Bits Bucket For December 22, 2008
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Examining the home price boom and its effect on owners, lenders, regulators, realtors and the economy as a whole.
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Why on earth it would surprise anyone,that a bunch of arrogant thieving SOB’s would flip them the bird is beyond me. The only bright spot is they are flipping off a group of equally corrupt a-holes. Dodd, Fwank & company are well deserving of contempt. Of course it’s neither groups money and the ones truly getting screwed have no say so in the matter…
AP
Where’d the bailout money go? Shhhh, it’s a secret
Monday December 22, 6:13 am ET
By Matt Apuzzo, Associated Press Writer
Where’d the bailout money go? $350 billion later, banks won’t say how they’re spending it
WASHINGTON (AP) — It’s something any bank would demand to know before handing out a loan: Where’s the money going? But after receiving billions in aid from U.S. taxpayers, the nation’s largest banks say they can’t track exactly how they’re spending the money or they simply refuse to discuss it.
“We’ve lent some of it. We’ve not lent some of it. We’ve not given any accounting of, ‘Here’s how we’re doing it,’” said Thomas Kelly, a spokesman for JPMorgan Chase, which received $25 billion in emergency bailout money. “We have not disclosed that to the public. We’re declining to.”
The Associated Press contacted 21 banks that received at least $1 billion in government money and asked four questions: How much has been spent? What was it spent on? How much is being held in savings, and what’s the plan for the rest?
None of the banks provided specific answers.
“We’re not providing dollar-in, dollar-out tracking,” said Barry Koling, a spokesman for Atlanta, Ga.-based SunTrust Banks Inc., which got $3.5 billion in taxpayer dollars.
Some banks said they simply didn’t know where the money was going.
“Where’s the money going? But after receiving billions in aid from U.S. taxpayers, the nation’s largest banks say they can’t track exactly how they’re spending the money or they simply refuse to discuss it.”
Aren’t laws on the books which require disclosure of how tax dollars are appropriated? Sorry, I forgot — the $700 bn TARP was a bailout, not taxation.
Combine that insult with the fact that Wall Street firms needed a bailout, but are still paying bonuses to the pigmen who helped get us to this point. If nobody in Washington has the brains or the balls to make this right, then its about time for another Boston Tea Party. Consumers vote with their dollars. Since these are our tax-dollars being spent without any accountability or our consent, lets vote with our dallars and just not pay taxes this year. Lets say that 5-8 million citizens got mad enough to refuse to pay taxes and let our government representatives know about it- what could possibly happen? WE’DE BE TOO BIG TO FAIL! We would get a bailout!! Woo-Hoo!
After you.
“We must all hang together, or assuredly we shall hang separately.”
- Benjamin Franklin
Way to be brave there, Cupcake. Let me get on e-Bay and see if I can buy you a set of gonads for Christmas. Remember the mass e-mail and fax campaigns during the bailout hearings? Well, that slowed them down and made the bastards think a little bit. Maybe a couple-million more e-mails outlining their inability and unworthyness to administer future tax dollars would goad them into demanding real transparency. Do you really think they’ll do it of their own accord? Remember, you will ALWAYS get the most pathetic type of representation that YOU are willing to stand for.
The IRS will gladly explain to you the difference between gonads and stupidity.
Sounds like to me combo and Blano are displaying common sense.
I’m all for it, Beer and Cigar Guy. The problem lies in the organization of any sort of demonstration. Like you, I am absolutely OUTRAGED at this bailout nonsense. I read a story yesterday about how the bailed out bank CEO’s party on as usual, with private jets and all the bells and whistles. The individual letters to local reps, etc., don’t seem to be working at all. What it takes is several million people showing up at our nations capital, with signs and pitchforks.
Absolutely true.
Karl Denninger has been trying to get people to become more active, but has had poor results, from what I hear.
How much more do we need to take before the sheeple wake up and demand accountability from those who are supposed to represent us?
Trouble with failure to pay the IRS is manifold. Most folks have already paid through withholding and the IRS will come after you if you simply do not pay them.
Think, instead, of a thousand small cuts. First cut is if millions of people minimize their withholding to a level that they are comfortable paying any difference over a 6 - 8 month period. That takes the money out of the system for a while. Second cut, give away as much as you can before years end to add to that Charitable donations line item. Other cuts, stop buying anything but what you need to live on. Take the money out of the system. Of course then we have to have the inflation/deflation discussion again to make sure we are clear on where to put that extra money.
When your taxes are completed and if you owe more, pay part of it and wait. You’ll get something in a few months from the IRS requesting the rest and the penalty charges. Now send them part of what’s left with some sob story about little Timmy or something. Then wait ….
The point is to drag it out a while and keep the money out of their hands for as long as you can without getting into trouble. As a natural reaction to this economic contraction the folks are already holding their cash more closely to the vest. The US net savings rate is up from negative into the positive a few points.
I learned a long time ago that the Federal Gov doesn’t give a rats arse about our lives, but if you mess with the money, watch out! Murder is a local crime, but bank robbery is a Federal crime.
You have the right spirit, but it’s too early and you’ll only hurt yourself.
An (still legal at this point) alternative for people who are similarly angered is to stay out of the stores. Minimize purchases, especially big tickets, and avoid anything that involves financing.
Motivate yourself to help slow the velocity of money! “They” are already feeling the pain.
““They” are already feeling the pain.”
OHHHhhhhhhh! … I like it!
We’ve been doing our best in that regard, for five years now. After a while, you get quite comfortable with the non-consumerist lifestyle, when all the side benefits start to kick in. I don’t think we could ever go back.
If I remember correctly this Bailout was 481 pages. What was spelled out in those pages?????
At 485 pages it could have been one of those animated comic “flip” books.
If you flip the edge of the pages really fast you’ll see Hank flipping you the bird.
Nice one!
Maybe they will give details - HAR! *snort*
Commercial real estate developers seek bailout
Snips
…A dozen real estate development groups have asked Uncle Sam for help to avoid defaults, foreclosures and bankruptcies…
—
…In a letter to Paulson, the commercial real estate leaders warn that thousands of properties are in danger of foreclosure because current financing is coming due and credit for new financing is hard to come by…
—
Treasury officials have indicated a willingness to consider adding commercial real estate to the $200 billion loan initiative, but it could take time. The program is not even expected to be up and running, let alone modifiable, until February.
Full article:
http://www.bizjournals.com/pittsburgh/stories/2008/12/22/daily2.html
Er…February???
Potty mouth @%^&*@ grrr.
Leigh
Bailouts are the new black.
“Unlike residential mortgages, commercial mortgages are usually designed to last five to 10 years with balloon payments at the end of the term. A loan must be refinanced or repaid at the end of the term. If refinancing is unavailable, an owner would be faced with attempting a distress sale or losing the property.”
This seems to be nothing more than yet another attempt to prop up artificially high prices, this time for commercial RE. If there weren’t a glut of CRE and if a buyer hadn’t overpaid, would it really be that difficult to obtain new financing?
It’s more of a scam than most people realize. Real estate developers extract millions and millions of dollars by re-financing projects at very inflated values. Those that placed obscene levels of debt against new projects, paid themselves handsomely up front….in the form of developers’ fees, asset management fees, property management fees, accounting fees, construction supervisory fees, etc. The developers set up several ancillary corporations, for the sole purpose of extracting ongoing cash flow from the projects, thus leaving the underlying property unable to service its debt. Some of the toxic waste in the current debt market can be traced to real estate developers nationwide; many were enabled by local government agencies that also added millions in fees for bond underwriting services. In recent years, it has been very easy to become very wealthy in commercial real estate without having or risking one’s own money.
Right on the money FB….
In recent years, it has been very easy to become very wealthy in commercial real estate without having or risking one’s own money.
=================
It’s also been very easy to become very wealthy without risking your own capital, if you worked in the finance industry…
Where are all the apologists for capitalism and the wealthy? Please tell us again how “productive” these parasites are!
Some developer in Idaho was just indicted for doing this very thing, though he just wasn’t as sophisticated as the bigger ones. Now we’ve got a commercial bailout coming? This is absolutely reprehensible behavior on the part of this corrupt, miserable excuse for a government.
I suspect that the banks are also not revealing exactly how much trouble they see ahead for themselves with the foreclosures. Just my own paranoid guess, but I think by the second quarter earnings we may have another big crisis like we had in October.
By then a lot of businesses will have failed, so commercial real estate is going to be a big problem, too.
“so commercial real estate is going to be a big problem, too”.
Biiiiiig problem! The largest shopping mall owner in America(I forget their name) has put a number of them up for sale. Just wait until the first quarter next year, the number of retail failures is going way up IMO.
From the Sunday U-T:
http://www3.signonsandiego.com/stories/2008/dec/21/1n21retail224233-optimism-hard-sell-retail/?uniontrib
” Even the 880,000-square-foot mall’s parent company, Chicago-based General Growth Properties, is flirting with bankruptcy. The nation’s second-largest shopping mall owner, whose properties also include Chula Vista’s Otay Ranch Town Center mall, last week negotiated a brief reprieve on $900 million in debt it had racked up during an aggressive expansion in the real estate boom years.”
“General Growth’s payment deadline is now Feb. 12. If it can’t come up with the payment or new loan terms, it may be forced to file for bankruptcy protection.”
It also seems that properties that aren’t (yet) experiencing an exodus of tenants are still squeezing costs by doing things such as cutting maintenance. I agree that commercial is going to be ugly next year.
The majority of U.S. banks (including ALL the large ones) are technically insolvent. Just like Japanese banks at the beginning of the “lost decade.”
In a month it will be “lost decades”. 20 years is a long time.
Buy and hold. It’ll all provide 7% gains eventually right?
(ignore the negative gains for over 25 years now in Japan)
So what affect does this global recession have on Japan. If you hit by a big housing bust several years before the rest of the world does, do you get hit by a global recession any harder?
This will likely be a double post.
Commercial real estate developers seek bailout
Snips
A dozen real estate development groups have asked Uncle Sam for help to avoid defaults, foreclosures and bankruptcies.
Treasury officials have indicated a willingness to consider adding commercial real estate to the $200 billion loan initiative, but it could take time. The program is not even expected to be up and running, let alone modifiable, until February.
Full article at http://www.bizjournals.com/pittsburgh/stories/2008/12/22/daily2.html
Leigh
“Commercial real estate developers seek bailout”
That coupled with the $300 billion the the home builders want,there goes the TARP balance.
In the words of Jessie R.P.Jackson(race pimp)… Taint enough!
This is quite preposterous. If someone asked me what I had done with, say, the last $100K worth of paycheck, I would likely be able to give them a rough breakdown off the top of my head. Or I could hand them my checkbooks and W-4’s for the past 15 years and they could puzzle it out themselves.
Is there ANY chance at all that this will miff the new Congress enough to withold the second $350 billion? Or will we lose that too?
You only have to look at the Madoff scandal to know how it will play out 50billion scam,and an embarassment to the world,and he is not in jail???!! Now all his greedy clients want cipic money? those dirt bags also knew he was running an inside con…BUT they were getting their cut. I say wait in line behind the Lehman holders which should be nada…it was a hedge fund..nothing for you !
Right, and sending people like him and wall street crooks to jail is what would restore confidence. But at last, rich get richer till the poor get educated.
Charles Barkeley: “Rich people don’t go to jail.”
It’s quite obvious the real problem is corruption. It’s finally taken it’s toll on the country, and I don’t think we can survive long term until something is done. Business is in 100% control of our government, and until that changes, the rot will continue. What’s alarming to me, is that a lot of this stuff is mainstream, but the perps continue on unabated, laughing all the way to the bank. NOTHING has changed in their world.
There was a memorable post here on the HBB some time ago, about how the ultimate fall of a country is when people don’t respect the laws. One by one laws here and there are looked over, and from there it unwinds.
Bantering…. To give the system a royal flush will require hanging the cronyism/corporatism apologists from light poles and standing up to the lie that reasonable regulations equal socialism. Anytime you see or hear lies from the liars, stand up to it. They most frequently hide behind silly, ideological platitudes, propose low cost/no cost “solutions” to very big problems, overuse the socialism/government hobgoblin and other such stupidity. Much of the time, they’ll throw out buzzwords and phrases like “freedom” (yet never mention opportunity), morals and belabor the “decline of society” and think the solution is more law and order.
You know, come to think of it, I do live in an alternate universe.
Folks I know work hard and smart.
They are honest.
Loyal.
Friendly.
I do not know (other than what I read) of anyone close to me that is in debt.
They don’t live beyond their means, and -
Wait for it -
They have enough money, but not rediculously.
Merry Christmas, for some of us are truly blessed.
Best always,
Leigh
OOPS…Liar liar pants on fire!
I do know one. A victem of sorts.
My cousin and her ex taught us what a HELOC could be used for - taking equity out of your home in 1997/8.
Loving hubby and I looked at each other (almost telepathically) as if to say: What the HE double hockey sticks!
Losty, I think that’s your lovely curse word?
Leigh
Exeter, you don’t quite get that the regulators are the ones who have sold out, corporate apologism or none. Do you think if all the corporate apologists would proclaim to corps to be selfish entities then suddenly everything would be great?
“Regulation” sounds great, until you admit that the regulators that would be in place if you were “king” would, themselves, also sell out. Remove the power of the regulators, and now the corporates no longer have a foothold into controlling everything.
It’s a broken system.
Corporations are a collection of people, nothing more. People like to get something for nothing big surprise. Instead of trying to change that fact, its better to turn off the spigot.
“Is there ANY chance at all that this will miff the new Congress enough to withold the second $350 billion?”
Yes. The Congress is already miffed. The new Congress will be even more so. No idea if what they will end up doing will acutally work, but they will certainly try.
I’m annoyed that Congress is miffed, simply because they’re the ones who approved the bailout. I saw some bonehead Congressman complaining the other day, about the lack of transparency in the bailout- which HE VOTED FOR!! They’re incompetent!
“The Congress is already miffed. The new Congress will be even more so. No idea if what they will end up doing will acutally work, but they will certainly try.”
What they will try counsel, (you are a JD are you not Polly) is to get in on the scam and enrich themselves. The only fear of the new government is that the pickins’ may be might slim going forward.
I have the feeling that more than a few dollars are making their way back to Washington DC in the form of campaign contributions and lobbyist.
Absolutely!
