December 13, 2008

Bits Bucket For December 13, 2008

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Comment by Muggy
2008-12-13 08:29:21

The super Ponzi collapse is impressive.

Comment by Muggy
2008-12-13 08:35:03

“It appears that at least $15 billion of wealth, much of which was concentrated in southern Florida and New York City, has gone to ‘money heaven,’” he said.

Aahh, South Florida, the gift that keeps on giving taking.

Comment by DennisN
2008-12-13 09:46:37

It’s really got to annoy you to go to your investment company’s webpage and get this message instead:

Comment by Blano
2008-12-13 10:29:29

LOL holy sh*t, no doubt.

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Comment by Faster Pussycat, Sell Sell
2008-12-13 12:19:02

In London, the most startling confession came from Nicola Horlick, probably the most famous British fund manager, known as Superwoman for balancing her high-flying finance career with bringing up five children. Her fund, Bramdean Alternatives, had almost 10 per cent of its assets – about £10m – invested with Mr Madoff, money Ms Horlick admitted yesterday she was “uncertain” she would ever see again. Bramdean shares lost a third of their value.

Looks like the Hor got Horlicksed†!


† ol’-school Brit term for screw*ing something up royally.

Comment by jay
2008-12-13 14:09:45

and, the markets rallied on the news of this and treasury ready to backstop the big bad three! Amazing a 50 billion fraud did not crash the markets…my belief is it will come. This market has no reason to rally besides some big guys moving it AND WAITING FOR THE SUCKERS TO BUY IN!

Comment by Prime_Is_Contained
2008-12-13 17:14:12

It seems like as these frauds get exposed, there will be an unavoidable impact on psychology.

Is your money safe? Are your statements real? Is your account really there?

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Comment by Chip
2008-12-13 23:44:26

In a word: no.

Comment by Ann
2008-12-13 17:28:05

Got a phone call today from a friend…worried about her job…her employer lost 50 million…

Comment by Faster Pussycat, Sell Sell
2008-12-13 18:52:28

Give her the ol’ British gallows humor: Sorry you lost your job. Hope you made a killing on your house!

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Comment by Chip
2008-12-13 23:45:45

FPSS - LOL. Cocktail hour, admittedly, but that cracked me up.

Comment by combotechie
2008-12-13 08:35:17

Stay tuned;There never is just one cockroach.

Methinks the entire hedge fund industry is loaded with these Ponzis.

Comment by mrktMaven
2008-12-13 09:45:37

Some are banning investor withdrawals. This will not end well.

Comment by Faster Pussycat, Sell Sell
2008-12-13 10:16:38

It’s all over for Citadel (down 50%.)

Once you hit the -25% mark, they can never make up the “highwater mark” to pay the employees their fat bonuses.

The talented traders will leave first, and the death spiral will continue.

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Comment by ET-Chicago
2008-12-13 12:32:33

Once you hit the -25% mark, they can never make up the “highwater mark” to pay the employees their fat bonuses.

Sad, isn’t it, when the employees can’t get their requisite fat bonuses. Why, 25 percent in the hole ain’t that bad, is it?

Comment by Faster Pussycat, Sell Sell
2008-12-13 12:53:55

Firstly, they took 50 for the team not 25.

Secondly, it’s just a question of the fee structure. How do you even pay your employees to come in day to day when your fee structure mandates that you get over the “highwater mark”?

Suppose you were a good trader. You made a lot of money for them this year. But you aren’t going to be paid because the rest of the firm is down.

Here are your choices: wait it out there for a few years without a great pay (presumably for future political gains or whatever), or go somewhere else where you can make money (because of your track record.)

What would you do?

Comment by ET-Chicago
2008-12-13 13:04:09

What would you do?

I would cast off my dirty hedge-fund power suit and become a hippie goat cheese maker.

But I don’t suppose that’s a scenario that most top hedge-fund traders can embrace …

Comment by skroodle
2008-12-13 13:38:32

FP what kinda numbers are you talking about?

Are these traders making $20k with a $100k bonus or are they making $100k with a $500k bonus?

Comment by ahansen
2008-12-13 13:41:16

What would you do?

I’d go skiing for a year, then find a small town where I wasn’t known and open a book store. And lie low for a looooonnnggg time, just watching.

Comment by Faster Pussycat, Sell Sell
2008-12-13 14:06:00

What kinda numbers?

Typically, you’re looking at some “base salary” and some percentage of your takings (and the base gets subtracted out from that percentage.)

It’s a true commission based deal (of sorts.)

Your latter numbers are closer to the mark.

Comment by Faster Pussycat, Sell Sell
2008-12-13 16:03:10

But I don’t suppose that’s a scenario that most top hedge-fund traders can embrace …

When I lived in Chicago, I knew a couple of “pit traders” that had done exactly that. Walked away.

Super nice guys too. Funny as well.

Both said that they could not have been happier. Of course, I’m sure the money they socked away didn’t exactly hurt.

They both did different stuff after a year or two off. Not exactly goat-cheese makers but not the hard-edged hard-drinking finance life either.

Comment by Pondering the Mess
2008-12-15 10:20:10

Years ago there was a Dilbert cartoon where Dogbert started up a corrupt investment company. You would get 100% return per year guaranteed, but you could never take your money out. Despite that, he had no shortage of people signing up… sad that the real economy has turned into something out of a cartoon!

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Comment by Blano
2008-12-13 10:31:54

Tens of billions of more cash going poof, as you like to say.

Comment by combotechie
2008-12-13 10:39:02

… which makes any remaining cash scarce, thus more valuable.

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Comment by Asparagus
2008-12-13 13:44:11

The victims should get a government bailout.

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Comment by Lionel
2008-12-13 11:28:15

combotechie, I wonder how many of these Ponzi schemes will prove to be unintentional. I talked to a friend earlier this week who lost 50K in a housing development investment in Huntington Beach, CA. He claimed the initial returns were great, so he invested more money this time around. When I told him it sounded a lot like a classic Ponzi scheme, he adamantly defended the developers, saying that they must have just gotten in over their heads and panicked. Whether it was intentional or not, the end result is the same. Of course, part of his defense of the developers is ego-driven: who wants to admit to being scammed?

Comment by combotechie
2008-12-13 12:37:43

I don’t think the housing mania was a Ponzi scheme (where Peter is robbed to pay Paul) but more the result of a fully accepted mantra of “real estate always goes up” (meaning there will always be an endless supply of Greater Fools).

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Comment by oc-ed
2008-12-13 23:57:10

Isn’t that the definition of a Ponzi scheme? Make the pitch of huge gains to sucker in the greater fool’s cash to pay the current “investors” huge gains.

Housing appreciation in double digits unabated was the pitch, FB’s the GFs.

Owners who sold before the market topped walked away with profits. FB’s who bought in high and stood pat expecting more appreciation were, well, FB’s and definately the Greater Fools.

Comment by Pondering the Mess
2008-12-15 10:25:38

It was a Ponzi scam because it depended upon an ever-increasing number of suckers buying in at ever-higher prices; that was the only way the previous round of suckers could get out and make a huge profit. Of course, most of them turned around and “invested” their profits into into buying more real estate at higher prices, thus becoming their own suckers AND losing even more money thanks to the wonders of leverage. Since so many of them lied and cheated on their mortgage applications, I can’t feel sorry for them - too bad the rest of the economy is going down with them.

Comment by Professor Bear
2008-12-13 11:57:01

My hunch is the hedge fund industry is rife with a bevy of “too big to fail” Ponzis — a natural consequence of their ‘lightly regulated’ status coupled with the growth of too-big-to-fail entities in the wake of the LTCM bailout in 1998.

Comment by Faster Pussycat, Sell Sell
2008-12-13 13:19:08

Galbraith pointed this out fact about hedge funds in one of his “bubble” books as early as 1996 (IIRC.)

That the Fed would blow the daughter- and mother-of-all-bubbles was not something he could’ve anticipated.

The amount of “excess return” they were generating was miniscule compared to the cost of capital. Natural strategy was to leverage it up with predictable consequences.

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Comment by Prime_Is_Contained
2008-12-13 17:18:42

“Natural strategy was to leverage it up with predictable consequences.”

My new favorite slogan: “Leverage: works great on the way up!”


Comment by packman
2008-12-13 13:58:22


- You mean 1988 right?

- For this layman, can you expand on that last part? One of the things I’ve wondered about is if parts of the housing bubble can be tied directly (or indirectly) to LTCM. I haven’t looked into it that much, but would appreciate if you (or anyone) have some thoughts off the top of your head.

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Comment by Professor Bear
2008-12-13 15:23:47

The Plunge Protection Team’s response to the Long Term Capital Management blowup sent a signal to the financial sector that too-big-to-fail entities enjoyed a free guarantee that in a worst-case scenario, some kind of bailout arrangement would be cobbled together that limited downside risk. With the understanding that too-big-to-fail status provided an implicit license to play “heads we win, tails taxpayers lose” financial arbitrage, there was tremendous growth in the number of too-big-to-fail financial entities in the past decade, to the point where the stage was set for a too-big-to-bail financial Armageddon (sound familiar?). Now the PPT is left with the unsavory task of picking winners and losers, and sticking taxpayers with the tab.

P.S. The linked Wikipedia piece about LTCM mentions a loss of $4.6 bn in four months following the Russian financial crisis in 1998. How does that stack up compared to $t’s in bailout monies and counting during the current episode?

Comment by Ann
2008-12-13 17:29:53

Don’t worry this guy will go skiiing and do a Ken Lay(enron) and swallow the blue pill..

Comment by mrktMaven
2008-12-13 08:42:43

This Madoff story reminds me of the housing bubble — it is one giant Ponzi scheme. Until policy makers start calling a spade a spade, they are not going to be able to deal effectively with this crisis.

Until recently, big Sis was using equity/principal from one home to pay the interest on two other homes. Now, that the principal/equity from the first home is done, the whole thing is collapsing. And, this kind of behavior was widespread.

Comment by mrktMaven
2008-12-13 08:53:46

What’s more, she was paying local taxes on the two homes with the equity/principal from the first home. She recently stopped. Now, we’re seeing local and state budgets collapse as a result.

It’s funny (scary too) watching and reading policy makers’ responses to this crisis — stop foreclosure, raise taxes, lower taxes, save the banks, raise capital, lower interest rates, quantitative ease, print. Everyone is evading the core issue — the housing Ponzi scheme has collapsed.

Comment by edgewaterjohn
2008-12-13 08:57:57

What’s more is that they’re doing all that stuff while it’s still early in the game. Our pols simply aren’t up to the demands of a prlonged downturn. They’ve been thrown softballs for decades.

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Comment by wmbz
2008-12-13 09:08:59

“They’ve been thrown softballs for decades”.

Ain’t that the truth!!
Next up a 100mph pitch, with a bunch of girlie men on the receiving end. They are running around like chickens with their heads cut off now, imagine this time next year.

Comment by Bill in Carolina
2008-12-13 12:51:25

And that 100MPH pitch is high and inside, a lot further inside than your typical “brushback” pitch.

Comment by milkcrate
2008-12-13 14:01:35

You got it, Bill. And no time left to spit, scratch, go for the pine tar. It’s high. inside. fast.

Comment by desertdweller
2008-12-14 09:20:35

“They’ve been thrown softballs for decades”.

Ain’t that the truth!!
Next up a 100mph pitch, with a bunch of girlie men on the receiving end. They are running around like chickens with their heads cut off now, imagine this time next year.

Majority, 90%+ of the pols are wealthy, have been wealthy all their lives and wouldn’t know how to handle their own, much less their constituent’s and locals slide into poverty, hard times.
Woosy girlymen and women. I sure hope that the pols who have inherited etc their wealthy feel the pain, real bad.

Comment by bluprint
2008-12-13 09:51:38

scary too

I don’t know if I’m weird in this way, but I don’t find any of this particularly scary, mostly funny, ironic or appropriate depending on what we are talking about. Maybe I should be more scared but I’m not. I also find myself expectant, like I can’t wait to see what happens next.

In a way, I feel like I’m playing a game. For a while (at least 5 or 8 years) I’ve been reading/studying Austrian economics. I thought we would have massive inflation. For a lot of that period, it just didn’t feel “quite right”, I couldn’t figure out why. I over looked how unwinding credit was actually monetary contraction. Now I’ve corrected those views and continue “playing”.

In the past couple months I decided to start applying some of this awareness to making money in equities, which I’ve so far been very successful at in percentage terms. This was a result of having two 401ks (my wife’s and mine) which I needed to roll over. I was very close to sending it to Peter Schiff. Again, something just didn’t feel right and I kept putting it off. Finally I realized the thing that was wrong is that all the other markets aren’t going to act rationally (e.g. China isn’t going to let the Yuan rise and start producing for its own citizens) and Schiff under estimates the role politics plays in economics and finance.

So anyway, all that to say I’m just merrily traveling along playing this fantastical game. Watching things explode and trying to dodge them (I left private industry and got a job in government). Economics is something I’ve been interested in as a hobby for a long time and this whole event I feel is a once in a lifetime thing, like an interesting movie I’ll only get to watch once.

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Comment by Faster Pussycat, Sell Sell
2008-12-13 12:24:16

I think the denizens of this blog have a far better chance of coming out of this (relatively) unscathed than the rest of the population.

For one, they didn’t spend most of the last five years snorting the white powder of RE, and two, they seem to have a realistic set of expectations.

Overall, I’d bet on this crowd before a lot of others.

Comment by milkcrate
2008-12-13 14:04:10

Yeah, but I am itching to scoop up some bargains!
We’ve overcorrected to the low side, right?
Wuddayamean, values are still going down?

Comment by Faster Pussycat, Sell Sell
2008-12-13 16:20:31

I’d scratch that itch if I were you, boy-o!

More money is lost on “catching falling knives” than was ever lost by riding the gravy train hard.

At least a year for financial stuff, and at least 2012 for the housing market.

Comment by Vermontergal
2008-12-13 17:51:30

I think the denizens of this blog have a far better chance of coming out of this (relatively) unscathed than the rest of the population.

I agree.

I think what is scary is how all the rest of the people for whom this is a complete surprise will react. How much social and political unrest will we see? How orderly or disorderly will this completely predictable financial implosion be? That’s the great unknown.

I also agree with bluprint that sometimes the power of politics is completely under estimated. Everyone will attempt to continue the party until long after it’s clear that it won’t work.

Comment by Faster Pussycat, Sell Sell
2008-12-13 19:06:38

It will be disorderly.

I have no evidence from history that a credit bubble ended in anything but complete shambles.

It takes a whole generation to recover.

Comment by sf jack
2008-12-13 19:35:13

Speaking of disorderly, anyone placing any bets on how and when China comes apart?

Comment by dude
2008-12-13 19:59:58

From what I can tell, it’s already happening.

I’d wager the war will take care of dissent in favor of patriotism.

Comment by measton
2008-12-13 23:20:23

Likely when US stops purchasing crap, and stops making payments on it’s treasuries.

Comment by oc-ed
2008-12-14 00:41:58

“… once in a lifetime thing, like and interesting movie I’ll only get to watch once.”

I am with you on that. Since 2001 I felt there was something just not right about housing. And after finding Ben’s blog, where my suspicions were shared by many very smart folks, it has been like watching a very good film.

Check out the Black Swan Theory. It may have some relevance.

My stumbling block has been how angry some of this stupidity has made me. When I can let that go watching this train wreck has been fascinating.

Comment by CA renter
2008-12-14 03:37:30

…it has been like watching a very good film.

Hence, the popcorn. It’s gonna be a long, wild ride, IMHO.

Got popcorn?

Comment by diogenes (Tampa,Fl)
2008-12-13 09:18:32

But what is most striking to me of all these schemes and dreams and various rip-offs………….NO ONE. Repeat: NO ONE has been arrested. NO ONE is going to jail. Was the latest thief arrested for his FRAUD???

