lots. Leverage was still very high back then.
Lots of fear and borderline panic on the boards these days. Almost as bad as when the bailout went through the first time. Or the second time.
Did anything happen with those bailouts? No.
I sincerely hope you are right James.
Hope is NOT a strategy.
True.
That’s why I listen carefully to you and others here.
I refuse to go hide miself in a bunker at this point.
If it starts to get weird I’m going back to backwoods PA in the event of a collapse.
Its a “plan” more or less.
10:00 a.m. on CNBC - “Foreclosure Profits”
Description: “How to profit from today’s foreclosure market.”
Is this really why the FCC allows companies to use the country’s airwaves? I wish CNBC would get investigated and shutdown. Their crimes are many.
Keep the hope alive, keep the cash flowing into the System.
I’m in full support of these shows. The more knifecatcher money sacrificed the better for all of us.
I agree. Let the sheep get sheared. None of them wants to think about what happens to their “investments” with 10% mortgage rates, or higher. Bring in the knife-catchers.
NYC and all,
When/why will we see higher interest/loan rates? If we are Japan, they kept them low for many years during their recession.
I’m guessing that’s an infomercial, based on the time slot cited. Not a CNBC-originated program…
Isn’t CNBC a 24-hour a day infomercial?
yes yes it is, i wasnt a tin foil hat person till last year when the treasury gave a speech and just as he started to say that people were given loans they couldnt afford it cut to a talking head.
I also remember some other talking head a woman back in 06 saying “well no one wants home prices to go down, how to we prevent that?”
McCain is on Meet the Press saying polls don’t matter..
Now they are showing videos of him & ’ssshrubery in total agreement with one-another.
You can stick the biggest fork imaginable, in him.
I had just sent an email to a few friends about this appearance. I used the term “f—ing moron” without the dashes. He is criticizing somebody else for saying they would “spread the wealth” but he wants to buy up all of the FBs mortgages. Gee, it is tough to see how those things are similar.
I can’t wait until November 5, when the long knives come out and Palin starts blaming McCain and vice versa…
It will also mark the beginning of the end of the evang political fling that’s gone so very wrong.
If only that were true.
One can dream though, Alad.
Socialism!!! The sad thing is that he and McPalin are apparently so ignorant of economics that they don’t realize what is socialism and what isn’t…
Palin can’t even figure out how to use a diaphragm, let alone understand economics.
DEAN CALBREATH
‘Spreading the wealth’ is nothing new to U.S.
October 26, 2008
As the presidential election draws to a close, the campaign trail has come alive with allegations that Barack Obama is a “socialist” because he proposes to raise taxes on the wealthy while lowering them for the poor and middle class.
“Barack Obama calls it spreading the wealth,” Republican vice presidential hopeful Sarah Palin said last week. “But Joe the plumber and Ed the dairyman, I believe that they think that it sounds more like socialism. Friends, now is no time to experiment with socialism.”
spreading the wealth,” Republican vice presidential hopeful Sarah Palin
Isn’t that what Alaska is? A socialist state? geeze they get the most money ever for supporting all they say and do.
Gosh, why can’t they see this?
I know..LIV Low information voters.
This dingbat from Alaska never fails to make herself look like the amateur she is. How tough is it to run a state that has nothing but budget surplus, year after year?
LMV (low McEdumacation voters)
Brokaw is sticking the knife into McCain on MtP, showing past videos of Geritol Johnny that are especia
That are especia—-what?
Spit it out!
My Calico decided to walk across my laptop as I was swerving across the keyboard, and she’s got a heavy foot and stepped on the send key mid-message.
Her bad.
You still haven’t finished the sentence, or is th
LOL
Thanks to his cat, we all will have to guess what he was about to
You know how Democats are…
They are too cat-atonic becaus
You know, I like NYCityBoy’s moniker, calling you the puddytat, cause it
Hey!! Dang cat! @!(&&^%
Well, this represents a total CAT- tastrophy.
Loser. You repeated a ‘t’ because you were too lazy to
OK, I HAVE to post this:
www dot youtube dot com/watch?v=SBedwedu01k
it goes a little catatonic after the first minute, but hey, it’s SO Katmandu.
worst thread eve
ROTFLMAO!!!!!
good one, clu
holytrainwreck, this one’s for YOU!!!
youtube dot com/watch?v=a3mw2kaIbx4&feature=related
This unfortunately is not a new phenomena.
“It is the common fate of the indolent to see their rights become a prey to the active. The condition upon which God hath given liberty to man is eternal vigilance; which condition if he break, servitude is at once the consequence of his crime and the punishment of his guilt.” — John Philpot Curran: Speech upon the Right of Election, 1790
“If a nation expects to be ignorant and free … it expects what never was and never will be.” — Thomas Jefferson
“The issue today is the same as it has been throughout all history, whether man shall be allowed to govern himself or be ruled by a small elite.” — Thomas Jefferson
“The penalty good men pay for indifference to public affairs is to be ruled by evil men.” — Plato
Those of you who are renting in Pinellas around the $1k/mo. mark can buy a 3/2 at 120x rent. If you plan on living here the rest of your life, you could start shopping and lowballing in my opinion. If prices continue to decline, say, 10% for the next 3-5 years, you’re going to be spending that on rent anyway.
It’s time for Floridians to fire up Randy H’s bubblizer or the NY Times rent/own interactive calculator.
There are two points to add here:
1. You’re gambling with location. I think some reasonably nice areas will go to shit.
2. Do NOT buy a condo or townhome. Check this in-the-trenches story: http://www.city-data.com/forum/fort-lauderdale-area/472464-how-foreclosure-crisis-affecting-us.html
Plus, the overbuilding means that the equilibrium point for rents is much much lower.
Wake me up at 80x in a nicer area of Fl.
-
“NY Times rent/own interactive calculator.”
Love it.
remember to set to 0 the scales on the left.
nice talk for a sunday morning.. I know we need to protect assets and keep our powder dry but dang lets make some “mad Money!”- I’m sick of looking at my diversified assets going down. I followed Peter schiff and down big, got gold, got cash got bets against the dollar, zero real estate.. looking at building a bunker.. but it seems the best advice I’ve gotten was a line from some blog-
I spent my money on coke and Hookers- the rest I wasted.
What industry would you try to get into to profit and ride out the storm?
Gunsmiths and their produce should be in demand. Several survival type supply houses have given notice of 12 week delivery timeframes. Reminiscent of the latter Jimmy Carter days.
Well that’s if you want fancy-pants guns.
The normal suppliers still are having factory-rebates. Joe’s Sporting Goods here still advertises a “shotgun special of the week”. This week it’s a Remington 870 Express 12 gauge for $259 after mfg. rebate of $30. I picked up a S&W airweight at a great discount this past spring over at Cabela’s.
There are still warehouses full of WWII era military surplus arms and ammo which you can pick up for cheap. They are “good enough” to harvest a deer or control some two-legged varmits.
Peter Schiff has been consistently wrong.
Part of being in finance means you have to keep an open mind about things that seem contrary to your “fundamental” picture. There are always reasons things that are happening are happening.
In the long run, he will probably be right but that’s not good enough for investing.
Some people have a tendency to confuse finance (and economics) with religion — always a bad idea.
Case in point:
Secrets of the Temple
Well, I’ll go one step further and say that “finance is not economics”.
While it is true that you at all points in time must keep the fundamental picture (= economics) firmly in mind, sometimes in the short-term the role of various other things plays a larger role and you must bet against fundamental factors.
Your goal is to predict correctly and make money not think about economics.
What could such reasons be to bet against fundamentals?
Demand and supply imbalances (definitely Econ 101, also sometimes called “technical” factors), or political factors (hard to predict consistently but sometimes you can), or even one-off events that can never be repeated statistically (like earthquakes, for example.)
“Finance is not economics”
Agreed.
I will just note here a quote of Jesse Livermore which has held me in good stead over the years: “Never argue with the tape.”
(tape = stream of quotes and trades in modern-day parlance.)
Updated housing market version:
“Never argue with the comps.”
Let’s not have the market-maker discussion again, please.
OK — from now on, I will try my best to never compare the housing market to Wall Street, as there are clearly no connections or similarities between the two markets.
