Bits Bucket For December 19, 2008
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The Housing Bubble
Examining the home price boom and its effect on owners, lenders, regulators, realtors and the economy as a whole.
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Name:Ben Jones
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Dive,Dive,Dive….
California home prices dive 38%
The median price drops to $258,000 in November from $414,000 a year earlier as foreclosures prop up sales but erode prices.
Associated Press
December 19, 2008
The median home price in California dived 38% in November from a year earlier as foreclosures propped up sales but eroded prices, a real estate tracking firm said Thursday.
The median home price dropped to $258,000 last month from $414,000 in November 2007, San Diego-based MDA DataQuick said. A total of 32,163 houses and condominiums were sold statewide, up 26% from a year earlier.
“Indicators of market distress continue to move in different directions,” DataQuick said. “Foreclosure activity is at or near record levels, financing with adjustable-rate mortgages is near the all-time low.”
DataQuick said the median home price in the nine-county San Francisco Bay Area plummeted a record 44% in November to the lowest level since September 2000.
Prices still need to “Voyage to the Bottom of the Sea”
You mean a voyage back to 60’s prices?
The California Association of Used Home Sellers has forecast the rate of price decline will dive from 38 percent to 6 percent over the next few months. So far they have been way off on almost all their price forecasts; how do you think this one will turn out?
I think 6% in the month of January (not just for the entire year, as they predict) would be a more accurate prediction. Compounded for 12 mos, CA will be looking at a 52.4% decline in 2009. Which of these two figures will be closer to the truth for the decline in CA for 2009: -6% or -52.4%? Are these price drops accelerating or decelerating? I would say -52.4% is in the bag.
These used house associations love to pull these numbers out of their @sses, don’t they?
Speaking of collapse…
http://www.nytimes.com/2008/12/19/opinion/19krugman.html?_r=1&hp
The best article you will read today. Nobody says it like Paul Krugman.
Yea, isn’t he great? It takes real economic wizardry to make debt and spending beyond our means into arguments for a successful economy, eh?
“Consider the hypothetical example of a money manager who leverages up his clients’ money with lots of debt, then invests the bulked-up total in high-yielding but risky assets, such as dubious mortgage-backed securities. For a while — say, as long as a housing bubble continues to inflate — he (it’s almost always a he) will make big profits and receive big bonuses. Then, when the bubble bursts and his investments turn into toxic waste, his investors will lose big — but he’ll keep those bonuses.”
This is a beautiful business plan. The only missing ingredient is a $700 bn taxpayer-funded bailout to raise the funds needed to remove those toxic waste assets off the books of the firms whose money managers made buckets of money by screwing over their hapless investors. I wonder if anyone has thought of this possibility?
At the crudest level, Wall Street’s ill-gotten gains corrupted and continue to corrupt politics, in a nicely bipartisan way. From Bush administration officials like Christopher Cox, chairman of the Securities and Exchange Commission, who looked the other way as evidence of financial fraud mounted, to Democrats who still haven’t closed the outrageous tax loophole that benefits executives at hedge funds and private equity firms (hello, Senator Schumer), politicians have walked when money talked.
Meanwhile, how much has our nation’s future been damaged by the magnetic pull of quick personal wealth, which for years has drawn many of our best and brightest young people into investment banking, at the expense of science, public service and just about everything else?
Thinking about this stuff is better than ipecac at inducing emesis. It’s nice to see someone actually call some of these scumbags out by name. This is what we need from the press on a weekly basis, until our gov is shamed into prosecuting, and the people are sickened enough to vote those most guilty out of office.
did you see this one?
http://www.nytimes.com/2008/12/18/business/18brokers.html?fta=y
Here is how the two deans of Columbia Business School ponder this housing mess…
December 17, 2008 Opinion WSJ
Low-Interest Mortgages Are the Answer
Stop the decline in home prices, stop the crisis.
By R. Glenn Hubbard and Christopher J. Mayer
Recent news articles suggest that the Treasury Department is considering a plan to offer a 4.5% mortgage for home buyers for a period of time. Let’s hope it does. It would help arrest the decline in house prices that is at the base of the ongoing financial crisis and recession.
Raising the demand for housing makes sense now. While fundamental factors clearly played a role in driving down house prices that were at excessive levels two years ago, we have argued . . . that in most markets house values are today lower than what is consistent with the average level of affordability in the past 20 years.
The increased demand for housing arising from lower mortgage rates would provide a floor on further house price declines . . .
- - - - - - - - - - - - - - -
Mr. Hubbard was chairman of the Council of Economic Advisers under President George W. Bush and is dean of the Columbia University Business School, where Mr. Mayer is senior vice dean and a professor of finance and economics.
The problem here is not their intellectual ability - I believe they have this in spades. The problem is that these two spend hours and hours toiling to come up with data that supports their preconceived ideas. Then they tell Presidents what to do.
If R. Glenn Hubbard and Christopher J. Mayer represent America’s best and brightest, then there is no hope for our Republic.
Oops - here is the link:
http://online.wsj.com/article/SB122948162452913103.html
“If R. Glenn Hubbard and Christopher J. Mayer represent America’s best and brightest, then there is no hope for our Republic.”
Who made them the big mega-megas? Some media outlet. This is why media outlets are dying. Like the Wall Street Journal, owned by a senile old man with a late-life crisis.
Is R. Glenn Hubbard related to L. Ron Hubbard?
*THIS IS WHAT ECONOMISTS ACTUALLY BELIEVE*
“Who made them the big mega-megas? Some media outlet.”
Wrong. If you check their academic publication records, including text book authorship, history of participation in their professions and public service (very considerable indeed), you will get the correct answer. Whether you agree with their views, it is hard to argue with their credentials to air them.
As someone else once wrote…
“Bloated-head syndrome that is endemic among academics - they believe they can say something and make it so as a consequence of their “degree.”
P.S. Won’t work, can’t work, so that all but guarantees they will give it a try. I hope they do, keep screwing with it they are sure to completely ruin it. Then ‘we the people’ can build it back. Excluding all the whining ass it’s not fair crowd.
Families would to well to read up on the panic of ‘73… 1873 that is.
+1 on reading up on that panic.
What is amazing to me is the number of people I encounter everyday who believe that the New Year will bring a turn around. As if the calendar works magic…
Wait, wasn’t there something about the Mayan calendar and 2012?
Any good books about it??
12.21.2012
What happens then? Did I miss a good conspiracy story?
Mayan Prophecy 12/21/2012: Entering Our Galactic Day
*sigh*
The whole Mayan calender “world ending” nonsense is just a Y2K problem (at worst) in their calender. Basically, it just ups the next “placeholder” digit, and the rest goes back to zero. Their calender no more ends on 12/12/12 than the world ended on 1/1/2000.
And no, our planet and solar system doesn’t magically line up with the center of the galaxy or anything on this day or anywhere near it… currently, our star system is above the galactic disk, with no poles aligned close to anything on a galactic sense and that won’t change for tens of thoustands, if not millions, of years.
If the world ends on 12/12/12 or earlier, it will almost surely be by some stupidity of humanity (huge war, etc.) or some unseen event (asteroid impact), not by some “mystical seers” from the Maya civilization.
Pondering. you just spoiled a good one.
Dern you.
‘Pondering. you just spoiled a good one.
Dern you.’
Just do what I do, when confronted with cold hard facts that spoil or tarnish a cherished conspiracy theory or any other crazy notion I’m entertaining: just close your eyes, plug your ears with your fingers, and bellow ‘la la la’ loudly. If the person disabusing you of your precious nonsense is REALLY convincing/annoying, then you need to punch them in the stomach* before you do the closing your eyes thing.
*Oh, come on. It’s not either abusive to punch the person, if III do it. Thanks to the stupid stick-bug girly arms, it feels more like gentle cherry blossoms wafting against their abdomen, is what I understand.
It makes ME feel better, though.
“Mayan Prophecy 12/21/2012: Entering Our Galactic Day”
******
I know nothing about Mayan prophesies or Galactic this or that.
But I do think that would be a much better date to think about buying a house in California than the present.
+2
>>And no, our planet and solar system doesn’t magically line up with the center of the galaxy or anything on this day or anywhere near it…
Yeah, but anyone who divided by their solar system X coordinate (pointing toward the Vernal Equinox) might have a nasty surprise on Sunday
Pussycat gave it the +1 and so I read up on it. I don’t see how it relates. Theory is that it was caused by
1. Overexpansion from the railroad boom (I have no trouble accepting this is analogous to our housing boom)
2. An attempt to corner the gold market (I don’t see anything like that at the moment in present day. Maybe Mr. Aladinsane will try it)
3. Horse flue and everybody’s mode of transportation quit working (Nothing like that I see going on present day)
4. Chicago fire (Don’t see anything like that, but an epic disaster could happen at any time I suppose)
5. The coinage act of 1873 where silver was no longer “money” (We already did this many years ago)
6. Ulysses Grant’s policy of money contraction (we have absolutely nothing like a policy of money contraction. Our government will buy your toilet paper if you’re in the right “position”. Bernankruptcy is doing everything he can to insure the money supply doesn’t contract.)
So how does the panic of 1873 relate to today? What am I msising?
Collapse of debt bubble.
Collapse of commodities.
Scandal. Failure.
State budget crisis and withdrawal of Federal aid (could happen).
Construction boom and bust (as a result of the fires).
International coupling.
Years til recovery.
We have plenty of time to throw in a plague and a disaster. Nature always kicks you in the ass when you are bent over.
1873-US = China
Virtually every single “robber baron” made their money in that very specific boom-bust cycle.
We have plenty of time to throw in a plague and a disaster. Nature always kicks you in the ass when you are bent over.
Let’s hope it doesn’t come to that — we have enough in the global crisis bullpen already without a pandemic or tsunami or Krakatoa v. 2.0.
(Though destruction of all kinds, financial or ecological, produces opportunity for something or someone in the ecosystem … or ficosystem.)
Blue Skype,
I’m not denying the economy is in a lot of trouble. I’m saying I don’t see how what’s going on is related to what went on in 1873. I’d rather see a depression where the government was hell bent on printing up whatever money it could to compare against. I think in most depressions governments contract the money supply, not expand it as we are doing.
Pussycat gave it the +1 and so I read up on it. I don’t see how it relates. Theory is that it was caused by
1. Overexpansion from the railroad boom (I have no trouble accepting this is analogous to our housing boom)
Malinvestment in housing and over supply in major employment sector
2. An attempt to corner the gold market (I don’t see anything like that at the moment in present day. Maybe Mr. Aladinsane will try it)
Speculation in commodities hit epic level last year
3. Horse flue and everybody’s mode of transportation quit working (Nothing like that I see going on present day)
Oil supply problems
4. Chicago fire (Don’t see anything like that, but an epic disaster could happen at any time I suppose)
Katrina
5. The coinage act of 1873 where silver was no longer “money” (We already did this many years ago)
Ok, not quite the same.
6. Ulysses Grant’s policy of money contraction (we have absolutely nothing like a policy of money contraction. Our government will buy your toilet paper if you’re in the right “position”. Bernankruptcy is doing everything he can to insure the money supply doesn’t contract.)
Considering credit is contracting this isn’t that different
So how does the panic of 1873 relate to today? What am I msising?
I hope bold isn’t still on. Not the same but some similar things. We have the Iraq war as well. Malinvestment is malinvestment. The prcing phenomena and deflation might bite any business with debt over the next 5 years
Michael,
One of the galactic subtleties is that the Gov’t isn’t in control of the money supply. It is falling fast despite their attempts to get credit moving. They can lend it into existence only if there are borrowers on the other end.
The borrowing binge is over.
The TARP money will go to money heaven. It will not cause inflation.
1873 is interesting because most people think 1929 was a very unique disaster, not a normal part of the economic cycle made monsterous (again) by government intervention.
A lifespan between the two and here we are again.
Virtually every gorgeous building that we ogle in Paris, Vienna, Berlin, etc. was built during that boom, and they speculated like crazy on RE.
The US speculated on railways and they issued “second-mortgage guaranteed scrip” and the “gold bond, second scrip” which were the CDO’s and CDS’s of the time.
There’s a great cartoon about it too from Harper’s Weekly. You could change a few things and it would be the same as today.
Those banks, etc. might not be lending, but it doesn’t mean they don’t have it. At any time they could decide to buy assets with it (like stocks, gold, whatever) or they can hold on to it to keep from going under. Either way the Fed throwing money at the problem is different than when they typically try to contract the supply, so it *is* different this time. I doubt it’s going to be *better* this time, though.
Thanks for all the thoughts you guys added.
“I’ve lived through twelve recessions, eight panics, and five years of McKinleynomics.”
Some of the biggest crooks I’ve ever met are in academia. These guys conjure up ways to obtain taxpayer money, then use the funds to pursue personal aspirations under the guise of contributing to the common good. I thought corporate America was corrupt, but these academic folks are a pretty good match, and when questioned can hang their hats on their supposed superior intellect.
I always have problems taking business/economic advice from university scholars who been appointed to life time jobs that they can never be fired from or laid off.
