Bits Bucket For February 19, 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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Commercial real estate’s crisis point approaching?
$171 billion in loans coming due this year
By Mike Freeman
Union-Tribune Staff Writer
2:00 a.m. February 19, 2009
With credit markets still shaky, about $171 billion in loans backed by offices, shopping centers, hotels and other commercial buildings are coming due this year.
Experts increasingly wonder whether there’s enough credit capacity in the system to refinance them.
Yesterday, at a conference sponsored by the Burnham-Moores Center for Real Estate at the University of San Diego, bankers and real estate experts tried to tackle the crucial questions facing the market.
Two of them were: When will the credit freeze thaw, and what can commercial landlords expect when dealing with lenders?
The overall message was that it’s too soon to know. Too much uncertainty remains over the direction of the economy and federal efforts to shore it up.
For months, experts have been saying commercial buildings will be the next shoe to drop in a real estate-led downturn that began with toxic subprime home loans and has spread to every sector of the economy.
One reason for concern is that the market for commercial-mortgage-backed securities – bondlike investments backed by bundled commercial mortgages – has all but dried up. Such securities accounted for about half of commercial real estate loans during the boom years of 2006 and 2007.
If landlords can’t refinance, it could lead to distress sales as they’re forced to get rid of their buildings or face foreclosure – further driving down values of real estate assets – many of which are secured by mortgages held by banks.
While the market in commercial-mortgage-backed securities is stalled, banks and life insurance companies are still making commercial real estate loans.
Even if commercial real estate landlords can refinance their loans they are still hosed because their customers aren’t spending as they were before.
A consumer based economy is screwed when the consumers are no longer consuming.
“A consumer based economy is screwed when the consumers are no longer consuming.”
To piggyback of Exeter…
Will the dead please lie down!
Bring out your debt; bring out your debt.
I’m not debt yet…….I’m actually feeling better…..
Just like the point you made about the automakers yesterday. It seems everyone wants to make sure all the puzzle pieces are there for the next consumer blast off - which they are absolutely certain will be along shortly.
You mean trying to avoid paying people while at the same time expecting them to consume more has a bad ending? Who “coodadnode?”
Exactly. It’s about well-paying JOBS.
Who coodadnode?
well, Karl Marx.
(ps, I am not a Marxist, so shaddap with the flames)
Mr Donovan and Mr Geithner, what do you guys DO in Washington ?
Did you JUST discover the OBVIOUS ? Jobs? We’re friggin’ INSOLVENT ! Sorry, I’ll make it easier for you egghead financial Wizz Kids. The USA is BROKE !
Aren’t We paying you ENOUGH the Big Bucks to look out of the lobbyist’s friggin’ WINDOW?
Don’t you read Ben’s Blog for free after your Tuesday Morning Prayer Meetings ? Sheesh
AP – From left, Housing and Urban Development Secretary Shaun Donovan, Treasury Secretary Timothy Geithner, … WASHINGTON – Housing Secretary Shaun Donovan said Thursday it’s critically important that banks and lending institutions “step up to the plate” to help make certain the Obama administration’s new home foreclosure initiative succeeds.
“This started as a mortgage crisis but it’s become a jobs crisis,” said Donovan, speaking a day after President Barack Obama announced a $75 billion program aimed at a problem many analysts say has been at the heart of the country’s economic tailspin
http://news.yahoo.com/s/ap/20090219/ap_on_bi_ge/obama_foreclosures
Frankly, it’s been a jobs/wages crisis since about 1995.
“The overall message was that it’s too soon to know. Too much uncertainty remains over the direction of the economy and federal efforts to shore it up.”
AKA: sit there like a deer in the headlights until you get wiped out. Don’t do anything proactive.
well, what options does a commercial property owner have? If there’s no credit available, what’s left.. sell? Selling seems like the first, last and only resort..
What i’m wondering is how either the loss or sale of commercial property affects the tenants.. tenants who’s businesses may be humming right along.. and which have a lot of people on the payroll.
Would business continue as normal through the transition, or will everyone get laid off while the company moves and sets up shop elsewhere? What are the incentives for a business to stay and for the new owner to keep them at the same rates?
Legal protections for commercial leases are not nearly as strong as for residential, afaik.
It benefits tenants quite a bit as the landlord that buys the property at foreclosure has a much lower costs basis and can charge much lower rents.
This forces some of other landlords that did not buy the property at foreclosure to lose tenants and go into foreclosure.
This allows the landlord that buys the property at foreclosure to have a much lower costs basis and can charge much lower rents.
This forces some of other landlords that did not buy the property at foreclosure to lose tenants and go into foreclosure….
This happened in Texas in the late 80’s/early 90’s. There are strip centers that are still empty to this day.
if those strip malls sit empty to this day, it sounds like location is everything in CRE.. A business could probably rent those units for next to nothing, but it’s still too much.
If so, commercial property buyers know it.
If they know it, they also know that the best locations can extract the greatest rents, especially in times of economic strife during which every available advantage must be taken advantage of, and competition for those properties could be fierce..
I can imagine a situation where some, select buildings and parcels of CRE might well rise in price while most others fall..
yeah.. i see opportunity everywhere.. i confess.
Eeeeeexcellent, eeeeeexcellent … *steeples hands and cackles*
“…….still empty to this day…….”
Question for the HBB Brain Trust…..
I’m seeing this all over town……..commercial property that has been vacant for YEARS.
How is it possible for someone to sit on commercial real estate for years, and not be eaten alive by taxes, or whatever? None of it is “appreciating”; in fact the property and the neighborhood is deteriorating.
Nobody seems to want to buy existing commercial real estate. They would rather put up their own “green field” site.
Taxes write offs, estate judgments, tax seizure or money laundering. Take your pick.
Agreed, sort of.
If you’re underwater, you’re screwed and the markets going to get you. You can
1. Wait it out and hope the gov’t bails you out.
2. Wait and collect as many paychecks as you can before the lights go out.
However if you’re not underwater it’s time to get agressive:
1. Sell now, aggressively before everyone gets into the market.
2. If possible, lower your current tentant’s rent.
3. Lower offers for new tenants. Speeding up the race to the bottom.
I’m not sure I understand. It seems to me there’s plenty of credit available, just not under the lax standards of recently.
I would agree. I made an offer on commercial property a year ago with 25% down, although my firm offer was 10% below the ridiculous asking price. No problem getting pre-approval for the loan.
The deal fell through because the seller did a poor job of disclosing profit and loss, and my mother (who was my business partner) felt that he was hiding something, and so did the bank. I’ve moved on, but was satisfied that almost a year later, his property is still on the market at the same price, and his hopes for getting an offer even close to mine are becoming increasingly remote.
The problems seems to be that the appraisals are still based on years-old data and banks are no longer willing to fund them in today’s market. Smart move.
…It seems to me there’s plenty of credit available, just not under the lax standards of recently.
Credit is available in small amounts, but the main pipline is backed up… It has little to do with lending standards. The secondary market for securities has dried up…
———
If a bank has $1M total in deposits, it can write ten $100K mortgages before it must stop. It has no more money to lend.
The bank collects ten monthly payments and waits for a long, long time.. years.. before it takes in $100K, allowing it to write just one more mortgage.
But if investors felt real estate was a “good investment”, (which they don’t at the moment) they would purchase those 10 mortgage-securities from the bank. The bank would immediately take in a profit from the sale AND get it’s $1M returned to it.
That bank could then write 10 more $100K mortgages , sell them and repeat. Now, 20, 30, 40, 50.. 100’s of mortgages can be written on that original $1Million in deposits. Investor money makes it possible.
The banks could also write business loans. Investors would buy them as well. The loaned money is immediately returned to the bank, and the bank writes more loans.. Businesses could borrow money easily. Credit would be flowing freely..
Investors would collect the monthly payments from the mortgages and business loans, and get a very good return compared to putting their money in treasuries or similar..
——-
But since investor money is not currently available from the secondary market, banks are severely limited in how much they can lend. And these days, when there’s a suprise every minute, they had better keep a lot of cash in reserve for emergencies as well, or they are very vulnerable to failing.
Oftentimes, the best thing to do is nothing.
I only wish the socialists in Washington felt the same way. They are doing everything they can to ruin this country.
I am absolutely opposed to the bail-out plans, however, in this situation I’m firmly confident that doing nothing will quickly lead to mass starvation in the United States.
Unemployed Americans cannot compete with employed Europeans and Japanese for our food supplies.
Because of course if the government did nothing, 100% of businesses would fail, and we would have 100% unemployment. Everyone would just go home and say “Oh, crap. Well - I guess that’s it then.”
Actually, I am confident that doing nothing will lead to mass starvation, because doing nothing means the laws/government that created this mess remain. What needs to be done is to eliminate all laws and liquidate government assets at auction and return the proceeds to the american people (let the bond holders eat the loss). This would be a real economic stimulus.
Sure things would get rough for a while and crime would go up for a while, but that will happen no matter what government does. There is no reason that continuing actions and policies that hurt society should continue.
Precisely what Obama wants to hear from the masses. Abject, unbridled, unreasoned PANIC. Act now, think later, eh?
You’ve signed away my life. Way to go, lemmings. Right off a cliff, and doing your damndest to take everyone else with you.
I guess it really is time to go buy a gun. The moonbats are going diurnal en masse.
Dennis, are you out there? I know woefully little about armaments. Evidentally, it is time to learn.
Well, they are finishing the job the corporate capitalists started (and mostly finished).
There is no sadder sight than a corporate capitalist bunglicker who champions the free market in flush years but decides we all must rescue his way of life when the free market impacts his bottom line.
What capitalism is this you speak of?
We had capitalism where:
- the govt forced banks to lend, via CRA to people who did not qualify to get a loan
- the govt confiscated over 50% of income in various forms of taxation (add up federal, state, sales, property, car registration, etc)
- the govt puts up barrier after barrier to business through osha, environmental regulations, minimum wage laws, worker compensation laws, family leave act
That isn’t in the capitalism ballpark That isn’t even in the same sport as capitalism. We haven’t had capitalism in this country for decades and sadly will probably never have it again.
And
-the government created a monopoly lender whose job was to write insurance at long term breakeven rates.
-the government subsidized the interest paid on a home mortgage (incenting people to buy as much home as possible)
-the government offered a massive reduction on taxes from the gains of a house (houses if you were flexible on where you lived).
-the government offered free insurance to bank lenders so they had zero incentive to take business away from bad bankers.
Yep, that looks a whole lot like unfettered capitalism. Most of these problems go back to the Great Depression. When we essentially gave all the risk to the seemingly unlimited government, well we’ve finally reached a limit on how much risk it can realistically absorb.
Sorry folks, the 19th century came and went.
Sorry folks, the 19th century came and went.
The solution to amoral greedy f%ckers running rampant over our economy is clearly additional unfettering of the whimsical capitalist impulse. The Masters of the Universe will save us.
Can’t you see that?
(Bonks head.)
ET-Chicago, perhaps you have bonked your head too hard. The solution is to eliminate all of the government intervention mentioned above.
These big-wigs masters-of-the universe do not deal with capital, they deal with debt. I read a lewrockwell article that highlighted that what we have to do are financial managers who play with other peoples money and make a cut. These people do not invest their own money.
Companies no longer grow via capital, the grow via debt.
The problem we have today is that we have consumed all of our capital that took 100’s of years to build up. We will have to spend the next 20 years (or more) attempting to find all of the real capital we squandered and re-allocate it back where it is needed.
Capitalism is all about morality. In a capitalist society the threat of violence is never used to steal money. All “capitalist” transactions are purely voluntary by both parties.
Your anti-capitalist world view infers that you will use violence to steal money from some people and tell others what to do with their property. Your position is fundamentally immoral and is the justification used to create the government power that is then used by big companies to steal from the masses via the government.
You have it backwards.
Government intervention for the past 70 years has led to this point. And your solution is….drum roll please….more government intervention.
Brilliant.
ET-Chicago, perhaps you have bonked your head too hard.
That is always a possibility, sir, always a possibility.
Your anti-capitalist world view infers that you will use violence to steal money from some people and tell others what to do with their property.
It does?
I’m not anti-capitalist, I’m anti-immoral-capitalist.
Climb down from your Libertarian Utopia In The Clouds and take a look around at what real, self-proclaimed capitalists do to their fellow Americans on a daily basis, all in the name of almighty profit.
It’s shameful.
“Capitalism is all about morality. In a capitalist society the threat of violence is never used to steal money. All “capitalist” transactions are purely voluntary by both parties.”
Yep.
The solution to amoral greedy people starts with a G and ends with an E. It’s French.
Regarding CRE crisis - picked up some SRS while it’s still relatively low. Should be a no brainer, however, time will tell.
I feel ya … shoulda picked up more, but I like to have multiple irons in the fire, ya know?
“Luck, be a lady tonight.”
Please remember that double short etf’s are not for longterm short plays. They are only good if you think that the stock is going down in the near future.
If the underlying etf is stable for days/weeks, the double short will consistently lose value.
Well aware of the decay factor.
well, dunno if you missed the news, but it doesn’t look like CRE is looking too stable this year…
a year holding a double short etf will lose you a lot of money.
I’m just making sure that people are aware of the decay factor.
Well, my SELL orders on SRS got pinged back in August (in retrospect, perhaps I was not ‘greedy’ enough, ha!), so I didn’t get back in until this year. And before then, it’d been in and out with these ETF’s (although I didn’t trade them weekly like some people).
Back in 2007, we were all worried about the derivatives world blowing up and the possibility that all of our double short shares would go to zero. It seems like with all the dislocations since then, that hasn’t been one of them (yet).
Sheeeesh, I bought at 50.
