Bits Bucket For January 1, 2009
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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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Happy New Year y’all.
Happy ‘When is this nightmare going to end? Please make it stop.’ Year!
With everyone wishing me ‘Happy New Year’ yesterday, I had a hard time reciprocating, because I knew, in my heart of hearts, that we ain’t seen nothin’ yet.
Happiness is an odd thing, though. Maybe we will be happier after the repo man has come and gone.
So last night, when they were clinking all their bubbly flutes…were they really toasting the New Year or just “crying uncle”?
Working on despair management technique.
LOL.
I just heard on CNN Money the unanimous agreement that “It’ll be difficult to get loans, but that’s a good thing.” “If it were difficult to get loans in the last few years, maybe we wouldn’t be in this mess.”
Seems like MSM is catching on.
What upsets me the most is that a lot of innocent people will be suffering because the mistakes of a lot of as&holes. It is sad to see a lot of people will be losing their jobs, a lot of seniors struggling to pay for the every-day needs, and a lot of recent college grads not being able to find a job.
To most of you, it probably feels good to laugh at the financial institutions, NAR, infestors, banks, etc because it makes you feel ‘more intelligent’ than the rest of society since you’ve been predicting these problems. However, you should also have some empathy!!! A lot of peopla are having the worst Christmas ever!!!
“a lot of innocent people will be suffering because the mistakes of a lot of as&holes. It is sad to see a lot of people will be losing their jobs, a lot of seniors struggling to pay for the every-day needs, and a lot of recent college grads not being able to find a job.”
“A lot of peopla are having the worst Christmas ever!!!”
That happens every year to some degree. This year isn’t any different. Being “upset” about that doesn’t do any good either.
I believe that there are some people who did not live beyond their means that are losing their jobs because of the state of the economy. In otherwords, there may not be a one-to-one correspondence between those responsible and those that are suffering.
No belief required. It’s a fact. Just rephrase to say, “…and some that are suffering.”
If you mean that alot of people are having the worst Christmas ever and that relates to having to live within their means (and those means can keep the lights on, feed them, and provide shelter) then I feel no sympathy. For the little old lady that has to decide between meds and cat food for her dinner then I am a bleeding heart. If they are whining because Hanna Montana didn’t come to town with a 3 karat diamond and a botox certificate, well so be it.
With that said, I hope everyone had a Happy New Year, and here is to the USA in 2009, a USA that can pull itself up by the boot straps, and produce something other than debt and tattoos.
Yup.
And always remember:
You can’t legislate “fairness”
It’s not about the people not getting Hannah Montana DVDs or buying a new car; you know there have been a lot of people that have lots of their jobs, which is their only source of income. Right now, they are struggling to pay for foods and their other basic needs. Not everyone has been the ‘evil’ materialistic individual that flipped a house and got tons of money using HELOC. I agree, there are tons of those, but there are many others who are suffering for no reason.
” I agree, there are tons of those, but there are many others who are suffering for no reason.”
sure there are and instead of whining about it here, go take your anger out at the people who got everyone in this situation. That includes your flippers, your congressmen, senators, regulators and MSM. This board and other like it were warning folks for years but were dismissed as tin foil, doom and gloomers and now you accuse us of gloating? We have empathy, we’ve had empathy for years, thats why we were here warning and protecting our own as much as possible.
What you percieve as gloating is actually anger and frustration at what was obvious to everyone here but was denied by media and sheeple in general. Direct your anger at those folks please.
What he said.
Preach it, Brother Sartre!
Not everyone has been the ‘evil’ materialistic individual that flipped a house and got tons of money using HELOC. I agree, there are tons of those, but there are many others who are suffering for no reason.
There are very few real innocents in this scenario, aside from pets and children. The sheeple elected the fools of both parties who “led” us into this mess and turned a blind eye as the greed and avarice of their Wall Street wire-pullers was exceeded only by their stupidity. Other “victims” let themselves or family members be led down the primrose path by MSM truth-makers and NAR shills, never applying an ounce of logic or critical thinking to the situation. Most were too busy watching TV or other mindless entertainment to even care what was going on all around them.
These and others aren’t suffering for “no reason” - they’re suffering because they tolerated, allowed, or actively participated in unsound practices and an entitlement mindset that was bound to end badly. Now, not a minute too soon, they might finally have some motivation to come out of their MSM-induced lobotomies and start thinking for themselves, and making smarter choices.
What you percieve as gloating is actually anger and frustration at what was obvious to everyone here but was denied by media and sheeple in general.
Except in my case - I’m definitely gloating and reveling in pure schadenfreude as those who willfully refused to open their eyes to reality, are reaping their just desserts.
Everyone who got an adjustable mortgage (with the exception of people who had the cash to pay off the mortgage in full if they needed to) was a speculator, motivated by greed.
Sometimes you reap what you sow.
I have no sympathy for people who are too weak-minded to avoid following the crowd, whether in the form of becoming a mortgage slave or voting for the Messiah.
Some of these people laughed at me for renting. One Phoenix buddy told me two years ago that a man in his 40s should not be renting but owning a home. Another colleague called me a rent slave. These guys don’t seem to be very happy lately, nor as free as me.
Also, the internet is here, the library is “free.” The tools to do personal finance research are nearly free. People could have used their heads, but became greedy instead. Personal finance and working toward financial freedom are not about get rich quick schemes. Millions of Americans were alive during the last real estate bubble. They did not learn from it. They also ignored the adage “if it sounds to good to be true, it is too good to be true.”
Bill,
The thinking 1% of the population are going to have to lead the rest out of this mess, if that’s possible. I don’t know about you, but over the past year I’ve seen the smugness wiped right off the faces of fools and herd creatures who scoffed at the nation that we were in a housing bubble or that our national “prosperity” was built on a gigantic debt and credit pyramid. They ain’t scoffing now, and I’m not shy about reminding the worst of them that any independent thinker should’ve seen this coming. Now they make a point of asking my opinion on where things are going. A lot of them have come out of their previous self-delusion, and are ready to listen to different voices than the fools and swindlers that led them into this mess.
“Some of these people laughed at me for renting. One Phoenix buddy told me two years ago that a man in his 40s should not be renting but owning a home. Another colleague called me a rent slave. These guys don’t seem to be very happy lately, nor as free as me.”
If you had purchased that stucco box, you may not have been able to pursue better job contracts in other cities, especially if you opted for a standard-issue Arizona suicide loan. I was never called a rent slave, but did draw a few sympathetic (?) looks regarding my choice to rent in AZ starting in ‘05.
I have a cousin who I see every few months. I remember him declaring at Christmas 2006 that “it takes a minimum of $350K to get into this subdivision despite the ’slowdown.’ ” Here is one bank-owned behemonth in the same subdivision: http://phoenix.craigslist.org/wvl/reb/973957485.html
He was actually referring to the smaller, 1,900-2,300 sq ft models, which are listed (and occasionally even selling) in the $170s and $180s. Of course, the prices decline further each month.
“If they are whining because Hanna Montana didn’t come to town with a 3 karat diamond and a botox certificate, well so be it.”
LMAO!
Sammy, that guy who told me that “I should be a homeowner since I’m in my 40s” has not talked with me for over a year. I used to go to his house parties, the birthday party for his wife or the birthday party for his son, even a Christmas party.
The one who called me a rent slave has not discussed real estate much with me. We talk about other things that we like in common though (that’s younger women). He used to say I invest like an old man (because I buy savings bonds, TIPs, and municipal bonds outside my retirement plans mostly). He no longer says that either. And we no longer discuss gold or oil.
That “1%” “they” are talking about. Do they mean the top 1% of net worth, the top 1% incomes, or the top 1% savers? There can be major distinctions between all three groups. If it’s savers, the government is not going to get much. T-bills pay very little interest. Savings bond interest is not taxable until redeemed, and that can be held off 30 years from issue. Municipal bonds are not taxable at the federal level.
The Republican Bush Administration and the Democrat Congress has proven how stupid a bunch of officials can be. But I doubt if they will change the tax laws on savings bonds and municipal bonds. They would shoot themselves in the foot and lose a substantial source of funding if they reduce the tax advantage of government securities. So I feel relatively safe as a saver in government securities.
I think I won’t be counted among the 1% to lead the nation out of this predicament.
AnonyRus - Wow! 4,000 square foot, once valued at $700,000 and “the bank may take $299,000!”
That’s about 2,500 square feet too much for me…
I wish employers could/would run credit reports and search property records before doing layoffs, and get rid of the houseflippers first!
In nearly every office over the past few years (I work as a consultant, so I’m in quite a few offices!), it was common to hear watercooler talk about making a killing by “dabbling in Real Estate”.
It would be a tremendous boost to the morale of a company if these were the people who were let go first during a downsizing.
(And no, I’m not kidding.)
I’d very much approve of this also, reuven.
About 16 months or so ago, an infrequent poster asked a question about how to best screen job applicants. I said that Rule #1 would be to run their credit reports and select those that did a good job managing their own finances.
Why hire someone who spends every nickel they have? If they don’t give a whit about putting themselves behind the proverial 8-Ball, it’s probable that they won’t keep an eye on their employer’s bottom line as well.
I was ripped to shreds on this very board for suggesting such a thing. Several people called me a troll.
Members of the “everyone else is a crook, so I might as well be one myself” crowd, no doubt.
“To most of you, it probably feels good to laugh at the financial institutions, NAR, infestors, banks, etc because it makes you feel ‘more intelligent’ than the rest of society since you’ve been predicting these problems. However, you should also have some empathy!!!”
Oh sheesh. Did you ever hear of mixed emotions. Last time I checked, people are capable of complex responses.
Like sartre said (HBB sartre
) I am pretty ticked off with all the people I know personally who refused to listen to any reason outside of “your genious purchase of a home will make you a millionaire (ps. too bad for everyone who didn’t get in on time)” and I’m ticked off with every crooked banker, realtor, politician who saw a golden ticket in this mess and I feel relived that this thing is unwinding, as the bigger it gets the worse it will be and I am quite frightened of the unintended consequences such as war and violence that can occur during periods of financial stability and I feel pretty good that I didn’t buy under extreme family preseeure, but paid off my student loans instead and I feel badly for people that are suffering as a result, even some of the ones that deserve it. I’m willing to see taxes go for shelter and food for distressed families, but not for homeownership.
By the way, unless you are responding to a specific “heartless” post, or you are doing something specific to help the situation (which a lot of people on here did do by WARNING people around them), then I think you could adopt a slightly different tone. No one in here is responsible.
periods of financial in- stability (shoulda said.)
