Bits Bucket For February 18, 2009
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The Housing Bubble
Examining the home price boom and its effect on owners, lenders, regulators, realtors and the economy as a whole.
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Germany to break postwar taboo with new bank law…
BERLIN/FRANKFURT (Reuters) - Chancellor Angela Merkel’s government appears ready to end weeks of intense debate and back a new law this week which would give Berlin the right to seize private property for the first time in the postwar era.
The law, an extension of bank rescue legislation agreed last year, is due to go before Merkel’s cabinet on Wednesday and would set the stage for a nationalisation of Hypo Real Estate (HRXG.DE), a high-profile casualty of the financial crisis.
Her government decided last month it needed to take control of Hypo, a Munich-based lender, after giving the bank 87 billion euros (77 billion pounds) in state guarantees over the past year and seeing no improvement in its financial condition.
But negotiations on the legal details of taking it over have dragged on for weeks amid disagreements over how to handle U.S. private equity firm JC Flowers, whose Hypo stake of about 25 percent must be bought to give Berlin the full control it wants.
The government has so far failed to secure a compromise with Flowers and now looks ready to push through a law allowing it to seize possession of Hypo shares, most likely for a small price tied to the current stock value of just above 1 euro. Flowers bought the stock last June at a price of 22.50 euros per share.
Other countries, including Britain and Ireland, have already taken control of stricken banks, justifying an expropriation of shareholders by pointing to the extraordinary nature of the crisis and the need to protect taxpayers.
“The government has so far failed to secure a compromise with Flowers and now looks ready to push through a law allowing it to seize possession of Hypo shares, most likely for a small price tied to the current stock value of just above 1 euro. Flowers bought the stock last June at a price of 22.50 euros per share.”
BWAHAHAHAHAHAHAHAHAHA! Globalization, RIP!
Other countries, including Britain and Ireland, have already taken control of stricken banks, justifying an expropriation of shareholders
There was no “expropriation of shareholders” because the banks were worthless. Any business that cannot continue operating without government assistance is worthless.
Period.
Yes, but like Austria, once Germany starts appropriating banks, they will find it hard to stop.
I’m both amused and terrified that we seem doomed to repeat the 20th century all over again.
I’m both amused and terrified that we seem doomed to repeat the 20th century all over again.
Brings to mind a saying: “Those who cannot learn from history are doomed to repeat it”… for most it’s just easier to say “It’s different this time” and follow the herd.
“I’m both amused and terrified that we seem doomed to repeat the 20th century all over again.”
I don’t know. I had a pretty damn good time in the 80s. I wouldn’t mind repeating it again.
(of course, I’d run the risk of actually remembering what happened this time and realizing it wasn’t so great)
It’s never as good (or bad, thank goodness) as it seemed when you were younger.
RE: I had a pretty damn good time in the 80s.
Ditto, here.
Now that “W” is gone I’ve noticed the new chic for the liberal morons is a foaming mouth, wild eyed, demented tirade against Ronnie Reagan.
“London Calling”, alaclaclacaca…
My family didn’t do so well in the 40s….I wasn’t thinking of the 80s!
Jim A, too true.
Don’t discount the anti-Semitic sentiment here in America, reuven.
Some of my coworkers have made statements recently that disturb me. And it’s scary how many people believe the same old lies.
Oh, I know, not a gator. It can easily happen again. Anti-semitism is becoming mainstream in the Democratic party.
I forget - was that quote from George Santayana or from Carlos Santana?
George Santayana if IIRC…
They made a bad investment and got burned. The risk premium that investors require for investing outside their home market will likely rise. But thinking that no one will ever make cross-broder investments again is rather silly.
“But thinking that no one will ever make cross-broder investments again is rather silly.”
What’s even sillier is thinking I said no one would ever make cross-boRder investments again. Because I was looking at my post and it’s really funny, but I just don’t see where I wrote that.
“Cross border” investments are as old as nations themselves. Hello, Marco Polo? But cross border investments and globalization are two entirely different things, in my book, anyway.
“You keep using that word. I do not think it means what you think it means.” Inigo Montoya, The Princess Bride
It might clarify things if you define what you mean by the word globalization. Some people are aware of only certain parts of it’s meaning.
But, imo, a lot more people use the word as a catch phrase inclusive of all the things they personally hate about involvment in foreign countries.. in which case it has a negative connotation.. and means next to nothing.
Two words: Henry Kissinger
Well, you shouldn’t give deadbeats 87 billion euros in state guarantees in the first place. Problem solved. Why not give healthy banks 87 billion in guarantees so that they can expand their business and allow the failures to die.
+1
I also give that comment +1.
” U.S. private equity firm JC Flowers,”
Call 1-800-FLOWERS.
I can understand how Germany feels, they probably did try to work something out with Flowers, and I’ll bet they couldn’t get anywhere. What self-respecting nation wouldn’t want to ram it up the butt of some US hedge fund, investment bank or private equity firm right about now?
…and please NO lubricants
Time to export Joshua trees to Germany.
Sehr gut.
Taint enough! LOL! Should have filed bankruptcy from the get go, but no, got save to keep shoveling money into a dinosaur…
Feb. 18 (Bloomberg) — General Motors Corp. asked the U.S. for as much as $16.6 billion in new loans, more than doubling the aid to date, and said it needs some of the cash next month to survive as it sheds brands and cuts 47,000 more jobs worldwide.
Chrysler LLC, propped up like GM with federal assistance, said it’s seeking $5 billion more from the government and will shed 3,000 more positions.
The automakers met a deadline yesterday to report progress in revamping operations with $17.4 billion in loans granted so far. Now, they must show the U.S. by March 31 that they can become profitable in order to keep the money. Along with Ford Motor Co., they got a boost when the United Auto Workers said it reached tentative agreements to help trim labor expenses.
“Most of the low-hanging fruit when it comes to cost cutting is gone,” said Rebecca Lindland, an IHS Global Insight Inc. analyst in Lexington, Massachusetts. “You get to the point where you’re throwing good money after bad.”
“Most of the low-hanging fruit when it comes to cost cutting is gone,” said Rebecca Lindland, an IHS Global Insight Inc. analyst in Lexington, Massachusetts. “You get to the point where you’re throwing good money after bad.”
Thanks for the “global” insight, Becky! Yer a real genius, you are.
But she does have a point. Just let GM die its ugly death.
Besides, congress excels at throwing good money after bad, it’s their forte.
They just lobbed a huge chunk into the crapper yesterday.
let them sell more cars…errr…eat cake.
RE: Just let GM die its ugly death.
Having driven American cars and trucks all my life, and having been pretty much satisfied with all my purchases, I can only say…
with all the financial difficulties of GM and Chrysler you just know they are cost shopping to the EXTREME to get the lowest bidder for all the parts that goin’ into their cars.
“We’ll take a million of those half-a-peso bolts made from re-cycled Mexican beer cans please”!
So, who the fook is going to make the long term purchase of a $32k (average domestic price) car or truck that’s been constructed with LOW BID parts from foreign junk peddlers or domestic suppliers who on the financial brink themselves?
It’s a complete death spiral!
My recent experience with GM products:
- rented a Cadillac for a weekend, don’t remember which model, but that big boat of a sedan, Deville?…the thing had 300 miles on it, and the panel under the dash fell off during my rental
- rented a Chevy Cobalt , had less than 10K miles on it. every time I went over 70 mph, the thing shook like it was about to blow up
They could give me employee + + + double secret super + pricing and 0% APR for 100 years and I still would not spend a dime for a UAW made POS car
As the target market for the Cobalt is
-rental fleets, and
-the “teenager’s first new car” market
Perhaps shaking at any speeds about 70 mph is a good thing?
Maybe the previous renter took it off roading and killed the wheel alignment? Rentals are for ragging….
Hahahaha, you’re going to give me a hernia, VaBeyatch!
Manny, how do you know that car wasn’t built in Mexico? I haven’t noticed any increase in US car quality since GM started shutting down all their union plants.
A hint: GM doesn’t give a fig about quality b/c they make all their money financing, have since the 1920’s when they first figured this racket out. Many of the early labor disputes at GM were over stopping the production line when errors were being introduced. Line employees wanted to craft quality cars; management just wanted the crapmobiles to keep rolling off the line, no matter how many parts fell off when they rolled off the lot.
Didn’t take ‘em long to figure out they could make a mint doing in-house service and parts sales, too.
They deserve to go the way of KIA.
So, I assume the end product of GM and Chrysler will consist of nothing but overpaid executives sitting around in offices while being handed our money in endless bailouts?
Let’s pretend they get to keep building cars, so what. Who are they going to sell them to? People with MONEY, perhaps?
Lol, people with that money stuff aren’t letting go of it.
The Economic Contraction rolls on…
At the Chicago Auto Show last weekend the GM exhibit featuring a concept Stingray was mobbed by “aspirational” buyers.
These auto shows are so bizarre during these times. Like fiddling while Rome burns. Maybe that should be our barometer - we’ll know we’ve hit bottom when they stop doing auto shows.
Exactly - people seem to be missing that point. There’s a reason why the company is going into the crapper* - people aren’t buying cars! I guess they expect that to change soon. I’ve got news for them… it ain’t. Not until we get this massive recent debt wrung out, and we’ve got about 3-5 years more of that to go, at least.
*Well - that and mismanagement w/regards to the unions.
It’s hard to disassociate Chysler’s Bob Nardelli from the $250million severance he received from Home Depot just as it was announcing layoffs, store closures, and its stock was tanking. Who’s to say he isn’t going to take the money and run, again?
I’d like to see him put some skin in the game. Send him to me for a week and have him bring his checkbook. I’m sure I could persuade him to throw a good-faith donation to the cause. Something in the nine-figures range.
I think this idea has some traction. Please also send Mozillo, Cox, Gramm, the Sandlers, Madoff, Cassano, Raines, Fuld, et al. I’m sure I could persuade them all to do the right thing, and they would all sleep better at night not having to worry about those ill-gotten gains.
Is Guantanamo still open? I’ve never waterboarded anyone before, but there doesn’t seem to be any WRONG way to do it…
May I be a part of your persuasion team? You can have the corporate hacks, I’ll take the political hacks, past and current.
Chrysler is owned by a private equity firm.
They still have billions to invest! They refuse to throw good money after bad, so why should the US taxpayers?
Last I read Chrysler only had 30-40k employees anyhow.
Nardelli has a self righteous you owe me attitude after he was passed over for GE’s chairman and CEO slot by John “just call me Jack” Welch.
I’m sorry he got passed over for that gig, I really am. It would have done my heart good to see NBC’s overpaid teleprompter readers pounding the pavement.
Didn’t he run Home Depot into the ground before moving to Chrysler?
He certainly did. Take a look at a HD chart. Then absconded with $250 million.
Yep, Home Depot went into the crapper just as Nardelli was departing. Which is why I wish he’d gotten the gig at GE.
Just a note about Nardelli’s tenure. It was Frank Blake who filled Nardelli’s role at HD. Frank Blake is a GE henchmen who had a office next door to Nardelli in building 5 at the Main Plant in Schenectady.
Talk about a crime syndicate!
Home Depot was en route to the crapper long before Nardelli arrived. Among other things, they got out-competed by Lowes.
Let us not forget that Nardelli wasn’t just a failure at Home Depot and Chrysler, but that he is part of the Jack Welch Cult and thus a member of the “loot the company and then destroy it” school of business. Looks like he’s doing a fine job! I wonder what stupid group will hire him next after he’s finished with Chrysler?
GE’s management school in Croton is truly a cult training ground by any description.
Under the Boardwalk
Down at the job bank
We`ll be having fun
Down at the job bank
Paychecks for everyone
Down at the job bank job bank
GM, Chrysler seek nearly $22 billion more U.S. loansFebruary 18, 2009 6:36 AM ET advertisement
All Thomson Reuters newsDETROIT (Reuters) - General Motors Corp and Chrysler LLC requested nearly $22 billion in additional U.S. government loans and said they had reached tentative deals with the United Auto Workers union to reduce labor costs.
Around here, even now, the prevailing attitude seems to be that it’s the rest of the country that doesn’t “get it” re: saving the Big 3.
Denial continues to run really deep, yet it should be obvious that they’re just going to keep coming back for more and more.
They’ll eventually get it.
I grew up watching Kodak and Xerox grind down in Rochester. They’re still doing it, and still believing that the turn is right around the corner.
“They’ll eventually get it.”
Sorry, what I meant was: they may not get it, but reality will slowly become “obvious,” like, say digital photography.
Sort of like the internet and the newspapers. People were all up in arms about Carlos Slim buying into the New York Times. LMAO! All I see is two birds getting killed with one stone. Of course, I’m sure he can afford to lose his stake, but the NYT crapped its own nest years ago. Slim may transform it into another El Diario, but for whom? More like another Justicio tabloid.
Mr. Slim bought the NYT not for making a profit. He invested thed $$$ so that the NYT publishes editorials and other pieces that are favorable to his other business ventures. A form of lobbying if you will.
One share of stock in the NYT costs less than the Sunday edition of the paper.
“Mr. Slim bought the NYT not for making a profit. He invested thed $$$ so that the NYT publishes editorials and other pieces that are favorable to his other business ventures. A form of lobbying if you will.”
BWAhahahaha! Like GE and NBC.
But who reads the NYT anymore, really? Or, if they do, who believes a word they print?
I think he made a bad investment. If you’re going to have a mouthpiece, it should have some credibility.
It pains me to see another Slim making a bad investment.
FWIW, the NYT is still the “newspaper of record”, but I do agree that it was a bad investment.
‘It pains me to see another Slim making a bad investment.’
LMAO
“and still believing that the turn is right around the corner.”
Yep. Not much different than the rest of the post-manufacturing areas of the northeast. These places are like graveyards where the dead forgot to lie down.
Muggy:
My friend is the editor of the Xerox company newsletter.I told him he has the safest job there. Once he gets fired It will send a message to xerox employees Its over the company is dead!
“it should be obvious that they’re just going to keep coming back for more and more”
Ditto for FB’s, Bums, Banks, Crack Heads, Wall Street , Old Ladies, Politicians, Foreign Governments, , Slow Learners and the Military. The Treasury (Pandora’s Box) is now open to all those who wish to suck on the public Teet. What happens when the well runs dry?
i love to gamble on high risk stuff like this.. GM at $2 a share.. govt will give them billions.. labor is making deals. The question is where to sell after the bump up.. $4.. $8? ..more?
Nobody ever lost money taking a profit too soon.
OT..
you guys got me going with all that talk about sourdough starter.. i ran a batch for almost 6 months before my inattention let it spoil, and it’s been years since.
But, i got another one going a couple days ago… be a few more days till it’s ripe.
Someday i’m going to walk by a bakery in San Francisco or similar, and ask real nice ( and slip him a 20) for a little hunk of fresh dough.. and use that to start. This might be the way to assure a good flavor.
There’s also Sourdoughs International. I’ve heard people have good results with those. No personal experience here though.
i checked out their webpage.. looks good.. very convenient. They claim to have a really hard time getting ahold of that stuff, and now i’m wondering if a bribe and a smile will be enough.
Bakers might guard the raw dough with their lives.
Well, I can tell you more on my experiences on the subject, if you’re bored enough.
Email: cba DOT fed DOT ihg AT gmail
If you’re seriously gonna get into sourdough, a book or two, and a buncha science might come in handy. Mostly, it’s just a lot of grunt work though.
But the flavor, the flavor!!!
Hopefully, the US Taxpayers will get at least 80% of GM, so their stock will be diluted quite a bit.
Buy some calls, more bang for the buck, though I haven’t looked at the cost of these particular calls.
Don’t buy the calls, short the puts
For some reason, whenever I hear the phrase “low hanging fruit” I picture the classic Kung Fu move Monkey Steals the Peach. Ouchie!
So Barry thinks that ’sharing’ the burden will save the hapless FB’s. The new BARF welfare plan includes 50 billion to save homeowners. Millions of hangers on will be sorely disappointed…
California Foreclosure Epicenter Shows Challenge Facing Obama
By Dan Levy
Feb. 18 (Bloomberg) — It has taken Susan Erb just three years to see the value of her Merced, California, home plunge by more than half to $350,000. Next month, her mortgage payment jumps 20 percent to $3,321 and she knows she can’t afford it. Her bank won’t rework the loan unless she stops paying altogether.