Paulson should be in JAIL. Robert Rubin, his co-hort, who defrauded customers of Goldman-Sachs, is an OBAMA advisor. He should be advising for a cell-block somewhere in Oklahoma.

All these CON-artists/ Ivy-league fraudsters, should be doing a perp-walk before the CONgress. Unfortunately for us, and the future of this country, the criminals are now guarding the gates, and supervising the inmates. W e A r e D o o m e d……..Ponzi-dollar-print-lend-schemes….LEGAL TENDER?

Look at the latest lies……..Obama had NOTHING to do with his former Senate Seat, even though the Gov. had the same poitical contacts and allies from Chicago as OBAMA……Reznick, now in prison, raised money for both. Bulls_it!!

Comment by Itsabouttime
2008-12-13 11:10:09

Bush II and Clinton both played a role in creating the mess in which we find ourselves. But, it’s really weird. Obama has more than a month before he takes office, and some people are already frothing at the mouth about him, and completely ignoring the current Oval Office occupant and his shenanigans. Maybe they focus on Clinton as well. But, that’s hardly an even-handed analysis.

Focusing on Obama, who has yet to take office, and ignoring Bush II, is like running past the thirty-five year old career criminal who’s carrying a stolen television set, while racing over to arrest the recent college graduate just because they look like they might jaywalk.

I wonder why.

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Comment by ET-Chicago
2008-12-13 12:35:41

But, it’s really weird. Obama has more than a month before he takes office, and some people are already frothing at the mouth about him, and completely ignoring the current Oval Office occupant and his shenanigans.

Interesting, isn’t it, given the enormity of the crimes, incompetence, and mendacity over the past eight years?

Comment by skroodle
2008-12-13 13:41:21

Like the previous comment, voters do not like to admit they were scammed.

Comment by Itsabouttime
2008-12-13 13:46:43


Please clarify.


Comment by packman
2008-12-13 14:06:37

I think it’s more a case of Bush II being a known entity that’s already been beaten to a pulp and stands to leave a worse legacy than Carter, together with a lot of conjecture about Obama being an unknown entity, combined with reaction by bloggers to the fact that he’s already been sainted by the mainstream media. Just read one day of the Washington Post and you’ll see what I mean. It’ll make you puke.

Comment by Itsabouttime
2008-12-13 15:34:40

I guess I just expect more balanced, fact-based considerations on HBB. If I wanted the silliness of the MSM, I’d be reading the MSM. We know better. We should act like it. Consistently.


Comment by Vermontergal
2008-12-13 17:54:45

We should act like it. Consistently.

I consistently act like the giant collection of emotion-laden faults that compose my personality. I like to think I’m a role model. :)

Comment by skroodle
2008-12-13 17:57:15

I think people are not wanting to admit that the last 7 years or so were not really years of prosperity. Greenspan/Bernake/Dems/Repubs all conspired to create a house of cards.

Comment by Silverback1011
2008-12-14 05:22:17

That’s a very astute observation, Skroodle.

Comment by diogenes (Tampa,Fl)
2008-12-14 06:58:51

WE all agree that Bush is and was an idiot. The Republicans did a terrible job of regulating, however, the Dem’s have been in control of Congress the past couple of years and took NO action.
In fact, they fought any reform.

My point about OBAMA, is not to “focus” on him, you MORON, it’s to point out that “HOPE AND CHANGE” is bullshit. There is NO CHANGE.
This man is a Chicago con artist, and has even worse tactics than the Bush team.

Forget Change. It’s about lining the pockets of the political players.

Comment by desertdweller
2008-12-14 09:32:27

Blue Dawg dems are really voting republican.

Please reflect that the dems are slight majority in congress for the past 2 yrs.
CAVEAT, the majority of THOSE dems in office are Blue Dawg Dems who are very conservative and vote republican and have since early in 1900’s. So it really isn’t a Dem controlled congress, just acts like one on tv…
Just like that lieberman guy. Says he is or was a dem, but look what happened there. And he is the only one who “came out”.

Comment by rms
2008-12-13 09:26:29

“This Madoff story reminds me of the housing bubble…”

I always enjoy these stories where the leader is discovered to be feeding on their own cohort; reminds me of the sports hero turned developer skinning his fans alive. I look forward to some great reading.

Comment by skroodle
2008-12-13 09:32:48

Thats as bad as U.S. senator and ex-Tiger pitching great Jim Bunning after voting against the auto bailout plan going to Detroit to hawk autographed baseballs, jerseys or gloves:

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Comment by jimbo
2008-12-13 10:16:27

My wife and I were listening to somebody on Lou Dobbs’s show, I think, yakking about how some type of bailout money must get into the hands of underwater FBs, whose “investments” in their homes were disappearing everyday. It was a very appealing, populist pitch, contrasting “struggling homeowners” with Wall Street fat cats. In pointing out to the wife problems with taking such a tack, I analogized the “struggling homeowner,” who had “invested” all he or she had in an overpriced McMansion, to a financial whiz, who had “invested” all he or she had in a lot of Beanie Babies 20 years ago. I asked wife if she thought it would have been a good idea for government back then to do something to prop up prices of Beanie Babies so the speculator did not lose his or her life savings on the lot once the Beanie Baby craze died. Wife responded,”Of course not,” grasping the point right away. Wife’s just a casual observer of the Bubble’s collapse but is becoming much more skeptical of pleas to get help directly to “struggling homeowners.”

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Comment by GH
2008-12-13 08:52:14

Ahhh the sweet smell of deregulation in the morning…

Comment by taxmeupthebooty
2008-12-13 11:25:55

housing is very regulated and subsidized
there are 200 gov GS12-13’s making over 100k each just to watch FRE / FNM
hows that for regulation ?

Comment by pressboardbox
2008-12-13 09:02:23

“Its the most-ponziest time of the year!”

Comment by Paul in Florida
2008-12-13 09:14:49

I find this story sad but fascinating in many ways, and have been reading every thing I could on it.

Apparently, some people who thought it was a Ponzi scheme early on - in the 90s - gave up on that theory because it had gone on for so long. Many knew something fishy was up, but thought it was either insider trading or some form of front running.

One story mentioned the “four horsemen” of conmen - #1 in importance being a kind of casual intimacy with those being fleeced.

The most amazing screw-up is the Fairfield Greenwich Group, a fund which had $7.3 billion (1/2 of assets under management) invested in Madoff’s fund. Their website, appropriately, is

Palm Beach Post reports a Jewish charity party last night was like the Titanic - lots of drinking and crying.

Comment by edhopper
2008-12-13 09:45:32

Barry Ritholtz asks;

“Given how easily identifiable the Madoff/Ponzi scheme was mathematically, I must ask a simple question:

Does the SEC do any quantitative research ?

There is little evidence that the SEC is using any of the quantitative methods — now so common on Wall Street — for searching out and indentifying fraud.

I would suggest to the incoming head of the SEC to put together a blue ribbon of math professors, quant scientists and algo specialists to develop a few basic programs that ferrets thru market, options, and perfromance data looking for aberrational data series, and leading to criminals and fraud artists.”

Comment by Bob in WPB
2008-12-13 10:05:16

There must have been CPA’s on the take as well as other office personnel. As auditor, one of the most basic things you do when conducting an audit is confirm cash. It shouldnt be too dificult to notice 15b missing.
Also, think of all the monthly brokerage statements mailed out every month or quarter. These were all doctored. I heard a quote from a Palm Beach accountant named Rampell who said some of these brokerage statements were 100 pages long with numerous trades reported. To generate fiction like that takes a very complicit office staff.

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Comment by skroodle
2008-12-13 13:46:06

Hedge funds are unregulated. I am sure they were never audited.

I am surprised that the IRS never took a look.

Comment by Faster Pussycat, Sell Sell
2008-12-13 14:44:18

Ummmm… typically, they are audited.

Would YOU invest in an unaudited fund? No, well neither would the rich folk, and not all of them can be stupid, right?

Unregulated is one thing; unaudited totally another.

Comment by skroodle
2008-12-13 17:54:42

Evidently, a lot of people put money into unaudited hedge funds:

Large funds tend to be audited while small funds tend not to be.


By nature, hedge funds are basically not regulated and are not required to report their fund information to the SEC. Hedge funds are not even required for auditing because of the private partnership structure.

Comment by Faster Pussycat, Sell Sell
2008-12-13 18:42:07

The argument isn’t that mor*ns don’t exist. The argument is that not everyone’s a mor*n.

Surely you can see the distinction between those two statements?

Comment by aNYCdj
2008-12-13 18:55:30


I’ll bet you a adozen donuts that complicit staff was 23 year old Paris Hilton type chicky poos with fake boobz….complicit…nope hire them young and dumb…..they can claim stupid and get away with it!!

To generate fiction like that takes a very complicit office staff.

Comment by rms
2008-12-13 21:10:45

“Would YOU invest in an unaudited fund? No, well neither would the rich folk, and not all of them can be stupid, right?”

Who needs auditing when you insure against loss with credit default swaps from AIG? :)

Comment by cactus
2008-12-13 21:48:58

Madoff’s fund never lost money ever…. until it did

I find this really funny I think most of the investors figured he was trading on inside information and they wanted a part of it. probably won’t get bailed out not big enough only 50M

We only bailout loses in the billions for the greater good of Paulson’s future employer.

Comment by measton
2008-12-13 23:25:49

Just get those crack rating agencies to start rating Hedge Funds. Moody’s S and P Fitch ect.

Comment by Faster Pussycat, Sell Sell
2008-12-13 10:18:39

What kinda person with real brains would work for an intensely political organization like the SEC when they could, I don’t know, be making real money?

All these ideas are a joke. Nobody who’s ambitious and talented (at least in the business/science/research/technology) settings ever works for the government.

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Comment by WhatOnceWas
2008-12-13 12:42:18

To reiterate: to think he did this alone is beyond ludicrous…Being a dutiful father he is falling on the sword while trying to save the family. You have to believe that there’s one hefty account over in the Bahamas somewhere with 1000 pounds of gold buried in the backyard..Oh well, kinda perverse pleasure watching the gang eat their young.Should be a true schadenfreude moment as this unwinds in the coming weeks.
…also: Blodgett blog is writing about many investors “knew” it was a scam,but figured he was insider trading or other some such crooked plan ,and asked no questions as long as they got their cut! …..suuurrrprise!
…makes you wonder if our overseas inWestors will keep playing our shell game ,or decide to take profits,and walk?

….yes, interesting days indeed.

Comment by ET-Chicago
2008-12-13 12:49:20

Nobody who’s ambitious and talented (at least in the business/science/research/technology) settings ever works for the government.

While I understand your point, I think that’s painting with a pretty broad brush. (I’m not addressing the SEC specifically, though.)

Steven Chu’s nomination as Energy Secretary is an obvious, recent example — are you seriously going to argue that this Nobel Prize winner is not one of the best physicists in the country?

Something to consider with less glamorous examples than Mr. Chu: there can be a significant multiplier effect in moving from the private sector to government service and back again. Many talented people are willing to take that route for a few years because the government service gives them a broader base of knowledge, more power than they had in the private sector, more contacts in their field, or an inside track to lucrative federal grants and contracts once they return to the private sector.

And some talented people just believe in, like, serving their country, you know?

Comment by ecofeco
2008-12-13 13:53:18

It appears that nobody talented works on Wall St. either.

Comment by Faster Pussycat, Sell Sell
2008-12-13 14:04:30

Not true, not true.

There are plenty of talented people who’ve done quite well in the downturn. However, those types tend not to flap their mouths in the media. They probably take the subway to work, and if you sat next to them at a restaurant, you’d never suspect that they were a mega-millionaire. They also have most of their money invested in their own firms aligning their investors’ incentives with their own.

They exist. In sufficient numbers. Just not visible.

Comment by Faster Pussycat, Sell Sell
2008-12-13 16:27:59

Steven Chu’s nomination as Energy Secretary is an obvious, recent example — are you seriously going to argue that this Nobel Prize winner is not one of the best physicists in the country?

Steven Chu was one of 46 employees named in a 2006 PricewaterhouseCoopers audit of improper compensation practices at the University of California. Records produced under the California Public Relations Act also show that he was one of at least 29 employees offered unusual perks in hiring letters, perks which the university had not made public.

(Source: Wikipedia)

The people who go into politics have a certain kinda personality. There is no role there for naive idealists and honesty.

The SEC has to be one of the worst places to work if you have a true talent for finance/math/statistics.

Comment by Professor Bear
2008-12-13 12:03:08

I found it quite interesting to see the stock market go up yesterday in the aftershocks of a double-earthquake, between the political earthquake of the automotive industry bailout rangling and the financial earthquake of a collapsed Ponzi scheme. The bulls must be pretty durn confident to pile in on the release of such terrible news.

Hedge Funds Are Victims, Raising Further Questions
Published: December 12, 2008

Frauds on Wall Street aren’t unheard of. But a $50 billion Ponzi scheme, one that prosecutors say struck at boldface names on several continents, is a bombshell by any standard.

The case against Bernard L. Madoff, the respected longtime trader accused of running one of the biggest frauds in Wall Street history, has been Topic A in the investor community. But close behind is a heated discussion of how the sordid drama will affect the already-battered community of hedge funds and other investment firms — many of which invested with Mr. Madoff.

Mr. Madoff’s case could hardly have come at a worse time for hedge funds. The whipsawing markets and suddenly unfriendly lenders have already taken their toll on high financiers, and many have already suffered what amounts to runs on the bank by investors clamoring to withdraw their investments.

“It can’t help but have the effect of further chipping away at the confidence that the investor community has in the hedge fund industry,” said Ralph L. Schlosstein, the chief executive of Highview Investment Group, a money management firm and a former president of BlackRock. “But like many things that come at moments of fragility, its impact is magnified.”

Comment by cactus
2008-12-13 21:54:53

“It can’t help but have the effect of further chipping away at the confidence that the investor community has in the hedge fund industry,” said Ralph L. Schlosstein

Gee ya think so ? I think you have to have 1.5M net worth to play with hedge funds ? Maybe there will be a few less of these high net worth folks to go around in 2009 ?

Comment by wmbz
2008-12-13 08:36:10

More than four million still paying their credit card debt from last Christmas

More than four million Britons are still struggling to pay off their credit cards from last Christmas as the debt crisis worsens amid the economic downturn, it was disclosed yesterday.

Comment by Faster Pussycat, Sell Sell
2008-12-13 11:56:35

The UK is a death spiral.

It ain’t over until the IMF bailout.

Comment by what-me-worry?
2008-12-13 14:52:57

Why don’t we just surrender now and let a whole new culture take over? That’ll fix the U.S. economy in a Mecca Minute!

Comment by dude
2008-12-13 20:50:34

Do you work in government? That may be the stupidest idea I’ve ever heard.

I’m pretty sure you were being facetious, I hope you were.

Every step that big gov takes to regulate, control, divert, bailout, etc. just makes the problem bigger and punishes the people who can actually get us out of this mess.

The last thing we need is to give any extremist group of any slant additional power. How about instead we ask everyone to read the constitution, maybe even give a pop quiz?

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Comment by what-me-worry?
2008-12-14 12:11:14

Mellow out, dude. It’s the Saturday Bits Bucket. Yikes.

Comment by Pullthetrigger?
2008-12-13 20:37:41
Ignor this website:)

Comment by wmbz
2008-12-13 08:37:16

What does a nation do when it cannot pay its obligations?

Ecuadorean President Rafael Correa has declared his country in default on foreign debt as his government grapples with falling oil income and a decline in remittances from Ecuadoreans living abroad. Calling the debt “immoral and illegitimate,” Mr. Correa said his government would not make a $31 million interest payment, a move heightening concern in global markets over Ecuador’s $10 billion in foreign debt. The decision by Mr. Correa, an American-educated economist, could have far-reaching impact in Ecuador, which risks being shut off from foreign credit markets even as the move temporarily frees up funds for social welfare projects.