As a matter of fact, some were trying to ban the use of bailout money for lobbying purposes.
That was a loser all around! Everyone came out fighting against it.
Go figure…it’s the lobbyists who control the bailout money, because they are the ones who control Congress. Always have, always will.
This is quite preposterous. If someone asked me what I had done with, say, the last $100K worth of paycheck, I would likely be able to give them a rough breakdown off the top of my head.
At the end of Seinfeld they visited a town with a Good Samaritan Law. My dream law would be a Common Sense Law. I do not know how it would be administered, maybe by juries of elementary school teachers?
We have disregard for regulations perpetuated by the free market ideology, a “follow the money” mindset, and the foxes running the henhouse, and everyone is surprised at the proliferation of widespread corruption and epic ponzi schemes?!
Bailed-out banks paid executives $1.6 billion
‘07 extras include cars, stock options, bonuses
By Frank Bass and Rita Beamish
12:02 a.m. December 22, 2008
HIGHLIGHTS: CORPORATE JETS
Six financial firms that received billions in bailout dollars still own and operate corporate jets:
AIG: Has one of the largest fleets among bailout recipients, with seven planes, according to Federal Aviation Administration records.
Citigroup: Has a wholly owned subsidiary, Citiflight Inc., that handles air travel for executives. In 2007, then-CEO Charles Prince used company aircraft for personal trips, costing the company $170,972 that year. Current CEO Vikram Pandit began reimbursing the company for all personal travel on company planes since being appointed in November 2007.
Morgan Stanley: Has reduced its fleet from three planes to two since 2005, a spokesman said. FAA records show two Gulfstream Vs registered to the company. In 2007, CEO John Mack’s personal use of the aircraft totaled $355,882, according to a February proxy filing.
JPMorgan Chase: Registered as the owner of four Gulfstream jets, including a 2007 ultra-long-range flagship G550 model, FAA records show. A G550 ordered for delivery that year would have cost $47.5 million. In 2007, CEO Jamie Dimon’s personal use of company jets totaled $211,182, according to a May filing with the Securities and Exchange Commission.
Bank of America: Registered as the owner of nine planes, FAA records show. CEO Kenneth Lewis racked up $127,643 in personal travel last year, according to a March filing with the SEC.
Wells Fargo: Owns one jet “strictly for business purposes under appropriate circumstances,” a spokeswoman said.
SOURCE: Associated Press
Banks that are getting taxpayer bailouts awarded their top executives nearly $1.6 billion in salaries, bonuses and other benefits in the calendar year 2007, an Associated Press analysis reveals.
The rewards came even at banks where poor results last year foretold the economic crisis that sent them to Washington for a government rescue. Some trimmed their executive compensation because of lagging performance but still forked over multimillion-dollar executive pay packages.
Benefits included cash bonuses, stock options, personal use of company jets and chauffeurs, home security, country club memberships and professional money management, the AP review of federal securities documents found.
The total amount given to nearly 600 executives would cover bailout costs for 53 of the 116 banks that have accepted tax dollars.
Rep. Barney Frank, D-Mass., chairman of the House Financial Services Committee, said the bonuses simply “get them to do the jobs for which they are well-paid in the first place.”
“Most of us sign on to do jobs and we do them best we can,” he said. “We’re told that some of the most highly paid people in executive positions are different. They need extra money to be motivated!”
Obvious question: How much dough are these $%@!%#’s funneling into Barney the Banking Queen’s campaign coffers?
Dang — that sounded kind of derogatory. I have already slipped on my New Year’s resolution to refrain from defamatory language.
No worries, you’ve got 10 more days.
It seems we share similar resolutions. Mine is to be more kind and considerate of fellow bloggers, and society in general. I’ve become much too cynical in light of the current circumstances.
Follow-up question: How much did the financial industry already funnel into the current administration, they who laid the groundwork for this debacle and appointed Blind Man Paulson as Dispenser of Dough?
The USA, all of us have been duped and fleeced beyond belief
for the past 30+ yrs, with only this recent example of our financial and worldwide demise. Bringing down all the other countries that ‘bought into it’ and voila, we, here in the USA are no longer solvent. Those of you with some money are holding ‘tickets’ out of some situation or another, but those ‘tickets/paper money’ are just so much printed tp.
We have been fleeced and no one has the answer. No one in office is courageous enough to say,’we don’t know the answers’ and how do we get away from ( as if they wanted to get away from the opiate of lobbyists) the monkey.
Sunday afternoon, the hwy 111 should have been packed the weekend before christmas, but it was dead. Took only 25 minutes to drive from Palm Springs to Indian Wells. Normally a 45-50 min drive during high season/holiday season.
And the store paRking lots were virtually empty, save The Mall, but even that looked to have easy in/out flowing traffic.
As someone said earlier, it is getting easier to get away from the consumerism. Spaghetti for christmas dinner!
1.6 billion for the top executives only, obviously. I remember reading in a UK newspaper that the total amount paid out to bank managers this year is estimated at more than 70 billion for Wall Street and 30 billion for London City.
These failed managers are getting a really large chunk of the bailout money.
The old expression was, “If you’re going to panic, panic first”. Now it is, “If you’re going to fail, fail first (and epically)”.
The Gilded Age - how long will taxpayers scrambling to make ends as their jobs are shipped overseas continue to support these Titans of industry?
As long as we can be thrown in jail for not paying our taxes. Unlike these modern-day robber barons, most of whom will never, ever even see the inside of a courtroom, let alone a prison cell.
Need some vigilante justice against these high paid crooks.
The PTB better start preparing for the consequences of b@ilout-envy. After a while, everyone starts believing they are entitled to a little bit of the juice and they start behaving awkwardly, even against their own self-interest. It’s a natural reflex when governments start managing the economy.
Hint to industries that want bailouts: Think campaign contributions.
I don’t ever want to hear anyone ever bag on socialism again. I may go off on the next dipshit I meet that makes a dumbass remark about it.
What we have is 100 times WORSE than socialism. We have the rich robbing the poor and middle class. Socialism would be AN IMPROVEMENT.
This is outrageous.
We have a unique system known as “capitalism on the way up and socialism on the way down.” Maybe we should go full-on socialist and be done with it.
Our Nation of Whiners lives on Wall Street.
>I don’t ever want to hear anyone ever bag on socialism again. I may go off on the next dipshit I meet that makes a dumbass remark about it.
>What we have is 100 times WORSE than socialism. We have the rich robbing the poor and middle class. Socialism would be AN IMPROVEMENT.
Yep, have to cringe in disbelief whenever someone tries tie this to socialism! This is crony capitalism run amok.
You’re confusing real world with theoretical world.
In a theoretical world:
- The U.S. is a capitalist free market system.
- Socialists take from the rich and give to the poor.
In the real world (the one we actually live in):
- The U.S. is far more socialist than it is capitalist, especially recently.
- Socialists take from the middle class and give to the rich, with some pittance left over for the poor.
You see in a true free market capitalist system - there certainly are rich people, but these rich people “take” directly from private citizens, where the private citizens willingly give their money in exchange for goods and service. This system is not free of fraud and corruption, and thus sometimes the private citizens get ripped off by the greedy rich folk. That seems to be what you’re protesting against.
That is not however what we have in America today. What we have in America today is the greedy rich folk using the government to forcefully take money from private citizens. It is not money given willingly by people being “duped” out of it. Instead is being literally wrenched out of their hands - by taxes, by inflation, and by investment losses.
“- Socialists take from the middle class and give to the rich, with some pittance left over for the poor”
well, you’re kind of making up your own language then, aren’t you? that isn’t socialism by definition, which I believe was bananrepublic’s point.
socialism does involve state control of industry to some degree (differs from, say Cuba to Finland to China to Canada), but the similarity ends there. someone downthread suggested statism, which might be a good term. I’m not sure. But what you’re talking about could as easily be fascism, and in situations like this, language matters, or it’s just a lot of people yelling over eachother.
Mainly: the banks and industries which are being bailed out are not being socialized. In the UK, Northern Rock was socialized, I believe. If it ever is profitable in the future, its profits will belong to the crown. If Morgan Stanley is ever profitable, as I understand it, US taxpayers won’t see a dime.
“If Morgan Stanley is ever profitable, as I understand it, US taxpayers won’t see a dime.”
NB. I don’t think I got this quite right - taxpayers have equity, and when I have time, I need to eduacate myself about this further, sorry.
packman wrote:
You see in a true free market capitalist system - there certainly are rich people, but these rich people “take” directly from private citizens, where the private citizens willingly give their money in exchange for goods and service.
==================
The problem I have with this sort of capitalism is that it’s very vulnerable to monopolies and tends to funnel money from the masses to the few who have the right connections and control money flow and the means of production.
I’d have no problem if we had total capitalism WRT “wants”, but where “needs” are concerned, the people should have control over the nation’s resources, IMHO. People cannot “willingly” give or withhold money where needs (clean air, water, infrastructure, healthcare, etc.) are concerned.
“What we have is 100 times WORSE than socialism. We have the rich robbing the poor and middle class. Socialism would be AN IMPROVEMENT.”
Yes, with socialism, we can ALL be poor (except for the party elite) like in the Soviet Union, Cuba, etc. It’s ironic that the anti-corporation people would choose to abolish competing corporations in order to form ONE BIG corporation- the government!
(Spoken as a devil’s advocate)
What we need is vigorous enforcement of laws already on the books, such as laws that would prosecute mortgage fraud, ponzi schemes, monopolies or near monopolies, such as NAR, Microsoft, NEA, etc.
“Yes, with socialism, we can ALL be poor (except for the party elite) like in the Soviet Union, Cuba, etc.”
I like how you pick the worst examples of socialism and ignore the better ones, especially those that are hybrid capitalism/socialism. In any case, I stand by what I said. Socialism would be an IMPROVEMENT to the shit we have now.
I want to throw up every time I see some big swinging dick driving a Benz down the street. You just know he stole it from someone.
Us!
You’re confusing communism with socialism (very common for Americans to do this, BTW).
Check out the most successful countries — whether measuring healthcare, education, general wealth, GDP per capita, general wellbeing and quality of life, crime, logevity, etc. — and you will see that socialist countries top the list, by far, in almost all categories.
As an excercise, try fiding **ONE** country that has NO government healthcare, education, infrastructure, etc. — basically a libertarian’s utopia — that tops socialist countries on a consistent basis.
Here’s a link to help you out:
http://www.nationmaster.com/graph/eco_hum_dev_ind-economy-human-development-index
Don’t believe the “capitalist” propaganda. Check the facts and think for yourselves!
So true, bananarepublic!
What I’ve never understood is how the BIG money people have managed to convince the sheeple that “capitalism” is in their best interests, too.
Like the Wizard of Oz, they’ve convinced people that they (the very wealthy and powerful) know better than the rest of us. This blog is proof that it is not true. How many of us — not plugged into the “system” — knew what they claim to have never understood? Of course, I think they are all liars, but still…if WE ran things, we would not be where we are today.
I feel strange.
All of a sudden money means something.
I placed an order, cancelled the order, the company refuses to accept the cancellation and it goes to dispute with the credit card.
My former landlord wants more money, I left early, on the 10th, but left him the security deposit. He made threats, I sent him a Christmas postcard with the keys and a penny.
None of this would have happened even a year ago.
Also, when I went shopping, unless the prices reflect our current economic crisis, I was not happy about what I bought, even when the items where things I needed and where not frivolous.
Re: niece below.
Went into Panera’s (not a normal thing for me) and ordered four sandwiches.
Gave the girl and fifty and exact change.
She gave me my receipt.
I said, can I have my change (ha ha).
No, she was not distracted, and her manager had to open the till - I was nice about the whole ordeal.
Be careful out there,
Leigh
Um, I think I read somewhere that stuff like this was pretty characteristic of the populace during the Russian economic collapse.
Neighbor is doing a big patio project (BBQ, sink, refer, etc). He gets a written bid direct from a manufacturer for $4500, which is the lowest by far. He calls and says ok. Munu’s rep says he can cut the price even more if he will pay cash, instead of credit. Neighbor says yes, cash. Rep says it will be $3700 for cash ($800 discount!). Neighbor calls to finalize the pick-up time, and the rep mentions he has the equipement at his house, as he didn’t want it sitting out on the loading dock in the rain. Neighbor realizes employee is selling “lost inventory” out of his home, and calls the manufacturer’s VP. Employee is fired, and manufacturer says they won’t honor the original written bid. Neighbor reminds manufacturer that the bid was given by their representitive, on their letterhead. After 3 days of e-mails, manfacturer relents and honors the bid.
I’m not sure that the builder is legally obligated, but as a “finders fee” for diming out the crook, probably worth it. How much MORE would he have stolen if the neighbor hadn’t dimed him out?
and so now the neighbor will get secretly sabotaged equipment in his quest to browbeat people on price.
when it fails after a few months he’ll continue to kvetch & moan . . . good luck getting the co. to honor any warranty … AND he will have to pay all labor/shipping costs.
loopholes! gotta love ‘em.
(not endorsing illegal/unethical actions at all this story, but people DO have a way of getting-even if they feel cheated. is it worth the horrible hassle of added cost & time later just to satisfy yer ego that you “got the best of the other guy” in a deal? that twisted logic always amuses me)
You ordered four sandwiches from Panera and it cost less than $50? :-p
*chortle*
Bimbo withheld $26 smackaroooooos.
Leigh
I don’t blame her. She thought you gave her a $24 bill.
ROFLMAO!
That’s nothing, someone got hold of my SS # and got a credit card. We lost a box in a move so I put a 90 day hold at Experian. Despite this some bank in SD gave these criminals a credit card, ie they did not get any info from the credit reporting agencies and just mailed a credit card with my name to some PO box. $250 limit on the car but somehow criminals were able to charge much more. Now I get to waste a large amount of time getting a 7yr credit block,and I get to pay for a service to monitor my credit.
Criminal banks won’t make it easy to just put a 7 year block on an account which I would have done. You have to file a police report and submit a bunch of forms. Why can’t we just put a block on any new cards when ever we want. Our gov is so bought off by banks and financial companies, it’s nauseating.
Muir;
my former gangster landlord tried to sue me for six grand. it’s too early to swear, but i hired my mom’s lawyer and was lucky to only lose 1800 dollars.