BTW, I believe it was before you were a poster on this board, but a couple of years ago there were many trolls who came on this board to ridicule me for daring to suggest that there might be some connection between Wall Street and the housing sector. This was quite a while before the MBS securitization business collapsed into rubble.
Trust me, I know the connections and appreciate the similarity but I really really cannot go into how to correctly model the housing market you need to do a “cross-sectional study” on long-term “longitudinal data”, and then you can compare it to the trades and quotes.
Please, for the love of science, it’s Sunday morning and I’m hungover.
Blog discussions are a far better hangover treatment than hair of the dog measures
Pussy,
Care to hear about the tale of the dog that bit you?
Peter Schiff seems to me to be too much of a left-brain person to see factors that aren’t easily measured or modeled. He underestimates the extent to which politics or social pressures effects economic realities.
I tend to be that way also. Gaining balance in that regard is a benefit I have received from participating on this blog.
Interesting viewpoint. Probably very accurate too.
This explains my failure to talk to engineers about finance (even though I have a math/engg. background myself.)
They get too caught up in minutiae to see the unfolding backdrop. It doesn’t matter if something if you can’t measure how much something is gonna drop. It’s gonna drop somewhere between 10% and 30%. I can live with that kinda uncertainty.
Knowing roughly is good enough!
They always need to measure to the last decimal which they can’t anyway, and I’m just sittin’ there thinkin’, “I can be so much more productive with my time.”
This is the difference between seeing the tree and the forest. Tactics and strategy. Most engineers work on very specific problems to the last detail… In their business there are technology architects and business strategists dealing with the whole picture, something they are likely not fully aware of.
I work at a large technology company. I see this all the time. On the other hand technology strategists and I can have very interesting discussions.
Hah hah hah. You’re the second person to point that out to me.
It’s true. I used to be “one of them”.
They pointed out to me that I knew the tactics and had a “phase change” to strategy.
They claim it’s “radical”; I claim it’s “obvious”.
Re: Peter Schiff
Have you read Crashproof? Looked at all his videos over the past few years archieved at Europac.net or available on youtube? Have you Read Bull Moves in Bear Markets?
As far as I am concerned, the only thing Peter Schiff has been wrong about is the degree to which the US housing crash has ruined the world financial markets…although the jury is still out between hyperflation and deflation (as exhibited by the many discussions on the blog).
Blindly following anyone with a financial interest is dangerous, but taking his message to heart saved many of us a tremendous amount of money. Various people in the private banking industry used to laugh at my Peter Schiff derived observations, they aren’t laughing now.
hurry, wrote a book about the upcoming collapse of the economy - make it generic enough that you can just change the title as need be and still sell it…
The Upcoming Collapse of the Dollar
The Upcoming Collapse of the Political System
The Upcoming Collapse of Iceland/Hungary and the Whole Damn Planet
The Upcoming Collapse of Shopping, Debtor’s Success, and Keynesian Economics as an Economic Paradigm
The Upcoming Collapse of John Bigbootey
The Upcoming Collapse of Civilization
etc. you get the picture…
John Bigboote: Damn John Whorfin and the horse he rode in on.
BigbooTAY TAY TAY!!!!
Lost,
Whatever happened to the sequel they promised us at the end of the film?
Buckaroo’s been really busy working designing rocket cars (since Perfect Tommy decided to go into the hotel biz after it was revealed he was really a brunette).
“I’m goin’ long gay porn.” - Jim Cramer
If you’d actually bothered to pay attention to the “porn business”, you’d have realize that they enjoy the kind of ROI (return-on-investment) that investment managers can only dream of.
And gay porn enjoys the kind of ROI (during the credit boom) that you’d be hard-pressed (yes! pun) to find even something close to it.
Foolish moralists. It’s called ROI.
Quick quiz — top 5 money-making companies off porn (I assure you you’ve heard of every single one of them. They are household names!)
I bombed your last pop quiz, but I cannot resist taking a stab at two answers:
- Google
- Marriott
Not bad, not bad but you’re still not there yet.
Think “further”.
Biofilm, Inc. and Trojan®
What use would someone taking care of his own needs have for a Trojan®? So far as I know, one cannot catch VD from his own hand.
ROTFLMAO
To state my point in another light, Rosy Palm and her five lovely sisters do not provide suitable habitat for spyrochetes to thrive.
How many people still have a family farm? My extended family has 30 acres in rural Ohio maintained by one of my cousins. My grandfather bought the land during the Great Depression.
All of my mom’s side of the family were dust bowl Okies that moved West and we all have farms and are hunters, etc. My grandpa told me that in his teens he got ammo from his dad and he had to bring back one animal per shell or he got a trip to the wood shed. If he missed something he’d have to wait until he got two squirrels lined up. Don’t know if it’s true but it made a great story. I went hunting this weekend and didn’t get anything, but I didn’t use any shells. Never heard the punishment for that. Farms and hunting are hard work.
I know nothing about hunting, other than my other half heard the cry of a hunted rabbit (sounded like a baby crying) and decided hunting wasn’t for him.
You’re right, farming is hard work. Being that I am more of a Lisa type, i.e. Green Acres, I really respect the knowledge and back breaking work of farmers. Their knowledge base is impressive too. It’s a science, not for dumbies.
Most people would be surprised at the noises rabbits can make. The one you’re talking about is truly hard to hear. Deer can make lots of sounds, too, some that are hard to hear. I know what your other half means.
A few years ago our cat, Lucky, found a nest of baby bunnies and brought them all home for dinner. Under our back porch. Baby bunnies are LOUD!
Asia and Europe call for joint action on markets
HONG KONG: Heads of state from across Asia and Europe called for a coordinated response to the global financial crisis in a two-day conference in Beijing, an event that underlined China’s growing role as a diplomatic counterweight to the United States
But the leaders fell short of offering specific solutions to the current economic troubles, which have shown no signs of slowing. On Sunday, the central bank of South Korea, where stock markets and the currency have been plunging, said that it would hold an unscheduled monetary policy meeting Monday morning, Reuters reported.
http://www.iht.com/articles/2008/10/26/business/summit.php
Can anyone explain to me why “free market” economists morph into communists when home prices are falling? I frankly don’t get it. Perhaps consulting fees are changing hands behind the scenes? Otherwise, why would these guys advocate a rob the poor (renters) to pay the rich (homeowners) scheme?
Finance and economics
Economics focus
A helping hand to homeowners
Oct 23rd 2008
From The Economist print edition
Some economists think the credit crisis needs to be fixed at its source—in America’s housing market
…
Martin Feldstein, who chaired Ronald Reagan’s Council of Economic Advisers (CEA) in the early 1980s, suggests creating “mortgage-replacement” loans to prevent distressed homeowners walking away from their debts. Under the plan, the government would provide low-cost loans to all mortgage holders, worth 20% of their outstanding mortgage debt.
…
If banks won’t lend, Fannie may
Another former CEA chairman, Glenn Hubbard, along with his Columbia University colleague, Chris Mayer, take a more radical approach. House prices could collapse, they reckon, because the downward pressure from foreclosures is made far worse by the scarcity and expense of home loans. To address this, the government should use Fannie Mae and Freddie Mac, the nationalised mortgage giants, to provide home loans to new and existing borrowers on terms that would be available if markets were working normally.
The risk of the kind of programs these guys propose is that well-informed (wealthy / educated) buyers have the common sense to avoid taking the bait, so only uninformed (poor / uneducated) buyers get to catch falling knives. Oh wait — these guys are Republican economists — now I get it
There is a severe flaw in their logic which seems worth pointing out. Just because the U.S. economy was heavily vested and dependent on the housing sector to a historically high extreme for the past ten years does not mean that this is the way things always have been and always should be. Before any policymakers get too excited over proposals to sustain or reflate the housing bubble, I suggest they take a good long look around at the piles of economic wreckage left in its wake to see all the good that came out of it.
Has anyone considered the possible role of high level policy makers constantly baiting would-be home sellers with hints about future programs to inject your tax dollars into private home sales transactions that would result in the seller getting an above-market price? My guess is that sellers who might otherwise be willing to face the music today might be willing to hold their asking prices above the current market price for a far longer time if they are hoping for some kind of cargo drop from Washington to sweeten their deals. The consequence of this would be a severe drop in housing market liquidity (the kind we recently experienced).
