Bits Bucket For March 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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So what has this wonderful new Fed conspiracy to use dollars that didn’t exist yesterday to buy dollars that don’t really exist today do to those of you holding out for an SKF purchase today?
Thank you C+C Music Factory for these things that make me go hmm.
I don’t know about SKF, but it did wonders for my UYG.
UYG? Not FAZ? Come on, dig in, banking sector stocks can only go up!
You know, something in my heart of hearts just don’t seem right about the leveraged ETFs (I own UYG, so please don’t think I’m bashing).
FAZ is 3X leveraged. They appear, every few months, to come out with an ETF with more leverage on it, I’m sure 5X is next, then 10X… Well, something just doesn’t make sense here. If we can keep increasing leverage forever, why not have a ticker (new for the day) with a 1 dollar par price and 100,000X leverage. If the market goes up 1%, you make 100,000X that (or 1000 dollars), if it goes down, the instrument goes to 0 and is removed from trading for the day. The thing is, they can only go to 0, you can’t have a stock with a negative price (although, with the banks, perhaps we should remove that rule). The more leverage you put in, the more upside you have with the floor remaining the same.
Where does this money come from? Who’s got the “other side” of the bets for these ultra-leveraged ETFs? It just seems like you can continue to make derivatives, eventually winding up at a 100 to 1 leveraged ETF without much trouble; take the movement of FAZ, double it a few times, and now you’ve got 100 to 1 leverage.
Something just doesn’t seem mathematically “right” about this. It seems like something has to fall apart when you start to put in the leverage ratios like 2 to 1 or 3 to 1 (that would become more obvious at 100 to 1, or 100,000 to 1).
Just keep making 1 dollar bets until you hit, eventually the market will have an up day, and every 1% you make 10,000 dollars (on your 1 dollar bet).
I don’t know, maybe I’m not thinking about it correctly. It just seems like in all other areas, leverage has a downside (you can wind up at less then 0 because you borrowed money, or, with an option, there’s a time restriction, and you’re paying for time value).
“(you can wind up at less then 0 because you borrowed money, or, with an option, there’s a time restriction, and you’re paying for time value)”
That’s where the huge payoffs to qualifying for too-big-to-fail bailouts come into play.
Just wait until Bernanke announces the FED is going to be buying ETFs? I think they already do as part of the PPT which could even be the reason behind the creation of some of these Hi-Lev ETFs.
Yes - but don’t you understand - they have NO CHOICE!!! The stability of our entire financial system depends on it!!!!1111oneone.
Well, the stability of THEIR system (inflation = destroys savers and salaries, rewards the parasites) depends on producing infinite money out of nothing. Sheesh - you weren’t expecting your salary or savings to be worth something, were you? Now, back to work ! AIG’s bonuses depend on it!
1.2 TRILLION and NONE of it to help poor ole me get a job, or help pay down my Credit cards so i can buy a suit for the non existent interviews.
Sign up to work for the 2010 Census; plenty of jobs if you’re smart enuff to get a good score on their test…..no more than one or two wrong out of maybe 100 questions. Are you up to it??
A.B. - by chance, you don’t live in Oil City do you?
Negative. Rosemont, Illinois when I’m stateside. Come visit next time you have a long ORD layover.
Ooh, 8:30, time to watch the market. Can’t log into TD Ameritrade, guess it’ll be a fun day.
A.B. - do you know of the Cavaliers drum and bugle corps, in Rosemont, Illinois?
I marched Phantom Regiment, down in Rockford - in case you do.
Of course I do — they’re just down the street from my condo complex.
Thanks for the reminder — I should sponsor one of the young dudes who can’t afford the uniform.
As for Rockford, how logn ago did you march with the Phantom? I used to own one of the paintball fields just outside of Rockford until a few years ago.
Every layover in ORD is long. That place is frequently unescapable.
I live about 5 minutes from ORD. My regular pub is 30 seconds from my flat, and it’s open till 4am. If you’re laying over, drop me an email and lets do drinks.
Dodd says Bammy’s admin officials asked him to add language to the stimulus bill protecting AIG bonuses.
http://www.cnbc.com/id/29763023
O’Bama’s Irish brethren O’Geithner being one of those O’Fficials, you think?
First he was outraged, then he was surprised, then he was blamed, then he blamed the other guy.
Confidence builders, all.
What do you call legislators who do not read the bill before the vote? Subprime.
Dodd specfically said that *Treasury* added the language removing the ability to modify preexisting bonus contracts during last minute negotiations. Last time I checked, Treasury is Geithner.
There was an article a few weeks ago explaining how Geithner also lobbied the rest of the administration (virtually everyone else in Obama’s cabinet) against putting limits on executive compensation. He was successful.
Geithner is dynamite…meaning he is about to blow up in the administration’s face. Get rid of him.
The Treasury can write law now? Wow.
Yes, the administration and Congress conduct backdoor negotiations so that they draft a mutually agreeable bill the president will sign and not veto. Nothing new…this has been going on hundreds of years.
As opposed to all the lobbyists who were writing law during the former administration. Lets face it, while congressmen pass all laws, they’re not neccessarily the ones writing them.
I’m not defending the past administration. I don’t talk about it much because its gone. Now we have this one.
And we’re talking about Congress, not the presidency anyway. Congress is responsible for writing laws. Anything else is giving them a pass for neglecting their duties.
Lets face it, Congress passes all laws, but does not write them, read them, or understand them.
Geithner is doing a terrific job, exactly what he was hired for: protecting the financial interests of the Wall Street elite. The Obama administration is either financially clueless or they have the same goals …
nhz: The Wall Street elite aren’t the ones Geithnew is protecting. Those who profit from whoever is in charge of the Wall Street firms are the ones who are looking for protection.
I’ll give you a hint as to who they are. Unscramble the following anagrams and win an ounce of silver from yours truly:
ONE SLY PANIC
SO DITCH, DROP HERD
JIBE DONE
HECK ICY END
HI, A LINCOLN TRY
Sorry to make up anagrams of mostly one party, but I’ve already forgotten names of the other ones.
So who wants to guess all 5 for a nice, shiny, U.S. silvery dollar?
Nancy Pelosi
Christopher Dodd
Joe Biden
Dick Cheney
Hilary Clinton
Do I get the Silver, assuming I don’t get filtered?
Excellent anagrams and decoding effort!
RE: Confidence builders, all.
Don’t forget STOOGE #3!
She’s certainly not going to be upstaged by such banal problems as bonus pay-out’s to financial fraudsters and the currency printing presses creating a cool trillion out of thin air!
http://www.foxnews.com/politics/2009/03/18/pelosi-tells-illegal-immigrants-work-site-raids-american/
That`s right madam speaker
Nothing say`s America like.
Baseball, hot dogs, apple pie and illegal immigrants on the job.
God bless Nancy Pelosi and god bless Estados Unidos
“On Tuesday, Dodd denied to CNN that he had anything to do with adding the language”
The devil made me do it.
I didn`t know I got ant special treatment on my mortgage.
It`s Bushes fault!
“It`s Bushes fault!”
Oh, yah, this admin and CONgress will be dining out on that one for years. I don’t deny that shrub did some pretty crappy stuff, that needs to be remedied. But here’s a little story: back before the CONgress got a demo majority, I called my dem Senator to complain about something or other, probably the Iraq war. The local staffer whined “It’s this Republican Congress”. Boo-hoo, sniff. So what happens when they get a majority? Impeachment is off the table and they can’t get those bailouts going fast enuf. Eff ‘em.
Not even 60 days out and they’re already making the Bushies look good.
Change
lmao
I’m ready to invest in a new cable news network called CN: whenever they have politicians or politicos on, they will pause after every sentence spoken and display 3 seconds of “CITATION NEEDED!”
Maybe that will let the sheeple think.
I’ve been considering a new voting mechanism that lets voters rescind their vote at any time and redeem it for another candidate. If the new vote totals sway enough, just replace the guy in office with the other guy. We could have some fun!
“vote of no confidence” would be a major reform
As Geithner’s burdens grow, skeptics multiply
By Jackie Calmes
NEW YORK TIMES NEWS SERVICE
2:00 a.m. March 19, 2009
“He is making all the right moves in terms of playing a bad hand,” President Barack Obama said about Treasury Secretary Tim Geithner
WASHINGTON – All three of President Barack Obama’s top economic advisers were on message when they appeared Sunday on separate television talk shows. They said Treasury Secretary Timothy Geithner had concluded, based on lawyers’ advice, that he could not stop the $165 million in bonuses that American International Group was even then doling out to hundreds of employees.
But when Geithner and other officials met at the White House that night, the president’s political advisers – who had agreed to the day’s message – decided the growing outcry left Obama no choice but to publicly second-guess his Treasury secretary. The next morning, the president said he had directed Geithner to find a legal way “to block these bonuses and make the American taxpayers whole.”
The next morning, the president said he had conspired with Geithner to find a legal way “to appear to block these bonuses and make the American taxpayers whole, minus the 50% the State is already taking from them.”
There, fixed it for you.
“They said Treasury Secretary Timothy Geithner had concluded, based on lawyers’ advice, that he could not stop the $165 million in bonuses that American International Group was even then doling out to hundreds of employees.”
Yeah, right. I have a feeling anyone on this board would have said just let those AIG employees try to sue the U.S. Gov’t for their bonuses, and good luck with that.
Most of those folks worked in the UK.
I believe that it would fall under the WTO. I’m sure they would win.
How come Raines skates?
Franklin Raines
Fannie Mae was always a political beast, but it reached its elbow-swinging heights during the time when former Clinton administration budget director Franklin Raines sat in the CEO chair. Under Raines’ leadership, Fannie overstated earnings by a stunning $10.6 billion, all the while paying Raines and his senior management team massive bonuses.
It was under Raines’ management that Fannie morphed from being a company in a sleepy business — issuing debt to buy mortgages from lenders — into a far more risky and exciting one: buying up mortgages and holding them, thus capturing the spread between its borrowing costs (which were lower than anyone’s other than the federal government’s) and the interest rate received. It was a great business, except that it had nothing to do with Fannie’s charter. According to a May 2006 report from OFHEO, Raines became obsessed with keeping earnings per share as high as possible and motivated management to achieve that goal by setting up a bonus system that rewarded increasing earnings per share (EPS).
The thing is: Any company can hit an EPS number if it doesn’t worry about little things like accounting rules, debt levels, and risk factors. All told, Raines pulled in some $90 million between 1998 and 2003, the majority from bonuses. And when OFHEO began to ask uncomfortable questions, Raines actively lobbied Congress to cut its funding. In April, Raines agreed to disburse $24 million for his role in the accounting “errors.”
Wisconsin lawmakers want to recoup AIG bonuses
By Diana Marrero of the Journal Sentinel
Posted: Mar. 18, 2009
Related Coverage
AIG CEO says some executives have begun to return all or part of bonuses totaling $165 million
Washington - With public anger growing over hefty bonuses for executives at the bailed-out insurance firm American International Group, members of Wisconsin’s congressional delegation are exploring ways to snatch the $165 million paid to company officials.
Rep. David Obey, one of the most powerful members of the House, is co-sponsoring a measure to impose a 95% tax on the bonuses paid to employees at companies that received any federal bailout cash.
Rep. Gwen Moore, a Milwaukee Democrat, sponsored her own bill to tax 100% of bonuses paid by bailed-out firms. “The fact that some on Wall Street have sought to exploit the public tax dollars is not only outrageous but is an egregious violation of the public’s trust,” she said in a statement.
Obey and Moore are among a number of lawmakers who have introduced bills this week seeking to recoup AIG bonuses. They are acting in response to disclosures that dozens of employees at AIG recently received bonuses of at least $1 million despite the ailing health of the company. AIG received about $170 billion from the federal government.
http://www.jsonline.com/news/statepolitics/41473297.html
Ohhh I hope Freddie and Frannie are included in this tax the bonuses. I would like it even more if Congress would tax themselves. Well I can dream can’t I?
B of A, Citi, hell anyone that got free money. I say tax prior CEO’s at 95% as well for ill gotten gains.
for sure all the companies that got bonus money through AIG (like Goldman Su***) should be included.
Maybe they can also claw back bonus money from Dutch financials ING and Aegon, who also received loads of money through AIG. The Dutch government is not doing anything about it despite growing public outrage, and the ING bonuses are FAR bigger than those at AIG.
“He is making all the right moves in terms of playing a bad hand”
Doin’ a heckuva job, Timmie?
Funny how moral hazard comes back and bites you in the face . What was this about put out the fire first and than deal with the details later . Feed money into a Corrupt orgination and than deal with the corruption later .
If you protect thieves ,and even give them additional money to play with ,you get what you get. Does anyone find it funny that the new public servant to lead AIG was the CEO of Allstate who just happened to retire and take on the job for free . Didn’t Hank Paulson just happen to retire from Goldmans and happen to be available for the Treasury Job .
Get real everyone ,the remedies are being contrived by the very group that wants to pick and choose which thieves will get public bail out funds . Who is protecting Main Street
these days I wonder ? Its clear that a certain Investor class has been protected and many unregulated corrupt Orginations have been protected .
This absurd show of Congress/Senate trying to get the money back from the crooks is funny really . The usual culprits are in the mix ,Senator Dodds ,the Treasury ,you name it . I wonder what is going to happen when the regular people realize that the money could of been spent much more efficently ,and Obstruction of Justice has a price to pay . I don’t know if they are just trying to buy off the theives to not talk or if they really thought they needed the same band of theives to carry on business as usual . Anybody accept the notion that they needed this group of workers that got this compensation to wind down the Casino Bet insurance division of AIG .
I really can’t wait until this show is made into a movie some day . The problem is that right now you don’t have any heros in the movie ,and maybe the American people will become the heros in the future movie .
Let’s not forget how some of our fellow Republicans were against capping executive compensation:
GOP’s lame attempt to blame Dems for AIG bonuses
Republicans and executive compensation limits
http://tinyurl.com/c46etp
Doesn’t do us any good with creeps like Dodd and Schumer in there, bought and paid for by the FIRE economy, and when you have Obama being sucker enough to appoint a douche like Turbo Tax Timmay to guard the hen house.
He could have called Robert Reich, you know.
I’m in Miami and staying at the Fountainbleu (free trip from boss) and you wouldn’t know there’s any recession here. I’ve already seen big empty condo towers and lots of cranes.
Key word ‘empty’.
So, the Fed is buying Treasuries to lower mortgage rates and printing new monies to buy agency MBS for home shoppers to get loans. Plus, there is the $8,000 tax credit for first time buyers. Will it make a difference?
Could sales gain additional traction? Will prices continue to drop, flatten, or rebound? Will most of the money go to refinancing existing loans? Or, do you think it will not make a difference b/c the total available amount of credit money going toward housing is smaller than yesteryear?
I think King Kash has been deposed. His loyal subjects were confronted yesterday by the appearance of a trillion cannibalistic King Kash lookalikes. Not trusting any particular King Kash, the formerly loyal subjects have been tasting heavily of Mello Yellow to calm their nerves.
There are still trillions of dollars destined to disappear. Good luck in trying to reverse this.
Events need to run their course.
This is targeted directly at home prices, however. The Fed is essentially using its balance sheet to buy homes. It will own approximately 70 pct of all new home loans. If the Fed succeeds, will dollars continue to disappear?
Maybe we’ll all be issued FED credit cards, with special perks for going into debt.
In any economy with inflation (as defined by the Austrian School — an increase in money supply), there is ALWAYS a perk to getting into debt: paying off the purchase with depreciating dollar value.
The wealthiest people I know are those who buy ultralow and sell at the eventual equilibrium point, or pre-bust during the next boom phase. I have quite a few friends who leveraged to buy rental properties pre-violent-boom, and got out a year “early” but did surprisingly well. They’ve done the same with other assets and investments.
As long as the value of currency held falls, leveraging really cheap purchases is a great proposition. The trick is to get out before the cab drivers are talking about whatever it is you bought.
I’m a risk taker, but I prefer to make my money by earning it. If I had lower morals, I’d probably leverage away.
Why is leveraging “immoral”?
Greenbacks don’t have morals. I don’t see any problem with leveraging if you understand the game.
Do you share my sneaking suspicion that, at some level, whatever A. B. Dada thinks he is doing w/o depending on leverage is leverage-dependent?
Considering that almost all of my wealth is in profit-generating assets, or physical bullion, I’d be surprised if anything I did was leverage-based.
The only “trading” I do is on the SEP-IRA that my accountant pretty much forces me into every quarter pay-period.
Oh, I do have a credit card (from a credit union), but I only use it once in a blue moon. I prefer my Chase Mileage Plus Debit Card for my daily spending.
Why is leveraging “immoral”?
Leveraging is immoral when you become too big to fail and expect the taxpayers to rescue you when it blows up in your face, and give the profits to your CEOs and shareholders when it doesn’t
Good question - a lot of the morality/legitimacy of it depends on whose greenbacks you’re leveraging, I suppose.
