Bits Bucket For December 23, 2008
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The Housing Bubble
Examining the home price boom and its effect on owners, lenders, regulators, realtors and the economy as a whole.
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Name:Ben Jones
Location:Northern Arizona, United States
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Madoff scandal hits Aspen
http://money.cnn.com/2008/12/22/news/companies/madoff_aspen.fortune/index.htm?postversion=2008122211
“One very wealthy couple has already put their house on the market and moved in with their grown kids. Then there’s the guy who smelled the recession coming, sold his expensive home here at the height of the market frenzy and, yes, invested it all with Madoff. Today — no home, no money.
…
One couple who has lived in Aspen for 25 years was able to retire early with their small real estate business and their investments with Madoff. Now, at ages 59 and 64, they’ll have to go back to work and sell their home. ”
Investing 101: Don’t put all eggs into one basket.
Fools and money… One thing I always wonder is how they (fools & money) found each other in the first place?
Unfortunately, even the ones who pulled their money out of the Madoff basket within the last 6 years may end up paying for it tool.
tool = too. Need more coffee.
“Investing 101: Don’t put all eggs into one basket.”
Yep - this cannot be repeated enough.
It’s amazing how often you hear about a rich person “losing it all” in X, Y, or Z.
Investing 102: Don’t give all your eggs to a crook.
Shouldn’t that be Investing 001?
Investing 102: Don’t give all your eggs to a crook
That’s the real lesson of the Madoff fiasco–because it wasn’t lack of diversification that caused this debacle. If he had been invested as he claimed, his investors would have been more than sufficiently diversified, even if they had most of their assets under his management. The problem was that he was running a scam, and that the people who had been pointing out as much for the past two decades were ignored.
Diversification, it cannot be emphasized enough, is not just the investment style but the actual physical and custodial attributes of the asset. So, it’s not enough to put all your money into a single “diversified” fund - that is not diversity.
Think alternative investments, think geographical diversity, think about investing in yourself too, as part of this exercise.
I agree that holding assets in a variety of funds with separate custodians provides some hedge against exactly the danger that arose here–fraud risk. On the other hand, Madoff claimed to be invested in a wide variety of asset classes and vehicles. If he actually HAD been invested as he claimed, then the fact that investors were using him as the sole conduit through which they made a wide variety of investments would not have precluded them from being actually diversified. Just as an individual making all of their non-retirement and non-real estate investments through a single equities broker can be throughly diversified (though they would still be in trouble if the broker was simply stealing their money and not investing in anything).
It was greed. These people fell in love with the guaranteed double-digit returns. This fraud was obvious. No way to have a guaranteed return like that unless you are doing something really illegal. So they were shitheads either way.
These are the assholes that think they are better than everyone else. Smarter. All because they have money.
Yeah, I’m crying tears for them. Not!
“Investing 101: Don’t put all eggs into one basket.”
But most people on this blog claim they are only in cash. Alad is only in gold!
This is the first time in my life that I’ve thought non-diversification was less risky than being diversified across a variety of asset-classes. Am I right? Who knows—-time will tell. So far I’ve been glad I took this course.
I’m all in Treasuries. Have been for 18 months. Oh the horror of my losses…. wait.
Not me, Bill. In fact, I have been DCA into stocks for the second half of this year, thanks in part to your suggestion to diversify.
Since no one answered my question down below, I will do it. Stock indices have more upside potential now than gold. This, of course, does not mean I do not own gold. Probably now 14% of my net worth.
I am glad you are diversifying.
I was 98% into equities in 2000 when the crash occurred. Learned my lesson. Now with many indices at 50%, it will be tougher to get lower NAVs. I invite naysayers to start shorting the S&P 500 now
I invite naysayers to start shorting the S&P 500 now
==================
I had been short selling since late 2004/early 2005. Sold out of all my short positions in mid-October.
While I’m still largely in cash and Swiss Treasuries, I would not short or go against the market (the Fed) right now.
IOW, you are probably right about DCA at this point, Bill.
“But most people on this blog claim they are only in cash.”
Thats right and its a bit worrysome because unlike RE they are making more of it .
Yeah Yeah Yeah….then you all beeitch if they sell their holdings to diversify and then their company stock tanks…aka the tan man!
_____________
Investing 101: Don’t put all eggs into one basket.
High level executives in company A are supposed to be over exposed to the risk of stock losses in company A. That is the whole thing of aligning the interests of management with the interests of the shareholders stuff - not that it seems to have worked all that well when the incentive was all to the short term.
But retired people? Anyone who isn’t a senior executive of the company they are overweighted in?
Yeah. I got the fool part down pretty good. It’s that money thing I keep missing out on… I wonder how they managed.
There is no mystery to how wealth is created in this country. Or at least, how it WAS created in this country.
Leveraging assets.
You buy something using other people’s money. Then wait for it to go up in price, and then use the “equity” to leverage more assets. This is how most wealth is created, and it is also why this collapse is going to be epic.
This strategy does not work, because everyone took it to the extreme. Now leverage is in reverse, and it is ugly. And these same people are using our tax dollars to prop up their bullshit.
Most of these people did nothing more than leverage assets. Borrowed money, and leveraged it buying assets. No secret. Adds no value. Always ends badly when you run out of suckers. Well, unless you can buy politicians that will gladly use tax dollars to try to prop up the same assets.
The truth is, these people never deserved the wealth they had. They were mostly mediocre people that started thinking their shit didn’t stink solely because they leveraged assets.
Let them all eat dirt.
Oh yeah, Merry Christmas.
Agree, bananarepublic.
And Merry Christmas to you, too!
One wonders how these people got so wealthy in the first place, lacking a brain.
“One wonders how these people got so wealthy in the first place, lacking a brain.”
These victims were trusting Jewish folks. They were wealthy because they are smarter than the average Joe, and they were willing to take some risk. At least they are quickly vacating their properties, which shows honor…way more than the FB’ers we read about who live rent free for months, maybe years. My guess is that Bernard Madoff will be felled like Yitzhak Rabin.
Kidding, right?
“Kidding, right?”
’bout what, BB?
True that. I didn’t mean to disparage trusting Jewish people, having relatives on my hubby’s side who fall into that category. I’ve been to Aspen, and it’s hard for me to think of the fabulous, glitzy folk there as victims. Or trusting. Or even Jewish!
Somehow I have a hard time thinking of people who own glitzy multigazillion dollar Aspen homes in the same ‘trusting’ category as my sweet little Jewish mother-in-law. But it’s true that many of those who were bilked couldn’t imagine it happening to them. I did not intend to disparage Jewish folk!
how these people got so wealthy in the first place ??
For some it likely came to fast & easy…Lose the perspective on how difficult it is to earn it…
People that are talented at one thing are frequently inept at others. In the worst case, their talent in that one area makes them think they are experts at everything. I hear that doctors are particularly prone to this.
This is true. I should know, as I am one. My ineptitude is in the area of team sports. No one in their right mind would choose me for their volleyball/softball/soccer/you name it team.
There are few doctors who can afford multigazillion dollar Aspen homes, however. The Madoff investor class probably didn’t include many doctors.
here, here. unfortunately that be me. It’s never too late to learn though - I have learned immensely from this blog over the past year. I have avoided other “investments” in no small part to this blog.
People that are talented at one thing are frequently inept at others. In the worst case, their talent in that one area makes them think they are experts at everything. I hear that doctors are particularly prone to this.
Engineers too
Maybe some of these “rich people” got wealthy running their own little version of a ponzi scheme, back in the day.
Think about it. Most of them don’t work. Haven’t done an honest day’s work their entire lives. They either inherited it, or they ran a scam on the unsuspecting public.
Then, they hid behind laws or “corporations” to keep the public from clawing their money back. They’ve been doing this for generations.
It’s the ones who get caught that make them all look bad…
I’m just not welling up here. Greed has a way of biting you in the ass, especially when you don’t heed the sage old advice of “if it sounds too good to be true, it probably is”. The returns this guy was offering/promising were unreal- literally.
Madoff investor found dead of suicide inside Manhattan office
NEW YORK (AP) — The founder of an investment fund that lost millions with Bernard Madoff was found dead Tuesday at his Madison Avenue office of a possible suicide, authorities said.
Authorities found the body of Rene-Thierry Magon de la Villehuchet just before 8 a.m. at his office of Access International Advisors, located on Madison Avenue a couple of blocks from Rockefeller Center.
A French newspaper is reporting that the 65-year-old de la Villehuchet committed suicide. The New York medical examiner spokeswoman says it has not determined the cause of death yet.
Madoff is accused of running a $50 billion Ponzi scheme that wiped out investors around the world, with big funds like de la Villehuchet’s $1.4 billion Access International Advisers being especially hard hit.
A former business partner said that de la Villehuchet came from a long line of aristocratic Frenchmen, with the Magon part of his name referring to one of France’s most powerful families.
His fund enlisted intermediaries with links to the cream of Europe’s high society and jet set to garner clients. Among them was Philippe Junot, a French businessman and friend who is the former husband of Princess Caroline of Monaco.
De la Villehuchet, the former chairman and CEO of Credit Lyonnais Securities USA, was also known as a keen sailor who regularly participated in regattas and was a member of the New York Yacht Club.
He lived in an affluent suburb in Westchester County with his wife. There was no answer Tuesday at the family’s two-story house, which has a majestic view of a pond.
“He’s irreproachable,” said Bill Rapavy, who was Access International’s chief operating officer before founding his own firm in 2007.
De la Villehuchet’s death came as swindled investors began looking for ways to possibly recoup their losses. Hedge funds, which lost big to Madoff, are also coming up against investor lawsuits, since they had a fiduciary responsibility to protect their clients.
A handful of lawsuits have already been filed, all claiming that the hedge funds failed to properly vet Madoff and overlooked some red flags that could have steered them away.
“One formerly very wealthy couple has already put their house on the market and moved in with their grown kids.”
It has not just hit Aspen -
WE NOW HAVE OUR FIRST SUICIDE
A Frenchman from a noble family.
Something tells me this is about to become much more common….
http://www.huffingtonpost.com/2008/12/23/thierry-de-la-villehuchet_n_153147.html
Suicide not a shock to other Madoff victims
BY TRACY CONNOR
(NEW YORK) DAILY NEWS STAFF WRITER
Wednesday, December 24th 2008, 4:21 AM
* Man who lost $1B in Madoff scandal kills self
* Yachtsman was proud of ties to aristocracy
News that a hedge fund manager slammed in the Bernie Madoff scandal committed suicide did not come as a shock to some of the scheme’s other victims.
“I think what Madoff did was so outrageous that it’s got to have ramifications like this,” said Roger Peskin, a retired publisher who lost $3 million.
“This isn’t only money. This is people’s lives.”
Peskin, 65, and his wife, Diane, 44, had hoped to live off their nest egg until their two children - ages 13 and 9 - were grown.
Now they don’t know how they’ll pay for the kids’ private school, the mortgage on their new house in Bethlehem, Pa., or college.
“This thing has dramatically affected our lives,” said Peskin, who is facing the prospect of having to look for work in a shrinking economy.
“We’re just beat up by this whole thing. I think the future is really dismal.”
Chinese drywall fears widen in SW Florida
Richard Cesta’s on his third air conditioning coil in a few months at his Bella Terra condominium. The air in his home sometimes smells of sulfur. Like other Lee County residents, he’s worried he may be victim of Chinese drywall leaking corrosive chemicals into his home and endangering his health.
Those materials leak into the air as gases and combine with the moisture on an air conditioning coil to create sulfuric acid, which appears to be dissolving solder joints and copper tubing — creating leaks, blackening the coils and even causing the system to fail, Reid said.
http://www.news-press.com/article/20081221/RE/81220026/1076
“Charles Jans, a former vice president of McGarvey Construction in Bonita Springs who started this month as a partner in commercial real estate agent Grubb Ellis / 1st Commercial, said the importing of drywall from China is a practice of the past.
“I think we’re pretty much back to the local sources now because the demand’s way off,” he said — there’s no need to buy more expensive foreign products.
Drywall isn’t usually a problem, he said, because it’s thoroughly sealed off.
“It goes on the wall and they tape it up and then they sand it really well and then they spray a primer on and a final coat of paint,” he said. “All this acts as a sealer.”
What a complete ass. As if the drywall hangers actually did this. More likely it was a bunch of illegal alien labor hired cheap to do a quick job.
No, Muggy.
It was people who were buying who didn’t give a rat’s *ss.
They were not interested in WHAT they were buying, they weren’t going to live there anyways.
At least not very long, “I’ve got ‘equity’” that’s what REALLY mattered.
Yeah, the buyers are responsible too.
How many out there committed to taking on hundreds of thousands of dollars of loans without the slightest knowledge of what constitutes good construction?
Really, if I don’t research my investments and pick a bummer of a stock - it’s my fault. You think with so much on the line the buyers would have tried to educate themseleves or at least hire a compotent inspector.
edgewater and HBBrs,
I’ve said it before, this is the path that led me to HBB.
I was interested in shady construction practices in 2004 and stumbled into this blog.
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This type of thinking ( the kind that goes like “let’s observe and reason this out”) is not that common.
HBB is not a common place at all.
It’s not bragging or being cultish to say this, it’s the truth, people don’t think, too much effort to look, observe and draw your own conclusions.
I look with suspicion upon any home that has not withstood the test of time (20+ years ideally, though I really prefer the ones that are 80+ years old). I am particularly suspicious of anything that was built during the bubble. It will be interesting to see whether 2002-2008 built houses end up having a stigma in the near future. (Obviously, in my mind they already do…) I have already seen five-year old houses being sold as fixers.
My wife grew up in a farmhouse from 1800 on the dot. It needs new windows and porch (sagging), but that’s about it.
