Bits Bucket For December 10, 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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Mortgage Troubles Are Moving Downtown…
He recently missed part of a $319,000 monthly payment on a $66.5 million mortgage for 60 Madison Avenue, a second-tier Midtown Manhattan office building that he refinanced in April 2007, Commercial Mortgage Alert, a trade publication, reported in October. The cash flow from the property does not come close to what was projected in the loan documents, according to Realpoint, a credit ratings agency which has put the loan on its watch list.
http://www.nytimes.com/2008/12/10/business/10default.html?_r=1&ref=business
Article highlights that even the newer refinances were reckless - very sobering and true to the fact that high finance is still business and usual and turning away from the handwriting on the wall.
This one commerical building default will equal 130 mcmansions. Article predicts commerical defaults will accelerate through 2012 and have not even begun to weigh in. So commerical seems to be somewhat behind residential - but far larger hit to banks and investors.
What I don’t understand is why investors are still holding these commerical r/e bonds? Why would they not sell? Article says investors were shocked to learn Morgan turned over bonds to special servicers to help with troubled assets.
Is there any place to see the performance of these commerical loans? Are these bonds or stocks? Is performance of this paper not yet indicating trouble and that is why these investors don’t sell?
Q Ratio Signals ‘Horrific’ Market Bottom, CLSA Says…
The ratio, developed in 1969 by Nobel Prize-winning economist James Tobin, indicates the Standard & Poor’s 500 Index is still too expensive relative to the cost of replacing assets, said Napier. While the 39 percent drop in the S&P this year pushed equity prices below replacement cost, history suggests the ratio must sink further as deflation sets in, he said. The S&P may plunge another 55 percent to a trough of 400 by 2014, the strategist said.
http://www.bloomberg.com/apps/news?pid=20601087&sid=aKNSK0gYlqB0&refer=home
“Before the trough in 2014, investors are likely to see a so-called bear market rally for the next two years as central bank actions delay the onset of deflation, he said.”
“At the end of the four largest U.S. bear markets in 1921, 1932, 1949 and 1982, the Q ratio fell to 0.3 or lower, and history is likely to repeat, said Napier. From the 1982 trough, the S&P 500 grew more than 14-fold to the middle of 2000, when Napier says the last bull market ended.”
“The government’s efforts will eventually fail as ballooning government debt devalues the dollar, causes investors to flee U.S. assets and takes the S&P 500 to its eventual bottom in 2014, Napier said.”
My sense from other sources and the experiences of the GD was that we might be looking at a near term rally before an eventual bottom. This is the best explanation I’ve seen as to how and why this might happen along with a timeline and historical comparison. However, are central bank actions going to be able to delay the onset of deflation for as long as two years? Could the rally be shorter and the bottom sooner?
be happy that you don’t have to wait 10-20 years for the bottom, like in Europe …
While the U.S. might get to the “bottom” sooner than Europe, it might still be near that bottom in 10 to 20 years. There are still a multitude of long term structural problems that the U.S. has yet to address.
Sell the rallies and get out while you can, IMHO.
The overshoot low of 400 makes sense to me. What is horrific is that it won’t occur until 2014. What does that say about the economy until then? Triple dip recession?
maybe WallStreet can arrage that for the next five years the S&P index oscillates between about 500 early in the year and 1500 near Christmas, in order to get the maximum bonuses (and a fresh start with a crash every year, to beg for some more bailout money for Wall Street and company).
I am coining the word Decession to describe a recession that continues as long as a depression, but not quite as severe.
What will you call it if it is rather more severe?
severecession?
Defecession.
Pun of the day award here.
Mobadession
I thought we’d just calling it turning Japanese
Without MEW expect Japanese style economic malaise, cycles of hope and despair. Louise Yamada has a nice description of the current structural bear market on u t-u-b-e. Napier wrote ‘Anatomy of the Bear,’ an in depth study of the last 4 major bear markets and things to look for at the bottom.
A permanent step downwards in living standards will look like an oscillating recession with small recoveries. Each time, the lows will be lower and the highs will be lower, and the gap between them will decrease as we settle down into our new, perma-hosed economy.
I’m loving this whole Blagojevich brouhaha. From the Tommy Christopher blog on Political Machine:
“The Obama press office just sent out the following statement, via email:
STATEMENT FROM SENIOR ADVISOR DAVID AXELROD
I was mistaken when I told an interviewer last month that the President-elect has spoken directly to Governor Blagojevich about the Senate vacancy. They did not then or at any time discuss the subject.
That should put the entire matter to rest. What? No?
Axelrod’s statement is in reference to this appearance on Fox Chicago Sunday, Nov. 23.”
Blago was awesomely unrepentant on TV yesterday. Makes me wonder…Oh, and BofA ended up agreeing to lend money to that window and door company in Chi-town so they could sever their employees. This after Blago threatened to bar the bank from doing business in the state of Illinois.
“This after Blago threatened to bar the bank from doing business in the state of Illinois.”
That should be “doing business WITH the state of Illinois”.
Anyway, you go, Blago! Show American how it’s really done. And don’t sugarcoat a thing!
“Blago! Show American how it’s really done.”
From what I know of Florida and New York, it can be much different…
Did you see Crist appointed a car dealer/ex-NFL player to the state educational board?
http://www.theonion.com/content/node/52822
You know Palmy, the whole reason he was arrested at his house was to help keep the president-elect squeaky clean.
At that level, there’s honor amongst theives and typically the perp’s lawyer gets the call first - and the lawyer quietly brings his client into to be “processed”. Blago got thrown under the bus Chicago style - in plain sight for all to see.
Oh, and that whole BoA flap, the budding Marxists I work amongst, already have concocted elaborated stories of Blago’s martyrdom at the hands of the big bad banks. Get real, the guy was crook not a crusader.
The guy is a crook, absolutely.
It’s no freakin’ secret — anyone connected to Illinois politics knows Blago’s guilty of a lot more that this. He knew he was being investigated, and he still mouthed off over the phone. (Roll eyes — what an arrogant, stupid SOB.)
But there’s no evidence that the president-elect was playing ball with him. In fact, Fitzgerald has the governor on tape complaining that the incoming administration refused to give him any kickbacks or quid pro quo.
They best treat Blago nice or he might sing to high heaven.. nobody wants a big ol’ scandal before the swearing in ceremonies..
If needed, he can be “disappeared” if that were a threat. Hey, with Hillary on board, along with other Clinton retreads, “disappearing” people may be the new thing to do!
Hope Blago isn’t planning on going on any solo plane flights any time soon… or skiing, etc.
That did seem to be a problem early on. I guess Blago will take a stroll in the park pretty soon.
I’m curious about the candidates and who was trying to buy as much as who was going to sell.
Good luck with your presidential selection everyone.
Blago’s own words prove that Obama wasn’t going to play along with him, as in “all they (the Obama camp) are willing to give me is their appreciation? F*** them!” regarding Obama’s suggestions for his possible replacement . Obama has always been cool to Blago. Smart man, our Prez-elect.
Blago’s got little to sing about that the Feds don’t already have on tape. With him, the corruption begins and ends at his own desk.
The thing I find most disturbing about Blagojevich is his hair. I am not usually this superficial, but I his hair really, really annoys me. I think it tops The Donald for its annoyance factor. It looks like someone took a toupee and slid it halfway down his forehead before gluing it on.
Bad, bad hair, yes…worse than the Donald, no. That hairsprayed mess of an excuse for hair swirling atop Trump’s noggin is more offensive than words can describe. Got a match?
Got a match?
Yep. Donald Trump’s mouth, and my goldfish’s.
Well it looks like many Americans were ‘victims’ of an ‘unfair’ recession that one one saw coming and it is now going to get ’scary’….
Worst Spending Slump Since 1942 Extends ‘Scary’ U.S. Recession…
Dec. 10 (Bloomberg) — The biggest slump in U.S. consumer spending since 1942 will extend the recession and push the jobless rate to the highest level in a quarter century, according to economists surveyed by Bloomberg News.
Household spending will drop 1 percent in 2009, the biggest decline since after the attack on Pearl Harbor, according to the median estimate of 51 economists surveyed Dec. 4 through Dec. 9. By the middle of next year, the economy will have shrunk for a record four consecutive quarters, the survey showed.
http://www.bloomberg.com/apps/news?pid=20601103&sid=ado8P..GCtC4&refer=us
Yesterday I stopped at the local Post Office shortly after the noon hour to send a couple of Christmas packages off to some family members up North. The place was scary dead. During lunch hour. On a weekday before Christmas. I commented on it to the clerk and he said that last year, the lines started the day after Thanksgiving and it didn’t let up until just before Christmas. This year, the place is slower than a humid Florida summer morning in the dead of August.
Saturday, wife and I went to Freeport, ME, home of LL Bean and many outlets. There was no traffic, plenty of parking, small check-out lines and no wait at the restaurants. Also, there were some incredible deals on clothing.
Flashback to our trip last spring (not even the holidays). Traffic began at the highway offramp, checkout lines were out of hand, parking was a nightmare, getting a seat at a restaurant was painful.
The deal of the day was a pair of Gap Corduroy pants for the price of 2.5 Starbuck coffees.
same thing at Kittery
Say, I know a couple posters last week were saying again how quickly things are shipping from places like Amazon.
Well, on Sunday my sisters and I pooled all our gift orders together for one bulk order from Amazon. There was a wide range of movies, books, and other stuff in a whole range of genres. I insisted on the free shipping - pointing out that there was plenty of time left. They ribbed me that doing so would “ruin” Christmas.
The entire order shipped the very next day. Now either they have extra staff on to handle the rush - or business is dead. Time will tell.
Another dead business.
I go to the same Valvoline oil change joint every time. On Monday at 5:00pm I pulled in, no other customers. Start talking with the guys, turns out I’m the 27th customer of the day. On a normal monday by 5:00, they typically see 65-70 customers.
Said it had been like that since Thanksgiving, every single day.
People are driving less
People are changing their own oil to save money.
I recently reopened my tool box after dealer gave me a 1100 dollar estimate on brakes, and changing a PVC valve. I did the work for 300 dollars in about 4-5 hours.
I agree on doing brakes yourself, and used to change my own oil but since I no longer have a driveway to do it in, I’m outta luck. Besides, for $40 to get it done saves me the hassle of getting under the car (too low to get there comfortably) and having to take the oil back to get recycled here in the city.
The guys were saying they’re seeing the regular customers that were religious 3000 or 5000 mile intervals stretching out the interval to 10000 miles instead of an actual reduction in customers.
Oh yeah, and the ‘lectric company called them while I was there, saying they were 60 days late on their latest electric bill. That one cracked me up, apparently corporate may be having some communication problems.
My GM dealer sends out coupons once a year that say “We haven’t seen you in a while! Come in for a FREE oil change.”
Since I only put about 3000 miles/year on my car once a year is about right. I haven’t paid for an oil change in 10 years.
(My office is 4 block north of my house, I only drive to/from airport and shopping on the weekends!)
Reuven, you’re a man after my own heart.
I used to walk to work, but decided it made me too lazy (you know, roll out of bed late, throw on uniform, trot over half-asleep), so I moved a little farther away and now I bike four times in 15 min intervals every day. (4 = home for lunch, natch) It doesn’t seem like much, but I get MUCH better results in the gym now. *big grin*
There are a number of synthetic oils out now that have really high mileage limits between recommended changes. Mobil One Extended Performance is good for 15,000 miles. Seems like a no-brainer for the change-it-yourself crowd.
I’m reluctant to use the 10-minute places and prefer Sears. The former often try to snooker you into replacing your transmission fluid because it’s no longer red. The “red” is a temporary dye to differentiate it when it is installed/added - it’s normal for it to turn brown over time.