Well said, ella and sartre!
you have go to be kidding me to think people on this blog need to have any empathy. Did anyone care that their actions caused many to become priced out of homes. no, they went to christmas parties, birthday parties, and talked of the riches to be made buying and flipping properties. many maxed out their housing ATM to buy these investment properties creating artifical demand. some, lived it up on credit cards, housing ATM. they are the ones going bankrupt and walking from all their debts. HOW HAVE THEY SUFFERED!! the banks took all the losses and now we have our government spending trillions to prop up the free spending of our fellow americans. SO those of us who did not profit from the mess end up paying through higher taxes…in the end! they can move out and move into a tent for all i care! I am looking to buy my first house and since it will be all cash…it is going to be a great deal for me!! I saved for all the years houses were too costly for me to buy…something many americans have forgotton! I thought it was interesting when bank tellers would tell me few my age had the kind of savings i had and i earned and saved it all! THANKS DAD FOR TEACHING ME TO SAVE!!
“I just heard on CNN Money the unanimous agreement that “It’ll be difficult to get loans, but that’s a good thing.” “If it were difficult to get loans in the last few years, maybe we wouldn’t be in this mess.”
“Seems like MSM is catching on.”
The MSM is now reporting reality simply because there’s much much less $$$ flowing from bubble-connected entities.
To think we could EVER get a BALANCED analysis of any bubble (that financially feeds the MSM) from the MSM is naive.
Remember how many RE financing loan as we endured on TV and radio, the cheerleading from paid-off economists and RE talking heads? A freaking non-stop barrage it was, and I for one, am glad it’s toned-down.
True unbiased reporting by the MSM is dead. It’s all about the advertizing $$$ now. They’ll never bite the hand that feeds.
Sad.
DOC
But…but…but…you mean we can’t borrow and spend our way to prosperity? That’s un-American!
Dang Blano,
Everyone that responded to you seems a little down.
We guy a Happy New Year to you
We=Well
Happy New Year! Ow, my head. Love that champagne.
Korbel x-tra dry. Cheap, but tastes great going down.
Royal Canadian whiskey and diet cherry Coke for this boy.
Extra dry Gin martini very cold and very dry with two olives. When you have had a martini you know you have had a drink. One is too few and 3 are too many.
3 are too many.
Says who?
“I’d rather have a bottle in front of me than a frontal lobotomy.”
Martini’s are sometimes compared to women’s bre**st. One is too few and three are too many. Two are just right.
But four is better! All multiples of two might be considered good as a matter of fact.
I love they way you think and party FPSS
You go, Blano! BTW, all the best to you and yours in 2009. Here’s hoping it’s a healthy and prosperous year for you. And if I may say, you are a true gentleman. Glad to have met you here.
Thank you, Palmy, I appreciate it!! Back at ‘cha, and the same for your and yours.
I’ve always enjoyed your writings, rantings etc. Been a pleasure knowing you here too.
Happy New Year everyone!
Will we see housing price drops end this year? Or will just the RATE of decline slow down? When do you think the Case-Schiller (20-city average) bottom will be reached?
I’m gonna be an optimist and say Spring 2010, although three years ago I never would have guessed the decline would be anywhere near this bad.
311 Sandtree Dr
Palm Beach Gardens, FL 33403 $60,000
2 Bed, 2 Bath, 1,338 Sq Ft
Property Type: Condo/Townhouse/Co-Op
$60,000 is what they are asking today 1/1/09
$59,900 is what it sold for Jan. 1980
January 1980?
You’ll be kicking yourself in ummmm, TWENTY NINE YEARS if you don’t buy today!
(Insert FPSS laugh here)
Yes 1980. Looked it up on Palm Beach County Proprty Appraiser site.
But the NAR can still say real estate always goes up, even if it`s a hundred bucks in 29 years.
Hey…you can do alot with a hundred dollars!
Lane
“Yes 1980. Looked it up on Palm Beach County Proprty Appraiser site.
But the NAR can still say real estate always goes up, even if it`s a hundred bucks in 29 years.”
LOL!!!
DOC
been a lurker for 4 yrs. never had anything to add before.
after selling our last house -bought for 315,000 for 410,000 just 2 yrs later in2004 was convinced there was a bubble. moved to ny area and convinced husband to rent. i started reading hbb and read it every day. it helped convince husband to rent inspite of incentives offered by his company that make it a good deal to buy.
just moved to madiera beach fl and continue to rent.
my parents bought a sunrisr fl condo in 1980 for 40,000. in 1998 my brothers andi sold it after it was on the market for 9 mos. for 19,000 furnished. we were glad to get rid of it.
having lived in plantation fl. since 1978 and owning one home for 10 yrs and another for 15 yrs before leaving area in 2002 i certainly knew prices dont always go up.
i have really enjoyed this blog more than i can say. i feel part of a community on this blog that i could not find living in pa,nj, and ny for the past 7 years ,even though i grew up in brooklyn and spent about half my life in that area.
i follow realestate in ft. lauderdale since my 2 kids live there (they rent)and we will buy there when sanity returns to prices and taxes.
i wish every one a happy and healthy new year.
happy and healthy new year to everyone.
happy new year
Happy New Year to you, ellen! Sounds like you made a few really good decisions (along with your kids).
If it wasn’t a condo, I’d lowball at $20K.
It`s a duplex and the 2/2 rents for $900 a month, I know a lawyer that still owns four units, he had seven but sold three near the peak. He got them in the 80`s from some kind of legal action.
Amen, brothah! I’m renting a condo right now. Would never buy, since I don’t like having my fortunes tied to a bunch of people I don’t even know. Condo owners in Florida must live in hell right now, unless they’re in a stable, older building. And even then, as a result of the bubble, there’s defaults all over the place and the decent, dues paying owners have to take up the slack for the deadbeats. Majorly sucks.
Whaaa? Buy for $60K, rents for $900/mo? What is wrong with this place? I’d be scared to see the mildew creature growing out of the toilet or the missing appliances in the kitchen… dang.
Ten grand would get it ready for rent, I think he is gonna buy it so he can take the comp to the county and knock down the taxes on his other units. If you wanted to be a landlord [ I DON`T ] it`s probably not a bad deal, Ben has said there is opportunity everywhere.
Probably a $500 mo condo fee because no body else is paying it on time.
—————
What is wrong with this place
It sounds like a pretty dam good deal if the numbers are correct…Thats 5-6 times gross…Am I missing something ?? HOA, Taxes or insurance cost are really high ??
Google maps shows it as a garden-variety small duplex subdivision; not gated, looks like no common pool or other facilities to pay for, so HOA should be very low. Close to I-95 and a good-sized shopping center.
The one big theoretical negative could be insurance - it is east of I-95 so almost certainly in the highest-premium zone. If I owned it, I’d try to buy coverage minus wind and if that weren’t possible, go bare except for liability.
jeff saturday,
There’s a lot of property in Palm Beach that’s similar.
Here’s an observation: prices from 1983 to 1997 where stagnant in West Palm.
Seen dozens of comps that bear this out, sales in 83 for 60K (+- a couple of thousand) and again same unit in 97 for the same 60+-
Same for some Miami-Dade.
Of, course, you also see it in Case-Schiller graphs.
-
Palm Beach in ahead of Miami. It’s still 2003ish here.
I expect 2001 by years end.
It’s all kind of a weird “Back to the future.”
I think we’ll see housing price drops end this year, beginning this year, and middle this year.
Here’s hoping to an increased rate of price drops in the mid-Atlantic region. We got some catchin’ up to do with some of the other regions of the country.
I think we will see the rate of declines slow down after late-2009, but small declines will continue, in a national average sense.
The reason? Most places will probably fall all they need to by the end of this year, but will probably see no significant gains for years.
Meanwhile, in the New York area the decline is just getting started, and will by itself be enough to pull the national average down a little.
Add inner DC suburbs/good DC commute to that list of places where the price drops are still pending. The area is down because of the outer places and harder commute places.
Patience may be a virtue, but it is boring.
Polly, I subscribe to several financial newsletters. One I just received predicted housing costs to remain ’stable’ in the DC region for 2009, while pricing in the rest of the country continues to decline. I, too, am waiting for an opportunity to buy here in Montgomery County — but it appears my wait may be for naught.
See exeter’s comment below, and do your own research as well.
+1
Garbage. Drop your subscription to that newsletter.
The stupid loans were rampant in this area. People may try to hold out. Interest rates are lower so an exploding ARM may do a little less damage, but the 2% teaser rate is still going to go up to 5% at least. No one who didn’t make a huge downpayment is going to have enough equity to do a refi unless it qualifies for a gov backed loan at 3% equity and very few made a huge downpayment. Unemployment is lower so forced moves because of job loss are less frequent. But people still get fired. People have to move for other reasons.
It will come here. It will be late, but it will come.
Oh, and there will be HUGE pressure on the Obama administration to spend stimulous money anywhere other than DC since our unemployment rate is lower. Now any government spending has some effect here because some of the administration/oversight happens here, but government distributes a lot administration in other places. Just my department (not agency or division, just department) has way more employees in Ohio, Texas and Utah than in DC.
“One I just received predicted housing costs to remain ’stable’ in the DC region for 2009″
Say what? What planet are they on? Prices in the DC region are down about 20%, and dropping at an ever-faster rate. Not exactly what I’d call “stable”. How can something that’s not stable remain stable?
(scratches head)
Stylized facts about Washington, DC housing collapse since the bubble top, based on the Radar Logic’s 28-day-moving-average price per square foot (PPSF) data:
PPSF in Jan-00 = $100
Peak PPSF (May-06) = $266
Plateau-phase PPSF (Nov-06 through Dec-07) = circa $230
Overdrive-crash phase:
25-Dec-07 = $228.14
28-Oct-08 = $179.43
Elapsed days:
Dec-07 6
Jan-08 30 + 1
Feb-08 30 - 1
Mar-08 30 + 1
Apr-08 30 + 0
May-08 30 + 1
Jun-08 30 + 0
Jul-08 30 + 1
Aug-08 30 + 1
Sep-08 30 + 0
Oct-08 28
Total elapsed days = 6 + 9*30 + 4 + 28 = 308
Annualized rate of decline in PPSF from 25-Dec-07 to 28-Oct-08:
((179.43/228.14)^(360/308)-1)*100 = 24.5 pct.
Perhaps the posters above meant to say the rate of price decline has been stable since last October?
P.S. PPSF drop off May-2006 peak = (179/266-1)*100 = 33 pct. Am I being sufficiently transparent here?
PB - where do you get your PPSF data?
packman, PB mentioned Radar Logic; check out radarlogic.com.
Right, I am not any kind of troll, but now that the US center of financial power has clearly shifted from NYC to WashDC, it’s not clear to me that there will be any price decline in the DC area. OTOH I’m not saying it CAN’T decline, just that DC metro could possibly be an exception to the rule of decline. I used to say NYC could possibly be an exception, but now it’s likely NYC will be falling big time. NY/DC are the only places where foreign buyers might save the market if the dollar resumes a weakening trend. Gary Shilling (who has been even MORE right than Shiller, Roubini, and Thornberg) believes the US dollar will remain strong for the next five years; if so, NY prices are in for a sound beating.
