Bits Bucket For January 13, 2009
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Examining the home price boom and its effect on owners, lenders, regulators, realtors and the economy as a whole.
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up with a Sick cat last night…from the yahoo board:
C + MS = Citi-Morg
That’s a hint for Citi….
Over the worst Ben?
It’s hard to say. I don’t get sick often, but every time I do I notice the same thing; it comes in waves. Last night, after I finished working I took a shower and went to the store for some much needed things. I realized I felt good, wasn’t sneezing, etc, and thought I was shaking this cold off. But I wake up at 3AM not feeling so great and can’t sleep. Maybe it’s just me.
same here, woke up at 3 and swore I had strep. Got up at 7 and didn’t feel bad at all.
“…it comes in waves… Maybe it’s just me.”
Not at all, pal. I succumbed to this nasty cold & cough about a month ago — first illness since last winter. I have continued with my normal routine (especially exercise), but every few days, another wave of coughing attacks hits me. The encouraging sign is that the wave crests have recently been lower.
I got it too, one of the worst I’ve had in a while. Today’s my first day of normalcy. It’s a bad one - get lots of rest and get well soon.
Come to Minnesota… the virus bugs are all dead with the temperatures far below zero today (it was a balmy -21 F this morning when I left for work).
While you might not get the cold, you will feel chilled and have to deal with “black ice” (condensing and freezing of automobile exhaust on the roadways). Lots of cars in the ditches, roll-overs, fender-benders this morning.
Helps keep out the rif-raf I guess. Also helps “cleanse” the REOs colons of clogged up foreclosures… Pipes burst, flooding the house…
Synovus, Comerica Brace for Commercial Real Estate Loan Bust…
By Linda Shen
Jan. 13 (Bloomberg) — Synovus Financial Corp.,Comerica Inc. and Huntington Bancshares Inc. are among regional banks that may face a second wave of real-estate loan losses, this time for shopping centers and residential construction projects.
Losses in commercial real estate excluding construction are expected to increase tenfold, Deutsche Bank AG analyst Mike Mayo said in a Jan. 5 research note. Moody’s Investors Service said yesterday it’s considering a downgrade of Synovus because of commercial real estate losses.
Borrowers have fallen behind on payments to regional lenders as the year-old recession shutters retail stores and offices. Overdue commercial real estate loans quadrupled from two years earlier in the third quarter to 4.73 percent, according to seasonally adjusted data from the Federal Reserve. That’s the highest level since 1994.
“We’re overbuilt in a lot of areas like shopping malls,” said Bruce McCain, chief investment strategist at Key Private Bank in Cleveland. Apartment developments are also suffering as falling home prices draw people away, he said. “The fundamentals are on the verge of going really, really negative for commercial,” McCain said.
Losses are likely to get worse because overdue commercial construction loans, an early indicator of future defaults, are rising, according to Mayo. Developers may not be able to refinance “hundreds of billions of dollars” in loans because there aren’t any willing lenders, said Sandler O’Neill and Partners LP analysts led by Mark Fitzgibbon in a Jan. 5 note.
Portfolios for commercial real estate and commercial and industrials loans are so big that “even marginal deterioration could translate into large dollars of new losses,” Fitzgibbon wrote.
Synovus Prediction
Synovus, which reports quarterly results on Jan. 22, said Jan. 2 that losses on loans and uncollectible debt will “remain at elevated levels.” The Columbus, Georgia-based company plans to reserve about $250 million to help cover Atlanta&cls; real&cle; estate loans.
The lender has had five quarters of lower profit and losses, and its stock has fallen 44 percent in 12 months, compared with 28 percent for the KBW Regional Bank Index. The bank’s real- estate loan portfolio makes up 78 percent of total loans, according to Deutsche Bank data. Almost a fifth of loans are in commercial real estate projects like shopping centers and hotels, Synovus spokesman Patrick Reynolds said in an interview Jan. 6.
Synovus “stopped lending to any new projects in the retail sector, in the shopping sector, or the hotel sector” in June, Reynolds said. He said the bank hadn’t seen any deterioration in the loans, and cut off lending after seeing the plunge in home and auto sales.
“Borrowers have fallen behind on payments to regional lenders as the year-old recession shutters retail stores and offices.”
DUH!!! Not to mention the new retail malls and strip malls that aren’t even getting off the ground. For example, there’s a mall near me that was built primarily to service the “upscale” Mira-Bay development. It has a Sweetbay Supermarket, a nail salon and a Chinese food establishment. That’s it. The couple dozen retail spaces are EMPTEEEEEEEEEE!
Oh, but they’re still building over at the new SouthShore Industrial Plaza. Some great little back roads have been re-configured to accomodate this monstrosity and they’ve still got the backhoes and graders and dozers going at it, bitching up the traffic and everything’s re-routed. Yep, I’m sure tons of businesses are waiting to get in there and use all that office-warehouse space.
Of course when the idiot financing disappeared, they couldn’t fill those upscale* developments with upscale idiots. ‘Cause there NEVER were enough actually wealthy people to fill ‘em.
*defined as people with more credit than sense.
Retail closings -> commercial loan defaults -> more retail closings
There’s another loop Half-empty gated communities that have no nearby retail strip where you can drop of your dry cleaning, rent a movie, or pick of some milk, etc, are even less appealing, leading them to fail have more empty houses, leading to more retail failure.
There are strip malls all around me that range from totally empty to more than half empty. Few are actully more than half full.
and yet SRS is trading down today. oooookayyyyy…
How could the FED be stymied? I thought the solution was simple, print mo money!
U.S. Economy May Shrink 1.5% in 2009 as Recession Stymies Fed…
Jan. 13 (Bloomberg) — Economists slashed forecasts for U.S. growth in 2009 and projected Federal Reserve policy makers won’t be able to start raising interest rates until 2010, according to a monthly Bloomberg News survey.
The world’s largest economy will contract 1.5 percent this year, a half percentage point more than projected last month, according to the median of 59 forecasts in the survey taken from Jan. 5 to Jan. 12. The slump will push inflation below what some Fed officials consider price stability, the survey showed.
“It’s very hard to get anything into place to change the course of the economy in the first half of this year,” said Bruce Kasman, chief economist at JPMorgan Chase & Co. in New York. “We’re in the middle of something very deep here.”
How quickly the U.S. will pull out of the slide may depend on the $775 billion stimulus package that President-elect Barack Obama is pushing lawmakers to enact next month. The projections indicate he’ll be seeking to halt what may be the longest recession since World War II.
“This is a once-in-a-century crisis, and we’re about to see a once-in-a-century response,” said Ian Morris, chief U.S. economist at HSBC Securities USA Inc. in New York. “We could be in for a wild ride” depending on the timing and size of the stimulus, he said.
Quarterly Forecasts
Gross domestic product dropped at a 5 percent annual pace in the last three months of 2008 and will contract 3 percent this quarter, with a 0.8 percent drop in the next three months, according to the survey median. All estimates were lower than in the previous monthly survey.
Obama’s spending and tax-cut package will result in GDP increasing 3.7 percent more by the end of 2010 than it would without the stimulus, according to a study compiled by his economic advisers. The two-year plan also will generate or save as many as 4 million jobs, according to the report.
“It’s not too late to change course — but only if we take immediate and dramatic action,” Obama said in a weekly radio address on Jan. 10. “Our first job is to put people back to work and get our economy working again.”
The odds that the economy will be out of the recession in the next 12 months were 55 percent, the survey showed. The slump began in December 2007.
Consumer spending, the biggest part of the economy, may fall at a 1.6 percent pace this quarter after dropping 2.7 percent in the last three months of 2008, the survey showed. Combined with the decline in last year’s third quarter, it would be the first time in the postwar era that spending fell during a nine-month span.
‘Horrendous’ Economy
“There’s nothing good out there for the consumer except cheaper gasoline,” said Joshua Shapiro, chief U.S. economist at Maria Fiorini Ramirez Inc. in New York. “The economy will be horrendous for the next quarter or two.”
Plunging home values and stock prices have eroded household wealth, and the economy lost 2.6 million jobs last year, the most since 1945. The unemployment rate, which climbed to 7.2 percent in December, will surge to a 26-year high of 8.4 percent by late 2009, the survey showed.
Stocks had the biggest one-week drop since November last week on growing concern over the economy and company earnings.
The first simultaneous recession in the U.S., Japan and euro area means American businesses will keep paring output.
“The worst of the declines in business spending are still to come,” said Peter Kretzmer, a senior economist at Bank of America Corp. in New York.
Holiday Sales
Homebuilders are in the fourth year of a slump and retailers are coming off the worst holiday-sales season in four decades. General Motors Corp. and Chrysler LLC sought government loans to stay afloat.
“It’s going to take several years to pull ourselves out of this,” Dan DiMicco, chief executive officer of Nucor Corp., the largest U.S. steelmaker, said in a Jan. 9 interview. “We know things are getting worse.”
I certainly cannot understand the math of these “economists”.
We will spend 3% of our GDP in stimulis and get a 3% increase in GDP. Great, it’s not like GDP was profit; nearly zero ROI.
Accelerating shrinkage of GDP reached a 5% rate in the last quarter of 2008, but is predicted to shrink only 1.5% in 2009, while unemployment “surges” a whole 1.2%!
“We know things are getting worse.”
I guess when the “economists surveyed” say that we are freakin doomed, is the time for me to buy stocks, oil, gold and a house.
“I guess when the ‘economists surveyed’ say that we are freakin doomed, is the time for me to buy stocks, oil gold and a house.”
Don’t know about oil, gold and a house, but that’s when you should buy stocks.
I remember an econ prof suggesting that buying stocks was a terrible plan back in 1994, just before the biggest bubble runup in stock prices ever. My personal experience has been that economists’ financial advice is a good contrarian indicator.
‘I remember an econ prof suggesting that buying stocks was a terrible plan back in 1994′
Likewise, I remember meeting with a financial advisor in late 1995 and having her tell me that mutual funds were dead. Nice going. Glad to see she was correct but only about four years ahead of it all. This new-fangled age of money is nothing new really. I expect another bubble somewhere. It is almost mandatory.
About that time my dad got so old he couldn’t micro-manage his investments, so he rolled everything into PALM and Fidelity Contra and retired to the recliner. He did all right, lol
I’m sure, or, I think, there are some good days ahead in the markets somewhere, sometime, some day.
Fidelity Contra… that *was* a good ‘un.
That seems like such a long time ago. Of course, it really wasn’t.
These “eCONomists” can theorize all day building logical fallacy upon logical fallacy. At the end of the day their “recommendations” ALL depend upon the use of violence against the general population whom have committed no crime nor act of violence against others. This violence takes the form of theft by taxation to force the people to spend money they would prefer to save.
These eCONomists all seem to think that we can “get something for nothing” and have no respect for savings. After all, you can you enslave a population if the population retains sufficient capital to survive without government subsidies?
Any theory on “human action” that relies on violence to force actions necessary to accomplish a robust economy is fundamentally flawed and arrogant. These economists do not understand how people behave, they want to tell people how they should behave.
taxation is not violence… I’m sorry you think your income is your life’s blood… it’s not…
Its non-violent in the same way that complying with an armed robber who doesn’t commit violence b/c of your compliance is non-violent.
Even if all levels of taxation are just its dishonest not to acknowledge that taxation is enforced by threat of violence. The level of violence increases as the level of resistance increases.
This violence takes the form of theft by taxation to force the people to spend money they would prefer to save.
Taxation is not theft, inflation and printing money is theft.
Say I managed to become dictator in chief by majority vote (due to heavy usage of propaganda that I am “the one savior”) and convinced congress to pass a law requiring you to give me 100% of everything you have and everything you make and in exchange give you 1 loaf of bread, and 1 glass of water per day and a well insulated cardboard box to live under.
Would that not be theft? Would you not feel “stolen from”? Can you complain, I provided you with all you need to live and keep you safe!
Neither majority vote nor divine right of Kings can serve as a moral justification for what would be clearly theft in any other case. A majority vote is simply a proxy for war in which both sides agree that the side with more votes would likely win in violent battle and therefore the looser agrees to surrender. This is no different than a minority with greater firepower that dictating their will and the majority peacefully complying because the cost of resistance is higher.
In my opinion, increasing the supply of debt-based money is not theft because no one forces you to use that money. I could issue as many bonds as I want (debt based money) backed by my promise to pay… eventually the free market would price them at 0 value.
The fraud of inflation is peddling debt notes as warehouse receipts thereby falsely representing the item you are trading. The theft occurred when the took the gold and closed the gold window.
The fact that inflation and printing of money occurs because of the government’s threat of violence against those who attempt to use gold/silver as money proves the point that GOVERNMENT is violence if the individuals governed do not freely consent!
In my opinion, violence may only morally be used against those using violence on others and that it should be proportional to the “crime”.
Great sets of posts, and I agree with you Dan, 100%.
Anyone (or any entity) who sticks a gun in your face with the presumption that they know what’s best for you (or them) is after one thing: Your Life.
I just marvel how a nation that so freely bestowed celebrity status on CEOs (who almost all got their jobs/status from connections) now so quickly puts so much trust in the hands of celebrity-like politicians (who almost all got into office by making empty promises).
How is any of this ever supposed to give me cause to buy more house than I already have? What reason is there to cast more of my lot with this crowd?
Trust? I thought we were still just about to start with some Hope.
What does any of this have to do with you buying a house? Economies can seize up in a manner similar to internal combustion engines that are run without sufficient lubricant. Do you want to see that? You just might.
Where should you cast more of your lot? Going back to the same stuff that we did that led us here might not be the best strategy to advocate.
Hope now, trust later…
Financing should be like the mantra of the US-Soviet nuke treaties: “Trust, but verify.”
“In God we trust, all others we track.”
LOL, you know it’s getting bad when they have Rahm Emmanuel on TMZ.
RE: I just marvel how a nation that so freely bestowed celebrity status on CEOs (who almost all got their jobs/status from connections) now so quickly puts so much trust in the hands of celebrity-like politicians (who almost all got into office by making empty promises).
Sheep have small brains and readily follow the Judas goat to slaughter.
A perfect segway for me to tell you guys about my famous great cousin temple grandin. She invented the merciful slaughter of sheep. she is a well known autistic person with many books at amazon. I of course am not quite so autistic.