I don’t know where this myth started that tenured professors can not be fired. Tenured professors can be fired (e.g. Timothy Leary).
I know of a full professor that is being fired because he’s been sitting on his ass (he’s a few years from retirement). I guess he thought that being a full professor meant that he didn’t need to do internal service, sit on committees, get grants, or prepare for class.
I know of another that is being fired because he stopped teaching in the middle of the semester. Twice. But, then again, he might be off of his rocker, and was recently dragged out of his office by the police.
I know of another that did just enough to keep his job. The end result was that his raises were so low that they didn’t keep up with inflation, and after a decade, this full professor was making less than a new hire straight out of grad school.
What tenure does do is allows academic freedom. Professors don’t need to worry about being fired because they disagree with their boss (heck, they are their own bosses, to an extent).
And unlike teachers, tenure is earned — publish or perish. I know of one that was just denied tenure due to poor scholarship. And, believe it or not, another was denied tenure due to horrible teaching reviews (despite strong scholarship and grants).
I thought corporate America was corrupt, but these academic folks are a pretty good match, and when questioned can hang their hats on their supposed superior intellect.
I’ve met plenty of lazy, corrupt, intellectually bankrupt or otherwise flawed academic types in my day, but their failings (such as they are) typically don’t make trillions of dollars disappear overnight, poison watersheds with chemicals, knowingly harm workers, knowingly harm consumers, and all those other great things, big and small, that corporations are caught doing year after year.
Orders of magnitude.
Actually these guys sell themselves and then come up with the needed research to back up the flawed ideas (economic, medical, etc).
Look at all the cheerleading along the way that helped drive the bubble, or the medical research that allows harmful drugs on the market, as a couple of examples. They do their part by being ambitious and dishonest.
Intellectual = a person educated beyond their
natural capacity.
The 30 year fixed is already down around 5%. If that doesn’t stop house price decline, how would 4.5%?
And there’s the rub…
I guarantee that lowering mortgage rates won’t increase my demand for housing. Why would I buy when 1) credit underwriting is still not really back to traditional levels so there is more competition and 2) the “how much a month” crowd will be paying the max price they could ever afford because of the low mortgages?
I’ll wait until underwriting standards are even higher and mortgage rates are at least at hisotical levels, preferably very much on the high end of things.
I do understand why they think that stabalizing prices is important, but I don’t get why they think they can do it when prices are still out of whack in comparison to incomes or why they think they can stabalize prices when incomes are still going down. If this was just an attempt to keep prices from “overshooting” it would make some sense, other than that, what they heck are they smoking?
And just one more crack on the what men/women want debates from the last two days? Every time in the last few months when I have met someone who seemed to be pursuing a conversation with me (not a firm indication of interest, but generally the way things start) and he has mentioned a recently purchased house or condo, I find I lose all interest in the conversation. Which is weird, because it is largely a financial issue and I don’t base my interest on finances. Maybe it is the fact that they are bragging about it? That they think that mentioning the real estate is the way to get a woman interested? That they are assuming that I am shallow enough to prefer someone who owns his place? I can’t quite put my finger on it, but it is a real turn off.
And, of course now people are less inclined to see a house as a SOURCE of wealth, and less worried about being “priced out forever.” Demand has been reduced because people are simply less interested in overpaying. The recent, double digit price declines mean that even the remaining speculators REALIZE that they’re speculating. Very few are under any sort of “sure thing,” illusion.
“The recent, double digit price declines mean that even the remaining speculators REALIZE that they’re speculating. Very few are under any sort of “sure thing,” illusion.”
Not so sure about that. But I do think that the ones that are left are the really dumb/deluded ones. And there are fewer really and truely dumb people than there are people who are just severly over influenced by the culture surronding them.
Unfortunately, the culture in the DC area is still a long way from getting it. People really think that what has already happened in the outer burbs can’t happen closer to and within the Beltway. Just you wait. If any of the stimulous money goes to expand the Metro, there will be a good try at a new bubble in the areas slated to get transit stops. Not sure if it will work as the lenders may not allow it, but they will sure try.
But I do think that the ones that are left are the really dumb/deluded ones.
Reality will indeed take a while to sink in.
I think the quote from an article a few days ago about 70% of homeowners thinking that their house had increased in value shows that it will take more time for the average homeowner to understand the current situation.
I have a reasonably intelligent friend who the other day was trying to tell me that now is a good time to buy properties as an investment. This is in northern Virgina - probably in the top 5 or so areas in the country bubble-wise. His reasoning? Prices are down.
I would say at least 50% of people who would consider investing in real estate don’t look beyond that. Most real estate investors are optimist by nature, so what they do is look at two things:
- Current price point
- Price trend
If either of those is “favorable” then they think it’s a good time to buy. They don’t:
A. Look at the sum total of the two factors - e.g. if prices are low but the trend is down it doesn’t matter - what matters is that prices are down. Conversely if prices are high but the trend is up - that’s OK too.
B. Look deeply into the data - e.g. when looking at the current price point they only compare with recent data (1-3 years), not with historical data, or with affordability comparisons. Likewise when looking at price trends they are often fooled by spring/summer bounces, and won’t look at the more important YoY data.
That is why sales numbers are up - in fact skyrocketing - in some areas. There are lots of knife catchers out there right now.
Oh don’t get me wrong, plenty of people are under the illusion that this is a good time to buy, or they think that prices are near bottom. But few are under the illusion that RE prices don’t decline or that it is ALWAYS a good time to buy RE.
packman wrote:
That is why sales numbers are up - in fact skyrocketing - in some areas. There are lots of knife catchers out there right now.
=====================
Yep. We’re seeing plenty of those out here in San Diego.
While the lower-end homes are getting close to reasonable prices, the mid/high and higher end areas have barely budged (perhaps 10-20%, which is nothing compared to the bubble gains).
The bubble is still alive and well, believe it or not.
Look deeply into the data - e.g. when looking at the current price point they only compare with recent data (1-3 years), not with historical data
Housing value should go to 1998 levels, adjusted for inflation, with an additional adjustement for the trend swinging inevitably too far in the opposite direction of the bubble. And that’s assuming that the jobless rate and consumer confidence are on par with 98 levels, cough*.
I’m sure others have a few additional downward adjustments to add as well.
On Yahoo, D.C. is one of the ten best places for “Price Stability”. Seattle is number 1, and Cleveland is also on the list ;0
polly,
Some women just are not attracted to men in prison.
Like your thinking Blue Skye
Oops. Lost stuff I put in the less than/greater than signs. Here is the response:
*giggle* *smirk* *decidedly unlady-like snort*
“in the last few months when I have met someone who seemed to be pursuing a conversation with me (not a firm indication of interest, but generally the way things start) and he has mentioned a recently purchased house or condo, I find I lose all interest in the conversation.”
I’m a renter….you need look no further!!!!
I got you beat Blano, for Polly’s fancy: I am short a lot of homebuilders and REIT stocks.
Polly, next weekend good for you?
are you making a pass at polly, Blano?
Oooooo. Internet flirting. I like it.
‘Polly, next weekend good for you?’
Well, get busy, polly. Because cougar has made detailed and credible plans to become a real we*e*nie, starting
right next year. That gives you, lessee, a mere 12 days. Of course, it may take him awhile to really ramp up into serious a*sshattery, so there’s that.
And behold:
(cougar91, from yesterday)
‘.. I have made my new year resolution: I am going to go from nice boy to bad a*s for 2009. Here are a few behavior modifications I have came up:
2008 coug: Open car door for women.
2009 coug: Pretend to open car door for women, then as she is half-way out of the car, slam the door with full force and yell “Get yo fat ugly a*s out of my ride.”.
2008 coug: Say to her: “I would like to take you to see Yo-Yo Ma when he comes back”.
2009 coug: Say to her: “I would like to see yo mama behind your back”.
2008 coug: Say to her “I get along with women really well because I am a sensitive guy and a real good listener”.
2009 coug: Say to her “I really get down with yo hoes & b***ches”.
2008 coug: When finishing dinner at fancy restaurant: “I had a nice time with you, let me pay for this dinner”.
2009 coug: When finishing dinner at Soul Fried Chicken: “Yo lucky I am splitting it with yo ugly a*s”.
2008 coug: Say to her “One day I would like to have children and raise them the proper way. I love children.”.
2009 coug: Say to her “I need some more headcounts to fatten my welfare & TARP checks.”.
These behavior changes should now guarantee me & any other HBB dudes any women we fancy. Thanks, HBB gals.”
Yeah, cougar baybee! Prepare for love!
Blano, you had me at “I’m a renter”
Now, now gentlemen. I told you I don’t judge based on net worth, so just bragging about your shorts (double entendre intended) won’t do it.
Going to Vermont next weekend to run around in the cold with my uncle’s kids and pass out gifts purchased at the National Geographic warehouse sale. Tween boys like books about volcanoes and hurricanes and Mount Everest, right? And borrow more of my uncle’s CD’s to bring home and load up on my ipod - Lord, I’m such a cheapskate. Also to eat fried potato pancakes, but I’d go even without those - really, I promise I would.
Oh, and just in case we are bragging about our economic prowess (and just to drive Flat crazy) here is a link to the 2009 DC area federal salary table.
http://www.opm.gov/oca/09tables/html/dcb.asp
That’s why next weekend is the LAST weekend for all HBB gals as far as a piece of me goes. This is my new slogan:
“Get a piece of nice cougar91 before you are priced out forever”
“are you making a pass at polly, Blano?”
Um…..yes!!!
“I told you I don’t judge based on net worth”….+2 for polly.
But if SanFran gal wants to step to the plate too, well heck, let’s have at it!!!!
you better have ‘em send photos first…
And I bet Bronco, your one great looking gem aren’t you.
“you better have ‘em send photos first…”
They sound like nice gals…..photos not needed.
They sound like nice gals…..photos not needed.
================
You’re learning, Blano.
Anecdotally, my husband and I met online over ten years ago. We e-mailed for about three months before meeting in person. Our first physical date was a blind date…neither one ever asked for pictures during the entire three months we were e-mailing, nor did we talk about how much money we made.
Over a decade and three kids later, I can honestly say he’s the most wonderful and beautiful (inside and out) person I’ve ever met. The fact that he never asked for a picture impressed me more than wealth ever could.
I wish you the very best in your love life…maybe 2009 will be your year.
Why should we keep prices from “overshooting”? Again, all of this comes back to the idea that “its good to pay too much for something”; an idea somehow rammed down our throats by the housing MSM/cartel. I think that gas prices have probably overshot on the downside; is that a BAD thing?
This entire notion that we MUST STOP prices from going down really needs to be questioned (imho). Imagine if we had stopped prices from falling for computers (your 3ghz machine would be worth about 5 billion dollars), TVs (perhaps 1M dollars for your 56″ projector), cars (your 2008 Corvette is nicer/faster then a 1980 Lambo, therefore it’s worth 300K), etc. How is this a bad thing? Prices are going down, things are getting nicer for the same price, and everyone has better things at good prices.
I don’t buy this “Armageddon comin!” argument about deflation. Yes, if you’re massively over leveraged deflation is deadly. But if you have cash and a good job, deflation isn’t a horrible thing (and can be a wonderful thing; look at the housing burst for those of us who don’t own!).
I do understand some of their (banksters) arguments about deflation, but, frankly, most things SHOULD go down in price over time. Printing money just tries to stem the fall; but look at housing… We can put up a 3K sq/ft home in 3 weeks today, 50 years ago it would have taken 6 months (min!). We have tools/prefab that make it much easier to put up (no need for engineers on site). And there’s NO shortage of land in most of the country (although I do concede that land is a limited resource and, as such, has the potential to appreciate). Now, I do realize that I am glossing over lots of details (labor, materials, etc), but there’s also massive efficiency gains that are totally disregarded when discussing home prices. It’s just not as hard to build out as it used to be!
totally agree; deflation is generally a good thing (just not for the banksters).
I’m hoping we get the same adjustment in Netherlands, it’s about time. Including overshoot homeprices could go down more than 80% I guess. And no, I’m convinced we don’t have a shortage of land either, but we do have a zoning problem like in CA; time to get rid of that.
One factor that has pushed up cost of new homes in many developed nations is government regulations. In my country this sure is an important factor (most of these regulations are totally unnecessary of course …). But just like this pushed up home prices on the way up, they can make prices go down when the regulations are loosened at a later time out of necessity. Just like labour and building materials have a potential to decline strongly (both are still at bubble levels here).
“Imagine if we had stopped prices from falling for computers (your 3ghz machine would be worth about 5 billion dollars)”
I like that analogy in 1994 I picked up 100 sticks of 8meg ram
price $250000. A 4bed 2 bath in my area at the time $84000.