“Now I know how people feel when I go knocking on their door,” said Erb, 53, a real estate agent who works for a company that notifies residents in foreclosed properties that they must vacate. “I’m in their shoes.”
Merced, the epicenter of the U.S. foreclosure crisis, demonstrates the steep challenges President Barack Obama will face in trying to stem defaults. One in 59 housing units in the Merced metropolitan area received a foreclosure filing in January, the highest rate in the U.S., according to RealtyTrac Inc., an Irvine, California-based seller of default data. For- sale signs are everywhere and a building boom fueled by subprime mortgages has been brought to a standstill. Just 18 construction permits were issued last year. In 2005, there were 1,427.
“We’re ground zero,” said Merced Mayor Ellie Wooten, 75. The city, population 81,000, had an unemployment rate of 15.5 percent in December, “and it’s going to get worse,” she said.
Long division = FAIL
On the good side, Merced may be first to the bottom. If so, I am confident that Susan will be the first to say so.
She’s damn lucky her payment is only jumping 20%. If LIBOR wasn’t at historic lows it’d probably be jumping 50%.
“Now I know how people feel when I go knocking on their door,” said Erb, 53, a real estate agent who works for a company that notifies residents in foreclosed properties that they must vacate. “I’m in their shoes.”
Talk about poetic justice. This Suzanne clone no doubt used her NAR-supplied propaganda masquerading as “research” to persuade her hapless clients of 2004/2006 into “stretching” to get into houses they couldn’t afford, using creative financing and suicide loans. Alas, like so many of her NARster fellow snake-oil salepeople, she made the fatal mistake of drinking the NAR Kool-Aid along with the doomed FBs. Now she’ll join them in their misery. Nature and providence have a funny way of putting things right.
RE: This Suzanne clone
Hey, SS, you are right on the money bringing up the NAR real estate sales scumbags who all seem to have been forgotten in the shuffle.
Did ya see that public broadcasting show on the financial meltdown last night?
When the show ended, and I was sortin’ out the info in my head, I came to the conclusion that this entire mess, all really, really, began with the bazzillion of real estate sales “Suzannes” out there with their “Dear Leader” David Lereah encouraging everybody to drink the Kool-aid.
“Welcome to California - the world’s 9th
10th
11th
15th
23rd
30th
55th
79th
98th
103rd
128th largest economy!”
Well dangit, that didn’t work right - let’s try again…
“Welcome to California - the world’s
9th10th11th15th23rd30th55th79th98th103rd128th largest economy!”
Ok, I finally get it - current stimulus plan = catching a falling knife.
… and so that is why it won’t work. America has placed itself in the position of holding up the entire global financial system and preventing globalization from re-forming itself. What we are doing won’t work because it is a 30’s type of solution to a problem that couldn’t exist in the 30’s.
Roidy
“…it is a 30’s type of solution to a problem that couldn’t exist in the 30’s.”
Our pols, and entire political apparatus for that matter, is geared for the last century. This of course reflects the fact that many, many voters themselves think only in terms of the last century - specifically the slice known as the Pax Americana.
Not just voters, but many financial, political, media and entertainment “elite”. This crowd loves to wag its finger at US citizens and workers, telling them to get on board with the globalized new world order and forget about all that great stuff we had here, like certain legally mandated civil protections. “We, the people”, must get over ourselves and descend to the levels of other nations.
However, watch these so-called “elites” howl when the harsh justice of globalization is applied to them. Hollywood, for example, starts yelling about “intellectual property rights” and wonders why other nations couldn’t give a crap if American movies are pirated. Bollywood replaces Hollywood and American actors can only look on in dismay. Brit accents admonish us on US news programs. Let’s replace Katie Couric with Katty Kay. Or Brian Williams with Simon Cowell.
And corporations should not expect to get the same bennies they get in the US, as evidenced by the JC Flowers story above.
Corps like Microsoft used the US legal and physical infrastructure, supported by taxpayers, to flourish. Only to outsource to other countries. And then they’re surprised when the EU has problems with certain business practices.
All of a sudden, these “elites” realize that most of them could never have gotten anywhere in some other country. It was our system here that gave them a shot at fame and fortune.
You are certainly right. Once you cross the border a lot of protections are thrown out the window. It is so bad that if you owe money here, and move to canada or mexico, there is no legal way of getting you to pay. Corporations forget this and have forgotten the recent past (1970’s) where most of latin america nationalized whatever companies they wanted, starting with oil, telephone and electricity that were mostly owned by US interests. The companies got paid 5% of their total investment.
I would not be surprised if China takes the same route. Now that they have a nice industrial base provided for by US companies, what is stopping them from just “nationalizing” all of it in lieu of all the money we owe them? It would not be a bad deal, as they get huge infrastructure boosts, while we are left without an industrial base to compete.
I am certain that the Chinese and the Indians most certainly do not have the well being of the US at heart, and will do whatever they do to keep their populations under control, and the PTB IN control.
/rant off
Oh, yah, all these masters of the screwniverse chant for globalization until it bites ‘em in the arse. Then they start mewling for rights and privileges they legislated away from the people.
IIRC, US companies were required to partner with a Chinese company when setting up factories in China.
But, I don’t think US companies really care. Some, take NIKE for instance, do not own a single factory.
GM would probably be happy if all of their cars came from factories in China owned by someone else.
The fact is, US companies do not have the US at heart and have been selling this country out for many years now.
They were also required to build housing for their employees, pay bribes to the local officials to look the other way, and to sign a 99 year lease that does not include property rights.
Those companies that built factories there, were lured by the lack of environmental regulation, no unions, low taxes, and over all, very low labor rates.
Yet, a lot of companies formed these “joint” ventures, and a lot of them still form part of them. Some like IBM sold their “joint” ventures to their partners early on… Before the bomb hit.
But the possibility of China turning LatAm on those companies that are still there is growing at an alarming rate. I would not be surprised if they pulled the trigger on it pretty soon, in order to bring their disgruntled labor under control.
And I still seem to remember a lot of companies with significant investments over there…
And to think, those gawkers I saw at the auto show this weekend probably still think they’re doing the right thing by taking on more personal debt to buy a GM car.
RE: moving ops overseas
Don’t ask what GM can do for you, ask what you can do for GM.
Good point regarding China, pinch.
But still they feel compelled to kill the Golden Goose that is our Constitution.
palmetto,
Right, like the “Public Service” announcement you can’t fast forward past when you rent a DVD.
“You wouldn’t steal a car would you?” You wouldn’t steal a purse? Then why would you buy a pirated movie or music album!?
And I’m supposed to get up in arms over this because..?
Palmster, the Hollywood elites are dying. They used to have the means of production, which required serious gear and capital. Not anymore. There is nothing stopping anyone from making a great film of any message/persuasion these days.
Same for this, blogging… I’ve spent more time learning from and reading the HBB than all the fish wraps combined.
The common thread here is massive overpayment in all these fields that are dying. Hollywood is dying because it pays people 10M dollars for a few months of work. Simple as that. The Hollywood business model of selling a DVD that was created for 5 cents for 20 dollars is dead, and will never be coming back. Same with music, massively overpaid stars, incredible profit margins quickly going to 0. And of course, banking. Do we need to say anything about the business model of paying out multi-million dollar bonuses while, at the same time, desperately begging for govt money to prevent BK?
The common thread is massive overpayment of all the people involved. I don’t shed a tear for the Hollywood elite, they made their own mess through blatant greed. Had they just made a few moves to protect their customers 5-10 years ago, their pain would be dramatically minimized today!
Especially when you consider that some tacky beauty queen from south of the border is willing to paw herself silly onscreen for 1/50th of what Paris Hilton gets, or jiggle and giggle for 1/20th of what Pam Anderson gets.
Muy Caliente!
Let’s not forget what the internet has done to Hollywood. The internet has some great free entertainment.
Amen to that.
The military always prepares for the last war. See “Maginot Line”.
Are you implying that billion dollar stealth bombers aren’t needed to defeat peasant insurgents?
It’s like the old saw about generals always preparing to fight the last war.
Pardon the very extended analogy:
Obama is doing the equivalent of buying a deteriorating farm now, and planting fruit trees and gardens and getting piglets and chicks. Yes, he knows he’s not buying at the bottom, and he knows that value of the place will fall in the short term. And he knows that he’s going into debt doing it. But he needs to do it NOW, before the soil dries up and flies away, and so that the trees and piggies have time to grow. If he waits for a true bottom (or allows true bottom to happen), the soil will be fone, the farm will be worthless, and will have no potential for recovery at all.
In time, so goes the hope, the piggies will grow, and the fruit trees will bear. But the point is, you have to go into debt becuase you can’t wait until you get the cash together. Every day you wait, more soil blows away, and trees and piggies don’t grow overnight. You have to start NOW and you have to go into debt. You have to get past a couple hard years until the place is established. Will it work? Ask any homesteader from 150 years ago. The answer is, maybe, maybe not. But if you don’t try, you are sure to starve.
Republicans don’t seem to understand this. All they care about is the short-term value of the farm, or the jabbering heads who are jeering just outside (that would be Wall Street). Or they just want to eat what little seed corn is left and be content that they are fed for today only, without planting for the future.
Obama understands this full well, as does Biden. But I think they gave up on trying to explain it, because they are aware that the public doesn’t like to read anything longer than a bumper sticker. (After all, how many of you have even read this far?)
I like the analogy, but I think it’s missing a bit. For instance, if money is given to the big 3, then it’s like seeding contaminated soil. Money given to failing banks is the equivalent of buying chickens for the wolves to eat. If money is used to buy down the principle on FBs’ mortgages, then all that is accomplished is heaping manure on dead fruit trees. I hope the package has something real in it.
That’s a pretty good analogy. A city-slicker who just HAS to buy a farm NOW (fully leveraged since he doesn’t have money to invest in a farm) before the bare soil blows away!
The lesson still to be learned is that you shouldn’t buy a farm where the grass don’t grow.
lol
I read all of it and regretted it.
Except that that Old Barry’s farm was built on top of 3 Mile Island.
I really like this analogy. I can see it now, old farmer “O” hitched up to his team of pretty pink and white unicorns out planting row upon row of Skittles. I’d also imagine unicorns would be gassy like horses or mules too, only they’d fart rainbows.
The mistake that is made is that it fails to account for the private industries that sow seeds only to have Obama redirect the water to dead trees.
Government has no “profit-loss” calculation because they do not pay the losses, we do. 500 or 600 people in government are not capable of understanding the best use for capital. It is far better for them to stop spending money for other people and “we the people” make decisions that IMPROVE our well being.
And your partisan politics reveals you to be a pawn manipulated by propaganda with no real understanding of what you are talking about.
I just did my taxes (according to how the IRS fraudulently declares I would owe) and they want almost 8K that I would have invested toward becoming energy independent. I know for sure that whatever they spend that money on will help me out far less than what I would spend the money on.
I disagree with your analogy only on a few points. I think the farm as is can work perfectly well as is but the methods of farming need to change.
What a farm needs more than anything is a good water supply. Our economic farm has been using Brawndo: The Thirst Mutilator to irrigate our fields and feed our animals instead of water. Poor Obama and company don’t know of any other way so the crops and animals get more Brawndo. Oops!
We just got 800 billion more gallons of Brawndo applied to our fields and more is a comin!
You wanna use water? Like, the stuff that’s in toilets?
“Ask any homesteader from 150 years ago.”
My ancestors from 150 years ago who were homesteaders most certainly did not depend on debt to get started. They got their start through LOW REAL ESTATE PRICES!!! Further, the farms that are no longer in the family were without exception lost due to overleverage of debt in the face of a downturn.
Your analogy is insanity writ large, and I think the J6P type would swallow it hook, line, and sinker.
I did, and I thank you for a damned fine analogy. Get your fruit and nut trees in first…then worry about the rest.
WTF? Second stimulus? This is the second stimulus you morons, and there will be a third,fourth, fifth etc… Why not just replace the 50 trillion that’s be wiped out world wide so far! ROTFLMAO…
DENVER — President Obama has not ruled out a second stimulus package, his press secretary, Robert Gibbs, said on Tuesday, just before Mr. Obama signed his $787 billion recovery package into law with a statement that it would “set our economy on a firmer foundation.”
The president said he would not pretend “that today marks the end of our economic problems.”
“Nor does it constitute all of what we have to do to turn our economy around,” Mr. Obama said at the signing ceremony in the Denver Museum of Nature and Science. “But today does mark the beginning of the end, the beginning of what we need to do to create jobs for Americans scrambling in the way of layoffs.”
Mr. Gibbs, speaking to reporters aboard Air Force One on the way to Denver, said, “I think the president is going to do what’s necessary to grow this economy.” While “there are no particular plans at this point for a second stimulus package,” he added, “I wouldn’t foreclose it.”
Well, somewhere along the “third,fourth, fifth etc…” the deflation/inflation argument will finally be decided.
If you have to do a third, fourth… It has already been decided, and its way too late.
What news source?
Never mind - I see reference on Reuters.
It’s not really significant (yet), from what I can tell. It sounds like they were just trying to pin him down with a statement saying that “this is it”, and he wasn’t willing to do that, and rightly so. I haven’t seen any indications (yet) that a second stimulus is actually in the works.
wmbz provide a link?….that would slow him down….welcome to the wmbz “fishing derby”…he posts it, you go find it.
“We are spending more money than we have ever spent before, and it does not work. After eight years we have just as much unemployment as when we started, and an enormous debt to boot.”
-US Treasury Secretary, Henry Morgenthau, May, 1939
news.yahoo.com/s/huffpost/20090217/cm_huffpost/167301
With the Great Depression, there was the ‘29 Crash and contracting government spending, with the “disease” of severe economic contraction; then, in 1933 the ballooning of government spending and economic growth; then in 1936 the reduction of government spending and economic contraction; and then, in 1938 increased government spending and a return to economic growth.
It is interesting to note that Republicans, who have delighted for 50 years in attributing the end of the Great Depression to World War II, conveniently omit that in World War II there were wage-price control boards, rationing, higher taxes and massive government spending. Other than massive government spending, and “employment” in the armed forces, there is nothing economically “magic” about war. One might even suggest that, from a pure economics perspective, much of the spending in war is wasteful, building machines that will be destroyed before their useful life is completed.
But, these are all words. Just show opponents the graph, and ask them to explain how it was that the GDP in 1936 exceeded that in 1929 and never, even with the 1937 contraction, fell below that level again. And why, if government spending were irrelevant or even counterproductive, GDP fell when government spending was reduced and then grew again when it was again increased?
It would be interesting to see a graph of unemployment over the same period.
While conditions did “improve” somewhat in the latter stages of the GD, keep in mind that it’s very natural for the markets to work themselves out of such a state. Depression is not a natural free-market state. I think the main argument is that it took longer for us to come out of the depression than otherwise would have. We still had 15% unemployment in 1940.
Anyone who thinks that WW2 itself brought us out of the depression is stupid. You can point to GDP and unemployment data all day long - that data was meaningless during WW2 because such a large percentage was military, not civilian. What brought us out of the depression was winning WW2, specifically:
1. The euphoria of winning the war spilled into general economic optimisim.
2. The fact that the other major economic powerhouses (our competition) of the world had been bombed into oblivion, while the U.S. remained unscathed - this is probably by far the single biggest factor.
In reality the Great Depression didn’t really end until the end of 1946, when true civilian-based GDP and employment picked up significantly.
But isn’t it possible that civilian GDP increased because people with jobs are more likely to spend money. I suspect there is a lag time before confidence reappears. The GDP and industrial production numbers suggest the recovery was earlier than this. The article posted above suggests that FDR rolled back gov spending in 1936 after unemployment dropped to 10%. GDP promptly fell, and unemployment rose to almost 20%. Then in 1938 gov spending was increased again and GDP increased, followed by a drop in unemployment. The story I get is that they pulled back too quickly.
“We are spending more money than we have ever spent before, and it does not work. After eight years we have just as much unemployment as when we started, and an enormous debt to boot.”