In Vermont over the weekend. Friend got a 10:30 p.m. Fed Ex delivery, guy in an Enterprise Rent-a-van. Fed-Ex is smart to only lease extra trucks when they need them, but the 10:30 delivery was wrong imo. Luckily he didn’t wake the kids.
Not everywhere is dead. The business I work at was processing shipping until after midnight the day before yesterday. Orders are running approximately the same as last year.
The local Long Island City PO has cut back hours right at xmas time…They used to open at 8 am now it’s 9, and used to stay open till 7pm now its till 5 pm on MWF…..
“The place was scary dead. During lunch hour. On a weekday before Christmas.”
It’s getting a bit creepy, isn’t it? We did our Christmas shopping Monday in the Palm Springs area. Normally, this time of year it’s JAM PACKED everywhere, because the snow birds are back and spending their retirement money. Not this time. Everyplace….Sam’s Club, Super WM, The Mall, Petsmart, even IHOP and the coffee pub were dead, dead, DEAD.
I got great service everywhere, though. And our food at IHOP (the Int’l House of Obese People) got to us VERY fast. I’d barely gotten a gulp of coffee first.
Speaking of service…I walked into Lowes yesterday.
First stopped to get a lighter. No sooner was I looking at them that someone was there asking me if I needed help.
Then walked to the back to get some Ridx, I got “help” again along the way.
Then returned to the front of the store to pick up some paint sample cards, I had the numbers wrote down and knew exactly which ones I wanted. Walked straight to it and within 10 seconds AGAIN had someone asking me if I needed help.
It was a weird experience. I wrote it off as an anomoly…I plan to return to Lowes again in the next few days so we’ll see if it happens again.
My local Lowes here in Boise was deserted yesterday. I just dropped by for a couple of 2 x 4s to build a target stand. Only one checkout line was open, with no waiting.
Still little sign of a slow-down here in Maryland, or maybe I am just missing it. At any rate, we don’t have all those “yucky” subprime loans here - just top quality Alt-A and Option ARMS, and those can’t go bad, right? And everyone here is rich because of DC… yeah, really!
Our local Home Depot is dead in the mornings now. I drive past every day around 6:45 and the lot used to be full of contractor pickup trucks. I counted one truck in the lot yesterday.
Your lucky, my Post Office is closed during lunch.
Plus they have removed the machines that sell single stamps and installed machines that take credit cards only. Minimum purchase is now 18 stamps now.
I know it doesn’t make sense but I’ve been to the local mall here in Pleasanton, CA a few times just to check out the action and the parking lot has been just as packed as ever. As for whether anyone is buying anything,…
Skip,
We have those machines here. Assuming they’re the same, can’t you send individual envelopes and get the appropriate amount of postage. IOW, instead of buying a stamp, put the envelope on the scale and weigh it and have it tell you that you need to purchase the stamp. If memory serves, minimum purchase was 3 stamps but I swear at one of them I only needed to pay .42 to send a letter.
I can agree about the post office this year.I still help my old boss with networking in the distribution facilities. The rule for years was, no contractors after NOV 15- JAN 5. This year were on the floor right now. Packaging volumes are the same as throughout the year.
That reminds me–what the **** happened to the snowbirds?
Don’t tell me they were all “all in” in the stock market!
Hahahahaha!!! I did see two Lincoln Towncars today (ugly cars) but the one I was close to had GA plates, so really not a snowbird at all. I know the restaurant business here is contracting (and crying) so it’s not a good thing, but I must admit some Schadenfreude given the way those entitled big dogs used to wheel their guzzlermobiles around every winter.
Oh, they showed up last year… yeah, that was funny… while I was shorting the market for all I was worth. Wow!
Those town cars don’t get as bad of mileage as you might think. Equal or better than your typical “crossover” SUV; better aerodynamics combined with V-8 torque and very tall gears.
The big 4×4’s are what get truly awful mileage; my roomate in college had a 91 K-1500 Scottsdale with 350 and 3.73 gears, he was lucky to see double digits even with a manual transmission. Newer trucks are a little better but are even larger; EPA estimates are only accurate if you drive conservatively at the speed limit (usually only applies to beat up old work trucks, not poser-mobiles).
the FEDs must be doing something wrong, as government agencies in Europe are predicting a Goldilocks scenario for Dutch (and other) consumers next year
Wages are increasing strongly (3-5% yoy plus often big one time bonuses), while purchasing power is expected to increase several percentage points thanks to lower prices for almost anything. The lowest mortgage rates ever will be another boon for consumers, so spending could increase significantly.
Only people on fixed income like pensioners and self employed people (without social security entitlements etc.) will see their purchasing power decline (strongly). And of course, the government deficit will swell like never before, instead of declining as predicted just a few months ago.
The ‘Sinterklaas’ inkopen (our flavor of Thanksgiving) were up 3% over last year, and Christmas purchasing is expected to increase at least 3% as well. Somehow I get the feeling that our economists might be missing something…
Wages are increasing strongly On this side of the pond, wage increases are un-American.
(Household spending will drop 1 percent in 2009)
I believe it will have to drop 6 percent just for people, collectively, to stop going deeper into debt.
1% sounds low to me, too. We have a NEGATIVE savings rate; most people’s lifestyles were based on borrowed money.
is it just me or does the timing of the illinois guvs arrest seem suspiciously close to his announcing the state boycott re BofA !?
perhaps the bank pressured the feds to step up the arrest date to ease the pressure on ‘em to play ball for the factory workers?
dunno, maybe I’m reading too much into it but still …
(also, looks like a young dan akroyd)
No, no, no! Don’t feed into the myth that this guy was some kind of protector of the working man. He was crooked and an embarassment and if left alone sooner or later he would have tainted the president-elect.
BoA didn’t make any “calls”. If anything, the calls that were made on this one were made to Hyde Park, not Wall Street.
Ding, ding, ding…
“if left alone sooner or later he would have tainted the president-elect.”
The Bushies just did Obama a big favor.
The Bushies?
The same prosecutor convicted Georgie’s pal Scooter and tried to get the goods on Dickie Boy — he’s been after Blago for a couple of years now. Fitzgerald is no friend of Georgie’s, though he is a Republican appointee.
Fitzgerald prob’ly has a ton of dirt on the guv, but he is a methodical man. Seems like he doesn’t move for an indictment unless it’s a sure thing.
According to recent reports, it was RahmEmmanuel who threw Gov. whateverhisnameis under the bus with a call to the FBI.
Patrick Fitzgerald who is leading the case against the Illinois gov is the same attorney that went after Libby Scooter (I believe). So how did the Bushies do Obama a favor?
…”would have tainted Obama…” ?? The Obloviator wont talk his way out of this one and the bad smell from that empty suit reaches from one end of this country to another. The changing of the things that were said by his “advisors” is laughable.
The only thing laughable is the angry, desperate and unsuccessful attempts to tear down a president elect who has massive public support by the barking moonbat minority.
The shoes on the other foot now. How’s it feel? makes you little angry doesn’t it? four more years.
No anger but it sure is hilarious considering the shrinking minority of knuts.
Carlos, do yourself a big favor and read “Dreams from My Father.” (First published in 1995.) You’ll feel a lot better about our “empty” new President and his Chicago background. And your blood pressure will likely thank you.
They very likely announced it now, so Blago won’t be able to fill the Senate spot. If he did, then it would be an even bigger mess to remove that person from office.
then it would be an even bigger mess to remove that person from office The US Senate as a body can refuse to admit someone as a Senator.
So how was it that they let Bella Abzug in? Lol, just kidding. (She was a House rep anyway–they let anybody in there.)
Senate Candidate #5, who apparently offered to pay for the Senate seat, was Jesse Jackson Jr. So, yes, they had to stop that before it went forward…
Triple J? Thank goodness they took him off the table … People outside IL don’t realize it, but he stinks as bad as the Daleys.
Him trying to buy a seat does NOT surprise me… he’s been involved in crooked dealings trying to get elected (didn’t work).
OlyGal, here is the latest (I promise I won’t spam the bits with my littleman)
http://i117.photobucket.com/albums/o72/muggyFL/2767.jpg
It hasn’t changed my bubble strategy, but my wife wants a house bad. She’s cool about talking it out, and she knows she’s being irrational, but doesn’t care - she wants one “because.” It’s easier to defer, since our plans involve moving within the next year. We’re really, really lucky that we have amazing landlords or I’d be beside myself. I
I’m not sure what we’ll do once we get back to upstate NY. I’ve noticed online that wishing prices there are out of control. We’ll probably rent for a year, but I don’t know if I can make the wifers wait.
“I’m not sure what we’ll do once we get back to upstate NY. I’ve noticed online that wishing prices there are out of control. We’ll probably rent for a year, but I don’t know if I can make the wifers wait.”
Introduce her to exeter. He has a big advantage in his ability to make the case for renting without worrying about getting “cut off.”
I grew up in a house that my parents owned, but we were in an apartment until I was three, I think. I have absolutely NO memories of the apartment. Nothing. Zilch. Nada. My earliest memory is of my mother putting me to bed in my room in our house. Don’t let your wife make the munchkin the reason for needing a house. He won’t remember much about a rented house or apartment. If he does, he won’t care.
Now, your wife wanting to be “settled” after a big move is another issue. Can’t help you there.
Our kids are a lot older than yours, Muggy (very cute, BTW!!!), and they don’t care one bit that we rent.
Your wife probably has her reasons, but trust that the little guy isn’t going to be teased in preschool because his parents are “renters”.
Best of luck to you, whatever you do!
You don’t know if you can make her wait? Dude, you’re pathetic! You deserve an over-priced home. You need to worry less about where you’ll live and more on where the heck your testicles went. (uh-oh…..personal attack alert…..I feel a banning coming.)
Lol, I’m'a tell her what you said, then hit her with a beer bottle. Is that better?
What else are you an Ex of?
Muggy,
Cutest baby!
When my hubby goes all “I want a house now” I lock him in the closet for a week.
Of course I feed, water and give him sunshine.
Get a rental with a locking closet, that’s what I say!
Leigh
Make the comparison contain the kid. For example, “If we wait a year or two, the savings will pay for junior’s college education.” Plus, as a kid I don’t remember anything prior to 3 years old.
“Plus, as a kid I don’t remember anything prior to 3 years old.”
This is so true…
My earliest memory was watching Americans walk in space in 1965.
I was 3.
My first memory was the day my sister was born. It was a traumatic experience, as I had been the only child up to that point. B-E I was 18 mo.s old.
However, at this point, all I can remember is having the memory (like, replaying it when I was 8, and how I interpreted my reactions) rather than the memory itself. I think my brain has moved on. 8^D
My earliest memory was watching the lunar landing in ‘69. I was only two-and-a-half, and don’t think I really understood what was going on, but knew that it must be important because everyone around me was very excited.
It hasn’t changed my bubble strategy, but my wife wants a house bad. She’s cool about talking it out, and she knows she’s being irrational, but doesn’t care - she wants one “because.”
That’s tough.
I seem to have made my case successfully, but I think it hinged on making the argument that we want a particular kind of place with features X,Y, Z, and that those places are, rationally speaking, way overpriced right now. We’re also lucky to have a very lovely rental, too, so there’s no particular urgency to find the “right” place.
We need to have a weekend intervention program for anyone dealing with a spouse still desperate to buy. (BTW There are as many husbands of posters being held back from buying as wives of posters.) A weekend surrounded by doom and gloom bears full of numbers and facts and too much alcohol would be enough to keep anyone from buying a house ever. Maybe we can have HGTV come and film it the way Bravo (?) does the drug/alcohol intervention programs.
Muggy,
Thanks so much for this link…Little Mug looks like the kind of old soul who processes EVERYTHING!