This entire notion that we MUST STOP prices from going down really must stop
Nobody said that we MUST STOP house prices from going up, did they. [except us]
Oh, I would love to see the overshooting. It would be great for me. But I can understand why the academics/politicians would want to prevent it. Digging your way out of a really big hole is hard enough without digging your way out of an even larger one. And academics (and the politicians that make them feel important by asking them to give testimony and write briefing papers) feel the need to do something to solve the problem. It is the nature of the beast. I just don’t get the desire to do what completely impossible, which is to stop the declines before they get to a natural equilibrium with wages. People shouldn’t want to set themselves up for failure.
And I am perfectly aware that all this was the symptom of the real problem which was the unsustainable run up in prices. But since the banks weren’t required to mark their CDO’s/MBS’s/bad retained loans/etc. to market until the market started to turn, they could ignore the problem until then. Holding assets on your books that are going to collapse is bad, but not yet a crisis. The crisis comes when the accountants and bank regulators come to call.
I am all for bringing things back to first principles. Really. I’m a math person. I love first principles. It’s just that sometimes you can’t spell it all out in every post.
Polly:
During the run-up in prices some of these
locaslocal women bragged to me about the house they built, or the mortgage they acquired, or the apartment complex they took over the payments on. The crowd that worships the REAGU god (or goddess) is not gender specific. This tells me women are just as capable of using huge debt expenditures to impress people with their “business acumen” as any man can. Which is weird, because in my thinking huge debt expenditures = stupidity.Totally believe that. Women are not exempt. As a matter of fact, they may be more prone to do it. After all, the stereotype is that the woman wants the house. So why shouldn’t she be as inclined to buy stupidly as a guy who merely thinks that buying a house will make the women like him better?
Seriously, even if a woman is only looking for a guy who could provide a house, why would she only consider a guy who already has one? What if his house is good for his commute to work but not for hers (big deal in DC)? I can’t get my head wrapped around it.
It’s an easy answer, Polly. He lacks critical thinking skills. He thinks only the first level; e.g. “Housing good! Picket fence good! ALL women think this, you know, like suzanne commercial. *grunt* TV told me so!”
A critical thinker like you looks at the first level, but then sees that the heart of the problem is in the second level of thinking; e.g. “Housing is good, usually, BUT not now because [insert HBB reasons]. TV is wrong today.”
The real turnoff is that not only does the guy think on the first level, he has no idea that a second level exists. On top of it, instead of bothering to find out what you’re like, he assumes <— that’s why it’s so annoying — that you are a first-level thinker (to him, there is no second level thinker), and tries to impress you with the picket fence.
There’s an old joke:
Q How do you convince a man he’s stupid?
A You can’t, because he’s stupid.
Don’t waste your time with the knife catchers.
I think you nailed it, oxide. It is the assumption. There is nothing that will cause me to go off the deep end faster than someone saying something to me (mostly my mother) that I see as implying that I am stupid/ignorant/venal. I’ve learned to control the outward manifestation (yelling), but the anger is still there.
Mom: Now, dear. “really obvious platitude”
Me, now (fuming on the inside): “Yeah, right” or “Whatever, Mom”
or
Me, old version: What on earth makes you think I am so stupid I don’t know that already?!? When did I ever say anything to justify that assumption?!? What is wrong with you?!?
She doesn’t think you’re stupid. She thinks it’s her job to warn you about the pitfalls that may not be obvious to an intelligent and inexperienced person. She doesn’t know what you don’t know and may not remember that she told you last week. Somehow she thought it was your sister that she told.
My son gets equally irritated at me. Just pat her on the head and say, “Thanks, Mom” while rolling eyes.
I agree, but I think they should try 4% refi’s, for about 2 months. Hey, it would stimulate ME!
Its like getting a pay raise…Thats if you have a job…
Some people will buy, but it may get a lot of people who own their houses outright to refi and take the free money for 30 years. In 10 years when you can make 10-15% on your CD you’ll be sitting pretty with that 30 year loan at 4.5%.
Let’s get back to basics.
Everyone and their dog who could get a home loan did. That market is tapped out and currently contracting.
The bottom of the barrel of home owners has been scraped. The only buyers in the future will be those who traditionally have good credit.
The same with cars and all other big ticket items.
Without increases in incomes, the game is over.
Yes but we with good credit and who are willing to buy are first going to wait until the liars (about incomes) leave the neighborhoods they could not afford in the first place. It will be after the peak option ARM resets, which is 2012.
“Without increases in incomes, the game is over.”
No — without increases in incomes, the price decline game is only just begun.
“…the decline in house prices that is at the base of the ongoing financial crisis and recession.”
If they really think that the decline in house prices is at the base of this crisis then they are shockingly clueless.
Now, now. Declining house prices started the banking crisis because they caused the original problems with valuation of the CDO’s/MBS’s. They can’t propose fixing things by getting into the Way Back Machine with Sherman and Mr. Peabody and preventing the collapse of lending standards and the credit bubble, so what else do you expect them to say? Saying that the real problem is something that no one can do anything about doesn’t get you published, and that is what professors care about.
The decline in house prices is a symptom, not the cause. Just like failing car companies, failing banks and failing insurance companies. The cause of this crisis was easy money, greedy and malinvestment. We as an entire economy bought into a giant Ponzi scheme of selling each other houses, outsourcing jobs and financing our life style through a buy now pay later scheme that is unsustainable. Well, now is later and nobody can pay up. Game over.
Now we’re trying to print our way to prosperity, I seriously doubt that this will end well.
The original cuase of the pop is this: we ran out of people who were able/willing to buy. And this began in Spring 2006, exactly the time when the 3-year I/O ARM grace periods on Spring 2003 flipper homes ran out. We saw this happening before our eyes on the HBB, during that very boring year of 2006 when “nothing was happening.”
Earlier flippers had to sell at either the same price or slightly lower (they weren’t going to “give it away.”) They were lucky to sell to the knife catchers, but by then the comps were set. By mid 2007, you had many more FB’s with rest interest rates competing for fewer and fewer smarter and smarter money waiting for lower and lower price points. Throw in all the new supply that came online. And you can fill in from there…
The news, btw, NEVER says this. They describe the upward spiral very well. The describe the downward spiral very well. But they can’t seem to pinpoint the precise turnaround point, filling in with lame cliches like “but then the American dream turned into a nightmare.” It turned when you could no longer fill in the larger and larger base of this Ponzi pyramid with fresh FB’s. It’s textbook.
Exactly, oxide.
The decline in house prices is a symptom, not the cause of this crisis. The cause was easy money, malinvestment and greed. We invested in houses, luxury cars and consumer goods. None of those generate any returns in the future. They make very poor long term investments. Our economic paradigm is really a giant Ponzi scheme. But now, pay later. Now is later and nobody can pay up. Game over. Housing has nothing to do with it.
Now we’re trying to print our way to prosperity, doubtful that will end well.
What REALLY caused the current crisis?
I like to step back to about 10 years ago (not sure of the exact date or year even), when we began sending all those factory jobs to “factory heaven” (places like Vietnam, Singapore, China, Mexico, etc.)
At that point, we as a nation had to come up with “something else” to employ all those people whose jobs had disappeared. The only way to keep those people employed, (or at least offset their job losses with someone else down the street) was to create an entire asset class whose sole, unfailing, responsibility in the economy was to go UP, and UP, and UP every year, so that the asset class itself would inspire people to do work in the hopes of “getting ahead”.
And “get ahead” they did, those who first latched onto the concept. Easy money helped, and the house prices went up. Were jobs created in the vapor trail of this housing rocket? Were they ever! Realtors, mortgage brokers, investment bankers, insurers, builders, bricklayers, plumbers, electricians, loggers, bankers, you name it.
So it was with great awe that we all stood back and watched this massive structure rocket toward the sky, and we marveled at the way the ground shook and the engines roared and the vapor streaked across the sky.
And then the unthinkable happened. There was a flash of light, and the vapor trails diverged, and suddenly there were so many vapor trails and pieces of debris in the air, that we could not tell for several minutes whether the house was ascending, or whether it was (unthinkably) beginning to descend.
And now, sadly, all those people who had found lucrative employment building the house, and those who had placed it on the launch pad, and those who had put fuel in the rockets and those whose job it was just to stand back and give us a running commentary about how beautiful the house was as it rose against the sky (David Lareah), well those people no longer had jobs.
So, now what do we do with all those people now that the program has been shut down? Nobody wants to set off the house-rocket ever again, until we figure out what went wrong with the last one and why it came crashing down to earth.
‘At that point, we as a nation had to come up with “something else” to employ all those people whose jobs had disappeared.’
This sounds like policy-maker speak. We as a nation had to come up with nothing. As a nation, we should have stayed out of jobs creation policy and let market forces dictate where people whose jobs had disappeared would find renewed relevance.
We as a nation had to come up with nothing. As a nation, we should have stayed out of jobs creation policy and let market forces dictate where people whose jobs had disappeared would find renewed relevance.
——————-
But is that really possible when all of our productive jobs were being outsourced…and for what couldn’t be outsourced, we found cheap labor from foreign countries to come here to do the work “Americans wouldn’t do”?
I agree it could happen over time, as third-world wages rose and ours dropped to reach an equilibrium, but the transition would be/is very, very painful.
Wait I remember mr peabody. what show was that?
Hey Rocky, watch me pull a rabbit out of my hat!
Who said that?
A. Ben Bernake
B. Henry Paulson
C. Bernard Madof
D. GM/Chrysler/Ford
ann,
The Rocky and Bullwinkle Show
Count me among the shockingly clueless.
Why would one need to go beyond this;
“Mr. Hubbard was chairman of the Council of Economic Advisers under President George W. Bush”
for an explanation of why they are clueless?
RE: R. Glenn Hubbard and Christopher J. Mayer represent America’s best and brightest, then there is no hope for our Republic.
Ivory tower babble from snotty, arrogant, “all contained” talking heads far removed from the nastiness of the real estate biz cauldron.
These same people have been 3/4 years behind the curve.
They have zip for credibility.
Those who “do”, “do”…those who can’t “teach”.
My big question: How much grant money do Hubbard and Mayer take from the FIRE sector? Answer that if you want to figure out the reason for their puzzling advocacy position from high academic posts.
Why is the auto industry the holy grail? When you produce something that consumers don’t consume you can’t stay in business. It is not rocket science. This move just puts them on life support, they are to big and fat to get out of their own way. Time to go on a serious diet, and they will like it or not.
DETROIT/WASHINGTON (Reuters) - General Motors Corp and Chrysler are close to securing emergency loans as part of a U.S. government aid package that would demand sweeping restructuring at the troubled automakers, according to sources familiar with the talks.
Bridge loans to carry the companies for several months could be announced as early as Friday, said the sources, who were not authorized to publicly discuss the negotiations.
That would stave off the prospect of an “orderly” bankruptcy, one option being considered by the U.S. government after more than a month of wrangling.
The aid package being spearheaded by the White House would demand that both automakers restructure by seeking new concessions from unions and creditors, two people briefed on the talks said.
Both GM and Chrysler have been forced to idle plants and lay off thousands of workers across North America as they try to shore up cash and have warned they could face bankruptcy without federal assistance.
http://www.reuters.com/article/topNews/idUSTRE4BH6ZJ20081219
My take on it is that a bankruptcy at GM would rupture the banks. Rough estimate of debt at GM and subsidiaries $300B and at a fairly high interest rate due to junk rating. The debt service alone is a hemorrhage. BK would make 100s of billions go to money heaven in a flash, sending a tidal wave through the banking system. Add Chrysler and Ford and all of their suppliers.
It’s about the banks and not about the cars (IMO). It’s always about the banks. Who do our pols work for anyway?
Busch said he doesn’t want to leave this problem to O’b, so he probably will, big time.
Per-zackly. They talk about jobs, but UAW unskilled labor making good buck, great pensions, and products nobody wants do not make good poster children for sympathy.
A good amount of corporate debt and related instruments surround GM et al.
Follow the money. This is another throwaway (let’s not even call it a bailout- nothing gets bailed out; cars still sit on the lots, GM still closes plants, banks still go under; let’s call it what it is, a throwaway) to the banks.
Except, of course, the executive branch of the government does not have piles of cash sitting around, and just cannot appropriate new amounts out of nothing to turn around again and throw it away into the void whence it came. Congress must do that. And congress says no.
That leaves the Fed, which also can magically create money from nothing and return it back to nothing. Wait, we expect the Fed, of the banks, by the banks, and for the banks, to bail out its damn self? Not when their is a buck to be made by getting taxpayers and their children to do so.
I like that term throw away. How ’bout throw up?
How about a two finger choker
You can say a lot of things about the UAW, but I don’t see how you can call them “unskilled workers” by any stretch of the imagination. Let’s see you try to put a car together.
don’t forget to add all the outstanding CDO’s related to GM/GMAC etc. …
“Busch said he doesn’t want to leave this problem to O’b, so he probably will, big time.”
That’s the reason for the loans IMHO…..to punt the BK’s to Obama.
I anticipate the squealing over some of the terms to commence shortly.
agreed
Also, please see credit default swaps.
“Under the terms of the plan, if the companies can’t demonstrate financial viability by March 31 the loans will be called and the money must be returned, the statement said.”
I don’t know about you but to me this sounds idiotic.