-US Treasury Secretary, Henry Morgenthau, May, 1939
This statement ignores the drop in unemployment from 25% in 1932 to near 10% in 1937 which corresponded to the years gov was spending money on infrastructure. The subsequent rise of unemployment in 1939 resulted from a pull back in gov spending if the article I posted is to be believed.
Unemployment graph below
http://www.econreview.com/events/ur1932b.htm
Food for thought
We need a graph of gov spending to combine with GDP and unemployment.
What helped also was that people had jobs during the war, but nothing to buy. So they saved and saved and saved.
Don’t forget that the “second depression” or “depression within the depression” was set off by the “hard money men” freaking out that the recovery was causing inflation.
They promptly instructed the Fed to tighten, and tighten it did–squeezing the life out of the nascent recovery!
What people also forget is that most of FDR’s alphabet soup programs sunsetted after 18 mo’s or so … first there was the CCC. Then it was shut down. Then, later, there was the WPA.
One last thing–FDR is NOT to blame for all of the unemployment, nor is Hoover. An environmental distaster drove thousands off of their farms, where they joined the ranks of the under- and un- employed. “Okies” worked the truck farms of California, for example, where they were treated much like Blacks in the segregated South.
I suggest you visit mises.org to get an education on economics and the broken window fallacy. Then read Mises on Money. If you are not willing to do this, then you are operating on “faith-based economics” where you “trust without thinking”.
“There are certain things that are true no matter how much someone may deny them. In the economic realm, for instance, you cannot legislate the poor into independence by legislating the wealthy out of it. You cannot multiply wealth by dividing it. Government cannot give to people what it does not first take away from people. And that which one man received without working for, another man must work for without receiving.” - Kenneth W. Sollitt
The only thing that government spending can accomplish is the redistribution of existing wealth at significant overhead. The fallacy being that government assumes people do not know how to grow wealth on their own and then presumes that *they* know something that the masses do not.
Wasn’t some or all of that quote Adrian Rogers?
VT Dan,
See my post above (still in blog purgatory) regarding govt spending and technological advances.
VT Dan
I was just pointing out that gov spending did reduce unemployment. The unemployment numbers miror the GDP numbers in the article. Gov spending increased under FDR. Unemployment dropped from 25% to 10% in 1936-7, gov spending programs were rolled back and unemployment rose to 20% in 1939. Gov spending increased and unemployment dropped again. I posted a link to an article posted in seeking alpha which suggests growth in civilian dependent GDP increased as well. I disapprove of unemployment and well fare programs but I am all in favor of gov preventing massive unemployment, and the crime and social problems that come with it.
Measton,
Government spending may have created “make work” and increased the number of people “doing something” and “receiving a pay check”, but it did not increase the *real* productivity of society in a manner that was a net gain.
This thing that is *always* overlooked is what unemployment would have been without government intervention. The *assumption* promoted by government is that it would be *worse* but we know that it is far more likely that unemployment would have been less without the government spending than with as private individuals investing private capital is far more efficient at creating lasting and relevant jobs than government.
Everyone compares unemployment at two different times and then makes the illogical conclusion that “government spent money and unemployment went down; therefore, government spending decreases unemployment.” What they must attempt to compare is unemployment with and without government spending/intervention at the same point in time. Unfortunately this comparison must rely upon logical deduction and reason and not a 1 line statistic comparison and logical fallacy.
You are incorrect, it was not all “make work”. On the contrary, they built a great deal of infrastructure that is still in use today. Bridges, public buildings, highways, aqueducts, and even electrification for the goobers in Tennessee.
That infrastructure is an investment that yields dividends … for one thing, it allows businesses to prosper. They get electricity, water, supplies, a work force, and their output can be easily brought to market.
Destruction of infrastructure, as has been occurring in the last twenty years, disrupts the supply chain and constrains industry. Part of the woes of Western Mass. are caused by a closed bridge…
Just because work has some useful end doesn’t mean it isn’t “make work”. If the free market did not deem the work as necessary, then the government is simply “making work” for people at the expense of other jobs / investments that were more valuable to individuals than the bridge, dam, etc.
You cannot measure the benefit without counting the opportunity costs. The opportunity costs are *huge* compared to any marginal benefits of government spending.
OK VTD
Can you point to any historical data that supports your contention that doing nothing in the face of massive unemployment is the right thing to do?? There is no way to replay the great depression and plug in different responses. I think the temporal relationship of gov spending to rising GDP and falling unemployment is pretty strong evidence.
I’d like to see some of that proof, too, VT Dan.
If we all “know that to be true,” then there ought to be some proof somewhere, no?
“…the president is going to do what’s necessary to grow this economy…”
This statement deserves a closer look, because it’s a beut! It shows just how far things have come.
And by “grow the economy” they mean: keep people in debt.
Get out there and buy something you can’t afford today!
wmbz, this is at least the THIRD stimulus. The first was directed mainly at us, in the form of one-time checks (payday loans). The second was the $700 Billion directed at banks to reliquify them. Stimulus IV will be here by summer, and Stimulus V by the end of the year
Any speculation on what form they will take?
Next up is nationalization of the banking system, “temporarily” of course. Once that’s done I would guess BARF4,5,6 etc… will continue the pumping. Question is, who’s going to borrow, not who’s going to lend. They will go gubmint direct at some point if need be. So will the dead beats of the past get to line back up? Going to get interestinger & interestinger. Never been down this road this far before, on a world wide scale.
They will not stop printing and sooner or later it will gush out the door. IMHO.
“But today does mark the beginning of the end…”
Yes, it certainly does mark the beginning of the end.
United States of America- R.I.P
On the front on my Yahoo page:
“Worst Is Yet to Come:” Americans’ Standard of Living Permanently Changed
Posted Feb 17, 2009 12:53pm EST by Aaron Task in Investing, Recession
There’s no question the American consumer is hurting in the face of a burst housing bubble, financial market meltdown and rising unemployment.
But “the worst is yet to come,” according to Howard Davidowitz, chairman of Davidowitz & Associates, who believes American’s standard of living is undergoing a “permanent change” - and not for the better as a result of:
* An $8 trillion negative wealth effect from declining home values.
* A $10 trillion negative wealth effect from weakened capital markets.
* A $14 trillion consumer debt load amid “exploding unemployment”, leading to “exploding bankruptcies.”
http://finance.yahoo.com/tech-ticker/article/176478/%22Worst-Is-Yet-to-Come%22-Americans‘-Standard-of-Living-Permanently-Changed?tickers=WMT,WFMI,FDO,%5EGSPC,%5EDJI,RTH
Howard Davidowitz, chairman of Davidowitz & Associates-
I know of this man. His firm does analysis of retail firms, among other analysis. My former employer (Retail REIT)was a huge fan.
That’s a particularly bold statement at this stage in the game. I am kind of surprised. They have to know that popular expectations for a late 2009 recovery are running very high right now.
Besides, no one knows exactly what lies beyond a recovery -although there’s a huge segment that thinks recovery means a return to 2005.
“I wouldn’t foreclose it.”
Love that choice of words. That kind of sums up the whole picture, doesn’t it? Although not the way he intended, I’m sure.
Why foreclose now, wait for a better government deal!
I _loved_ that choie of words as well!
Freudian slip, perhaps…
Another “billionaire” Hedgie on the loose:
http://abcnews.go.com/Blotter/WallStreet/story?id=6903014&page=1
Let’s… start RUNNING!
Why does Chris Dodd’s name keep showing up in the worst places. Does he have any shame at all? To think he is a powerful committee member, telling us how he’s trying to “fix” this makes me want to puke.
Wow, what a surprise, the list of money recipients… NOT!
“Stanford’s business is headquartered on the Caribbean island of Antigua. In the last decade, Stanford and his companies have spent more than $7 million on lobbyists and campaign contributions in efforts to loosen regulation of offshore banks”.
“Among the top recipients: Senator Bill Nelson (D-Fla.), Congressman Pete Sessions (R-Texas), Sen. John McCain (R-Ariz.), Senator Chris Dodd (D-Conn.) and Senator John Cornyn (R-Texas), one of the members who took a trip to Antigua where he was entertained by Stanford”.
Thanks for the data on Bill Nelson, my former Senator. I say “former”, because he sure doesn’t work for the people. But he makes a nice Southern-drawly type show of pretending he does. When he was insurance commissioner for the state of Fla, he allowed companies like State Farm to form a separate corporation for Florida’s homeowner’s insurance. A real piece of deceitful crap who has dined out on his old-time American astronuat image.
Bill is the son of a wealthy real estate developer. And a traditional Southern Dixiecrat/Republican.
Nice to see bi-partisanship in action.
Ahhh don’t you just love BI-PAR-TI-SAN-SHIP?
Dubai is crrrrrrrrAAAAAAASHHHHHIIINNNNNGGGG hard, just as predicted.
Here’s a six-minute video, with an accompanying written piece, on the bursting of the Dubai bubble. This might be the most stupendous short-term misallocation of resources in the history of the world, primarily because was and is no reason whatsoever for Dubai to exist. My first conclusions: real estate people all around the world look the same. So do McMansions. Those “villas” on the artificial islands look a lot like Florida.
http://smashingtelly.com/2009/02/15/bye-bye-dubai/
Snake - I’ve been in some of them and they are a lot like Florida, though generally they have a lot more square feet. Feels like acres of marble flooring.
It is hot, hot, hot in the summer in Dubai. Now that the fair-weather expats are fleeing, who is to buy these places. There a few events each year that will draw tourists. The Burg is fun to look at. Sharja souks are fun to shop in. But then what? The place is an ideal vacation spot for Arabs who want a more relaxed environment than they might find at home in, say, Saudi Arabia, but there likely aren’t enough interested buyers among them to make a small dent in the problem.
‘This architecture, a three dimensional solidified version of a synthesized musical jingle, consists of ever more preposterous gimmickry - ….’
Let’em eat sand!
It will be interesting to see how fast these countries revert to looking like the Sudan when oil runs out. My guess is that the CEO who moved to Dubai and I believe became a citizen will regret that move at some point.
Don’t worry, Haliburton moved their headquarters there. I am sure the will regret it when the hordes of are at their gates.
LOL, if I were king, I’d slam the doors shut on Halliburton AND its executives. I’d say “You wanted to go there, now you can stay there. Good riddance and don’t let the door hit ya where the good Lord split ya.”
Don’t they want to welcome the DICK back?
Saudi Arabia has a population flirting with the 40 million mark in a country that traditionally could only support 5 million. They will revert to Ethiopia.
Dubai = Biggest national bubble ever.
Dubai will absolutely (when the oil runs out) fall 100%, there’s simply nothing to keep that area alive other then the money of the oil rich neighbors. It’s a god-foresaken part of the world, it’s not attractive, it’s too far away. Basically, except for oil rich neighbors, it has absolutely nothing going for it. Those condos on the artificial islands? Worth 0, nothing, nada.
“Worth 0, nothing, nada.”
Worth _less_ than nothing, actually. I wouldn’t take one for free. Zero asset valuation, but significant liability valuation.
I would take one for free. Have a little reunion with my boys, throw back Natty Ice by the case, dismantle with shoulder, fist, forehead, whatever gits ‘er dun.
“I would take one for free. [...] dismantle with shoulder, fist, forehead, whatever gits ‘er dun.”
Sounds like fun, provided you don’t hang around the country long enough to end up in debtor’s prison for the back-taxes. Remember, that liability stays with the property if not resolved at closing.
With the number of people fleeing Dubai, their government may well get more aggressive in looking people over before letting them leave the country.
I give Dubai the “close but no cigar” award. They seemed to recognize the need to build an economy based on something other than just oil. The govt there claimed to be building a global financial center. I give them credit for at least recognizing the oil will end at some point.
Implementation was horrible with money spent on such well thought out ideas like the ski slope in the desert and building houses on top of piles of sand in the ocean. Truly I don’t think they could have done much worse.
Oh well, better luck next time.
I wonder how all these problems are affecting Emirates Airline? They have been expanding rapidly due to their cheap-money, cheap labor, cheap fuel (vs. their competition) business model.
If the government money dries up, how screwed are they? And if they start having problems, Airbus is screwed, because Emirates holds 25% of the orders for the A380. (200 orders, of which 45-50 are from Emirates…….break-even point of the program is reportedly 400 plus)
That reminds me - Western food prices in the Emirates are exceptionally reasonable, which means there must be a subsidy somewhere. My guess is that the state subsidizes transportation. They’ll have to keep it up or face rebellion among the expats who are quite happy with the present price of fresh brie.
But I saw a show on CNBC just a few months ago that said Dubai was poised for unprecedented growth over the next 20 years.
They had on experts and everything.
How could this have happened?
Shocking I tells ya.
Abu Dhabi: “Dubai? Bah!”
Sounds like the natives are getting restless, what happens when the jobless numbers double or tipple?
BEIJING (Reuters) - China must guard against “hostile forces” within and outside the country working to stir up trouble among its masses of newly unemployed workers, a senior trade union official said in comments published on Wednesday.
Beijing’s Communist Party leadership has issued repeated warnings that legions of idle rural workers gathered in the country’s struggling export hubs could pose a threat to the social stability.
Clashes between police and unpaid workers locked out of failed factories have flared up across China in recent months, but the government bans independent trade unions, depriving workers of a key channel for resolving disputes.
Sun Chunlan, vice-chairman of the state-backed All-China Federation of Trade Unions, said police taskforces had been “rushed” to all regions to “understand the situation with regional social stability,” the Beijing News paraphrased him as saying during a teleconference with officials.
Authorities needed to guard against “hostile forces within and outside China using the difficulties of some enterprises to infiltrate and bring trouble to rural migrant workers,” Sun said. He did not elaborate.
After enacting a landmark labour law last year giving greater protection to the country’s 130 million migrant workers, labour rights groups have accused officials of turning a blind eye to violations amid economic hardship to help factory owners survive the financial crisis.
Sun said China’s official trade unions would extend aid to more than 10 million migrant workers, in the form of job training or “living assistance.
LMAO! Sounds like China is ripe for a Communist takeover!
Lol.
HA! I now have a coffee colored monitor…
LOL…
But on a serious note, social unrest and the rise of fascism is one of my biggest fears related to this downturn.
My biggest fear, too.
China is the one place I think the “doomsday” collapse and unrest can actually occur in a significant way. They have had a taste of the capitalistic system and prosperity and I think it will be hard to keep that many people down given the size and scope of the population. Not saying it will happen, just that I think its the best chance/place for it to occur. They do have the cash and the military to try to ride it out, but have a hard time seeing the export economy returning anytime soon. It is a huge ship to try to turn around….
Unfortunately I think their taste of capitalism is going to do nothing more than send them screaming back for deeper communism. China basically got the table scraps of capitalism - all of the pain (low-wage labor) with very little benefit. Most of the benefit - the profits due to the low labor costs - remained in the U.S.
There were still a lot of rich people created over there in the past 15 years. Some of them might just be a little ambitious and not willing to give it all up to a communist lackay.
They’ve got a very small upper class and a small middle class that benefited from capitalism, and a very large lower class that didn’t benefit much. I can’t think of a better candidate for revolution.
“Some of them might just be a little ambitious and not willing to give it all up to a communist lackay.”
They many not have much say in the matter. Anyone see Dr. Zhivago recently on PBS? I saw it years ago, back in the day. Watching it in a new era, it had a little more meaning for me.
“It’s noticed you know. Your attitude is noticed.”
“Your attitude is noticed, you know. Oh yes, it’s been noticed.”
“and a very large lower class that didn’t benefit much”
This is not my understanding. My impression was that standard of living in the rural areas actually went up quite a bit during the boom, at least for those who had a family member who was working in the city and sending home cash.
Some families who previously had subsistence-level existences suddenly had bigger, better-constructed homes and color TVs.
How large a fraction, I don’t have good data. But certainly some at the lower-end benefited significantly.
The fact that credible information about what’s going on in that country has to be pryed out of it with the Jaws-of-Life should be some indication of how oppressed those people must be.
Do “work units” near the cities own a color TV? maybe.