Animals in Translation: Using the Mysteries of Autism to Decode Animal Behavior by Temple Grandin, Catherine Johnson in Books
$1 to $31 from 48 sellers
By Temple Grandin, Catherine Johnson - Harcourt (2006) - Paperback - 372 pages - ISBN 0156031442
I don’t know if people will ever be able to talk to animals the way Doctor Doolittle could, or whether animals will be able to talk back. Maybe science will have something to say about that. But I do know people can learn to “talk” to animals, and to hear what animals have to say, better than they do now. –From Animals in TranslationWhy would a cow lick a tractor? Why are collies getting dumber? Why do dolphins sometimes kill for fun? How can a parrot learn to spell? How did wolves teach man to evolve? Temple Grandin draws upon a long, distinguished career as an animal scientist and her own experiences with autism to deliver an extraordinary message about how animals act, think, and feel. She has a perspective like that of no other expert in the field, which allows her to offer unparalleled observations and groundbreaking ideas. People with autism can often think the way animals think, putting them in the perfect position to translate “animal talk.” Grandin is a faithful guide into their world, exploring animal pain, fear, aggression, love, friendship, communication, learning, and, yes, even animal genius. The sweep of Animals in Translation is immense and will forever change the way we think about animals. *includes a Behavior and Training Troubleshooting Guide « less… more »
I only met her once.
Oh I hate to be a spelling cop but you meant Segue not Segway.
I wonder if the release of the Segway was a segue for the current mess? It surely was indicative of the times…..
Did she also invent a not so merciful slaughter of criminal CEO’s, politicians and central bankers? Somebody needs to.
Very interesting!
Animal behavior is endlessly fascinating.
“Did she also invent a not so merciful slaughter of criminal CEO’s, politicians and central bankers? Somebody needs to.”
LOL!
Segway is not that great of an invention. I heard people say they would build cities around the Segway. Heh. You get rained on, you can’t go fast, you can’t carry anything. It’s no different from a bicycle. Nobody built a city around a bicycle.
It’s not anything like a bicycle; it’s a sidewalk SUV.
I’ve actually seen one city that looked like it was _almost_ built around a bicycle; it was in the Netherlands, and I can’t quite recall them name for certain–Barneveld, maybe?. Nhz, any tips?
It amazed me, though; most of the locals seemed to ride bikes to get around, get to work, shop, etc. They had dedicated bike-streets in many/most places, separate from the car-lanes. They had lights specifically to stop cars and allow bikes to cross. You could apparently commute without having to share the road with cars at all.
Wish we would do that here…
I’m not sure, must be one of the newer Dutch cities. Maybe Almere or Lelystad? Almere tries other clever ideas along these lines, but most of it doesn’t work as well in real life as it does on paper… I think some of the New World cities are better examples (Brasilia maybe?).
In my own historic town (most of the city center is 16-18th century) cars are a curse. The streets are too narrow and the whole historic center is destroyed by parking spaces and other car infrastructure (parking ticket dispensers etc.).
There has been discussion about getting rid of cars for ages, and it wouldn’t be too difficult technically except that citizens are too lazy to realise the concept. People simply want parking space for at least two big cars right in front of their home, while most of them don’t need a car at all (many could go to work or the shops on a bike). Because of that nearly all the trees in the city have been cut over the last 25 years (one big tree = parking for 1-2 cars) and nearly all the free space in the city is devoted to parking lots. Some of the newer city developments are nearly inaccessible by bike and totally geared to car owners (I guess that is normal in the US, but not over here …).
Nobody built a city around a bicycle.
You never heard of sidewalks?
“Oh I hate to be a spelling cop but you meant Segue not Segway.”
Leave her alone, punk.
As a long time dog person, whose current companion is a rescue, of a breed thought by many ignorami to be vicious, I am one of Dr. Grandin’s followers. I have benefited from her insights, as have my charges. Congratulations from afar on your reflected glory!
Needless to say, I am quite certain you are glory worthy in your very own right, cf. interesting blog posts and commentary in general. Just thought I’d make that clear.
Four disconnected things:
1) Edge — Totally agree with you on entitlement. Somebody posted the other day about the Shrub being born on third base and thinking that he had hit a triple. I’ve appropriated that sentiment in my anti-Bush/anti-plutocracy jeremiads and it really resonates with people.
I got plugged into that world of privilege in high school (the Marecal way in “Grand Illusion”, not de Boldeiu’s), so I have been in that world and know people from that world but I’ll never truly be OF it. I was merely a relatively cheap way to raise average test scores of the privileged dolts and a bet that in the future, I’d be able to make a pile and give back to the schools and start my own lordly lineage. I have repudiated those values, so I don’t expect my kids (if I ever have them, but I see that ship a-sailin’) to follow in my footsteps. Nor, really, would I want them to have play that game.
2) Re: “hope”. I’m not flaming you MoleMan, as far too many posters here do, but my daddy always said, “Hope in one hand and take a dump in the other and see which hand fills up first.” He wasn’t being pessimistic really; it was just his way of saying that you make your own luck, half the battle is just showing up, yadda yadda.
Along those lines, I saw a review of the Sandra Bullock movie “Hope Floats” and someone had written, “So does s**t.” Shades of the review of Spinal Tap’s “Shark Sandwich”. And as the late George Carlin said, “F**k hope”. I won’t go that far, but I follow the “hope for the best, but prepare for the worst” precept.
3) W.R.T. all of the bail-outs and stimulus packages, in the news etc., I quote from the delta bluesman by way of Led Zeppelin with apologies to Katrina victims,
“Cryin’ won’t help you and prayin’ won’t do you no good.”
4) The other song that somebody on this blog put into my head is the theme to “Good Times”. Every other headline that I read makes “Temporary layoffs, GOOD TIMES!” pop into my head.
Bored on the train with no interweb,
Mr Bubble
You used ‘jeremiad’ in your discourse!
Thanks. * satisfied sigh *
It was a choice among that and “screed”, “polemic”, “diatribe” and “harangue”. Glad that I chose wisely!
MrBubble
“There’s nothing good out there for the consumer except cheaper gasoline,”
Not true. I’ve noticed small drop in food prices too. You only get the drop if you are willing to shop the sales and clip coupons, though the amount of stuff you actually want to buy that has coupons is very, very limited (where are my coupons for fresh pineapple or apples or carrots). One place around here had triple coupons over the weekend which is pretty much unheard of.
What I’m noticing is not cheaper prices but smaller quanities.
1/2 gallon if Ice cream is now 1.5 quarts. What used to be a pound is now 15 oz. A “pint” is now many times 15 ozs.
Milk prices are down, meat prices are down. Since almost all produce is seasonal you’d have to compare their prices with this time last year, but I know January strawberry prices are lower this year. Can’t wait for the Plant City crop next month. The prices of prepared foods and cereal/grain/bread products are still high.
Yep, I grocery shop and cook since we’ve been retired, to give my wife as much opportunity to play (primarily golf, tennis, and outings with the “girls”) as I have.
Big sale on blueberries, cherries, and strawberries this week at Publix. Lower prices than I’ve seen in a while. Cherries must have especially had a bumper crop this year.
I think we’ll see lower food prices this year, and for those in a position to bargain for it, the beginnings of lower rent.
Yup. They now put dimples in the bottom of containers for food items such as peanut butter, to shave off a few ounces, and charge the same amount. They better not mess with cubes of butter, we’ll never be able to bake anything right if the measurements are off.
Actually, the dimples provide additional strength to the bottom while allowing a thinner “sheet” of plastic to be used. Has nothing to do with reducing the volume.
General Mills says the falling cost of raw materials is boosting their profits. Not that they are part of my grocery basket, but price reductions should follow.
I doubt that … maybe - just like the banks - they will use the extra profit to boost their bottomline (out of necessity, maybe).
let the breakfast cereal death spiral begin!
(hfcs sodas are also facing declining sales… hahahah)
From the early 1980’s on, GM, Post and Kell. relentlessly raised the prices on their sugared toasted grain doots. They were able to do so because of the widespread (erroneous) perception that these breakfast cereals were healthy. They supplanted the heavy-in-saturated-fat traditional American breakfast of bacon/ham/sausage/hash and eggs with butter, oj, coffee, whole milk, and biscuits/toast/johhny cakes/potatoes/pancakes/waffles to boot.
By the late 1990’s, two things had happened: consumers were starting to say “no mas” to cereal price increases (from being one of the cheapest food items they had become the most marked up), eggs were super cheap AND becoming rehabilitated in the public eye, and some research was starting to trickle out that the skim milk and cereal breakfast for kids was leading to snoozing in the classroom. Something was amiss.
Look around today, and you see a rising diabetes epidemic. Nutritionists are not big on the breakfast cereal. Excess carbs are suspected in everything from insulin resistance to sleepiness to weight gain. The government is stumping for fresh fruit. Whole grains are back in vogue, putting some of the most recognizable brands on the spot, while oat purveyors have had to pull back on their extravagant 1990’s “heart healthy” claims.
I think they’ll have no choice but to try to compete on price. They can also try negotiating lower TV ad rates.
Polly, where’s the triple-coupon place? I’m in your area.
It was Bloom. Just this weekend, but keep an eye on the circulars. They might do it again.
I guess I now have to fess up to buying commercial soup, but they had some of the Campbells stuff with new labels (I assume the soup is pretty much the same) on sale 8 for $10 AND I had a bunch of $0.50 off two cans coupons. So you get $1.20 a can minus $0.75 (half of a tripled $0.50 coupon). I would never buy them at the normal price ($2.50 a can or so) but worth picking up at less than 50 cents. I like soup on cold weekends and I’m not likely to make clam chowder or tomato soup on my own.
Also, the store on Rockville Pike is right on my way to the library, so I would stop off on the way up and the way back, spend a little over $10 a trip, be extra nice to the checkout clerk and get six or more little stickers toward free cookware on every trip even though you are only supposed to get one for every $10 you spend. I now heve enough to get a small saute pan for free or a stir fry pan for $15. Haven’t decided yet. Today is the last day for stickers but you can redeem them for another two weeks.
God, I’m such a cheapskate. Part of reason for going to library is to scope out the cd’s to put on ipod for free.
Cheapskate? Nonononono, you are verrrrry SMART. Free library CDs for the iPod, why didn’t I think of that?!!
My hubby likes soup, and last weekend I bought him some of the Campbell’s Healthy Harvest (I think) soup because the label said “No MSG” which was the first time I realized that, D’oh, the other types must contain MSG. It was on sale AND I had a coupon. I love it when that happens.
I thought that everybody did that!
Check out the Pimsleur language series if you want to learn a new language. Libraries usually have them. The Teaching Companies lectures are good too.
I LOVE the Teaching Company lecture series. Also available at the library, though I must admit I feel a little guilty doing it. I have a ton of their courses on cassette, and can’t really listen to them that way since the last walkman died and I don’t drive the car enough to remember what was going on from one lecture to the next. I think the company has a program where they will let you sub out the old media for a new media format (life-time guarantee), but some of the courses I have are out of print/been redone and I would miss the old lecturers. I guess the solution is to digitize the cassettes, but that is one heck of a project.
Remember this is the ipod I got for free from being a law student and getting gobs of “westlaw points.” I’m still a cheapskate.
I lost my iPod in a bike crash and haven’t gotten another. Masochistic punishment for being stupid. A conditioned iPhone is in my near future…
baby formula - same price, less product. Same with cereal
Check the Tropicana juice box — was 16oz, now 14oz.
Same price, but New! container.
change” = spend even more
didn’t work for Japan and it won’t work here
RE: “There’s nothing good out there for the consumer except cheaper gasoline,” said Joshua Shapiro, chief U.S. economist at Maria Fiorini Ramirez Inc. in New York. “The economy will be horrendous for the next quarter or two.”
BFD…So what will the passing of 6 months do?
Higher tax levies; increased health insurance costs (to those left with insurance); and rising energy prices is what everybody can look forward to.
Lots of stimulus here.
Plus former 6.9% cc interest rates now at double digits.
Adios, retail economy.
Homebuilders are in the fourth year of a slump
I don’t recall Bloomberg saying that homebuilders were in a slump in January 2005…
LOL! No sh*t!
Precisely! Pisses me off to no end to see the reporting of this slumping being in the “third” or “fourth” year, when the MSM was in totaly denial just two years back! Grrr…..
Skip,
Absolutely. IIRC at that time my Aggravation Meter was freaking pegged and my neighbor was bragging endlessly about how the new home he hadn’t even -finished- yet was going up in value daily!
( I saw it a few months back posted on Craigslist and he pretends not to see me or the wife when we ‘almost’ cross paths in town ) When he completed it in Oct. ‘05 he was still boasting that he locked in the lowest possible loan rate! ( 5.75% ) Happy NOW @ssmonkey?
“There’s nothing good out there for the consumer except cheaper gasoline,” said Joshua Shapiro, chief U.S. economist at Maria Fiorini Ramirez Inc. in New York. “The economy will be horrendous for the next quarter or two.”
How about CHEAPER HOUSES and CHEAPER RENT? Oh! I see in your next sentence these are bad. Silly me.
Amen, reuven!
The Nucor Culture can be summarized in five areas: decentralized management philosophy, performance based compensation, egalitarian benefits, customer service and quality, and technological leadership. Underlying these elements is the fact that none of Nucor’s plants, whether built from scratch or acquired, are unionized. Nucor is opposed to unions, believing them to be a destructive force in the US steel industry. No Nucor plant has ever held a successful union certification election, even though Nucor management has not engaged in the controversial “union busting” tactics adopted by other companies. The company has never laid off an employee due to a work shortage.
http://en.wikipedia.org/wiki/Nucor
Okay…let’s carefully read the last sentance…and see where THIS recession takes Nucor as their origional companies, REO, then Nuclear Corporation went both went BANKRUPT
“The trade deficit plunged to the lowest level in five years in November as a deepening recession slashed demand for oil by a record amount. Imports from China also fell by the largest amount on record.”
So…the banks extended credit, which was used to buy crap from China. And the Chinese were taking those dollars and putting it back into US stocks, treasuries, etc. Very little of the money was being used to do anything constructive in this country.
And now that this cycle is broken, I can only think of two things left to happen. Call them the final acts.
Massive interest rate increases as the dollar implodes. That would put an exclamation mark of this entire debacle, and kick the legs out of what’s left of American’s standard of living.