Any time you are borrowing money you are using leverage.
Any time you are borrowing money you are using leverage.
Technically, NO.
If I have $100K in my pocket, and I go out and borrow $20K putting down $10K as collateral to make a leveraged bet on some stock then am I levered or not?
The answer is that the bet is levered but looking at me as a balance sheet, I am not. I can delever anytime I want. I just choose not to.
So it all depends on what level you look at the balance sheet.
Not commonplace but some of the smartest people I know do it.
Faster,
I had this debate with a friend before. If you can borrow the $20k with $10k of collateral (and not risk at all the other $90k. It could be a wise way to get exposure to risk assets with putting some of the risk on other people.
However, if the $20k loan is backed up by the $10k of collateral (plus signing personally), then you just decided to pay someone interest for the fun of it. It may make you feel better to have the cash under your pillow, even if it’s guaranteed to repay the debt, but I’m not sure it’s the right financial move. Better to simply take $20k of the $100k and not pay anyone interest.
But that’s just me, living with no debt.
Grant you that it is likely to be dumb in the stock example.
But there are other kinds of bets where you are paid to play. A carry trade, for example.
Yeah. The wonderful carry trade that works until it doesn’t. One word for you…Iceland. Yikes.
Only if you don’t know what you are doing.
This stuff isn’t for everyone.
Only if you don’t know what you are doing.
The big boys who ran Lehman Bros, Merrill, Citi, etc. all supposedly “knew” what they were doing when they were overleveraged, until they didn’t. Now everyone is playing musical chairs with their balance sheets trying to find a sucker to buy their level 3’s.
This sounds like a “guns don’t kill people, people kill people argument”, though when you live in the Wild West it sure as heck is easier to lock up the guns than all the people.
There is a massive difference between people playing with OPM and people playing with their own money.
Hint: one engenders competence; the other does not.
Not to get all technical, but Rothbard defined inflation as expansion of the money supply to the extent it exceeds expansion in the supply of gold.
IMO a slightly better way to look at that is that there is some “natural” expansion of money (probably roughly tracking population increase possibly modified by changes in technology) which is acceptable and reflects increasing productivity and anything beyond that should rightly be considered undue inflation.
Of course, no one in the world is smart enough to run the money supply and know the correct expansion rate. So until Jesus shows up to run it, gold (or something similar) is a pretty good proxy.
FPSS thinks floating short rates are a better proxy. I don’t agree with that…but then he’s a lot smarter than me so he’s probably right.
Even IF you could magically increase the money supply at the rate of productivity expansion, it would still increase malinvestment.
In a relatively fixed-currency society, we’d have soft price decreases over time as productivity increases. People would have to adjust to prices falling (we already do in terms of some things), but we’d also have to adjust to incomes falling over time.
This is a GOOD THING. People can put their labor and investments in growth areas, and competition can work properly. We’d all be “wealthier” through savings, and we’d be able to spend more wisely knowing our money would be worth more rather than less.
Yes, things might grow slower, but at least they’d be more realistic.
Money is a good like anything else. It can be created (or harvested or whatever) and those who do the creating can exchange it to fulfill needs.
The problem comes in when govt gives powers to a select few to monopolize money and also to legitimize an otherwise baseless and illegitimate money (in other words, a money which would not be initially accepted as money in a free market). As we have now, these folks can then create money at will with none of their own labor involved. This is a bad thing.
And sustainable, one hopes.
Subsidizing outmoded industries/modes is a road to nowhere.
“Maybe we’ll all be issued FED credit cards, with special perks for going into debt.”
Payment on your “IRS Frequent Buyer Visa” statement is due by April 15, 2009. Thank You and your AIG Corp and INVESTORS are most appreciative
One they get rid of the jobs and savings, this dream - welfare dependency for all - will be realized. Printing presses away!
A new liquidity tsunami out of the Fed will have little effect on housing prices unless they couple this action with a reversion to the lax loan underwriting standards of the earlier part of this decade that allowed for decoupling between household incomes and home purchase prices (e.g. Central Valley strawberry pickers earning $20,000 per year who could qualify for $700,000 mortgages). Perhaps someone else knows better, but I don’t foresee this happening for at least another generation (say 30+ years), as the collective memory of the pernicious effects of debaucherous lending standards is still fresh in the collective American psyche.
P.S. The thing to watch going forward is income inflation. If the economy recovered and income inflation kicked into high gear, that could provide a cushion of support for home prices to start “always going up” again. We’re not there yet.
I have a hard time believing we’ll see any income inflation. Few jobs and lots of workers doesn’t make for rising wages, and it seems like we keep having jobless recoveries after every recession. The only way the govt has been able to lower unemployment stats has been to fudge the numbers.
But “we must repair our bridges, build more unused Amtrak stations, expand citywide public transit, build more schools, add more administrative buildings for welfare needs, and bring the Olympics to Chicago permanently.”
Just think of all those jobs created moving bricks and cement around.
Talk about malinvestment.
it seems like we keep having jobless recoveries after every recession. The only way the govt has been able to lower unemployment stats has been to fudge the numbers
The great unwashed are starting to realize this.
Stagnant wages and lots of price inflation is what we will have. Stagflation, in response to the current massive inflationary Fed policies.
Which is highly negative for house prices. The 70’s stagflation was accompanied by rising wages, which is why house prices didn’t go down nationwide (there were regional busts, notably in NYC).
Looks like stagdeflation at least in the near term.
LOL - your right FB!
I don’t see any prices other than medical care and tuition going up right now.
med and edu are about 50% gov subidized- only reason they can rise
I don’t see any prices other than medical care and tuition going up right now.
Yup, the kids are still going to school and borrowing up the wazoo to do it. And academic scholarships are drying up left and right, in large part because the endowments that fund them were invested in the stock market.
We visited a podunky college recently that offered our kid a pretty good scholarship. The place is out in the middle of nowhere, hundreds of miles from any large city. The annual out of pocket for us is $3000 though, so it looked good. All of the closer state colleges offered a piddling $2000 in scholarship money, and we were invited to borrow up to $18,000 to cover the balance (per year). Since we live “too far away” (more than 20 miles) our kid has to live on campus the first year. What a joke. And yet there are tons of kids all signed up already.
There will be no income inflation in this cycle.
As long as some doomed soul in a 3rd world nation is willing to do a half-rate version of your job as a near slave for 1/10 the cost (or far less) with no benefits, and live in a crumbling shack on 1 bowl of rice a day, there will be no wage inflation… this is especially true considering that the overall goal of all this “globalization” nonsense is to get all the middle and lower class down to the living standard described above.
BINGO
Globalization is only good for the middle class if there are infinite resources. If there are not then production is capped by resource availability and you have the formerly middle class in a race to the bottom in wages, workers rights, environmental regs, regs on elite, ect. The elite become extremely wealthy exploiting the masses and controlling natural resource production and distribution. They will doll out just enough to keep the masses from rioting as they slowly get used to their collapsing standard of living. Kind of like putting a lobster in a boiling pot of water vs heating it up with lobster in side. The problem in this country is far to many middle and upper middle class think they are or will soon be in the elite class. Even many of the top 1% will find that they will not gain entry into the controlling class and their wealth will evaporate. Social mobility has been on a downward path for some time in this country and it is only accelerating.
There’s one thing people forget: the goal of TPTB isn’t to put trillions directly into the pockets of the banksters, but to give some of it to unionized labor that will move bricks and cement around for fun, while giving TPTB a nice skim on that money over 5-10 years.
Why do you think the Employee Free Choice Act is up for vote? To unionize as much labor as possible before the floodgates of spending is unleashed.
Union labor tends to be significantly higher than non-union labor. TPTB think they can INCREASE people’s incomes so they qualify for 5X loans. If your gross paycheck is $2300 a week, you can qualify for a $600,000 loan at 5X gross income. Of course, kick out dues, taxes, and other withholdings (like the sucker 401K most people think is a good thing), and you’ll never be able to afford the house, but who cares?
like the sucker 401K most people think is a good thing…
Right, because tax deferred growth and an employer match is a sucker bet? Get a clue. An employer that matches your contributions is giving you free money. Money that can be rolled over into an IRA if you change employers. How is that a bad thing?
How is that a bad thing? For starters, when the 401K is restricted to investments in scam markets only.
— AFAIK,IRA’s are not matched by employers as 401K’s might be.
Once you move your $ to an IRA, your investment opportunities open pretty widely (through some special advisors, you can invest in private deals with an IRA, etc. Not just public markets)
But you’re right, while in the 401k, you are limited in choice.
That said, I’m actually OK being limited as long as the choices are lower fee (Vanguard-like) and well diversified if the trade-off is that I put in $1 and get $1.50 of investments on day one.
Sucker.
No employer wants to give 401K matches, but Congress offers incentive for it taxwise — and companies who are publicly traded have incentives to keep their W2 suckers invested.
18 months ago I said publicly and privately to liquidate 401Ks, take the tax hit and penalty (call it 36% total for many) and stick to USD. Those who did only lost the 36%, others lost a lot more.
The matched employer amount comes out of your paycheck opportunity. Congress wants/needs to keep suckers in 401Ks or the true value of the stock market would appear.
Yes, I put 25% of my non-dividend payroll checks into a SEP-IRA, but I have full control and trade daily and weekly. I can’t short, but I can buy ETFs to go counter-market. I’ve done very well with my SEP, with only 1 down week to every 15 up weeks. But I have choice, whereas 401K investors usually don’t.
The “tax deferred growth” argument is bogus; you merely get to keep the gov’t share for a while, and pay it to them (including the growth of/on it) later.
The real benefit of the 401(k) is the company match. The free money is great for your apparent returns on your contributions.
The tax benefit is totally tax-rate arbitrage—e.g. if your rates are lower after retirement, you come out ahead; if they are higher, you come out behind.
My 401K was up over 5% last year because I wasn’t in stock mutual funds, rather a bond fund and a money market fund… had I listened to your advise and cashed out, I would had taken a huge tax hit instead of paying no taxes on the gain or the match… I’m sorry, but spouting crap like “cash out your 401K and take the hit” is pure garbage.
In terms of tax-deferred growth, you take what you can get. You have no control over what tax rates will be in the future, but many employers are now offering a Roth 401K, so take your pick… pay taxes now or pay them later. As Prime said above, it’s the match that matters…
Oh, and AB’s crap about being a sucker wage slave is also pure bull. I don’t disagree that working for yourself or starting your own business is the way to go, but for most of us, especially those with family responsibilies and dependants, that wage put’s food on the table and money in savings while working on a business plan/starting a business/etc. You need to dial the disdain and arrogance down a couple of notches… there are plenty of six-figure earners on this blog who have their financial house in order.
When I have a family, I would NEVER think to put all my eggs in one employment basket or one industry. THAT is irresponsible. Even with savings, being dependent on one industry is suicidal, in my opinion.
So you earned 5%, you’re one of the rare ones. In my experience, bond funds and money market funds are just as immoral as most overleveraged businesses: they fund businesses that can’t stand afloat on their own, and they don’t produce dividends (profit-sharing) so you really own nothing.
My real investments are in companies I can actively control, or have a finger on the pulse of. They issue real dividends from real profits. They run without debt (issuing additional shares if they need to expand). That’s a stock you want, not shares of companies X Y and Z that issue zero dividend and pay their profits out as bonuses. No thanks.
There are plenty of 5 figure earners who have their financial houses in order, but that’s none of my business. I think a 401K is a waste, and I’m of a rare opinion, but it’s an opinion that I know others have been glad to hear — even if they don’t agree with me.
My 401k was up. Same for my wife. We both moved the balances around to avoid the stock mkt crash (early 08 after it had gone from ~14k to ~12k, so we did lose a bit).
Like NE said, this was a better move than cashing it out, by your estimate a -36% hit.
401k is arguably a waste in terms of national policy, but on the margin where we actually make decisions, it makes sense depending on the matching. I get a 1-1 match, that’s 100% return return right off the bat. I’ll take that all day long, thanks. When I leave this job I’ll put it in an IRA and manage it myself.
I’m sure that’s true, but it still seems to be a terrible risk to take. I get the employer share option, but don’t you see more profitability going to a 1099 contractor, paying yourself a small salary and issuing dividends on an S-corp that are taxed at a lower rate? Plus you avoid almost 15% of other taxes (maybe more).
One of the businesses I run is in mergers and acquisitions (I’m starting a new site to teach people how to enter the field — business-broker-blog dot com). There are a TON of business opportunities for people who want to get out of the corporate grind.
I still believe there are better investment opportunities in local profitable businesses than in the stock market where you have little to no control over the companies you supposedly “own.”
There are a lot of other factors involved in moving from W-2 to 1099. This discussion isn’t about that and I don’t think anyone here is arguing in favor of going to work as a W-2 employee just because of the 401k benefit. The discussion is: among W-2 employees, what’s the deal with the 401k?
If you advised people to cash out their 401k’s those are likely W-2 employees and for them it was bad advice (assuming they get a 1-1 match or something similar). Good advice would have been to do what I and NE describe above.
Now if you want to talk about all the benefits of being self-employed, that’s fine. The 401k matching might come into that discussion but is likely a very small factor (probably nonexistant).
Cashing out your 401(k) early gets hit with an additional 10% federal tax penalty. CA piles on with another 2%. Add your marginal tax brackets and you’ll probably pretty close to a 50% hit in CA. So it is probably not a good idea. You may have limited options in your company 401(k), but a cash/stable value/money market should be one of them.
Oh Lord, NOT A.B. Dada. This guy will make you miss Aladinsane ( as I actually do ). A.B. Dada is a nutcase who actually blogs about Global Unanimocracy, for Pete’s sake. ( Google him ). I remember reading some boasting by him to the effect that he was able to wait until pizza businesses in the same area as his ( more successful ) pizza business would go broke, and he could swoop in and take the “key employees” and have thm work for him at 50 % of what they were formerly making. I also remember him boasting about owning 5 businesses simultaneously, and advocating his secret hiding place of using a PIZZA OVEN to hide his silver bars (until he had recently switched hiding places for his stash). I mean, this guy is too goodly weird to be true. He’s just a genius I tells ya, a genius. Cripes.
“lax loan underwriting standards of the earlier part of this decade that allowed ” for trillions of dollars to be created
and you’re right it can’t be recreated so the FED just pushes on a string maybe causing a treasury bubble for its trouble
IMHO the bigger deal is the fact the the Fed is buying $700 billion worth of worthless MBSs to prop of the kissing cousins F&F. I’m guessing that we’ll see average mortgage rates drop .75 to 1% in the coming weeks. Pity the poor slobs that refinanced last month.
These a$$clowns really are trying to start another housing bubble.
“These a$$clowns really are trying to start another housing bubble.”
That was my first thought. But how can they do that without allowing a big increase in lax underwriting standards and mortgage fraud, which were key props under bubble pricing?
And it is hard to overbuild another 18 m vacant homes (or whatever the true number is) so soon after it just recently happened, and when the glut of vacant homes is still large.
We have Democrats controlling the Federal State.
Democrats like immigration. Democrats like inflation. I coined a term a few years ago called immigflation: hiding the inflation of the money supply by increasing legal immigration and decreasing policing of illegal immigration.
Problem solved.
Note: I could care less about who comes to the U.S., as long as property rights are returned to the rightful owner.
A.B. Dada — I guess you foresee a flood of wealthy immigrants to the U.S. propping up home values, then?
Both parties like immigration, let’s keep it objective. I do have a problem with both legal and illegal immigration. America and Americans should always come first in this country.
No need. I see Michelle Obama’s buddies at the CFR planning to increase U.S. headcount in Afghanistan, sending support to Japan to protect them from North Korea’s launching of a satellite rocket, maybe protecting the Sudanese, and increasing Federal “protection” police within the federal borders.
Since we’ve run out of idiots who want to enlist right now, and since dear Rahm’s desire to start a new draft will burn in flames, their best bet is to entice foreigners to come in and get drafted in exchange for instant citizenship.
Get them in the military, pay them infantry-grade salaries (with bonuses and benefits front-loaded), bring their extended families too (someone has to watch all those kids), and spend away.
Admit it, the idea makes sense.
Ah….a fellow CFR loather! Tin foil hats abound!
In my neck of the woods (Chittenden country Vermont), we have a town that literally has no white people left because local immigration groups have imported 100’s of new families there in the past 5 years. Apparently 19(!) languages are spoken at the school and new kids are showing up daily. It’s completely out of control.
These kids will make great fodder for the next War(TM).
Democrats like inflation.
What evidence do you have of that, other than you said so?
Who appointed Paul Volcker Fed Chair? What is he doing these days?
Who appointed his successors, “Easy Al” Greenspan and “Helicopter Ben” Bernanke?