If that child doesn’t grow up to be a District Attorney, it will be a terrible waste of one squirm-inducing penetrative stare.
Lucky Dad.
“Little Mug looks like the kind of old soul who processes EVERYTHING!”
He’s a lot of fun. Today he removed the orb from my trackball and hurled it into the screen of my old powerbook! Yes, he processes everything, like, “hey, I can throw this, but only if it’ll hit something fragile.”
Since you have a kid, you should really consider renting, until you know exactly which school district you want to be in. We sold and went back to renting when my oldest was two. We didn’t know at the time that he would have ADHD and possibly dyslexia. Thanks to the soft rental market, we were able to move to a really, really good district. I’m hoping that we will have a handle on most of his educational problems before we move again. They do another big assessment in about a year, I’m hoping we can stay here until then.
Some things that have made renting more palatable are good furniture, nice curtains and frequent vacations. Furniture, in particular is cheap right now, and good-looking pieces will still look good wherever you live. Ditto for the curtains.
This is a response Moss and ET…
This is one reason why we will probably buy when we move back to Rochester. We know where all the best of everything is. I know all of the ‘hoods, we have tons of family, friends… what we want is simple, affordable, & already in a good district. For those of you that know the area, it will be Pittsford, Brighton, or Fairport in that order.
We have a nice home in a reasonable area now(albeit surrounded by some serious nonsense), but the biggest issue is that we’ve never settled anywhere. We knew we wanted to spend our twenty-somethings goofing around, and we did. Now we’re thirty-somethings starting a family. I honestly don’t care if I can walk to a bar anymore. Exeter slammed me good about this a few weeks ago, but honestly, if prices grind down 40% over ten years I simply don’t feel like waiting, especially for $120k house.
My situation is slightly different in that we plan on dying in the house we buy next. We’ll hit Florida in Feb/Mar every year, but that’s about it.
How many HBB’ers are ready to buy an ender house? Well, we are…
Muggy - regarding your relocation…contact me. I know somethings about that area that you should also know if you are serious about moving back. facedown at fdcarson dot net
Snap out of the delusion northeasterners
“He says the effects will be strongest in the “coldest, most congested and most expensive states rather than the high-growth states of the South or West.” Among the states where Mr. Myers sees downward pressure on prices within the next decade: Connecticut, Pennsylvania, New York and Massachusetts.”
http://www.denverpost.com/business/ci_11170169
I agree, the macro trends of migration may be disrupted by this bust, but they will go on over the long term. The Northeast and Midwest are facing huge structural problems in their economies. That Census report that came out yesterday showed what’s really been happening since 2000, the jobs are vanishing and wages plunging for the Rust Belt.
In Boston, we have Fidelity, Eaton Vance, Putnam, SSgA, etc, etc.
If these mutual funds are paid as a percentage of assets under management (AUM), and AUM are down 30-40%, doesn’t that mean revenues are down the same amount, if revenues are the a % of AUM?
I don’t know how they are doing doing right now.
They’re laying off.
John, do you have a link to the report?
Here, try this:
http://tinyurl.com/59bpq3
Ex,
I posted a tinyurl but it might take time to clear.
Otherwise, go to Census.gov and click “press releases” - it’ll have a link to the actual report.
The MSM had excerpts yesterday and they weren’t pretty.
Forbes magazine even named Bensenville, IL the #1 declining town in the U.S. - that’s a mere 10 miles from where I type.
Thank you.
Add Vermont to that list. People are still smoking the RE crack pipe up here. Of course, nothing is moving.
By northeast, specifically New England. I can confirm the delusion is still alive in VT as I am a native. I’ll be heading back there in two weeks to commiserate with the dim bulb RE believers in my own family.
Hey, VT HBB people. Last night I bought tickets from Baltimore to Burlington on AirTran for $140 round trip. Now, I have to admit they weren’t the most popular times (afternoon of Christmas Day and very, very early on the Tuesday after) and there is a $15 charge for a checked bag on each leg, but that is still pretty darn cheap. I had been planning to drive, but at that price (I estimate $205 total including parking) my time is worth more.
Join me in hoping that they don’t cancel the flights.
Join me in hoping that they don’t cancel the flights. I hope you have a good flight. I’ve sworn off air travel since 1994. Going 1600 miles soon to pick up my sister, another 1600 miles to drop her off at her grandchildren’s, then 500 miles back home for Christmas. Gas is cheap & I like to drive.
I flew to NY from L.A. the day after thanksgiving for $319 round trip…that included all the taxes, fees, etc. Just booked flights to Hawaii from L.A. for September of 2009 for a hair under $500.
I got a pimp rental car (remote start, leather w/ seatwarmers, moonroof, etc.) this week for $22 a day and I’m staying in a two story “casita” hotel room at a Hilton resort in AZ for $112 a night.
I’ll look like a hero on my expense report AND enjoying luxury I don’t get at home (in my apartment and Toyota Prius) at the same time. Sweeeeet.
I’m with Tresho. I like driving and can barely tolerate flying, although I do it a lot, but almost all international. I’ll drive 800+ each way for Christmas. Wouldn’t even consider flying, even at $4 gas - 4 trips to and from airport, lugging stuff around, on a fixed schedule, forcing others to adjust to your schedule at destination, surrounded by oblivitoids at the airport, no food, $10 drinks - vs. driving which gives you the ability to help out and be a leader rather than a follower at your destination, helping with shuttling, can take big stuff including food and can bring home big presents or a leftover pie, take plenty of warm clothes and leave them in vehicle if not needed, do coffee/OJ/booze runs, etc.
“Over the long run, he says, home prices tend to increase on average at an inflation-adjusted rate of 2.5 percent to 3 percent a year, about the same as per capita income.”
That is not for a given home, but for homes overall, with newer and bigger homes skewing the data. I wouldn’t be surprised to find that existing homes depreciate in value, particularly with the shift of wealth from older areas to newer areas (and in some cases gentrifying areas).
As for the Northeast, NY definately has the furthest to fall, just because it has not yet really begun going down. A real 60% would not surprise me.
Right. The amount people spend on houses is a function of income. This is not house price appreciation.
Houses, like other durable goods, are subject to decay and depreciate over time.
In order for existing houses to keep up, the house must be maintained, repaired, and improved. Meanwhile, the homeowner pays taxes, insurance, and possibly other homeowners’ fees.
Right. The amount people spend on houses is a function of income. This is not house price appreciation.
It turns out, that it’s a function of how much you can BORROW. If banks were doing their job–or weren’t pressured into putting poor people into houses–this would have been a function of income (or wealth).
During the peak of the boom in Orlando, there was NOTHING priced under $417,000, the conforming limit. Even slapdash rental-to-condo conversions were priced at $417,000.
I’m talking about long-term function.
Actually, in the very long run, the steady-state value of all houses, like equities, and life itself, is zero. Must extract utility - residence, dividends, consciousness - in real time.
+1
I am still amazed that people here in NY are accustomed to house prices that nobody can afford ($500k for an “Archie Bunker” house in Queens).
This is common; friends who bought in the 90’s for under $200k don’t get why homes in their area can’t sell to similar families for more than twice that.
No understanding of income to price ratios. The bubble mindset is still in play.
it’s still the same almost everywhere in the world. And I’m not so sure that the US bubble is done for good, with all the invervention plans that Hank and Ben are cooking up. IMHO people will only learn when they get burned severely (for life), loosing a large chunk of their own asses by playing the bubble. Most of the loosers up to now only lost other peoples money, and there are always new gamblers for the casino, especially as long as they keep downpayments close to zero.
In my country many homes are selling for 10x their 1990 price, and the median home costs for 8-9x median income. Still no problem to get 100-125% finanding. Nearly everyone thinks that is ‘normal’. Realtors are expecting a small price dip next year, but after that ‘off to the races’ again thanks to even lower mortgage rates and new plans from the kleptocrats for even more subsidies for the building mob.
“In my country many homes are selling for 10x their 1990 price, and the median home costs for 8-9x median income.”
nhz, were median home prices really 1x median income back in 1990? Or have incomes gone up that much in the past 20yrs?
Your numbers there suggest housing may have been significantly undervalued back in 1990…
I think homes were about 3x median income in 1990.
Incomes have increased about 70% over those years, the BIG difference is in mortgage lending conditions and rates (about 12% in 1990, 4% now). One of the many other factors is that most mortgages are now fully based on two incomes, which was impossible in 1990. And the type of buyers (and their incomes) has changed a lot since then.
Maybe Dutch homes were undervalued in 1980, because there was a -40% crash the year before. Prices have steadily gone up every since, from the early nineties until early 2000’s at double-digit rates.
the Dutch Herengracht index shows an inflation-adjusted yearly gain for homeprices of 0.5-0.75%, for the period of about 1625-1975. Some other indexes from other countries showed similar gains, in the 0.5-1.5% yoy range; definitely insufficient to cover all the costs associated with owning a home.
For the last 25 years the yearly gain in Netherlands was 15-20% but that is clearly abnormal. I guess the 2-3% inflation adjusted gain for US is mosty based on the Greenspan-era ?
Good thing Maryland isn’t mentioned!
I’d hate to think anything would get in the way of our “right” to sell Post-War crudshacks at 4 to 6 times median household income, or crummy condos for even more money. And we NEED houses start in the 3/4 million dollar range since everyone can afford that…
I think water concerns and cost concerns are going to cause people to consider a heavy coat and mittens as a small price to pay.
We could easily lose 1M in the OC/LA area and it would help the water problems substantially.
And long underwear, and slush-proof boots, and earwarmers, and a car that has 4-wheel drive and antiskid control, and a snowblower, and ice-melting stuff for the sidewalk…..
But i wouldn’t trade living 2 miles from a big old freshwater Great Lake for anything. Really.
Good Lord here we go with the running out of water fear mongering.
“Albuquerque, N.M.; Boise, Idaho; Salt Lake City; Seattle; Portland, Ore.; Denver and Colorado Springs, Colo. He says those places generally offer “urban vitality” and “easy access to outdoor activities” combined with affordable housing and good job-growth prospects from modern industries, such as biotechnology.
LOL. I’m on the other side of this article, being in Portland. Is there any state that isn’t touting that it will bring biotech or green jobs to its millions of worker bees?
Semiconductor is, mostly, dead and I don’t see many innovations coming to fill the gap.
Median HH income in Larimer County dropped 10% from 2000 to today. I guess all those lost jobs at HP, Agilent, etc. took their toll.
What are we getting instead? A windmill company that pays $15 an hour. That’s the ticket! Lose your semiskilled job in tech, replace it with a $10-$15 hour job.
Finally, a solution to put all of those idling machines back to work:
http://www.palmbeachpost.com/localnews/content/local_news/epaper/2008/12/09/1209jupatm.html?imw=Y
Someone took a front end loader lift and used it to rip an ATM cash machine from its foundation outside a Bank of America in the Abacoa Plaza in Jupiter.
OMG.
I’m speachless!
Leigh
er (blush) spEEchless.
In an unrelated matter, the B of A ATM in Uranus was unmolested.
I hope I get to watch this happen in person before I leave Florida. I think my chances are very good.
The great thing about the it is a property crime. You get caught THREE years max. No gun used no violet assault.Use a gun 20 to life.
On a lighter note, my local PBS station is running a great program about the Philly Sound, and Vanity Fair Magazine has a fantastic oral history article on Motown. Great music, always makes me feel better. Beats the heck outta rip-hop.