“In 1935, six years after the 1929 Crash, the U.S. remained mired in the Great Depression — as it would be for five years more. At a congressional hearing, then Federal Reserve Chairman Marriner Eccles told Rep. Thomas Alan Goldsborough (D., Md.) that there was very little the Fed could do beyond what it was already doing to pull the country out of the doldrums.
” ‘You mean you cannot push on a string,’ said the congressman.” This exchange is recalled this morning by George Melloan in the Wall Street Journal as he explains, in clear detail, how the Federal Reserve is trying to re-inflate the debt bubble. Is the Fed again “pushing on a string?” At the moment it appears to be so, but Dr. Bernanke is trying his damnedest to make the exercise work. Keynesians, Again.
Keynsians still would be more apt. The gratitude generated from WPA jobs and other such that prevented people and their families from completely imploding held fast for a long time, and even now is only barely faded. The utility of these programs also held up extremely well for the long term. There is such a thing as the common good, and ours is worn and battered and in need of work. The idea that just letting things fall apart will be more just and hasten a correction doesn’t have much support.
in 1921 the government did nothing
look it up
shortest and DEEPest recession year ever -then a boom
then look at the depression and Japan
government did everything
That “boom” was due to another credit bubble. Not sure that’s really what we want, is it?
“There is such a thing as the common good, and ours is worn and battered and in need of work.”
Said like a dyed-in-the-wool Keynesian!
PB,
What would you suggest WRT our failing infrastructure and the unemployment problem?
I’ve nothing against charity. I’d sooner give ten dollars worth of food to a hungry neighbor than pay ten dollars worth of taxes for WPA type programs. Government programs may “help” some on the bottom rung, but at great cost.
I expect we could feed everyone in the country with less than is being spent to feed the Wall Street elite. JMO.
Elitists believe by definition that the common man isn’t capable of deciding what is good for him.
“Well the first $350 Billion didn’t help, so let’s spend another $350 Billion right away.”
What’s that definition of insanity?
insanity - doing the same thing, but expecting different results.
insanity- a derangement of the mind. Psychosis. Madness. Lunacy.
insanity - doing the same thing, but expecting different results.
Unfortunately, that’s also the definition of “persistence”
“Elitists believe by definition that the common man isn’t capable of deciding what is good for him.”
Bullseye!
Where have all the common men gone?
Elitists believe their own success is based purely on their individual actions, not aided by the infrastructure supplied by the common good.
common man is the one asking for jobs, healthcare, lower bills… also to be saved on his horrendous RE investment … er, what was that about common man knowing what was good for him?
The WPA did more than charities, though. Millions gained education — both academic and life skills –, the country gained lasting tangible benefits, and it likely prevented civil unrest.
People who worked in the WPA said that welfare and charity handouts were the worst thing that happened to them - handouts without strings made them apathetic. Conversely, the WPA taught them to be more self-sufficient and take pride in their work. I’ve read some diaries from the CCC workers: some of these guys couldn’t even wash their own behinds before they joined, but they learned to work hard, learned to read (they had to take classes after work), learned to cook, etc in the CCC. Straightening out a few million idle young men must have had long lasting benefits to our society beyond the forests replanted and beautiful bridges built.
Another example, the housing projects during the depression were administered and maintained by the low-income tenants, and as a result, they were clean, well-maintained, and had high standards for the tenants. When the building’s administration was taken over to the government, tenants ceased to take pride in the buildings because it was no longer theirs, and they were not able to evict drug dealers or thugs. I have a guess about which type of housing program was less costly, too.
I would much rather see aid to the able-bodied poor go into some kind of community works project than just a straight-up handout. Let the community decide what it needs, too: that would be revolutionary.
Exactly, AK!
the WPA employed 5000 “artists” in 1937
remember any of the creations ?
nope
Taxeupthebootay:
Agree with the notion that art doesn’t need to be subsidized by the unwilling.
As to your question, though, we have images from Dorothea Lange - evocative and memorable.
the WPA employed 5000 “artists” in 1937
remember any of the creations ?
nope
Why, yes, I do. Vividly.
I own several books about WPA/FSA/etc. posters, murals and photography. FSA-commissioned photos (by Walker Evans, especially) are some of the most enduring, iconic images of 20th century America. The FSA body of work is incredible — I highly recommend checking it out sometime.
WPA posters and lithos get ripped off all the time, to this day, in both commercial and high art — you’ve seen the visual references, whether you realize it or not.
Lastly, there are public buildings everywhere in the US with WPA-commissioned art in them. It’s fun to run into it by accident.
While most of the artists of the era are far from household names, the WPA and other related agencies left us with an amazingly rich body of work. They succeed both as works of art and documents of a particular time and place.
WPA authors were sent to work writing documentary/travel guides to each of the 50 states. I’ve read the one on Idaho and it’s quite good for giving a history and description of place for Idaho in the 1930’s.
There are murals all over the Bay Area from depression artists - several in San Mateo proper. Read the book that’s come out recently about the WPA - you would be enlightened.
The WPA built a lot of nice community baseball parks that are still being used today..They are easily recognizable…They are enclosed wood construction for the stands and almost always painted green…
ET:
Nice post.
Also, in case you are ever down that way, in Eden Park in Cincinnati they have some WPA work near the lake (not the reservoir) that are super-nice… tall, sentinel-looking columns on either side of a road that appear almost as rooks (from the game of chess) on either side of a winding drive. The castles, as we used to call them, look European and are made out of local rocks. Two stories tall at least.
This is one of the most famous photos of the depression, taken by WPA photographer:
http://www.retrobash.com/DepressionWomanCutout.gif
Yeah that lady is probably only twenty seven but looks older.
“Yeah that lady is probably only twenty seven but looks older.”
Agreed, she’s certainly not a Mabeleine girl.
Photo was taken by Dorothea Lange working for the Resettlement Administration. Story about the young girl on the left to be found here. She turned 77 in Dec., still working cleaning houses near Modesto.
“I’d sooner give ten dollars worth of food to a hungry neighbor than pay ten dollars worth of taxes for WPA type programs.”
But do you give ten dollars worth of food, really? And not through your taxes. Just, “Here. Go get yourself something to eat.”
I don’t. I’m just not saying that I do.
“Elitists believe by definition that the common man isn’t capable of deciding what is good for him.”
Bush admin elected for second term.
Elitists 1 - common man - 0
Sub prime loans
Elitists - 2 common man - 0
Madoff, Bears and Stearns, WaMu, CDOs, 1st round bailout, et al.
Elitists -3 common man - 0
The list is long. It’s how we got into this mess. The avg person IS born and bred dumb, with OR without higher education.
The utility of these programs also held up extremely well for the long term. There is such a thing as the common good, and ours is worn and battered and in need of work.
Yes, absolutely. Large-scale investments in the past that’re still paying dividends include the Tennessee Valley Authority projects, the often-overlooked Rural Electrification Project, Eisenhower’s interstate highway system, and ARPAnet, which eventually morphed into the series of information tubes we all seem to regard as incredibly useful. The utility of those projects alone makes a pretty powerful argument.
I certainly don’t agree with all federal measures that’ve been floated or implemented recently, but infrastructure / public works were sorely neglected in recent years (see New Orleans, Minne. bridge collapse, Tenn. holding pond disaster), and, unlike amorphous TARP funds or piddly tax rebates, infrastructure provide us with something tangible and useful, often for generations to come.
The utility of these programs also held up extremely well for the long term. There is such a thing as the common good
Large-scale investments in the past that’re still paying dividends… Eisenhower’s interstate highway system, and ARPAnet
ARPAnet was a defense department project to create a network that could withstand a nuclear strike, ala no single point of failure.
The interstate highway system was designed and built with the intent of moving military hardware, supplies and personel quickly around the country.
Just saying that your “large-scale investments for the common good” were really about pending conflict. But go ahead, take these examples out of the time period context in which they were designed and built…
Just saying that your “large-scale investments for the common good” were really about pending conflict. But go ahead, take these examples out of the time period context in which they were designed and built…
Wait — National defense isn’t in the common good?
Are you serious?
That line of thinking is patently absurd.
Regardless of their Cold War pedigree, ARPAnet and the interstate system remain excellent examples of large-scale infrastructure investments that’re still paying off. In fact, I included them precisely because they weren’t generated by WPA-like programs — they are Big Picture ideas that aren’t predicated on so-called “libral idealism.”
ET, you cannot know that those “large scale infrastructure” projects achieved the common good. Likewise, the spending on our military cannot be considered in the common good.
Our military will be used to suppress rebellion in our country as the financial elite attempt to increase their control. This military is under the control of the president and not the people. It is used by big companies to earn them illegitimate profits at the expense of smaller countries… clearly our defense spending is not in the common good, but the good of a few at the expense of the many. “Defense and Security” is but a cover story to maintain public support.
The private sector will spend as much money as necessary to secure their persons and business and to maximize profit… our military knows no limits and will spend far more than is necessary. Their existence and power is an end unto itself.
If there is demand for more transportation, then there is money to be made by providing those services. Eminent domain is not necessary because property can always be purchased at market price. All government funded “infrastructure” programs do is redirect money according to political interests instead of the “common good”. A bridge to nowhere is an extreme example, but all roads funded by taxes are driven by the same political and private interests and not the “common” good.
And before you throw out the “free rider” problem, I would like you to pay me for my beautiful garden which you and many other have clearly benefited from. Before you throw out the “pain of tolls” I would like to direct you to the failure of DRM in the market and yet profit can still be made despite piracy. All it takes is creative business models and competition.
ET, you cannot know that those “large scale infrastructure” projects achieved the common good. Likewise, the spending on our military cannot be considered in the common good.
Our military will be used to suppress rebellion in our country as the financial elite attempt to increase their control.
Dan, we’re miles apart on this issue, though I do appreciate your skepticism.
Didn’t you say below that you don’t believe there’s any such thing as “common good”?
Your very stance is both alien and rather silly to me.
There is no such thing as the “common good” because the concept assumes that the “cost to some individuals” is less than the “benefit to other individuals”. All value is relative and personal. I could value a childhood teddy bear coated with lead paint more than any other possession in this world for sentimental reasons… yet to everyone else it is a “health hazard”. Which is valued more, my sentimental feelings or the general public’s peace of mind knowing that could not accidentally poison myself or my children with lead?
To a poor man $1 is a lot of money, to the elite $1 is not worth bending over; therefore, some would argue that it is in the interest of the “common good” to steal $1 from the rich man to the poor man. Unfortunately it is impossible to know whether the rich man’s investment of that $1 into finding a cure to cancer would be more valuable than the poor man spending it on drugs.
It is impossible to objectively measure the true “cost” or the “gain” of any action done in the name of the “common good”; therefore, applying violence (via the government) against innocent people in the name of the “common good” can never be justified.
The only thing that is in the “common good” is to do away with violence against those whom have not committed violence against others.
Allow the free exchange of goods and services among individuals and it becomes clear that every exchange benefits both parties or the exchange would not be made. In this case you can clearly see that the common good was served because no individual was forced to a state of less satisfaction. While the gain is still impossible to objectively measure, there is no impossible to measure net-loss to any individual. Each individual, using their own value system, perceived a gain.
So… I would like to hear from all of the people who are paying the price for this governmental intervention and see if they think it is for their good? Furthermore, it can be proved that the government’s attempted “stabilization” will lead to more squandered resources and less freedom. Any “gains” are theoretical and hollow based upon one logical fallacy or another.
“”"”"”There is no such thing as the “common good” because the concept assumes that the “cost to some individuals” is less than the “benefit to other individuals”.”"”"
BS - Keeping people employed and out of poverty is a common good, it prevents the rise of crime and anarchy which affects everyone. The elites in central America live behind walls, and pay for armies of bodyguards. Small business has a hard time growing due to crime and corruption at all levels.
“”"” To a poor man $1 is a lot of money, to the elite $1 is not worth bending over; therefore, some would argue that it is in the interest of the “common good” to steal $1 from the rich man to the poor man. Unfortunately it is impossible to know whether the rich man’s investment of that $1 into finding a cure to cancer would be more valuable than the poor man spending it on drugs. “”"”
You assume that all poor people buy drugs and all rich people invest in cures for cancer. You assume that the elite have not stolen the money they have from the average citizen. I contend that most of those in the top 0.1% got there via manipulation of the system which is theft in my book. Gov should prevent the monopolies, market manipulation, and off loading risk onto taxpayers. They have failed miserably as of late. Thus they have been replaced, let’s see if the next set does any better.
“Behind every great fortune is a great crime.”
I think of that every time I hear something was underwritten by the Rockefeller Foundation.
I do not dispute that the vast majority of wealthy today acquired their wealth by immoral means (most likely via one government subsidy, regulation, monopoly, etc)
I did not assume anything about what the rich man or poor man would do, I simply stated that *you cannot know* and then provided an example. Since you cannot *prove* things would be better then you cannot justify the theft.
Furthermore you have been duped by the propaganda of government economists when you say.. “Keeping people employed and out of poverty is a common good, it prevents the rise of crime and anarchy which affects everyone.”
If people are unemployed today due to an economic collapse then it is the result of prior attempts of theft for the “common good”, namely housing subsidies of every way shape and form. The argument being that “home debtors are better stewards of their property than renters” and that increasing “home debtor-ship will reduce crime by giving people greater respect for themselves” and other similar B.S. you hear in the media.
See this article: Does “Depression Economics Change the Rules?” for a much better understanding…
It is difficult to think objectively about “idle resources” when they are workers with families to feed. The reader who is still on the fence should first work through the arguments, pro and con, with other resources. In the comments of a recent blog post, Mario Rizzo relates how in class Milton Friedman used the example of dress shirts on the shelves of department stores. Adopting Krugman’s viewpoint, these shirts are “idle” inventory and are clearly being wasted in the sputtering private sector. Clearly the government ought to raise the deficit and spend a few billion dollars buying up these shirts, even if just to use them as rags on construction sites. Some critics might object that this is a “waste” of precious resources, but what good is a shirt on a store shelf?
Dan, you couldn’t be more wrong if you tried.
I would demolish you point by and then take a victory lap, but this board does not allow me make long posts. I’ll be lucky if this one goes through.
But you are so unbelievably wrong and your views are part of the problems in this country.
I would solve the world’s hunger problems, but I gotta finish this here beer.
Nice post V.Dan
Agreed.
Dan - Ever listened to Evan Sayet on the web? Look him up and listen to some of his speeches. Well worth the time.