Fortunately, recent news from the NAR regarding a pick up in the number of homes selling suggests that the market is healing up quite nicely on its own without the huge further influx of taxpayer moneys that many REIC commentators are suggesting is needed to fix the housing market. The best possible fix for the housing market would be a return to affordable prices, and the many proposals that get floated to artificially prop up prices would have exactly the opposite effect.
NATION’S HOUSING
KENNETH HARNEY
Trade groups are calling for more tax credits
WASHINGTON – Reluctant potential home buyers could be in line for some additional tax and financing enticements, either through a post-election lame duck congressional session or from the new Congress arriving in January.
The last paragraph says it all:
“Why should Congress restimulate one segment of the economy – homeownership – when there are so many economic sectors that need help?” said Jim Arbury, the council’s senior vice president for government affairs. “Why not provide tax credits to buy cars or refrigerators or other products? After all the excesses we’ve been through, why should we be inducing people to buy more houses?”
At what point does the REIC get thrown under the bus? Sooner? Later? Never?
Lotsa empty hands are being held out right now. I still think once the banks steady themselves - main street - including the REIC - is going to be left with empty platitudes and sympathetic pats on the head.
I would advocate stimulus for restaurants and movie theaters before throwing away more money on the housing sector. My family went to dinner and the movies last night, and the restaurant and theater were both nearly empty. It seems that all the money that got thrown into housing in recent years is having a boomerang effect on household budgets, providing a severe jolt to the luxury consumption sector.
Hollywood is hurting, too. Why aren’t restaurants and movie theaters just as worthy of bailout monies as the housing sector?
Maybe we’ll get some good movies after all.
Budgets improve creativity just like arbitrary artistic constraints (twelve-tone music, for example, or harmony in fourths) enhance creativity.
I have been mulling goods and services alot lately.
I don’t need anymore goods but I’m not sure which services I will need coming up other than basic doctor, dentist, vet, and car repair.
I am cutting back on my services budget in a huge way. I basically am my own chef, lifecoach, teacher , tech expert, spa person, dog walker, motel maid, driver, and .
What services do I really need?
A barista?
What services do I really need? Electrical power, water for drinking & washing, sewage disposal, trash pickup, maintenance of some kind of shelter…
And lots of friends and lots of booze.
And a buncha candles to drink the booze by (with aforementioned friends.)
I think the members of the HBB are in good shape.
–
Thanks everyone for a civil and good discussion on “flation” yesterday. We are all trying to figure out where we are headed.
Howe many think that we will have rents falling in the US as a whole? For CA, it is a given once all the vacant homes have a real owner and many would rent them at a lower rate than vacant.
I realize that people are not patient with time lags to work out thru the economy, but forecasting is to really foresee how the various lags would play out once the major force (HB burst) is in play.
BTW, CA is MORE THAN HALF the housing related problems in the US financial markets due to the large $ amount and more than twice the price drop compared to ex-CA.
Jas
“For CA, it is a given once all the vacant homes have a real owner and many would rent them at a lower rate than vacant.”
Based on first principles, one would expect the rent on single family homes to fall in California, given all the vacant homes that litter the landscape. But the simple fundamental picture is clouded on various levels:
Foreclosures have been occurring at such a high rate that the glut of empty homes is effectively in limbo status, as lenders cannot (or choose not to) sell foreclosure homes at a sufficiently high rate to offset the rate of new foreclosures.
One possible reason that foreclosures are piling up is that lenders have been led to believe that (a) more bailout monies may be headed their way, if they just hold out hope, and (b) there will be no recession, or if there is a recession, it will be short in duration and shallow in depth. The passage of the $700 bn (or however much it actually was) bailout likely gave lenders further reason to hold out hope for the injection of taxpayer-funded deal sweeteners for those willing to wait for such announcements.
The various resulting misplaced hopes are likely to have the effect of encouraging lenders (and other owners of vacant homes) to believe they will do better by keeping their properties empty “until the market comes back,” rather than just facing the music and selling (or renting them out). The result is a severe shortage of would-be sellers (or landlords) who are willing to make offers at a price the market currently will bear.
“CA is MORE THAN HALF the housing related problems in the US financial markets due to the large $ amount and more than twice the price drop compared to ex-CA.”
I would add that the fundamental misalignment of home prices and incomes became especially severe in CA relative to other parts of the country.
Here on the iron oxide belt there are fewer and fewer people who can afford to rent or buy a home of any decent size. Plenty of Section 8 applicants waiting for capitulation, however, more and more of the homes listed for sale in the better communities are standing vacant. Those in the ghetto remain boarded up awaiting the bulldowzers. The visiting pols promise, promise us that jobs and good times await us if only they are chosen. Cant wait to fill in those ovals and line up for the stimulus.
Jas,
“Howe many think that we will have rents falling in the US as a whole?”
In most, if not all, of Florida rents have fallen.
Many here have reported that.
I expect Miami to quickly eclipse anything going on in Cali within 8-9 months.
I think from a percentage basis you are probably correct but in raw dollars Cali will probably “win”.
California is just a larger area and I think prices were even stupider.
We have more of an economy too but once you get away from the coast, its a stinking desert. See bakersfield and the IE, east San diego.
Also places like outskirts of Marin, Napa and San Jose that are nice, like upstate NY or rural PA but not viable economically.
Anybody get the virus yet?
I think the communication slowdown may be coming, and its gonna get down right spooky. I have said this before, but as of late, I have had two seperate incidents involving certain, I will not name them, episodes causing shutdowns to POS systems, fibre-optic lines, as well as disrupted microwave communications…
this is not a test. this is real folks.
Part of me hears less people, but part of me believes less communication among the sovereign nations individuals who silently protest in these venues are now in the crosshairs.
This is a global collapse, an utter failure of securitization on a global scale.
I got a trojan or worm of some sort. It was godawful and so embedded, I had to have my entire hard drive wiped and re-load everything. There’s weird stuff going on on the net these days, I agree.
There was a microsoft patch about a week or so ago that was supposed to take care of this latest bot. You obviously didnt load it.
I believe this “worm/trojan horse” is a way for the internets(!) to refinagle the way they charge for free access. ‘If you want clean and fast, you pay’
thereby getting around the laws etc. and getting big money for fast/ access. New bubble alert. And definitely a way to keep information from the masses.
That is what I think this worm/trojan horse is doing right now.
That is what ” they” gov etc was trying to do the past few years.
Way for major internet co’s and gov to keep information from the masses, and to get free subscribers to pay for fast and access. A culling of the masses and voters from getting information just like the big guys.
Pay per access and speed, coming soon a new bubble.
Get a ham radio.
The problem with ham radio is, you can only contact other hams. “Your signal is 5-9, lots of QSB, maybe we can talk more when propagation is better, 73″
dah ditty dah dah ditty ditty dah.
I’m reading you Q5 R9, tresh, good buddy. My rig is a Collins, and I’m using a 40 meter half-wave di-pole antenna out in my back yard. My QTH is the Cactus Rat Mine out here in the middle of nowhere, somewhere between Green River and Temple, running off a generator. What’s your QTH? 73s and over.
QTH is in grid square EN91. Rig is a Kenwood boat anchor. And don’t call me ‘good buddy’ LOL
CQ CQ, yeah I got a little confused there, me and CW McCall been talkin’. Sorry. This is W0RogerQueenCharlie way out back in the outback. 73s.
“This is a global collapse, an utter failure of securitization on a global scale”
Are “They” thinking this was due to the tons of information people are able to get thru the internet to stay ahead of the PTB?
I would still be clueless about whats going on if it wasent for the information I was able to find on the net.
You mean Vista?
The latest data from the Bank for International Settlements shows that Western European banks hold almost all the exposure to the emerging market bubble, now busting with spectacular effect.
They account for three-quarters of the total $4.7 trillion £2.96 trillion) in cross-border bank loans to Eastern Europe, Latin America and emerging Asia extended during the global credit boom – a sum that vastly exceeds the scale of both the US sub-prime and Alt-A debacles.
Telegraph: Ambrose Evans-Pritchard — Europe on Brink of Currency crisis meltdown
Now she tells us — after the price has crashed by 25 percent!!!