WhatOnceWas asked this late last night…
“WTF is going on with the neg bond action…I know, I know hedgies, pension funds bailing to safety etc etc.but why not just let it sit in some type of cash account? This seems all too like a bubble rush to me,and the implications of the inevitable snap back…what happens if/when a stampede back out? I make no bones about understanding the subtlties of the bond market, but ” first time neg. rates since 1929″ gets my hackles up…Ok discuss amongst yourselves…”
=================================
There’s no slack in the financial system, and the crowd has no idea where to go to, in terms of economic safety…
The only item that “looks” safe is something that nobody would have bothered with just a year or 2 ago, because there were better returns to be had elsewhere.
Elsewhere looks positively frightening now, so fools rush in, en masse.
“The Crowd” is almost always on the wrong side, when it comes to dire matters of a financial nature. historically.
Why should it be any different this time?
If you have a huge amount of money a small negative return isn’t the end of the world. You can lose a little in treasuries, lose a bunch in the stock market, or risk losing much of it above the FDIC limit by putting it in a bank. Parking it in Treasuries for a SLIGHTLY negative return until the market “bottoms out” doesn’t seem like a terrible idea.
if i may..
“If you have huge amount of money to protect, a small negative return..” etc.
Paying for protection is not at all an unusual thing.. it’s commonly called insurance… might be the way to go in times when even the safest positive-return investments are not safe enough for one’s tastes..
“You can lose a little in treasuries, lose a bunch in the stock market, or risk losing much of it above the FDIC limit by putting it in a bank. Parking it in Treasuries for a SLIGHTLY negative return until the market “bottoms out” doesn’t seem like a terrible idea.”
When, as, and if, any market bottoms out may be a long long time from now. The so-called experts of finance and economics always quoted by the MSM have been absolutely DEAD WRONG for years now. Why shouldn’t we believe it will take 10 or 20 years for the equity, RE, or other markets to bottom?
As my brother stated during deflation, if your breaking even or loosing less than most you’re becoming richer. I’ll keep my home purchase money in treasuries for now.
I can understand negative interest rates, theoretically, if cash didn’t exist. But this seems to be saying that there is a cost to holding cash (crime, fear of losing, it might get wet?) that I never knew existed.
On the positive side, if enough fools rush in and drive rates negative, maybe the government can make enough money by borrowing to close the deficit.
We’re not talking small amounts here.
In our credit based system, all money has to reside in some form of credit somewhere.
It’s not easy slinging around large sums of money. You’ll be surprised how hard it is to move.
If the US Mint still printed $10,000 notes, holding actual cash might be a popular option for many.
Good point, Skip.
“But this seems to be saying that there is a cost to holding cash (crime, fear of losing, it might get wet?) that I never knew existed.”
You don’t think there is an elevated risk of home invasion if you are holding lots of wads of bills, and that information leaks out somehow? There definitely is a cost to holding cash as bills–I won’t hold a large sum for that reason.
There is another cost that is being ignored as well–liquidity reduction. When my cash is held in Treasuries, it is very liquid and I can move it into some other asset class very easily. If it is held as paper, I have to go to the bank, deposit it, convince them that I’m not a drug-dealer, wire the funds back to a broker, and all of that takes time and the delay may have a cost.
If the market tanks 90% tomorrow and my money is in treasuries at my broker, I can buy; if my money is under the mattress, I cannot.
If the market tanks 90% tomorrow and my money is in treasuries at my broker, I can buy On the other hand, if your broker goes bust, how long will it take you to access your treasuries. Just wondering.
Best explanation I’ve heard is somethign like this:
The Fed is printing money out of thin air and giving it to the banks to buy their bad debt and investments or as the MSM likes to say “assets”.
In return, the banks use this “printed out of thin air money” to buy Treasuries from the Fed.. in effect causing a mirage where the value of the dollar seems to rise and inflation does not occur.
But time will tell what is really going on.
A possible first volley in a trade war?
They’re saying China is telling it’s airlines to delay and cancel orders. Also they’re not to renew aircraft leases with foreign companies. The aircraft industry is the pride of the U.S. and the Euro Zone - so I’d say that’s a stab at the jugular.
The story is over on Yahoo! Finance, go check it out.
trade war.. hmm.. I don’t see a link to trade-war-aircraft-whatever but there is another story..
Economists had expected China’s exports to rise 15 percent and imports to be up 12 percent compared with November 2007. But the data showed exports fell 2.2 percent from a year earlier and imports dropped by 17.9 percent.
“Global demand for Chinese products is vanishing,” said Gene Ma, an economist at China Economic Monitor, a Beijing consultancy. “Secondly, the credit freeze in importing countries has made it hard for Chinese exporters to sell abroad.”
Perhaps not, but there’s no getting around the fact that those aircraft sales will be sorely missed in U.S. and Euro Zone G.D.P.s
I think the first volley was China reversing course on allowing their currency to rise.
China is not deflating their currency, China is not letting the Yuan Renminbi appreciate. Ergo, the hot money is fleeing China.
Hoz - how do you square this with the Hang Seng up 40% in the last 2 months and a good rally in mainland China shares as well?
maybe just the proverbial bounce? many stock/sector indexes are up 50-100% over the last two months …
“Lemme ’splain, Lucy”
Mr. Ricky Riccardo
China stocks have less debt than comparable American or European stocks. China dividend growth has averaged 18% per year for the last 5 years vs 3% in the US. Even with the drop in the rate of growth in China, the average company will still grow at 20% this next year.
While the US screws around with bailout schemes, fiscal manipulation and flooding the world with money, China is quietly buying every real commodity from oil to Molybdenum at these absurdly low prices. For example, China’s oil imports were up 35% last month over last November. China is not buying US Treasuries with their rapidly expanding US dollar reserves. They are buying real assets at low prices from businesses and countries that have to service their debt.
The biggest beneficiary of the proposed US bailout will be China, the next biggest beneficiary will be Japan. Water flows downhill.
I put some of my gambling money in FXP today. Demand for manufactured goods is collapsing. China makes it’s living on manufacturing. When I start to see bale out money dropped from choppers onto the public or unemployment drop then demand may start to rise, but not before then.
Recently their costs have been dropping faster than their exports, so they’re doing ok. Once they stop coming out ahead due to the commodities burst, the export declines should more directly impact their valuations. Or at least, that’s my suspicion.
Chinese airlines are deep in the red, so this is not surprising at all. Given that the big airlines (Air China, China Eastern, China Southern and their subsidiaries) are government owned, the govt is preparing for a further slowdown. The Olympics are over and the planes don’t need to be spanking new anymore you see.
“It would be superfluous to add that the powerlessness of crowds to reason aright prevents them displaying any trace of the critical spirit, prevents them, that is, from being capable of discerning truth from error, or of forming a precise judgment on any matter. Judgments accepted by crowds are merely judgments forced upon them and never judgments adopted after discussion.”
from “The Crowd” by Gustave Le Bon
“Every crowd has a silver lining.” P T Barnum
“None of us is as dumb as all of us.” - Demotivators
“It could be that the purpose of your life is only to serve as a warning to others.” - Demotivators .
(Could be a motto for an auto maker or financial operation)
I often wonder if the judgement of crowds might also be inversely proportional to the complexity of a society. In 1808, the judgements of individuals would have been much more basic than in 2008. We often mock J6P for gobbling up the housing bubble BS hook-line-and-sinker, but think about all of the things on the mind of an average family in 2008. It all makes people very susceptible to propoganda, because in a society where peace and quiet is unheard of, mass opinions are guided by those who shout the loudest.
The answer, of course, is experience. Large crowds can learn about reality through common experiences. Sometimes these experiences trick us (see housing bubble). Sometimes these experiences teach us about real values (see Great Depression). The current/coming financial pain has always been inevitable, and it will happen again and again, and I’ve come to peace with the fact that common sense does not exist. So long as my kids have food in their belly, a roof over their heads, a dusty old piano and a library full of books, all is right in my world.
The IQ of a crowd is equal to the IQ of the smartest person divided by the number of people in the crowd.
I often wonder if the judgement of crowds might also be inversely proportional to the complexity of a society Large numbers of people seem to operate under rules that differ a lot from those that apply to much smaller numbers. The American Revolution was the result of actions of a large number of people. So was the French Revolution. The resulting mileage varied.
True, but the circumstances were much different. The motivations and social complexities were very different in the aged France. The American colonies were, in contrast, populated by an extrordinary class of people who favored the risk and unknowns of migrating across the globe on a wooden ship in search of liberties unavailable in their homelands. This was an unusually informed populace, having learned from their own recent experiences. This is one of the flaws in current thinking about nation-building. We can’t extrapolate the outcome of the American Revolution to ancient societies where motivations are far too complex to rally a singular mindset.
Crowds of course, can be manipulated by persuasive speakers.
The American Revolution was the result of actions of a large number of people.
Was it, or was it the result of a small number of people who used propaganda to motivate a large number of people.
Here’s what I learned about the American Revolution in a college history class.
1/3 was for the Revolution
1/3 was for the British
1/3 didn’t care. Life would be the same for them no matter who won
— was it the result of a small number of people who used propaganda to motivate a large number of people
— 1/3 was for the Revolution
Still a large number of people involved any way you cut it.
Fed considers issuing its own debt: WSJ
LONDON (MarketWatch) — The Federal Reserve is mulling issuing its own debt for the first time in a move that would give it more flexibility to stabilize financial markets, The Wall Street Journal reported Wednesday, citing a person familiar with the matter. Government debt issuance is largely the job of the Treasury Department, but Fed officials are looking for new tools as the crisis drags on and have approached Congress about the idea, the Journal reported. It added the concept could include issuing bills or some other form of debt, but it isn’t known whether the preliminary discussions will result in a formal proposal or Fed action. The Journal said one roadblock is that the Federal Reserve Act doesn’t explicitly permit the Fed to issue notes beyond currency.
apparently they think there still is a plentyful supply of idiots to buy that debt. Or maybe they know that some bribes here and there for big pension fund managers and central banksters from other countries will do the trick, for a few more years
But at some level, don’t Federal Reserve Notes constitute debt issued by the Fed? Aren’t they carried on their books as a liability?
A liability against what? What can I demand from the Federal Reserve with my green squares?
Rectangles….not squares. Geometry portion of brain busted….must have coffee…..
They look more pyramidical from my vantage point…
Some of them do have pyramids on the back.
With the all seeing EYE on top of the pyramid
Back when we had the gold standard - yes Federal Reserve notes were Fed debt.
Now they’re not such. Still though - the Fed simply doesn’t have assets to issue debt against. IMO the Fed issuing debt is simply a big fat red herring. It’s a way for them to try to hide the fact that all this money is being created out of thin air - by artificially creating the impression that they’re about to “run out of money”, and therefore need to issue debt, so that they’ll have enough money to turn around and loan to others (or maintain their reserves).
In reality there are no reserves, and money loaned to others is just created out of thin air - so the Fed doesn’t need to issue debt, for any reason other than PR.
Why did I just envision a enormous sucking black hole while reading your post?
Let’s see…the Fed buying debt (FNM, FRE, US Treasuries) while selling it’s own…isn’t that what got us into this mess? Oh yeah….but the Fed can’t default can it?
IMHO no big deal, just another GSE that allows the Fed to act marginally faster.
However, there is also this comment:
“Perhaps we’re missing something, but this looks like a step in anticipation of an eventual partial default or devaluation of US debt and the dollar.
You know what they say: When the going gets tough, the debt holders get screwed.
We are going to have to tie Andrew Jackson down in his grave.”
Jesse’s Cafe Americain
Maybe the FED will price debt in foreign currencies, unlike treasuries. Is it a back door way to increase investment in the US by people/countries ect that don’t want to touch the dollar with a 10 foot pole.
During the Carter administration, the US was forced to borrow denominated in Deutsche marks and Swiss francs (so-called “Carter bonds”.)
There is plenty of precedent.
This is a deflationary act, no? For the Fed to sell securities…its the opposite of what they usually do which is to buy securties from govt/banks to increase the money supply.