Ann,
In Fl with tens of thousands of mortgage fraud cases in the State Attorneys’ office clogging up the system, it would surprise me that it would be taken to a civil matter that is also backlogged with foreclosures.
But I protected myself and filled various reports with the police dept alleging wrongdoing on his behalf.
What I find interesting is that this is the same landlord that bragged about how he could get $2500+ in season (Feb/March) on my unit and had bought at a great price.
-
It’s a different world now that a lot of people are not paper rich.
As someone mentioned, be careful out there.
Cheney-Shrub…from the horse’s mouth: “Willllllllllburrrrrrrrrrr!”
“…Obama will decide what he wants in a vice president. And apparently, from the way they’re talking about it, he does not expect him to have as consequential a role as I’ve had during my time.”
“But then Cheney, whose five deferments during the Vietnam War were an all-time world record for a major American politician, has always loved any war that he didn’t actually have to fight himself.”
I’ll be thrilled to see you go, Dick Cheney:
http://www.nydailynews.com/news/politics/2008/12/21/2008-12-21_ill_be_thrilled_to_see_you_go_dick_chene.html
Biden can match him deferment for deferment.
Not to mention lobbyist progeny.
Don’t get me wrong, I can’t stand Dead-Eye. But this artifical “My dog’s better than yours” debate is something I’m so weary of, I just want to go to the North Pole, lie down in a snow drift and take a snooze. Maybe Santa will rescue me on his way to bring toys to all the good little boyz and girlz of Washington and Wall Street.
Yeah, sorry…couldn’t resist. My bad.
Ditto… I’m so sick of this partisam crap….
The vast majority of the Americna population is absolutely convinced that both parties suck. Sure, YOUR guy is okay, but everyone else’s on both sides of the aisle SUCK!!! Check the congressional approval ratings.
And still, the only thing either party can do is crow on and on about how the other guy sucks worse than yours.
Just once… just once… I’d like there to be an election where I’m actually voting for someone instead of just voting against the other guy.
I am thinking of bringing back the WIGS.
“Don’t get me wrong, I can’t stand Dead-Eye. But this artifical “My dog’s better than yours” debate is something I’m so weary of”
It’s in the air.
I saw this headline in the NY Times yesterday:
http://www.nytimes.com/2008/12/22/business/media/22radio.html?hp
“Amid all the pressures on the radio industry, news-talk stations see an opportunity — and his name is Barack Obama. After eight years of playing defense for President Bush, the conservatives who dominate talk radio are back on offense.”
It’s just the natural order of things, I guess, but the endless poisonous sniping. ugh. It’s ramping up again. Heavens, please protect my ears from hearing about Obama’s private life. I really don’t want to know. Nor about Sarah Palin’s or Huckabee’s either, for that matter.
I know a couple of Canadians who love American politics. I’ve called both of them on it. They don’t really care about policies, or ideas, or doing anything. If they did, they would be following our own parliament, which is quite exciting these days (for real!). They just love the gossip and the team sports-aspect. They quote things off of Daily Kos, and treat all the players like action figures, and cheer youtube clips from the sidelines. I guess it’s ultimately harmless, but lately it is getting under my skin and tiring me out.
I saw an old episode of “All in the Family” last week. I wondered if it would be out of date. It wasn’t.
Montana,
Can you provide links about Biden?
this is the first one that came up
http://hotair.com/archives/2008/09/02/bidens-deferments/
Ha,…but Cheney has faster & better thumb to joystick trigger response than Biden.
Suspected US drone attack in Pakistan kills at least seven Taliban:
http://www.csmonitor.com/2008/1222/p99s01-duts.html
Drones better than sending our men and women abroad who can’t fight but are asked to act like state police. And BO is going to double troops in Taliban land?
But it will be good to see Cheney go into the Al Haig dustbin.
http://www.nytimes.com/2008/08/25/us/politics/25biden.html
Aides Defend Bank’s Pay to Biden Son
During the years that Senator Joseph R. Biden Jr. was helping the credit card industry win passage of a law making it harder for consumers to file for bankruptcy protection, his son had a consulting agreement that lasted five years with one of the largest companies pushing for the changes, aides to Senator Barack Obama’s presidential campaign acknowledged Sunday.
Mr. Biden’s son, Hunter, received consulting fees from the MBNA Corporation from 2001 to 2005 for work on online banking issues.
I posted this yesterday, but maybe it’s worth a repost, from Paul Krugman’s Op-ed in the NY Times:
“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.”
I’m amazed there is never any discussion about campaign finance reform! Loosing of regulations has exacerbated politicians “following the money”, which is the root cause of so many of America’s problems.
We had reform, over and over. McCain-Feingold - hello? And Obama blew off public financing entirely.
However you change it, they will figure out another way.
“However you change it, they will figure out another way.”
Well, of course they will, and then new measures will have to be put into place. The dust never ends, but it doesn’t mean you stop sweeping the house.
Where can we get a democracy like this and get in on the free-for-all?
http://news.yahoo.com/page/week_in_photos_rss?fid=20081219
Where’d the bailout money go? Shhhh, it’s a secret! $350 billion later, banks won’t say how they’re spending it:
WASHINGTON (AP) — It’s something any bank would demand to know before handing out a loan: Where’s the money going?
But after receiving billions in aid from U.S. taxpayers, the nation’s largest banks say they can’t track exactly how they’re spending the money or they simply refuse to discuss it.
“We’ve lent some of it. We’ve not lent some of it. We’ve not given any accounting of, ‘Here’s how we’re doing it,’” said Thomas Kelly, a spokesman for JPMorgan Chase, which received $25 billion in emergency bailout money. “We have not disclosed that to the public. We’re declining to.”
(link):http://biz.yahoo.com/ap/081222/meltdown_secrets.html?.v=8
This isn’t some skit from SNL or Monty Python.
This is Grand Theft USA and high crimes, IMO.
Time to SHUT DOWN every bank, brokerage, hedge fund, and politician that has contributed to the mess. Send the executives, officers, and legislators to places like Angola State Penitentiary for 40 years; until they die a “dignified death” or are “re-educated”, IMO.
“Time to SHUT DOWN every bank, brokerage, hedge fund, and politician that has contributed to the mess. Send the executives, officers, and legislators to places like Angola State Penitentiary for 40 years; until they die a “dignified death” or are “re-educated”, IMO.”
TESTIFY, TESTIFY!
As I said above Madoff is the poster boy for a public be-heading,and yet he is drinking fine wine,and ordering in….where is the outcry?
Sorry, the beautiful people of podunk states like Massachusetts keep giving us people like Barney Frank. These people never go away.
Gooooooooooooooooooooooood moooooooooooorning
HBB!
We borrowed our niece for a few days of fun.
The four of us (hubby, son, niece and ME) headed to a fancy smancy movie theater for a double-header. (Yes and TALE OF DESPEREAUX).
You’d think the weather (tons of snow) would keep bone heads like us home around the fire place.
Apparently we are not the only dimwits to brave the subzero temperature - the theater wasn’t packed, but lots of folks out there!
Next, of to Sam’s Club - I’m still shaking my head on that one. Crash carting and darting thoughout the place!
I live in an alternate universe.
We were locked in a traffic nightmare for fourty minutes. (and then another 30 minutes to the house)!
Forgetabout waiting for housing prices to come down, we’re seriously considering building.
They will not likely get the memo here until the earth stands still.
Oy vey,
Leigh
Dang - I need coffee.
That reads like a bunch of jibberish.
Yikes,
Leigh
P.S. Off for said coffee.
It’s the cold air Leigh….aren’t you in Wisconsin??
Yep Blano - and I must be a real sicky ’cause I love it here!
Leigh
Yeppers Blano and loving every minute!
Leigh
We finally got some snow here in MT but it’s not nearly enough for me. It never is…it’s not nearly the winter wonderland people seem to assume. If ya like snow, move to either western Washington or back east…
That reads like a bunch of jibberish.
I think you were conveying that the movie theater had other brave souls such as yourselves and that Wally was crowded. So this is a one time sign that the shoppers are still out spending.
Yesterday here in LA I drove in the Del Amo Mall area around 10:00 am. Not much traffic. So I thought - hmm maybe the gloom and doomers are right. I swam my 2 miles in the 4 lane 25-yard indoor pool at LA Fitness, got out, still light traffic in the area at 11:30. Later, around 4pm I drove around the area again. Traffic jam headed for the mall. I know enough of the streets to be able to outsmart the traffic. Drive on Del Amo (the street) to get to Maple and then take the short cut to Crenshaw by the courthouse instead of drive down to Torrance blvd. Or drive Anza down to Sepulveda to get to Crenshaw.
The point is, I’m wondering how many of the blogger posts who say “no traffic, no shoppers” have just done a cursory check at a time of day when there was certainly no traffic, but later the places were jammed? Or the opposite, bloggers who say the places are jammed, when it’s only a 2 hour feeding frenzy of spending binges?
Here in Norfolk the mall definitely jams up at certain times. I bought my parents a Wii (Good thing they don’t read the HBB). I went to the store that had them, and I was the only one there. The employees jumped at the opportunity to sell me one. “Woah, epic crash” I thought. Then my coworker decided to get one 2 days later. Said the store I went to had sold 30 of them since I bought mine and all of them were 100% out. They got one somewhere, but not after lots of searching. So I consider my observation flawed, maybe people just don’t shop on a rainy Thursday night.
Buidling vs buying, hey that may be the way to go! Builders see the writing on the wall… sellers have not yet.
Rusty,
We’ve been in the market for almost 3 years now.
I feel naughty for meeting with a builder, but we’re not getting any younger.
We don’t want a garagemahal. Nor a Mccraption.
Land is still a bit high, I’m seeing progress on land prices (5+ acres).
Sigh,
Leigh
Leigh-
Good for you. Life has been on hold for us too, and it’s getting old. What style of architecture are you thinking of?
The thing is, if you have the time, you can really control HOW the house is built now. My grandparents were a dang nuisance to their builders (my grandfather had built his own house previously so he knew quality work) Their house is incredible, modest, but everything well done. He’s gone now unfortunately, or I’d get him to supervise. If I build I’ll be there as must as humanly possible to get it done as well as can be. (an no illegals!)
My wife KNOWS the economy is bad, KNOWS the houses were poorly built, KNOWS that prices will come down and yet some innate thing makes her say “hey I’m sick of renting!” Even after watching her parents lose a fortune on a Palm Beach condo x2.
Luckily the 60 minutes show was on, last week, that sobered her up and gained us some time. I understand, I’m sick of renting too, just waiting for buying to be cheaper than renting is all. Houses for sale near us are still at astronomical wishing prices.
Server eating my replies - Blano - yep Wisconsin and loving it here!
Awaiting, a brick split ranch with a walkout, solar, and windmill w/backup generator and man cave for hubby (wood shop)
Leigh
We’re building in the spring. Land is free and
clear, all permits are a go. We figure it will cost us less than 50% of the original projected
cost due to decrease in material costs and lower
labor costs. Plus we’ve downsized to a more
easily managed home.
Given the decrease in the cost of labor and materials, merely doubling (as opposed to trebling,) the original projected cost of your house should put you right in the ballpark! What fun to be building your own right now…you should be able to find some great deals in odd-lot structural materials. Antithetical as it sounds, ask the building inspector for tips–they know who has what just sitting around because of overstocks.
Antithetical as it sounds, ask the building inspector for tips–they know who has what just sitting around because of overstocks.
Great tip!
So many loving minds here!
Thank you Ben for the venue - perhaps time for a quartly fundraiser?
P.S. ahansen please e-mail me again. Still not going through. grrrr.
I love you girl. God Bless and Merry Christmas. barbluvsong at yahoo dot com.
P.S.S. You are awesome! Loving energy to you and yours.
Leigh
Rats butt.
Quarterly.
(ducking the spell police)
Leigh
Paulson’s Daisyitis seems to be infectious:
Banks:
“we love ourselves…”
“we love you not…”
“We’ve lent some of it. We’ve not lent some of it. We’ve not given any accounting of, ‘Here’s how we’re doing it,’” said Thomas Kelly, a spokesman for JPMorgan Chase, which received $25 billion in emergency bailout money. “We have not disclosed that to the public. We’re declining to.”
Where’d the bailout money go? Shhhh, it’s a secret:
http://finance.yahoo.com/news/Whered-the-bailout-money-go-apf-13890568.html
It’s a crisis, for crisakes! Nobody has time to track the flow of $350 bn worth in rescue money during a crisis!!!
I think the banks know were the money went and thats why they don’t want to account for it.
This is the third time this has posted in this thread. This is NOT a bad thing. It’s awesome. The arrogance of the banks is now all over the news, and the vast populace — including J6P — will see it. Congress is getting 100 million enraged voters for Christmas! Maybe they will pay attention now.
Now that the banks and the automakers have their bailouts, when will Congress get around to bailing out all the other industrial sectors?
Some of the biggest U.S. property developers are asking for government money in the face of $160 billion in maturing commercial mortgages next year, the Wall Street Journal reported Monday.
Congress is getting 100 million enraged voters for Christmas! Maybe they will pay attention now.
I don’t know. No one talks about these things where I work. Everyone is in nose to the grindstone mode, and scared of being laid off. But they really don’t seem to be aware of the pigmen getting their mega bonuses. They are angrier with the big 3 bail out, even though it is dwarfed by the Wall St. bail out. Probably UAW envy (never mind that the Wall St. boys make an order of magnitude more money)
I wish I thought it was awesome. I fear it contributes to mass cynicism. Like the soundtrack to the news these days is “Everybody Knows the Dice are Loaded”.
Who was it who posted that 70% (?) of Americans admired a scam, or some such thing? It seems related. As with the rise of “spin” and gambling (all on the rise where I live, too).
I am naturally pretty bubbly and optimistic and up-with-people-y, but I’m feeling quite down. I thought that if things got this bad, people would…I don’t know, wake up, or pull together or put some bad guys in jail.
I listen to radio call-in shows while I’m working, and in response to the Madoff scandal one caller called in to suggest that it’s the government’s fault for regulating too much, and another called in to suggest this is the doing of “the Jews” (this is NPR). In response to the mortgage bailout, almost every caller wanted easier credit, backed by the government. What was the moral of the story again?