I love the sound of the creaky boards, and the house breathes like no other house I’ve been in. I take unusually long naps there…
One man’s “breathes” is another man’s “drafty.”
At the height of the bubble, a person I know complained daily about how shoddily a patch of local spec houses were being built. She’d walk by and complain that they were skipping some important step, or skimping on this, or noticing that they weren’t pouring enough concrete for that… They were indeed crappy houses. As soon as they were completed, she stopped criticizing them and went in and bought one.
My sister is studying interior design. One of her class projects involved the class driving to a new home construction site and identifying all of the mistakes being made.
When I was in college, many many moons ago, an architecture major friend was showing me her design for a building. It was round, quite big, and had two floors. I looked at it and asked how the second floor didn’t fall in, since I didn’t see any columns or special beams holding up the floor over that huge span. She looked rather surprised for a moment, and said arily, “Oh we don’t worry about that. They just judge us on our design. We could have a sewer pipe for a toilet going down the middle and it wouldn’t matter.”
It’s too bad these budding Frank Lloyd Wrights weren’t graded on structural acumen. They would have flunked out, and we would have been mercifully rescued from commercial design that drives me away from a business, not toward it. Has anyone seen those awful awful commercial buildings with the round bump-out at the corner with the funny circular roof overhang?
“Has anyone seen those awful awful commercial buildings with the round bump-out at the corner with the funny circular roof overhang?”
As a structural engineer I’ve seen far to many “wishing makes gravity go away” architectural designs come across my desk. I’m amazed how many clients worry about every penny being spent on structural materials trying to create a “green” building but gladly waste hundreds of thousands of dollars worth of meterials so they can have a functionally useless entrance canopy.
whats that saying you get what you pay for?
I once said to a buddy of mine, that the homes built 70-50 years ago seemed stronger and better than the ones today.
His response, well to be fair the builders back then all spoke the same langauge and could read plans
And the wood was stronger.
Trees were older when harvested; therefore, more rings.
I had a 110-year-old house in CA - it was great.
I installed a gas fireplace - when I was installing the chimney I had to put in a couple of 2×4’s in the ceiling. When I tried nailing through the existing 2×4’s (real 2-inch by 4-inch) all the 16-penny nails kept bending. At first I thought “WTF? Cheap nails” but then I realized it wasn’t cheap nails - it was because the wood was rock hard solid. From then on I knew that I had to use screws with pre-drilled holes in that house. It was great.
The window frames in the house were old-growth heart redwood. When we had a guy in to look at refurbishing them he about had a woody (pun intended). They had withstood 110 years of weather with minimal problems.
I miss that house.
(P.S. the house had some other interesting history - Winona Ryder lived in it for a while, in the early years of her career. I heard some … interesting… stories.)
Its rate of growth, not age for the most part.
Oak trees that grow faster(wider rings) are stronger than oak trees that grow slower.
Packman, did you live on the west side of Petaluma?
Yep, on Bodega Ave.
“Its rate of growth, not age for the most part.”
The two are interlinked though. Lumber nowadays is “fast grown” using fertilizers, and thus the rings are much wider. Most lumber is harvested from 20-year old trees I believe, but the size of these trees is about the same as the size of old-growth trees that would be 40-50 years old at least.
“Oak trees that grow faster(wider rings) are stronger than oak trees that grow slower.”
I don’t work in lumber, but I’m pretty sure the opposite is true. I know from personal experience it’s true for redwood and for fir.
Also oak isn’t used to build houses, that I know of - generally pine is now used universally.
Packman, I also lived there, but I moved to Denver a few years ago. I miss those houses, too. It’s a sweet little town, but the prices are ridiculous.
Petaluma is one of the neatest places ever - not sure if you’ve been back but they’ve done a lot with the downtown - mostly good things actually (new theater and some new buildings - mostly good style though). I left in 2006 right as things were opening up.
You’re right prices were ridiculous. We gulped big time when we bought in 2000, but bit the bullet. We sold in 2006 for 125% gain (including some work I had done) - got *really* lucky on the timing, since that summer was when inventory shot up.
I look forward to visiting some day, and heck we may even retire there. We’re close with family - so my goal is to get everyone to move out there from the SE (NC, VA, FL). Previously there was no way with house prices being what they were - now I’m thinking in 10-15 years or so it may be quite affordable :).
I bet you will find that most of the houses more than 100 years old are built from oak.
Packman, At our “cabin in the tundra” as Exeter calls it, it is all rough sawn, local true 2 by lumber. It is the hardest toughest stuff I have ever dealt with. The guy who built it was meticulous and I am very grateful for his efforts and attention to detail though I do occasionally curse him when making an improvement ad have to cut through or work around something he “overbuilt.” It has survived 35+ Adirondack Winters without any sign of wear and tear whatsoever.
Winona Ryder lived in it for a while, in the early years of her career. I heard some … interesting… stories.)
Do tell!
And how do we know if the sulfur is from the drywall or regular Florida water? I guess you could saw open the pipe to see if the inside is rusted too.
Winona Ryder lived in it for a while, in the early years of her career. I heard some … interesting… stories.)
Do tell!
Not too big a deal actually - just stuff I heard from the people we bought the house from, who had bought it while she lived there (her folks rented it).
Her family was good friends with Timothy Leary, who was her godfather. The later owners found a bunch of odd stuff in the attic, including a few stacks of “Free Timothy Leary!” posters and such.
At one point they said several months after they bought the house, they saw a couple of characters poking around in the garage. He went out to investigate, and they said they were looking for their “stash” that was left in behind a loose car seat in the garage. The owner told them he had thrown all that stuff out, and to get lost. Well - lo and behold when we moved in, we found an old car seat in the attic of the garage! No stash however dangit (though I’m sure it wouldn’t have been quite… stale… after 15 years or so).
Apparently there was a lot of Beetlejuice paraphernalia around, like stickers on the ceiling and such too.
He met her briefly - said she was a pretty odd person, which of course wouldn’t surprise anyone.
Then there are the ranch homes in my neighborhood, built in the 1950s, all by the same builder.
When we decided in the early 1990’s to replace a 12-foot expanse of sliding glass doors to the patio, we found there was absolutely no visible means of support. The whole thing was supported only by its frame.
I guess you could argue that it’s a sign of good construction that it hadn’t all come tumbling down. Anyway, the moral of the story is: ‘old’ does not necessarily equal ‘good’.
RE: said the importing of drywall from China is a practice of the past.
Like who cares if you’re one of the poor SOB’s stuck with the stuff.
These people are lookin’ at thousands of bucks to gut and refurbish with made in USA.
Also include a fookin’ monster mess.
Expect divorce rates to ratchet up.
Another notch in the belt of Globalism.
“It goes on the wall and they tape it up and then they sand it really well and then they spray a primer on and a final coat of paint,” he said. “All this acts as a sealer.”
Wow they paint both sides of the drywall … and if the air conditioner is in the attic where I’m sure they paint all the Drywall up there.
More crap coming from China. No surprises here. That’s it, when it comes time to buy a house, I’ll get one from pre-1992 or so.
Or ha, I’ll build a Tudor the old-fashioned way: with real wood beams and fill in the spaces with mitered straw bales and plaster. Hey, that sounds cool.
Hmmm I was thinking, what about living in a 6000sqft steel building. They cost like $100K without the concrete and building out an inside. In the end, use 1/2 for living (or less), and the rest as garage and space for robots to build some sort of product that could be sold.
Also, some old farms insulated their homesteads with corn cobs, which worked well. And I’m sure “R value” hadn’t been invented yet.
“The air in his home sometimes smells of sulfur”
Oh, sure. Blame the dry wall. I guess blaming the dog is passe.
A lot of well water in Florida smells like sulfur, BTW. We had some friends who lived in Wimauma, out east of here. Take a shower or run the sink tap, sulfur smell. We went out to eat at a little country restuarant close by and I ordered a glass of homemade lemonade, made with sulfur water.
We call it buttwater. I always cringe when I see tourists washing or sipping from a reclaimed sprinkler head. Seen it more than once. C’mon, Ben, need that barf gif!
:barf:
A water softner system will generally help remove unwanted freebies from well water.
iron sulfide. Rid-out in the water softner. Orange laundry stains. Ah, the memories.
We used to hitchhike down Interstate 75 to to Myakka for a long weekend in winter. Always in the backpack: Kool Aid, to make the water drinkable.
The sulfur might be linked to the widespread phosphate deposits.
Of course, in Texas, you got your hydrogen sulfide gas. That stuff is plain dangerous, not just stinky.
How did I get onto this “smells I have known” thing?
Now I know why my hotel stank of sulfer last Summer in Florida. My wife and I thought there must be some fishy construction.
That’s really scary. I didn’t even know there was such a thing as “bad drywall”. Makes you wonder how many other toxics we have imported from China during the globalization boom.
Super Bowl Ads Go Co-op
According to a representative of ad agency Cesario Migliozzi, it is in discussions with the network about buying a co-op ad in the Super Bowl which may be the first of its kind. The agency is attempting to line up enough advertisers (eight) at $395,000 a pop so that it can cover the cost of a 30-second spot in the Super Bowl Feb. 1 that will feature all of them. NBC is said to be amenable to the idea…
http://www.broadcastingcable.com/article/CA6624637.html
Maybe we could all chip in and buy into an advertisement co-op during the superbowl. During our 1/4th of a second we can show a few frames of a ranch house with a failing, old for-sale sign in front, and a mushroom cloud in the background.
Below is a link to an article on the deterioarating economic situation in the Keys. I know several of the charter captains and commercial fisherman (lobster & stone crab). Demand just recently fell off a cliff. Many captains have 10% of their usual bookings. Two of the commercial crabbers I know are pulling their traps and seeking other employment - many restaurants still have large amounts of stone crab claws frozen from last season and so demand is just not there and prices are plummeting. There are always alot of homeless in the Keys (you won’t freeze outside in the winter here), but lately I’ve seen a marked increase. Here is the article from the Key West Citizen :
http://keysnews.com/node/8659
Dang - I love the keys. That stinks. Though it’s nice for their sake that there’s less tourism (I know many locals down there really hate the tourists).
I always think its funny how the tourist destinations all hate tourist, but cry when they don’t come.
Maybe this is the winter I should go to the Keys on vacation, huh?
I’ve never been so here’s my chance.
” Maybe this is the winter I should go to the Keys on vacation, huh?”
You should, as a Manhattanite you will appreciate Key West’s cozy scale and good food. I love it there, even though it’s an over-priced tourist trap.
Never been there either, and it sounds like a great place to bum around a while. And it’s warm!!!
Its a great place. My wife and I go about every year. We stay in Key west, Curry mansion. Love that place. Small, open bar from 5-7 PM. Nice breakfast in morning by the pool. One block from Duval. Great place.
Lane
Place is overrun with cats as it is.
(True story.)
Those Hemingway cats with the toes (or lack thereof)?
LOL
I have one and she is beautiful!
Her name is Oreo and her front paws look like mittens.
Hubby wanted to name her two-paw.
I wasn’t having any of that!
Leigh
Two-paw Shakur?
That would be a good name.
Leigh doesn’t sound like she would care for a violent cat whose meow would prolly be an incomprehensible utterance.
“Her name is Oreo and her front paws look like mittens.”
Exact same thing with my dog. She is my third child and we are a package deal. No Oreo, no Blano.
No, that’s more NYCityBoy’s style.
For him I also offer a pair of cat names: Bleeck and Bleecker.
A neighbor wanted to name his sixpack, but the wife and daughter’s wouldn’t go for it.
“Two-paw Shakur?”
Biggie Claws?
I almost forgot… PET ESSAY WRITERS
I am going at the end of the month. I am a salt-water fishing fanatic and there is no better place on earth for that than the FL Keys. I was fishing off those long Key bridges last winter and it absolutely amazed me on how many type of fishes you can catch by simply hooking a little shrimp and drop it into the water. Most of the time the bait is gone and fish on in 5 seconds or less.
Interesting! I’ve been thinking if I get laid off of my job, I’m going to go diving in the keys or southern Florida for a few days. On the way back I’ll try to drive through Alabama, Louisiana, Tennessee and Kentucky just because I’ve never been to those states. Then I’ll come back to Norfolk for a few days, then go to Boston & Maine because I’ve never been there either.
Maybe I can get a deal on dive charters in the keys.
I traveled across country twice this year. One of the most beautiful roads on my travels was the Blue Ridge Parkway, a lasting achievement of the New Deal. This is what happens when public money is invested in public improvements. Drive 50 miles of this 2 lane parkway and get great views of the Smokey Mountains and the Blue Ridge Mtns into Tennessee. Memphis by the way is one stop I’d like to make again. Great ribs and terrific live music.
http://en.wikipedia.org/wiki/Blue_Ridge_Parkway
Melvin,
Good to see you posting. Haven’t seen you posting recently.
Plan on visiting that parkway in April. Taking a family trip for a month across country. Never really been anywhere but California and boarding states. It’s the gift I am giving to my family and myself before the kids fly the coop. I am really looking forward to Boston and New York, will go to D.C. even though I am disgusted with the nonsense that has been going on there. I will be traveling by car from NoCa. plan to visit Mt. Rushmore on the way there, then travel back on the 40 to see some of the southern states. If anyone has any suggestions on places I should visit they would be greatly appreciated.
Long time reader (over 3 years) seldom poster,
Julie
Happy holidays.
If you’re taking the Parkway, you won’t be far from Biltmore Estate in Asheville. And Great Smokey Mountain National Park.
I don’t know if you object to the incoming nonsense or the outgoing nonsense, but the city iteself is less partisan than you would think. Go see all the free stuff. If you’re pressed for time, don’t go up in the Washington Monument. It’s okay, but generally not worth the hassle. My personal fave is the Portrait Gallery.
Check out the Biltmore Estate near Ashville, NC on Rt 40.