What am I missing here?
It is a possible means of devaluing the currency. Definitely not deflationary. It gives the Fed the ability to buy debt in private companies (not likely at this time) as well as other government debt issues (FDIC, GSE) not responding to lower interest rates (very likely). The Federal Reserve can give money to anybody it chooses provided it has the money.
It is just another tool in the Fed’s “How to Fight Deflation Handbook” pg 4. If we get up to pg 47 (literally dropping dollars from helicopters), I would be shocked. You don’t want to know what is on pgs 48,49 &50.
gold is up 5% on this FED announcement, very telling
According to the snippet pasted above, the Fed is looking to issue debt, not buy it. Which would have the effect of taking dollars out of the economy.
the concept could include issuing bills or some other form of debt
“You don’t want to know what is on pgs 48,49 &50.”
hoz, I’ll bite: what could possibly come_after_ helicopter drops???
what could possibly come_after_ helicopter drops??? My guess is, the helicopter crashes after dropping its money, right on top of the frenzied masses bent over and picking up their free currency.
“hoz, I’ll bite: what could possibly come_after_ helicopter drops???”
Well for one thing, instead of dollars they start dropping turkeys.
live or frozen?
That was a very funny episode.
The only reason to sell a new bond is to buy other items, perhaps government depressed issues or commercial paper. It is the buy side of the government that causes inflation or devaluation. It is the government competing against private money for limited assets. It is the same as if the Treasury were to go into WalMart and buy all the IPods. A scarcity in IPods created by a limitless buyer.
As the others said, somehow they are trying to get to hyperinflation with this type of nonsense. Printing up a new currency, buying things with artificially 0 or negative rates, etc. More monopoly money created out of thin air and backed with nothing that will be used to drive up prices.
Perhaps this is the first step to issue a new currency!
Bond holders beware! Look out below!
Interesting - but who would want “Bennie Bucks?”
Imagine such a currency devaluation that people will be begging for (something to be done) and Bernie and the Banksters step froward with the new currency!
Welfare Exploding in Florida Economy
TALLAHASSEE, Fla. (AP) — Florida’s top welfare official says public aid has exploded in the past 19 months due to the slumping economy.
Department of Children & Families Secretary George Sheldon said 1.7 million Floridians are getting food stamps, up 45 percent since April 2007. He said that’s the biggest increase in the nation.
He cited those figures Tuesday at a news conference with Gov. Charlie Crist to announce a new Web site to help the growing number of people getting food stamps, Medicaid and other assistance.
Crist almighty…
Department of Children & Families Secretary George Sheldon said 1.7 million Floridians are getting food stamps, up 45 percent since April 2007. He said that’s the biggest increase in the nation.
That’s a lot of foodlatelists!
Got tweezers?
With cold weather elsewhere and cheap gas, the demand for Florida residency (and access to those precious food stamps) is in no danger of drying up.
Can illegals get food stamps?
I wouldn’t be surprised if the ratio of non-citizens/citizens on food stamps is higher than the same ratio in the general population.
“Can illegals get food stamps?”
Irrelevant, they can buy them .50/1.00 from methmomz.
If their kids are US citizens, I imagine so.
The bubble still seems to be percolating here in ND. Anyone interested? It got all the way up to 9°F yesterday.
http://tinyurl.com/56zoj7
When The New York Times mentions your available real estate in a front-page news story, it can’t hurt getting the word out to prospective buyers.
But when the prospective real estate is a $540,000 penthouse in downtown Fargo, well, that word gets back to the curious among us.
What kind of condo, pray tell, costs more than a half-million dollars in downtown Fargo?
Turns out we didn’t have to look far – it’s being built to look out at the iconic Fargo Theatre marquee.
The penthouse atop a $5.4 million soon-to-be-completed retail and condo project at 300 Broadway was referred to but not named in a front-page story in Saturday’s New York Times. Continued work on the overall property was used to illustrate how North Dakota is enjoying economic growth despite recession fears nearly everywhere else. While the two-story penthouse is getting the attention these days, 300 Broadway also features 8,000 square feet of ground-floor retail space, a two-story atrium entrance and a 78-seat movie theater connected to the Fargo Theatre. Much of it will be ready for occupancy by January, said project manager Mike Allmendinger, who works with the Kilbourne Group developing the area.
The single-bedroom condos on the south side of the building range from 1,074 square feet to 1,211 square feet and are priced at $244,000 to $284,000, he said. The two-bedroom units on the north side range from 1,500 square feet to 1,700 square feet and are priced from $338,000 to $390,000.
All of the 17 condos have walk-out “front porch” spaces on Broadway. The building also has a dog run for pets. Fourth-floor condos will have fifth-floor rooftop decks.
The 2,000-square-foot penthouse condo, the only unit with an enclosed fifth-floor living space, is not finished, but Allmendinger is proud of its views out to the Red River greenway to the east.
Construction on the 47,800-square-foot building was started in what was a parking lot south of the Fargo Theatre in November 2007.
Realtor Carol Raney of Fargo’s Park Co. Realtors said granite countertops, hardwood floors, tiled showers and solid-core doors are standard in the building. The condos also have many options for customization, Allmendinger said.
But 300 Broadway isn’t the only high-end condo space now available for purchase in downtown Fargo.
According to the Multiple Listing Service, there are nine other condo units now on the market in Fargo’s downtown. Among them:
E A 2,078-square-foot unit at 12 Broadway N. for $449,900.
E A 2,390-square-foot unit at 300 NP Ave. N. for $394,500.
E A 1,939-square-foot unit at 111 Roberts St. N. for $349,000.
E A 1,229-square-foot unit at 12 Broadway N. for $249,000.
Realtor Raney said condos are selling downtown. If there’s a problem for the local housing market, it’s that workers transferring in from elsewhere – particularly Minnesota and Michigan – are having a hard time selling their former homes, she said.
Downtown condo buyers get Renaissance Zone benefits, including no property taxes for five years, and a five-year, $10,000-per-year North Dakota income tax exemption, which make the properties attractive, Raney said.
Allmendinger said there’s a growing interest in refilling unused urban spaces and “smart city growth.”
“We’re very excited about the amount of interest in downtown Fargo,” he said. “The Kilbourne Group really believes in the idea of building the core of downtown Fargo.”
Readers can reach Forum reporter Helmut Schmidt at (701) 241-5583
A Perfect Storm? No, a Failure of Leadership
By Steven Pearlstein
Wednesday, December 10, 2008
“…And in several recent interviews, Robert Rubin, the Treasury secretary turned boardroom consigliere, conjured up the perfect storm to explain how Citigroup and the rest of Wall Street nearly brought the global financial system to a grinding halt, vaporizing trillions of dollars in wealth and putting large swaths of the economy on government life support.
The first thing to understand about the perfect-storm defense is that these guys actually buy into this nonsense. The rest of us want desperately to believe that what brought us this economic crisis was some combination of greed, fraud and negligence — and, no doubt, there was quite a bit of that. What the populist critique ignores, however, is that at the heart of any economic or financial mania is an epidemic of self-delusion that infects not only large numbers of unsophisticated investors but also many of the smartest, most experienced and sophisticated executives and bankers.
It’s not that they don’t see the excesses and dangers in front of them — how could they not? But somehow they convince themselves that the world has changed, that the old rules no longer apply or that, because of competitive pressure, they had no choice but to run with the herd. …
It is useful to remember that in Sebastian Junger’s gripping account of a shipwreck that popularized the notion of the perfect storm, Billy Tyne, the skipper of the Andrea Gail, received urgent and repeated warnings that he was heading into what could be a monster storm off the Grand Banks — warnings that Tyne and his crew chose to ignore…”
http://www.washingtonpost.com/wp-dyn/content/article/2008/12/09/AR2008120902816.html
About time somebody placed the blame on corporate incompetence.
Since debt was the motor that drove purchases that fueled all purchasing power ,and that debt was based on passing off junk paper
that was based on unqualified buyers ,I call this “Perfect Storm “the biggest fraud market in history . It was a creation of money by false values of real estate ,along with false qualifying for debt . And to add
insult to injury ,the Corporations underfunded Pension obligations during the boom ,to no doubt pump up the stock value ,while they took on more unqualified debt given out freely by the Money Changers .
Unregulated Business will scheme and leverage and do anything to get a quick buck ,especially if the Politicians are in the Corporations back pocket ,but this scheme was criminal in that the Money Changers breached their duty to qualify debt ,while rating it high-grade .
—Unregulated Business will scheme and leverage and do anything to get a quick buck Regulated businesses will also generate cunning plans, it may just take them a little longer to carry out those plans. Legislators should always keep their eye on things, but instead they simply cash the checks for campaign contributions & get re-elected.
—in the movie they didn’t even bother to put on life vests in reality they put on their golden parachutes.
Excellent recap.
The first thing to understand about the perfect-storm defense is that these guys actually buy into this nonsense.
I think the fundamental premise here is wrong — I don’t believe that a Rubin or Paulson or Vikram Pandit or Richard Fuld buys into the “no one could’ve foreseen this perfect storm” claptrap.
They saw, they understood, they made a conscious choice to ignore the evidence before them in the hope that they could reshuffle the deck when the latest scheme ceased to bear fruit.
And in the movie they didn’t even bother to put on life vests.
at the heart of any economic or financial mania is an epidemic of self-delusion that infects not only large numbers of unsophisticated investors but also many of the smartest, most experienced and sophisticated executives and bankers.
This may be true, but I’d like to have a looksy at what they did with their stock, money and real estate before I conclude that the experienced and sophisticated bankers were deluded.
“It’s not that they don’t see the excesses and dangers in front of them — how could they not? But somehow they convince themselves that the world has changed, that the old rules no longer apply or that, because of competitive pressure, they had no choice but to run with the herd. …”
Wasn’t the dot com bubble a new way of doing business. Sounds like to me history just repeated itself; just faster.
Latest predictions from Roubini, from the economy to the stock market:
Known as Dr. Doom, the NYU economics professor saw the mortgage-related meltdown coming.
By Nouriel Roubini
We are in the middle of a very severe recession that’s going to continue through all of 2009 - the worst U.S. recession in the past 50 years. It’s the bursting of a huge leveraged-up credit bubble. There’s no going back, and there is no bottom to it. It was excessive in everything from subprime to prime, from credit cards to student loans, from corporate bonds to muni bonds. You name it. And it’s all reversing right now in a very, very massive way. At this point it’s not just a U.S. recession. All of the advanced economies are at the beginning of a hard landing. And emerging markets, beginning with China, are in a severe slowdown. So we’re having a global recession and it’s becoming worse.
Things are going to be awful for everyday people. U.S. GDP growth is going to be negative through the end of 2009. And the recovery in 2010 and 2011, if there is one, is going to be so weak - with a growth rate of 1% to 1.5% - that it’s going to feel like a recession. I see the unemployment rate peaking at around 9% by 2010. The value of homes has already fallen 25%. In my view, home prices are going to fall by another 15% before bottoming out in 2010.
For the next 12 months I would stay away from risky assets. I would stay away from the stock market. I would stay away from commodities. I would stay away from credit, both high-yield and high-grade. I would stay in cash or cashlike instruments such as short-term or longer-term government bonds. It’s better to stay in things with low returns rather than to lose 50% of your wealth. You should preserve capital. It’ll be hard and challenging enough. I wish I could be more cheerful, but I was right a year ago, and I think I’ll be right this year too.
Hard to ignore someone who has been so right.
This whole article is a must read.
http://money.cnn.com/galleries/2008/fortune/0812/gallery.market_gurus.fortune/index.html
Saw an interview of the guy who wrote The Black Swan and he says Roubini is an optimist.