(”What a tangled web we weave,” remarked playwright W. Shakespeare. Somehow a great deal of the sorrow in the world is based on games nations play with phony money. When the chips are down IOUs take a beating. Which brings to mind the biblical admonition, “Neither a borrower nor a lender be.”

Comment by palmetto
2008-12-13 10:25:50

“Mr. Correa, an American-educated economist”

Need I say more?

“Eff you, I ‘ain payin’.”

Comment by Blano
2008-12-13 10:38:27

“which risks being shut off from foreign credit markets”…….

Unlikely. An article last night pointed out this is nothing new with Ecuador. They did it in the 80’s and 90’s as well. Eventually they’ll head back to the well, and someone will accomodate them.

Comment by az_lender
2008-12-13 11:05:29

“Neither a borrower nor a lender be”

wmbz, my impression is that this line comes from Polonius in Hamlet. If it had already appeared in the Bible, show me; that would improve my education.

Not that either source would stop me from being a lender.

Comment by Blano
2008-12-13 11:16:26

I don’t recall that being in theh Bible (not that it isn’t, lol), but from Proverbs (of which you already may be aware):

“The rich rule over the poor,
and the borrower is servant to the lender.”

Comment by reuven
2008-12-13 13:18:21

It’s from Hamlet!

Neither a borrower nor a lender be;
For loan oft loses both itself and friend,
And borrowing dulls the edge of husbandry.

Fortunately, I went to college before “multiculturalism”, so I know my European literature.

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Comment by Blano
2008-12-13 13:25:16

It’s equally prophetic, IMHO.

Comment by milkcrate
2008-12-13 14:08:23

A good thing.

Comment by what-me-worry?
2008-12-13 15:04:25

With the possible exception of the ox cart industry.

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Comment by cactus
2008-12-13 15:00:47

So does the treasury bail Ecuador out too ?

Comment by oxide
2008-12-13 17:56:51

decreases in remittances from Ecuadoreans living abroad

Living abroad… Oh, you mean illegals who lost their under-the-table construction jobs in the US aren’t sending as many moneygrams.

Comment by Xenos
2008-12-13 20:24:50

Do you know what the fee is on moneygrams? I was going to send some emergency funds to Greece, and the charge came out to 7.5%– a thousand dollars transfer costing $75!

A lot more people than 3rd world governments making money off of the poorest of the poor.

Comment by rms
2008-12-13 21:29:51

“The decision by Mr. Correa, an American-educated economist, could have far-reaching impact in Ecuador, which risks being shut off from foreign credit markets even as the move temporarily frees up funds for social welfare projects.”

Must be an election on the horizon.

Comment by wmbz
2008-12-13 08:40:43

Oh well looks like some rich folks are no longer…

$50 billion at stake after Wall St broker Bernard Madoff is arrested over ‘world’s biggest swindle’

Some of America’s wealthiest socialites were facing ruin last night after the arrest of a Wall Street big hitter accused of the largest investor swindle perpetrated by one man.

Many of his investors came from the enormously wealthy enclaves of Palm Beach, Florida and Long Island, New York, where people had invested billions in Mr Madoff’s firm for decades. He was a fixture on the Palm Beach social scene, and was a member of some of its most exclusive clubs, including the Palm Beach Country Club and Boca Rio Golf Club, where he drummed up much of his business.

Comment by ButImNotDeadYet
2008-12-13 09:36:21

I have been wondering what instrument the government is going to use to “make whole” those who lost out on this ponzi scheme. Remember, these are not blue collar UAW members who were the victims here. These are some of the most wealthy, socially connected in the New York and Florida social scene. I am sure the incoming phone lines to Senators and Congressmen for these two states are burning with ideas.

My guess is: they’ll try to run it through the AIG “slush fund” somehow. Nobody seems to be questioning the untold billions that are being funneled through AIG, and there is little to no transparency there. So my “double-play” call is 4-2-1: TARP -> AIG -> wealthy victims.

You heard it here first…

Comment by palmetto
2008-12-13 10:28:52

I’ve got a very sick feeling in the pit of my stomach. These Richie Riches should get the same boning everyone gets. Nobody makes me whole when I screw up. And these folks screwed up, they didn’t watch their investments.

The whole thing is so creepy, I can’t even stand it.

I want to see some of the old doyennes tottering on their Manolos.

Comment by milkcrate
2008-12-13 14:30:03

Maybe a grouper sandwich would settle the churning tummy? :)
For a while, anyway.

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Comment by Eudemon
2008-12-13 18:43:27

Eat the rich.

Comment by rms
2008-12-13 09:56:16

“Some of America’s wealthiest socialites were facing ruin last night after the arrest of a Wall Street big hitter accused of the largest investor swindle perpetrated by one man.”

These folks are more than just socialites. They use their money to play empire around the world, but primarily in the middle-east. These folks will soon learn that Senators don’t have any friends — only rich acquaintances. I look forward to the changes in foreign policy influence.

Comment by The Housing Wizard
2008-12-13 11:12:33

When all those investors lost money in the “Keating ” swindle of
the 1980’s ,they never got their money back . Many retired people lost their life savings . While Keating went to jail and Lincoln Savings
went BK ,the investors didn’t get their money back . What about all the money that employees lost with Enron .

So, my point is that if your a victim of fraud ,the criminal goes to jail ,but if the money is gone ,at least historically ,your out of luck .
How can the Politicians pay off the rich people on a fraud case and
not bail out say the stock losses of the employees of
CountryWide and WaMu ,or the Enron employees ,or victims of the Keating misrepresentation ?

Comment by Matt_in_TX
2008-12-14 10:03:20

Via financial/governmental innovation.

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Comment by az_lender
2008-12-13 11:08:36

“many of his investors came from … Palm Beach and Long Island”

Darn. Just this morning, I was thinking that I’d like to live in Santa Barbara in wintertime. Why couldn’t Mr Madoff have made off with some of the Santa Barbarians’ fortunes, thus assuring me of distress sales of housing there? Hmmm, well, I may have to consider Palm Beach.

Comment by east beach
2008-12-13 14:01:02

Rent here like me :-)

Or you can buy the foreclosed house around the corner.

Comment by technovelist
2008-12-13 16:06:39

Ira Roth, from New Jersey, said that his family had $1 million invested, and that he was in a state of panic.

At least he won’t have to pay any income tax. :-)

Comment by Faster Pussycat, Sell Sell
2008-12-13 18:44:11

Please don’t forget the $3,000 he gets to write off each year on his taxes for the next 333 years!


Comment by Eudemon
2008-12-13 18:47:42

Ira Roth should have copywrited his own name. He and his would be on easy street for the rest of their lives.

Comment by TCM_guy
2008-12-13 08:41:26

Fed Refuses to Disclose Recipients of $2 Trillion

The Federal Reserve refused a request by Bloomberg News to disclose the recipients of more than $2 trillion of emergency loans from U.S. taxpayers and the assets the central bank is accepting as collateral.

Comment by exeter
2008-12-13 09:23:22

Gee let me guess….

Bank of America
JPMorgan Chase Bank
Wachovia Bank
Wells Fargo Bank
Washington Mutual Bank
SunTrust Bank
U.S. Bank
Regions Bank
Branch Banking and Trust Company
National City Bank
World Savings Bank
Countrywide Bank
PNC Bank
ING Bank
Merrill Lynch Bank
Sovereign Bank
Comerica Bank
Union Bank
Commerce Bank
North Fork Bank
Fifth Third Bank
LaSalle Bank

Those poor banks….

Comment by sf jack
2008-12-13 19:47:18


Don’t forget the Bank of Marin, which received $28 million recently, in order to “keep lending to businesses and individuals.”

This is a surprise. Given appearances and all, I had thought in the Land of Milk & Honey and All That Is Good… there wouldn’t need to be a government bailout.

Comment by Professor Bear
2008-12-13 12:08:38

Isn’t there any kind of legal requirement to disclose how tax dollars are spent?

Comment by Professor Bear
2008-12-13 12:41:42

P.S. Three advantages of taxation by running the printing press:

1) No discussion of the incidence of the tax is necessary.
2) No discussion of who gains from the tax is necessary, either.
3) Most of the taxpayers don’t even have a clue they are being taxed.

Comment by TCM_guy
2008-12-13 14:03:36

Finals week is over! Yeah!!!
Back to the HBB…

Disclosure? What disclosure? We don’t need no stinkin’ disclosure! (You think this is a democracy or something? This is gobmint off the people, for the lawyers, by the lawyers.)

Individuals, groups, and organizations with strong (not casual) political connections will be made whole. All Treasury needs is delaying tactics, to understand who is underwater in what hedgies. By the time anybody figures out how the money was doled out, it will be too late.

Somebody posted that Madoff’s Scheme suckered some $15 billion from New York. If any given fund suckered enough of the Northeastern elite establishment (for example), then look for it to be labeled TBTF, while larger and more heterogenous hedgies are NOT lableled TBTF. As long as there is no transparency, TBTF will be the cover used by Treasury to make the most powerful whole.

Talk about the perfect storm. A lame duck administration with only one month remaining, a judiciary with a historic affinity for slow moving adjudication, a massive melt down of the entire global credit/banking system, and the very rich and powerful soon not to be so rich = unparalleled transfer of wealth from the masses to the few, in a very short period of time. Since dW/dt is near infinity, how will this play out in systems that are now under great stress and duress?

Comment by milkcrate
2008-12-13 14:19:38

Of course there is, prof. Though many legislative records are considered privileged (federal). They can file a FOIA request, have it deep-sixed by countless delays, and maybe get something cogent in two years, redacted. Then Reuters, or whoever, has to appeal to have a judge look at the complete documents “in camera,” in his/her private chambers, to see whether any that has been redacted shouldn’t have been. Cost: time in the dark, and legal fees.
Two of the most damaging exemptions to foia: “national security” and “possible harm to competitive position” (confidential business information). The General Accounting Office can get some financial info public quicker. But if there is favoritism to be hidden, the Congressional chairmen with the data would hem and haw and drag and…

Comment by mrktMaven
2008-12-13 13:14:33

Connect the ….

Comment by ACH
2008-12-13 13:15:04

Two things:
1) They really don’t know where the $2 Trillion went.
2) Isn’t this “no money down - years and years to pay” the method Alan G. used to get this whole thing rolling?


Comment by exeter
2008-12-13 08:44:12

The latest denial among those who hung their entire economic future on the value of their shack;

“It’s like a stock…. I don’t have to sell”.

What they’re missing is the fact that highly liquid asset classes like stocks, gold, oil and commodities is the fact that those asset classes have already corrected at least 33% (please don’t bother aladinsane) and by 50% or greater in some cases. Why? I believe it is because of the frictionless transaction process. Anyone can be in and out of any paper asset in the matter of seconds. And they did just that over the last 120 days. Not so with housing. And it is because of the illiquidity, transaction price and painfully slow transaction process related to housing that it hasn’t corrected to the same depths as other asset classes…… yet.

Question: Will the decline side of the curve require a sales volume equal to the bull side of the curve for housing to hit bottom? If so, has anyone considered the duration necessary to bottom?

Comment by Blano
2008-12-13 11:02:22

Seems to me sales volume on the down side equal to the upside would delay the trip to the bottom.

As we see in articles linked here, various realtwhores and others get all geeked when sales tick up; people start calling the bottom, it’s a great time to buy, yada yada yada. Soft landings are tough; seems to me to get to the bottom there has to be a complete collapse of both price and volume.

Comment by exeter
2008-12-13 13:43:14

You don’t get a collapse in price without volume.

Comment by wmbz
2008-12-13 08:46:16

‘Been Bamboozled’

Congress is demanding more transparency from the Fed and Treasury on bailout, most recently during Dec. 10 hearings by the House Financial Services committee when Representative David Scott, a Georgia Democrat, said Americans had “been bamboozled.”

Comment by hoz
2008-12-13 08:48:58

Magicians And Mathematicians
December 12, 2008 2:18 PM | Posted By : Paul Wilmott

“…You are in the audience at a small, intimate theatre, watching a magic show. The magician hands a pack of cards to a random member of the audience, asks him to check that it’s an ordinary pack, and would he please give it a shuffle. The magician turns to another member of the audience and asks her to name a card at random. “Ace of Hearts,” she says. The magician covers his eyes, reaches out to the pack of cards, and after some fumbling around he pulls out a card. The question to you is what is the probability of the card being the Ace of Hearts?…

Once you start thinking outside the box of mathematical theories the possibilities are endless. And although a knowledge of advanced mathematics is important in modern finance I do rather miss the days when banking was populated by managers with degrees in History and who’d been leaders of the school debating team. A lot of mathematics is no substitute for a little bit of commonsense and an open mind.”

I got the answer. I like magic shows.

Comment by Eudemon
2008-12-13 19:14:55

Wow - quite the ballsy comment by this Wilmott guy. (Thanks for the post, hoz).

I agree wholeheartedly with his views. You can be among the brightest in any field - law, finance, engineering, math, science, journalism, military, arts, retail, etc. - but unless you can understand the common man and are able to communicate with him at a level he can understand (AND engross him with material interesting enough to merit his spending additional time thinking about what you have just talked about), then you accomplish nothing most of the time.

Sitting in an academic, public or private ivory tower and pontificating life with one’s friends is in many ways a pointless endeavor. Aside from meeting the typical ego’s hedonistic need for self-aggrandisement, of course.

A shame that many of today’s pointy heads don’t realize, or refuse to acknowledge, that simple fact.

You don’t NEED to be brilliant.

You need to be RESOURCEFUL. That’s where true brilliance lies. It requires good, practical, working understanding of many different aspects of life.

Comment by wmbz
2008-12-13 08:54:49

From the Daily Reckoning…

The front page of today’s USA Today adds, “Home values may take decades to recover.” Finally, the press is catching on!

Of course, economists’ and analysts’ guesses are rarely worthwhile. How many foresaw the market collapse coming? Very, very few. How many saw the price of oil below $50? Who guessed that Japanese stocks would fall 50%? Or that Warren Buffett would lose $25 billion? Practically no one.

Analysts lack imagination. Instead, they merely read the day’s news…and extrapolate. They imagine that tomorrow will be like today. Often, it is. But sometimes, it is not. And that’s where you get big profits…or big losses – when things happen that are unexpected.

Right now, the analysts and economists are spreading gloom and doom. But Mr. Market likes to surprise us. What will the surprise be? Here is our guess: things will be better than expectations…and much worse too.

Remember, these guesses are worth what you paid for them: but despite yesterday’s setback, we wouldn’t be surprised if this rally continued for several more months. No particular reason. It’s just the way Mr. Market works. Investors have gotten scared…they’re taking precautions. They’re closing their wallets…they’re asking questions and reading prospectuses carefully. Mr. Market will want to loosen them up a bit…get them to relax, let down their guard and come out into the open – so he can destroy them.

He’ll be aided and abetted in this mischief by the feds. A headline in yesterday’s paper tells us that more and more of the economy is directed by the government. As private spenders grow reticent, public spenders become more bold. They’re talking about a massive public health system…new roads, bridges, trains.

Mr. Market surprised us in 2008. He hit harder than almost anyone expected. What’s his surprise for 2009?

Comment by matthew
2008-12-13 15:55:25

“decades to recover?”… got that right.. try 8-9 decades.. doubt the USA Today will be around by then..

Comment by Vermontergal
2008-12-13 18:01:15

There will always be a market for pretty graphs.

Comment by Eudemon
2008-12-13 20:41:59

Thanks once again for some good reading, wmbz.

It seems to me, given the current environment, that an ability and willingness to play both good defense and offense now are important. Solid defense was needed from 2005 to maybe a month or so ago. Now, the scene has changed at least in the short term.

I smell something unexpected - that the next big mania might very well be government. Literally. Invest your money/assets/time in anything tied to the government - make big money for a few years, then sell like mad before the public sector tanks.