1. The auto companies says that they won’t last a few months with out aid.
2. They consistently lose money year in and year out
3. They admitted they cheated consumers on quality
4. There operation costs are through the roof
5. They pay a large group of Union workers that sit idle all year.
Now they are given 17.5 billion to get their act together in 4 months or they take the money back? Will the money even be there in 4 months? Do I see large bonuses to executives before everything implodes. Or they keep whatever they are doing believing they are too big to fail…
Who’s going to buy their new cars?
Don’t forget that the foreign automakers utilize some of the same parts manufactures as the Big 3, not to mention joint factories.
All auto production could be impacted.
Of course, we managed fine during WWII when there was no new car production for 3 years.
“Of course, we managed fine during WWII when there was no new car production for 3 years.”
Funny how people seem to forget that. It’s the end of the world dontcha know, if we don’t have new cars being made every month. Nevermind the fact that there are dozens of other car companies in the world - that sell into the U.S. no less - that are not threatening to go out of business.
How abnout all the out of work metal workers / dealer mechanics wandering around? I might finally be able to get my metal fence fixed up to code without having to buy metal working tools
LOL! Imagine grabbing gubmint/taxpayer dough to later find there are strings attached.
Dec. 19 (Bloomberg) — Regional lenders, insurers and financial companies clamoring to get into the Treasury’s $700 billion rescue fund may not know what they actually signed up for until long after they’ve pocketed the money.
As financial firms race against a Dec. 31 deadline to become eligible for federal funds, they must decide if they can live with rules allowing the U.S. to “unilaterally amend” any part of its Troubled Asset Relief Program securities-purchase agreement. Bank officers and trade groups asked the government to delete the “open-ended obligation,” said Mark Tenhundfeld, regulatory-policy director at the American Bankers Association.
“It’s inconsistent with safe and sound banking practices,” Tenhundfeld said in an interview. “Treasury is saying, in essence, ‘Sign up, but we can’t tell you exactly what you’re signing up for.’”
The government could increase the dividend it’s being paid for preferred shares, require caps on executive compensation or force banks to halt foreclosures, said David Baris, executive director for the American Association of Bank Directors, in a Nov. 3 letter to Treasury Secretary Henry Paulson. At least 148 regional lenders received preliminary approval for more than $61.7 billion in TARP funds, according to data compiled by Bloomberg. Another $13.4 billion may be doled out to 45 other companies.
“This provision grants carte blanche for this or any other Congress to change any of the terms of the agreement,” said Baris. “Congress could do just about anything it wanted.” Some lenders that can qualify for TARP might not participate because of the amendment, he said.
Declined Government Funds
More than 30 banks refused to sell preferred shares and warrants to the government under TARP. Joe Conners, chief financial officer of Philadelphia-based Beneficial Mutual Bancorp Inc., said his bank declined TARP money in part because of the amendment.
“You’re signing a contract with a counterparty, and the counterparty in this case is going through a complete management change,” Conners said in an interview. “You’re basically signing away your right to have any kind of remedy if in fact they do change the rules.”
Publicly held financial firms have until year-end to gain bank or lender holdin
Hilarious. Isn’t this pretty much what banks do to their CC/checking/etc. customers all the time? “We have the unilateral right to amend this agreement whenever we want, and if you don’t like it, tough munchies!”
Yeah, and even funnier:
“It’s inconsistent with safe and sound banking practices,” Tenhundfeld said
Well, Mark, it may be inconsistent with “sound banking practices” but it’s very consistent with banking practices implemented by members of your organization in the last decade or so.
Crazy is as crazy does…?
Wow. The banksters have legally-binding language in CC agreements stating that they can change the terms at any time for no reason whatsoever. But now that the shoe is on the other foot, they are talking like the consumer advocates they loathe.
Just as well. Stand up to your high principles of right v. wrong and decline any bailout money. The taxpayers will thank you.
Yahoo had a story on a new law preventing CC companies from doing this now.
I’ll bet their main beef is the prospect of putting their salary at risk. I doubt they care about the other crap. PIGS are PIGS
How much of this forced hedge fund selling is caused by the senior tranches desire to be made whole on the backs of the juniors? How bad is this right now? Has it eased up, and if so why? I just don’t hear a lot about this. This seems to have “slipped off the stove.”
Roidy
Good question, Roidy.
Too bad I don’t have an answer.
Storms in Chicago, NYC, quadruple witching and maybe an auto announcement, should be a fun and volatile day!!! Ho Ho Ho
You guys were spot on about the auto move for today. Silly me, I am so naive, I actually thought the decider might sit on it.
Why would you think the decider would sit on it. I mean he’s not called the “decider” for nothing.
The only people that are “sitting” on the big fat d*ldo are the taxpayers.
LOL
You’ll never go broke overestimating these criminals.
“Orderly Bankruptcy”
Translation: Pelosi the Pick Pocket, and company, are back in town. You better chain a pit bull to your wallet.
You must not get around. The Dems are our protectors, its the libertarians you have to watch out for. They’ve been running this country into the ground for the last 40 years.
right (where’s exeter?)
Living in your head….. rent-free.
Hahahahaha!
Good one!
And it’s quite spacious in here.
exter,
You sneaking b*****d
@ Polly & Paul in Florida
I tried to reply to your comment but it won’t post:
The decline in house prices is a symptom, not the cause of this crisis. The cause was easy money, malinvestment and greed. We invested in houses, luxury cars and consumer goods. None of those generate any returns in the future. They make very poor long term investments. Our economic paradigm is really a giant Ponzi scheme. But now, pay later. Now is later and nobody can pay up. Game over. Housing has nothing to do with it.
Now we’re trying to print our way to prosperity, doubtful that will end well.
We were discussing the statement “the decline in housing prices is at the base of the crisis.”
There was no crisis before the bubble and subsequent collapse of that bubble, and that bubble was housing. I call that a base. We can digress from housing to easy money, from easy money to greed or laziness, from greed or laziness to human nature, from human nature to the existence of the universe, but to my mind the decline in housing prices is at the base of the crisis - not in the middle or on the periphery. Semantics.
I have to agree with Mike from Miami. Housing is merely the most visible symptom of a crisis caused by loose lending standards and short term thinking. Most younger people who don’t own homes are also struggling under huge debt burdens for school loans, car loans, and credit cards.
I agree about cars and CCs, but where else except housing can you rack up billions of debt $600 and $700K at a time? There aren’t many people who can shop their way to $300K of credit card debt. (Sarah Palin maybe)
I agree in general too, with what Mike is saying. The housing bubble was merely an extension of the 1990s stock bubble. And even though loan rates were higher in the late 80s, there was a push of loose money to high risk borrowers back then. I betcha every household has at least one person who spends money like it’s going out of style.
When are the rest of you going to join me in the war against the irresponsible?
I also agree with Mike.
This is a **credit bubble** that had its roots back in the early 80s. Think about the internet/stock market bubble (the one that peaked in 2000 and the one that peaked in 2007), bonds, commodities, housing, hedge funds, derivatives, etc.)… ALL of this has been affected by the same thing…excessive debt and leverage. Housing is just what J6 focuses on, but the credit bubble is behind everything.
The executive will pull funds from TARP to give to car companies.
How is this even legal? How are they able to arbitrarily redirect specifically allocated funds? hat’s to stop them from taking money allocated to education and give it to car companies?
“How is this even legal”?
It isn’t and multiple legal eagles have made that case. Of course little things like that don’t matter to Washington Central Planning. Just like we no longer operate under the Constitution.
Can you send me to any links to any of the legal eagle arguments like this?? I’d like to read them. If so, thanks in advance.
There are multiple people that have protested on the simple basis that the TARP money was only designated for the financial industry only. There is no provision in TARP for manufacturing, so unless GM & Chrysler are no longer in the manufacturing business they are not eligible.(Which they may not be)
I read a short piece yesterday that several lawyers would file suit if the W.H. violated the provisions set forth. So I guess they will file, won’t make any difference I can’t find but a hand full of folks at the Central Planning Dept. that give a damn about any rule of law.
http://blog.heritage.org/2008/12/12/tarp-now-a-slush-fund-for-detroit/
http://trustreagan.com/2008/12/12/tarp-money-to-detroit-is-illegal/
I haven’t seen a legal expert make a compelling case that using TARP funds would be illegal (though it wouldn’t surprise me if the case can be made), but the head of the Government Accountability Office testified last week that the wording of the legislation was flexible enough to authorize loans to the auto industry.
Plus Barney Frank said they could do it and we know he always speaks the truth.
Yes we all know The Banking Queen Barney Fwank would never speak with forked tongue.
Tried to send a couple of links but they must have been burnt to a crisp in cyberspace.
Their bottom line was there is no provision in TARP to lend/give money to manufactures, it was designated for the financial industry only. So unless GM&Chrysler are no longer manufacturers they are not eligible for any funds from TARP.
I don’t doubt a suit will be filed but it won’t get anywhere, who in D.C. gives a damn about laws, rules regulation when it pertains to them. Don’t like a law just change it.
Support the Detroit bailout….. it’s the right thing to do.
Dutch housing bubble update:
home prices are still near alltime highs, but worries in the market are increasing every day, although no one believes there will be serious price declines here. More and more discussion about the pillars of the Dutch housing pyramid game (HMD, mortgage insurance and other market distortions courtesy of the kleptocrats). Number of homes for sale (and for rent …) keeps increasing.
I’m looking into renting a home (had to sell my home years ago, currently living in a home of a family member). Looking to rent gives a fresh perspective on the market. A very small but nice 1-2 person home in my city, in good condition, recently sold for 350K euro. Fifteen years ago such a home would have cost 40-50K. New owner decided to live somewhere else and does not want to sell the home at a loss - so it’s not selling.
So now he is offering it for rent at 1000 euros a month, about 3% gross return but probably covers most of his cost. There are plenty homes on offer here for 1000-2000 euros a month, but more than 90% have been advertised for more than a year - no takers at these prices which are unaffordable for the average citizen. In the gov. controlled rental market (which is far bigger than the free market that I have to deal with) one can rent a pretty big home for 500-600 euros a month, or even 300 euros if you are ‘disadvantaged’ somehow. Prices in the free market for such homes are far higher; market distortions everywhere.
I’m currently trying to negotiate a lower rent with the owner of the home, and otherwise will wait because I expect rental inventory to surge in the next months. Many Dutchies have two homes (because previous one not sold yet) and will have to rent out the old one if the market keeps deteriorating. No one wants to take a loss, and banks and government make it financially very attractive to keep the second home another 1-2 years. Also, in several of the newer developments near my city, homes are now for rent instead of for sale because there are no buyers; I expect more of this in the next months …
I don’t know much about the Netherlands, but I can’t help thinking of the spectacular crash in Iceland. A small country over-leveraged beyond belief. That is the setup for a fast and unstoppable crash.
In the US, the housing bubble wasn’t a national phenomena* to the degree it is in some of the smaller countries. When all your eggs are in one basket, crashes hit hard and fast.
* In 35 out of 50 states, house prices reflected and continue to reflect local incomes and can be bought and bring in rent that is 110-140% of the mortgage payment.
the Dutch housing bubble sure is more a national phenomenon than in the US. Even in the most remote corners, without any jobs, homeprices multiplied 5 or 10 times and are completely detached from incomes or rents.
Of course it helps that it is a small country. Also, the Dutch have a reputation of bubbles, starting with tulipmania that came a few years after the invention of the stockmarket. Guess we are speculators at heart who love a deal that is too good to be true
I’m not sure this is the setup for a fast and unstoppable crash. We had a -40% homeprice crash in 1980 within 1.5 years, after a price runup of about 100%. The current runup is nearly ten times bigger, but I think it will take at least 5-10 years to correct. The Dutch housingbubble is of such importance that politics will do anything they can to delay the reckoning. They have more options/time left than US policymakers, as our national and private budgets are still in far better shape.
They have more options/time left than US policymakers, as our national and private budgets are still in far better shape.
Better shape for now.
From the US to Iceland to Britain, we have plenty of examples of alleged triple-A assets, sure-thing revenue streams and in-the-black budgets taking a quick nosedive into the sh!tter.
sure, a few more unexpected problems and the real trouble will start here as well. The Dutch government already has to pay 0.6% more on their debt as a result of the bank bailouts, and that is just the beginning.
it’s just very difficult to predict when the downslide really starts here
“According to the Alaska Department of Fish and Game, while both male and female reindeer grow antlers in the summer each year, male reindeer drop their antlers at the beginning of winter, usually late November to mid-December.
Female reindeer retain their antlers till after they give birth in the spring.
Therefore, according to EVERY historical rendition depicting Santa’s reindeer, EVERY single one of them, from Rudolph to Blitzen, had to be a girl.
We should’ve known……
ONLY women would be able to drag a fat-ass man in a red velvet suit all around the world in one night and not get lost.”
Merry Christmas Ladies!
LONDON (Reuters) – Oil fell below $34 on Friday to its lowest level in almost five years as the global economic slowdown overshadowed OPEC’s record supply cuts.
