Bits Bucket For November 11, 2008
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The Housing Bubble
Examining the home price boom and its effect on owners, lenders, regulators, realtors and the economy as a whole.
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Name:Ben Jones
Location:Northern Arizona, United States
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Wow, this comes a big surprise.
Fannie Says $100 Billion Pledge From Treasury May Not Be Enough …
“Treasury may end up putting far more than $100 billion into these entities, especially if the housing market continues to decline,” said Rajiv Setia, a fixed-income analyst at Barclays Capital in New York. “There’s just no way, no way” Fannie and Freddie will emerge from conservatorship within the next two to three years, he said.
http://www.bloomberg.com/apps/news?pid=20601009&sid=a.iQh4uHj3X8&refer=bond
I am shocked. I thought we were being told the truth by our government officials. I am so disillusioned. Bernake and Paulson lied to me? Nothing makes sense any more.
But don’t worry, Bob Toll wants massive subsidies to get house prices going up. My wife is down in North Carolina right now. Yes, I’m home alone, and hungover. She said the Toll Brothers development has signs that proclaim, “$40,000 off”. Our old NC home is on the market. It is listed as a wishing price. Stick a fork in the Carolinas. They are done. No more rich Yankees to prop them up.
“Stick a fork in the Carolinas. They are done. No more rich Yankees to prop them up”.
Correct, but the brain dead Realturds down here keep running the obnoxious “our market is strong and growing” commercials… We’re different here… You got that right, we’ll keep our heads buried in the sand, until the market comes along and kicks our azz.
Actually what’s propping them up now is all the Floridians exiting en masse. Or at least what had been propping them up a lot - I think that action is coming to an end as Florida prices continue to plummet towards affordability.
I think one or two HBBers in fact have recently relocated from FL to NC.
BTW - I’m from NC and follow a few message boards. They are in deep denial. While central NC didn’t get the bubble that most areas did, the bookend parts did (Asheville, Wilmington, etc), but haven’t really popped yet. Even central NC will get hit soon due to the general economic downturn, aside from the already big job losses due to furniture, tech, and tobacco. Particularly Charlotte is going to get slammed due to banking.
I rode up two bubbles Palm Beach County Florida and then Asheville North Carolina. Asheville sales have slowed big time but this week 2 houses on my street sold!? Overall we are just in the beginning of the pop here. Prices are going down very very slowly. Same denial I saw in Palm Beach County 4 years ago. The good news here is that the only overbuilding that was done was in million dollar and multi million dollar spec homes so supply and demand is not as out of whack as Palm Beach County.
“Stick a fork in the Carolinas. They are done. No more rich Yankees to prop them up.” Like sweet, sweet music to my ears!
latest news
[FNM] Fannie, Freddie to unveil mass loan modification plan: WSJ
PAUL B. FARRELL
Warning: King Henry’s bailout like Rummy’s Iraq
Reaganomics hidden in ’sleeper cell’ armed with lethal ‘financial WMDs’
By Paul B. Farrell, MarketWatch
Last update: 6:47 p.m. EST Nov. 10, 2008
ARROYO GRANDE, Calif. (MarketWatch) — So you thought Barack Obama’s victory signaled the death of Reaganomics? Wrong, wrong: Reaganomics is very much alive.
In a subtle, bloodless coup, the Reaganomics ideology magically pulled victory out of the jaws of defeat in the meltdown. The magic happened fast and quietly, in the shadows, while you were in a trance, distracted by the election drama.
Recently Naomi Klein, author of “The Shock Doctrine: The Rise of Disaster Capitalism,” framed the issue perfectly: “Has the Treasury partially nationalized the private banks, as we have been told? Or is it the other way around?” The question was rhetorical, the answer painfully clear. In a few weeks Wall Street did the old bait and switch, emerging from an economic and market disaster with new powers, in total control of America.
“In a few weeks Wall Street did the old bait and switch, emerging from an economic and market disaster with new powers, in total control of America.”
Exactly. Is there any undoing this damage?
Probably not, as Wall Street uses campaign contributions and lobbying efforts to keep politicians in their back pockets.
It’s way past time to jerk these arrogant bastards up by the neck, line um up and stone them to death.
One funny line is by the congressman that says, ” but they promised me they wouldn’t do this stuff again” Who would have thought that a liar would lie?
Another AIG Resort “Junket”: Top Execs Caught on Tape
KNXV Discovers $343,000 Secret Gathering, AIG Signs and Logos Hidden
http://abcnews.go.com/Blotter/WallStreet/story?id=6223972&page=1
If concerned citizens are following the AIG folks around and making videos, my hat goes off to those citizens. That’s cool.
The exposure that AIG has felt is THE reason Bernanake/Paulson do not want the public know what institutions or companies are receiving the $2T in assistance; every participant would then be under media scrutiny.
The truly disturbing thing is that they and the PTB think that such transparency is a bad thing. Don’t mind the man behind the curtain!
ABC news with Peter Jennings (I believe) did a piece at the end of the show “The fleecing of America”. Each time the the show covered a story about a company, a person, etc. ripping off America and it’s taxpayers.
The Fed, Treasury, BB, Paulsen, Bush is now fleecing America and it’s taxpayers. Paulsen and Bush, who is leaving office by the end of the year are making sure their friends are set for generations. It was a con job right. A two page 700 billion dollar proposal and they basically said, sign here or else.
It’s kind of like the mortage broker saying, “sign here, don’t read the fine print becuase you don’t understand, trust me you can refi later”. But in the end, you get screwed and the broker get’s his commission and everyone else in the mortgage food chain gets a piece of the pie.
Did Peter Jenning pass on? I don’t remember. But he should do a two our clip (way too short though) on how the goverment is fleecing itself.
“It was a con job right. A two page 700 billion dollar proposal and they basically said, sign here or else.”
The U.S. voters were overwhelmingly opposed to this largest one-time Republican tax levy in history, but CONgressmen in the House of Reps went right along with it (except for the House mavericks who voted against it the first time, which did not include a certain John McCain).
Peter Jennings died of cancer a few years ago.
“The U.S. voters were overwhelmingly opposed to this largest one-time Republican tax levy in history, but CONgressmen in the House of Reps went right along with it…”
Right. And those few who balked at it initially, were easily swayed by the “sweeteners” which were added in order for them to sign on the dotted line. Many, if not most, of our politicians belong in prison.
Someone posted yesterday, that our standard of living would never reach the lows of China, because we are largely free of corruption. I laughed my head off to that one.
‘…“sweeteners” which were added in order for them to sign on the dotted line.’
Right — $150 bn in pork can change lots of Congressional hearts, minds and votes in an instant.
My posting was:
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.
which has a completely different meaning from what BanteringBear said.
The Fed, Treasury, BB, Paulsen, Bush is now fleecing America and it’s taxpayers. Paulsen and Bush, who is leaving office by the end of the year are making sure their friends are set for generations. It was a con job right. A two page 700 billion dollar proposal and they basically said, sign here or else.
its been done before
1Jesus told his disciples: “There was a rich man whose manager was accused of wasting his possessions. 2So he called him in and asked him, ‘What is this I hear about you? Give an account of your management, because you cannot be manager any longer.’
3″The manager said to himself, ‘What shall I do now? My master is taking away my job. I’m not strong enough to dig, and I’m ashamed to beg— 4I know what I’ll do so that, when I lose my job here, people will welcome me into their houses.’
5″So he called in each one of his master’s debtors. He asked the first, ‘How much do you owe my master?’
6″ ‘Eight hundred gallons[a] of olive oil,’ he replied.
“The manager told him, ‘Take your bill, sit down quickly, and make it four hundred.’
7″Then he asked the second, ‘And how much do you owe?’
” ‘A thousand bushels[b] of wheat,’ he replied.
“He told him, ‘Take your bill and make it eight hundred.’
8″The master commended the dishonest manager because he had acted shrewdly. For the people of this world are more shrewd in dealing with their own kind than are the people of the light. 9I tell you, use worldly wealth to gain friends for yourselves, so that when it is gone, you will be welcomed into eternal dwellings.
Not so fast, yogurt. You posted:
“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.”
We are NOT reasonably free of corruption. So, then, do you just redact your statement to not include that as a condition of our higher standard of living?
Whether the US is or is not reasonably free of corruption at the moment has no bearing on the correctness of what I said. I was stating what I believed to be sufficient conditions for the US to maintain a First World standard of living, not claiming that any or all of them were being met at the moment.
If I say “I will keep my job as long as I come to work on time”, that is not a claim that I came to work on time today.
I also think it’s rather rude to be caught misquoting someone and then to launch a questionable attack on what he really said, rather than admitting you made a mistake.
“Whether the US is or is not reasonably free of corruption at the moment has no bearing on the correctness of what I said…If I say “I will keep my job as long as I come to work on time”, that is not a claim that I came to work on time today.”"
Nonsense. This is no different than somebody who is drunk saying “I quit drinking” because they don’t have liquid in their mouth.
“I also think it’s rather rude to be caught misquoting someone and then to launch a questionable attack on what he really said, rather than admitting you made a mistake.”
It was not meant to be rude, or an attack. From now on, I’ll go dig the quote rather than paraphrasing. You’d know something about rude behavior, that’s for sure.
Interestingly, this sort of secrecy amidst financial bailout is something we’ve long chastised other countries for doing, such as when the IMF bails out someone… but I guess when we do it it’s ok.
I seem to recall we gave Japan hell for hiding the extent of devalued assets owned by their banks in the early 1990s. What goes around, comes around, it seems…
Under The Decider’s reign, it’s always been “do as I say, not as I do” in matters both great and small.
Ask not for whom the bell Tolls:
http://money.cnn.com/2008/11/11/news/companies/toll_brothers.ap/index.htm?postversion=2008111107
“In any compromise between food and poison, it is only death that can win. In any compromise between good and evil, it is only evil that can profit.”
Ayn Rand
OK - so that’s a good one.
“The last rights they obtained for themselves was the privilege of being the last to starve.”
Jared Diamond
good one!
BTW - do you really get up at 5 in the morning for your daily HBB fix?
I’m typically early to bed and early to rise, as is my custom.
“No eternal reward will forgive us now for wasting the dawn.”
Jim Morrison
“Out here we is stoned…….immaculate.”
“I’ve found life to be one crushing defeat after another until one day you just wish Flanders was dead.”
Ride the snake to the lake …
We have constructed pyramids (financial?) in honor of our escaping…
On some level ,a rescued person or entity always hates the entity or person that rescues them because its a open reminder that they are not a success or capable . Now you owe the other person or entity that rescued you and they might make requirements that you can’t live up to . How often do you witness a person taking relief and than shorty after it does no good
because the person or entity becomes angry and comes up with excuses as to why they can’t now be successful . The person or entity that gets relief is spared the lessons that only failure and punishment can give .
The book “Crime and Punishment ” covers the human need for punishment and redemption . Witness how the rescued
Firms or Borrowers are taking the money and seeking new ways to game the system because the punishment that is required is absent . Reward and punishment works ,always has always will .
” A Society that does not render reward and punishment in a just manner is doomed to fail .” (Author unknown )
Very good points.
Absolutely agree.
In my opinion - as a parent - much of the foundation was with the changed parenting styles starting in the 50’s and 60’s, as led by Dr. Spock’s advocacy of permissiveness and aversion to punishment. We are now reaping the rewards of that philosophy, as these coddled children have now become our “leaders”.
“Live long and prosper” has become “Use botox and game the system for all you can”.
What a sucky custom!
It’s all my father’s fault…
He had the early morning wake-up can’t go back to sleep gene, which I inherited (originally I was supposed to get up @ 8 am like everybody else, but the tax bite on my windfall was about 4 hours, thus my typical 4:20 awakening) from him.
And it’s all good, as the early bird gets the sunrise-which unbeknownst to most, is just as impressive as any sunset.
Some Indian Tribe had a idea that a person in life had a red road and a black road of their destiny to choose from . If a person got on the Black road ,their spirit would always be
disturbed because it was not their true Destiny . If a person got on the Red Road of their Destiny ,their spirit would be
content ,no matter what trials and tribulations that road
would have .
We are no doubt are heading down the Black Road of the American
Destiny should we continue with the solutions that the Power Brokers are resorting to . The Red Road brings us out of the
worst Destiny and into the true calling of the spirit of a people of a Country .
huh huh… he said 4:20 awakening… huh. huh.
Wake and bake baby!
Somebody cue up the Marley!