INVESTING
Gold could be a risky bet
Long-term gains on bullion are taxed at 28 percent
By Jane Bryant Quinn
BLOOMBERG NEWS
October 26, 2008
Gold is for rich guys – buying physical gold, that is. The metal’s highest and best investment use is as an insurance policy against a currency collapse. For that purpose, you need a lot of it, stored around the world. Owning 20 or 30 coins is nice but won’t protect your standard of living in a world where dollars are dust.
I’m anxiously awaiting a mainstream economist that doesn’t prattle on in about how Gold doesn’t pay dividends and costs so much to store. Every article I read, reads the same way.
What stocks are paying dividends and not plunging?
A safe deposit box that can hold $250k worth, costs around $25 a year.
Do negative capital gains count as dividends?
I can sell 1 ounce Gold Buffalo coins for $125 over the spot price of $735 right now, nearly a 20% premium…
Are you aware of any stocks or bonds that perform in a similar manner?
Yes, actually.
Most illiquid stocks trade this way. That’s because there’s a market-maker, and they trade so rarely that the market-maker needs to make money.
In fact, all over the world spreads in stocks that are thinly traded behave exactly this way.
I do not believe you are impressing us with this example. I also do not think it illustrates anything at all.
Gold is anything but illiquid, in a world short of liquidity on virtually everything else…
You have never seen a situation where the Precious™ was illiquid?
Wow, you haven’t lived enough then.
I’m sure I’m younger than you but even I’ve seen it twice in my life.
PS :- I generally am on your side. I’m just not indoctrinaire about it.
Housing is similarly illiquid. For a case in point, DataQuick figures show the September median used single family home sale price in our zip code (Rancho Bernardo West — 92127) was $725,000, but the current median used home list price shown on the MLS (SD ziprealty.com) is $1,299,000 — a gap of $574,000 between the median list price and the (recent) median sale price. The $1,299,000 list price is so popular that there are currently six homes (out of 201) on the market at that exact price. It is also worth noting that the $725,000 figure represents sales that occurred before the October melt down on Wall Street.
I realize there is a quality differential between the median home that sold and the median home currently listed, but I still maintain that a significant part of the price difference is due to the bid-asked gap under highly illiquid falling-knife market conditions — similar to what we are currently seeing in the gold market.
P.S. I don’t take sides — just call ‘em like I see ‘em.
I’m not taking sides. I’d just like a “stable monetary system”.
That doesn’t mean gold.
It just means letting both the currency and the short-rate float.
Why this is not obvious to EVERYONE including the gold-istas is a f*ckin’ mystery to me!!!
Jeebus Cripus, it’s bleedin’ obvious.
Pussy Galore:
You advocated spreading money around to several banks in order to minimize the risk, but just about every bank is a ticking time bomb, isn’t it?
Not with a taxpayer guarantee, sweetheart.
Finance is a “relative” game not an absolute one.
I only need to bribe the guards better than you on the way out of the “gas chambers”, right?
Capisce?
PS :- Be intellectual not indoctrinaire.
Who’s the bagholder on all the guarantees that have been proffered over the past couple of weeks?
They’re never getting paid (in real terms.)
It’s called default.
About letting the short rate float, what does that mean in terms of the Fed changing the money supply? What signal would they use to know when it’s time to increase (or decrease if need be) the money supply?
They can’t. That’s the point.
Not without a public admission.
It also makes ALL banks compete just like any other industry. It stops privileging them. They become just yet-another-industry that must compete for your savings.
That’s what I thought.
I’ve been thinking about this for quite some time. At first I agreed, yeah it’s obvious, if the Fed let the short rate float that would be as good as a gold standard (the problem of trusting the govt to do the right thing aside…).
But it occured to me recently, that this presents a problem with regard to money supply. Under a gold standard, the changing value of gold relative to goods/services serves as a signal to miners to increase or decrease the rate of inflation. As real wealth in the economy is created, we may need more money to help represent that wealth and the price of gold would be the indicator to organically manage that monetary expansion.
Under your proposed monetary standard, the current quantity of money would be fixed, which could be problematic at some point.
It’s interesting to note that Murray Rothbard defines inflation as expansion of the money supply to the extent it exceeds the expansion of the supply of gold.
But that’s the beauty of the float (theoretically, don’t crucify me politically!)
You are not limited to a physical process which has nothing to do with reality.
If GDP expands faster than gold supply for technological reasons you get a depression for no particular good reason other than the fact that they couldn’t mine fast enough. This is just as retarded as building houses because their price is going up.
There are problems with the gold standard that the gold-istas refuse to acknowledge.
I understand the politics of the gold standard. I “get” it, I f*ckin’ get it in spades, OK? But there are serious problems, and they are like the religious right. No amount of reason will do.
I’m not interested in the politics for the purposes of this consideration. I’m just trying to understand how the floating rate replaces (or doesn’t) a gold standard. Or to put it in a more neutral way, whether the floating rate is the ideal money. The only “standard” I have to compare it to is a hard money standard, whether gold or something else.
I like your point about economic expansion growing faster than gold expansion due to technological reasons. I had never considered that.
That tells me you agree there may be some need for monetary expansion and I don’t see how we get that at all with your proposal in a smooth manner. There has to be some mechanism to expand the money supply, I think we agree on that.
A gold standard potentially de-politicizes that process. Your alternative, even assuming the people in charge are really trying to make unpolitical decisions, has the built-in problem that no one is really smart enough to know how much money we need and they have no signal to indicate when and to what degree to expand money. At best money expansion would be very bumpy, creating similar volatility as what we experience under the current system.
One other issue, I’m of the opinion that money derives its value from “real value” or “utility” first, then gains monetary value later. The dollar is an example. When you have a money for which utility has been removed and which then has no value beyond that derived from its role as a money, then that value will gradually and inevitably dissipate.
You get it “automatically” with float because someone has to loan at the short rate, and someone else is willing to borrow at the long rate.
The market sets the rate.
In fact, without a gold standard you would get a “flat yield curve” almost all the time with a steep curve in times of distress.
Because the yield curve would be flat, banks would not “automatically” make money. They would be forced to compete for your savings and actually make “good” long-term investments. In short, they would have to be competitive just like any other industry.
There is data dating back to the Renaissance to back up this claim. This is hardly news and I’m hardly an original thinker for thinking this up.
Pussy,
“You have never seen a situation where the Precious™ was illiquid?”
“I’m sure I’m younger than you but even I’ve seen it twice in my life.”
===================================================
I bought and sold my 1st Gold coin over 30 years ago and have bought and sold more than you could imagine since then, but I can’t remember there ever being a time when I couldn’t sell bullion, even when it touched it’s lows around $250, it was totally liquid.
Clue me in, please.
You need to live in a different country at a suitably “wrong” point in time.
I’ll agree with you about the US.
Only if you are short.
The date on this article “Gold could be a risky bet” is wrong. Today’s cite is a reprint of the original Quinn article that appeared 22 Oct on Bloomberg.com. I posted a link to it on HBB that day. That post got no comments at all. I thought it was a useful summary of gold as an investment in very few words.
I am really more disinterested in this gold market issue than my frequent posts on the subject may suggest. I am more interested in taking aim at muddled arguments served up by true believers in special asset classes (just as I did back in 2005 with respect to housing) than in the specific bubble asset du juor.
I advise anyone considering physical gold as a hedge to think very carefully about the debate between posters here who claim there is some kind of conspiracy by monetary authorities to publish official (paper) gold prices that are not representative of the true but well-hidden physical metal market prices that are available from Joe the Gold Dealer and the skeptics (like me). I personally find this kind of conspiracy to hide true prices implausible. An alternate hypothesis is that the published prices are akin to bid prices and the especially high price for which you can buy gold at Joe the Gold Dealer’s is an asked price (akin to the high list prices in the housing market which I referenced above). The wide bid-asked price gap reflects a dearth of liquidity in a falling knife (deflationary) market.
A simple test of the above would be to try to sell physical gold back to Joe Gold Dealer for anywhere near the price for which he will sell it to you.
At the height of the housing bubble, one could buy as many homes as their little heart’s desired, @ 0 down.
Every troy ounce of physical Gold requires payment in full to transfer it from seller to buyer, with no exceptions to the rule.
Thus, every ounce is held in the strongest hands possible…
Now, how does that compare to the housing bubble?
“Now, how does that compare to the housing bubble?”