I believe he’s optimistic in his assessment that housing will drop just 40%. That may be where it bounces to for consolidation but there is nothing to sustain housing at a price 15% below current fantasy prices.
I’d almost swear that Roubini has embalming fluid coursing through his veins…
I saw the same Taleb interview on Charlie Rose. I did not understand his reasoning on why he thinks it will be worse than Roubini says. He said the reason why it will be worse than even the Great Depression is that this time if an order is canceled in the US a factory will be shutdown in China. That maybe true, but worse vs. what? If a order in the US is canceled a factory in the US is shut down? How is that worse? Now we have globalized the supply chain and credit flow and pain will be shared by many countries, vs perhaps concentrated in a few countries. Perhaps he thinks due to various countries involved now it is more unpredictable and global? I am not convinced as to why that should automatically mean it is worse than the GD for the US if the pain is spread globally.
Another thing he said was that he compared financial risk systems to a turkey being slaughtered by a farmer. He stated that just because the farmer has been feeding the turkey for a long time until the turkey got fat and one day the farmer cuts the head off the turkey, boom, there is black swan. People were fooled by thinking that the turkey will be getting fatter, so to speak, and nothing bad would happen. But the thing he did not mention is that from the very beginning / get go, the interests of the two parties involved, the farmer and the turkey, are diametrically opposed to each other: the former will kill the turkey sooner or later. I would think that no one invented risk control or econometric models IN THE HOPE of one day blowing up the financial system on purpose. At worst it is a naive attempt and misguided effort to build a system in attempt to model human behavior using data and mathematical equations and being fooled into believing the results the model produces. I don’t particular think it is a good analogy.
Finally one thing that struck me is that he said “Finance is dominated by rare events”. But if something is dominated by occurrence of some event over and over again, should it not be called rare anymore? I didn’t think he framed it quite correctly. He should have said “dominated by perceived rare events”, by those who should have known better.
I know I will be asking him all these questions if I am able to sign up for his risk course @ NYU next semester.
I was on the Mazda site yesterday looking for service info on my 2002 Protege. So I thought I would price out a new Mazda 6 just for fun, and then I checked out what the payments would be…
But every day I read HBB and thoughts of additional debt are driven from my head…I slowly step away from the debt-ledge and get back to work.
Excerpts from Roubini are very effective in doing that.
Commie!
For a moment there I was thinking that one should be mindful that NR might let this recent publicity get to his head and capitalize in his exuberance by over-predicting the doom. He seems fairly even-keeled though:
“I wish I could be more cheerful, but I was right a year ago, and I think I’ll be right this year too.”
And the recovery in 2010 and 2011, if there is one, is going to be so weak - with a growth rate of 1% to 1.5% - that it’s going to feel like a recession.
I disagree, because if we’re down so long, it will look like up to us.
Sure, just look at Japan…Oh,wait.
The eurozone depends on a strong US recovery
December 10, 2008
by Martin Wolf
“I think of it as an “oops” moment: the US goes into a recession; Europeans believe this deserved punishment has little to do with them; the European economy slows unexpectedly; the US throws everything at restoring growth; finally, the US recovers, pulling Europe behind it.
Yet this is not just a slow-down. It is also a financial crisis. What if the solvency of a eurozone member came into doubt? After all, spreads over rates on German bunds and the prices of credit default swaps have risen already, the most affected countries being Belgium, Greece, Ireland, Italy, Portugal and Spain (see charts)….”
FT
“Oops” moment or an ‘Oh shit’ moment, I can’t believe its Greece. Oh well
EU is DOA IMO
I’m afraid current Greece (the rioting etc.) is the shape of things to come, not only in Europe but also in the US.
In Southern Europe things are heading south; in northern Europe there is still full denial of the severity of the problems (oh yes, the kleptocrats acknowledge that there will be a recession, but they won’t adjust their spending - on the contrary). Also, in countries like Netherlands the government still says there is no housing bubble; lots of downside risk.
Seems that the youth of Greece didn’t get properly trained to stay with the flock.
To not at least look at this as a possible scenario is being irresponsible. …Of course the ‘experts’ never saw this downturn.
—-
On CNBC this morn the avg to spend on Xmas was down to ~$725. With the more optimistic spenders the ones that thought their home would continue to appreciate ?? It was some figure over 35%.
——-
…and this, another anectdotal notice of the paper unwind yet to come..paper promises.
http://canadiansilverbug.blogspot.com/2008/12/silver-certificates-and-failure-to.html
The general strike was originally called to press economic demands for increased pay and to protest belt-tightening measures put forward by the government.
But the antigovernment movement acquired new impetus after the shooting on Saturday.
While clashes between the police and students have been common in Greece for decades, the ferocity of the reaction to the boy’s death took the nation — and its government — by surprise. Outrage over the death was widespread, fueled by what experts say is a growing frustration with unemployment and corruption in one of the European Union’s consistently underperforming economies, worsened by global recession.
NYTimes — Strikes Cripple Riot-Shaken Greece
Xmas 07′: Flat Screen
Xmas 08′: Flat Scream
Xmas 07′: Wii
Xmas 08′: Wee!
‘Xmas 08′: Flat Scream’
I was expecting Fiat Scream, but the nuance is what it is.
Anybody catch the PBS Newshour segment on Zimbabwe last night?
There was something extraordinarily poignant, when they showed a $10 Million Banknote laying on top of the trash undisturbed, as people were ferreting through it, looking for something to eat, anything.
isn’t $10 million the old currency version? in that case it is worthless now, apart from the value of the toilet paper itself …
I think $10 Million there will buy you one section of toilet paper, but I repeat myself.
yup.. when you’re starving only ONE thing has any value..
Our church supports a missionary and his wife who have lived there over 30 years. They landed there during the civil war in the 70’s. In their opinion, the last year has been tougher than the civil war years. Most of their focus is on finding people some food.
Food shortages throughout the world are quite possible next year.
Contrary to deflationist prattle, the cost to plant is the same as 2008. It does not justify planting much next year at current grain prices. Current prices are 25 - 35% below cost.
Enjoy these low food prices while you can.
This reminds me of a story.
Once upon a time there was a woman and a boy. They were poor and had very little to eat, mostly beans..
The woman gave the boy a handful of beans and told him to go to the market and trade them for some bread. When he got to the market a old man stepped up to him and showed him a gold coin, saying “Look at this shiny gold coin. Pretty as can be. I will give it to you for that handful of worthless beans.”
The boy, being young and foolish, accepted the trade.
When he got home his mother scolded him “You fool.. we need food and you trade beans for metal? Go to bed!” and threw the gold coin out the window.
Lo and behold, by some magic the next morning there was a huge golden tree that stretched into the sky where the coin landed. The boy climbed up it and came to a big castle where lived a giant. The giant had a goose that laid real eggs! The boy hadn’t seen an egg for a long time and his mouth watered..
..Continued next week.
The money looks pretty boring, I wonder if you could pay Mugabe to get your portrait printed on the money:
http://llnw.image.cbslocal.com/0/2008/08/02/320×240/Zimbabwe_dollar81026519.jpg
Sorry if this gets double posted.
It seems the bubble is still alive here in ND. Any takers on this condo? It got all the way up to 9°F here yesterday.
http://tinyurl.com/56zoj7
When The New York Times mentions your available real estate in a front-page news story, it can’t hurt getting the word out to prospective buyers.
But when the prospective real estate is a $540,000 penthouse in downtown Fargo, well, that word gets back to the curious among us.
What kind of condo, pray tell, costs more than a half-million dollars in downtown Fargo?
Turns out we didn’t have to look far – it’s being built to look out at the iconic Fargo Theatre marquee.
The penthouse atop a $5.4 million soon-to-be-completed retail and condo project at 300 Broadway was referred to but not named in a front-page story in Saturday’s New York Times. Continued work on the overall property was used to illustrate how North Dakota is enjoying economic growth despite recession fears nearly everywhere else. While the two-story penthouse is getting the attention these days, 300 Broadway also features 8,000 square feet of ground-floor retail space, a two-story atrium entrance and a 78-seat movie theater connected to the Fargo Theatre. Much of it will be ready for occupancy by January, said project manager Mike Allmendinger, who works with the Kilbourne Group developing the area.
The single-bedroom condos on the south side of the building range from 1,074 square feet to 1,211 square feet and are priced at $244,000 to $284,000, he said. The two-bedroom units on the north side range from 1,500 square feet to 1,700 square feet and are priced from $338,000 to $390,000.
All of the 17 condos have walk-out “front porch” spaces on Broadway. The building also has a dog run for pets. Fourth-floor condos will have fifth-floor rooftop decks.
The 2,000-square-foot penthouse condo, the only unit with an enclosed fifth-floor living space, is not finished, but Allmendinger is proud of its views out to the Red River greenway to the east.
Construction on the 47,800-square-foot building was started in what was a parking lot south of the Fargo Theatre in November 2007.
Realtor Carol Raney of Fargo’s Park Co. Realtors said granite countertops, hardwood floors, tiled showers and solid-core doors are standard in the building. The condos also have many options for customization, Allmendinger said.
But 300 Broadway isn’t the only high-end condo space now available for purchase in downtown Fargo.
According to the Multiple Listing Service, there are nine other condo units now on the market in Fargo’s downtown. Among them:
E A 2,078-square-foot unit at 12 Broadway N. for $449,900.
E A 2,390-square-foot unit at 300 NP Ave. N. for $394,500.
E A 1,939-square-foot unit at 111 Roberts St. N. for $349,000.
E A 1,229-square-foot unit at 12 Broadway N. for $249,000.
Realtor Raney said condos are selling downtown. If there’s a problem for the local housing market, it’s that workers transferring in from elsewhere – particularly Minnesota and Michigan – are having a hard time selling their former homes, she said.
Downtown condo buyers get Renaissance Zone benefits, including no property taxes for five years, and a five-year, $10,000-per-year North Dakota income tax exemption, which make the properties attractive, Raney said.
Allmendinger said there’s a growing interest in refilling unused urban spaces and “smart city growth.”
“We’re very excited about the amount of interest in downtown Fargo,” he said. “The Kilbourne Group really believes in the idea of building the core of downtown Fargo.”
Readers can reach Forum reporter Helmut Schmidt at (701) 241-5583
Dollar prints $1.30/euro, weakest level in 6 weeks.
I wish the exchange rates would settle down. My employer exports (and imports) and trying to price things is a pain.
I suppose I should be happy that I have an employer.
Can you use forward contracts to insure against currency fluctuation risk?
for most (smaller) businesses that is not a realistic option. I have looked hard at in in the early nineties when I had to deal a lot with US$/guilder fluctuations, and in most of the possible scenarios the bank would be the only winner.
Maybe with todays currency markets the insurance is a bit cheaper, but the trouble is that there are usually some competitors who don’t use insurance and just take their chances when they are lucky, depending on how the exchange rate pans out.
All you are saying that “on average”, people who buy insurance must lose which is how it should be otherwise there would be no incentive to the people providing insurance to do so.
You should expect to lose when you buy insurance.
Back in the good old days, that what people used futures for, as a business hedge and not speculation….
You need someone to take the opposite side of a hedge. That would be a speculator.
Ain’t gonna be one without the other. They are joined at the hip.
“You need someone to take the opposite side of a hedge. That would be a speculator.”
The other side is not _always_ a speculator. You can have two sides who are both legitimately hedging opposite-direction risk; think about a true producer-consumer relationship.
That said, the speculator often is the other side of a hedge, and serves a useful purpose by doing so. Or at least, that’s what I like to tell myself.
They are providing a service. They are providing insurance.
That service doesn’t come for free, and that’s why hedging “on average” should lose you money.
All I want is that people think for about five minutes before they start running off their mouths about “speculators” and “short sellers”.