Fed signals fears about commercial real estate woes
12:03 PM, February 18, 2009
The Fed also signaled growing worries about commercial real estate. From the meeting minutes:
A number of participants expressed concern that the commercial real estate sector could deteriorate sharply in the months ahead. They noted that a large number of commercial real estate mortgages will come due at a time when banks likely will still be facing balance-sheet constraints, the ability to securitize commercial real estate mortgages may remain severely restricted, and vacancy rates in commercial properties could well be climbing.
Some participants worried that the outcome could be an increase in defaults on commercial real estate mortgages and forced sales of commercial properties, which could push prices down further and generate additional losses on banks’ commercial real estate loan portfolios.
However, the commercial real estate sector had expanded more moderately during the recent expansion than during the expansion of the late 1980s, suggesting that the downturn in the current cycle could be milder than that seen in the early 1990s.
“However, the commercial real estate sector had expanded more moderately during the recent expansion than during the expansion of the late 1980s, suggesting that the downturn in the current cycle could be milder than that seen in the early 1990s.”
WHAT????!!! Has anyone SEEN all of the new speculator built strip malls and office/retail abominations in Everytown USA that were built to ’support’ all of the new residential ‘luxury’ communities.
Agreed - There are a still a lot of other forces at work here. Suspect 6 months or a year from now they’ll be preaching “No one could have seen this CRE crisis coming”.
RE: worries about commercial real estate.
MSM still behind the curve…
John Hancock Tower and Fanueil Hall busted here in Beantownland.
“We have begun the essential work of keeping the American Dream aliver in our time.”
-B. O’Bama
Anybody else think that commercial real estate — and the banks that love it — will be allowed to go the way of Lehman Brothers? You don’t pull any political heartstrings by “keeping people in their businesses.”
The pols will market such bailout along the lines of “we are losing places of employment”.
If businesses are not from where people get their paychecks, where do paychecks come from?
business = job
no business = no job
no job = you don’t wanna go there.
I don’t get my paycheck from someone else. Matter of fact, it’s been years since I’ve gotten a paycheck.
Instead, I’m self-employed. Have been since 1994.
My money comes from my doing work for clients. If they like my work, then more projects come my way.
Because my I rise and fall based on the merits of my work, I have a built-in incentive to keep improving my skills and broaden my knowledge. This helps me find find better-paying clients.
BTW, I never had this incentive in any of my jobs.
Arizona Slim .. as a businessman you must know that no matter who you are or how big you are, or how esoteric your gig is, someone down there along the food chain IS earning a paycheck.. and he feeds you. Therefore you are as much dependant on a paycheck as he is.
JoeyinCalif,
Which came first the “self employed” or the paycheck? Clearly there are no paychecks until someone creates a job and that someone who creates a job is the “self-employed” individual who has managed to drum up more business than he can handle directly.
The problem with the masses is that they see money as the beginning instead of the middle. Therefore, if they create more money they can achieve more ends. This fallacy ultimately destroys the real source of wealth.
There is always a job for someone who can recognize a need of others and attempt to meet it.
VirginiaTechDan … If i had questions as to the origins of the system, it wouldn’t involve money. I’d guess that people invented debt long before they invented money.
When caveman #1 couldn’t move a boulder on his own, caveman #2 helped. #1 then owed some amount of work to #2.
Pretty soon all the cavemen owed eachother some different amounts of work, and remembering it all got too complicated.. so they scratched marks by names on the wall to document who owed who what…
The wall’s not being portable was an inconvenience, so they set up a simple system. Possession of a bead or a seed represented a certain amount of labor owed to you, and the tokens could be “spent” if and when you needed someone’s help.. or a loaf of bread.. or a new spear.
Once the system has money and debt.. further evolution into things like businesses, paid labor, collateralized debt obligations, special investment vehicles.. seems fairly straightforward.
It is easy to “make up a story” of how X or Y got started first, but in doing so you ignore several things.
1) Money is the most marketable commodity, not some “score card” as you propose. Our politicians have slowly removed the commodity and turned it into a “score card” so that they can cheat and give themselves more “points”.
2) The first commercial interactions between two people must be trade (barter). Money evolved out of barter. A primitive mind would not be capable of abstract ideas about “value” and would see something they want and offer something they have. This process requires minimal communication. The simplest transactions exist before more complex transactions. Therefore, a complex transaction such as “debt” should follow much after trade and therefore comes after money. Debt requires that both parties communicate terms, this requires a higher level of communication and evolved intelligence than money.
Simple minds want value for value and do not understand “paper value”. More advanced minds can understand “future value”, fractional ownership, and the implications of debt. Unfortunately, more advanced minds are also capable of over-estimating their own understanding and therefore be deceived by accounting schemes that simpler minds would never touch.
3) Look at how kids play. Left to their own they will start trading (and evolve money) long before they ever understand the concept of debt. You can teach animals to use “money” but good luck trying to get them to understand debt.
Excellent comments by all. I don’t think they’re telling us anything we didn’t already know? Many CRE’s are paying out dividend in share distributions vice CASH dist. ( and I’m told the IRS had to sign off on this so they could keep their charter )
However… unlike dumb@$$ SFH’s, CRE has an actual function outside the utility of shelter. If you’re looking for a window to cap. on the overshoot, “I” happen to think this is it. IMHO.
“Many CRE’s are paying out dividend in share distributions vice CASH dist.”
This confuses me; how can giving out more shares to holders of shares be called a dividend? It sounds more like a fractional-split.
And pplits are not taxable events; dividends are.
Prime_Is_Contained,
Trust me, ‘we’re’ trying to get our minds wrapped around it too. When many of these REIT’s went into “cash preservation mode” last fall, there was initially an understanding that it would be retained until the end of their fiscal and -then- paid out. Otherwise obviously they would be taxed and almost identical amount!
So there’s several different categories here. Those that have continued to pay out as agreed. Those that are offering to pay out cash prior to the end of FY and those that are paying out in shares. I’ll see if I can find the “new” IRS reg. that was being circulated?
DinOR,
Very interesting. Keep us posted on what you learn.
But all of this begs the question: why are you still holding CRE REITs if you know they are heading flaming down the cr*pper? Or if you’re not holding them, why are you following their dividends?
Right. Never mind that “we” aren’t “losing” them. They still exist and will be owned by someone, they’ll just be changing hands.
LehighValleyGuy,
Well I don’t know how “right” I am but the word we’re getting is that the managers of private REIT’s ( that haven’t had to stockpile cash for redemptions ) will have the resources to pick up some property at fire sale prices.
I realize we’re all as frustrated by the sprawl of strip malls etc. but at ’some’ entry point, they will pencil.
lower rents –> more shopping choices –> small businesses save the US economy once again
not sure why joey in Cali (Jo Jo À Go Go) is not a fan of this; perhaps he has a financial interest in very large, poorly run companies? employment or investment?
How does “more shopping choices” save the US economy once again?
new businesses arise which create new jobs
perhaps “shopping choices” is too glib, as retail/svcs probably aren’t going to save the economy, but there are many other kinds of tenants in commercial buildings
cruddy, oversized, inefficient concerns that have lost their way need to fail; the opportunity is arising for good new businesses to be born
gator .. I was responding to “You don’t pull any political heartstrings by “keeping people in their businesses.”
If you know that business cannot be separated from J6Pks’ jobs, you certainly do pull political heartstrings when something threatens businesses.
Sometimes I sound like I support only the bigger players. The reason are two-fold.
One is that the bigger players get all the grief around here. The other is that we are all in this together, from the biggest WStreet players to guy who mops up under the fry cook’s grill. What affects one category affects everyone. I try to defend them all.
Sure the RE bubble causes the whole economy to over expand. Too many businesses now exist. But is it accurate to say the whole business community must shrink?
Fact is that certain types of business multiplied disproportionately. Some types of business did not multiply and remained at a stable level.
Anything negative which hits businesses across the board (like falling CRE prices or the credit crunch) is not targeting those spectific bubblicious things which should be attacked.. Instead, we’ve got random friendly and unfriendly fire coming from all directions, schrapnel flying, and innocents dying..
I am for supporting the sustainable economy as it existed pre-bubble. I wasn’t prejudiced against big or small business, Wall Street, labor, banks, borrowers or lenders then, and i’m not against them now. All of these components must be maintained in working order or the system won’t function. The threat is real everyday. And if one part fails and the machine breaks down.. you and me.. everyone will suffer.
and yet, some people cheer the fall of the financial system.. a favorite target. Most of the “schadenfreude” i see around here is completely misguided. For whatever strange reasons, people are taking delight in their own suffering. Rather than assign some psychological disorder to it, I will be charitable and chalk it up to plain old ignorance.
not a gator,
I like where your head’s at man! Anybody remember when we had HUGE used computer/office equip. liquidators -right- on main arteries of traffic!?
The boom ( read fake ) demand drove these guys right out of existence. Well now that we no longer need a “Furniture Outlet” on every corner..?
joey,
The pre-bubble economy is pre-1913… and I think that before this is over our economy will look a lot more like 1913 than 1998 or whenever you think this “bubble” started.
All business were misled and made bad investments. All will suffer for making bad investments *except* for those who recognized those bad investments and acted accordingly. Attempting to spare some “innocent” bystander with other peoples money simply continues to misallocate resources. Any action the government takes will only hurt those who made accurate assessments about the quality of an investment.
Businesses that didn’t multiply, but held steady would likely have shrunk without the bubble. The bubble temporarily screws up all profit/loss signals and anyone who does not recognize those false signals deserves to fail! To continue to support them is to continue to support the false signals!
In the end, the best investment strategy must involve accurately predicting what government will do. Time spent predicting the government action is a burden on the productive capacity of society, but in our current environment is the most important thing someone who is attempting to serve society and create wealth can do. Failure to predict government ultimately leads to bankruptcy when they change the rules and therefore your profit/loss calculations.
It is people like you who dream up plans to “save” something that change the rules and therefore hurt everyone. For what ever reason, you seem to promote ideas that will result in your own suffering. I will be charitable and chalk it up to plain old ignorance.
Yep. Many development loans have a feature where the interest payments are made from the loan. (They are negatively ammortizing until construction is completed.) Soon they’ll be going tango uniform too. I suspect that when has more to do with loan terms than it does with the actual economic feasibility of the project.
I know someone in LA who seems bound and determined to screw himself. He mortgaged his paid-off-house in 2007 for $715K and used the money to purchase 5 major pieces of commercial real estate in the LA area.
When he told me this I all but paniced. He told me not to worry and that he was going to make a killing and retire rich (he’s age 56).
I’ll bet he loses everything. Zillow now says his house is only worth $600K.
IIUC commercial real estate mortgages are not “no recourse”.
DennisN,
Bound and determined sounds about right. At that juncture I don’t know if it would’ve helped for him to have SOLD his house ( rented ) and paid cash? But that’s the ‘other’ side of the equation. It’s those like him that today’s buyer is looking to exploit.
Sad.
I’m sure that $715K was used as a minimum-down-payment on those 5 commercial real estate purchases. I’m thinking he’s going to be completely wiped-out.
What’s the down requirement for CRE? 10%? 20%?
DennisN,
I have plenty of friends that would be willing to say that has already in fact occured.
People are running and scrabling for safety. Screw the little gold bars, worthless dollar$ and dead and dying RE!
Invest in mikey’s new and improved “Majic Beans”.
If things really go south, you can use them in the soup lines or SELL them to the US Gov’t…as those FOOLS WILL BUY ANYTHING
Meh, Obama will spend another $275B we don’t have to fix the problem. I’m not in the least worried.
Modifying Mortgages Can Be Tricky…
In Miami, Jeffrey Mitchell saw his family income drop just as real estate taxes and insurance premiums increased, making his monthly mortgage payments crushing. He got a lower interest rate, too. But with the added fees and penalties, his monthly payment remained the same. He is now back in foreclosure.
As the Obama administration steps up efforts to help troubled homeowners modify their mortgages, it might consider the experiences of these two South Florida borrowers and their mortgage companies, one small, one large.
National statistics on mortgage modifications suggest that what happened to Ms. Reeves, a disabled 54-year-old, and Mr. Mitchell, a 42-year-old union representative, is fairly typical.
The nation’s 14 largest banks reported that more than half of the loans they modified last year were delinquent again after just six months, according to the federal bank regulator, the comptroller of the currency. But several small mortgage companies like the one that helped Ms. Reeves, which have been pursuing modifications longer, say that less than 25 percent of their modified loans became delinquent again.
http://www.nytimes.com/2009/02/19/us/19loans.html?_r=1&ref=business
TELL THEM TO RENT
I may have read this wrong, but it looked like the target “audience” for Obama’s loan modifications were those whose current home value was between 80 and 105% of their current mortgage balance. That means you can only be 5% under water.
Most FBs are so far under water that they would get the bends if they came up now.
This is what illustrates how out of touch the DC crowd is; thinking that $13/week tax cuts, $8000 mortagage credits. etc., are going to make a difference.
$13/week, (to a guy/gal upside down $300K on a mortgage)= Fart in a hurricane.
that is true. but how about majority of us who are not underwater and can really use that 13/week?
For what they’re paying, they are renting…from the bank, and at a premium.
It is becoming obvious that the true goal of the loan modifications and moratioriums is not to keep people in their current homes but merely to give handouts to the worst offenders in the most palatable way possible. DC knows that most of these owners are still going to walk eventually and they know that handing cash to these owners would be political, if not literal, suicide. Their solution is to provide free housing for as long as possible allowing these people to build a nest egg they will eventually use to move and, at some point, buy again. Some are living without any housing costs for years and some are even collecting rents while not paying a dime. It infuriates me that I am expected to read about their sob stories while I cut my rent check every month and try to save my own down payment.
No, no, no - no house for you (or me) or any other prudent person! That’s the point of the Bailout. Keep bleeding the suckers while keeping housing unaffordable.
I fully expect a parallel universe of housing prices to emerge, where a $150,000 house is “worth” $300,000 to the bank - and that’s the price you have to pay, but the government will cover about $100,000 of it (yeah for hyperinflation), leaving you on the hook for more than the house is really worth AND dependent upon handouts to pay your mortgage for the next 30+ years.
