Bits Bucket For November 10, 2008
Please visit the HBB Forum. Post off-topic ideas, links and Craigslist finds here.
The Housing Bubble
Examining the home price boom and its effect on owners, lenders, regulators, realtors and the economy as a whole.
About Me
Name:Ben Jones
Location:Northern Arizona, United States
To donate by mail, or to otherwise contact this blogger, please send emails to: thehousingbubble@gmail.com
PayPal is a secure online payment method which accepts ALL major credit cards.
Links
-
November 2024 M T W T F S S « Sep 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30
Photo Submission: hbbphotos@gmail.com
View the HBB Photo Gallery *updated 4/13/2008
AIG Gets Expanded Bailout, Posts $24.5 Billion Loss (Update1)
By Hugh Son
Nov. 10 (Bloomberg) — American International Group Inc., the insurer bailed out by the U.S., got an expanded government rescue package valued at more than $150 billion after posting a fourth straight quarterly loss.
The U.S. will reduce the original $85 billion loan that saved New York-based AIG in September to $60 billion, buy $40 billion of preferred shares, and purchase $52.5 billion of mortgage securities owned or backed by the company, according to the Federal Reserve. The insurer lost a record $24.5 billion, or $9.05 a share in the period ended Sept. 30, compared with profit of $3.09 billion, or $1.19, a year earlier, AIG said in a regulatory filing today.
http://www.bloomberg.com/apps/news?pid=20601103&sid=aLAOKeHG_AM4&refer=us
But I thought Canada was different.
Reuters
Nortel sets sweeping cost cuts, posts big loss
Monday November 10, 7:16 am ET
By Wojtek Dabrowski
TORONTO (Reuters) - Nortel Networks Corp (Toronto:NT.TO - News; NYSE:NT - News) reported a large quarterly loss and announced a round of sweeping cost-cutting on Monday that includes laying off 1,300 another people as the economic downturn eats away at its business and strains its balance sheet.
Nortel, North America’s biggest maker of telephone gear, said the rapid deterioration of the economy pushed it once again to cut its 2008 outlook as telecommunications companies reduce spending on the equipment it makes.
The latest job cuts are close to 5 percent of Nortel’s roughly 30,000-strong workforce. Along with the layoffs, the company said it would freeze salary increases, cut back on consultants and review its entire real-estate portfolio.
Isn’t it Canada that has more moose then people? Or something like 10 sq/miles of land per resident.
I saw a few stats about Canada (that I don’t have time to find) like the above (which are made up) that blew my mind. How on earth can you even think of having a housing bubble in a market like that? There’s nothing but land; land for 1000’s of miles.. Unreal.
However, even in my hood, it’s not all that different. While looking at condos in downtown West Palm Beach 4 years ago, I was being led around by me REwhore who (timing was perfect) was droning on about how “WPB has run out of land, the prices will go up forever”. At the time, she was standing in an EMPTY city lot that was right next to the 300/sq/ft condo she just took me into. A lot, which, to this day, is still empty (and still in the most desirable downtown WPB neighborhood).
The denial was just shocking; we are out of land, and yet, right across the street from the condo we were just in there’s 20 ACRES of open land? WTF?
For those who are in WPB, the lot in question is directly across from Publix (CityPlace). Still a nice, totally empty lot!
well, at least the Netherlands is different
88% of the country is still unbuilt area (and we DO make new land from time to time). Despite that, in regions like where I live - with the same bubbleprices as the big cities - there is farmland as far as the eye can see. Not much different from Arizona I guess, except that prices have been going up for about 25 years over here 
We don’t have the overbuilding of the US (yet), but I’m starting to guess that at least some 5% of the Dutch housing stock must be empty because of all the people who purchased a new home before selling the old one. It is SO cheap to keep two homes (because of tax/mortgage incentives etc.) that sellers stick to their wishing price forever. One realtor explained in last weeks newspaper that instead of lowering the asking price by 10%, you can keep your home on the market at full price for another four years (even longer if you rent it out) - easy choice for the sheeple!
The thing to consider about Canada is something like 90% of the people live within 50 miles or so of the US border. Most of it isn’t really where people would comfortably live.
We have the same thing here in the US. There are millions of square miles in southern California, Nevada, and Arizona where people can’t live because there isn’t any water.
didn’t nortel go BK in 2001? Incompetence rules.
I had an old co-worker that at one time had $250,000 worth of Nortel Networks stock options. He could have turned them in and walked away with 1/4 of a million dollars. The stock started going down. He didn’t turn anything in. He watched the stock go from $69 to $.80. He kept thinking, “it will go right back up. I will be a millionaire.” He didn’t get a nickel. I love it. He was a lazy piece of crap.
The same thing happened to Lucent. Both Nortel and Lucent were making the big bucks in the Nineties because the Baby Bells were converting their switches from analog to digital and both Nortel and Lucent were major participants in this conversions.
The logical question that I used to ask the Lucent 401K millionaires was “What is going to happen after all of the switches are converted? How are these companies going to make their money?”
“They’ll think of something” was the general reply.
All these guys ended up royally screwed.
In Lucent’s case, they had a pretty strong history of innovation and a lot of smart people working for them.
You’re right about the final result, of course, but (IMO) Lucent had the potential to do well in the next decade if they had been able to move strategically into the digital realm.
I had a little fun with NT back around 2003. I thought it would all go back up too. But I was lucky just to go from ~3 to ~5 and sell. Later I freaked because the price was way up and I missed it! But it was just a reverse split.
I was in the optical networking space during that period. Our startup was acquired, and our $0.25 shares were worth $115. We were all millionaires — vested, too. I know guys that exercised their options, but didn’t sell any. They took out $250,000 second mortgages to pay the AMT. The analysts said we were going to $200. You’d be crazy to sell!
The stock eventually crashed below $1. My buddies have nothing left from the wild ride, except the monthly mortgage payment.
They only person I knew that made bank was a brother of a friend of mine that went to work for Mark Cuban at Broadcast.com. Yahoo bought them out a week after he was hired. Immediately sold his now vested options for $60k.
I don’t know which is worse, that Nortel is laying off or that Lucent/AT&T isn’t #1 in manufacturing telephone gear. In the US I believe Lucent switches are way more popular in the telephone central offices than the Nortel DMS switches. Of course as the USA moves to fiber to the premises I don’t know what is on the central office side of those services.
Nortel used to be a big employer in Raleigh also. I know they downsized during .com days.
AT&T is seperate from Alcatel-Lucent, no?
French run Bell Labs. How’s that working?
“Of course as the USA moves to fiber to the premisis I don’t know what is on the central office side of those services.”
The central offices, as we know them, are doomed. The world is going wireless. Landlines are yesterday’s technology, even fiber-to-the-prem.
Telephone, internet access, televison - all communication access needs - will someday (soon) be offered by wireless.
IMHO.
It may happen eventually, but with current technology, wireless doesn’t work well enough in cities for non-broadcast applications. WiMAX is not working out as hoped other than in some rural areas. And nimbyism is preventing the installation of adequate cellular coverage in many residential areas.
We will still have central offices, we’ll just call them data centers.
My company is switching away from PSTN service to software PBX based on commodity hardware. However, the last mile will still be running on digital land lines, because wireless is too unreliable. Not good news for Nortel or Lucent, but not bad news for land lines.
From a security standpoint, you will certainly get a lot of pushback on using wireless in sensitive environments. Hard lines will continue to be maintained in these type environments for quite some time, imo.
WPA was just partially cracked…
soft pbx is the way to go. Smart phones & dumb pbx’s. Nortel and Lucent are doomed.
Wireless will not catch on until the current cell phone only crowd makes it to the board room. Not having phones (and employees ) tied to a desk is a revolutionary idea. Not having a secretary shield you calls is another revolutionary idea.
Telephone, internet access, televison - all communication access needs - will someday (soon) be offered by wireless.
Um, television has always been offered by wireless.
Guess I’m getting old,
Yogurt, those old antennaes were made outta wire…really thick wire.
“The central offices, as we know them, are doomed. The world is going wireless. Landlines are yesterday’s technology, even fiber-to-the-prem. ”
For individuals perhaps, but not businesses.
They continue to dump tax dollars at the problem ‘they’ can’t fix. Under the guise that the taxpayer will benefit in the future, fat chance!
Government provides new aid to AIG
Monday November 10, 7:12 am ET
By Jeannine Aversa, AP Economics Writer
Government provides new aid to troubled insurance giant American International Group
WASHINGTON (AP) — The government on Monday provided new financial assistance to troubled insurance giant American International Group, including pouring $40 billion into the company in return for partial ownership.
The action, announced jointly by the Federal Reserve and the Treasury Department, was taken as it became increasingly clear that an original financial lifeline thrown to AIG in September would not be sufficient to stabilize the teetering company. All told, the moves boost aid to the company to around $150 billion.
The $40 billion infusion comes from the recently enacted $700 billion financial bailout package. The government is buying preferred shares of AIG stock, giving taxpayers an ownership stake in the company. In turn, restrictions will be placed on executive compensation at the firm.
aw, crap, ya beat me to it.
“The government is buying preferred shares of AIG stock, giving taxpayers an ownership stake in the company”
So the taxpayer will own a bunch of bankrupt companies (AIG, GM, Ford, and various financial institutions). What a great investment! Of course there’s no quick turn around (especially Ford & GM) so we will be throwning more good money after bad in the coming years. That is provided “we” don’t run out of money, which is a very real possibility given the prevailing spending patterns.
Because that worked so well ~40 years ago in Europe.
We the people already “own” 79.9% of this steaming-pile cleverly disguised as assets, that we paid $85 Billion for.
If we the people throw another $40 Billion at it, does that mean that we the people own over 100% of a sucking chest unwound?
RE: we paid $85 Billion for
It’s a lot more than $85 billion…
http://www.bloomberg.com/apps/news?pid=20601087&sid=aatlky_cH.tY&refer=worldwide
Last food grab by the rats before the ship goes under.
Leverage.
Debt was far greater than the underlying assets.
that’s good news, the hunting party’s and other management fun can continue as if nothing happened; always look at the bright side of life
Palm Beach Post Staff Writer
Sunday, November 09, 2008
Who says people aren’t buying Florida real estate?
The developer of The Edge condominiums reports an “unbelievable” amount of interest in 41 unsold units set for auction on Saturday in West Palm Beach. “We’ve had close to 1,000 people come through the building. And I’d say 50 percent of those people are actually interested in buying,” said Jay Jacobson, South Florida director of Wood Partners, the developer of the 307-unit condo on Australian Avenue. So far, about 220 people have preregistered for the auction.
The auction is being structured to sell off unsold Edge units in a dramatic, bargain-basement fashion. Some of The Edge’s units are being sold for as much as 72 percent off their market value price. (For example, one unit is priced at $95,000, down from its original asking price of $337,000.) Other units are going for between 40 percent and 70 percent off. The idea is to create a floor price low enough to generate sales, which will, in turn, hopefully boost prices. Wood Partners has 156 unsold units in the building.