I agree with most but not the locus of power for DC argument. It’s not that easy to dismantle an industry that has been entrenched for 150+ years.
az_lender, here is your easy rule of thumb for where the price declines: when house prices reach 3x average regional annual household income, or 120x average regional monthly rent, you will be in a stable situation.
I agree that it might be “different” in DC simply because they won’t have as many layoffs. But only in the inner suburbs like Montgomery, half of Prince Georges, and northern Fairfax counties. Older stable neighborhoods will likely fall to ~2002 prices when the heloc-mew crowd defaults, but not much more. New construction and outer suburbs are toast. As is every condo.
The District itself — I don’t really know. I think those comps will be decided on a case-by-case basis.
Say what? Try 1.5 X income and 60 X monthly rent. Lower for dated properties in high tax areas.
“…it’s not clear to me that there will be any price decline in the DC area. OTOH I’m not saying it CAN’T decline, just that DC metro could possibly be an exception to the rule of decline.”
Just do the math, or if you are disinclined to do it, read my post above. DC prices are tanking right along with the rest of the country.
Bear bear,
If prices were $100/s ft in 2000, what would that be in late 2002? $125? I think prices will indeed crash in DC, just not as steep and not as far. But that’s for good stuff — nice nieghborhoods, near transport.
NoVa is “Toll Brothers Country,” McMansions up the wazoo built in 2002-2004. Pricing for those might be moot, as they should be entering the falling-apart phase fairly soon.
WT, I believe 2009 will be the year all the deluded knuts who have consistently denied a bubble in their area will be show a new reality. So much for “we didn’t have a bubble here”.
On that subject, I talked to a developer in Marin yesterday, a former special class of bubble denier now burnt beyond recognition.
He said he had “not received a business related phone call for three months.” It would not surprise me, if in fact, he was not exaggerating at all.
I mentioned that I thought he probably had a pretty good 17 year run prior to this period.
Silence.
Then I asked him about the future.
“2009 is going to bad. There’s a lot more mortgage problems to come; maybe we’ll see something of a turnaround by 2010.”
I did not have it in me to say:
“Good luck with that.”
had a pretty good 17 year run prior to this period ??
Exactly Jack…There was sooooo much fricken money made around here for the last 15 years or so…If they bet it all and got caught in this Gauntlet then all I got to say is “Greed Killed the Pig”….
dumbass ate the seed corn
Exeter, I’m going with you on this one.
I’ve convinced my wife to rent for one year when we move back next year… that means I am safe for 2009 (renting in FL) and 2010 (renting in Rochester)…
So what do you think? 40-60% off peak?
Rochesterians say Pittsford will never fall because “they’re rich,” but what I’ve seen in massive overbuilding there.
Having made some forays into Rochester this past summer myself, I can say that there ain’t one thing special about any part of any area there. Nothing whatsoever.
How anyone can say any part of Rochester is “special” is totally mystifying.
For my old stomping grounds, I’ll stand by the method where the 1996 price is determined and add 2.5-3%/yr adjustment for inflation. There is no other sound way to determine price without removing the bubble year increases and replacing with traditional metrics.
I think we will see the “Historical” wide gap for values with job center housing vs. rural area’s…The days of $500,000. for a decent house in Nevada or Southern Oregon are over….I will be looking very hard for something on the Oregon coast this year…Maybe Nevada/Reno also…
Happy New Year and may we all prosper in health and
wealth, friends and family, memories and good booze.
Here, here!
Happy New Year to you, to Ben, and to all the HBBers.
Happy New Year!
Came back yeasterday from visiting family in TX. I took the train as it always offers chances to talk to people from all over, and to see the side of towns and cities that most don’t.
The economy is on everyone’s minds. Whether it was the “Foreclosures Soaring” headline in the Waco paper, or the two separate individuals I spoke with from central WI (Stevens Point & Janesville) who were going to try to make a go of it in TX - the signs of the times are plentiful.
Huge new distribution warehouses are still going up S.W. of Chicago, and unfinished subdivisions abound all along the route. There is most certainly not any shortage of buildings or land in this country!
Travel really helps fill in the gaps left from all the news coverage and bogus statistics.
Happy New Year Realtards.
There is no doubt many of you are viewing this blog, tell us how you’ve come to terms with your lies and distortion. Do you have any remorse? Has reality reached you in a way you’re able to tell the truth for once? Or is the loss of easy money for little to no knowledge just too painful for you? C’mon out of hiding…. tell us how your speculative bets and deluded third rate forecasts you so often yammer about have turned on you.
Go ahead. Post up. We won’t trash you so long as you find even a smidgen of honesty. No lies, no BS, no phony optimism.
+1
BWAHAHAHAHHAHAHAHAHHAHAAHHAHHAHAHHHHHHH!!!
Realtor relative just turned license into state. Says might go back in 3-4 years. Predicts massive walking away from houses as boomers retire. No sense in flushing that pension down the mortgage.
I wouldn’t even bother. Here in Florida, many realtors are still talking about “the market coming back”. But here’s a challenge that really stops ‘em: I say, How do you figure? People have to have jobs to buy. People are losing jobs. Not to mention losing pensions and investments, if you’re depending on retirees. How are people going to buy if they don’t have incomes or money? How are they going to buy if they can’t sell the white elephant up north?
And then I say, WAIT, you’re right! The market IS coming back, to the 1980s, when a Florida house was affordable.
Some realtors, however, are glad to see prices fall, so they can sell. A small commission is better than no commission.
But I have to say, I’m beginning to see a disturbing trend of landlords squeezing the nuts of their tenants in some cases. Nuisance hikes, that sort of thing.
I’m reading “Havana nocturne.”
Story of Lanski, Luciano in Cuba.
Fascinating read but here’s the kicker, I did not know the History of the Mob in St Pete/Tampa.
I knew South Fl, but when I started reading about Tampa and St Pete, I thought of you and Muggy.
Hey, Muir, Happy New Year! Back in the day when I lived in South Florida (’79-2000), I could always count on my Cuban American friends for great book recommendations. I’m gonna check that one out. Because I don’t know much about the history of the mob in these parts. Apparently members of the Gotti family have been kicking around here for a while, I think they extradited one guy from Tampa to NY recently.
Havana Nocturne. Thanks for the tip.
“People have to have jobs to buy. People are losing jobs.”
Thank you, Palmy. As I’ve been saying to anyone who will listen around me, I don’t expect any RE recovery until job markets return to, say, the strength of the mid-80’s to 90’s. Actually, probably not until several years AFTER that happens.
The economy is composed of multiple markets: RE, jobs, stocks, etc. These markets can be out of sync temporarily, but not permanently.
Just saw an NAR ad saying that THIS is the YEAR. I think I am going to switch back to the Mythbusters marathon.
Myth: “Real Estate always goes up”
Result: Busted.
Mythbusters HQ is here in San Francisco. I would love to work for them. Love all the experiments they run to bust or not bust a myth.
I wouldn’t bank on any realtors showing up in here, but we can always go pay them a visit. A couple of years ago a few HBB stalwarts be-bopped over to the website for uber-realtor Babs Corcoran. Amidst the gushing adoration from her NAR syncophants, suddenly we popped up with our own unwelcome wisdom. They were too stunned, I think, to even respond. I also take a fiendish delight in emailing lowball offers (usually 60% of asking price) to realtors still pushing for 2005 prices on Craigslist. You can tell how what dire straits they’re in by how much vitriol they pour out in their replies. It gets quite comical.
Yeah Samster…. No takers from the realtard crowd. It was worth a shot but I like uncommon rhetoric. Say…. you should post some of those responses from craigslist. They’d make for great entertainment here.
The Locus of Control: Why Low Status Individuals Are More Likely To Spend Heavily On Status Consumer Items
An actually informative article from Yahoo! news. Next we’ll hear that the Florida Panhandle dipped below 32F…
Some of this was covered in an excellent book called “Class” by Paul Fussell. Explains why some try to buy status. The book was written in the early 1980s, but really explains why the “lugzury” business boomed along with the bubble. My sis used to comment about bank tellers sporting Coach bags made in China. Nothing against bank tellers, but a Coach bag made in China does not really indicate status. If anything, it reverses it. But it was the NAME that meant something.
“boosting income by moonlighting or selling goods on eBay,”
Um, unfortunately, sellers don’t control their own business on ebay anymore. Ebay controls the sellers, mandating forms of payment (you can’t take legal tender, only Paypal, which of course is owned by ebay) and dictating how much you can charge for shipping. It’s a joke. You’re treated better as an employee of ebay than as a customer. The management must be complete juveniles, they have this little rating system where sellers get “stars” from the buyers for accuracy of description, shipping costs, shipping time, communication, etc. I haven’t been rated with stars since I was in the second grade. The CEO must be a major ass. Was rated one of the worst by his own employees for 2008.
This was always one of my pet peeves how ebay store owners would have 1 cent cd’s and $5.99 shipping
$3 shipping is fine for 1 cd…but its when you want to sell 100 cd lots that the new system stinks. you have to sell under wholesale lots..and the 15% fee is too much.
So i have see whole areas of cd’s are buy it now for $5.99 $6.99 with “free” shipping… cd auctions have dried up a lot.
——————————————
and dictating how much you can charge for shipping. It’s a joke
They get a kickback on the shipping cost from the provider.
http://news.yahoo.com/s/ap/20090101/ap_on_re_us/rose_parade
—
The recession and housing crisis didn’t keep the crowds away or stop the National Association of Realtors from entering its first float in the Rose Parade.
The Realtors’ float was one of 46 — some from major companies with sagging stock prices such as Honda Motor Co. and Macy’s — in the floral extravaganza that has marched on through the Great Depression and world wars for 120 years.
Planned more than a year ago — before a flood of foreclosures and a credit crunch that has made mortgages hard to come by — the association’s float is dubbed “Celebrating the Dream of Homeownership for 100 Years.” It showcases a Victorian-style house covered in corn husks, coconut flakes, sesame seeds, roses and orchids.
Tournament of Roses Chief Operating Officer Bill Flinn said the effect of the recession likely won’t be seen in this edition of the parade because commitments to spend hundreds of thousands of dollars on floats have been in place for at least a year.
—
“Tournament of Roses Chief Operating Officer Bill Flinn said the effect of the recession likely won’t be seen in this edition of the parade because commitments to spend hundreds of thousands of dollars on floats have been in place for at least a year.”
Commitments don’t mean a dang unless the money is there to back them, and even then. Hey, it’s like buying a house! A person can “commit” to buy, but if they can’t get approved for a mortgage, so much for the commitment.
Oh, I just posted about the parade. Still hasn’t shown up yet.