Federal Reserve Act, ch. 6, 38 Stat. 251, enacted December 23, 1913, 12 U.S.C. ch.3 — enacted by President Woodrow Wilson, Democrat.
Of course, the First Bank of the United States (1791) was created by a Federalist, the party opposed by the Democratic-Republicans (at least they were a truly unified party back then). Today’s Democrats and Republicans are pretty much Federalists (desiring larger federal government).
Note that whenever I say Democrat or Republican, I mean both terms to mean the same: Federalist. Sadly, the original party (Democrat-Republicans) that opposed the Federalists no longer exists.
Paul Volcker today is not the same Paul Volcker as in the 70s, just as Greenspan today is not the same Greenspan as in the 60s.
Absolute power corrupts absolutely.
darthrealtor: I don’t hate the CFR, I’d love to join it!
I also want to join the Bohemian Club, too.
A lot of new immigrants will NOT under any circumstances join the military. Frequently enough they fled their former countries because of the military. When you learn to dread a uniform, you’re not likely to put one on.
I’d take a wager that they WILL join the military.
Don’t forget: Obama wants to be the next Lincoln, and over 1/4 of Lincoln’s troops were foreigners who were paid to fight. Since 2007, the Pentagon has been actively pursuing the idea of enlisting immigrants for citizenship. I can’t post links because the spam filter hates me.
Don’t forget that George Bush was moving to legalize all illegal immigrants in the USA. 9/11 got in the way IIRC.
If the Fed is the ultimate buyer of most or all agency debt, doesn’t it remove the default risk from private lenders? Plus, the government is sanctioning 105 pct FHA loans. As we learned during the bubble years, remove the risk and anything can happen.
It’s harder to get people to buy, however. Increase the incentives — tax credits and low rates — and they might. Increasing unemployment rates doesn’t help, however.
The Obama admin needs to introduce an icentive where you get a 100% tax credit and a free Hummer if you buy ten or more houses and grow pot in them. That is what it would take to reinflate the bubble.
The one guy I know that grows pot gets free Hummers every week.
Plus he has enough cash on-hand to buy ten houses.
I think he voted for Obama.
Maybe the fed’s goal is not to reflate the bubble but to keep it from deflating more. Maybe it is throwing everything at it hoping something sticks, anything. Maybe its an act of desperation. Maybe the fed doesn’t even know if this will work or not.
+1 - mrktMaven, desperate times call for desperate measures.
While lawmakers problem-solve, examples of a chronic concern seek shelter beneath their feet
By Stacy Forster of the Journal Sentinel
Posted: Mar. 18, 2009
Mark Hoffman
After washing up in a restroom, Susan Howes wheels a cart with her belongings in the Capitol basement. On cold days the basement is crowded with those seeking warmth, from 8 a.m. to 6 p.m., when they are required to leave. Many spend the night in shelters.
I don’t mind helping the homeless in the Capital Building of the State of Wisconsin but MUST we pay to shelter the Eternally Stupid above them?
Oh well, if we are lucky, some nice little old bag-lady will get lost and pass some decent legislation
http://www.jsonline.com/news/statepolitics/41472052.html
“That was my first thought. But how can they do that without allowing a big increase in lax underwriting standards and mortgage fraud, which were key props under bubble pricing?”
They can’t. But that is only obvious to those of us who understand the fundamentals. Bernanke, the banksters & other assorted folks are so far removed from the reality of the situation they just can’t see it.
They’ll find a way to get around to that, too.
Look at all the other nonsense they got away with so far, and with nothing but hollow anger from the public.
Until somebody stops lending the US money to p*ss away blowing bubbles and lining the pockets of crooks, I expect each Bailout will grow progressively larger and more insane as they struggle to produce the Ultimate Bubble Economy.
AIG Estimates:
Outstanding shares as of 2004: 2.6 x10^9
Source: AIG 3rd quarter statement of 2005. I found this at http://findarticles.com/p/articles/mi_m0EIN/is_2005_Nov_14/ai_n15795023
Price per share in 2004: $76.
Source: Yahoo Stock Quotes
Total approximate worth at that time: $198 Billion (Total shares times max price in 2004).
Bailout so far: $173 billion
Source: Yahoo news.
Amount that needed to “unwind”: $2.7 Trillion
Source: Yahoo News
Progress so far: $1.1 Trillion
Source: Reuters
Amount to go: $1.6 Trillion (Difference from needed and progress.)
Cost per Trillion to unwind: $173 Billion/$1.1 Trillion = $0.157
Bailout to Go: 0.157 * $1.6 Trillion = $251 Billion.
Total Projected Cost: $424 Billion or more than twice what it is optimistically worth in 2004.
Moral of this story: Do no let anyone BS you about what we will get back when this is all over with.
Roidy
Hwy’s Final Four:
U.C.L.A.
Syracuse
West Virginia
Connecticut
Linus: “Charlie Brown, your such a Blockhead!”
BWAHAHHAHAHAHHAHAHHAHHAHAHAHHHHHHHHHHHHH!!!
The CED (current era depression) is temporally a non-issue…beer & ribs & select-a-sheet paper towels will be scattered around Hwy’s romper room.
It doesn’t get any better than this week if you likes the b-ball! I’ve picked UNC to win it but I’m sure that Roy “Choke Master” Williams will find a way to blow it before the Final 4. Yeah I know he won it back in ‘05 but that was with Doughrety’s team. I live on Tobacco Road so b-ball is in my blood! Good luck with your bracket picks.
Ha,
you all tarheelsbluedevils are just like Tigger Woods…too damn consistent!
I still have an NC State Wolfpack shirt buried somewhere
Linus: “Someday the Great Pumpkin will rise up in the sky and shower down on the small hamlet of Valparaiso… the NCAA basketball crown”
Snoopy: ” BWAHAHHAHAHAHHAHAHHAAHAHHHHHHHHHHHHH!!!”
Does anyone have any thoughts or info on the RE market in Princeton, NJ? The wishing prices here seem, well…wacked. I mean, $500K+ for a 3/1 duplex with an outdated kitchen? Seems like many places at $300/per square foot. Yeah, Princeton is a nice and cute college town and has good public schools, but am I missing something? Do you think prices will come down? When? How far?
Big deal. In isolated Eureka, California–a very rural area 300 miles north of San Francisco, we have a 10% unemployment rate, no industry, horrible schools, gloomy weathertons of bums and dope dealers and homes sit at $300/square foot.
I think Princeton sounds quite reasonable.
Wasn’t “Eureka” the cry of in Joy the Gold Rush era or was when the RE Commission gang dug up a GF ?
Anthony,
How come you haven’t moved yet?
I’m trying desperately to move. There are no transfer opportunities outta here. I figure Eureka will end up being the most expensive place in California after all this is done, and it ain’t worth it by a long shot. I’d much rather live in cheaper San Diego and actually have good weather.
Someone else from Princeton area? Alright! My sis’ house in Montgomery, just north of Princeton, supposedly have depreciated from $820k to $670K, and probably the same case for Princeton. Property tax is going up again and Gov. Corzine may wipe out state tax deductions for property tax you paid, not to mention higher state income tax for high earners in Princeton.
Down we go.
Ben Bernanke… he from Princeton, it’s different in Princeton
I think the key question is: What are rent rates for comparable housing? Meaning, what is the rent ratio? The pet ratios posted here almost forever range from 100x to 150x. If we consider those the extremes, then if the cost is 100 times the monthly rent or less, it is a good time to buy (though many here thing it could get better). If the cost is 150 times the monthly rent or more, it is a terrible time to buy. All IMO.
From today’s NY Newsday:
Some Hamptons homes are half off in online auction
This postmodern home in Water Mill was originally listed for $3.495 million. Right now a buyer can snag it for $2 million — unless someone else makes a higher bid by 7 p.m. Sunday.
The 5,100-square-foot five-bedroom, 4.5-bath house is one of 15 available in an online auction being run by two East End agents at Prudential Douglas Elliman Real Estate.
Vincent Horcasitas, who was Prudential’s top-producing agent on Long Island for the past two years, says none of the properties are in foreclosure or going into foreclosure, although there are some short sales. Instead, Horcasitas says, he and Enzo Morabito decided to organize the auction “to bring attention to the properties.”
“We felt there was a need,” Horcasitas says. “There are people having difficulty selling their property.”
Horcasitas says he held a similar auction last year. Some houses received offers but sold a year later for bids that didn’t meet the reserve prices, he says.
So far only one property has a bid this year — a three-bedroom, 2.5-bath, 1,800-square-foot Southampton condo. The starting bid was $500,000; the original asking price — $1.275 million.
In general, all the properties in the auction are marked down by 30- to 50 percent, Horcasitas says. “There is some tremendous value here,” he says.
“Horcasitas”
Doesn’t this translate into something like “Little Whorehouses”?
These “auctions” i stay away from……only Ebay has a cutoff time that forces you to bid correctly (or snipe)
Almost all the other “auctions” will keep the bidding open if anyone bids in the last 5-10-15 minutes.
Plus most of the other “auctions” do not let you see the final winning bid or bid history after it closes. To check to see if the shills put in a bid in the last 5 minutes to goose up the price.
Just heard on NPR’s Morning Edition (with respect to the Fed’s new liquidity tsunami into T-bonds and MBS): “Trillions have become the new billions.”
Doesn’t flooding the credit market with freshly printed liquidity used to make purchases of devalued assets have the effect of creating an inventory of devalued assets on the Fed’s balance sheet?
Now just a second Mr. Bear…there are suddenly lots of people that want a 30 year fixed mortgage @ 3.25%…leave them alone.
Why do I have the sinking feeling that hyperinflation is underway? Wheelbarrows, anyone?
If you truly believe in hyperinflation, you should go out and buy as much heavily-leveraged RE as you can qualify for the loans on. Max it out, baby!
Are you?
Some people are, as evidenced by an anecdote on the other thread about the dude who buys 30+ houses a year. This kind of preference for grossly excessive levels of home ownership pretty much only makes sense in a world where real estate always goes up, which is the world the Fed apparently prefers…
Because it is, but hyperinflation was the goal all along. Destroy the savers and producers and reward the parasites. What better way to do this than to delude the sheeple into dreaming of inflation as a way to prop up their grossly overpriced house even as they ignore the runaway cost increases that will come in energy, medical care, food, etc. Oh, and no, incomes won’t be going up.
Yes. But why should the Fed care? They don’t have stockholders to answer to. Or voters. That’s the wondrous thing about the Federal Reserve.
The Fed only answers to stockholders, actually:
Citibank
Chase Manhatten
Morgan Guaranty Trust
Chemical Bank
Manufacturers Hanover Trust
Bankers Trust Company
National Bank of North America
Bank of New York
Of course, this list is from 1983. Who knows who the current stockholders are?
This is true. The Fed though doesn’t make its profits by sale of goods or services to consumers or businesses, like a normal business would. It makes its profits by lending money - money which can be created out of thin air. That does wonders for one’s balance sheet.
Back to PB’s original question - yes buying assets with newly-printed money does devalue the existing assets - but the net effect to the Fed is positive since they don’t own all the like assets. E.g. in the case of MBS - if the Fed owned all of them then creating money to buy more wouldn’t do any good. But they don’t.
So for instance when they created $750B yesterday to buy MBS, the devalued the sum total of all MBS by $750B. But since the Fed only holds a fraction of that sum (say 1/5th), it only devalues their holdings by $750B / 5 = $150B. So they come out $750B - $150B = $600B ahead.
At least that’s what my limited mind thinks. I could be wrong.
Guys, read up about the structure of the Federal Reserve System. It’s all online and doesn’t take long.
The Fed is “run” by a government agency and a whole shiteload of laws more than its run directly by private banks.
Of course, the fact that the lawmakers themselves have evidently quit the responsibility to create law in favor of big money is another issue all together…
What accounting standards are applied to the Fed’s balance sheet? Is there any? Or is their balance sheet whatever they say it is?
Doesn’t flooding the credit market with freshly printed liquidity used to make purchases of devalued assets have the effect of creating an inventory of devalued assets on the Fed’s balance sheet?
That’s just the top of the iceburg, the next step is guarantees to private investors to purchase said assetts. It’s heads I win tails the gov looses.
NPR is bunk.
I have the real solution that Congress should work to pass as their Big Law of the Year: a mandated definition change of the term “billion.”
In the U.S., we use a system called the short scale. In the short scale, the term billion is defined as 1000 million, or 1,000,000,000.
There’s another system called the long scasle, where the term billion is defined as a million million or 1,000,000,000,000.
The U.S. has almost always used the short scale (échelle courte in French). The U.K., France, Italy and most European countries have used the long scale. In 1973 or 1974, the U.K. decided to change from the long scale to the short scale. The rest of Europe didn’t.
If Congress can create a bill called the Proper International Definition of Value Act of 2009 that changes the U.S. definition from the short scale to the long scale, problem solved!
Instead of giving away trillions, we’ll have just given away billions. Then the skunks in office can say “Wait, we only gave away $3 billion in 2008, and under Bush, we gave away hundreds of billions!”
It would still be true.
I’m sure we agree on something. I just can’t put my finger on it.
uh, house prices are going down?
So it would be a “national move the decimal day” of sorts
Behind “The O.C.” curtain:
The O.C. Register 3-19-09
More from OC Retail:
* Home furnishings retailer may close up to 125 stores
* Macy’s to cut, add O.C. jobs
* Camarillo outlet mall names 23 new stores
* 3 store closures at South Coast Plaza, Brea Mall, Downtown Disney
* Store at The Lab mall to close
* Pier 1 to close O.C. store, 2 other local closures
* Kitchen & outdoor liquidator opens O.C. location
* Another big store at The Block closes
* Big decor store near O.C. to close
* Downtown Disney store to close
* $35 movie ticket may be coming to O.C.
* BBQ retailer to close 2 O.C. stores
* Kohl’s to move into 3 O.C. Mervyn’s stores
* Brea Mall store to close
* Home Depot to close 3 O.C. Expo stores
* Forever 21 to move into O.C. Mervyn’s store
* Circuit City gives liquidation sales date
* Another Calif. retailer bankrupt
* Downtown Disney store owner files for bankruptcy
* The Block to get discount department store
* What may replace Virgin Megastore at The Block
* Clothing maker files for bankruptcy
* O.C. surfwear maker to cut 200 jobs
* O.C. clothing retailer announces layoffs
The O.C. Register will never get page views if they don’t start using proper terms like “massive”, “never-before seen” and “frightening.”
The Virgin Megastore in Paris was dead this year but was packed last year. Who buys CDs anymore? Or CD management towers, or $49 RCA cables?
Downtown Disney store to close
** Another vital and essential store, a pillar of any thriving up-scale coummunity along with “Thelma’s Candles, Scents,and Nail Boutiqe Shop !
Someone slipped them a mickey, I figure.
Hold on there mikey. Them thar fighting words. At one time the Disney store was carrying some pretty good stuff for adults.
He doesn’t mean that “Disney Store” closed. He is saying that another tenant in “Downtown Disney” closed. Downtown Disney is an outdoor shopping mall the build between the Disneyland hotel and the main entrance to the 2 Disney themeparks. It has a variety of restaurants, nightclubs and stores. If you are a LEGO fan they have a huge store that just sells nothing but LEGOs. There is a similar shopping mall at Walt Disney World in Florida.
DtD in Anaheim has been bleeding tenants, which is not surprising as the HELOC money is gone. I am still amazed that Disney is able to keep is super pricey ($300+) Grand Californian hotel packed in this economy, as well at the less expensive (but still pricey) Disneyland and Paradise Pier Hotels.
Wow Colorado, didn’t really need the history lesson. I do know about DTD. It is a wasteland, just like the California Adventure.
I didn’t read what mikey posted correctly.
Mikey,
Whoops, I didn’t read your post correctly. My apologies.
Speaking of Pier 1 - my wife was in the local Pier 1 last week and overheard the manager say 125 stores would be closing across the country. I was surprised the manager would say that in front of customers(but not surprised about the closings).
Other observations from the ground in NE Wichita:
- A nearby Chili’s restaurant closed. It had been open less than a year.
- Construction progress on several small hotels has slowed to almost nothing. There was no real reason to build them in the first place.
- Restaurants that were busy a year ago are not busy anymore. Bars seem to be doing well.
- Layoffs have hit hard at Beech, Cessna, Spirit (formerly Boeing), which usually happens during recessions. Lots of stuff is showing up on Craigslist.
- Builders are still building, but at a diminished rate. Strip malls have plenty of vacant space, but new ones are going up. One commercial property that I’m aware of has been put on hold after the land was cleared and the underground work was completed.
I’ve slowly extricated myself from restaurants that seat more than a few dozen people. In Paris, a great Chicago chef opened a restaurant called Spring that has a multi-month waiting list. Why? He feeds only a few at a time, with fresh market-bought produce and meats. His menu changes, and the dinner is fantastic.