I recommended to some others here that they listen to him as well, but apparently my suggestion was of little interest. Their loss.
VT Dan,
If your libertarian utopia is really a possibility, could you please direct us to a region in the world where **no** government infrastructure, healthcare, education, military, etc. exists and where the people of this region have greater measures of health, wealth, literacy, etc.?
I’d like to see an example.
Everything I think of looks like many African nations and large parts of Latin America.
Please back up your theories with credible examples, as it would really help to convince those of us who doubt libertarianism and Darwinian capitalism will result in a more successful society.
“‘You mean you cannot push on a string,’ said the congressman (Thomas Alan Goldsborough (D., Md.)).”
Awesome! I’ve wondered who coined that particular turn of phrase. Nice to see it was a GD reference…
Karl Marx was always right about Capitalism.
So what are ’strong’ measures? LOL.
Bernanke Urges ‘Strong Measures’ to Stabilize Financial System…
By Craig Torres
Jan. 13 (Bloomberg) — Federal Reserve Chairman Ben S. Bernanke warned that a fiscal stimulus won’t be enough to spur an economic recovery and that the government may need to buy or guarantee banks’ tainted assets to revive growth.
“Fiscal actions are unlikely to promote a lasting recovery unless they are accompanied by strong measures to further stabilize and strengthen the financial system,” Bernanke, 55, said in the text of a speech at the London School of Economics. “More capital injections and guarantees may become necessary to ensure stability and the normalization of credit markets.”
Bernanke’s speech indicates he sees further government aid to the U.S. financial system as essential to an economic recovery. The U.S. Treasury has already channeled $350 billion in taxpayer funds to recapitalize banks and other financial institutions, while the Federal Deposit Insurance Corp. has guaranteed principle and interest payments on $111.2 billion in bonds issued by financial companies.
The Fed chairman recommended three approaches on troubled assets. Public purchases of the bad assets are one possibility, as was originally planned under U.S. Treasury Secretary Henry Paulson’s Troubled Asset Relief Program, the Fed chairman said.
The government could also agree to absorb, in exchange for warrants or a fee, part of the losses on a specified portfolio of troubled assets, he said. Regulators used that method recently with Citigroup Inc.
Another measure “would be to set up and capitalize so- called bad banks, which would purchase assets from financial institutions in exchange for cash and equity in the bad banks,” he said. Finally, efforts to reduce preventable foreclosures “could strengthen the housing market and reduce mortgage losses” and increase financial stability, Bernanke said.
The Fed chairman said the U.S. central bank still has powerful tools to influence growth and prices.
To contact the reporter on this story: Craig Torres in Washington at ctorres3@bloomberg.net
Last Updated: January 13, 2009 08:00 EST
‘Strong Measures’ = flood the system with liquidity and hope for the best
Mr. Bear, you’re equations are becoming rather condensed…perhaps the truth is circling nearby
How difficult is IT to grasp the “Mark to Market and take your Chances Concept” Mr Bernanke ?
and “powerful tools to influence growth and prices”.
when it comes to nominal prices that shouldn’t be a problem, but for growth probably only in US$ terms (by generating even more inflation) and not in actual volume.
PB,
Let’s not be disingenuous here, when has it been implied to be otherwise? And that’s what really bugs me about this whole thing. We’re in such uncharted waters we’re going strictly by the say-so of the “forward lookout”.
I drove home from Klamath Falls Sunday night and the fog/visibility was so poor I was literally driving a few car lengths at a time. Which is fine. As long as you slow down appropriately. Since the people behind you are driving off of YOUR tail lights they wonder what -your- problem is! Yet no one seems all that eager to pass?
Why are these gangsters allowed to give our tax dollars away at will?
WTF?
Same reason a dog licks its balls - because it can.
They’ll keep doing it, until THAT game ends. That would be truly ugly. Not just the lugubrious hyperbole about 7% unemployment, but seriously ugly. Hopefully that doesn’t come to pass.
“Another measure “would be to set up and capitalize so- called bad banks, which would purchase assets from financial institutions in exchange for cash and equity in the bad banks,” he said.”
I think we already have _PLENTY_ of _BAD_ banks. How about we set up and capitalize some so-called “good banks” instead?
Seriously, if we set up some banks that don’t have the problems of existing banks, then we could let them go down and still have a functioning banking system, which is the supposed justification for bailing out the banks.
Prime,
“and the meek shall inherit the earth”
I like it. I like where you’re going. When I think back, nearly every promotion I got in the military AND… the private sector were due to some d!ckhead with an exaggerated sense of self falling on his own sword.
well, maybe the concept is to have REALLY bad banks, e.g. ones that only use black money or stuff from drug laundering operations as savings deposits. I’m not suggesting this is new, but keeping honest savers out could be innovation.
After you’ve “pulled out all stops” that weren’t holding back the string, then you use strong measures to push harder on the string.
Darrell,
Are you EVER going to tell me what Division you were in on the Tarawa!?
I did.. you must have missed it. I was in S7. Automated Data Processing….
This is an interesting article:
http://finance.yahoo.com/expert/article/mortgage/133927?count=30&start=36#dtk-cmtscnt
Particularly as these “popularized” articles go.
Summary: Once upon a time, the banks got government money and “hoarded” it, not increasing their lending. Why? Maybe (just imagine here children), the banks needed it to survive. And maybe this is a good thing. Hey, it could happen.
And the comments, after. Sheesh. No wonder everyone in the public pussyfoots around this concept. The pitchforks are waving because none of the “public” can (apparently) even imagine that a bank can actually fail. This isn’t an article comment, but I wouldn’t have been surprised to read something like: “No bank would lose 100B, they are banks for gosh sakes. I bank with Citigroup, the largest bank!” The combination of vitriol and underlying faith is… odd.
I particularly liked the comment, “Let the weak banks fail and the strong banks survive! That’s the free market!” Gee Joe, you STILL don’t understand the problem: What if there ARE no strong banks? (Among the large, too big to fail class, that is.)
Which brings us to the question, “Is it better to bail out banks with TARP money or the depositors with the FDIC?” I think THAT question boils down to “Will the TARP work?” Just like those getting mortgage modifications, there is a significant chance that the TARP will be insufficient to allow the banks to come out okay on the far side. Certainly as a taxpayer, if the TARP fails, seizure by the FDIC would have been better. But if I worked for a company that kept its accounts at one of the failed banks I might have a differnt view.
a hud/ gov stooge was on the tube bragging that only 45% of mort modifications (funded by your tax dollars) have failed
only 45% !!!!!!!
Close enough for government work.
“only 45% !!!!!!!”
Correction: only 45% _so_ _far_.
A 55% SUCCESS Grade in all the schools that I attended …was a “Frigging Super F minus” circled in RED
FDIC would not allow the mgmt that ran the bank into the ground to remain in control and sometimes there is even jail time for their misdeeds.
TARP rewards bad mgmt with bonuses.
My view months ago was to simply shore up FDIC and let the Banks fail ,or perhaps lets the process of fire sales begin and see who is left standing . The Feds were shoring up the Banks and Investment firms by short term loans during 2007 and it was keeping them afloat ,IMHO . Funny what happens when you start keeping insolvent entities afloat ,they need more money repeatedly . It has always been a issue of the Powers/taxpayers absorbing the losses ,or stalling the losses . Isn’t this how all great Ponzi schemes work ?
In my view ,we are going to get repeated requests for capital injections to the Banking system in one form or another until all
losses are absorbed . I like to call all this interference by the Government ,”The Great Bag=Holder Transfer “. The mess has always been a issue of how the losses are absorbed .
That to me would be the best solution.
Everyone’s making a big deal out of management bonuses. To me this is like decided whether or not to withhold dessert from your son who’s just gotten a DUI or committed armed robber. Make the punishment fit the crime!!. They should be fired, period - at a minimum. The best way to do this is to let them go bankrupt.
Sounds like an inverted Ponzi scheme: you keep shovelling money into a hole as the hole gets bigger and bigger.
Yep… $300 billion+ a quarter, from now until the $7+ trillion in real losses are all nationalized.
As you know, Wiz, I feel very much the same as you!
RE: “Is it better to bail out banks with TARP money or the depositors with the FDIC?”
You know the management fraudsters are skimming monies from TARP.
They couldn’t pull this off with the FDIC controlling the show.
Wouldn’t it then just be different fraudsters skimming in different a way?
People, all people whether govt employees or not, tend to take advantage of free stuff and stuff they don’t own but do control especially when the rightful owner isn’t around to make sure the thing is managed correctly.
bluprint,
Not that it ‘couldn’t’ become a concern, it’s just that the very function of FDIC is pretty straightforward. How much did you have in deposit at SkimBank Corp. and do you have a recent account statement that reflects that amount? Here’s your check. Sorry for the inconvenience.
Yeah, fair enough I see what you mean. Certainly simplicity of function can help mitigate the principle I state above.
I agree it would be better to let the banks fail and just liquidate them a la the FDIC procedure rather than dumping a truckload of TARP cash onto their balance sheets.
So true hd74man . Your point is why I wanted FDIC takeovers
rather than capital injections to the crooks . You knew darn well they were going to abuse it . FDIC takeovers would of cost far less than the route that the Powers decided to go . So what if FDIC
would of needed a bail out ,it still would of cost less .
RE: Your point is why I wanted FDIC takeovers
rather than capital injections to the crooks .
What’s interesting to me Wiz, is why the journalistic heavy hitters aka WSJ haven’t filed Freedom of Information Act suits against the Treasury, to discover where the hell all this money is going.
Obviously, Congress has played the idiot for so long relative to the massive internal waste and fraud which has gone for so long; they can’t/won’t even muscle up the intellect and to tackle the job themselves.
This is the result you get with entrenched incumbency.
Just as TARP won’t help a fundamentally mismanaged business turn around, mortgage cramdowns won’t help an irresponsible borrower turn around.
If we’re simply adding liquidity, does it really matter who gets the money?
If our Governement handed out money to people with savings accounts (for example, you get a check for 2x the interest you earned in FDIC-insured bank accounts), and some similar stimulus for responsible small business, that equaled the same dollar amount as the planned stimulus, won’t the net result be the same, without the moral hazard?
reuven,
I’m still leaning toward WT Economist’s position that cram downs are the way to go, both short and long term. When you have bad debt on your books, you can pretend it doesn’t exist and those delinquent accounts will somehow start performing or you can come to grips with it.
Now as to whether that drives more banks ( and I hate even calling them ‘that’ ) into insolvency..? Not really my problem.
Why do you need cramdowns? The problem of over-valued assets will solve itself.
Well the only REAL advantage of cramdowns is that it eliminates the huge transaction costs of foreclosure => REO slowwagon => sale at market. When you have a bankruptcy judge who is charged with ensuring that the borrower doesn’t have the ABILITY (instead of just the INCLINATION) to pay, they may be more efficient than foreclosure.
“REO slowwagon” LOL!
Didn’t they have a lot of hits back in the 80’s? Wasn’t one of them “Time For Me To Fly”?
Any Chicagoans that have seen REO Speedwagon at the Amphitheater and Aragon Ballroom more than a dozen times (and the annoying WLS promo spots ) please signify by saying Aye.
If bank doesn’t do a cramdown, they stand to lose more in the foreclosure, eviction, strip house of all metal, auction process.
However, looks like the other party still will not pay in many of these cases. Uh-oh. (The rot (kleptocapitalism) started at the top of society and trickled all the way down.)
Any Chicagoans that have seen REO Speedwagon at the Amphitheater and Aragon Ballroom more than a dozen times (and the annoying WLS promo spots ) please signify by saying Aye.
(Belly laugh. But nay.)
If bank doesn’t do a cramdown, they stand to lose more in the foreclosure, eviction, strip house of all metal, auction process.
I think the term “cramdown” is different than a loan modification which both parties agree to, in that the former is forced. Perhaps I misunderstand this term.
Ah, WLS, that brings back some memories…especially “Animal Stories” with Uncle Lar and Lil Tommy.
the first 350 billion is gone, it went to cover losses. The banks have huge losses in the CDS market and have paid their counterparties. that is why the banks should have not been bailed out and let the FDIC do its job, combine and sell off the banks. then bailout FDIC after all the counterparties take their losses. if the other 350 billion goes to the banks it will be gone too, there are more than 700 billion in losses…so the banks are broke and will continue to bleed. congress sees no money went into lending so they don’t want to give the second bailout. of course, it makes no sense to ease lending for those maxed out anyhow.
A bailout with one hand, a slap with the other:
http://www.detnews.com/apps/pbcs.dll/article?AID=/20090113/AUTO01/901130370/1148
But what is the problem? Chrysler is a privately held corporation which is something they could relatively easily change if they wanted to be treated in the manner of public companies.
Are you suggesting they become a bank?
I’m mulling this over in my mind. To stop being a privately-held corporation, Chrysler would have to hold an IPO. I wonder how successful any IPO, much less a Chrysler IPO, would be in today’s market.
Given that Daimler reduced the estimated value of their 20% stake in Chrysler to zero, that pretty much says it all IMHO.
How about just let the banks go under and have the FDIC take them over, wipeout the stock holders, calculate the value of the real assets, pay off the depositors and give the bond holders whats left?
What a novel concept.
Oops, wait thats what the FDIC has been doing for since 1933!
“How about just let the banks go under and have the FDIC take them over, wipeout the stock holders, calculate the value of the real assets, pay off the depositors and give the bond holders whats left?”
The only problem is that the FDIC could do this with the first 1% of insolvent/failed banks, and then be out of $$$.
If the deposit insurance limit was 100k per person then the maximum amount the govt would have to pay is 30 trillion. How many people have 100k in the bank? The 30 trillion would be the max total real money in the USA as you would have to issue a new currency. Pay off the rest of the world USA bond holders by giving them Alaska. It’s the only way out.
Great idea llcarlos, except:
Alaska has more unused natural resources (metals, minerals, oil, gas, fish, etc.) than the rest of the continental US combined. As an Alaskan for 28 years, your comment, though probably meant in jest, demonstrates the lack of understanding that many Americans have about their northern-most State. It is a far greater asset than most even begin to comprehend. At more than twice the size of Texas (almost four times the size of California), Alaska represents the future, in so many ways to the United States.