I can’t perceive any means by which the government will be able to successfully implement whatever national programs it launches. The money isn’t there. The ROI isn’t there. The public support won’t be there, especially after everyone realizes that not only are they asset-poor for decades to come, but that they’ll be services-poor for the remainder of their lives as well.

People used to being coddled for their entire lives (which is 75 percent of the population) by government or by demographics, are going to mightily resent not only losing their houses and retirements - but they also will become infuriated by all the services promised to them but not delivered (Social Security, Medicare, etc.)

By 2015-2018 or so, I can see a time when government will shrink dramatically at all levels as much of the populace turns away and refuses to participate any longer.

Why would ANY population (even welfare scabs) choose to participate in something that will lead to no benefits whatsoever? (Contrary to popular opinion, I don’t think the *vote for me and I’ll give you money* scenario will last much beyond 2015. The financial means of supporting it will have long evaporated before then. The wealthiest people in this country don’t have the kind of money to pay for Medicare. Not even close).

Comment by CA renter
2008-12-14 04:05:36

No problem if you have a printing machine in the back room…

Deflation for now, inflation/currency debasement in the future, IMHO.

Comment by desertdweller
2008-12-14 09:56:57

Investing in something to get Nothing?

Didn’t alot of folks just do that very thing this week?
Invest in Treasuries for Zero Percent earnings, only asking that
the investments be guaranteed. Not interest at all in their investments?

Comment by diogenes (Tampa,Fl)
2008-12-13 09:00:47

The long, steady, tedious collapse……….My latest report.

It has been some time now since I gave a report on my own company’s business, and that of aligned industries. As some of you know, I work for a housing supply manufacturing company here in Florida. We ship nationwide and are one of handful of companies offering the products that we make….structural components.

Here is a brief summary: Over the past 2 years, we have seen a steady decline in business. During the late summer and early fall, it looked as though we had reached a lower plateau, moving about 20-30% of the volume of parts that we did during the peak.
That held until about a month or so past. We are lucky to get a 20% sales volume, in spite of increased marketing and sales efforts.
75% of our prior work force is gone. We had more layoffs last month, and let go another office manager yesterday. We are now working with 70% administrative and 30% production overhead.

The company has tried to keep as many of us “not easily replaceable” managers/professionals/skilled labor pool as possible, holding enough staff in place to try and break even until we can see some increase in sales, hopefully by late spring of 2009. Shop foreman and supervision have taken the role of machine and tool operators, at times, to keep our staff at a minimum. The regular work crews are now on 4 day work weeks, with reduced hours, for a 20% reduction in gross pay.

I feel fortunate that I have survived that cutbacks to this point, as I know, by talking to my fellows in the engineering business outside my area of work, that commercial RE is slowing and A/E services are shrinking. If i get the boot now, I don’t see much in the way of employment or work opportunities, so I may end up as one of the long-term unemployed.

We still make sales, and some days we get unexpected increased volumes of some products, but given the holiday season, I expect very little business between now and New Years. We are using the time to find ways to streamline costs and cut unnecessary work processes, re-tool and re-design some products, and add more automation to our processes. But, that still COSTS money, in terms of staff. If we do not increase our sales volume by the spring, at least somewhat, we may have to cut down to nothing.

The plant I work in has been in business at its current location for over 25 years. Those who have been there since the beginning say they have never seen it this slow.
The only saving grace……..we are still operational as of today, and still are having a Christmas Party next week, although it’s a low budget affair.
Best of wishes to all from the Deep South.

Comment by diogenes (Tampa,Fl)
2008-12-13 09:09:03

Oh, one last thing.
I forgot to mention a friend in another “allied” business. They sell concrete components for masonry and concrete structures. The company did and “across the board” cut in pay last month. Everyone took a 20% reduction.
This kept the company from losing money, and kept everyone employed. This meant they all shared the pain of income loss, equally. It’s fair to all, but more difficult for some.
My particular friend, against my advice, bought a bubble-house in 2006. Under the current circumstances, without any unforeseen expenses, he is able to keep up with this bills. However, he tells me, if he loses any more, then he is underwater and suffering negative cash flow…………expenses exceed income.
In the short-term, that’s uncomfortable. Over a longer haul………personal bankruptcy.

Comment by combotechie
2008-12-13 09:32:37

“The company did an ‘across the board’ cut in pay last month. Everyone took a 20% reduction.”

Signs of deflation. Look for more of this as the Great Unwind unwinds.

Comment by scdave
2008-12-13 10:16:55

Maybe at the end of this, the repricing of assets will allow us to afford a 4 day work week…A five day work week may produce to much of everything given production efficiencies that we have gain over the last twenty years or so…

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Comment by taxmeupthebooty
2008-12-13 11:35:44

I think folks will be working 6 days to equal their 1960’s pay- whoops, they already have to

Comment by San Diego RE Bear
2008-12-13 14:35:59

Hang in there diogenes. This is what sucks about the economy - the good people who did what they were supposed to and didn’t live above their means but are still having to worry about job cuts and other punishments for crimes they didn’t commit. Am so sorry you’re one of them.

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Comment by desertdweller
2008-12-14 10:01:45

Now if only more corps did ‘across the board’ reductions, but they
do not. They take the most from the people on the force making the least, and then give themselves bonuses. Personal experience.

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Comment by ButImNotDeadYet
2008-12-13 09:44:40

I applaud the “across the board” pay cut idea. Better for everyone to sacrifice a little, than to have a few people (20% of workforce?) sacrifice 100%, in my opinion…

Comment by Kirisdad
2008-12-13 17:08:29

As opposed to the UAW. They chose to cut the pay of the newly hired and soon-to-be-hired claiming they made concessions. Even when pushed to the brink of bankruptcy, the UAW refuses to take pay cuts for their entire membership. This is why I am longer a union official. I refuse to represent the reprehensible. The greed and selfishness is beyond the imagination.

Comment by Vermontergal
2008-12-13 18:06:04

Assuming that unions survive, when the young (those “who cares because haven’t been hired yet” group) become the voting majority, I can almost guarantee that union pensions (which they will not get) will be a “concession” for higher pay to current members.

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Comment by Kirisdad
2008-12-13 19:08:54

In most cases they negotiate the pension back. Happened with the Long Island Railroad conductors. Pension given away for new hires, in 1988, negotiated back in 2003 or so. The recently retired old timers, just had a very public disability scandal uncovered.

Comment by Eudemon
2008-12-13 21:18:46

It’s a demographic problem more than anything else. Seriously.

We have in this country an entire generation of Boomers (born from 1936 to 1954 or so — NOT, imo, from 1946-1964) who have been in the catbird seat for most of their lives. They have no recollection at all of the Depression, and benefitted hugely by World War II and its aftermath, as well as a massive population boom from 1946 to 1964.

Until very recently, demographics have:

(A) Allowed them to forever sell their properties for significant gain with very little effort or sweat.

(B) Allowed them to obtain highly paid positions of employment very early in life (due to very few people being born the 10-20 years immediately ahead of them).

(C) Allowed them to benefit strongly from social welfare programs of all types, including unions.

It is this same age cohort that is largely unwilling to give up the demographically-advantageous lives they’ve always had.

They are more than willing to screw all those younger than they because somehow they think they are ENTITLED. They are the true Me Generation.

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Comment by Happy2bHeard
2008-12-14 12:16:04

Those born in the latter years of your boomer generation started their working lives in the years of the first oil shock and inflationary 70s. Inflationary times engender a spend now before the price goes up mentality.

Those born in 1944 will reach retirement age next year. Most of your boomers have not yet reached an age to benefit from Medicare and Social Security. Many are self employed and do not belong to unions.

Any decent parent worries about the world their children inherit and willingly sacrifice their desires to provide for their children.

There are some demographic forces in play, but you ascribe selfishness and spite to an entire generation where survival may better explain. What would you have them do? Die? Biological imperative drives all of us to continue putting one step in front of another as long as we can.

In a few years when you discover that the boomers are remaining in the workforce in greater numbers due to retirement incomes that have gone up in smoke (SS, 401K, no pensions), you will be upset that they are still there. How selfish of them to want to eat.

Comment by Eudemon
2008-12-14 17:58:09

Survival my ass.

Whose fault is it that many people born from 1938 to 1954 lived way beyond their means for decades (credit, dinners out, trips to Club Med, multiple houses, etc.)?

Too bad, so sad.

Comment by CA renter
2008-12-14 04:26:33


Thank you very much for your informative post.

I am very sorry to hear about the troubles with your company, and hope that they can make it through this downturn.

Another reason for letting prices drop **quickly** is that we can get back to business more quickly. It’s the length (not depth) of the recession/depression that is the most damaging, IMHO.

Comment by edgewaterjohn
2008-12-13 09:17:22

And to think, you and your company are doing all that without the need to parade yourselves in front on congress.

Multiply your company many times over and its no wonder why on main street there’s not much sympathy for three historically mismanaged auto companies.

Comment by Hwy50ina49Dodge
2008-12-13 09:21:44

I wish you & your company…are able to get through 2009.

Speaking of which, all this trash talking ’bout Ford & GM …VS …Toyota & Datsun / Kia / Honda

All I can say is that… I rented a Ford V-8 Mustang 2007 to go to a pal’s wedding in Denver from California across the Mojave thru Nevada Virgin river gorge, across the Utarr red rock knock your socks off canyons over the the Colorado granite boulder peaks…that car was a “bitchin” ride…smooth, comfortable, quite, not one friggin’ problem…and nothing from Kia or Hyundai or Toyota even come close to that Mustang. Shelby’s Corker McConnell…can kiss
my as$! ;-)

Comment by exeter
2008-12-13 09:30:13

I had the misfortune of being a passenger in a new(?) Vulva “Cross Country”. What a noisy, hard riding POS. I doubt the junks could make it across town no less cross country.

Comment by not a gator
2008-12-13 10:22:15

I think Ford just sold them.

Btw, Ford, which built that Mustang, isn’t the one crying to congress that it’s days from going broke. They just want money because if CONgress bails the other two out without giving them some money, they’ll be like Delta after congress gave USAir $20B.

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Comment by AnonyRuss
2008-12-13 09:50:33

“I rented a Ford V-8 Mustang 2007 to go to a pal’s wedding in Denver from California across the Mojave thru Nevada Virgin river gorge”

Was that because your GM vehicle was in the repair shop? BTW, I hate Dexcool.

Comment by buckwheat
2008-12-13 11:02:12

x2 on the Dexcool. That stuff is garbage.

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Comment by Hwy50ina49Dodge
2008-12-13 11:47:23

Naw, got a weekly rental for $129.00…unlimited mileage…3,000 total overall… averaged around 24 mpg :-)

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Comment by hd74man
2008-12-13 10:04:40

RE: a Ford V-8 Mustang 2007

The Mustang has always been Ford’s “ace”-in-the-hole.

There isn’t one auto company in the world that produces a car with 300HP & 290ftlbs of torque and sell it for a little over $25k.

I still have my 5.0 ‘88GT purchased new for the princely sum of $12.5k.

With 171k on the odometer, it’s never seen snow, and still puts a smile on my face whenever I drive it.

Hats off to Mobil 1 oil!

Comment by exeter
2008-12-13 13:08:00

Bingo on M1 oil.

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Comment by taxmeupthebooty
2008-12-14 06:49:32

mobil 1
I’d love to be their marketing man for 6 months

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Comment by scdave
2008-12-13 10:21:28

that car was a “bitchin” ride ??

Its also “bitchin” looking….IMO, combine the “best” products of all three of the “Big 3″ and you would have a a chance…

Comment by cactus
2008-12-13 15:25:46

The company I work for is Mothballing one of its Foundries.
We have layoffs and rumors of layoffs daily, our stock is about 75 cents a share.

I’ve been through this before which is why I now rent a house.

And now for those of us about to get let go just remember we won’t have to pay much in taxes if we don’t have jobs and or get much lower paying jobs to bail out Wall Street and every other idiot who got us to were we are today.

Comment by Bill in Los Angeles
2008-12-13 17:13:36

we won’t have to pay much in taxes if we don’t have jobs and or get much lower paying jobs to bail out Wall Street and every other idiot who got us to were we are today.

That’s the silver lining! Could be revenge too.

The long term outlook, even during these bad times (and perhaps they will get worse) the human brain is being creative. The money making types who are doing the creative thinking will build the better mousetraps and renew the cycle of wealth creation. Kind of like what the PC did from the early 1980s.

Just as some people with cash are finding great deals on houses they value, so too, are there people and groups finding great deals on companies.

For now, I’m still in the tax avoidance scheme. No capital gain for me until this cycle of socialism (which has only begun!) is reversed.

Comment by Silverback1011
2008-12-13 09:13:01

Good luck Diogenes. Unemployment worries, or actually being cut, are touching other posters here & there on the HBB. I have noted 3 other posters besides myself re: my husband’s unemployment. I hope that your company stays open and that you don’t get cut.

Comment by edgewaterjohn
2008-12-13 09:27:03

Yesterday I was talking to one of our purchasing agents. She told me that they had just sent out a routine bid that for years has netted about three to four pages of responses.

This year - 51 pages of responses!

Comment by The Housing Wizard
2008-12-13 09:13:04

I remember very well the day when Mozillo and Senator Dodds and a few others started the campaign for bail-outs . It was unnerving that the Congressional investigations extended to calling in the three notorious Lender CEO’s who would spin their BS about nobody saw it coming .

I remember after Mozillo pumped and dumped his stock he was openly calling for the Government to do something about the loans that were defaulting . Than we find out that Senator Dodds and a few other Senators got a low rate no fee loan from Countrywide .Further investigations have been discouraged by the Politicians and Treasury Sec. with the BS that Bail Outs come first and investigations and new regulations come later .

Than everybody and their brother ,including Investment Banks ,started getting short term loans from the Feds ,than came the Bail Outs and one step after another to rescue a fake real estate market that hasn’t worked . Loan modifications have over a 50% re-default rate and Banks are doing what they want with Bail Out money . Its just thrilling to watch AIG get more and more money for there fake Credit Default Swaps bets they couldn’t back up .

When is the Media and the Powers going to admit that the real estate market was a giant Ponzi -scheme and deal with it accordingly . Falsely raising appraisals and not underwriting loans is no different than the
fake Ponzi-scheme that Madoff pulled off . It all has to do with the creation of fake money . The Big 3 Auto makers benefited by the fake
economy and now they are contracting ,as many businesses are . I would like to hear more talk about the root cause of the contraction of jobs because of contraction of the fake money debt economy that was based on Real Estate and what is going to replace those jobs .

Comment by matthew
2008-12-13 16:02:46

Dodd and Frank should be fired before Wagoner at GM, in my opinion.. Yes, Wagoner is a terribly incompetent to have overseen this disaster at GM and should go bye-bye, but Dodd and Frank are just over-paid and over-quoted Conn men..

Comment by Bill in Los Angeles
2008-12-13 16:58:20

Shh! You are ruining the dream we are all having that it’s only the Republicans’ fault.

Comment by desertdweller
2008-12-14 10:10:47

It isn’t all the reps fault, all the powers that be should be hacked/sacked and dumped.
It was surely the beginning when Reaguns said ‘fire em’ and also close the mental health institutions- put em out on the street, and also deregulation- NO oversights at all, and then Nixon…and so it goes. Probably was mostly republican initiated and the elected dems felt take care of the peeps and then me. They all do this, but repubs put 1 for you, 10 for me into their “Friends pockets”.

Comment by skroodle
2008-12-13 09:26:40

No credit? No FICO? No problem as long as you are Amish:

Comment by Hwy50ina49Dodge
2008-12-13 09:55:33

Ha, and their home “loans” can’t be sliced & diced and spread around the globe as manure…a legal quark due to: NO electricity! :-)

Comment by ann gogh
2008-12-13 09:42:11

Overall, I am most joyful about the upcoming auto maker bailout. It is so refreshing to bailout something that has nothing to do with homeowners, bankers, brokers and realtors. I am finally at peace.

