The Housing Bubble

CALL it the Bad Apple of West 34th Street.

Neighborhood advocates are irked - and retail brokers mystified - over the big, empty hole that Apple Inc. has left on one of Manhattan’s busiest shopping blocks as it tries to unload the site that CEO Steve Jobs no longer wants.

Apple controls 21-25 W. 34th St. between Fifth and Sixth avenues, diagonally across from the Empire State Building. Its 75-by-100-foot site constitutes half of the crater that also includes 27-29 W. 34th St., which has been leased to fancy footwear retailers Geox and Aldo.

But while a building to house the shoe stores is expected to rise soon, the Apple situation is less clear.

“It’s been all cloak-and-dagger,” said Prudential Douglas Elliman honcha Faith Hope Consolo.

The land under both sites is owned by a joint venture of SL Green and Jeff Sutton. The JV leased nos. 21-23 to Apple way back in November 2006.

Small buildings on the site were demolished. Merchants on West 34th Street - where stores like Banana Republic and Victoria’s Secret have been replacing schlocky discounters - looked forward to another spectacular Apple emporium like the one on Fifth Avenue.

An Apple rep sniffed this week, “We’ve made no announcement about that location and can’t comment.”

But publicly traded SL Green has no such luxury - the lease with Apple is noted in its February 2007 10-K statement to the Securities and Exchange Commission.

Apple liked the location so much it subsequently leased adjacent 25 W. 34th, giving it 75 feet of precious sidewalk frontage. Apple pays $5,906,692 in annualized rent, according to Green’s latest 10-K.

But Steve Jobs soon decided he didn’t want a store there after all; one source said he looked at a run-down building across the street and said, “This is not for Apple.”

So Apple put the site up for sublease through Robert K. Futterman. RKF’s Web site says the property - which can support about 18,000 square feet on three levels - will be available for 13 years starting April 1, 2009.

RKF broker Karen Bellantoni did not return a call.

So far, there’s no word of a nibble.

“None of this makes any sense to us,” said Dan Pisark, vice president of retail services for the 34th Street Partnership.

Moonbats, one & two ask/plead Daddy Warbucks please ’save’ the auto bis.

In a letter to Treasury Secretary Henry M. Paulson Jr., House Speaker Nancy Pelosi (D-Calif.) and Senate Majority Leader Harry M. Reid (D-Nev.) asked Paulson to “review the feasibility . . . of providing temporary assistance to the automobile industry during the current financial crisis.”

The letter notes that Congress granted Paulson broad discretion to use the bailout money to “restore financial market stability. A healthy automobile manufacturing sector is essential to the restoration of financial market security,” the letter continues, as well as to “the overall health of our economy, and the livelihood of the automobile sector’s workforce.”

http://www.washingtonpost.com/wp-dyn/content/article/2008/11/08/AR2008110802000_pf.html

I guess the Chicoms have seen how well our stimulus/bailout has been working and want to give it a shot.

Nov. 9 (Bloomberg) — China announced a 4 trillion yuan ($586 billion) stimulus plan to spur expansion in the world’s fourth-largest economy, helping sustain global growth as the U.S., Europe and Japan teeter on the brink of recession.

The funds, equivalent to almost a fifth of China’s $3.3 trillion gross domestic product last year, will be used by the end of 2010, the Beijing-based State Council said today on its Web site. China will adopt a “pro-active fiscal policy” and pursue a “moderately loose” monetary policy, it said.

http://www.bloomberg.com/apps/news?pid=20601087&sid=a.qGMw.h5jYA&refer=worldwide

This must be a short sale ?

15100 Marquette St UNIT C Moorpark CA 93021 3 beds, 2.5 baths, 1,353 sq ft

For Sale: $300,000

Value Range: $280,925 - $353,635
30-day change: $14,000
Zestimate updated: 11/07/2008
Last sale and tax info
Sold 03/28/2006: $465,000
2008 Property Tax: $4,312

This is not going to end well! The NY Times today said:

Treasury Secretary Henry M. Paulson Jr. proposed a federal government purchase of this so-called toxic paper from financial institutions, which had the attraction of setting a price on these obligations and rendering some liquidity to them. But the mortgages would still be outstanding, and the names of the homeowners who took out those mortgages would still be there. Hence, the ownership of the mortgages might change, but the debtor would still be the same family or individual owing the same amount of money. The main concern now is to help the lender and the homeowner simultaneously.