Great photo of the NAR float on “Jim the Realtors” site:
http://www.bubbleinfo.com/2008/12/nar-float-for-the-rose-parade/
(kinda)
Bwa haha
Thanks for the link, Curt. When I read Matt’s post, I thought, “Now THIS I have to see!”
Then I read the caption:
“THEY’RE HOPING TO REACH OUT TO THOSE WHO ARE UPSIDE-DOWN.”
Looks like they’re way too late… those folks riding are already ghosts!
Maybe the house should have been upside down on the float…:)
The NAR is trying to “reach out” to upside-down FBs?!
BWHAHAHAHAHAHAHA!
Granted, most FBs are morons, but you don’t think they’re going to remember the role that realtors played in their financial Waterloo?
http://www.youtube.com/watch?v=Ubsd-tWYmZw
Looks like the foundation collapsed on one side. How appropriate.
Too bad we couldn’t have designed the NAR float. I’d have Barney Frank, Chris Dodd, and Lawrence Yun in orange jumpsuits behind prison bars. And Suzzane of “Suzzane Researched This” working a street corner in her new and more noble profession. Then we could arrange an ANIMAL HOUSE-style ramming with our own HBB Deathmobile float.
Any other details that I missed?
The credit culture began in early 80’s (partly because of politics, partly because computers made it easy). Greenspan started the interest rate mess in 2001. All the instruments of unregulated poof money were in full swing by late 2003, and escalated all the way through 2005. We ran out of buyers (the start of the Great Deflate) in summer 2006.
By the time Frank and Dodd obatined real power in early 2007, the crash was already baked in thecake. So why all the hostility toward them?
http://www.youtube.com/watch?v=JqbgcejIT_k
Greenspan and his easy money was the single biggest villain of the piece, but Dodd, Franks, etc., with their social engineering agenda, bear a huge share of the blame for the vast expansion in subprime lending.
You forgot to add Greenspan, Bernanke, Paulson, Bush etc..
Yeah, the market is coming back.
And there are still people collecting beanie babies.
A NAR float covered with flakes?
I wish I could make this stuff up.
** REAL ESTATE NEWS WARNING, NOT FOR THE FAINT OF HEART**
SOLD 2005: $319,950
FORECLOSED: SUMMER 2008
LISTED BY BANK TODAY: **$49,950**
That is **Down 84 Percent ** from the peak!!
The house is SFR 3/2, about 1600 squares, ONE ACRE of land, not in a bad area and is NOT trashed. The only thing missing is the carpeting, which the former housedebtors appeared to have taken with them. Area comps just got MASSACRED.
Anything else anyone needs to know about the future of real estate 2009?
Where at???
Offer $15K and see what happens. I bet you get it.
This sounds sweet. My only worry would be dealing with the property tax assessor’s office.
One more reason to wait another year to buy… who needs the aggravation? Prices plummet and stay low 2-3 years and the local government will be happy just to get a paying customer.
I know nothing of FL taxes but wouldn’t taxes be really low at a $15K level?
Don’t know where Rancher’s for sale is; however, in Fl, the price you pay for a property may have nothing to do with what the assessor’s office says is fair market value.
He’ll goes by last years comps and may not count “distressed sales” or transactions he deems “not arms length.”
Muir,
Same in NY. How a transaction between a bank and a willing buyer isn’t an arms length transaction is beyond me.
A non-arms length transaction? Family transferring assets to other family, hence the reason for the rule.
Rancher is around Grants Pass Or….
In Florida, you don’t pay on the first or third $25K of value if you have a homestead exemption (i.e., it’s your primary residence). Thus property taxes are already very low for anything valued under six figures.
I’m expecting increases in sales taxes, alcohol and cigarette taxes, gas taxes, and perhaps a state income tax within 18 months, plus all those other taxes that I can’t think of off the top of my head but with which NY Gov. Patterson is very conversant.
WHERE?
Are you 100% positive foreclosures get counted in comps? I see lots of REO activity, but the comps seem to stay high in my region.
I’m in FL - am not aware of any county in the state in which foreclosure sales are counted as comps. They, along with short sales, are considered distressed sales and are excluded.
What sucks about that is that it holds even when there were no “valid” (non-distressed) comp sales in the neighborhood in the previous six months. Some (if not most) assessors reach out and grab a comp from some distant neighborhood, if necessary, as their justification for keeping the assessed value high.
Seems like no way out. Appeals should succeed, but when the state and local govt purses are empty I think the pols will fight reductions tooth and nail for a while to come.
What will this do for the comps?
http://www.kfnn.com/intertechmedia_article.asp?contentId=3287378
Dunno, but I’m LMAO at the return of barter to the American economy…
I went to the site, onlinehousetrading dot com. In the article leading to the site, the CEO claims 60,000 active listings. No comment on that. Of course, you have to register to see more than the teaser page. And on the teaser, it looks like the majority of traders want to trade down in either size or price. Wonder how that’s supposed to work out.
Thanks to East Bay Renter and her husband for a nice HBB New Year’s Eve party. It was good to meet HARM and his wife, and to see Big V and her husband again.
We had fun watching “foreclosure porn” — a bunch of wailing FB’s — and some other financial recordings, and reveling in our collective identity as Jealous Bitter Renters.
When I whined that someone on CNBC (12/30/08?) had said Robt Shiller said housing isn’t overvalued any more, the other guests assured me that the CNBC commentator was probably exaggerating Shiller’s stmt.
I agree….
Glad you guys had a fun party!
I saw that exchange with Shiller, and it looked like he was referring to **some** locations that had already dropped 40-50%. When she [forgot who the anchor was, maybe Michelle Caruso-Cabrera (sp)] said something like, “see, Robert Shiller said prices have bottomed,” it looked like he wanted to correct her, but they cut and went directly to a commercial break.
so what to do in 09
oil for me as the chances of ANWR and drilling are slim
I’m seeing all the neighbors reactivating the SUV’s
ANWR was a diversion anyways. There wasn’t that much oil there to begin with.
I don’t see people buying many new SUVs - the credit problems virtually assure this. Older SUVs coming off of lease are going to be a continuing burden for the finance companies..
ANWR, Israel, Cuba, Turrrrrrrrists all meant to rally know-nothings and retards into voting against their own economic interests.
I looked at the Toyota Highlander and Sienna Minivan. Salesman said things were selling but all the highlanders were top of the line 30K. They did sell a used one while I was there.
I’ll wait. BTW the salesman was lame. Maybe he thought I was poor because I pulled up with wife and two kids in my old 1998 Subaru ? No key for the highlander so I couldn’t adjust the power seat !! I found the used one had a manual adjustment so I could at least move that seat around ( down because I’m very tall ).
I’ll rent one for the weekend see if I like it and then buy fleet.
Edmundsdotcom is a good reference
“ANWR was a diversion anyways. There wasn’t that much oil there to begin with.”
And you know this because… ? You are a geologist with Xray vision? Or simply parroting DNC talking points?
This is from wikipedia (edited):
In 1998, the USGS estimated 10.4 billion barrels of which 7.7 billion barrels lie within the Federal portion of the ANWR 1002 Area.
In 2007, the United States consumed 20.68 m bbls of petroleum products per day.
In other words, the geologists with the x-ray vision say that the protected portion of ANWR contains enough petroleum products for 1 year of US consumption.
Drilling in ANWR is a lot like an auto exec flying his private jet to Congress. It has very little monetary value. But there is a great deal of impact in attitude and PR.
So what’s the big deal about letting private companies drill there? If there’s very little monetary value, they’d just be wasting their own money.
Oh my word that is hilarious. Nothing like getting your head handed to you 2x aye LVG?
So Oxide crushes your argument (and bs comment about DNC talking points) so you change it. How very… oily of you.
But I’ll take the bait: because private companies pollute and rarley clean up. See also: Noranda.
Oil is a sunset technology and we are better than that. Politics has nothing to do with it. Only the future of our country. But drill baby, drill!!
So if we drill and extract ANWR oil we’re going to stop getting oil from every other source for a year? That’s the left’s false argument. Sorry, I mean lie.
How about if ANWR supplies 10% of our needs. Then it lasts 10 years. Sounds like a smart move to me.
Well, I don’t see how he crushed my argument– an entire year’s worth of US consumption of oil is hardly of “very little monetary value”. And that’s taking the USGS estimate at face value. My original point was that NOBODY really knows how much oil there is, and if private co’s want to speculate, we should let them do it.
Oh, I forgot– private co’s pollute. I guess you guys have never seen the results of state-run companies’ pollution in Eastern Europe. Right. Gov’t run companies = nirvana, private companies = pollution.
I agree. Let them speculate. And the profits should return to us.
Oh I forgot. Govt. run companies’ are horrible, private companies’ are honest, upright and noble.
I’ve never seen govt. run company pollution in E. Europe….. nor have you.
You’re just way too easy.
Ever heard of Chernobyl?
Why not? When I can buy a 2007 Suburban 4X4 with
all the bells and whistles for $11,500 it sure beats
spending 30k for a gas mizer that I can’t even get into. The difference buys a loooooooot of gas.
Its never been a better time to purchase a used car IMO….
I intentionally waited until January to start looking in earnest for my next ride. The ‘06 models are now 3 year olds primed for running in the derby!
Even with the gas price drop I’m still driving 65 on the freeways here (70 MPH limit). I’m back to getting blown off the road by pretty much everyone again.
I’m back to getting blown off the road by pretty much everyone again. Sounds like Michigan. If I drive less than 75 in that state I run the risk of getting rear-ended or at least getting the state welcome sign. ..|. 10 days ago I drove through MS & AL on I-20 doing the speed limit the whole time, very few people passed me, and I passed very few people. Now & then a would-be NASCAR racer blew by in the left lane & within 5 miles would be pulled over by the local police. Sweet.
Blano, you’re risking your life to prove that you’re better than the others? Wow!
Article on Yahoo Finance today of “experts” calling for a hike in gas taxes. Even Libertarian Reason Foundation member advises increasing the gasoline tax. One thing mentioned in the article is that people switching to economy cars and more likely alternative fuel cars coming on the road will mean less revenue from gasoline sales. They are worried about the deteriorating condition of the infrastructure - interstate freeways and such.
So I’m laughing about people who think this current decline in gasoline prices will last forever and are now buying Hummers or Escalades!
I’ll keep my 2003 Toyota Matrix.
Umm…is there any event in the world more wasteful than the Tournament of Roses Parade? Hundreds of towns, cities and companies spending millions of dollars on a parade float? Yeah, they get 20 seconds of exposure on TV (for the people who watch it), but they can’t present their products and their name is maybe said twice.
Do the municipalities spend budget money on this, or is it all donations? Sounds like the first donation I would cut as an individual and the first budget item I would cut in a crisis.
Plus it is food, glued on a truck (OK, that is a little over simplified, but still.)
I’m just saying….
I’ve always thought parades were godawful boring.