Does a significant portion of the “900,000 villages, which have an average population of from 1,000 to 2,000 people”.. have running water? Doubtful.
wiki has a page on “Rural society in China”
Those in lower classes who didn’t necessarily benefit financially were none-the-less uplifted by the hope for better days. I know this from discussions with my many Chinese friends. IMO, the loss of hope can be as devastating as the loss of assets, job, etc. Revolution is based on a combination of desperation and realization that things are never going to get better.
Al wrote — “They’ve got a very small upper class and a small middle class that benefited from capitalism, and a very large lower class that didn’t benefit much. I can’t think of a better candidate for revolution.”
That sounds a lot like a country that I know (except for the lower class that benefitted with useless baubles like jet skis and spinner rims).
And that’s my problem with this whole thing. Everyone thinks that yes, there is a recession, but it won’t affect them. You don’t even want to know how many times I’ve heard people exclaim that they are in a recession proof business. Heads in the sand!
Now, I’m not going all Mad Max on you, but I predict that there will be worldwide rioting and that very few of us will escape all of the pain that is coming (even those with gold, guns, ETFs, canned food, etc.). I have been “waiting” for this since 2005 and now that it’s happening, the unwinding is happening with frightening speed.
MrBubble
Didn’t Orwell teach us that a revolution is simply the exchanging of places of the middle and upper classes?
The message I got from Orwell was that although we imperfect beings know we can never create perfection, there are no limits to the pain we are willing to cause in the attempt.
“utopia”.. from the Greek.
oo = not or no
topos = place
..not a place.. no place.
“China is the one place I think the “doomsday” collapse and unrest can actually occur in a significant way. They have had a taste of the capitalistic system and prosperity and I think it will be hard to keep that many people down given the size and scope of the population. ”
That is the plan isn’t it?
You’re not cleared for that, Citizen.
..Sun said China’s official trade unions would extend aid to more than 10 million migrant workers, in the form of job training or “living assistance”..
living assistance??
There a bunch of freakin Socialists! .. commies even..
but seriously.. China is fooked. Their latest revolution has been bubbling hot for a long time. Big changes are coming.
Largest economy in the world 20 years from now? How about 20th largest economy in the world 2 years from now..
The Smartest In The Room used to say China as THE PLACE to invest one’s money.
LAMO.
as THE PLACE = was THE PLACE
Jim Rogers?
He’s one. Jim’s crystal ball seems to have gotten a bit fogged up lately.
Jim “I’m tellin’ everybody to buy wheat!” Rogers
I knew that was going to happen. Other posters may recall how I refuted the Rogers Doctrine on this blog. Oh, and I used to get flamed for it big time, on account of Rogers was supposed to be some sort of all-knowing god.
Half the time I think he was flogging his own crap.
Lucky for China that their production has become decoupled from what happens in the U.S. and Europe, else they would be in big trouble.
How many here stocked up on rice last summer? Now I read where prices are crashing due to too much supply.
I explicitly said it was absurd. In this fat-fatter-fattest society of ours, this is not terribly likely to be a problem in this depression.
Besides, McD’s are the new soup kitchens.
Got to admit I bought into that crap for a while - bought some JJG (grains ETF) at 70 (yes, right near the peak), later sold at 54 when I realized it was all hype. It’s now at 36.
Lesson learned.
packman, my post on Rogers got eaten, but I had this guy’s number from the get-go. He was hawking his own crap and that people were willing to position him as an “expert” was a real gift. There’s another jerk and his “I’m taking my marbles and moving to Asia”. I hope he has to pay baksheesh for the rest of his life in Singapore. But he’ll come crawling back here like the rest of the cockroaches who get burned abroad.
I’ll admit to not buying much rice during the summer. Cooking it heats the house up too much.
Besides, McD’s are the new soup kitchens.
Not just McD’s… BK, Wendy’s, and Taco Bell all have 1$ menus, too. Have to give the proles some variety.
“Besides, McD’s are the new soup kitchens.”
Great way of putting it; I had not thought to use that expression.
But I had thought they would do well in the down-turn; they are the “cheapest calorie provider”, so it only stands to reason. When times gets tight, people will eat whatever is cheapest.
This is the problem.
People keep looking for literal equivalences to GD1 rather than functional equivalences. Which masks the highly deflationary environment in - calls about fiat money notwithstanding.
You bring up a good point (at least I think this is what you were alluding to).
In reality the whole price deflation thing is fairly moot - it doesn’t matter if the price of a given item goes up or down if there’s a significant shift in buying patterns. E.g. if there was a big shift of people going from buying Land Cruisers to RAV4’s, and the price of Land Cruisers and RAV4’s went up by 5% - is that 5% inflation? Technically yes, but in reality it doesn’t matter - people are spending less.
Same principle applies now to people eating in vs. going to restaurants, people driving vs. flying, even just people taking less vacations, etc. Functionally it doesn’t matter if prices of any given things go up or down - what matters is how much people spend as a whole. This is what drives revenue health vs. illness.
Technically yes.
Actually, technically no.
This is the whole point with trying to measure the effect and not the cause. You can’t do it EVER.
You can’t tease out the effects of extra credit from changes in demand and supply.
Understand the cause, and you will realized what an absurdly deflationary environment we’re in. That it’s even being debated is absurd to me. OK, cocktail hour.
Slim - have you thought about buying a $20-$30 rice cooker and cooking it on a table near the back door? The gizmos work great. My wife loves a Wolfgang Puck one that she got for I believe $30. They all work on the same easy principle and all you care about is getting one a nonstick pot.
If china is sitting on soo much of USA debt why dont they just start buying things from us…I dont mean like Ipods I mean like things to improve the living conditions of its people
iPods are designed in California and MADE in China.
i’ll take the cynical approach.. and say that when the standard of living of the peons in a communist country improves, they tend to become aware of what they’ve been missing, and how the rest of the world lives, and become vocal and/or violent in expressing their dissatisfaction.
So, it’s better to keep them wanting, ignorant and firmly under your boot.
To the Chicoms, there is nothing more important than maintaining political control of the country… and despite their best efforts, they see it slipping away. The experiment with semi-capitalism failed.
I feel sorry for the people over there.. Things may get rough.
What do we have, or make, that anyone in China needs?
Our labor?
Scrap metal and rags.
We need to send in an advance team of Madison Avenue “advisors” to help them conflate “want” into “need”–and then, finally, into “right”.
Have it yooooour way . . . have it your waaaaay . . . .
Gad, LMAO!
You have to teach them about the “Drive Through” first
Farm equipment. Aircraft.
But……much like Japan did, they are leveraging access to their market, by requiring technology transfers/subassembly work.
Once again……..”Capitalists (Globalists) will sell you the rope you will hang them with.”
Two words:
Reverse engineering
They’ve been doing it for years on turbines. Aircraft might prove tricky but farm equipment should be a breeze.
What will save us with the airplane business will be the fact that a huge amount of “Tribal Knowledge” is NOT written down anywhere. And a lot of the peons in the aerospace business have QUIT writing stuff down, knowing that their future employment depends on this stuff Not being exportable with the click of a mouse.
Example: There is a popular model of bizjet that has a flap system that basically CANNOT BE RIGGED, if you do it strictly by the book. But I can rig a set in under 8 hours, because one of the old guys showed me the way to do it, and I have found a few improvements of my own. None of this is on paper, but will be handed down to the next generation when an appropriate time comes.
“peons in the aerospace business have QUIT writing stuff down”
correct
endangered Florida turtles
They are buying up commodity producers in an attempt to control the raw materials of industrialism. Not a bad plan.
Dispatch Billy Mays to China at once!
come to papa!
Housing starts data out. Consensus range was 480M - 570M. Actual number (drum roll………)
466M
Dang.
I was disappointed by the Frontline documentary last night. I am usually a big fan of that show, but thought it was far too short and lacked the depth and insight their reporting usually has. There were a few good moments, but compared to the recent CNBC piece, I thought it fell short. I would have thought Frontline would have blown away CNBC on this topic. Oh well, just my 2 cents.
My post about it was eaten, but I fell asleep in the middle of the program. I didn’t learn anything new that I hadn’t already known from this blog. zzzzzzzzzzz
I didn’t learn much either. But it really painted a picture of Bernanke & Paulson as being reactive & scared. I think it is fascinating to see the 2 most powerful financial guys on the planet telling congressional leaders on a Friday that the world economy will collapse on the next Monday w/o $700M.
They didn’t know how bad it was. They had no plan after many months of incredibly obvious problems. And they almost led the world to economic collapse. How much do these guys get paid?
They get paid more than we do. And therein lies the rub.
Well it did what it did fairly well, but it was NOT a comprehensive guide to what is wrong with the economy and how we got here. Instead it was a detailed look at two of the the steps in the relentless bump bump bump of the economy as it dragged down the stairs. From the B.S. collapse and the lobbying for the TARP. IMHO they could have done a clearer job of explaining “systemic risk” and “moral hazard,” since those seemed to be central to their explanation.
I think Frontline’s audience understands those two terms. I watched it and I think they tried to cover too much so they couldn’t cover any of it in depth. They could do a whole hour just on Bear and another hour on Lehman.
Inside The MeltDown-
They should have started with the repeal of the Glass-Steagall Act in 1999, and gone forward. It was good, but not as in depth as it should have been. I just finished a Structured Finance class, so I wanted real information, with the events.
Can someone fill me in on “The House Of Cards”. The previews looked like it was mostly MBS victim stuff. Was it worth the two hours?
Oh, and Greenspan says “self regulation” works in a recent speech:
http://www.reuters.com/article/ousiv/idUSTRE51H0OX20090218?pageNumber=1&virtualBrandChannel=10452
The producer of the show was on Charlie Rose a couple of nights ago.
During the interview, he made it clear that he was more impressed with the “drama” of the situation, rather than the nuts and bolts of how we got here. Hearing this, I was prepared to be disappointed.
Basically, it was the typical “based on a true story” Hollywood history show.
I was disappointed by the Frontline documentary last night. I am usually a big fan of that show, but thought it was far too short and lacked the depth and insight their reporting usually has.
Well, that’s good to know. I was really disappointed that I forgot it was on, and it hasn’t shown up OnDemand yet. Maybe there’s no rush. In general, though, Frontline produces well-researched, well-edited, top-notch documentaries.
Agreed, wish I had missed it. Frontline is usually a great program, but usually I know little of what they present so it is almost all news to me. This was a cursory review of something I follow closely, so maybe my expectations were too high. My wife who does not follow this (but is quickly trying to get up to speed now) liked the CNBC show much better than the last night’s Frontline.
“Inside The Meltdown”
Frontline has now posted it online. That’s how I watched it at 4:30AM this morning.
They didn’t mention Alan Greenspan once.
FrontLine is top drawer, cannot be better, journalism. I saw last night’s piece and thought, Of ALL TOPICS for them to have a bad production - Geesh.
Then I thought, maybe I just happen to know lots about this topic and in reality, and all their stuff skates along the top like the production last night.
It was interesting how they tried to imply that the failing of Lehman Brothers was the cause of the meltdown. Somehow, I got the feeling that the financial community was trying to hold the taxpayers/govt hostage, threatening the “end of the world” at every turn.
What would have happened if we let all the weak firms fail, and covered insured deposits instead? Can’t pretend we didn’t have enough money for the FDIC, as we’ve somehow managed to come up with hundreds of billions (trillions?) to hand over to the banks.
No One’s Home:
Neighborhood Abandoned
Created On: Friday, 13 Feb 2009, 11:28 PM EST
Brad Edwards
DETROIT - All this week, we’ve brought you stories from people who say they’ve been ignored by police. Even Detroit Mayor Ken Cockrel, Jr. admitted there’s a huge problem.
This is the story of an entire neighborhood disappearing because of that very issue. In this video report, FOX 2’s Brad Edwards takes you to a place where the boarded up homes now outnumber the people who live there.
There is a site called detroitblog that regularly features pictures of former neighborhoods that are returning to nature because the abandoned houses eventually fall apart/get burned and only the streets remain which eventually become overgrown. It’s downright apocalyptic to see some of these pictures with captions that mention it was taken in a city that once had over a million people.
All of this coming soon to an urban/suburban wasteland near us all…
Seems like a ripe place for business development if you can find enough workers. Low cost of living, low wages, etc.
Plenty of $1 houses there.
Chicago condo sales last quarter?
Negative 250 units.
http://www.suntimes.com/business/1436134,CST-FIN-condo18.article
sorry, meant to say downtown Chicago condo sales. But that’s a pretty exciting number
“The sales figures went negative in late 2008, she said, because buyers began canceling contracts and some developers were caught fudging sales data from earlier in the year.”
“Overall, 592 condos sold in central Chicago during 2008, the survey found. The result was abysmal for a market that has generated annual sales of 4,000 to 8,000 units.”
“…and some developers were caught fudging sales data…”
Say it ain’t so Joe! Such deception is beneath the character of Chicago’s real estate developers.
Negative 250 units.
Crazy, huh?
And yet the talking head “expert” quoted in the article said that “for all the gloom in the industry, condo prices downtown are holding close to steady.”
Not for long, lady, not for long, especially with 5,000 new units still in the pipeline for 2009.
Office building prices in Manhattan (yeah it’s really different here… it’s WORSE than other cities that is) falls 30%-50% in 2 years:
NYTimes
By TERRY PRISTIN
Published: February 17, 2009
Just as office towers appreciated in value faster in Manhattan than elsewhere during the boom years, now their decline is outpacing the rest of the nation, brokers and analysts say.
Building values are dropping as unemployment worsens, offices empty, rents decline, credit remains tight and buyers expect higher rewards for taking on more risk.
“The outlook for New York is much worse than what we see outside New York,” said Sam Chandan, the president of Real Estate Economics, a research company in New York. Some people estimate that values in some cases have fallen as much as 50 percent.”
what are those blackstone dinglebeeries up to these days. during the boom they were all the rage…these days though…hardly a peep.
California budget negotiations hit a new snag
Reporting from Sacramento — As California’s government continued its grinding downshift toward insolvency, efforts to close the state’s nearly $42-billion budget gap hit a new snag late Tuesday as Republicans in the state Senate ousted their leader.
Around 11 p.m., a group of GOP senators, unhappy with the higher taxes that Senate leader Dave Cogdill of Modesto agreed to as part of a deal with the governor and Democrats, voted to replace him in a private caucus meeting in Cogdill’s office..
another dirty trick by them vile, evil republicans..
oops.. forgot the link..
www
dot
latimes.com/news/local/la-me-budget18-2009feb18,0,2637442.story
“Soon after the leadership change, lawmakers returned to the Senate chamber, where they voted down the $14.4 billion in proposed tax hikes that are part of the budget package.”
Those “vile, evil republicans” are doing the right thing this time. They’ll get no thanks for saving the dems from themselves over the massive tax increases in that bill. The state spends $13B per year on illegals and wants to hit taxpayers for another $14B in taxes per year under this bill. Anyone who pays taxes is p!ssed and that includes a lot of dems.
Speaking of spending taxes on illegals, why doesn’t Arnie just commute the sentences of all illegals in California prisons (except the few who are in for murder or other major crimes), conditional on them leaving the country, and give them a quick bus trip to Tijuana?
No other single move would be so easy to implement and save the taxpayers so much money.
While it would do something to help ease the overcrowding in the prisons, I wonder how may of even the less violent offenders would stay gone from California if deposited in Mexico or their country of origin? It’s probably still worth the risk even if some do return and of those that do return, some commit new crimes. If it doesn’t work, you just don’t do it again in the future.
I’d like Budgets for $1,200, Alex.
..and the answer is: “The destiny of mega-billions in taxpayer dollars saved by sending all the illegals home.”
Suzy?
“What is.. to be dumped into the California general fund and foolishly wasted elsewhere as soon as humanly possible?”
You certainly know your Californication, Suzy.. absolutely correct..
They’ll probaly lose in the end.. not that I need care any longer. I’m almost positive I’ve found my spot, out of Calif.. gonna go there for a few days and scope out the territory.
If they define a win as no increase in taxes, then they will ultimately lose. However, a better bill would begin to cut and cut deeply into areas that would have less impact and would have much less increase in taxes. If they hold firm, the eventual bill that passes will be much better than the one that was just defeated.