I have never been excited about a societal or financial breakdown, because there are potential unintended consequences which can damage a society for generations. And also, that’s the kind of wish terrorists, Bolsheviks, fascists and Trotskyites share. So I don’t hope for a breakdown and a clean slate, let’s hope we will muddle through. But we keep getting muddlier and muddlier!
I am naturally pretty bubbly and optimistic and up-with-people-y, but I’m feeling quite down. I thought that if things got this bad, people would…I don’t know, wake up, or pull together or put some bad guys in jail.
I know what you mean. I had hoped that following 9/11 the country would band together, and that perhaps something positive would come of that tragedy. I thought it would lead to a re-examination of our role in the world, some self-reflection, perhaps to our coming together as Americans and a renewed community spirit. Hell, something positive. Instead, we were told to keep shopping, let ourselves be easily manipulated by fear into an unnecessary war, and increasingly divided by partisanship and uncivil discourse.
So, I’ve wised up. I don’t have any illusions that a significant breakdown in the US will lead to any sort of positive “re-boot” of the systems or of the country. It will simply lead to fear, and fear leads people to make poor decisions. The American people’s authoritarian tendencies will be unleashed even further. They will throw their lot in with whatever leader chooses to exploit their fear, and be willing to further sacrifice their freedom in exchange for some small amount of security. They will look for scapegoats to blame their problems on, who will probably be lower on the social or economic chain, and who have little responsibility for the current crisis.
I don’t think anything good is going to come out of any prolonged economic crisis here. I hope that, however imperfect, things hold together and we don’t get a complete economic collapse, because it will make what’s happening in Greece look peaceful by comparison.
We’ll just have to Keep the Aspidastra Flying, Bub
http://en.wikipedia.org/wiki/Keep_the_Aspidistra_Flying
Decline In the US Housing Prices Keeps Getting Uglier and Uglier
Latest Annual Rate (Transaction originating Dur Aug-Oct) & YoY:
Metro Latest Trend YoY
Sacra, CA -48% -37%
Chicago, IL -44% -7%
San Fran, CA -42% -35%
Phoenix, AZ -40% -32%
Minn, MN -40% -16%
San Jose, CA -36% -25%
Atlanta, GA -35% -12%
Tampa, FL -35% -21%
Detroit, MI -34% -20%
Las Veg, NV -33% -34%
Denver, CO -31% -13%
L. A., CA -30% -30%
San Die, CA -29% -29%
Boston, MA -29% -19%
25 MSA Comp -28% -20%
Seattle, WA -28% -10%
Jacksonv, FL -28% -13%
Milwauk, WI -27% 3%
Miami, FL -26% -25%
Columb, OH -25% -2%
Wash, DC -24% -22%
St. Louis, MO -23% 17%
Cleveland, OH -22% -8%
Phila, PA -21% -4%
Charlotte, NC -17% -3%
New York, NY -16% -8%
Original Data Source: Radar Logic
This is the fastest rate of decline and also the broadest.
Jas
sorry are these prices or no of sales?
–
Price (price per sq ft.) changes (declines).
Jas
Those rates of decline suggest two things:
1) Mathematically speaking, the rate of decline cannot continue at over 20 pct per year for very long before prices are crushed down to levels where fundamental demand will kick in, as end-users will once again be rationally willing and able to buy based on long-term affordability considerations. Thus either those rates of decline will soon attenuate towards a milder rate of decline, or else a price bottom will soon be reached in many markets.
2) If comps are locked in to reflect those drops in price, lots of banks are going to become insolvent as a consequence. So I am guessing the Fed, Treasury, FDIC etc must be working frantically behind the scenes to hatch price discovery avoidance plans.
P.S. Jas — apologies for my rudeness last week. It was a bad week and I was venting.
To illustrate the math, let t = time for prices to drop by 50 pct from their current levels, assuming a continuous 20 pct annual rate of decline. The answer is given by the solution to
(1-0.2)^t = 1-0.5, or
t = log(1-0.5)/log(1-0.2) = 3.1 years.
Now that I see the numbers, I am thinking annual rates of decline in excess of twenty-percent per year for a few more years may not be all that unlikely. Can someone remind me for how many years home prices dropped in SoCal after the end of the last recession (I am thinking maybe five years — 1991-1996?).
California’s gonna drop 80% peak-to-trough.
Annual declines of 20% are quite likely five years in a row.
(1 - 0.2)^5 = 0.32768
That’s barely 68% off the top. Even 25% barely gets you to where rents and prices intersect.
My point (which might not have been obvious) is that 20% declines for five years are quite LIKELY, and I’ve never once heard of or seen a bubble where the prices didn’t revert far below the mean.
It’s precisely when things look barely fairly valued that the knife catchers catch the knife, and then the knife shows them who’s boss.
Thanks, FPSS. I have a friend who is talking about buying a condo soon as a retirement investment; I will do my best to talk him down from the ledge onto which his wife has pushed him.
“…and I’ve never once heard of or seen a bubble where the prices didn’t revert far below the mean.”
This bubble is different, because BB has expressed his unflagging commitment to make it all good again.
In a fight between economic fundamentals and a pointy-headed poindexter from Princeton, it’s a no-brainer where to put the betting money.
Oh, and why’s the Nasdaq not back at 5,000 again?
“Oh, and why’s the Nasdaq not back at 5,000 again?”
A couple of years back, before you started posting, some hilarious trolls from Wall Street infested the blog to insist that the stock market and the real estate markets were fundamentally different, and moreover, that Wall Street had absolutely no connection with the residential real estate market. To my recollection, this discussion played out in late 2006, shortly before the subprime implosion revealed the deep connections between Megabank, Inc’s securitization racket and the subprime lending industry.
Just in case any of the trolls who tried to educate us back then are not too hungover or drunk at the moment to be reading this, I have only one thing to say to you:
BwaHaHaHAHAHAHAHAHAHHHAHAHAAHAHHAAHAHA!!!
“My point (which might not have been obvious) is that 20% declines for five years are quite LIKELY, and I’ve never once heard of or seen a bubble where the prices didn’t revert far below the mean.”
Also quite likely:
Five more years of bottom-callers predicting the housing market will bottom out by next year.
So-far, so-good
It would be a more interesting exercise if some WAG assumptions were made about how much rents will get shredded based on out-migration and soaring unemployment in the Golden State.
The Terminator’s 2 day furloughs are just an appetizer.
Being from Buffalo, I have an appetite for death spirals.
“Being from Buffalo, I have an appetite for death spirals.”
Being from Rochester, and now living in Florida…
I am become death spiral.
The only thing that dove faster this year than the price of gold was the Buffalo Bills.
Good use of the quote Muggy :-), I thought it looked familiar
NASDAQ closed at 5048 back in 2000, Friday it closed at 1564.
Do not forget to factor in “opportunity cost of capital”.
Somehow that seems to be conveniently left out in the statistics because it is unseen.
Bastiat lives!!!
A most interesting feature of the
Nasdaq crash is that average volumes have been much higher during the post-2000 falling knife phase than during the pre-2000 bubble runup. Is this a harbinger of what’s to come for the housing market, as the Fed’s attempts to keep the market liquid inadvertently accelerate the pace of downward spiraling price discovery?
Oh, great. Zombie economists. Just what we need
(Oh, I was referring to Bastiat not victims of downward spiraling price discovery.)
Weekend at Bastiat’s.
I’ll bump this until someone gets it right:
Professor Bear:
Your bank offers you a great deal:
An annual interest rate of 100%, compounded not monthly, not daily, not hourly, but at an infinitely small time interval. You deposit one dollar. One year later you have how many dollars? Please express your answer as single letter.
I’m guessing you won’t see this buried in todays posts so I’ll repost next time you post your exponential extrapolations.
8
lim_{n => infty} (1+1/n)^(n) =
lim_{n => infty} exp(log(1+1/n)/(1/n)) =
exp(lim_{x => 0} (log(1+x)/x)=
(Now apply L’hopital’s rule)
exp(lim_{x => 0} (1/(1+x)) / 1) =
exp(1) = e = 2.7182818…
So a 100 pct interest rate compounded continuously for one year yields 171.8%, due to the magic of tax-free compounding!
Dude, you rock.
Are you a math professor?
No, just a show off…
But the non-availability of credit CAN remove owner-occupiers from the market. At which point we’re left with Landlords and speculators with cash. My guess is that shortly there won’t BE many speculators with cash around.
I was talking about yesterday’s speculators who are now trapped in falling-knife property holdings. I have this image of the Wily Coyote hanging on to the cliff by his fingernails, and the Road Runner dropping a heavy anvil into his arms…
Last week, somebody pointed out to me that those guys are “moat fillers.” Eventually there’ll be enough dead knife catchers to fill the moat.
–
Thanks, Prof. It takes a big man!
My best to you and all HBBers.
Jas
PB is a gentleman and a brainiac.
That’s a relief. I thought I had heard he was a mental man and a maniac
. Guess I should wash behind my ears more.
Both and…
OK this will sound bad but - I thought PB was a woman. PB I thought I remember you posting something about your husband some time back??? Guess I misunderstood. Or maybe…
Not that it matters (to me anyhow). I for one appreciate all your posts regardless - great information and discussion.
(Austin)
“That’s a MAN, baby!”
(/Powers)
there’s a pic of him at a meetup here somewhere
Montana,
Check out Annie’s website of HBB pix-
http://picasaweb.google.com/anngogh/HBB02?authkey=ii5vsUFNGyk#
It was legal in California for a while you know.
You guys are lucky I am hyper this winter.
Here is the link from San fran meet up. I also have a few, but not enough, photos of individual members. Please send me your photos so we can have a real online community and i will relaunch.
annmoorman at att dot net
http://picasaweb.google.com/anngogh/Hbbsf?authkey=kBjpaXJZGpo#
Nice! Which one is professor bear though?!
I haven’t had much luck with getting a Norfolk, VA / southeastern Virginia / Hampton Roads HBB meetup going. Everyone is still drinking the flavor aid here!
I think I see “PB” in photo 21. Professor Bear is that you?
Then he would be younger than I would have imagined! I was thinking #28, but can’t read the name tag.
ahansen, the photos aren’t captioned. Am I missing something? A secret password perhaps? I mean, the only ones Iremember are Ben and hwy50.
Would so love to see the names connected with the pictures.
http://picasaweb.google.com/anngogh/HBB02?authkey=ii5vsUFNGyk#
I will re do the whole site as soon as I get some new blood (photos) to post.
In the meantime…it is a secret code.
#4 is CArenter
#5 OV
#11 carealestate bear
#12 HWY
#13 ben
#16 kling
# 18 bear and ben
#21 bear and toscano
#23 Combotechie
#26 our allena
#28 toast on the coast
Why are there Midwestern cities on this list? I thought there was no bubble in the Midwest? What gives?
–
You may recall, 3-4 months ago that was not tthe case. Now it is.
I have been saying, recently, that NOW we have the broadest declines.
Jas
Just ribbin’ ya Jas.
Just seeing Chicago come in above Frisco is certainly an attention getter.
Don’t know about you, but I’m glowing with regional pride …
Ahh man,
Chicago took SF glitter away. I like that
Jas,
Do you have any data on Salt Lake? Here in Utah we’re behind the trends in most everything, and I’ve been hearing (not just from the realtors) that the downward trends in prices so far here have been modest, even though sales are way down. I’d be curious as to what your sources are saying.
ITSF,
FWIW, I track wishing prices for 4+3 or larger in Cedar City area and Provo 84604. Here are the median wishing prices for the last 4 months with the 22nd of each months as the data point:
CC
Sep. $375K
Oct. $360K
Nov. $350K
Dec. $345K
84604
Sep. $650K
Oct. $619K
Nov. $619K
Dec. $549K
Methinks the fortress is crumbling…
Thanks for the info. The fastest declines are where annual rates are much greater than Y-O-Y. Thus, places like Chicago and Minneapolis are now the leaders and are crashing much faster than, say, Miami.
Thus, places like Chicago and Minneapolis are now the leaders and are crashing much faster than, say, Miami.
Our long, cold winter certainly has something to do with it — after Thanksgiving, sales in the Midwest drop precipitously even when the housing market is moving. It’s a long time to make the monthly nut when one is already overstretched.
Now, with sky-high inventory and a very twitchy regional economy, there is only one logical direction for prices to take.
Twitchy is an understatement - this is a full blown charlie horse.
Are the declines seasonally-adjusted though Jas? If not, then I would take them with a grain of salt. Many areas - including Florida actually - do so downswings in the fall & winter and then upswings in spring & summer.
Awoke to pounding rain (yay, it’ll wash away some of the snow in the horse meadow,) and crashing oaks, (yikes, I wish I hadn’t loaned my neighbor my chain saw.) This winter is off to an amazingly awesome start…a portent of things to come?
Happy Solstice, everyone! Keep your kindling dry.
Better tell Gulfstream Gore that this is a cold winter.
Turns out, maybe the term “climate change” is more accurate after all.
“maybe the term “climate change” is more accurate after all.”
Calling it “global warming” softens it. If they called it what it really is, “global weather extreming”, (thanks to Hummers, McMansions and outdoor heaters) it might get more attention.
Hey DinOR, my Norweigen maple tree in Portland lost all of its leaves ~ 11/15/07, but at 11/15/08, some of the leaves were still on. Which year is more closer to normal, 2007 or 2008? I only get up to Portland a few days each year. Thanks.
PortlandHomeDebtor
I too have noticed the new mantra is “climate change.” That way they can blame humankind whether the temps go up OR go down. Pretty clever.
Did you know there was no climate change whatever in the eons before the ascendency of humankind?
Bush&Co. tried to entrench “climate change” into the New American Lexicon. Once that mission was accomplished, the next step was to modify the term to “climate variability,” thus convincing J6P that those godless scientists were freaking out over something about as important as the forecast on the local news.
btw, I suspect temperature changes won’t affect us much. But we’ll be done in by changes in rainfall.
“(thanks to Hummers, McMansions and outdoor heaters)”…..
What a load of horsesh*t.
The climate was changing hither and yon long before Hummers showed up, and will be long after we’re all using electric cars.
Every year it’s hotter than normal somewhere, every year it’s colder than normal somewhere, earthquakes, floods, droughts, tornados, etc. etc.
Get used to it already.
Thanks Blano.