Comment by Blue Skye
2008-12-13 13:29:17

But you might be wrong about that. Suppose a failure of GM might bring some Wall Street banks to the brink…….

Government of the banks, by the banks and for the banks.

Comment by crazy frog
2008-12-13 20:30:09

What do you mean by “bailout that has nothing to do with bank and brokers”? What about GMAC? As afar as I know GM still owns a big chunk of it.

Comment by edhopper
2008-12-13 09:50:01

I am more than angered at the Republican Party’s war on the worker. There are different reasons to oppose or support the Auto bail out. Put to put all the blame on the Union workers and vote against it on that basis is both irresponsible and not based in reality.
I guess Joe the Autoworker doesn’t get the support of Joe the Plumber.

I also notice those Senators leading the opposition are from Southern States with foreign owned Auto Plants.

Comment by edhopper
2008-12-13 10:48:21

“UAW President Ron Gettelfinger said today that U.S. automobile companies are being put at a disadvantage by government in competing against Volkswagen’s new auto assembly plant in Chattanooga.

The union leader questioned why government leaders in Tennessee are willing to provide assistance to the German-based Volkswagen while the state’s U.S. senators declined to back a federal loan to help the Big Three U.S. car makers.

Mr. Gettelfinger said that trying to equalize UAW pay with what foreign car makers pay in the United States, as urged by U.S. Sen. Bob Corker, R-Tenn., is like comparing apples to oranges. In its home country, Germany provides government-paid health care for Volkswagen workers, and VW is receiving $577.4 million in tax breaks and direct assistance from Tennessee governments to build an automobile plant in Chattanooga.

“They use taxpayer dollars to subsidize our competition,” Mr. Gettelfinger said during a news conference. “It doesn’t help our industry.”

From the Chattanooga Times Free Press.

Comment by exeter
2008-12-13 13:04:39

“If we don’t do this, [the GOP] will be known as the party of Herbert Hoover.” VP Cheney, 12/10/08

This was in response to the failure of angry, hateful Nixonian senators Corker, Shelby and Grinch McConnell to get on board with a Detroit stimulus package. I contend that it is much much too late for the GOP. Their 40 year journey into the wilderness, and their failed supply side economics, has just begun.

Comment by Blano
2008-12-13 16:33:43

You’re calling someone else angry and hateful???

Too funny!!!

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Comment by exeter
2008-12-13 21:03:20

I see nothing angry in calling out a retard for being a retard. ;)

Comment by CA renter
2008-12-14 04:37:37

I’ve never seen Exeter come across as angry or hateful.

Comment by Blano
2008-12-13 10:56:05

It’s not right to blame the union totally, but to say the union is doing all it can to help is pure BS. The UAW smokescreen, which managment has actually facilitated for years, can be summed up in two words: jobs bank.

Comment by skroodle
2008-12-13 13:53:40

I doubt the 3,000 workers in the jobs bank program are the driving force behind the auto industry’s problems.

I would suggest paying medical benefits to retired workers is more of a problem, not to mention the 40% drop in sales. There are just too many retirees compared to actual workers.

This is the exact problem that Social Security will have in 10 years.

Comment by edhopper
2008-12-13 15:24:15

Social Security is solvent until 2075.
Medicare is a problem, but fixing the drug benefit, paying extra to private insurers for the same coverage, and Universal Health Care will help with that.

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Comment by Vermontergal
2008-12-13 18:19:46

Social Security is solvent until 2075.

Ha, ha, ha, ha!!! Phew! I feel better.

The social security surplus of the last several years was safely “invested” into Treasury bonds. Meaning the “surplus” was spent ages ago on military toilets, government brochures, and letters from your congress people. (I hope you enjoyed them…)

All we have is a pile of IOUs and a shrinking workforce (as compared to retirees) in the next 3 decades to pay back the bonds (with interest!) *and* pay into social security. Soon the ratio of workers to retirees will drop to unsustainable levels. (Less quickly if we can get the boomers to put off retirement.) There’s no way around the demographics problem that is SS.

Comment by Blano
2008-12-13 16:25:24

I agree totally with you that the jobs bank isn’t the “problem”, and that retiree benefits are gonna bite.

The point I was trying to make (poorly, apprently) is that it’s a classic example of neither side really making the “tough” choices until it’s too late.

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Comment by Kirisdad
2008-12-13 17:48:19

The jobs bank is one of the reasons, the big three, are totally inflexible when economic slumps arrive. Name an industry (even the gov’t) that can’t lay-off when business sales contract. They won’t even take across the board pay cuts. As Diogenes mentioned ” share the pain” . Maybe the UAW should heed Obama’s advice and “share the wealth”, between its own members.
Let’s bring the discussion back to RE. Why do UAW workers need to make $30-50/hr when the rust belt areas have the least expensive homes in the country? After all, homes are the biggest expense in one’s budget. I bet most of the affluent suburbs of these cities are filled with auto workers. Again, totally inflexible, cost of living goes down, wages do not contractually adjust. They only give up new hires, who contractually, are the first ones laid off in a downturn. The big three are doomed to fail w/o real union concessions. Down deep everyone knows this, political ideology over common sense, will waste billions more.

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Comment by exeter
2008-12-13 21:00:26

Why do CEO’s need to make $100 million a year?

Comment by Eudemon
2008-12-13 21:38:13

Check that. The average UAW worker makes about $70 an hour (when benefits and retirement are included).

$70 an hour! $560 a day!

Comment by CA renter
2008-12-14 04:50:46

I believe that $70/hr is an average “labor cost” that includes benefits for those who are already retired.

Comment by Eudemon
2008-12-14 09:16:39

You are correct.

Still an unbelievable sum, no matter how you cut it.

$145,000 a year. That tidy sum must land them in the top 1% of all income earners. And many of these folks (retired) are producing absolutely nothing.

Is that what unions are supposed to do? Ensure that their members are fat cats? Not much difference between they and Wall Street capitalists.

Comment by exeter
2008-12-14 11:47:35

Let me help you with facts instead of angry propaganda.

The largest Toyota assembly plant on the globe outside of Japan is located in Kentucky(home of Nixonian Mitch “Grinch” McConnell) with a worker wage of $27/hr. The wage of a big 3 assembly line worker? $26/hr.

Comment by Eudemon
2008-12-14 18:05:21

Hmmm…I wonder if the University of Michigan….the source of my information….considers its research to be “propaganda”.

You are insulting a left-wing institution, exeter.

If you have an issue with their published reports, call the head of U of M’s business school and whine their way.

If you think they are wrong, tell THEM.

Comment by Next Shoe to Drop
2008-12-13 09:53:26

Appears we have some Craigslist housing deflation occurring — same house here on 2 diferent posts a couple days apart with a $20k difference. This is a great area with excellent schools, but of course still way too expensive.




Comment by scdave
2008-12-13 10:31:39

That is a good area but Sunnyvale is dependent just like everyone else in supporting those kind of values in S/V…”jobs”…Layoffs are coming from all directions..Businesses that have been around for 30+ years are folding…Good, creative, educated people are talking about leaving again…What I am seeing is repricing back to 2004 levels generally speaking…

Comment by reuven
2008-12-13 11:10:19

I own a house 94087, and I have no ax to grind.

I expect prices here to drop another 50% when all is said and done. My neighbors think I’m nuts when I tell them that.

Comment by scdave
2008-12-13 11:29:08

drop another 50% ??

Boy oh Boy…If they do, I am all in….Barring a catastrophic earthquake, nuclear bomb or a terrorists virus attack I think 10 years from now this will be all forgotten in S/V…

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Comment by Faster Pussycat, Sell Sell
2008-12-13 12:27:26

Count me in as one betting on 80% peak-to-trough for CA and Silly Valley, in particular.

Incomes, it’s all about incomes.

Comment by scdave
2008-12-13 13:08:04

Incomes, it’s all about incomes ??

I agree and thats exactly my point…Yahoo may disappear but Stanford University will not barring one of the events I suggested above…I am not a silicon valley cheerleader…I do not think we are “special” and I believe much of the run-up was fueled by all the kool-aid ingredients that we have discussed here and the valley will pay a significant price for that just like everybody else…I have just watched many of these cycles here in the valley over my years (even though this is the worst) and I have learned much from my parents and grandparents since we have been in the same location for almost 100 years…

Comment by Faster Pussycat, Sell Sell
2008-12-13 13:12:29

All these cycles were fueled by the “mega-cycle” of interest rates going from 18% to 1%.

This can only happen once. The game has been kinda shut down for a very long time.

California’s budget are going to be devastating. I’d rent but I wouldn’t buy. Not unless it was real throwaway money.

Comment by reuven
2008-12-13 13:25:47

As I said before, Sunnyvale will most likely be different from the central valley Ex-urbs only in that at some price, houses will sell here. Since it was already built-up pre-bubble, you’re less likely to see blocks and blocks of empty, boarded up houses. It also has a nice mix of industry, modest-sized houses, and rentals.

However, even though I own a house here, I won’t be surprised if median house price in my 94078 zip code drops from $800K to $400K. At its very peak, a couple of houses on my block sold for $1.2 and $1.4Million. Ridiculous, I thought, and I was right!

Comment by reuven
2008-12-13 13:28:29

typo: it’s 94087

Comment by crander
2008-12-13 13:58:53

Would that house rent for $4000? That is an insane price to me. Now I know why some many people decide the weather in Portland isn’t so bad and move here.

Comment by Paul in Florida
2008-12-13 14:01:44

“I have just watched many of these cycles here in the valley”

Don’t see how you can be so sanguine. This isn’t a cycle. This is the end of America as it was, probably the 2nd biggest cataclysm in the country since its founding (#1 - the Civil War). Will end up being more significant than the Depression and the World Wars.

Comparison of Obama to Lincoln is appropriate because each will have the course of their presidency determined for them before they arrive in office.

Comment by what-me-worry?
2008-12-13 15:19:06

I’m looking forward to paying 20% annual income tax to my local gang chieftain.

Comment by MightyMike
2008-12-13 17:56:03

That page on Craigslist is interesting. The three photographs from the inside of the house shows that they paid a lot of money “upgrading” the house with all of the cliches - stainless steel appliances, granite, crown molding. The photograph of the outside of the house shows a completely ordinary house that would sell for less than $200,000 in 95% of the counties in the country.

Here’s a question for you Silicon Valley folks. What’s the typical income for Sunnyvale, 94087? Are most of the people professionals and executives with family incomes over $250,000?

Comment by sf jack
2008-12-13 20:05:00

You can see it all at this link.

There are fewer people living in this zip code in 2007 than in 2000.

You can see the ridiculous house price run up from under $250,000 (Q1 2003) up to $1 million in just a half decade (Q3 2008)… and you can see that household AGI in 2004 was around $100,000.

Perhaps it is 10% higher today. Or maybe 15% higher, at most.

So quite obviously, Reuven’s neighbors haven’t been paying attention.

Comment by dude
2008-12-13 21:20:56

2007 median household income $99690

Comment by reuven
2008-12-14 09:07:38

Thanks for that link! That means that median house price should be about $300,000. Which, coincidentally is what I paid for the (now paid off!) house 17 years ago.

It’s a nice place to live, but I wouldn’t pay $1,000,000 for the house I’m living in.

Comment by Silverback1011
2008-12-14 07:08:44

I showed this house to my unemployed depressed, 30-years of experience, 2 1/2 years of pharmacy school husband. His exact words were:

“Like Hell !” and

“I’d rather build a shack !”

Around here, that house is worth about $ 75,000 in Garden City, which is at least as nice a town as Sunnyvale. The sounds of the crashing will be resounding around Sunnyvale.

Comment by cheezbubbler
2008-12-13 09:54:28

Man who killed self in standoff faced foreclosure

A Jackson man who killed himself after a five-hour standoff with police at his wife’s Fredonia home was “a very angry man” who was going through a divorce and, along with his wife, had just been foreclosed on the day before, court records show.

Comment by Faster Pussycat, Sell Sell
2008-12-13 12:30:11

Oooh yeah, oooh yeah, now that’s the ticket.

Happiness is a warm gun.

Comment by ButImNotDeadYet
2008-12-13 09:57:03

For you Finance Pros out there (or those who, like me, wish you were Finance Pros), an interesting Tender Offer announced Thursday evening by ProLogis an industrial Real Estate Investment Trust:

The deal in a nutshell: the company is offering a deal to its noteholders of $500 million due on November 15, 2010 (23 months from now). The deal is - take 70% of the principle NOW in exchange for the notes. And the company will finance the purchase of these notes through existing lines of credit (essentially exchanging debt for debt, at a 30% discount).

It seems a rather clever and innovative way of “kicking the can down the road” by giving the current noteholders some immediate price appreciation (notes recently trading at 50 cents on the dollar).

I am not a stockholder of PLD (Prologis - an industrial REIT) nor am I pumping this stock in any way. I just found this extremely interesting because I’ve never seen a company directly intervene in the way its own bonds trade before. And I’m wondering if this might be a trend that we’ll see in other places / industries as this credit crisis continues to unfold.

All thoughts and comments are appreciated, from those who are experts or otherwise…

Comment by scdave
2008-12-13 10:39:13

Prologis - an industrial REIT ??

If they own a lot of this twenty year old R & D stuff here in Silicon Valley they are in big trouble…We literally have millions of square feet that is functionally obsolete…

Comment by CA renter
2008-12-14 05:06:42

That’s really funny, BINDY.

I was checking that company out just last night, and saw the offering. It looks like there is a lot of buying going on there (the stock, and some options). Interesting moves there.

Comment by laughing boy
2008-12-13 10:01:37

Interesting…. the company I work for is switching from a stock option based incentive program to cash. (possibly because all the options they’ve doled out in the last 2 years are now completely worthless).

Cash is king, indeed.

Comment by laughing boy
2008-12-13 10:09:36

I just read the post above about the company downsizing and cutting pay across the board 20% and find my post rather inappropriate. I’m pointing out changes in profit sharing while others are having their pay cut or losing their jobs. Apologies.

Comment by sequoia
2008-12-13 10:10:36

We are getting our hours cut 10% in a hospital folks. Nurses,Sonographers,Rad techs and surgery. The whole enchilada and we are looking at 10% layoffs,wage freezes, and increased insurance costs. Till a few months ago there were jobs galore in healthcare. Those days are history, if we are getting cut everybody else better batten down. I have been in healthcare since 1990 and I have never seen it get this bad.

Comment by not a gator
2008-12-13 10:28:02

Wow… Gainesville’s headed for the poop chute, then, since medical is a big part of our economy…

Makes sense, though… Sad to think of those people who will avoid/put off the doctor now because of money who might have early stage cancers or heart problems.

Oddly enough, during the GD the death rate went down. “Too poor to die.” (May have actually been the drop in Kcal/day–good science now shows that undernutrition extends life, although it might not be all that pleasant.)

Comment by Itsabouttime
2008-12-13 11:44:47

Yes, but epidemiological research shows that inequality and death rates are positively correlated — the more inequality, the higher the death rate. In the Great Depression inequality declined because fortunes were lost; thus, even though some became poor, the wealthy lost wealth at a faster rate, reducing inequality. Thus, as recent research would predict, the death rate also declined.

There are lots of theories as to why declining inequality and lower mortality co-vary, and no clear consensus. I’ve seen the research and every theory has some evidence for it and against it. The finding, though, has been replicated cross-nationally, found in multiple different nations, and found across different states and counties in the U.S. The finding seems robust.


Comment by Faster Pussycat, Sell Sell
2008-12-13 12:41:00

What are the competing theories as to the explanation?

It can’t be just the inequality. There has to be control for the basic level of wealth in the country too, no?

Or are these longitudinal studies?

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Comment by Itsabouttime
2008-12-13 13:19:54


Yes, they control for the wealth of the country in various ways. Some studies are longitudinal, others are cross-country comparisons, and some are both longitudinal and cross-country comparisons. Some are within one nation (e.g., U.S. states or counties), and some of those are longitudinal as well. The finding is robust.