What a nice way to bring back serfdom!
Went to courthouse foreclosure yesterday.
Interesting to all here at HBB
Here’s one that sold
2301 COLLINS AVE #310 MIAMI BEACH FL
This is a condo on Miami Beach.
I have the taxes from tax assessors’ office:
2008 taxes $14,914.33
Folio number 02 32260431260
–
Here’s the legal from property appraiser’s office:
2301 COLLINS AVE #310 MIAMI BEACH FL
33139-1627
Property Information:
0007 RESIDENTIAL- CONDOMINIUM
Beds/Baths:
2/2
Floors:
0
Living Units:
1
Adj Sq Footage:
1,480
Lot Size:
0 SQ FT
Year Built:
1926
Legal Description:
RONEY PALACE CONDO UNIT 310 UNDIV 0.0028521 INT IN COMMON ELEMENTS OFF REC 17787-1644 COC 24987-0107 09 2006 1
Sale Information:
Sale O/R:
24987-0107
Sale Date:
9/2006
Sale Amount:
$915,000
Assessment Information:
Year:
2008
2007
Land Value:
$0
$0
Building Value:
$0
$0
Market Value:
$758,360
$824,300
Assessed Value:
$758,360
$824,300
————————————————————–
There is a listing in the building in the same floor that is 250 sq ft smaller in the MLS: m1230747 asking $350K
Notice: the 2006 sale of $915,000 and the taxes for 2008.
————————————————————–
Sold at auction for $140K
————-
Detroit’s 2nd biggest RE broker files bankruptcy:
http://www.detnews.com/apps/pbcs.dll/article?AID=/20090219/BIZ/902190395/1001
“Brokerage firms “can’t survive selling these $20,000 homes when they used to cost $200,000,” Bennett said.”
Poor things.
/sarcasm off
We need to see a lot more of this, everywhere IMO.
Finally 6% seems to be an appropriate commission -
U.S. Jobless Benefit Rolls Reach Record 4.99 Million (Update1)
By Bob Willis
Feb. 19 (Bloomberg) — The number of Americans collecting unemployment benefits jumped to 4.99 million two weeks ago, breaking a record for a fourth straight time, signaling the job market is still deteriorating.
Total benefit rolls surged by 170,000 in the week ended Feb. 7, the Labor Department reported today in Washington. First-time applications for unemployment benefits were unchanged at 627,000 last week, higher than economists projected.
General Motors Corp. and Chrysler LLC this week announced an additional 50,000 workers would be cut from payrolls as crumbling demand for autos deepens a recession now in its second year. President Barack Obama is counting on the $787 billion stimulus plan he signed into law this week to create or save 3.5 million jobs and stem the slump in spending.
“This is a really rotten labor market,” Roger Kubarych, chief U.S. economist at UniCredit Global Research in New York, said in an interview with Bloomberg Television. “We’re going to have an unemployment rate that grazes 9 percent.”
Treasuries were lower, driving up yields. The benchmark 10- year note yielded 2.8 percent as of 8:37 a.m. in New York, up 4 basis points from yesterday. Stock-index futures were higher.
Producer Prices
Prices paid to U.S. producers rose in January for the first time in six months as fuel costs climbed, another Labor report showed. The 0.8 percent increase in wholesale costs was higher than forecast and followed a percent 1.9 decline in December. Over the last 12 months, producer prices fell 1 percent, the biggest year-over-year decline since 2006.
Looks like Congress is on a roll:
31 percent approval: Good news for Congress
First, if you are a member of Congress, the good news:
Approval of the job you are doing has climbed 12 percent in the latest national Gallup Poll.
http://blog.seattlepi.nwsource.com/seattlepolitics/archives/162228.asp
A single-number approval rating has little meaning. Some context from the article:
1. Approval of Congress has hovered at 35% since 1974. (Presidents hover at 55%. Messiah at ~65% now.)
2. Approval of Dems went up while approval of Republicans went down.
RE: 31 percent approval: Good news for Congress
Great spin from the minions of theUnited Socialist States of America propaganda machine.
Just like BB, “The Talking head from the Fed, who has everything under control.
http://finance.yahoo.com/news/Wholesale-inflation-takes-apf-14410311.html
It could be 2% and they would all get re-elected anyway so who cares?
Not only are the feds spending more, but they tell states the can’t spend less.
Michigan lawmakers told certain budget cuts not allowed under stimulus package.
http://www.detnews.com/apps/pbcs.dll/article?AID=/20090219/POLITICS/902190376
I love the CNN Money Headline right now:
Stocks open higher after dour reports on jobless claims and wholesale prices weren’t worse than expected. More soon.
“Gee, Mortimer, it’s bad, real bad. But our guess on how bad it is was spot on. Let’s buy some GM stock and orange juice futures!”
Rick Santelli was on a roll during the premarket. He blasted the bailout saying it would cause moral hazard. He got a lot of support from the not-so-packed Chicago trading floor. Then an idiot guest (don’t remember his name) said something implying Rick was a communist!
I say Rick Santelli for Fed Chairman.
2nd!
3rd!
Santelli is the best thing CNBC has going. Second best is that blonde lady who often is on at night. She’s great.
4th!
In the land of the crazy, the half-sane guy is king.
not a gator,
It’s just his willingness to call a spade a spade. It’s almost as if the other talking heads are forever trying to goad him into putting a spin on a negative event and he absolutely -refuses- to do that!
Uh… there was a time when a guy like Rick would *not have been in the minority.
“3rd!
Santelli is the best thing CNBC has going. Second best is that blonde lady who often is on at night. She’s great.”
–
A couple of the Capitalist ladies on CNBC I wouldn’t mind doing the nasty to while they are tied up and screaming at “BUY, BUY!!”
CNBC’s Michele Cabrera has strongly come out against bailing out underwater FB’s. Olick surprised me when she thought it didn’t go far enough because it didn’t include 2nd homes. Ugggh! The guy with the square glasses is a complete moron.
May those times come again, D. Though, what we will have to endure to get there!
next month it will be revised down…showing that it was worse than expected…but the next month will be than expected.
rinse…wash…repeat.
and the band played on.
They’d need a tank farm to take delivery of FCOJ.
Feb 19, 3:28 AM EST
AP Analysis: Fewer outsiders are moving to Florida
By MIKE SCHNEIDER
Associated Press Writer
ORLANDO, Fla. (AP) — Is the love affair outsiders have with Florida losing its zest?
A drop in driver’s license applications from out-of-state residents certainly suggests they’ve cooled to the Sunshine State’s charms. The number of applications from outsiders has tumbled 30 percent during the past five years - dropping from more than 585,000 in 2003 to about 410,000 in 2008, according to an analysis by The Associated Press.
New Yorkers have snubbed Florida in the largest numbers, with 34,000 fewer applicants coming from what has long been Florida’s No. 1 feeder state. That’s a decline of almost 50 percent. The next biggest drop came from New Jersey, with 11,000 fewer applicants.
Theories abound on why people are finding Florida less attractive. The recession. The awful housing market. Hurricanes. High insurance costs. Battered retirement funds. And, perhaps, the end of the “9-11 effect,” which demographer Jan Vink said caused more people to move out of New York to Florida after the terrorism attacks in 2001. That migration spike peaked in 2005, but Vink isn’t sure what has caused it to taper off.
hey Vink .. it’s one of them trick questions.
Check e) All of the above.
That migration spike peaked in 2005, but Vink isn’t sure what has caused it to taper off.
The RE market peaked in 2005, MEW-babies could no longer sell their houses for more than they owed on them, no re-lo to Flori-duh in the cards any more.
How stupid is this guy?
Very stupid, I mean, how do these dorks get a gig?
What’s really evil about all of this is that people think guys like this have something to say and rely on data that they get from them.
No wonder our “fiat” money is worthless. How the hell can anyone have confidence in anything if it’s all spindoctoring and dumb statements?
The MSM just sucks so profusely. It’s all corporate PR crap now and bread and circuses for the masses.
Lack of money?
Underwater?
No more HELOC?
New Yorkers snubbing Florida? That’s the best possible news!
You sure about that? They might want to turn into “halfbackers” and invade North Carolina. They miss their seasons and all.
4 bedroom house on the beach in 2010 that was $800K in 2005…$316,000
state income tax paid…$0
temperature in January….72
absence of loud, obnoxious NYers, New Jerseyites and other north easterners…priceless
European banks still have 18,6 trillion euros of toxic assets on their balance sheets, that’s 44% of all assets, according to a paper of the European Commission, reports the Daily Telegraph.
The article has now disappeared from the telegraph web site, but a German translation can still be found at the Austrian Die Presse.
Then they have the other 66% of assets that aren’t trashed yet but will be in the next 12-18 months.
44 + 66 = ?
I could say something snarky about being math challenged, but I won’t.
Drowsy maybe, not math challenged, besides they surely will all be taking on another 10% of worthless assets as the government force feeds them insolvent institutions, no?
their dial goes to eleven
Is subsidized housing in the octuplets’ mom’s future??
http://www.freep.com/article/20090219/NEWS07/90219023/Home+of+octuplets++grandmother+in+default
I bet she is found to be an unfit mother and ends up not getting getting custody.
http://www.nbcwashington.com/news/entertainment/Grandmother_Of_Octuplets_May_Lose_Home__Owes__23K_In_Mortgage_Payments.html
“In 2006, Angela borrowed $453,750 from IndyMac Bank, agreeing to make payments on her loan monthly. However, last May, she stopped making the payments and as of Feb. 5, 2009 owes the loaner $23,224.98 in back pay, according to the Notice.”
Typical IndyMac underwriting - loan over $450K to a single mother with 6 kids with only disability as income. The strawberry pickers had a better chance of paying back their loan. Note also that she stopped paying on the loan around the time of the fertility treatments leading to the latest 8. What’s her excuse - I’m pregnant again so I don’t have to pay?
“On being questioned if she had been in negotiations with her lender, IndyMac Federal Bank of Pasadena, Calif., Suleman replied, “I haven”t even had time right now, but I”m sure I could do something.”
Why wasn’t she in negotiations with them instead of getting pregnant again? This woman is a total leech on society. Take all of the kids from her and put her @ss back to work to pay off the hospital bills.
“Typical IndyMac underwriting - loan over $450K to a single mother with 6 kids with only disability as income.”
Angela is Nadya’s mother. Having seen the house on various television broadcasts, however, there ain’t no way that place was worth $450K.
Angela is the grandmother and was taking care of the first batch of kids while the daughter was working on having the latest batch.
So much for the days when the grandparents or parents might help out with a down payment, not cover the entire loan.
How sad for the family that reporters felt the need to dig into county records for that info.
I guess some good will come out it though - someone will offer them help. Doubt that was the reporters intention though.
Idea for a new show: “Deadbeat Squad”
Show opens with FBI kicking in the front door of this deadbeat. Shoots grandma in the head when she looks to panicky. Show proceeds to show the sale of the children to Arab entrepreneurs & the tying of Mommy’s tubes by the nice surgeon.
Follow up recounts Mom’s new life in a Vegas brothel. If done right, it could be an attitude changing show.
Jon,
I realize you’re being a ‘little’ flippant but Diana Olick from CNBC who really -has- been in our camp from Day 1 had some intelligent comments yesterday.
While their “panel” was discussing ( what else? ) The Bailout, she mentioned that it’s easy to lampoon borrowers and lenders for what only looks like common sense in 2009 when in fact ( given the backdrop of 2005 ) worked off an entirely different standard!?
Not to put words in her mouth but at one point, the possibility of being “priced out” looked very real. Stretching to get into a home -probably- seemed sensible at the time. *Not starting a business that fed off the MEW-trough ( in the fear that it too may end ’someday’ ) isn’t necessarily good business sense either?
I believe it’s the grandmother, the one who is disgusted with her selfish and irresponsible daughter, who is defaulting on the huge mortgage. Maybe she’s glad she is no longer able to provide housing and support for said daughter. She has stated she’s “through” with her daughter. Not that I’ve been following the story closely, mind you.
The 14 (grand)kids are the big losers in this tale of insanity and woe.
I think the infertility doc who consented to treat Octomom should lose his/her license. And I’m a physician too.
Various bits from TMZ
The house is in foreclosure however, OctoMom blew some of her hard earned handout money on one tube of clear lip gloss — which ran the food stamp user a cool $14.50 plus tax at Nordstrom. In comparison, a 48-pack of Pampers usually runs around $16.99.
OctoMom admitted her massive family is in dire need of a place to live, telling us: “I need a new home.”
The default notice shows Angela Suleman is $23,225 behind in her mortgage payments and that the house could be sold at auction beginning May 5.
phrank 54 wrote:
I hear she wants breast augmentation and a nose job next. It sure is amazing what you can do if you don’t waste your money on the mortgage payment.
02/19/2009 10:58:23 a.m. EDT
i larf.
What’s truly astounding is that that 48 pack of Pampers is going to last two days at best.
It’s much better just dealing with cats and a litter box. I don’t even want to imagine what it would be like to change 48 or more diapers every 2 days.
more like every 2 hours!
I don’t care if it’s PC or not.
Somebody please NEUTER that insane woman NOW, before she asks congress for a major Emergency Baby Bank Bailout !
Division B Title IV (viii) of the new stimulus bill is all about OctoMom. It’ll take $1.2 billion just to sort her out.
Is there any reason why most of you haven’t said anything about the douchbag fertility doctor that got her pregnant? He is partially responsible for eight of those children.
Bingo. Considering the women is totally nuts, I would say the docs are–by far–the most responsible party to this crime. In fact, the idiots ought to be made to support this one-family-population-explosion for life.