The Federal Reserve on Monday evening granted a request by American Express to become a bank holding company, giving it access to low-cost financing from the Fed.
http://dealbook.blogs.nytimes.com/2008/11/10/american-express-to-become-bank-holding-company/
=====================================================
How does an individual become a bank holding company?
Sounds like e-z money…
Local CRE trouble:
The Sun-Times reports today that General Growth Properties, the owner of iconic upscale shopping malls at Water Tower Place, Northbrook Court, and Oakbrook Center, is $24B in debt and is having much trouble refinancing.
I stand by my earlier prediction, this winter will bring reality to Chicago. These three are amongst Chicago’s most venerable shopping centers and they are were the “supposedly” rich shop.
Closer to home, the site of what was once perhaps my neighborhood’s best restaurant is now being proposed to become a temporary (as in this winter) homeless shelter.
CRE is cracking.
I’m sure that other CRE firms are salivating at the thought of GGPs headquarters going up for sale.
I personally like the building - it’s a very good example of mid-century modern, but at that location a 3-story office building isn’t even close to being a cost-efficient use of that lot. I would be willing to bet that a 50-75-story office building at that site would be able to lease out 95% of it’s space before construction was finished. It would suck for all the other downtown office buildings that lose tenants, but be a nice payday for whomever ends up with this lot.
My prediction is that the loop and south loop condo market, which has already crashed, will come to a screeching halt. Sales will be damn near zero. Developers won’t even know what hit them. There’s very few buyers with the kind of money they’re asking. Today I spoke with a young investment banker who is going to return to B school because the job market totally sucks. Keep in mind he and his social group all make about $100k a year plus. I asked him if he planned on buying a place soon and he just laughed! I asked if any of his friends are looking…he took a second … and then said, “no, none.” So if the cream de le creme, the $100k IB and other financial professional crowd isn’t looking…..
My prediction is that the loop and south loop condo market, which has already crashed, will come to a screeching halt. Sales will be damn near zero.
Sales in the Loop and South Loop are pretty damn close to zero now anyway — the numbers were somewhat inflated in previous quarters because presales for the Calatrava Spire were included.
From Crain’s on Nov. 10th: “Buyers signed contracts for only 160 condos and townhouses in the quarter, down 82% from the same period a year earlier, according to Appraisal Research Counselors, a real estate appraisal and consulting firm.”
And that’s 160 contracts, not 160 done-deals with The Future FBs of America, Midwest Chapter.
DHL shutting down US operations and laying off 9,500. I’m majorly pissed. First of all, it was a good operation with great customer service. In all the time I used DHL, I only had one breakage, as opposed to UPS, whose delivery people enjoy playing football with packages. Also their rates were reasonable. Secondly, however, this is what happens when foreign corps buy out US corps. DHL bought out Airborne (which is the reason it had such great US customer service, BTW) and poof! There go the jobs. Yah, I know, it might have happened anyway. They couldn’t compete with Fed-Ex and UPS. I dunno why, when those two companies suck so profusely, at least for shipping larger items. They just didn’t get the word out after Airborne was purchased by DHL.
http://www.ft.com/cms/s/0/bd334a18-af55-11dd-a4bf-000077b07658.html
“In all the time I used DHL, I only had one breakage, as opposed to UPS, whose delivery people enjoy playing football with packages”
HA I have done the network infrastructure for every United States Postal distribution center in California.
The word FRAGILE does not exist in any package delivery company.
Buy the insurance.
I used Reverse Psychology on Postal workers
“PLEASE BREAK THIS PACKAGE I NEED THE INSURANCE MONEY”
Never had to file a claim…ever!
I like dhl also - they were more reasonable - it is too bad they are gone - maybe a usa company can buy them here
I prefer Brown or postal. They’ll leave the package behind the wall on my porch, or come in the evening or on weekends when we are home.
DHL shows up 9 to 5 when we are at work, and sends it back after two days.
Happened to me last week with something I bought online. Didn’t realize it was coming via DHL until I got the delivery notification. I had to drive down to their distribution center between 6:30pm and 8:30pm to get my package.
UPS hits my neighborhood around 6pm.
DHL/Airborne was good because they’d still do late pickups at the office. FedEx got too hoity toity to do that.
I work with the niece of the creator of Airborne Express. Phone call she received yesterday said that when the company was bought out, he was given a management role in DHL over quite a large area. Well, THIS JUST IN… He was layed off yesterday morning. He and his wife were in the process of trying to close on a multi-million dollar, 13,000 sqft shack that they just built in a near-by mountain town. They haven’t sold their old home and they had bought all new furnishings (and interior decorator) for the new place to the tune of about $500,000. From what I gathered, total cost for the build and furnishings went heavily over “budget”. LOL!!!. Recent appraisal, before closing, came in $200,000 less than expected.
Not sure what they plan on doing with the monstrosity, but the niece was told that they were likely going to move back into the old house which isn’t paid for either.
My sis’s boss was down in South America on business just before the election. He was going to vote Republican until he got into a conversation with a cabbie, who pointed out that anyone who ran such a great campaign, might be able to do a good job of running a country. Boss came back and pressed the lever for Obama, after seeing the disaster of a campaign run by the other guys.
“pressed the lever for Obama”
Maybe I should have said “filled in the circle” or “pressed the screen”.
Wait till the newchimp uses a lever on his income. He’ll be a born again Republican.
Seriously, take the racist garbage to another board
Racist?
Probably not. There have been numerious racist comparison of Obama to chimps, implying that African Americans are not fully evolved. On the other hand, Bush has been referred to as a chimp too, not sure why. If Obama is a “new” chimp, the comment is more likely to be a comparison to Bush, not blatently racist.
You heard him.
“Bush has been referred to as a chimp too, not sure why.”
Seriously? Unless you think it is insulting to chimps, I can’t understand why you wouldn’t understand the comparison.
Planet of the Apes: Chimps were the wise ones.
‘On the other hand, Bush has been referred to as a chimp too, not sure why.’
‘Cause of the ears. It could only be that, because real chimps are more intelligent than Dubya ever gave any indication of being.
We are all chimps now.
link?
4th word, people.
I love the debates on the board, I’ll fight for anyone to say what they want, but I’ve got too many friends who have had to deal with crud like that their entire lives.
I agree.
Steve’s remarks are racist and insulting.
Racist on the brain. GW is a chimp so what?
I have a niece that’s half black and you can’t tell she’s half white, I take her with me to places all the time and have yet to see anyone treat her different. In fact they go out of their way to be overly nice to her. Just like newyork cityboy was saying, people are trying to be “politicly correct” as not to be seen as racist.
But we’re all chimps deep down inside. Just some people are less hairy.
check out the chimp
bushorchimp dot com
pretty funny. I guess we all have to behave politely now.
walking on eggshells.
Bush has been called a “chimp” many times. Calling Obama a “newchimp” may be a comparison to Bush, not a racist reference to monkeys/evolution.
B.S.
Intelligently designed response or knee-jerk reaction?
“I guess we all have to behave politely now.
walking on eggshells.”
I’m tellin’ ya. Jay Leno made a reference to that recently. Can’t make fun of O’Bama, “that’s why God made Joe Biden”.
And for Steve W., just to clarify Carlos’s post (I think you know what he meant and were having a glorious politically correct moment), Bush was called a “chimp” over the years for his simian facial features. Many people heartily agreed. Never saw where you objected. Why now?
How can the politically correct Thought Police believe in evolution and not understand that many humans are going to have features that are reminiscent of our simian ancestry? I guess they are so busy being offended that they can’t bother worrying about reality and truth.
Let us not forget that the fascism of Political Correctness is a big reason we have this housing bust, in the first place.
Ah, yes. Political correctness.
This is the only reason why Condoleeza Rice was able to keep her job as National Security Advisor after 9/11.
Noone wanted to excorciate the first truly educated black woman who had managed to reach the upper echelons of our government. Meanwhile, people like me who demand accountability from our government wanted to see her head bobbing up and down on a stick.
Let us not forget that the fascism of Political Correctness is a big reason we have this housing bust, in the first place.
Try starting with the unmitigated greed of the moneyed class, then work your way down.
“Political correctness” (a nebulous term used almost exclusively by cantankerous white middle-aged males for “Crap That Annoys Me And May Involve Minorities In Some Way”) is barely a blip on the radar in the great housing game.
I don’t think it was all PC that kept Condi in the game. Incompetence, even gross incompetence, doesn’t seem like something that got people fired in the Bush Administration.
She finally got to use her Sovietologist street cred, making not so veiled threats to Putin-post-Georgia, trying to make amends for her underestimation of the powers of LSD. (Latent Soviet, Dude)
If the comment was not referring to his skin color, I apologize. PC ain’t my thing.
But when you have European soccer fans hooting like a monkey every time a black person touches the ball, when you have racists (and I’m not apologizing for this one) coming out with “vote for obama 08″ t-shirts with a picture of a monkey on it, well, that stuff annoys the heck out of me. Again, I’ve got too many black friends to let something like that slide, especially because I know this board has people who are influential to others here, and I really would like to have a nice color blind society at some point, you know?
peace out
“I really would like to have a nice color blind society at some point, you know?”
I do know what you are saying and I feel the same way. But i also tend to think that when people are falsely accused of being racist, they take offence and it tends to push them towards that direction. So people really need to be careful about jumping to conclusions before getting the facts.
just sayin….
I’d like to see Condi’s head bobing up and down on my stick…
oh that just sounds wrong for some reason
Idiot,
I doubt there was any racist intent. Everyone called Bush a chimp for years.
Does this mean I can’t continue my lifelong tradition of calling dumb politicians “monkey boys?” What do I call them now?
And even though I wrote in my own name for POTUS, I’m rooting for the Obamaman. Whoops, was that racist? Did I somehow subliminally suggest he’s inferior because he’s a man? Or because that particular combination of letters has the word mama in it? Whatever… there are some very creative minds on this blog…
Geez, I just dunno what to say anymore…
(scratches head)
Say what? W has been portrayed as a chimp so many times in editorial cartoons, one can’t count. Is that racist?
Not saying that Carlos’ intents were necessarily noble (I can’t read his mind), but that you’re overreacting.
BTW - did you know that chimps have light skin color? I’ll bet you didn’t.
(correction - *some* chimps have light skin color - some do not).
a view of the old chimp
http://www.bushorchimp.com/pics.html
The web smirkingchimp.com has been around since 2001 (at least). At the moment its banner headline reads “Congratulations to President-Elect Obama!” © 2008 Smirking Chimp Media
Any criticism or even less than enthusiastic support of Obama is by definition racist.
“He was going to vote Republican until he got into a conversation with a cabbie, who pointed out that anyone who ran such a great campaign, might be able to do a good job of running a country.”
let’s see, a cabbie in south america points out the (I am sure, empirically derived) correlation between a good campaign and a good presidency. instead of questioning the logic of that assertion, this argument actually sways the person to vote opposite what he/she was going to in the first place.
I hope most put more thought into their selection than that, but I have to say that I am skeptical on that front.
Don’t be too harsh on the cabbie. He had just dropped lainvestorgirl off at some condos she was looking at in Argentina. Surely, that trip would disorient any human being.
Hahahahahaa! Good one, NYCity!
GWB had quite good campaigns too. His presidency however did not turn out so good.
I call bulls**t
Not much of an effort there varelse. lmao.
Being a good politician and running a good campaign requires a completely different set of “skills” than being a good leader for the whole of America.
So, maybe we should change the system whereby each politician only gets x amount of dollars for a campaign ,so the leveling of the playing field will bring out the best for the job .
Politicians promise everything and than go about the process of seeing what they really can do after they get in office ,or they see how they can do what they really wanted to do for whomever .
Some Presidents totally change their mandates in office if they are faced with a situation that they didn’t expect ,(like being attacked ,or having a National Emergency ,or being lame duck because of
Congress or the Senate ).
Look at how Truman had to be the guy who said yes to the
Big Bomb .You would never think that a guy like President Truman would be able to make such a decision .Yet ,JFK held back on attacking Cuba ,(which it turns out it was most likely the right decision ). You just don’t want the wrong guy to be in the office at the wrong time .
where x=0 ?
As part of their big mortgage announcement today, Citi says they’ll approach mortgage holders that they “deem” in need of a workout.
Have a mortgage with Citi? Then you may want to make yourself “worthy”. You know what to do.
According to this article, you don’t even have to be delinquent:
http://money.cnn.com/2008/11/10/real_estate/Citi_steps_up_foreclosure_help/index.htm?postversion=2008111022
From the NPR coverage, you need to not be in trouble….yet.