With enough coal to heat the homes of America for 500 years, and more gold, platinum, copper, oil, natural gas, not to mention being the ‘fish bread-basket’ of not only the US, but the entire world, Alaska’s value is immeasurable to the America’s future. I am sure that Russia would gladly promise us a future-note encompassing our entire National Debt to get it back!
maybe he thinks Alaska is the only state the bondholders would accept.
Shane, How’d you guys up there end up with a clueless retard for a governer?
Well said, Shane. Alaska is a gem of the US.
Nah, give ‘em Jersey.
At this point ,give them California .
We could sell Massachusetts to the Russian Federation - it would fit the bill, and the People’s Republik would happily line up for the May Day parade.
DC?
Good suggestions all! Since many of these states have effectively decided to drop out of the union in one fashion or another I’m good with a show of hands.
Oh and don’t leave out the possibility of Oregon?
Kallyfornia and New York.
Yes to all the above (especially Oregon, where i now reside. I have never lived in a State more disconnected from economic reality!!!) Yesterday, our beloved detached and completely inept Govenor expounded the virtues of various tax increases. At a time when the State budget may be $2 billion short, he is espousing a $2 billion increase in spending……..wow, I can see why the majority of politicians scored lower than the average American on that Internet Civics test. It is what happens when most of our political leaders have never had to actually make a payroll, and pay the subsequent taxes.
Shane,
( And welcome aboard the Hellbound Train btw ) I personally would be willing to sacrifice my citizenship and submit to the will of the nearest despot if it meant my KIDS had a chance at a real future!
Having a nifty carve-out on the map would ensure that generations of future school children would ask why the U.S map “looks kinda’ weird”. The ensuing explanation would elicit the “I… get it” response and serve as a warning. Do write from time to time, will you?
Sell the Deep South and buy lower Canada.
You guys aren’t thinking. We should put our vaunted military to work and invade Canada! The war would be over in a few weeks and we could then sell off Canada to the highest bidder(s).
You mean just like we did with Iraq?
The US military doesn’t have enough “trained translators” to invade Canada and dispite the weather, some of their women are really HOT and that would unduely distract our troops after Iraq and Afganistan
I’m not sure that they wouldn’t just GIVE us Quebec if we asked nicely.
Good grief. If they gave us Quebec, that would constitute grounds for us to invade the rest of Canada to force them to take it back.
Well they want to be their country, but they don’t want to have their own foreign policy, or currency. Maybe they should join the E.U.? Others have pointed out that there might be some space opening up….
(ducks, runs away)
The FDIC limit is, or rather was, $100K per person per bank. Some of us have money in more than one bank to make sure this limit isn’t an issue assuming the limit is allowed to go back to $100K per person per bank at some time.
Your point about the limit not being an issue for most still holds.
“If the deposit insurance limit was 100k per person then the maximum amount the govt would have to pay is 30 trillion. ”
But the deposit insurance limit is NOT 100k per person; it is (or was before they bumped it) 100K per person per _institution_.
For those that thought Madoff might actually go to jail, we get this interesting piece from the NY Times:
Madoff Still Free on Bail; Signs Seen of Plea Deal
By DIANA B. HENRIQUES
Signs emerged that the lawyer for Bernard L. Madoff was actively negotiating a plea agreement that could conclude the baffling fraud case without a trial.
Usually don’t they work on a plea agreement when they have something to gain ,like getting the Master-mind of a fraud scheme ? In this case they got the big guy ,so the smaller fish will follow ?
Isn’t it clear that all business Bernie conducted for years was fake and
the paper trail is already written on the fake investor receipts ?
I think the World is going to be calling for some Justice regarding this
scum criminal ,so why even talk about giving that guy a break for information ?
Actually, MOST criminal cases are pled out in this country, whether or not they’re trying to get testimony against somebody else or not. We simply don’t have enough judges and prosecutors to try all, or even most criminal cases. And in this case we’re probably talking about spending more than a million dollars to prosecute at complicated case like this. So it’s not unreasonable for the defense to try to get SOMETHIG in exchange for saving the government the cost of prosecution.
The Housing Wizard,
Actually no, it’s *not clear. All we have in terms of evidence at this juncture is Bernie’s own statements about… himself!
I’ll contend that his losses were up to a point garden variety hedge fund losses until he reached the point of no return and intentionally scuttled his own fund. Remember, on Wall Street it’s much better to be thought a thief than a fool!
By declaring that he was a fraud SIPC picks up the tab and makes his clients whole.
“By declaring that he was a fraud SIPC picks up the tab and makes his clients whole.”
Limited to $500,000 per client; doesn’t exactly make those Palm Beachites whole, nor should it.
Correct me if I’m wrong, but since he was
not registered, the SPIC can’t fund the loses.
Rancher,
That was my best guess too! Well, evidently *not. They can and they are. I’ll further speculate that accounts were titled differently to take advantage of the coverage much as is done w/ FDIC.
I’m just sick about it.
Perhaps somethings might be made public at a trial that would be embarrassing to certain people?
There is an old adage that comes to mind - follow the money!
Perhaps that $50 billion was not lost in trading, but went somewhere “else”. Perhaps it is in the best interest of certain people that a full accounting of where the money went never occurs.
I can’t think of any other case where the prosecutor would plea bargain with someone who has already confessed to the crime.
yes, I have read many references in that direction lately.
If they don’t prosecute one of the biggest criminals ever on WallStreet and put him in jail for the rest of his life, that would confirm what people should already know about the US financial system: it is the biggest scam ever, and authorities think they can get away with it.
“We’re trying to figure out whether he committed suicide or died trying to escape” - Capt. Renault
COLUMBUS — Ohio’s unemployment compensation fund went broke on Monday, Jan. 12, requiring the state to borrow $50 million from the federal government to continue paying benefits to unemployed workers.
The federal government has approved lending the state $500 million to cover benefits for January and February. The last time Ohio had to do such borrowing was in the 1980s.
The state had thought it might need $50 million for December but got by without that loan.
For the week ending Jan. 3, the last week for which data was available, 245,782 Ohioans were receiving regular benefits, a jump of nearly 60 percent from a year ago.
Seems to me that this black swan event will drive the states ever more towards a single unified entity. We’ll be there soon financially.
Not really what the founding fathers had in mind.
How can it be a black swan event when it has happened before when it happened a mere 20 years ago?
I think it was actually very predictable.
What happened 20 years ago pales in comparison to what’s happening now.
Yes there are similarities. But we’re just now reaching the level where states’ financial troubles are approaching the levels of the 80’s problems. But we’ve only just begun - they will get a lot worse.
A black swan event is an outlier beyond the realm of normal expectations.
A state government mismanaging its money can hardly be considered a surprise.
The unraveling symbiosis is being trumpeted by the MSM as a hopeful sign. Watch out what you wish for!
ECONOMIC REPORT
Trade gap plunges on falling demand, prices
November deficit narrows to $40.4 billion on record decline in imports
By Rex Nutting, MarketWatch
Last update: 9:05 a.m. EST Jan. 13, 2009
WASHINGTON (MarketWatch) — The U.S. trade balance with the rest of the world plunged by 29% in November to stand at $40.4 billion, on a record decline in oil prices and significantly weaker demand for imports, the Commerce Department reported Tuesday.
We have quite a January effect going this year right on the back of the Santa Claus rally — for short sellers!
Warning that house prices may fall by 80%
LAURA SLATTERY
Tue, Jan 13, 2009
HOUSING MARKET:IRELAND WILL see more demolition than construction of houses over the next decade, as the economy struggles to recover from the collapse of the housing market and the emergence of “zombie” banks, UCD economist Morgan Kelly told the conference.
In a presentation that drew several collective intakes of breath, Mr Kelly predicted that house prices would fall by 80 per cent from peak to trough in real terms.
“Construction, but not demolition, of residential and commercial property will fall to zero for the foreseeable future,” he said.
Low levels of education among those employed in construction – where worker numbers peaked at about 280,000 – meant retraining would not be straightforward.
Recovery will be slow: “It has taken us 10 years to get into this situation – it will in all likelihood take us 10 years to get out of it.”
Mr Kelly said he had been hailed as being extremely prescient as a result of his warnings in relation to the property bubble, when in fact he and a handful of other “amateurs” were merely stating what was obvious.
Sparing no blushes, he said professional economists in the Central Bank and the Economic and Social Research Institute “need to look very closely at their analyses of the Irish economy and figure out what went wrong”.
Mr Kelly said Ireland’s “reputational capital” had been damaged by “chancers” such as ex-Anglo Irish Bank chairman Seán FitzPatrick, who had been abetted by “buffoons” such as former financial regulator Patrick Neary, Minister for Finance Brian Lenihan and the Taoiseach.
In discussing the €110 billion given in loans to developers, Mr Kelly said a typical regional housing collapse in the US saw banks sustain a 20 per cent loss on these loans, but the narrowness of the Irish market increased the risk of “substantially larger losses” for Irish banks.
“The guarantees of Anglo and [Irish] Nationwide liabilities have a strong chance of being called in over the next 21 months,” he said. Extending the Government guarantee to these two financial institutions was “extraordinarily unwise” and could produce losses that the State cannot afford to repay.
The global financial crisis may have been positive for the Irish economy as it “stopped us dragging ourselves even deeper into our hole,” he said. “If it had taken another year or two, we would have ended up in an Icelandic-shaped hole, which is not to say that we won’t end up in one.”
Mr Kelly said the Government should abolish stamp duty on property, compile proper price and quantity statistics and restore competitiveness through a public sector pay cut of 10 per cent.
A paper by TCD economist Patrick Honohan on the banking crisis argued that capital injections in the banks were a prerequisite for recovery. The financial regulator needed to decide now which banks had systemic importance to the economy – in other words, are “too big to fail”, and which are “zombie” banks.
“The goal is to avoid the continued operation of an undercapitalised, error-prone bank with a flawed business model and administrative practices, a problematic customer base and a compromised management facing distorted incentives,” the paper stated.
© 2009 The Irish Times
“HOUSING MARKET:IRELAND WILL see more demolition than construction of houses over the next decade…”
Broken window economic stimulus program
demolition: sounds a like what they are doing in Netherlands to keep home prices elevated: demolish whole neighborhoods because the homes are ‘outdated’ (no granite countertops probably) and ‘nobody wants to live there’ (of course not, if you can get a new or bigger home from the government for the same rental price …).
The same institutions who often claim that there is a housing shortage in Netherlands (to justify sky-high prices) are those who are constantly pushing for demolition of cheaper homes, and of course higher subsidies to pay for the far more expensive homes they want to build instead of the cheap ones.
at least the Dutch are not yet stimulating the economy by bombing foreign countries into oblivion (oh well, except Afghanistan but who cares …)
A lot of the houses I saw in Ireland were made from stone. Not a lot of windows.
Not that many windows in Afghanistan either…
I particularly like this bit
“Mr Kelly said he had been hailed as being extremely prescient as a result of his warnings in relation to the property bubble, when in fact he and a handful of other “amateurs” were merely stating what was obvious.”
Do i hear clapping and cheering amongst us?
Really, how could you NOT see this comming unless you were blinded by your own self-interest?
Yea, for me thats been one if not the most interesting aspects of this whole mess. Way back around the end of 2005 beginning of 2006 i was in a meeting with a bunch of Finance muckety mucks and one said there was no RE bubble because there wasn’t much “speculation” going on, it was all based on sound fundamentals. I told him that I disagreed and that the houses on either side of my rental had been been bought by speculators. That was one of the reasons why i found my way here. It was a lonely time way back then living amongst the kool-aid drinkers. Their firm has since gone bankrupt and i sure hope those guys like working for their new English overlords.
I still remember when this blog was in the old format.
This is why my idea of “REPAVE AMERICA” would put hundreds of thousands back to work immediately, repaving, filling in potholes painting, fast “shovel ready jobs”….No need to wait months/years to put bids out to build new bridges and subways, light rail….
——————————–
Low levels of education among those employed in construction – meant retraining would not be straightforward.
Let’s hope that these jobs go to Americans. In this part of the country, low-skill construction jobs go to those from South of the Border.
That would be mandatory, Legal Americans only. With a reward say $5000 for each Illegal you turn in that the employer hires.
Hope this is not a double post.
LOS ANGELES – Mike Reilly spent his lifetime chasing the California dream. This year he’s going to look for it in Colorado.
With a house purchase near Denver in the works, the 38-year-old engineering contractor plans to move his family 1,200 miles away from his home state’s lemon groves, sunshine and beaches. For him, years of rising taxes, dead-end schools, unchecked illegal immigration and clogged traffic have robbed the Golden State of its allure.
Is there something left of the California dream?
“If you are a Hollywood actor,” Reilly says, “but not for us.”
Since the days of the Gold Rush, California has represented the Promised Land, an image celebrated in the songs of the Beach Boys and embodied by Silicon Valley’s instant millionaires and the young men and women who achieve stardom in Hollywood.
But for many California families last year, tomorrow started somewhere else.
The number of people leaving California for another state outstripped the number moving in from another state during the year ending on July 1, 2008. California lost a net total of 144,000 people during that period — more than any other state, according to census estimates. That is about equal to the population of Syracuse, N.Y.
The state with the next-highest net loss through migration between states was New York, which lost just over 126,000 residents.
California’s loss is extremely small in a state of 38 million. And, in fact, the state’s population continues to increase overall because of births and immigration, legal and illegal. But it is the fourth consecutive year that more residents decamped from California for other states than arrived here from within the U.S.
A losing streak that long hasn’t happened in California since the recession of the early 1990s, when departures outstripped arrivals from other states by 362,000 in 1994 alone.
In part because of the boom in population in other Western states, California could lose a congressional seat for the first time in its history.
Why are so many looking for an exit?
Among other things: California’s unemployment rate hit 8.4 percent in November, the third-highest in the nation, and it is expected to get worse. A record 236,000 foreclosures are projected for 2008, more than the prior nine years combined, according to research firm MDA DataQuick. Personal income was about flat last year.
With state government facing a $41.6 billion budget hole over 18 months, residents are bracing for higher taxes, cuts in education and postponed tax rebates. A multibillion-dollar plan to remake downtown Los Angeles has stalled, and office vacancy rates there and in San Diego and San Jose surpass the 10.2 percent national average.
Median housing prices have nose-dived one-third from a 2006 peak, but many homes are still out of reach for middle-class families. Some small towns are on the brink of bankruptcy. Normally recession-proof Hollywood has been hit by layoffs.