Julie, me thinks you should talk to me. river and source (no spaces) at yahoo
I’ve been down the Blue Ridge Parkway a number of times! Have camped along it with my parents. It’s a few hours from Virginia Beach / Norfolk. I’d say I was last up there 3 or 4 years ago. Definitely a nice drive!
Personally I dislike Key West. Tourist trap, too many people, lots of dirt bag con men….but that’s just me. I like to stay at this dive motel midway down Islamorada, and get away kayaking….but yes beauty, birds, and fishing! As an aside I could have bought an acre on key largo in the 70’s for 5K,but thought that was too much for bare land…Oh well.
Sorry, I self-imposed lurk-mode a few days ago, but I can’t do it. I’ve never smoked crack, but I imagine this is how a crackhead feels. I need a hit from the HBB pipe.
However, I will continue to fight my temptation to be a jester
Can we help you fight the temptation to move to Rochester too???
LOL
“Can we help you fight the temptation to move to Rochester too??? ”
Sure, I’m open to discussion… but what would you do? 99% of our family resides in either Rochester, NY or Pinellas, FL. I’m stuck between an abandoned factory and a stucco chitbox.
I lived in TN and loved it, but can you imagine how they’d react if I said, “I’m originally from New York, but just moved here from Florida.”
The locust I hate is the locust I am.
Tell the people on Rocky Top: “Whah, ahm one of dem dere 17-ye-uhr ci-cay-duhs.”
Sure, I’m open to discussion… but what would you do? 99% of our family resides in either Rochester, NY or Pinellas, FL. I’m stuck between an abandoned factory and a stucco chitbox.
Well, I’m going to dissent again the dissenters.
My take: as long as you’re prepared for the winter weather and the abysmal wages in upstate New York (and it sounds like you are), it’s a lovely place to be. I enjoy that whole corner of the state — in the summer and fall.
It’s a great area to raise kids, IMO, as long as the aforementioned wages and weather aren’t an issue. Don’t undervalue the proximity of family, either … we wish our relatives were much closer.
“My take: as long as you’re prepared for the winter weather and the abysmal wages in upstate New York (and it sounds like you are), it’s a lovely place to be. I enjoy that whole corner of the state — in the summer and fall.
It’s a great area to raise kids, IMO, as long as the aforementioned wages and weather aren’t an issue. Don’t undervalue the proximity of family, either … we wish our relatives were much closer.”
ET wins it all! Ding! Ding! DIng!
Rochester?!! That’s no better than NW Pa. Actually with the property tax levels in NY state, Rochester may be worse.
“That’s no better than NW Pa”
Crap, am I starting to sound like the Oil City guy?
LOL, no, not at all.
No. There used to be a poster here named “Bye FL” who went on incessantly about how much better things would be once he made his move to NW Pa.
I suspect that ByeFL was a she. Do you know any guy who collected Beanie Babies? And held on to them even after the craze was over?
“There used to be a poster here named ‘Bye FL’ who went on incessantly about how much better things would be once he made his move to NW Pa.”
Oh, God, I remember. From his posts, I interpreted that NW Pa is Heaven. Anyplace else in the world is Hell.
But, I hope he got there if that’s what he wanted. Me? I’ll take Hell, TYVM.
“Do you know any guy who collected Beanie Babies? And held on to them even after the craze was over?”
Well, Florida attracts this type of person. I wonder if the sheriff had to tell the neighbors when he moved in?
Hey, I was going to make that Oil City joke.
I’ve been to Oil City and went to College in N.W. PA, quite an eye opener for me….
I’d vote for the Brandywine area in SE Penn.
Another poster ET? also mentioned don’t undervalue the proximity of family.
Most of my family is in Ohio River Valley; spouse’s job has our stake in Central Valley at the moment.
This time of year, as Neil Young would say, I “feel the pull.”
itsa ok
Jester? Be a eunuch instead.
At least a few of us might like to get some in ‘09, cougar.
Yeah, dream on Blano. Polly was very clear on not being impressed by your home non-ownership status.
Au contrare, cougar, IIRC. She was unconcerned with “things” I thought. Plus SanFran gal was swooning at my renter status, so I refuse to give up hope.
“I need a hit from the HBB pipe.”
If you’re not shooting you’re not really partying.
Frozen Ports in Long Beach, Singapore Mean Bleak 2010…
Dec. 23 (Bloomberg) — Chris Lytle, chief operating officer of the port of Long Beach, California, took in a panorama of the slumping world economy from his rooftop observation deck one day this month.
Shipping cranes stood still, truck traffic trickled and a cargo vessel sat idle, moored to a pier.
“You never see that,” Lytle said. “It’s quiet. Too quiet.”
Port traffic has slowed from North America to Europe and Asia as a recession erodes consumer demand and the credit crisis chokes off loans to export-dependent companies. International trade is set to fall by more than 2 percent next year, the most since the World Bank began measuring it in 1971. Idle ports around the globe are showing how quickly a collapse in trade can spread, undermining growth in each country it reaches.
September and October are typically Long Beach’s busiest months as U.S. retailers take deliveries for holiday sales. This year, imports fell 15.8 percent from a year earlier in September, 9.5 percent in October and 13.6 percent in November.
“Everybody expects 2009 to be a bleak year,” said Jim McKenna, chief executive officer of the Pacific Maritime Association, a San Francisco-based group representing dock employers at U.S. West Coast ports. “Now, it looks like 2010 is going to be just as bleak.”
Stockpiles
Coal is piling up at the Mozambique port of Maputo. Brazil’s exports of cars, household appliances, machinery and furniture fell in November from a year earlier. The port in Singapore, the world’s busiest for containers, posted its first month-over-month decline in seven years in November, at 1.5 percent.
Shipments to the port of Rotterdam, Europe’s largest, are likely to remain stagnant this year compared with 2007, said Jan Westerhoud, chief executive officer of Europe Container Terminals BV, the largest handler at the facility.
“The problem is that people can’t get financing, no matter what their credit situation,” said Ed Rice, president of the Coalition for Employment through Exports, which represents companies such as Boeing Co., Caterpillar Inc., United Parcel Service Inc. and BNP Paribas SA. “Banks are cancelling credit lines even for creditworthy customers.”
Shipping Rates Fall
The Baltic Dry Index, a measure of shipping costs for commodities, is down 93 percent from a record in May, a sign that traders expect export volumes to stay depressed.
Gasp! We might have to start making stuff here in the US again!
No, not that!
Why, we need to import cheap plastic crap from China so we can grow our economy!
You must be a pinko communist, palmy!
I find it quite annoying that global businesses basically live off the check-cashing place to get them through the next 30 days. If a consumer does that, they are spit on as white-trash-subprime-losers [insert extra pejoritive]. If a business does that, they are Jack Welch and sell millions in “leadership” lectures.
Maybe the roots of this Great Recession can be found with the beginnings of the just-in-time financial model. [I never liked just-in-time of any stripe. Too unnatural.]
+1
I made this point a couple of weeks ago about the American auto industry - how in the world can they have so little reserves that just a few months worth of slow auto sales drives them into bankruptcy? If you look at auto sales charts - they really didn’t start to drop off significantly until early 2008. It boggles the mind.
You can’t have both the utmost efficiency and a lot of redundancy (= robustness.)
They have pushed for the most extreme efficiency as the only goal worth pursuing. IMNSHO, robustness is a worthy goal too.
Compare the finances of the average stretched-out FB, and the average HBB denizen, and the point could not be more obvious.
Oh, but then you’ll make 11.85% profit instead of 12.85% profit for your shareholders.
In the long-term, there is no contradiction between the two. Survival is doing the best thing for your shareholders while your competition is busy annihilating themselves, you’re gaining marketshare.
In the short-term, you get pain. Tons of it.
Once again, the comparison between FB’s and the HBB could not be more obvious.
They have pushed for the most extreme efficiency as the only goal worth pursuing. IMNSHO, robustness is a worthy goal too.
Great observation — the divide between efficiency / just-in-time logistical blah blah blah and “robustness” (or “sound, long-view, conservative business practices,” as some people might frame it) was allowed to grow too much, too quickly, and too imprudently.
Efficiency models don’t tend to account for the possibility of systemic breakdowns, as those make things pretty in-effing-efficient.
Survival is doing the best thing for your shareholders while your competition is busy annihilating themselves, you’re gaining marketshare.
CEOs and shareholders have not been aligned in quite a while.
I believe even Greenspan was shocked that CEOs took short-term profits to the detriment of their own companies.
They have NEVER been aligned. It’s a myth.
Unless you own the company, and it’s your own money on the line, the interests will NEVER be aligned.
I still think CEO’s should be paid in stock on a monthly basis that is automatically sold in exactly some fixed number of months. Ie CEO is given 1/12 of stock in January 2008 and then that stock is sold Jan 2011. The whole idea that ceo’s can sell when they want leads to the cooked books. Yes they have lock out periods but it’s still insider trading. CEO says, next year I’ll sell 80% of my stock so this year I’m going to hide debt, increase buy backs, and lie about income. Bingo instant riches. This type of insider trading needs to be eliminated.
We could enact a rule that says all CEO income (ie dividends and stock gains ect) is taxed like wages ie 35% unless they take this type of pay package. Then give them a small brake.
Unless you own the company, and it’s your own money on the line, the interests will NEVER be aligned.
————————–
Bingo!!!!
We could enact a rule that says all CEO income (ie dividends and stock gains ect) is taxed like wages ie 35% unless they take this type of pay package. Then give them a small brake.
———————————–
I think we should eliminate stock-based compensation altogether.
IMHO, a portion of all profits should be pooled, and ALL employees should get a certain percentage of that, including the executives, who would get a larger share.
If an executive manages to get a company through a particularly difficult time when there are no profits, he/she should get a bonus that is payable when the profits are realized.
Why do you need reserves when you have the tax payer? Reserves are for suckers if you can score a bailout any time you get into trouble.
Not only did they not have reserves, they also had over three decades to reinvent themselves. Around about 1990 I thought they were making some headway - then like much of this nation they opted to recreate the circa 1950 Bedford Falls ideal.
Too bad the U.S. isn’t the victor in 2008 that it was in 1948.
Its my understanding the GM has been in trouble for over a decade and was just costing on its 0 APR sale, and its sale of GMAC. They were a lame duck lone before this trouble happened.
Mean while, here in Aichi Japan, the toyota employees are in trouble, and every one is feeling it…there is this quite panaic in the air.
Today GM/Ford have resumed their death spirals.
Do explain your comment about Toyota…
Yes, tell us what it’s like in Japan please.
Toyota makes a lot more things than just automobiles. I think they even have their own city.
RE: Today GM/Ford have resumed their death spirals.
While I have purchased domestically produced vehicles all my life, I’m now a waffler.
While build quality has ALWAYS been suspect, only God knows what the bean counters are skimping on, relative to the parts which are goin’ into their cars these days.
Plus, dealers also were notorious for haggling over warranty work. And this was when times were good!
Can’t imagine it now with all the penny pinching goin’ on.
Ugh…it is indeed a death spiral.
“Toyota makes a lot more things than just automobiles. I think they even have their own city.”
American car companies also have their own city.
I just heard the mayor of Detroit on NPR praising the auto bailout. He sounded exactly like Ted Nugent. Until that I didn’t realize there was a Detroit accent.
Not just the auto industry. How many local homebuilders or furniture stores and home decor places etc went down after being in business for 50 years?
Somebody here said that our near-hyper inflation has already happened. Except, we didn’t have matching wage inflation because of outsourcing, so we filled the gap with Mastercard MEW cash. Problem is, wages are yours to keep, debt you have to pay back.
During the last bust in the 90’s, I remember all the Persian rug businesses going down. It’s happening again right now. But according to Nouriel Roubini, the news in early ‘09 will get scary. Predictions about what businesses will be going down this time?
I would call the run-up in housing uber-inflation. Also college tuition, cars, boats and hotel rates (property taxes?). MEW and low int. rates made it all happen. Wages didn’t go up, but figure in MEW and incomes did go up for a decent portion of the population. How can you not figure, ten’s of thousands of dollars spread out over thirty years, as anything but income? It was spent on the items listed, making those prices skyrocket.
During the last bust in the 90’s, I remember all the Persian rug businesses going down. It’s happening again right now.
It sure is happening now — there are lots of Persian rug dealers near my office (I don’t know why there are so many Persian rug stores around here, though it’s nominally Chicago’s gallery / interior design district) — many of them are having 70% off or liquidation sales.
Little Al– When was the last time you saw a Persian rug place that DIDN’T have a “closeout- going out of business” sign out front. I have to conclude that like gyms that go in and out of business in the blink of an eye it’s just part of the business model.
One of the many books I picked up after seeing it mentioned here was “Class: A Guide Through The American Status System” by Paul Fussell.
http://www.amazon.com/Class-Through-American-Status-System/dp/0671792253/ref=cm_cr_pr_product_top
I remember one of the things mentioned was that old, worn, Persian rugs were associated with “old money”, while new ones were strictly “new money”. This is one of those pieces of useless information that I now carry around with me. Thanks heaps, HBB.
At least I know to avoid “prole gap” when buying a jacket…
“Somebody here said that our near-hyper inflation has already happened. Except, we didn’t have matching wage inflation because of outsourcing, so we filled the gap with Mastercard MEW cash.”
With all the money that was sloshing around, I’d agree we already had mass inflation. I grew up skiing/snowboarding, and though that’s kind of gone by the wayside the past 7 or 8 years, I was checking out lift ticket prices today. $80. Wow. Everything has rocketed up over the past decade- except for wages. It seems that now all the talk is about yet another round of inflation right around the corner. Unless there’s some sort of miraculous wage growth, I don’t see how the money can make it into the people’s pockets. Peak debt has run it’s course.
I bought that book on a whim as well. Enjoyed it! Keep that jacket collar tight!