Take their goal of reaching x number of people, and multiply by 7%. That’s probably where the dust will settle.
It will be stunning to review the files of LIARS LOANS that are now resetting.
Nov. 11 (Bloomberg) — American Express Co. won U.S. Federal Reserve approval to become a commercial bank, gaining access to government funds as credit-card defaults climb with economies slowing around the world.
…
With defaults rising in the U.S. along with the unemployment rate, October marked the first month since 1993 that card companies were unable to sell bonds backed by customer payments.
I think we should all pool our funds and open our own bank….sounds like the easiest way to get moneys these days.
Most likely, we’d be a deemed a healthy bank, all assets, no liabilities. We’d be bought by a large sickly one. Which is OK too.
I think we should all pool our funds and open our own bank….sounds like the easiest way to get moneys these days.
I’m in. We can call it the Bank of Cereal and Asparagus.
My branch will be Pie in the Skye
Welcome to the 1st Bank of Containment.
“I think we should all pool our funds and open our own bank….sounds like the easiest way to get moneys these days.”
Pooled resources leveraged to the advantage of its participants as in insurance pools? You Socialist!!!!
I know someone who started his own religion when he was in college. He and a couple buddies got together, looked up the IRS requirements, and began holding Friday services, just for themselves, based on the consumption of beer. And they tax-deducted all of their beer as religous supplies.
Not sure if it happened exactly that way, but he’s the type to do it.
Our libation, who art in bottle,
Hallowed be thy name.
Thy kingdom come,
Thy will be done,
In home, as is in tavern.
Give us this day our daily
intoxication.
And forgive us our flatulence,
As we forgive those who
flatulate against us.
And lead us not into
abstinence,
But deliver us from sobriety.
Amen.
Parishoner since 1992.
I want to declare myself a bank.
I would go out and buy some hot plates and toasters at Wal-Mart, give them away to people to get them to deposit their hard-earned money with me.
Then, once I have their money, I will learn to “create” money out of thin air (due to fractional reserve banking). For every $1,000 in deposits I have, I will magically do an entry on my computer to create $10,000 which I will lend out to people who need money. I will then charge those people usurious rates while paying my depositor only a miniscule rate of interest. I will make lots of money this way. Since creating money out of thin air is such HARD WORK and requires high levels of judgement and education, I will pay myself a very high salary to do this kind of work.
This gig of creating money out of thin air is so lucrative, that I will declare myself a corporation and issue shares to the public to get my hands on more of this magical “real money”. I will pay my new shareholders a really nice dividend as an incentive to get them to give me money for my shares. I will regularly increase that dividend by a small amount so that they have the illusion of dividend growth, no matter how well my loan portfolio is doing.
I will hire a lobbyist at a high salary to get the government monkeys off of my back. I will get the lobbyists to create laws that give me unfair advantages versus the people I do business with (the farmers, homeowners, and businesses who borrow money from me). The lobbyists will also keep the government regulators from visiting my business, so that noone discovers how bad my loan portfolio is doing.
If any of the people I loaned money to default on their loans, I will seize their homes, their farms, or their businesses and they will lose their homes or their livilihoods. Since I don’t know how to plant a crop, mow a lawn, or run a real business, I will immediately sell these assets at a huge loss to someone who really knows what they’re doing.
I will borrow large sums of money at ridiculously low rates of interest from Federal Reserve bank’s discount window.
If enough of the people I loaned money to default and my portfolio threatens my ability to draw a large salary, I will go to the Fed and complain that I need help in order to keep my local economy going. The rationale for this request is that “it will be good for Main Street,” which is in a sense true because the guy I buy my cocaine from lives on Main Street. I will offload a large portion of my bad loan portfolio to the Fed in exchange for U.S. Treasury securities, which I will use to create more money in my magical computer that allows me to mint new money on my desktop. Because the Fed doesn’t want people to think this exchange of bad assets (my crappy loan portfolio) for good assets (U.S. Treasury securities) is a bailout, the Fed will give this operation an exotic name. Something like “Term Auction Facility” will work pretty well, and will have the public scratching their heads about what is really going on here.
Yes, I want to be a bank too.
“I will immediately sell these assets at a huge loss”
you forgot to add that you will use these losses to avoid paying taxes so that the tax-payor money you will receive wont be your own.
Butimnotdeadyet …..LOL ….Sad part is that what you say
is true .
Only if we go full reserve! Oh wait, The Fed wouldn’t even allow us to do such a thing.
where can I get one of those applications? I would love to have access to the fed window! I have a few loans I’ve made over the years that I can’t collect on.
“With defaults rising in the U.S. along with the unemployment rate, October marked the first month since 1993 that card companies were unable to sell bonds backed by customer payments.”
Well I don’t want them. Do you?
Here is the problem. I wouldn’t mind investing in mortgage bonds for houses bought next year at reasonable prices with downpayments. But how would I know I wasn’t getting the crap?
I wouldn’t mind investing in corporate bonds for companies with decent accounting whose business didn’t rely on consumers spending more than they earn. But how would I know I wasn’t getting covenant light?
If you are an unsophisticated investor like me, you invest through mutual funds. Those funds hold investments with losses that have not been admitted to yet. How can you be sure you aren’t buying a loss that already exists? How can you be sure you aren’t buying a LEVERAGE loss that already exists?
Years of lies coming home to roost. And the solution is to suspend mark to market?
Methinks the “sophisticated” investors are nearly as bad off as the unsophisticated investors at this moment in time.
Not enough transparency at any level, too many obtuse financial instruments, ratings that’ve been exposed as nearly useless — and to top it off, the “sophisticated” investor is likely saddled with the hubris that he knows what he’s doing …
“sophisticated” investors = pretentious sucker
Now you know why everyone wants to open a bank. It’s a license to counterfeit money.
One for you, two for me, two for you, four for me …
The people will learn the hard way why the Founders insisted on gold and silver being the only legal money tender.
We already do get it. The founders were isolationists. In the 20th century the USA became immersed in global commerce and conflict. The rest of the world went off the gold standard before we did (except for France I think). It is not possible to be the only one doing business with gold. You pay gold, they pay paper, game soon over.
IIRC, only taking gold in payment from Germany and England as we sold war supplies to both, was how we ended up with so much gold in the first place.
The rest of the world went off the gold standard before we did
And it was for the same reason that we did - to be able to print enough money to pay for war costs, no? We just didn’t have the “need” yet.
Free trade is the opposite of isolationist. Putting in regulatory and taxation burdens in the middle of free trade transaction is what is “isolationist”. Maybe you need to look up the word in dictionary dot com.
You can trade whatever you want to trade, gold for paper or paper for gold, in a free market. It’s just not likely people would continue trading gold for worthless non scarce sand money paper. All the government needs to do is get out of the way, and allow competing currencies. That’s why we have this crisis, because government has forced (look up that word in dictionary dot com too) paper money to be used in the market by prohibiting competing currencies. And thus, we are stuck with with a money supply that is incessantly manipulated and counterfeited. This causes skewed supply and demand pricing signals to lead to bubbles.
Are you saying it would be practical for the US to be the only country using gold for money and all else using fiat? Not following your logic dot com.
Of course! The “US” doesn’t trade, individuals trade. And no trades whatsoever ever occur unless that which is received is valued more than that which is given away in exchange. The laws of gravity or trade don’t change because of imaginary political boundaries.
Their paper system would be far weaker. If anybody so desires they can insist on any terms of trade that are mutually beneficial. If you don’t like paper, insist they convert their paper to some other useful commodity first.
It’s the people stuck holding the paper when the music stops that are looted. If we didn’t value green rectangles here, why would we value their purple rectangles here?
Nice theory CrookCounty, but it leaves out other countries trying their damnedest to destroy our currency.
You are exactly and precisely correct, CrookCounty. Great set of posts.
Sadly, you’re going to have to hammer people over the head a thousand times over until they comprehend what should be obvious.
One of the significant barriers that might thwart any effort you make toward this end is that the USA has largely become a land of The Art Of The Deal rather than providing goods and services of actual value.
The people will learn the hard way why the Founders insisted on gold and silver being the only legal money tender.
Wrong.
“No State shall enter into any Treaty, Alliance, or Confederation; grant Letters of Marque and Reprisal; coin Money; emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debts; pass any Bill of Attainder, ex post facto Law, or Law impairing the Obligation of Contracts, or grant any Title of Nobility.”
The Constitution prohibits the states from issuing fiat money. But the Federal Government is empowered:
“To borrow money on the credit of the United States;
To regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes;
To establish an uniform Rule of Naturalization, and uniform Laws on the subject of Bankruptcies throughout the United States;
To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures;”
To give you all an idea of how sound the founding fathers wanted our money to be…
Every last Gold Coin issued from 1795 to 1838 actually had more value in content-than the actual face value, as we were a fledgling nation and wanted to prove our money was sound, largely because we had discredited our money in such a fashion, by issuing fiat Continental Currency (”Not worth a Continental”) without any backing whatsoever, and what came with it was our first experience of ruinous Hyperinflation.
A country that was weaned financially on Hyperinflation and learned a hard lesson early in it’s life, might well be done in by Hyperinflation in it’s old age…
p.s.
How despised was paper money in days of old?
The first Federal Banknotes were only issued in 1860…
To coin Money
That does not imbue the power to make things other than gold and silver legal tender. It means, literally, to “coin” (a verb) money, or turn money into coins.
If they had intended to allow making fiat money, they would have included that language (make any Thing but gold and silver Coin a Tender in Payment of Debts) just as that language was used elsewhere in the document.
I just read an article about citigroup not foreclosing on any pastdue loans
for 90 days. Are they attempting to get the monthly foreclosure report
numbers to go down to try and get some optimism amoung buyers and investors?
and how long can that last? The house across the street from me was foreclosed upon over a year ago and is still empty. No signs it was even put on the market. There has to be thousands of homes just sitting on the banks books waiting for the tide to change.
takingbets…..When Firms start freezing foreclosures ,I think its just because they are waiting for the hand-out that’s coming from the Treasury . I find it hard to believe that Companies with foreclosures believe that freezing foreclosures will be any kind of relief that will
work .The lenders know that these loans are bad by now . Look at the lack of success lenders had with borrowers wanting to take advantage of the Government Offered 300 billion dollar program that started in October .
What is interesting about the defaulting borrowers today is that they show no signs of interest in bail-outs if it doesn’t mean that they will make a short term profit or be able to have a ATM source . How many borrowers had shelter and long term home ownership in mind when they purchased ? How many borrower know darn well they lied to obtain the loan and the teaser rate adjustable loan was just a way to use leverage ? The housing market was a keep the party going investment scheme that would fail if real estate wouldn’t continue to go up .
You can’t make a bad loan good and the Bail Outs are designed to simply keep the Lenders from insolvency and take the loss and put it on the taxpayers obligation .
The government knew that AIG was corrupt in 2005 because they
had launched a investigation on them for cooking their books ,(that AIG denied of course ).
The bets that Wall Street were making on real estate were criminal . Insurance on Securities (Credit Default Swaps ) that were meaningless because the Company had no ability to pay on the leveraged insurance ,come on .
I ask myself why did the regulators allow the unregulated to be mixed with the regulated ? The unregulated was leverage insuring the regulated …..does this make sense ? Yet,we have a Wall Street system that is screaming that new regulations are not called for or
investigations on possible violations of that system are not called for.
Its insulting that the powers are sidetracking people by making people think that the only regulation needed is that CEO’s shouldn’t be paid as much . CEO payments are peanuts when you look at the evils of leveraged Credit Default Swaps and all the other higher leveraged Casino bets that the greedy pigs of the shadow world of banking and investing were making fortunes on . If AIG was allowed to go Bk ,boy that evil world would of been exposed for what it was .
i really enjoy your insight on the situation. You really have a great skill on boiling down the situation for others (like me) that have a hard time putting the pieces of this puzzle together. Keep up the good work! and thanks for the clarification.
Thanks my friend ,I have also been looking at your posts for a long time and enjoying your points and insights .
Are we approaching the end of the Industrial Revolution?
Possibly, and it seems we are also nearing the end of what was once known as the Worldwide Revolution of Rising Expectations.
My expectations rise everytime I read of Gloom & Doom. This is the climate that creates great buying opportunities.
Money isn’t everything, king.
Never said it was.
I was talking of future tense, not the present conditions where damn near anything will suffice as money.
I want to die and go to heaven, just not today.