Way back when we used to attend independent evangelical churches, there was always a contingent of apocalyptic Hal Lindsey types (Late Great Planet Earth). A steady stream of prophetic end times charlatans would come through, hawking their books and videos and t-shirts, and invariably they would point to all the earthquakes and floods and wars, just like was prophecied! Whenever any particular piece of bad news didn’t pan out towards armageddon, they would just point to some new piece of news.
I could never get through to them that the reason that it seemed as if all the bad news was increasing was that we hear every last piece of it now, because we’re all wired in. No interest whatsoever in putting it all in perspective.
That kind of nonsense was one of the main reasons that we finally parted company. And I’m sorry if this offends anyone here, but the parallels between those folk and some of the GW/CC acolytes is incredible at times. I understand that most of us are just getting our news and trying to sort things out, and not predisposed toward wild apocalyptic scenarios. But I’ve got to say that having run with both crowds, the inciters at the top of the stack in both cases are cut from the exact same cloth, and it’s not a good piece of fabric. And no, it’s not different this time, either.
“Way back when we used to attend independent evangelical churches, there was always a contingent of apocalyptic Hal Lindsey types” (Late Great Planet Earth).
I remember in the early 60’s seeing a man walking if front of our state house with a sign reading, ” prepare,the end is near” I asked my father about it, he said the earth will end one day, perhaps in a few billion years, so don’t worry about it.
Melting Arctic ice impacts the other Gulf Stream, too– making weather patterns exceedingly whacky. We’re watching it happen, guys. You can stick your heads in the sand (coming soon to a forest near you,) or you can start dealing with it like grownups. Either way, denial it is like going to a pedicurist to have your femur set.
Ok, we are having the coldest winter in 20-30 years and who is in denial?
See above. Sheesh.
http://en.wikipedia.org/wiki/Thermohaline_circulation
“Melting Arctic ice impacts the other Gulf Stream,..”
How about the INCREASING Antarctic ice? No mention of that in the GW Religion.
Never hear about that or glacier growth in Alaska,record lows already in many spots around the world. They worship at the throne of OwlGore whatever he says goes with the Global Warming crowd.
How can you look at the change in forestation, and the change in atmospheric gas composition and fossil fuel use and not believe that mankind is altering the environment. How can one not be concerned that the alterations could cause catastrophic consequences. I think all agree that climatology is a tricky science given the vast number of variables, but to see so many dismiss it with no hesitation based on Exxon funded science always amazes me.
Real Estate only goes up according to NAR economists.
Since 1800 the concentration of CO2, Methane, and Nitrous Oxide have more than doubled. An area the size of Central park 900 acres is deforestated in Brazil every 15 minutes. Nope nothing to see her just move along.
“I think all agree that climatology is a tricky science given the vast number of variables, but to see so many dismiss it with no hesitation based on Exxon funded science always amazes me.”
nicely put.
most of Europe had another record summer; 8 out of 10 of the warmest summers on record (for my country the records go back about four hundred years) fall within the last ten years. And yes, the current climate models predict that some areas could get colder, dryer or much wetter during certain times of the year (more extreme weather indeed). Even more so when the atlantic conveyor belt completely shuts off (which could happen very soon).
I have no doubt that global warming is happening and that mankind if causing it (even though we don’t understand all the details).
Nicely said, ahansen.
This Global warming thing seems to coorelate best with housing construction. We should be all good now for a while.
Seneca Lake didn’t warm up enough to swim in this past summer.
There used to be a mile thick layer of ice here. Change is sometimes good.
In all of history the Arctic ice has never melted before the last half century or so??
Please. Is that the best you can do???
-2 this morning, -20 wind chill, foot of snow. Could be a looonnnnggg winter.
Every dark cloud has a silver lining.
BULLETIN
STOCKS MIXED EARLY MONDAY
Hitched to the economy
Divorce rates drop as couples realize it’s cheaper to stay together
By Marty Orgel
Last update: 2:12 p.m. EST Dec. 21, 2008
SAN FRANCISCO (MarketWatch) — The recession and economic turmoil is creating a new class of casualties: Married couples who can’t afford to get divorced. In these tough times many people are finding it’s cheaper to stay together, even when they can’t stand each other.
Wasn’t there an old classic movie or two done on this theme?
(With the inevitable ending of the couple getting back together again of course)
Studies have shown that when married people work through periods of discord, they are happier than their divorced counterparts when surveyed ten years later.
Fighting and disagreeing do not mean a couple has no option but divorce. Almost EVERY couple who has been married for 50 years or more can tell you about times during their marriage when they **really** wanted out…but they stayed for whatever reason (children, money, etc.). Many decades later, they are much better off for doing so.
It’s all about empathy for your spouse and trying your very best to be considerate of their feelings and beliefs. Do what makes your marriage stronger, and don’t do what makes it weaker.
Big related question: When will the army of real estate flippers and specuvestors that piled into the residential market in the first half of this decade, only to find themselves trapped at the onset of the credit crunch in money-losing investments, finally throw in the towel and head for the exits?
Wall Street Journal
DECEMBER 22, 2008
Stock Investors Lose Faith, Pull Out Record Amounts
One of the hallmarks of the long market downturns in the 1930s and the 1970s has returned: Rank-and-file investors are losing faith in stocks.
In the grinding bear markets of the past, huge stock losses left individual investors feeling burned. Failures of once-trusted firms and institutions further sapped their confidence. Many disenchanted investors stayed away from the stock market, holding back gains for a decade or more.
Today’s investors, too, are surveying a stock-market collapse and a wave of Wall Street failures and scandals. Many have headed for the exits: Investors pulled a record $72 billion from stock funds overall in October alone, according to the Investment Company Institute, a mutual-fund trade group. While more recent figures aren’t available, mutual-fund companies say withdrawals have remained heavy.
If history is any guide, they many not return quickly.
“I don’t have any confidence in buying any new stocks,” says David Herrenbruck, a 52-year-0ld Newy York photographer at the peak of his ability to save and invest. Mr. Herrenbruck was a big believer in stocks in the late 1990s, but he was burned by the tech-stock meltdown. He has since moved much of his money to real estate, and he ha recently invested in bonds and certificates of deposit. “If I have some cash lying around, it is going to be in CDs,” he says.
I expect to read future articles about fools like this one losing their faith in real estate, and dumping myriad residential investments onto the inventory pyre.
It’s funny to read about grown men chasing after El Dorado. Keep chasing that dream buddy! Dot bomb? No. RE? No. Oil? No. Hang in there tiger.
“He has since moved much of his money to real estate, and he ha recently invested in bonds and certificates of deposit.”
The FDIC will print whatever is necessary to make good on the CDs, but this schmuck is going to take it up the rear when the final bubble, bonds, bursts. Of course, the FED will put a floor on the US Treasuries, but the cost of gasoline will hit double digits. And I pray the price of gold gains at least 1 (and maybe 2) zeroes at the end of the current price so I can pay off my f#*$ing mortgage of $203K and afford to pump fuel into my cars.
PortlandHomeDebtor
Prediction: Double-digit (greater than 10% annually) inflation will be here before the end of Obama’s first term.
Remember the Carter years?
prediction: i never see you or your dog again.
The WIN campaign was during Ford’s admin..
I don’t like either party. I think inflation was building for quite a while.
I once was a big believer in the hyper-inflation story. However, government is no longer handing out the money to citizens like they did last spring. We didn’t go and spend the money like we were told to. We saved it or used it to pay down debt. Can’t have that.
So, now the government will spend the money for us, on make-work programs.
Yes, the money being printed out of thin air is inflationary, but the debt bubble is collapsing faster than they can make-work. The net-net is still a slowing economy, rising unemployment rate, slowing demand, falling incomes, etc.
We’re at the point where ANY sign of inflation results in an immediate drop in demand. Consumers are holding on by a thread, burried in debt, unable to get more debt.
I’m now convinced that the demand is just not there to support inflation.
We can’t get a sustained cycle of inflation without first getting wage inflation, and we can’t get wage inflation in a globalized, slowing economy suffering a debt collapse.
I agree. Inflation is now not a concern. It was horrific earlier in the decade (when home prices were going up 20-40% YOY), but now it’s much more moderated.
How on earth can inflation be 3% when home prices (typically 20-40% of TOTAL household expenses) are going up 20%? Can someone PLEASE explain that math to me?? I know about “rental equiv”, but still, that’s just total BS. Inflation was 10-20% YOY for about 5 years and nobody seemed to notice. Now we are so leveraged up on debt that there’s just nothing that can be done on the demand side. Hyperinflation would fix the problem, but I don’t think that’s a real possibility (as it would likely start a World War).
They include rents, not house prices.
House prices are not a factor in inflation. CPI assumes there will be a reasonible link between rent and house prices… for example, the historic norm was for a house to be 100-120x one month rent that the house could be rented for.
So, the CPI uses rent (known as owner’s equivelant rent), NOT house price, to determine inflation.
When figuring inflation, you are not paying for the house… you are renting it from yourself, and your rate of inflation is tied to how much rents are changing in your city.
MEW changed everything. Once people could pull money out of their homes, houses became income producers. Therefore, you’re correct 1996-2006 CPI numbers were much lower than reality. We have seen high inflation for a decade.
How on earth can inflation be 3% when home prices (typically 20-40% of TOTAL household expenses) are going up 20%?
China + technology + bigger houses + Gov Hocus Pocus.
There are some interesting inflationary and deflationary scenarios in this article by Martin Wolfe (Financial Times):
https://www.businessspectator.com.au/bs.nsf/Article/Helicoper-Bens-massive-challenge-pd20081217-MDSEG?OpenDocument
“Is deflation a realistic likelihood? Core measures of inflation strongly suggest not. But one measure of expected inflation – the gap between yields on conventional and index-linked Treasuries – has collapsed to 14 basis points. Moreover, yields on 10-year US Treasury bonds are already where Japan’s were in 1996, six years after the latter’s crisis began.
…First, deflation makes it impossible for conventional monetary policy to deliver negative real interest rates…Second, as explained by the great American economist Irving Fisher in the 1930s, ‘debt deflation’ – the rising real value of debt as prices fall – then becomes a lethal threat. In the US, whose private sector gross debt soared from 118 per cent of gross domestic product in 1978 to 290 per cent in 2008, debt deflation could trigger a downward spiral of mass insolvency, falling demand and further deflation.
and
“Does [the Fed] face any constraint? Not really. As Robert Mugabe has shown, anybody can run a printing press successfully. Once the interest rate hits zero, the Fed can perform much further easing. Indeed, it can create money without limit.”
and, most interestingly
“Once inflation returns, the central bank will need to sell assets into the market, to mop up the excess money it has created in fighting deflation. Similarly, the government must reduce its deficit to a size it can finance in the market. Otherwise, deflationary expectations may swiftly turn into expectations of above-target inflation. This may also happen if the debt sold in efforts to sterilise the monetary overhang is deemed beyond the government’s ability to service.”
conclusion:
“This time, I suspect, the result will ultimately not be deflation but unexpectedly high inflation, though probably many years hence.”
“I don’t have any confidence in buying any new stocks.”
A typical buy high, sell low lemming.
Chasing last year’s winners is not a good idea int eh last 10+ year (if ever). He was in the tech bubble, real estate bubble and will find the next bubble for himself no doubt….
He’s in the bond bubble too by the looks of it.
That’s what I thought too…..a true bubble chaser.
so what is left in terms of assest
Have you been drinking?
Step right up and demand your own bailout! The bankers and the auto manufacturers got theirs, so you are entitled to one, too, so long as the industry in which you are employed is struggling.
Wall Street Journal
* REAL ESTATE
* DECEMBER 22, 2008
Developers Ask U.S. for Bailout as Massive Debt Looms
With a record amount of commercial real-estate debt coming due, some of the country’s biggest property developers have become the latest to go hat-in-hand to the government for assistance.
They’re warning policymakers that thousands of office complexes, hotels, shopping centers and other commercial buildings are headed into defaults, foreclosures and bankruptcies. The reason: according to research firm Foresight Analytics LCC, $530 billion of commercial mortgages will be coming due for refinancing in the next three years — with about $160 billion maturing in the next year. Credit, meanwhile, is practically nonexistent and cash flows from commercial property are siphoning off.
Given the “breaking the buck” risk, is it smarter to put your meager cash savings into FDIC accounts these days, or will the Fed make it all good on money market funds that can’t cover their management costs out of near-zero-percent returns?
Money market funds reel as yields near zero
By Deborah Brewster in New York
Published: December 21 2008 19:12 | Last updated: December 21 2008 19:23
Money market funds, an increasingly popular place to park cash, will need to raise fees or close to new money to remain profitable as yields hover at near-zero, according to industry managers.
The funds, which manage $3,800bn and have seen big cash inflows, are reeling from frozen credit markets, subprime exposure and a crisis of confidence triggered by one fund “breaking the buck”, or returning investors less than they paid in.
That article is in the Financial Times
I traded my treasury MM for Prime MM treasury was paying about .9% prime about 2.4%
GNMA and broad index bond funds pay closer to 4.5%
we have seen this before just a few years ago
What happened then?
Question: if one had money stuck in a 401k with a choice between mmkt, bond and equity funds, would you get back into equities if it looked like inflation was going to take off again?
I would and will.
would you get back into equities if it looked like inflation was going to take off again?
yep Bonds do terrible with Inflation. Do you see inflation ?
Nouriel Roubini on culprits in the crisis
He is definitely one of the gloomiest bears on the planet, who speaks his mind directly. I believe it is very good for the economics profession’s reputation when its members shoot straight from the hip, without giving the appearance that they are engaging in some kind of outlandish propaganda exercise.
Is our economic system now called Statism?
“We’re seeing a more statist world economy,” says Ken Rogoff…
“Saving Capitalism No Sure Thing as Statism Undermines Economy”
(Bloomberg)
Statism. hmmm, interesting.
Isn’t Statism just another name for Facism?
http://en.wikipedia.org/wiki/Statist
“The term tends to be used most often with respect to economic policies. For instance, Merriam-Webster defines statism as a “concentration of economic controls and planning in the hands of a highly centralized government.”
I have never heard it used for fascism. I had heard that Mussolini referred to fascism as corporatism, but wiki claims that’s not backed up:
http://en.wikipedia.org/wiki/Corporatism
Indeed it is. Statism=Fascism=Corporatism. None have anything to do with capitalism.
CRE developers are now asking for a bailout. Story is now over at Yahoo! Finance for those who are interested.