Polly,
From what I remember being told by parade officials many years ago…floats by municipalities use only donations of money & labor to pay to construct floats and place them in the parade.
Wow look at all the optomists for 2009. I’m still shooting for 2010, hard to know without knowing what percentage of the alt-A’s will get refinancing. I expect a long flat market after.
I’m expecting no market in the not-too-distant future, the result of government regulation of private property. How’s that for optimism?
Happy New Year!
Who predicts the central bank’s plan to buy up all the bad mortgage bonds will spark a housing turnaround in 2009? (Personally I have little sense of what this action will accomplish, other than enriching a few private firms who are supposed to carry out the process.)
Financial Times
US stocks suffer worst year since Great Depression
By Alistair Gray in New York
Published: December 31 2008 14:09 | Last updated: December 31 2008 22:08
The worst annual performance for Wall Street stocks since the Great Depression ended with a modest rally on the final day of trading as the Federal Reserve pushed ahead with its plan to buy mortgage-backed securities.
The central bank’s plan to buy up to $500bn of mortgage bonds by the middle of 2009 helped spur a 1.4 per cent gain on the day for the S&P, which finished 2008 at 903.25.
What can it possibly do?
The prices depends on rents and rents depend on incomes.
What does this have to do with what some past mor*n paid or didn’t pay or defaulted upon?
I am thinking the main impact will be to finally relieve whoever currently holds the $500 bn in toxic assets of their burden, and shift it to someone else. I cannot see how this will have much impact on the price trajectory in the residential housing market. Perhaps the Fed should consider opening up REO and landlording operations if they really want to mix it up?
Agree with your assessment, PB.
Hundreds of thousands of FB’s were depending on appreciation to furnish the equity in order to “refinance later.” When housing prices stagnated, no re-fi for FB, FB’s 3-year toxic mortgage adjusted, and they defaulted. Hence the price crash and the banking crisis. If the gov buys up the mortgages, those FB’s would be able to refinance, and banks would be more solvent.
Prices would not go up, but they would stop going down. At least, this is the hope. I don’t think it will work, unless the gov buys up every single mortgage, including specu-second homes. All it takes is 1-2 distressed homes to set a comp. I don’t see Congress buying everything — they can’t. I don’t think they can even buy up all the primary residences.
Time for our politicians to grow a pair and get motorists to pay for the driving they do. No more income tax revenue should be spent on highways.
WASHINGTON – A 50 percent increase in gasoline and diesel fuel taxes is being urged by a federal commission to finance highway construction and repair until the government devises another way for motorists to pay for using public roads.
The National Commission on Surface Transportation Infrastructure Financing, a 15-member panel created by Congress, is the second group in a year to call for higher fuel taxes.
With motorists driving less and buying less fuel, the current 18.4 cents a gallon gas tax and 24.4 cents a gallon diesel tax fail to raise enough to keep pace with the cost of road, bridge and transit programs.
In a report expected in late January, members of the infrastructure financing commission say they will urge Congress to raise the gas tax by 10 cents a gallon and the diesel fuel tax by 12 to 15 cents a gallon. At the same time, the commission will recommend tying the fuel tax rates to inflation.
“No more income tax revenue should be spent on highways.”
Dream on — this ain’t gonna happen. A private toll system would underprovide highways, as highways are a congestible public good
“A private toll system would underprovide highways, as highways are a congestible public good”
Please translate this remarkable claim from economese -> English.
Public good
From Wikipedia, the free encyclopedia
In economics, a public good is a good that is non-rivaled and non-excludable. This means, respectively, that consumption of the good by one individual does not reduce availability of the good for consumption by others; and that no one can be effectively excluded from using the good.[1] In the real world, there may be no such thing as an absolutely non-rivaled and non-excludable good; but economists think that some goods approximate the concept closely enough for the analysis to be economically useful.
OK. But I don’t see that roads necessarily fit either part of that definition. In fact, from the article you linked, this passage:
“Technological progress can significantly impact excludability of traditional public goods… The costs for electronic road pricing have fallen dramatically, paving the way for detailed billing based on actual use.”
seems to imply that roads are not a public good, or are becoming less so.
Regarding “congestible”, this apparently means that roads are congested at some times and not at others. The solution is simple: adjust the tolls to be higher at peak times and lower at off-peak times.
“The solution is simple: adjust the tolls to be higher at peak times and lower at off-peak times.”
I totally agree with congestion pricing, provide one gets the right balance between peak price, off-peak price and subsidy. But given the publicness of roads, subsidies (by taxpayers) are warranted, unlike in the case of owner-occupied housing, which is a private good. The only justification I can think of for subsidizing owner-occupied housing is to line politicians’ pockets.
“Technological progress can significantly impact excludability of traditional public goods… The costs for electronic road pricing have fallen dramatically, paving the way for detailed billing based on actual use.”
The non-rival part of the definition of public good still stands, provided the road is not congested. If the road is congested, I agree with you on the electronic pricing solution.
Considering Detroit’s current predicament, and considering the added personal consumption that the automobile culture automatically generates - it is indeed unlikely that the gov’t will enact any measure or tax that will put any crimp on auto use whatsoever.
They’ll through up a few wind turbines and declare victory. Peak oil is very much debatable - but I think everyone can agree that there will be future oil price shocks regardless.
Peak oil is very much debatable -
Debatable?? All I have to do is look at US oil production, and Alaskan oil production to know that at somepoint there will be a peak. All the technology in the world has not salvaged US production. Take a look at the small blip Prudoe Bay made in US oil production and how fast it tappered off to see what ANWR (a much smaller find) will do.
Then I look at all the incentives for big oil, and OPEC to lie about how much they have, ie stock price and political influence. I look at how easy it is for them to lie. I look at the hype regarding oil shale, and ND oil and note the huge amounts of energy required to produce said oil.
Peak oil is hardly debatable, except for the exact date. The other side is composed of NAR like dreamers who refuse to look at the data and the financiers who fear that the truth will cause people and governments to act.
The faster we extract it the sharper the falloff when the peak arrives. If peak oil isn’t enough,the wealth transfer to our enemies should get people to reduce consumption.
Production is endogenous, and so are new proven reserve discoveries.
Peak oil is hardly debatable? That’s a good one. That sounds an awful lot like “global warming is hardly debatable.” If anything it’s not debatable because it’s obviously not true.
There’s no such thing as peak anything. I’ve been hearing this garbage since the 1960s. Prices ration production. If prices get very high, supply increases and substitutes emerge, constantly extending supply. You think the Bronze Age ended because we ran out of bronze? (bronze=~85% copper, BTW)
The main problem with shale is that it leaves a big hole and makes a mess. But the energy cost argument is not valid. The higher the cost goes the greater the value of what is being extracted, so that revenues have to rise faster than costs as long as there is some break-even profitability pride level, which there clearly is.
We haven’t even started to look for oil yet, relative to what could be found if prices rose high enough.
Thank you for weighing in against the Peak Oil faithful, Paul. I thought for sure they had left the playing field when oil prices dipped below $40/bl, but apparently not…
Certainly we’ve seen peak oil production in the US. OIl production has been declining in the US since 1970. Prudoe Bay was a blip. We’ve seen peak oil in the North Sea which has declined since 1999. Mexico’s production is in decline. Yet you believe that there is an endless supply of oil. Interesting.
I’m not saying peak oil is occurring now but I believe strongly that it will occur in the not too distant future.
Q: The price of oil can fall even if production is falling if???
A: Demand is falling.
US gas demand off 3%, I imagine world demand is off even more if they can’t even afford Milk (see recent NYT article)
No more income tax revenue should be spent on highways ??
Thats fine but don’t stop there… Raising the upper income tax to fund mental health ?? Taxing tobacco and Booze to fund the schools and so on…
I like the gas tax increase idea. It is suitably regressive. Increase auto registration and driver’s license fees while they’re at it. Up the sales tax also.
This pyschobabble economics gets wearying. When are macroeconomists going to finally discover the budget constraint, and work it into their models?
How to prevent the Great Depression of 2009
December 30, 2008
by FT
By Roger E.A Farmer
…
In classical economics, the prices of stocks are determined by fundamentals and the fundamentals of the economy are sound. The US had the same stock of factories and machines in August that it had in July and the US workforce has not been afflicted by a sudden attack of contagious laziness. Although Keynes didn’t manage to work out all of the details of his theory he was right on one point: In the real world; psychology matters for the behaviour of markets!
When households believe that assets are not worth much, they spend less; unemployment increases and the belief becomes self-fulfilling. This is why households and firms are not spending today; they are forecasting further falls in asset prices and there is a real danger that these gloomy forecasts may turn out to be correct.
This notion that it is households’ pessimistic beliefs that are driving the economy down is a stretch. The chair legs were burned out from under the global economy in the first half of this decade, and the hangover from the euphoria is resulting in a shortage of real wealth to share. From here on out, the global economy will be playing the financial equivalent of musical chairs for a while going forward.
“For much of the post-war period, the US Federal Reserve has been relatively successful at combating recessions by lowering the interest rate to stimulate aggregate demand. The policy was unavailable in the 1930s because the interest rate on treasury securities was already near zero, just as it is today. It is this fact that makes the current crisis more like the Great Depression than any other of the post-war recessions.”
I guess we are SOL then.
“It is time for a greatly increased role for monetary policy through direct intervention of central banks in world stock markets to prevent bubbles and crashes. Central banks control interest rates by buying and selling securities on the open market.”
I have little faith in this plan, as I have seen little evidence that central planning works very well in practice. Refer to the recently failed USSR for a leading example.
Besides how do they know what the right level for the S&P is? Are they smarter than the market?
Evidence seems to argue against it.
“A logical extension of this idea is to pick an indexed basket of securities: one candidate in the US might be the S&P 500, and to control its price by buying and selling blocks of shares on the open market.”
What makes him think this is not already a routinely utilized financial market manipulation tool?
Welcome to the farm, the animal farm.
I’m really gonna have to read that book.
All animals are created equal, but pigmen are more equal than others.
I don’t want to be a pigman, I just want freedom……is that too much to ask??
“Freedom’s just another word for nothing left to loose
Nothing, I mean nothing honey if it ain’t free, no no
Yeah feeling good was easy Lord when he sang the blues
You know feeling good was good enough for me
Good enough for me and my Bobby McGee.”
Blano — I was spoiling the punchline of the book for you (sorry about that!):
“All animals are created equal, but some animals are more equal than others.”
– George Orwell –
I get it now!!! (several hours later)
Please do. It will take about an hour and a half. Well worth it - even if only to add to your ability to riff off the quotes and metaphors.
This just in, had to share:
Watching the Pasadena Rose Parade, the NAR float depicts a family shipwrecked on an island with their “American Dream” home!!!
ROTFLMAO
Comment by Prime_Is_Contained
2008-12-31 13:36:07
Re: “worst since the great depression” meme
Hoz, why do you think this meme is wrong? I think this one likely will be the worst recession since the great depression, and might slip into depression territory.