I’d rather (and have actually) eat at a great chef’s home than deal with restaurants with declining quality food (to compensate for the cost of keeping so much food fresh and running energy to huge ovens). It’s popular in Italy, too, I’ve heard.
“Camarillo outlet mall names 23 new stores”
hey thats not in OC
FPSS I was thinking some more about your money creation calculations, and your example of buying roses, with the conclusion that the amount of money created was only equal to the difference between the price paid for the roses vs. the market value - i.e. the amount overpaid. I think you’re wrong.
Overpay’s got nothin’ to do with it.
It doesn’t matter if the buyer paid too much, too little, or fair value. The point is that the buyer is paying with money that simply didn’t exist before. The entirety of that money is now out there in the system, whereas it wouldn’t have been before.
With regards to the Fed $300B announcement yesterday (other $750 aside) - this is $300B that wouldn’t have existed otherwise. I don’t know if the Fed will be overpaying for these treasuries or not - but I think it matters not a whit. It’s still $300B that’s being pumped into the economy that would not have been otherwise. If the Fed wouldn’t have put in $300B, then it would have had to have come from somewhere - i.e. it would have been $300B diverted from other resources (the equities market, real estate, money market, whatever); resources that will now get that money whereas they wouldn’t have otherwise.
If one assumes that this money will eventually be paid back, by the Treasury to the Fed, then perhaps any overpay amount may come into effect; though it depends on a huge number of other factors. However that “if” is a bad assumption. Who really expects this money to be paid back? Technically these specific bills may be paid back over time, but they will be replaced by like bills. There is no current projection for the Federal debt to be paid down at any point in the future.
Thank you packman, FPSS comment yesterday was so nonsensical I could hardly stand it.
The high-bidder in an auction always “over pays” because there is no one else in the market willing to bid as high. Any additional money thrown at the supply of treasuries will increase demand and therefore the price beyond its “market value”.
You made a good point about the 300B entering the economy by realizing the opportunity cost of putting 300B in treasuries. I had never considered that angle before.
So, now we have a situation where China sees that treasuries are being artificially propped up at “above market prices”. Seems like this would be the best time to unload because if the FED ever stops propping up prices then the value of treasuries will fall like a rock. Furthermore, who in their right mind would *buy* treasuries that are artificially overpriced due to FED intervention?
Actually it looked like the Fed was underpaying.
Pretty much everything the government does is about opportunity costs. Very few people see that since opportunity cost is an abstract concept.
I’d say just about everything everybody is does is about opportunity costs. And I fully agree that very few people see that since opportunity cost is an abstract concept.
Sorry, the “true” worth of the bonds is money that is already inside the system.
You can just go to the bond market and cash it for quick cash if you are so inclined. Same goes for just about every liquid asset like commonly traded stocks, etc.
Why did everyone hit the bid yesterday? Because they know that someone is overpaying so you take what you can get. The inflation is the amount of overpayment.
Incidentally, what happens when they have to sell the bonds back into the system? That is sucking money out of the system.
I don’t think you have a clue of what you are talking about. I do.
Any bond transactions before maturity have no effect on inflation, because it’s an equal transaction. Only newly-created or matured bonds have an effect.
Take an example of the car market - people can sell used cars to each other all day long at whatever prices they want, and it doesn’t change the amount of money on the bottom line. It’s only when someone borrows money to buy cars that the bottom line is affected, by the amount that they borrowed.
Same for houses. The amount of equity in the bubble actually didn’t matter - what mattered was the amount of debt behind it, with regards to the money in the system. The money that’s being destroyed is directly the debt that’s being paid back and/or written off, it’s not the equity value losses.
“Incidentally, what happens when they have to sell the bonds back into the system? That is sucking money out of the system.”
Yes you are right, that will suck money out of the system, and that will indeed be deflationary. You let me know when that happens.
Only newly-created or matured bonds have an effect.
Well then, if you understand this, there are no new bonds being created. They are buying “old” bonds with “printed money” and overpaying for them.
Why is this not obvious?
They are trying to force lending but if you don’t believe that you should be lending at these rates, then you won’t be lending.
This will fail spectacularly.
In short, this is nothing more than a shadow bailout of the banking system. The banks will hand their bonds to the Fed, and get capitalized in return.
But the banks are hemorraging in the derivatives market.
Let me know when they start commercial lending again, and extending credit lines to FB’s, and lending to each other again.
Where did you see that they’re buying secondary and not first-issue? I haven’t seen that.
Nevertheless - the entire purchases are made with newly-created money. Regardless of overpaying or not - this is $300Billion that is going to the sellers of those bonds, that can then be used for other purposes.
Regarding the purpose - I guess that depends on what their purpose actually is. You believe the purpose is to lower rates and get lending going again - perhaps it is, and if so then yes I think they will fail spectacularly. However instead the purpose may be simply to inflate the dollar; to avoid deflation - in that I believe they will succeed.
in that I believe they will succeed.
So why are all asset prices (houses, stocks, corporate bonds) still deflating?
In a debt-based currency, only spanking brand-new loans constitute inflation.
The Fed monetizing these loans is not inflation. It is the legitimization of PAST inflation, and it gives the people holding these loans the ability to go out and lend more.
Will they? Looking at their balance sheets, I don’t think so.
Go look for yourself. They are literally bleeding money in the derivatives market.
This is sorta a shadow bailout of banking without anyone saying so.
“Let me know when they start commercial lending again, and extending credit lines to FB’s, and lending to each other again.”
Already happening. There was a bunch of discussion the other day on commercial lending. Refi’s are through the roof the last few months. Yes most of those refi’s aren’t new lending from the debtors’ perspective, since there’s very little cash out, but from the lender’s perspective it is new. I just refinanced last month in fact, from Chase to USAA, who sold it to US Bank. From US Bank’s perspective, that’s a brand new loan they just gave.
Credit is still *very* easy - historically speaking. Don’t buy into the media crap that credit has frozen up - sure it has if you compare it with 2004, but not if you compare it with 1980 or even 1990. Credit has only dried up for risky borrowers - as it should.
“Go look for yourself. They are literally bleeding money in the derivatives market.”
How do you do that??
Credit is still *very* easy - historically speaking.
Yeah?!?
Take a look at the corporate bond market particularly the junk bonds, and tell me we are seeing the same thing.
I’ll grant you that it is still extraordinarily loose compared to 1980 and 1990 but both of those chosen time points are very very specific. Pick 1985 and 1998, and I am not convinced at all.
In a debt-based currency, only spanking brand-new loans constitute inflation.
The Fed monetizing these loans is not inflation. It is the legitimization of PAST inflation, and it gives the people holding these loans the ability to go out and lend more.
Agree with the first part. For the latter - it’s inflation in one area (Fed created money) replacing deflation in another area (private loan writeoffs). It is indeed legitimization of past inflation (I’ve stated that before myself), but it’s also transfer of the debt from private banks to the Fed. This *will* make it easier for the banks to loan again, and therefore introduce new inflation to the public. They’re disallowing current deflation, and setting the table for more future inflation.
Will they? Looking at their balance sheets, I don’t think so.
Go look for yourself. They are literally bleeding money in the derivatives market.
For now yes. But a scorpions very life depends on him stinging somebody. When he heals - he will go back to stinging. The banks are easing off lending some - but not completely. And their ease-off right now is being balanced by increased government spending, which is why CPI is flat and not nosediving.
Yes I know the official CPI numbers don’t include housing. But consumers aren’t buying those right now - they’re buying food and clothes and toys and gas, the prices of which are not going down. Same with stocks and bonds - people aren’t buying them right now, so they’re irrelevant with respect to inflation. (Generalizing of course)
This is sorta a shadow bailout of banking without anyone saying so.
Absolutely.
They’re disallowing current deflation, and setting the table for more future inflation.
In the long run, we are all dead.
I only make my bets locally (with some view to the long picture, of course.)
This deflationary game is far from over. I bet you the T-bond market implodes before they finish all the “debt monetization”.
There’s a LOT of derivatives out there.
Here is the thing with derivatives, for every loser there is a winner. No money is destroyed by derivatives failing, only balance sheets. Some companies get hit by counter-party risk where the derivative they “won” never got paid out… even so, it means that no money was destroyed!
The FED is replacing low-powered money (that created by fractional reserve lending) with high-powered money and increasing the monetary base. This means, that past inflation becomes the permanent foundation for a new round of fractional reserve expansion.
In my opinion there is too much focus on debating the money supply and not enough focus on international dollar demand or resulting government default.
The only thing that has to happen is for dollar demand to start falling in a reinforcing cycle in response to the systematic redistribution of wealth from dollar holders to the big banks/government.
“I bet you the T-bond market implodes before they finish all the “debt monetization”.”
T-Boned.
They will never sell the bonds back into the system… it would cause the dollar to crash because the number of sellers, (Gov, Fed) would outnumber the dwindling supply of buyers that have spare savings to invest in government extortion.
The market price on treasuries has NO EFFECT on inflation / deflation. The price paid has no effect. All that matters is where the money came from. In this case it was printed by the Federal Reserve…
Does this currency move have legs, or will other countries soon follow suit in flooding their currency markets with fresh liquidity?
USD-CHF 1.1267 -0.0142 -1.2446% 09:08
USD-SEK 7.9726 -0.0964 -1.1953% 09:08
USD-DKK 5.4568 -0.0720 -1.3014% 09:08
USD-NOK 6.3464 -0.1909 -2.9202% 09:09
USD-CZK 19.6090 -0.2755 -1.3855% 09:08
The exchange rate numbers are from Bloomberg dot com
It’s like having an exchange rate between Cottonelle and Charmin-brand toilet-paper, isn’t it?
Mr. Whipple for Secretary of the Treasury!
The great news is that our kids will have 7-ply toilet paper and can brag that they’re wiping their rear ends with 3.5x more plies than we had, and 7x more than our folks did.
Win, win!
Ha ha - great analogy.
(P.S. RIP Mr. Whipple - an icon of my childhood)
Whoa, he died?
Doesn’t that make him eligible to be put on a coin or a bill? I’m all for a return of the $500 bill to compete with the EU500 bill. Helps all the black market large-scale exchanges.
“I’ll take 2 ounces of the green goddess, please.”
“That’ll be one Whipple.”
What cave have you been in?
He did in late 2007, at 91. Front page news!
Green toilet paper for everyone!
Those kids better be crapping Golden Eggs or paying for their TP American Dream will be one expensive flush
We are going to see more and more competitive devaluations and trade protectionism. It’s inevitable. Everyone is hurting.
latest news
U.S. March Philly Fed job index record low -52.0
CURRENCIES
Dollar extends losses after Fed-inspired plunge
By William L. Watts & Polya Lesova, MarketWatch
Last update: 10:03 a.m. EDT March 19, 2009
NEW YORK (MarketWatch) — The dollar extended its sharp weakness against other major currencies Thursday, as the Federal Reserve’s surprising decision to aggressively pump liquidity into the financial system continued to weigh on the greenback.
The dollar plunged Wednesday in the wake of the Fed’s announcement that it would buy $300 billion worth of U.S. government debt in coming months.
The dollar index (DXY: US Dollar Index Future - Spot Price
Last: 83.13-1.47-1.73% 10:20am 03/19/2009), a measure of the greenback against a basket of major currencies, fell 1.4% to 83.04, down from 84.184 in late North American trade Wednesday.
The index had traded at 86.471 shortly before the Fed’s announcement Wednesday.
So when you have 15 people falling out of the Willis Tower in Chicago (the tallest building in America), but one of them is falling fastest all of a sudden, it’s only bad to be that one guy, right?
it’s only bad to be that one guy, right? Nah, it’s all good - until impact.
which guy falls the fastest?
The important question here, Bronco, is which of those guys are you happy to see go out the window?
And did you push him? Another important question.
Don’t lie to me! I know you did!
Ahhhh….
*nostalgic sigh *
This reminds me of when I wanted to be a cop. I’m a justice freak, and I like to see the wicked get punished. Alas, reality intruded in the form of the realization that, first of all, I break the law sometimes, and secondly, I’m not big enough. Tall enough, but kinda spindly.
Curse these stupid stick-bug girl arms! I mean, I can shoot guns amazing, since I growed up in Utarr, and I look great in blue, but could I haul a deserving miscreant out of a vehicle single-handedly and bounce his wicked head up and down on the pavement? Which is an ability I totally demand in cops?
Probably not. And this makes me sad.*
*Yes, it really does make me f*kin’ sad. I’m not being satirical here, people! Show some sensitivity for a dream lost! Jerks.
“Whenever the legislators endeavour to take away, and destroy the property of the people, or to reduce them to slavery under arbitrary power, they put themselves into a state of war with the people, who are thereupon absolved from any farther obedience, and are left to the common refuge, which God hath provided for all men, against force and violence.”
John Locke, Second Treatise on Government
You know - I believe a monster-sized mural of The Broken Window Fallacy should be painted on the chamber walls of every government building in the world.
Germany pumps up auto sales by paying to trash used cars and buy new ones - same proposed for U.S.
By the same logic - why don’t we evacuate a few cities and then nuke them? Think about how that would help the poor ailing construction industry!!!
(shakes head)
“Instead of building newer and bigger weapons of mass destruction - we should think about getting more use from the ones we’ve got.”
- Jack Handey
The Chinese might do that - in a different way: They could lob some neutron bombs, save the infrastructure, and get rid of the credit bubble - 90% of the U.S. population of overspenders.
This is close.
http://www.usatoday.com/news/world/2006-06-14-death-van_x.htm
Just eating into future demand…don’t sweat it.
Hey, if someone offered me a new Corolla in exchange for my 12 year old Taurus, I just might do it. Then again, the insurance would go way up, so maybe not, but I would at least think about it for a few minutes.
If someone tried to trash my 10 year old Corolla, I’d be pissed. She’s got another good decade in her, and I’m sorry but building a new car to replace a perfectly good one is NOT environmentally friendly.
Hey, if someone offered me a new Corolla in exchange for my 12 year old Taurus, I just might do it. Then again, the insurance would go way up, so maybe not
I just received the excise tax bill for my wife’s Honda Pilot… $500 for an ‘08. Between sales tax, excise tax, registration fees, inspection stickers, mandatory insurance coverage, a proposed increase in the state gasoline tax and tolls, I’m beginning to rethink my love for autos.
For those of you that haven’t been to Germany, you cannot drive an old clunker there. Body damage, rust, leaking fluids - all those things would get you a fine if you took it out on the road(in fact I had a friend whose neighbor call the police because his car was leaking oil while sitting in the driveway).
Those “old” cars they are talking about are newer and in better condition than 80% of the cars you see on the road in the US.
That’s exactly what I was thinking, and why I mentioned the Broken Window Fallacy. You can bet your bottom buck those cars that are being trashed still had lots of useful life in them.
Inefficient waste of resources. They try to put lipstick on the pig by giving bigger credits for more fuel-efficient cars - but everyone always discounts how much energy actually goes into *making* a new car. The less made, the better.
Since 50-75% of my posts are getting eaten, I’ll just post something simple and generic.
Has anyone noticed that Craigslist is starting to lose a lot of high end listings? I wonder what is happening when people stuck with homes >$500K? Have they given up trying to sell or are they feeling more hopeful that they’ll get bailed out?
test
D-
No Single One left behind.
“Since we’ve run out of idiots who want to enlist right now…”
The following is a friendly message from A.B. Dada to all you American family members with “enlisted” sons & daughters over in Iraq & Afghanistan.
I have two.
I went to a church for the past 6 years that had kids enlist. I openly advocated for them to go AWOL immediately. None listened.
When I meet people in the service, I also tell them that going AWOL is patriotic. I am of firm belief that when one takes an oath to uphold the Constitution, violation of it is treason. MOST troops, politicians, and public “servants” violate that oath practically daily.
If you have sons and daughters involved in unconstitutional wars and police actions, going AWOL is the most important choice they should make today. There are more than enough movements offering to help them skip out and uphold their oath they took.
For those who still enlist, I can not imagine a single moral, respectful, honorable or intelligent position that supports the idea that being a part of any armed force today is patriotic.
Puts you in a moral hazard Mr. Poser. Being a citizen of these USofA, you are the one sending these trusting kids off to war. Then you offer them a death sentence in disgrace.
Too Much Dada.
(a) I don’t vote, and I actively tell others not to.
(b) I support organizations that support those who go AWOL (40,000 and counting since 2000 alone).
(c) If I know of someone considering military service, I explain my viewpoint and my moral compass.
(d) For those who have served in constitutional wars (World War II being the last), I’ve volunteered my time to sit and talk with them and still do. I even take one to the mall about once a month in his wheelchair.
No war crime is committed in my name. Dual citizenship allows for me to say that.
As for dying in disgrace, that’s something I’ve heard from the few people I communicate with online who went AWOL: they didn’t want to die in disgrace.
A.B. Dada,
You don’t have dual citizenship. You have none. You don’t vote and encourage others not to. You should find a country more suited to your personal beliefs.