Seriously, is watching this unfold the best entertainment or what?
testing one two three
testing three two one
Whew, what a relief. It seems that despite the magnitude of this enormous financial mess, counting actually does still work. Someone tell the govt. this fact, ASAP!!
10 Worst RE market for 2009 per Fortune:
1 - LA
2008 median house price: $375,340
2009 projected change: -24.9%
2010 projected change: -5.1%
2 - Stockton, CA
2008 median house price: $248,050
2009 projected change: -24.7%
2010 projected change: -4.0%
3 - Riverside, CA
2008 median house price: $256,540
2009 projected change: -23.3%
2010 projected change: -4.8%
4 - Miami Beach, FL
2008 median house price: $293,590
2009 projected change: -22.8%
2010 projected change: -6.4%
5 - Sacramento, CA
2008 median house price: $225,140
2009 projected change: -22.2%
2010 projected change: 2.3%
6 - Santa Ana / Anaheim, CA
2008 median house price: $532,810
2009 projected change: -22.0%
2010 projected change: -3.5%
7 - Fresno, CA
2008 median house price: $257,170
2009 projected change: -21.6%
2010 projected change: -3.3%
8 - San Diego, CA
2008 median house price: $412,490
2009 projected change: -21.1%
2010 projected change: -2.9%
9 - Bakersfield, CA
2008 median house price: $227,270
2009 projected change: -20.9%
2010 projected change: -2.5%
10 - Washington, DC
2008 median house price: $343,160
2009 projected change: -19.9%
2010 projected change: -5.7%
With all those California cities projected to drop next year by 20 pct or more, I am wondering how the California Association of Used Home Sellers is going to get their forecast of a mere 6 pct drop in California home prices to work out?
Didn’t your copy of the press release include the “per quarter” notation? Whoops!
Whoo Hoo!
D.C worse than Phoenix, Vegas & Detroit?
Can we please send this data to all the bonehead Sellers in the D.C. Metro area that STILL think they can get 800K for their crapshacks?
I agree. I’ve been looking for a reasonably priced SFH in NoVA for about a year now. Sellers are still delusional. I looked at an old split-level (estate sale) in McLean that needed either (a) major renovations to bring it into the 21st century (b) to be torn down (c) to be condemned. The sellers thought they could $850k (!) for it - now it’s down to $750k and still waay overpriced. But there are still knife-catchers here, too….
I still think getting bumper stickers with “Overpriced!” on them, and slapping them on the real estate signs would be hilarious.
That’s a novel idea VA. I’m wondering if this is an actionable offense the REtards could press.
Yes, it’s vandalism.
What’s with the “-2.5%” drops for 2010? It will be another 20%, especially for the Prime palaces.
10 worst real-estate markets for 2009
8. San Diego
San Diego
2008 median house price: $412,490
2009 projected change: -21.1%
2010 projected change: -2.9%
As the luxury condo boom continues to fizzles, median home prices in this southern California market are forecast to fall $87,000 to $326,000 in 2009.
Funny thing is that DataQuick numbers for November 2008 are out, and the median sale price in San Diego is already down to $305,000. Only -$21,000 to go is necessary to match the CNN prediction
All San Diego number of homes sold and median prices, Nov 07 versus Nov 08:
Sales / Median Prices
Nov 07 / Nov 08 / % Chg / Nov 07 / Nov 08 / % Chg
2,400 2,673 11.40% $440,000 $305,000 -30.70%
Roubini’s Financial Times interview (I recently posted a link). I guess he is no fan of the decoupling theory…
Interviewer: “We’re close to the end of 2008. What’s in store for 2009?”
Roubini: “In brief what I call global staga-flation, it’s going to be a year of economic stagnation and recession for most of the global economy with deflationary pressures. It’s going to be the worst U.S. recession in the last 50 years. At this point it’s not just the U.S. — it’s the Eurozone, UK, the rest of Europe, Canada, Japan, Australia, New Zealand — almost all of their economies will have severe recession.
At this point there is also a very sharp slowdown of growth in emerging market economies — I expect a hard landing in emerging markets. Recession in Russia, recession in Brazil, very sharp slowdown of growth in India and China. And for China to fall from a growth rate of 12 to one of 5 to 6 percent is equivalent to a hard landing, given they have to move 12 million poor rural farmers to the modern urban sector every year with a growth rate of 10 percent, so I expect a global recession and a severe one.”
He’s too optimistic about China. China has virtually no chance for growth of 5 to 6 per cent in 2009. Maybe Cambodia or Laos could do those numbers.
I’m thinking if they gave out awards to economists who were the most effective Purveyors of Gloom and Doom, Roubini would be a front runner.
Unfortunately for us, he is effective because of his track record of being frequently right.
Note that he is advocating Fed/govt intervention and ultra-low rates along with “reducing the household debt burden” (which I agree is the ONLY thing that can bring this economy back to life).
Still wants more of the same…more credit. How can we get more credit and still reduce debt at the same time?
At the late mass last night, someone offered a petition during the prayer of the faithful for the millions of people losing their jobs. Mine is not a parish where people read the financial press daily.
The streetlevel is that the recession has just hit NY in the last two months, and it has hit with a vengance. Job losses, business closings, and real estate price declines which have been accumulating elsewhere are happening all at once here.
I have been hearing those petitions for quite some time now,
I’ll be wishing for a solid “financial en*ma” for the masses this year.
Unlike the pope’s hopes for “world peace”, my wishes actually come true.
Is en*ma a bad word here???
Only if the mighty JT is the raking mechanism. Gets a bit bloody and stinky and all the delicate doilies can’t handle that.
testing four five six
You are all gonna just love this.
I had 2 FBI agents in my office working on a case with me. I asked if the delay in their response was due to the mortgage fraud case load consuming their resources. The both laughed out loud and replied that they had many cases of documented fraud with evidence to prosecuter the perps but could not get the us atttorney to proceed. Why? The FBI is allocated money by congress earmarked for a specific issue and can only sprend said money on the pre determined issue. FBI is trying to change the earmark system with limited success so far. They stated that most of the mortgage fraud will not be prosecuted for this reason.
WTF???….. so we are waiting for the boyz on the hill to investigate themselves. Scary times. No wonder the banksters wont reveal how money is spent.
What do you expect them to do? Put 1/2 of FL/CA/NV in jail? The fraud was so widespread that I would venture 30-40% of ALL the loans made in 2004-2006 have some material fraud in the paperwork somewhere. In the bubble areas, I would guess a much higher number. The scale is simply over the top; the only thing to do is get the worst offenders (the strawberry pickers in the 1.5M dollar house) and forget about the rest.
A significant portion of this country all committed bank robbery at the same time. Now they will all be given a free pass.
Actually, I’d just like to see the MTG brokers/RE agents involved go to jail. Without their help, none of this could have happened. Seeing them in jail would seriously discourage others from attempting this kind of stupidity again.
I agree but why get J6P? Instead get the CEOs and white collar crowd. A few public perp walks would do wonders but don’t count on it.
It used to be that these guys would loose their jobs and money. Now, it seems we are rewarding these guys with government money.
Agree, spacecoast.
The strawberry pickers could not have committed their crimes unless they had a willing and able accomplice (mortgage brokers to Wall Street execs).
We need to have the BIG DOGS arrested, public scrutiny of their cases and trials (like we get with the Caylee Anthony case), and ALL of their assets seized for reparations.
“What do you expect them to do? Put 1/2 of FL/CA/NV in jail?”
We, the largest jailer in the world, have 5% of the worlds population, but 25% of the worlds inmates. Since Nixon started the modern incarnation of the WO(S)D, we’ve roughly doubled the population on lock and key every 7 to 10 years. With that trend slowing recently, financial fraud *would* just what the moral crusaders ordered.
Unfortunately, its hard to create moral panics on non-consensual crimes.
/sarcasm
/p*ssed
I bet that if they jailed all the fraudsters (or lets say all the ones who lied for more than $ 100K), the composition of the inmate population would change hugely.
How much do you need to steal in the US to get in jail, $ 10 maybe (if you are black or colored)? In my country shoplifting for 100 euro or so can get you in jail, especially if it isn’t the first time. But for all the fraudsters who stole more than a million euro, I don’t think there has been one who spent time in jail (a few got temporary jailtime before their trial, but that usually means it is close to standard hotel service).
What the heck is WO(S)D? and why is it that so many of our citizens are incarcerated? I understand that white collar crime gets off scot free because of overcrowding, but why?
War On (Some) Drugs
What percentage of the world’s invaders do we have?
Bailouts are the new black.
Commercial real estate developers seek bailout.
A dozen real estate development groups have asked Uncle Sam for help to avoid defaults, foreclosures and bankruptcies. The Wall Street Journal reports that some of the country’s biggest developers have asked Treasury Secretary Henry Paulson to be included in a $200 billion loan program recently created by the government to support the market for car loans, student loans and credit card debt.
http://www.bizjournals.com/pittsburgh/stories/2008/12/22/daily2.html
Nice flow chart on how the economy got so bad:
http://www.theonion.com/content/infograph/how_did_the_economy_go_bad
The Great Recession may have given me a humorectomy, but aren’t they supposed to be writing satire?
Surely THIS is a sign of the “end times” approaching.
Modified mortgages re-defaulting at high rates: regulators
Hope Now alliance sets impressive target for number of modifications in 2009
By Ruth Mantell, MarketWatch
Last update: 10:58 a.m. EST Dec. 22, 2008
WASHINGTON (MarketWatch) — More than half of mortgages modified in the first quarter were at least 30 days delinquent after half a year, and it’s necessary to figure out why so many modifications are not preventing re-defaults, regulators said Monday.
The proportion of modified loans delinquent by 30 days or more was 55% after six months, according to the Office of the Comptroller of the Currency and the Office of Thrift Supervision. Modified loans that were 30 or more days delinquent after three months stood at 37%, the agencies’ data showed.
“One very troubling point is that, whether measured using 30-day or 60-day delinquencies, re-default rates increased each month and showed no signs of leveling off after six months and even eight months,” said Comptroller of the Currency John Dugan.
“This trend of increasing delinquencies underscores the need to understand why these modifications have not been more sustainable,” he said in a statement.
The proportion of loans modified in the first quarter that were 60 or more days delinquent was nearly 37% after six months, and 19% at three months.
This trend of increasing delinquencies underscores the need to understand why these modifications have not been more sustainable,” he said in a statement.
===================
Gee, let me guess: they are going to spend millions of dollars setting up a committee to “discover” what we’ve known all along…
These FBs were fraudsters. They only reason they took on these mortgages was because they could get rich quick. They had **ZERO** skin in the game, and were effectively given free call options on housing.
When the lenders “renegotiate” the terms, that only gives the FBs additional time to live rent-free while they plan their next scheme.
This is why we had the old-fashioned lending standards. Ownership NEVER turned a degenerate theif into an upstanding, responsible citizen. The reason “homeowners” faired better than renters was because only upstanding, responsible citizens could qualify for mortgages. DUH!!!!!!
Although mutual fund investors have historically been terrible market timers, there are several reasons to be cautious about betting against them:
The “smart money” hasn’t been so smart lately; heading into 2008, Wall Street strategists (including many of the same cited in Barron’s this weekend) were forecasting the S&P would be at 1,640 right now. Then came all the false “bottom” calls throughout 2008.
Stocks tanked this year and still haven’t “bottomed” even though mutual fund investors have been pulling money out of U.S. equity funds since 2006, at a rate of about $40 billion annually, the WSJ reports.
Either directly or indirectly, individual investors own about 50% of U.S. stocks; if they keep selling, it’s going to be a major drag on indexes for the foreseeable future.
Long periods of overvaluation for stocks — as we’ve just gone through — are typically followed by long periods of undervaluation, meaning today’s “attractive” valuations could get cheaper still, or just remain stagnant for years.
I was expecting something like this to happen anyway with the retirement of the boomers. Just happened sooner than expected!
Those WS strategists actually meant the NASDAQ would be at 1640. They misspoke when they predicted S & P 1640.
Using you all as sounding boards again to prevent bad things from happening. Fiancee and I actually went and applied for a mortgage and are considering making some offers.
4/3, supposedly 1850 sq ft though I dont think thats accurate. (Guess if you count foyer and some stuff maybe it is) .7 acres but backs up onto river+green acres. Immaculate condition but almost everything is original 1962. Nice in that you can update at your leisure. 4th bedroom is tiny: 10×10. Kitchen is a tad newer. Asking 439k.
Originally did my own research and just pulled all properties in area that have sold from 1990 to now, used official cpi numbers, attempted to inflate until today. Obviously, distortion in the final prices is seen for houses sold in 2001 onward, so excluded them. Excluding those houses, the rough comps appear to be from 315k to 375k, with a few all the way up to 480k.
Realtor provided comps:
0.5 acres. Sold 2/08 for 427k, 2376 sq ft (much larger), realtor states equivalent is 396k today. Modernized but actual lot inferior (doesn’t back up to green acres). Close but different neighborhood.
0.75 acres. Sold 12/07 for 435K, 2112 sq ft (larger), realtor states equivalent today is 406K. Modernized, backs up to green acres, but not river section. Effectively same neighborhood.
0.66 acres. Sold 2/04 for 445K, unknown sq ft but home is literally the home in questions’ twin. Oddly is 3/3 whereas house in question is 4/3. Perhaps the 10×10 is merged into something or its misreported as 3/3. Looking at the room sizes I think they did away with the 1st floor bedroom, replacing it and the den with a large kitchen and remade the kitchen (2nd level, split) into something else. (based on dimensions and identicalness). Oddly enough, on opposite side of street, no green acres or river.
Originally had an initial offer in mind of about 20 percent off their asking but as the Realtor’s comps were actually more interesting than mine as they covered a larger area, been rethinking that. Showed them to the fiancee and oddly enough she thought our initial offer might actually be too high. Although we expect a proper offer would probably close the doors anyway, but hey, there’s lots of houses out there. Realtor of course recommended 380-410 and that makes no sense based on those comps. Its lower but the cost of modernization alone, despite the better lot, can’t make up that difference.
So? Opinions?
NJ should hold up quite well, at least as long as Wall Street continues to boom.
Well, seeing as they’re all somehow still getting their bonuses this year…. If they can string together enough bailouts, 20 percent is in the bag
In the not too distant past, this would have been a $100,000 house in my old Chatham neighborhood.