Jacobson had expected the bulk of his buyers to be young professionals. But he’s been surprised to see that many of the potential buyers are older than 50. “They’ve watched their stock market holdings go down and they want to put their money in Florida real estate,” he said. “They feel it’s bottomed out.”
Even better, a lot of these mature buyers already have a ready tenant for the space, Jacobson said. Many say they want to buy so their child or other young adult relative can have a place to live as they enter the workforce.
Jacobson says having Wells Fargo Bank lined up to provide mortgages gives the auction credibility. But quite frankly, the bank might not even be needed, since most potential buyers say they’d rather just pay cash, he added.
Of course, all this bullish talk may just be talk. The real proof will come on auction day. “If 300 people show up on the day of the auction, and we get 10 or 15 percent of them, we’ll be happy,” Jacobson said. For more information, check out http://www.theedgeauction.com.
If interest in The Edge is any indication, apparently there’s a lot of money sitting on the sidelines, waiting to invest in something, anything, that seems more reliable than gyrating stocks and depreciating assets.
One developer with an eye on those restless investors is Richard M. Rendina, chairman of The Rendina Cos. in Jupiter.
Rendina, 28, took the reins of the respected medical office developer in 2006, after his father, Bruce, passed away. Since then, Rendina has had to climb more mountains than one might expect. They include keeping the company together after the passing of its larger-than-life founder; breaking ground on two new Palm Beach County projects, including the company’s fourth medical office building at Wellington Regional Medical Center; and oh yes, navigating the worst financial climate in more than 70 years.
But trouble can create opportunity, and Rendina sees an opportunity to tap wealthy, private individuals who have cash to invest but no idea where to put it. With health care still a reliable industry sector, Rendina says he’s planning $120 million to $160 million in new medical office buildings for 2009 and 2010. But to build, Rendina needs extra cash to satisfy bank lenders who want up to 30 percent in equity for new deals.
So for the first time, The Rendina Cos. is opening its projects up to private equity partners. “We’re opening the doors,” Rendina said.
Details still are being worked out, but Rendina said investors likely will be investing in a portfolio of medical offices that will be built around the country, including in the Chicago area, where Rendina hopes to open an office.
I guess the markets are going to the moon today because of China’s “stimulus” plan. Monkey see, money do.
The stimulus plans are working.
They’re not helping the economy any, but they are achieving their true goals.
“They’re not helping the economy any, but they are achieving their true goals.”
Top hats to the life boats, padlock steerage below deck! Hurry!!
China’s stimulus plan is a joke. They are talking about building infrastructure which they already have been building at full throttle. There will be zero net effect on their economy. Commodities could possibly benefit.
Remember when China used to throw $586 Billion at us, back when they thought our t-bonds were the cat’s meow?
Who’s gonna pick up the slack, jack?
Welcome to Peak Credit.
“Peak Credit.” Brilliant!
Green Rectangles.
Instructions: 1.) Wipe Ass. 2.) Flush.
In case of Emergency, replace Green Rectangles with Rainbow Rectangles.
Just exactly HOW are those dollars going to be repatriated if the central bank isn’t buying U.S. bonds? That is the trillion dollar question IMHO.
I’ve got a plan…
We create a bubble in used cheap Chinese goods, get prices up to like 3-5x vs. what we paid China for them, and export the bubble goods back to hordes of anxious Asiatic buyers just waiting for a new bubble to replace the old bubble.
Somebody is always buying USG bonds. That’s called the bond market.
The only question is what price buyers are willing to pay, or to put it another way, how high interest rates have to be,
But the stock markets around the world must have fallen for it…. So surprising
But isn’t holding cash, houses, money market funds, and Treasury bonds far riskier than holding stocks?
Not at this point, but let’s revist this question in about a year or so from now.
The best you can do is hold a little bit of everything and hope it all doesn’t crash and burn.
Palmy…. here is another lesser known China stimulus plan. People they throw in jail (I don’t comment on civil rights issues here), they must pay for their room and board. That’s right. Steal from the masses, and you have to pay for your own food and lodging.
That’s an idea that could be considered in California and Florida to say the least. Or get their relatives to pay.
Or, if they are illegals, bill the “home” country - deduct it from gasoline purchases, for example.
Unions: It’s time to cash check
After spending $400 million on the election, Big Labor wants easier organizing laws
By Neil Roland
November 9, 2008 12:01 AM ET
As the labor movement seeks to cash in on its huge contribution to Barack Obama’s presidential campaign, business groups are trying to play out the clock on legislation to ease union organizing—even citing the credit crisis as a reason to put any new organizing laws on hold.
http://www.financialweek.com/apps/pbcs.dll/article?AID=/20081109/REG/311109977
Organizing should be made easier.
Ex, come on. Do you really think it is fair to let Unions do away with secret ballots and make you vote in public with your vote know to all? That is against everything our country stands for. It would result in tainted and unfair elections to organize or decertify a union and a pure bully play. Its not making it “easier” its making it lopsided and unfair and pure political play in the ugliest sense of the word. As I posted last week, this issue and modifying the Bankruptcy Code to allow modifications of first mortgages will tell me if BO is really different or just more Washington inside baseball, bought and paid for in advance. JMHO….
werent the secret ballots an import from Australia. In ye old good days you voted in front of the party boss, who would distribute a reward of punishment.
The old saying being vote early, vote often and bring a gun?
Card Check has been a long sought after enhancement to organizing. Perhaps secret ballots should be an option but card check is so simple that the vote can be achieved by regular mail.
Card check should only be allowed for deciding whether or not to hold a secret ballot. The opportunity for coercion is too tempting for unions, many of which operate like gangs… speaking as a former union member.
When voting by mail, would they be able to identify/match the voter and his/her vote? That is the issue I have with it. That and the fact that the most likely off-site polling place will be the local union hall, not a very neutral place.
“speaking as a former union member”
What trade?
I was working as a software developer, but was forced to join IATSE because they were running a closed shop. The company went out of business a few years later because they could not make a profit while paying people serious money to sit around and read novels at work.
The problem with the unions is that they end up protecting the jobs of the total idiots.
Two examples I was personally involved with:
-Employee drove company truck home, spent afternoon mowing yard (was supposed to be picking stuff up). Supervisor saw him on his way to work (lived a few blocks down the street). Fired when he returned.
Employee filed grievance for unlawful termination. The reason? “Nobody said I couldn’t mow my yard on company time”
Employee “borrowed” truck for personal business. Terminated. Filed grievance. Reason? “The contract doesn’t say anything about using comapny equipment for personal business”
The problem with the unions is that they end up protecting the jobs of the total idiots.
I didn’t know that Bear Stearn, Lehman Brothers, WaMu, etc. were unionized,
I bet all those GM retirees are pretty pissed that they are losing all of their health benefits in 7 weeks while the union retirees are keeping theirs.
Unions are bigger than ever. You just have to recognize that today they are called College Degrees. No card, no student loan dues, no work!
Bear, etc, are the total idiots on the management side that make union organizations a neccesity.
In my experience, the 10% of the managers that are total idiots spend all their time dealing with the problems that they cause, plus the problems that the 10% of the bargaining unit that are total idiots cause.
The other 90%, being reasonable intelligent people, usually work things out among themselves.
Boeing Engineers union story:
An engineer and and manager were both on a long cross Atlantic plane trip. Neither passenger knows the other also works for Boeing. One bumps the other with his luggage cart in line while getting off the plane. Words ensue. Maybe a shove or two, I forget. Nothing “union” here until the manager yells he’s a Boeing manager (and should get special treatment from the airline or something, I guess.) IIRC, after he gets back, the engineer thinks about it and decides to mention the incident to his supervisor. He is later fired for insubordination. (Neither participant was “on duty”, or getting paid for their travel time, neither knew the other worked for the same company until after the incident, etc., etc. Just unbelieveable.)
Union helped the engineer fight the firing. Case went to arbitration, and the arbitrator found for the company. Case over, nothing more the union could then do, per their contract.
All they could do was report the facts and say: Guys, you two are grown men: grow up. And the rest of you: don’t mouth off to anyone because you might find out later he is a manager of your company. And if you ever do this and find out about it, keep your mouth shut afterward ;).
Moral of the story: One job of unions is to try and force the company to follow its own rules. This is one reason why I still favor white collar unions, on balance. Big companies have lots of rules. It helps when they are followed, and followed impartially. They constrain the management as well as the rank and file employees.
Embrace Sacrifice!
I agree. We need to break the Wal-Mart grip that has wrecked this country.
in Netherlands (where unemployment is officially still low) the unions have started lobbying today for another proposal: in order to protect workers from the credit crisis, companies will no longer be allowed to fire workers, but instead workers will start working parttime or (if there is no work at all) will be moved to some kind of ‘employment pool’ that can be tapped by other companies.
The catch is: even if these workers don’t work at all, they will keep their full wage (forever). The difference between unemployment benefits and their real pay will be paid in full by the government. Great isn’t it? The union thinks this is a perfect idea to make the best of the credit crisis situation. Of course it is less than perfect for taxpayers, but why should the union care about that? After free put options for homeowners, the Netherlands is going to add free put options for wages
So where is the Netherlands coming up with all the money to pay for all these programs (housing, jobs, etc.)?
income tax rate is 40-50%, plus 19% VAT and many many special taxes like for energy, alcohol, tobacco etc. Ultimately of course these programs are unaffordable, just like all the new initiatives in the US. But politicians will never admit such.
Little snippet from Paul Craig Roberts this AM:
“The change that is coming to America has nothing to do with Obama. Change is coming from the financial crisis brought on by Wall Street greed and irresponsibility, from the eroding role of the US dollar as reserve currency, from countless mortgage foreclosures, from the offshoring of millions of America’s best jobs, from a deepening recession, from pillars of American manufacturing—Ford and GM—begging the government for taxpayers’ money to stay alive, and from budget and trade deficits that are too large to be closed by normal means.”
“Change is coming from the financial crisis brought on by Wall Street greed and irresponsibility, from the eroding role of the US dollar as reserve currency, from countless mortgage foreclosures, from the offshoring of millions of America’s best jobs, from a deepening recession, from pillars of American manufacturing—Ford and GM—begging the government for taxpayers’ money to stay alive, and from budget and trade deficits that are too large to be closed by normal means.”
Almost all of those problems come from the first item mentioned “Wall Street greed and irresponsibility”. It caused the erosion of the USD, the MTG foreclosures, much of the offshoring….
Much of the problems we see in this current economy all trace back to Wall St greed and irresponsiblity. Hopefully someone will wake up and say/do something to try to prevent this from happening again. Until the root cause is revealed, the issues will never end.
“Hopefully someone will wake up and say/do something to try to prevent this from happening again”
Well, it’s not gonna be O’bama. I was watching the Sunday morning punditry shows. Meet the new boss, same as the old boss. The window dressing is different, that’s it.
Obamarahma. Yessir, that’s some real change right there. But, at least people will “feeeeeeel good” about everything.