U.S. light crude for January delivery fell $2.64 to $33.58 a barrel by 6:50 a.m. EST. It earlier touched $33.44, the lowest since early February 2004.
—
white man have no need for oil, ridem a reindeer.
Yep, won’t be long now before the oil producing nations will be going BK and begging for a bailout. The IMF is already hearing rumblings to that effect,
And Venezuela will be well to the right of the U.S. by the end of 2009.
LOL
Like all good DCAs, I bought a lot more oil this morning. an awful lot. Reasons, the carrying cost is so low that there is virtually no risk relative to a US Treasury.
Where will oil be priced in 10 years and in which currency? Where will the yield be on US Treasuries in 10 years and in which currency will they be denominated?
Hoz, enquiring minds want to know: How do/did you buy oil? You didn’t really buy, like, a tanker full that you’re going to store on your property, did you?
So are you saying this is a currency as well as commodity play???
I started moving into energy/commodities (Jim Rogers RICI Energy and Agri funds) two weeks ago, but already lost a lot of money. Not a major position yet, as I already guessed it might go down more and want to build a position for the longer term - just in case Heliben gets his mission accomplished.
The pricecrash especially in oil is surprising, far bigger and faster than almost anyone imagined; just like what happened with gold(stocks) shortly ago. Another currency/commodity play, but unlike gold, oil is crashing in euros too now (maybe a good hedge?).
Just remember Jim Rogers is never wrong
He will be right in a year or two I am sure, but I just want him to have a positive spin on something, just once. I saw him a bashing the dollar and pitching commodities, esp oil and gold, 2-3 months ago and that trade would have killed you in the short term. I will never forget when he was big on CNBC a few years ago proclaiming that the 10 year UST would never trade below 4% in his lifetime, yet we are close to 2% today… He’s a smart guy but nowhere near the guru he thinks he is. I am glad he spend so much time in Asia!
Hoz — It’s such a no-brainer bet, I even thought of it myself before reading your post. And my grandfather thought of it, too, back in the mid-1930s. He bought enough Occidental Petroleum stock to help my grandmother live out her 97 years without financial hardship.
“Yep, won’t be long now before the oil producing nations will be going BK and begging for a bailout.”
That is a scarey thing from a national security perspective. Seriously double plus ungood.
I am in shock at the price of oil. I remember reading here in August that gas would be at $2 a gallon. I thought, maybe in two years if this stuff gets really bad. But six months later. Dang. It goes to show you how short and fast our economic cycles seem to be these days.
My primary concern with oil isn’t the price of gas for my car, but the cost of propane. I live in a small mountain town and hardly drive but I am heating my well-insulated house year round. (We only have about 20 days a year where the overnight low is above freezing). So when propane was $2.85, that hurt, a lot. I filled up two days ago for a BUCK FIFTY a gallon. That is the cheapest propane has been around here in maybe five years.
My salary is the same, my job security is good. Bring on the deflation.
a good read
“Why Wages Don’t Fall During a Recession”
Truman Bewley
Google- Wages During the Depression Wolman, Leo.
The percentage change in real weekly wages at the utilities increased +24%.
The most dominant reindeer males can collect as many as 15-20 females to mate with.
Are you sure it’s the dominant male, or is it the dominant females that decide they will stay with the male?
LOL
Merry Christmas to you & yours Hoz! & Thanks for all that edicating information! 
I agree…hoz brings a lot of good info…Others do also..Thanks hoz…
Very nice hoz,
Merry Christmas to you and your family.
Hoz, you sure are a jolly fellow and I enjoy your posts.
Even the layoff posts are exciting!
Rudolphina.
Now I really thought Cougar or FPSS or Clue or somebody would have caught the “White Noise”
Of course they were all female reindeer. Santa feeds them, shelters them and pays for their fancy leather straps (Catch that Oly?) and decorative crap all year long! He has to make them work at least one night a year…and its no surprise the female reindeer make him wait till the end of the year to do it and its on a day when there is football on! What do you think Santa does with that whip?
OK with you if I borrow this for my more-or-less-annual holiday letter? My girlfriends will appreciate it.
Not proprietary. (Please use the ‘white noise’ comment above). May they enjoy it !
Off to Chicago to spend the weekend bailing out the department stores, then to watch the Bears lose to the Packers.
Have a great weekend all!
Have a nice weekend and Merry Christmas, hoz!
Hmm, I thought about this a little and I have serious doubt as to the “must-be” female gender of the say Santa reindeer. Here is my reasoning:
Have you ever heard a peep out of these Santa reindeers? I haven’t. And do any of us dudes ever had a female who keep their mouth shut for that long period of time, especially during the holiday season? I mean I don’t know about you guys, but I always ask Santa for ducktape & super-glue due to the non-stopping female requests and demands, like “Buy this for me” or “Carry this for me” or “Can you pay this for me”. I don’t ever see the reindeers asking the Santa for anything other than just being fed, so that to me is a dead give-away they aren’t female, since I do not know of any female who is happy simply being fed a full meal and never ask for anything else. In fact if I could just find a gal who has a on-off switch on the back of her neck, I will be in bliss.
Thus from careful consideration and obvious deduction of common-sense logic, reindeers can not be female.
ps: I luv you HBB gals. What I said above is a total joke and I do not believe any part of it.
Okay, folks. I need some help. As the times turn more sour in 2009, how do you handle family and friends who want to “borrow” money knowing that you have been saving religiously? I need to come up with something slick and smooth, enough to be effective, but not enough to destroy the relationship.
Just say no. As in, “NO!!!”
Ask them for collateral. Ask what’s in it for you.
I’d throw in a few F words too while I’m at it.
Maintaining “relationships” with moochers is not high on my list of priorities though.
Tell them you invested all your savings with Madoff.
Absolute refusal. You say, “Here, I can give you 50 bucks if that will help.” You must have the cash handy, and reach in and offer it, so they know that’s the deal, pure and simple. But no loans, no way.
Paul, I always do the fifty dollar give away.
I say I can give you $50.00 but the stock market ate my homework.
And don’t accidently pull out the money clip with a wad of 100’s in it. Make sure you always know which pocket the fitty is in.
To protect us BOTH and avoid any possibility for confusion or disappointment in the future, just sign this promissory note which outlines the amount you are borrowing, the dates you will be paying it back, the collateral you are pledging to me to secure the note and the rate of interest you will pay me for the privilege of using my money. These additional provisions are Events of Default which means that if you don’t pay me back according to the note, I can raise the rate to a much higher rate and sue you and include any costs of legal action in the amount you owe me.
Now, how much did you want to borrow?
But ya have to be prepared to actually go after them if they default.
Sadly, I know this from bitter personal experience.
I loaned my cousin $500 a long time ago to pay a court fine so that he wouldn’t get thrown in jail. On the advise of my BIL (an attorney), I drew up a simple promissory note, no interest and it delineated easy payment amounts and intervals. I ended up having papers served on him a couple of months later. Then he paid-up. Moral to the story: Loaning money to family is a good way to lose money AND family.
BTDT. Now I just say no.
I don’t have a problem making small mistakes, as long as I learn lessons that are far more valuable then the actual money lost. I made these mistakes earlier in my life and lost a total of about $10k. If I made this mistake now, I would stand to lose way more than that. So I wont’ be making this same mistake again, and I consider myself lucky to have lost only about $10k.
I also learned that the more religious they profess to be, the less likely they will pay you back. Now mix religion with relatives, and your probability of payment in full approaches 0.00000000000000000000000001%.
You live and learn.
Bingo. I did it when I was a young pup. Late-80s I had been saving up for something (new tires for my beat up car maybe) and a sister who had a history of bad financial decisions was buying a house with husband number three. Closing day is coming and she’s begging for money, and my life savings were a six pack of Coors and $802.37. Over that six pack I agreed to loan her $800.
Three beers later I was flat broke. She never even bought me a six pack, and eventually became a real estate agent and spent the past eight years trying to get me to buy a house. I guess the $800 was a cheap lesson to learn about trusting her….but I’m still cheesed about that six-pack because I was under age at the time.
You say this like it is a Bad Thing? If I could afford to pay my 45 year old brother not to mooch off our mother I’d find it a bargain. I’m not sure exactly how much money that would take to not be instantly depletable. Maybe if I got him a 20 year lottery annuity? No, I guess you can borrow against those.
#4) I wish I could help, but it’s all locked up in a CD with a 30-month penalty for early withdrawal.
#3) Sorry, but we are going to use that money to buy a house. We don’t even have one house and everyone asking for money already has 2 or 3.
#2) I gave you actionable information on the best course of action 4 years ago and you chose to ignore it.
#1) I will help *if* you will move into a sustainable situation. I’ll want to see finances, stock and flow of your monthly money. But I can’t pour money into something unsustainable. (I’d do this, actually, because the increase in savings they’d experience from being in an equivalent rental would make them solvent).
They “know” you have money??
It’s over. Hide.
Let them borrow. I have a brother who buys anything he wants, whenever he wants. But if he’s in trouble, I would give him money that I work hard to save. Maybe it isn’t “fair,” but he is family.
I would sooner go broke helping my family than be rich caring for only myself.
* I don’t have any real mooches in my family. I might feel differently if I did.
Adam, would you adopt my brother-in-law? Please? Pretty please?
This advice may not help you, but it may help others who read this blog.
Simply say no the first time, and every time thereafter. Without establishing a precedence, it makes it more difficult for them to keep asking you when they know the answer is NO.
Does he own a vehicle free and clear? Not likely, but if he does then talk him into signing his vehicle over to the cash advance. This single act of kindness will go a long way to improving him as a responsible human being, especially at this time of the year, when peddling a bicycle in the cold rain and slush is no fun.
Suggest they take a bank loan, now that FED rates are down to 0.5%.
Tell them you don’t hold US$ anymore.
Ask them to start a bank and apply for TARP funds.
Ask them first! end of story!
If you have a partner play good guy bad guy….Works quite well…
Say No. If they ask again, just say the following:
What part of “NO” didn’t you understand, the “N” or the “O”
I guess i was fortunate in that I was asked this question years ago and said no. So they knew ever since that they will not ask me for money again.
I don’t tell my relatives about my income. I only tell them about my losses
Bound for Zero
The Fed’s risky foray into anti-deflation economics
Friday, December 19, 2008
“…For now, the Fed will forget interest rates and begin intervening directly in credit markets using “all available tools.” Expect the central bank to follow through on, and perhaps expand, its previously announced plans to buy up hundreds of billions of dollars’ worth of securities backed by mortgages, car loans and credit-card debt. It may also promise low interest rates on medium-term government debt. With a balance sheet already in excess of $2.2 trillion, the Fed is morphing from a lender of last resort to the last lender, period.
Inflationary, you say? Certainly the foreign currency markets see it that way, which is why the dollar plunged the day after Mr. Bernanke’s announcement. But that’s just the point. Mr. Bernanke is determined to prevent a deflationary spiral and a second Great Depression. Consumer prices fell at an annual rate of 1.0 percent in October and 1.7 percent in November. These unheard-of numbers are easily explained: Debt-strapped firms and households are slashing spending and hoarding cash. Everyone is selling — at deeper and deeper discounts — but no one is buying. So far, this counts as disinflation. But if it isn’t checked, it will mutate into true deflation, that horrible condition in which every debt must be repaid in dollars that have more buying power than the ones you borrowed — and credit totally collapses.
The way to prevent this is for the government to pump out more and more money, until, at some point, dollars become so cheap that people are willing to part with them in return for assets such as cars or houses — or securities backed by car loans and mortgages. Then, at last, prices will begin to rise, and the deflationary spiral will be aborted. Or so Mr. Bernanke himself explained in a now-famous 2002 speech in which he alluded, jokingly, to the possibility of dropping dollars from a helicopter.
…
The success of the Fed’s strategy will depend not only on its own efforts but also on the size and shape of the fiscal stimulus package that President-elect Barack Obama and a Democratic Congress appear set to enact early next year. If and when sustained growth kicks in, the Fed will have to shut down the monetary printing press as swiftly as it turned it on — because if there’s anything worse than deflation, it’s hyperinflation. ”
WaPo
Big Chief Bernanke must make Stutters a lot Hank print’em wampum to keep bond market from getting crushed by big snow melt.
He’s gonna get crushed anyway.
Households have budget contraints and unless his “freshly printed dollars” make their way into wages, all you get is an impoverished population scrambling for food while house prices get EVEN more crushed.
This is going to end worse than I thought.
It will truly be sad how the end game will be played.
It is weird, we were going through a recession up here for the last 8 years (unemployment 8%+), this national recession is pulling us out of the recession. Seasonal rentals are booked solid. Signs up looking for help at local stores. Probably from Chicago scum and Milwaukee mopes no longer able to go to Utah or Colorado.
WalMart is 20 miles away. Mills Fleet & Farm (Blain’s Farm and Fleet Brother’s stores) is 40 miles away - both looking for help.
The average wage was $8/hr last year, steadily rising. $8/hr can buy a decent house at an affordable payment.