You’re making the same mistake that the FBs made.
Prices do not necessarily go up with inflation every year, year after year.
Here in California, prices should have dropped from 2001 levels, based on historical trends and economic circumstances at the time.
Take 2001 prices, and go down from there.
Good luck!
“Realtor of course recommended 380-410 and that makes no sense based on those comps.”
Suggestion #1: get yourself a new realtor. Whether this person is family or not, it’s already obvious he/she’s not looking out for you.
Suggestion #2: listen to your fiance’. An offer 20% off ask is too high. The ask is likely too high to begin with.
“realtor states equivalent is 396k today.”
Suggestion #3 re: “equivalent”: see Suggestion #1.
Here’s one thing exeter and I agree on: there ain’t a house in this country worth over 375K (his words IIRC).
Suggestion #4: make some offers 40% off ask and take your time.
Just some .02 from the frozen tundra.
I absolutely agree with Suggestion #1. The realtor I will work with (but not for a couple years) won me over when she stood up in front of a group a year ago and said that some houses in San Diego were selling at 2001 prices and that’s what you should be looking for. (Now 2000 prices.) Get a new realtor who understands the value of cutting the price viciously and won’t worry about insulting a seller. If they want to prop up egos let them go teach kindergarten, not spend other people’s money.
There is no hurry. Think of where you would be if you bought one year ago today. I think 2009 will be just as brutal and much more brutal on the higher end homes. Make a pact to wait one more year and reward yourself with a trip to Hawaii with some of the savings between buying and renting right now. (OTOH if it’s cheaper to buy than rent that may be a different equation.)
No rush. You can keep fixing your financing and if you see it creeping up can make a decision at that time, but still suspect you’ll have plenty of time to save money.
Good luck!
Judging from the comps of 12 months ago and your descriptions, this place does not represent good value anywhere north of $300K. I could see these types of properties (I’m picturing Glen Rock/Ridgewood, N.J.) dropping by another 50% in the next 12-18 months.
As Suze would say ….. “DENIED”
It may depend on how much a premium you are willing to shell out for the river locale (hope it doesn’t flood), how long you plan to live there, and what your future source of income will be.
As others here have correctly schooled me, waiting won’t hurt.
Good luck.
Caterpillar Inc. said Monday it will cut executive compensation by up to 50 percent next year because of weakening demand triggered by the global economic slowdown.
The world’s largest maker of mining and construction equipment also said it will reduce compensation for senior managers by 5 percent to 35 percent in 2009. Other management and support staff will see a reduction of up to 15 percent.
Got cash?
Sorry, Cat item not for this thread. Argh.
All of those comps are too old to be considered good comps in a declining market.
Has nothing sold in the neighborhood more recently?
A vintage 1960s house, how cool is that! But be careful when remodeling to not go Home Depot on it. Too many vintage homes get generic tract house/condo remodels, aka granite, pergo, granite, stainless, granite, berber. Check out magazines like Dwell which have great ideas for modernizing without bastardizing. There’s tons of interesting new/old materials out there like real Linoleum, which comes in an amazing spectrum of colors. Sounds like a great opportunity if you get the right price.
Dutch bubble update:
the newspapers today report cracks in the Dutch bubble.
November homeprices declined 0.9% from previous month and are up just 1% on a yoy basis (below inflation). In most of the outer areas (outside the big cities), prices are now declining on a yoy basis. Sales numbers declined 30% from previous month (part of that is due to less working days).
The realtors recently changed their forecast from up 4% in 2009 to possibly down 5%. The Ministry of Truth is still forecasting stable or slightly up homeprices for next year. But there are less optimistic predictions, like from one from the banks (-20% within a few years) or certain developers (-30%). I will stick with my prediction of at least -50% on a real basis, however I think that will take many years because homeprices are a national security issue in tulipmania country.
I think one aspect of you report mirrors the states. Outlying seem to lead the drop. However, in such a tiny country, I’m surprised it makes such a difference there.
I think itulip described a model that was expecting this, but don’t remember the details.
By now the outer areas of Netherlands are probably the most overvalued, as prices went up more percentagewise (often over 1000% in my area). Prices are also higher in the outer regions relative to local income, probably the result of equity locusts and speculators. Homeprices are pretty even all over the country, while the well paying jobs are concentrated in a few areas. In addition, near the outer areas is the Dutch border where prices drop off steeply.
I don’t think it is very surprising that it mimics the US on a smaller scale. While US commuters are probably used to long distances, 100 km is really the maximum here (the outer areas are 100-200 km from the big cities) and most people probably work less than 10 km from home. During rush hour the Dutch Randstad can be one big traffic jam, 100 km can easily take two hours.
Also, politics funnels the money to where the kleptocrats themselves live, in/near the big cities. In times of financial distress this certainly gets more important.
on another note, the realtors say that over 20% of Dutch people who are selling their home currently own TWO homes. They are the ones who could get in trouble quickly, because they purchased at least one home near the top of the market and need to sell at a high price. Of course the realtors want politics to ‘do something’ for these ‘poor’ (greedy) homeowners.
Owning two homes has been encouraged by politics. People can get 1-2 year bridge loans that are extremely cheap (effective rate below 1%); so this delays the reckoning with 1-2 years. I think that most of these bridge loans are due next year, as the program started in 2007.
Dec. 22 (Bloomberg) — Magnetar Capital LLC, the $8 billion hedge-fund firm co-run by former Citadel Investment Group LLC trader Alec Litowitz, limited withdrawals from its biggest fund after it lost 30 percent this year through November, according to two people familiar with the fund.
The restrictions, known as gates, were triggered after clients sought to pull more than 15 percent of their money from the firm’s $4.8 billion multistrategy fund, said the people, who asked not to be identified because the information is private.
The pointy-heads at that fund mostly came from Citadel which is down 50%.
Ummmmmm … looks like they were not that smart.
Incidentally, their stellar strategy last year of buying the lowest-tranche of CDO’s and then “over” hedging by buying insurance on 200% of the highest tranches had only one flaw. You need to offload the lowest-tranche AFTER the hedge pays off.
Ooops. Didn’t think of that part, did you?
BWAHAHAHAHHAHAHAHAHHAHAHAHAHHAHAHHHHHHHH!!!
Priceless, isn’t it FPSS?
This is exactly why I didn’t participate in the housing bubble even after it was clear to me that it was a bubble, and would go on for quite a while.
You need liquidity to GTFO when the tide turn. I may choose to speculate in a bubble in the future, but only in an asset-class that provides high liquidity. If the SHTF, you don’t want to find the exits clogged.
Here is a strange case.
This place was the run down house on the corner for ages. It had potential, but was in a bad state. Then a family lived in it for a while and eventually fixed it up bit by bit. It sold near the top when the market was faltering. Check out the Zillow or Redfin data on that. They buyer must have totally misunderstood the market and the “Friendly Acres” neighborhood. Now they just want out.
http://sfbay.craigslist.org/pen/reo/959772775.html
“$559000 Not Bank Own - Regular sell - No need to view interior”
No need to view interior? Well, okay then. Next stop $499k? I’m expecting one or two sets of knife catchers to loose fingers on this one on the way down, but we’ll see.
Anybody who’s half a million plus without looking at what he/she is buying deserves to get JT’d double-plus good.
I don’t know a lot of people who could clear $180K annually regularly with no interruptions for 30 years.
“Huge Corner lot 7200 SF ”
Not sure I would qualify 7200 SF as huge.
Gotta be a typo… Corrected, $59,000.00 O.B.O.
Even at $59K, I think I would want to see the interior…
Even at $59, I’d want to see the interior.
A perfect example of the bubble. Only an idiot would pay $500k for a house of that size and type, I don’t care what the location is.
If that house was located next door to me (in Wisconsin), you’d be lucky to get $140,000 for it. More likely about $120,000…
Aladinsane, if you’re still out there… I think they found your gold stash.
He hid it in Israel.
I am neither wealthy nor Jewish, but it didn’t take long for me to find somebody affected by the Madoff scandal. Talked to a friend of mine in NYC who works at Yeshiva University today. Madoff was chairman of their business school! They had A LOT of money invested through him. The chairman of the investment committee resigned, and the estimated losses keep climbing - now at $114 dollars.
I was told they had a large meeting to assure employees that the university wasn’t going to go under.
Whenever your employer calls you to tell you that you aren’t going under, you should start mailing out resumes that very same day.
Ed-Zachary!
My wife worked for block buster when Wayne Huizenga sold it. He told them how they were like family and part of the deal was no job cuts. He even threw in a tear to make it ‘real’. I told my wife that night get your resume ready. Less than 90days later, whack, pink slip don’t let the door hit you in the ass on your way out.
LOL
I’ve always kept my resume up to date. Like you said, whenever you hear everything is okay, you better start doing some research about the company and other jobs. Been through 3 reorganizations at 3 different companies. I knew it was coming and was prepared.
The part of keeping your resume up to date is that it’s fresh, and more importantly the tone isn’t like somebody who just got laid off. You’ll have a more positive sound if it’s created when you’re in a positive mood.
That’s really sad. I hope Yeshiva doesn’t go under.
Having said that, they never should’ve invested with a Board of Trustees member and chairman of the biz school (Madoff was both) — a clear conflict of interest, no? Where was the rest of the Board in all of this?
(Not to mention that Madoff should’ve dissuaded the university from investing with his firm, presuming he wasn’t completely delusional, and wanted Yeshiva to succeed.)
I heard the most any single investor can get back is 1/2 million through SIPC. Yikes.
I hope other charities and universities will take a look at their holdings now and diversify more.
Dec. 22 (Bloomberg) — Walter Noel’s Fairfield Greenwich Group, the hedge-fund firm that had $7.5 billion invested with Bernard Madoff, was sued by investors for allegedly failing to protect their assets.
Noel’s Greenwich Sentry fund invested $220 million with Madoff and his Fairfield Sentry fund invested $7.3 billion solely in Madoff, jeopardizing investors’ interests while collecting “millions of dollars in fees,” according to a complaint filed Dec. 19 in New York State Supreme Court in Manhattan.
that’s a question…where did the fees go?
Duh - that should read $114 MILLION dollars. Thanks to everybody who read what I meant, rather than what I actually typed…
And now - look what has happened to the “Realtor-to-the-Stars” right here in Dallas.
http://www.dmagazine.com/ME2/dirmod.asp?sid=&nm=&type=MultiPublishing&mod=PublishingTitles&mid=7155F7796F354F21B1183937D847D6DF&tier=4&id=A39834020ADA4F9BAB31C757EA59AF73
This woman was the elite real estate agent in the DFW area for years - catering to the professional athletes and oilmen.
Hmmm.
Hasn’t paid her taxes in years.
Hasn’t paid her mortgage in years.
Living in a million dollar home but allowing $200 and $300 checks to bounce.
All the while she is avoiding and evading the IRS, she is splurging on shopping sprees at Neiman-Marcus and Stanley Korshak.
Living a lie - living in piles of debt - and then having the mayor and the Dallas political establishment over for campaign events.
These are the people whose behavior is going to cause pain for everyone.
I am a very compassionate person - I, however, have no sympathy for these people.
They should be given a trial - and if found guilty - should not see the light of day until every penny is paid back.
Ok, I’ll be the shallow one……..
If nothing else, she looks darn good, especially at 60.
BWAHAHAHAHAHAHAHA! These people are retarded. Why is it the smarter you are the more you struggle? DUH! They want the dumb to be “rich” so they spend it all. Too bad it is pseudo rich. Hey lady, don’t stand too close to that heater this winter plastic melts you know. I still think they should Botox the ovaries of anyone half this dum(b).
(What I’d post if I didn’t have to sign up- I HATE that)
another Dutch bubble tidbit in the news today:
nearly half of current Dutch mortgages are IO loans, and many of these are 100-125% loans. The financial authorities are getting worried about this (a bit late, I would say …). They warn that because of such risky deals the Dutch housing market could be hit by all kinds of adverse forces at the same time (I predict that is exactly what is going to happen - Dutch homeowners have no idea what is going to hit them).
Dutch consumers are still in total denial, they are spending on consumption stuff like there is no tomorrow. But just maybe that is also because they know that if you run out of money the government will always help you. Don’t be stupid enough to have savings somewhere when you want to get rid of your mortgage …
Troubles at the publishing houses, commercial and university:
Commercial publishing houses, including Random House and Farrar Straus Giroux, have been rocked by layoffs and reorganizations in recent weeks, as the effects of the economic downturn eat away at the book trade. Are university presses next?
In what may — or may not — be a sign of things to come, one of the larger university presses, SUNY Press, has laid off five employees, the Albany Times Union reported today. “The cuts, made earlier this month, represented nearly 15 percent of what was a 34-member staff,” the paper wrote. “The business manager’s office overlooking Lark Street is now empty. A publicist, a clerk, an editor, and a production manager also lost jobs.”
Linky.
No one and nothing will be untouched.
MACD and ADX are flattening; plus, the markets have dipped back below their 50 DMA.
Hey-a, Blue Skye .
I think yesterday you asked if it was interesting for Canadians to watch the future unfolding down south, and I had some sort of sarcastic, not-actually-very-helpful response.
Anyway, I really should have posted this:
http://www.theglobeandmail.com/servlet/story/RTGAM.20081212.wmortgage13/BNStory/Front/home
Special investigation: How high-risk mortgages crept north
The untold story of how elements of the first Conservative budget in 2006 encouraged big U.S. players such as AIG to make a push into Canada, creating our version of subprime mortgages
“In the first half of this year, as the subprime mortgage crisis was exploding in the United States, a contagion of U.S.-style lending practices quietly crossed the border and infected Canada’s previously prudent mortgage regime.
New mortgage borrowers signed up for an estimated $56-billion of risky 40-year mortgages, more than half of the total new mortgages approved by banks, trust companies and other lenders during that time, according to banking and insurance sources. Those sources estimated that 10 per cent of the mortgages, worth about $10-billion, were taken out with no money down.”
and
“Intended or not, the shift followed years of mobilizing by U.S. insurance companies, all hungry for a piece of what is regarded as one of the most lucrative and the second-largest mortgage insurance market in the world. At the forefront of this movement was mammoth AIG, now in near ruins as a result of its role in the U.S. subprime crisis.