You may wish to encourage people not to join the military, that is fine. Encouraging soldiers to go AWOL is not. If you disagree with the war, then advocate against the war. Instead of using soldiers as pawns for your political beliefs (sound familiar?) you may wish to fight your own battle with the government.
You don’t have dual citizenship. You have none.
I have yet to abrogate my citizenship because I feel that the U.S. has the roots to being the perfect country.
You don’t vote and encourage others not to.
I don’t believe in democracy. The United States was not founded on being a democracy but on being a limited republic, decentralized. The original union under the Articles of Confederation would be more like the European Union: dozens of small States that bind together to confirm that they’re not allowed to trample on basic, inherent human rights.
The current U.S. is a mockery of a limited republic. It is one of the worst forms of democracy, thanks to the voters. As Hans-Herman Hoppe said, democracy is the god that failed us.
You should find a country more suited to your personal beliefs.
No, I should and will continue to fight rats and skunks and vultures and buffoons who are vile and treacherous and criminally-minded, those who wish to trample on the rights I and every human being was born with.
The U.S. is far from the freest country in the world, but at least we have a significant percentage of the population who still believes in true freedom. The real patriots are those who oppose the State and uphold the tenets of the Constitution, not those who succumb to the State and provide for the nefarious undermining of freedom in the name of the Nation.
What little I do find solace in is that those, like you, who embrace the State are those hurting the worst. I am quite proud of the fact that I am able to face my battles against an ever-weakening opponent.
Every police department is an armed force. Should they also be disbanded?
The Supreme Court has ruled time and again that the police is under no burden to protect the citizens. Since those rulings, we can officially and legally declare that the police has one purpose: to generate protection for the State, and to generate income for the State. They’re not here for you and I.
As such, I prefer to defend my own property from criminals. i would much rather rely on private security forces (if necessary) than on unionized public thugs who prefer to spend hours a day pumping iron to make their chests bigger and more intimidating, and pumping lead into those who may not have committed a crime against another private citizen’s person or property.
In short, yes, disband the men in blue. Or see Rothbard on disbanding the police force by googling Society Without a State by Murray Rothbard.
After this latest spate of braggidocio, Malthusian invective, and thinly-veiled misogyny, I found myself surfing past your posts.
But I agree with you absolutely on this one.
True patriots are those with the courage to oppose military adventurism in the face of ignorant mob mentality. There is nothing “honorable” in killing people for money. Nothing.
I don’t know, I think killing people for money is better than killing them for more esoterical reasons.
Whether it be Hessian soldiers hired in the revolutionary war to modern day Ghurkas and the Swiss Guard mercenaries often provide a much needed services.
+2
Some of my closest friends also hated my 2 decades of professional contrarian trolling. My #1 investor in business ventures wanted to kill me for my online banter when I was just 16. Give it time.
I am definitely and openly a misogynist (actually superandroist), but since most of the West has succumbed to feminist mumbo-jumbo, someone who loves contrarian living would be labeled as such.
Thanks for your comment. We may not agree on much, and if it perturbs you, remember that a broken clock is always right twice a day.
For most people’s sake and future, I openly do hope I’m wrong on everything.
“True patriots are those with the courage to oppose military adventurism in the face of ignorant mob mentality.”
Cupcake, this is the ignorance that I’ll never understand. Perhaps you’d prefer to hold hands and sing Kumbaya with someone who’d love to chop your head off just because you were born in the US and A. It’s that military thingy you despise so much that tries to prevent that.
I’ll pass on the “We Are The World” crap. I think preemptive strikes are the best.
I’ve got it! A.B. Yada Yada is actually a parody troll, and a darn good one.
It matters little to me that some consider me comical or who harbor hatred and resentment for my beliefs. I post under my real name — listing often my real city of residence, my phone number and my email address. I’ve done it this way for 20 years. Most of you hide behind your little noms de plume and your vanity nicknames because you are not fully behind the beliefs you espouse. Anyone who knows your true situation could come and say “Elanor, he/she is in crazy debt and about to be foreclosed on!” Me? You can look up my entire history online — and that gives me the reputation that most anonymous posters lack, here and on other forums.
Here’s the fun part: I’ve met quite a few of you in real life, and have made some solid friendships, even with some who regard my beliefs as insane or nonsensical. The fact that those friendships are sustained gives me more hope for offering sagely contrarian opinions that time and again come true.
Just a curious question AB. Do you admit when you are wrong?
I hang out here for the sage comments of people like Hoz (I miss Hoz!), Fasty, Professor Bear, packman, Olygal, and many others. They all manage to be humorous and generally gracious while dispensing their wisdom. A little humility and some self-deprecating humor can go a long way toward being well-regarded by others.
Mr. Dada, you might want to give that a try. It would be a stretch for you, no doubt.
Always.
My latest forthcoming (summer) book (will be in e-format) is about all my failed business ventures and why they failed. In each case, I solely blame myself for the failures. It will be titled “I am to Blame: steps to take to delegate responsibility responsibly.”
I was VERY wrong about two things in recent years, but luckily I was the only one harmed by those hunches, since I prefaced the direction with “this is highly risky and may collapsed in a heartbeat” to all who were listening
“Do you admit when you are wrong”
Admitting you are wrong is a fault. And he evidently doesn’t have any faults.
Noticed that our friend A.B. Dada showed up again during the same week that my kids are out on spring break.
Coincidence?
Tons of faults, but those who pay for my skills are aware of all of them, because my portfolio lists my downfalls, and my clients who are my references are happy to discuss those same issues with those considering hiring me or those who work for me/with me.
I look at my faults as strengths in some ways, too, though. One needs to grasp at some point in life that there are things you can’t change, so find a way to either profit from them, or utilize them to make your life better in some way.
I was wondering about spring break also, and if Alad would show up in the same timeframe.
“I was wondering about spring break also, and if Alad would show up in the same timeframe.”
LOL.
Apparently they don’t have the interwebs down unda. Otherwise he definitely would have been chirping yesterday.
“When I meet people in the service, I also tell them that going AWOL is patriotic.”
That’s why they should have declared a war, so this kind of thing would be illegal.
‘Comment by Blue Skye
2009-03-19 07:21:26
‘I have two.’ (enlisted children)
I hope they stay safe and come home. Here, I’m going to pray for them.
*prays for them *
I don’t know their names, so I just said ‘Blue-skye’s kids’, but I’m sure Jeebus can find ‘em and keep track.
And then when they get home say to them, ‘Hey, Olympiagal says a sincere thanks.’ Don’t forget! Or I’ll be mad.
I won’t forget. Thanks for the good will. Happy filppant frog lovin prayers are the best!
Some pretty amazing picures:
http://www.boston.com/bigpicture/2009/03/scenes_from_the_recession.html
As a bonus, no clicking as all of the pictures are on the same page!
Wow
Nice collection of photos, what struck me the most are how happy the children are in photo #16. Just goes to prove what a fallacy it is for young families who feel the need to rush out a buy a house they can’t afford just to have a backyard for the kids to play in. Kids can be happy anywhere.
My observation (indirectly anyhow) is that children in impoverished countries are generally happier than children in wealthy countries.
A lesson we could all stand to have. It’s in part why I’ve been proposing to many people that a Depression wouldn’t necessarily be a bad thing. A good dose of humility generally makes for better long-term happiness.
The Great Depression is one reason why the “Greatest Generation” is known as such.
Thanks for the link.
Leigh
My credit card billing cycles are getting shorter and shorter. (Not that I care.)
LOL
This is sure to send some FB’s over the edge.
It’s the new Bernankean calendar.
What month are we in now…Benuary? Beruary?
We’re in Marrrgh now, but O’bril is right around the corner. Not as nice temperature-wise as Mayday Mayday, but significantly cooler than Julius or Augustus.
Funny, I’ve started paying my credit card every week or so. Before I would just wait until I got the monthly bill. So I have effectively voluntarily decreased the cycles.
I always pay my credit card bill off BEFORE the statement cuts so it always shows 0% utilization. If you keep high utilization, it drastically effects your FICO score.
Of course, my FICO score is dreadful thanks to a few nice IRS and IDR liens (paid) and a co-signed auto-loan from a few years ago, but I don’t rely on FICO to live.
I always have my payments automatically deducted from my checking account electronically. Keeps me from screwing up and keeps my FICO above 800! Saves on postage and worry as well.
Why? It’s free float.
I agree that the effect is minisculy non-existent but there’s that all-too-important psychic victory.
But seriously, they are pulling out all the stops in trickery to raise money through fees.
I bet you that also sends some FB’s over the edge.
Actually, running up your credit cards can work if you’re on a Saver Strike like I am (keeping cash dollars hoarded rather than in a bank).
Keeping my USD out of the system means the banks can’t create liquidity due to the immoral fractional banking system. Running up your credit cards means the bank’s fake liquidity is reduced even more. It’s a double-whammy against a corrupt system.
I’ve contemplated running up my card monthly, paying it off before the statement closes so it shows 0% utilization, and then running it up again the day after the statement closes. This would keep them hurting as they’d only earn the pittance on the transaction fee (0.5-1.5% tops).
Why?
It helps me keep better track of my spending. The value of that is much higher than the value received from the float.
Aah, just use a spreadsheet like everyone else.
I used to use Quicken and liked it. However when I went back to school in Jan 07 I ran out of time to update it. Probably this summer (or maybe the fall when I’m finished taking the CPA exam) I’ll start using it again.
My average of 5-10 new credit card offers per week (which seemed to run at that pace for at least the past decade, until last autumn) has now dwindled to about 1 offer every other week or so.
Mine too, but I don’t miss them at all.
Isn’t it wonderful?
Call the magic 8xx-number, and you too can have your unsolicited credit card offers go from 5-10 to ZERO per week.
I tried that, but it doesn’t get rid of everything. Banks affiliated with certain frequent flyer programs seem to be the worst offenders for me. And although I have a Citi card, they keep sending me offers for other cards in their lineup.
Their pre-paid Mastercard was paying over 4% interest! If only that money was FDIC insured, I might consider prepaying a month or two worth of charges.
Instead, I am getting credit limit increases without asking for them. They clearly want me to start loading up.
A credit card I’ve had since 1992 recently had its credit line increased to $ 3500 MORE than I make (gross) in a year. Wow. What faith they have in me
I sent this earlier today, but it never made it to the blog.
AIG: Why Ben is mad.
AIG stock price 2004 Max: $79
AIG Outstanding shares 2004: 2.6 billlion.
Total AIG worth in 2004 (approx): $205 billion.
Total AIG Exposure to hedge fund: $2.7 Trillion.
Total progress on unwinding this: $1.1 Trillion.
How far to go: $1.6 Trillion.
Bailout so far: $173 billion.
Amount that it costs per dollar to unwind: $173 Billlion / $1.1 Trillion = 0.157 bailout dollars / hedge fund dollars.
Amount of bailout still needed at this rate: (0.157) ($1.6 Trillion) = $251 Billion to go.
Amount we will need to pay: 251 Billion + 179 Billion = $431 Billion for a company that was worth $205 billion in 2004 and is worth diddly-squat now.
Now I understand why Ben is mad.
Roidy
This is the very embodiment of moral hazard induced by a policy of free too-big-to-fail bailout insurance from the Fed + Treasury for any and all financial entities that qualify. This policy has been in place at least since the LTCM rescue if not before, and it has come a cropper during this market meltdown, as AIG is hardly the only overleveraged firm raking in multi-billion dollar jackpot winnings at the moment. Big changes are coming down the pipeline, as anyone paying attention to the CIC’s recent comments on this subject already realizes.
The AIG retention money payout and the AIG bailout money going out the back door are a red herrings. The real issue is AIG’s current worth, future worth, and past worth. That 2004 number is the most they have ever been worth EXCEPT during the market/dot com run up in the early part of the decade.
We are paying $430 Billion for nothing. We will own a good insurance company, but it won’t be worth anything near $430 billion.
As you say, if this is true for this company, then what about the others? This is moral hazard. What really makes me mad is that we may not have a choice. I like Meredith Whitney’s suggestion that we use the local and regional banks and let the large banks go down the tubes. I’m not sure this would work.
I posted this earlier analysis (if it can be called an analysis) to a local newspaper blog. No one is touching it. The local readers want to talk about what a communist Obama is, or how ticked off the American Legion Commander is, etc. The Sheeple!
This is the real issue. What we are going to be forced to pay and what we are going to get back. Taxpayers pay all and get nothing and have no choice in the matter. It probably won’t work in the end no matter what we do. We - the taxpayers - are being set up to blame for this, also. “The taxpayers didn’t allow the gov’t to do enough! It’s their fault!”
Roidy
“I like Meredith Whitney’s suggestion that we use the local and regional banks and let the large banks go down the tubes.”
My heroine.
The entire country is mad…it kind of reminds me of 9/11, where everyone was united in sadness and anger. There is not much more bailing out of AIG that can be done without some pretty extreme political backlash. I predict more stealth bailouts of AIGs customers.
Bread and circuses for all!
http://news.yahoo.com/s/nm/20090319/media_nm/us_usj_goldman
latest news
U.S. Feb. leading economic indicators fall 0.4%
Banks shouldn’t be too big, FDIC chief says
By Rex Nutting
Last update: 10:36 a.m. EDT March 19, 2009
WASHINGTON (MarketWatch) - Before lawmakers on Capitol Hill begin contemplating the creation of a broad systemic regulator, legislators should consider limiting the size and complexity of financial institutions as a means of reducing risk, a key regulator said Thursday. “Congress should examine a more fundamental question of whether there should be limitations on the size and complexity of institutions whose failure would be systematically significant,” said Federal Deposit Insurance Corp. Chairwoman Sheila Bair at a Senate Banking Committee hearing on modernizing bank supervision.
“Congress should examine a more fundamental question of whether there should be limitations on the size and complexity of institutions whose failure would be systematically significant”
Institutions like… the Federal Government?
And concerning “private” enterprises, the best way of limiting their size and complexity would be to repeal the corporation laws that enable them to grow to such appalling dimensions.
+1 LVG
Are there any successful, advanced economies with laws that hold owners and senior executives fully liable for their companies activities? I ask because I really don’t know, but I would doubt it. It seems to me that the transactions costs for investing in a company would be far too high, and even moderately sized companies wouldn’t exist.
You could still get fairly large companies, there would just be several layers of “middle men” between the company ownership and the average Joe.
Many wealthy individuals have far more income/revenue than many moderately sized companies. It wouldn’t take many of these individuals to coordinate to create even bigger companies. The difference is that rich individuals would be personally liable for the actions of the larger companies and would be held in check.
It only becomes a problem when you have middle class individuals with relatively small amount of capital attempting to buy stock in a larger company. These individuals do not have the resources to directly do the necessary diligence to counter the liability they would be taking on.
Jon,
I second Dan’s comments here, and please also remember that domination of the economy by large corp’s is mostly a 20th century phenomenon.
I really don’t think there’s much productive work that can’t be done by people working in groups of 1-2 dozen, tops. Once you get to a company of 100+ people, I don’t see how any CEO could keep track of what that many people are doing, much less add any value to their work. Companies bigger than that exist primarily to give the exec’s lavish pay and self-aggrandizement.
Without mega-corps, it might be harder to build huge skyscrapers, superhighways, etc., but the social utility of these things is questionable anyway.
The monetary base has recently contracted by about 200B from 1.8T (after nearly doubling in a few months). It looks like that contraction will be temporary. If the FED buys 1.1T in assets then the monetary base will grow to 2.5T from 900B in Nov 2008. This would almost triple the monetary base from the Nov 2008 levels and this time the money is more likely to get into the hands of people on the streets.
“…this time the money is more likely to get into the hands of people on the streets.”
Are you expecting delivery of cash bundles dropped out of black helicopters?
The helicopters are actually light blue because it’s calming.
They’ll be there to pay the people pretending to fix bridges, taking breaks while not building public transit stations, taking measurements of land repeatedly where the future school will never be built, and those who actually are working moving bricks and cement from point A to point B and back, ad infinitum.
Baker-Miller Pink.
Hey fellow HBB help calm my nerves. I’m not ready to buy, though some prices are approaching reasonable levels in Wash, DC and area. NOTE I say some prices. But I am NERVOUS about having so much cash. Politically easy to tax “the rich” esp. liquid assets. Figured if I bought a house at least I would have a place to live. True you rent it via property taxes, but you can’t get blood from a turnup. I have some gold - not a lot and only the ETF. Not crazy for gold. Hedge my cash with REITs ? Any other suggestions ? Plus with a house with a yard could grow food. P.S. Also have some foreign currency. Again not crazy about that.
Should I pull the trigger now ? One area of interest is 22030. During the height lowest prices were $450K to $500K for 3bed/1bath 1950s quarter acre ranches (yes quarter acre will not grow much food) But 1950s have not HOA Nazis. Now decents ones for as low as $250K - $300K . But still pricey.