Why do you think “the bottom may have been reached in the economy”? I see no evidence of that, and only evidence of actions on a broad basis (layoffs, belt-tightening) that will have cyclic reinforcing effects.
Please elaborate… I value your opinion.”
It is just my opinion, do not value as investment advice. The GD had 25% unemployment with 50% of all businesses closing. It was a nightmare. In the 1982 recession, unemployment reached 12.5% housing starts were not numbered, they were named. And now we have pundits that cannot read a corporate balance sheet proclaiming the worst since the GD! BS on em all.
It is going to get ugly in unemployment, but there are some indications that business overall has bottomed. As opposed to every other recession, productivity has not declined. Inventory is surprisingly light.
The Federal Reserve is taking unusual risk onto its balance sheet or as the private industry delevers, the risk is being bought by the Fed.
“… per capita consumption expenditures (all types, deflated by the PCE-all deflator) were up in November for the first time since May. This is the largest monthly increase in two years.
per capita durable consumption good expenditures (deflated by PCE-durables deflator) increased in November
per capita expenditures (deflated by category-specific PCE-deflator) were up in November for all three consumption categories
per capita retail sales (deflated by PCE-all deflator) were pretty flat in November, after 5 straight months of significant losses ”
Mr. Casey B. Mulligan
I’m going to be forced to disagree with you on this one Hoz, the consumer (70% GDP) has butt pucker like I’ve never seen before. I’ll agree that this downturn is different than the GDGD but I can’t agree it won’t be as deep and wide. 2009 will tell a tale and I don’t expect it to be one of recovery.
Has the deleveraging slackened? Is there pressure toward increased wages? Is credit loosening? Will energy prices remain comfortably low? Is the average household feeling more wealthy or less wealthy?
And you should disagree! It is just that numbers are adding up differently than one would expect given the severity of the financial implosion. The numbers show the economy is sick, but not on a death bed. I would not be surprised if the US stimulus package is cut to $300 - $450B.
Aside:
Even though I went to a Pac 8 School, I am cheering for Penn state - I hated hearing the USC song every time they scored on us.
Jo Pa is one of my favorites, and a legend in his own time.
What a great matchup.
“The numbers show the economy is sick, but not on a death bed.”
I also see evidence to this effect on the ground. For instance, though I am quite sure sales were off this holiday season around San Diego, nonetheless the local shopping mall parking lots were full to overflowing each time I went. This is hardly the kind of behavior which one would expect of born and bred American dopes during a Greater Depression.
I doubt the world looked that scary in 1930, either. There will be fits and starts over the next 6 months, and maybe even an up quarter or two, but the direction of this economy (and the world economy) is still down.
I boycotted the malls this Xmas and managed to do nicely (and frugally) at local stores and online. However, since shopping has become not only consumption but entertainment, it’s no surprise that the malls would be full over the holidays. Its become a ritual. Doesn’t mean that folks were spending like the past, though, and I’ve read that many people are cashing in their gift cards to buy groceries and such. On a happier note, my husband and I attended a cool public art event at the beach today and hundreds of people wandered around the huge maze/medallion that an artist carved into the sand. We were all invited to add our own rocks, candles, pieces of driftwood, pine cones, bird of paradise. It was very cool, our own stonehedge.
What are folk’s thoughts with regards to bank rating services, e.g. Veribanc? I want to check out my current banks, as well as investigate others. Anyone know if they’re worthwhile, and if so have recommendations on what are the best?
Thanks.
Bankrate.com has bank ratings which I think come from the government (FDIC?). I would assume they are using the same data–?
Check out the Bauer Financial website for bank and credit union ratings.
Vozworth, Voz, Clue
“I want the regular readers to say yeah, or nay to my moniker change.”
Typical West Coast hippie mentality raised in the dust bowls of Arizona and weaned on Maui Wauie. Giving people a vote. Go back to your commie thinking and just tell ‘em what to do.
I vote yeah. Although I vote yeah on Voz and Vozworth. I am like the Fed I will accept anything.
Accept anything?!?
That’s a bold statement.
I did not say I would like anything!
“Jan. 1 (Bloomberg) — The U.S. Treasury threw the door open to taxpayer financing for a widening array of companies and industries by drafting broad guidelines on aid to the auto industry. …”
next loans to American importers of the Chinese manufactured goods.
“Trade finance is collapsing,” said Victor K. Fung, the chairman of the Li & Fung Group, the giant supply chain management company that connects factories in China with retailers in the United States and Europe. “We’ve got orders we can’t ship right now.”
…American quotas on the import of a wide range of Chinese garments are set to expire on Thursday. …” NYT
We have Terry Schiavohttp://en.wikipedia.org/wiki/Terri_Schiavocredit markets for the time being.
Sorry for the misfired link…
Terry Schiavo credit market
Clue, be clue when you do your funny stuff and Voz when you need to make an important point.
ann gogh/ouro verde/ agitated in sd
since the vote seems to be against “dont shank my prison bitch”,
vozworth it is.
2009 Predictions
1. Orange jumpsuits quadruple in price due to heavy demand and supply side failures.
2. Gold has a blow off top after breaking out of 890 and then promptly collapses as the gold bugs declare victory over fiat.
3. Old fashioned printing presses are discarded in favor of debit cards for the second round of US stimulata.
4. GMAC merges with AIG in a “make it up on volume and synergistic approach to throwing money away”
5. Oil bottoms on Jan 19th, 2009 just in time to get all the buses to DC for the coronation of the One.
6. Civil unrest in Ukraine threatens to shut down natural gas supplies to Western Europe, but Somali Pirates are hired to guard the pipeline.
7. Nobody buys a house when long term mortgage rates hit 3%.
8. GDP reporting is shelved in favor of a Global Cheese Output Index, tied to a basket of global cheese producers. UN Resolution on Velveeta gives Kraft a permanent seat on the Security Council.
9. Barney Frank and Ben Bernanke get into a hair pulling and slap fight during a weekend gettaway to Mykonos in the Greek Isles.
10. Nobel Peace Prize goes to Hillary Clinton after negotiating a peace deal between Hamas and Isreal (seriously, that could actually happen).
Ah yes, 2008, so much to remember and so much to forget.
You forgot Club Med! Greece, Italy, Spain and Portugal - France (motto: No place else exists) is trying to get into the club, but one of these four countries will bail on the European union this year.
#8.
http://www.nytimes.com/2009/01/02/business/02dairy.html?_r=1
they are gonna TARP the Cheese for the Wisconsinite-onian-heads.
Never been a better time to buy and sell Smoked Gouda.
“Gold has a blow off top after breaking out of 890 and then promptly collapses as the gold bugs declare victory over fiat.”
First I expect we will hear from the Peak Gold theorists…(we’re running out of gold, they’re not making any more gold, ya know, etc)
Not a peak gold theorist, but it’s a verifiable fact that gold production is dwindling due to a variety of factors, mostly the depletion of existing deposits and the difficulty of getting financing, permits, and funding for new mines. At the same time, physical bullion (as opposed to paper gold that doesn’t exist) is getting harder to find, and more expensive - try going to a bullion dealer site and seeing how little they have in the way of supply.
I see gold as a proxy (negative) on the dollar. If I believed the Schilling-strong dollar thesis, I would be bearish on gold. But I buy the weak dollar/inflation thesis - maybe not right away, but soon enough. If true, gold should rise faster than a simple negative correlation with the dollar. It could rise nicely (it already has), and then really bubble before declining, as panicked investors pile into it as the best inflation hedge. This could likely still be a multi-year process.
I still think gold will go above $2000 per ounce in the next 4 to 8 years.
if that were to occur, sir, I would tell you the Great Reflation is working.
“3. Old fashioned printing presses are discarded in favor of debit cards for the second round of US stimulata.”
IRS is set up to send checks, not issude debit cards, so don’t count on it. And it ain’t that hard to “monetize” a debit card. Most people buy something, so they can sub the card for that spending (grocery store comes to mind) and still do the equivalent of “saving” it. Can you see them sending out debit cards that can’t be used to buy food? No, neither can I.
I see no reason another lifeline cannot be extended to Detroit at the end of March if the current one does not pan out. In fact, I will predict this here and now: If the current automotive manufacturing bailout does not pan out by the end of March, another one will be extended at that time, then later on another, and another, with taxpayer-subsidized subprime lending to car buyers of dubious credit worthiness thrown in as a bonus. Detroit is clearly too big to fail, especially with Democrats in charge.
America’s car industry
No end to the nightmare
Dec 30th 2008
From The Economist print edition
Detroit has been given a brief reprieve, but the threat of bankruptcy still looms
THE sense of relief in Detroit that greeted the $17.4 billion federal lifeline thrown by President Bush to General Motors (GM) and Chrysler just before Christmas is unlikely to last long. The terms of the bridging loans amount to a gun at the heads of the two carmakers and their stakeholders. Unless they use the next three months to negotiate a viable way forward, the loans will be called in at the end of March—and bankruptcy will follow.
I normally don’t make predictions, but I’ll predict here that by the end of January there will be trial balloons floated that the car companies should get more.
Sounds about right. Politicians always seem to float trial balloons in the MSM as advance preparation for ramming a policy down taxpayers’ throats. Did Machiavelli think up that idea?
I predicted the same thing below. Around the end of January, the trial balloons will go out.
Ooops, I meant here.
I also said this a while back. Now that the first “loan” has been extended, the Detroit Three will never be allowed to fail. Production will be subsidized by the taxpayer, and since they no longer have to worry about possibly going out of business, the Detroit Three’s products will slowly degenerate back into the kind of crap they turned out in the ’70s and ’80s.
LMFAO! GMAC aka the bank… Has decided to start making zero interest loans again on vehicle purchases, low credit score(620) A-OK. This brain dead crowd borrows money and has to pay interest and will ten lend it back out at zero percent. Wow what an innovative idea! Without doubt GM, Chrysler will go belly up and become nationalized in the not to distant future. Way to go boyz!
Treasury Opens Door to Aid for Broad Array of Firms, Industries
By Rebecca Christie
Jan. 1 (Bloomberg) — The U.S. Treasury threw the door open to taxpayer financing for a widening array of companies and industries by drafting broad guidelines on aid to the auto industry.
The Treasury’s guidelines, published yesterday, would let officials provide funds to any company they deem important to making or financing cars. That leaves room for the government to provide money from the Troubled Asset Relief Program beyond loans already committed to General Motors Corp., GMAC LLC and Chrysler LLC.
“There are going to be other industries that are going to have just as good a case,” as the auto companies, former St. Louis Federal Reserve Bank President William Poole said in an interview on Bloomberg Television. “We don’t know what those other industries are going to be. Where does this process stop?”