“8/hr can buy a decent house at an affordable payment.”
They have decent houses there for less than $50K??
What’s there, hoz?
‘This is going to end worse than I thought.’
Wow. ‘Cause you already thought it was going to end quite badly.
I did not account for policy-makers to make it worse, and they’re giving it all they got.
Just think how bad it could get for Cali…38 million people with the state leveraged to the hilt…Like the guy from Pimco said the other day..”Think about the unthinkable”…I “Think” the “Unthinkable” could happen…Bankruptcy Reorganization…
I don’t think that word “Unthinkable” means what you think it means, Vizzini.
FPSS — do you think the macroeconomists will consider putting budget constraints into their models after the current farce finishes playing out?
How many angels can dance on the point of a very fine needle, without jostling one another?
‘How many angels can dance on the point of a very fine needle, without jostling one another?’
Well, are these dancing angels doing a hornpipe, or a polka, or one of those Russian hopping-up-and-down dances, or are they performing a stately and graceful minuet? I should think that’d make a difference here. Let’s settle that point first, I say.
Also, are there refreshments? Because I like dances with refreshments.
If they’re dancing the Highland fling, we’re all screwed.
“Big Chief Bernanke must make Stutters a lot Hank print’em wampum to keep bond market from getting crushed by big snow melt.”
Not the best metaphor. Wampum was hard to make. First you had to get the shells. Then you had to make the beads. Then you had to drill a tiny little hole in the bead. Or maybe they drilled the tiny little hole and made the bead around the hole? But it sure as heck doesn’t look easy. At least not without carefully machined miniature steel drill bits. Not really like a government printing press
-From an HBBer who took the school bus down Wolomolopoag Street
“If and when sustained growth kicks in, the Fed will have to shut down the monetary printing press as swiftly as it turned it on — because if there’s anything worse than deflation, it’s hyperinflation. ”
That’s what someone on Kudlow last night was saying…that the Fed is gambling on flooding the nation with dollars and then being able to stop in it’s tracks and shut off the presses at the right time when growth returns. I don’t think he was too optimistic about the possibility.
My faith in the Fed timing it right, is about as much as I had in Bernanke’s statement on the Senate floor earlier this year stating categorically that he didn’t forecast a recession.
Won’t work. This housing bubble popped when people still had jobs. Losing a job and regaining a new green Obamajob just puts you back to where you were…which is still underwater.
Just what part of “30 year mortgage, 27 years of which are at ridiculously high payments” do these people not understand? The only thing that will work is if everybody with an adjustable mortage of any stripe somehow refinances to a sustainable fixed payment…whether it’s by moral hazard principle adjustment (which would destroy banks and/or taxpayer), or by BK.
The fed has worked itself up into a quixotic state of pan|c. The levers aren’t working anymore. It is flat out of options. So, it resorts to threats. It declares the free-market its enemy. Now, it will destroy the village to save the village.
It is resorting to persistent pretense, as in persistently pretending that it has unlimited power to pull all the levers behind the curtain to make the puppet economy dance to whichever tune it chooses. Never mind that home prices, oil prices and consumer prices are all dropping like a rock. That’s not deflation — that’s affordability!
+1
“Now, it will destroy the village to save the village.”
It takes destruction of a village to raze an economy.
If and when sustained growth kicks in, the Fed will have to shut down the monetary printing press as swiftly as it turned it on — because if there’s anything worse than deflation, it’s hyperinflation. ”
The problem is the entire world has the money hose running full on, and US interest rate adjustments are unlikely to turn off inflation quickly.
IMHO, one of the more dangerous things nobody is talking about is the massive supply capacity destruction while the Fed is throwing money in every direction (except workers, that is).
At some point, we will run out of supplies (lumber, oil, crops, steel, etc.) due to the closing of plants and contraction in these industries…probably at the very point when debt is destroyed and we are set up for growth again…and all that money sitting out there with nowhere to go. There is no way the Fed will be able to reverse course in time, IMHO.
I see another bubble coming.
Hmmm, when I increase gains in my most used controllers, I leave the limits alone. Something about the underlying physical capabilities of the system not changing no matter how much money you throw at it…
LOL @ clue-y
What didja I tell ya? They’d goose it good for the quad-witch.
You gotta think like these criminals.
moral hazard is a difficult game to play.
Naah, these are criminals. Not one of the “born and bred dopes” of the MSM can figure this out.
What are the chances that Mr. Hope-tastic will not goose the game at the next quad-witch?
LOL
What’s interesting to me is how this MSM newbie (in 2001 she was a rookie writer for Barrons) sniffed out the Madoff foolishness, but of course no attention was paid to her, and I am sure she learned the proper lesson in time for a journalist at her level - don’t upset the order of things.
http://www.npr.org/templates/story/story.php?storyId=98435441
‘moral hazard is a difficult game to play.’
Not for me. I understand the ‘hazard’ thingie, but am having trouble grasping the ‘moral’ part. So that’s only half a game, and it’s over quick.
Kind of a weak response tho…less than 1% up.
Earlier this month, I really thought we would probably be over 900 by now for a while. After all the trips up to about 900 and then sideways or down, I’m no longer convinced its going to happen. I picked up some short etf’s a few days ago. I’m thinking now we may just take a big dump at the end of the month like we have the last few months. Then proly another run up to ~900 maybe higher with BO’s inauguration before the long, slow bleed.
I’d wait before the day is out to see the response.
Understood. It just seems like right now with this market it’s “all or nothing”, either it goes ape-sh*t one way or the other, or it just sits.
Perhaps my interpretation 30 mins into the day is premature, I’m new to the trading game so I’m still learning for sure but I’ll withhold any conclusions until at least lunch.
LOL @ blu-ey
They goosin’ it good now @ 10:15am.
There’s another trade in here somewhere. Possibly at the close.
Watch the birdie, boys, watch the birdie! Alley-oop.
I remember your comment the other day about a trade at the close, that’s what I’m looking for today. Thought there might be a quick trade in the autos today but they’re all over the place.
I’m still trying to train myself to think in S&P, but anyway I sold when the Dow was up between 150-160…just a few mins ago. When I saw it run from 80-90 range up, I figured I’d take my grandido I made in two days and wait to see how this auto thing plays out.
I’ve got a cash account so that means I’m out for 3 days.
bluey,
Maybe get yourself an account where you can get back in the next day. It’s much more fun.
I can already see the headlines: Markets up on auto bailout.
ROTFLMAO
This stuff never gets old.
I ♥ Jesse Livermore; I ♥ you with all my life.
Maybe get yourself an account where you can get back in the next day. It’s much more fun.
I’m working on it. I had this account years ago and only recently started using it again. On the other hand, I kinda like the handicap. It makes me think a good deal more about each action and resist emotion.
Technically I can get back in if I want, but I can’t sell THAT position until the last sell has cleared (3 days) without a 90 day prohibition from trading.
“I can already see the headlines: Markets up on auto bailout.”
Stranger things have happened, yes?? No???
Be nice to the rookie.
The rookie is doing reasonably well.
I’m up ~50% on my IRA accounts (one mine, one the wifes) in 2 months and almost 10% in about 1 month in my cash trading acct.
Today was a curve ball and spooked me, but it wasnt totally unexpected and I did come out in the +. And as long as I get something out of it, I don’t expect to hit home runs or even triples. I’ll take a little of the leftovers for now and be happy with it.
And I just picked up “Security Analysis” 5th ed. by Graham and Dodd at the library today. I’m heading to Alaska on Sunday and this will be my main read for the next couple weeks.
“I ♥ Jesse Livermore; I ♥ you with all my life.”
“The market does not beat them. They beat themselves, because though they have brains they cannot sit tight. Old Turkey was dead right in doing and saying what he did. He had not only the courage of his convictions but also the intelligence and patience to sit tight.”
J.L.
Gonna have to reread that.
That whole section has to be my favorite.
Yep today is the day to unload my F. Still waiting. I have a sell order in to protect a 20% gain if it falls, but hope I can catch more to the upside with a little help form all of our friends. We will see.
Yepsters on that one.
There are gonna be a few really nice trades today.
I sold mine a bit early yesterday for 16%. Good enough I suppose. I still feel like a contrarian indicator at times though.
Still trying to figure out where today’s nice trades are gonna be too.
Yup, go F! Wait, that didn’t sound right.
LOL
I got stopped out, so if we get a late day rally, I’ll miss out. Banked my 20% so I’m not too unhappy. Now to the next knife catching experiment….
Had a weird dream last night - that Madoff didn’t steal the money - instead he moved it all offshore for the customers who already know that we are going under and that Leviathan will confiscate our metals at gunpoint and the rest of our wealth through hyperinflation. The customers must wail for effect, of course. In this dream, ‘ol Bernie has a terminal disease and the customers will take care of his family forever in exchange for his selfless sacrifice. The rest of us are standing on the deck and the last lifeboat left a half hour ago.
I think this is what prompted the dream:
“Uncle Sam May Grab Your Gold If You’re Not Careful”
http://www.financialsense.com/editorials/benson/2008/1218.html
Good deal, Chip. Thanks for posting. Made a lot of sense to me, because sooner or later, the jig will be up and SOMETHING of value will have to be used for money.
You are a g’damn GENIUS! What did you drink before you went to bed? And the “victims” get a tax break to boot!
did Bernie have a terminal disease just like Ken Lay?
I’m wondering in what safe heaven guys like them retire, after they have gotten a new identity … difficult to predict what will be safe after they have whacked the worldwide economy.
What do y’all think? Time for a “jubilee” cancellation of all debts?
http://www.ft.com/cms/s/0/85432b32-cd32-11dd-9905-000077b07658.html?nclick_check=1
Where do I sign up?
Doesn’t that also imply a cancellation of all savings?
It has to, by definition.
In our debt-based system, all savings are somebody else’s liability. Your “cash in the bank” sits on the bank’s liability sheet; your stocks are “assets less liabilities” on somebody’s balance sheet, and those “assets” are somebody’s liability.
There is NO such thing as savings unless you dump it into commodities and hug them daily.
There is NO such thing as savings unless you dump it into commodities and hug them daily.
That’s a pretty big “unless” isn’t it? I get that you are focusing your comment on conventional financial institutions/markets, but I think it will become important somewhere, someday that savings can exist outside of those financial insititutions. Likewise, if the circumstance presents itself, that savings can and will come out of hiding and potentially have a pretty big impact.
Well, there’s other stuff really.
Land, “productive capacity”, etc. Heck, I’ll even include “talented employees” under that broad rubric but the general point stands.
All savings are liabilities from somebody else’s point of view.
“… all savings are somebody else’s liability.”
So very true. That’s why one needs to be picky when choosing who it is on the other side of the equation.
A lot of debt will get destroyed during this bout of deflation, and the savings associated with this debt will also get destroyed. But some debt will remain, which means the savings associated with this debt will remain.
The remaining savings will thus increase in value due to its scaricity.
“Doesn’t that also imply a cancellation of all savings?”
Yes. I think people have to realize that there are limits to how long you can preserve wealth through financial assets.
Dare I say, we’re at the point of needing to re-read Matthew 6:19:
Lay not up for yourselves treasures upon the earth, where moth and rust consume, and where thieves break through and steal: but lay up for yourselves treasures in heaven…
OT, but this reminds me of a class I just finished for corporate tax. Whenever the prof wanted to read something from the IRC, she would say “And a reading from the good book. Section 162 subsection 1…”
“And now a reading…”
grr
Personally, I’ve never found the Internal Revenue Code to be as good a book as the Bible. But that’s just me. I don’t mean to offend anyone who believes otherwise.
I’m convinced the code is a heck of a lot more cryptic…
Toss them both in the recycling bin.
Just don’t do that to the Koran, the NYTimes will get you.
And to follow along re: swimming naked and the helplessness of clinging to materialism: people for years have preferred security to freedom, health insurance to health, religion to consciousness, etc. ANY smugness this side of the grave is premature.
PB,
I responded again last night but it took awhile for HAL 9000 to get it through the filter, maybe I used “poop” too many times in one day?
“In defense of fat mormons, maybe this is just their way of putting away a year’s supply?”
Thanks for that insight. Actually, food storage in the mid-section was evolutionary biology’s away around a lack of refrigeration technology during the early days of the human race. People enjoyed holiday feasts between the harvest time (Halloween) and the New Year’s (Christmas, Hannukah, etc) to increase their local food storage sufficiently to supply them with a very local food source through the cold winter months. This is apparently not such a big issue in these latter days of electrification and refrigeration. Obesity is nowadays more about food addiction than survival.
Thanks also for the Emma Smith story. I never read it before, but have heard it told. This is a nice example, IMHO, of how scripture can come into being, and also gets at one of the reasons I am not a church member. Sorry, but with a modicum of familiarity with science-based reason, I have a hard time accepting health opinions that grew out of the prophet’s wife’s distaste for tobacco juice as scientific fact.
The Bono Put
Posted by David Gaffen
Source: European Pressphoto Agency
While Warren Buffett watches his investments in Goldman Sachs and Constellation Energy struggle, the savvy investors in this market turn out to have been Bono and Madonna.