“You see wages go down and the cost of living go up,” Reilly says. His property taxes will be $1,300 in Colorado, down from $4,300 on his three-bedroom house in Nipomo, about 80 miles up the coast from Santa Barbara.
California’s obituary has been written before — “California: The Endangered Dream” was the title of a 1991 Time magazine cover story. The Golden State and its huge economy — by itself, the eighth-largest in the world — have shown resilience, weathering the aerospace bust, the dot-com crash and an energy crunch in recent years.
But this time, the news just keeps getting worse.
A state board halted lending for about 2,000 public works projects in California worth more than $16 billion because the state could not afford them. A report by Sen. Barbara Boxer, D-Calif., last month said the state lost 100,000 jobs in the last year and the erosion of home prices eliminated over $1 trillion in wealth.
“I don’t think the California dream, per se, is over. It has become and will continue to become grittier,” says New America Foundation senior fellow Gregory Rodriguez. “Now, perhaps, we have to reassess the California of our imagination.”
Gov. Arnold Schwarzenegger is among those who say the state needs to create itself anew, rebuilding roads, schools and transit.
“We’ve lived off the investments our parents made in the ’50s and ’60s for a long time,” says Tim Hodson, director of the Center for California Studies at California State University, Sacramento. “We’re somewhat in the position of a Rust Belt state in the 1970s.”
Financial adviser Barry Hartz lived in California for 60 years and once ran for state Assembly before relocating with his wife last year to Colorado Springs, Colo., where his son’s family had moved.
“The saddest thing I saw was the escalation of home prices to the point our kids, when they got married, could not live in the community where they lived and grew up,” Hartz says. “Some people call that progress.
“…Median housing prices have nose-dived one-third from a 2006 peak, but many homes are still out of reach for middle-class families.”
This seems to be some sort of mathematical constant…perhaps it can be useful as some sort of…a long term indicator.
I lived in Colorado for a decade, and don’t get me wrong… it is a beautiful state. But, if he thinks he can escape all his problems with this move, he is wrong. Engineering contractor….
Dude, the ENTIRE country is overbuilt, and even if it weren’t, there are millions of people with your skill set that would be rushing into any pocket of activity in numbers 100x the actual jobs available.
Denver is not cheap. It is not immune from trafic, illegals, bad schools, etc. Denver is going to see a crash too.
CO better than CA??? Yes! A way to escape ALL his problmes? NOT EVEN CLOSE!!!
Maybe he is going to relocate to South Park
But you are right in that he won’t find much construction work here either. T-Rex is finished and there isn’t another pork project like that on the horizon. Housing is overbuilt. Commercial is overbuilt. And oil is cheap again.
One day the people will vote to restructure the pentions of state workers.
http://www.bloomberg.com/apps/news?pid=20601087&sid=aw9HrY21Ynno&refer=worldwide
Oil is plunging again. Looks like more cheap gas will be available soon. Time to take the Hummer out of the garage for a spin around the block?
Oil may be plunging - I am buying to sell again, but NYMEX gas is going up and is now up 25% in the last 2 weeks. Diesel never broke last years lows.
As for the Hummer -Nope; time to get the snow mobiles cranked! Favorite time of the year, cold with the trees popping from the ice, wind blast 45 mph off the lake and snow blowing sideways. Minus 2 F - awesome winter - fish will be biting in 3 weeks.
LOL!
It’s good to see not **everyone** wants to live in California.
Oil up on cut.
http://www.bloomberg.com/apps/news?pid=20602013&sid=ajVU417mbSdo&refer=commodity_futures
EU bubble update:
Standard & Poor’s is threatening to downgrade Spain because their economy is deteriorating. Spain currently has AAA status and their government debt is about 40% of GDP; I think there is a country that runs a slightly bigger national debt and still has AAA status.
I’m waiting for Moody and the other slizzards to chime in here…
So long Club Med
Spanish 10yrs are trading at default levels.
What would it take for them to drop out of the Euro?
I don’t think Spain can really drop out - that would mean a total collapse of the euro currency. Spain is a big economy, and probably Italy and Greece would go first. With real inflationists at the wheel in France there would not be much backing left for the euro (just Germany + Benelux?).
and that is even without considering the impact on EU real estate markets when the Spanish market totally collapses; I’m pretty sure this would wreak havoc to the house of cards on EU mainland, because of all the leverage from EU specuvestors in the Spanish housing market.
Wow, I guess that might be one of the reasons the dollar has been so strong of late.
The Dutch appear fed up with the EU. I could almost see them drop the Euro and adopt the GBP.
“I don’t think Spain can really drop out - that would mean a total collapse of the euro currency.”
I do not know if it will be Spain that bails or Greece(wtf), personally I think it will be France; but one of the Club Med countries is going to bail on the Euro. Unfortunately Germany has been singularly unhelpful to the distressed Med countries.
Germany’s surplus is not and has not been used in a productive manner for the other Euro nations.
Current purchasing power parity for the Euro is $0.85 - that is pretty damn close to collapse. At $1.15, I would expect to see Club Med failures.
Britain has the mother of all housing bubbles. They’re about a year behing the US. When it busts it will be truly spectacular. Kind of like Iceland only 100 times larger.
A guy I work with owns an apartment in London. He moved the U.S. a couple years ago and got married and before he did apparently refied the apartment and used the cash to buy a place here in the U.S.
He is now about 5k upside down (I don’t recall him specifying if that was dollars or pounds). On the upside, he’s probably cleared more than that from the strengthening of the dollar from when he refied and converted.
I haven’t asked him why he’s still holding onto the apartment instead of selling out now before it gets any worse….
Because he’s a m*ron and you think that he might still pick up the drinks tab a few times?!?
Britain has the mother of all housing bubbles.
Spain is to London as Florida is to New York.
Mostly b/c I have to work closely with him and its a question that can’t be unasked. I may get to it I just haven’t decided to pull that trigger yet…
Funny thing, I’ve known for a while he had the apt but didn’t know any financial details. He bought a house I think it was mid-late last year. He told me they put down about 50%. I think the place was maybe 160-180k and he had 80k or so cash IIRC. Compared to average, it was fairly prudent. I though he must be very conservative and even wondered if it was a cultural thing (i.e. maybe most brits are frugal and save a lot). I imagined he probably even owed much less than FMV on the London apt.
It wasn’t until recently he told me about the refi. So that’s where the cash came from and it turns out hes under water on the apt.
He could still salvage and be sitting pretty (~100k loan on a pretty decent place in a nice neighborhood) if he doesn’t ride the london apt down and crash and burn….
The Brits have the “own property” gene far far worse than the worst of the Californicators.
They make the Bay Area look positively sane by comparison.
“The Dutch appear fed up with the EU. I could almost see them drop the Euro and adopt the GBP.”
they have to be very quick then, before the GBP disappears completely. From the latest news it seems the Bank of England wants to print the GBP out of existence even before Benny’s dollar. I think Robert Mugabe has an interesting subject for his next speach …
as for the Euro: todays TV news says that even Germany is now surpassing the Euro max 3% budget deficit rule. I think the Dutch are still below that, but that won’t last long - they are going to announce new plans to support their banks and housing market this friday. That should be enough to break the budget rule.
So I brought it up. We were discussing the exchange rate and its been in his favor recently (since he converted to dollars and now is paid in dollars in the U.S.).
He is keeping the apt in London which “has slightly negative equity” b/c he is “convinced it’s a good investment in the long term. Plus it’s nice to have a place in London, you never know what’s going to happen.”
His main concern right now is the exchange rate favoring him making those payments (which it has been lately) as well as in the event he decides to sell and has to cover the amt under water.
Jan. 13 (Bloomberg) — Hedge funds lost $350 billion globally in 2008, the most on record….
About 90 percent of the money was lost in the three months to the end of November….
Good. Only several trillion $ left to go.
Ah, maybe that is why they quickly need another 350 billion for WallStreet?
Jan. 13 (Bloomberg) — The Federal Home Loan Bank of Seattle joined its San Francisco counterpart in suspending dividends and “excess” stock repurchases, after the declining value of mortgage bonds likely led to a regulatory capital shortfall.
…
Washington Mutual Inc., Merrill Lynch & Co. and Bank of America Corp. were the largest users of the Seattle FHLB’s secured loans as of Sept. 30…. Citigroup, JPMorgan and Wachovia Corp. … were the largest borrowers from the Federal Home Loan Bank of San Francisco on Sept. 30….
I posted this data the other day in tabular form, figured I’d make a graph. Thoughts?
Housing Bubble graph - mortgage borrowing
This is taking Federal Reserve z1 data and estimating the size of the mortgage borrowing bubble - about $5 Trillion - noting the rate of change, and making a stab at how it may play out in the unwind.
Note that this doesn’t include business borrowing, which experienced a similar though smaller bubble.
Thoughts?
(Ben, I hope it’s OK to use the HBB name as reference - let me know if not).
Thoughts on the hedge fund news that Hoz posted late yesterday in the BitsBucket? As Hoz said, it is well worth a read.
I thought it was a very creative approach. It gives instant liquidity (at potentially a significant haircut) to the investors that want out, but also reduces fire-sale asset dumping by the fund, so imposes less damage on the investors who do not want to get out. I think it is potentially better than limiting withdrawals.
It will be interesting to see what kind of management compensation they propose, though; it would be hard to justify 2-and-20 for a holding company.
Link for those who missed it:
http://www.ft.com/cms/s/0/3584c2ec-e04a-11dd-9ee9-000077b07658.html
The whole thing is a scam! This hedge fund is a scam and should be regarded as a scam by any rational investor. Look at what they owned. 80% in 4 stocks. Nice hedge
Most of these funds are scams.
Heads they win, tails someone else loses.
I totally agree, hoz; I was thinking the same thing a few days ago reading the article about the broad-based hedge-fund-industry losses.
These were not hedge funds at _all_, since they clearly were not hedged in their positions.
We should rename the whole d*mn industry to be “leverage funds”.
I was listening to Bernanke’s testimony while riding in to work on my bicycle today.
He said that the Fed had been forced to “print money” and that the monetary base had soared, a potential (hyper?) inflation risk, but the risk is not present in the near term because M2 and M3 have shrunk rapidly due to deleveraging.
So in effect those on this board who say the government is printing money and those who say cash is disappearing are both right.
I guess the soft landing is they get to shrink M1 gradually as the economy picks up and M2 and M3 grow. But it seems no one is doing what they want to do, they are doing what they have to do, and control of the situation is tenuous.
I was listening to Bernanke’s testimony while riding in to work on my bicycle today.
Listening to Fed testimony while riding the mean streets of New Amsterdam during rush hour — is this not a combination fraught with danger?
Either one is challenging enough by itself.
Only some of the streets I ride are mean. The others are narrow streets with bike lanes and little traffic, and bridges with separate pedestrian paths.
I bought the radio to listen to the end of Mets day games while riding home, but I must admit the financial news has been more interesting the past few months. I get a daily dose of doom in both directions from Bloomberg radio.
Ah, the Mets — you’re better off listening to Bloomberg, eh?
(It’s great that you have a safe bike route to work, regardless.)
We already had hyperinflation, over the past 8 years or so - about $5Trillion worth at least. Didn’t anyone notice home prices and car prices going through the roof?
We should be having corresponding hyperdeflation right now, in order to get back to a normal state, but aren’t (for the most part) - in part because of the frantic pumping of the Fed / Treasury.
If we get back to a normal state and the Fed is still pumping, we’ll be back to hyperinflation again, except this time it will be more obvious since it will be in consumer goods etc. rather than home and car prices.
We already had hyperinflation, over the past 8 years or so -
NO, NO, NO.
We’ve had high levels of inflation in the money supply. But the most people define HYPERINFLATION as an incrase of 10%-100% EVERY MONTH, not annual. You make the spectre of real hyperinflation much LESS scary when you apply the term to merely high levels of inflation.
This is true. Perhaps not hyperinflation then, just high inflation for an extended period.
I define hyperinflation as 100% over 5 years.
A ZImbabwe situation is not likely, a 100% inflation over 5 years is possible with current policies - targeting inflation at 13% over 5 years.
I define hyperinflation as 100% over 5 years.
And if you’re from Florida, you can define “bitter cold” as 40 deg f. But people from Minnesota will laugh at you.
I was listening to Bernanke’s testimony while riding in to work on my bicycle today
They don’t know it yet but the American taxpayers will be LUCKY to have a bike to ride by the time their Gov’t and FED gets done with them
Jan. 13 (Bloomberg) — State governments from Rhode Island to California have run up estimated pension-fund losses of $865.1 billion, forcing some to cut benefits for new hires.
Assets for 109 state funds declined 37 percent to $1.46 trillion over the 14 months ended Dec. 16…. The Standard & Poor’s 500 Index of stocks fell 41 percent in the period.
Hey kids — when the stock market goes up, they enhance benefits for those cashing in and moving out. When the stock market goes down, they cut pay and benefits for new hires.
We’ve had several cycles like this in New York.
Are Social Security and Medicare any different? Enriched for the generations now in charge, degraded for future generations.
The private sector?
How about energy and the infrastructure, and all those debts?
Generation greed strike again and again and again, and no one says boo.
When people accept Wall Street is just one giant Ponzi generating machine, then and only then will they learn to take profits early and often. Whenever the proles got hungry for dot com stocks, Wall Street just printed more and more to satisfy the appetite. Does’nt anyone remember all the junk IPOs?
More recently, as the proles got hungry for homes, Wall Street went on another printing spree. Printing CDOs and what not like there was no tomorrow. It never ends b/c Washington has Wall Street’s back. Until the proles figure this out, they’ll never win. Like lemmings, they’ll DCA themselves into oblivion.
The “generational greed” thing doesn’t wash well with me. I paid ever increasing taxes for decades with the growing expectation that the benefits would not hold up when my time to retire came. I paid for my grandparent’s generation, and my parents generation to get some SS and medical. I didn’t think they were greedy slugs.
I’ve no love for the greedy, just please don’t paint an entire generation with that brush.
Those who weren’t greedy have been outvoted.
Remember, we all have paid excess payroll taxes since 1983 to “save Social Security.” That money is gone.
I wouldn’t count on Social Security unless you were “at or over 55″ at the moment Bush spoke the words.
Why not cut benefits to existing employees? This “shared sacrifice” thing, to work, HAS to include everyone. Otherwise, people my age will simply rebel against our elders. We’re NOT going to take it!