Even the strongest hands would be tempted to fold if they conclude that prices are going to continue going lower without a prospect of a return to bubble prices within decades. (Not claiming this is necessarily the case, but it is a potential outcome…)
“I’ve never seen anything like this. We’re basically sold out until the end of the year,” said Robert Hartmann, co-founder of ProAurum, a gold vendor based in Munich. Despite the shortages, about 200 customers line up at his counter every day, he said, asking for coins and bars, not certificates.”
====================================================
Professor, let me assure you that this is the very same situation the world over, as in nobody has any quantity of the precious, nor does anybody in the business think that they’ll have access to any, anytime soon.
“…as in nobody has any quantity of the precious,…”
This is ludicrous, as I am quite certain both precious and fiatscos are stuffed under mattresses in great abundance world wide.
Lad, that isn’t true. I have bought physical gold on margin before.
A tale of 2 bubbles…
As oil went up to $147 a barrel, like most people, we never had more than around 30 gallons of gas on hand, as in no inventory, around $140 worth at any given time.
Compare and contrast with houses worth hundreds of thousands of Dollars which are deflating like a leaky balloon?
Ground-level report from Atlantic City,NJ: I posted back ’round June about an on-the-market McMansion, 50 yards from me, put up with material that strikes me as totally inappropriate for the shore. Realtor had at least three open houses over five-week stretch back then. The place must have sold in September; still hasn’t hit the local rag’s “Real Estate Transactions” column, so I don’t know for how much it went. Anyway, ’bout two weeks ago, my beagle, Vern, started with the type of howls he lets loose when another dog’s being walked alongside our fence. I went out to quiet him and saw a very yupppie-looking woman, early- to mid-fifties, dangling her arm over our fence, letting Vern sniff her. She was very pleasant and introduced herself. She had some kind of orange lap dog with whiskers, maybe a little bow, called the dog Misty or Muffy, something like that. Woman and I made small talk and she explained to me that she and her husband planned to move to the shore full time, but they first had to sell their home outside Philadelphia. Neither she nor I explicitly mentioned market conditions, but she seemed pretty confident about selling her Philadelphia place, spoke about it as if it were something that would happen as a matter of course. I don’t know whether the nonchalant bravado was for my sake or whether she was trying to fool herself. Next time little Muffin gets Vern a howlin’ I intend to inquire about what’s up with the woman’s Philadelphia place.
Whoops– should have explained that woman bought the McMansion. Up too late with the Phillies!
“She had some kind of orange lap dog with whiskers, maybe a little bow, called the dog Misty or Muffy, something like that.”
Remember the scene in Monty Python’s Holy Grail where the “awww, it’s just a cute little bunny rabbit” jumps into the air and maims and murders the poor unsuspecting knight?
Be wary, be very wary…
Ground-level report from Atlantic City,NJ: Trouble ahead trouble behind
I don’t think she is going to die there unless its a double suicide ….watch out for their mental heath, and if they abuse muffy
———————————————————
The casino industry has been pressured as consumers continue to tighten spending due to the ongoing housing slowdown, diminishing credit, rising food costs and recession fears.
Las Vegas Sands Corp. shares fell $1.24, or 15.1 percent, to $6.97 in midday trading. The stock hit a new low for a second straight day, reaching $5.80 earlier in the session. A year ago the shares traded as high as $148.76.
The California lottery is down 10% in revenue this year.
It’s no big deal though, it only funds our state’s education system…
As usual, totally OT: I used to know a woman who had some connection to the Vegas casinos, her dad owned Hurrahs or some such nonsense. Anyway, she was very wealthy, this was Aspen territory, and I used to take a friend’s daughter to her place for English riding lessons. The instructor was very good, a nice person.
The stables owner ended up conning my friend into leasing a pony for the daughter so she could practice riding at home…long story short, it all ended up on its way to litigation, this wealthy woman against my friend, the woman had written the lease agreement so there was an implicit promise to buy the pony for an unreal sum after so many months, pure BS, and my friend had idiotically signed it, not having read it thoroughly and under pressure. (Sounds like just another FB, eh?)
Upon realizing what was going on, I loaded up the pony and returned it to her, along with a promise to come back with a few wild buffalo and hungry realtors if she didn’t tear up the lease, which she did. She was pretty good about it, had kind of a nervous laugh when I mentioned the realtors, the buffalo didn’t make a dent.
It left me thinking that some people can never be rich enough.
But I guess we already knew that.
I wonder if she’s managing a hedge fund these days.
PS we got the kid a wild mustang from the BLM auction. She learned more about riding in one hour than all those darn expensive lessons.
How about a bailout of Hollywood? Why should the banking sector be first in line for bailouts, with trickle down scraps from the master’s table to all the other sectors?
Hollywood studios feel squeeze of economy
By Ryan Nakashima
ASSOCIATED PRESS
LOS ANGELES – When Paul Hodges lost his job as a newspaper librarian this summer, he cut back on junk food, canceled his Netflix subscription, went back to his old DVDs and tried to stop buying new ones.
The world fell in love with FIRE. Now, it’s ablaze. Hows about some Cash?
Love is a burning flame
and it makes a fiery ring
bringing hurt to the heart’s desire
I fell in the ring of FIRE
I fell into, into the burning ring of FIRE
I fell down, down, down, down into the deepest mire
and it burns, burns, burns, burns
the ring of FIRE, the ring of FIRE, the ring of FIRE
The taste of love is sweet
When two fiery hearts meet
I believed you like a child
Oh but the FIRE went wild
Sounds like some FIREs have popped up in some of the Gulf (Middle East) states this weekend. This thing gets more interesting by the day. The emerging market/third world/non-aligned nations implosion ought to be downright spectacular.
You should know better than to scream FIRE in a crowded blog…
Here is a list of “recently sold homes” from our zip code which are supposed to be comps to the home we rent (which is a 3/2) (from San Diego ziprealty.com).
I find it very curious how that $417,000 or something very close to it keeps popping up again and again and again in the last few transactions. It gets even more curious when one notices that all six of the August transactions shown were for the same address, and there are no comps after August 8.
Recently Sold Homes
Address Beds/
Baths Dist.
(miles) Date Sold Price
17019 CAMINO MARCILLA
SAN DIEGO, CA 92127 0/0 0.68 08/08/08 $425,000
17019 CAMINO MARCILLA
SAN DIEGO, CA 92127 0/0 0.68 08/08/08 $452,500
17019 CAMINO MARCILLA
SAN DIEGO, CA 92127 0/0 0.68 08/08/08 $416,000
17019 CAMINO MARCILLA
SAN DIEGO, CA 92127 0/0 0.68 08/07/08 $416,000
17019 CAMINO MARCILLA
SAN DIEGO, CA 92127 0/0 0.68 08/06/08 $417,000
17019 CAMINO MARCILLA
SAN DIEGO, CA 92127 0/0 0.68 08/04/08 $491,000
11540 CAMINITO CORRIENTE
SAN DIEGO, CA 92128 3/2 0.85 07/24/08 $560,000
16323 AVENIDA SUAVIDAD
SAN DIEGO, CA 92128 3/2 0.72 07/23/08 $578,000
16390 AVENIDA NOBLEZA
SAN DIEGO, CA 92128 2/2 0.67 07/11/08 $433,000
15818 BIG SPRINGS WAY
SAN DIEGO, CA 92127 3/3 0.25 07/03/08 $520,000
Mystery solved: They be falling-knife condos…
Not sure my post (w/ link to RedFin) will make it through but the 17019 CAMINO MARCILLA homes are apparently condos, currently going for $399,000. Catch yer falling knife fast, before it falls all the way to the ground!
AP headline:
“McCain dismisses poll numbers, insists he will win”
Is this even possible? Oly told me it was McOver.
He’s been reading “The Secret.”
From their overdone website: “The Secret reveals the most powerful law in the universe. The knowledge of this law has run like a golden thread through the lives and the teachings of all the prophets, seers, sages and saviors in the world’s history, and through the lives of all truly great men and women. All that they have ever accomplished or attained has been done in full accordance with this most powerful law.
Without exception, every human being has the ability to transform any weakness or suffering into strength, power, perfect peace, health, and abundance.”