The explanations? Some are social-psychological (e.g., people feel better when there are not dramatic differences in wealth because the poor feel impoverished and the well off feel stressed in keeping the wealth lest they become impoverished). Some explanations are material (e.g., large inequality is associated with inefficiencies that allow the wealthy to hoard resources and this leads to higher death rates amongst others). Some explanations are “political” (nation-states or states with lower inequality have social provisions that protect the least well off — the object case for this would be the Scandinavian countries). These political explanations also sometimes suggest that large inequality breaks the sense of togetherness — everyone is alienated, and thus it’s hard to get things to work for the good of all.

These are a few of the theories that have been proposed. But, at this point the jury is still out.

One final observation. I know lots of people seem to focus on the “bottom line” and by that they mean their financial status. However, many social scientists regard mortality (e.g., life expectancy, infant mortality rates) as the true bottom line, both because it is not subject to things like tax law that change its meaning (though I’m sure some government would like to try — LOL) and because there is no labor/leisure trade-off that makes something like earnings harder to compare across persons (e.g., the teacher who has low pay may just prefer to not work in the summer, so, how can that be compared to someone who would rather earn money all year ’round?). In other words, people differ far more in their desired finances than in their desire for life.

And, by the standard of mortality, low inequality (not necessarily NO inequality) is regarded as a good thing for functioning societies.


Comment by Itsabouttime
2008-12-13 13:48:15

I responded to your questions, FPSS. Still waiting for the post to show.


Comment by DennisN
2008-12-13 11:48:00

Maybe guys like my dad who insisted on “bacon & eggs” every single day and smoked 3 packs a day have to cut out that nonsense due to the expense.

My nephew quit smoking mostly due to the cost involved.

Comment by skroodle
2008-12-13 13:56:55

I sure wish my brother would.

I am always amazed that people who appear homeless always seem to have cigarettes.

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Comment by Molly
2008-12-13 15:05:29

“I am always amazed that people who appear homeless always seem to have cigarettes.”

And cable TV too.

Comment by Vermontergal
2008-12-13 18:23:17

And cable TV too.

LOL - those homeless are such spendthrifts.

Comment by Milkcrate
2008-12-13 19:12:28

Sands a big plus in Alachua County. Helped a friend beat leukemia when others were bewildered.

Comment by Milkcrate
2008-12-13 19:14:34

Shands, that is.

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Comment by diogenes (Tampa,Fl)
2008-12-13 10:34:52

Here’s what is looks like in chart form.
Every picture tells a story.

Comment by Rick
2008-12-13 10:40:00

I just heard about this from a friend that works at a clinic in the Everett Wa. area cut hours forced days off things like that the reason given lack of patients. I guess a sick bubble as well.

Comment by DennisN
2008-12-13 11:43:59

Maybe those idiots who go pester their doctor when they get a common cold now will choose to stay home rather than pay a small co-payment.

Comment by skroodle
2008-12-13 13:58:31

No, they will probably go to the Emergency Room and line up with the Illegal Aliens.

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Comment by Eudemon
2008-12-13 21:52:51

Let’s hope so!

So many people running off to the hospital for a common cold or sprained ankle….and so many doctors handing out so many antibiotics. Good way to ensure that disease spreads like wildfire.

Get some aspirin, an icepack and lay around on the couch or bed for a few days.

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Comment by scdave
2008-12-13 10:44:40

our hours cut 10% in a hospital folks ??
and we are looking at 10% layoffs,wage freezes ??

That is quite disturbing even with all that we already know…Possibly the “best of the best” growth industry is cutting back ??

I would be interested in knowing what area you are in sequoia…

Comment by WhatOnceWas
2008-12-13 13:08:30

“I would be interested in knowing what area you are in sequoia’

That was my thought. If you are a state funded Hospital in Ca. it makes a lot of sense seeing the state of the state…

Comment by Silverback1011
2008-12-13 16:33:46

HMMM theyr’e cutting non-clinical staff at the national Top Twenty hospital where I work also. I work for the School of Medicine & we haven’t seen any cuts yet, but they did fire one girl who wasn’t doing ehr work and they’re not replacing her. Our team is pretty much cut to the bone anyway. I continue to work here because:

1. I pm good at it.

2. I’m respected and treated like an adult, which means a lot to me.

3. There aren’t any other decent jobs around anyway.

AND, the most important reason,

4. My employer gives us a 10 percent 457 match, and if I work there for 10 years, I will have lifetime health benefits with a 10 percent costshare for me. Eventhough I’[m paid a little less than I would make elsewhere, that makes all the difference to me as I enter my senior years.

And yet, with the way things are going , after I recover from some surgery that I have to have in January, I am going to take a second, part-time job doing “remote coding”, or medical coding as a distance employee, to lay in some extra cash. Twon’t hurt any. I also spoke with my husband about him being trained /certified as a coder too. He already has a great grounding in disease/anatomy form his years in pharmacy school. I have figured out a way to get him certified, also. And since my employer will pay for an extra-high specialtiy certification that I just found out taht distance-coding companies will pay quite a bit extra per hour for, I am going to go ahead an study for that too. This Madoff shit makes you think about REALLY bad times ahead, not just real estate problems.

Thanks for your posts above, everyone. Pussycat, you did an especially good job. Extra catfood for you tonight, in all seriousness. Thank you.

Comment by Brett
2008-12-13 10:56:52

I know my logic is REALLY stupid, but I live about 2 miles from the center of Downtown Austin in a really quiet upscale neighborhood near the lake in Austin, TX. I can walk with my dog to most places near downtown, but it is a bit far to do it on a daily basis.

I would really like to move to a similar unit in one of the new condo/apartment units being put for rent in the heart of downtown. However, I don’t know if it is a smart decision (well, I know it isnt).

I currently pay $850 for ~700 sq ft. The units I’m looking at run for at least 1,200 - 1,300. They are plenty available for rent right now.

I can easily afford it; I make about 63k fresh out of college. I have no CC debt, student loans, and I just paid off my car.

Am I dumb for wanting to do something like this?

I am a little scared of how things will turn out next year with the economy; there have been no lay-offs at my company YET, but there could be next year.

What do you guys think?

Comment by Faster Pussycat, Sell Sell
2008-12-13 12:58:49

How about a “halfway house”?

You rent one more year, and put aside that extra $450 ($1300 - $850) into a savings account EVERY single month.

If you find your lifestyle really really crimped by that (and I’m guessing you do), you’ll have learnt your lesson. If not, you’ll have a buncha savings.

Bonus: you get to take the wait-and-watch approach with your employment, and you’ll have a little more clarity next year.

And buy a bike or something. The dog can run. Most dogs in this country are too fat anyway.

Comment by CA renter
2008-12-14 05:13:55

Listen to FPSS. He gives good advice, IMHO.

Comment by Muggy
2008-12-13 13:21:34

It sounds like you want to be stumbling distance from the nightlife. Have fun for a couple of years. I say go for it.

(puts on flamesuit)

Comment by crander
2008-12-13 14:07:35

I say its a little dumb. If you save up 6 months of living expenses first though and you really want the new lifestyle then consider it. If there is a lease for 12 months make sure you have all that cash before moving in… at least that is how I justified my move to a fancy apartment downtown.

Comment by Muggy
2008-12-13 16:43:52

“at least that is how I justified my move to a fancy apartment downtown.”


You’re only going to be a 20-something once, Brett. If you want all of the lifestyle options, do it. If you’re “metro” and just want a fancy place to live, stand still while I judo-kick you in the giblets.

I went Wu-Tang in NYC for 3 years after college, did a lot of stupid things, spent a lot of loot, and don’t regret a single second of it. Except maybe that one time I went to Burritoville after a few pitchers of Rudy’s red, then got on the PATH.

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Comment by what-me-worry?
2008-12-13 15:33:33

That’s a no-brainer. Go for it. How bad can a one-year lease be? You’ll never be able to assess the difference on imagination alone. “Easily afford it.” “No debt.” “Paid off car.” Are you kidding? For a small (large) fee, I’ll be happy to encourage you to move downtown.

Comment by David
2008-12-13 17:21:42

Two thoughts.
1) Make sure the owner of the condo or appartment is solvent. You dont want to rent a place that is going into foreclosure. If renting from an individual condo owner, ask to see that the mortgage is current. I would even add a clause to the lease that you have the right to see the mortage statement every 90 days.
2) Calculate all the money saved by not buying a house in the last two years. Maybe its ok to spend a bit extra for an appartment, you are still way ahead of those who bought.

Comment by Silverback1011
2008-12-14 07:11:10

A third thought - it all sounds like a good way to get into debt, which you don’t need right now. I’d stay where I am. But, then I was the owner of a Big House Mistake in the 1980’s. You have years to pay it back, at least.

Comment by reuven
2008-12-13 11:03:08

This week’s Business Week (the print edition) asked a panel of “experts” when housing will rebound.

All of them had some answer; none gave the correct one: Never.

Comment by GH
2008-12-13 11:47:03

I would hazard a guess myself. Hmmmm around 2028? (5 years down, 5 years slump, 10 years climb to next bubble peak)

Comment by reuven
2008-12-13 12:05:27

If the government still thinks it’s a priority to give poor people mortgages they can’t possibly afford to pay back, maybe. But I think asking when housing to rebound is like asking when the market for Beanie Babies will rebound; it’s not likely in our lifetime.

Comment by packman
2008-12-13 14:12:28

Exactly. The housing bust is like dropping a bowling ball - there ain’t gonna be no rebound. Just a thud as it hits bottom (crushing some toes in the process), and then it’ll roll along.

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Comment by Kirisdad
2008-12-13 18:32:03

Not all housing busts are the same. We had a housing bubble in the late ’80’s, it burst down 20% or more, and it rebounded quite well. The difference is that incomes went through the roof during the 80’s and housing went with it. This one was very different, easy credit driven.

Comment by GH
2008-12-13 21:45:54

I have to agree this was very different. This is the first bubble where incomes and prices comletely fell apart. We are definitely in unknown territory.

Comment by CA renter
2008-12-14 05:19:32

It’s also the first housing boom in decades that was more affected by easy credit than by demographic influences.

Boomers were net buyers in the 60s, 70s, and 80s. They will be net sellers from here on out.

Then you have the outsourcing of jobs and insourcing of cheap labor. People were more likely to have union jobs (more secure and higher-paid) and employer-paid healthcare and retirement. As that goes away, people will need to save more, leaving less money for housing costs.

This will be a double or triple bust, IMHO. It will take decades for prices to reach peak levels, inflation adjusted…and that’s probably a bit optimistic.

Comment by Bill in Los Angeles
2008-12-13 17:06:41

Suppose you have a good asset mix in investments that you actually accumulate wealth over the next few years to buy your dream house (and pay it off at sale) and have enough assets left to live off of? Would it matter to you if real estate recovers or not? Not to me.

California coastal real estate in my biased (native Californian) opinion, is the best for location. But it depends on where along the coast. I like Big Sur, Mendocino, Laguna Beach, La Jolla, San Francisco, and Santa Cruz.

If real estate “never recovers” but I have my dream home I would die in, I would not care about the “never recovers” part.

Comment by Blano
2008-12-13 11:10:53

Re: the Madoff Ponzi scheme…..nearly every time lately I read about some shenanigans, guvmint actions etc., it reminds me of comments from Galbraith’s “The Great Crash.” Here’s another:

Pg. 138 At any given time there exists an inventory of undiscovered embezzlement in – or more precisely not in – the country’s businesses and banks. This inventory – it should perhaps be called the bezzle – amounts at any moment to many millions of dollars. It also varies in size with the business cycle. In good times people are relaxed, trusting, and money is plentiful. But even though money is plentiful, there are always many people who need more. Under these circumstances the rate of embezzlement grows, the rate of discovery falls off, and the bezzle increases rapidly. In depression all this is reversed. Money is watched with a narrow, suspicious eye. The man who handles it is assumed to be dishonest until he proves himself otherwise. Audits are penetrating and meticulous. Commercial morality is enormously improved. The bezzle shrinks.

Just as the boom accelerated the rate of growth, so the crash enormously advanced the rate of discovery. Within a few days, something close to universal trust turned into something akin to universal suspicion.

Pg. 140 One of the uses of depression is the exposure of what auditors fail to find.

Comment by Faster Pussycat, Sell Sell
2008-12-13 15:06:12

I posted similar stuff that Galbraith wrote to PB above. (It hasn’t shown up yet.)

Comment by Mot
2008-12-13 23:46:29

Or one can paraphrase Buffet:

It’s when the tide goes out that one can see who is swimming naked.

Comment by Shannon
2008-12-13 11:16:46

I just have to get this out of my head.

My brother, who is on the verge of losing his primary residence and his rental, told me just yesterday that I am throwing away money by renting. We sold our home years ago and have been waiting for this collapse. Our money is happily tucked away in some very safe places and he still thinks I’m the fool.


Comment by Faster Pussycat, Sell Sell
2008-12-13 11:44:09

Have you considered selling your brother and renting another one instead? ;-)

Comment by what-me-worry?
2008-12-13 15:42:16

That’s funny! —BTW, what “safe places”? Mine’s still in the bank. And I’m not thrilled about that.

Comment by Professor Bear
2008-12-13 12:22:03

“My brother, who is on the verge of losing his primary residence and his rental, told me just yesterday that I am throwing away money by renting.”

Sounds like he will very soon commence throwing away his own money on rent when he joins the priced-out, bitter renter’s club himself.

Comment by Faster Pussycat, Sell Sell
2008-12-13 12:25:57

Yes, but that’s only before his next money-losing venture.

After all, everyone knows that you can only make lose money in RE.


Comment by reuven
2008-12-13 12:47:02

Honestly, the only think I got from home ownership is the right to rent a house from the school district for $500/month. And I have to be responsible for all insurance and maintenance. For people buying today (I have prop 13 stabilized taxes), it’s closer to $1000/month.

I’m no bitter renter; I have two 100% paid-up properties. But there’s absolutely no economic advantage to home ownership. And there never has been, (excepting a few cases where people got in and out at just the right times during a period of national mania.

Comment by Blano
2008-12-13 13:29:54

Within 6 months he’ll be asking you for a loan.

Comment by Molly
2008-12-13 15:15:14

“My brother, who is on the verge of losing his primary residence and his rental, told me just yesterday that I am throwing away money by renting.”

Tell him you’re gonna buy his house from the bank for a song after he vacates. Of course, that’ll just make him put cement down the toilets.

Okay, I know that’s b*tchy, but I HATE people giving me unsolicited financial advice. Every person who gave me RE advice in the past ten years is upside down now.

Comment by Cinch
2008-12-13 11:59:47

It used to be about prices; not anymore I’m afraid.

It all about jobs now: having one, keeping one and saving what you got for that rain day(s) (IMHO rainy yearS).

Jobs cut by the thousands are born every week. If this trend continues, I expect riots like Greece. For 2009, the public obsession with housing will fade. Their attention will turn to daily existence and survival as most posts on this thread have been alluding to with regard to employment.

Will Obama’s $1 tln stimulus package with emphasis on infrastructure turn things around? IMO, it is impossible to convince an unemployed financial service hack to take a physically demanding work repairing infrastructure for a fraction of the pay that he was used to. Maybe he/she will as desperation lead them to act in strange ways.


Comment by Faster Pussycat, Sell Sell
2008-12-13 12:46:44

As Ben has been saying forever, it was ALWAYS about the jobs.

Or as I keep insisting, it was ALWAYS about the incomes.

Same thing. Two sides of the same coin.

Yep, this ain’t over until everyone forgets about housing and focuses on the J-O-B-s.

Comment by CA renter
2008-12-14 05:23:16


Comment by In Colorado
2008-12-13 14:00:59


All those companies that that will build the infrastructure for Uncle Sam will net white collar workers too. The pay won’t be as good as on Wall St. for sure, but it will be better than nothing.