However, as individuals, we can get busy and bug the crap outta our Congressional reps about everything under the sun. Although I didn’t vote for Bama (go Nader!), I do want him to do well. I’m not a prayin’ person, but I do pray for this guy, to stay safe and do the right thing.
“… but I do pray for this guy, to stay safe and do the right thing.”
This “right thing”, IMO, is to surround himself by guys like Colin Powell, Paul Volker, and Warren Buffett, and to actually LISTEN to what they have to say.
combotechie,
Didn’t Colin Powell help to get us in the Iraq War? I will admit he resigned over it, but still he helped get us into it.
Also, I’m rather suspicious of Buffett. He has heavily invested in the stock market as of late. Maybe he will come out ahead, but still it seems too early to me. People are still not exhausted in the stock market and don’t appear to be getting that way any time soon. I think Buffett caught a falling knife and will bleed over it.
Roidy
We should all expect the unexpected and unprecedented from Precedent Obama.
MLK had a dream where people would be judged not by the color of their skin, but by the content of their character.
Election 2008 has shown that neither one matters anymore.
Tea,
Agree with point one, and am glad we have that behind us.
Colin Powell:
2000: Bush/Cheney are the best choice for America
2001: Thank you for appointing my son to be the head of the FCC
2002: Iraq has WMDs
2003: Iraq has WMDs
2004: Bush/Cheney are the best choice for America
2008: Obama is the best choice for America
2008: Sen Ted Stevans has impeccable character please don’t convict him
As long as he says he stands for change, folks will probably believe him, as most don’t understand the status quo sufficiently well to gauge whether or not change actually occurs.
“As long as he says he stands for change, folks will probably believe him”
Only for so long. As in a Rebound Relationship, euphoria doesn’t need substance in the beginning.
Yeah, but the last relationship was with a spouse that liked to beat up his country, so much in fact that the end result was our country electing a President that is Black & Blue.
Things Change…
I agree that we had one black and blue abusive marriage, and an equally violent seven-year-itch. IME, the rebound relationship starts in euphoria but progresses toward disillusionment, “what was I thinking”, etc. Just talking about human nature.
“…President that is Black & Blue”
+1 Now that’s good, really good!
Maybe one day we will no longer look to DC as our saviour. We The People….awww nevermind.
Warren Buffett
WTF is it with everyone wanting Buffett to have political influence? Seriously!? Wake up folks - the man is entirely self interested. Being a good investor has nothing to do with being good at serving the best interests of Americans.
All one has to do is look at his support of the bailout, which was obviously well served by his large stake in Goldman.
I think Warren is looking more to remembered for doing something good in his final days, rather than being just another failed big-wig financier, perhaps the most highly thought of, but failed nonetheless.
A keen mind like his still has much to offer, and Barack is smart to accept his aged wisdom about what’s going on, as Buffett is the Bernard Baruch of our era.
His support of the bailout was because of these not some penny ante investments:
http://www.berkshirehathaway.com/news/may0208.pdf
“Hopefully someone will wake up and say/do something to try to prevent this from happening again. Until the root cause is revealed, the issues will never end.”
So, who is this sleeping “someone”?
from a deepening recession, from pillars of American manufacturing—Ford and GM—begging the government for taxpayers’ money to stay alive, and from budget and trade deficits that are too large to be closed by normal means.”
————————————————————————
if engineers were in charge instead of the bean counters ford and gm wouldn’t be begging for handouts. Anyways what should ford expect when they put sh*tty tires and sh*tty paint jobs (ever seen an old taurus) on their products. If they get a taxpayer handout then the present management should be sh*tcanned. They had their chance and if taxpayer money is going to be p*ssed away I want some new faces pissing it away.
The best would be to let GM and Ford go bankrupt first. Then, after the UAW and the incompetent managment have disappeared take over whatever is left. Not one penny of taxpayer money should go to these companies as long as the UAW and current managment are in charge. All that is need are 6 month tops and the “problem” will resolve itself.
“The best would be to let GM and Ford go bankrupt first”.
That is exactly what should and would happen if Gubmint would stay the hell out of it, but ‘they’ won’t!
Your tax dollars are going to be propping up all those high paying union jobs. Guys/gals who had the gall to complain to me about having to start forking out a 5 dollar copay for prescriptions.
Tax dollars are going to prop up CEO pay and banksters and Hedge Fund managers.
I don’t get it . Medicare take over the basic obligation of medical care from 65 onward . People pay about 96 dollars a month from their Social Security checks for the medical coverage that requires some co-pays . There are supplement policies if you want greater coverage, which is often times necessary if you have very expensive medication .
If Medicare picks up the basic obligation for retired car
workers ,where is the big obligation coming from that they always talk about . Fixed Pension Plans I can understand ,but
why are they always screaming about medical care
that is under Medicare after 65 years old ? If current workers are given full coverage at no cost ,I can understand why that
would be a back breaker for a Corporation ,but they get relief from the retired workers because of Medicare .
I thought the retirement plans had something better than Medicare? Or at least, if you retire younger than 65, you get primo insurances, which is about the most expensive thing to get for 55-64 people who lose their jobs. Plus if you have preexisting conditions you’re hosed there too.
Housing wizard, medicare mostly takes over at 65, the trouble is the uaw allows them to retire with full benefits after 20years (they even have some cheesy saying like “20 in, 20 out”). So you had people retiring with full medical benefits starting at the age of 38. I’ve been to some of the GM warehouses and it’s truly a different world
GM is way down this morning. If it falls below $1 it will be delisted. Has there ever been an example of a DOW component getting delisted before? How would that be handled?
They won’t let that happen - that might wake people up! Can’t have that - they need to keep watching TV, buying stuff at Circuit City… oh, wait… scratch that… um, yeah, buying stuff, and pretending that all is well!
I think the authorities will handle it ‘professionally’, just like the delisting of Fannie when they were unable for more than a year to comply with official regulations …
“The best would be to let GM and Ford go bankrupt first.”
Amen! Under BK they have power to renegotiate union contracts and wages. If they can’t save it under BK, then sell the operation to private enterprise and let them rehabilitate it.
Actually, companies do not have the power to abrogate union contracts through bankruptcy since Frank Lorenzo did it with Continental in 1982.
Bankruptcy Judges, however can impose wage and work rules.
“They had their chance and if taxpayer money is going to be p*ssed away I want some new faces pissing it away.”
You mean similar to the afir and balanced happenings in the Fed bailout of banks and financial concerns; how about today’s remodeling of the AIG deal to $150B, few strings attached. The Fed gives them more money then relaxes the penalties and oversight. How about the “secret Paulson order” that changed IRS banking regulation section 382 to the tune of an estimated $140B in tax savings for his cronies.
Helping the auto companies helps real American people, blue collar types with mortgages and kids in school. Helping finanacial institutions and the three piece suit types helps keep the Mercedes, BMW, Lexus, Lamborghini, and Porsche sales up.
helping the auto companies helps some real American people but punishes a lot more real American people. GM is a buggy whip industry, they are history. Better get it over with now instead of prolonging the suffering for the taxpayer. Of course, the same goes for much of the financial industry and the RE mob.
Don’t think that al the luxury EU car brands are doing well, most of them have already announced that they are closing their factories for several weeks or more over the next year.
Maybe the car companys could build millions of portable power generators for households.
yes, something like a Tesla Roadster v 2.0
“if engineers were in charge instead of the bean counters ford and gm wouldn’t be begging for handouts.”
The typical cycle of an American company:
1. Engineer designs new product, teams up with rich guy to start company.
2. Company takes off making folks involved rich.
3. Engineer retires/dies, turns over company CFO.
4. CFO still trusts a few of the guys in engineering, company putters along without the great growth it once enjoyed.
5. CFO (now CEO) takes company public, pockets millions.
6. CFO (now CEO) retires, Wall Street board appoints new CEO.
7. New CEO has no clue about products or engineering. Begins cutting engineering & design, increases sales force.
8. Product turns to crap but money is rolling. CEO gets big bonuses.
9. Japanese step in and sell far better product.
10. CEO panics and offshores to China. Cuts price.
11. Japanese offshore to China, sells better product at cheaper price.
12. CEO pockets last few dollars, declares bankruptcy. Company gone, workers unemployed, few tax receipts, budget & trade deficits up.
I can’t think of any company that followed this route.
Normally, after step 2 its.
3. Product becomes obsolete, cash flow decreases and the company has no new products in the pipeline.
4. Bought out by rival.
You forgot step 7A….
-Private Equity firm buys out company using leverage.
-Any cash on hand used to pay off Private Equity guys.
-Company borrows money (”leverages itself”) to continue paying off the sharks for their exceptional leadership, and starts trashing payscales, benefits, retirement plans, starts outsourcing, etc, because “we all have to tighten out belts to get thru this downturn/remain competetive….”.
Must taxpayers bail out failing industries?
“Where were the government bailouts when the horse and buggy industry was fighting to keep up with the newly invented automobile? Where were the bailouts when the US textile industry all went east and west and every other direction but home? To my understanding, today, there is not one shirt manufactured from scratch in the US.
“Remember the prosperous whaling industry just a century ago? Whales provided the oil for every lamp in every home and business. The whaling industry employed over 70,000 people. Those were real jobs, but the government refused to prop up the industry and today not a single lamp uses whale oil to light the night sky.
“Look at the print industry. The newspaper and magazine are going the way of the dinosaur. Replaced by digital print. And who is there to care? And what happened to typewriters and Smith Corona? Smith Corona was a staple name just 30 years ago.”
http://www.marketoracle.co.uk/Article7174.html
Sorry but… give me a break.
Not trying to make excuses for the auto industry, but - what viable new technology is there to actually replace automobiles?
Comparisons with horse and buggy, whale oil, etc. only serve to prove the author is a fool. Complete apples and oranges.
The auto industry was screwed by unions, with the housing bubble being the straw that’s finally breaking their backs - pure and simple. Not by lack of wholesale technology change.
“The auto industry was screwed by unions”
Good Lord help us. /shaking head/
Yup, unions of consumers voting with their pocketbooks to buy reliable vehicles from the Japanese…
I’ve been hearing for thirty years about how all these old tech manufacturing jobs are best done in other countries, while our workforce moves into higher technology products.
Sure enough, all the old tech jobs disappeared. Still waiting for the new tech jobs to show up.
What everybody doesn’t seem to realize is that cars/trucks are a “high-tech” product too. Especially the design and engineering side of the product. All that knowledge will be sold to China, Japan, etc. for pennies on the dollar, if the Big 2.5 go down the tubes.
Here’s a dirty little secret: There is nothing that I can produce in the U.S. that I can’t produce in China a whole lot cheaper. Nothing. Nada. Zip.
Another dirty little secret: Chinese people are just as smart as American people. They can figure out how to make things assuming we don’t just show them.
The last dirty little secret: Our standard of living will decline to theirs as long as we are sucked into the “globalization is good b.s.”. It has already started and will only continue to accelerate downwards.
The US will have a higher standard of living than China as long as it has democracy, the rule of law, and is reasonably free of corruption.