U.S. competitors had envied premium rates on Canadian mortgage insurance policies for years. With only two players competing in the space, Triad’s Mr. Tonnesen said CMHC and Genworth were so profitable that they were “basically printing money.”
and
“Intended or not, the shift followed years of mobilizing by U.S. insurance companies, all hungry for a piece of what is regarded as one of the most lucrative and the second-largest mortgage insurance market in the world. At the forefront of this movement was mammoth AIG, now in near ruins as a result of its role in the U.S. subprime crisis.
U.S. competitors had envied premium rates on Canadian mortgage insurance policies for years. With only two players competing in the space, Triad’s Mr. Tonnesen said CMHC and Genworth were so profitable that they were “basically printing money.”
(Of course, we re-elected this government, because we’re super-geniuses.)
While longer term mortgages cost people more in interest, and as prices go down, people could be under water, I don’t think Canada has followed the same path of the US. I don’t think we had “pick a payment” or “liar loans” or “interest only” or ARM mortgages that reset to very high interest rates. I’m willing to be proved wrong…
By the way, my ARM is currently at 3.5%…and will always be tied to the bank prime interest rate. Not that matters much anyway, as I will have paid it off by April.
While the article spends a lot of time blaming the Conservative government, it should be noted that the provision to allow more mortgage insurers was originated by the Liberal government in 2005.
Well, let me preface by saying that I am in Vancouver, which is almost its own country in real estate terms. Regardless of the quality of loans, our affordability has gone completely out of whack with our incomes. We are also an economy that has become very reliant on real estate an building as well as exporting building-related resources, like timber. Having said that, our market, which was starting to slow down in 2005, was revived by the changes in lending standard to allow 0% down/40-year. That, by itself is a compromise in lending standards. (I have also heard of a business in Surrey that made forged paystubs for people to corroborate their “income”, but that was just gossip from someone I know at a bank.)
For liar loans, I can only tell you that I personally know one “liar” (who does not have a job or savings, but now owns 3 houses, each one bought on the sudden increase in equity of the last). Stated income loans, and mixer-mortgages (where you buy a mortgage with several friends) became quite popular.
Interest-only, we definitely did have. Here is a promotional web page from Unisource Canada:
http://www.unisourcemortgage.ca/mortgage-news/archive/2007/2007-04-13_Mortgage-101-Interest-Only-Loans-Whats-So-Interesting-About-Them.php
As for the rest, we have one key weakness that many American borrowers don’t have, which is that many mortgages come up for renewal after 5 or 10 years, which is like a benevolent cousin of an ARM. If interest rates go up, there will be borrowers who are crushed upon renewal. As interest rates go down, renewing on a mortgage with a private lender could fall through anyway, if the lender is now shaky OR if the equity of your home becomes negative, they could decline you as well, forcing you into bankruptcy.
Here is an example of Canadian subprime , which directly relates to allowing new, private insurers into the market:
“Rick Lafleur, who held a mortgage with Xceed for five years, says he and his wife, Diane, were recently forced to give up their Windsor, Ont., home. He said Xceed refused to renew their mortgage, even though they made all of payments on time.
Another mortgage lender would not take them on because of their high debt load, he said
The couple are now renting after Xceed foreclosed on their home.
“It forced me into bankruptcy.”
http://www.realestatetalks.com/viewtopic.php?f=8&t=36743&p=124056#p123993
(the original story seems to have come down, but there is a copy at the link).
(Dave, I did answer your points, but the post may take a while to show up as it is long and has links.)
Thanks for the information - I didn’t realize Canada had been so creative…(but not in a good way)
Affordability is getting out of whack here in Saint John - we still seem to be quite bubbly. The people next door just put their house on the market - $294,900 for a 2 story 3 BR, with pool. I think they bought it for about $ 100,000 less a few years back…
Oh, that is a jump. I had heard it had gone up a lot in St. John’s, too.
To give you an idea of how crazy it is here, houses in my neighbourhood which were about $300,000 in 2000 sold for 1 million last year. Most Vancouver-sellers are counting on a spring bounce, but in the meantime, sales have really dropped. We are quite an extreme market!
ella,
Thanks. I’m not very sensitive to Canadian politics, but I see evidence of most of the trends that will end poorly in the US also in place in Ontario, albiet on a smaller scale.
Low interest rates (and lower gas prices) will help my friends there quite a bit.
Ontario will have a headache after this all comes out, I think. The real damage seems more likely to be out west, though. In many ways the notion of “Canadian” real estate is kind of mixed up. Canada had the same kind of credit loosening, and real-estate madness as everybody else, but our Western provinces is where things got really out of hand (benchmark price for a house in Vancouver got to $900,000, our average family income is something like $70,000). Ontario has a much more diverse and stable economy, as well, unlike BC and Alberta which are quite dependant upon oil, gas and timber (and now building and real estate
).
I love how they word it like our Ebola infected mortgage brokers wandered into the midst of their pristine and virgin citizenry and infected them all with the Ameriplague.
hee hee, Americooties!
Well, yes, bink , I am hanging my head in shame a little over that.
Dec. 22 (Bloomberg) — MetLife Inc. and Prudential Financial Inc., the largest U.S. life insurers, declined in New York trading on concern that losses on commercial mortgages will surge as the recession deepens.
…
Life insurers have cut jobs, curtailed stock buybacks and reduced dividends as losses on stocks, asset-backed securities and corporate debt deplete capital. The industry, which puts about 10 percent of its invested assets in commercial mortgages, may see losses rise to the highest levels since the early 1990s, according to Randy Binner, a life insurance industry analyst at Friedman, Billings, Ramsey Group Inc.
Just noticed something weird on the crude oil market I hadn’t seen before - can anyone else comment?
On Friday the key index was January delivery - it ended the day on Friday at $33.87 - down big for the week.
Today the key index is now February delivery - fine no problem that’s normal - but it’s now $39.91, and down a lot from Friday.
I’ve never seen so much discrepancy between the key indices for monthly deliveries - especially right at the end of the month. It’s weird that they’re talking about oil going down a lot today, but the value of the key indices went from $33.87 to $39.91! Normally it seems like the value of the indices are very close - within a few cents - whenever they make transitions from month-to-month. However this time there was about a 25% difference!
Here’s a chart of the various deliveries:
http://quotes.ino.com/exchanges/?r=NYMEX_CL
Presumably this weird thing is because there’s an expectation that prices will rise, at the same time that prices are falling dramatically.
Time value.
Something in the future is worth less than in the present. You have a discounting effect.
Plus, when something expires you have demand and supply effects.
change in contract month - there was an $8 difference between Dec and Jan futures, and now the quoted future is one month out rather than one day - conclusion: market is currently flooded with oil
It’s being affected by “contango.”
Contango is playing havoc with oil. Long range futures have oil much higher. Dec 2010 has oil at $65.
http://en.wikipedia.org/wiki/Contango
Or is it that the dollar is worth half its current value in 2010, at least in the currency of black gold? Gets confusing, no?
Dr Bernanke explains quantitative easing:
“If we feed the banks enough dollars, something good is bound to come out the other end eventually…”
And if it doesn’t, I’m counting on Obama to keep nationalizing aggregate demand until it does.
They eat rainbows and poop butterflies…
(Movie- Horton Hears a Who)
Nazi Germany attempted a “permanent solution” with despicable results.
Lenders say foreclosure moratorium no solution
Mon Dec 22, 2008 2:15pm EST
WASHINGTON (Reuters) - Private mortgage lenders warned on Monday the number of U.S. homeowners seeking help to avoid foreclosure would double next year, but said a moratorium on house evictions was not a good idea.
Hope Now, an industry alliance trying to keep homeowners in their homes after the collapse of the country’s housing market, said mortgage modifications aimed at preventing foreclosures would climb to around 2 million in 2009.
Foreclosures are at an all-time high and are expected to rise as a year-long U.S. recession pushes up unemployment.
U.S. lawmakers have called for a moratorium on home foreclosures and some states have unilaterally imposed a halt, but industry leaders said this just postpones the inevitable.
“Ultimately, you have to face realities … there are some situations that cannot be resolved,” John Courson, chief operating officer of the Mortgage Bankers Association, told a Hope Now conference call to discuss the year ahead. “An outright ban is not a permanent solution.”
When lawmakers are proposing gumming up the works with a moratorium, the rational thing to do is expedite your foreclosures so that you don’t have as many in the pipeline when the moratorium hits.
Unintended consequences—-gotta love ‘em.
The next rational thing to do is to stop making loans going forward, in order to avoid exposure to future foreclosure moratoriums.
Except in NY, where I think laws already make it excruciating slow even before the bubble.
San Francisco office space rent drops 22%
http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2008/12/19/BUIJ14QSM7.DTL
Buy now before you are priced out forever.
THE TRANSITION
The Anti-Greenspan
Why Obama’s new Fed pick may be the most important member of his economic team.
By Michael Hirsh | Newsweek Web Exclusive
Dec 19, 2008
From link:
The question is whether Tarullo will push for too much regulation. In his 2008 book on international banking regulation, “Banking on Basel,” Tarullo repeatedly argues that the subprime crisis is a once-in-a-lifetime opportunity to regulate. “The crisis has—at least for a time—altered the political environment for financial reform by placing banks on the defensive,” he wrote. “Domestic reformers may have the upper hand if they move quickly.” The debates at the Fed should tell us a lot in the coming months.
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I like it!
Please everyone, stop distracting me with your interesting observations, news and insight. I have to go back to work!
I’m going to listen to this, since I am a financial gossip crack addict:
http://www.onpointradio.org/shows/2008/12/corporate-compensation/
Wall Street Bonuses Under Fire
(looks like a tsk tsk to Wall St. but also looking at what happens when there’s less money to buy high end luxury goods)
Guests:
Louise Story, business reporter for The New York Times.
Lucian Bebchuck, professor of law, economics, and finance and director of the Program on Corporate Governance at Harvard Law School.
Steven Kaplan, professor of entrepreneurship and finance at the University of Chicago Business School.
Kind of interesting - New auction of the 6-month bill today and the yield rose 5 basis points during the course of the trading session (33%) from 0.15% to 0.20%. Can the market stomach the coming auctions of longer-dated paper?
International Herald Tribune
FLOYD NORRIS
The year the financial system stopped working
Published: December 18, 2008
NEW YORK: Long-term interest rates are at their lowest levels in half a century. Long-term interest rates are at their highest levels in nearly 20 years.
This is shaping up as the worst year in seven decades for the stock market. Of the 10 best days the stock market experienced during those 70 years, six came in 2008.
A Wall Street legend who became a hero for forcing Wall Street to treat investors better now admits to defrauding a later generation of investors of $50 billion. A prominent lawyer is said to have embezzled hundreds of millions by selling phony securities to hedge funds.
The economists are worried about deflation. They are also fearful of inflation.
The U.S. government is lending money to businesses that never could have borrowed from it before. People fear a wave of corporate bankruptcies as companies find they cannot borrow money to repay loans that are due.
This was the year the financial system stopped working. Nearly all the contradictory but accurate statements above can be traced to that fact.
Hello from Girdwood, Alaska.
Traveled all day yesterday and the airports in my opinion were definitely easier going than I expected, considering it was the weekend before christmas.
Today we skied all day (first time for me) at the Aleyeska…ski mountain thingy, or whatever you call a place like this. My brother has an apartment on the slopes. I talked to one of the people working this morning and she said they’ve been particularly busy this week. I didn’t get to how it compared to last year. But I plan to do more scouting and chatting with folks around here to try and get a feel for how it compares.
There is a bar at the bottom of the slope, I didn’t catch the name, my brother tells me they were considering tearing down to build condos. It’s a neat place, good food. He says he doesn’t think its going to happen now.
I guess that’s all. I’m keeping my eyes peeled for economic and housing related indicators.
bye all
Enjoy your vacation, and be careful on the slopes…
The great migration south and west in the U.S. is slowing, thanks to a housing crisis that is making it hard for many to move.
…
Most southern and western states are not growing nearly as fast as they were at the start of the decade, pausing a long-term trend fueled by the desire for open spaces and warmer climates, according to population estimates released Monday by the Census Bureau.
…
“But people have stopped moving,” he said. “It’s a big risk when you move to a new place. You need to know that moving and getting a new mortgage is going to pay off for you.”
Wall Street Journal
* REAL ESTATE
* DECEMBER 23, 2008
Foreclosure Mitigation Makes Little Headway
By JESSICA HOLZER
WASHINGTON — Intensified efforts to help borrowers stay in their homes made only slight headway in stemming the growing number of foreclosures in the third quarter, a new report by the Office of the Comptroller of the Currency and the Office of Thrift Supervision shows.
The number of newly started foreclosures fell 2.6% to 281,298 in the third quarter from the second quarter, partly as a result of state moratoriums on foreclosures and increased efforts by mortgage servicers to lower interest rates or otherwise modify troubled mortgages. But the number of foreclosures under way during this period rose 11% to 617,642, according to the report released Monday, and the number of foreclosures completed rose nearly 8% to 127,738.
Credit quality deteriorated across all loan categories, from prime to Alt-A to subprime, during the third quarter, pushing the share of current and performing loans down to 91.5% from 93.3% at the end of the first quarter.
More than half of loans modified in the first quarter had slipped back into delinquency after six months, and were 30 or more days past due by the end of September, the report said.
Hint to Sheila Bair and like-minded policy makers:
Just do the math. Foreclosure relief does not pencil out. Many people who bought homes they cannot afford would best serve their personal financial situations by walking away from mortgages they will never be able to repay. It is not good policy to encourage households to financially hang themselves. The lenders who made these crazy loans deserve to go out of business. The damage is done, and there is nothing at this point that can fix it.
Barn door left open
Horses have all run away
Hurry, close the door.
“It is not good policy to encourage households to financially hang themselves. The lenders who made these crazy loans deserve to go out of business.”
True in theory, false in practice. When the lenders go out of business we taxpayers pick up the tab. I’d much rather “encourage the households to financialy hang themselves” then have us taxpayers get hung, after all they’re the ones that signed the loan documents.
Sorry to shout but, heya CA RENTER you said on yesterday’s thread: “Studies have shown that when married people work through periods of discord, they are happier than their divorced counterparts when surveyed ten years later.”
Where di you get this information, book or link? I have someone I would like to pass it onto, if you have it. Thanks!