Heaven is right here on earth, not some fantasyland of mind over matter.
I’ve got my piece. Can’t hurt to be hedged.
Heaven is right here on earth, not some fantasyland of mind over matter.
Amen to that…
OK guys, if you agree, then it must be so.
‘Money isn’t everything, king.’
As Faster noted the other day:
‘No, but it’ll buy everything.’
Hmmmm. I didn’t get that exactly right. Fasty? Fasty? What was it?
“Money can’t buy happiness, but the lack of it sure buys misery.”
Grampa
Breaking News:
After thousands of years of waiting for somebody to verify that heaven exists and isn’t a figment of imaginations, we have via satellite-the very first shred of evidence, courtesy of Pearly Gates Cable-Vision…
(Ready on the set… Action!)
Awe, just a frustrated bigot. I can picture you in that scene in Brave Heart, with the curvey hooked knife in your hands, imposing yourself so to speak.
I’ll admit to being bigoted against intangibles of invisible invasiveness, indeed.
It’s the end of the FIRE Revolution. Like power and water, finance should function as a utility serving the real economy. Instead, finance has grown so large that it is sucking the energy out of the real economy, destroying it. FIRE needs to be iced.
“finance has grown so large that it is sucking the energy out of the real economy,”
Testify! My sis and I have discussed this from time to time, being that she lives in hedge fund territory (Fairfield County, CT). These entities basically contribute NOTHING to the overall economy in the way of jobs or useful production. They’re parasites. They extract money.
Just look at job sites, almost no one wants you to do actual work. Make a database so the sales dept can make 100 calls and presentations day to drum up business Must be proficient in Excel and Powerpoint…
———————————————–
NOTHING to the overall economy in the way of jobs or useful production.
sorta, agriculture is looking at improvements of less than 1% in specialized areas, I think the same applies for other industries - a 10% productivity improvement is a very big deal. In my field (computers and networking) Moore’s Law still rules. Over the last 20 years there has been a huge increase in capacity while costs have decreased. This is God’s will that in the final days, communication is pervasive and fast. In Roman times it would be strong and robust orator, standing in a well designed collesseum that could make himself heard to 1000 people who then could relay the message according to how they received it.
Yes, the Drudge Report is much better.
Drudge Report…. LOL!
Mm, have you ever read it? It’s just pageload of links and his little scoop of the day. Pretty handy IMO.
I like Drudge, cause’ he’s quick on a story, but he tilts so hard to right that my screen has tipped over, if I leave the page up too long.
“Are we approaching the end of the Industrial Revolution?”
The US political/corporate definition of Industrial Revolution was “outsource all manufacturing to the cheapest source”. Now that their revolution is almost complete, we will have a nation of workers that cannot buy the foreign manufactured goods because they have no jobs!
The next revolutionary solution seems to be to eventually have everyone on the government payroll in some fashion.
I realized the Free Trade mantra was B.S., when I read the statistic that if EVERY JOB in the USA was relocated to China, they would still have 500 million people in need of work.
China did what they should do for it’s citizen’s. Absorb as much of the world’s manufacturing capability as they could get away with.
Our highly paid “management/executive” types, in their tunnel vision, figured they could maximize their profits by making stuff in China, and pocketing the difference between manufacturing costs here vs. there.
They didn’t figure on everybody doing the same thing. With any luck, all these managers will be out of jobs soon, because their are no workers left to “manage”.
France and the UK have recognised this as a new “Bretton Woods moment.” This is their chance to push not only for the new regulations needed to restore confidence now and prevent this kind of global financial crisis from happening again, but also for a new global financial order….
Clearly, we need a new, strong, global regulatory system. Wall Street tell us that light regulation encourages innovation but the financial innovation that we have seen in recent years has mostly been directed at regulatory, accounting, and tax arbitrage, figuring out ways to deceive investors about the true value of the company, or to get around regulations designed to ensure that banks act in a prudent way.
Telegraph: Joseph Stiglitz — Europe’s leaders can seize this opportunity to fill the leadership gap
“we need a new, strong, global regulatory system.”
We need a strong US regulatory system. All countries should do what’s best for their citizens, first. Then we can talk about global.
All we need is a regulation that requires companies to book profit on payments that they actually got, not deferred interest and other such poof-money that they think will come in sometime in the next 30 years. That alone would have prevented a great deal of the housing crisis. Add a corollary that debt must be seasoned before it is sold, and that will prevent the rest of it.
Mr Ackermann (DB) is already singing: “Hey! State! Leave us banks alone”.
In the true spirit of self-regulation. Not even a month after that (German) “bailout”.
Italy probably wants this even more, since they can hardly expect Germany to carry them alone for very long.
The French are great at posturing and bullying.
I do not buy the whole story about “lack of regulation caused all this”. Regulation in Europe is way stricter than on WS and they are in the same, if not even worse shape than WS.
Exactly. And taking it farther to the extreme - heavy regulation didn’t exactly help out the Russia’s, China’s, etc. of the world.
I have to laugh at all the suggestions that we need more regulation. We don’t need more regulation - we need a combination of less regulation, and less corrupt regulation. The latter referring primarily to regulations which favor only a subset of corporations - e.g. like say - bailouts.
Postal Service Looks To Cut 40,000 Jobs In First Layoff In History
SHREVEPORT, LA (KSLA) - “We lost 2 billion dollars and like any other business we have to stay afloat.” And to keep from sinking, the United States Postal Service is considering cutting thousands of jobs nationwide. Lavelle Pepper with the post office in Shreveport says they too are feeling the affects of the same disease hitting the country… a struggling economy. “We employ about 685,000 people. If we do layoffs it would include clerks, carriers, mail handlers across all crafts.”
Pepper says the postal service is looking to eliminate 40,000 jobs nationwide. There’s not an exact number on how many of those could be from the Ark-La-Tex. Pepper says workers who are not part of union with six or less years of service would likely be the first on the chopping block. “We’ve identified 16 thousand people that are not covered under contract. We’ll see what those numbers add up to.”
These are good paying jobs, $23-$28 per hour. That will take another 1.6b out of the national economy.
So USPS damaged a $1400 HAM radio that was shipped to me. Then they lost the certified mail that the shipper mailed me with the insurance receipt (he had a copy). It took a number of visits to get the insurance claim filed (I only went after repair money, of which I can do the repair so it wasn’t much). While I was at one of the local offices someone asked the clerk how he was doing and if he was going to retire. He made some sort of comment that retirement was moved out 5 years given the current economy. Oddly enough the certified mail arrived yesterday, 2 months late.
“He made some sort of comment that retirement was moved out 5 years given the current economy.”
These are the guys that are going to help save the Social Security system.
Before anyone says, “if they keep the jobs”, you have to integrate the number of jobs with the extra length they are staying in the system to keep their personal finances shored up.
A quick calculation shows that even if unemployment à la GD 1 shows up tomorrow morning, that extra five years does a lot to shore up SS. Most people are going to try and stay even longer.
Reality is probably even a lot kinder (to SS not to these folks.)
“He made some sort of comment that retirement was moved out 5 years given the current economy.”
Those people need to vacate those jobs so that others can have a chance to feed at the trough of public largesse like they have been doing…
I haven’t done much mailing the last few years, but in the past i’d spend $25-30k a year mailing insured packages via the USPS over the period of a decade, tens of thousands of packages of all sizes and dimensions, and perhaps 20 went missing or ended up damaged upon arrival.
20 out of perhaps 20,000 packages?
Not too shabby…
Yeah, they get a bad rap (which they brought on themselves to some degree.)
Tracking changed the game.
My business also mailed about 1000 packages via USPS one year. Just dropped them in a mailbox (when you could still do that.) Each package worth about $150. No insurance. Saved $3000 on insurance and they ALL got there.
Postal workers putting off retirement may be the cause of the lay offs. They were expecting older higher paid workers to leave voluntarily. Instead they lay off the younger ones.
Hear hear!!
I am sorry, but cutting jobs does not take money out of the economy, it simply reallocates it to other uses in the economy… like bailing out banks.
Yeah, why this simple point is not obvious to everyone is a surprise.
If I don’t spend on a movie ticket that leaves more for me to spend on a beer.
Same with the postal company.
Same with the country.
Same with the world as a whole.
It can have an effect on the economy at the state or city level.
Conversely, bailing out banks does not take money out of the economy, it simply reallocates it away from other uses in the economy…like creating jobs.
Of course, this point is only relevant to die-hard believers in a macroeconomic budget constraint. The more severe the credit squeeze, the stronger my faith becomes.
Exactly! Bailing out ANYTHING is subsidizing activities which the economy cannot afford and that consumers do not want, at the expense of positive economic activities.
This simple concept is why ALL bailouts are ultimately bad.
They aren’t all that bad for the politicians, who always make sure they get a cut.
“I am sorry, but cutting jobs does not take money out of the economy, it simply reallocates it to other uses in the economy… like bailing out banks.”
This may be accurate by Economics 101 standards, but I guarantee that if you cut off the noise in an airliner at 30,000 feet it will definitely contact the ground in fairly short order.
I know a few postal workers that deserve being fired, but it probably won’t come down that way.
The entire cadre at the post office of Montrose, Colorado, should be sent off to learn some people skills at some place like, oh, I dunno, maybe Poin du Moun Prison here in Utah.
Years ago @ a certain post office in the city of angles…
One of the clerks, was an aged fellow in his mid-60’s that still owed many a year to the company store, as he had retired early in his 40’s, due to health issues. Medical advances over 15 years allowed him to go back and do his old job, so the Post Office took him back on, and the relationship was a rocky one.
To set him off, all I had to do was start talking about his pension (only after I had finished my transaction) and he was a like a wind-up toy, putty in my hands.(I only used the force once in a blue moon)
If anybody was ever a candidate to go postal, it was him…
You know, I’m still seeing ads for $0 down mortgages as well as $100 down HUD acquired homes. Anybody know what’s goint on with these? Are the agents just false advertising or did someone invent a new scheme to bypass the ban?
HUD and Fannie have properties and their own rules on “repossessed” properties.
They are still listed in the MLS, in a “normal” market it may be a good source for leads.
Beware, many of these properties are pretty beat up and located in less than the most desirable of areas.
There’s a house around the corner from me that’s for sale and has a sign saying “100% financing available”. I’m not sure if it’s the seller offering 100% financing, or if they have a lender lined up? At any rate, it’s still available here in Austin, TX.
I read somewhere if you do Botox treatments on a regular basis and then stop cold turkey, it can cause faces to SAG quite a bit, and in just a matter of months, one puts back all those years you sought to hide, and then some.
Hollywood’s wax museum?
How….literary. Not quite Oscar Wilde, but even more fitting.
Remember ladies…bangs are cheaper than botox.
Occasionally we’ll watch L.A. news stations, and I kid you not… nearly everybody of all the long term faces, looks as young as I remember them looking, way back when they started being newsreaders back in the 1970’s…
The clock is @ 14:28 of Dorian Gray’s 15 alloted minutes for many, in the city of angles.
Toll Revenue Drops 41% as Luxury-Home Demand Slumps (Update2)
“Unfortunately, the preliminary signs of stability we had discussed in early September were upended by the past month’s financial crisis,” Chief Executive Officer Robert Toll said in the statement. Credit market disruption has driven “home-buyer confidence and our traffic and demand down to record lows.”
Toll urged the federal government to act swiftly to help the housing market and recommended Congress cut mortgage rates and enact a buyer tax credit. Home prices slid 17 percent in 20 U.S. metropolitan areas in August as foreclosures rose, according to the S&P/Case-Shiller price index, and foreclosures reached the highest on record in the third quarter.
http://www.bloomberg.com/apps/news?pid=20601206&sid=a_.hHmz2D5.o&refer=realestate
does congress have the authority to cut interest rates?
Bob Toll has come up with some really great proposals for my tax dollars to save his a$$. Keep’em comin’ Bob.
He needs taxpayer dollars. That’s what happens when you build for a demand that doesn’t really exist.
I guess Bob Toll wants all those kids that had to live with their parents for years to be able to save for a down payment on the permanently high house prices to leave home and get a tax break to buy a house at slightly lower permanently high price.
Was that Bob Toll who said something to that effect or was it Bill Gross of PIMCO?
If Bill Gross does anyone have a link to the original quote?
Thanks!
Time for a bailout to help upper-income home buyers afford McMansions priced north of $500,000!!!
“Toll urged the federal government to act swiftly to help the housing market and recommended Congress cut mortgage rates and enact a buyer tax credit.”