Why do you think Hong Kong has such a higher standard of living, when they are right next door to China and have had free trade with them for decades?
That’s the reason why first world countries are first world and third world countries are third world. It doesn’t matter how hard people work if the system is screwed.
Here’s a dirty little secret: There is nothing that I can produce in the U.S. that I can’t produce in China a whole lot cheaper. Nothing. Nada. Zip.
Automation, ERP Systems, and solid design/engineering expertise can help a company compete profitably against even cheap Chinese labor. I should know, as I worked for a US manufacturer that was very profitable in a space dominated by “offshore manufacturing”, aka China.
You actually have to know how to run a manufacturing operation and squeeze every bit of productivity out of your people and technology, invest in automation and technology, but it can be done… it’s just easier for lazy, incompetent managers and executives to “offshore”.
Another dirty little secret: Chinese people are just as smart as American people. They can figure out how to make things assuming we don’t just show them.
Who showed them how to make tainted foods?
“Cheaper” is not neccesarily “better”. If “cheaper” was better, we’d all be flying on Russian airliners.
“I’ve been hearing for thirty years about how all these old tech manufacturing jobs are best done in other countries, while our workforce moves into higher technology products.”
yea I heard that too, we moved into buying and fixing homes for profit.
Housing, as currently constructed in the US, is about as “low tech” as it gets. Haven’t seen to many future brain surgeons on a framing crew, lately……
In fact, in every measure other than energy efficiency, you could make the case that housing has regressed since about 1980 or thereabouts (out with the seasoned 2×4s, copper, and plywood, in with the green wood, plastic tubing, and OSB)
“Automation, ERP Systems, and solid design/engineering expertise can help a company compete profitably against even cheap Chinese labor.”
Northeasterner,
There is nothing preventing Chinese corporations from implementing the same automation, erp systems, and solid design/engineering.
“The US will have a higher standard of living than China as long as it has democracy, the rule of law, and is reasonably free of corruption.
Why do you think Hong Kong has such a higher standard of living, when they are right next door to China and have had free trade with them for decades?
That’s the reason why first world countries are first world and third world countries are third world. It doesn’t matter how hard people work if the system is screwed.”
Yogurt,
I disagree with your assessment. Hong Kong was never very democratic and went from British rule to Chinese rule. Germany industrialized quite well under autocratic rule. It is really an economic culture that determines growth and wealth, and the Chinese have adopted that culture.
We can’t compete because of the pure scale of China. They already out manufacture us and they haven’t even scratched their labor pool.
Their is no reason for an American company to produce in the U.S. We can just design the product here, and engineer and manufacture it in China.
Democracy and the rule of law create long term stability. But so do guns and torture chambers.
You’re right, but its sill cheaper (and better politically) for them to employ their peasant class. I think the LAST thing the Chinese are interested in is automation and (GASP!!) workers’ rights.
The auto industry was screwed by unions …
The auto industry was screwed by itself. Quite well, it seems.
Yep unions only??
Nothing to do with management that tried to crush fuel efficiency standards and didn’t produce a decent car that got over 35mpg. This despite massive handouts from the government to help them with the research. It has nothing to do with US monetary tax and trade policy. It has nothing to do with overpriced CEO’s and management. The middle class in this country is what made it great. The death of the middle class will spell it’s end.
Amen!
Look at how the middle class is faring, and that will be your best leading economic indicator.
“Not trying to make excuses for the auto industry, but - what viable new technology is there to actually replace automobiles?”
There isnt a new technology ready to replace autos, but we are still going to be buying a lot less of them. Between a great recession, and higher energy prices; buying habits have changed big time. We will see a combination of smaller cars, motorcycles, scooters electric bikes, hybrids and electrics. But the biggest demand destructor will be people keeping their existing cars longer; less replacement. We will still need cars, just a lot less new ones than before. And the new ones will generally be cheaper, smaller ones to replace the giant (high profit margin) SUVs as they wear out.
and because of that, companies like GM that rely on high profit, low efficiency stuff like SUV’s are going the way of the dinosaur. Nobody can dominate an industry forever, it’s time for change!
Agree. I was just knocking on the comparison with horses and whale oil, etc. These were done in by newer direct-replacement technologies that were a *lot* better than the previous, either in terms of price or feasibility (it’s a lot easier to take care of a car than a horse, believe it or not).
People will do things like walk, ride bikes/scooters, take public transportation, etc., more than they had been, for sure. But these are not replacements for automobiles, they are complements.
GM has made very good six cyl. engines for years (3.5L, 3.8L) these CARS get 30mpg/gal highway. The problem is, that their economic model is based on people buying new cars every three years. This hasn’t happened since the sixties. They kept this up thru leasing, but that bubble just burst.
Does the american consumer really need to lease a different new car every 4 years?
I bet not. Crash bang smash long slide to oblivion.
Also, why aren’t requirements made of bailed out companies ? If your giving a Company a loan ,than you can make requirements for that loan I would think .My requirement would be that the Car Companies have to make smaller energy cars as their main stay and the bigger cars or trucks have to be a smaller percentage of their business . Sure the Car Company would make a smaller profit per care ,but the idea would be volume selling at a lower price .
I think the Car Companies have loan loss on their books and I think that is cracking their backs more than anything .All this debt business that the car companies took on with cheap credit during the boom is coming back to haunt them . Don’t the car companies carry a lot of their own loan paper ?
Anyway you look at it, its debt obligations that cannot be paid ,or isn’t being paid that is cracking the backs of many a Corporation .
“I think the Car Companies have loan loss on their books and I think that is cracking their backs more than anything .”
You’re correct, Housing Wizard.
The problems facing the auto industry are exactly the same as the housing industry, too much supply. Auto are very reliable today when compared against seventies or eighties vintage. Back then 80k-miles meant a new auto, but now they last well toward 200k-miles. During the past five years people have been changing (buying) autos when the seasons change, or when a mood uplift is required, which has led to an oversupply of good used autos. People would still like to change their autos as often as they change their underwear, but the credit just isn’t there. Lastly, resale values on autos have plunged dramatically causing grief for leasing and lending companies alike as their paper assets shrink. Jas is right, inflation is easier to swallow than deflation.
china self stimulator plan
any these any strong currencies / countries for the future ?
It is a lot easier to list weak currencies than strong ones at this point.
But I think the resource-based economies will come out the best in the medium run.
I disagree. Who are they going to sell the resources to? Themselves?!?
Countries with viable business models will come out ahead - no surprises there.
Another poster child for the mortgage so-called crisis: my cousin Sherry, who owes $196K on a house appraised just a year ago at $400K. Sherry’s SS income is $1100/mo and her mtg payment is $1200/mo. Don’t ask what income was claimed in the Jan ‘08 re-fi application. At the moment, she is auctioning furniture and jewelry to make ends meet. She knows it’s a self-limiting process, saying, “One morning I’m gonna wake up and there’s gonna be nothing left to sell but a used plastic bag.” She’s in touch with a (scumbag??) realtor who tells her to price the house at $311.5K but to wait till spring to try to market it. BS. If it won’t get $311.5K now, it won’t get it in spring either. I think she should either tell the realtor to get serious, or she should consider the Jingle Mail option. Although it’s probably not a non-recourse loan, she really has no assets so what the heck.
Why send jingle mail? Do you really think the house has lost 50% of it’s “value” in the past year? It would seem that even if $311k is too high to sell it, there’s still plenty of room for your cousin to reduce the price and sell and still get some money out of the house, no?
I gotta agree with drumminj. If she only owes $196K, list at $296K or whatever will move it and walk away happy. I can’t believe she was selling off stuff to keep the house when should could have sold for more than the mortgage.
RE: “One morning I’m gonna wake up and there’s gonna be nothing left to sell but a used plastic bag.”
Shoulda cut out $5k for a boob job to go Sugardaddy hunting.
And she should go for the monster 3000 cc ones not the daity 400 cc cute little d cup, She would look fantastic with those basketeballs wrapped around a pole, not that i would know anything about that.
Damn I’m sounding like NYCboy…
why is her ss income so low? Most the people I know get above 1500 a month.
She could be claiming on a former husband earnings.
Isn’t that about the max for early retirement? (70% of normal benefit)
“The Federal Reserve is refusing to identify the recipients of almost $2 trillion of emergency loans from American taxpayers or the troubled assets the central bank is accepting as collateral.”
http://www.bloomberg.com/apps/news?pid=20601087&sid=aatlky_cH.tY&refer=worldwide
=====================================================
Classic Gresham’s Law instance…
Unnamed troubled assets (Bad Money) coming from unnamed troubled recipients (Bad Company), in exchange for $2 Trillion (Good Money).
And some of you really believe you are safe with money market funds or T-Bills?
It’s time to wake up and smell the coffee…
Lol. First you declare $2 trillion as being “good money” then you question whether this money is safe.
And the money in your money market account looks just like the bright and shiny new Good Money, of which $2 Trillion was just created out of thin air in exchange for dubious assets, so shady in fact that:
“Bloomberg News has requested details of the Fed lending under the U.S. Freedom of Information Act and filed a federal lawsuit Nov. 7 seeking to force disclosure.”
Most importnat to me is the question of the Total Debt-money trajectory. Is money supply contracting despite these (criminal) injections?
I think so. The key players only are kept from dying with these injections. The foot soldier is getting creamed. I had two friends tell me in the past week that retirement is pushed out two years at this point.
so where is the safty then?
Wampum, Yap Stones, or perhaps some other barbarous relic?
Wasn’t Manhattan originally purchased with counterfeit wampum? Has anything changed?
Indians gave different values to different colors of beads. I think red was the most valuable hue.
‘I think red was the most valuable hue.’
Red’s a hard color, maybe the hardest, to produce without the wonder of fancy chemicals, and one of the most fugitive when you do manage to get it.
Hey, that reminds me, I recently won a bet with a lobbyist about cochineal beetles being the source of red colorants in many lipstick and ink and curry powder and such-like stuffs. (I know this because I like bugs, and I like colors.) He refused to believe that the FDA would permit manufacturers to put insect squeezings into stuff human people use. I said, ‘You’re a LOBBYIST and you believe that?!’
At stake in the bet was: 1 bottle of expensive wine, and something else.
See, you’ve got to define your bet terms beforehand. Had I lost, I would have defined ‘expensive’ as a bottle of wine with a cork in it, or one without the words ‘Easy Night’s on the label. Since I won, I’m going to define ‘expensive’ as a bottle of wine that costs more than a Ford F-150 series truck.
Oh, don’t worry about him, he can easily afford it, so no rebukes from you, hd74man. He can afford it because he gets paid lots of money to convince legislators to let businesses get away with slightly tainting stuff that human people use.
(You all may have noticed that Olygal really enjoys irony.)
I would have to look up the exact amount (shouldn’t be a problem, the Dutch were real beancounters at the time and they wrote down all their transactions), but I guess they purchased Manhattan for something like 20 hard guilders in cheap merchandise. That’s about 10 euro’s if we forget about inflation.