A solution to these dilemmas would greatly improve the chances of reaching the primary goal: stabilization of home prices. To achieve it, we must alter the terms of these mortgages to contain the foreclosure process and, in time, bring it to an end. Only then can we shrink the number of houses under forced sale conditions and stop the downward pressure on prices.

Imagine if Barack Obama tries to “stabilize” house prices at their current, STILL TOO EXPENSIVE, rate! It will lead to inflation, hammering the nails in the coffin of the savers/investors/renters/Taxpayers who had nothing to do with the housing bubble, while deadbeats get their free house.

Jared Diamond’s writings were a revelation to me, as his nuanced way of looking at the world in the big picture historically, combined with his decades long journeys into the wilderness of New Guinea, is similar to my world-view, my wilderness turf being the Sierra Nevada.

I recommend “Guns, Germs & Steel” & “Collapse” as a primer to his way of thinking.

Here’s a TED video of him in 2003 describing how societies collapse. @ around 12:00 of this 18 minute video he describes our present course towards collapse, with chilling detail…

“One blueprint for trouble making collapse likely,
is where there’s a conflict of interest between the short-term interests of the decision-making elites and long-term interests of the society as a whole, especially if the elites are able to insulate themselves from the consequences of their actions.”

http://www.ted.com/index.php/talks/jared_diamond_on_why_societies_collapse.html

SMlandlord…THANKS for the link to the Argentinian real estate, it might be the solution to all my problems (I can buy RE AND escape the Obamanation).

The last domino falls.

http://www.nytimes.com/2008/11/09/realestate/09cov.html?_r=1&oref=slogin

“Median prices in Harlem and East Harlem were down nearly 20 percent, to $440,000 at the end of this year’s third quarter, from $549,000 at the same time last year, according to data from Miller Samuel Inc., a real estate appraisal and consulting firm. Similarly, condominiums in Midtown East and Turtle Bay dropped 18.6 percent, to $1.197 million from $1.47 million; and condos in Midtown West and Hell’s Kitchen dropped 8 percent, to $1.01 million from $1.099 million.”

“Another sign that the market has slowed significantly is the marked drop in sales, decreasing 24 percent in Manhattan, to 2,654 in the three months that ended on Sept. 30, from 3,499 in the third quarter of 2007.”

“From everything we’re seeing out on the street, the fourth quarter report will slow prices down across the board in every neighborhood”

What is happening, according to this source, is that prices in less prestigious Manhattan neighborhoods are plunging as options open up in more prestigious Manhattan neighborhoods. That will happen to a far greater extent in competing urban areas nearby — Brooklyn, Queens, Hoboken.

Same thing in the suburbs. Price drops in Garden City and Scarsdale will lead to price plunges in Levittown and Hartsdale.

So much for it can’t happen here. Perhaps because NY is late to the adjustment it will happen faster.

I was wondering why the largest holding in a mutual fund I own had been increasing it`s ownership of GE for the last couple of months now up to almost 5% , then I realized that GE is the parent company of NBC and MSNBC and they would be looked at very favorably in the incoming HB administration .

By E. SCOTT RECKARD

Los Angeles Times

Sunday, November 09, 2008

The government’s Hope for Homeowners plan launched Oct. 1 was initially projected to help over the next three years as many as 400,000 struggling borrowers avert foreclosure.

But fewer than 100 homeowners applied to the program in October, and the Federal Housing Administration now projects that just 13,300 will be helped in its first year. An FHA official told a mortgage industry conference recently that one large lender had reported that in a group of 23,000 troubled borrowers only 1,200 would be eligible for the program.

On the road…

It was somewhere near Merced cruising northbound, when the pungent smell of onions penetrated our jalopy and didn’t let up till the outskirts of Galt.

We came upon Stockton in the dark, and a good many houses melted into the nightscape foreclosed from view.

The orgy of overbuild seemed to end in the El Dorado Hills, where my better half noticed that there were no trees as far as the eye could see in this newer cookie-cutter suburbania, pesky obstacles that must have been taken out to allow easier parking, no doubt.

South Lake Tahoe seemed a little slow business-wise, and we don’t get up there all that often and it’s been awhile. Right at stateline, across from Harvey’s is a big pit with rebar exposed with a fence around it. Some big condo or hotel project perhaps? I doubt this one gets finished…

When did Caesar’s Tahoe turn into the Montbleu?