Dems need to bombard dem legislators to push for a better budget (deeper cuts, less or no increase in taxes). So far those dem legislators seem unwilling to listen. At least with my U.S. reps, I usually get a response of some sort to my emails. From my state reps, nada! Are they overwhelmed or do they simply not care about the views of the constituents that voted for them?
good luck
thanks.. Can’t reveal where just yet because I don’t want any feedback. It took forever to find it, and i’m going to give it every chance to prove itself in the flesh.
“I don’t want any feedback. It took forever to find it, and i’m going to give it every chance to prove itself in the flesh.”
That funny, I heard that phrase from my republican congress-putz last fall in his explanation for a yes vote on stimulus II.
Sorry, Idaho is full. Look elsewhere.
Feb. 18 (Bloomberg) — President Barack Obama released a $75 billion housing program that will cut mortgage payments for millions of homeowners as record foreclosures force down home prices and worsen the deepening recession.
The program, which Obama will unveil later today in Phoenix, will have the government share in the cost of reducing interest rates on borrowers’ monthly payments, according to a fact sheet released by the White House.
“It will give millions of families resigned to financial ruin a chance to rebuild,” Obama said in remarks prepared for delivery later today. “By bringing down the foreclosure rate, it will help to shore up housing prices for everyone.”
wow.. frugal, careful people who weren’t involved in the mess not only get to pay for the Messiah’s largess, their money goes towards maintaining unaffordable, bubblicious property prices at the same time. It’s a two-fer!
I love it.
I mentioned a few weeks ago that my former friend was getting a loan mod… well, the docs finally went through: ARM to fixed @ 8%
I LOVE IT!
Oh, snap! “The 80’s are calling, they want their loan back.”
Can’t wait to see the anal-probing by lenders once the Candy-Crappin’s Unicorn’s housing plan goes through.
“It will give millions of families resigned to financial ruin a chance to rebuild,” Obama said in remarks prepared for delivery later today. “By bringing down the foreclosure rate, it will help to shore up housing prices for everyone.”
I give you the world’s greatest Vaseline salesman.
After being modified, stay current for 1 year and you get $1,000.00 a year for staying current, for 5 years. $5,000.00 for paying you bills on time?
Stop it! You’re killing my computer equipment today! HAHAHAHA!
Here’s another one for ya, santacruz:
Masters of the Screwniverse
“By bringing down the foreclosure rate, it will help to shore up housing prices for everyone.”
I didn’t read it anywhere but did Barry mention the millions of people who could not afford to buy a house at the outlandishly inflated prices that he would like to shore up?
Ach, don’t get me started.
As some of you may have figured out, I’m actually a fan of The Prez, but this has to be the most bass-akward piece of funding. Evar.
I spent way too much time over on HuffPost yesterday. Yes, I should know better.
Even Arianna herself was getting aboard the ‘Victim Express’, with dire stories of people losing thier homes due to medical expenses, etc,etc.
Despite trying to point out that, in the long run, house prices coming down in line with income was actually a good thing, it appears that many people see this Bill as a way of getting the govt to reduce the principal on their property, and that declining housing prices are ‘extremely dangerous’.
Anyway, after being called a lot of unpleasant things, I’ve come back here today to the Land of Sanity and Reason (with some funny snarkiness on the side - oh how I miss that).
Anybody who thinks that most of the US populace ‘gets it’ is sadly mistaken.
Anyway, nice to be back, and thank you HBBers for being, well, sane, informed and reasonable. I guess - on the bright side - its only $75 billion.
Sigh.
Some of this plan might have a point if the foreclosures were just due to losing a job. However, trying to prop up overpriced houses is insane. Presumably this plan won’t have much more impact than all of the other previous plans for housing.
Reworking horribly onerous loans into something slightly less onerous isn’t ultimately helpful. Instead, why not encourage these “owners” to follow the lead of Ohio and squat in the houses until the lenders can prove ownership and foreclose? At least it might have some moral hazard impact on the lenders.
The US populace will eventually ‘get it’ whether they like it or not. When that’ll happen is well more than a year out, maybe more than 2 to 3 years.
Yeah, I have to agree with you SDGreg.
Its just sort of disheartening to see the amount of panic and short-term thinking that passes for conventional wisdom.
They’re all screaming about NOW! and not taking a long view.
Anyway, just woke up The Husband with news of the Bill.
He stays away from Housing Stuff like a cat avoids a swimming pool - but even he did a ‘whaaaaa? won’t that just make prices go down ever faster?’
My work here is done.
A question:
A number of the “foreclosure victims” are fighting their foreclosure by demanind the paperwork. I’d love to see a counter-attack that states if you fight a foreclosure in this manner, but cannot produce your end of the original paperwork, then your are immediately tossed out because you cannot proove you indeed own the house…
What if you produce the deed but not the loan docs?
IF they can get house prices to stablize then they can set some prices on those toxic paper assets the banks are sitting on. Once that is done then the banks will again start loaning to people that can’t afford a house at outlandishly inflated prices. See? Problem solved.
I think the end goal is to create 2 parallel universes regarding pricing.
Basically, a house that should be worth $150,000 will sell for no less than $300,000. Then, the sucker will buy into it and the government will pick up part of the tab, leaving them to pay for $200,000 of it.
This has a few “nice” effects:
1) It lets the banks pretend that the house is still worth $300,000 and they are they are still solvent.
2) It helps jack up real estate prices since these numbers can keep going up each year
3) It prevents people from being able to afford to buy a house without government help, thus turning everyone into peons who rent from the state… as if the state will keep its promises for 30 years (the life of the mortgage.)
4) It destroys the value of savings, the dollar, etc.
Brilliant!
1)+2)+3)+4) = govt sanctioned scam operation = Enron writ large
I think even Obama realizes that this plan will not keep housing prices up. This was obviously floated out 6 hours before the speech to see if anyone in the MSM catchs on.
And once he confirms the MSM is still brain dead and asleep…?
Anyone watch the Frontline piece last night?
http://www.pbs.org/wgbh/pages/frontline/meltdown/view/
I did - though I wasn’t as impressed with it as I was with “House of Cards’ last week. I guess the two of them together are pretty good.
I liked the fact that it concentrated more on the financial side, though I found myself getting all absorbed, only to go ‘that’s it?!?!”‘ as it came to a hasty conclusion.
Though, I would have liked to see more blood and entrails on the floor over Paulson and Bernanke. Even Krugman had something nice to say about HeliBen, and the apparent ease with which Paulson got over his belief in Moral Hazard wasn’t nearly accusatory and damning enough for me.
Still, at least the MSM is talking about it.
“Even Krugman had something nice to say about HeliBen,…”
Is it surprising, given that they are colleagues on the Princeton Econ faculty?
I guess not - I get kinda confused with ‘Family Feuds’ part of it all.
The thing that irritated me about it was the attitude that all the problems are due to people panicking/”lack of confidence”, as if there was no reason to panic. Nothing about people that stopped listening to the BS, and actually started doing the math and due diligence.
Yes, they tried to make it sound like the “crisis” just happened in 2007/2008. The crisis happened long before that, when asset prices were forced up by debt that could never be paid off. This has been coming for a long, long time, and Lehman Bros did not suddenly cause the crisis to occur.
I tried to but I was a little under the weather and I fell asleep. I’m going to try to watch it at the website later today. That and some old episodes of Nova which I just found out are also available online.
Frontline always has great productions. This one wasn’t one of their bests and as somebody else said, hasty ending, but still good.
One thing I did pick up: There’s no sense of brotherhood/sisterhood on WallStreet. There are no heros who feel any responsibility and it is everybody for themselves- i.e. Fed/Treas asked Wallstreet to help bailout Lehman and everybody said no unless they got gov backing. What a bunch of babies. Paulson let Lehman fail to show WS that gov will not bailout everything. Lehman was more connected to everything else than Paulson thought, and hence Lehman failure was credited with freezing the credit markets and potentially sending us into GD. Paulson had to back down later with AIG - which was indeed too big to fail.
I learned a bit more about Tim Geithner and can see why Obama appointed him as Treas Sec going in. Tim came off as tougher against WS big players than many give him credit for. He originally wanted Bear to fail. Paulson also made sure JP Morgan offered 2 dollars for BS stock - to ensure it was painful for BS. Frontline hinted it would have been a higher offering had Paulson not stepped in.
Don’t forget that the BS failure, though, was “payback” for BS opting out of “saving wall street” when LTCM failed.
Bear Stearns made enemies in the late 1990’s, hence it was the first to fall.
My poor Saturn! It’s going to be an orphan!
On the bright side, maybe I can get an H1, cheap!
I just read that. The Jeep product line is a perfect example of turning a reliable piece or steel into an amalgam of unreliable, plastic chit.
“maybe I can get an H1, cheap!”
If you still plan on retiring in Orlando, get an up-armored version.
That’s the thing about the Hummer. I think the H2 and the H3 ruined the product image. Those two models were just gussied-up consumer SUVs, and it changed what a Hummer was.
If they had just stuck with the H1 as a modified military vehicle, it may have been profitable. But they changed the perception of the vehicle to something only a low-class slob would would want to buy with the cheap knock-off versions.
Isn’t the cost of an original $100k?
Automakers aren’t happy with building 1-2 vehicles, and being the best in their product niche. They want to “leverage” the brand into other parts of the market, expanding their market share, and the CEOs bonus.
Jeep is one example. Porsche is another. The Japanese manufacturers have done a better job with Lexus and Acura.
GM decided to create a new division out of the whole cloth (Saturn) and sell cars with a Japan-like sales and service approach, rather than apply that plan to one of the existing divisions. One could have suggested that it might be better to try it with (say) Pontiac, used the money saved (by NOT starting a new division from scratch) to develop unique “Pontiac-only” products, and tried the new sales and service plan to see how well it worked.
Yes, indeed! Another case of a big corporation with division heads protecting their turf–at the cost of the entire company.
Hey but you can get a Jeep Grand Cherokee 4×2 for under 25 grand. What a bargain.
Wait. Jeep 4×2? Bwahahahaha.
Or you can get a used M35 6×6 for around 10k. http://www.easternsurplus.net/deuce.html So you can look down in those guys in their tiny, girly-man H1s.
OMG, that’s what I drove when I was in the Army.
I loved driving my deuce-n-half ton truck; I remember the number B-52. It was a turbo diesel. That baby booked on the Washington highways and the back roads of Fort Lewis and Yakima Military base.
Wow! I had no idea. Of course, I’m guessing that it might be a bit difficult/expensive to find someone to work on it. And how expensive are parts & tires??
And of course in most states they just barely have a low enough GVWR to drive with a normal driver’s license.
I dunno about parts, but my Air Force coworker learned how to change tires and do other basic maintenance while he was in the service … Remember, those beasts have to perform in the field … I couldn’t change a truck tire if my life depended upon it. (I can handle car tires, now … Mama did raise me right, okay?)
Why would anyone need a 4×4 or AWD in places like SoCal?
Status. Cutting off and intimidating other drivers enhances “confidence”. Females can sniff out “confidence” from a mile away.
So what if it’s cruel? It’s Science™.
Thank the Krauts at DaimlerBenz. They were the main drivers of the cheaper/plastic/de-contenting the product/expanding the product line Movement at Chrysler.
They weren’t happy with Jeep selling only Renegades and Cherokees/Grand Cherokees (which worked for 30 years) They decided to expand the product line (Patriot, Compass, Commander, Liberty), and dilute the engineering and the product across the board.
When the Compass came out, i knew Jeep was fooked.
Produce the Note!
http://news.yahoo.com/s/ap/20090217/ap_on_re_us/produce_the_note
Why can’t individual states condemn these properties and sell them? That would alleviate the state budget shortfalls. The purchaser certainly can’t produce the deed, he can’t argue adverse possession, and apparently the lenders can’t produce the mortgages. Doesn’t all property escheat to the states absent proof?
“A University of Iowa study last year suggested that companies servicing mortgages are often negligent when it comes to producing the documentation to support foreclosure. In the study of more than 1,700 bankruptcy cases stemming from home foreclosures, the original note was missing more than 40 percent of the time, and other pieces of required documentation also were routinely left out.”
“April Charney, head of foreclosure defense for Jacksonville Area Legal Aid in Florida, said the strategy has been so successful for her that she now travels around the country to train other lawyers in how to use it. She said she has gotten cases delayed for years by demanding that lenders produce paperwork they cannot find.”
Delayed by not months, but years!
Another sickening example of FBs wanting something for nothing.
IMO, making a single payment on the mortgage should be proof enough to a judge that you acknowledge and owe the debt.
Don’t most courthouses have this stuff online? I know I can go look at my deeds and mortgages online any time I want.
Tom Deutsch, deputy executive director of the American Securitization Forum, a group that represents banks, law firms and investors, dismissed the strategy as merely a stalling tactic, saying homeowners are “making lawyers jump through procedural hoops to delay what’s likely to be inevitable.”
And that’s a bad thing? Jumping through prodedural hoops is what lawyers ARE BORN TO DO. Effem if they can’t take a little people power karma.
Someone paid good money for the note. What difference does it make if it got chopped up and resold?
Chances are excellent that some poor SOB who’s retirement is tied up in a 401K or has a mutual fund in his portfolio (maybe me) owns a piece of her mortage. What is the justification for screwing him? Guilt by association?
..some judges are more sympathetic than others..
The particular judge makes all the difference, imo. So, if this is your plan, alls you can do is hope you don’t get Judge Judy.. a character type that strives to do the right thing..
They tend to get fired up at such lame attempts to stall things.
Okay, guys, I need more help.
My grandparents coldly informed me last night that they have decided to buy in Hemet despite the mountains of evidence I provided showing that buying there for $200K was the worst idea ever. I admit to crying and pleading on the phone.
He also point blank refused to WAIT until his house in Minden, NV was sold before purchasing the NEW house, bragging that he could get $1200 rent for it — he’ll cash flow positive, but not by much, and not if the tenants damage it — or if he can’t get tenants.
My grandfather is a stubborn, insensitive, and apparently irrational a-hole. I am done with him.
The NEW PROBLEM is that they expect my dad to bankroll the ENTIRE purchase, all $200,000. I’m sure they’d pay him back… when the house in Minden sells. A big hardy-har-har to that.
My dad’s a roofing contractor and — due to a horrific childhood — has been working his butt off since he was 12. It would mean risking four more years of his life on a roof to make that money back for his own retirement (he’s self-employed, so limited SS). I’ve spoken to him about this, and he has a clear understanding of the myriad reasons why he shouldn’t do it, but because of his effed childhood, he will buckle so that he can be the good guy.
How do I convince my father — and mother, who is an RE True believer, and who has NEVER had to work to help support our family — NOT to loan them this money? We’re meeting tonight to discuss this as a family.
Thanks for any advice you can provide.
See an attorney who specializes in family law, and quickly. You can get a free consultation.
One other thing. You can write out an agreement with your parents and ask them to sign it. Something along the lines of provided they DON’T go along with the scam, you will support them, if they do, you won’t.
They may not sign it, but you can at least leave them with written documentation.
This is one of those no-win situations.
Your father should just point blank say no. Of course, he is unlikely to. In that case, you should tell your father point blank that you will not bail him out if things go sour (which they will in all likelihood.)
And what is the chance that there will be need for an aging roofing contractor in this part of the housing down-cycle?
He’s in a niche market and makes a lot of money.
Basically, he does all the high-end, impossibly designed work in the expensive beach communities in Orange County, e.g. Laguna, Newport, CDM, etc.
He makes a lot of money, but is a perfectionist and does a lot of the work himself. Two weeks ago he was almost killed by a poorly installed gutter endcap (think notre dame’s gargoyles) when it fell off a roof he was fixing and hit him in the temple.
Business is still good for him, but he runs a small shop. This will add at least 4 years to his roofing career to regain the $200,000 for his own retirement.
Did I mention my grandfather who is now 77 retired at age 51 with a fat Pacific Bell pension? My dad is still roofing at 57.
I;m really disgusted with my gradnparents. Can you tell?
You should tell your father that you will not bail him out under any circumstances. You will not give him a penny of your hard-earned money even if he is reduced to begging on the streets.
And then step away. You can’t fix stupid.
Buying a house at age 77 is just stupid on it’s face, even if the numbers work.