(The Manhattans leaving with their bounty…)
“dude, those idiots gave us enough beads to allow us to be the financiers of the known indian world, all for this stupid piece of land~, we so do own the other tribes…”
I guess the indians didn’t recognize property rights to start with, so they made a killer deal whatever they got …
This _IS_ a delightful irony, Olygal! Nice work…
Beaver pelts.
I’d trade for some beaver!
Would you trade some red glass beads?
“I’d trade…..”
I hesitated to post my “pelts” suggestion, because I just KNEW someone would not be able to control their baser instincts.
Nice to know I’m in good company.
“……Trade some red glass beads?”
What do you want to trade them for?????
(You’re up next, Olygal…..:)….)
I prefer landing strips to beaver pelts but I’m usually not that picky.
“”I just KNEW someone would not be able to control their baser instincts.”"
all your baser are belong to us.
red glass beads too
I’ll teach you how to make your own red glass beads on a torch olygal… Then you’ll only have to trade one beaver pelt, as you’ll be self sufficient from then on.
“Wampum, Yap Stones, or perhaps some other barbarous relic?”
Yes. Barbarous relic.
I like the sound of that.
“Two months later, as the Fed lends far more than that in separate rescue programs that didn’t require approval by Congress, Americans have no idea where their money is going or what securities the banks are pledging in return.”
Does the fact that the $700 bn in bailout monies came from a Congressional act legally obligate the Fed to divulge what it is taking as collateral? What law states this? Is there any chance it will be enforced?
I’m no constitutional lawyer, but common sense, and common practice, would dictate that all public moneys - both revenue and expenditures - be fully transparent.
Unfortunately common sense and common practice have gone bye-bye, in spades the last few months especially.
Actually - I say that, but in reality we’re talking about the Federal Reserve here. Since that organization is not *technically* a government agency, it’s not subject to the rules of disclosure.
In the words of The Church Lady… “My, my… how conveeeennnient!”
Time will tell.
Bloomberg Sues Fed to Force Disclosure of Collateral (Update1)
By Mark Pittman
Nov. 7 (Bloomberg) — Bloomberg News asked a U.S. court today to force the Federal Reserve to disclose securities the central bank is accepting on behalf of American taxpayers as collateral for $1.5 trillion of loans to banks.
The lawsuit is based on the U.S. Freedom of Information Act, which requires federal agencies to make government documents available to the press and the public, according to the complaint. The suit, filed in New York, doesn’t seek money damages.
“The American taxpayer is entitled to know the risks, costs and methodology associated with the unprecedented government bailout of the U.S. financial industry,” said Matthew Winkler, the editor-in-chief of Bloomberg News, a unit of New York-based Bloomberg LP, in an e-mail.
Saw that. Go Bloomberg! I hope the suit is successful.
“You have to balance the need for transparency with protecting the public interest,” Talbott said. “Taxpayers have a right to know where their tax dollars are going, but one piece of information standing alone could undermine public confidence in the system.”
FU Talbot
Lac of information, and manipulation are much more likely to undermine public confidence in the system. You can bet that banks have sold crappy assetts to Siv like entities which then borrow against them from the FED and promptly go bankrupt.
“undermine public confidence”
Oops….missed it by THAT-MUCH!
“You have to balance the need for transparency with protecting the public interest,” Talbott said.”
What the eff does THIS mean? IMO, transparency IS the public interest.
I am absolutely disgusted by all the money being funneled into these institutions which are “too big to fail”. It seems as if sending the country into complete and total financial ruin, or worse, is an acceptable risk for Paulson and Co., as long as no banker is left behind. I’m seeing red over this.
Are you seeing red… glass beads?
In its first report since being seized by the U.S. government last month, Washington-based Fannie Mae said its third-quarter net loss was $29 billion, or $13 a share, from $1.4 billion, or $1.56, a year earlier.
Bloomberg
“…third-quarter net loss was $29 billion…”
Is FNM stock likely to go up or down today on this news?
Holy cow.
What’s the record for biggest loss in a single quarter by any one company (using the term loosely)? Surely that must have eclipsed it by a mile.
Last year GM had some tax accounting change that resulted in a 38 billion dollar loss for a quarter, or somewhere thereabouts.
I think this IS the week things really fall apart.
Everything else has merely been the prelims, up until now…
I’m quite sure the timing of this announcement for only three days after election day was a historical accident, no?
Hall of NBER Sees `Conclusive’ Evidence of U.S. Recession
By Steve Matthews
Nov. 7 (Bloomberg) — The Stanford University economist who leads the panel that dates economic cycles said there is now no doubt that a recession is under way following today’s jobs report.
The committee is waiting to determine the exact start date of a contraction.
“The evidence is more than compelling,” Robert Hall, who leads the National Bureau of Economic Research’s business cycle dating committee, said in an interview. “It’s conclusive, in my personal opinion.”
well if you ask me, it started contracting in 2005. What I can’t figure out is why they waited so long to even acknowledge things were slowing down until this year. But what should I expect? Its the government.
The most isolated outpost in the lower 48 has been found!!
The Economics Department of Stanford University.
Seriously… beating out CNBC by a nose.
keep in mind that November 14 is Domino Day in Netherlands, when the little black blocks start tumbling and take the next one down. Many EU countries are participating in the event. If everything goes according to plan there will be no one left standing, although sometimes a few escape fate.
I couldn’t find out which companies are sponsoring the event, but I guess ING and Fortis are likely candidates …
Turbulent week for stocks expected as report studied
By Joe Bel Bruno
ASSOCIATED PRESS
November 10, 2008
NEW YORK – Wall Street heads into another turbulent week with investors set to pore over a government report on retail sales and earnings from Wal-Mart Stores Inc. to get a better reading on the consumer.
There are growing signs that the deepening economic slowdown has caused Americans to tighten their purse strings. There was fresh evidence of this last week when retailers posted the worst October same-store sales in 35 years – and analysts believe the upcoming holiday shopping season could be one of the slowest in decades.
ECONOMIC NEWS
THURSDAY
-Weekly jobless claims
-Mortgage rates
FRIDAY
-October retail sales
SATURDAY
-International summit on financial crisis convenes
A lifetime of possessions for sale
Foreclosures force people to hawk goods
By Jenifer Goodwin
STAFF WRITER
November 10, 2008
Pamela Nuccio sold her belongings this month before she cleared out of her foreclosed home in Oceanside. Nuccio made nearly $3,000 in the estate sale.
…
With unemployment rising and credit drying up, more Americans are struggling to stay afloat – and are looking to their closets and garages for help. Estate sales, once used primarily by family members to dispose of a deceased relative’s belongings, are now being held in the homes of those very much alive.
…
“Foreclosure/moving sale EVERYTHING MUST GO!!!!” read an ad by Kelley Donnelly, 48, who took out a nearly $250,000 mortgage on the College Area house that her mother left to her free and clear.
Donnelly, who had little income, ended up using the money from the loan to make her monthly payments, a plan that had long-term flaws. Her foreclosed home sold at auction last month.
“I’m not letting my son play in the yard,” Donnelly said. “I’m afraid sheriff’s deputies are going to show up.”
Nuccio is determined to avoid that. Long divorced, she bought her two-bedroom house for about $270,000 in 2006. Soon after, she lost her job selling condominium conversions. Jobs selling land in Mexico and time shares were a bust.
“I had always been able to find a job really easily and I didn’t think it was going to be a problem,” Nuccio said.
FXP hitting 60’s.
I think this one is about to set a new low under 59.
looks like GM at 3 bucks is pricing in a shareholder wipeout.
That is just ugly.
Yeah, I’d wait. It’s that old canard about not shorting into a thunderstorm.
Remember I said you’d get it under $75 a few days ago?
You’ll get most of those ultrashorts for cheaper most likely. There will be some absurd rally between now and Christmas. Next year though, watch out below!
closing under 70 on triple volume. NAV over a 100.
overnight blood in the streets in Asia…
this is outa control.
GS hanging on to 70…
not gonna end well…. best get AIG some more bailout.
When FDR was elected about this time, way back when…
Hoover made overtures a ‘plenty that FDR was welcome to help out and solve the financial crisis (banks were going bk all over the country), but FDR pretty much let Hoover preside over the mess he made and was hands-off until March 4, 1933.
By this time the wreck was virtually complete, and FDR could start fresh and he did.
Obama needs to follow the very same course.
It is best that the mess that ’ssshrubery made fall apart during his watch, and not after.
To clarify - are you proposing that FDR’s “fresh start” was good, or just the fact that he waited for Hoover’s crash* to be complete?
* As if the crash were really Hoover’s fault.
What policy suggestions do you have for the President Elect, to fix the mess well and good?
Obama ought to shut down every last unregulated hedge fund, which as luck has it, is all of them.
Transparency happens, but only if you let it…
Obama doesn’t have to shut them down; That’s Mister Market’s job.
Mister Market has around 77 days to purge itself of all of it’s bad actors, so nothing is going to happen, is it?
Something is happening every day.
Mr. Market is taking a crowbar to them daily. Who needs a Messiah when the crowbar comes down?
The “regulated” banks have negative reserves too.
You must start with the most obvious problem and work your way down the line…
“What policy suggestions do you have for the President Elect, to fix the mess well and good?”
Number 1: strict limits to executive pay. Make the executives earn their living over 20 years, no go for the big payout in year #1. Tie their compensation to the long term health of the company.
All excessive salaries (over 500k), bonuses., golden parachutes, and stock grants must be approved as a line item vote by stockholders.
All bonuses, golden parachutes, stock options and stock grants are paid over 10 years. If the company has to restate earnings, fraud is found, or the company goes bankrupt; the executives lose their remaining bonuses. In the case of fraud and massive earnings restatements, the executives are legally required to return their allready received boneses if based on the fraud.
I’ll second david’s post
All of their income should be taxed like wages.Give them a tax break if they take their stock options as follows. Each month they get stock that must be sold in exactly 3-5 years even if they are fired. They should be allowed to time their sales as they are insiders and have control of the company. This would reduce short term thinking and fraud.
I think that is kind of over the top.
I’d just like that stock options have to be announced two years before they can be exercised.
Then require that stockholders vote on the compensation.
Just protect the investors and integrity of the market.
Some of the accountants on here might have some good suggestions for changes in how off balance sheet liabilities are handled.
As for Hedge funds and other BS. Kill them at the source. Require 20% CASH reserves for banks and kill the Fed.
I’m not sure anyone is prepared to discuss the GAAP here?
That should read they should not be allowed to time the market.
“I’d just like that stock options have to be announced two years before they can be exercised. ”
The problem with that is that they can still manipulate earnings for their stock sale. Why should they have any say in when their stock is sold. It’s insider trading. Look at Mozillo and Ken Lay as examples of what happens with this type of system.
“Some of the accountants on here might have some good suggestions for changes in how off balance sheet liabilities are handled.”
There shouldn’t be any liabilities or assets off the balance sheet. Problem solved.