Bishop, Ca. has put on quite a few corporate pounds, and has lost a lot of it’s charm, sad to say.

The rest of the little towns past Bishop are all fine and dandy and refuse to grow up…

The Trader Joe’s in Bakersfield, like the Trader Joe’s in Fresno, is about the only thing that makes hungry to visit places you’d otherwise avoid like the plague.

Upon our return to the land of the calicos, we received 11 minutes of disdain from them, followed by hours of “don’t ever leave us again” love.

It’s all good…

There’s that word again, “hyperinflation.”
blogs.ft.com/wolfforum/2008/10/it-can-be-worse-than-the-great-depression/
Now, major states, such as Italy, have more than 100 percent of GDP in public debt even before the crisis, rendering major state bankruptcies a real danger. Fiscal and monetary stimulation are needed and deflation must be avoided, but currently fiscal considerations are disregarded altogether, which is a recipe for disaster. State default can easily lead to hyperinflation, which is far worse than deflation

Goodbye 401-k ??

The testimony of Teresa Ghilarducci, professor of economic policy analysis at the New School for Social Research in New York, in hearings Oct. 7 drew the most attention and criticism. Testifying for the House Committee on Education and Labor, Ghilarducci proposed that the government eliminate tax breaks for 401(k) and similar retirement accounts, such as IRAs, and confiscate workers’ retirement plan accounts and convert them to universal Guaranteed Retirement Accounts (GRAs) managed by the Social Security Administration.

Rep. George Miller, D-Calif., chairman of the House Committee on Education and Labor, in prepared remarks for the hearing on “The Impact of the Financial Crisis on Workers’ Retirement Security,” blamed Wall Street for the financial crisis and said his committee will “strengthen and protect Americans’ 401(k)s, pensions, and other retirement plans” and the “Democratic Congress will continue to conduct this much-needed oversight on behalf of the American people.”

http://www.carolinajournal.com/articles/display_story.html?id=5081

What’s the best bait to use when fishin’ for TARPon?

Years ago there was an Outer Limits or Twilight Zone story called, To Serve Man. Aliens that look like oversized men arrive on Earth, and share their advanced knowledge bound in a special book as a type of Thanksgiving gift. The advanced aliens provide luxury and plenty, wiping out disease and famine. Eventually someone deciphers the book’s true meaning, to serve man is a cookbook. The meaning of this parable came to me in my sleep; a most remarkable author!

Mini nuclear plants to power 20,000 homes…Nuclear power plants smaller than a garden shed and able to power 20,000 homes will be on sale within five years, say scientists at Los Alamos, the US government laboratory which developed the first atomic bomb.

The miniature reactors will be factory-sealed, contain no weapons-grade material, have no moving parts and will be nearly impossible to steal because they will be encased in concrete and buried underground.

http://www.guardian.co.uk/environment/2008/nov/09/miniature-nuclear-reactors-los-alamos

‘Aliens that look like oversized men arrive on Earth’

Paulson for sure, but Bernanke?

How long will it be before people start asking for student loan bailouts?

The U.S. financial sector, once the emblem of our economic success, has failed us. Financial markets are supposed to allocate capital and manage risk; instead, they squandered capital and created risk. Even more galling, the banks’ chiefs raked in private rewards totally out of whack with what scant good they were doing for the wider society.

WaPo: Joseph Stiglitz — More Pain to Come Even if He’s Perfrect

Just as righty-tighty USA went way liberal, way liberal New Zealand just went righty-tighty…
====================================================

Prime Minister-elect John Key will meet Act and United Future allies today to form a Government as speedily as possible with the hope that his Cabinet can be sworn in within a week.

http://www.nzherald.co.nz/nz-election-2008/news/article.cfm?c_id=1501799&objectid=10542062

I am watching Meet the Press right now. We are really ruled by idiots. They threw out a quote from Charlie Rangel. Good lord. These people don’t have a clue. They truly believe that we can bailout this credit addicted economy by borrowing more money, even if that money doesn’t exist. Buy a shovel and remember where you buried your money.

Challenges on the horizon
Plenty of doubt that state, city can deal effectively with fiscal mess

By Chris Reed
November 9, 2008
…
The global financial crisis has sent government revenue plunging and left already underfunded public employee pension funds in even worse straits. Gov. Arnold Schwarzenegger and Mayor Jerry Sanders – both elected to clean up fiscal messes – instead are likely to leave office in grim circumstances.