Benefits for existing employees are supposedly unassailable due to statutory and constitional provisions. I don’t buy it, but that’s what they say.
You ever wonder if the past couple decades has been an economic version of “The Ring” ?
Ah, the movie about the Two Towers, and My Precious
we need aladinsane to comment ….
Dr. Scott: You don’t want to hurt anyone.
Samara Morgan: But I do, and I’m sorry. It won’t stop. Everyone will suffer.
Belated Happy New Years everyone, was out for 2 weeks traveling through southern Florida and central America (Guatemala & Honduras).
America Hunkers Down: A Nation of Savers?
By Annys Shin and Nancy Trejos
Washington Post Staff Writers
Tuesday, January 13, 2009; Page D01
In ordinary times, Bill Rattner would be better off than most. He’s paid off his mortgage and has no credit card debt. He and his wife, a social worker, have been faithfully socking away money in their 401(k) accounts.
The 50-year-old Richmond resident, however, is also the creative director for the e-commerce group at Circuit City, which recently filed for Chapter 11 bankruptcy protection. He knows he could soon end up joining the 11.1 million Americans who are out of work.
So Rattner, with three children — two of them in college — has started acting like a man making up for years of financial profligacy. He and his wife have cut their expenses by 15 percent. They’ve trimmed $70 to $80 from their monthly grocery budget. They switched car insurance companies to get a lower rate. They are staying home for dinner more often and are buying fewer clothes. Whatever they save, they stash in a high-yield money-market account.
“Everything gets considered. Is this a need? Is this a want?” Rattner said.
There’s evidence to suggest that more consumers are hunkering down. After hovering near zero for much of the decade, savings as a portion of disposable income rose from 2.4 percent in October to 2.8 percent in November, according to the Bureau of Labor Statistics. Also in November, auto loans, credit cards and other forms of consumer borrowing fell by $7.9 billion, the largest dollar amount since recordkeeping began, more than 50 years ago.
Also from the article:
The more I hear Keynes name, the more convinced I am that he was one of the most evil men of all time. Quite possibly he was the anti-Christ in fact, given that his “borrow and spend” ideology was so at odds with Biblical teachings.
During the 7 years of abundance in Egypt, he would have advised Joseph to burn the crops in order to prop up prices to stimulate the economy, since of course it’s best to have a strong economy when you know 7 years of famine is coming.
Either evil or idiot. Perhaps both actually.
What’s the saying? Never attribute to malice what can be adequately explained by stupidity…or something like that.
I don’t know about evil but I think short-sighted is appropriate.
Given his active involvement in driving Euro-American economic policy - I very much attribute Keynes views/policies to malice. He was not a pawn in the game, but a major player. The major players are not stupid, though they sometimes intentionally make themselves appear to be.
if I remember correctly he seriously regretted all this in his last years … but of course that is seldom mentioned in public, have to keep the faith in Keynesian economics high because it suits certain powerful groups.
“Whatever they save, they stash in a high-yield money-market account.”
LOL - “high yield” must mean 0.175%.
Zion’s Bank is still paying 2.8% on MM accounts…..
About every 6 months the gals at my bank (Fifth Third) call me about a “special high yield” account I’m already “qualified” for with a $2500 minimum.
Of course, I always have to ask them what they define as “high yield”…..and it’s always 1 percent. So I just gently let them know, without laughing too hard, that despite the sales pitch they’ve been taught by their superiors, 1 percent ain’t exactly high yield, and no thanks.
DId the at-home kid get a newspaper route? Or start a leaf-raking/gutter-cleaning business? (Then use those proceeds for the family garden plot.) All of the family should be increasing their financial inflow routes!
That was my childhood to a “T”.
NEW YORK (Reuters) - Beazer Homes … closings dropped 53.2 percent to 938 in the first quarter ended on December 31 from 2,006 a year earlier.
New home orders … fell 56 percent to 551…. The cancellation rate … was 45.6 percent … from 46.6 percent a year earlier.
Cancellation rate is going down… all is good.
Beazer is one I’d LOVE to see implode. Why none of the bullies haven’t gone bankrupt is a mystery.
A quick layoff anecdote:
One of my cousins has been a corporate pilot at a Fortune 500 company for the past two decades — he’s one of the guys that flies all those muckety-mucks all over the globe. He had become the most senior pilot at this company (and therefore highest paid), and was close to his getting his pension fully vested.
The company laid him off before the pension vested, of course. They did give him a nice severance package, I hear.
How close was he to being vested?
I was less than 60 days from being vested when they shut down my last job. If he is fairly close, he can negotiate getting vested in the retirement plan. Especially if they have a company program to fill open positions with laid off personnel. Stay in the pool (and on the payroll), until his vesting date.
Depending on his severance package, it may or may not be worth doing it. I gave up 4 weeks of severance pay to vest, but I can start drawing a pension at age 52-53 if I want.
I dunno all the details, as the news funneled through my mom.
But he got an entire year’s salary as severance. He’s got a pretty good head on his shoulders — I’m pretty confident he would weigh out any available options carefully.
I was less than 60 days from being vested when they shut down my last job.
That, sir, is total BS. But it sounds like you got a decent trade-off.
The bulls argue we’re probably looking at a head and shoulder reversal — neckline from 1007 to 943 and head Nov 20 lows. It’s something to consider.
In English please?
Why we are nowhere near bottom. My wife and I have 700+ credit scores and our total debt (house, student loans, cars, credit cards, etc) is less than 2x annual income. Up until 4 months ago, my mailbox was constantly full of “cash advance at 3, 4, 5% until paid off” from my 3 Chase credit cards. My purchase interest rates were prime + 5% and +7% putting my rates at 10-12% on the various cards.
Today I open a “important change in terms” mail from them. All 3 cards, they are raising my rate to prime +20.99%, purchase and cash advance.
I can accept the higher rates, or I can decline, in which case they will close my accounts and trash my credit score.
Now, I’m lucky. All my balances are below 5%, and until paid off, so this change won’t effect them, as long as I’m not even a single day late. However, could you imagine the effect this would have on someone with $20-30K in balances at 10%, suddenly having that rate jump to 25%??
Expect the bankruptcies to soar, consumer spendind to continue to fall. We’re in full blown debt collapse, and the last one of those to happen in the U.S. is called The Great Depression.
“Today I open a “important change in terms” mail from them. All 3 cards, they are raising my rate to prime +20.99%, purchase and cash advance.”
We received a similar notice on both of our BofA Visa cards a few months ago. However, we carry-over zero debt; our mortgage is our only debt, and that is less than 15% of our net income. I ran MyFICO two weeks ago, 813. Our Achilles heel — employment; we could last about a year without income, but a job search right now would be tough despite good skills.
poor banks looks like they won’t get the second 350B so they will take it out on their customers, well they would probably take it even if they did get the other 350B
“I tell people I leave town with a great sense of accomplishment and my head held high,” Bush told a small pool of reporters Tuesday at the end of his final meeting with his top advisers.
Note: if you are telling people you are leaving with your head held high, in all likelihood you screwed up big time. And oh boy, did this moron screw the nation royally.
What a disgrace.
It seems to me there is an inverse relationship between competence and the eagerness and self-importance a person demonstrates with regard to being a leader.
I have found that the worse off someone is, the more important they consider themselves, the more arrogant they tend to be.
This exists at all walks of life and levels of income, but usually at the lowlife level.
For example, many drug dealers and gangbangers consider themselves so important, they like to shoot anyone who doesn’t give them the proper “respect”.
While viewing that press conference I thought about how as an employee I could never be inspired by this leader as a boss. We all know what it is like to work for a doofus and the resulting less than stellar trickle down performance to all levels below. Obama will stumble and fail, but he is someone his direct reports will respect and be inspired by, and that alone will be an invigorating wave.
Sure, if I am the new treasury secretary where non-payment of taxes and employment of undocumented worker is no problem at all, then I would give my boss lots of respect.
will bernacke and other stimulators lose their jobs when it fails ?
nope,it’s gov so they ALL get raises !
I don’t see all the private sector bankers who perpetrated the mess standing on the corner with cup in hand. In fact, most of these are still employed and making six figures. So don’t tell us that it is just gubmint folk who get rewarded for bad performance.
In fact, most of these are still employed and making six figures.
Make that seven-figure, or more…
They (public politicians and private bankers) are two sides of the same coin.
Just found out my out-of-state landlord lost his job last week. I’m now wondering what I should do. Since the amount of rent I’m paying now doesn’t cover his costs, I’m pretty sure he will stop paying. He promised to keep me updated, and he’s a good guy, but I gotta look out for me any my own.
The lease isn’t up until the end of June. I’m pretty sure the foreclosure process, or whatever he decides to do, won’t even be that far along by then. But if he stops paying, I really don’t want to pay what I’m paying now. Guess I’ll just have to keep my eye on what’s going on with the property.
Just watch your county recorder’s web site and watch for a Notice of Default, or whatever the equiv is where you live… Here in AZ it is a notice of trustee sale. Then, deduct enough out of the rent to get back your security deposit…. because if it does go into default and you get kicked out, odds of getting the security deposit back are slim and none.
Other than that, I’d keep paying the rent. No since opening yourself up to small claims action… Besides, you are still getting to live there, and really should pay for that, I think.
My LL let me know he was going to stop payoing the mortgage on Nov payment. He further stated that if he wasn’t paying the bank I didn’t need to pay him, and that we would call it even on the deposit.
There has not been an NOD yet. It s my understanding that until the actual trustees sale, or sale on the courthouse steps, that the property is held by the LL and the bank has no right to trespass or require anything of the occupants.
The new law in Cali has it that a tenant who has over 12 months in the property will need be given 60 days notice by the bank to quit after the trustees sale. It was previously 30 days.
Word on the blogs is that it takes 6-8 months from NOD to REO. I’ve known another couple of people who negotiated reduced rent during that period, and one could make the legal argument if needed that said NOD is an impediment to “peacable enjoyment ”
“UNINHABITABLE PREMISES-CONSTRUCTIVE EVICTION
Unless otherwise expressly agreed, there is an implied agreement in every lease for real property that the landlord will refrain from acts or omissions which interfere with the tenant’s right of peaceable enjoyment of the premises. If this implied agreement is breached by the landlord, either by act or by omission, resulting in the premises becoming legally uninhabitable, the tenant may vacate the premises, terminate the lease, and owe no further rent. The premises become legally uninhabitable when there is a disturbance of the renter’s possession by the landlord which renders the premises unfit for occupancy for the purposes leased. To exercise this remedy, the tenant may need to abandon the premises. Before the tenant is justified in moving out, the landlord must also have been given notice of the problem by the tenant and a reasonable time in which to remedy the situation. Only in extreme conditions may a tenant vacate the premises and stop paying rent. For example, where the heating and plumbing stopped functioning and the ceiling collapsed – the premises were found to be legally uninhabitable. This remedy should never be attempted without first talking to an attorney. ”
Please take note of that last sentence if you are going to get in your LLs face over this. You will probably find that once there is an NOD that he/she/it is willing to negotiate.
Also, there is a thread on the forum by OG on this.
Warning that house prices may fall by 80%… Remember back in the early 80’s when bull boozers went to work in several states knocking down houses? It will happen here again no doubt.
* Civil Service wage cuts not enough to solve fiscal crisis
* Call for State to consider tax on property
LAURA SLATTERY
HOUSING MARKET: IRELAND WILL see more demolition than construction of houses over the next decade, as the economy struggles to recover from the collapse of the housing market and the emergence of “zombie” banks, UCD economist Morgan Kelly told the conference.
In a presentation that drew several collective intakes of breath, Mr Kelly predicted that house prices would fall by 80 per cent from peak to trough in real terms.
“Construction, but not demolition, of residential and commercial property will fall to zero for the foreseeable future,” he said.
Low levels of education among those employed in construction – where worker numbers peaked at about 280,000 – meant retraining would not be straightforward.
Recovery will be slow: “It has taken us 10 years to get into this situation – it will in all likelihood take us 10 years to get out of it.”
Mr Kelly said he had been hailed as being extremely prescient as a result of his warnings in relation to the property bubble, when in fact he and a handful of other “amateurs” were merely stating what was obvious.
Sparing no blushes, he said professional economists in the Central Bank and the Economic and Social Research Institute “need to look very closely at their analyses of the Irish economy and figure out what went wrong”.
Mr Kelly said Ireland’s “reputational capital” had been damaged by “chancers” such as ex-Anglo Irish Bank chairman Seán FitzPatrick, who had been abetted by “buffoons” such as former financial regulator Patrick Neary, Minister for Finance Brian Lenihan and the Taoiseach.
In discussing the €110 billion given in loans to developers, Mr Kelly said a typical regional housing collapse in the US saw banks sustain a 20 per cent loss on these loans, but the narrowness of the Irish market increased the risk of “substantially larger losses” for Irish banks.
“The guarantees of Anglo and [Irish] Nationwide liabilities have a strong chance of being called in over the next 21 months,” he said. Extending the Government guarantee to these two financial institutions was “extraordinarily unwise” and could produce losses that the State cannot afford to repay.
The global financial crisis may have been positive for the Irish economy as it “stopped us dragging ourselves even deeper into our hole,” he said. “If it had taken another year or two, we would have ended up in an Icelandic-shaped hole, which is not to say that we won’t end up in one.”
Mr Kelly said the Government should abolish stamp duty on property, compile proper price and quantity statistics and restore competitiveness through a public sector pay cut of 10 per cent.
Remember back in the early 80’s when bull boozers went to work in several states knocking down houses?
“Bull boozers” — I like the sound of that.
Kind of reckless and frightening.
they are doing exactly that in the Netherlands on a regular basis to keep home prices up, even before the downslide has really started …
So if you do not trust the government, think PM’s are over priced and possibly in bubble territory, shy away from oil due to the spector of deflation and are afraid of stocks for the same reason: where do you put your sizable nest egg?
I have been renting the past few years having sold my primary residence in 2006. I’d really like to buy a house. I might be able to pay cash or be close to it. Southern California (born and raised here).
Would you buy RE or continue to wait? Would you buy something else? Is the collapse of the US dollar being sensationalized and fears about it surviving overblown?
“Would you buy RE or continue to wait? Would you buy something else? Is the collapse of the US dollar being sensationalized and fears about it surviving overblown?”
wait one more year
Not collapsing yet
maybe buy TIPS and GNMA mutual funds
where in S. CA ? Smart you sold your house in 2006 you got out at the top !!