From today’s Bloomberg DOT com: “Bank of New York Mellon CEO Opposes Limits on Bonuses — “The unintended consequences of an un-level playing field could mean that at a time when you want stability in senior management and you want your banks to be more successful again, I would worry that you could potentially lose senior executives,” Kelly said. ”
That’s a feature, not a bug. OTOH, solvent profitable banks should be allowed to pay whatever bonuses they like. Banks such as, uh, uh, uh…
“… I would worry that you could potentially lose senior executives…”
Lose senior executives? Lose to who? Who wants to hire a senior executive who was part of running a business into the ground?
Who wants to hire a senior executive who was part of running a business into the ground?
Other senior executives who also are running businesses into the ground. It’s a club.
Yes, we want to keep on the best shysters and spinmeisters money can buy.
Because you never know, maybe one of these geniuses will come up with some hybrid Frankenstein monster investment vehicle we can sell to the gullible in the future.
High pay is sooo important when retaining people that should in fact be FIRED. Wait did I say fired in big letters? I meant JAILED.
Nardelli, CEO of Home Depot. Destroyed the company and then moved on to Chrysler is one example.
Any followers of “Neutron Jack” Welch would fit this description.
Don’t forget Al “Chainsaw” Dunlap.
Or, as my father once said about Lee Iacocca, “Why’s he being paid so much for being stupid?”
I want to hire John Thain to come clean my carpets. They smell like cat piss.
I would hire him to clean my shower, but he would do a half-assed job.
So I scrubbed it myself.
Plumbing in my shower needs repair. But I don’t trust Thain in there. So, time for a Slim DIY repair session. Off to Bonnets and Stems (Tucson’s best plumbing supply house) I go…
Off to Bonnets and Stems (Tucson’s best plumbing supply house) …
Great name, too.
“I want to hire John Thain to come clean my carpets. They smell like cat piss.”
John “Hungry as a Dragonfly” Thain is shrewd and smarter than you. He’d likely hurt himself in your place, clean out your homeowner’s insurance policy, take you to court for not paying withholding taxes, drive you from your home, and sell it for a profit.
“I want to hire John Thain to come clean my carpets. They smell like cat piss.”
That comment reminds me of the early 90’s recession when my uncle was the only excavation guy that had any work and the competition had none. We kept getting prank phone calls at the shop that went something like, “Do you have a backhoe?”. Reply, “of course we do”. The caller would then say “I got some work for you. I got a big pile of dogshit on the living room floor and I need a backhoe”, click. We got the cops involved and come to find out it was our local competitor who had no work.
ROTFLMAO!!!!!
Yeah but we got the last laugh. The bank came and repo’ed all his iron around 1994 because he’s stupid and greedy and took on too much work and got slammed. Running his brain along the sharp edge of a razorblade is like rolling a pingpong ball down an 8 lane highway.
Saab may be days from bankruptcy
DETROIT, Feb. 18 (UPI) — Swedish Industry Minister Maud Olofsson said the government would not intervene to prevent automaker Saab, owned by General Motors Corp (NYSE:GM), from going bust.
GM has asked Sweden for help keeping Saab afloat, saying it could be bankrupt within 10 days, The Times of London reported Wednesday.
“Given the urgency of stemming sizable cash demands associated with Saab operations, GM is requesting Swedish Government support prior to any sale,” GM said.
But Olofsson signaled help was not forthcoming.
“The Swedish state and taxpayers in Sweden will not own car factories,” Olofsson said.
==============================================
You guys are gonna have to stop making jokes about Sweden being Socialist now as I guess its up to the US to now bailout Saab.
If you look at all the countries GM is asking for help, it’s easy to see they need far more than they claim to stay afloat. At what point do you stop??
http://www.freep.com/article/20090219/BUSINESS01/902190486/Bottom+line++U.S.+auto+industry+says+it+needs+97.4+billion+to+live
From the article.
Bottom line: U.S. auto industry says it needs $97.4 billion to live
The figure — equal to $874 from every U.S. household — includes up to $39 billion in survival loans for General Motors Corp. and Chrysler LLC, a $25.5-billion rescue sought by auto suppliers and $25.4 billion in requests to retool auto plants to build more efficient models.
And it’s likely not the end.
If I read the article correctly, that 97.4 billion is just in the US, not including what they’ve already gotten from Canada, not including what else the Canadians will be asked for, plus the billions their finance companies have gotten, plus what their asking from the South Koreans, plus their subsidiaries in Europe, and on and on and on and on and on and on and on and on.
“The Swedish state and taxpayers in Sweden will not own car factories,” Olofsson said.
the most awesome quote from a government official i have read on this blog.
nice.
I see it as the difference between truth and lies. Sweden is honest about its socialism (which is state ownership of the means of production). US wraps it in a tissue of lies. Lies make it easier for the scamming to continue. Swedes see this issue clearly (doesn’t mean they aren’t deluded about others things–like RE) and have made the decision that it isn’t worth it.
I’m sure the US ownership makes the decision all the easier. US corps have a bad name in Europe these days.
It’s a shame. I never met a Saab owner that wasn’t loyal as hell. In a price-loyal world ( that’s saying a lot )
Saab and Volvos are/were fashion statements for ultra-liberal Democrats, once upon a time.
They’ve moved on to the Toyota Prius.
And, from the seat of my bicycle, I like to call the Prius “The Car of Virtue.” Reason: The people driving those things look oh-so-smug.
South Park did a great episode on this. It was called the Toyonda Pious. Driven by liberal smug a-holes who like to smell their own farts. God I love that show!
“Ever since you bought that Prius, you’ve been in love with the smell of your own farts!”
Yes, this was probably the best comment on that car, ever.
Incidently, market research showed the Prius buyers bought them instead of more expensive, smaller cars like Audis and Saabs. So Toyota ought to have been able to charge them more! Ah, lost opportunities.
My parents were Republicans all their lives, owned several Volvos. My car in high school as a hand me down beater 240 that despite my best efforts, simply would not die.
I am about as conservative as they come. I’ve owned 3 Saabs.
Sometimes the stereotypes don’t always fit.
“My car in high school……beater 240……..”
Man, thats depressing even thinking about. Glad to see you have overcome that trauma…….
Saabs were kinda cool, especially the pre-GM 1980s turbo cars. That, and the fact that Saabs were instantly recognizable. (I’m a form-follows function type).
Like BMWs today, it’s too bad that the majority of their owners didn’t appreciate their technical qualities.
Somewhat conservative also and I’ve owned an 1800S, P1800,240,760wagon and a V70 wagon.
GM might be willing to let Saab die on the vine.
Yet another economic Saab-story.
I’m enough of an old crank that I’m of the opinion that if you don’t have to put oil in the gas it isn’t a REAL S.A.A.B..
GM brings new meaning to the old wisdom of “Everyone has a Saab story.”
Jim A,
LOL! Years back I had a B.S.A motorbike and the joke was “If it isn’t -leaking- oil ( it’s because it’s OUT of oil! )
I’ve had friends that evidently kept adding oil in their Saab for over 300k miles. In IL the body would rot out and they just kept running.
I love two stroke streetbikes. My first one was an old Suzuki GT-380. Just loved that two stroke sound feel and smell. Always wanted a Yamaha TZ 750 but never had a chance to get one in good shape.
Not an authority but the “Beezers” were called ‘thumpers’. A lot of people believed it was b/c of the thumping sound that was the signature of their exhaust.
Actually it was b/c BOTH pistons came up at the same time ( vice alternating as is the case w/ most twin engines ) Although the cylinders fired alternately.
Please resume the FB hate-fest. Oh btw ( and not to stump for her ) but Michelle Malkin has been running a great series on protestors following around The President that are none too happy about the bailout. Really funny protest posters in the pictures!
LOL. Went to the site and those are some pretty funny signs being held up. Michelle (I’m never wrong) Malkin can make me angry just as much as Al (I’m never wrong) Franken can, but I stand with her on this one.
Man in the old days you’d get gubmint cheese, now you can get so much more! Yay change!
I grew up riding dirt bikes, and “thumpers” were what we called the four strokes that my friends and I on two strokes used to leave in the dust. They’re (4 strokes) MUCH better today.
BSA 441 Victor?
Just heard a saying about an old Navy fighter from the 1950s:
“If the puddle of hydraulic fluid under it was small enough to jump across, it was safe to fly…..”
Between radial engines, and comments like this, I DON’T miss the “good old days”.
Saab has never been the same since GM took it over. A 9-3 which sells for $30K is nothing more than a Chevy Malibu that sells for $18K. The shell game worked well for a while. But I’m guessing these days, people might not be so apt to shell out $30K anymore for a Malibu with better leather.
Obama’s Stimulus Will Cause ‘Lower Wages’ for American Workers, Says Congressional Budget Office
Wednesday, February 18, 2009
By Fred Lucas, Staff Writer
President Barack Obama signs the economic stimulus bill, Tuesday, Feb. 17, 2009(CNSNews.com) –
The huge economic stimulus package that President Obama signed into law Tuesday will result in “lower wages” for American workers, according to the Congressional Budget Office (CBO).
The CBO analysis, dated Feb. 11 and sent to Sen. Judd Gregg (R-N.H.), says the $787-billion plan will increase employment in the short-term, but will run up deficit spending which will “crowd out” private investment in the economy in the long-term.
The analysis concludes that the stimulus will put downward pressure on Gross Domestic Product (GDP) and wages after 2014. (The Gross Domestic Product is the total value of all goods and services produced in the United States in one year.)
Sat it aint so Peggy, say it aint so.
not sure this isn’t part of “the plan”, as keeping the masses on the treadmill keeps them off of the streets…
How much lower can they go than minimum wage kept low by the cheap labor conservatives? Most of the good paying jobs were shipped out of the usa except managment, congress,government employees, and CEOs, have wages the rise?
the stimulus plan might actually give jobs to americans
The lower wages are going to be due to the massive inflation that will begin before the end of The One’s first term. Yeah you might be making 20% more, but when things cost 50% more your real wages have dropped.
That’s 50% inflation per year, right?
It could happen.
“Yes, we can!”
Just out of curiosity, what would you guys be calling McCain if he had won?
He took credit for brokering the first $750 billion TARP deal, so I imagine you guys would have a funny name for him as well.
Flappy McJowls?
President?
President Palin’s obstacle?
The plan might actually give jobs to immigrant workers. I still don’t see Chip and Biff clamoring to get that insulation job or go stand in concrete with a screed.
I know plenty of non-immigrants that like to work in construction. They just can’t make a living at it.
Charels Smith over at http://www.oftwominds.com said he made $7.50/hr in the late 70’s as a carpenter. He also said that $7.5/hr was the same pay in 2008.
Oh, lawdy. What shall we do when our investments in CDO’s & MBS’s get crowded out.
Lower wages for American workers was always part of the Master Plan, Stimulus Bill or not.
Exactly.
Now if we could just get the Master(bators) of the Universe to realize that you have to pay people a decent wage or they can’t buy things in a 75% consumer driven economy.
2nd try (sorry if double)
Went to courthouse foreclosure yesterday.
Interesting to all here at HBB
Here’s one that sold
2301 COLLINS AVE #310 MIAMI BEACH FL
This is a condo on Miami Beach.
I have the taxes from tax assessors’ office:
2008 taxes $14,914.33
Folio number 02 32260431260
–
Here’s the legal from property appraiser’s office:
2301 COLLINS AVE #310 MIAMI BEACH FL
33139-1627
Property Information:
0007 RESIDENTIAL- CONDOMINIUM
Beds/Baths:
2/2
Floors:
0
Living Units:
1
Adj Sq Footage:
1,480
Lot Size:
0 SQ FT
Year Built:
1926
Legal Description:
RONEY PALACE CONDO UNIT 310 UNDIV 0.0028521 INT IN COMMON ELEMENTS OFF REC 17787-1644 COC 24987-0107 09 2006 1
Sale Information:
Sale O/R:
24987-0107
Sale Date:
9/2006
Sale Amount:
$915,000
Assessment Information:
Year:
2008
2007
Land Value:
$0
$0
Building Value:
$0
$0
Market Value:
$758,360
$824,300
Assessed Value:
$758,360
$824,300
————————————————————–
There is a listing in the building in the same floor that is 250 sq ft smaller in the MLS: m1230747 asking $350K
Notice: the 2006 sale of $915,000 and the taxes for 2008.
————————————————————–
Sold at auction for $140K
————-
Wow! Although it doesn’t have a direct view of the ocean, it is just one block away. It is amazing what you can see with gglErth. What’s the catch, however.
The catch is: $1,600/mo for ins and property taxes.
That’s a boatload of a catch, and you can’t even cook it.
And, Mario, the owner, was paying none of that.
In 10/15/2008 the association placed a lien for none payment of dues and special assessments that began in 05/28/08.
–
Kirisdad’s numbers were way off!
taxes: 14,914 a year
HOA: 1,200 a month
—————-
Total: $29,314 a year / 12 = $2442 a month!!!!!
Sorry Kirisdad
Special Assessments: ?
–
Rents are mid $2000
But, I think the investment group that won the bid should be able to sell it quickly at a profit.
See listing info I posted above.
–
I can post more info on the courthouse foreclosure sale if HBBrs want me to.
GM’s SKorean arm holds talks with state-run bankFebruary 19, 2009 9:16 AM ET
All Associated Press newsSEOUL, South Korea (AP) - The South Korean arm of General Motors said Thursday it held talks with a state-run bank over long-term financing, while a news report said it sought hundreds of million of dollars in aid.
GM Daewoo Auto & Technology Co. President Michael Grimaldi visited Korea Development Bank last week “to discuss cash-flow improvement for the long term,” company spokesman Park Hae-ho said.
South Korea’s Yonhap news agency, quoting a senior bank official, reported that GM Daewoo requested assistance of about 1 trillion won ($676.7 million).
Anyone hear anything more about the Goldman Sachs partner margin call meltdown?