I’d look up comparable sales prices in Minden……find out what comparables are selling for. If the grandparents asking price is too high, show dad that he may NEVER get his money back, if getting it back is contingent on their “wishing” price.
Stuff like this makes me glad that my extended family isn’t exactly “close”. None of us would have the balls to ask for a $1000 loan (much less 200K) from each other.
BTW, I agree that I *SHOULD* tell my parents that I am divorcing myself from them financially if they give my g-rents this money.
I love my parents WAY TOO MUCH to not help them out if they were in trouble but, as was astutely explained by Palmetto, this decision has the potential to destroy my husband’s and my plans for our future and our family.
However, I will absolutely cut my grandparents off if they take this money from my dad. By even asking they are inexcusably selfish. They are completely disregarding the well-being of this man who has done EVERYTHING for them (including roofing their first effing house in Minden for free) so that they can have a “new house” — it was made clear to me that they are buying in Hemet because it is the only place where they can afford a new house and my grandma has to have pristine living quarters. Renting is NOT an option. Apparently, my husband and I are subhuman because we are not homeowners.
I’m going to stop ranting. Thanks for all the advice, guys. I swear, I may just drive out to Vegas to buy you all a round and drink myself stupid enough to forget this debacle and the complete and inexplicable sudden retardation of half of my closest family members.
So sorry to hear about your situation, hllnwlz. GS fixer had some good advice about showing your dad some realistic comps of your grandparent’s current house (the one they are trying to sell).
Make sure you have an accurate picture of their indebtedness on that house, too. Though they might have paid a reasonable price many years ago, make sure they didn’t cash-out/HELOC up to their eyeballs.
Why are they asking your father to bankroll their new house, BTW?
reminds me of a song by blood sweat and tears.. God bless the child.
Them that’s got shall get, them that’s not shall lose
So the Bible says, and it still is news.
Mama may have… and papa may have
God bless the child that’s got his own… that’s got his own
..refrain..
And rich relations may give you, a crust of bread and such
You can help yourself, but don’t take to much
Mama may have, and papa may have…
God bless the child that’s got his own, that’s got his own
my advice: drop it before the trouble starts.. It’s none of your business. Nobody appreciates hearing what they don’t want to hear from someone who’s not involved (advice like this, for instance).
Yes, but if the grandparents bankrupt the parents, the child will have his own eaten by the parents. I’m all for children caring for their parents, after all, parents have to go through a lot for their children and it is good to return the favor.
However, when a child sees that his parents are going to make a stupid move for which he is ultimately going to have to pay, then he has to try to do something about it.
Reading the post, I can see that hll is the sort who will do whatever they can for their parents and is staring at the prospect of having a huge, unnecessary burden added to the future.
We ran into this with my pop, who would have bankrupted his kids if he could have, just to be a prick in his old age. As it was, my sis and my mom (divorced from pop) had to straighten out a huge IRS debacle for him.
Like hll, I don’t even want to go there about events that transpired in the past. Sometimes hell is other family members.
if you (and most of us) can immediately see hllnwlz is actually worried about his inheritance, how much more obvious is it to his parents and grandparents?
Sometimes the truth is the best way. Be righteous, and handle it like this: Tell them to their faces.. “You idiots are threatening to blow off my inheritance.” They already know it but it would be fun to hear you say it.
And, you’ll catch the sh*t you deserve and they still won’t change their minds, or have any pity.
i changed my mind.. hllnwlz .. Don’t back off. Go for it.. lay it on them good.. bring charts and graphs and newspaper clippings.
Besides being an insensitive tool, you’re completely wrong.
A) I get nothing when they die. I know, because I helped them set up their will.
B) I want them to sell the house in Minden first so they can free up more cash so they don’t HAVE to buy in Hemet (although I think the new house thing is crucial to them). Then, they can live within a short drive of my family and actually see the great-grandchildren my husband and I are planning to have more than once a month. Most importantly, when they need us, we will be able to get there within ten minutes.
C) I’m a girl.
And if you were alluding to any inheritance from my parents, by the time they kick the bucket, I fully expect to be paying a probably not insignificant portion of their bills as they are both spendthrifts.
I’m done with you. Be gone, bitter loveless troll.
Family matters must be handled with great care. Strive to avoid conflicts of any sort. Do not attempt to impose your will on your elders. Offer an opinion if asked, but do not press the issue. Offer help when asked, and give it without reservation.
Your objective should be to build and maintain a comfortable, pleasant relationship with them.. not to treat them as though you are the wise parent and they the ignorant children.
You’re just getting started with your life. It’s a new life.. a new family. It deserves all of your attention. Keep counsel with your husband but with nobody else. Think of yourselves, your plans, your future. Everything else will take care of itself.
Wow, joey, I did NOT get that at all. What I saw was a child who loves their parents deeply, and has a great deal of empathy for her father who went through a hellish childhood with the grandparents. The father has managed to be successful, but has to work his fingers to the bone to get there and stay there. In one swell poop, the grandparents could wipe out all that hard work, without a second thought. In fact I think the grandparents feel they are entitled. Hll expects to have to care for her parents in their old age and accepts this, but does not want the stupid, arrogant grandparents to make that job more difficult. I did not get any whiff of inheritance issues, in fact quite the opposite. Unless we’re talking about hll having to inherit debts. And if I were in hll’s shoes, I’d be concerned about that myself.
Thank you for changing your tone — you never struck me as rude before, so I was quite bewildered by it.
Believe me, my husband and I are a team with achievable goals and concrete plans to achieve them on our own. However, as Palmetto observed, the actions of my grandparents now can put a huge crimp on our ability to do so because we may have to adjust our lives radically to care for them and/or my parents because of the fallout.
The fact that they would even ask this kind of sacrifice from my father — adding approximately four extra years of working as a roofer to his retirement date — when all they have to do is aggressively price their paid-for house and wait a couple of months to buy enrages me.
I changed my tone because i wasn’t getting through to you. If you’re “enraged”, i’ve failed again. Third time might be a charm..
If you really believe your father is incapable of making his own decisions, call social services and request that he be examined.. tell them you suspect he’s dangerously incompetent. Then have an attorney file papers with the court making you his guardian.
My mom lost most of her inheritance in the stock market Enron , BAC, GE, Lu the last 10 years or so. Now back in 1998 1999 that was over 600K I pleaded with her to sell it and move into a Mutual Fund of mostly bonds because she likes dividends. Nope wouldn’t do it capital gains tax too high and just plain ignorance my mom is a trust fund baby and grew up stupid about money.
So now its mostly gone and I may have to help pay for things…….. I told her fine but first we sell off all her stuff OH no now crying and tears.
What are you going to do with relatives ? Do your best and don’t worry about what you can’t change you will have kids of your own and then like me you just won’t have the time to waste on them if thats the game they play. period you won’t have the time.
Palmy.. how old were you when your last surviving grandfather died? I was about 20 or so. He was 86. Had 6 kids.. my dad was 2nd to the last.
OK.. So, maybe i’m projecting. Maybe I see myself.. a female self.. a 20-something who can’t decide where to plant her next tattoo, or what hair style makes her nose appear smallest, but thinks she has it all down pat when it comes to making decisions for people with 10 times her experience..
Actually, i tend to think there’s more to this than meets the eye.. something deeper than a couple pieces of real estate. Now I’m gonna bow out of this thread.. i’ve probably said too much already. I do wish only the best for everyone involved.
“Palmy.. how old were you when your last surviving grandfather died?”
I wuz but a gleam in my parents’ eyes.
1) joeyInCalif is apparently a real estate true believer. Nothing wrong with that, but the global financial crisis, the basis of which are overpriced houses, and people who took out mortgages they couldn’t afford in order to pay for them, has only started to temper the true believer’s “everything is a buying opportunity” attitude. Joey doesn’t seem to like the facts, and if he’s got skin in the game, he’s going to keep passive-aggressively cheerleading real estate. He reacted badly to the “aggressive pricing” strategy.
2) You have to make a case to your father. Ask them whether they understand the current global financial crisis, and whether they understand why the government is spending trillions on bailouts. Get some house price history in the target town. Show them how they’ve skyrocketed, and let them know it was due to the imploding credit bubble.
Finally, you may wish to give them this information - relative danger of various occupations - the first number is fatalities per 100,000.
1) 111.8: Fishers and related fishing workers
26.2: Driver/sales workers and truck drivers
2) 86.4: Logging worker
3) 66.7: Aircraft pilots and flight engineers
4) 45.5: Structure iron and steel workers
5) 38.4: Farmers and ranchers
6) 29.4: Roofers
7) 29.1: Electrical power-line installers and repairers
9) 22.8: Refuse and recyclable material collectors
10) 21.4: Police and sheriff’s patrol officers
The information is from:
http://www.bls.gov/news.release/pdf/cfoi.pdf
Making your father work in an industry that is more dangerous than policing, just so your grandparents can make a killing on a place, after the bubble has burst, just seems very selfish of your grandparents.
neuromance — I don’t believe that jiC is a real estate true believer from previous posts nor do I think that jiC is a troll, since he’s been around for some time. [jiC may be a Right Wing Wing Nut (RW^2N), but that's a different issue]
Hll — “the great-grandchildren my husband and I are planning to have more than once a month” Your fecundity is astonishing! Got sisters?
MrBubble
The part where Joey imagined himself as a ditzy, gothy woman was interesting, though. I’m picturing the stage act of Miz Jo-Jo À Go Go.
Is the NV house paid for? If so, have them put down both houses as collateral. If they die before paying your dad back, he gets both houses. That should protect him somewhat.
Now if they have a big azz mortgage on the NV house, forget it!
It is paid for, BUT the market there is crap. A bigger house (but significantly less nice) is selling for $230,000. A nicer house is selling for $390,000. They bought for $460,000.
They will be lucky to get $250,000.
There are NO JOBS in Minden to support a house like that.
It’s 2400 sq.ft., but only has 2 bedrooms. It’s got a stupid office/library, making it useless as a family home.
But, goshdarnit, they should sell the damn thing first!
“They will be lucky to get $250,000.”
It doesn’t seem to me that it matters much what they paid for it, assuming it is paid off.
The real question is whether they will wake up and smell reality in their pricing, and thus sell it—-or play the typical chase-the-market-down and not sell it even for the $250K you mention.
If they sell it for more than $200K and don’t have other obligations to pay off with the proceeds, they could in theory make your parents whole on the $200K loan.
My guess is that you will end up talking yourself blue and to no avail. Family & money is tough to mix. But I wish you the best of luck. It’s one thing for the grandparents to be stubborn and bankrupt themselves; it’s another for them to be stubborn while losing your parent’s money.
It’s called transcontinental transportation, Thanksgiving, and alcohol. Leave.
Thanks, Chili.
I needed that.
Show him Professor Shiller’s chart?
http://www.financialsense.com/editorials/bronson/2006/images/0907/chart10_lg.gif
You can’t fix stupid. Your parents are grown. If they won’t see reason then they’ll do what they want.
I would make clear that I will not be available to help with any fallout from this decision. Help is being provided right now in the form of good information and advice and will not be provided later in the form of money or anything else b/c they chose to ignore the good help (an ounce of prevention…) when it was offered.
They have cash now. With a deepening recession they can choose to drop that cash into the cash-swilling vortex that is the current economy and housing market or hold on to it for future use. Given your dad has a job relying on housing and construction it seems he would be concerned right now about cash flow…
You won’t change their mind. It’s much like changing the mind of a fox news watcher. You can show them the truth/data/facts but you can’t do the thinking for them. Some can’t think for themselves and some are too lazy. Unfortuanate but true but if they’re in the too lazy camp, you can put some simple graphs together as a visual aid to convey the magnititude of the current scenario on which a realistic forecast can be explained in simple language.
When I watch racheal maddow I need a zombie drink!
Zombie drinks are refreshing after years of unaccountable “journalism”.
Or you can show an MSNBC viewer mountains of evidence as to why socialism doesn’t work and yet he still is in favor of it.
Go figure.
When no other excuse exists for the failed policies called corporatism and welfare for the wealthy elite, in absence of brainpower, toss out the worn out hobgoblin called socialism. Even at a wage slaves economic peril.
You’re right. I should come up with a catchy slogan like
HOPE
or how about
CHANGE
Much better that talking about an economic policy that has been failed every single time it has been tried, and which is being enacted by our DEAR LEADER as I type.
Call it Fred for all I care. When the government takes over banks, pays people’s mortgages, takes over the auto industry and spends trillions upon trillions on pork spending….that’s socialism by any other name.
Socialism works very well in Sweden, Germany, Italy, France, Portugual, Spain, Japan, Taiwan, etc. We’ve never tried it here but we know corporatism is a failure. It didn’t work for Nazi Germany, Mussolini’s Italy or in the US between 1981-2008.
RIP corporatism.
Sticking fingers down my throat.
Correlation, not causation.
First, Italy, Spain, Japan, Portugal, France, and Taiwan are on the verge of national bankruptcy. I wouldn’t chalk those countries up to the “greatness” of socialism. All were part of economic bubbles at some point and are now going to suffer the consequences.
Second, Sweden and Germany have a much more homogeneous society than we do - not to mention a higher penchant for following rules. However, as that changes their system will breakdown sooner or later.
Third, how can you say they would be successful in a vacuum? Sweden is heavily export oriented (hello, USA consumerism) and will be/are being adversely affected by worldwide slowdown. The “great bank nationalization” occurred when US/UK banks/economy were just starting to gear up for the tech bubble. What happens when their welfare programs start to get affected be a dropping tax base? I know you are the big “spread the wealth/everything is the fault of republicans” person, but have a little intellectual honesty and you will see that no system that rewards the non-producing and punishes the producing is stable. It has more to do with misallocation of capital more than transient ideals.
Just lay it out there like you tried with your Grandpa. Unfortunately it sounds like you’re beating your head against the wall with all of them.
Plead your case tonight, then step away from the inevitable emotional blast zone when it all blows up in their faces.
And NEVER lend any of them a dime.
“And NEVER lend any of them a dime.”
Easy to say, Blano, but it is obvious that hll loves his parents deeply and will do anything for them, even if they screw up. He or she is just trying to avert a larger burden imposed by the grandparents.
Don’t lend, just let them know he or she will take them in later on in life.
If he doesn’t like logic….
“Geeee, grampa Smith wouldn’t be so frivolous with money.”
“I’m sure this will bring us all closer together when you and dad are living in my basement. So we’re clear, the rent is $700/month, and I get to say ‘I told you so’ as often as I want.”
“Would you mind if I stopped by the house and punched a few holes in the walls, you know, before the tenants do?”
“If you wait until the fall when the house is selling for $100K, I’ll even chip in.”
Nice, and very funny! If logic doesn’t work, try embarrassment.
It actually works.
I once remember many years ago when my parents were visiting and trying something absurd to save about $20/day.
After reasoning with them that it would mean an extra hour of work for me each day they were there, I just lost it, and told them that if they couldn’t afford it, I’d just pick up the difference.
And what a change that made!
“…..something absurb to save $20/day”
Like my relatives that insist on driving 100 miles (one way) in their 8 mpg Suburban, to pick and fill two bushel baskets with potatoes, because they can save 20 cents/pound vs. buying them at the store?
Or my dad, who insisted that putting 400lbs of sandbags in the bed of my truck would improve my gas mileage, because “your tires won’t slip on the road as much”
(I asked him if I would get 30mpg, if I put 2 tons of sandbags back there……)
A ha ha
hahaaaahhaha!
Maybe he was actually concerned about your stopping distance, which a load on the bed *might* (depending on the design of the truck) actually help with!
“My grandparents coldly informed me last night that they have decided to buy in Hemet…”
Ahhhh Hemet…where my “modified loan” lil bro’ lives…
Well, if your going to “pipe” in, start with something like this:
“Hey Grandpa, you got “equity” in that house in Minden? Yeah, great! I hear there are a ton of companies right now that would love to give you a “reverse mortgage” loan… so you can take of your “personal” aspirations of moving to “heaven-on-earth” Hemet, all by yourself, like all good “personally responsible” people are taught to do. Look at your son, works hard, takes care of his & his own…besides, he may need that $200,000 for medical expenses, like getting his tonsils removed.”