And that may be a best-case scenario. There are plenty of reasons to doubt whether state and city leaders are up to the challenges they face.

Silver lining of the bailout: It has stimulated some wonderful descriptive writing to describe the gargantuan scale of what has transpired.

DEAN CALBREATH
U.S. isn’t even close to rescuing the economy
November 9, 2008
…
It’s hard for nonmathematicians to grasp exactly how much money $1.5 trillion is. So here’s a handy illustration, courtesy of Washington Post columnist Bob Herbert.

Imagine a 6-inch stack of bills worth $1 million. (To keep the stack so small, most of those bills would have to be $500s or $1,000s, which were discontinued in 1969.) To get to $1 billion, that stack would have to be 500 feet high – close to three times as tall as San Diego’s Mormon Temple. To get to $1.5 trillion, the stack would stretch more than 140 miles, only slightly less than the distance from downtown La Mesa to the Arizona border.

That’s how much money we’ve already sunk into the financial system in “rescue loans” and bailout packages. So far. And even though much of that money will eventually be repaid – in theory, at least – for the time being it’s a gaping hole in the federal budget.

A bailout of GM is a gift to Republican causes. Go for it, moonbats!!!

COMMON SENSE
The case for not giving GM, Chrysler a hand
By James B. Stewart
SMARTMONEY

November 9, 2008

Here’s a hot potato for the new commander in chief: Having just scored $25 billion in low-cost federal loans to develop fuel-efficient vehicles, General Motors and Chrysler are back, hat in hand, looking for more billions to assist their proposed merger. President Bush decided to pass on this one, leaving it to the new administration. Can you blame him?

The biggest potential political problem here has nothing to do with Detroit and everything to do with Wall Street – specifically Cerberus, a private-equity firm based in New York.

Bush’s former Treasury secretary, John Snow, is chairman; former Vice President Dan Quayle has been a prominent spokesman; and the firm’s chief executive, Stephen Feinberg, gives generously to Republican causes.

WALL STREET
In such volatile times, maybe look at parking your portfolio in cash
By Mark Hulbert
NEW YORK TIMES NEWS SERVICE

November 9, 2008

Critics of market timing argue that it’s hard, if not impossible, to consistently beat a buy-and-hold approach by jumping back and forth between stocks and cash.

But new research raises the tantalizing possibility that you can do as well as the overall market – with much less risk – by parking your portfolio in the safety of cash during times such as these, when market volatility spikes higher.

Wall Street Journal

* ENCORE
* NOVEMBER 9, 2008

Tax Rule Slams Hard-Hit IRAs, 401(k)s
By TOM LAURICELLA

In the past month, Congress and the Bush administration have worked feverishly to help Wall Street.

Now millions of older adults are seeking last-minute help with a problem that directly affects Main Street: required withdrawals from retirement accounts.

Wall Street Journal
* NOVEMBER 8, 2008, 8:00 P.M. ET
World Bank Sees Crisis Crimping Trade
By JEFF FICK and ALASTAIR STEWART

SAO PAULO — The ongoing financial crisis will likely lead to a decline in global trade for the first time in 27 years, World Bank President Robert Zoellick said Saturday.

According to Mr. Zoellick, the onset of the crisis caused a “stunning” decline in global trade. “And we believe that you could find in 2009 that you could have an actual decline in world trade, which would be the first time since 1982,” Mr. Zoellick said.

Wall Street Journal
* NOVEMBER 8, 2008

Japan Worries It Faces the Return of Deflation
As Global Recession Spurs Fear of a Free Fall in Prices That Knocks Economies Flat, Tokyo Braces for Its Own Sequel
By YUKA HAYASHI

TOKYO — The faltering global economy is prompting worries about deflation. Japan, which had to conquer the problem of widespread falling prices more than three years ago, could be the first to face it again.

(Japan defeated deflation years ago, when everything, including these shoes, seemed to be on sale. But deflation might need to be defeated again.)

Inflation in Japan, which had picked up since early this year, was caused mainly by higher oil and commodity prices, not because of strong demand in a growing economy. Now that those prices are falling sharply, inflation is easing. Economists say consumer prices may stop rising over the next several months, and may start falling sometime next summer.

FYI, the author is probably writing under a nom de plume, as it seems unlikely the writer on such a topic would coincidentally share the name of the original dismal scientist.