Shares of auto suppliers including American Axle & Manufacturing Holdings Inc. and Lear Corp. jumped yesterday after Treasury announced the guidelines. The Motor & Equipment Manufacturers Association has been lobbying for the use of federal funds as a backstop in case parts makers can’t collect money the auto manufacturers owe them.
Analysts have speculated that companies such as GM’s bankrupt former parts unit Delphi Corp., might be eligible for assistance. The Treasury guidelines may encourage more guessing on what companies and industries are next, said Vincent Reinhart, resident scholar at the American Enterprise Institute in Washington.
‘Constructively Ambiguous’
Treasury officials “much prefer discretion, and so they would view the statement as being constructively ambiguous,” Reinhart said. “It’s appropriate that they end the year the way they spent most of it — that is, adding uncertainty into an environment in which there’s a lot of uncertainty.”
The guidelines don’t bind the government, so the lack of specifics gives President-elect Barack Obama plenty of leeway to decide who succeeds and fails when he takes office in three weeks. The bailout was originally designed to buy assets from banks and has instead become a fund for Treasury to prop up lenders, insurers, carmakers, auto-finance companies and, now, any firm that may be important to those industries.
Slippery Slope
“The further you go, the slipperier the slope becomes, the more you open the door to anyone who says, ‘Look, my firm is in trouble, I need help too,’” said Lyle Gramley, a former Fed governor and now a Washington-based senior economic adviser for Stanford Group Co. “We don’t want to go any further down that road than we absolutely have to.”
The Treasury already has provided $6 billion in aid to GMAC, the financing arm of GM, and up to $17.4 billion in financing for GM and Chrysler, using funds from the $700 billion bank-rescue package.
“Treasury will determine the form, terms and conditions of any investment made pursuant to this program on a case-by-case basis,” the Treasury said in the new guidelines. “Treasury may consider, among other things, the importance of the institution to production by, or financing of, the American automotive industry.”
The government will weigh “whether a major disruption of the institution’s operations would likely have a materially adverse effect on employment and thereby produce negative spillover effects on economic performance” or on credit markets, the Treasury said.
“This brain dead crowd borrows money and has to pay interest and will ten lend it back out at zero percent. Wow what an innovative idea!”
I can see you don’t fully understand the business plan. They’re going to make it up on volume.
“I can see you don’t fully understand the business plan. They’re going to make it up on volume”.
You’re right of course… Volume is the key, I had forgotten that part of their formula! It has worked so well in the past.
You guys are funny.
Any entity receiving Fed/Treasury aid should immediately be de-listed. At a minimum, these entities should be segregated in a separate index. Only after the re-training wheels come off should they be allowed back on the field with the big boys. Anything less is a farce against real capitalists.
Senate Allocates $460 Billion
“…Rushed through the Senate in the middle of the night, S. 9037, also known as the Must Act Now Act, authorizes the federal government to take full advantage of sensational savings on select and already reduced merchandise. Besides earmarking $250 billion alone for much-needed back-to-school clothing, the bill also provides for the purchase of marked-down washing machines, dishwashers, bedding, bath towels, oscillating fans, and much, much more….
“According to this circular obtained by members of my staff, all summer sale merchandise is to be discounted an additional 30 percent,” said bill sponsor Sen. Bill Nelson (D-FL), holding aloft what appeared to be a colorful newspaper insert. “If this information is reliable, and I believe it is, then I say there’s no point in the public paying full price for hot summertime must-haves like garden tools, Weber grills, all Coppertone and Banana Boat–brand sunscreen, and family swimwear, when, come Labor Day, they’ll be a virtual steal.”
“Look at these Rockport-brand oxfords I’m wearing,” Nelson added, lifting one leg and pointing to his foot. “I bought them at the last Labor Day sale for an amazing $59.99, over half off the original price. Plus, we really need new sheets, and now is the time to buy. As a nation, we can’t afford not to.”
Onion August 2007
Must Act Now Act, MANA is a much better name than TARP.
MANA from heaven.
Economic notes:
I was speaking with a certain radiator Red Angus the other day and he told me he has no business since November. His shop has been in place on independent auto repair row in Palmdale for 14 years. His reasoning is that rather than repairing a car that is having trouble the peeps are resorting to sharing the remaining road-worthy ride.
The general mechanic next bay over where we gets our repairs done was dead business wise when we asked if we should bring the car in for a “check engine” light diagnosis but was busy when we actually got there. In part this is because one of the partners went back to Guadalajara for the holidays.
Also, I had posted the other day that the Palmdale Mervyns made good on the closing by shuttering after the 27th. When I walked by on the 26th I could see that while the liquidation was progressing there was still quite a bit of merchandise on the shelves. I’m in Utahr now and walked by the Mervyns in the Provo University mall and it looked like the shelves had been picked clean by the time they closed. I took this as an indicator that the Wasatch is further behind in the correction in that there is more cash/credit available to spend on close out bargains than down in Cali. Am I off base here?
Closet Keynesians Emerge
by Gary North
One of the best tests for determining whether a financial columnist or a professional economist is a Keynesian is to examine his views on personal spending. If he favors an increase of personal spending as a means to stimulate the economy, he is a Keynesian. He may not call himself a Keynesian, but he is a Keynesian.
John Maynard Keynes believed that an economy could become a self-reinforcing economic depression because the general public saved too much money. He believed that the key to economic growth is not productivity, but rather spending. He did not believe that the price system is a reliable system of resource allocation. For example, he did not believe that the interest rate is a price that allocates investments and savings. He believed that it is possible that many people in the economy can save money by hoarding currency – not depositing it in a bank, where it is immediately lent. This, he said, undermined the interest rate’s role in equating savings and investments.
First, this observation is irrelevant in a world in which almost all currency is either deposited in a bank account or sent abroad, where it functions as a currency for black markets.
Second, hoarding currency pressures sellers to reduce prices. This acts as an incentive for people to buy more goods and services with their currency. The supposed excess of supply then disappears. Holding currency is a means of thrift. This thrift produces a positive result: lower prices and therefore greater purchasing power for the currency. This process was disparaged by Keynes as a liquidity trap. It was no trap. It was a benefit for holders of currency.
Keynes and his disciples had a solution to the liquidity trap: increased government spending and monetary inflation. This debases the currency, forcing hoarders to spend. The process by which this was accomplished, worldwide, was World War II. In the name of the war effort, every nation authorized its central bank to inflate.
This is what they are all doing again, in our Keynesian world, in which hardly anyone in the West hoards currency. Central banks are inflating. Governments are running huge deficits.
http://www.lewrockwell.com/north/north672.html
“John Maynard Keynes believed that an economy could become a self-reinforcing economic depression because the general public saved too much money.”
The Japanese saved ‘too much’ money, which helps explain why a fifteen-year-plus economic downturn did not create all that much hardship at the household level. Moreover, savings come in handy when global credit markets completely shut down due to a central-bank-inspired debt binge. Keynesian thinking is a scourge on the global economy which has long outlived the acceptance of his ideas in higher academia, as many who work at or for the Fed are well aware.
Bingo!
In the long run, Keynesian thinking will be dead. But for now, all the smartest economists and journalists in the room are still thoroughly brainwashed.
Now is not time to cut back lending
Published: December 22 2008 02:00 | Last updated: December 22 2008 02:00
The UK needs a hair of the dog that bit it. It may be suffering after a debt-fuelled binge, but right now it needs more credit. It is feared, however, that UK banks will not lend enough. And, without credit, even sound companies will not be able to survive. The government must ensure that a flow of lending is maintained.
November 2001 Series I bonds are now 50.7% higher than face value. Right now this 6 month period they are yielding 7.9%. Much easier to get monthly income from that compared with collecting from a deadbeat tenant in a POS house with its value declining.
“deadbeat tenant in a POS house with its value declining.”
Those words contain everything needed about why the value of rental property will keep collapsing. It will be a very difficult and dangerous way to try to make a living, which is why prices have already fallen through the 100 X monthly rent level in parts of FL and are likely headed toward 60 X, maybe even 40 X in a high interest rate environment.
“…prices have already fallen through the 100 X monthly rent level in parts of FL and are likely headed toward 60 X, maybe even 40 X in a high interest rate environment”
Wow — that is impressive! We are nowhere near that point in San Diego yet, so far as I am aware. For instance, a 4br (2000 SqFt) home would rent for about $2500/mo in 2009 (according to HUD Fair Market Rents data), while at a sale price of $200/SqFt (Radar Logic), it would sell for maybe $400,000, implying a price/rent ratio of $400,000/$2500 = 160 X monthly rent. It looks like the price/rent ratio will have to fall by another 37.5 pct (60/160*100) or so to reach equilibrium here.
I am talking about mid-to-low end rentals here, Martin and Palm Beach Counties, FL, although I know there are similar pricings in many other areas of FL.
I am seeing the following situations here: (1) 2 BR condos that are not new and not in particularly nice locations now typically fetch around $50-70K. Rent is $650-800. (2) Small 2-3 BR houses not in great shape can be had for $70-$100K; rents are $750-$1000.
Admittedly, nicer small to mid-size houses that did sell in the mid-3s are now in the high-1s (although they aren’t selling) and rents on these are typically in the $1200-1300 range.
2 big banking sector acquisitions completed
Bank of America completes purchase of Merrill Lynch, while Wells Fargo gets rival Wachovia
http://biz.yahoo.com/ap/090101/banks_acquisitions.html
So, we should see some good movement in these issues (BAC, WFC) in the next couple of weeks, no?
http://www.reuters.com/article/reutersEdge/idUSTRE4BU53T20081231
Hardly surprising that the MSM is lining up at the bailout trough. Much like PRAVDA during the Soviet era, it only makes sense that these propaganda outlets can only continue to exist as long as they’re subsidized by the guv’mint, since even the dumbest of the sheeple are finally starting to see what lying frauds they are and are canceling their subscriptions.
That should help shut up anyone in the MSM who might otherwise call the bailout policy into question.
For real truth and real news, people have little choice these days but to turn to blogs. Most are crap, but a few, like this one, have become true beacons for truth-seekers.
I was raised by parents who put a very high value on telling the truth, and it is in my nature to ruthlessly search for the truth rather than engaging in porcine beautification efforts. I am frankly quite perplexed by what I perceive as a profession of “economic scientists” who are either so clueless about economic reality on the ground that their theories come out sounding like bald face lies, or else who are deliberately lying to satisfice their benefactors. I find either explanation for what I see highly troubling.
IMO, the so called economists get paid not to tell the truth.
IMO, the so called economists who get paid not to tell the truth are prostitutes. Now I have nothing against prostitution, per se, but I highly prefer truth in advertising.