I wouldn’t want to be a CEO under those conditions. It would be a pay cut. It would be interesting if paychecks at private companies had to be co-signed by the President. I guess I just said an oxymoron.
Slash taxes on the middle class and small business. Tax energy consumption and return the money to every tax payer in the form of a check. Do away with CAFE standards and slowly increase tax on gas to 4-5 bucks a gallon.
TAX CEO Hedge Fund income as wages. Their effective tax rate should be higher than the average workers. Give them some breaks if they take their incentive pay/stock in a fashion that doesn’t allow them to time the market and rewards long term thinking. ie each month they get stock that has to be sold in exactly 3-5 years. They should not be allowed to own stock otherwise.
Invest in energy conservation wind geotherm solar
Invest in distributive generation that is much more efficient.
Companies should not be able to own transmission lines gas lines ect and generation capacity same goes for cable. These should be highly regulated. Then more people could get into generation market and sell electricity. Cable and satalite channels would go to the highest bidder with some reserved for public access/broadcasting.
Make shorts and derivatives markets transparent.
Ahh the old calling government spending “investments” trick. Brought to you by an “Army” of Obama teachers. Yes we can! Don’t call him the President, call him your local handyman “Mr. Fixer”! Hey man, we just need a little credit hit. You know we’re good for it. We’re just “paying ourselves”! Yeah, that’s the ticket.
And what do you call the tax breaks handed out to big oil over the last 8 years. That’s investment?? I’m all for getting rid of all deductions but the rich would have a fit.
I noticed you didn’t post one suggestion on how to fix the problem.
MEaston,
I love your ideas!
I’d also add that exectives should not receive ANY options or stocks as compensation. If they want stocks, let them buy them just like everyone else out there.
Let them earn their pay the old-fashioned way, and they can get bonuses from a pool that is a percent of each year’s profits — to be shared among all the company’s employees. The executives could get a bigger share of this profit-sharing pool, but this would reward ALL employees for their work, and keep the game-playing out of the stock/option bonuses.
Clearly, if FDR did not prescribe the recovery efforts that he did, the depression would have gone on into the 1950’s.
By some measures, it did.
Hero-worship aside, that’s not clear at all. Many have good reason to believe if he had not done anything, recovery would have happened sooner.
Most here agree that recovery will happen (more) quickly if the govt will just let prices revert. Attempts to prop up prices will only prolong the suffering.
FDR chose to prop up prices and prolong suffering. We got vast surpluses of goods out of it, including labor (demonstrated as high unemployment).
When people are broke and hungry, how does FDR-like policies of destroying and keeping food more expensive help?
FDR’s main attribute was being able to communicate with people. He made lots of mistakes in quickly implementing new ideas, and it’s easy to look back now and not worry about the situation confronting him immediately upon becoming President, but fascism either of the nazi or soviet flavor had quite a few Americans in it’s favor, and the country could easily have been led down the primrose path of fascism, but it didn’t.
I credit FDR immensely for not letting it happen…
FDR can be credited with bringing us into the war in Europe. USA in the 1930s was primarily isolationist, not fascist, but any man who would serve four terms and usurp powers not given to him and directly contravene the Constitution with respect to honest money would know something of fascism.
Like Greenspan, you read Rand but you fall short at the test.
Yep, they are repeating the same mistake with houses.
Houses are a consumable good. You need them to provide shelter from the elements. By propping up prices, you are making quite literally the same mistake as propping up food prices.
Substitute rent for food and they are literally doing it again.
I have never seen more revisionist history than when libertarian-types talk about FDR. It’s hilarious.
revisionist history is the primary goal of “libertarianism”.
Funny neither of you are able to make any corrections. Please do.
And if FDR did not do the things he did - we most likely wouldn’t have the current depression either.
Who do you think created Fannie Mae? The FDIC? Etc? The very existence of these entities is the primary factor in the housing bubble, and also in the S&L crisis in the 80’s (FSLIC), and the soon-to-come retirement savings crisis (social security). All of these are socialist programs implemented by FDR, and to be blunt - all are contributing to what may turn out to be total failure of the U.S. economic system.
But hey, if we had a stable currency based on something real like gold, maybe we wouldn’t be in such a mess.
Wait a minute - FDR outlawed ownership of gold in 1934. Well, yet another strike (if you believe that a gold standard is appropriate - ahem)
There was a tremendous run on our precious from 1931-33, after all the other players in the world went off the standard…
Europeans valued Gold @ more than the long-held price of $20.00, after their respective currencies were set free from their previous high standards of accountability, and backed by nothing. The price in Europe for a few years was closer to $27-28 per troy ounce.
A $20 Gold Coin has 97/100’s of a troy ounce in pure content.
$20’s were the largest coin we minted, and easiest to export, so…
From the 1950’s to present-day, Europe has always been the happy-hunting ground for old $20 Gold Coins (1850-1933), as so very many of them went there in the early 1930’s, when Hoover allowed it to happen. A good many of these (millions i’d suspect) have made their way back home over the years.
I know of one individual that has probably brought back home in excess of 100,000 of these coins, over the past 30 years, to give you an idea of how much went away when we were giving it away, below true market value in the early 30’s.
FDR was wise in making sure that no more of our bounty was given away by greedy financiers looking for a quick buck, @ the country’s expense.
Your argument is revisionist.
Gold in banks had always been a fractional reserve against outstanding obligations. When the banks were on their own, they had adequate means to protect their reserves. Use of gold as a recognized fractional reserve always precluded immediate liquidation of all monetary obligations into gold. FDR basically said since there was not enough gold to pay all holders of gold obligations, the federal government should expropriate and keep all of the gold.
The country was not being drained of gold and only FDR apologists use this line of reasoning.
If draining didn’t happen, please explain the many millions of $20 Gold coins that have been coming out of Europe for such a very long time?
How’d they get there, Livingston?
Au contraire alad - None of FDR’s executive orders prevented Europeans from buying gold - he didn’t have the authority. FDR’s orders prohibited Americans from owning gold. So in reality he helped push gold overseas - not prevent it from going there.
Technically order 6102 was supposed to include confiscation, which presumably would keep it here. However as we all know confiscation didn’t really happen. No one had their safe deposit boxes opened against their will, or their houses searched. What it did serve to do what prevent people from trading gold on the U.S. open market. So what to do? Sell it overseas.
There you go.
Sorry packman,
All the coins got exported before FDR came to power, as the difference between the spot price we were using $20, and the spot price in Europe $27-28, allowed for a tidy profit, for financiers on both sides of the Atlantic.
When FDR set the price @ $35 per oz after we went off the Gold Standard, what incentive would there be for Europeans to buy our coins?
“By this time the wreck was virtually complete, and FDR could start fresh and he did”.
“Obama needs to follow the very same course”.
You have got to be kidding? FDR is the reason the damn depression drug on as long as it did, and that is a fact, period. As OwlGore would say, “no need for further discussion”.
I’ll present you 2 wrecks…
Hamburg, Germany: 1946
Gary, Indiana: Present-day.
The former was beaten to a pulp, virtually every industry was bombed out of existence, and more homes were destroyed than were left standing.
The later was beaten to a pulp, as virtually every industry was exported out of existence, and more homes are abandoned than occupied, of those left standing.
The difference between these 2 wrecks is, Hamburg was completely rebuilt because there was nothing left, but Gary still had it’s antiquated and outmoded industries very much intact, but it looked like too much work to rebuild it, so we abandoned it.
It’s a lot easier dealing with a complete wreck, than a partial wreck held together by bailing wire and buildings.
Are you proposing that we bomb Indiana?
Gary, Indiana already appears as though it was bombed.
What would the equivalent of Dresden be? Detroit? Lanc’s for the memories.
I just hope Michael Moore is there when we bomb it.
Dr. Bombay?
Only South Bend.
Well, one thing is certain:
We will continue to attempt to place blame on one side of the political aisle, or the other; while the truth is, most of us are to blame (directly or indirectly).
Either we were complicit in the decisions made by Congress to subisdize everything under the sun with borrowed money, or we were asleep at the wheel and did not bring our political influence to the fore to help create a different outcome.
Democrats and Republicans (both Parties) created much of the structural financial problems that we now face. The fact that Wall Street (and Main Street) reacted to these market distortions will make for many chapters of reading in future economic textbooks and PHD publications.
What is certain is that President-elect Obama will not be able to borrow enough money to stop what is already happening. The world-wide deleveraging of debt is so monstrous that the entire US Treasury cannot plug the proverbial holes in the dam.
The “have your cake and eat it too” days are coming to a close for the US Government, and for many of us in the good ole USA. I am old enough to remember how most people retired during the 60s and 70s. Most retirees lived a very modest retirement, with very little to spend on travel or extra items. And most of the money came for life’s extras came from personal savings (not credit).
I am dissappointed that our way of life will not continue as we have come to expect. But I remember my Grandfather and his brother, and how they lived very productively, into their ’80s’, while still laboring to provide as much as they could for themselves and their families. Gardens, mending things to extend their use, pinching pennies whereever it was possible. There is virtue in provident living, and it would appear that most of us are going to “move on” to the upper division level classes in “Provident Living”.
Tough times always brings out the “finger pointers”, because, as I once heard someone say, “It is one thing to be poor and right; it is another to be poor and dead-wrong”.
Updated list of downturn casualties (let me know if I missed any big ones).
Doesn’t include financials.
Several small airlines (ATA, Aloha, Frontier, etc.)
KB Toys
Mervyns
Sharper Image
Uno Chicago Grill
Linens & Things
Bennigans
Shoe Pavilion
Boscov’s
Lillian Vernon
Bombay Company
Tropicana
Steve & Barry’s
Goody’s
Circuit City
mrs fields
Yep. Also saw Mattress Discounters.
I forgot to add DHL, i saw this morning they are shutting down their US operations.
Good riddance. Often consultants would overnight letters to us with DHL. We then wouldn’t receive the letters for 3-4 days. Because we’re out of a “service area,” DHL would overnight to Denver and then put it in the regular post to get to us. What a joke! And at least one consultant lost a contract because of this.
Almost all of these companies deal in consumer discreationaries; or purchase petroleum by the truckload (dhl and airlines).
The consumer is dead.
Any company consuming lots of energy had/will have real troubles.
DON’T REPEAT ERRORS OF NEW DEAL…
THE historical model that the Democrats are choosing to hold up as they ponder our financial crisis isn’t Harry Truman’s Fair Deal or Lyndon Johnson’s Great Society. It is Franklin D. Roosevelt’s New Deal. At least three economic reforms under discussion now were also central in the New Deal package. Trouble is, these reforms didn’t necessarily work well when they were first tried - and some failed outright.