The Baltic Dry Index Revisited
By: Thomas Malthus
Saturday, November 08, 2008 1:46 PM
Sectors: Finance

To help put this into perspective a recent article by “The Independent” noted that in the beginning of June the total cost of a shipment of coal from Brazil to China would have totaled USD15mn per voyage compared to USD1.5mn currently. At the same time, the article noted that the daily cost of chartering a capsize bulk carrier during this cycle’s peak amounted to USD234.0K vs. USD5.6K presently. This is a drop of around 98%!

One of the houses I’m keeping my eye on has dipped below $200K (currently at $199,900). It started in the upper $200s. Been on the market the better part of 2008. I haven’t looked at it so I don’t know if the condition is an issue, but nothing seems to be moving around here so I kind of think it’s just a matter of sellers getting real (it’s been sitting empty). Maybe it’s time for me to take a peek at it… Could be worth $160K

here’s a funny one…

So a few fortnights ago on a Tuesday, all the AIG stock existent could have been purchased for around $8 Billion @ prevailing market values, so Henry Paulson decided the next day, that we the taxpayers should buy 79.9% of AIG for $85 Billion (later increased in total to $122 Billion) and now AIG wants a bunch more Billions from us.

I am going to take a huge gamble with my family’s well being that we will have either a more extreme form of inflation than we have known recently (circa 1970s) or that student loans will be crammed down by the government.

Next year I will start a part time law program at a local state school. It is not a good law school or a bad law school; nor is it a cheap law school. My estimates, including books and other costs, is approximately $80,000 for four years. In addition, I will be working close to full time during that period. I will be expected to work a average of 40 hours a week but, as my work is generally project oriented, I will be able to reduce that load to 30 hours per week for certain periods. I estimate I will need to devote 25 hours to class and study per week.

At 7% interest and a payoff in 15 years, my monthy nut comes to about $725 after taxes. I expect that will be $1050 with taxes. When I finish the degree, I will be in my late thirties, bi-lingual, and with 7 plus years as a paralegal in a small firm (more and varied experience). In other words, I expect my chances at finding employment, given my skills and experience, will be better then some of the competition.

My hope is that inflation, especially wage inflation much farther down the line, will make this debt more manageable. Either that or a percentage of federal student loans are forgiven.

Any thoughts?

Lunch stimulus special:

Chinese take-out, just $586 billion (fried rice $25 billion extra)

Whooo hooooo! Mushrooms really ARE the answer to everything! I knew it!

‘Forget Corn: Mushrooms May Hold the Key to Solving World’s Energy Crisis’
http://tinyurl.com/635cct

I’m full of mushrooms, by the way, although not that kind. For breakfast I made a huge omelette stuffed full of russulas, a couple of laccarias, and a very pretty p. ostreatus clump.
Say, are any other Hbbers mycophiles? I would assume so, being correctly-thinking already, and all, it would only be natural.

mycophiles - gourmet mushroom spawn.

Talk about pricey stuff. Mushrooms are expensive and not part of middle income grocery bills. You must be a chef for a fine kitchen to see all the varieties there are, otherwise just give me button or portabello ’shrooms. Love ‘em with garlic.

ECONOMIC PREVIEW
Worst retail sales trend since 1974 expected
Fourth consecutive month of declines seen; sentiment, trade data on tap
By Ruth Mantell, MarketWatch
Last update: 12:01 a.m. EST Nov. 9, 2008

Hedge fund managers ‘funereal’ in midst of crisis
More pain expected, but some look for opportunities in ‘rubble’
By Alistair Barr, MarketWatch
Last update: 8:32 p.m. EST Nov. 7, 2008

SAN FRANCISCO (MarketWatch) — In the midst of the worst financial crisis since the Great Depression, several top hedge fund managers sent a grim message to their investors in October: it isn’t over.

One said he was sickened by the crisis, while another admitted shock and embarrassment at the severity of the market slump and the losses his firm suffered. A third warned clients to be careful about buying anything and said it will be years before investors should buy stocks.

Such pessimism is often taken as a sign that markets may have hit a bottom and most of the managers realized this. Indeed, some said they’d already begun buying securities that they think are cheap enough to discount all the gloom.

The Standard & Poor’s 500 index slumped more than 16% in October, while credit markets collapsed.

Spreads on investment-grade corporate debt jumped by 151 basis points, while junk bond spreads surged by 521 basis points to a record 1,617, according to CreditSights.