The Crisis in 10 Points…
Daily Article by Robert Stewart
The acquisition of a house was viewed by many buyers not so much as having somewhere to live but as a painless way to make money. House prices, they naively believed, would always continue to increase in value while the relative burden of mortgages would continue to fall. Not only that, but as house values increased, a house could be used as collateral for a further loan. The financial equivalent of turning sea water into gold had been created. So long as house prices increased, borrowers were in financial heaven. When house prices fell, the earth opened up under the feet of lenders.
Government-sponsored entities like Fannie Mae and Freddie Mac subsidized mortgages for people who, under more-prudent rules of borrowing, would never have qualified for a loan from a conservative banking institution. Congressman Barney Frank in 2003 stated in a moment of candor, “I want to roll the dice a little bit more in this situation toward subsidized housing.”[3] Well he certainly did, at the same time accepting with gratitude campaign contributions from Fannie and Freddie.
http://mises.org/story/3263
Every personal finance text book and periodical I read never mentioned real estate as “a painless way to make money.” But what do personal finance educators know anyway?
Careful, you are talking against Barney Frank and his fellow thugs - they are the ruling class and in November, the lemmings cast their vote for more kool-aid. I heard he had a boyfriend in a high level position at Fannie Mae or Freddie Mac.
Remember when he got slapped on the wrist for fixing the parking tickets of the “boyfriend” living in his basement, who also happened to be a male prostitute?
What a class act.
“I want to roll the dice a little bit more in this situation toward subsidized housing.”
Barney rolled a crap.
“For almost 100 years, the US government has not felt constrained to match its expenditure with its revenue. This policy was given intellectual justification by the writings of John Maynard Keynes who argued in the 1930s that, during periods of slow economic growth, active and purposeful government policies would allow the economy to spend its way out of recession.[2] It was simply a matter of time before citizens aped the financial habits of their governments by living beyond their means.”
What Keynes missed: Humans are mammals, and mammals habituate themselves (even to predictable government policies).
My lovely wife, teetotaler that she is, cannot grasp the wisdom of the hair-of-the-dog hangover cures currently promoted by the top minds in the economics profession as a cure for the lender-bender that has given the global credit markets such a tremendous headache.
MONDAY, DECEMBER 22, 2008
UP AND DOWN WALL STREET
Serving Up Fido Whole
By ALAN ABELSON | MORE ARTICLES BY AUTHOR
Dr. Bernanke’s latest nostrum for the ailing economy. Another look at oil.
WHATEVER ELSE YOU MIGHT SAY ABOUT 2008 — and when you say it, please remember that Barron’s is avidly read by precocious toddlers eager to recoup the family fortunes gobbled up by the beastly bear market — its final hours are turning out to be a real doozy, a fitting close perhaps to a memorable year we’d just as soon forget.
Our beloved president, taking a last victory lap in Iraq, was suddenly a target of footwear thrown at him by an Iraqi journalist shouting “You dog!” The journalist, in truth, meant no harm; quite the opposite. Having, like Mr. Bush, a tenuous grasp of the English language, he thought “dog” was a term of affection and sought to match word with deed, by hurling his shoes at the president, cognizant of the fact that dogs fancy unoccupied shoes.
Oddly enough, a canine metaphor also underlies the Federal Reserve’s approach to resuscitating the economy and the financial system, which have been laid low by a serious malady brought on essentially by a huge accumulation of debt accompanied by mindless consumption.
Chairman Ben Bernanke’s ingenious remedy is to effectively slash interest rates to zero, to entice people to — what else — borrow more and, of course, buy more.
In other words, Dr. Bernanke’s prescription for what ails us goes way beyond offering the patient merely a hair of the dog that bit him; he’s intent on serving up Fido whole. The template for this most interesting approach is Japan after its great boom went bust in the early ’90s. Last we looked, the Japanese were still mired in a very mushy economy.
MAYBE WE’RE MISSING SOMETHING — but if banks remain inordinately shy about lending money, it’s a little difficult to fathom just how a zero-interest policy will induce them to loosen up. Or, for that matter, since a lack of savings has been a meaningful contributor to the fix we’re in, it’s a little difficult to see how zero interest will incite people to save. With all its rhetorical bows to the virtues of thrift, does Washington assume that savers are deep-down masochists? Or, more likely, just plain dumb?
If rates were at 5% I could channel my scottish ancestors and save 2500.00 a month for a down payment on a home somewhere in america. But since it’s at zero, I have no income and no savings. thanks BB.
For Ron Paul fans, seems his book “The Revolution” was a 2008 mega-hit on Amazon:
http://www.campaignforliberty.org/blog.php?view=6999
http://www.youtube.com/watch?v=v5_RkYXlmXE&feature=bz302
Speaking of clowns, this is pathetic, but funny - our Border Patrol at work.
Actually, when you reach the tipping point crossing the rubicon going forward with change, not just change, but real change. The change we need, or rather, the change we can believe in one must take a nuanced approach. You know, seriously, its like failure is not an option. no?
Just saw a GMAC bank commercial offering a 4 percent CD.
That didn’t take long.
In retrospect, one of my best financial moves in 2008 was to get WAMU’s 5% CD just before the FDIC shut them down.
This war on savers sucks!
(feeling for you on this, ann)
I have savings I just don’t have any new savings.
How one family solved their lifestyle issues after an 84% drop in income:
“We decided to start over, to shake loose from all the things holding us down. We got rid of all the stuff we didn’t need and worked on paying off debt. Then canceling our credit cards and using cash, we followed an efficient financial plan that taught how to track every penny.”
http://www.countrysidemag.com/issues/89/89-6/L_Kevin+Donna_Philippe-Johnson.html
The USA will be seeing a lot more of this type of thing, IMHO.
Paulson says crisis sown by imbalance
By Krishna Guha in Washington
Published: January 1 2009 23:31 | Last updated: January 1 2009 23:31
Global economic imbalances helped to foster the credit crisis by pushing down global interest rates and driving investors towards riskier assets, outgoing US Treasury Secretary Hank Paulson told the Financial Times.
OK, so then what effect is the Fed’s campaign to drive interest rates down to zero supposed to have on driving investors towards riskier assets?
Good question.
OBwan’s honeymoon is in jeopardy even before he sets foot in office.
Financial Times
Republicans threaten to delay stimulus
By Andrew Ward in Washington
Published: January 1 2009 19:00 | Last updated: January 1 2009 19:00
Members of Congress are poised to resume negotiations over Barack Obama’s proposed fiscal stimulus on Friday, amid Republican warnings against hasty legislation laden with wasteful spending.
The president-elect wants Congress to have a bill ready to sign soon after he takes office on January 20, but Republicans are threatening to delay the process.
The Troubled Asset Relief Program (TARP) has been a utter failure and waste of taxpayer money thus far
The Hair of the Dog
By Jayme Evans Monday, December 22, 2008
2008 is mercifully coming to an end. The year of the ass-backward; the year of the bailout, the meltdown and of failed leadership will soon be behind us, as will the disaster known as the Bush Presidency. Unfortunately, it appears as if President Bush isn’t quite prepared to saddle up and ride off into the sunset singing “Home on the Range” just yet. His approval of a bailout for the auto industry is yet one more nail in the coffins of capitalism, our constitution and individual freedom.
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Jayme Evans is a veteran of the United States Navy, military analyst, conservative columnist and an advocate and voice for disabled and other veterans. He has served for many years as a Subject Matter Expert in systems software testing, and currently serves as a technical lead in that capacity. He has extensively studied amateur astronomy and metallurgy, as well as military and US history.
Fix your life by making your dollars work harder for Wall Street? Harumph…
Wall Street Journal
* LIFE & STYLE
* DECEMBER 31, 2008
How to Fix Your Life in 2009
Whew!
Last year at this time, we were wondering if it could get any worse.
It did. Trouble in the subprime market exploded into an across-the-board rout. The credit crunch evolved into a global financial crisis. Markets tanked. Mighty institutions fell. Recession took hold. Layoffs began to mount just as the holiday season got under way. Few people have been left untouched. And still, we don’t know if we’re through the worst of it.
If you’re living in a house worth less than you owe on it, you aren’t alone. Ditto if your retirement savings are down by double digits. Or if you’re earning nearly zero interest on your savings, and yet unable to borrow at historically low rates. Or if you’re looking for a job or worried about keeping the one you have.
All of which has given rise to the newest new normal. Exuberance and excess have made way for prudence and pragmatism. Frugality is, once again, a virtue. To help you settle into this strange new world, our reporters have dug deep into their beats. Modeled on Personal Journal’s regular Quick Fix feature, the advice here covers a lot of ground, but shares a common theme: helping you make your dollars work harder.
I see nothing here that a little hair of the dog cannot cure.
Wall Street Journal
* OPINION: JOHN FUND ON THE TRAIL
* JANUARY 1, 2009, 10:14 P.M. ET
The Bush Hangover
Republicans vs. Bailout Nation
By JOHN FUND
The Republican National Committee, which consists of two representatives from every state and territory, is technically the governing body of the Republican Party. In reality, it has normally been a rubber-stamp for the incumbent president whenever the White House is in GOP hands. “I’ve never seen much of any debate, much less a contested vote, in the years I’ve been on it,” one RNC member told me.
But the debacle of the last two election cycles, coupled with an increasingly erratic set of policy choices by the Bush White House, is finally prompting a mini-revolt. A group of RNC members has initiated a special meeting to hear presentations from the six candidates running for the job of chairman. Even more significantly, the RNC’s vice chairman and other officials are sponsoring a resolution that will oppose the Bush White House’s support of seemingly bottomless bailouts for Wall Street and the auto industry.
“We can’t be a party of small government, free markets and low taxes while supporting bailouts and nationalizing industries, which lead to big government, socialism and high taxes at the expense of individual liberty and freedoms,” Solomon Yue of Oregon, a co-sponsor of the resolution, told the Washington Times. The resolution was written by James Bopp, a noted constitutional law attorney who is the RNC’s national vice chairman.
“Articulating a political philosophy is equally important as applying it consistently,” says Mr. Yue. “Failing to do so, we have today’s identity crisis, which resulted in our losses in 2006 and 2008.”
“Fix your life by making your dollars work harder for Wall Street? Harumph…”
I am going to make wall st work harder for my dollars.
I suppose it doesn’t hurt to have a former Treasury Secretary (John Snow) on board when currying special favors from the Treasury.
Wall Street Journal
* REVIEW & OUTLOOK
* JANUARY 2, 2009
Treasury to Ford: Drop Dead
The GMAC rescue plays favorites.
When the Bush Treasury decided to bail out Detroit, GM and Chrysler quickly said yes to the taxpayer cash, but Ford Motor Co. said it didn’t need the money and declined. Ford’s reward for this show of self-reliance? Treasury is now helping GM again by giving it a credit pricing advantage against Ford in the marketplace.
That’s one little-noted result of Treasury’s action earlier this week to rescue GMAC, the GM credit arm that, as it happens, is 51% owned by the Cerberus private-equity shop that also owns Chrysler.