Consider, for starters, a stimulus package. President-elect Obama has said that “the one thing I can say with certainty is that we are going to need a stimulus package passed either before or after my inauguration.”
http://www.nypost.com/seven/11102008/postopinion/opedcolumnists/dont_repeat_errors_of_new_deal_137967.htm
UK’s Brown: Now is the time to build global society…
“My message is that we must be: internationalist not protectionist; interventionist not neutral; progressive not reactive; and forward looking not frozen by events. We can seize the moment and in doing so build a truly global society.”
http://mobile.reuters.com/mobile/m/FullArticle/CBUS/nbusinessNews_uUSTRE4A900K20081110?src=RSS-BUS
Frig Brown and his “global” society. Global this. And what does that even mean, anyway? Yep, to Brown, it means a “global” system of finance. No, thanks.
I pledge allegiance to the flag
of the bailed out states of America
and to the world by wich it`s owned
one nation under water
with freebies and handouts for all
Good one, Jeff. Sad, but good.
Yes it is a sorry state of affairs. I wonder when people will finally realize that a “global society” is only attainable for the people that actually have global reach?
A global society does nothing for the scattered tribes of humanity that, for the most part, are locked into their respective locales. Besides travelling to other locations on the planet, the only way to effectively be global is as palmetto says. Money will always travel for good or ill.
UK, the country that has refused to join the EU, now wants to be internationalist. The UK that still uses the pound instead of the euro.
I’d like to show brown what he can do with his global society…
Question for you all: Anyone know a place where a workplace housing initiative worked? I’m seeing some in Miami and Arlington VA, and wonder if they did any good..
My grandfather was a maintenance super for company housing of Bethlehem Steel in South Buffalo back in the 40s. That apparently worked for a while.
The S&P 500 falls to the unchanged mark and then recovers a bit.
The White House is willing to listen to any new congressional proposals regarding automakers, according to a White House spokeswoman, Reuters reports. General Motors (GM 3.38, -0.98) and Ford (F -1.96, -0.6) are under selling pressure this session.
Yahoo
This just about says it all.
OMG, we need to make an announcement before people really start to look behind our curtian!
There was a headline on Yahoo briefly, that an analyst changed his outlook for GM to $0.
Which hits 0 first; GM stock price or the Fed Funds rate?
Barclays’ analyst Brian Johnson downgraded GM to “underweight” from “equal weight.” Deutsche Bank also cut GM to “sell” from “hold,” and saw an equity value of $0 for the stock, according to a report on theflyonthewall.com.
http://biz.yahoo.com/rb/081110/business_us_generalmotors_research_barclays.html
Filthy, dirty, rotten scum. All of them.
My anger at this crap continues to mount to new levels every day. Paulson, Bernanke, and their cohort bankers need to be thrown in jail for the rest of their lives.
From WaPo:
A Quiet Windfall For U.S. Banks
With Attention on Bailout Debate, Treasury Made Change to Tax Policy.
The gist of the change is that the banks can now use writeoffs from losses of purchased companies to offset their capital gains. This comes right as - surprise - the day before Wells Fargo announced the buyout of Wachovia, and as lots of other deals like Merrill Lynch are going through.
The best thing of all about crises is the ability to quietly and quickly change the rules when everyone is distracted by panic.
‘The Shock Doctrine’ by Naomi Klein.
Read it and weep.
Or, better, read it and rant.
Or, better yet, read it and then go kill someone who deserves a good killing.
Or, I guess you could do a combination of all of the above.
Naomi is brilliant and rang the alarm multiple times regarding the wholesale theft by the corporatists during the Bush regime. Now the moonbats say it’s an issue.
Not sure my blood pressure could take it…
PB you are a wise person - I’d love to meet you someday.
Except I still think you should’ve stuck with GS.
Trying to get wiser, as in doing a better job of following Ben Jones’ example of an active response to a bad situation at hand. Once I reach his level of enlightenment, I will consider myself wise.
While GS was clever, I like PB better. It’s appropriate for a wise man. If he gets bored with it, Wise Bear is available.
I listened to this outrage over the radio today, and just wondered: which would I rather: instant tax relief of 140B, or 140B added to the bailout borrowing.
If it helped the orderly restructuring, why not now rather than later? As long as the legislature is shoveling it out anyway.
For those interested in the physical price of PMs; ebay precious metals exchange.
http://ebaypmx.com/
Interesting - thanks for the link!
One question though - why is the bid price higher than the highest sold price for some things? That doesn’t make sense.
Some auctions may still be ongoing?
From looking, it appears you’re right.
I think the high and low bids / sold values though are not really useful data - for instance the one bid I see for $900 for k-rand is bogus. Many prices are for mint pieces, which carry a bit of a premium. Low bids /solds might be for damaged coins or such.
Most meaningful would be if they posted an average or median price of sold pieces, in order to track more accurate market values.
Seems like only a few hours ago the stock market was up 200+ on all the great economic news invented and staged over the weekend.
http://finance.yahoo.com/q?s=%5EDJI
HBB’ers however, are familiar with “SELL.EVERY.RALLY.” TM MMVIII Mormon TeaCo
You mean the chinese stimulus package won’t go to Wall St? Hmmm, come to think of it, that money won’t be buying US T-bonds either. Uh oh…
I’ll claim a share in that TM, thanks.
“I’ll claim a share in that TM, thanks.”
Absolutely! - It’s a sharing and caring bunch here at the HBB TM BenJonesCo MMVIII:
“Consider yourself at home.
Consider yourself one of the family.
We’ve taken to you so strong.
It’s clear we’re going to get along.
Consider yourself well in
Consider yourself part of the furniture.
There isn’t a lot to spare.
Who cares?..What ever we’ve got we share!”
In other actual housing news - local observation - MRIS numbers for DC area are out. Loudoun county median down 35% from peak now, and prices are falling at the fastest rate yet. Keep in mind this is the highest per-household income county in the nation, and in an area that still has only 4% unemployment (lots of government jobs).
One big thing is going to change because of the credit crunch, the housing bubble, the bailout, and the pending deflation or inflation.
For the last 26 years, people could generally count on earning a safe return on their money from stocks and bonds. You could get 5% to 10% reliably, and if you were a risk taker you could do 20% a year easily. And of course real estate was the perpetual jackpot. Everyone became used to the idea that if you save or invest you get a profitable return and its safe. Wall street may have taken a few percent for themselves, but no one cared becasue everyone was getting rich. We were in a period where you could trust almost to watch over your money, now we are in a period where you cant trust anyone.
Now we are going into a period where nothing is certain and everything is a risk. People ask me where to invest, and i really dont know what to tell them because everything has some kind of risk.
t-bills and cds maybe are safe, but only pay 1% and are at risk in case of inflation. money markets invest in commercial paper, and that isnt safe anymore. stocks fluctuating wildly. foreign investments look risky too. and real estate falling wildly.
Im not sure we will have clearcut inflation or deflation; i think prices of everything will fluctuate unpredictable and in a way that no one can predict and everyone gets wiped out.
Its not just individuals, its pension funds, corporations, municipalities.
How can a person, company or goverment prefund a retirement plan, when there are NO safe investments, and you cant predict a reliable positive return over 20 years.
The beauty of rising stock market, rising real estate, and relaible bonds; is that you can get people to save and invest for their retirement. Who is gonna want to save when they see everything being wiped out.
“Its not just individuals, its pension funds, corporations, municipalities.
How can a person, company or goverment prefund a retirement plan, when there are NO safe investments, and you cant predict a reliable positive return over 20 years?”
Given the enormity of the problem, expect our government to do worse than nothing. Expect our government to reprise the calamitous effects of repealing the Glass-Steagle Act by repealing or eviscerating the Financial Accounting Standards Board Staement #158:
Summary of Statement No. 158
Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans—an amendment of FASB Statements No. 87, 88, 106, and 132(R)
Summary
“This Statement improves financial reporting by requiring an employer to recognize the overfunded or underfunded status of a defined benefit postretirement plan (other than a multiemployer plan) as an asset or liability in its statement of financial position and to recognize changes in that funded status in the year in which the changes occur through comprehensive income of a business entity or changes in unrestricted net assets of a not-for-profit organization. This Statement also improves financial reporting by requiring an employer to measure the funded status of a plan as of the date of its year-end statement of financial position, with limited exceptions.”
The PTB don’t want “you” to know how bad it really is. If you did, “you” might want to change the PTB.
and that is why (hyper)inflation is the only option for the authorities; as long as everything is going up most people don’t worry.
I don’t know the US situation, but in Europe a savings account has been a loosing bet for the last 10-15 years, mostly thanks to the ECB. No way to keep up with inflation, but most savers never noticed. Now that the stock market has gone nowhere for a long time some people are starting to wake up, but that is only those who are actively investing. There is some trouble brewing regarding private pension plans (essentially black holes) but most people reckon the government will compensate them for the losses. Still, people are gecoming less savvy about these pension plans because of the bad publicity.
Only the EU housing market still has huge yoy returns if you look at the last 10-20 years. My newspaper today reports how wealthy individuals are lining up here for a new luxury development with second homes in the 1M euro price range. The developer could have sold 2-3 times as many properties on the first day, but they were sold out right away. Buyers are extatic: cash in the bank is risky and doesn’t pay off, stocks are only going down but real estate only goes up. And while making money you have a nice property to enjoy - the choice is easy!
The beauty of rising stock market, rising real estate, and relaible bonds; is that you can get people to save and invest for their retirement. Who is gonna want to save when they see everything being wiped out.
—
Paradoxically, the more investment made sense, the less “the people” saved/invested and the over consumption further boosted the investments…
It is a good time to be a too-big-to-fail financial firm.
MARKETWATCH FIRST TAKE
One bailout hums, another is idle
Commentary: Viability, familiarity favor AIG over automakers for bailout
Last update: 10:24 a.m. EST Nov. 10, 2008
NEW YORK (MarketWatch) — On the surface, the government’s decision to expand its bailout of American International Group Inc. while hedging on a similar rescue for Detroit, seems inequitable.
But it shouldn’t be. The Treasury Department is a friend of the financial industry, but it also recognizes the outlook for the auto and financial industries are different.
Financial Times
Try AIGain
Published: November 10 2008 14:42 | Last updated: November 10 2008 18:52
If at first you don’t succeed, try a more complex solution. The AIG bail-out – plan B, or is that C? – replaces the $85bn bridge loan agreed way back in September with a collection of schemes. A $40bn equity injection from the Treasury’s troubled asset relief programme will help pay down the initial loan. The credit facility, reduced to $60bn, has been extended to five years, with much reduced interest rates. Finally, two financing vehicles capitalised by the authorities (with a token contribution from AIG) are intended to deal with the most crisis-racked areas of insurer’s business.
The aim is to buy both sides time. The government, scarred by the collapse of Lehman Brothers, is now fully committed to saving finance from itself. AIG, which lost $24.5bn in the third quarter, was simply haemorrhaging money too fast to survive under plan A. More breathing space allows AIG time to pursue asset sales – and push for decent prices.
THE RATINGS GAME
Deutsche Bank sees GM shares as likely worthless
Automotive giant may have trouble funding past December, broker warns
By Simon Kennedy & Christopher Hinton, MarketWatch
Last update: 1:10 p.m. EST Nov. 10, 2008
NEW YORK (MarketWatch) — A Deutsche Bank analyst downgraded Monday shares of General Motors Corp. to sell from hold, saying the automaker was on the path to bankruptcy before the end of the year unless the U.S. government agrees to a bailout.