“With all the money that was sloshing around, I’d agree we already had mass inflation. I grew up skiing/snowboarding, and though that’s kind of gone by the wayside the past 7 or 8 years, I was checking out lift ticket prices today. $80. Wow.”
My observation as well. In the mid-90’s most lift tickets were $40 or so. Between the tech and housing bubbles they’re now up to $80 or so as you say. Hmm - up 100% in 10 years - sound familiar?
I wonder if there are any public ski resort companies I could short…
Public ski resorts: MTN = Vail Resorts…
Trade fell 2 % and the ports are “idle” ?? There is *one* cargo vessel moored and the port is “frozen” ?? By the way, I counted cargo vessels moored off Singapore port, to keep me from getting sea sick, early this year. I soon got to one hundred and stopped counting, and was told there are always that many.
hi from singapore! [waves in the direction of the US]. the economy here hasn’t seen the dramatic slowdown of the US, xmas shopping was frenzied today. the overbuilt luxury condo market has started to decline from its stupid peak, off 20% or so, but there is a huge glut of partially finished projects still coming online. the HDB (government built housing which can be purchased with a withdrawal from a personal SS-like account) market is holding steady, particularly in the central area. I am trying to convince a friend it’s impossible for the most valued districts not to fall eventually as the outskirts fall, but she’s skeptical.
Hi from the US. Please keep posting belle. What you just posted was fascinating. Would love to hear more about your perspective from Singapore
“The HDB (government built housing which can be purchased with a withdrawal from a personal SS-like account)…”
Interesting concept…
Simplified: You have to have money to buy things.
My $.02…
I work for a company that does between 50 and 100 million in business each year. There are currently 250 employees. Our bonus this year was 40% of gross salary.
There are plenty of biomedical firms hurting big time and announcing layoffs. Why is the company I work for doing so well? You could say niche market, closely held, quality, etc. I’ve got 2 words.
No debt.
Nice post wmbz….
Baltic Dry Index. Reminds me of a guy at work that was day trading DRYS, when it was between $50 and $100 (its $9.58 now). About six months ago I finally convinced him to pay off his debts instead (including most of his house). While he was trading the stock he kept stopping by my office with some piece of news about why the bubble would last or what some analyst said and I kept beating into his head that the bubble would pop. He thanks me every time he sees me (about once a week for the last few months). Just about everyone else at work never listened to my rants about GD2.
Congratulations on the save!
Feinberg Despised in Wisconsin Where Cerberus Lives Up to Name…
Dec. 23 (Bloomberg) — Just about everyone in Kimberly, Wisconsin, hates billionaire Stephen Feinberg.
“This is a greedy, extremely greedy guy who doesn’t care about other human beings,” said Jeffery Wyngard, a third- generation Kimberly mill worker with 30 years on the job.
“Feinberg has no morals,” said paper mill workers union local president Andy Nirschl.
“There won’t be a lot of Stephen Feinberg Little League fields,” said Bob Brukardt, who also worked at the mill for 30 years. “He sold his soul to the devil.”
Feinberg inspires this reaction in Kimberly because Cerberus Capital Management LLC, the company he founded in 1992, owns NewPage Corp., which closed the town’s 119-year-old paper mill that Local 2-9 of the United Steelworkers says was profitable when NewPage bought it nine months ago. Six hundred people are out of work in the town of 6,200 at the same time Cerberus’s money-losing Chrysler LLC automotive unit was seeking a taxpayer loan.
The Kimberly workers are searching for new jobs as the U.S. unemployment rate reached a 15-year high last month. The government has pledged more than $8 trillion to rescue cash- strapped financial companies, plus $4 billion for Chrysler.
‘Pent-Up Anger’
“There’s a pent-up anger wherever I travel,” said Leo Gerard, president of the Pittsburgh-based United Steelworkers, which represents 1.2 million members, including the Kimberly mill workers. “People feel very much like they’re being screwed. I really think you’ll see tens of thousands of people if not hundreds of thousands taking to the streets and protesting across the country.”
During the Great Depression of the 1930s, Kimberly paper mill bosses spread the work around so every family in the Wisconsin town could put food on the table, said Mark Van Stappen, whose grandfather started at the mill in 1892.
Cerberus’s investors include pension funds, endowments and family savings, and the company has a fiduciary responsibility to protect those investments, Tim Price, a Cerberus managing director, said in a phone interview.
Doubt that the opinion of a buncha rubes matters to Stephen Feinberg either.
So you won’t name a little league field after him? Wow, that should really set him a tremblin’ down to his boots. Who could possibly not be afraid of a credible threat like that?
How do you make money by buying a busniess and then shutting it down?
The land is worth more then the business. But this is what’s different about this depression. Companies are firing workers, and closing down barely profitable businesses.
Newspapers did it successfully for years, until the advertising genie fled the bottle and the audience became publishers.
Diamler-BenzeCerebus did the same thing by buying Chrysler.I think you make it up in volume or something. Not sure, I don’t have an MBA from an Ivy League school.
I’m guessing that they got caught when the music stopped. The LBO business model was to buy it, saddle it with unsupportable debt levels, and then sell it to the greater fools on Wall Street on the basis of your “turnaround” expertise.
This _used_ to be the model, Jim. In its current incarnation, the buyer pays themselves huge “fees” as part of the re-structuring, essentially getting all of their money and then some back out up-front. Then they leave the beast to die a slow death, and don’t really care whether it ends up being worth anything down the road. They may still own it, or some part of it, but they’re not really “invested”.
I would say the model to to buy it, ditch unprofitable business lines the previous owner hung on to for sentimental reasons and then sell it to some other company or to Wall Street. Their value add is in their lack of sentimentality about the overall business. You could say that they are cruel, but the fact is that they are cruel in much the way the firm’s competition is cruel, and the way the march of time is cruel to unviable business models.
Buy solvent good business, load it up with debt, kill it, profit?
Buy, load and sell BEFORE it dies. That last part is important, son.
Profit
Have you seen CEO salaries.
Company stock might pay dividends.
Company might purchased over priced goods from another company you own.
So you borrow a billion to buy the company, and a couple more to keep it going. You sell all of the assets and lease them back to extract the maximum amount of cash. Somewhere in there you go public and sell as many of the shares as possible before the whole mess collapses.
According to some, the financial industry wants to get its hand on hard assets? And then, what to do with them? Will bankers take care of plumbing in residences, chop onions in restaurants, operate paper mills, hotels, and lastly, hospitals? ‘next crop of surgeons, apply at BoA’ ??? (Didn’t they own many farms, once, looong ago, did not go that well, I hear. The know-how was kind of missing).
“Cerberus’s investors include pension funds, endowments and family savings, and the company has a fiduciary responsibility to protect those investments”
Good idea, but then why exactly did you buy Chrysler when when Mercedes-Benz dumped it? anybody with an ounce of intelligence knew that the ship was sinking, that’s why Mercedes-Benz was so desperate to get rid of it.
Suggestion: Put Chrysler on Ebay, starting bid $0.99, no reserve.
See what you can get for it.
“why exactly did you buy Chrysler when when Mercedes-Benz dumped it?”
A couple reports I read said Cerberus wanted Chrysler’s finance arm to go along with their majority control of GMAC. Once they got it, they’d dump the auto operations.
Remember, Cerberus didn’t actually pay Daimler any money to buy Chrysler….they just agreed to put X number of billions into Chrysler to take it off Daimler’s hands.
I had a business partner like that. Over leveraged from too many projects, so he shuts down the only project making us money.
We parted soon after.
“Since the Federal Reserve began issuing debt-based US dollars 95 years ago, the US dollar has lost 95 % of its value. The whiff of the dollar’s demise is now in the air and unless something is done quickly, its end is imminent. There is only 5 % left to go.” Uh-oh, another of those crazy attacks on the Federal Reserve? The majority of Americans admit that the economy has soured but do not see any connection between the ruin of the dollar and the antics of Congress and the Federal Reserve. There seems to be a general impression that “if we can get enough money flooding into the economy we can restore those light-hearted days when we happily spent money to lift our spirits and buoy the economy.” Alas…we dug a very large hole and getting out of it is going to be a tedious chore.
only 5% left to go?
of course not, it can easily decline another 95% from here
only this time in 95 weeks or so, instead of 95 years.
“The whiff of the dollar’s demise is now in the air and unless something is done quickly, its end is imminent.”
Lol. Do you meant these worthless fiat paper things that everyone is so desperate to get hold of to solve their financial difficultities?
I reiterate, double-digit annual inflation will be here before the end of Obama’s first term.
You may be right, but for now deflationary forces prevail.
Go with the flow.
I’m learning combo.
Thanks.
I understand the deflation process, but when would inflation kick in, when the Gubmint starts works projects? When the debt comes due? Explain it to me like I am a 7 year old.
Inflation will kick in when people start borrowing (at historical low int. rates) to overspend on limited supplies. Limited supply won’t happen with housing for quite some time. Wages won’t go up until the unemployment figures go down and the new gov’t, somehow, restricts outsourcing. Deflation will be here awhile.
Oh my word. Do you really just make this stuff up or is it premeditated?
“Explain it to me like I am a 7 year old.”
Dollars can be traded for labor and for things, and labor and things can be traded for dollars. This convertability of dollars into and out of labor and things are what gives dollars their value. Some people complain that dollars are not “backed” by anything, which is not true: Dollars are backed by everything they can be exchanged for, which is everything that is for sale.
When dollars are easy to get then their value declines in relation to the labor and things that they can be exchanged for. Lots of available dollars causes prices to rise (i.e. houses). Some people think of these rising prices as inflation. It is more accurate to think of rising prices as the result of dollars being easy to get, meaning rising prices are not inflation but rather are the result of inflation.
When dollars are hard to get then they can buy more labor and more things. This means those who want dollars will have to work harder/longer to get them. Those who want to trade their things for dollars will discover, because of the difficulty of getting dollars, that they’ll have to lower their asking price in order to entice the buyer to part with his difficult-to-get dollars. Because he is forced to lower his asking price everyone that is offering the same things for sale will also have to lower their asking price. This phenom is not lost on the holder of dollars; he soon learns that the longer he holds on to his dollars the cheaper everything gets. This is fun for the dollar-holder, not fun for those who are employed by making things.
Dollars are loaned into existence by banks. Banks create dollars out of thin air when they float loans. The borrower pledges as collateral his good name or, more commonly, whatever it is he is going to buy. If the borrower is going to buy a house then he pledges the house as collateral for the loan. If the borrower doesn’t make the payments on the loan then the bank gets to keep the house. This is not a problem for the bank as long as the house keeps its price. When the house loses its price and the borrower walks is when it becomes a problem for the bank.
When millions of houses lose their price and millions of house buyers walk is when it becomes a BIG problem for the banks because the value of house collateral backing loans vanished into thin air from whence it came.
So now, because banks have no collateral, they can’t make any more loans, thus they can’t create any more money to put into circulation.
In fact, banks now relentlessly remove money from circulation. Much of the money that goes to banks in the form of loan payments never leave. Banks take money in but don’t loan money out. This makes money tight; hard to get, hard to keep.
In steps the Federal Reserve, the Lender of Last Resort. The FED loans $billions to the banks, but the banks aren’t loaning these $billions out. Thus money is circulation continously gets reduced from circulation and economic activity receeds.
And those with money get to call the shots to those without.
Re limited housing supply, I wondered what would be the net impact if 20 million illegal residents are granted amnesty and become eligible for gov.-sponsored loan guarantees for housing. No usual Section 8 fare; houses nearly everywhere.
But it looks like deflation is here to stay for a while. I was in big box store recently.Looked at saws. Looked to expensive. Manager comes by; we chat. I actually say the words, “What’s your best price for that?” almost as if I were in Juarez or a dusty antique store where foot traffic is slow. Mgr. stood there and said he would sell today at 10 percent off marked price (which would leave him 7 percent, by many markitup models). I thanked him and went on my way.
Re limited housing supply, I wondered what would be the net impact if 20 million illegal residents are granted amnesty and become eligible for gov.-sponsored loan guarantees for housing.
Since when have illegal aliens been unable to obtain gov sponsored loan guarantees??
I know the PATRIOT Act threw in some extra paper work, but are you required to show passport/birth certificate when purchasing a home and are Mortgage/Title Companies required to do a background check with state/fed agencies to verify those documents now a days?
Combo, Also as a 7yo, am I missing something that your premise above is based on there only being US dollars to trade in?
to wit:
Almost every other ‘expert’ keeps saying we are definately in a bond bubble. I guess today several T auctions were selling at zero rate? What happens when that trade unravels? That money will be scrambling for a home. I tend to believe that won’t be the US dollar, or her sisters. It seems very unsettling for our future ,and a very near term problem. Please inform…..
I am going to purchase a complete new set of tools “top to bottom” after the first of the year…Probably at Lowes…
“Please inform…”
Here’s my shot: The T-bond bubble is the product of a rush to quality. Please note there is no junk bond bubble; Interest rates on junk bonds are extraordinarily high. Why is that? Probably because a lot of these junk bonds are going to default and the bond market knows it, meaning the many holders stuck with junk bonds will be out of lots of money.
When these junk bonds become worth less or worthless, money is destroyed. This destruction of bond money is just as real to the bondholders as was the destruction of the money left with Bernie Madoff. The destruction of money makes any remaining money that much more scarce thus that much more valuable.
Also, money is destroyed everytime a bank has to take a writeoff due to a homebuyer walking away from his house instead of keeping up with his payments. This is why the people in charge (I use that term loosely) are desperate to stem the mortgage default rate.
” What happens when that trade unravels? That money will be scrambling for a home.”
yes thats right guess were it goes and buy first. stocks ? corporate bonds ? and how much invested treasury bond money will get wiped out if the price gaps down ?