Losses in these markets so far this year reached 19% and 31% respectively, prompting the fixed-income research firm to ask “Can it get any worse?”

Hedge funds have been hit particularly hard by this market collapse. The average manager lost 5.43% in October, leaving them down more than 15% so far this year, according to preliminary estimates on Friday from Hedge Fund Research.

That puts the $1.7 trillion industry on course for its worst year since at least 1990, when HFR began tracking performance. Before 2008, hedge funds had only one down year in that time: in 2002 they lost 1.45% on average.

latest news
[FBTX] Franklin Bank closure is 18th of the year

Credit Suisse shuts down bond fund
By Shawn Langlois, MarketWatch
Last update: 2:11 p.m. EST Nov. 8, 2008

SAN FRANCISCO (MarketWatch) - Swiss bank Credit Suisse Group said Saturday that it is shutting down a bond fund and its subfunds after their value was crushed by the global financial crisis, according to a published report.

The bank said it will close the CS Bond Fund (Lux) Target Return because the lack of liquidity in the market has made it impossible to sell assets to meet redemption requests, Reuters reported.

“In the course of the last days and weeks investors have significantly sold assets in a flight to liquidity. The volume of redemptions has meant that many subfunds have become too small to operate on practical and economic terms,” Credit Suisse said in a statement.

REAL ESTATE
Obama’s home front
What the new president will do to keep people in homes and improve housing
By Amy Hoak, MarketWatch
Last update: 7:01 p.m. EST Nov. 6, 2008
Comments: 52

CHICAGO (MarketWatch) — Economic concerns were at the forefront of voters’ minds this week. And for many Americans, those financial issues begin at home.

Between rising foreclosures and falling home prices, housing issues became a huge concern in the months leading up to the election. As such, they’re likely to continue to take priority during President-elect Barack Obama’s first term.

… foreclosures are likely the No. 1 concern, because that problem is a big one.

According to a report from Credit Suisse, 6.5 million loans were expected to fall into foreclosure over the next five years. That’s based on home prices dropping 10% in 2008 and 5% in 2009, before rising 3% in future years.

The Center for Responsible Lending estimated in August that nearly 2.2 million foreclosures would occur due to defaults on subprime loans from late 2008 through the end of 2009. More than 40 million homes in neighborhoods surrounding those foreclosures would suffer price declines as a result, causing a $352 billion total decline in property values, or an average $8,667 per home.

2 RE stories:

SIL and her husband were looking at a Ryland home on 3 acres in Fredericksburg Va area for 660K a few years ago; he promised he’d buy them the home if it went to 350K (haha - it would never fall that low, don’t listen to my ridiculous ideas) - now some models in the development are going for 319K albeit on 1 acre…

A professional couple (he works, she’d rather not) had the privilege to have 2 SFRs, one for 700K (no money down fixer upper - needs a new 50K roof - she just HAD to have it - at least he realizes they top-ticked the market and is upside down, and one for 285K that they had to rent. They just got an all cash offer on the 285K house for 370K - they (she) wanted to hold out for 385K - the road was just widened, we live in Alaska, natural gas is going through the roof, the houses will be worth 1 million and half a million in a few years etc etc, but after some wine I held forth on Minsky deflation, Kondratieff winter, everyone has debt/no one has cash (or gold), they (he) ultimately took the deal…I’m sure they’ll (she’ll) burn through it pretty quickly on monthly week-long trips (’for the children’), home repairs and vet bills (she unilaterally bought a puppy), but I did my good deed for the month. I told him if she wanted 15K that badly she could go back to work…

Goldman forecasting biggest rise in joblessness since WWII
By Rex Nutting
Last update: 10:55 a.m. EST Nov. 7, 2008

WASHINGTON (MarketWatch) — The unemployment rate is expected to rise to 8.5% by the end of next year and inch even higher in early 2010, economists for Goldman Sachs wrote Friday. The cumulative trough-to-peak increase of more than 4 percentage points in the jobless rate would be the most since World War II, they said.

Financial Times
AIG nears deal on another state bail-out

AIG is closing in on a new government bail-out that will allow the troubled insurer to reduce interest payments and give it more time to sell assets and save itself from collapse - 22:42

Hedge fund results seen going from bad to worse
Fri Nov 7, 2008 8:17am EST

NEW YORK (Reuters) - As brutal as September was for hedge funds, October was even worse.