Financial Times
William Buiter’s Maverecon Blog
(Does Sarah Palin post there?)
November 10, 2008
Time to pull the plug on AIG?
AIG, the walking-dead insurance giant, is reported to have gone through $81 bn or so of the $122.5bn worth of financial facilities provided by the Fed since September 2008, first through an expensive (850 basis points over 3-month Libor) 2-year $85 bn facility and soon after through a rather cheaper (as far as I can tell) $37.5 supplementary facility. Not only is AIG seeking additional Federal assistance. It is also arguing that the original $85 bn facility is unfairly expensive, compared to the 5 percent plus some warrants charged by the US Treasury for its capital injection into nine large US commercial banks.
AIG is correct in noting and complaining about the inexplicable discrepancy between the cost of official funds charged to the nine banks and that charged to AIG. The unfairness, indeed the outrage, however, lies in the US Treasury injecting equity into the nine US commercial banks on sweetheart terms, way below what these banks ought to have paid for the money, and way below what it would have cost them to raise the money in the markets, whether from Warren Buffett or from Qatar.
AIG’s current modus operandi and business model is obviously not sustainable. Indeed it is not viable even in the short run. What if the US authorities reduce the cost of the existing facilities and dole out a further $200 billion or so to see them through to Thanksgiving? AIG will no doubt be back for another $200bn when the turkeys have been digested, to see them through to Christmas. This is getting very silly indeed.
DHL to eliminate 9,500 jobs in the U.S.:
“Citing heavy losses and fierce competition, the overnight-delivery giant DHL is cutting 9,500 American jobs and significantly reducing its air and ground operations in the U.S., largely leaving the field to FedEx, UPS and the Postal Service”
http://news.yahoo.com/s/ap/20081110/ap_on_bi_ge/eu_germany_deutsche_post
Nov. 10 (Bloomberg) — Russia’s currency reserves, the third-biggest in the world, are no match for tumbling oil prices and an exodus of capital that may force the central bank to accept a devalued ruble.
Welcome to Yuri’s House of Armaments…
We have a special sale going on right now, as we need to raise das kapital or we are kaput.
Good point. This is a scary scenario.
I think it’s true generally as well, including for U.S. relations with say China etc. Financial instability tends to lead to political instability.
re: the Russian sub disaster, said sub being rushed (?) for export.
My wife doesn’t understand how fire supporession equipment can kill you. She doesn’t appear to understand my story about having worked in metal boxes where the extra door handle is next to the sign that says if you break the thin aluminum box we will fire you, right next to the sign saying run like hell if you hear this Halon alarm… I think we were supposed to run in circles until suffocation.
It seems like every time I try to post a link, it doesn’t come through.
Did they contain links? I find that makes a big difference.
sltrib dot com
PARK CITY - It’s nail biting season in Utah’s top ski town.
Most years, the first big dump of snow, like an analgesic balm, relieves anxieties about whether the upcoming winter’s tourism will boom or bust.
But although this week’s gift from the snow gods was generous, tensions among Park City merchants over the condition of travelers’ pocketbooks are still running high.
“It’s going to be an interesting winter,” observed Mike Lindbloom from behind the grill at the Main Street Deli.
He has seen it all in 24 years as proprietor of the deli - dry snow years and economic recessions - but Lindbloom is unsure what the current financial tumult portends for the ski season, which opens Nov. 22 at Park City Mountain Resort.
“There are a lot of people on this street who are nervous.”
Large operations, such as ski resorts and chain stores, can weather a bad season much better than Park City’s smaller shops, many of which are owner-operated.
For them, the pre-season jitters surrounds this question: If tourists do show up, will they spend money like they usually do?
The big storm and the lake effect that dropped two feet of Utah’s famous powder in the Wasatch Mountains on Wednesday was a good start. The hope is that an abundance of snow will trump financial worries.
Belcher, across Main Street at Southwest Indian Traders, believes that folks in upper income brackets and those with second homes in Park City will materialize - even without a resolution to the national credit crisis.
I plan to ski a lot this winter, regardless of economic terrain (Red Diamonds?).
Park City is so overbuilt and trendy I couldn’t even find any park…
Or place to park, for that matter…
The “no on prop 8″ whiners are staging an official boycott of Utah’s tourism industry too. While the lower revenue will hurt the state, I say the less people on the mountain the better!
I am not sure if this was linked to yet. It is a slightly amusing article from 11/7 about big box closures in Arizona and related stuff.
” ‘You see these big businesses going under, and it just makes us small businesses concerned that we can’t make it,’ said Surprise resident Robert Cross.
Cross and his wife opened Nutin’ But Fun, an indoor playhouse for kids, in February. The outlet is next to the Surprise Towne Center where Linens ‘n Things soon will close.”
Wow, Nutin’ But Fun sounds like a long-term winner.
” ‘Next year, the West Valley might see an influx of newer, trendier stores that take advantage of good deals on empty storefronts’, said Rick Murphy, senior vice president and retail real-estate specialist with brokerage CB Richard Ellis.”
Yeah, it may see such an influx. I kind of doubt it. The broker types are not going out on a limb near as much these days.
http://www.azcentral.com/community/glendale/articles/2008/11/07/20081107gl-bizclose1107-ON.html
“Cross and his wife opened Nutin’ But Fun, an indoor playhouse for kids, in February.”
We’ve got one of those too, except we call it McDonalds. And I bet Mom and Dad can buy a drink or a snack from the dollar menu for less than admission to the nut house.
We had one of those when I was a kid, it was called the Great Outdoors or, in inclement weather, whoever had the most tolerant mom’s house.
lmao… you gotta watch this. 16 seconds. Volume is a must.
http://www.youtube.com/watch?v=Ua0JM4gRaRw&NR=1
The poor saps at Faux News. reality’s gotta bite…
Cramer should study his breath control
At least he had only one network to flip off.
Financial Times
US transit authority deals sour
By Nicole Bullock
Published: November 10 2008 01:06 | Last updated: November 10 2008 01:06
Public transport agencies in big US cities are seeking help from the government to avoid default and billions of dollars of payments on leasing contracts that have soured amid problems at AIG and monoline bond insurers.
More than 30 transit authorities in 17 states are at risk of default, according to a letter to the US Treasury and the Federal Reserve from leaders of the congressional transportation committee. The letter says that up to $4bn (€3.1bn, £2.5bn) of deals are immediately at risk.
The agencies, their trade association and various US legislators want the Treasury to guarantee the leasing deals, which could move to technical default after credit rating downgrades for AIG and other insurers.
The US Treasury has not decided whether to assist the agencies. It has been besieged by requests for help from state and local governments, and may be reluctant to open the floodgates. It is also unclear whether stepping in to help local transport agencies in their contractual disputes with financial services firms is critical to preserving US financial stability.
critical to US financial stability: does this group of 30 include transit authorities catering to WallStreet area? If the mob all come to their work by Ferrari it might get messy in NYC …
“It has been besieged by requests for help from state and local governments, and may be reluctant to open the floodgates.”
“… and may be reluctant to open the floodgates.”
Lol.
Didn’t we bail our AIG so that this wouldn’t happen? Good return on my money, IMO.
BULLETIN
STARBUCKS POSTS SHARPLY LOWER PROFIT ON SALES DROP, RESTRUCTURING CHARGES
Starbucks profit drops amid restructuring
By Matt Andrejczak
Last update: 4:21 p.m. EST Nov. 10, 2008
SAN FRANCISCO (MarketWatch) — Starbucks Corp. late Monday reported fiscal fourth quarter profit fell sharply from a year ago, due to weaker store traffic and restructuring charges. Starbucks earned $5.4 million, or 1 cent a share. Excluding charges, Starbucks said it earned 10 cents, below Wall Street’s target of 13 cents, according to a FactSet analyst survey. The Seattle-based coffee chain earned $158.5 million, or 21 cents a share, a year earlier.
So do you think they are getting desperate ?!
Suze Orzman on Yahoo! Finance today:
That deflationary crunch we’ve been debating for the last three years?
It’s here.
This from the Telluride Foundation’s web page:
The Telluride Foundation is concerned that the enormity of the financial situation requires a deliberate and sustained plan to secure the health of nonprofits. The Telluride Foundation recognizes that the country is heading into territory that none of the nonprofits have experienced, and the feeling from state and national philanthropic organizations is somber. At every turn is evidence that the force of the impact will accelerate through declining state tax revenues, significantly reduced corporate and individual giving, and dramatic impacts on foundation assets.
Unlike storms in nature, the credit storm has lasted over a year and appears to be intensifying rather than abating at this point.
Financial Times
Growing credit crisis claims more US victims
By Francesco Guerrera and Jonathan Birchall in New York
Published: November 10 2008 20:35 | Last updated: November 10 2008 23:20
The credit storm swept through Wall Street and Main Street with renewed virulence on Monday as AIG and Fannie Mae reported huge losses, a leading US retailer filed for bankruptcy and multinationals such as Nortel and DHL cut thousands of jobs.
The bad news coming from both the financial and corporate sectors underlined the broadening of a crisis that claimed its first victims among banks and insurers but has spread to the rest of the global economy.
IBM’s in heap big trouble, too.
got some posts pulled today.
Ben, I dont think you re runnin it.
One thing is for certain: Free monies tend to give rise to unlimited wants. Tis the nature of a system where budgets are unconstrained and monies grow on trees.
Wall Street Journal
* NOVEMBER 11, 2008
Strains Mount on Bailout Plans
American Express Gets Quicker Access to U.S. Cash; Fannie Mae May Need More Help
By DEBORAH SOLOMON, JAMES R. HAGERTY and MICHAEL CRITTENDEN
WASHINGTON — The U.S. government’s financial-system rescue plans are coming under pressure as a growing array of distressed companies signal the need for assistance.
On Monday, mortgage giant Fannie Mae said it is losing money so rapidly it may need a cash infusion from the Treasury Department by year’s end. The funds would come from a special $100 billion pool Treasury set aside back in September to aid the company. Fannie Mae had a loss of $29 billion for the third quarter.
In another sign of the stress on financial-services companies, American Express Co. won swift approval from the Federal Reserve to become a bank-holding company. The move paves the way for the credit-card giant to get a taxpayer-funded capital infusion from the Treasury.
Wall Street Journal
* NOVEMBER 11, 2008
Retail Losses Sap a Jobs Safety Net
By JEFFREY MCCRACKEN, VANESSA O’CONNELL and RAY A. SMITH
Circuit City Stores Inc.’s bankruptcy-court filing Monday underscores how this economic downturn may differ from others in recent memory: The U.S. retail sector is losing its place as the employer of last resort for the newly unemployed.
“Paulson has called housing recovery central to the economy’s revival and urged Fannie and Freddie to play a bigger role.”
Still unsure how housing will recover as the world slides into a Recession ? Running out of bubbles here