You can’t have a liquid market without speculators. They are the ones making it liquid by putting their capital at risk. I’ll also state the most obvious thing that seems to have escaped most economists : liquid markets can’t be efficient, and efficient markets can’t be liquid.
FPSS, I’m totally with you on the speculator-bashing; people who engage in this are idiots.
“I’ll also state the most obvious thing that seems to have escaped most economists : liquid markets can’t be efficient, and efficient markets can’t be liquid.”
FPSS, can you elaborate on what you mean by this?
Efficient just means that the market nets out all available information and discovers a correct price. I would think that the market being able to express this price would require liquidity; e.g. no transactions implies no price-discovery. So I would argue that an illiquid market can’t be efficient, and an efficient market must be liquid.
(!liquid implies !efficient, so the contrapositive, effient implies liquid)
I think we are talking about slightly varying notions of efficiency.
Firstly, the mechanics doesn’t work that way. The market-makers who are “making the market” (bids and asks) must be getting paid. Otherwise there is no incentive for them to provide this service.
Hence a liquid market must necessarily be “dissipative” (as in the transaction costs endured by the people who NEED to trade must go into the pockets of the market-makers), and the prices must always be slightly off to account for the expected profits.
The flip side is where everyone knows the exact price of an object. You’d have a totally efficient system but you wouldn’t be able to trade without paying an explicit premium for liquidity.
Of course, you can have both — illiquid and inefficient. I didn’t rule out that case. Go read my statement again.
OK, I made a long post, and that post went into “vegetative post” state. It’ll probably show up in a few hours.
I hate this “post purgatory”.
mikefolkerth dot com
We the People; Screwed Up:
I often have to ground myself in reality, lest I get caught up in all the diversions that our leadership and main stream news dish up daily. To do so, I go back and read the boring lessons of history and the brilliant foundational material that was written by those who had been there, done that, and remembered most of it.
One such name has graced these pages many times and that is Leonard Ayres who wrote, “The Chief Cause of this and Other Depressions.”
Boring stuff? Not really. Here is a reminder of what Mr. Ayres tried to tell us in 1934. That is, he tried to tell those who wished to forgo another Great Depression, which apparently did not include our Federal Government.
“Operating in a stable and predicable environment is the key to our economic woes.” Mr. Ayres so well stated, “That kind of fundamental stability is the product of the drab and un-dramatic exercise of national integrity and self-restraint.” In other words, we have already failed the first principal.
Following are the points that Mr. Ayers suggests would keep our economy on an even keel. He begins, “It involves persistent adherence to at least seven national policies.”
1. Peace, and the enduring prospect of peace. (So much for that one).
2. A sound money in which both our citizens and those of other countries have full confidence. (He’s gotta be kidding).
3. Balanced national budgets. (SAY WHAT! How else would we have a false economy)?
4. A sound banking system, independent of political influence. (Right).
5. The limitation of bank credit to loans fully justified by the demonstrated earning power of the assets on which the loans are based. (Where is this man’s head, what’s next, down payments)?
6. The restriction of speculation financed by credit. (Is he crazy? We live on speculation).
7. Such negative regulation of business operations as experience may have proved necessary to prevent abuses, dishonest competition, and exploitation, but with a minimum of positive regulation designed to control wage and price competition, or to favor special group interest. (I bet he was talking about banks and the auto industry).
That Mr. Ayres was one sharp cookie huh? He also makes the statement, “The fact that is extremely difficult to induce a business recovery by increasing the purchasing power of the individual consumers is being impressively demonstrated in this depression.”
Hank Paulson should have read Mr. Ayres book before he said the rebates would create 600,000 jobs. Or, he could also have studied the recent history of the Japanese, but then, we are smarter than history or the Japanese.
As a people in general, we are sooooo powerful (and gullible), that we believe our leadership can snooker the natural sciences on top of defying all of Mr. Ayres advice. How are we doing so far?
That is the problem ya know? We are attempting to push a rope. Anything that can’t go on forever; doesn’t.
The bailouts are having the desired affect of allowing the banks to get their money back through taxation without representation. After all, the taxes to repay these enormous bailout dollars will be paid by people who have yet to be born; how could they possibly be represented?
It’s our job to represent the future generations, not the dunderheads that we send to Congress. You remember that document that starts out “We the People,” don’t you?
sltrib dot com - this is bound to affect Utah - everything is unravelling very quickly:
Rio cuts 14,000 jobs, spending as demand falters
LONDON (Bloomberg) » Rio Tinto Group, the world’s third- largest mining company, will eliminate 14,000 jobs, reduce capital spending by more than half and sell “significant assets” as demand for metals sinks in the global recession.
It was not immediately known what impact the layoffs would have of Rio Tinto’s Kennecott operations in Utah.
One month after repelling a hostile bid from BHP Billiton Ltd., Chief Executive Officer Tom Albanese said in a statement today Rio needs to reduce costs “to appropriately low levels until we see credible and meaningful signs of a recovery in our markets,” which are suffering an “unprecedented rate of deterioration.”
From a realtor site…
Average House Prices Don’t Tell the Real Story
by Jim Adair
Samuel Clemens, better known as Mark Twain, wrote that “figures don’t lie, but liars figure.” He also credited Benjamin Disraeli with the quote: “There are three kinds of lies: lies, damned lies and statistics.”
Canada’s housing market statistics have been making headlines this year, as the number of sales and average house prices have declined for the first time in many years. The drop in average home prices, in particular, are making dramatic headlines, worrying Canadians that a full-scale housing crash is underway. But on the front lines, real estate leaders say the market isn’t as bad as the media makes it sound.
Part of the problem may be those lying statistics.
Average house prices reported in Canada are based on sales through the Multiple Listings Service, which is operated locally by real estate boards across the country. National numbers are compiled and reported each month by the Canadian Real Estate Association (CREA).
The system is flawed because it doesn’t include private and most new home sales, but it’s the most accurate reflection of house prices that’s available. The numbers are used by most economists and by Canada Mortgage and Housing Corp. as a major economic indicator.
Recently two banks announced they were introducing new indexes to present a more accurate picture of house prices. First off the mark was TD Bank Financial Group, which unveiled the TD Home Price Index (TD HPI) in November.
TD says that the problem with using average MLS prices is seen when markets are fluctuating significantly. “Such is the case in Canada at the moment,” say TD economists Pascal Gauthier and Grant Bishop in a special report. “As at Oct. 08, sales were down 50 per cent British Columbia, for example. Since average prices in British Columbia are the highest in the nation, the drop in sales tends to overstate the extent of price declines when applied to a simple national average.”
The new TD HPI weights the markets by the outstanding stock of homes within each market. “This will help control for price volatility related solely to shifts in sales volumes – which arguably distort national figures,” says Gauthier.
“We weigh each major market by its share of housing stock (as per cent of total) using the number of dwellings from Census data, interpolated as needed between Census years. To remain agnostic about post-2006 Census developments, weights are fixed after the 2006 Census until we get the next Census from 2011.”
Using this example, the CREA sales-weighted average price for major markets in October was down 10.9 per cent from last year, while the TD HPI stock-weighted measure shows a decline of just 4.6 per cent.
Are all the problems in California rolled into one?
“Because California does have a perennial budget crisis, it’s very easy to fall into the ‘boy who cried wolf’ syndrome,” says Dan Schnur, director of the Jesse M. Unruh Institute of Politics at the University of Southern California. “This time the sky is really falling.”
The state faces a $28 billion budget shortfall over the next two years. If nothing is done, nearly $5 billion in public-works projects could be halted in little more than a week for lack of bond sales – everything from bridge replacements to a new highway tunnel and billions of dollars’ worth of school construction, according to state Treasurer Bill Lockyer.
He and three other state finance officials testified Monday in a rare joint session of the legislature.”
Well there you have it. If they would have just smoked joints more often in the legislative sessions, all the problems could have mellowed out by now.
A friend that is a waiter @ a restaurant in one of our National Parks, tells me business has come to a standstill.
The few people eating out anymore, tend to share entrees.
Anyone care to explain why BEARX is taking such a beating over the last week?
With the markets showing a lot of green for longs in that time span, should not surprise. Dang thing up 25 percent YTD, though.
They did a payout of LT/ST cap gains.
I assume it is Tice’s partial cashout before he dumps it to Federated.
BEARX invests in gold. Look out below!
Will there be any tv commercials during the Super Bowl?
How much you wanna bet one of the shrinking three runs a full :60?
I can already see it now, dusty pickups with grizzly men and patriotic music, like those “keep America rolling” ads after 9/11.
Btw, one of the craziest weekends of my life was working on a Super Bowl spot. We used FTP and the time difference between coasts to keep production running non-stop. The LA guys stayed late and the NYC guys came in early, both very difficult tasks to get those people to do
http://www.youtube.com/watch?v=i7oh1so-2M8
Toyota & Honda & Nissan maybe a BMW or Merc-Benz.
It will be the cheapest advertising spot in years. What else will mopes do but watch the game and drink beer?
Someone will go big in poor taste. C’mon guys, we’re talking about advertisers here, cowboys, mavericks and torpedoes be dammed types.
I predict:
1. a T. Boone Pickens ad
2. a rational appeal for used crap from eBay
3. a dollar store ad
4. get 72 burgers for $10 McDonald’s
Payday loans, title pawn shops, stuff like that. And beer.
Another couple that my wife and I are friends with that I would say do very well, making about 140K a year made a statement the other day. My friends tell me they are cutting way back this year on Christmas, don’t want to spend the money. Both of them are in very stable jobs, very little credit and rent for cheap. I was blown away by this considering they don’t need to cut back. The phsycology truly has changed.
Test
You’re in, with a No. 2 pencil.
Layoff Tracker
http://www.forbes.com/2008/11/17/layoff-tracker-unemployement-lead-cx_kk_1118tracker.html?partner=yahootix
Its nice to know someone is keeping a score card.
Would need to keep long-term running numbers for comparison for that to be meaningful.
Layoffs happen even in the best of times.
Bon Voyage…
This will be my last message on the Housing Bubble Blog, and i’d like to thank Ben for being such a hospitable host to all of us, the past few years~
My eyes are tired from too much reading, quite frankly.
The USA has reached the push meets shove part of collapse, and we want no part of it.
Gun sales are the only leading indicator in terms of growth here, and to us, this is the scariest statistic imaginable…
Living in fear is bad enough, but being afraid of our fellow man, and being willing to take his or her life because they have nothing and wish to get your something, is a recipe for disaster.
We’ll be watching from afar, and hoping for the best-but expecting the worst…
Thanks to all of you for the scintillating conversations, and i’ve learned much, and hopefully I was able to return the favor.
bye-bye
Lad, don’t go baby don’t go.
Damn.
Damn indeed.
Laddie, I will definitely miss your pithy comments and delightful punning, as well as your opinions.
Headline on Marketwatch: “Bulls cling to buyout hopes”
The stock market of today, on the surface, appears to employ the same logic as the real estate market of yesteryear, using any information that could possibly be deemed positive, as an excuse for higher prices.
Let’s talk about price inflation / deflation in terms of something close to the heart of the American consumer: big-screen TVs. (Don’t worry, I have no desire to buy one—-this is just a thought exercise.)
I’m wondering whether this downturn will be so severe that we will actually see price _increases_ in “wants” eventually (in spite of a zero-inflation disinflationary environment), due to the fallout damaging the supply chain.
In the short-term, I expect massive after-Xmas-sale bargains to drive prices down, as retailers try to dump inventory out of the channel. But longer term, might we see production slow so dramatically that prices actually go up, due to the loss of efficiencies/economies of scale?
If so, this would be very confusing to the American consumer to has become accustomed to prices on many cutting edge technologies only going down.
Thoughts?
Unlikely.