Yep. The Bush disaster will be with long after that dumbass is gone.
It’s ridiculous to politicize this. The debt bubble that is not bursting took at least three decades to blow. It is not the fault of any one president.
I agree and I hate Bush.
Reagan fired Volcker.
Clinton loved anything that blows….
Prime, If they are going to base everything on the short-term, hugely rewarding the short-term gain to the detriment of the long-term, then those in-charge during the short-term loss must be held responsible. Bush was at the helm during all of this mess and said nothing, did nothing, knows nothing. Bush is to blame. Others may also be to blame. But Bush is definitely to blame!
Double digit inflation is, and has been for years, already here.
Deflation is only very recent.
Double digit inflation is, and has been for years, already here. Deflation is only very recent.
I wonder if this is because of the baby boomer population bubble ? back in the day much had to be made for the emerging young boomers, that could be inflationary .
Yes, cactus. I think the Boomers certainly had an effect on inflation, though that’s not it entirely.
The banks needed people who were willing to take on that debt in order to create dollars, too. When you have so many people chasing a limited quantity of goods and services, prices will rise…and if wages don’t rise with them, people will turn to credit.
I believe we are in for a deflationary recession/depression until the first half of the Boomers is well into retirement.
“Since the Federal Reserve began issuing debt-based US dollars 95 years ago, the US dollar has lost 95 % of its value.”
That is over 3% inflation per year:
(1+x)^(-95) = (1-0.95)
x = (1-0.95)^(-1/95)-1 = 0.0320364889
3.2 pct inflation per year, on average.
Check:
1 - (1.0320364889)^(-95) = 0.95.
From the Boston Globe Business Team
Mass. home sales and prices fell in November
December 23, 2008 07:02 AM
The number of single-family homes sold in Massachusetts last month dropped sharply as the November median selling price for a single-family home clocked in at $283,000, down 14.2 percent from $330,000 in November 2007 and down 4 percent from $294,900 in October 2008, the Massachusetts Association of Realtors said today.
The number of single-family homes sold in Massachusetts had increased in September and October, prompting hopes that the hard hit housing market might be showing some signs of recovery. The theory was that prices had fallen to the point where they had become more affordable for bargain hunters.
While a drop in the November sales volume would seem to dampen those hopes, the realtors association cautioned that sales traditionally go down from October to November in Massachusetts.
For November, 2,339 single-family homes were sold in Massachusetts, down 21.8 percent from 2,991 sold in November 2007, the Massachusetts Association of Realtors said.
As for condominiums, 906 units sold in November, a drop of 27.3 percent from November 2007, the association said.
The November median selling price for a Massachusetts condo was $250,000, down 9.1 percent from $275,000 in November 2007 and flat with a median of $250,000 for October 2008, the association said.
“While prices still continue to be affordable, the uncertainty created by the September financial crisis on Wall Street caused many would-be-buyers to once again stay out of the housing market,” Susan R. Renfrew, the association’s president, said in a statement. “We need a vibrant housing market to help get the economy moving and the recent steps by the Federal Reserve to reduce interest rates combined with affordable home prices are the type of action we need.”
(By Chris Reidy, Globe staff)
Has anyone seen the flick “Idiocracy”? Wow. What’s scary about it is, a lot of that exists right now and you don’t have to go too far in the future to experience it.
And it sort of goes along with my observation on how Saturday Night Live has descended to the level of “wink-wink” fart and titty jokes.
Hasn’t SNL always operated on this level? I seem to recall enjoying the “Colon Blow” spoof cereal ads being done on SNL a couple of decades back…
lol. I enjoyed the colon-blow stuff, too.
Hmmm, I’m noticing a trend here: Floridians saying Idiocracy already exists…
Yeah, this Floridian noticed a long time ago that idiocracy exists. It was the decline of the humor at SNL that sent up warning signals. Not to mention the election of certain offishuls.
It’s interesting to watch the flick and then turn on the TV afterwards. Like that Playboy show with the girls living at Hef’s mansion.
The best part is when the cops blast that dudes car without due process and he start’s cheering. I guarantee that’s already happened in Hillsborough. LMFAO!
Hey, Muggy:
I once toured the Hills. County Jail. No, just a tour. Sheriff trying to drum support for jail expansion. I could not believe the number of people stuffed into cells.
And, even though I may sound like a law and order nut on this board, I really am not. Thing is, most of the people were being held on charges that they had not been tried for. Couldn’t make bail. The difference between have nots and haves (who had already been sprung awaiting trial date) was never clearer.
difference between have nots and haves (who had already been sprung ??
Can you say; Madoff
I love “Idiotacrcy” (or however it is spelled). Watch it every time it is on…strongly recommended for anyone with half a brain…
I need some electrolytes.
Brawndo has them.
From the House of Representin’:
Lady’s and gentlemen, the President of America
I’m flipping you the double bird right now.
/heads off to FuddRuckers and Starbucks
The only thing unbelievable about Idiocracy is that the President is much smarter than our current one.
Dutch newspaper headline: ‘housing market is crashing’
(down 1% from last month, but still +1% yoy; what a drama …)
The paper also briefly mentions that some RE experts say prices could decline 20-30% (very optimistic IMHO, I think -50% would be a benign outcome).
Dutch producer confidence numbers today came in at an all time low (they started tracking in 1985). Some of the financial authorities are ringing alarm bells. But consumers are still relatively upbeat and keep spending like the economy is in perfect shape. People are expecting higher unemployment, lower home prices and more stock/savings losses next year, but not for themselves of course. Anyway, if there is a problem mommy government will take care of it. Most Dutchies have no idea what is going to hit them next year.
Well, nhz
You have been waiting a loooonng time for this.
Congrats!
nice Xmas present for sure
How long do you estimate until the prices really tick downward?
Seems like your government is even more invested than ours in propping up housing prices.
government is even more invested than ours in propping up housing prices ??
I think the new direction will be propping up Jobs….
it will probably take another year before prices start going down at more than 5% yoy. There will be some new government incentives early next year to prop up the housing market, they just haven’t decided on the details yet. Probably more tax cuts, bridge loans and other homeowner subsidies
As long as employment is good (it still is) I don’t expect serious housing problems. But the layoffs are just starting, so the situation will be very different in a year. A wildcard is the credit crunch, the government is running out of options to rescue more banks. One or two major bank failures (like ING?) would severely limit gov. power to support the housing market, because they are running out of money. One year of low oil/natgas prices: major negative surprise for the gov. budget.
Another wildcard is the big number of people with 100-125% IO mortgages that reset next year. These owners depend on price appreciation, and that is not in the bag for next year. But unlike the US, nobody seems to track how many of those toxic mortgages are floating around.
Oh, I’d wager that SOMEBODY is tracking them, they’re just not telling you or me.
It’s different there, right? RIGHT???
definitely, for 95% of the buyers and politicians. And I wouldn’t be surprised if they still say the same a year from now.
..Of course y’all are USED to your houses being underwater right? Ducks, runs away.
our politicians are more worried about underwater mortgages than underwater homes, that’s for sure.
When the recent projections for sealevel rise are correct, the Netherlands will be in big trouble within 30-50 year. More than half of the country would disappear. In my area all the new housing developments are 1-5 meters below current sea level; when they stop pumping, homeowners get wet feet before entering their home (happens a few times a year already).
But government is still not acting regarding flooding protection. A proposed plan to upgrade the dikes etc. for higher sea levels is on hold because it is ‘very expensive’ at about 1 billion euros a year. At the same time government is spending 30 billion a year in homeowner subsidies, to keep the mortgages above water. Crazy …
Haha. That’s hilarious! 1% for you guys means that the market is crashing. We’re down 50% where I am and the market is merely “soft”. Go figure.
sure, it shows that they have no idea what is coming.
“HOA President Robert Wise stood before the unruly crowd and tried to establish a sense of common purpose.”
” ‘We are not the enemy here,’ he pleaded to the audience. ‘We did not cause this problem.’
Wise, elected in August during the community’s first-ever homeowner election, went on to explain the board’s rationale for asking residents to approve a special assessment of $750 per home in addition to their regular monthly dues of $125 in 2009. . . ”
“. . . In all, the board estimates the companies have shorted the association about $600,000. . .”
“Former and current homeowners still owe the HOA close to $1 million, including more than $700,000 in payments that were due months ago, and perhaps even years ago. . .”
” ‘It’s doubtful the bulk of that money ever will be collected’, Wise said. . .”
http://www.azcentral.com/realestate/articles/2008/12/21/20081221biz-homeowners1221side.html
About a year ago Dodge and Cox international fund NAV was $46. Now it’s under $21. P/E is 8.7.
Stocks seem out of favor don’t they?
And gold is holding up around $840 spot.
Which has more upside?
“P/E is 8.7.”
As the E goes, so does the P. And it looks as if the E is in deep doo-doo.
This is the part that people seem to be forgetting.
The E is not guaranteed, and the E is gonna plunge.
2009 Q2 earnings is gonna be epic.
Spot on, guys. Those market analysts who are saying P-E ratios are attractive by historical standards don’t seem to get that E is highly variable in a severe recession or depression.
Combo
FPSS
SP 650 4Q?
-
Home prices 1997 vrs 1983 is no biggie to me.
In my neck of the woods there was NO (or virtually none) change from 1983 to 1995.
10x current earnings (not horsesh*t like “forward earnings” or EBITDA)
Estimate: 550-650
Guessing 2009Q4-ish (to be taken with a sack of salt.)
I always thought EBITDA hyping was a bunch of crap myself. Along with hyping gross margins. The bottom line is the bottom line.
How could it possibly be anything but cr@p?
Earnings before interest, taxes, depreciation and amortization?
Take out all the bad parts, and pretend they don’t exist?
Oooh, oooh, it’s happy-land, skippy-land with dancing elves and prancing white ponies.
Hey, at the end of the day, earnings don’t get you anything either. Only dividends pay the bills.
“Guessing 2009Q4-ish (to be taken with a sack of salt.)”
FPSS, I’m looking forward to the discussions around this in Q4…
I think the discussions will heat up around earnings season in Q3 (= Q2 earnings.)
Get your financial Xmas 2009 shopping list ready, folks!
“And gold is holding up around $840 spot.”
Maybe it is just my take on it Bill, but I don’t think your comment is accurate. Gold is spiking, hardly stable at $840. Challenged the 200DMA again, at yet a lower level than last time, and didn’t break out. If the pattern that has been setting up for the past six months holds, it will drop into the $600s rather quickly.
I don’t see any change in the direction of global psychological trend of the past six months, rather an increased acceptance of deflation and malaise. Zero interest at the Fed should have taken gold off the charts. I do wonder how long until coin speculators remorse kicks in. I guessed at six months, but that has about passed.
We certainly saw the denial and anger comments on this blog over gold. Now it is quiet, very quiet. Does that mean we are entering the Depression stage?
gold price is extremely stable when measured in euros.
check the charts of recent months, it is in a contracting triangle around the EUR 600 level. The $ gold price is hardly stable because the dollar is unstable.
I found a gold chart in euros and yes that looks interesting. There was a tightening triangle in the USD chart like that this time last year, and then gold broke out to the upside.
“Now it is quiet”
That is quite the specious argument there, considering a certain insane lad from the CA central valley has stopped posting daily updates of his love affair with a certain “bullion brahmin”!
no intent to be misleading. He wasn’t the only enthusiastic poster on the subject.
No malfeasance intended on your part, I’m sure. My point was that the gold dealer started almost all the discussion of the precious on the blog.
Maybe a better question to ask one of these mornings is who, if anyone has sold any physical in the last 3 months. I haven’t, though I also haven’t bought mostly due to the premium for physical over spot.
gold. Now it is quiet, very quiet. Does that mean we are entering the Depression stage”
I give that because Alad was all but run outta town by the mob. It’s obvious the vocal few don’t wish to discuss it so I don’t bother. I just read, and try to learn,but sleep well knowing I have my insurance policy bought,and paid for. I truly believe we are fast approaching the day where you will want to buy “physical” PM’s and then you will see the panic. We are presently living on the kindness of foreigner benefactors buying our Treasuries, and think there will be the final exit. I keep envisioning the scene in “A Bronx Tale” where Sonny walks to the door,and locks it with a click…” I asked nicely…..Now youz can’t leave”
My 2¢: Get your 10% Physical posession now. Not ETF’s, GLD, or Perth mint butt wipe. You already have 3 months of food/water already..right?
Last weekend we hosted a dinner party. One of the guests ownes a co-op in Leasure World, a very nice mega over 55 development in Montgomery Co, just north of Wash DC. He said that there are numerous units for sale like never before, and are not moving. Prices are down 40%-50% from peak (when he bought). People die off or go to assited living/nursing homes. The heirs take over, and have to pay the hefty monthly fees. People who normally buy in can not sell their existing homes to make it worthwhile to move into Leasure World. So the units just sit.
Sounds like your friend is an FB. If it’s down 50% and its still not moving, then there’s plenty of downside.
Did you offer him some fine cheese to go with that whine?
we call that seizure world here in Arizona.
Same thing here in Maryland.
Mongomery County people have a healthy fantasy life about what people can afford to pay for everything, but especially housing.
I was making the rounds of local apartment complexes yesterday to get comps to use to argue down my landlord from its stupid proposed increase and one showed me a chart as to what sort of income you needed to qualify for particular rent amounts. Only the highest one stuck in my mind. An income of $131K means you can qualify for a rent of $3750 a month. $3750 a month? What is that, 75% of take home pay for that income, at least if you max out your 401K? Ridiculous. And parking is extra in this complex.
We are in a MUCH smaller, MUCH lower density version of Leisure World here. Although 55+ is not a requirement, over 95% of the residents are retired. Same thing is happening here; maybe one home sale a month. Builder spec homes and specuvestor failed flips are going back to the banks. Fortunately those are a very small percentage of the total homes here (the community is over 30 years old). But I forsee a slow decline in population as people die or are forced by declining health to move to assisted living or nursing homes, and their houses remain vacant.