Anon,
A little ground is enough to grow some veggies. This is more of a cathartic exercise than an economic boon. If you save a few dollars, it will have little impact on your overall finacnial picture in my experience.
It is a personal decision, if you “need” to buy a house, go for it. Realize that you are buying into the collapse of a lifetime, just getting started.
It is sooooooo hard for most people to stand pat with money in their pocket and wait.
It is sooooooo hard for most people to stand pat.
“What should I do? What should I do? What should I do?”
“Are we there yet? Are we there yet? Are we there yet?”
They drive you to drink, you know!
They drive you to drink, you know!
Oh, I doooooo know.
(hiccup)
Oly,
Did you drink your breakfast?
Did you drink your breakfast?
Not today, anyway. That was for dramatic illustration purposes sort of thingie.
Hi. I rent a nice apartment. I have stood pat since 2000. I can stand pat till I die. But I am worried about loosing all my hard earned and saved powder $$$$. Not so worried whether I own or rent. I do try and enjoy the moment and am good at it.
But would not like to see my money to go to gov. There are many charities that would do better with it.
“Figured if I bought a house at least I would have a place to live.”
Where do you live now??? (slight sarcasm here) Is it not good enough??
Just say no. It does work.
Immoral Business Idea #147: Fake Resume Enhancements
At my private club (membership is only $20 per month) in Chicago, I like to discuss immoral business ideas that can make people money if they have no ethics.
Here’s a great idea: charging people for fake resume lines. Been unemployed for a long time? Maybe you were a 1099 consultant and need a job history? Not meeting the requirements for the job you’re applying for?
For $50-$500, we’ll give you a positive reference with one of hundreds of shell companies. Using VoIP, we can place phone lines anywhere, and create a nice fake history of the company on our shell company websites. We’ll give you a positive reference at the job you request, with a positive pay history, too!
Getting leads for this is easy: post about 50 fake want-ads for jobs on craigslist. Harvest thousands of email addresses from people applying for the fake positions. A month later, email them all and get them to sign up for the service.
BTW, I only talk about these immoral business ideas to figure out ways to get around it. Will future possible-employers ask for past tax returns to confirm your employment with a real firm?
I’m sure this immoral business idea has already started somewhere. If not, watch out if you work in HR.
lol.
nice! I want to hear more.
Blue, let’s just stick to the moonshine.
I’m moving off my inlaws farm and into town (a subdivision) in a rent house.
So shine plans are delayed at least until my next move, likely in a year or two which will be into something I own.
So I gotta have something of marginal legality to keep me busy…
My condolences regarding moving to town. Good luck!
“I’ve been to a town.”
Grizzley Adams
Might work in some industries, I guess. In others this kind of reference would be insufficient. Even in a good-sized city, first thing a potential employer will want to know is which accounts you have worked on while employed at such-and-such. You worked on the Ace Cookie account? Oh, then you must know Bob Smith. Your ‘employment history’ could unravel very quickly from there.
But I like the way your mind works. Additional immoral business ideas will be thoroughly reviewed for practicality.
How much for a reference for Vandelay Industries?
How much for a reference for Vandelay Industries?
Aren’t they in the latex business?
Actually, they their railroad design architects, AFAIK. I have a listing for them if you need a reference. We can also play various background sounds of an HR department depending on how big you want us to sound like.
For those who do find this amusing, I come up with one decent immoral business idea a week. Some of them are REAL doozies. If you ever meet in in real life, ask me about my reverse Ponzi scheme idea.
Couple of minor anecdotes from my local network. YMMV.
Significant demand destruction is going on in housing even among the gainfully/comfortably employed segment. Two young women I know who work at a large fortune 500 company are both helping with it. One bought a small house in late 2006 (tried hard to talk her out of it, but no dice); she’s now talking about renting out a portion of the house to a roommate—something she would never have considered a couple of years ago. The other was renting a large 3br house, and a couple of years ago had no interest in having a roommate; now she’s giving up the house as “too big” and planning to move into the top half of a smaller house, shared with someone else. My impression is that both now have some concern about the security of their jobs.
Another fellow I know who worked construction until last Oct, when it suddenly dried up, was significantly underemployed the past 6 months or so. Now he says that his old crew is all working again, and that they have jobs that will likely take them through the end of the year or so. According to him the jobs are mostly remodels. This one doesn’t make a lot of sense to me. Are people doing more remodels in the hopes of making it easier to sell, or perhaps remodeling instead of doing move-ups?
All of this is Seattle-area, btw…
Many of my friends in NYC are putting out craigslist ads to share their apartments. These are folks who I am fairly sure make a high 5-figure income.
On the other hand, I have _always_ shared living space with others. Right now is the only time in my life I’m living completely alone, but the new property I acquired 2 months ago will have 4-5 co-tenants in the space (5000 square feet live/work in Chicago’s Pilsen neighborhood). I’m getting it for about 70% below market value, and the co-tenants will also be part time contract workers at the multi-purpose business I’ll run out of the front/retail portion.
If I had to get a mortgage (doubtful I ever will, but who knows), I would get one based on my ability to pay it off in 7-10 years, but then get a roommate or two to knock it out in 3-4 years. I’ve said it before: if you earn $60k a year in Chicago, you can easily afford a $200,000 condo or townhouse (with a 20% downpayment), get a roommate who pays $700 a month in rent and half utilities, and pay the sucker off in 4-6 years:
Cost to buy: $200,000
Downpayment: $40,000 (3 years of hard savings)
Monthly PITI: $2300 (10 year note @ 6%)
Additional Tenant: $700 / month
Utility Share Saved to Principal: $200 / month
Payoff: March, 2015 (less than 6 years)
You have to be a sucker to be carrying a 30 year mortgage if you acquire decent property in your 20s before you have long term responsibilities. The savings over your lifetime ends up at nearly $2 million at 2.5% interest a year.
Has anyone seen the ad on TV for sugardaddie dot com? I swear they have been running this funny ad on TV a lot lately, since the economy tanked. I wonder if there is any correlation to this type of relationship and economy in general (down economy = more women looking for sugardaddy, but I assume also less men can be sugardaddy due to job loss and stock decline)?
The Mother of All Depressions (MOAD)
Bob Moriarty
Archives
Mar 19, 2009
The US government lit the fuse to the $683 trillion dollar derivative’s debt bomb on Wednesday March 18, 2009 with the announcement the Fed would purchase $300 billion dollars worth of US Treasury used toilet paper and an additional $750 billion dollars worth of mortgage backed used toilet paper. In total the commitment to counterfeit over a trillion dollars leaves only $682 trillion dollars worth of derivatives to sort out.
Economics is all about price discovery. No one knows what the real value is of the $683 trillion dollars in derivatives. No one knows who owns what. No one knows who owes what. If left to its own devices, the market would lower prices until all assets had a value to someone. The government in its infinite wisdom has just short-circuited this discovery mechanism.
This is the end of the dollar. Everyone with any sense on earth will be unloading both their treasuries and mortgage-backed crap on the Fed. The Fed has just pissed $1 trillion of counterfeit money into a $683 trillion dollar cesspit. It can’t possibly fix the problem. When the world realizes the impact of the Fed monetizing all debt, there will be a total default. And then what happens?
The Mother of All Depressions.
The ability to publicly fund its debt has been what has kept the US government spending. Once that ability is dead, so is the government.
The meeting of the G20 in London on April 2, 2009 will be the most important financial meeting in history. If the delegates do not adopt a new gold standard of honest money, the dollar will totally default within a few months. The fuse has been lit. There is nothing the government can do beyond what they have already done. Nothing has worked. Nothing can work.
Bob Moriarty
They have lit a fuse but not in the way that the guy (who is a “sensationalist”) is suggesting.
Firstly, derivatives are zero-sum. If I write a contract to you, and I stand to make $100, then you stand to lose $100.
Secondly, a lot of these contracts have been underwritten on specific actions by specific central banks. Whenever they intervene, they are arbitrarily scr*wing over one entity over another, and nobody knows who is the spanker and who is the spankee.
Something somewhere will fail as a consequence of what they are doing.
Who is that gonna be? Nobody has a clue. And failed entities don’t pay back debt.
This absurd deleveraging (= deflation) is far from over.
This Bob guy sounds like he is about to blow a gasket.
Coming soon: gov’t bailout money for old cars so you can buy new ones:
Washington Post Staff Writer
Thursday, March 19, 2009; Page D01
To put a stop to sliding auto sales that were dragging down Germany’s stalwart automakers, the German government offered drivers a few thousand dollars to scrap their old cars and buy new ones. In February, while auto sales fell throughout Europe, German auto sales jumped 21 percent.
Now the United States is contemplating whether such a tactic can work here, where sales have plummeted to the lowest levels in more than two decades.
Rep. Betty Sutton (D-Ohio) introduced a new spin on the concept on Tuesday in an effort to battle the steep decline in auto sales that’s pushing car companies deeper into the red. Under her bill, the government would buy cars and trucks that are at least eight years old and send them to the scrap heap or to be recycled for parts and materials. The owners would receive vouchers worth $3,000 to $7,500 to buy more fuel-efficient North American vehicles or use mass transit.
New cars must meet a minimum of 27 miles per gallon on the highway and trucks must meet 24 mpg. The better the fuel efficiency, the bigger the payout. And the sticker price on the new car can be no more than $35,000.
New cars must meet a minimum of 27 miles per gallon on the highway and trucks must meet 24 mpg. The better the fuel efficiency, the bigger the payout. And the sticker price on the new car can be no more than $35,000.
To some, the program has the potential to help strapped automakers, tackle climate change and stimulate the economy — all in one fell swoop. By encouraging people to ride mass transit and buy more efficient cars, it has the backing of environmentalists, public transit officials and economists.
But to others, the proposal violates trade agreements and threatens jobs by reducing vehicle repairs. The Automotive Aftermarket Industry Association argues that by taking cars off the road, the proposal would reduce the supply of used cars and effectively push up the price of those that remain.
Sorry, scrapping old cars for more fuel efficient models doesn’t work, because we don’t make them.
Sure we do. Ford and GM already make and sell cars that get over 30 mpgs on the highway. The Ford Focus and Chevy Cobalt actually sell quite well. The Cobalt’s replacement, the Cruze will be a much better car. Ford is also supposed to start selling the Fiesta next year in the US.
Keep in mind that the Germans are very strict about what constitues being roadworthy. I would venture to say that any car in the US (regardless of make) that is more than a few years old with typical maintenance would require expensive repairs to pass the TUV inspection.
The Netherlands is introducing a similar 2500 euro subsidy for everyone who exchanges an old car (wreckage) for a new car. This is said to be good for the environment (current engines have less polution), but some experts have argued convincingly that the environmental impact is probably very negative.
But well, why complain if you can throw lots of taxpayer money at a nearly bankrupt industry…
This week’s funniest moment…..
I was test-driving a new car this week in the Rock County (Wisconsin) area where GM had shut down with a loss of over 1000 jobs, as well as local suppliers also laying off at least another 1000. While not the 10,000 plus positions as in some areas, please note this has a HUGE impact economic impact on the surrounding area.
New car salesman tells me GM is pulling all of the equipment out of the plant (no surprise) BUT the rumor is Harley Davidson is going to move into the plant and start production!!
I started laughing so hard I almost crashed the car. Salesman asked me what was wrong, so I noted the following: 1) Harley is having problems (just like the automakers) and reducing production and laying off people, 2) you can argue a car is a necessity but no one can argue a motorcyle is a necessity, 3) with new Harley’s costing more than the new car I was test driving it makes more sense to buy a car than to buy a Harley, 4) many people in the area will be hurting financially and start selling off their toys, 5) where was the money coming from to buy those Harley’s? HELOC!!!!
Sadly, they would not accept my respectfully submitted offer of $700 lower than their “rock bottom” price. Well, if their sales are so good, why are there so many cars on the lot with dusty windshields and bird poop? Also, if sales are so great, why are they suddenly running a “below invoice” special where they’re “losing money” on every car?
Actually the second dealer did manage to come in $1K less than dealer one (same car, but upgraded model) but I’m still trying to see if dealer one will come back and beat what dealer two offered. Dealer one will have to come in lower, as I was ready to buy Saturday but they could only point at the price and say “this is what you have to pay.” Uh uh….the MadMobile has at least another year on it and if I have to pay what your dotted line says, there is no difference to me if I buy now or a year from now.
Strangely enough, I was at dealer one for almost an hour and only one other person came into the dealership.
Thanks.
This is the sort of anecdotal evidence that the HBB is so good at providing and that I find so interesting.
+1
OMG OMG OMG….
Blush shyly…
Responses from both ladies on whom I have HBB crushes….Olympiagal AND FPSS!
FPSS - you’re in NYC? I love NYC - to visit - but would never consider living there - too busy for my small town mid-western taste.
OG, I would love to head to the PNW - I loved the time I spent in the PNW, including the weather.(and a Seattle radio station via internet). Alas, no job offer forthcoming…oh, and the small detail that MissMad has no interest in packing up Little MadBoy and feline to move out west.
Keep your pants on, FPSS is a guy!
Responses from both ladies on whom I have HBB crushes….Olympiagal AND FPSS!
I’m almost positive FPSS is a guy
Really?!? I stand corrected.
Keep your pants on, FPSS is a guy!
I am gonna display some unFREAKin’ believable restraint right now.
“where was the money coming from to buy those Harley’s? HELOC!!!!”
Same with the RV sales.
Winnebago Industries posts 2nd-quarter loss as RV sales continue to fall in troubled economy
In recent weeks, the downturn has claimed two of Winnebago’s main competitors. Fleetwood Industries Inc. and Monaco Coach Corp. filed for Chapter 11 bankruptcy protection within days of each other earlier this month.
“We anticipate continued softness in motor-home sales until we see improvement in the credit markets at the wholesale and retail levels and in consumer-confidence levels,” Olson said.
In 2008, RV shipments fell 33 percent, according to the Recreation Vehicle Industry Association. In January alone, they plunged more than 70 percent.
http://biz.yahoo.com/ap/090319/earns_winnebago.html?.v=10
Ooops…I was at the dealer 2 hours, not “almost one” (still doesn’t matter…no one came in).
Also, dealers seemed shocked when I said car prices would be the same, or less, next year. HELLO…you’ve been moving among incentives, cash back, 0% loans, rebates etc. for eight years.
When rejecting my offer, the manager compared it to “listing your house for $180K and being offered $150K when you ‘know’ it’s ‘worth’ $180K.
It was priceless…and do you know how hard it is to shift and clutch when laughing hysterically?
Dear Meredith (may i address you as Meredith?),
Yesterday, I tendered an offer to you for “personal services”. Suprisingly, I have not, at this time, received an acknowledgement or reply to my proposal.
I know you are busy, or it may have been an inadvertant oversight, or perhaps my proposal did not have enough keywords for your HR software to flag it for follow up.
It then occured to me that I may have been too “general” in describing the benefits of a limited partnership. If this is the case, may I briefly describe some of the “opportunities” that could be pursued.
-Procure an outfit something like Olygal’s “Female Nazi Interrogator” outfit…….jackboots, black riding breeches, black leather jacket….I will wear an outfit reminiscent of the Merrilll Lynch bull.
You may flog me with your riding crop while I bellow, cow-like “We should have listened to you, Gruppenfuhrer Whitney!!!!”
-I wear a sheep suit, wearing a nametag that says “Citi”………you shear me, shaking the fleece in my face, yelling “Kiss more of your market cap good-bye, you stupid sheep!!!!”, while I say “You were riiiiiiiiiiiiight, Miss Whitneeeeeeeeey”
-I dress like the mighty Kiowa chief Santanta (body painted red all over, wearing a loincloth). You dress like a defenseless Plains farm girl. I try to raid your “homestead”, while you shoot me in the a$$ with a paintball gun.
These are just a few examples…….the possibilities are only limited by our collective imaginations. Sorta like Apple or Disney, less the EE degrees.
Please do not hesitate to call if you need additional information, or if any clarification/detail on my proposals is needed.
Sincerely,
As always, your humble and submissive man-bi#ch,
X-GS-fixer
Hmm,
May I watch?
Roidy
Forget the watching! I’m totally fallin’ in love, here.
Note to self: Buy digital camcorder.
And a sunbonnet.
My master Meredith would be wearing the “Bo-peep” outfit with sunbonnet.
Three guesses on where her “crook” is……..:)
Wow, what an imagination. Many talents here on HBB. Many.
fixer,
Hope it hasn’t gotten to where you are drinking on the job! Don’t forget to count your tools before you button up that engine.
Skye
Yeah, and don’t stick your hand in the whirly thingie. Or you’ll have to have some help tying on the sunbonnet.
(Serious, though, X-GS, good luck to you. And let us know if Meredith answers you. Don’t just disappear away into merry boy-toydom.