Congress has no authority to cut mortgage rates and they already enacted a buyer tax credit. NEXT IDEA?
Get ready for the $25,000 first time homebuyer’s tax credit, applicable over a five year period, during which time the beneficiary of said program will not be allowed to realize a profit on said property.
No matter what, someone is going to have to live in those 10 million empty houses. And tax policy will be used to re-house all those Americans.
Think about it, when this thing finally bottoms, we are going to have to stimulate the economy in a way that gets us off the floor. All those new home owners [and at $50K for a house, with a big tax break, many will actually become homeowners -- think of this as an unintended consequence of Bush's Ownership Society] will actually get things moving again in related retail sales and construction.
I’ve called for a super-sized Homesteading Act before, and now with GOBAMA, I think it’s a lock.
But we’re going to have to endure the price-prop follies a while longer.
Million dollar question: Will home prices ever capitulate, despite a plethora of price prop follies?
I think RE capitulation is imminent, less than 4-5 months.
My only support for this is how fast, furious and desperate the bailout fixes are coming — practically everyday, and for those many of us here who enjoy reading history, we’ve seen this before, in other gov’ts/economies prior to capitulation. The talking heads, financiers and politicos are all having meltdowns, on air and in print, because even they know the only way out is for a massive default of the underlying debt.
If you step back and look at it dispassionately, every single industry is actually saying they need a bailout.
What they’re really saying is — we can’t stay in business under a reality model.
Another business idea: Bailout-a-day calendar for 2009!
One would guess that eventually loan owners awaiting bailout cargo drops would catch on that none of the bailouts are going to succeed in bringing back 2005 home prices, no?
Franky G…
Thanks for the laugh. I think you’re right.
I find it highly amusing that as we approach a time of world-wide shortages of probably most everything, the most powerful and most dividing message the repos could come up with the past 7 years, was to have as many babies as possible.
I was a reproductor in my day, but I’m retired.
I was under the impression that every sperm is sacred.
Only if you have a really big ego. At my age that is irrelevant, plowing infertile fields and all, just for the joy of it.
Lying fallow are you?
frisky felicitous fallow fellow. Life is good.
Apparently it depends on where they swim.
Who was saying that?
From Washington Post - homebuilder NVR’s CEO gives up salary and bonus for third straight year.
Surprise, surprise - they’re the only major homebuilder showing a profit!
The main reason is because they didn’t buy huge chunks of land at peak prices like other homebuilders, they instead got options which they let expire. This lesson was learned when they went bankrupt in the last downturn, by the new management team that came in. So - apparently you can learn lessons, and actually get through downturns (so far at least) by using fiscal responsibility and true hedging.
Not that NVR is squeaky necessarily - they’re at least a lot more responsible than the others under their new management, and now have the profits to show for it. I’m guessing they’re one of the few homebuilders that will make it through, when all is said and done.
NVR they didn’t buy huge chunks of land at peak prices like other homebuilders, they instead got options which they let expire.
NVR first time I’ve heard of a company with a strategy to survive
‘Hollywood’s wax museum?’
New bumper sticker: “Don’t Be Ghoulish”
Looks like another fun day on the The Street.
I can’t even stand it. I wish the sumb*tch would just crash already, so they can shut it down and we can go about our business.
And the GM/Ford death spiral continues.
See your Chevrolet stock decay in a 401k,
The way to save retirement pay in the USA.
Oh, oh, can’t….breathe….laughing…..too…hard….choking….
Just. Brilliant.
Now is the time to buy Ford and GM stock. Their values will skyrocket when BO bails them out come next winter.
(Just a hunch here — I will kick myself later if it pans out, as I have no plans to act on it.)
Then buy “out of the money” call options. Most you are out is the price of the options.
BTW, just for the record, I do not recommend such a “Hail Mary” play.
Stuck my neck out for 100 sh. LOL
‘I do not recommend such a “Hail Mary” play.’
If BO rescues them, I will be sure to remind you next spring so we can both enjoy kicking ourselves for not Hailing Mary.
The reason I am inclined to believe BO will rescue the Big
32 auto makers is on grounds of fairness: Why should Wall Street get all the bailout monies and Main Street get the shaft?I make a clear distinction between `strategy’ and `outcome’.
My strategy is sound. The outcome may be unfavorable. I do not care.
‘Then buy “out of the money” call options. Most you are out is the price of the options.’
Last time I bought options (puts), they expired out of the money. A year later all my bets proved correct, except for the timing. If you buy a few shares of the Big 2 zombie auto makers now and they ever come back to life, you get to exercise your “option” to sell.
I had thought about GM and Ford stock. But BK is for certain without a bailout. Maybe after the BK and it looks like they will manage to come out of it a smaller and more efficient company. And if they do get their bail out I will still wait and and see if they manage to turn things around. I don’t see them disappearing completely but there is lot of bad change coming.
I have to go to GM today. It is always fun to go and see the blatant excess that is GM.
P.S. FPSS probably already knows this, but you can think of ownership shares in a company’s stock as a bundle of at-the-money call and put options, whose life spans are only limited by the time until the corporations die. The fact that the Big 2 shares are so cheap at the moment suggests that a critical mass of investors have concluded that death is imminent. A purchase at this point is a gamble that a bailout will extend their corporate life spans indefinitely, and that they will prove more profitable in the future than they do currently.
So buy longer-dated options or even LEAPs.
Your play has to be matched to your expectations which in this case is a very long shot that BO will rescue them.
If I were into betting on this kinda stuff, I would much rather wait till they “get rescued” and then short them again because the fundamentals are dreary. But that’s just me. I don’t like “Hail Mary” plays.
‘If I were into betting on this kinda stuff, I would much rather wait till they “get rescued” and then short them again because the fundamentals are dreary.’
Let us know when and if you do this. Being a rational skeptic by nature, this is also more my style.
I cringe when I read about BUYING out-of-the-money call options as a long shot.
Here’s an idea, GM Jan10 PUTS 2.5 were selling today for $1.85! You SELL the naked puts (say 10 contracts for $1850). You do what you want with the $1850 like earn interest, then in January 2010 after Obama has bailed out GM, they expire worthless and the $1850+interest is yours to keep. Your breakeven point is 65cents/share! I repeat, haul in $1850 today, if GENERAL MOTORS, once the largest company in America and bastian of American ingenuity goes to 0, your MAX possible loss is $650. Isn’t this better than SPENDING money today as a long-shot of making something? This is a serious money-making opportunity that doesn’t come along very often in a lifetime and I figure if GM does go to 0 I will have much bigger problems to worry about, LOL.
I’m assuming you’re talking of crossing the spread to sell the options since I just don’t see you competing with the options market makers with limit orders.
It’s price-size priority not price-time.
I agree that this is a great way to play it.
Struggling US carmakers say they can’t wait for Obama presidency
9 hours ago
NEW YORK (AFP) — Facing the collapse of sales and reticence among bankers and investors to support them, US automakers say they need immediate public aid to survive and cannot wait for President-elect Barack Obama to take office on January 20.
Since General Motors and Ford published disastrous quarterly results last Friday — bringing losses for the two so far in 2008 to nearly 30 billion dollars — their cries for help have grown more desperate.
The US auto giants say that a 25 billion dollar package of government loan guarantees for the development of fuel-efficient vehicles, passed in early September but still not released, is not enough.
They want another 25 billion taxpayer dollars to forestall their collapse; GM is warning it only has the cash on hand to last a few more months.
Obama, whose election on November 4 was seen as a rebuff to President George W. Bush’s Republican party, stressed in his first news conference as president-elect last Friday that the auto industry “is the backbone of American manufacturing,” and he pressed both Congress and the Bush administration to take action to help it.
Merrill CEO says economic environment recalls 1929
“We are going to be in a very difficult economic environment for a significant period of time,” Thain said. He said the U.S. economy “is contracting very rapidly,” creating uncertainty “at least over the next few quarters.”
“Although things are starting to improve, this is going to be a long process, and this is not going to get better quickly,” he added. “It is not like ‘87, it is not like ‘98, it is not like 2001.”
http://biz.yahoo.com/rb/081111/business_us_merrill_thain.html
Whatever your personal feeling about Wall St. are, Thain was the only executive that did what was in his mandate — do the right thing for his shareholders.
He saved his firm. Which is more than Fuld or Cayne can say.
And he’s saying what we’ve all agreed upon for a while so…
$700 bn in tax dollars ought to at least inspire a modicum of optimism. But not to worry — Pelosi and company are about to push for an extension of bailouts to Detroit.
Merrill chief sees severe global slowdown
By Greg Farrell in New York
Published: November 11 2008 14:42 | Last updated: November 11 2008 20:06
The global economy is entering a slowdown of epic proportions comparable with the period after the 1929 crash, John Thain, chairman and chief executive of Merrill Lynch, warned on Tuesday.
Speaking at the company’s annual banking and financial services conference, Mr Thain said while he was cautiously optimistic about the future of the financial services industry, he lacked optimism about the near-term prospects of the US economy and global markets.
By JEFF OSTROWSKI
Palm Beach Post Staff Writer
Monday, November 10, 2008
ORLANDO — Known for preaching the power of positive thinking, Realtors heard an uncharacteristic outpouring of pessimism during the four-day gathering of the National Association of Realtors that ended Monday.
In educational sessions and news conferences, the 23,000 people in attendance heard speaker after speaker use downbeat tones to describe a still-cratering housing market.
“Where Homes Are Worth Less Than the Mortgage”
check out Nevada
http://www.nytimes.com/interactive/2008/11/10/business/20081111_MORTGAGES.html?hp
Big leg down in San Diego trustee deeds this month, continuing from previous downward action the last couple of months:
http://www.sddt.com/Finance/EconomicIndicators.cfm
(adjust start year to see more monthly granularity)
A indication of foreclosures finally starting to peter out? Or instead just a temporary result of moratoriums?
Foreclosure moratoriums do have the tendency to reduce the rate of foreclosures. But they also create pent-up demand for future foreclosures. However, perhaps the latest week’s bailout measure (to be announced at 2p) will bring about an immediate end to the foreclosure crisis, as those who cannot afford their mortgages are about to enjoy a monthly payment reduction.
We may go out for a veteran’s day drive to celebrate the crash of oil prices below $60/brl. The 52-week high was $147.55 on 7/11/08 — four short months ago. This represents an annualized rate of decline of
(exp(3*ln(59.78/147.55))-1)*100 = 93.3 percent.
I don’t mean to suggest here that I actually expect prices to drop by that percentage over a one-year time horizon, although I note that the Baltic Dry Index and certain MBS did so, as evidenced by the ABX indexes.
latest news
Dec. crude falls $2.63, or 4.2%, to $59.78/brl on Globex
IRWIN KELLNER
Get out there and spend
Commentary: When the going gets tough, the tough go shopping
By Irwin Kellner, MarketWatch
Last update: 12:16 a.m. EST Nov. 11, 2008
PORT WASHINGTON, N.Y. (MarketWatch) — As the nation’s retailers gird for the holidays, it’s time to remember the golden rule: he who has the gold, rules.
By now it should be no surprise that a growing number of people are in dire straits. Consumer spending in the third quarter fell by the most for any quarter in 28 years.
October doesn’t look any better.
Excluding the post-9/11 plunge, it could very well be that retail sales in the past month turned in their worst performance in as many as 40 years. Folks, we’re talking about 1968 — when the nation was in turmoil over two assassinations, the Vietnam War and a presidential election.
The problem is that people are broke and those D@mm Banks won’t open the vaults to the public!!! One heck of a situation were in? Lol!!!!!
I thought the $700 bn bailout package was intended to get banks once again lending with abandon. Wha’ happened???
Like I’ve mentioned before, there are entire towns here in Utah where the economy is based on stealing from each other. The banks are borrowing that model - witness the new AMEX, which has become a bank so as to capitalize on exactly this.
(And to think all this happened after I got that dang gold card.)
People are overleveraged. Even the ones with great credit can’t borrow. Same for companies, they need to cut costs, layoff people or shut down becuase they are over leveraged. It’s harder now to get a bridge loan.
Feds move to streamline aid process for homeowners
An industry official who worked on the plan said the new approach will allow lenders to modify more delinquent loans by establishing broad criteria to speed up the process. The official spoke on condition of anonymity because details had not been announced.