I wish I could say the reason we bought cheap (a foreclosure) in 2005 is because I saw this coming. Not so. In any event, the house is a modest percentage of our total assets and it’s not mortgaged. If we really had to, we could take the ultimate hit of just walking away. That’s not a likely scenario, but a 50% haircut certainly is. It all depends on how well we age.
In the meantime, life is good.
Anybody notice how few stories there are on Holiday shoppers? I guess they are keeping all the negative news quiet until next week.
No run or fights over any “must have” item this year at Walmart
There have been a bunch of stories this morning about how no one was shopping this weekend. Some of the expected “blame it on the weather” stuff, but not blaming all of it on the weather by any means. Stat thrown out that 60% of Americans didn’t spend any money on gifts this weekend. Also that people aren’t buying gift cards because they are worried that the stores will go bankrupt before they can be used.
That’s odd coming from you, being in NYC. There was a temporary worker at a Wal*Mart trampled by shoppers in NYC. Also, the Wii’s are selling fast. Wii Fit’s are the impossible to get item. All the new game systems were released last year, so there won’t be a new one for a year or two.
I guess I’m clueless. I’ve never been a gamer, so i couldn’t care less about PS3 or wii’s
Check out what this grad student is doing with the wii controllers:
http://www.cs.cmu.edu/~johnny/projects/wii/
Those controllers have built in infrared cameras and accelerometers. That is some serious high tech gadgetry for $40.
I was blown away. When someone starts producting the prototypes this guy has put together, I will finally feel like we are coming into our age.
Zak
Wii Fit can be found, at a premium. I just ordered it for my niece from Overstock.com (tickled my funnybone that the hottest game of 2008 is available there, but whatever). It’s being mailed directly to her in case the lovely weather we’re experiencing prevents personal delivery by moi.
No sir, no getting trampled for this shopper!
I like overstock.
The stampede was the one day when all the door busters went running for the loss leader items. The store didn’t make any money.
And there are no must-haves anymore. That only happens when an item becomes popular unexpectedly. Nowadays, the company makes container-tanker loads of something, then the “market” creates demand for that thing. Everyone stampedes the store, and then, gosh golly gee doggonit say it ain’t so, it just so happens that the item is right there for you to buy.
Exhibit A: Guitar Hero. No shortage of that. Yoo betcha.
Guitar Hero World Tour is a follow up after 3 versions of the game or something. Rock Band II is the same way. I think it’s an off year, in that there are no Tickle Me Elmos, Beanie Babies, video game consoles, Cabbage patch kids, Coleco Visions or whatever other hot toys were big in the past. I seem to recall maybe 2 or 3 years ago it was the same way. An off year with no big releases.
So what’s with Guitar Hero anyway? do players really learn to play anything or is it just all posing and air guitar?
Just fantasy playing.
It does not teach the art of playing guitar, which Dinor would attest to, if he were about.
Its “Dance, Dance, Revolution” that you play with your hands instead of your feet.
Actually killed in Long Island. They’re nasty out there. (Grew up both in LI and NYC)
Frozen Ports in Long Beach, Singapore Mean Bleak 2010
By Michael Janofsky and Mark Drajem
Dec. 23 (Bloomberg) — Chris Lytle, chief operating officer of the port of Long Beach, California, took in a panorama of the slumping world economy from his rooftop observation deck one day this month.
Shipping cranes stood still, truck traffic trickled and a cargo vessel sat idle, moored to a pier.
“You never see that,” Lytle said. “It’s quiet. Too quiet.”
Port traffic has slowed from North America to Europe and Asia as a recession erodes consumer demand and the credit crisis chokes off loans to export-dependent companies. International trade is set to fall by more than 2 percent next year, the most since the World Bank began measuring it in 1971. Idle ports around the globe are showing how quickly a collapse in trade can spread, undermining growth in each country it reaches.
September and October are typically Long Beach’s busiest months as U.S. retailers take deliveries for holiday sales. This year, imports fell 15.8 percent from a year earlier in September, 9.5 percent in October and 13.6 percent in November.
“Everybody expects 2009 to be a bleak year,” said Jim McKenna, chief executive officer of the Pacific Maritime Association, a San Francisco-based group representing dock employers at U.S. West Coast ports. “Now, it looks like 2010 is going to be just as bleak.”
I can’t even talk about what is happening to the hoi polloi. It is not in my basic nature to be as gloomy as Roubini, but it is hard to discuss economic reality any more without coming off that way.
Shipping Rates Fall
The Baltic Dry Index, a measure of shipping costs for commodities, is down 93 percent from a record in May, a sign that traders expect export volumes to stay depressed.
Slowing trade is both a cause and an effect of the first simultaneous contraction in the world’s largest economies since World War II. Throughout this decade, trade grew by 12 percent a year to $13.6 trillion in 2007, propelling growth in nations from Germany to China and Chile. Now the evaporation of financing and collapse in demand threaten an activity that accounts for a quarter of the $54 trillion global economy.
“We are having this dramatic reversal,” said Michael Finger, a trade economist in Geneva since the early 1970s. “I’m a long time in this business, but this is unique.”
Oil futures contracts are still contracting.
Any idea why the links to 5-day etc. don’t work there? Do they work for you?
Porcine beauticians hiding evidence of a very hard landing?
Too complicated. Invoke Occam’s Razor.
Expiration of the last contract was last week. Five days haven’t elapsed since (today is Tuesday.)
Also not working:
1mo 6mo 1y 2y 5y “All data”
Are you suggesting these time horizons don’t make sense for this data?
No, they don’t.
Time for a little education for the professor.
When you buy a futures contract, you’re buying one with a specific expiration. There is a nearest one, and then the one a little further out, etc.
For equity indices, they are three months out each (h, m, u, z. = mar, jun, sep, dec.)
For oil, they go out quite a bit. Monthly for the next year, and then various others out as long as five years or even more.
What you really want to do is to “stitch” together the data from all the various “near” contracts (as they are referred to.)
But that’s not how their website works. It graphs one specific contract, and only two days have elapsed for it (yesterday and today.)
Next week, you’ll see the five-day chart work.
Hmmm - how come then INO has it?
http://quotes.ino.com/chart/?s=NYMEX_CL.G09&v=w&w=15&t=l&a=0
All the way over a year out in fact. Just at a much higher granularity (data only about 3 times a day vs. every 5 minutes or so). February 2009 future have been sold for some time - they didn’t just start selling them this week - right?
I think maybe what you’re saying is that MarketWatch simply doesn’t track the futures contracts except for the current “next month” contracts (whereas INO tracks all futures contracts). Right?
I find it hard to believe the price of oil is really going down. The one commodity which is probably most important to the perceived value of the dollar… do you think Bernanke, Paulson and Co. would be laissez faire with oil futures after printing trillions of new paper?
Now, I’m not a conspiracy theorist (at least I didn’t used to be), but something generally stinks here.
Uh, have you purchased gasoline recently? My car is drinking cheap, cheap, cheap gasoline and lovin’ it! I can’t believe that has no connection to oil prices, can you? I mean, we have gone from over $4/g gas to under $1.75 gas in less than six months. Where’s the conspiracy?
The conspiracy, though perhaps not the one you are searching for, would occur at the Straits of Hormuz, where tankers are gathering with a decline in sales.
Imagine mines closing the straits.
Bye-bye el-cheapo gasoline.
I guess the conspiracy would be that to get the economy moving again requires cheap gas, so oil prices are being artificially deflated.
U.S. new home sales fall 2.9 pct in November
Tue Dec 23, 2008 10:10am EST
WASHINGTON, Dec 23 (Reuters) - Sales of newly built U.S. single-family homes slowed in November to the weakest levels since 1991, according to Commerce Department data on Tuesday that offered fresh evidence of housing market distress.
The seasonally adjusted annual sales pace of 407,000 was down 2.9 percent from October and was the lowest rate since January, 1991.
Economists polled by Reuters had forecast sales would notch a 420,000 rate compared with a downwardly revised 419,000 in October, previously reported as 433,000.
The median sales price rose to $220,400 from $214,600 in October. The median marks the half-way point, with half of all houses sold above that level and half below.
Economists believe the U.S. housing market will not begin to recover until home prices fall far enough to stimulate demand that whittles down the overhang of unsold homes accumulated since real estate weakened sharply last year.
Which leads up to the January 2009 issue of Money Magazine, where Lereah admits what we’ve already known:
Former real estate bull admits, “I spun”
Working for realtors, David Lereah was famously optimistic. Not anymore.
By Donna Rosato
As chief economist for the National Association of Realtors, David Lereah was famously optimistic. Now a private consultant, he’s abandoned what he calls the “positive spin.”
Q: Were you wrong to be so bullish?
A: I worked for an association promoting housing, and it was my job to represent their interests. If you look at my actual forecasts, the numbers were right inline with most forecasts. The difference was that I put a positive spin on it It was easy to do during boom times, harder when times weren’t good. I never thought the whole national real estate market would burst.
Q: The NAR’s latest forecast calls for a slight increase in home prices next year. Thoughts?
A: My views are quite different now. I’m pretty bearish and have been for the past year and a half. Home prices will continue to drop. I think we’ll see a very modest recovery in sales activity in 2009. But we’ve still got excess inventories, a bad economy and a credit crunch that will push prices down further, another 5% to 10% more. It’ll take a long time to get back to the peak prices we saw in many markets.
Q: Any regrets?
A: I would not have done anything different. But I was a public spokesman writing about housing having a good future. I was wrong. I have to take responsibility for that.
Personal Request from Shizo: DO US ALL A FAVOR AND JUMP YOU DUMB@$$!!!
“A: I worked for an association promoting housing, and it was my job to represent their interests.”
How did all that lying on behalf of ‘their interests’ pan out?
- Worst real estate recession in history.
- Worst real estate price crash in history.
- Worst residential construction crash in history.
Oh what a tangled web we weave
when at first we practice to deceive.
I am seriously quite curious why so many PhD economists think of lying through their teeth as part of their standard operating procedure. Can anyone offer comment?
Funding.
Most consultants say what sells.
A widespread willingness to prostitute does not square well with the economics profession’s aspiration to have their academic discipline regarded as a scientific field.
What does aspiration have to do with reality?
When does Math become a Science?
What do you have against prostitutes anyway?
Friedrich August von Hayek, Lecture to the memory of Alfred Nobel, December 11, 1974: The Pretence of Knowledge
They all want a nice, cush job with the Fed.
Or else they want to be Prez, AKA Woodrow Wilson.
They think they know everything. See the Pretence of Knowledge lecture by Hayek.
“They think they know everything.”
Making all manner of dumb predictions, then lying or playing mum over how far off the market they were, does not help keep up the know-it-all image.
I meant to write “off the mark,” but perhaps “off the market” is more on target.
Well maybe they just think they know more than the rest of us.
crander — thx for the very timely suggestion.
Friedrich August von Hayek
Prize Lecture
Lecture to the memory of Alfred Nobel, December 11, 1974
The Pretence of Knowledge
The particular occasion of this lecture, combined with the chief practical problem which economists have to face today, have made the choice of its topic almost inevitable. On the one hand the still recent establishment of the Nobel Memorial Prize in Economic Science marks a significant step in the process by which, in the opinion of the general public, economics has been conceded some of the dignity and prestige of the physical sciences. On the other hand, the economists are at this moment called upon to say how to extricate the free world from the serious threat of accelerating inflation which, it must be admitted, has been brought about by policies which the majority of economists recommended and even urged governments to pursue. We have indeed at the moment little cause for pride: as a profession we have made a mess of things.
If he feels so bad, maybe he would consider donating his back pay to charity. He can live off the income from his books (yeah he gets the income from stupid people who buy the books, but I guess he still earned the income from them.)
What else needs to be said? The guy was a paid liar for an organization that is loaded with liars.
Sad.
Existing home sales, prices drop at record pace
Tue Dec 23, 2008 10:44am EST
WASHINGTON (Reuters) - The pace of existing home sales plunged a record 8.6 percent in November and prices fell a record amount as layoffs and a stock market crash worsened an already grim housing market, a real estate trade group said Tuesday.
The median home price fell 13.2 percent on an annual basis, down for a fifth straight month to $181,300. It was the largest drop since the current data series began in 1968 and probably the largest since the Great Depression, Lawrence Yun, the chief economist for the National Association of Realtors, told reporters.
The pace of sales fell to a 4.49-million-unit annual rate.
Economists polled by Reuters were expecting home resales to set a 4.90-million pace. October’s figure was revised downwards to 4.91 million, from 4.98 million.
“The quickly deteriorating conditions in the job market, stock market and consumer confidence in October and November have knocked down home sales to another level,” Yun said.
“
It is, therefore, imperative to provide incentives for homebuyers to get back into the market…”It is best for economic recovery purposes if prices quickly correct to affordable levels. Demand-side stimulus measures like he suggests will only serve to continue the longstanding problem of unaffordably-priced housing which is currently dragging down our economy.
How long before a NARscum mouthpiece says something like, “Buy now before prices skyrocket in the spring”?
I’ve posted this before, the amount of hopes and prayers riding on 2009 seems to be amazing. Every discussion on the subject on this year’s holiday party circuit is qualified with the phrase: “it’ll turn around in 2009″.
Sounds like Cubs fans. Just wait til NEXT year!
It is sure lucky for the Fed that home prices are not part of inflation statistics; if they were, I am pretty sure that record declines in home prices would result in consumer price index (CPI) deflation, given that housing is over 30 percent of consumption expenditure in this day and age.
People don’t get foreclosed on every day.