)
I don’t drink much, never developed the habit. Same deal with the “other means of intoxication”. Too much down-side, if a random drug or alcohol test comes up positive
Although there are a few times that I wished that I had.
As the noted patriot and philospher Ben Franklin once noted:
“Beer is proof that God loves us, and wants us to be happy”.
I mean, Jeeze, man, you gonna’ fight that sort of wisdom?
Commie!
More car owners behind on auto loans…
DETROIT — Consumers straining to meet household expenses are taking longer and longer to make their car payments, increasing the risk they’ll default on those loans and potentially making it harder and more expensive for everyone else to get car loans.
Car loans that were 60 days past due — and likely to soon go into default — were up 17% in the fourth quarter, says Experian Automotive credit tracking. And the share of loans 60 days past due is expected to be up 40% by December, compared with the share in December 2007, TransUnion Credit says.
Even with the increases, 60-day delinquent loans remain only about 1% of outstanding loans. But any rise is bad news for buyers, who’ve already seen lenders tighten standards. They are less willing to lend to subprime customers and asking for larger down payments even from customers with solid credit histories. Lenders are also less willing to issue loans that are for more than a car is worth — a practice that had been common this decade as buyers traded cars on which they still owed money and wrapped that amount into their new loan.
“A lot of lenders made changes in 2008 to their lending practices,” says Melinda Zabritski, director of automotive credit for Experian Automotive. “I expect to see that holding steady for the rest of this year.”
Experian says 60-day delinquencies are highest in Mississippi, the District of Columbia, Alabama, Georgia and South Carolina. Delinquencies are lowest in North Dakota, Arkansas, South Dakota, Montana and Wyoming. Buyers in those areas tend to borrow less, says TransUnion, and are more likely to make their payments because they rely more on their cars.
The average loan for a new vehicle was $24,444 in the fourth quarter, down $338 from the first quarter of last year, Experian says.
Auto sales have taken a beating in recent months, down 39.4% year-to-date. Rebates and incentives are up 7.1% through the end of February, according to industry tracking firm Autodata, as the automakers attempt to lure more buyers into showrooms.
But the cost of financing could soon start rising, says Pete Turek, automotive vice president in TransUnion’s financial services group. Typically, lenders try to make up money they lose in delinquencies and repossessions by raising other customers’ costs.
I find it curious that the Dodd/AIG story was plastered everywhere yesterday, yet nobody is breathing so much as a word about it today. Could it be that all of the pols want to hurry up and sweep it under the rug, with the media happy to oblige? I, for one, am ENRAGED by the situation. Chris “Corruption” Dodd needs to step down immediately, or be forced to resign. He singlehandedly took it upon himself to ensure AIG would get those bonuses. It is NOT a mere coincidence that they were the largest contributor to his campaign. Keep screaming, people.
And nary a comment from our lefty zealot pals on here. How ironic.
The partisan rhetoric is quite old, Blano.
Call it what you want, the silence is deafening. Your denial of the truth doesn’t change the truth.
My denial of the truth? I voted for Obama! Wake up, Blano.
Yeah, they should have pressured him to resign just like the GOP did when the story broke about Larry Craig soliciting $ex in an airport bathroom. What he did is just as sleazy in my book if not worse!
Shortly after class, an economics student approached his economics professor and said, “I don’t understand this stimulus bill. Could you explain it to me?”
The professor replied, “I don’t have any time to explain it at my office, but if you come over to my house on Saturday and help me with my weekend project, I’ll be glad to explain it to you.” The student agreed.
At the agreed-upon time, the student showed up at the professor’s house. The professor stated that the weekend project involved his backyard pool.
They both went out back to the pool, and the professor handed the student a bucket.
Demonstrating with his own bucket, the professor said, “First, go over to the deep end, and fill your bucket with as much water as you can.” The student did as he was instructed.
The professor then continued, “Follow me over to the shallow end, and then dump all the water from your bucket into it.” The student was naturally confused, but did as he was told.
The professor then explained they were going to do this many more times, and began walking back to the deep end of the pool.
The confused student asked, “Excuse me, but why are we doing this?”
The professor matter-of-factly stated that he was trying to make the shallow end much deeper.
The student didn’t think the economics professor was serious, but figured that he would find out the real story soon enough.
However, after the 6th trip between the shallow end and the deep end, the student began to become worried that his economics professor had gone mad. The student finally blurted out, “All we’re doing is wasting valuable time and effort on unproductive pursuits. Even worse, when this process is all over, everything will be at the same level it was before, so all you’ll really have accomplished is the destruction of what could have been truly productive action!”
The professor put down his bucket and replied with a smile, “Congratulations. You now understand the stimulus bill.”
Love a professor that uses visuals and the hands on teaching method.
Ed Zachary!
LMAO!!!!
A great analogy. Although I would have liked to have seen a reference to a jackhammer somewhere in that story.
Was she wearing a swimsuit?
Crude really ratcheting up the past few days. I know a lot of it may have to do with the dollar, but if gasoline gets well above $3 per gallon again, with diesel breaking the $4 mark, we’ll see a marked increase in the speed of this economic meltdown. Not much attention has been given to the fact that high fuel prices (and commodities in general) had an absolutely devastating effect on the economy.
I’m scratching my head on that one too. Crude oil stocks are still very high - very much so relative to norms. That’s what caused prices to plummet late last year. Obviously the downturn is counteracting the (overblown) OPEC cuts.
The only thing I can figure is that people are starting to use crude as a hedge again. Not a wise thing, IMO - though not unexpected (I own some USO in fact; it’s doing well of course).
“The only thing I can figure is that people are starting to use crude as a hedge again. Not a wise thing, IMO”
Please elaborate…this is very interesting.
Jumps in some UCO, AA, and DYY I picked up over the past few weeks prompted me to bail today.
If we have massive price inflation, it’ll kill the economy even worse - at least relative to inflation. Oil (unlike gold) is a true commodity - you can’t use it for currency. Commodities lose their demand in a depression. Especially oil, since during a depression there’s less stuff to ship, less people commuting to work, less vacationing, etc.
However that being said - there’s a good chance oil will go through the roof if we do end up having a bonafide recovery. That’s years down the road though.
Thanks, it is a bit of a conundrum to be sure. There’s opportunity there in the bounces, but I’d rather wait until we retest the lows to see how commodities respond the next time down.
“if gasoline gets well above $3 per gallon again, with diesel breaking the $4 mark, we’ll see a marked increase in the speed of this economic meltdown”
Agreed. Low prices at the pump = more for “The Consumer” to spend elsewhere AND low gas prices hurts certain regimes not-so-friendly to the USA.
“if gasoline gets well above $3 per gallon again, with diesel breaking the $4 mark, we’ll see a marked increase in the speed of this economic meltdown”
Yes, and by the same token you have the head of Ford asking for a huge increase in the gasoline tax to run the price up so more people will buy their hybrids. Funny once the gas price dropped sales of hybrids plunged 80% imagine that.
Some of the increase has to do with refineries being taken off line for annual maintenance. Happens every March-May.
Exactly how much of the rise can be attributed to that I do not know.
no Bernake said a falling dollar doesn’t affect US consumers because we buy stuff in the US…. with dollars.
What a tool Bernake is now he’s buying Treasuries with air
As a Canuck I think that oil going up in price is a good thing. I would like the CDN dollar to be 1.50 US dollars. We could sell you oil and you could sell us red peppers, I don’t want any Mexican produce. In return for a low US dollar you can have all the auto manufacturing jobs that we have no. You’ll like Chyrsler as they hardly ever try to extort from the people.
The past life of AIG CEO Ed Liddy
Scroll down for the rest of the story once you’ve clicked on the link
http://tinyurl.com/cmyqo5
The D.C. clown troupe is tripping all over itself. LOL! Hey Moonbat & Co. What about the huge bonuses being paid out at Freddie&Fannie, along with a whole host of others? These A-holes are close to unbelievable, while they piss away trillions.
WASHINGTON (AP) - Acting with lightning speed, the Democratic-led House has approved a bill to slap punishing taxes on big employee bonuses from firms bailed out by taxpayers.
The vote was 328-93.
Said House Speaker Nancy Pelosi: “We want our money back and we want our money back now for the taxpayers.”
Republicans called it a legally questionable ploy to paper over Obama administration missteps.
Minority Leader John Boehner, R-Ohio, said the bill was “a political circus” diverting attention from why the administration hadn’t done more to block the bonuses before they were paid.
The bonuses, totaling $165 million, were paid to employees of troubled insurer American International Group, including to traders in the unit that nearly brought about the company’s collapse.
THIS IS A BREAKING NEWS UPDATE. Check back soon for further information. AP’s earlier story is below.
WASHINGTON (AP)—Democrats pressed for quick action Thursday on a bill to slap punishing taxes on big employee bonuses from firms bailed out by taxpayers. Republicans called it a legally questionable ploy to paper over Obama administration missteps.
It’s getting close to the point where the great unwashed are going to demand that the plug be pulled on this Charlie-Foxtrot, so the system can reboot.
If nothing else, it might have the effect of leveling the playing field.
Gerald Celente’s experience with cash withdrawal from a bank:
Author’s Note: Suspicious of the soundness of the banking system, I requested to withdraw a substantial sum from our Key Bank account, leaving funds sufficient to cover ongoing business operations. First they tried to dissuade me, then they stonewalled me, and finally they turned openly hostile.
I was forced to sign a series of documents, including one acknowledging that since I was carrying a large sum I could be the target of a robbery. To enhance that possibility, the teller slammed down the bag of cash on the counter and publicly announced the sum.
Despite repeated requests in the days preceding my withdrawal to get the cash in hundreds, they gave it to me in twenties, making for a bag five times the size and more robber-friendly. When I complained to the bank manager who had processed the request, the response amounted to “take it or leave it.”
This will not be an isolated event. If you attempt to withdraw a large chunk of money from your account, negotiate the details in advance and anticipate possible hassle and obstruction.
U.S. Bonds - the Riskiest Safeguard in Financial History
By Bill Bonner
Paris, France
It’s the waterslide into Hell! Whee!
What a day. Under cover of the AIG scandal, the Fed did something foolhardy yesterday.
“Fed plan stuns investors,” says the headline in the Financial Times this morning.
It should stun us all. But we’re getting used to expensive bamboozles.
In response to the Fed’s latest move, the yield on 10-year Treasuries fell more than any time since they started keeping records in 1962. From 3.01% it had fallen to 2.48% when last we looked.
Yields fell because the Fed said it would buy $300 billion worth of government debt. Stocks rose - with the Dow up 90 points. And the dollar fell heavily against the euro…down to less than $1.31/euro.
Of course, most people have no idea what this means. But here at The Daily Reckoning we weren’t born yesterday. And we’ve been following this story for the last 38 years.
Yes, dear reader, when Richard Nixon cut the link between the dollar and gold, the world has been using a money system that is, to put it in its best light, experimental. The last experiments of this sort - on anything like this scale - were conducted in the 18th century. The Banque Generale was set up by that rogue, John Law, to buy up the debt of France - of which there was plenty. And a similar plan was underway in England soon after - later known as the South Sea bubble. It was similar in that the bank substituted pieces of paper - stock in the South Sea Company - for government debt.
In the U.S. version, circa 2009, the Fed uses pieces of green paper called ‘dollars’ to buy up the government debt.
Wait a minute…where do the dollars come from? Oh, silly reader, they come from the same place that shares in the South Sea Company…or shares in the Mississippi Company (the French version) came from - they just printed them up!
And now, they don’t even have to print them up. When the Fed buys U.S. debt, it merely makes an electronic notation…like an IOU that disappears as soon as the power goes out.
When those 18th century debt buy-up schemes were put in place, at first their stock rose. John Law’s shares were such a hit that ladies would stop him in the street…it was rumored that they offered their most cherished favors in exchange for an opportunity to buy. Shares in the South Sea Company, meanwhile, went up 10 times in a single year.
U.S. bonds rose strongly yesterday too; of course, the richest investor in the world just entered the marketplace - announcing he would buy $300 billion.
And if that doesn’t work…he’ll buy more.
“Fed to buy $1 trillion in securities to aid economy,” reports the New York Times.
“The Fed is engaging in massive quantitative easing,” said William Poole, former head of the St. Louis Fed.
And why not? The central banks of England, Japan and Switzerland are all buying their government bonds. The IMF too.
Besides, all the bailouts and stimulus plans so far haven’t worked. And at least this latest plan makes a little more sense. The problem is debt, not liquidity. Buying up the securities of Fannie and Freddie, the Fed will lower the cost of mortgage debt. This will give homeowners an opportunity - probably the last one of their lifetimes - to refinance their houses at low interest rates. The target range…we’ve heard…is between 3% and 4%.
Commodities surge after Fed bond plan
By Javier Blas in London
Published: March 19 2009 19:14 | Last updated: March 19 2009 19:14
Commodities prices surged on Thursday as investors sought protection against the risk of higher inflation by buying everything from oil and gold to copper and sugar.
Plans by the Federal Reserve to buy $300bn of US government debt triggered the stampede into commodities markets, which had suffered sharp price falls on worries that the world was heading for a depression. For the first time in almost a year, traders looked to oil and other raw materials as a hedge against an unexpected jump in prices.
The benchmark S&P GSCI index, a basket of raw materials, rose 6 per cent as oil prices soared to $51 a barrel, up 7 per cent on the day, to their highest level since December. Copper reached a four-month high.
The switch into commodities was triggered by concern that the US central bank might find it difficult to manage down the country’s money supply when its economy turned. That could lead to sharply rising prices for many goods and services.
Hussein Allidina, head of commodities research at Morgan Stanley in New York, said: “Investors are buying commodities as protection against inflation and as a hedge against a weaker US dollar.”
Nick Kalivas, an analyst at MF Global in New York, said that the aggressive move by the Fed was “stoking inflation expectations” and that there was a belief that a lot of money could flow into commodities.
And of course, everyone knows that families have no budget constraints so that higher food prices would never force them into foreclosure.
Similarly, retirees have no budget constraints, so higher food prices would never force them into hunger.
Of course, that goes without saying.
Actually, I think QE is gonna increase the rate of the housing fallout not decrease it.
I’ve been thinking the same. Liquidity + stringent underwriting standards = price formation at fire sale prices.
FPSS - that’s what I think, too. Wages can’t increase fast enough to keep the FBs from going under at an increasing rate.
NEW YORK (Reuters) - Investor Wilbur Ross, who made a fortune snapping up distressed companies, said on Thursday he expects as many as 800 more U.S. banks to fail in the next few years.
Ross, on the sidelines of an insurance conference where he spoke, told Reuters he includes in his tally banks that have accepted funds as part of the federal government’s bailout program.
In total, he expects about 1,000 failures, including about 200 that have failed so far and 800 more in the next few years.
About 250 banks are on the Federal Deposit Insurance Corp’s so-called “watch list” of financially troubled banks, he noted. “There will be more on that watch list when the March quarter results are announced,” he told a gathering of insurance-linked securities specialists.
Ross, a consummate turnaround specialist, has been eyeing the sector for deals.
Earlier this year he agreed to buy more than 68 percent of First Bank & Trust Co, an Indiantown, Florida, community bank with a handful of branches and $83 million in assets, from Linda Post, widow of the bank’s former chairman.
It is a tiny deal, but expected to be the first of more takeovers by an investor known for getting in before sectors rebound.
First Bank represents a slightly different strategy for Ross. The family-owned bank, located an hour from Ross’ Palm Beach residence, avoided the lending problems that gripped many Florida banks. Post, the seller, will remain a director and retain a 23 percent interest.
Ross has been eyeing financial institutions because they are on sale at deep discounts in the wake of the long, drawn-out credit crisis. He is also interested in making further investments in insurance.
Ross, the founder of New York-based private equity firm WL Ross & Co, holds investments in a wide range of sectors from low-cost Indian airline SpiceJet Ltd (SPJT.BO) to bond insurer Assured Guaranty Ltd (AGO.N).
Last year, he acquired H&R Block Inc’s (HRB.N) subprime mortgage servicing operations for $1.3 billion.
WL Ross, formed by Ross in 2000, has been a part of fund manager Invesco Ltd (IVZ.N) since 2006.
Based on Wednesday’s close, the KBW Bank Index .BKX has fallen more than 70 percent since the end of June 2007, as the credit crisis began to set in. The index ended down 9 percent on Thursday.
The Smoking Gun has an report about kids in Florida finding an empty, foreclosed house and having a party in it–causing $75,000 worth of damage
http://www.thesmokinggun.com/archive/years/2009/0224091house1.html
(This is going to become a huge problem in Florida where there are a lot of vacant McMansions.)
U.S. Economy: Leading Indicators Index Declines 0.4%
By Shobhana Chandra and Timothy R. Homan
March 19 (Bloomberg) — A measure of the economy’s future performance dropped and the number of Americans collecting unemployment benefits surged to a record, evidence the recession is deepening as policy makers try to unfreeze credit markets.