Q: How can it be a secret when all you have to do is get the book? Kind of like Backpacker Mag’s articles about the last secret places to hike…
And, IMO, that most powerful law in the universe is the human’s attraction to getting something for nothing. Kind of like gravity or magnetism.
LOL! That’s good stuff- McCain’s been reading “The Secret”.
If McCain gets elected, will he find a cabinet post for Alan Greenspan? I recall a few years back McCain said that if AG died, he (McCain) would extend AG’s tenure as Fed Chairman by propping him up in a chair…
The Grapes of PATH?
AP
Wall Street workers leaving NYC for fresh start
Sunday October 26, 2:53 pm ET
By Valerie Bauman, Associated Press Writer
Amid downturn, Wall Streeters leaving NYC…
http://biz.yahoo.com/ap/081026/wall_street_exodus.html
“ALBANY, N.Y. (AP) — Bankers and brokers looking to escape the financial meltdown are scrambling to relocate their families, possessions and rarified talent far from Wall Street to places such as Florida, Chicago, Milwaukee, Virginia and Asia.”
“Rarified talent” - HAHAHAHAHAHAHHHAHAH!
Serial killers, con men and arsonists have rarified talent too.
I don’t want them in my neighborhood, however.
Prison, maybe.
Maybe they should be required to register just as sex offenders are required to register.
How is the stock market shaping up for the coming weak in the wake of AG’s near-mea culpa last week on Capitol Hill? (Sorry my Freudian spelling slip is showing up again…)
With wreckage piling up, Fed eyes another rate cut
By JEANNINE AVERSA – 1 hour ago
WASHINGTON (AP) — As the economic wreckage piles dangerously higher, the Federal Reserve is prepared to ratchet down interest rates — perhaps to their lowest point in more than four years — with the hope of relieving some of the pain felt by many Americans.
The convergence of a housing collapse and a lockup in lending has created the worst financial crisis in more than a half-century. Alan Greenspan, who ran the Fed for 18 1/2 years, called it a “once-in-a century credit tsunami,” and conceded that he made mistakes that may have aggravated the economy’s slump.
I do think you meant “Capital Hill”…
“with the hope of relieving some of the pain felt by many Americans”
I think they misspelled “reliving”.
News just broke out (Associated Press and Syrian TV) that the US has attacked a village in Syria. There are deads on the syria side. Is this the beginning of a war on Syria and Iran before the end of the term of the current administration?
http://www.marketwarnings.com/2008/10/us-attacks-syria-october-26-2008-is.html
Why am I not surprised that ’ssshrubery & co. have created an even bigger mess, in a misguided effort to cover-up the financial mess…
I posted about those 24 choppers flying southwards in formation . It gave me the willies.
Do you think they will be shipping out in coronado?
more likely shopping
Got tinfoil?
Clearly McCain would make a better war president than Obama, as he has been there and done that, as have his ancestors.
What could lie behind Syria raid?
By Jonathan Marcus
Diplomatic correspondent, BBC News
Syria has said American troops carried out a raid inside Syria along the Iraqi border, killing eight people - if the claims are true then this will be the first military incursion by the US into Syrian territory from Iraq.
But its timing is curious, coming right at the end of the Bush administration’s period of office and at a moment when many of America’s European allies - like Britain and France - are trying to broaden their ties with Damascus.
Got Google?
“in a misguided effort to cover-up the financial mess…”
That is tinfoil.
Nah, just a well deserved slap if it actually happened. Good job Bushies.
Lets hope so
I would like nothing better then for them to institute the draft again…
That would force people to learn how to read write and speak English and graduate high school and get into college to get a deferment, and hopefully the death of rap hip hop music
I don’t hold a lot for the future of our country with the dumb kids we have created.
The morals deteriated under the supposed moral right. Just imagine how bad it’s going to get now?
The moral right turned out to be neither.
“I like to operate like a submarine on sonar. When I am picking up noise from both the left and right, I know my course is correct.”
Weaving a bit are you? Are you sure there is a sonar?
Mogadishu all over again.
currencies runnin hot.
dollar/yen is 92. thats a nickel away from parity.
yen/globex– yen is on a 2-3% move higher…looks like the carry trade needs continued unwinding. This is now my leading indicator.
dollar/yen
vs.
yen/globex
hard day at the forex office coming up. least the intertubes are workin.
Comment by Hoz
2007-10-29 07:03:48
“…Because many of these countries tie their currencies to the dollar, US interest rate cuts prevent emerging market central banks from tightening monetary policy very much, even if their economies are overheating. In other words, a weaker US economy leaves monetary conditions too loose in the emerging world, pointing to heightened inflationary pressures….”
IMHO Mr. Stephen King has the inflation correct, but I am not so sure there is enough decoupling to prevent world wide ill ffects. Mr. Kings analysis is based on the IMF showing US growth of 0.2% next year. Canada is tied into the US economy as is Mexico. As we enter this recession, those countries will be directly impacted. I suspect that Japan and as a result China will be impacted. South America (due to the lack of US interference ever the last 8 years) is tied to Asia and should be impacted.
What happens when the growth in the US goes into negative numbers?
———–
didja think it was gonna get this bad?
In my estimation, we are inside this comment from last year. This comment was just before the Nov’07 all time high on the DJIA.
just sayin.
“Clean up time,” Dorothy swabbed.
Darkest before dawn and all that crap, nay the less it is a brave heart that fights the tape. The tape is up.
Caution over caution.
Berlin believes danger persists
By Chris Bryant in Berlin
Published: October 26 2008 20:04 | Last updated: October 26 2008 20:04
Global financial markets are still at risk of collapse and turmoil will continue until at least the end of 2009, Peer Steinbrück, German finance minister, warned on Sunday.
Mr Steinbrück said he would not try to fool the German public by claiming the government had everything under control: “The danger of a collapse is far from over. Any attempt to give the all clear would be wrong.”
——————–
I think de-coupling may actually mean at this time that the US actually starts to bottom in the short term, as Europe and Asia continune falling in the short term….
back to same as it ever was? If the future looks more like the past, then the US will start to lead out..and the fruits of the efforts of the last 232 years would remain so.
The last 79 years, notwithstanding.
The official discussion of the ’situation’ has been dismal in Germany, politicians utterly clueless. The hollower his brain, the more likely that some ‘expert’ is interviewed by the media - what else is new. Steinbrueck has been fast asleep at the wheel, and everyone tries to dish out blame along party lines. Seems the Social Democrat / Green Party coalition got rid of most laws that were in the way of derivatives trading, and the Christian Democrats finished the job.
Now Angie called for a public apology by the bankers, while showing no sign that she gets what happened, and while the enablers continue to advise her. Same for Steinbrueck.
The Fed has been speaking with dozens of prominent hedge funds and their counterparties in the past weeks to monitor trading and liquidity issues as the financial crisis deepened, industry sources have said.
——-
from dealbook.
lotsa folks paying real close attention.
rate cut coming up on Tuesday.
yawn……
Clue, you think the above was the worst thread ever? How about this:
Just got some awesome shots of a snake!!! Right in its path, beady little eyes and forked tongue.
A funny thing is if you’re out hiking and your friend gets bit by a poisonous snake, tell him you’re going for help, then go about ten feet and pretend YOU got bit by a snake. Then start an argument about who’s going to get help. A lot of guys will start crying. That’s why it makes you feel good when you tell them it was just a joke.
Jack Handey
I like that! OOOH it would work. Unfortunately all we see are garters and corn snakes. Although periodically somebody brings in a stray from N. Dakota or Idaho or some such mythical place.
OT (again): ANCHORAGE, Alaska – The Anchorage Daily News, Alaska’s largest newspaper, has endorsed Sen. Barack Obama for president.
You betcha! What’s Anchorage? How many people work there, eh? 10? Do they make anything I want? How good is there dynamite for fishing?
I mean fair Losty, this election is about important items of discussion, like what is the Mrs. wearing! And how many babies did he kiss.
It is not wise to confuse issues with facts.
My bad. Sorry, I was thinking about snakes and how in the H-E-doublehockeysticks you fish with dynamite.
So, how do you?????
lol
“Blast fishing or dynamite fishing is the practice of using explosives to stun or kill schools of fish for easy collection…”
http://en.wikipedia.org/wiki/Blast_fishing
Kinda like overdosing a girl at the bar
Easy pickens fer some.