Hedge fund industry trackers Barclay Hedge, Hedge Fund Research Inc and Hennessee Group LLC will report over the next few days just how poorly the $1.9 trillion industry performed last month. It was a period of plunging stock prices, frozen debt markets and fire-sales by banks scrambling to boost cash.

“You had one of the worst months in the equity markets that you had in decades. You add to that the ban on short selling, which destroyed convertible arbitrage, and the equity strategies were hurt badly,” said Sol Waksman, founder of industry tracking service Barclay Hedge.

Observation: As long as money keeps growing on trees, there are really no limits on the number and variety of bailout measures that can be proposed and implemented to respike the credit bubble punch bowl.

Financial Times
Wall St jobs axe threatens 70,000
By Francesco Guerrera and Aline van Duyn in New York
Published: November 9 2008 23:32 | Last updated: November 9 2008 23:32

The financial industry is bracing for a fresh round of job cuts as Wall Street banks slash costs to cushion the blow of further market turbulence and deepening economic woes in 2009.

Executives and analysts say the redundancies – to be finalised this month as banks prepare next year’s budgets – could top 70,000 among US groups alone and add to the estimated 150,000 jobs already lost by the financial sector worldwide.

Isn’t this where we were last December, except for the taxpayer funding that recently was ramrodded through Congress?

Financial Times
Buying of US toxic assets urged
By Krishna Guha in Washington
Published: November 9 2008 22:01 | Last updated: November 9 2008 22:01

Plans for the US government to buy troubled assets as part of its $700bn financial sector rescue should not be abandoned or delayed in the transition to the Obama presidency, a top securities industry official has warned.

In an interview with the Financial Times, Tim Ryan, president of the Securities Industry and Financial Markets Association, said: “I do not think we can put this on hold for two months. We would not put foreign policy on hold for months during the transition.”

John Paul Kashkari: “I have not yet begun to bail.”

SPECIAL REPORT AMERICA’S MONEY CRISIS
Kashkari: Bank bailout just beginning
Key Treasury official said it’s too early to judge effectiveness of the capital injection plan and added that other options to help financials are on the table.
By David Ellis, CNNMoney.com staff writer
Last Updated: November 7, 2008: 3:50 PM ET

Buying stocks right now seems like a really dumb idea. I can feel the stupidity of such a move in every inch of my body. How can anyone even consider buying stocks at this point in economic history?

Bear market: Time to buy?
By John Authers

Published: November 9 2008 20:21 | Last updated: November 9 2008 20:21

As world stock markets plunged last month, investors were able to take heart from the latest words of Warren Buffett: he announced he was buying stocks. “A simple rule dictates my buying: be fearful when others are greedy, and be greedy when others are fearful,” proclaimed the man known as the Sage of Omaha. “And most certainly, fear is now widespread, gripping even seasoned investors.”
…
“I haven’t the faintest idea as to whether stocks will be higher or lower a month – or a year – from now,” he wrote. “What is likely, however, is that the market will move higher, perhaps substantially so, well before either sentiment or the economy turns up. So if you wait for the robins, spring will be over.”

But is there a way of telling when equities might have hit bottom? Certainly, when fear overcomes greed to this extent, attempts to assess a stock’s value according to fundamental measures go out of the window. Instead, all people have to go on is history. Yet precedents as extreme as last month’s “Black October” are few. Only four periods in the past 100 years (two of them during the 1930s) match the 46 per cent slide since the Standard & Poor’s 500, the world’s most widely tracked index, reached an all-time high in October last year.

PB, wow, that was six posts in a row plus one reply == 7.

I would be careful about trying to map the present situation too closely to the 1929-32 period. Have you read _Anatomy of the Bear_ by Russell Napier? My takeaway was that while lessons can be drawn from comparisons of bear markets, each one is quite unique. One reason he wrote the book was frustration with the available financial histories, which he characterizes as impractical.

In our current bear market, the economic environment and policy responses are so far unlike anything we have seen before, so I would not expect to be able to predict stock prices “this time” based on historical results.

Yield Curve May Steepen to Record During Recession (Update1)
By Dakin Campbell and Liz Capo McCormick

Nov. 10 (Bloomberg) — Treasury two-year notes, the worst performing U.S. government securities in the past year, may beat longer-term debt as the Federal Reserve cuts interest rates to pull the U.S. economy out of a nosedive, according to one of the bond market’s most-watched barometers.