Comment by Mole Man
2008-12-13 15:14:16

The riots in Greece are pretty strongly related to cultural issues such as treatment of the young, bohemians, and especially young bohemians. Rioting related to labor meltdowns tends to be even more dangerous and unpleasant.

Comment by what-me-worry?
2008-12-13 15:48:26

I haven’t found a really good write-up on that story, yet. Just some AP Wire stories. Something about a kid being shot by police.

Comment by nhz
2008-12-14 05:09:17

I think you are wrong, it has a lot todo with bad employment opportunities for young educated people …

Comment by matthew
2008-12-13 16:09:07

hell, I say cut out the middle man and send everyone money from the treasury… why bother with all that investing mumbo, jumbo stuff… just print money and mail everyone checks each month to keep the economy going.. yea, that’s the ticket..

don’t laugh, I’m guessing that option has been discussed as it’s important to keep the scam going for those at the top of the heap..

Comment by Happy2bHeard
2008-12-14 14:21:55

The unemployed financial services hack may be physically incapable of physically demanding work. I have friends who had to drop their physically demanding jobs due to back injuries.

Time takes its toll.

Comment by Professor Bear
2008-12-13 12:35:21

HUD Pick Foresaw Subprime Crisis In ‘04
By Glenn Thrush
Dec 13, 2008

(The Politico) Barack Obama’s pick for HUD — former New York City Housing Commissioner Shaun Donovan — was one of the earliest public officials to foresee the magnitude and destructive capacity of the subprime crisis.

In the middle of 2004, I sat down with Donovan (I was at Newsday at the time) for a chat about Mayor Michael Bloomberg’s initiative to tackle the shortage of low- and middle-income housing in the city.

To my surprise, Donovan brushed aside my questions about the city’s initiatives and began taking at length about the coming “flood of foreclosures” he anticipated among highly leveraged apartment buildings purchased by recent immigrants — and a looming subprime crisis for one- and two-family homeowners in up-and-coming neighborhoods in southeast Queens and central Brooklyn.

I left the meeting a little shaken: At the time housing prices in previously depressed parts of the city were booming and the city had been able to sell off almost of all its once-massive stock of foreclosed properties to private owners and investors. The future looked bright to almost everyone — but not to Donovan, who was planning for the looming disaster.

Comment by diogenes (Tampa,Fl)
2008-12-13 19:37:16

“In the middle of 2004, I sat down with Donovan (I was at Newsday at the time) for a chat about Mayor Michael Bloomberg’s initiative to tackle the shortage of low- and middle-income housing in the city.
To my surprise, Donovan brushed aside my questions about the city’s initiatives and began taking…………”

A pure propaganda piece. Where is the story from this reporter concerning that meeting??????
Or is this purely a …..’ I recall from my meeting with so and so back in …….”
HeLL, he could say whatever he wants.

This is pure crap.

Comment by Professor Bear
2008-12-13 12:38:25

I am impressed and optimistic about Obama’s choices of individuals who have shown a willingness to question the prevailing conventional wisdom.

Bloomberg’s housing program has received mixed marks from advocates, but Donovan is extremely well regarded among groups that have often clashed with City Hall, in part, because he’s focused on improving conditions in rental housing at a time when many officials spurned such initiatives.

And, unlike many Clinton-era housing officials, the 42-year-old financing expert never subscribed to the prevailing (and deeply misguided) belief that low-income homeownership was the panacea for all the nation’s housing ills.

Copyright 2008 POLITICO

Comment by ET-Chicago
2008-12-13 12:56:17

And, unlike many Clinton-era housing officials, the 42-year-old financing expert never subscribed to the prevailing (and deeply misguided) belief that low-income homeownership was the panacea for all the nation’s housing ills.

There’s a distinction to be made between thinking that “low-income homeownership was the panacea for all the nation’s housing ills” and thinking that, generally speaking, it is a good thing when people of all economic strata can afford to own a home.

I don’t think many Clinton-era officials — or housing officials from any post-war administration — were naive enough to see low-income homeownership as the panacea for all the nation’s housing ills. That’s a ridiculous assertion.

Comment by packman
2008-12-13 14:54:37

I’ll be impressed when I see them take meaningful action (or meaningful inaction, as the case may be).

Comment by palmetto
2008-12-13 15:48:56


Comment by Faster Pussycat, Sell Sell
2008-12-13 15:56:20


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Comment by Professor Bear
2008-12-13 13:08:53

If the gloomsters would just stop issuing these pessimistic reports, it could be be all good again.

Reports compound economic bad news
Stock markets close higher on word of auto assistance
By Martin Crutsinger
December 13, 2008

WASHINGTON – Signs that the recession will be long and severe mounted yesterday with a fresh round of bad economic news, including plunging sales from manufacturers to stores and falling prices that raise fears of dangerous deflation.

The widening economic troubles did put a lid on inflation. But they raised concerns about the opposite threat – the potential for a bout of deflation that could drag down incomes, clobber home prices even more and shrink corporate profits.

“Everything is going wrong in the fourth quarter,” said Mark Zandi, chief economist at Moody’s “We have collapses in consumer spending, housing and now investment. Business is just shutting down.”

Comment by matthew
2008-12-13 15:47:43

I liken the US consumer as the fat pig that has to keep it’s head the trough and gorging itself just to stay alive while the rest of the world sells and feeds off our feces as they continue to pour the slop into the trough to keep us fat and gorging.. what happened this summer was the pig (US consumer) slipped and fell and has been struggling ever since to get back on it’s (our) feet… even the government wants the pig now (US consumer) to ignore it’s fate and get back up, even on 2 or 3 legs if need be, and get our fat heads back into that trough again to keep the ponzi scheme / scam going… to heck with eating (consuming) only what you need to survive on.. that’s not the game that was created for us..

Comment by ecofeco
2008-12-13 17:07:05

I’m sorry. You now know too much. Please report to the nearest re-education. camp.

Comment by clue
2008-12-13 16:01:58

Structured debt market collapse (aka securitization).

This is what brought down the mighty Dreier fellow. When the debt (credit) markets work, you can ALWAYS raise cash by selling debt, just look at the US Treasury market, bid to cover is still quite robust, to say the least.

And yet, here we are in an historic electronic credit shutdown. A liquidity situation that is almost unfathomable. The alphabet soup of lending facilities wholesaling ungodly amounts of money that continues to evaporate. Everyones still looking to a single event or trigger, but its not one thing…an epic collapse of debt becomes many things (a housing crash, a stock market crash, a commodity crash, a hedge fund collapse)… We are witnessing multiple credit event inside the epic credit epoch.

The unsecured creditors, the brave souls that exist and lend money without security…are the ones panicking.

There is not going to be any recovery until the unsecured creditors once again “feel safe”.

Who are the “unsecured creditors?”

When will the US treasury market reflect that a risk free return is something that cannot exist in this environment?

Comment by clue
2008-12-13 16:14:02

Unsecured Clients…of the now infamous Mr. Dreier.

Ascot Partners - hedge fund
Assicurazioni Generali (G.MI) unit Banca Svizzera Italiana, or BSI
Banco Popolare (BP.MI) unit Aletti Gestielle
Banco Santander
Banque Benedict Hentsch - Geneva
BBVA - Spain
BNP Paribas - France
Norman Braman, who owned the Philadelphia Eagles
Bramdean Alternatives Limited of UK

Stephen A. Fine, president of Biltrite Corp. in Waltham
Jerome Fisher, founder of Nine West
Fairfield Greenwich Group

Fairfield Sentry Ltd.
Avram and Carol Goldberg, former owners of the Stop & Shop supermarket chain
Joyce Greenberg, a philanthropist and retired financial adviser in Texas
Stephen J. Helfman, a lawyer in Miami
Robert Jaffe, Cohmad Securities Corp.
Saul Katz
Irwin Kellner, of Port Washington, New York
Kingate Management Ltd
Robert I. Lappin Charitable Foundation in Salem, Mass.
The Julian J. Levitt Foundation - Texas

Loeb Family
Bernard L. Madoff Foundation - poof
M&B Advisers Gestion (M&B Capital Advisers)
Massachusetts state pension
Maxam Capital Management LLC
Sandra Manzke, Maxam’s founder and chairman
J. Ezra Merkin, the chairman of GMAC
Neue Privat Bank - Zurich
Nomura Holdings Inc. - Tokyo
North Shore-Long Island Jewish Health System
Optimal Investment Services SA - Geneva

Pioneer Alternative Investments, a unit of Italy’s UniCredit SpA (UCG.MI)
Ira Roth, a New Jersey resident
Royal Bank of Scotland
Carl and Ruth Shapiro
The Shapiro Family Foundation
Richard Spring, Boca Raton resident and former securities analyst
Sterling Equities

Sterling Stamos (?)

Tremont Capital Management of New York - a unit of Massachusetts Mutual Life Insurance Co.’s Oppenheimer Funds Inc.
Union Bancaire - Geneva
Lawrence Velvel, dean of the Massachusetts School of Law
Fred Wilpon, the principal owner of the New York Mets
Judy & Fred Wilpon Family Foundation
Yeshiva University - New York

From various news articles, like Bloomberg and WSJ, NYT, Boston Globe, etc…
Do you feel it?….the CDS mountains are shaking violently.

counter party risk.
asset seizure.
frozen accounts.
adversarial lack of trust leading headlong into litigation about money lies and deceit.

Comment by Kirisdad
2008-12-13 19:00:56

Irwin Kellner, is a contributer to Newsday, quoted here often. I see him on our local news station doing financial commentary. He is a very calm individual, conservative, positive, he has a way of speaking that exudes confidence, w/o sounding smug. He lost one million dollars. I can picture his next commentary. Hair in disarray, fists pounding on his desk screaming “we’re all going down!!!! sell,sell,sell !!!!”.

Comment by Faster Pussycat, Sell Sell
2008-12-13 16:18:08

The Fed is competing with the “unsecured creditors”, and they are rational in not competing with a money-making machine that can undercut them all the time.

The effin’ fools never think of second-order effects.

They’ve crowded out all the private lenders. Would you lend against the Fed?

Comment by clue
2008-12-13 16:36:14

Would you lend against the Fed?


If by lending against, you mean loaning 30% of my US dollars in favor of non-US dollar denominated bonds is lending against the Fed.

Im working only two theories.
1. How does decoupling work in my favor.
2. How does the volatility improve my postions.

Comment by Faster Pussycat, Sell Sell
2008-12-13 16:41:48

I was talking about competing for the same debt that the Fed is going to undercut you on.

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Comment by clue
2008-12-13 16:49:52


are you implying the FED is not buying foreign bonds, or contemplating issuing foreign denominated bonds?

lay off the CATNIP !!!

its in the playbook, just a bit further…..

Comment by Muggy
2008-12-13 16:54:22

“debt that the Fed is going to undercut you on.”

Don’t be shy my friend, step right up to the discount window!

Comment by clue
2008-12-13 16:57:08

GE floated the first volley on Euro denominated bonds bout a week ago….

any fanfare?

Comment by neil
2008-12-13 19:36:27

Holy crap.

That is like Yen T-bills…

Comment by clue
2008-12-14 08:05:55

Australian state bonds slid this week as banks sold A$11 billion ($7.4 billion) of debt backed by Prime Minister Kevin Rudd’s funding guarantee, “dislocating” markets and pushing the premium investors demand to hold New South Wales securities over sovereign to the highest since the 1990s.

The spread on five-year New South Wales bonds over sovereign borrowings of similar maturity swelled to 150 basis points today, from an average of 31 points in the past 10 years, after Commonwealth Bank of Australia Ltd. auctioned A$2.2 billion of government-backed debt on Dec. 10. National Australia Bank Ltd. and Suncorp-Metway Ltd. sold similar domestic debt yesterday and three other banks carried out offerings in U.S. dollars.

Rudd’s guarantee has driven up state government yields without achieving its goal of bringing down banks’ funding costs, JPMorgan Chase & Co. said in a note to clients.

Comment by clue
2008-12-13 16:24:13

The US exported the infaltion during the boom, and now we export deflation…. behold, the illusion of false prosperity around the globe.

Comment by Faster Pussycat, Sell Sell
2008-12-13 16:31:40

Oh, and don’t forget we’ll be buying up their assets for fire sale prices with freshly printed money.

The game is on, fo’ shizzle, you can’t make this up!

Any 19-th century economic observer would’ve told you the game plan.

O Schumpeter! my Schumpeter! our fearful trip is done,
The ship has weathered every rack, the prize we sought is won,
The port is near, the bells I hear, the people all exulting,
While follow eyes the steady keel, the vessel grim and daring;
But O heart! heart! heart!
O the bleeding drops of red,
Where on the deck my Schumpeter lies,
Fallen cold and dead.

Comment by clue
2008-12-13 16:41:56

“we’ll be buying up their assets”

The we’ll of money is attached to my stable of two holed corn pickers thats squeezin my nubbin :P

—ya got me in a mood.

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Comment by Faster Pussycat, Sell Sell
2008-12-13 16:58:18


Comment by SanFranciscoBayAreaGal
2008-12-13 19:31:39


“mighty Dreier” brought to mind this song:

Everybody’s building the big ships and boats
Som are building monuments, others jotting down notes
Everybody’s in despair, every girl and boy
But when Quinn the Eskimo gets here everybody’s gonna jump for joy
Oh come all without, come all within
You’ll not see nothing like the mighty Quinn
Come all without, come all within
You’ll not see nothing like the mighty Quinn.

Oh you know I like to do just like the rest
You know I like my sugar sweet but guarding fumes and making haste
You know it ain’t my cup of meat
Everybody’s out the trees, feeding pigeons all under the limb
But when Quinn the Eskimo gets here the pigeons gonna run to him
Oh come all without, come all within
You’ll not see nothing like the mighty Quinn
Come all without, come all within
You’ll not see nothing like the mighty Quinn.

A cat’s meow and a cow’s moo to you know I, I could recite them all
Just tell me where it hurts you, honey, and I’ll tell you who to call
Nobody can get asleep, there’s someone on everybody’s toes
When Quinn the Eskimo gets here everybody’s gonna want to doze
Oh come all without, come all within
You’ll not see nothing like the mighty Quinn
Come all without, come all within
You’ll not see nothing like the mighty Quinn.

Comment by Professor Bear
2008-12-13 20:20:01

Seems like more and more ginormous whales are caught these days stranded high and dry up on the beach, now that the credit tsunami tide appears to have permanently receded.

Lawyer Seen as Bold Enough to Cheat the Best of Investors
Published: December 13, 2008

Marc S. Dreier knew the 45th-floor conference room of Solow Realty well. He had been in it many times as a trusted lawyer for the company’s founder.

So nothing seemed amiss when he showed up one afternoon in October and told a receptionist he had a meeting with her boss, people associated with Solow say.

Mr. Dreier was elegantly dressed, as always, the people said. He had three people with him. The receptionist ushered the group past her desk. They were sitting there, visible inside the glass-walled room, a few minutes later when the boss, Steven M. Cherniak, happened to walk by.

Mr. Cherniak would later tell people at the company how surprised he had been to see Mr. Dreier. He had not scheduled any meeting with him, and he had no idea what Mr. Dreier was up to.

But people there gave little thought to Mr. Dreier’s odd visit until November, when the company’s founder, Sheldon H. Solow, received a disturbing call. The caller wanted to let Mr. Solow know that Mr. Dreier had offered him the chance to buy promissory notes that had been issued by the company, people associated with the firm said.

They were fake notes, and shortly thereafter, lawyers for Solow Realty — different lawyers — were in touch with federal authorities, reporting their suspicions that Mr. Dreier might be engaged in financial fraud.

Since that opening tip, federal authorities have been tracking what they describe as a brazen swindle of some of New York’s savviest investors by one of New York’s more accomplished lawyers. Mr. Dreier has been charged with multiple frauds in the United States and a related crime in Canada, and is being held without bail in Manhattan.