One for Hoz,
Bernanke says the Fed is buying stuff from banks, which the banks are largely keeping on deposit at the Fed. The M0 money supply (currecny and deposits) is skyrocketing, but that money isn’t “entering the economy” so no inflation. When the economy returns, the Fed will sell the stuff back, sucking up liquidity, and containing inflation.
Okay… I get it.
BUT!!!!
At what price can they sell this stuff. They are buying it at close to par, right? That is what the banks need to sell for to stay in business.
So, when the Fed needs to sop up this excess money, can they FORCE the banks to buy it back at the price they sold it for? Wouldn’t that make the banks zombies, with no hope for profit anytime in the future since all gains will have to be directed at buying back overpriced assets from the fed?
Or, can they buy them back at whatever the current market is at the time, that probably would result in more than half the excess liquidity staying in the economy?
I don’t follow what Helicopter Ben was saying.
Welcome to the club! Few can understand Mr. Bernanke
It is important to remember the first rule of the Fed is to lie.
Serious question:
Does lying to the populace result in more effective economic policy?
We just keep straddling the 15 min time-scale downtrend line. The setup looks like double bottom pop reversal. We’re at support and the daily chart looks doji. Alternatively, if we break support, we could get mad selling into the close.
Not sure if this is a double-post but very disconcerning… Chinese made drywall make S. Florida houses go pooh-pooh (fault ordor):
WSJ, Jan 12, 2009
By MICHAEL CORKERY
Some home builders already struggling in Florida’s dismal housing market are facing another headache: The Chinese-made drywall they used is causing unpleasant odors and possibly leading to electric problems in dozens of homes constructed during the housing boom.
A handful of builders and environmental consultants are investigating whether the drywall, a wide flat board used to create interior walls, is emitting sulfur-based gases that may be corroding air-conditioner coils, computer wiring and metal picture frames.
Some homeowners are concerned about possible respiratory problems, but the Florida Department of Health says tests show that the levels of emissions from the drywall pose no “immediate health threat.” The affected homeowners also worry that the drywall problems will reduce their already decimated property values and hamper their ability to resell, even when the market recovers.
Nortel Networks (30K + employees) pretty much bankrupt. That’s going to really sting the Canadian economy.
This is a company that was 100k employees before the dot-bust.
Geithner has maid and tax problems.
Yea, I hope this POS gets a swift kick in the nutz and out the door, won’t happen of course.
Source: Geithner failed to pay personal taxes
Source: Geithner quizzed about failure to pay personal taxes, housekeeper’s immigration status
* Brett J. Blackledge, Associated Press Writer
* Tuesday January 13, 2009, 3:39 pm EST
WASHINGTON (AP) — Treasury secretary designee Timothy Geithner is meeting with senators to discuss why he failed to pay personal taxes and check the immigration status of a housekeeper.
An official with President-elect Barack Obama’s transition office says Geithner (GYT ner) answered senators’ questions during a meeting he requested Tuesday. The person requested anonymity because the source is not authorized to speak publicly on Geithner’s situation.
Obama’s transition team was expected to release a statement about the issue later Tuesday.
Obama named the 47-year-old Geithner as his pick for Treasury secretary in November, citing as a top priority tackling the nation’s financial crisis.
Yea, I hope this POS gets a swift kick in the nutz and out the door, won’t happen of course.
I dunno, you may get your wish — such things have unseated many an allegedly iron-clad nominee in the past.
“…check the immigration status of a housekeeper.”
Didn’t that sink the prospects of one of Bush’s appointees?
Oh yeah…
New York Times
Kerik Pulls Out as Bush Nominee for Homeland Security Job
By ERIC LIPTON and WILLIAM K. RASHBAUM
Published: December 11, 2004
WASHINGTON, Dec. 10 - Bernard B. Kerik, the former New York City police commissioner, abruptly withdrew his name from consideration to be President Bush’s secretary of homeland security late Friday night, citing questions related to the immigration status of a former household employee.
Mr. Kerik’s swift fall - he was nominated only a week ago by President Bush to succeed Tom Ridge - came in a letter in which he called the offer “the honor of a lifetime” but said that “moving forward would not be in the best interest of your administration, the Department of Homeland Security or the American people.”
Kerik is a highschool dropout and a frequently hires hookers.
Sounds like he understands how to stimulate the economy!
Well, you know, some of our rich citizens are above the law. I heard someone say once that “Only little people pay taxes.”
Come to think of it, she was from New York also. Maybe it’s something in the air out there:
WASHINGTON (AP) — President-elect Barack Obama’s choice to run the Treasury Department and lead the nation’s economic rescue disclosed publicly Tuesday that he failed to pay $34,000 in taxes from 2001 to 2004, a last-minute complication that Senate Democrats tried to brush aside as a minor bump on an otherwise smooth path to confirmation.
“Yea, I hope this POS gets a swift kick in the nutz and out the door’
Ha,
I see that the currently under paid Mr. Paulson’s job opening for someone to “pick-up-the-daisy-petals” …(no experience needed)…still hasn’t been filled yet…anyone knows if it pays the Federal minimum wage limit of $6.50 an hour?
Sorry if this was already posted.
Fannie Mae bans evictions of renters
By ALAN ZIBEL
The Associated Press
Tuesday, January 13, 2009
WASHINGTON — Mortgage finance company Fannie Mae said Tuesday it has adopted a policy allowing renters to remain in their homes even if their landlord enters foreclosure.
The policy will allow renters living in foreclosed properties to sign new leases with Fannie while the property is up for sale.
Sibling mortgage financier Freddie Mac, based in McLean, Va., is working on a similar policy, company spokesman Brad German said
Smart. Very smart. An income producing property is far more desirable than a broken window.
Plus, the renters get to stay, thus keeping general stability.
Shipping rates hit zero as trade sinks
Freight rates for containers shipped from Asia to Europe have fallen to zero for the first time since records began, underscoring the dramatic collapse in trade since the world economy buckled in October.
By Ambrose Evans-Pritchard, International Business Editor
Last Updated: 5:42PM GMT 13 Jan 2009
The cost of shipping goods from Asia to Europe has tumbled
“They have already hit zero,” said Charles de Trenck, a broker at Transport Trackers in Hong Kong. “We have seen trade activity fall off a cliff. Asia-Europe is an unmit*igated disaster.”
Shipping journal Lloyd’s List said brokers in Singapore are now waiving fees for containers travelling from South China, charging only for the minimal “bunker” costs. Container fees from North Asia have dropped $200, taking them below operating cost.
Industry sources said they have never seen rates fall so low. “This is a whole new ball game,” said one trader.
The Baltic Dry Index (BDI) which measures freight rates for bulk commodities such as iron ore and grains crashed several months ago, falling 96pc. The BDI - though a useful early-warning index - is highly volatile and exaggerates apparent ups and downs in trade. However, the latest phase of the shipping crisis is different. It has spread to core trade of finished industrial goods, the lifeblood of the world economy.
Trade data from Asia’s export tigers has been disastrous over recent weeks, reflecting the collapse in US, UK and European markets.
Korea’s exports fell 30pc in January compared to a year earlier. Exports have slumped 42pc in Taiwan and 27pc in Japan, according to the most recent monthly data. Even China has now started to see an outright contraction in shipments, led by steel, electronics and textiles.
A report by ING yesterday said shipping activity at US ports has suddenly dived. Outbound traffic from Long Beach and Los Angeles, America’s two top ports, has fallen by 18pc year-on-year, a far more serious decline than anything seen in recent recessions.
“This is no regular cycle slowdown, but a complete collapse in foreign demand,” said Lindsay Coburn, ING’s trade consultant.
Idle ships are now stretched in rows outside Singapore’s harbour, creating an eerie silhouette like a vast naval fleet at anchor. Shipping experts note the number of vessels moving around seem unusually high in the water, indicating low cargoes.
It became difficult for the shippers to obtain routine letters of credit at the height of financial crisis over the autumn, causing goods to pile up at ports even though there was a willing buyer at the other end. Analysts say this problem has been resolved, but the shipping industry has since been swamped by the global trade contraction.
The World Bank caused shockwaves with a warning last month that global trade may decline this year for the first time since the Second World War. This appears increasingly certain with each new batch of data.
Mr de Trenck predicts Asian trade to the US will fall 7pc this year. To Europe he estimates a drop of 9pc - possibly 12pc. Trade flows grow 8pc in an average year.
He said it was “illogical” for shippers to offer zero rates, but they do whatever they can to survive in a highly cyclical market.
Offering slots for free is akin to an airline giving away spare seats for nothing in the hope of making something from meals and fees.
This article fits well from what I noticed for the first time last Sunday. Along with empty oil tankers anchored offshore at Seal Beach are several empty container ships.
Finally a bone for renters living in foreclosure properties. Question: How does one find Fannie-owned foreclosure rentals?
Fannie Mae to allow renters to stay in foreclosed properties
By Wallace Witkowski
Last update: 2:29 p.m. EST Jan. 13, 2009
SAN FRANCISCO (MarketWatch) — Fannie Mae said Tuesday it established a new national policy that will allow renters to remain in foreclosed properties it owns. The policy applies to renters occupying any type of single-family property, including residents of two- to four-unit properties, condos, co-ops, single-family detached homes and manufactured housing. Fannie said it will manage affected properties through a real estate broker or a property management company, and that renters will pay market rate rent under the new leases.
Stops Fannie from having to recognize the loss for a little while longer.
I am so glad they found a “competent man” for the job. Minor issues like not paying taxes until you are called out on it are common mistakes and can be over looked. He is the perfect advocate for bring back the stated income loans and getting this economy back on track. I would hate to see all the incompetents they had to turn away. (Sarcasm off)
http://money.cnn.com/2009/01/13/news/economy/geithner/index.htm?cnn=yes
WASHINGTON (CNN) — Members of the Senate Finance Committee met Tuesday with Treasury Secretary nominee Tim Geithner over concerns involving his personal taxes and the immigration status of a former housekeeper, transition officials said.
The Geithners employed for about a year a housekeeper whose employment authorization document expired about three months before she stopped working for them in October 2005, according to a written statement from the Senate Finance Committee.
Later, the housekeeper, who is married to a U.S. citizen, was granted a green card, transition officials said.
The second concern involves Geithner’s taxes while he worked for the International Monetary Fund (IMF). According to a statement released by the committee, Geithner failed to pay self-employment taxes while IMF paid him from 2001 to 2004.
In 2006, the Internal Revenue Service audited Geithner for tax years 2003 and 2004, and he paid $16,732 for the taxes and interest for those years, the statement said. After Obama nominated him for treasury secretary, Geithner voluntarily amended his taxes for 2001 and 2002, paying $25,970 for those taxes and interest, the committee said.
“I believe that these errors, although serious, do not rise to the level of disqualification. He is an extremely competent man,” said Committee Chairman Max Baucus, D-Montana. “The errors were, in my judgment, honest mistakes. He did not in any way intentionally make those mistakes.”
Sen. Charles Schumer, D-New York, also said the mistakes were “not at all disqualifying.”
“Tim came to the committee, admitted he had made some mistakes, and was very contrite,” he said in a written statement. “I continue to strongly support his nomination and given the tough economic conditions, hope we can confirm him as quickly as possible.”
I am embarrassed to admit that I grew up in Montana. Way to go Max!!! Max, hopefully you will feel the same if I have to confess that it was an honest mistake that I said I made $500,000 per year(instead of $50K) when I bought my $50,000,000 McMansion that goes into forclosure.
If he was a Republican, he’d have already been run out of town.
Obama Veto threat.
Lovin’ it.
never had I heard words that supported a dollar rally so strongly.
Obama: You cant have the money.
Stock market: Boooooo
Dollar: Hell yah bitches..
Oil: anybody wanna contango?
Gold: no more dance partners.
Unlike the summer fish, winter steelhead on the Rouge spawn in the mainstream. They tend to be larger than their summer-run cousins, partly because only 50% of them have a half-pounder life history.
half pound salmon burger….on the river…didnt catch a thing other than a cold.
He’s gonna get the money. Senate isn’t even going to visit the issue, and certainly can’t override the veto.
We want you to use the money for something other than just handing it to Wall Street…. Sorry, but Wall Street needs every penny, and it all has to be no strings attached. They already spent the money years ago as dividends and end-o-year bonuses.
I knew you wouldn’t catch a thing! You are not using the right bait, dynamite. Blast fishing rocks.
Colds are good, they get you sympathy from somebody that cares. Hah!
Some years after these handouts/bailouts are finished, I think we will read of corruption that would make Iraq money distribution seem saintly.
I will post as it is approaching lunch time and the rest of you are abed. (Trading close for lunch).
A short while ago, I was long the Chinese stock market and it was on a tear trading up 60% at 4,000. All the mopes were talking about how the market would crash after the Olympics and were buying.
The problem with Mopes is that there is never an easy exit. I bailed early when the Chinese Minister of Interior affairs started talking about taxes and foreign owners etc. I had lost a lot in Russia in ‘97 and will never get caught again. (I will never complain about a justified profit). However the mopes that stayed in the market trying to pick the Olympic top got trashed. They all fled to the exit at the same time. There was no safe exit until the market had dropped 50%.
This is the same situation with investors in US Treasuries. “Every now and then you grab the bull by the tail and face the situation.” They all will flee to the exit at the same time. It will not be pretty.
Back to my meat ball pasty.
Fedspeak glossary:
banking clean-up dumping banks’ toxic waste on somebody else’s plate
stability and the normalisation of credit markets banks get to borrow money at highly subsidized rates and lend it back to consumers at usurious rates
Financial TImes
Bernanke calls for banking clean-up
By Krishna Guha in Washington and Paul J Davies in London
Published: January 13 2009 14:36 | Last updated: January 14 2009 00:05
Ben Bernanke called for fresh efforts to clean up the US banking system on Tuesday, warning that fiscal stimulus measures alone would not be enough to overcome the economic crisis.
Speaking in London, the Federal Reserve chairman said he would like the Obama administration to combine capital injections with a plan to cut troubled assets from bank balance sheets – the idea behind the original version of Treasury secretary Hank Paulson’s troubled asset relief program (Tarp). “More capital injections and guarantees may become necessary to ensure stability and the normalisation of credit markets,” he said.