When concert promoter Live Nation Inc. inked a 12-year deal with the band U2, they promised to pay part of their deal in stock, and guaranteed U2 $25 million in proceeds. But U2 has now decided to sell the shares — when they’re worth only about $6 million, handing Live Nation a $19 million loss.
The company said in a filing that it would pay for this with cash or borrowing money. The company will be selling 1.56 million shares of stock through Goldman Sachs, but that’s not going to make up what’s needed to pay U2. The company only made this deal with one other star, Madonna, who has the right, come April, to enter into a similar transaction, also for $25 million.
“It points out when you’ve got competition and you’re trying to buy your way into the marketplace,” says Jon Najarian, co-founder of Optionmonster.com.”
WSJ - Marketbeat
Dec. 19 (Bloomberg) — The options trading strategy Bernard Madoff said he used to help produce profits for 17 straight years would have required at least 10 times the contracts that trade on U.S. exchanges.
…
“It was never done,” Michael Schwartz, chief options strategist at Oppenheimer & Co. in New York and a trader since 1965, said of the strategy. “If he did it on an exchange, we would have heard about it, and if he did it over the counter, the person he bought it from would have hedged it on an exchange.”
Why do I get the sense people invested with these guys b/c of some kind of implicit benefit from the SEC? Why would anyone pay a fee to a hedge fund to have it hand the money to Madoff?
Fairfield Greenwich — run by financier Walter Noel Jr., his four sons-in-law and a former SEC official — had a total of about $7.5 billion with Mr. Madoff through its flagship Fairfield Sentry fund when Mr. Madoff’s business imploded. For fees it collected from clients, Fairfield handed that money to Mr. Madoff to manage.
WSJ: Fairfield extended Madoff’s reach
Because of articicial scarcity? You had to know someone to get in, because it took time for the elves to make up all the reports p)
Details…
“Thursday, December 18, 2008
Urgent Response Required
Mr. Ogechukwu Kanma (Bank Manager)
Union Bank PLC
Lagos Branch
Lagos, Nigeria
Attn/President/CEO
Dear Sir, I am Ogechukwu Kanma, Bank Manager of Union Bank PLC, Lagos Branch. I got your contact from the World Trade Center (W.T.C.) Regional office in Lagos, Nigeria although the details of my intention was not made known to them. Actually, I listed your name amongst four other names and prayed over them and God revealed you to me and I decided to contact you directly. I have a very urgent and confidential business proposition for you for our overall mutual interest.
For the past 18 years, an American Business Executive, one Mr Bernard Madoff has made a number secret deposits valued at USD$50,000,000.000.00 (Fifty Billion American dollars) into an account at my Branch. I recently sent a routine notification to his forwarding address and called his telephone but got no reply. Then I see the news that he is in jail! On further investigation I found out in the fine print that for this type of account Mr Bernard Madoff must come personally to my branch to withdrawal the funds.
This sum of USD$50,000,000,000.00 is still sitting in the Bank and the interest is being rolled over with the principal sum at the end of each year. And he cannot come forward to claim it, since Mr Bernard Madoff is under house arrest with a designer ankle bracelet. According to Nigerian Law, in such cases, the money will revert to the ownership of the Nigeria Government if nobody applies to claim the funds. Consequently, my proposal is that I will like you as a foreigner, with a foreign-sounding name, to stand in as the next of kin of to Mr. Bernard Madoff so that the fruit of this old man’s labor will not get into the hands of some godless and corrupt government officials.
The plan is simple;
(1) I will like you to provide me immediately with your full names, address, social security number, and credit card details (including the expiration date and little number on that back that they always ask you for when you make purchase over the telephone), your mother’s maiden name, your email, and driver’s license number so that the attorney will prepare the necessary documents and affidavits, which will put you in place as the next of kin.
(2) We shall employ the services of two attorneys for drafting and notarization, and obtain the necessary documents and letter of probate/administration in your favor for the transfer.
(3) A bank account in any part of the world, which you provide, will then facilitate the transfer of this money to you as the beneficiary/next of kin of Mr. Bernard Madoff. The money will be paid into your account for us to share!! in the ratio of 60% for me and 40% for you. There is no risk at all as all the paperwork for this transaction will be done by the attorney and my position as the Branch Manager guarantees the successful execution of this transaction. If you are interested, please reply immediately via this private email address.
(4) And don’t worry about your bank being suspicious about the transfer as I will make sure to split up the wires into units of less than 10,000 ($9,999.99) to avoid detection on the Fed wire. If I make 10 of these per business day (excluding Nigerian Public Holidays & Fela Kuti’s birthday) we will complete the transfers in only 500,000 business days!! Imagine the happiness of your soul to receive your 40% of USD$100,000 for the next 500,000 business days! Upon your response, I shall then provide you with more details and relevant documents that will help you understand. Please observe utmost confidentiality being certain that whatever you do DO NOT CONTACT THE SEC or anyone by the name of Arpad Busson as they might spoil our little deal.
Rest assured that this transaction would be most profitable for both of us because I shall require your assistance to invest my share in your country - hopefully in a nice and safe hedge fund or fund-of-hedge-funds, preferably one with consistently high returns and low-risk.
Awaiting your urgent reply via this email above, and please save me the anxiety of endless waiting.
God bless you.
/signed/
Mr. Ogechukwu Kanma
Union Bank PLC,
Lagos,Nigeria\
From
Cassandra
You know, there’s a chance he’s pulling your leg.
I’m issuing $10 Trillion in duplicate CDS immediately!
don’t make fun of these scammers, they will be one of the biggest oil suppliers to the US within some years …
I received at my house a check for 30c, it was supposedly for a dividend from a company i never heard of and a clearing agent i had never heard of. I think its a new scam where they want me to deposit the check, because after they will know my bank routing number and account number, and they already know my name and address.
DONT DEPOSIT SMALL CHECKS from a company you dont know.
I’m headed off across the frozen tundra to St. George to pick up my eldest from school for Christmas break, don’t anybody misbehave (badly) whilst I’m gone.
(especially you, OG!)
‘(especially you, OG!)’
What?! *indignant gasp * Why do you just assume it’s ME who’s going to be naughty?!
Anyway, today I’m getting ready to drive across the frozen tundra as well, and don’t have TIME to be naughty.
I will leave for Utarr tomorrow or Sunday or maybe even Monday, depending upon the weather reports, and I’m thinking I might even take a ride-along this time if there’s a student heading out. That’s kind of short notice to find one, but see, that way I’ll have someone to eat if I get stranded by a blizzard in the Blue Mountains.
So my problem is, should I pick a large person, as that equals more meat, or should I pick a little person, so I can overpower them easier?
Also, I just barely read an article the other day wherein cannibals in New Guinea indicate that white people taste too salty, and that Japanese people taste best. There’s that to consider as well.
Maybe a plump Japanese person is the way to go. Besides, Asians are polite, and might not object out loud when I start singing Christmas carols uglily, or when I get hungry and want to eat them.
What do you guys think? Anyone got a position here? Any thoughts on condiments?
Depends on what percent fat you prefer in your diet. Also, what type of food you like: Japanese, Mexican, meat-n-potatoes?
Since you are going through Pendleton, where there are a lot of sheep, why don’t you pick up one of them? A lot less hassle than cutting up a human plus you know they taste better. Put a cord of firewood in the trunk so you can BBQ it by the side of the road.
If you make it through to Boise, stop off I-84 at the Tablerock Brewery downtown and have a pint(s) of “Hopzilla”. I’m sure it has enough veggies (hops) in it for your taste.
Oly, you are one weird chick, is all I can say.
Why, because I plan ahead? Or because I want to eat an Asian in an emergency?
Surely everyone wants to eat an Asian; they’re so cute, and have mostly wholesome habits, making them healthful and delicious.
But I would only eat a jerk, you know. I wouldn’t eat a musician or someone valuable.
Ok, folks, note to self: never go road-tripping with OlyGal!
Just bring tater tots. You can throw them at her if she gets hungry and run like heck!
Does your route take you across Donner Pass?
I will work on being very bad!
Reputation, Olygal, reputation
*indignant gasp *? …Geez I was waiting for a 9:30am burp!
Well, here it is. (burp) Only a few hours late.
Dammit! Not the Cracker Barrel too!
*********************
From the Nashville Business Journal -
Standard & Poor’s Ratings Services has downgraded its outlook for Lebanon–based Cracker Barrel Old Country Store Inc. (CBRL) to negative.
“The outlook revision is due to (Cracker Barrel ’s) weakening operating performance,” Standard & Poor’s credit analyst Jackie Oberoi says in a news release.
“While we expect the company to reduce debt from seasonal peak levels over the next quarter … we remain concerned that without additional debt pay-down, (Cracker Barrel ) may have difficulty meeting financial covenants when they step down in the fourth quarter next July.”
****************
“Difficulty meeting financial covenants” sounds ominous. Will the Barrel have to liquidate some dumplins to make ends meet?
Eliot Spitzer, who as New York attorney general was known as the “Sheriff of Wall Street” for his crusade against investment fraud, has acknowledged that his family was swindled by the man accused of running what could be the largest Ponzi scheme in history.
According to a National Public Radio report, Mr. Spitzer revealed at a holiday party this week that his family real estate firm had invested money with Bernard L. Madoff, the financier who authorities have said confessed to a $50 billion fraud.
Which is it, baby, Spitz-er swallows?
Karma baby, karma.
Whatch yer mouth Mr., WATCH IT !!
Just Rememeber, America comes first, and the trickle down should lower Fannie spreads as Benny juices the markets with the bazooka.
que up, BOM CHICKA WOW WOW…
I cant believe one as sinister as FPSS….would not read the filthy line in that comment…..
cnat even get decent financial pron here anymore.
Does it count that I read the filthy line?
Wow!
2008 was a VERY bad year for Mr. Spitzer. Busted on prostitutiion charges in February, and taken down by a Ponzi scheme (Madoff) in December.
And I thought I was having a bad year…
NEW YORK (MarketWatch) — Weyerhaeuser Co. said Friday it’s reducing its quarterly dividend to 25 cents a share from 60 cents a share and cutting costs to counteract a business slowdown.
—
LEtter I got today:
RE: Notice of Assignment between Weyerhaueser Company and XXXX XXXX Inc.
Dear Supplier,
Jan 1, 2009, Weyerheauser Company will assign substabtially all its manufacturing assets and liabilities to Weyerhaeuser NR Company.
blah, blah, blah.
Special note: CASH DISCOUNTS WILL BE TAKEN REGARDLESS OF PAYMENT DATE.
—
they are about to break some indepepndents outfits.
they are about to break some indepepndents outfits ??
Please expand clue…Break suppliers or competitors ??
suppliers.
just and FYI…i will never…my children and granchildren will never buy a car made by:
- GM
- Chrysler
- Ford
have a nice day.
I doubt you can control what your grand-kids do but bully on your passion!
Rumor has it that Toyota is going to stop making convertibles.
In an infinite universe…we sure get hung up on “absolutes”
I glad my dad let me buy that $100.00 1949 Studebaker pickup…in 1973…man did I have some awesome surfing/camping trips in Baja with that single barrel flat 6 cylinder…Didn’t bother me that Studebaker had been bankrupt for what?…22 years!
PS, I like to know who the b@stards where that stole it while I was motorcycling in Alaska! Probably some d@mn puke whose previous car was a DATSUN!
No I don’t think Palin owned a Datsun ever.
what are yalls thoughts on investing in muni bonds over the next 12 to 18 months as a preservation of capital strategy. my wife and i are in a high tax bracket.
we are limting them to AA rated and above, general obligation and insured.
Take a pass. Everyone’s broke.
I would absolutely NOT be investing in muni funds right now.
But that’s just me.
Dec. 19 (Bloomberg) — U.S. House Financial Services Committee Chairman Barney Frank said Congress will release $350 billion from the bank-rescue package after lawmakers, President- elect Barack Obama and Treasury Secretary Henry Paulson agree to provide foreclosure relief and aid to automakers.
Frank, a Massachusetts Democrat, said he plans to introduce legislation with Senate Banking Committee chairman Christopher Dodd to release remaining funds in the $700 billion package next month. The bill will include conditions, including homeowner help and short-term loans for General Motors Corp. and Chrysler LLC, Frank said in a telephone interview today.
Clearly, more coordinated juice for the markets. If this plus the forthcoming stimulus package does not help institutional investors break through the ascending triangle over the next couple of thinly traded days, look out below.
Just listened to Rick Wagner (GM) the guy has no clue what they just signed up for, show me the money. Just wait until Obamarama rolls into town in Jan. Ol Rick will find out just how many strings where attached!
This is why the POS UAW should die a painful death, the bastards are never satisfied with any damn thing! I sincerely hope they go under, just like any loser would!
DETROIT (Reuters) - The United Auto Workers union termed the conditions in the auto bailout deal “unfair” and said it would work with the incoming Obama administration to ensure they are removed.