The Conference Board’s index of leading indicators, a gauge of the economy’s direction over the next three to six months, fell 0.4 percent in February, less than forecast. Manufacturing in the Philadelphia area shrank for the 15th time in 16 months, a Federal Reserve report showed, and the Labor Department said 5.47 million Americans are getting jobless benefits.
“The economy is still in a mess” and manufacturing won’t turn around until consumer spending and exports pick up, said Sal Guatieri, a senior economist at BMO Capital Markets in Toronto, who accurately forecast the drop in the leading indicators index. “The Fed’s aggressive action removes a big downside risk and will support a recovery later this year.”
Today’s figures underscore the picture of a worsening economy that provided a backdrop for the Fed’s meeting this week, when the central bank pledged to buy as much as $1.15 trillion in assets to pump more money into the banking system. Chairman Ben S. Bernanke forecasts an economic recovery in 2010 as long as policy makers take sufficient action.
“Chairman Ben S. Bernanke forecasts an economic recovery in 2010 as long as policy makers take sufficient action.”
Almost as if one can set their watch by it.
I just don’t know, is this confidence, audacity, jawboning, or just plain knowledge speaking here? As huge as the economy is, has anyone ever really taken on the task of making such a specific prediction as Boom Boom has here?
Of course there is a loophole, but still, the man ought to know how sensitive this issue is becoming with people and also how high expectations are running. Maybe he knows he might be elsewhere in 2010?
iBanks Grabbed $50 Billion in AIG Bailout Cash
By Barry Ritholtz - March 7th, 2009, 8:14AM
Yesterday, in Backdoor Bailouts for Goldman Sachs?, we noted that GS, as well as Morgan Stanley, Merrill Lynch, and Deutsche Bank, were all made whole on their bad bets with AIG.
That’s right, what was misleadingly described as systemic risk turned out to be in large part little more than a counter-party bailout — money for the very same people who helped cause the problem.
Only the $25 billion figure I mentioned was off by 100% — the WSJ is reporting this morning it was $50 billion dollars, almost a third of $173 billion total AIG loot:
“The beneficiaries of the government’s bailout of American International Group Inc. include at least two dozen U.S. and foreign financial institutions that have been paid roughly $50 billion since the Federal Reserve first extended aid to the insurance giant.
Among those institutions are Goldman Sachs Group Inc. and Germany’s Deutsche Bank AG, each of which received roughly $6 billion in payments between mid-September and December 2008, according to a confidential document and people familiar with the matter.
Other banks that received large payouts from AIG late last year include Merrill Lynch, now part of Bank of America Corp., and French bank Société Générale SA.
More than a dozen firms with smaller exposures to AIG also received payouts, including Morgan Stanley, Royal Bank of Scotland Group PLC and HSBC Holdings PLC, according to the confidential document.”
Now you know why the Fed was so reluctant to reveal who the coutnerparties were.
This is a giant DUCK POO to the American taxpayer. Isn’t there some Congressmen (besides Ron Paul) who are morally offended by the Paulson plan, which is slowly becoming the Geithner plan? Isn’t there anything that can be done?
DUCK POO rhymes with …
BABY POO?
Nah — RUCK ROO (in Scooby speak…)
Saw that last week. That’s exactly why the AIG bailout was so necessary. It’s the same principle as the Mexico bailout in 1982 - it had nothing to do with Mexico, it was a bailout of counterparty Citibank.
A step further - there’s an awfully good case to be made that the primary motive for very involvement in WW1 was a bailout of JP Morgan. They had tons of $$ to lose if England had lost that war. They had the motive and the means to make sure we got involved.
There are many different shapes and forms bailouts can take.
I am so glad to see Obama and the Dems hit the bailout jerks with that 90% tax, but I am afraid these %$#@ will figure a way out of it. For example, the tax is on people receiving $250k or more. What is to stop someone from saying “pay me less” so I can get the big bonus under the caps? I just think it is going to be hard to stop this unless we seize the company and throw these bums out of AIG once and for all (which I support 100%).
But I give props to Obama for at least trying, and the Dems for putting this into place. Of course, Geithner has to go, and I hope Dodd goes down in flames on the next election for his role. I also hope the Dems learned a valuable lesson in all this. Never trust the gangsters on Wall Street.
But I can clearly see that Obama is trying. How lucky we are to have this guy in there. He’s fighting for us at least. An honest guy in a town COMPLETELY CORRUPT. Good luck!
We all know Bush would have defended the bonuses as being someone free market capitalism or some other completely insane nonsense.
“But I can clearly see that Obama is trying. How lucky we are to have this guy in there. He’s fighting for us at least.”
HAHAHAHAHAHAHAHAHAHAHAHAHAHA!!!!!!!!!!!
Good one.
********Kool-aid alert!*********
Fed to Buy $300 Billion of Longer-Term Treasuries (Update4)
By Craig Torres
March 18 (Bloomberg) — The Federal Reserve opened a new front in its battle to bring down borrowing costs across the economy, pledging to buy as much as $300 billion of Treasuries and stepping up purchases of mortgage bonds.
The announcement following the Federal Open Market Committee meeting today in Washington spurred the biggest rally in longer-dated Treasuries in decades. Officials unanimously voted to expand the Fed’s balance sheet up to $1.15 trillion, and said they may broaden a program aimed at boosting consumer loans to include other assets, today’s statement showed.
With today’s move, the Fed has committed to buy or loan against everything from corporate debt, mortgages and consumer loans to government debt, after cutting its benchmark interest rate to zero failed to end the credit crunch. The unprecedented campaign comes after a worsening recession sent the unemployment rate up to a quarter-century high of 8.1 percent.
“The FOMC may believe the economy is nowhere near a bottom,” William Poole, former president of the St. Louis Fed, said in an interview today with Bloomberg News. “The Fed is engaging in a massive quantitative easing.”
Quantitative easing refers to using injections of funds into the economy as the main policy tool. Poole is now a senior economic adviser to Merk Investments LLC in Palo Alto, California, and a contributor to Bloomberg News.
Would the mortgage servicers included in these loans be Countrywide (aka BofA)?
Banks draw more, investment firms less over past week from Fed’s emergency loan program
Separately, the Fed said Thursday it is expanding a $1 trillion program aimed at jump-starting consumer and small business lending.
The program will include securities backed by loans or leases relating to business equipment, car-fleet leases and loans extended by mortgage servicers to cover payments missed by homeowners. The new categories won’t be part of the program’s initial rollout this week, but will be included starting next month.
http://biz.yahoo.com/ap/090319/na_us_fed_credit_crisis.html?.v=1
“The FOMC may believe the economy is nowhere near a bottom,” William Poole, former president of the St. Louis Fed, said in an interview today with Bloomberg News. “The Fed is engaging in a massive quantitative easing.”
yep
“quantitative easing”
I find myself vexed by disgusting thoughts about financial laxatives and the aftermath of their ingestion…
Why is it that every time BB and TTT make a new maneuver to fix the economy, I feel a little bit poorer, while some bigwig on Wall Street gets another multi-million dollar payment, or worse yet, some FUBAR financial firm gets billions of dollars helicopter-dropped straight on to their balance sheet ?
Hey, your profession came up with the absurd monetarist model that is the intellectual justification of mass theft.
Point your fingers clearly and you’ll be out of a job.
I can’t hold myself responsible for the malpractice of other practitioners, any more than any particular doctor would hold himself responsible for surgeons whose patients have a higher-than-average post-op mortality rate.
Does this mean the FED’s new program backfired? There was 200 billion available to investors.
Investors request $4.7 billion on loans from Fed’s consumer credit program
WASHINGTON (AP) — The Federal Reserve says it has received requests from investors for $4.7 billion worth of loans in a program that aims to jumpstart consumer lending.
Investors will use the money they get from the Fed to buy newly issued securities backed by a range of consumer and business debt. Loan requests were due Thursday. The Fed will provide the loans on March 25.
Of the $4.7 billion requested, $2.8 billion is for credit cards and $1.9 billion is for auto loans.
Ruth Madoff claims homestead exemption on Palm Beach mansion:
http://www.bloomberg.com/apps/news?pid=20601087&sid=aDNzDQ7orRzc
In Florida, don’t “the rest of us” have to have physically occupied the property on Jan.1 in order for it to qualify as a principal residence, for homestead exemption and presumably protection, at any time during that year?
Saw this late, it’s a different strategy.
An OJ thing.
FL laws defends it’s retirees against certain suits.
Is this illegal? If not, it certainly sounds like it should be illegal.
Some high muck-a-mucks have proposed giving the Fed more regulatory power. Given that they failed miserably to prevent the mess we are in when they already had regulatory authority, this sounds to me like handing the keys to the chicken coop over to the foxes.
I suggest the FBI rather than the FED should start getting more involved in the banking business. Let’s figure out where laws were broken, and give jail time where it is warranted.
BofA linked to Merrill writedowns
By Greg Farrell in New York
Published: March 19 2009 23:32 | Last updated: March 20 2009 00:32
Bank of America was directly involved in markdowns that contributed to Merrill Lynch’s $15.3bn loss in the last quarter of 2008, its final reporting period before the Wall Street bank was acquired by BofA, sources familiar with the matter say.
Mounting losses at Merrill during December almost derailed the acquisition. Ken Lewis, BofA’s chief executive, threatened to walk away from the deal unless the US government provided $20bn in extra capital. The deal closed on January 1 after federal officials pledged their support.
People familiar with the matter said BofA had dispatched Neil Cotty, its chief accounting officer, during the fourth quarter to work with Merrill’s finance team. They said Mr Cotty played an active role in preparing accounts, wielding influence with Merrill executives who were set to report to him and other BofA officials after the deal closed.
With Mr Cotty’s involvement in December, the people familiar with the matter said, Merrill took a fourth-quarter writedown of $1.9bn in leveraged loans and a $2.9bn reserve against an exposure to derivatives linked to asset-backed securities.
Mr Cotty also gave his blessing to a $1bn writedown of credit default swaps involving investment grade companies. The markdown of a position on the “high vol 4” index transformed a gain of $100m into a loss of $900m, said a source familiar with the matter.
In a statement issued by BofA, Mr Cotty said: “While BofA had access to Merrill’s financial information in the fourth quarter and had input into many accounting policy and valuation issues, Merrill management was responsible for these decisions regarding the marks and other valuations.”
Just about everyone is trying to game the system. Especially the big players.
Careful where you build those new schools.
FORT PIERCE — Just a few short years ago, St. Lucie County couldn’t build schools or hire teachers fast enough.
Teachers were recruited nationwide, even internationally. In one two-year stretch, the school district built six new schools, including two high schools, to accommodate thousands of new students. A temporary school, made of portables, was built in 2007 because construction simply couldn’t keep pace with the growth.
Then the bottom fell out.
St. Lucie now has one in 10 homes in foreclosure and a double-digit rate of unemployment. Government jobs, once a staple of the local economy, have dried up by the hundreds.
That crisis deepened today: The St. Lucie County School District, the county’s largest employer, laid off 331 people, including 157 teachers, and acknowledged that it would close two schools, including the temporary one built just two years ago, and consolidate its alternative schools.
School officials also plan to recommend to the school board that cuts be made to the school resource officer program and athletics, that employees take a pay cut, that transportation to magnet schools be limited and that substitutes be used less frequently in the schools, according to a 32-page proposal released late Thursday.
Chris Cillizza’s Politics Blog — The Fix
washingtonpost dot com’s Politics Blog
Wag the Blog Redux: Should Geithner Stay or Go?
Is Treasury Secretary Tim Geithner’s job safe? AP Photo by Ron Edmonds
The fate of Treasury Secretary Tim Geithner remains a hot topic of discussion in Washington as the political fallout from the AIG bonuses fiasco begins to be felt.
Yesterday, we asked Fixistas for their thoughts on whether Geithner should keep his job or whether it was time for him to go, and, more importantly, why. That conversation continues here.
We sorted through the responses and grabbed some of the best ones. They’re split into “go” and “stay” camps and excerpted below.
So, all this bad mortgage debt the fed is poised to buy - 1+ trillion - what does that do for the people who hold that bad debt, and the houses they are attached to?
Radically devalue the debt so the folks can stay in the houses for a signficantly reduced sum? Or better?
March 19 (Bloomberg) — U.S. senators proposed a 70 percent tax on employee bonuses paid by companies that received more than $100 million in taxpayer aid, hours after the House adopted a 90 percent levy on a smaller number of employees.
The Senate proposal would apply to a larger number of employees who work for companies that received benefits under the Troubled Asset Relief Program, even as it imposes a lower excise tax rate. Introducing the measure were Democrats Max Baucus of Montana and Ron Wyden of Oregon and Republicans Charles Grassley of Iowa and Olympia Snowe of Maine.
BTW, is it just me, or does it seem to others that we have moved on from the denial to the anger phase of the housing bubble stages of grief?
Washington Gone Wild
Congress’s destructive reaction to the AIG bonuses
Friday, March 20, 2009; Page A18
“SHORTSIGHTED,” “opportunistic” and “irresponsible” aptly describe the actions of those who fueled the debacle on Wall Street. They are also apt descriptors for lawmakers more focused on currying favor with a public outraged at the bonuses handed out by bailed-out companies than on fixing the fundamental and still potentially disastrous cracks in the financial system. By changing the terms of a deal months after it was entered into, Congress will show the government to be an unreliable partner, further draining confidence from the financial system and endangering long-term recovery.
Uh… last time I checked, California home prices were deflating at a YOY rate in excess of forty percent. Doesn’t the biggest, lumpiest, expensive consumption good have any effect whatever on deflation statistics?
Wall Street Journal
* MARCH 20, 2009
Excess Capacity Keeps Heat on Fed
Central Bank’s Moves to Spur Demand Seek to Counter Slack in Economy, Deflation
By JON HILSENRATH
The Federal Reserve’s decision this week to pump an extra $1.15 trillion into the financial system was driven in part by a worry that the U.S. economy has become plagued by increasing slack in the economic chain.
From empty hotel rooms to idle factory equipment to workers in part-time jobs, the economy is stuck with excess capacity.
This signals that even if the economy turns around tomorrow — and there have been glimmers of stability in recent weeks, including higher stock prices — the economy is likely to be operating well below its potential for many months, if not years, to come.
Military veterans waited in line at a career fair Thursday in San Francisco. One of the clearest signs of slack in the economy is the weak job market: The number of Americans drawing jobless benefits has hit a record high.
Fed officials worry about slack for another reason. When the economy has little of it, inflation becomes a problem because tight supplies allow businesses and workers to demand more money for their services. When there is too much slack, as now, inflation falls.
If the excess capacity becomes deep enough, or persists long enough, it could lead to outright declines in prices known as deflation, something Fed officials want to — and believe they can — avoid because it is difficult to unwind.
“In light of increasing economic slack here and abroad, the Committee expects that inflation will remain subdued,” the central bank’s policy-making committee said Wednesday, when it announced it planned to pump additional money into the economy through purchases of government and mortgage securities.
Geithner is far from the only top player in U.S. financial circles with taxing issues…
Unpaid tax by rescued firms adds to AIG furor
By JAMES OLIPHANT LOS ANGELES TIMES
March 19, 2009, 11:48PM
WASHINGTON — Working furiously to respond to public outrage over Wall Street excesses, the House passed a bill Thursday that seeks to recoup much of the $165 million in bonuses paid to executives of American International Group.
But lawmakers were having a hard time keeping pace with news that promised more headaches for Congress and President Barack Obama. On Thursday came the disclosure that 13 financial companies that received federal bailout money owe more than $220 million in unpaid taxes.
And reports surfaced that beleaguered mortgage giant Fannie Mae was set to pay millions in retention bonuses — the very sort of payouts that has fueled condemnation of AIG all this week.
The House measure, hurriedly drawn up at the orders of Democratic leadership, would impose a 90 percent tax on those who were paid bonuses at AIG and other companies if they received more than $5 billion in federal bailout funds.
Am I going senile, or didn’t the Fed recently blow a commodities bubble that deflated last year?
Oil, Copper, Gold Pace Commodities Higher on Inflation, Dollar
By Glenys Sim and Gavin Evans
March 20 (Bloomberg) — Crude oil and copper headed for their best week in three, and gold gained for the first time in a month after commodities jumped the most this year on heightening inflation concern and a slump in the dollar.
Oil climbed 7.2 percent yesterday, leading an advance in raw material prices after the Federal Reserve said it will buy more than $1 trillion in government and mortgage debt to help end the recession and credit crisis. The Dollar Index headed toward its worst week since September 1985, spurring demand for commodities as a hedge against accelerating consumer prices.
“In the short term, it’s having a negative impact on the dollar which is giving commodities markets a boost,” said Yingxi Yu, a Singapore-based analyst at Barclays Capital.
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