I’m still waiting for Eurostat to include homeprice statistics in the CPI calculation (instead of imputed rents, which are partly set by government in many EU countries).
They have been announcing this change for some time, and now that even Dutch homes have started their price decline it’s about time they introduce the new new CPI. EU inflation is still running over 2%, so the ECB could use some help to convince the citizens that they should throw even more money around ;-(
The pace of existing home sales plunged a record 8.6 percent in November
[end]
these stories are a source of endless delight. they show that even very belatedly the bad guys will perish. please, more grim reports all thru 2009.
will we see a wave of suicides?
will we see a wave of suicides?
Just happened in NYC over the Madoff scam…
Link?
Hot-diggity, this is getting better each day.
Did you mean this one
New York Times
Head of Fund Invested in Madoff Said to Commit Suicide
December 23, 2008, 12:28 pm
Rene-Thierry Magon de la Villehuchet, a founder of the hedge fund Access International Advisors, was found dead early Tuesday in his office in Manhattan, the French business daily La Tribune reported on its Web site, after losing as much as $1.4 billion that had been invested with Bernard L. Madoff, the money manager accused of running a $50 billion Ponzi scheme.
or this one?
gawker dot com
Death
Banker’s Nude Suicide in 5-Star London Hotel
By Pareene, 1:15 PM on Mon Dec 22 2008, 11,142 views
An HSBC banker hanged himself in a 5-star hotel room in West London, The Times reports.
…
Last week it was reported that HSBC has $1 billion “at risk” due to the collapse of the Bernie Madoff reverse-Ponzi scheme, with additional clients invested with Madoff.
French guy in New York…
Only people with a shred of honor take their own lives. Not many of those around here.
“Only people with a shred of honor take their own lives. Not many of those around here.”
I disagree with this (but in a nice way BR.) It’s the coward’s way out. The person who committed all the wrongdoing doesn’t have to face their sins but the family is left with the triple burden of shame over the original act, shame over the suicide and loss of the person they loved.
It takes a lot more courage to stand up and say “I screwed up,” taking responsibility for it and doing everything in your power to fix it including using your wealth to repay as many people as possible.
And I’m guessing a lot of these guys thought they were doing good things for their clients. Naive and dishonest for taking fees they did not earn, but no evil intent intended. Madoff acts were intentional and I hope he suffers for them. But lots of innocent (or at least not intentionally criminal) people are going to suffer including the charity recipients.
I don’t have a lot of pity for the people who ignored the unrealistic returns because they thought Madoff was engaged in insider trader. Karma’s a b!tch and wanting someone to be a criminal for your interests doesn’t garner a lot of sympathy when they turn criminal on you.
But I still don’t want them committing suicide.
So lame, if this guy was going to do it he could have taken one for the team. He could have take out Madoff and a few other CEOs that no one likes. At least he’d go out as a hero to some!
Ok, first sorry for the rant.
My hope would be the coming administration, who I was cool too, but I thought better than the alternative could really make a difference.
First Wall Street and all the Banks should be told to go screw.
Second, the Federal Government should allocate the funds to rebuild the entire infrastruture in the good old USA. (Many thought the Big Dig in Boston was very costly, but at least we got to see something from the spending of our tax dollars).
Wind generators and solar panels will become part of every home in America, the middle east can eat their oil.
Every city will return to the era of street cars (thank you GM for making them obsolete all those years ago).
Light rail will be provided to all suburbs of major metro areas.
High speed rail will be implemented between all major meto areas.
Shared eletric vehicles programs will be implemented in all cities for those that only occasionally need use of a car.
Anyone able body who wants a job can get a job, if you don’t want to work then die of hunger. Government aid will only be provided to those that really need (I don’t want to go to deep on this one, lots of social issues, but if you can be on the internet all day at home you are not disabled)
The point is the options are endless, what we have just isn’t working for us any more. People should not be going hungry or be unable to obtain healthcare and get screwed by major corportations just prior to retirement. The money we have spent on this bailout of these major financial firms, what a waste.
Now if we could just make someone listen.
Are you an engineer? Because sure you sound like one. These are exactly my thoughts and yes I am an engineer.
Unfortunately only China is run by engineers who think first of solving a problem they encounter. USA and other large democracies are run by politicians/lawyers who see a problem as an opportunity to further their interests, and not as an issue needing a solution.
I have seen some fascinating documentaries about China in the last year, and I’m amazed how their higher level managers (often relatively young people) are navigating this treacherous economic environment. Considering they are relatively new to the game they are doing extremely well, far better than most of the ‘experienced’ managers in western countries.
of course, a lot goes wrong (e.g. environment, corruption) but still, good job.
That’s a head scratcher. Most Chinese corporations I know of have their fingers in every pie, and are bettors at horse races, not long-term investors. One of China’s most prominent non-government owned companies, electronics retailer Gome, just had its CEO arrested for insider trading. (The more likely reason is that he failed to pay off the Chinese bureaucrat who nailed him). A lot of people at government-owned companies - and that’s most of China’s major exchange-traded companies - are simply people with relatives or friends among government figures. The connection between China’s movers and shakers is not that they are engineers - it’s that they’re the children of senior party leaders, appointed solely on the basis of nepotism.
Good idea! 100% agree.
Unfortunately I am a bit more pessimistic when it comes to the realization of the Obama plan. I see a lot of pork barrel spending:
new sports arenas, new highways, bridges to nowhere, new airports, etc.
All of the above will be pretty much useless in a decade or two when liquid fuels become scarce. But of course nobody with their head up their ass could have possibly seen this coming.
Yes, and never underestimate the power of the highway lobby. Coupled with the unions and other special interests they will make sure that the next administration’s transport policy will be as “green” as the last’s.
Don’t think so? Give it a few years.
My neighbor had a wind generator. It made a hell of a racket on windy days, which is just about every day here in south-central Kansas. Then, one day, it blew over - guy wire snapped or something, I really don’t know. It didn’t hit anything, but it could have, including both his house and mine. He junked it.
I like the idea of wind farms out where the deer and the antelope play. In neighborhoods - not so much.
Your N of one makes a real compelling arguement??? Good thing natural gas, oil furnaces, and electricity have never caused a problem.
How many manufacturers of small wind turbines have their been in the last decade? Is it possible it wasn’t set up correctly?? I’ll suggest that the fact it fell down may say more about your neighbor than the entire wind industry.
For whatever its worth, I went to the discount liquor store midday, and it was packed. All four registers were open and I counted at least six people waiting at each. I have been shopping in the same liquor store for more than 10 years and have never seen anything close to that many people buying that much booze. It looks like a lot of people might be staying home and getting crocked for the holidays.
Furnace went on the fritz last night and I have informed the owner and am awaiting the repair guy. Ahh renting does promote such a carefree attitude towards such potentially expensive problems. Last year when we were trying to decide if we wanted to extend the lease or move we had one builder and one FB / owner approach us and ask if we would be interested in renting their places. It turns out that renters that can and do pay are in short supply, who could have foreseen that? Next year we plan to lower our rent and increase the quality of our lodgings. We will be informing interested parties that we are already looking at multiple offers and that they should take that into consideration when making their best offer. Let the bidding wars begin.
Got Scotch?
Furnace went on the fritz last night and I have informed the owner and am awaiting the repair guy. Ahh renting does promote such a carefree attitude towards such potentially expensive problems.
Make sure you have a CO monitor, especially if the furnace is old.
But, but, but, you can’t paint your walls any color you want!
Don’t you wanna be a home-pawner too? You’re so un-American.
Your right, but in turns out that the owners have to do the painting. Besides I like white.
CO monitor, check. In NJ the owner has to supply those too. I have 3. Excuse me, I rent 3 CO monitors.
I have painted every wall in my rental exactly the color that I wanted too.
(I will admit that I will repaint the room my teenage son decorated according to his tastes, before I leave.)
We have painted every room in our rented house with the landlord’s okay. We have blue, yellow, orange, pink, red, green, purple and a sandy brown color. When we move we will paint it back to the landlord white.
Odd… I paint my walls any color I want. I originally planned on repainting the walls white upon leaving but, frankly, they can just keep my deposit.
How un-American.
With my money, I walk alone.
Wall Street Carols: 7 Hedge Funds Sinking, 6 Bonds Defaulting…
http://blogs.wsj.com/deals/2008/12/23/wall-street-carols-7-hedge-funds-sinking-6-bonds-defaulting/?mod=yahoo_hs
This one’s for Alad!
Merry Christmas to all!!!
I miss that guy. His name was one of very few I’d specifically cntrl+F for. Some of his witty 1 liners were worth their weight in, um, am I asking for it?
Although Alad beat the gold drum to death sometimes- to me it is no different than hearing about stocks day in & day out. Here’s to you homey… All the best to you and yours this Christmas season and next year to boot.
I liked Alad. Although I found a lot of what he said goofy, I think we’d get along in real life. I’d really like to party with the guy. And it’s on me. I thought Pussy was a little hard on him and possibly drove him to leave. But I like you, too, Pussy.
Merry Christmas everyone!
Figures don’t lie, but liars do figure. If you don’t like the results of your valuation, by all means change the method to something which produces more agreeable results.
If this FASB proposal is not illegal, then it is only because the FASB is above the law.
Wall Street Journal
* DECEMBER 22, 2008, 10:37 P.M. ET
FASB Reviews Valuation Method
Accounting Watchdog May Relax a Rule for Some Structured Securities
By LESLIE SCISM and DAVID REILLY
Accounting watchdogs are fast-tracking an effort to provide a small dose of “mark-to-market” relief for financial firms, as banks and life insurers continue grappling with deteriorating investment holdings.
The Financial Accounting Standards Board last week began steps to loosen a rule regarding when financial firms must book losses on a narrowly defined subset of lower-rated mortgage-backed securities, commercial-backed securities and certain other structured securities.
Late Friday, FASB asked for public comment on the proposal, a sign that it is under serious consideration.
Nothing like making things more opaque when our problems are all due to a “lack of trust” (according to the PTB).
/sarcasm
Where’s Hoz?
Still recovering from the Packers dispiriting OT defeat at the hands of Da Bears?
(Is it just me — shouldn’t the Pack have won that game, really?)
How about this weather! The one, two punch of frigid cold and now more snow has had to have been the last nail in the coffin of this year’s shopping orgy here.
Last night our trip to visit family in Canada was scrubbed due to the weather. Now it’s a scramble to get down to TX instead for the holiday. No way are we going near that airport though!
I like the snow just fine, but the temps on Sunday and Monday were ridiculously brain-numbing.
Good luck headin’ down to Tejas. We’re staying put this Christmas.
I thought hozzie was headed to Chicago with family to have a good time.
That would explain the lack of postings.
Yup. He left a good-bye post a couple of days ago—-Sunday IIRC.
I’m sure he’ll be back after the holidays…
He was heading to Chicago to watch his Green Bay Packers play the Chicago Bears.
Yeah, that game shoulda been called after three quarters.
Bring back that decoupling feelin’ I’ve been feelin’ all day long, baby!
The reputation of the Arabian Gulf as a financial hub was dealt a blow yesterday as Global Investment House (GIH), one of the region’s biggest institutional investors, confirmed that it was unable to repay a $200m loan, and had appointed HSBC to renegotiate the deal, and its other debts, with international creditors.
Analysts had expected the Kuwaiti government to meet the obligation in order to save face in the international debt markets.
GIH, Kuwait’s sixth biggest company, is the first borrower from the region to default on a debt facility provided by western banks. The $200m, which had been provided by a syndicate of foreign and local institutions, led by the German investment bank WestLB, had been due to be repaid last Monday.
The loan agreement was signed a year ago, but was doubled from the initial $100m that GIH had asked for after WestLB received wide interest from banks keen to join the syndicate.
The credit ratings agency Standard & Poor’s cut the group’s rating to “speculative default” last week after previously judging the group’s debt to be investment grade, or a solid investment choice.
BWAHAHAHAHHAHAHHAHAHHAHAHHAHAHHAHHHHHHHHHH!!!
How is it that many housing bubble era stock market darlings can appear to perpetually fall in place?
The situation reminds me of a famous M. C. Escher piece, Ascending and Descending.
Actually it appears that Beazer is about to bite the dust, while Toll Bros is remarkably resilient. Is a surge in demand for luxury McMansions lurking just around the corner?
Toll supposedly has a strong cash position - IMO it’s smoke and mirrors mostly. They haven’t had the big writedowns yet that other builders have.
They do appear better positioned to survive the downturn than most - but still I think they’re way overvalued, which is why they’re one of my biggest shorts.
Ever read the book Godel, Escher, Bach? Same theme echoed in Math, Art, and Music.
December 23 2008 12:36 P.M. EST
U.S. stocks nose northward
U.S. indexes notch narrow gains as investors look toward holiday break — but not before digesting a full plate of economic data.
Whatever the MarketWatchers say, I guess, but it looks like another crash to my bleary eyes…
Friedman Would Be Roiled as Chicago Disciples Rue Repudiation
At the University of Chicago, once ascendant free-market acolytes are finding themselves in an unusual role: They’re battling a wave of government intervention more sweeping than any since the Great Depression as the U.S. struggles with the worst recession in seven decades …
Ding-dong: Is The Chicago School dead?
Or just kicked in the shins a little?
Check out the falling housing prices in the background to an endless stream of cheap talk from the Fed and other top policy makers regarding their future plans to stop market fundamentals from running their natural course. This is very strong evidence that the free market which Milton Friedman championed is alive and well.
The invisible hand of the free market even thrived in Russia during the heyday of the Soviet Union. One of the stories I heard years ago which always deeply impressed me was that of the farmers who produced very little on the vast fields of the collective farms on which they were coerced to work. They were also allowed under state rules to maintain a small backyard plot on which they could grow produce for personal use. Guess which farming operation produced a higher yield?