Fishin’ with dynamite
1) invite Ralph (or local equivalent from DNR) if he/she wants to go fishing.
2) Meet at your boat with your tackle box.
3) Go out on water AND POP A BREWSKIE OR THREE
4) Open tackle box, pull out stick of dynamite
5) Light dynamite and hand to Ralph (or equivalent).
6) Ask Ralph “You goin to talk all day or you wanna go fishin?
Pretty soon yur fishin!
Detonate explosives in the water and the fish float to the top.
Fishing that way is completely impractical. Dead fish don’t float until they begin to decompose. Live (and recently killed) fish are neutrally buoyant.
I guess I watch to much Crocodile Dundee.
Would this work for croc fishin’?
October 26, 2008 7:20 P.M.ET
BULLETIN
Making recession official
GDP data expected to confirm contraction, Fed likely to ease rates
After nine months of job losses, declining output, lower sales and falling incomes, the final proof that the nation has tipped into recession will likely arrive in the coming week with the third-quarter GDP figures. Meanwhile, the Federal Reserve is expected to ease its policy rate target to to 1.00%. And if you want good news, watch for new homes sales.
Are the MarketWatchers going sarcastic now?
Here is a sign of a bottom forming. Forecasters whose forecasts have repeatedly been overly optimistic, due to “worse than expected” data, are turning into gloomsters. I predict “better than expected” new home sales data will begin emerging within the next two years.
U.S. New-Home Sales to Drop 12% in ‘09, MBA Forecasts (Update1)
By Dan Levy
Enlarge Image/Details
Oct. 22 (Bloomberg) — U.S. new-home sales will fall 12 percent next year as single-family housing starts drop by a record in a recession that could last through the first half of 2009, Mortgage Bankers Association Chief Economist Jay Brinkmann said.
“We’re looking at a recession of a minimum three quarters,” Brinkmann said today in an economic forecast delivered at the group’s annual meeting in San Francisco. The recession started in the third quarter of this year, and a recovery may be delayed by the permanent loss of manufacturing jobs that helped end previous slowdowns, he said.
U.S. single-family housing starts will drop to 525,000 in the second quarter of 2009, a record 70 percent decline from the peak in the third quarter of 2005, according to the forecast. Mortgage originations for home purchases will fall 20 percent this year to $912 billion, Brinkmann said.
P.S. I have posted this point many times, but in case anyone missed the earlier posts, a cursory look at the data going back to 1955 shows that each time U.S. residential construction investment (e.g. housing starts and completions) has dropped off by 25 pct or more, the macroeconomy recessed. There were seven such previous instances, by my count.
I am guessing with a 70 pct drop in housing starts, this recession will ultimately prove “worse than expected.”
Lessons for the Fed to (re)learn from the bubble:
1) Industries such as home construction have a natural speed limit, which is dictated by the rate of household formation. When the residential construction industry exceeds this natural speed limit for ten or so years, the result is a glut of recently-constructed housing which exceeds current demand and will continue to do so for many years to come.
2) Hair-of-the-dog stimulus programs which aim to fix the situation by continuing to build new homes on top of the glut will only make things worse.
3) Next time, remember and exercise the leaning into the wind concept before it is too late. Otherwise you will again end up burn the chair legs on which the economy rests to heat the room.
Fed to slash U.S. rates as recession looms
* Reuters
*Sunday October 26 2008
* What: Federal Reserve’s rate-setting committee meets
* When: Decision around 2:15 p.m. EDT (1815 GMT) Oct. 29
* Rates seen falling 1/2 point to 1 percent
By Ros Krasny
* Business
* US economic growth and recession
America joins UK on brink of recession
Fed expected to lower interest rates to 1 per cent
* Heather Stewart and Richard Wachman
* The Observer,
* Sunday October 26 2008
* Article history
Federal reserve chairman Ben Bernanke is poised to slash American interest rates to just 1 per cent this week, the lowest level since the depths of the dotcom crash, as government figures reveal the US has joined Britain on the cusp of recession.
Stringpushing.
GDP Probably Contracted as Spending Fell: U.S. Economy Preview
Wal-Mart Stores Inc., the world’s biggest retailer, is seeing consumers use credit cards less often because they are “feeling the pain” of the financial crisis, said Eduardo Castro-Wright, the company’s U.S. stores chief. Americans feel “maxed out,” he said in a speech in Los Angeles on Oct. 21.
Bloomberg.
I think the reason for the slow down in credit card purchases has more to do with their cards being “Maxed Out” than them feeling “Maxed Out”.
Or their lenders consider them maxed out and shrunk down their credit lines.
The policital comedy industry will lose out big time if McPalin and Cain don’t get elected…
Palin says she considers herself intellectual
4 days ago
NEW YORK (AP) — Does vice presidential candidate Sarah Palin consider herself intellectual? You betcha!
“And you have to be up on not only current events, but you have to understand the foundation of the issues that you’re working on,” Palin said in an interview with People magazine. “You can’t just go on what is presented you.”
…
“I appreciate a lot of information. I think that comes from growing up in a family of school teachers,” she said.
Palin said if she and husband Todd had had a sixth child, they had already picked a name for a boy joining siblings Track, Bristol, Willow, Piper and Trig.
“I always wanted a son named Zamboni,” she said.
Who’d of thunk that trying to guarantee just about everything would not work very well?
Financial Times
Credit markets hit by bank debt guarantee
By Aline van Duyn in New York
Published: October 26 2008 19:16 | Last updated: October 26 2008 19:16
Moves by US and European governments to guarantee the debt of banks and other financial institutions have made private fundraising in vital parts of the capital markets extremely unattractive.
In spite of governments intervening to shore up banking systems, there are so far few signs that this is improving conditions in the credit markets.
P.S. I don’t have a Financial Times subscription, and hence cannot access the rest of this article. But I note that one possible unintended consequence of guaranteeing bank debt is to crowd out potential sources of funding, as the resulting disappearance of risk premiums translates into a very-low potential rate of return for savers and investors who might otherwise be willing to take money out from under their mattresses to invest it.
Why would a “rational” moneylender compete with a money-printing machine?
They’re not demented.
Exactly. I would rather buy another viola than stick my money into a bank paying near 0 pct on savings.
P.S. And I really don’t need another viola. The only reason to buy another one would be as an inflation hedge.
This is my first post. i have been following the blog for about three years. In August 2005 I saw the writing on the wall and sold a waterfront investment property my wife and I owned in Florida. I made money from this insane real estate bubble. I pay my bills, have no cc payments and drive old Volvos.
NYCB with his post about trust has hit apon a major cause of this crisis. Trust is related to whether people tell the truth and hold themselves accountable for their actions. There has been a steady erosion in our societies moral values. I call it the “Bart Simson” effect. ..”It wasn’t me I didn’t do it”. Add to this the lying of President Clinton when he was in office “I didn’t inhale”.
I am the network manager of a law firm and have to deal with young people who play around on their computers in violation of signed Internet use policies. I have noticed an interesting pattern. They will always lie even when confronted with the actual evidence. They just hold their position as though it were valid.
I have a feeling this kind of behavior has began to permeate our culture. It is interesting when Greenspan says ” I thought that the banks and investment firms would look after the interests of their clients. I was wrong”. I guess Alan is just old fashioned.
And Your law firm hires little airhead chickypoos in HR who cant answer a phone, or an Email properly and is blatant about your law firms refusal to even interview a white male over 40 all because some partner wants to bang her behind his wife’s back
Its staggering the age sex discrimination in hiring in America, and law firms are the worst….
Has your law firm ever hired a male over 40 for an entry level paralegal job? NOPE its always a 22 year old….ahem “Recent 2008 college graduates only”
——————————————————————-
I am the network manager of a law firm and have to deal with young people who play around on their computers in violation of signed Internet use policies. I have noticed an interesting pattern. They will always lie even when confronted with the actual evidence. They just hold their position as though it were valid..
Beware of people like that who lie even when presented with evidence to the contrary. Those are the lizard people. (a.k.a. sociopaths?)
Silent Screaming.
Wait, there’s always a rate cut somewhere.
That ought to calm the traders, up market for sure.
Tuesday will be magnificent.
PB, can things get worse this week?
Of course it can. When it rains shoes, there are oh so very many shoes to drop.