To qualify, borrowers would have to be at least three months behind on their home loans, and would need to have home loans worth at least 90 percent their house’s value. The interest rate or principal amount of the loan would be reduced so that borrowers would not pay more than 38 percent of their income on housing expenses, the industry official said.
http://biz.yahoo.com/ap/081111/meltdown_mortgages.html
“To qualify, borrowers would have to be at least three months behind on their home loans, and would need to have home loans worth at least 90 percent their house’s value.”
Given a 40 pct YOY decline in California used home sales prices, I am wondering what percent of buyers in hot water (the kind who bought homes they could not afford in 2005-2007) might be less than 10 pct underwater? I am guessing the percent is pretty low.
P.S. Wouldn’t this measure give struggling loan owners an incentive to get at least three months behind on their home loans, in order to qualify for a lower monthly payment?
And what about minimizing reported income???
funny
I expect a great increase in unreported income when the D-rats get full control of the country, as this breed of politicians favor programs that subsidize poverty. The rational response by many low income households will be to increase criminal activities that pay well and do not count against qualifications for poverty subsidies.
At this point any bail out loan program of loan modification
cannot be based on the value of the property anymore ,but rather on designing a program that creates a affordable loan payment for the borrower who never was qualified or became unqualified on the monthly payment structure .
“The rational response by many low income households will be to increase criminal activities that pay well and do not count against qualifications for poverty subsidies.”
That’s trickle down for ya. They learned from the best.
yes they will eventually have to forgive part of the loan amount or it won’t work. Its just stupid now like paying rent but more expensive.
How do you think forgivening billions in Mortgages will affect bank earnings ? That will be capitulation time IMO
Needless to say, there was no mention of “forgiven” amounts as part of the cost of the latest bailout. The rollout was gave the impression that there is no cost to taxpayers in cram downs. If this were the case, wouldn’t lenders have already modified the loans (d’oh)?
If they owe at least 90% of the value of their home, that would mean their CLTV is GREATER than 90% (in other words they qualify if they are underwater by any amount or abovewater up to 10%).
So wouldn’t the rational strategy for anyone who is close to being underwater be to stop making mortgage payments for the next three months? If that is not long enough, then just stop paying the mortgage until enough interest accumulates on your principle balance so that your loan-to-value ratio exceeds 90 pct and you will join the loan-modification-eligible club.
Who will pay the homebuilders and the people who bought houses they cannot afford for this massive wealth transfer? Is it lenders, taxpayers or both?
Citi, Fannie, Freddie to Halt Some Foreclosures (Update2)
By Rebecca Christie and Elizabeth Hester
Nov. 11 (Bloomberg) — Mortgage companies Fannie Mae and Freddie Mac and Citigroup Inc. plan to cut home-loan payments for hundreds of thousands of borrowers facing foreclosures, following similar moves by the nation’s biggest banks.
Fannie Mae and Freddie Mac will reduce principal or interest rates on some loans and extend the terms of others, people briefed on the matter said. The Federal Housing Finance Agency, which seized control of Fannie and Freddie in September, scheduled a press conference at 2 p.m. in Washington to announce the plan.
Congress has been urging financial-services companies to work with borrowers after foreclosures rose to the highest on record in the third quarter. JPMorgan Chase & Co., the biggest U.S. bank, said last month it would stop foreclosures on some loans as it works to make payments easier on $110 billion of problem mortgages, while Bank of America Corp. said it has modified 226,000 loans this year.
“If housing doesn’t get stabilized, it’s really going to continue to bleed the economy,” said Joel Naroff, president of Naroff Economic Advisors Inc. in Holland, Pennsylvania, Bloomberg’s most accurate economic forecaster for 2008.
Let me guess: This measure will be announced without any reference to the cost. They will pretend that it is “free” as it “only involves modification of the terms of loans.” Costs of the program will only be estimated later, as there is no time to estimate costs now, given the financial emergency at hand.
Got disaster capitalism?
Fannie Mae and Freddie Mac will reduce principal or interest rates on some loans and extend the terms of others, people briefed on the matter said.
no wonder they need more money
Oh, no — this new measure will cost taxpayers nothing (or so the official announcements suggest).
The following is about my old neighborhood in Moab, it’s insane. Another good reason to rent, glad I sold my house. I doubt if this will get through, my neighbors are very articulate and will fight it tooth and nail, but who wants to waste their time having to fight such battles?
http://www.sltrib.com/ci_10952922
“Drilling here is certainly going to turn a lovely neighborhood into an ugly industrial area,” said Nordling, who with her husband, John, moved to Spanish Valley when she retired from work at Capitol Reef National Park eight years ago. “It’s kind of like your worst dream come true. Unbelievable.”
The BLM already is battling the Park Service over plans to sell drilling leases near Arches and Canyonlands national parks and Dinosaur National Monument. The Park Service wants to delay the Dec. 19 lease sales. The BLM refuses. Senior officials from the two Interior Department agencies began head-to-head negotiations Monday about the dispute.
Close examination of the lease coordinates turned up a parcel under a residential area, possibly the first in Utah to be included on a lease-sale list. It’s parcel No. 225, where retirees Jean and Mike Binyon live and houses sell for $200,000 to $11 million.
Oh, golly. Lookit that. Sigh. Sighhhhhh….some days I lose my annoyingly perky and cheery outlook.
Still, losty, it’s nice to have you back. How’s things in the wilderness?
Well, still wild, thank God.
That thing will never pass, these guys can get rabid like mean crazed coyotes on rabbit-cooked meth.
(See, that’s an example of why I don’t try to come up with metaphors and such…)
All of this will only end with the complete financial failure of the United States. Once unemployment gets over 10%, the Dr. Spock generation will demand that we borrow more from the future. Eventually, the debt will become to great and the system will fail. Not sure what will happen after that.
Sorry kurt, but I think that is naive extrapolation. The debt expansion cycle will end, that doesn’t mean the SYSTEM COLLAPSES. There is a limit to how much other countries can/will lend us to keep our game going. The Dr. Spock kids will have to eat less and work more.
My mom is 82. She says “People will have to live like we did.” That’s going to hurt.
Haines with the block, Zandi eats a wilsonburger.
Mark Haines this morning on CNBC called bs on guest Zandi making argument that property prices should be propped up. MH was getting visibly angry saying its not right. Refreshing to see.
Assuming they can prop up anything which they can’t.
If you prop them up, since housing is a consumable not an “investment”, you make household balance sheets that much more precarious and cause a bigger problem down the road.
I also see a potential further drop in real estate sales transactions if any measures to prop up prices on an unaffordably-high plateau are successful. What these fools are proposing to do is to artificially rig the offer (supply) price at a level where there is a severe (relative) shortage of purchase demand, especially in light of a reversion to sane lending standards. Result: a dearth of real estate sales transactions going forward.
Is a near-shut down of real estate purchase market liquidity really a desirable policy objective?
We could use a lot more visible anger in response to inane suggestions.
Doesn’t Zandi understand that propping up home prices would interfere with the GSEs’ ability to achieve their “affordable housing mission”?
We all know this has got nothing to do with people or the houses they borrowed — it’s about the securities and derivatives created against the mortgages.
In this case, the mortgages served as the foundation of a global finance skyscaper that it imploding.
There are a couple of engineer types here that can tell us how successful [and inexpensive!] repairing structurally unsound foundations can be.
“…it’s about the securities and derivatives created against the mortgages.”
Do you mean the kind that are currently priced below a nickel to the dollar, as indicated by these ABX indices?
They lost billions and billions of dollars last quarter. I am wondering what effect this latest bailout measure might have on the zombie GSEs’ bottom lines? Won’t it tend to increase the incentives for borrowers to get more than 90 days behind on their loans? That sounds expensive. Got microeconomics 101???
Wall Street Journal
* NOVEMBER 11, 2008, 12:41 P.M. ET
Fannie, Freddie Work on Mass Loan Modification Plan
Details to Be Unveiled by GSEs, Officials at 2 p.m. ET
By DAMIAN PALETTA
WASHINGTON — Fannie Mae, Freddie Mac and U.S. officials are expected to announce plans Tuesday to speed up the modification of hundreds of thousands of loans held by the housing finance giants, marking the latest effort to try and prevent more foreclosures, people familiar with the matter said.
The announcement could mark the government’s most assertive use of Fannie Mae and Freddie Mac to help homeowners since the companies were taken over in September.
The streamlined effort will target certain loans that are 90 days or more past due, these people said. The program will aim to bring the ratio of mortgage payments for these homeowners to 38% of their income by modifying interest rates and in some cases forgiving portions of principal debt, these people said.
———————————————————————————
At the Meeting
-Neel Kashkari, Interim assistant Treasury Secretary
-James B. Lockhart, FHFA director, oversight board chairman
-Brian Montgomery, FHA commissioner
-Faith Schwartz, HOPE NOW
-Michael Heid, Wells Fargo
Stop me if you’ve seen this one:
F*** the bailout.
Calling Frank’s office on Wednesday. This close to telling everyone I know to stop voting for him.
Close to telling? What on earth is stopping you?
On the 11th second of the 11th hour of the 11th day of the 11th month, who goes chapter 11?
On a lighter note:
Merrill chief sees severe global slowdown
By Greg Farrell in New York
Published: November 11 2008 14:42 | Last updated: November 11 2008 14:42
The global economy is entering a slowdown of epic proportions, comparable to the Great Depression, John Thain, chairman and chief executive of Merrill Lynch, warned on Tuesday.
“Right now, the US economy is contracting very rapidly. We are looking at a period of global slowdown, and a global slowdown in economic activity that affects everyone who participates in global markets,” he told investors. “This is not like 1987 or 1998 or 2001. The contraction going on is bigger than that. We will in fact look back to the 1929 period to see the kind of slowdown we’re seeing now.”
There is suddenly an excess supply of gloomsters. I may soon have to join the eternal optimist camp to help equilibrate the pessimism.
What about the king’s 1974 scenario?
Dec. crude falls 5.5%, or $3.41, to $59/brl on Globex
MARKETWATCH FIRST TAKE
Mortgage modification motives
Commentary: Citi is the latest to use bailout funds to aid troubled borrowers
By MarketWatch
Last update: 11:41 a.m. EST Nov. 11, 2008
NEW YORK (MarketWatch) - Big U.S. banks are making the right move by agreeing to revise terms on at-risk mortgages, but let’s be clear: these revisions will help the banks too.
Let’s be clear: The main reason these revisions help banks is because of the forced infusion of tax dollars to sweeten the deals.
“There is no such thing as decoupling,” he said, referring to the popular theory that emerging markets could sustain reasonable growth rates even while the world’s leading economies suffered through recessions. “All equity markets are linked. Each individual economy will be more or less affected, depending on reliance on global trade and commerce.”
Like DUH!!!
Makes sense to me:
Citi Jumps On Mortgage Modify Bandwagon: Does It Really Help?
Posted By:Diana Olick
from: CNBC.com
So here we go with another bank pledging to save us all from the foreclosure crisis. CitiMortgage now jumps on the bandwagon with JP Morgan (as part of a Countrywide settlement, since it bought Countrywide), saying that it will modify loans and save thousands of homeowners from foreclosure.
Of course, it’s only doing this for loans it owns, not loans that have been securitized and sold into the broader markets.
I’m all about the help, but I have some issues (I always have some issues). Citi is targeting borrowers who are not yet delinquent but who could become delinquent due to any number of issues, like loan resets, loss of jobs or home price depreciation. So I have to ask about yet another moral hazard, like a whole bunch of borrowers who might not really need to stop paying their bills each month suddenly trying to jam onto the modification train.
Yes, there will be some vetting process, one would hope, but, as Fox, Pitt, Kelton’s Howard Shapiro told me this morning, “I think there will be a lot of people on the borderline and this could encourage them to become delinquent in hopes of a better deal.”
My next issue is why now? Borrowers have been swirling around the housing toilet for more than a year now, and only in the last few weeks have the big banks suddenly said, “Okeedoke, let’s have a looksee at that loan.” Could it be all that TARP money being used to pay for these modifications? I thought that TARP money was supposed to help banks to go forward in lending, not pay for past abuses.
Now Fannie and Freddie are jumping on the bandwagon, handily enough the day before a big hearing in the House Financial Services committee, entitled, “Private Sector Cooperation with Mortgage Modifications—Ensuring That Investors, Servicer’s and Lenders Provide Real Help for Troubled Homeowners.” Please define, “Real Help” Mr. and Ms. Member of Congress!
I just have to wonder, with all these programs to help the borrowers, all these banks pledging to save the homeowners, a) given the sheer number, how are they going to have the manpower to process all these individuals and b) since many of these plans are only temporary modifications, aren’t we just pushing the problem out a few years??