I know the story but this isn’t just about the superiority of the ‘free market’. It would have been totally impossible to get such high yields from the huge areas that the collectives were using without far more workers (or without modern energy-intensive machinery etc.). I’m sure if the workers had 10x larger private crop gardens the yields would plunge too.
You can rationalize all you want, but governmental attempts to override the natural functioning of free markets (such as attempts to stop U.S. housing prices from correcting or foreclosure moratoriums designed to keep loan owners in unaffordable hosing) are ultimately doomed to failure.
I am guessing that Milton Friedman would be duly impressed with the awesome power of the housing market’s backlash against myriad failed distortionary government interventions of recent years. Attempting to use the U.S. housing market to achieve social engineering objectives was a bad idea, with predictable results.
U.S. Economy:
Housing Prices Collapse at Near-Depression Pace
By Bob Willis and Shobhana Chandra
Dec. 23 (Bloomberg) — Sales of single-family houses in the U.S. dropped in November by the most in two decades and resale prices collapsed at a pace reminiscent of the Great Depression, dashing speculation the market was close to a bottom.
Purchases of both new and existing houses dropped 7.6 percent, the biggest decline since January 1989, to an annual rate of 4.43 million, government and industry figures showed today. A 13 percent drop in the median resale price was the most since records began in 1968 and was likely the largest since the 1930s, the National Association of Realtors said.
“Housing is still in a freefall,” said Nariman Behravesh, chief economist at IHS Global Insight in Lexington, Massachusetts.
Adam Smith himself never said that capitalism could function properly without a rule of law. The deregulation juggernaut got so carried away that it basically created a lawless financial system, with predictable results. Hopefully whatever regulatory backlash occurs in response does not make the mistake of killing geese which lay golden eggs in a misguided effort to protect them from Wall Street foxes.
Professor Bear;
I always enjoy your insight. I must add that we had a unfettered market (lacking regulation-but not a free market) where the participants believed that Government, implicitly, had removed risk. That is how things got out of hand. “We, the market particpaters” came to believe that we could do almost anything, and that the market risks had been mitigated, or removed, by Wall Street, Fannie Mae, Freddie Mac, etc. I cannot count the number of times I heard investment advisors counsel people to put a large chunk of their portfolios into the Quasi-Government agencies because “the government will not let them fail”. Now Treasuries face the same logic, and many people still believe that the U.S. Government is “too big to fail”. To me, the economic principles are the same, whether we are talking about “Joe Sixpack”, or the U.S. Gubmint.
In a truly free market, information flows freely, and transactions are transparent enough for the real risks to the participants is known. We became accustomed to looking through rosy-frosted economic spectacles, and we quit seeing the risks.
“the government will not let them fail”
That pretty much sums up the antithesis of free market economics.
It takes team effort to persuade a 14K strawberry picker to purchase a 750K home then later promise to keep him in it by offering fantastical capital infusions.
This is freakin’ hilarious!!!
An investor who lost nearly $2 million investing with Bernard Madoff has filed a claim against the U.S. Securities and Exchange Commission (SEC) alleging the agency was negligent in failing to detect an alleged decades-long fraud, the Wall Street Journal said.
Phyllis Molchatsky, a 61-year-old retiree from Valley Cottage, New York, is seeking $1.7 million in damages from the agency, the paper said.
The claim is believed to be the first attempt by an investor to recover lost money from regulators, according to the paper.
How much longer before people start asking the government to bring old girlfriends and dead pets back?
I thought someone notified the SEC in 1999 and 2000 that it was fraudulent, including information, which they ignored? If that is the case, why isn’t the SEC negligent?
Bingo
I’m going to contribute to her legal fund. Let’s shine a little light on why the SEC didn’t detect this massive fraud.
Two fiascos were not enough (Solomon Bros, LTCM.)
It’s time for the perfect trifecta.
The second time might not be the charm for John Meriwether. The Long-Term Capital Management founder’s JWM Partners is losing more than half its partners and will slash staff following a year of big losses.
The Greenwich, Conn.-based hedge fund told investors that four of its seven partners are to leave next year, The Wall Street Journal reports. In addition, the firm plans to cut 10 of its 35 jobs early in the new year.
Partners Lawrence Hilibrand and John Tsai will leave sometime after New Year’s Day, according to the Dec. 17 letter. Founding partner Arjun Krishnamacher is expected to depart by March 31 while CFO Andrew Geisert will leave sometime after March 31.
JWM’s flagship Relative Value Opportunity Portfolio lost 42.78% through November, leaving it with $554.8 million in assets. The firm limits withdrawals to one-eight of total assets at each quarterly redemption date.
Meriwether founded JWM in 1999, shortly after the collapse of LTCM.
BWAHAHAHHAHAHHAHAHAHHAHAHAHHAHAHHHHHHHHHHHH!!!
You are in one mean sadistic mood today FPSS.
And I _like_ it…
Worst of all:
Those who oversaw the creation of the mortgage market Ponzi scheme have not owned up to it. These are people in top economic leadership posts, running the Titanic deck chair restacking operation currently underway.
latest news
Summers: Economy falling short of what it could be
PAUL B. FARRELL
‘Noah’s Ark Survival Kit’ for stormy 2009 seas
Just when you thought it couldn’t get worse, along came Grinch Madoff
By Paul B. Farrell, MarketWatch
Last update: 6:59 p.m. EST Dec. 22, 2008
LOS ANGELES (MarketWatch) — Historians say Ponzi schemes and con men are a fact of life. The best, the brightest and the richest can all become victims: from President Ulysses S. Grant in 1884 when the partners of his Wall Street firm left him penniless a year before he died of throat cancer to Bernard Madoff’s investors, many whom became instantly penniless, just before Christmas and Hanukkah. Greed is a fact of life.
Thomas Friedman said it best in the N.Y. Times: “I have no sympathy for Madoff. But the fact is, his alleged Ponzi scheme was only slightly more outrageous than the ‘legal’ scheme that Wall Street was running, fueled by cheap credit, low standards and high greed.
“What do you call giving a worker who makes only $14,000 a year a nothing-down and nothing-to-pay-for-two-years mortgage to buy a $750,000 home, and then bundling that mortgage with 100 others into bonds, which Moody’s or Standard & Poor’s rate AAA, and then selling them to banks and pension funds the world over? That is what our financial industry was doing. If that isn’t a pyramid scheme, what is?“
If the Federal Reserve can create money out of thin air, why can’t everybody else?
Monkey see, monkey do.
Fire up the color laser printer and have at it! Expand the economy!
By twisted logic, there may be real productive value to running the printing press, as many who were looking forward to a comfortable retirement based on their fixed income pension savings will now be forced back to work by the prospect of having it inflated away.
Dec. 23 (Bloomberg) — The accountant who predicted the nation’s largest municipal bankruptcy says as many as 10 insolvencies will roil the $2.7 trillion U.S. market for state, county and city debt next year as public finances worsen amid calls for federal aid to state and local governments.
…
As many as four cities in the Golden State and six others nationwide may seek court protection from creditors next year under Chapter 9 of the bankruptcy code, the section devoted to municipal governments, Moorlach said in an interview.
As many as four cities ??
Understated….Wait until the tax receipts come in this April and May and they raise taxes AGAIN instead of reorganizing Government…The 2009-10 budgets are going to be a nightmare…Then the REAL SH$T is going to hit the fan…
“Wait until the tax receipts come in this April and May…”
Not just at the muni level - same will be true at the federal level. $1T deficit will be nothing by 2011 or so, maybe even 2010.
Once again, how much evidence is needed to question whether the equation of houseownership has forever changed?
Who will pay for all those services? Renters can flee and sales tax increases will drive away commerce and rising commercial taxes will deter businesses.
The houseowners will have to ante up, but if they can’t pay their mortgages how can they pay their rising taxes?
Yes, good post, edgewater.
latest news
Summers: U.S. facing serious economic crisis
MARKETWATCH FIRST TAKE
Bailout politics
Commentary: Thrift regulators’ reputation takes a hit from IndyMac probe
By MarketWatch
Last update: 8:39 a.m. EST Dec. 23, 2008
NEW YORK (MarketWatch) — The financial crisis has produced a handful of heroes in Washington and Wall Street, but thrift regulators, especially the Federal Deposit Insurance Corp.’s Sheila Bair, were among those who seemed to be on track to emerge from the wreckage with their reputation enhanced.
That was until the Senate Finance Committee member Charles Grassley’s office revealed that the Treasury Department was investigating the Office of Thrift Supervision handling of IndyMac Bancorp.
This is kinda sad, after all it’s just money. But I guess if you are completedly wiped out the temptation is there:
Updated 2:53 p.m.
Rene-Thierry Magon de la Villehuchet, a founder of the hedge fund Access International Advisors, was found dead Tuesday in his office in Manhattan. His fund reportedly lost as much as $1.4 billion that had been invested with Bernard L. Madoff, the money manager accused of running a $50 billion Ponzi scheme.
A spokeswoman for the New York City Medical Examiner confirmed to Reuters that Mr. de la Villehuchet was pronounced dead Tuesday morning at a Madison Avenue building.
Authorities told DealBook that Mr. de la Villehuchet was found in his office with injuries to his arms, having apparently slit his wrists.
In this thread, someone posted about the FL Keys having tourism problems.
Last month I took a 7 day cruise, ocean view cabin (upgraded to balcony) for $370 per person… normally $800+ for that room.
My MIL/FIL had booked a cruise for Mar at $900 each for balcony. it is down to $600.
Disneyland may be in a pinch too.
Disneyland has not released hours for the parks beyond January. I’ve never seen them not have hours and shows posted for less than 3 months out. 5 weeks out is just crazy. People are anticipating some pretty serious cuts to shows and park operating hours.
Disneyland spent 2 months training up a new cast for their Aladdin Musical at California Adventure. The show ran for 3 weeks before being yanked for the winter.
The parade (Parade of Dreams) at Disneyland is also yanked until further notice.
Fantismaic!, which has always run nightly through the end of “the holiday season” which runs until the 4th this year, is ending as of the 31st of December.
They are cancelling two of the minor shows associated with their “Princess Fantasy Fair”.
Disneyland has also begun allowing SoCal residents to pay for their AP’s in monthly installments.
Sounds like those mechanical hillbilly bears might need to put in some extra hours.
They were yanked from Disneyland 5 years ago and replaced with a Winnie the Pooh ride… Which conveniently exits into a large Pooh store…. where they sell Pooh Fudge, which is just WRONG!!!!
They do still play at Disneyworld in Florida…. for now.
Yes, I saw them in FLA years ago. Haven’t been to “Land” since 1981 though.
“Pooh Fudge” - awesome!
At about $4 for a small piece I suspect that they won’t be selling as well as in the past.
Oh My Gawd !!! Next thing your going to tell me is the “Pirates of The Carribean” is on reduced hours
Well, if the park goes to reduced hours…..
I’m more than a little surprised that they have not made noise about delaying some of the projects going into DCA’s $1 billion extreme makeover… but for now all those projects seem to be going ahead as scheduled.
Perhaps because the wheels are already rolling and the financing was procured for the expansion. Not to mention that DCA desperately needs the makeover. It is arguably the weakest of the 4 Disney parks in the US.
Does anyone know if Johnny Depp gets any royalties for the Jack Sparrow robots (AAs for Disney geeks) on the ride? The likeness is amazing.
Things are even more dire at the much pricier Walt Disney World resort. They are offering 7 days for the price of four (hotels and parks, meals are not included in the offer). I read on a Disney blog that they are forecasting only 35% occupancy at the WDW on property hotels next month, which is about half of normal. I have no idea what the situation is with the off property hotels on International Drive. I imagine that they are seriously undercutting Disney’s hotels, even with thr 7 for 4 promotion.
It seems that people are having second thoughts about dropping 5-10K for on property Disney World vacation.
If the FED and the new group of handlers coming in really want to put a stop to deflation. Simply hire Gideon Gono to run the the show, we can whip this deflation monster. Yes we can! Now that’s real change!
http://en.wikipedia.org/wiki/Gideon_Gono
Did Gono study the Great Depression at Princeton also?
Dec. 23 (Bloomberg) — Cerberus Capital Management LLC, the $26 billion investment firm founded by billionaire Stephen Feinberg, limited investor withdrawals from one of its hedge funds after it lost 16 percent this year through November.
The restrictions … were triggered after clients sought to pull more than 16.5 percent of their money…. The limits on redemptions will last for one year.
Their investors got stucco.
Starbucks told employees the company won’t guarantee that it will make contributions to their 401(k) accounts next year — WSJ.
Will anyone be willing and able to buy stocks next year? Ever since the securitization money distribution machine broke, everyone seems to be hoarding cash, treasuries, and gold.
The big lure of 401(k) was like the ESOP and options… it was a way to give the employees extra pay in the form of stock, so ti would not be counted as an expense. Most investors just look at P/E, not growth in shares outstanding, so may not realize that future P/E will be diluted by all the shares the company is handing out to employees. Now, however, a compay’s 401(k) match can’t be in the form of stock in the company. Yikes. Now, just like ESOP, those plan contributions count as an immediate cost. I think many companies were just looking for an excuse to drop the company match.
I expect the PPT to help keep the stock market propped up while individual investors sit on the sidelines.
Reknown conservative/libertarian “economist” and inflationista banking apologist Larry Kudlow and his extremist sidekick Jerry Bowyer were pimping a resumption in the housing bubble on Lyin’ Larry’s propaganda show tonite. “Watch housing resume it’s bull run as soon as credit markets thaw” yammered Jerky Jerry. “Absolutely” responded Larry. These two are extremist monsters who hold the average person in bitter contempt.
Today I was in a store and two Hasidic guys came in offering to prey with anyone who was jewish. I am 1/4 jewish but I passed. it was so touching that people still care, and boy did they ever look out of place in surftown.