More Bad News for Goldman | Jon Winkelried suddenly announced yesterday he was retiring, and now there’s more bad news for Goldman Sachs: CNBC’s Charlie Gasparino reports that a number of partners at the firm have been forced to borrow money to cover margin calls. Several senior execs used Goldman stock to buy into hedge funds and the like, but with shares down 50 percent since last spring, “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.” How crappy a situation is this? Talk to Sumner Redstone. [CNBC]
Smartest Guys In The Room.
“The race is not to the swift, nor the battle to the strong, neither yet bread to the wise, nor yet riches to men of understanding, nor yet favor to men of skill; but time and chance happeneth to them all.”
[Ecclesiastes 9:11]
remember goldman pimping 200 / barrel oil.they are the most crooked bunch i have ever seen.
Hank Paulson made out like a bandit, having to sell off his stock to take the Treasury post. Sold out close to peak.
Hank Paulson made out like a bandit, having to sell off his stock to take the Treasury post. Sold out close to peak.
Dumb luck on his part — at the time, I’ll bet he thought he was going to miss out on years of high-flyin’ revenue. After all, no one could’ve predicted what happened.
Just curious but this all hit in the last downtick. Winkelried isn’t the only exec. being clobbered. How do they all have the same cost basis?
the ghost of ken lay.
Very quietly - bailout of Fannie and Freddie has now doubled to $400 Billion
U.S. Doubles Fannie, Freddie Backing to $400 Billion
The federal government yesterday doubled its commitment to Fannie Mae and Freddie Mac, promising to reimburse the companies for up to $400 billion in losses on their investments in mortgage loans.
The massive expansion of the government backstop is a response to mounting strains on the two companies, officials said.
…
Why are articles like this on page 6 of the newspaper?
Two sounds come to mind -
“shhhhh….”
and
“clink, clink”
(Yes I know we are in a deflationary environment - but there’s 200 billion more $$, created during the frontside of the bubble, that woulda shoulda disappeared on the backside, but now will not)
Best Buy up 5% this morning, Whole Foods and Benihana’s stocks up sharply today. O’reilly Automotive stock at its 52 week high today.
Just a few gems to remind you that even in bad times there are exceptions in the stock market.
Like houses, stock market is 1/2 of what it was 15 months ago and getting cheaper.
True, however ‘unlike’ houses, certain companies won’t need a high tide to raise all boats.
I imagine after an unsettling period auto parts houses will continue to do well as more people elect to keep older cars running vice buying new ones w/ each cash-out re-fi?
True, however, some of the people/entities buying these stocks may be levered. What happens when Mr. margin calls?
Price/demand is not always determined by the quality of the stock or its balance sheet; sometimes, like houses and other products (BMW), the ultimate determinant are the buyers, their cash flow, and leverage amount.
Always a factor. Yet it you never get a call on a stock that you’re ‘up’ in, but as we’ve seen it could be other poor performing positions that could create the need to raise cash ( and fast! )
Much like the otherwise reasonably sound Muni’s that sold off so violently last spring as HF’s were getting hit w/ MBS calls. Still I think Bill’s original comment stands. Besides my motto for ‘09 is “Take encouragement where you can find it?”
I was argueing last night that what really matters these days is a company’s debt service, not their business model.
This has ALWAYS mattered.
Only the falling interest rates from 18% to 1% kept allowing them to roll over their debt forward.
That’s over. And they fail.
+1
Capital structure is what is critical—in a de-leveraging environment, they will fail in leverage order.
If you sort the (former) IB’s by leverage (largest to smallest), they failed in that order.
They also failed in “reverse pecking order” which means that they were using leverage to goose their returns to keep up with the Joneses.
“They also failed in “reverse pecking order” ”
Interesting observation, FPSS… I hadn’t thought about it that way. Thanks…
C.Card defaults will keep right on rising, so perhaps we’ll need to direct some BARF money to the ‘victims’ of the evil credit cards issuers…
Bank of America, AmEx May Suffer on Card Defaults (Update1)
By Hugh Son
Feb. 19 (Bloomberg) — Credit-card defaults may rise beyond 10 percent this year, breaking records and wiping out more than half of annual profit for lenders including Bank of America Corp. and JPMorgan Chase & Co., analysts said.
Loan failures are about to surpass a previous high of 7.53 percent as people losing jobs amid the U.S. recession can’t repay debt, according to Fitch Ratings. The defaults may peak at 10 percent to 11 percent of loans by yearend under a stress scenario, Goldman Sachs Group Inc. analyst Brian Foran said yesterday in an e-mail, reducing 2009 earnings for issuers including an almost 40 percent cut for American Express Co.
“The challenge is getting past the intensifying credit problems that will probably stay pretty rotten over the next six months or longer,” said John Williams, an analyst at Macquarie Capital in New York, who rates American Express and Discover Financial Services “underperform.”
Banks that already got cash from the U.S. Treasury after losses tied to mortgage securities may have to add billions to reserves for credit-card defaults, straining capital levels further. They are cutting credit lines, raising interest rates and scaling back on mail solicitations to brace for future losses. Citigroup Inc., Bank of America, JPMorgan, American Express, Capital One Financial Corp. and Discover are the biggest card lenders.
Charge-offs, or loans that banks deem uncollectible, reached 7.5 percent in December, according to Fitch Ratings analyst Cynthia Ullrich. The record of 7.53 percent was in 2005 after a change in bankruptcy law spurred a wave of filings, according to Fitch, which tracks a quarter of the $964 billion in U.S. credit card receivables. Unemployment worsened in January, rising to 7.6 percent, the highest rate since 1992.
‘Awful Year’
“This is going to be an awful year for the credit card industry,” Bank of America Chief Executive Officer Kenneth Lewis told lawmakers this month. “The more optimistic views are unemployment at 8 or 8.5 percent, and that would cause very high loss rates in the credit-card portfolios.”
I spoke with an out of work fellow a few days ago that got a cash advance on his credit card to pay his auto ins. & power bill.I asked what the interest rate was. 18.75%! I am sure he is not the only one doing this.
wmbz,
An astute poster noted just days ago that we can -still- trace the “Credit Bubble” back to insane home prices! When 79% of your pre-tax income goes to PITI, what other choice did FB’s have but to pay their remaining bills through plastic?
It just bugs me when that gets lost in the shuffle.
“what other choice did FB’s have but to pay their remaining bills through plastic?”
In my mind, what you describe is a 2nd-order effect of the credit bubble, not the cause ofit. The credit bubble was really the fact that lenders were _willing_ to lend without normal underwriting and credit-worthiness.
The housing bubble was a first-order effect of the credit-bubble. Tapped-out FBs who then have no choice but to borrow for every-day expenses is a 2nd-order effect.
That rate doesn’t reflect the potential risk out there right now.
Why does he need a cash advance to pay his auto insurance? Don’t they accept credit card payments? Moreover, doesn’t he know how to manage cash? Charge everything that is chargeable and save the cash for things that are not.
The first thing I’d do if I were in that situation is get rid of the car! You can always take the bus to job interviews, or a cab.
Reuven:
I get jobs that are nowhere near public transportation…but my 96 escort wagon is paid off and i have safe drivers but its still almost $700 a year.
Heck, I’ve ridden my bicycle to interviews.
If I did that I’d be sweating like a whore in church by the time I got to where I was going.
talcum powder
Even without job losses, this was in the cards. ALOT of serial refinancers were under the illusion that paying off their credit cards with a HELOC or REFI was a sign that they were being responsible with their money; not that they were incapable of living within their means. They didn’t change their spending habits when the equity dried up. They just CONTINUED to spend more than they made. So they’re hitting the wall at full speed: maximum CC debt AND underwater on their mortgage. Bankruptcy really IS their best option.
Jim A,
Exactly, that about sums it up.
You nailed it Jim. People did think they were being responsible, since that HELOC was now tax deductable. Mass delusional behavior, perpetrated by the PTB.
I think most of them voted for Obama.
Umm, Slim here. I voted for Obama. And I spend less than I take in and don’t carry a credit card balance. No HELOC on the Arizona Slim Ranch either.
During his campaign Obama was promising more stimulus packages. I suspect a large number of folks heard the message loud and clear “If you vote for Obama he’ll throw a few extra bucks in your pocket.”
To what extent are credit card issuers increasing the possibility of default by pushing up rates as they’ve done the past few months?
We are all paying for past defaults and bankruptcies with higher cc rates. Every underwater RE speculator either walks away or rents and files bankruptcy. It’s the cc balances that get wiped out hence, higher rates for everyone else. Heads we lose/tails we lose- hoard cash/don’t charge and make the best of it.
No kidding. Maybe, just maybe, if they charged 2% interest on balances, people might have an incentive (and the ability) to pay back their debts. At 18.75% it’s hopeless. So in the end, everybody loses.
I used to think bankers were smart. Meh.
They ARE smart.
Who’s REALLY getting shafted? The shareholders.
And the CC stuff is largely collateralized and sold off.
To whom? Pension funds mostly.
You’re right, of course. What I should have said was “I used to think they were smart in an honest, customer-oriented way.”
But that was when I was young, idealistic and naive.
There’s no one more cynical than a disillusioned idealist.
Welcome to the club, honey!
When companies operate in ways that are NOT in the best interests of the company, it is usually the case that they are operating in the best interests of the CEOs and other top executives.
“The challenge is getting past the intensifying credit problems that will probably stay pretty rotten over the next six months or longer,” said John Williams, an analyst at Macquarie Capital in New York, who rates American Express and Discover Financial Services “underperform.”
Only six months, huh? LOL!
Zillow is hilarious. I looked at a street near my apt, and they are showing “values” on the main road (with all the traffic–NOT desireable) from $150K to an astounding $270K.
However, there are houses offered on this street as REO’s for $68.8K. Offered–not sold.
Yeah, but REOs don’t “count,” right. Even when they’re more than half the market. (/viscious sarcasm)
Which main road are you refering to?
And how bad is it in Gainesville, Gator-not?
NW 16th Ave
It’s okay in Gainesville, but I think it’s the calm before the storm. Basically there is still a lot of building going on (a lot of it university/Shands) though the house building has stopped and there are a few mostly empty, shoddily built developments on the outskirts of town.
The university is supposed to cut its budget by 10% for the next fiscal year. The city and county must also cut hard because of plummeting income. So we will see some carnage by fall.
The freezes made our snowbird season crappy, but they are coming here now that it’s more temperate. A lot of ill-considered businesses have failed, but others are hanging in there. The economy is MUCH worse in the rest of the county vs. Gainesville. Also, it seems that Marion County (horsey ppl, old ppl) is also much worse off than Alachua County.
As I told every back in January, I’m doing a route I last did two years ago and the traffic is DEFINITELY lighter. Seems like some of those savvy buyers who snapped up exurban properties have either lost the house or their job. Also, less SUVs wheeling in/out of private schools. So granny is broke this year.
Ooo, ooo! Big scandal this year, the principal of Hoggetowne Middle School (a generally well-regarded charter school in GNV) was caught using her school board credit card for tens of thousands in personal expenses.
Phillips Ctr is cutting back, bringing in cheaper acts so they don’t lose money, while local dance, orchestras etc are just scraping buy. So, much less money for entertainment out there.
And the mall was full but nobody was in the boutique shops (usually women’s clothing, which of course has taken a whacking nationally). They booted Limited and are bringing in Sephora in a LARGE space, which makes no sense at all.
Women can afford lipstick. Not that designer dress though.
the principal of Hoggetowne Middle School (a generally well-regarded charter school in GNV) was caught using her school board credit card for tens of thousands in personal expenses.
We’ve had a rash of local municipality Treasurer, Secretary, etc. dipping into the public till. One of them was busted after embezzling a couple hundred thousand bucks. How stoopid can you be? I’m not even going to get into the moral or ethical part of it.
But the remedy for these situations is usually hamhanded overkill. For instance in one borough they created another position to oversee the township manager, this position pays $75k per annum. (And most likely will be granted to a friend or family member of an influential council person).
In each case the perpetrator is doing time as well as ordered to pay restitution.
It is often the case that if they’d have stopped before they hit $10k they never would have been caught. Which makes you wonder: “How many DO stop?”
lemme see if I got this right.
Japanese Government Bank is buying down JGB’s, and now they are buying Corporate Credit.
The Bank of England is going to print money “to conduct purchases of government and other securities, financed by the creation of central bank money.”
Germany is going bail-out the Baltics to avoid an Eastern European crisis.
Chinese government is cutting deals with with Russia for $20 a barrell oil (while they export diesel).
US alphabet soup of lending and funding facilities looks to be permanent placement, and now we got housing fix and stimulus.
-yep, problems solved. QUICK, Everybody back into the pool !!! the fung-a-mentals are strong.
A CC cash advance rate of 18.75%, says the fellow had stellar credit. BofA shows ours at 21.99%, and we have 825 FICO’s. Never plan to ever pay them a dime (pay in full each month way before due), but holly cow. What ever happen to Usury Laws! Oh yeah, DE laws.
You’re right, I just checked our USAA Visa and it’s 19.75% for cash advance. Never used it so I haven’t paid attention, last I checked our FICO was 760. That was over a year ago.
I tell you the interest charged by some of ‘cash for car title’ places are the ones that blow my mind. We have one here that was charging 400%, on loans of $1000,00 or less. I would bet 99.99% never pay it off and just lose the car.
WOW.
I’m honored to be in such great company here on the HBB.
So many USAA members.
I actually had to hunt for a bank because we were over FDIC, and that took about a month!
Air five (as son would say) to USAA!
Leigh
Yeah, Capital One sent me a notice increasing my CC rate to 29.9%!!! Left me giggling uncontrollably. I called and canceled. They told me canceling it might hurt my FICO. Giggled some more. Told them I could give a crap about my FICO, cancel the F’in card. Hung up.
“I asked what the interest rate was. 18.75%! I am sure he is not the only one doing this.”
Interest rates don`t matter if you pay the balance off every month or if you never pay the bill. Kinda makes sense why all the lines of credit are being drastically lowered. Cuts down on the damage a victim can do.