THANK YOU! I forgot about this angle. I will definitely mention this to my family, as my uncle (my grandparents son, but my dad is the bank because he works) used to SELL reverse mortgages.
BWAHAHAHAHA! Foist with his own pitard!
It doesn’t even have to be a _reverse_ mortgage.
If the max out a conventional mortgage on their old house, they may be able to buy the new one with cash and have some left over.
Then when the SHTF hard, they could always just let the old one go back to the bank.
The real irony of the current debacle is that those with equity in their homes are the ones who actually have something to lose. Those with none have nothing to lose, other than the monthly nut for as long as they are foolish enough to keep paying it.
Encourage them to mortgage the old house to buy the new one.
Encourage them to mortgage the old house to buy the new one.
And if grandpa refuses and still wants dad to pay for it, point out the curiosity in why grandpa doesn’t want to put his own wealth on the line at all. Why is he so interested in only using someone else’s money, isn’t that odd?
kudos to Hwy50! Brilliant idea!
Go for it, hll!
This is “Plan A”
Your parents would be helping your grandparents with a “want”. If they help them with a “want” now, will they have they money to help your grandparents with “needs”, i.e. medical care, later on?
With housing and the economy tanking, will your parents be able to fund their own needs?
And stating that you fear that this will all come crashing down on you in the future is a viable argument.
Is this irresponsibility a sign of diminished capacity on the part of your grandparents?
Yes. My grandma has the beginnings of dementia and is finally grasping her mortality. I can’t imagine how scary this is.
Given his druthers, grandpa wouldn’t move, but g-ma’s pushing for the move and, like many a Mexican male, he does not know how to handle emotions and is just looking for the quickest solution.
I think he’s scared too, though.
Of course, when they realize the magnitude of their mistake, it will be too late and they will be stuck in He-meth.
True story: Kid I grew up with became a roofer. A few months ago, he fell through a skylight on a school gym in Delaware.
Left a wife and several children behind.
So, please tell your father to be careful up there. Please.
OK, I’ve got two suggestions and I hope you’ll pardon my lengthy post.
(Phase I) Bring up the genius idea of a reverse mortgage on the paid off house. Show them (made up) numbers that prove that they can pull 300K plus from the house they own. Don’t bring up details like residence, valuation, credit scores, etc. Offer to seek out the best possible situation for them to utilize this brilliant piece of financial engineering.
(Phase II) Come back a month later showing that, darn it, “Unfortunately you need to live in the home to get the money.”, and “Can you believe they only value the house at 200K?”, and “They’ll only do the loan for X percent of appraised value”. If they see these facts it may help awaken them to the reality of their situation. You’ve both inserted logic into the conversation AND delayed the bad move. The house in Hemet will drop 10K while you stall. Who knows? It may be that you find that the government insanity has reached a point where they actually CAN do a reverse mortgage walk away!
Lastly, if all else fails tell your dad that his absolute minimum requirement is that he be place on title as JT with right of survivorship. This will keep your GPs from taking out loans on the residence without your dad’s approval. If he wants to buy a ticket on the Lusitania in the end, you’ll have no choice but to give up and just love the goofy bastard despite his imperfections!
To my beloved fellow commenters:
Thank you so much. You really helped me get through today.
My husband and I are going to meet with my father and brother — my mom won’t come. Surprise, surprise.
I’m going to print this thread and go through it point by point with him in person. If he loans them the money, it is his business; I will make it clear to him that I will not bail him out with a loan, but will take him in if it comes down to financial armageddon for them.
Seriously, I freaking LOVE this blog. You guys are the greatest.
A Valentine’s limerick for all of you:
Pozole is orange
Enchiladas are red
Dear friends you have kept me
From losing my head
Okay, I could do better… but I have to meet with my dad. Thanks again.
What rules is he talking about? “Buy now or get priced out forever”? This has to be one of the largest veiled transfers of wealth from those not wealthy enough to afford homes to those wealthy enough to be homeowners in the history of the American union.
Obama sets aside $75 billion to slow foreclosures
Program would seek to bring mortgage payments down to 31% of income
By Ronald D. Orol, MarketWatch
Last update: 10:43 a.m. EST Feb. 18, 2009
WASHINGTON (MarketWatch) — The Obama administration unveiled a plan Wednesday to help 9 million “at risk” homeowners modify their mortgages, committing $75 billion of taxpayer money to back the initiative.
…
“The plan I’m announcing focuses on rescuing families who have played by the rules and acted responsibly: by refinancing loans for millions of families in traditional mortgages who are underwater or close to it; by modifying loans for families stuck in sub-prime mortgages they can’t afford as a result of skyrocketing interest rates or personal misfortune; and by taking broader steps to keep mortgage rates low so that families can secure loans with affordable monthly payments,” President Barack Obama said in prepared remarks.
“and by taking broader steps to keep mortgage rates low so that families can secure loans with affordable monthly payments.”
Our President endorses the monthly payment moron plan! Yaay!
Another failed attempt to stabilize housing. More government waste!
Housing Plan: A Break For Those Who Least Deserve It
This is straight from the White House Fact Sheet: “To provide extra incentive for borrowers to keep paying on time, the inititiative will provide a monthly balance reduction payment that goes straight towards reducing the principal balance of the mortgage loan. As long as a borrower stays current on his or her loan, he or she can get up to $1000 a year for five years.”
The Obama administration’s summary of the plan said the plan could offer a buffer of up to $6,000 against value declines on the average home.
And the loan servicers, don’t forget them. Banks will receive an up-front fee of $1,000 for each eligible modification meeting guidelines established under this initiative. They will also receive “pay for success” fees—awarded monthly as long as the borrower stays current on the loan—of up to $1,000 each year for three years.
http://www.cnbc.com/id/29257448/site/14081545?__source=yahoo%7Cheadline%7Cquote%7Ctext%7C&par=yahoo
From the article… This mess of a plan will not have the effect that they intend.
“The new Obama housing plan is going to give a break to those who least deserve it: people who bought more house than they can afford. It will reward those who made all the wrong decisions”.
I’ve written about this before, but I have to readdress it here because I’m absolutely gobsmacked.
“Think this through for a second. Your home value, along with all your neighbors, has gone down in the last year. But now your neighbor, who bought above his means and can’t make the payments, because of a reset to the REAL monthly cost of the loan, is suddenly going to get a gift. Well what about you? You did the right thing. . You didn’t buy more than you could afford. But you don’t get a break”.
Step 1: Define “responsible” houseowner behavior
Is defining responsible behavior really a task to be entrusted to the gov’t?
Exactly. I can’t wait to see the definition.
If you got a loan and pay more than 31% of current income- you are NOT a responsible home debtor. Next arguement, please.
It’s good for the banks to have loan owners on the hook for 31 pct of their incomes…
“as a result of skyrocketing interest rates”
Um, I thought we were at or near historical lows in interest rates… Silly me, I must be confused.
You nailed it PIC! The subprime disaster wasn’t about interest rates resetting, it was about mouthbreathers who bought too much house and loan underwriter who didn’t go beyond checking the mirror for fog!
Guess what folks? The Alt-A and option ARM surge is about exactly the same thing?
Got solvency?
If I take Obama’s claim that he’s going to help 9 million families with $75 Billion, I get $8,333 per family. What good will that do? The average FB probably owes twice that just to get current.
“What good will that do”?
It won’t do any good, but that won’t stop the PTB from going on and on with more harebrained BARF stimuli. Keep gumming up the works, they are good at that I’ll concede.
Time for a new course in “fuzzy math”… The first 5 million families will get the equivalent of a “stimulus check” about $600 for each adult, etc etc. The remaining 4 million get $8k a pop. The rest will go to fees and red tape.
Damn, sometimes I really wished I’d just have stayed an ape.
That ape thing gives me an idea: the gov’t should try raising bailout money from Primate Equity.
What’s George W doing these days?
From the first article: “U.S. homeowners lost an estimated $3.3 trillion in house value last year, real estate valuation service Zillow said.”
And Obama thinks throwing $75 billion at this problem is even going to leave a blemish?
Give him a break, he’s never ruined a country before!
At least he’s not Bush!
(checking half life)
Darn it, I forgot to start the control, I’ll have to try again at a later date.
Gee, woke up this am to the Obamanation RE welfare legislation coming down the pike. I’ll bet the banks will be lining up in droves to make future loans knowing that the 1M loan can be readjusted later to 500K or less.
Ah, the children are running the country!
Yep, but when gubmint becomes the lender of last resort, what do they care about return on loans?
Actually the housing plan commits “up to” $275 Billion, not just $75 Billion.
link
Housing Plan: $275 Billion to Help 9 Million Families
“President Obama unveiled his much-anticipated plan Wednesday to fight the housing crisis, pledging up to $275 billion to help stem a wave of foreclosures sweeping the country.
…
“An Obama administration official said the total plan commits up to $275 billion for housing, including $50 billion from funds already committed in the country’s financial sector bailout. It aims to help up to 9 million American families.
…
“It will also establish a $75 billion fund to reduce monthly payments for another 3 million to 4 million homeowners ’stuck in sub-prime mortgages they can’t afford as a result of skyrocketing interest rates or personal misfortune,’ Obama said.”
Does MEW abuse count as personal misfortune?
Yes.
Understating the true costs of stimulus and bailouts has been part of the sales job all along the way…
“Actually the housing plan commits “up to” $275 Billion, not just $75 Billion.”
That’s more significant. But still only $30K a pop.
That’s still chump change when you think about the fact that many more than 9M are underwater today, the number is rising daily, and that those in the bubblier areas are underwater in the six-digits range.
Ah, the power of long-division–one of FPSS’ favorite tools.
It’s shocking, isn’t it?
Most powerful tool in the financial arsenal and nobody ever uses it!!!
bank run
http://www.reuters.com/article/newsOne/idUSN1843214420090218
“The whereabouts of the brash, 58-year-old financier were unknown. CNBC television said he tried to hire a private jet to fly from Houston, the site of his U.S. headquarters, to Antigua, but the jet lessor refused to accept his credit card.”
He was also reportedly heard to exclaim, “Turn those damned machines back on!”
Abandoned amid structural concerns, and soon to be condemned, townhouse complex near DC in one of the nicer areas of Arlington is now in the middle of a battle to see who has to pay to tear it down.
These jerkoff developers have been building these over-priced McMansion style townhouse complexes all over Arlington. I guess there was a problem with the build quality. *snicker*
Washingtonpost Article
Used to live right next door. So much absolute junk got put up so quickly and cool places like Whitey’s (Broasted Chicken) turned into poser wine bars and Dan’s “Crusty Old Dude” bar with the table top Ms. Packman got bought out, etc. I was bitter. Apparently, still am. Hmm.
Dangit - I knew my wife was moonlighting as a table dancer.
Maybe I can finally get her to do one for me…
No worries packman.
Words I live by: “You don’t mow another man’s lawn, ya freaky piece of sh**!”
I know I shouldn’t even be thinking about buying a house right now, but if I could get one of the few decent ones I’ve seen listed in my area right now for ~70-75% of asking, I’d pull the trigger. Perhaps it’s time to try this kind of offer, with the following note:
Dear Seller,
Due to the current state of our economy - DOW below 8000 and still dropping, unemployment nearing double digits, continuing bank and corporate failures, record foreclosures (to name a few) - I am submitting my best and final offer on your house.
Unfortunately, around here that kind of offer would still be laughed at. When will they get it in the Philly `burbs?
It doesn’t hurt to try, but IMHO unless you are offering on REO to a bank you will not get any love. “Unmotivated” sellers are delusional. I think it may be a form of TSD.
I’m with Dude. We have switched our looking to exclusively new houses and REOs. I’m convinced that private sellers are and will remain too far behind the curve, no matter what they owe on the place. They cannot face up to losing money or losing the money they could have made at the peak. Even when they reduce their price, the builders and banks have cut prices faster and deeper.
The same thing happens trading the markets, in fact, I’ve got a line item on my trading account that shows a value less than what it would cost me to sell the shares. It’s a good reminder of the stupidity of holding on to unrealized losses in the hopes of a recovery.
Go “Ms. Barracuda”…the best & most qualified Republican female candidate in all of America for President in 2012…Oh, and Rash Limpbaughs will make sure that your “tax” sit-u-ation is far “different” then any of those anti-American, unpatriotic… democraps
Oil @ $34.00…that’s gotta help highlight the budget surplus in the American ice-box state…those $2,160.00 per person look to be going a little lower next yearly payout
Gov. Sarah Palin to pay back taxes:
“The amount of taxes owed is a private matter,” Sharon Leighow, Palin’s spokeswoman, said in an e-mail. “If the governor collects future per diem, those documents would be a matter of public record.”
http://www.miamiherald.com/news/politics/AP/story/909156.html
Question for the Viewers:
If the bottom of the real estate market is now really here, is now the best time to kick my apartment lease in the ass and buy a new or used home? Or should I just go rent a nicer home for much less? Does today mark the bottom of HBBland?
No.
No.
Agree. No. 2009 will be as rough on real estate as 2008 was. This time it will hit the high end and commercial properties harder. No rush to buy. No chance of prices exploding 30% a year again for a looooong time.
The timeframe for the next price explosion will be probably about the same as the timeframe between the last two, the last one being Florida 1920-1926. So the next home price explosion will be about in 2080.
Buy now or be priced out after 2080!
(Well, at least until 2088 anyhow)
I guess if you buy, immediately stop paying on the loan and demand new lower terms.
+1
“Or should I just go rent a nicer home for much less?”
Um, didn’t you just answer your own question? If price-to-rent ratio has not returned to its historical level, the bottom is definitely not in.
And we will overshoot, of course.
If I stay in a rental, my next rental will be same quality, 50% larger and 10% cheaper than my current one. That is strong incentive to continue renting.
If the bottom of the real estate market is now really here…
Who told you that? Certainly not anyone on this blog.
Dudes on ludes should not be buying houses.
Are you smoking something besides spearmint?
Wells Fargo WFC blasted through its 52 week low this morning. I’ve said it before but I’ll say it again, this one is being thrown to the wolves.
But houses are going up six thousand dollars a piece!
It’s got to make a huge dent in underpriced homes.
Hi Spearmint,
Into the Valley of Debt, rode the Six Thousand!
I remember your cousin, Mormon_Tea, from high school.
That’s funny cobalt.
Spearmint_Tea is refreshing and free.
There now we are all LDS.
Show me an underpriced home, and we can talk.
Mrs. Alan Greenspan just interviewed the Governor of Virginia on MSNBC. He is an Obama lackey, and I think that he repeated “people that played by the rules” a half-dozen times in reference to f’d borrowers. Mrs AG played “devil’s advocate” and threw some softball questions about House Republican opposition.
“people that played by the rules”
I hope this means they will require applicants to bring their tax returns proving they dident lie on those stated income loans (aka liar loans). We all know the majority of those loans were fraudsters trying to make a fast buck!
“people that played by the rules” No doubt a “talking point” given to all the foot soldiers for talk TV. Look for Keith O. and Rachael M. to have many guests spewing the term for our consumption. In the end the term will either be a) meaningless or b) so far removed from what any normal person would consider it to mean. If it turns out to be a real definition of normal meaning, then this plan is DOA as my guess i there is way less than 1,000,000 foreclosure victims (lost job/health issues) that I would consider to have “played by the rules” and truly deserve help under my definition.
RED MEAT ALERT.
If anyone is in the mood, the following was posted in the “comments” section of Andrew Leonard’s column when someone complained that Obama’s loan modification plan would discourage responsible buyers.
http://letters.salon.com/tech/htww/2009/02/18/obamas_shiny_new_housing_plan/view/index.html
“Surely you were not responsible because you expected to be rewarded for it beyond the comfort of your own financial security and stability. No matter how responsible you were, if the rest of the nation is allowed to go down the tubes, say if all the other houses in your neighborhood go into foreclosure, they’ll be taking you down with them….
…Next question: When do we get a similar approach to the credit card default crisis looming on the horizon?
– gkrevvv”
My own response is posted a few comments beyond.
CNBC reports that Goldman partners are borrowing from Goldman to meet their margin calls on leveraged investments using GS stock as collateral.
LOL
They’re eating their own now. This is hilarious.