“While we appreciate that President Bush has taken the emergency action needed to help America’s auto companies weather the current financial crisis, we are disappointed that he has added unfair conditions singling out workers,” UAW President Ron Gettelfinger said in a statement.
“We will work with the Obama administration and the new Congress to ensure that these unfair conditions are removed,” he said.
President George W. Bush offered $17.4 billion in emergency loans on Friday to the carmakers in an attempt to save General Motors Corp and Chrysler LLC from failing but imposed conditions that included requiring automakers to wrangle steep labor-cost concessions from the UAW.
The concession targets include making half of company contributions to a retiree health care trust in stock, making UAW wages competitive with foreign manufacturers by December 2009 and eliminating the union jobs bank, which pays laid-off workers, sometimes for years.
This shouldn’t be surprising……take what you can now and have your friends change things in a month or two.
These are the same people who thought it was a major concession on their part to “consider” getting rid of the jobs bank until their backs got shoved to the wall and didn’t have a choice. The entitlement mentality around here is beyond outrageous.
Good for the UAW! Support union labor….. it’s the right thing to do.
Fun with ass-cons.
(_!_) a regular ass
(__!__) a fat ass
(!) a tight ass
(_._) a flat ass
(_^_) a bubble ass
(_*_) a sore ass
(_!__) a lop-sided ass
{_!_} a swishy ass
(_o_) an ass that’s been around
(_O_) an ass that’s been around even more
(_x_) kiss my ass
(_X_) leave my ass alone
(_zzz_) a tired ass
(_o^o_) a wise ass
(_13_) an unlucky ass
(_$_) Money coming out of his ass
(_?_) Dumb Ass
Taking HBB to a new level I guess. Sorry bored today. Volitility dryed up on DXD. SRS not much better. Yahoo has a video of a grandmother winning 1 million if anyone’s interested
Ben’s gonna taze you, bro’…
Hopefully on one of the lower settings
Just apologize profusely and ask Ben for forgiveness.
Can you do a con that shows you bending on one knee begging forgiveness from Ben?
what I was thinking. But you say it so much more eloquently.
Belgian government collapses over Fortis affair
http://news.yahoo.com/s/nm/20081219/wl_nm/us_belgium_leterme_1
OMG! Not my chocolate!
great article about a couple “just getting by” on over 100K a year. Same kind of people who for 5 years thought I was crazy for not buying a house or stashing my kid in day care.
I always love those stories. I often wonder if those folks have any clue how big a target they just made of themselves?
Rhetorical question, of course.
Our IT guy and his wife, who live in Toledo and work in the Detroit area, have a company pay their bills for them because they can’t handle a budget themselves on their measly combined 150K a year salaries and side jobs.
They’re boaters too.
It is finally time for me to start my X-mas shopping tomorrow.
Financial Times
Shopping freeze hits US Main Street
By Jonathan Birchall in New York
Published: December 19 2008 19:40 | Last updated: December 19 2008 19:40
An ill-timed outbreak of wintry weather is threatening to deliver a further blow to struggling US retailers, as they wind up one of the toughest holiday shopping seasons in memory with a last frantic push for sales.
“I would say that the people who are saying it’s the worst in memory are right,” said Emanuel Weintraub, a veteran retail and apparel consultant, of the promotional frenzy that has erupted amid the slump in consumer spending.
…
Retailers from Neiman Marcus, the luxury fashion store, to JC Penney and Kohl’s, which target middle America, have unveiled incentives ranging from limited availability “doorbuster” sale specials, to coupons and gift cards that can be redeemed in January sales. In a sign of the desperation, Macy’s, the largest US department store chain, is offering customers $10 coupons that can be used on Saturday before 1pm to pay for merchandise already reduced by 50 to 60 per cent.
Howard Davidowitz, a retail consultant and investment banker, described the environment as “the biggest trade-down effect” the retail business has ever seen.
“The fact that 70 per cent off is the new 50 per cent off is simply a response to the consumers being in the worst post-war condition that they have ever been in financially,” he said.
Most retail markup is 400%+. When the big retailers whine about thin profits margins, they are lying through their teeth. Small mom & pop shops have thin margin because they can’t get bulk discounts. Big names can mark down to 70% and still make money.
On that note, I think I will shop at WalMart tomorrow.
Luckily only 70% of our economy is dependent on consumer spending, otherwise the economy would be in real trouble.
ROTFLMAO
H. Davidowitz has been calling events ahead of time and consistently so since 2005.
Any thoughts on why this
penny stock sold off at day’s end?
Penny for your thoughts?
I guess a three cent drop is not really a sell off, but it was an 8.7 percent drop, after all…
“Sign up, but we can’t tell you exactly what you’re signing up for.”
The Feds stole Bernie’s line!
Banks May Find TARP Comes With Long Strings Attached
http://www.bloomberg.com/apps/news?pid=20601087&sid=alGDSl982toM&refer=worldwide
I have a suggestion:
First Uncle Sam should scare the bankers into signing up for TARP funds as soon as possible. Then he should dictate terms whereby the bankers work for dirt cheap and live out their careers compensating the American public for all the money they threw down the crazy lending rat hole. Let’s get the bankers working for us for once, instead of forcing American workers to slave away to pay the banks.
Maybe we could even get the Democratic Obama Congress to reign in the Fed while we are at it. A rules-driven monetary policy might do the trick — the kind that makes central banking as boring and predictable as dentistry.
+1
We drove home from Mammoth yesterday to the Phoenix area via I-10 leaving Mammoth at 2pm and arriving home in Az at Midnight. Traffic was very heavy on eastbound I-10. We literally saw hundreds of pickup trucks heavily loaded with household furniture leaving Ca. There were times we could count as many as 10 such vehicles in view at a time.This looked like a scene from Grapes of Wrath in reverse. We were wandering if this is now a daily occurance or something else? Are people giving up and moving where they can afford to live? It appeared something quite significant is underway.
Drove from my home in Phoenix to Tucson on I-10 a few weeks ago; saw the same.
I don’t want to be mean but I hope they keep going east when they hit Phoenix.
By the time I get to Phoenix she’ll be rising
She’ll find the note I left hangin’ on her door
And she’ll laugh when she reads the part that says I’m leavin’
‘Cause I’ve left that girl so many times before
By the time I make Albuquerque she’ll be workin’
She’ll probably stop at lunch and give me a call
But she’ll just here that phone keep on ringin’
Off the wall, that’s all
By the time I make Oklahoma she’ll be sleepin’
She’ll turn softly and call my name out low
And she’ll cry just to think I’d really leave her
Though time and time I’ve tried to tell her so
Oh, she just didn’t know
I would really go
I would really go
thank you.
my mom is buried in Oklahoma.
sweet dreams…to you.
night all.
Chinese drywall may be behind some health problems in Florida. Can you say lawsuits? And guess when these homes were built? 2004-2005. Right during the height of the bubble.
http://www.news-press.com/article/20081219/NEWS01/81219059/1075
These brave contrarians would now be putting on the reflation trade - buying Financials and commodity stocks and selling defensives, especially in the Pharma & Biotech sector. At a regional level they would be buying back into Emerging Markets and Asia Pac and selling the US. A contrarian asset allocator would be buying equities/commodities/high yield and selling government bonds/gold/yen
Comment by hoz
2008-12-18 20:37:14
Comment by clue
2008-12-17 13:37:41
dude:
whale blubbers at 40.05, you gonna short it or what?
–
(hoz)
You think your little Cherokee *ss can sit on this mound? You couldn’t even make 100 miles in this sludge. lol friigin Hawaiians think a long ride is 2 minutes.
Size takes precedence. Real paper goes to size.
For the last 2 weeks, inflation running at 37% apr. Baltic dry index and CRB. TIPs - reflect inflation, even Jas, the Indian mope, doesn’t talk about deflation anymore, a failed subject.
Where to go, where to go?
Change in positions,
Short Euros
Long Yen
sold out my euros I covered at 125 - This morning. Wash, rinse, repeat.
Fighting the Japanese government agin. Midway redux. Do the Japanese really have the ability to fight off the hordes of allies looking for a safe currency?
—
ok, I am gonna parse this one out, because when Hoz gets the mean pills, he starts to talk his book….its a pretty good book. The weird thing is he’s so deep pocket he can wait in an irrational market longer than most mopes.like me.
1. He is long oil, as he stated today. I dont think he lies, and that makes him trustworthy to me. (I also do not believe FPSS lies)
2. Deflation has won the battle, but is now fighting a losing war.
3. He remains short US treasuries.
4. He is long Yen, but beginning to question it.
5. Lastly, Real paper goes to size. I thought on this for some time, and the only conclusion I can come to is….. buy your own strength. By doing this, you are reafirming (in a DCA kinda way) your belief in what is so. Do not DCA into losing propositions, only continue to buy what is working. (this goes all the way back to Wednesday)
I will close this one with a heatfelt thanks to all the people who post..I may not read all of em, but I read a helluva lot of em.
I am Choctaw, not Cherokee.
Umm…sorry to be a tad dull here. Clue or hozzie, pls tell me what a “DCA” is? Thanks.
dollar cost average (investing smaller amounts over time, so you are buying the dips as well as the peaks…just keep investing).
Goodnight, clue!
I posted this over in the California section also.
Jay Leno, via U.S. News: “I tell you, [the] economy’s rough. . . . People are standing behind President Bush just to get the free shoes.”
Saxo Bank’s Outrageous Claims for 2009:
Pre‐In’s First Out. Several of the Eastern European currencies currently pegged or semi‐pegged to the EUR will be under increasing pressure due to capital outflows in 2009.
1) There will be severe social unrest in Iran as lower oil prices mean that the government will not be able to uphold the supply of basic necessities.
2) Crude will trade at $25 as demand slows due to the worst global economic contraction since the great Depression.
3) S&P will hit 500 in 2009 because of falling earnings, vaporizing housing equity and increased cost of funds in the corporate sector.
4) The EU is likely to crack down on excessive government budget deficits in several member states, and Italy could live up to previous threats and leave the ERM completely.
5) The AUDJPY will drop to 40. The decline in the commodities markets will affect the Australian economy.
6) EURUSD will fall to 0.95 and then go to 1.30 as European bank balances are under tremendous pressure because of exposure to the faltering Eastern European markets and intra‐European economic tensions.
7) Chinese GDP growth drops to zero. The export driven sectors in the Chinese economy will be hurt significantly by the free‐fall economic activity in the Global Trade and especially of the US.
9) Reuters/ Jefferies CRB Index to drop 30% to 150. The Commodity bubble is bursting, with speculative excesses so large they have skewed the demand and supply statistics.
10) 2009 will see the first Asian currencies to be pegged to CNY. Asian economies will increasingly look towards China to find new trade partners and scale down their hitherto US‐centric agenda.
see #10…
peg to CNY- Yuan pegs….
BUY CNY !!!
BUY IT HARD. And short the WON, the one…..
do before 1.20.09
sorry Gabriel, just making notes
Marc Drier, founder of Drier LLP, seems to personify the behavior of those in power here at the dawn of the Greater Depression. The firm, a two hundred fifty lawyer behemoth with six offices from Manhattan clear to Los Angeles, has a clutch of specialties that ought to have them working nonstop in this environment. Instead of being buried in bankruptcy and securities work the firm is now disbanded, unable to meet payroll after the SEC froze Mr. Drier’s assets.
I think AG commodities and fertilizer stocks will fall more as the new president won’t want to subsidize turning corn into ethanol.
anecdotal short.
I had my truck worked on after Mrs Clue had a front end accident.
After the repairs, a couple of computer glitches were uncovered.
1. ABS light.
2. Check Engine.
anyway, I have the most expensive tool to use to uncover the problem…minor sensor change, anyway….I had Mrs. Clue drive to all my competitiors and plug the system and tell me the codes.
They were all the same. A 1500 Snap On tool was just as good as a 10k snap on tool…
short SNA….they cant sell the new tools..nobody needs em.
Dec. 19 (Bloomberg) — Treasury Secretary Henry Paulson urged Congress to release the second half of the $700 billion financial rescue fund after the government exhausted the first $350 billion in less than three months.
Paulsons death fight against Deflation and all the billions that have gone to money heaven thanks to Investment Banks just like the one he was in charge of. Ben Bernake I wonder what he thinks his great Depression senario is here and now he gets his chance to fix it his way.
Frank also plans to revise the Hope for Homeowners foreclosure-relief program Congress passed in July. The program, run by the Federal Housing Administration, is aimed at helping about 400,000 homeowners by insuring as much as $300 billion in refinanced loans after mortgage servicers forgive part of the loan balance. Few lenders have signed up because banks must cut a large portion of the loan and pay high fees.
Reducing Re-Defaults
The program is “very important because that has principal reduction, which is important in reducing re-defaults,” Frank said.
“re-defaults ” reduce the principal enough and the re-defaulters can sell for a profit and then buy again, default and get principal reduction again. isn’t this a great idea………
“The Real Great Depression”
http://chronicle.com/temp/reprint.php?id=477k3d8mh2wmtpc4b6h07p4hy9z83×18