CitiMortgage’s announcement that it could lower the interest rate on loans to 1-2 percent temporarily is essentially offering the same temporary teaser rate that the subprime lenders offered at the height of the housing boom. “It’s sad when the only way to ‘save’ housing and get borrowers out of default is keep them terribly leveraged by cutting their rates to 1-2 percent,” says Mark Hanson, aka Mr. Mortgage. “Exotic loans with teaser rates is what got us here in the first place,” he adds.
Wall Street Journal
* REAL ESTATE
* NOVEMBER 11, 2008
Home Inventories Decline but Remain Huge
By JAMES R. HAGERTY
The number of homes listed for sale in many metropolitan areas declined again last month.
The supply of homes available for sale in 29 major metropolitan areas in October was down 1.6% from a month earlier, according to figures compiled by ZipRealty Inc., a real-estate brokerage firm based in Emeryville, Calif. The ZipRealty data cover all single-family homes, condominiums and town houses listed on local multiple-listing services in metro areas where the firm operates.
Though inventories of listed homes have been falling, they remain unusually large. Meanwhile, some real-estate agents say sales, after improving in recent months, stalled in late September and October as falling stock prices and worries about the economy rattled potential buyers.
On a national basis, home inventories typically rise modestly in October from September. Over the past 25 years, the average increase in October has been 1.1%, according to Zelman & Associates, a research firm.
Nationwide, about 4.3 million previously occupied homes were listed for sale at the end of September, according to the National Association of Realtors. At the current sales rate, that is enough homes to last about 10 months, the trade group says. The housing market is considered roughly in balance between supply and demand when the inventory is around six months.
There is something highly distasteful about purchasing foreclosure homes — rather like hunting for road kill to use in tonight’s pot of stew.
Wall Street Journal
* HOUSE TALK
* NOVEMBER 11, 2008, 9:39 A.M. ET
House Talk
How to Buy a Foreclosed Home
By JUNE FLETCHER
For anyone wanting to take advantage of today’s buyer’s market, distressed properties offer the best chance to make a killing. But you need good credit or ready access to cash, and a taste for the hunt.
As I’ve mentioned in previous columns, searching for a foreclosure can be maddeningly frustrating. Newspaper notices of foreclosure sales are disorganized; foreclosure-listing Web sites charge hefty monthly fees; lenders post only minimal information on the properties they’ve taken back. And many real estate agents have little experience with these sorts of transactions, and don’t want to be bothered with them.
That means foreclosure buyers must be willing to do more sleuthing on their own to find the best deals. Here are some tips to get started:
Why? It’s capitalism at its finest.
You’re offering liquidity in an illiquid market. I see no problem relieving fools from their money.
Granted, there is the charitable aspect to the process, to which you refer. But I would be worried about hidden damage, as a foreclosed loanowner is apt to take out his unjustified anger on the property that is soon to be wrested from his possession.
Yeah, yeah, there are innumerable things to consider.
But I’m talking in the general, the abstract, the high-falutin’ style pioneered by the “unique institution” that I received in from — I see no basic problem in buying at foreclosure, no more than I would in buying used anything where I had information that it was worth far more than I was paying for it.
It’s called “value investing” and I suppose I’m a “value hound”.
I suppose an enterprising foreclosure buyer could either learn to conduct home inspections or hire someone who is qualified to do so, in order to assess the negative effect of hidden (and unhidden) damage by the former occupant on a home’s value.
“There is something highly distasteful about purchasing foreclosure homes”
Yes, the smell on these properties that have been locked in South Fl for months is HIGHLY distasteful.
I’ve been inside some of these.
“Sold” in 05 for 500K+
Value today = land value - demolition costs - haul debris costs + credit from county towards impact fees (there was a house there is the logic, thus depending on your square footage you do not pay total impact fees)
-
FPSS is correct
More implicit evidence here of waning home purchase demand. Why not make even better use of your space by taking on a boarder to help defray mortgage payments? Also, don’t assume your amassed equity is a positive number; for many underwater owners, it is a negative.
Wall Street Journal
* HOUSE TALK
* NOVEMBER 7, 2008, 2:19 P.M. ET
Outgrown Your House? How to Make Room
Tips on smart ways to remodel for those unwilling to trade up during the slump.
By JUNE FLETCHER
In a housing slump, homeowners who feel they’ve outgrown their homes may think about remodeling rather than trading up to a bigger house. And certainly, if you’re bumping elbows with your spouse as you make dinner in the kitchen, sharing sleeping quarters with a toddler, or having trouble carrying laundry up the stairs of a two-story house, remodeling can make sense. But if you’re just sick of the poodle-pink bathtub, then it’s better to wait a while, or look into purely cosmetic solutions like professional refinishing or relining with heavy-gauge acrylic.
Before you begin, consider how long you plan to stay in the house, how much equity (if any) you’ve amassed, and how much you need to spend to make your house equivalent to the neighbors in terms of bedroom and bath count and quality of finishes. (Remodeling in a downturn makes sense if you are bringing your house up to the standards of the neighborhood — not trying to exceed them.) Compare that with the cost of moving, keeping in mind that transaction costs plus fees for brokers and movers can easily exceed 10% of your home’s price.
November 11: A.R.M.istice Day.
This article seems very well-timed for a few minutes before a brand spanking new GSE bailout measure is scheduled to be unveiled. I keep thinking of the line from Humpty-Dumpty, “All the kings horses and all the king’s men, couldn’t put Humpty together again.”
Fail: One Word For Them All
By: Karl Denninger Tuesday, November 11, 2008 1:19 PM
Paulson, Bernanke, Geithner, Congress.
President Bush.
And if he doesn’t get on top of this, President-Elect Obama.
Let us begin by noting that President-Elect Obama voted for the $700 billion bailout - The “No Banker Left Hungry Act” - while the rest of America literally was losing their jobs and homes.
Yesterday we learned that Fannie Mae lost $29 billion in the third quarter, most of it by admitting to what they knew back in the first quarter - that a huge tax credit they had would be worthless.
Oh my word….. crude is trading at $58.xx. Peak oil is here! lmao.
Whatever did happen to all those peak oil posters here? It is as though they vanished into the darkness of the night.
BwaHaHaHAHAHHAHAHHAHHAAAAHAHAHAHAAA!!!!!!
dont forget peak treasury bills
0.20
buy now or be priced out by quantitative easing.
bwaha?
dont leave out peak banks.
DSL pricing in midweek FDIC default page as I type….
down the ole rabbit hole she goes…..
bwaha?
dont forget about peak automobiles…
GM…
crossing the rubicon…
bwaha?
dont leave out peak mobile phones.
Sprint.
once more unto the breach dear friends…
bwaha?
dont leave out peak commodities.
CRB index
dont leave out peak shipping
BDI
dont leave out….
f-ck it.
THIS SUCKER IS GOIN DOWN !!!!
sorry, I left off..
bwaha?
last one:
peak reverse 3 for 1 split.
Java aka sunmicrosystems
bwaha?
Peak oil is still valid as long as the world economy is booming
so now we put it off a few years by creating a depression……
Imagine if all those Mc Mansions had R36 walls and R52 ceilings-attics….That is where the big savings would be….plus making super efficient solar panels….Then peak oil will be for the next generation
not funny enough?
how about peak jobs?
how about peak benefits?
bwaha?
I sure hope these borrowers lied like hell on their loans.
I hope it shows up early and the country gets overwhelmed with all the fraud.
Who wants to bet not many people will even qualify for any of this new found HOPE.
The money needs to go to savers/renters instead.
I can only hope your right Ann
My salute to any and all of you gals and fellows who are Veterans.
Thank you Blue Skye. It is greatly appreciated.
Now it’s true, renters really are throwing money away on rent!
What incentive is there to buy a home anywhere in california for a first time buyer?
Three months rent free plus the possibility of giving the house back to the bank while they reduce your mortgage?
Just being imaginative.
So with Team America (f*ck yeah!)down 700-0. Someone tell me what inning it is. I see Bush is coming off the mound after being taken behind the woodshed by the Wall Street Gorillas and some new kid is coming in from the bullpen and is warming up. I left to go see a man about a mule and get a another warm, flat beer. What’d I miss.
The see-a-man-about-a-mule joke that I know now looks like an allegory for the Treasury Department:
Man goes out to the sticks to see a man about a mule for sale. Seller points out the mule, staggering down a hillside behind the house. “Hey, you can’t fool me,” says the buyer, “That mule’s blind!”
“Hell, he ain’t blind,” replies the seller. “He just don’t give a $h-t.”
Got a hot date with a 1,100 year old broad…
I must admit that when we first started dating, I was a little uneasy about her being so much taller than me, the ultimate Napoleon Complex, I suppose.
Glad she’s not a board!
She can’t be; she shatters on contact.
BWAHAHHAHAHHAHAHHAHHHHHHHHHHHHHH!!!
I swear I heard that!
Went looking at a few stores that are going BK. They are advertising “sales” but they are far from it. One item the wife almost bought 2 months ago for $35 was marked down 25% - from $80.
Lots of games out there. Buyer beware. Going out of business sales and big Christmas sales might be total bullshit.
Bailout measure number ??? — can’t criticize the Fedury for not trying to find the right hair-of-the-dog cure for the housing mania hangover.
SPECIAL REPORT AMERICA’S MONEY CRISIS
U.S. unveils mortgage plan
Effort focuses on Fannie, Freddie - sets standards for private sector. No direct financial help from U.S.
By Chris Isidore, CNNMoney.com senior writer
Last Updated: November 11, 2008: 3:17 PM ET
AMERICA’S MONEY CRISIS
* Pelosi supports help for auto industry - source
* GM: Stock sinks to 65-year low
* U.S. unveils mortgage plan
* Here for the holidays: Slow sales and layoffs
* Wall Street’s recession jitters
-Rising foreclosures have put increasing pressure on the housing market.
-’Underwater’ mortgages rise
-The trouble with ARMs
NEW YORK (CNNMoney.com) — The Bush administration on Tuesday unveiled a new program to modify mortgages and stabilize the battered real estate market, but the plan stops short of providing direct government financial help to at-risk homeowners.
The plan centers on Fannie Mae and Freddie Mac, which between them own or back about 31 million mortgages worth a combined $5 trillion. The federal government took over the firms in September due to mounting losses on their portfolios of mortgages.
Homeowners who are 90 days or more late in their mortgage payments, who live in the home on which the mortgage was taken and have not filed for bankruptcy are eligible - assuming that loan is owned by Fannie or Freddie.
Their mortgage payments would be adjusted through lower interest rates or longer repayment schedules with the goal of bringing payments below 38% of monthly household income.
and now for something completely different
granma.cu/ingles/2008/octubre/vier31/Reflections-30oct.html
Who knew that old fart was smart?
But he’s right. Just how many plastic keychains do we need?
MarketWatch.com
November 11 2008 4:15 P.M. EST
Bulletin
Major U.S. stock indexes finish down 2%; crude closes below $60 a barrel
Consumer woes rattle Street
Stocks slide into a second day as fears that the economy will slam companies’ earnings weigh on investors.
Economy first
President-elect Obama’s first priority remains the economy, a member of his transition team says. But he won’t be meeting with G20 leaders.
• House Speaker Pelosi seeking automaker rescue
Can US Be Approaching Bottomless Pit of Bailouts?
Addressing the housing crisis is far more important than aiding poorly run businesses that are failing, says Meltzer and other economists.
Though there’s a debate over how far the government should go in propping up housing prices, Meltzer says there are common-sense measures that can be taken.
In particular, he wants the government to provide tax credits to anyone buying a home until the end of 2009. That would drive up demand for homes and push prices higher, solving many of the problems vexing the market.
http://biz.yahoo.com/cnbc/081111/27662540.html?.v=1
Has this guy been listening to Bob Troll???
“That would drive up demand for homes and push prices higher, solving many of the problems vexing the market.”
I find it quite hard to believe how many reputable economists have jumped on the bandwagon of housing price supports through artificially stimulating purchase demand as a cure all for the housing bust. Is there a single source in all the myriad economics text books which suggests this is a sound policy? I challenge anyone and everyone to site a single reference to a theoretical basis for this idea in a book or academic paper by a reputable author (including Benrnake).
Accidentally caught Sean Insanity on the radio today. Man, his head was about to explode.
That dipshit is one bitter fool. Hey Sean, your party brought all this down on themselves. Need someone to blame?
Look in the mirror.