There is so much excess capacity in the global manufacturing sector that it’s gonna be a long time before this scenario unfolds.
What he said.
I guess what I’m wondering is whether a lot of that capacity might get mothballed in a super-hard-landing scenario. If the capacity is offline, with significant startup costs to get it back in motion, the economies of scale are reduced, and those with remaining operating capacity have less competition.
No, microeconomics explains this. It’s all about sunk costs v/s ongoing costs, etc.
It’s Chap 4. of any good econ text.
PB, here’s your chance to ride to the rescue.
That’s a very interesting idea - worthy of more discussion than I can offer right now, but I’ll say this:
It’s possible that economic conditions in the countries that these things are manufactured in might deteriorate right along with ours such that it ends up “balancing out” in the end.
If I had to guess, I would say that anything new that comes out may be higher priced, but items that already have a manufacturing infrastructure in place will continue to go down.
My $.02
SR
It’s the same as RE. You price to sell or you sit on it until you do. No money is no money. It’s strictly back to the fundamentals.
The difference is that unlike RE, where your property is repossessed if you can’t sell or keep up the overhead, you go out of business if you can’t drop prices AND at least break even.
It used to be you could get a bridge loan if you priced below break even but could show the bleeding was minimal. Not anymore.
Probably no shortages here but in some 3rd world countries that the USA ships food and medicine to yes I expect things will get worse. because of the global recession and the dry bulk shipping problems.
Here you go. Who needs appraisals for refinancing? The market has not changed much recently anyway, has it?
Fannie, Freddie May Waive Appraisals for Refinancings
(Bloomberg.com)
By Dawn Kopecki
Dec. 10 (Bloomberg) — Fannie Mae and Freddie Mac, the mortgage-finance companies seized by the U.S. government, are considering waiving a requirement for new appraisals on refinanced loans, their regulator said.
“If they refinance someone, rather than doing a loan mod, do they need a new appraisal if they already have the credit?” Federal Housing Finance Agency Director James Lockhart told reporters after a speech in Washington today. “That’s an issue that’s being discussed. They’re looking at it.”
What James should have said was. We want to avoid reality at any cost.
This is insanity.
Mortgage brokers were going broke left and right and backwards in early 2007, and they scheduled over 8 months until they would stop taking liar loans.
Apparently, the only institution slower is congress.
Santa Cruz down 41%, prices are back on year 2000 level.
http://www.santacruzsentinel.com/localnews/ci_11186190
Amazingly enough, the deficit for FY 2009 is likely to be closer to 2 trillion than 1 trillion.
The deficit for FY 2008 (ending 9/30/08) was $455b. The deficit for the first two months of FY 2009 was over $400b:
http://www.breitbart.com/article.php?id=D9504GN82&show_article=1
If we are running a federal deficit of over 10% of GDP and over 30% of total government revenues, then a political and economic calamity even much greater than that already being felt or forecasted is very near. There is no historical precedent for what is taking place - it is becoming increasingly meaningless to talk about markets in terms of sentiment, Santa Claus rally, etc.
I look for another huge down day in the market sometime in the next few trading sessions. Economic time is compressing.
It seems lately that you can double whatever bad news number Leviathan puts out and be pretty close to the real number.
Clue, 1/3rd of the way there. Mrs Clue going to enjoy Christmas or whatever celebration commie, ex-californian, by way of Texas and got lost in Arizona, hippies celebrate? Done any face plants on Mt. Hood yet?
Hoz, ya fricken moonbat…it aint Arizonia…its Hawaii-an.
Mrs Clue has graciously allowed me to plan a guided fishing trip on the Rogue in January with the boyos. I just love my best friends vacation house in Brookings….hope the poor bastard gets to keep it.
Trees up, lights up….moods a bit sour, though.
Stepped off UYG near the close at 6.10. Jury is out on oil and gold, though gold appears to be making a little run as of late.
“What’s wrong with America is that it’s run by investment bankers, mostly from the same bank,” the 49-year-old Malaysian said. “How can Americans stand for it? Is Barack Obama from Goldman Sachs, too?”
http://www.bloomberg dot com/apps/news?pid=20601039&sid=aa4nka49enf0&refer=columnist_pesek
A good interpretation of an incestuous relationship.
“…Heard at last night’s meeting…The Hawaii Food Bank has cut down on what is being being delivered to every area on the island, including coast from Kaaawa to Kahuku. There’s just not enough food to meet the needs, and smaller local groups are seeking help in filling the gap. And due to budget cuts at the state and city levels, neighborhood boards have been told they can no longer expect city agencies and staff to make community presentations on key issues before the boards. Instead, information will trickle down to the neighborhood boards through designated agency representatives. Fewer opportunities for the public to hear about issues first hand….”
ilind dot net
Ian Lind online daily from Kaaawa, Hawaii
Worth visiting his site.
Nice trade on UYG, I sold XLF a few days ago and kept UYG - still have it :>( - I CAN PRETEND IT IS A LONG TERM INVESTMENT (maybe DCA?) or HOW TO TURN A NICE PROFIT INTO AN ALSO RAN. I’ll be out of it by Dec 23. Pays my taxes and calls it a year.
not bad, I didnt want to get too greedy. After watching C rollover today…..methinks the roundtrip may have begun.
U.S. Gas Demand Rising to Mid-2008 Levels
“According to this week’s latest MasterCard SpendingPulse data, U.S. retail gasoline demand is back to levels seen earlier this year. Lower prices have apparently driven up demand, as Economics 101 says it will, demand destruction and depression be damned.
So, why haven’t global oil prices followed suit, especially given production cutbacks, current prices dropping below break-even for major suppliers, and so on?
Some will blame speculators, and they have a point. Certainly it shows why supply/demand is only part of the equation in this market, as is true in all markets, of course. But sentiment has become badly negative on oil, and many institutional players and hedge funds have exited the market, many of the former having only entered months ago. ”
Mr. Paul Kedrosky
According to this week’s latest MasterCard SpendingPulse data, “U.S. retail gasoline demand is back to levels seen earlier this year. Lower prices have apparently driven up demand, as Economics 101 says it will, demand destruction and depression be damned.”
I wonder if some of that is Thanksgiving travel and replenishment at gas stations after. Let’s see the data in January.
“So, why haven’t global oil prices followed suit, especially given production cutbacks, current prices dropping below break-even for major suppliers, and so on?”
I imagine world demand and other fractions of oil (jet fuel, diesel, ect) play into this
This is from a 2007 reuters article
NEW YORK, Dec 11 (Reuters) - U.S. retail gasoline demand slumped last week as demand slowed after the peak travel period during the Thanksgiving holiday, MasterCard Advisors said on Tuesday.
American motorists pumped 9.302 million barrels of gasoline per day on average in the week that ended December 7, down 0.9 percent from the previous week, according to the weekly SpendingPulse report.
“Normally you see a seasonal peak in the weeks around Thanksgiving and usually you see a retraction after that,” said Michael McNamara, vice president of MasterCard Advisors.
Kauhuku, Ewa, Kalihi….all rough country on Oahu.
I prefer to just hang out at the retired uncles castle in Aiea…..gotta put that together, he owes me a dinner and he still has my pneumatic nail gun.
oh yeah, Proshares opened up UCO, Ultra Crude Oil, double up on the dino juice.
I am also watching for SRS to have another moonshot, and when I see 300 on that, trigger pull blind faith the URE at a 3′ish number.
not investment advice, and should be read through murky watered goggles….
$3, you could lose a lot of moneys. lol Same theory for buying UYG. Not much downside risk in a market that has yearly moves in a period of days.
Default, default rah rah rah!
Re: UCO
I’d say that’s a marvelous short if we see oil close below 40.
I thought I heard gasoline storage was up.
It’s late, but I noticed Blago is still confident. Basic logic tells me this guy has a few cards left. This should get interesting.
But… you could “have a few cards left” and still be WAY shy of a full deck
He looks like he is on a Green Fairy trip.
The truth will out in the internet era, and Mr Potato Head can do little to hide it.
WSJ Op-Ed
* REVIEW & OUTLOOK
* DECEMBER 11, 2008
Whitewashing Fannie Mae
Congress begins its self-absolution campaign.
Henry Waxman’s House Committee on Oversight and Government Reform met Tuesday to examine “The Role of Fannie Mae and Freddie Mac in the Financial Crisis.” Alas, Mr. Waxman didn’t come to bury Fan and Fred, but to bury the truth.
The two government-sponsored mortgage giants have long maintained they were merely unwitting victims of a financial act of God. That is, while the rest of the market went crazy over subprime and “liar” loans, Fan and Fred claimed to be the grownups of the mortgage market. There they were, the fable goes, quietly underwriting their 80% fixed-rate 30-year mortgages when — Ka-Pow! — they were blindsided by the greedy excesses of the subprime lenders who lacked their scruples.
But previously undisclosed internal documents that are now in Mr. Waxman’s possession and that we’ve seen tell a different story. Memos and emails at the highest levels of Fannie and Freddie management in 2004 and 2005 paint a picture of two companies that saw their market share eroded by such products as option-ARMs and interest-only mortgages. The two companies were prepared to walk ever further out on the risk curve to maintain their market position.
The companies understood the risks they were running. But squeezed between the need to meet affordable-housing goals set by HUD and the desire to sustain their growth and profits, they took the leap anyway. As a result, by the middle of this year, the two companies were responsible for some $1.6 trillion worth of subprime credit of one form or another. The answer to Mr. Waxman’s question about their role in the crisis, in other words, is that they were central players, if not the central players, in the creation of the housing boom and the credit bust. Mr. Waxman released some of these documents Tuesday but kept others under wraps.
Fed bonds
Published: December 10 2008 14:53 | Last updated: December 10 2008 23:00
These are extraordinary times at the Fed. Looking back, the years under Alan Greenspan now seem almost quaint. Fulfilling the Federal Reserve’s dual mandate of full employment and low inflation was relatively easy. There were a couple of scares, but for the most part Mr Greenspan’s job involved the odd 25 point move followed by a speech, or perhaps lunch.
Today, however, the Fed is up to its neck in the nastiest economic crisis since the Great Depression. Its role of maintaining financial stability has brought its balance sheet to bare underpinning a range of asset markets as well as bailing out the odd mortgage company. For an institution that is technically private (its shares are owned by member banks), the Fed’s lengthening tentacles are already alarming some on Capitol Hill. But the mooted idea of the Fed issuing its own bonds for the first time may well prove an initiative too far.
I love British word smiths.
“This is not about the money – the Fed’s balance sheet is already limitless – but about monetary fine tuning. It is strange, though, that a measure that would suck funds from the system is being proposed just at a time when the rest of government is pumping as hard as it can.”
Next up (surprise!): “Worse-than-expected” inflation…
PETER BRIMELOW
Is it over?
Commentary: Signs suggest we may have seen worst of bear market
By Peter Brimelow, MarketWatch
Last update: 12:58 a.m. EST Dec. 11, 2008
NEW YORK (MarketWatch) — Gold up a lot, stocks up a little, bonds blah. Is it over, at least for now?
Dow Theory Letters’ Richard Russell thinks it might be. He writes: “We may now be hitting the inflection point that I’ve been talking about. The selling of stocks could be exhausted, the deflation may be on the edge of turning into inflation — today bonds were down, dollar was down, gold up strongly. The Bernanke-Paulson “re-inflation” efforts may finally have halted the fear and deflation syndrome — now the trillions of dollars that have been introduced into the system may be close to setting off inflation. I said that the first hint of the change would be rising gold and declining bonds. We may be there.“
Is Christmas Too Big to Fail? (WSJ dot com)
Spitzer-face epidemic spreads to Illinois governor’s mansion…
Corruption Charges in Illinois (WSJ dot com)