Financial Times
US public pension funds face big losses
By Deborah Brewster in New York
Published: October 26 2008 22:32 | Last updated: October 26 2008 22:32
Public pension funds in US states are facing their worst year of losses in history, exacerbating existing funding shortfalls and putting pressure on state governments to shore them up.
In the nine months to the end of September, the average state pension fund lost 14.8 per cent, according to Northern Trust, a fund company. The loss has grown since, as financial markets slumped further in October. The previous highest loss for state funds was 7.9 per cent for the full year in 2002.
Luckily since everything is guaranteed any more, I am guessing some of the $700 bn in bailout monies will be made available to guarantee state pensions. Does that sound right?
I found a bit more of this article…
California’s Calpers, the US’s biggest pension fund, last week reported a loss of 20 per cent of its assets, or close to $40bn (€31.5bn, £25.2bn), between July 1 and October 20 this year.
State and local pension funds comprise a patchwork of 2,700 funds which manage $1,400bn on behalf of 21m employees, including teachers, firefighters, and other municipal workers.
About 40 per cent are underfunded, meaning that they would not be able to pay the future pensions that employees have been promised. State governments have lifted pension benefits - a move that is politically popular - but have often failed to put in more money to pay for them.
This goes with the Financial Times article posted above under Ann Gogh’s post…
Cool waterfall graph (MSCI Asia x-Japan)
Asian defaults
Published: October 26 2008 19:09 | Last updated: October 26 2008 20:01
Asian contagion
Fears of default have washed up in Asia. Credit default spreads on Indonesia, one of the worst-hit countries during the financial crisis a decade ago, blew out to over 1,000 basis points on Wednesday, about 10 times their level at the start of the year. The Philippines five-year CDS has also ballooned, while other Asian bond spreads widened to records as fears of a Pakistan default spilled over into a general emerging market panic.
Sure, this is a world where nothing is safe: if US money markets can buckle, so too can countries where political stability is sporadic and stock markets are peremptorily shuttered. South-east Asian countries certainly have their weak spots. South Korea, hit by slowing exports, has announced a bank bail-out. Political risk in Thailand has never abated since the 2006 coup. The Philippines has external debt equivalent to 25 per cent of gross domestic product. And Indonesia’s current account, unusually for the region, is dipping into deficit. Investors’ have had a love affair with the country in recent years, thanks to its high interest rates. But it is now suffering from capital flight as hedge funds and other increasingly risk-averse investors liquidate their positions. Foreigners, for example, are estimated to hold one-fifth of Indonesian domestic bonds.
Like a severe thunderstorm in the midwest which hides a twister behind a curtain of rain, this is a worst-last storm. Not only are job losses high for the early stage of a recession, but so are housing price declines. Like in other recessions, I don’t expect housing prices to bottom out until the end.
Wall Street Journal
October 27, 2008
Early Job Losses Compound Downturn
A rash of new job data show the labor market is the worst it has been since the two prior recessions, worrying economists who usually expect the weakest picture at the end of a recession.
Wall Street Journal
* OCTOBER 27, 2008
Sharp Downturn in Asia Nears
Reliance on Exports Is Likely to Hurt, but Domestic Spending Remains Robust
By PATRICK BARTA
BANGKOK — Asia, the world’s last redoubt of fast economic growth, may be closer to a downturn than people think.
For the U.S. and other developed countries, investors typically define a recession as two consecutive quarters of economic contraction. For Asia, though, a sharp downturn occurs when region-wide annual growth slows to between 5% and 6%. For China, which has had multiple years of double-digit growth, the rate at which a downturn could effectively begin is likely even higher, possibly up to 8%.
Wall Street Journal
* INFORMATION AGE
* OCTOBER 27, 2008
Credit Panic: Stages of Grief
Uncertainty about Washington will slow the recovery.
By L. GORDON CROVITZ
Wall Street is working its way through the cycle of grief that starts with shock and denial, progresses to accepting responsibility and eventually gets to the stage of learning from mistakes. In contrast, Washington remains stuck in the denial phase, with political leaders refusing to admit that their actions have any responsibility for the credit panic. This matters because regulatory denial is suppressing confidence in markets, especially now that the country’s financial capital is in Washington, not in New York.
…
Washington’s culture is fundamentally different from Wall Street’s culture. Politicians of all parties thrive by avoiding responsibility and shifting blame. Congress has not even held hearings yet in the area where it is most clearly responsible: social engineering through banking by pumping mortgages to unqualified borrowers via Fannie Mae, Freddie Mac and laws that required banks to make bad loans. Hearings are promised after the election.
Accepting responsibility for the folly of Fannie and Freddie is crucial. Markets expect even more politicized lending now that the government has direct stakes in banks. Treasury Secretary Henry Paulson offers assurances that banks will operate without political influence, but just last week a group of Democratic senators agitated for lending rules aimed at supporting their social goals.
We’ve learned that complex modern banking can barely cope with its core function of allocating capital efficiently, much less politically. Denial of this basic point is undermining the beginnings of a return to confidence.
“The New York Times is failing – and the newspaper is failing. ”
John Hempton
Everything you wanted to know about moneys but were afraid to ask.
The Federal Reserve’s balance sheet
“”On Thursday, the Federal Reserve issued its weekly H.4.1 report, which provides details of the Fed’s balance sheet. Once upon a time, this was one of the least interesting of the government’s many releases of data. These days, it’s become one of the most exciting….”
http://www.econbrowser.com/archives/2008/10/the_federal_res.html
Heh heh…
These new Federal Reserve assets came in many colors and flavors, including the Term Auction Facility, the Primary Dealer Credit Facility, currency swaps (which I presume is the biggest single item in the burgeoning “other F.R. assets” category), and the seriously non-acronymizable Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity Facility.
The news just stated that one of the reasons that people are losing their homes (among others they stated) is because “home flippers” are increasingly abandoning houses without fixing them up, causing those that need to sell to not be able to sell their homes for what they’re worth.
-sigh-
…no mention that that “worth” was achieved over the past few years, in part, by the presence of unsustainable demand from those very flippers in the first place.
The Case against Housing Price Supports
Edward L. Glaeser, Harvard University
Joseph Gyourko, The Wharton School of the University of Pennsylvania
Summary
Economists and politicians have eagerly proposed policies aimed at stopping the decline in housing prices. The government can’t and shouldn’t be trying to stop price declines, according to Edward Glaeser of Harvard and Joseph Gyourko of Wharton.
Recommended Citation
Glaeser, Edward L. and Gyourko, Joseph (2008) “The Case against Housing Price Supports,” The Economists’ Voice: Vol. 5 : Iss. 6, Article 3.
Available at: http://www.bepress.com/ev/vol5/iss6/art3
Wall Street Journal
* BUSINESS
* OCTOBER 27, 2008
Financial Storm Hits Gulf
Speculative Currency Trades Plunge Kuwait Into Bank Bailout
By MARGARET COKER and CHIP CUMMINS
ABU DHABI — The global financial storm rolled across the Persian Gulf on Sunday, as Kuwait’s central bank guaranteed bank deposits and cobbled together a hasty bailout for one of the country’s largest banks.
The Kuwait intervention is the first bank rescue in the oil-rich Gulf, which until now had seemed relatively immune to the current crisis. It came as local markets across the region continued their steep selloffs. With oil prices down more than 50% from their July highs, the explosive, petroleum-fueled growth of the Gulf now looks suddenly vulnerable at the same time as international and local investors are pulling back sharply.
Chiller in Manila…
It’s
turtlesrecoupling all the way down.Wall Street Journal
October 27, 2008 2:31 A.M.ET
BULLETIN
Asia can’t stop stocks’ slide
Hong Kong, Shanghai lead major-market declines as fear of global recession continues to grip Asia. Japan’s Nikkei plunges to lowest level in at least 23 years, recovers but can’t then hold gains as sell-off accelerates late.
• G7 worries about yen fluctuation
• More pain for markets?
• Mitsubishi UFG eyes $10.6 billion stock issue
• Japan’s prime minister rules out early election
Manila -12.3%
Tokyo -5.9%
Taipei -5.5%
Hong Kong -4.8%
Shanghai -3.6%
Seoul -3.0%
Shanghai -2.0%
Sydney -1.8%
Mumbai -1.3%