Comment by hoz
2008-12-13 16:19:02

Reality Check for China

“…While currency speculators may suffer, China’s stock market may not take much of a hit, because only a small percentage of its listed companies are exporters. Indeed, the biggest Chinese-linked American depositary receipts listed in New York — China Unicom (ticker: CHU), China Mobile (CHL), PetroChina (PTR), China Telecom (CHA), Huaneng Power International (HNP) and China Life Insurance (LFC) — are domestic plays.

Such domestic plays are looking cheap. Edward Mullen, CEO of Shanghai-based Emperor Investment management, thinks stock prices are so bombed out that a currency decline won’t matter.

He sees earnings growing 6.3% for China H shares (mainland shares traded in Hong Kong), versus declines for Taiwan, Korea, and Singapore and Hong Kong. H shares are nearly 60% below their high, and their trailing 12- month P/E ratio has collapsed to near 8 from 14. They now yield 4.2% — the highest level since the 1997 Asian currency crisis….”

Comment by clue
2008-12-13 16:28:48

are going to revisit the “decoupling thesis?”….

ok, you know Im already in, and it dont feel like a winner.

Comment by clue
2008-12-13 16:47:41

I am suprised Nomura is on the contango-ed Dreier client list….

guess it was too long and fudicuary to read the fine print, and ask around to all the english players…

I want the hoz thats had the mean pills back…I dont here you being mean anymore.

Comment by Paul in Florida
2008-12-13 17:11:45

Believe you are confusing Dreier and Madoff.

Comment by clue
2008-12-13 18:28:08

Marc Dreier, 58, whose clients have included the rock star Jon Bon Jovi, took advantage of the financial crisis by selling fake debt to hedge fund managers looking for investment opportunities, say prosecutors.

In what the Securities and Exchange Commission called a “stunning, brazen fraud that targeted some very sophisticated institutional investors”, he is charged with stealing $113 million since October, including $100 million from two hedge funds.

its all connected,

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Comment by neil
2008-12-13 19:40:07


That’s it?

Got Popcorn?

Comment by Professor Bear
2008-12-13 20:33:47

From the NY Times:

Mr. Dreier has been charged with multiple frauds in the United States and a related crime in Canada, and is being held without bail in Manhattan.

In court last week, prosecutors said their count so far put the money missing at $380 million, most of it lost by hedge funds and other investors who had bought promissory notes that were flat-out fictions.

In recent days, Dreier L.L.P., the Park Avenue law firm that Mr. Dreier founded, has been plunged into chaos. At least $35 million in escrow that was to have been held by the firm seems to be missing, the authorities say, and nearly all of its 250 lawyers are now looking for work.

The amounts pale next to the $50 billion fraud that another high-profile New York figure, Bernard L. Madoff, was accused last week of orchestrating, but they have unnerved lawyers and their clients in the broader legal community.

A big fraud party! Big frauds, little frauds, red frauds, blue frauds, yellow frauds, green frauds, black frauds, and white frauds are all at a fraud party!

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Comment by hoz
2008-12-13 20:58:22

I took my mean pills started on Thursday, take for 5 days and lose all inhibition of what I think.

I’ll be real mean to Stupid foreigners from India that think Americans are stupid and don’t know how to look in the mirror.

I will be mean to the friggin Bears fans and when I go down there for the game on the 22nd, I know that A**hole fans will throw beer on me and I will exact revenge by singing or worse by farting my traditional stuffed cabbage tailgate dinner. (I got paid $5 at a karaoke bar not to sing again.) Bears fans make the rest of America look like geniuses except for those commie, ex-californians by way of Arizona, Hawaii Texas and probably some Canadian roots like a few Molsons or some other watered down cat pee that cheer for the Dallas cowhands. I won’t be mean to the commies though, I shall educate them in proper Packer respect.

I’m turning Japanese
I think I’m turning Japanese
I really think so
Turning Japanese
I think I’m turning Japanese
I really think so
I’m turning Japanese
I think I’m turning Japanese
I really think so
Turning Japanese
I think I’m turning Japanese
I really think so

Comment by clue
2008-12-13 17:13:41

4.2% for holding a basket of H.

H, ay-che, the horse, Herion.

Mainland H carries a 4.2% wealth effect……what happened to the good drugs like pot and alcohol?

Comment by Blano
2008-12-13 16:27:13

Anybody watching “FDR and the Presidency” on the History Channel?? Fascinating stuff.

Comment by CA renter
2008-12-14 05:38:44

Yes, I watched it. Very good, indeed!

Did you see the program just before it regarding the credit bubble. Quite good also. The History Channel is on it right now!

Comment by Paul in Florida
2008-12-13 16:41:38

I agree shares got very bombed out (a little less so now) but I think 6.3% earnings growth for H shares is very optimistic. I believe he is underestimating the decline in the Chinese economy and the negative wealth effect of collapsing RE prices (down 20% in Shanghai in the last 12 months); his theory sounds a lot like decoupling. What happens in the U.S. is going to be reflected worldwide, including China - if we fall to -7% GDP they are going to be flat at best.

Comment by Paul in Florida
2008-12-13 16:48:49

I’d say we’re getting very close to the “Roubini moment”: Roubini predicted a couple of months ago that the U.S. exchanges would close for up to a week sometime during the crisis. If a big down day sends the Dow and S&P through its lows, it will probably cascade lower quickly. At that point, the exchanges could be closed - probably into a long weekend. When they are repoened (in this hypothetical scenario) expect all short selling to be banned.

Comment by clue
2008-12-13 16:53:46

Roubini Scheemnee,

I consider the guy bullish at this point. Ban shorts again, I wouldnt count on it.

Comment by hoz
2008-12-13 20:03:11

I happen to agree with you about Mr. Roubini et al. He has become a reverse indicator and Ms. Meredith Whitney (whose research, I had a lot of respect for) has been pumping her employer (CIBC) so hard that she is losing credibility.

I am not bullish on the US market, I just am not massively bearish any longer. The market could churn at these levels for a decade. A great trading market. Not good for long term investing.

Everybody knows it is going to get worse, very rarely is everybody right where they can make money. The risk reward/ratio favors a bullish position. Not enough for me to jump in with any level of comfort.

Comment by Olympiagal
2008-12-13 17:55:38

Whooo hooo! I’s back! How’re yooooo all?
I note with interest that several snowflakes fell upon my uplifted face just now, as I scampered up to the mailbox in my noisy clattering clogs. Maybe we’ll get some snow here in the dark forest!

Oh, look, a nice Christmas card from cousin Tara, a gift-card from Shipwreck Beads, and some drivel from the Salvation Army. Does anyone know, is the Salvation Army legit? I don’t ever know, nowadays.

Also, three (3) Netflix DVD’s. What ARE they?! oooh!

Comment by Olympiagal
2008-12-13 18:10:00

–’Mongol’–some Chinesey sort of thingie.
–’The War’– a documentary by Ken Burns, Disc 6. (Don’t watch this series, any of you. It’ll make you sad and feel like lurking in the woods in a cap, with a blunderbuss, or something.)
–’The Indian in the Cupboard’–I got this movie because I read it bit by bit to my kids in my class about…7 years ago? Has it been 7 whole yearrrrrrs?! Gosh.
Well, I didn’t actually produce them, in that sense, but they were still MY kids. I taught art at an afterschool program for a bit, in the good and righteous city of Provo, Utarr. This was a good book. I remember once when the lunch-delivery guy knocked on the classroom door and said ‘lunch is ready’ I shouted grouchily to him to get out until we finished the chapter, and not one kid complained, so it MUST have been a good book.

Comment by Vermontergal
2008-12-13 19:16:21

Don’t watch this series, any of you. It’ll make you sad and feel like lurking in the woods in a cap, with a blunderbuss, or something.)

The Civil War by Ken Burns was depressing enough. I’ve never made it through the entire series because by the end I get tired of the body counts. (Plus, I know how it ends.) I don’t see how Ken Burns makes them without drinking and/or heavy medication.

Jazz was pretty good, though, and a whole lot less less dead people.

Comment by Olympiagal
2008-12-13 19:45:41

‘I don’t see how Ken Burns makes them without drinking and/or heavy medication.’

How does ANY of us ‘make it through…’
1. Where’s my hat?
2. Where’s my blunderbuss?

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Comment by Faster Pussycat, Sell Sell
2008-12-13 18:26:14

Faster Pussycat, Kill Kill?

Ooooh, ooooh, ooooh, self-referentiality. Is this the end? :-)

Comment by Olympiagal
2008-12-13 18:41:04

‘Ooooh, ooooh, ooooh, self-referentiality. Is this the end?’

I don’t even know what you’re talking about, Mr. Over-eddicated, all I know is, I got a bunch of soggy fog-moistened stuff to haul in off the porch, and then I gotta start some little fires, just little fires, to guide the way–only a week til the Solstice! Can’t let the sun forget! Nohow.

Also, I must tell you all how fun it was to meet a fellow Hbber, sleepless.

Where’s my hat?

Comment by Faster Pussycat, Sell Sell
2008-12-13 18:50:53

Did y’all go to the dive bar? What was the net drinks count?

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Comment by Olympiagal
2008-12-13 19:07:54

An extraordinarily modest two (2). That’s ’cause time was limited.

And what’s YOUR present net drinks count? Excluding your damnable little sloe-eyed french-fry cooking moppet, *grumbles darkly *

Hey, where IS my hat?!

Comment by Olympiagal
2008-12-13 19:19:33

I didn’t lose my hat after all! Whooo hoooo!

‘And what’s YOUR present net drinks count?’

Mine is three (3). But of course that’s ‘rez’ (reservation) beer. We like it strong. Hahahaha.

Comment by Vermontergal
2008-12-13 18:28:34

Wow! Excellent day!

It snowed here too, enough to go cross country skiing.

Netflix arrival day is very exciting at our house as well. (Although the stinkin kids get to open them…all I get to do is pay for it.) (Not that I am bitter, of course.)

Comment by Olympiagal
2008-12-13 18:56:55

‘It snowed here too, enough to go cross country skiing.’

You had more than a half dozen white flakes?

Comment by Vermontergal
2008-12-13 19:20:32

We’re very proud.

The snow showed up yesterday. We’ve only had ice and bad driving weather for the previous few days. Just enough winter weather to trap my in-laws in our 1 bathroom, 3 bedroom house for most of their visit. By the end, I was abusing my drug of choice (ice cream) just to make it through. It wasn’t pretty.

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Comment by Olympiagal
2008-12-13 19:53:42

‘By the end, I was abusing my drug of choice (ice cream) just to make it through. It wasn’t pretty.’

1. What kind of ice-cream?
(b). I was gonna announce that ‘ice-cream’ is a candy-a*ss kind of dr*ug of choice, but then I thought, I bet not the way Vermontergal does her ice-cream. That reassured me that the world is as I thought it was.

2. Oh, I’m sure it WAS pretty! Or, if not pretty, at least a viral ‘you-tube’ event, had you only had the forsight to set up a camera first.
Sigh. You, just like me, seem to be not able to forsee these type of filmable events. And that’s why we’re not the #1 visited website in Japan.*

*Actually, I may get there, one of these days. Hahahahah! * snort*

Comment by Vermontergal
2008-12-14 06:55:49

I bet not the way Vermontergal does her ice-cream. That reassured me that the world is as I thought it was.

I hate to change this fantastic rep, but it turns out it was sugar-free ice cream with dark chocolate on top. Which is totally candy-a*ss. but there it is.

There are alcoholics on both sides of the family. (Like destroy your entire life, liver, and never actually make it to AA meeting types.) I was lucky enough to be born into a pocket that doesn’t drink. However, that was replaced by eating like crazy, as the largesse of my family can attest (with the exception of my sister, who does WW maintenance).

Considering I went low carb in large part to break an addiction to *sugar*, of all things, I think it’s probably best that I’ve never been much attracted to the harder stuff.

So I apologize for having wussy drugs. It appears to be my curse to wander through life mostly conscious, which as I get older, is proving to be the incorrect choice.

Comment by clue
2008-12-13 18:45:26

it snowed in Roseburg Oregon too…. big fat flakes.

Comment by Olympiagal
2008-12-13 19:05:43

I love Roseburg! I remeber that from my travels, when I first decided to come live here, is that where you are?

Comment by SanFranciscoBayAreaGal
2008-12-13 19:36:07

I visited my platoon sergeant and his family years ago in Roseburg.

Comment by Olympiagal
2008-12-13 20:09:01

‘I visited my platoon sergeant and his family years ago in Roseburg.’

Man. You’sm the Lieutenant of Understatement, I must say.
So, what did yer do in Roseburg at that time?
Did you cook a turkey to perfection? Shoot a deserving person? Make snow-angels?
Dish to us, the curious.
At least me, I’m curious. Before I go to bed, because my head hurts. All the singing, you know.

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Comment by SanFranciscoBayAreaGal
2008-12-13 20:30:15

At the time, my ex and I were very good friends with the Sergeant. We all met at Ft. Lewis. Sergeant W wanted us to come and meet his family. It was a nice visit.

I agree with you Roseburg is pretty country.

Comment by hoz
2008-12-13 19:47:36

If it snows in June it is last winter; if it snows in July it is next winter.

# Tonight: Periods of snow. Low near 25F. Winds light and variable. Chance of snow 80%. 1 to 3 inches of snow expected.
# Tomorrow: Periods of snow. Some sleet may mix in. High 28F. Winds NE at 15 to 25 mph. 4 to 6 inches of snow expected.
# Tomorrow night: Some mixed winter precipitation possible early. Snow in the evening will transition to snow showers overnight. Low 11F. N winds at 10 to 20 mph, increasing to 20 to 30 mph. Chance of snow 80%. Snow accumulating 1 to 3 inches.
# Monday: Occasional snow showers. Quite windy. Cold. Wind chills approaching -20F. High 11F. Winds WNW at 25 to 35 mph. Chance of snow 50%. Some snow accumulation possible.
# Tuesday: Mostly cloudy and windy with snow showers. Highs in the low teens and lows in the low single digits.
# Wednesday: Mostly Cloudy. Highs in the mid single digits with temperatures nearly steady overnite

A dry winter is when there is less than 100 inches on the ground by Christmas.

Comment by Bill in Los Angeles
2008-12-13 18:01:29

Barron’s recent article chimes in that things are going to get a lot worse. It claims bottom will be in 2009.

I’m thinking that first the bailouts have to be paid for. The bailouts are taking taxpayer dollars that would otherwise be spent in intelligent ways more efficiently than any government could spend. The bailouts are, in essence, making a huge inefficiency, by preventing the market from punishing bad business decisions.

How long does it take to absorb $1 trillion or more of bailouts? I think longer than a year. At least 5 years.

Comment by what-me-worry?
2008-12-13 18:21:58

The Other American Auto Industry

The auto production numbers in the South are staggering. A dozen years ago, Alabama produced zero cars. Now it turns out 750,000 annually at Mercedes, Honda, and Hyundai plants. Three years after Mercedes opened its SUV factory near Tuscaloosa in 1996, it doubled the size and output. A Honda plant halfway between Birmingham and Atlanta went on line in 2001, and the next year the company spent $450 million to expand it, adding 2,000 more workers.

Comment by measton
2008-12-13 23:58:14

The funny thing is the red states think they are stealing from the North, but this will lead to red states becoming more blue via immigration.

Comment by silverstein
2008-12-13 19:18:17

To those who fear of getting laid off are already are, may i suggest day trading as a way to make money till you get next employment. Heck if you are good at it, you don’t need ‘em no more. I know one fat lady in texas who already does that

Comment by PerplexedContrarian
2008-12-13 20:10:00

Frank Biancheri (political/economic/think-tank French guy) states he believes that the U.S. will default on its debt in mid-2009. I learn so much from (nearly!) all of you on an ongoing basis and would appreciate hearing your views on his arguments:

Thank you.

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