Another one bites the dust…
WL Homes, Homebuilder, Seeks Bankruptcy, Cites Market Collapse
By Steven Church
Feb. 19 (Bloomberg) — WL Homes LLC, the 161-year-old homebuilder, filed for bankruptcy protection from creditors with plans to focus on developments in Southern California.
The company blamed its filing on the collapse of the real estate market, saying its 2007 sales had fallen by about half in Chapter 11 documents filed today in U.S. Bankruptcy Court in Wilmington, Delaware. The company listed assets of more than $1 billion and debt of $500 million to $1 billion. The company said it has as many as 50,000 creditors.
Irvine, California-based WL Homes, which also does business as John Laing Homes, traces its history to 1848, when its predecessor was a homebuilder in the U.K. WL Homes was formed in 1998 when John Laing merged with Watt Homes, according to court documents. In 2006 the company was purchased by Dubai-based Emaar Properties PJSC.
The case is In re WL Homes LLC, 09-10571, U.S. Bankruptcy Court, District of Delaware (Wilmington).
Great article in WSJ called Dukes of Moral Hazard on Obama’s foreclosure rescue. Hasn’t too much respect for it.
Wall Street Journal
* REVIEW & OUTLOOK
* FEBRUARY 18, 2009, 11:12 P.M. ET
Dukes of Moral Hazard
Re-default rates are 55% after six months.
…
Let’s focus on the plan’s effect on the individual borrower. Anyone with mortgages owned or guaranteed by Fannie Mae and Freddie Mac will be able to refinance to lower rates if his mortgage is between 80% and 105% of the value of the home. This is a sweet deal that is not available, for example, to many renters looking to buy homes now. Sadly for those who deferred the gratification of homeownership, the 20% down payment has now become industry standard. But at least their taxes will allow other people to stay in homes they can’t afford.
This plan amounts to yet another govt-sponsored measure to charge the prudent in order to subsidize the unscrupulous. I want my vote back. (Sorry to say, I am pretty sure John Clueless McSame would have gone down a similar path.)
Existing borrowers who may not qualify for Fan/Fred refinancing can still receive loan modifications that move their mortgage payments down to 31% of monthly income. In either case, no effort will be made to verify that recipients of aid were truthful on their original mortgage applications. Given that mortgage fraud skyrocketed during the housing boom, and that the Obama Administration intends to assist up to nine million troubled borrowers, we can say with certainty that the unscrupulous will be among those rescued.
Going forward, it will be up to lenders to verify income. Getting this number correct is critical to the government’s hopes for the plan. That’s because, if pending Treasury guidelines follow the Federal Deposit Insurance Corp. model on which they are based, new modifications will forgo extensive underwriting. The FDIC believes that a lot of the normal research that goes into making a loan or a refinancing decision can be skipped as long as the mortgage-debt-to-income ratio can be moved, even if only for a few years, down to that magic number of 31%. So the government will pay loan servicers $1,000 for each mortgage modified, share the cost of lowering the monthly payments and pay other subsidies to lenders and borrowers — adding up to $75 billion in taxpayer assistance for modifications. The government will then spend another $10 billion compensating lenders if the housing market continues to decline and some of these loans go bad again.
Will $10 billion be enough? The recent history of mortgage modifications isn’t encouraging. According to the December report by the Comptroller of the Currency and the Office of Thrift Supervision, “The number of loans modified in the first quarter that were 30 or more days delinquent was 37 percent after three months and 55 percent after six months. The number of loans modified in the first quarter that were 60 or more days delinquent was 19 percent at three months and nearly 37 percent after six months.”
Said Comptroller John Dugan, “One very troubling point is that, whether measured using 30-day or 60-day delinquencies, re-default rates increased each month and showed no signs of leveling off after six months and even eight months.”
R-can rescue plan: Save the wealthy base, screw everyone else.
D-rat rescue plan: Save the foolish and the unscrupulous, screw the prudent.
Both parties: Screw the stable middle class glue that defines and holds together our society out of existence.
I want another party (and don’t say go Libertarian, because (1) I am not an anarchist, and (2) they are not politically viable).
This is terribly unfair to those of us who played by the rules in obtaining mortgages we could afford, not to mention the renters waiting for a housing market bottom before purchasing. Moral Hazard! Shame on Obama!
Thank you all so much for your advice yesterday. I was able to use most of your points. BTW, we LOVED your ideas, Al. If my grandparents do this, I will definitely be lobbing some of those.
My family discussed the situation last night. My father said twice that he was going to “be the bad guy” and not loan them the money. My mother’s agreement was crucial. We were able to convince her that my grandfather needs to do what most homeowners do when they don’t have enough cash to buy a new house: sell the one they own first so as not to put themselves (and my parents) at additional risk in this downturn.
Hopefully, this will delay them from buying and maybe then they will reconsider getting something closer to us.
Thanks again, guys. You really pulled me through yesterday.
A special thanks to Palmetto. If you ever visit Orange County, CA give me a shout (hllnwlz at gmail dot com) and I’ll cook for you. Or, if you too think I’m a ditzy 20-something goth chick, I’ll just buy you a round at the bar of your choosing and then you can help me pick out my next tattoo. I’m thinking “Joey” inside a broken heart. ;p
Your father may turn out to “be the good guy” in the end.
Your grandparents are playing Russian Roulette with all chambers loaded.
Sort of like “Polish roulette”. That’s where you play Russian roulette with an automatic with one round in the mag.
So glad to hear this, hlln. I hope your parents stick to your guns. And I think your grandfather will gain some idea of where the market is now when he goes to try to sell…
People act completely different when they are playing with their own money. It’s real easy to say “if I can’t sell it, I’ll just rent it out” when it is someone ELSE’S two-hundred grand you got tied up for the next 40 years.
Your dad is not the bad guy, he’s doing everyone a huge favor.
20 year-old goth chicks offering to buy beers for blog members? Tell the truth, you’re a cop sent by NAR to bust us.
ROTHLMFAO!
hll, I hope this posts. You are welcome, but I don’t think you’re a ditzy goth chick with piercings and a tatoo, nor did I think there was anything about inheritance involved, so no beer necessary, but I’ll never pass up a home cooked meal. Your family is truly blessed to have you as a member and I am thrilled that things will work out for you. Please keep us posted.
She told us not too long ago she was smokin’ hot, so I just wanna know if she has any sisters.
Everybody’s smokin hot online, don’t you know?
Ya gotta prove it to me, philly.
Glad to put my 2 cents in. Keep us posted.
Obama Mortgage Plan Effect May Be Limited, Bank of America Says
By Jody Shenn
Feb. 19 (Bloomberg) — The effect of Obama administration’s housing plan on home-loan bonds and borrowers will be limited by restrictions on which mortgages are eligible, according to Bank of America Corp. analysts.
The plan, announced yesterday, includes government payments to lenders such as bond investors, mortgage servicers and borrowers either before or after loans are reworked. It also will loosen Fannie Mae and Freddie Mac rules to allow more borrowers to refinance into lower payments, including some who owe more than their homes are worth.
Only about 50 percent to 60 percent of securitized prime jumbo or Alt-A loans meet the loan-modification standards requiring borrowers to live in mortgaged properties and owe no more than Fannie and Freddie’s loan limits, according to a report yesterday by Bank of America strategists including Akiva Dickstein and Vipul Jain. The refinancing plan will be limited by a standard preventing homeowners from qualifying if they owe more than 105 percent of their homes’ value, they said.
“Borrowers who do not qualify due to loan size can of course still have their loans modified by their servicers, but without the government incentives,” the New York-based analysts wrote. The refinancing plan “does little to help underwater borrowers,” they added.
The residents of MEW-ville will Just Walk Away…
Now McMansionville will look like Chicago’s South Side … but with less class.
Well, parts of southside Chicago were crammed chock-a-block with “luxury condos,” our local equivalent of the McMansion.
Those condo-fied parts will once again join the less “lucky” (sarcastic quotes intended) parts of the southside, but the uncondo-fied parts will still have their history and character and BBQ joints.
This link was posted a week or so ago, but I think it’s worth a re-post. It raises a couple of interesting data-points that differ from our concensus expectation regarding prices and rents.
During Sweden’s RE bubble, in the 80s, the price-to-rent ratio returned to historical levels pretty quickly, but did not overshoot. And the other surprising thing is that their price-to-rent ratio returned to historical averages by rents _increasing_ while property values declined, and then finding stabilizing at a level above their pre-bubble level.
Both of those are contrary to what I’ve been forecasting: overshoot on the downside, plus declining rents due to the historically unprecedented vacant inventory.
Any thoughts on why Sweden did not follow that course?
http://www.clevelandfed.org/Research/commentary/2009/0209.cfm?DCS.pr=20090212
Stable macro-climate outside of Sweden which allowed them to keep their jobs intact which allowing inflation to seep into wages (and hence, rents.)
Compare and contrast.
Are there perhaps some regulatory hurdles to building new flats and so on? Because it seems rather odd to me that the renter pays the sublet premium (of course it is the opposite here in the US) unless, of course, there are more households than apts available and no way for more apts to enter the market. Either that or no prop. tax, allowing owners to keep flats off the market indefinitely.
Anybody?
A stable macro-climate sure makes recovery occur more quickly, but it does not seem like it would counteract the fundamental pressures of over-supply due to a building boom.
I’m leaning towards pinning it on currency devaluation—after all, they did move from fixed-exchange-rate to floating in 1992, which caused a significant devaluation; I’m guessing that caused inflation in many things, including rents.
Still, interesting nonetheless.
Well I’ve been argueing for a couple of years that downside overshoot is limited by the intentional landlord market. If a poperty is priced such that it will cashflow on year 1, SOMEBODY will likely buy it, even if they just want to rent it out.
Then, what exactly happened between 1993-1995?
Fear will prompt revulsion just like it did the last time. Especially when rents are dropping, and renters are aggressive.
How are rents tracked?
“Fear will prompt revulsion just like it did the last time.”
+1
Even potential intentional landlords become more risk-averse after such a broad-based event.
And it is hard to convince oneself that a property will cash-flow in an environment of declining rents.
Plus even so-called “intentional landlords” will have to have cash or good credit in order to act and provide such price-support.
don’t know any details about Sweden at the time, but I guess the answer is that there was some kind of market regulation changing the outcome. Sweden has very strong government meddling in many parts of the economy (and society in general).
I have mentioned before that continental Europe seems to be following a very different path from the US + UK) in going through this credit crisis, and is not just ‘1-2 years behind’ like most on this board think. Wages are increasing instead of decreasing, inflation is significant (no sign of deflation), very little decrease in home prices (up to now). Of course the EU housingbubble will pop, but the path will probably be different.
Rick Santelli on CNBC this morning. My new hero.
http://www.cnbc.com/id/15840232?video=1039849853
So California rammed the budget through last night and we all now have the dubious distinction of being the highest taxed state in the union.
I probably wouldn’t mind so much if I felt that this budget would last more than about 6-8 weeks before the controller notifies the governator that we’re broke, again.
California is soooo foooked. You’ve got the most liberal liberals & most conservative conservatives. Both are clueless. God bless. Hope you don’t get eaten by roving bands of starving illegals.
I love the CNNMoney article on it this morning:
“The budget package includes tax increases, spending cuts and borrowing to close the deficit.”
It then goes on to say, “Rather than approaching this unprecedented crisis with gimmicks and temporary solutions…”
I don’t know, but when I “balance my budget” using my credit card isn’t part of the solution. And how is borrowing NOT a temporary solution? Oh! Do they mean that borrowing will always be part of the solution?
The budget also includes a planned overall spending INCREASE for the next fiscal year of 6%.
The state is being held hostage by the labor unions for state workers and educators.
The whole legislature should be recalled, good, bad, or ugly. We couldn’t do any worse.
highest taxed state? which component? sales, income, property? overall california is about 6th highest taxed state in the union.
http://finance.yahoo.com/news/Oil-prices-surge-on-report-of-apf-14412863.html;_ylt=AieVhCFTw.FxB.23e1wUDjC7YWsA
So we have seen the effect of demand destruction, are we now going to begin to see the effects of production destruction?
There is a reference above to Goldman sucks prediction of $200/barrel oil. I think they were certainly right on price, but they missed on target date.
Worried about the economy? Relax!
Just think of the Stimulus Package as the Democrat’s fertilizer for the GNP.
We need more Pelosi in the economy.
Pelosi is to the economy, what horse manure is to oats and roses.
Don’t mind the smell, just spread it around.
Give it time to work.
Rain doesn’t hurt either. In fact, it has been said about spreading Pelosi, the wetter the better.
“…In fact, it has been said about spreading Pelosi, the wetter the better.”
cobaltblue shares with the HBB world…his “long” & deep…thoughts.
The “Young Repubicans” are now fed for the day.
Pelosi is the new Santorum?
Ewwwww!
This morning, i wrote Wisconsin senator Fiengold an email.
I sent hime a picture onf Nancy Pelosi hugging Stanford at the DNC Convertion, during a donors party. Under it I placed the word
GREED!
In context, I used the quote of Will Rogers, made during the last great depression. ” We have the best government money can buy ”
I also used the quote in cool hand Luke.
” What we have here is a failure to communicate ”
End emqil.
Next a question. So Obama signs the stimilus package and the average single tax payer gets an additional $7.50 a week on their check. Hurah!
Wiscons’s Doyle just submitted his 2009-11 budget. It call for a gasoline tax, an add on tax on income and raising fees on just about everything. i figured it out to be about an $8.00 a week increase on everything I use or purchase.
These politicians are without reservation, the best that money can buy.
So, not sure why but a few posts (some without links) haven’t gone through. Oh well.
One thing was - anyone note the Fannie/Freddie thing - raising the backstop level from $200 Billion to $400 Billion. I’m not sure why that’s not front-page news.