BWWWWAAHAHHAAAWWWAAHHAHHAAAHAHH!!!!!!
I heard from private sources same thing is happening at UBS.
BWAHAHHAHAHHAHAHHAHAHAHHHHHHHHHHHHHHHHHHH!!!
I feel so bad for them…..
ough times on Wall Street are reaching all the way to the highest levels of the most storied former investment bank—Goldman Sachs—as partners there are being forced to borrow money to cover margin calls, according to sources within the firm.
Several Goldman Sachs partners have leveraged their Goldman Sachs stock to buy alternative investments such as hedge funds & private equity, and they have done so through their Goldman Sachs brokerage accounts.
But Goldman stock [GS 83.61 -2.10 (-2.45%) ] has declined in value by more than 50 percent since last spring, meaning that Goldman Sachs is in the awkward position of making margin calls on its own partners, who can’t meet those calls because their alternative investments are underwater and they don’t have enough cash on hand.
Now those partners are being forced to borrow money—millions of dollars—to meet Goldman Sachs’ own margin calls.
That is PRICELESS! No wonder they’re blowing Geithner under the table for more BARF money.
I have noticed turbo tax Tim has that constipated look on his face all the time now. Perhaps it’s not constipation after all..LOL.
Masters of the Screwniverse, we salute ye!
Got a link perhaps? I’d love to save this gem.
Heres the Link:
http://www.cnbc.com/id/29260008
Trading Places (1983):
“Margin call, gentlemen.”
Da da da da daaahh!
I’m lovin’ it! ™
FPSS wrote yesterday:
“OK, this deserves a detailed explanation but since this is cocktail hour, and there’s no particular hurry to rush an answer out (we have 6+ months), let’s defer to a future date, shall we? ”
I very much look forward to it!
And I agree: we have plenty of time (6+ mo).
Although I’m guessing that the markets may well have given us an answer to the question rather directly within 6 months.
Wow. Alternet isn’t exactly the mainstream media, but how long until a story like this filters down to the MSM?
Will You Have Roomates for the Rest of Your Life?
http://www.alternet.org/story/127403/will_you_have_roommates_for_the_rest_of_your_life/
For many urban professionals — despite having a good job and a college education — the American dream has been seriously downsized. Instead of hungering for the house with the white picket fence, they fantasize of one day renting an apartment with no one else’s milk in their fridge.
“It’s hard not to ask the question,” says Duyn, who now works as a yoga teacher with hopes of one day opening her own studio, “will I have roommates for the rest of my life?”
For those in Duyn’s position — working in lower-paying fields and living in urban centers — the answer is a qualified yes. Buying a home of one’s own remains a distant dream. The housing market may have softened with the economic crisis, but so have paychecks and employment rates, never mind the fact that it’s now as hard to get a mortgage as it was easy this time last year.
In two years there will be *lots* of cheap homes to be had, by anybody with a single lick of financial sense.
There already are in some areas (e.g. the rust belt). There will be more and larger of these areas over time.
“For many urban professionals — [...] Duyn, who now works as a yoga teacher ”
Anyone else see a non-sequiter here???
She, um, _chose_ to work as a yoga teacher; while she may find it quite fulfilling, it is not particularly known as an upper-income “profession”. She’s the best example of an “urban professional” they could come up with? WTF?
The author no doubt picked his/her buddy that has the hippest lifestyle for the article. I believe yoga is a worthwhile fitness regimen but really to teach it as an income source is to be compensated somewhere between lifeguard and “do you want fries with that?”
The two yoga teachers that I know both work as regular teachers elsewhere. One is an elementary school teacher, the other an adjunct teaching English Lit.
Reminds me of martial arts studios. Some guy gets his 4th Dan blackbelt (he can now use the title “Master”) and figures he can open a studio. Most don’t last.
Also, a dirty little secret about the larger dojos/dojangs: Only the head instrutor collects a salary. All the other instructors do it for free (which is why so many try to open their own).
I was just surprised to see an article hint that maybe there was a downside to extremely high housing costs. I don’t understand why there weren’t more articles like this over the last decade.
Also surprised that there was no mention of dividing McMansions up into apartments.
When I lived in Pittsburgh, I had friends who lived in the old Victorian McMansions that had been turned into apartments. And you know what? They had some NICE digs.
The government better hurry and make tax deductions more than 3k if they want any tax money this year.
Otherwise just hold on baby.
“Welcome back my friends to the show that never ends”
Anybody notice the slogan under the new masthead at dailyreckoning.com?
“More sense in one issue than a month of CNBC”
Yes, and 100% true!
So if they are guesstimating unemployment will hit 8.8% then it will be much higher…
Fed downgrades economic forecast for this year, warns of long road to recovery
* Jeannine Aversa, AP Economics Writer * Wednesday February 18, 2009, 2:17 pm EST
WASHINGTON (AP) — The Federal Reserve on Wednesday sharply downgraded its projections for the country’s economic performance this year, predicting the economy will actually shrink and unemployment will rise higher.
Under the new projections, the unemployment rate will rise to between 8.5 and 8.8 percent this year. The old forecasts, issued in mid-November, predicted the jobless rate would rise to between 7.1 and 7.6 percent.
The Fed also believes the economy will contract this year between 0.5 and 1.3 percent. The old forecast said the economy could shrink by 0.2 percent or expand by 1.1 percent.
The bleaker outlook represents the growing toll of the worst housing, credit and financial crises since the 1930s. All of those negative forces have plunged the nation into a recession, now in its second year.
“Given the strength of the forces currently weighing on the economy,” Fed officials “generally expected that the recovery would be unusually gradual and prolonged,” according to documents on the Fed’s updated economic outlook.
Against that backdrop, unemployment — now at 7.6 percent, the highest in more than 16 years — will keep climbing and stay elevated for quite some time, the Fed predicted.
Fed officials anticipated that unemployment would remain “substantially” higher than normal at the end of 2011 “even absent further economic shocks.”
U-6 (broadest measure) is already at 15.4%.
I expect U-6 to surpass 20% before late-2010. That means we would be in GD1 territory again.
Don’t you fret little lady, I’ll fix yer wagon…
I’d be willing to bet that the fomula to derive the unemployment rate will change so that we never see 10%. 8.8% maybe?
I know from just talking w/ people that the unemployment rate has BLASTED through 10%… i’d guess 15% at least, TODAY.
8.8% my arse. It will top 10% before the end of ‘09. In Cali it may top 10% next month!
Think extending unemployment benefits and revoking welfare-to-work carries any moral hazard in this regard?
I’m crazy busy today and have not had time to read this thread…. But I just dropped in to say one thing.
Obama’s plan will do NOTHING to stop the foreclsoures or hold up house prices.
There are too many houses and not enough qualified buyers. Supply and demand means prices will keep falling.
His plan does NOTHING to convince me I should keep paying on my $180K mortgage when I can easily buy the same house for $120K, then just walk from the $180K loan. The only thing stopping me, and millions of others from doing just that, is that we’re not at the bottom of the market yet. Why do it today to buy at $120K, when 3 months from now the same house will be $80-90K?
They are desperately trying to find ways to make us mortgage slaves, but people won’t do it. They will buy and dump.
“Obama’s plan will do NOTHING to stop the foreclsoures or hold up house prices.”
That isn’t the real purpose of the plan. The true goal is to slow the crash, make it look like the pols are doing something to help, keep the sheeple and markets from panicing further, and yes, to keep a few more mortgage payments coming.
I just zillowed the place I rent and drumroll please:
oct 07- 630k
feb 09- 391k
I am slobbering over this. Must go to rubber room.
You have a whole room in your house devoted to c*ndoms?
Damn!!!
LOL
Yup, it’s a placebo.
“They will buy and dump.”
And they should. I’m not one of those “moral crusaders” who thinks it’s somehow “wrong” to do a buy and bail (or just a bail) when you’re grossly underwater. It’s the right financial move. As long as you don’t trash the house, or prevent the bank from taking possession, you’ve fufilled your side of the deal. You stopped paying the MTG and gave the house back to the bank, that’s what the contract stipulates.
This “moral” argument, IMHO, is a red herring from the banks to try to keep some people paying much more then they should (just long enough to pass the bad loan onto the government’s books, at which time I’m sure you’ll start to see “Buy and Bail starter kits” offered by the major banks). The terms of a MTG are to pay the loan OR surrender the house. As long as you do one or the other, you’re in compliance with the terms of the contract.
As long as you don’t trash the house, or prevent the bank from taking possession, you’ve fufilled your side of the deal.
Somehow this point gets lost from the discussion of the mortgage rescue planning process.
“The only thing stopping me, and millions of others from doing just that, is that we’re not at the bottom of the market yet. Why do it today to buy at $120K, when 3 months from now the same house will be $80-90K?”
Darrell — Thx as always for your post. What I glean from it is that once housing appears to have reached a bottom, there is likely to be a new round of handing over keys to the banks, as loan owners see the chance to purchase homes at a considerably lower price than their mortgage balances. Things could get quite chaotic at that point, with the supply side buffeted by lots of new REO and the demand side seeing a surge of interest in purchasing affordable housing. I have a hard time envisioning how this all will pan out, though I have a vision in my mind of the turbulent water landing at the base of Niagra Falls.
That was what I saw on the ground in the AV in the 90 downturn. I expect it to be much more prevalent and damaging this time. I wouldn’t be surprised at all to see some significant squatters rights reforms by the do gooders in Excremento with awesome (in a bad way) unintended consequences.
From Reuters…
Poll Results.
Is Obama’s rescue plan enough to curb the tide of soaring foreclosures?
Yes (63 votes, 21%)
No (232 votes, 79%)
No one that understands what’s going on honestly believes that Barrys new plan will ‘fix’ anything.
Upon his arrival yesterday, he was presented with an extra-jumbo sized basketball shoe. Previous wearer was none other than Shaquille O’Neal.
If you think about this for a moment, you have to wonder what sort of gesture it is to give a used Shaq-shoe to the President. Yes, I know that it’s better than throwing footwear at him (a la Bush), but, geez, a used shoe? Is this something for the dog-toy shower for the forthcoming addition to the Obama family? Or is something else afoot?
Damn, I wonder if Shaq used odor eaters, that could be a big stinky.
I wonder how that played in Islamabad?
Phoenix just made the durty bom list.
Still trying to stave off the inevitable.
http://www.detnews.com/apps/pbcs.dll/article?AID=/20090218/POLITICS/902180355
Expect an unhappy day in the markets tomorrow. HP was not immune. Sales are down 20%. They reported sales up 1% YoY, but last year they didn’t own EDS.
HPQ just dropped a pre announcement bombshell.
get yer crash helmets out……I still have not taken mine off.
It wasn’t a pre-announcement, but it was bad.
Also, 5% pay cuts across the board and some yet to be specified changes to the 401(k) plan (probably will cancel matches).
BTW, how much do you think the PPT had to slap down in order to eek out a 0.04% uptick on the Dow on this most important of days for our illustrious leader?
Nobody fainted when Obama signed the stimulous bill!
But it was a wonderful moment.
the beginning of the end.
Yeppers.
I watched On The Beach last night. Are they issuing the little white pills in Oregon yet?
I dont think we are gonna get the “standard crash the market prior to OPEX short covering rally friday”
I think we are gonna get a new “standard crash the markets smoking crater black hole cant see a bottom friday with 40 bank closures”
might wake up some people.
Tomorrow is Thursday.
Is your cocktail better than my cocktail?
I need to get a position in though. Not sure yet.
I love the smell of 9 sellers for every buyer in the morning!
This guy just doesn’t get it. It is not about whether Obama’s mortgage rescue plan achieves its stated objectives, but rather whether he is seen “doing something” to fix the problem. When this plan appears to not be working six months down the road, he will simply announce another one.
February 18, 2009, 7:15 pm
Mean Street: Why Obama’s Homeowner Rescue Is Bound to Fail
Posted by Deal Journal
Is there anything more heartless than foreclosing on a home and throwing a family out on the street?
How about taxing the family next door into penury to pay for the reckless borrowing of its neighbors?
meanstreet
Welcome to the Obama Homeowner Affordability and Stability Plan — a complicated wealth redistribution scheme dressed up as a cure for the nation’s housing woes.
It is almost certainly bound to fail.
Now, there is no doubting that Obama’s heart is in the right place. With foreclosures at record highs, the American white picket fence dream is crumbling.
And the impulse of any caring President must be to do something, almost anything to keep the dream alive.
But the experience of politicians tinkering with the U.S. housing market is not a happy one. Fannie Mae and Freddie Mac, anyone?
Real estate is simply too complex to be manipulated by anything but the “invisible hand” of the market.
Disagree?
Just read the four page White House Executive Summary with its laundry lists of programs, federal and state bureaucracies, conditions and caveats.
It’s confusing stuff even for the average MBA. How will it be digested by the average low-income subprime borrower?
Wall Street Journal
* FEBRUARY 18, 2009, 7:37 P.M. ET
Homeowner Aid Seen as Risky to Banks
By DAN FITZPATRICK and DAVID ENRICH
The rollout of the Obama administration’s efforts to help U.S. homeowners set off a new round of hand-wringing about the battered banking sector.
Bank of America Corp., Citigroup Inc. and Wells Fargo & Co. issued statements praising the plan, but banking analysts said the housing initiatives are likely to result in banks suffering a fresh round of painful write-downs, which will further depress their earnings this year.
“It accelerates some of the losses, at the very least,” said Tanya Azarchs, a banking analyst with Standard & Poor’s Ratings Services. She said the ultimate magnitude of those losses will remain murky until the government hammers out the final details of the plan.
The biggest negative impact of Obama’s plan may be on mortgage-backed securities, said Gerard Cassidy, an analyst with RBC Capital Markets. He said tens of billions of dollars of outstanding securities could face downgrades, which could set off a chain reaction of write-downs at the banks holding these securities, due to the likelihood that the underlying loans will be modified and end up being worth less.
Isn’t ‘worthless’ a single word?
How do you spell unintended consequences?
Housing starts may be near a bottom; either that, or they are destined to consider receding from levels last seen in 1959. That was 50 years ago, BTW.
U.S. Economy: Factory Output, Housing Starts Plunge (Update1)
By Timothy R. Homan and Courtney Schlisserman
Feb. 18 (Bloomberg) — Manufacturing and housing in the U.S. collapsed in January, government reports showed, as the Obama administration unveiled new proposals to stem what may become the worst recession in the postwar era.
The Federal Reserve’s industrial production index dropped 1.8 percent to 101.3, the lowest level in more than five years, the central bank reported today in Washington. Housing starts plunged 17 percent to an annual rate of 466,000, the fewest since records began in 1959, Commerce Department data showed.
U.S. Population Statistics:
1959 177,829,628
2008 (Apr. 2008 est.): 303,763,031
Housing starts per 1m population (based on 466,000 per annum):
1959 466,000/177.829628 = 2,620 per 1m/year
2009 (est.) 466,000/303.763031 = 1,534 per 1m/year
The high end is toast under the Obama plan. And when the high end collapses, it will flatten out the price distribution like a pancake. Affordable housing may yet happen before this episode is history. PATIENCE!
Wall Street Journal
* FEBRUARY 19, 2009
Some Americans, Underwater but Ineligible, Are Riled Up
…
While real-estate professionals applauded the refinance provisions, which the White House says could help four million to five million homeowners, lots of borrowers wouldn’t be eligible. For example, the refinance provision is limited to borrowers whose mortgages are owned or securitized by Fannie Mae or Freddie Mac, the government-backed mortgage companies.
That essentially shuts out wealthy borrowers who would like to refinance but can’t because they own expensive homes financed with so-called jumbo mortgages, which are too large to be owned by Fannie Mae and Freddie Mac.
Steve Rosenberg, a 44-year-old institutional stock broker in Chicago, has been trying to refinance his $815,000 option adjustable-rate mortgage for months. But his bank is requiring him to put an additional $150,000 of equity into his home, something he is reluctant to do because his income has been cut in half over the past year. For jumbo borrowers, he said, the government’s message is, “You’re on your own.” Mr. Rosenberg saw little consolation in the president’s initiative. “The only recourse I will have is a bankruptcy judge.”