There’s an old saying about how criminals are the heroes of the story in their own minds.
More stimulus is on the way — for everyone!!!
Financial Times
G20 set to unite on stimulus
By Chris Giles in London
Published: November 11 2008 19:32 | Last updated: November 11 2008 19:32
(Job-seekers at a recruiting fair in Wuhan, Central China)
A globally co-ordinated fiscal stimulus is emerging as a unifying theme ahead of the Group of 20 summit this weekend.
In part, tax cuts or public spending increases appear attractive because interest rates have lost some of their power to boost economies as most of the world’s economies enter recession. More importantly, they are something on which leaders of most advanced and emerging economies agree.
There are huge differences between continental Europe and Anglo-Saxon economies over the degree of regulation to impose on the financial sector and little common ground over how to increase the representation of emerging markets in the International Monetary Fund. With no time to dream up a new global financial architecture, and a lame duck US administration, fiscal policy is one issue that will enable a degree of unity to emerge in the Washington summit.
Five of the world’s six largest economies will be able to sign up immediately.
The US sent tax rebate cheques to most households earlier this year and Barack Obama, the president-elect, has called for a second fiscal stimulus package.
Financial Times
World Bank urged to lift trade credit finance
By Frances Williams in Geneva
Published: November 11 2008 17:14 | Last updated: November 11 2008 17:14
Banks and businesses will on Wednesday urge the World Bank and regional development banks to step up their trade finance programmes to help combat a trade credit shortage that threatens to throttle the flow of goods around the world.
This is one recommendation expected to emerge from an expert meeting of the main global players in trade finance convened by the World Trade Organisation in response to mounting concern about the impact of scarce credit on already depressed trade volumes.
REAL ESTATE NOVEMBER 12, 2008
Toll Brothers Sales Sink to New Low
Luxury Home Builder Cites Wave of Late Cancellations, but Strong Liquidity Staves Off Need to Slash Prices
By MICHAEL CORKERY
Troubles in the home-building industry keep getting worse. Toll Brothers Inc. said Tuesday that customer traffic and sales hit record lows last month, as the financial meltdown spooked an already weak market and triggered a wave of contract cancellations.
Chief Executive Robert Toll said signs of stabilizing conditions through the summer and into early September were “upended by the past month’s financial crisis” and the fear of job and stock-market losses.
The Horsham, Pa.-based company, which builds higher-cost homes, took orders for just 539 houses in its fiscal fourth quarter ended Oct. 31, down 27% from a year ago.
latest news Japan’s Nikkei 225 down 2.1% at 8,627.68
Citi unveils housing relief plan
Banking giant steps up efforts to avoid foreclosures
By Sam Mamudi, MarketWatch
Last update: 11:33 a.m. EST Nov. 11, 2008
NEW YORK (MarketWatch) — Citigroup Inc. on Tuesday released details of a plan that it said will help mortgage borrowers remain in their homes.
Citigroup said that under the Citi Homeowner Assistance program, it would preemptively contact 500,000 mortgage holders — involving $20 billion of mortgage balances — to try to ensure that they can pay their loans. It said it is focusing on borrowers who live in areas that are likely to face “extreme economic distress.” Read MarketWatch First Take commentary.
Citi also extended its moratorium on foreclosures, saying it won’t begin or complete a foreclosure sale on a home on which it owns the mortgage if the borrower wants to stay in the home, which is his or her principal residence. Citi said it will also need to be sure the borrower is working in good faith with the bank and has enough income for affordable mortgage payments.
“Under our new program we will preemptively reach out to help homeowners before they become delinquent, which is critical to avoiding the loss of a home and protecting their credit score and future borrowing potential,” said Sanjiv Das, chief executive officer of CitiMortgage.
Citi stock was down about 1.5% in early trading Tuesday, at $11.04. The stock has fallen 62% this year and 20.6% over the past month.
Great investing advice…
OPINION
NOVEMBER 12, 2008
Is Now the Time to Buy Stocks?
Here is what the historical evidence suggests.
By JOHN H. COCHRANE
The markets are chaotic. The stock market (S&P 500) is down 34% for the year, and 17% in October alone. Volatility, which measures how much stocks move unexpectedly in a year, is even more dramatic. It’s usually around 15%, but daily volatility in October was 75% on an annual basis. Meanwhile, the financial crisis continues. Is this the prelude to further losses, as in 1929? Or is it the mother of all buying opportunities? Even if we think the market is a bit undervalued, does huge volatility pose an unacceptable risk of catastrophic losses?
…
And what about volatility? Stocks could easily fall a lot more. The standard portfolio rule says that your stock percentage should rise with the expected return (stocks and bonds) divided by squared return volatility. So, if you were happy with a 50/50 portfolio with an expected return of 7% and 15% volatility (standard numbers), 50% volatility means you should hold only 4.5% of your portfolio in stocks!
Now, I might answer that, knowing this, everyone has tried to sell, pushing down prices and pushing up expected returns. But expected returns would need to rise from 7% per year to 78% per year to justify a 50/50 allocation with 50% volatility. Prices have not fallen anywhere near enough to make this a sensible forecast. Many sophisticated investors and hedge funds who use this standard formula are getting out, waiting for at least a return of lower volatility before getting back in.
The answer to this paradox is that the standard formula is wrong. It assumes that stocks are a random walk, and the chart tells us otherwise. Stocks act a lot like long-term bonds — when prices decline and dividend yields rise, subsequent returns rise as well.
Good bond investors know this. If you have a 10-year Treasury indexed bond, and a 10-year liability (say, you want to retire in 10 years), and you desire complete safety, you can ignore quarterly statements. If you see interest rates rise, bond prices tank, and bond volatility go through the roof, you would be foolish to call your broker and cry, “We’ve got to sell! I can’t take any more losses.” If bond prices go down more, bond yields and long-run returns will rise just enough that you face no long-run risk. (Foolish or not, many bond investors pay far too much attention to short-term returns.) Stocks are much riskier, of course. But the same logic explains why you can ignore “short-run” volatility in stock markets.
The average person must end up holding the stocks and bonds that are out there. Therefore, you should only ever buy, sell or rebalance if you’re different than the average person. We all like to think we’re smarter than average, but at least half of us are deluded, so that’s a dangerous way to invest.
If you’re less leveraged, less affected by recessions, and have a longer horizon than the average, it makes sense to buy. If you’re more leveraged, more affected by recession or have a shorter horizon, it might be the time to sell, even though you might be cashing out at the bottom. If you’re about the same as everyone else, do nothing and relax. If you’re wrong, at least you will have excellent company.
Mr. Cochrane is a professor of finance at the University of Chicago Booth School of Business.
As More Companies Seek Aid, ‘Where Do You Stop?’
11 Nov 2008 | 06:17 PM ET
The US government could be entering a bottomless pit of bailouts if it starts propping up failing companies outside the financial sector—including the struggling auto industry, economists say.
With both Ford [F 1.80 -0.13 (-6.79%) ] and General Motors [GM 2.92 -0.44 (-13.1%) ] coming treacherously close to severe cash shortage, Congress will convene next week to consider emergency aid for the troubled sector.
Many economists are against the idea, saying an auto maker bailout would open the door to a taxpayer rescue of virtually any major company with cash problems.
“Where do you stop?” says Bill Isaac, former chairman of the Federal Deposit Insurance Corp and now managing director at the LECG global consulting firm in Vienna, Va. “Circuit City’s [CC 0.13 0.035 (+36.84%) ] going down. Do we help them? What do you do if Starbucks [SBUX 9.99 -0.21 (-2.07%) ] gets in trouble? Do you help them?”
Well, playing devil’s advocate for a second, is there any other industry (besides financials) that has so much other employment dependent on it?
Parts mfacturers, dealers, etc?
Then again, I drive my cars for about 8 years. Do we really need a new car every 2 years? I think the heavy MEW years of the past decade masked and delayed what should have been a faster decay of this industry.
U.S. mortgage plan falls short
“NEW YORK(CNNMoney.com) — The federal government’s plan to streamline modifications of troubled loans held by Fannie Mae and Freddie Mac won’t help the majority of people threatened with foreclosure, experts said.
The program does not address the heart of the problem — troubled loans held by private investors.
Though Fannie (FNM, Fortune 500) and Freddie (FRE, Fortune 500) own or guarantee 58% of all mortgages on single-family homes, these loans represent only 20% of serious delinquencies. The majority of the problem mortgages were bundled into securities, which were sold in pieces to investors.”
As a friend once said to me while discussing a landslide in S. Cal for which efforts were being made to shore up the hill and save a few homes: “If the mountain wants to move, YOU LET THE MOUNTAIN MOVE!!”
Different kind of landslide this time. Same story.
dang, didn’t mean this to show up here. See below for linky.
Government Rescue Spending: Clear or Cloudy?
Critics Question Transparency of the Treasury Dept., Federal Reserve on Rescue Effort Spending
By ALICE GOMSTYN
ABC NEWS Business Unit
Nov. 11, 2008
How much will the AIG bailout ultimately cost? What are the banks applying for the government’s $250 billion capital purchase plan? Who is the Federal Reserve lending to and how can taxpayers be assured they’ll get their money back?
Federal Reserve Chairman Ben Bernanke and Treasury Department Secretary Henry Paulson are central figures in the government’s efforts to rescue the country’s financial system — efforts that, thus far, have aroused the concerns of critics concerned with the transparency of the government’s plans. After weeks of sometimes frenzied efforts by the federal government to rescue the financial system, and on the heels of the government’s latest move — the announcement of a new $40 billion infusion to the ailing insurance giant American International Group — critics say there are many questions but few answers about the work performed by the Treasury Department and the Federal Reserve.
“The bailout, the Treasury, the Federal Reserve — it’s like a three-card monte game, you don’t know where the money’s coming from, you don’t know who it’s going to, and I think the public has every right to be outraged by this,” said Bill Allison, a senior fellow at the Sunlight Foundation, a government transparency watchdog group.
Gerald O’Driscoll, a former vice president at the Federal Reserve Bank of Dallas and a senior fellow at the Cato Institute, a libertarian think tank, said he worried that the failure of the government to provide more information about its rescue spending could signal corruption.
Govt. Grinds Gears in Auto Industry Conundrum
Congress Weighs Aid For Car Companies; Skeptics Question Fairness
By CHRIS BURY
Nov. 11, 2008
With stocks for GM and Ford in a tailspin, the combined worth of the two companies is less than the value of Auto Zone, a parts retailer. But after Congress rode to Wall Street’s rescue, can the government just say no to American automakers that are sinking?
Your Money
Negotiating Better Terms for Mortgage
By RON LIEBER
Published: November 11, 2008
You don’t need to be behind on your mortgage payments to ask for a better deal from your bank.
Surprised? It’s easy to see why. The government’s announcement on Tuesday that Fannie Mae and Freddie Mac would modify terms for borrowers who are at least 90 days late with their payments makes it seem as if only the delinquent are eligible for a personal bailout.
But 90 percent or so of homeowners are still current with their payments, and for them, it has often seemed as if the banks were playing a game of chicken. Sorry, but until you blow off the payments for a few months running and wreck your credit in the process, the lender won’t even consider renegotiating the terms.
U.S. mortgage plan falls short
“NEW YORK(CNNMoney.com) — The federal government’s plan to streamline modifications of troubled loans held by Fannie Mae and Freddie Mac won’t help the majority of people threatened with foreclosure, experts said.
The program does not address the heart of the problem — troubled loans held by private investors.
Though Fannie (FNM, Fortune 500) and Freddie (FRE, Fortune 500) own or guarantee 58% of all mortgages on single-family homes, these loans represent only 20% of serious delinquencies. The majority of the problem mortgages were bundled into securities, which were sold in pieces to investors.”
moneyDOTcnnDOTcom/2008/11/11/news/economy/gse_plan_analysis/indexDOThtm
As a friend once said to me while discussing a landslide in S. Cal for which efforts were being made to shore up the hill and save a few homes: “If the mountain wants to move, YOU LET THE MOUNTAIN MOVE!!”
Different kind of landslide this time. Same story.
Norman reduces by $17.5 million asking price of Jupiter Island home
Click-2-Listen
By NADIA VANDERHOOF
TCPalm.com
Wednesday, November 12, 2008
JUPITER ISLAND — The housing slump is affecting even the most luxurious properties on the Treasure Coast.
Professional golfer Greg Norman has slashed the price of his famous barrier-island estate that gained worldwide fame when then-President Bill Clinton injured his knee there in 1997.