And here’s a lovely gem from the article:
“Officials said in September that $200 billion was much more money than the companies would need. Officials now acknowledge that won’t be enough to calm investors. Yesterday, they said that $400 billion would be much more money than the companies would need.”
Oh yes. Mastery.
LOL. How “much more”?
And if its much more, then why don’t they ever ask for: $400B - (much more than needed)?
This may have not been posted, due to a back button push, so I’m posting again.
I wrote Senator Fiengold this morning, enclosing a picture of Pelosi hugging Stanford at the DNC donors convention party.
I used two quotes, to define the picture.
1. Will Rogers ” We have the best government money can buy ”
2. Cool Hand Luke. ” What we have here is a failure to communicate ”
Next, Obama signs the stimilus and the basic tax break to us is $7.50 per week. Hurah!
So, Wisconsins Doyle submits his budget for 2009-11, calling for a state gas tax increase, fee increases, a add on tax to income, the list goes on and on.
Be a republican or a Democrat,
Will Rogers was correct. As far as communications go, a picture is worth a thousand words.
My guess is that their will not be x1 Republican on the list of 17,000
(As I’m reminded every day by “yelling-AM-radio/TV/blog” in America…only Democraps are: unpatriotic & unAmerican and would do something to avoid paying taxes)
“…Switzerland’s largest bank and U.S. officials have been negotiating intensely since allegations surfaced last year that UBS helped as many as 17,000 Americans conceal up to $20 billion.”
UBS move shakes foundations of Swiss bank secrecy:
http://news.yahoo.com/s/ap/20090219/ap_on_re_eu/eu_switzerland_banking_secrecy
17,000 more people in prison would be stimulative to some portion of the economy.
maybe they can rotate the pot smokers out … they can get new jobs as prison guards
SEC Uncovers Ponzi Scheme Targeting Deaf Investors
* Thursday February 19, 2009, 12:14 pm EST
The Securities and Exchange Commission obtained a court order halting an alleged Ponzi scheme by Hawaii-based Billions Coupons and its CEO Marvin R. Cooper that was targeting members of the Deaf community in the U.S. and Japan.
The SEC alleges Billions Coupons and Cooper raised more than $4.4 million from 125 investors since at least September 2007 by holding investment seminars at community centers for investors who were deaf.
The SEC is also alleging that Cooper pocketed at least $1.4 million in investor funds to pay personal expenses as well as purchase a new home.
This is the latest in a series of investor Ponzi schemes uncovered since the mammoth $50 billion investment fraud caused by Bernard Madoff was revealed in December.
My father would definitely qualify for this investment “deal.” Good thing he can do math as well as he can.
O.k., seriously, it’s time to put some heads on sticks.
Yeap. Seriously.
Otherwise, what law?
There will be more. A LOT more.
We are about to see just how corrupt this country really is. The Enron, Worldcom, Tyco crimes were nothing compared to what’s about to happen.
Spoke to a Realtard today (because I am a glutton for punishment) and was informed that Realtors will now be reporting the total time that a house has been on the market, including periods where it was pulled off and relisted. This is being done, she informs me, as a matter of full disclosure to would-be buyers, because the former measure of the # of days on the market (DOM) could be abused by sellers who modestly lower their price so that the house appears to be a new listing.
So I ask her about a house I knew to be on the market for nearly a year with five or so markdowns to date. She tells me that it has been on the market for 18 days, and that that is the actual duration of the listing. I’ll give her the benefit of the doubt and assume that the new rule is not retroactive or that she is just another realtard idiot.
Wonder if they’ll do that for my area. I’ve been following a house that the builder has had on the market for almost five years. He took it off for 90 days at one point to refresh the listing. One neighboring house is in foreclosure, and another recently sold as a REO. He isn’t just going to give it away, you know!
I would love to know what percent of buyers snapping up homes in Chula Vista and Fontucky are investors with gambling money left to burn.
Southern California home prices fall to 2002 levels
January median sales price falls 40% from a year earlier, to $250,000. But lower prices are luring buyers; record January sales are reported in Fontana, Palmdale, Chula Vista, Oxnard and elsewhere.
By Peter Y. Hong
10:06 AM PST, February 19, 2009
Southern California home prices continued their decline in January, falling to 2002 price levels, a real estate research firm reported today.
The January median sales price for all Southern California homes fell to $250,000, a 40% drop from the same month a year prior, according to San Diego based MDA DataQuick.
The falling prices were again driven by sales of foreclosed properties, which comprised nearly 60% of all homes sold in the region. Consequently, the lowest median sales prices were reported in San Bernardino County ($162,000) and Riverside County ($195,000), where foreclosures have been rampant.
Los Angeles County’s median sales price of $300,000 was down 35% from January 2008, while Orange County’s median sales price fell 29% to $370,000. San Diego’s median of $280,000 was down 35% from a year ago, Ventura County’s median fell 30% to $335,000.
knife catchers on the loose.
Prudential Parent Disqualified From Commercial Paper (Update1)
By Andrew Frye
Feb. 19 (Bloomberg) — Prudential Financial Inc., the second-largest U.S. life insurer, lost eligibility for the U.S. commercial paper program after a downgrade by Fitch Ratings.
“We no longer have the ability to borrow funds from the Commercial Paper Funding Facility” through the holding company, said Bob DeFillippo, a spokesman for the Newark, New Jersey- based insurer in an interview today. Prudential’s insurance unit still qualifies, he said.
“The company’s liquidity requirements are not dependent on the access to the commercial paper market or to debt capital markets,” he said.
Prudential’s short-term debt rating was cut by Fitch to F2 from F1 after the insurer posted two straight quarterly losses. Competitors Hartford Financial Services Group Inc. and Genworth Financial Inc. previously lost access to the commercial paper program after downgrades.
Fitch said the insurer’s level of debt may limit “financial flexibility in the current environment.”
Great. I smell insurance rate hikes in the offing.
Short story…
My spouse has annual investment checkup with brokerage guy. They go over pie charts, discuss re-balancing. Spouse keeps tabs on finances, let’s just say intensely.
Investment guy offers a line of credit plan.
No credit now needed, thankfully. This is a debt-free medical biz.
Then comes the pitch for a special credit card.
No, thanks. Yawn.
Investment fellow did manage to sway spouse into a short-term CD with a rate of more than zero. So spouse says OK, let’s go for it, they settle on an amount, and arrange a wire transfer from retained earnings at commercial bank to the brokerage firm. All is well… until spouse is leaving, when she asks for a verbal confirmation about the investment. Too much paperwork. Always good to hear what is happening or agreed to.
The person who made the transfer looks aghast. “Oh, that was an incoming transfer? All we have been doing lately is transfers out.”
Spouse says the vexed broker “had a face that looked like a mushed eggplant.”
They tidied their reckonings and the meeting ended.
Wife of milkcrate reports that vexed broker had face resembling mushed eggplant.
Oh, man. I dream of writing sentences like that.
I dream of selling pictures.
I would fire the broker.
What utility is he providing?
What utility is he providing?
One less FIRE assclown lurking on the streets in an ill-fitting suit.
FPSS
None, really.
But we can’t self-direct e.v.e.r.y.t.h.i.n.g.
Good advice is hard to find. Cash seems to be a good place.
Btw, you were spot on not to hold UYG for too long.
Sure you can self-direct.
How hard can it be? It looks like you’re doing all the hard work anyway. And it’s all online now.
+1
What part of self-direct is so hard?
And having someone else involved just adds expense and increases fraud-risk.
Prime:
Aware of the fees, and understand the added risk of fraud.
And none of the advisers ever say anything that we really don’t know, or at least intuit.
The advantage of having a third wheel is the two main wheels don’t create two much friction amongst themselves when business investment decisions, as they will at times, go south. CPA who is usually not selling products serves as extra pair of eyes. That also preserves peace on the home front.
Your mileage may differ.
“The advantage of having a third wheel is the two main wheels don’t create two much friction amongst themselves…”
I can totally understand the value of using a “lubricant” to reduce friction.
Point taken.
Feb. 19 (Bloomberg) — Nouriel Roubini, the New York University professor who predicted the global credit crisis, said a “sovereign bank may crack” as governments try to bail out their financial systems.
“The process of socializing the private losses from this crisis has already moved many of the liabilities of the private sector onto the books of the sovereign,” said Roubini on his blog today. “At some point a sovereign bank may crack, in which case the ability of the governments to credibly commit to act as a backstop for the financial system — including deposit guarantees — could come unglued.”
Roubini didn’t identify any individual “sovereign bank” that might run into difficulty.
——————————————————————————
That could make the dollar go up some unless of course its the American Sovereign bank that cracks
Had to laugh last night as Cramer was bad-mouthing Roubini as “only a professor” or something like that, that he’s never actually run anything.
There’s some truth to that.
What’s the use of being as right as he is if he didn’t bet using it?
+1
I was frankly a bit shocked when I heard him say recently in a TV interview that he was almost entirely in cash. Sure, I am mostly in cash too, but the small percentage in targetted shorts has done quite well in the last 1.5yrs.
To know with clarity what is going to occur, and not take any action to capitalize on it strikes me as rather foolish.
Actually, he doesn’t know with clarity. Plus, he’s simply not trained to think in a trading context, trying to read balance sheets and generally, figure out what’s next.
And wishful thinking gets in the way. Along with all that efficient markets h*rseshit.
Either way, I am not impressed.
Fair enough, but I took it as Roubini doesn’t know anything either.
Well, that was obviously the intention, and I wouldn’t take that jackass doing an entertainment show, and talking his buddie’s books terribly seriously but I just thought there was a slight kernel of truth to it.
Most economists are terrible traders. You need to understand finance and accounting but you gotta understand other people’s reactions too. You gotta be right but you gotta bet right before other people figure it out.
Centex stock down 13% today. Note this comment from the Yahoo message boards:
Wait until this builder has to take the massive mortagage losses
I worked with this builder as a sales rep and most of the deals we closed over the last 2 years were FHA deals with DPA for down payment assistance. Most of these buyers could barely afford these homes and most had no back up money in the event they lost their jobs. With this economic down turn many people are losing jobs mainly because most of the economy in this area was sustained by new home construction which is now almost non-existant.
CTX mortage, owned by Centex Homes will have to buy back all the bad loans that defaulted within the first 12 months of origination, which is the majority of them. Keep in mind this is only 1 division and I know of many other that were doing the same thing. Builder that had their own in house lenders are the ones really in trouble. Most of these losses have not hit their books yet. This ship has too many holes to plug and is taking on water quickly. Bail out while you can before you go down with it.
(The parrot on hwy’s shoulder… loudly yelling):
“Squuuuaaaaaak, Squuuuaaaaaak… less than 1 dollar”
“Squuuuaaaaaak, Squuuuaaaaaak… less than 1 dollar”
(parrot head bobbing up & down)
Somebody yesterday brought up that stupid book “The Roaring 2000s” (well, I guess they were roaring for some well-connected hedgies, but they weren’t exactly great for retail investors in US equities, which I believe he was pumping big time).
That reminds me of a coworker/friend of mine named Jim. He was telling me in 2006 about how the Dow was going way up. He was half-right (blew up to 14K before crashing). I remember in 2008 he had all these theories about how to get oil prices down, which he dutifully emailed to his senator. When the bubble burst, he went on and on about how he was right about needing to drill offshore. (Dude, it’s called talk therapy since that oil would not be hitting the market for three years! Yeesh.)
He’s a really nice guy, but a complete idiot wrt finance. I think his habit of marrying women who are smarter than him (his first wife tragically died of cancer while their kids were still young) is the only reason he’s still solvent.
Get Ready for Mass Retail Closings
Posted Feb 19, 2009 11:58am EST by Tech Ticker in Investing, Products and Trends, Recession
About 220,000 stores may close this year in America, says retail consultant Howard Davidowitz of Davidowitz & Associates. As more Americans save and spend less, it’s clear there’s too much retail space. Just visit Web site deadmalls.com and track retail’s growing body count. And luxury retailers? They’re on “life support,” Davidowitz says.
Among the brandname stores Davidowitz says are in trouble:
Nordstrom
Neiman Marcus
Tiffany
Jeweler Zale Corp.
Saks
J.C. Penney
Sears
Other than Craftsman tools from Sears, I have no use for any of the retailers on this list. And I suspect that I have quite a bit of company on this blog.
The first 5 I don’t think I’ve ever even stepped foot in.
Except for Nordstrom’s shoe department, I agree with you.
Oh, and Sears service departments. We had a couple of nice, and honest, guys come over to fix our garage door opener recently. We were all set to pay $450 for a new one (it’s 19 years old) and they said all it needed was a couple of parts. Cost us $195.
Sears svc/tools is the only business worth saving. Appliances is too competitive and their apparel is circling the drain.
Quite frankly, the wife and I have been *inside* Sears a number of times, only to discover they did not have the item we were looking for or did not have any item in our size–one of us is avg size, the other quite petite.
Nor did they have anything exciting enough to alter–I’ve altered or we’ve had friends or paid someone to alter quite a few garments in the last few years.
PS: I guess I should have gotten Jan 10 LEAP puts back in ‘07, the Year That Retail Refused To Die. Damn, I got so frustrated trying to short the retail index!
Penney’s has some of the best deals on linens. I spent some time comparison shopping for sheets awhile ago and Penney’s had the best prices on 400 tpi sheets.
Neimans, Saks, & Nordstroms are generally more expensive than other department stores, but they have clothes made in the good old USA. Not everything, but some actually is. Also, the shoes aren’t all made in China.
WASHINGTON (AP) — Housing Secretary Shaun Donovan said Thursday it’s critically important that banks and lending institutions “step up to the plate” to help make certain the Obama administration’s new home foreclosure initiative succeeds.
“This started as a mortgage crisis but it’s become a jobs crisis,” said Donovan, speaking a day after President Barack Obama announced a $75 billion program aimed at a problem many analysts say has been at the heart of the country’s economic tailspin.