The difference between yields on two- and 10-year notes, known as the yield curve, may widen to a record 3 percentage points from 2.44 percentage points now, according to strategists at Morgan Stanley and Credit Suisse Group AG. Shorter-term yields are falling on expectations the Fed will reduce its target for overnight loans between banks to curtail the recession. Ten-year yields are likely to rise as the government borrows to bail out the U.S. financial system, they said.

US data points to ‘big, bad and broad-based’ recession
Saturday November 08 2008

Investment bank Goldman Sachs Group has forecast the deepest US economic recession since 1982 after the unemployment rate climbed to a 14-year high and payrolls tumbled for a 10th consecutive month.

The economy will shrink 3.5pc in the fourth quarter and 2pc in the first quarter, compared with previous estimates of 2pc and 1pc, Goldman economists led by Jan Hatzius wrote in a research note yesterday.

That would be the biggest back-to-back quarterly contraction since the start of the second year of Ronald Reagan’s presidency.
…
“We’re heading for a deep recession,” said Nariman Behravesh, chief economist at IHS Global Insight in Lexington, Massachusetts. “Banish the word mild from your vocabulary. It’s big, it’s bad and it’s broad-based.”

Wall Street Journal

* TECHNOLOGY
* NOVEMBER 10, 2008

Technology Options Sink
Silicon Valley Considers Repricing but Risks Riling Investors
By SCOTT MORRISON

Silicon Valley is drowning in “underwater” options. But with the stock market in turmoil, investors might be uneasy bailing out high-tech employees.

Employees at scores of companies, including Yahoo Inc. and Google Inc., are holding stock options, the right to buy shares at a preset price, that have been rendered virtually worthless because those companies’ shares have fallen below the exercise prices.

At chip maker Advanced Micro Devices Inc., the situation has gotten so extreme the company is planning a shareholder meeting to ask permission to reprice 99% of its outstanding options. AMD, whose stock price had fallen about 76% over the past 52 weeks to $3.16 a share at Friday’s close, said this is necessary to prevent key employees from leaving.

“The vast majority of the historically granted stock options no longer are effective as incentives to motivate and retain employees,” a company proxy statement said. The date of the meeting has yet to be set.

Wall Street Journal

* OPINION
* NOVEMBER 10, 2008

Detroit Auto Makers Need More Than a Bailout
By PAUL INGRASSIA
…
Let’s assume that the powers in Washington — the Bush team now, the Obama team soon — deem GM too big to let fail. If so, it’s also too big to be entrusted to the same people who have led it to its current, perilous state, and who are too tied to the past to create a different future.
[Detroit Auto Makers Need More Than a Bailout] Associated Press

In return for any direct government aid, the board and the management should go. Shareholders should lose their paltry remaining equity. And a government-appointed receiver — someone hard-nosed and nonpolitical — should have broad power to revamp GM with a viable business plan and return it to a private operation as soon as possible.

Wall Street Journal

* NOVEMBER 10, 2008

CRISIS MODE
Paulson, Bernanke Strained for Consensus in Bailout
By JON HILSENRATH, DEBORAH SOLOMON and DAMIAN PALETTA

A chronology of NAR-speak:

Prices are still rising: “RE never goes down; buy now or be priced out forever; they ain’t making any more of it, you know.”

Price increases are decelerating: “Well, we can’t go up double-digits EVERY year.”

Prices are flat: “Don’t worry: this is just the pause that refreshes. Ignore those plummeting sales #s.”

Prices start to decline: “This is just a normal slowdown. What a great time to buy.”

Prices are down 10%: “It’s inconceivable [*The Princess Bride*, anyone?] that prices could go down much further. There’s so much pent up demand. Buy now or you’ll be sorry.”

Prices are down 20%: “This is all due to the financial crisis. Once it blows over prices will start rising again.”

Prices are down 30%: “Somebody make it stop!”

Prices are down 50%: “Why should I worry? I stopped being a Realtor years ago.”

Prices finally bottom out: “If I never buy another piece of RE it will be too soon.”

Anyone watch Schiff on Fox Business News? There’s long-haired, wild-eyed RE bull named Tom Atkins. On a previous episode in 2007, they made opposite points [surprise, surprise] but Atkins was buying in Texas where a lot of cities were UNDERVALUED during the RE boom. He also said he wouldn’t be buying in CA or the hot places. So maybe he and Schiff weren’t so far apart after all?

Embrace Sacrifice.