In addition to the new mortgage lifeline for millions of Americans on the brink of foreclosure, the administration on Wednesday announced an additional $200 billion in government assistance to mortgage giants Fannie Mae and Freddie Mac, the largest makers of home mortgages in America.
It’s all part of a stepped-up effort to encourage lending institutions to refinance homes for millions of homeowners considered to be “under water” — properties held by people whose mortgage payments exceed the value of their homes in the depressed housing market.
Interviewed Thursday on NBC’s “Today” show, Donovan said the administration feels certain there are sufficient requirements to ensure heavy bank refinancing, saying that could “tip the balance for millions of homeowners.”
Sheila Bair, chairman of the Federal Deposit Insurance Company, said: “There will still be some borrowers who lose their homes to foreclosure. Some of that will be inevitable. But this should have a significant reduction in the foreclosure rate, bringing it more in line with historical levels.”
“Historical” levels? What the hell is Sheila ‘dingbat’ Bair talking about.
7286 Oct. 9, 2002 closing low. 7177 Oct. 10, 2002 intraday low. 14,280 Oct. 11, 2007 intraday high. If we break recent lows, 7449, is Dow 5454 in the cards? We’re at 7464 right now.
Mystic 8-ball prediction:
All signs point to- YES.
Thank you, anycdj, for the pointer to Gawker. I like Jalopnik and io9 but really had never been on Gawker proper.
Nanashi Nogombe
3:03 PM
I did end up laying off some of my hope, after I went morally bankrupt and had to liquidate my lunches.
I find the Newyawkers’ comments on the financial crash to be out and out the funniest.
.
Deflation warning bells ring louder
“The government will report its key inflation index Friday morning, the Consumer Price Index, and economists believe the report is likely to show the first year-over-year drop in prices since 1955.
But while shoppers might see that as good news, economists generally view this as a threat to an already struggling economy.
That’s because deflation, or a widespread drop in prices, is one of the most destructive forces that can hit an economy.”
Destructive, yes. But does that mean it’s a crisis? This highlights part of the problem which is that all we strive for is growth, growth, growth.
There is a(n) (affordable, sustainable) steady-state that wants to be maintained, if we’d only let it be.
Widespread drop in prices is one of the most constructive forces that can hit an economy.
Wide spread debt-default causing the destruction of counterfeit money is not a force, it is a reaction.
The most destructive force that can hit an economy is the artificial boom caused by printing debt-based money from thin air.
It is like claiming that a warm day in the middle of winter is one of the most destructive forces to outside pipes. The destructive force was the cold days that froze the water, the warm day is when the ice melted and water starts to spray everywhere.
I would like someone to explain to me why deflation is destructive, at all.
Somewhat of a rhetorical question, but really - it’s something I have yet to see. I think that in reality:
- Every sees deflation happening during a recession/depression, and somehow confuses the cause/effect relationship. I see deflation as the fever that’s fighting the underlying disease - a very necessary part of healing.
- I think that in reality the anti-deflation argument has the bank-credit-expansion crowd at its roots. They make money through inflation, and thus lose money through deflation. The rest of the 97% of society benefits from deflation. The difference is that the rich bankers have deep media influence whereas the other 97% of us do not.
Deflation is the natural order of things as productivity and competition fuel to make goods cheaper and better.
Deflation is the PTB’s way of stealing generalized productivity gains (including wage gains) under the guise of “keeping stable prices”.
It’s obvious to anyone that understands how the game works.
I think you meant “Inflation is the PTB’s way of stealing generalized productivity gains…”
You are 100% on the mark. Unfortunately most people do not understand opportunity cost.
Sorry, inflation is the PTB’s way of stealing gains.
Sorry, sorry. Didn’t proofread.
Yep - exactly. Deflation is actually quite natural, for two reasons:
- Advances in technology make it cheaper and cheaper to produce any given item. This is obvious for things like PC’s and TV’s and such - but it’s also true for wheat, for oil, etc., as farming and drilling technologies improve. Over time a given person can produce more stuff than the same person years ago, thus the stuff should get cheaper.
- Given a constant money supply and growing amount of production due to growing population (aside from the growing production per person in the first bullet) - there’s a lot more “stuff” out there. If the money supply is constant then there’s more stuff per unit of money over time, thus deflation.
So despite what most economists say - deflation, not inflation, is the nature course of economics. So the PTB create not only enough money to keep prices constant (unnatural), but even enough to cause prices to rise! The amount of money for a given item goes up, even though the amount of man-hours to produce the stuff goes down.
(All this with ebbs and flows of course - right now being an ebb due to the depression. We had one heck of a flow upwards for a few years though! And will again, in spades)
Deflation is the PTB’s way of stealing generalized productivity gains (including wage gains) under the guise of “keeping stable prices”.
I think you meant “inflation” here.
Well, to me it IS destructive relative to where we’ve been in the bubble, meaning it destroys malinvestment in the economy (a good thing).
That’s my point. They are using “destructive” to mean that this is a crisis, which it most certainly is not.
I would argue that it is a crisis in the sense that it has a rapid and immediate drop in standard of living. It is a crisis in that it is immediately life-threatening. It is a crisis in how the government is responding to it.
Sure the cause and harm was caused in a non-crisis state as we slowly crawled out on a limb. The fact that this crisis destroys mal-investments and is ultimately good for the economy does not mean it is not a crisis.
It is still a forest fire that will destroy everything in its path including the very systems that keep us alive.
The crisis was on the way up, not on the way down. If it’s constructive, as you state above, then where’s the crisis?
I guess it’s all a matter of perspective, but I think we’re mostly talking about the same thing.
The problem is with your question which uses the word “deflation”.
One individual will point out that a shrinking money supply in our monetary system is very destructive and self-reinforcing and that the result is widespread poverty and therefore “bad”. They would be right in a certain sense.
Another individual will define deflation as a general fall in prices and yet retain conclusion based upon the other definition.
A rare few will recognize that a “general fall in prices” can also be the result of a surge in production efficiency which makes everyone wealthier and does not result in systemic debt defaults or poverty.
Fewer still will ask the question “why did the pipe burst” and so they blame it on the “warm weather” and attempt to re-freeze the pipe. This works for a while as the pipe freezes over again (and bursts in a new spot). The next time things thaw we have two or more breaks so we reapply the cold air. Eventually the entire pipe is destroyed and the entire economy falls apart losing all of its money (water in the pipe) in the process.
EU bubble update:
more stories on EU economic websites today regarding banking problems related to (mostly) Eastern-Europe mortgages, and the serious risks to the EU banking system and Euro stability. Dutch financial ING made a new low today, on worries about its exposure to mortgages in Ukraine (what’s next, a mortgage debt explosion in Georgia?). Looks like ING is going down the drain and will be taken over by the government sooner or later. Dutch banks seem to have relatively low exposure to this Eastern Europe problem, compared to big banks in many other EU countries.
Another news item is that our government is suggesting to freeze pensions for the next five years, and possibly start cutting pensions two years from now if the markets don’t improve. EU still has significant inflation so this is going to hurt for pensioners. At the same time, cutting the HMD (more and more viewed as the subsidy on luxury villas for the rich that it is) is still ruled out and in itself would solve all of the budget problems. But we can’t ask the highest income earners to pay for the crisis, can we? While pensions were frozen this year, people with high incomes have seen their spending power increase by 5-10% as a result of higher wages and new tax cuts/incentives.
Our TV news conveniently ignored both issues and focused all of the news on troubles in China as a result of the economic crisis …
On another note, I’m probably closing a deal on a new rental home tomorrow. My monthly rent will be 1/440 of the price the owner paid last year; he’s hoping I will sign for two years, but I will probably sign for just one year as I expect to see even better offers in the coming year. Just goes to show that the Dutch housing market is ripe for a huge crash …
Are we all on the same page here as far as interest rates going higher, much higher, in the years to come? I think inflation will be the default method to treat this mis-allocation of resources. It seems the only just dessert for savers eventually. You know, stopped clock pattern stuff?
Rough timeline for a similar episode in the recent past:
1973-1975 Crash like we are in the middle of right now
1976-1979 Whip Inflation Now
1980-1982 Volcker whipped inflation and beat Main Street to a pulp in the process
P.S. Interest rates were held low post-1975 and were not hiked enough to stamp out inflation until Volcker took the reins at the Fed in 1979.
Well - close but not quite. The WIN campaign was in 1975, after inflation had gone up a lot from 1973-1975. Inflation did indeed go down quite low until about 1978, and didn’t really get very high until 1979.
From Wikipedia on W.I.N.:
“The campaign began in earnest with the establishment by the 93rd Congress, of the National Commission on Inflation, which Ford closed with an address to the American people, asking them to send him a list of ten inflation-reducing ideas. Ten days later, Ford declared inflation “public enemy number one” before Congress on October 8, 1974, in a speech entitled “Whip Inflation Now”, announcing a series of proposals for public and private steps intended to directly affect supply and demand, in order to bring inflation under control.”
Interesting graph to come (if it every shows up)…
Graph showing relationship of Fed rate vs. inflation during the period:
link
(this is a *really* long link, so if it shows up it’ll be a miracle)
Ford declared inflation “public enemy number one”
Interesting how Bennie and the Fed have now declared deflation “public enemy number one,” no?
Very OT - but talk me down, could ya?
Could be possible, would it be do-able to keep people in ‘thier’ houses by basically renting them to the ‘onwers’?
Make them local govt property, sort of like Council Housing used to work in the UK?
Instead of giving the TARP money to banks, the local city, municipality, county, etc. would be given funds to employ people in a local housing department and to buy foreclosure properties with the express intention to rent them out to the former owners, or others?
Paying either auction prices, short sales or some algorithym using the last pre-bubble price plus inflation?
Banks and lenders would still lose money, but at least they wouldn’t be trying to be RE agents at the same time.
‘Owners’ would have a chance to rent their properties at local rates up to 35% of their income. If ‘their’ house is too expensive, they’d be able to downsize to a property where they could afford the rent.
The kicker being, of course, that they don’t ‘own’ any more, but at least for some they’d still be able to stay in the same property.
They’d be given a chance, through on-time payment, to fix their credit scores, and once they’ve saved a 20% downpayment, they’d be allowed to get a loan from a local bank, for a 3 x income fixed-rate mortgage, to buy back the house, should they want to.
Derelict foreclosures could be bought and fixed up (thus helping to stop the blight) and rented out to others. Lots of people won’t be able to make the mortgage in the near future, but they’ll need somewhere to live.
It just seems to me that this Hurculean effort to keep people in their houses, at everyone else’s expense, is wasteful and ultimately futile.
And there’s going to be a ton of people out on the streets, with crappy credit, trying to rent in a competitive private sector market.
Plus it would certainly put the kybosh on the ‘houses as cash-cows’ idea.
Is this a crazy idea?
Too Socialist for America?
Already been done and I’m reinventing the wheel?
I just can’t imagine Golden Palace not bidding on this Ebay auction:
330306913609
(I omitted the full URL link; just type the auction number in Ebay search box)
Christian Bale time-share?
Call Pilosi! This could be worth $50,000,000.00 for Palm Beach County.
Mice scamper, leap, fall from ceilings in courthouse
By SUSAN SPENCER-WENDEL
Palm Beach Post Staff Writer
Thursday, February 19, 2009
Of mice and men, there are tales aplenty at the Palm Beach County Courthouse.
Mice falling from ceiling tiles, scuttling down corridors, munching papers and potato chips - so many sightings some staff check their handbags for stowaway mice before leaving the building each day.
Vegas Book has called the Bank Failures on Friday +/- 3.5
any takers?
Things are worse for the US dollar than you think. President Obama tried to pay for some Maple Leaf cookies today in Ottawa and I don’t think the money was accepted.
USBank just sent me a change of CC terms: rate for purchases/transfers up from 12.5% variable to 14% variable, delinquency rate up to 29%! Wow!
They made of point of saying it’s not about me; it’s about them:
“Please note that these changes reflect a general adjustment in our credit card program and are not a result of your personal history with us or your credit score.”
I really couldn’t care less, since I’m a “freeloader” and pay in full each month. Not sure what the old delinquency rate was, either.
It’s interesting to see them cranking up rates when rates are at historical lows, though.
I think mine is 30+% too.
What is that? Borderline paycheck-cashing territory?!?
LOL
Sorry, freeloader here. They know that actually. They want you to make a mistake. More likely, they are gonna lose me to a competitor.
Actually, the term the bloodsucking leeches in the lending industry apply to people who pay their credit card bills in full each month is “deadbeat.” It would be kinda funny in and of itself, but now that the inability of their best cash-strapped customers to repay their subprime credit card debt has put bloodsucking leeches on the endangered species list, it is riotously funny!
With Credit Cards, Being a Deadbeat is a Good Thing
By LaToya Irby, About dot com
Merriam-Webster dictionary defines a deadbeat as someone “one who persistently fails to pay personal debts or expenses.” So by definition, you’d think a credit card deadbeat was someone who didn’t pay their credit card bills each month, whose accounts end up getting sent to collections or charged-off or both. Not so in the credit card industry.
The credit card industry, infamous for making up their own rules, says that a credit card deadbeat is someone who doesn’t pay their credit card bills on time each month. That definition is nothing the complete opposite of the one from Merriam-Webster. So who which are you going to trust? Here’s why you don’t want to listen to what the credit card industry says.
My unsecured cc has a rate that is some unknown to me % above the prime rate. Most rate cuts have been passed on except one last fall. The current rate on my cc is 6%. The limit is more than I make in a year. Banks are crazy.
Red Alert! Transports broke support and made new lows. Industrials followed and made new closing lows.
Dow Theory sell signal.
there is no bottom.
might see support at 6500 DJIA.
collar holler……Ben run the post above….people are still waking up. 40 FDIC banks in a day……thats a stress test.