The Housing Bubble

Mr. Bear…from your post yesterday: (Thanks for the late hour “ed-U-K-tion posts!

How ‘Toxic Assets’ Are Like Bad Apples
Analogy of Bad Apple Spoiling Perception of Entire Batch Can Help Explain Problem:

“…Imagine the bank as a fruit stand. It sells oranges, pineapples, grapes and apples — but there’s a problem with the apples.”

“They look beautiful and delicious on the outside but inside there are these horrible worms,” Adam Davidson, a New York correspondent for National Public Radio, told ABC News. “They’re rotten. They’re disgusting. Suddenly you say whoa! I don’t wanna eat apples!”

Wal-Fart solution: Sell them to China, smash them into apple-sauce, add melamine…ship them back to American for our children’s school lunch items! Globalization = ROI

Me first!

Stocks up on new Geithner plan. What is the plan?

Filed under: “Take it or leave it!”…or…”It’s all Timmy’s fault!” 

BWAHAHHAHAHAHHAHAHHAHHAHAHAHHHHHHHHHHHHH!!!

For your “bonus” credit…guess who is on board at OneWest in Pasadena? Rhymes with… “poor-us”

FDIC sells most assets of failed IndyMac March 19th, 2009

“As of January 31, 2009, IndyMac Federal had total assets of $23.5 billion and total deposits of $6.4 billion. OneWest has agreed to purchase all deposits and approximately $20.7 billion in assets at a discount of $4.7 billion. The FDIC will retain the remaining assets for later disposition.

FDIC and OneWest have entered into a loss share transaction on the single family residential portfolio. Under terms of the loss share agreement, OneWest will continue the FDIC’s existing loan modification program.

One posted comment on the article:

“I can only look back and laugh at the no rehire policy IMB introduced to discourage employees from leaving the company shortly before FDIC took over.”

But vaaaiiit…there’s more (Cheney-Shrub Financial Legacy Effect ):

“…Quittel also questions how the FDIC decided on a 50 percent settlement for uninsured deposits. Barr previously did an interview with Bankrate.com in which he said:

“The 50 cents was based on a very conservative estimate of what we feel we can get for the assets. But it’s way too early to determine how much more, if any, they’ll get above the 50 cents.”
And, in an e-mail to me, he wrote:

“In the rare instances that we provide such a payment, it is typically 50%. We try and not provide too much in the event we suffer greater losses. We don’t want to have to ask for money back. Remember, this is an advance payment provided before the receivership has gotten a single dollar to payout.”

Quittel’s most troubling complaint, however, is that federal regulators bungled, …perhaps criminally, …the handling of IndyMac. However, such issues have more to do with the Office of Thrift Supervision than with the FDIC.

In February, the Treasury Department’s Inspector General released a report critical of OTS, saying it allowed IndyMac to engage in reckless lending. The Inspector General said OTS “allowed IndyMac to record an $18 million capital infusion from the holding company, received in May 2008, as though it was available on March 31, 2008. This allowed IndyMac to inappropriately report that it was at the well capitalized level as of March 31.”

To be fair to the FDIC, if the OTS had not allowed the backdating of that capital infusion, IndyMac would have reported inadequate capital for the first quarter of 2008. That would have alerted the FDIC earlier that it needed to act.

posted by Mathew Padilla, Reporter The O.C. Register

Pending sales up 5.1% in Feb.

“The O.C.”

“…What advice would you offer to Westar and Mercantile West merchants?”

Hwy’s suggestion: Convert your Chihuahua fashion clothing / pet scrapbooking store into a .79 cent only store?

Friday, March 20, 2009
By RASHI KESARWANI The Orange County Register

No rent break for Ladera Ranch merchants:

“There’s no free lunch,” said Claire Shepard, secretary for the Mercantile West Merchants Association and co-owner of Infusion Restaurant. According to Shepard, Westar made clear in the meeting that those who received a rent reduction now would have to make up the difference later.

“…Ladera residents have rallied around local business owners in recent weeks after word of their troubles spread. Just last weekend, a fundraiser took place to benefit Joshua Vecchione, owner of Toy Town. So far, Westar has sent warning notices to four businesses in the Mercantile West Center and two businesses in the Mercantile East Center, according to Mercantile West leaders.

“It’s not about making Westar out to be the heartless management company,” said Svoboda

Feds unveil plan to sop up bad bank assets.
Administration rolling out plan to buy up to $1 trillion in toxic assets, free up credit…
Monday March 23, 2009, 9:30 am EDT

WASHINGTON (AP) — The Obama administration, striving to ease lending in the struggling economy, moved Monday with private investors to sop up bad bank assets. The administration said the program could grow to $1 trillion in purchases eventually, if it proves successful in attacking the bad-books problem that has been at the heart of the banking crisis.
In this March 16, 2009 file photo, Treasury Secretary Timothy Geithner, left, looks at President Obama as they meet with small business owners and community lenders at the White House in Washington.
In a lengthy fact sheet, the administration said it plans to use $75 billion to $100 billion from the government’s existing $700 billion bailout program for this purpose, and it predicted participation from a broad array of investors ranging from pension funds and insurance companies to hedge funds.

To achieve the goal of freeing up more lending, the program would entice private investors with low-cost loans provided by the Federal Deposit Insurance Corporation and the Federal Reserve. The government would also shoulder the vast bulk of the risk.

In one example used in the fact sheet, the purchase of a batch of bad mortgage loans would see the private investor put up 6 percent of the cost with the rest provided by the government, with the FDIC covering 84 percent of the cost with a loan and the remaining 6 percent coming from funds from the $700 billion bailout program.

From the Wall*Street Journal:

Abu Dhabi Firm Buys 9.1% of Daimler
Parent of Mercedes Secures $2.65 Billion of Private Funds at a Time When Rivals Seek Government Aid

By CHRISTOPH RAUWALD

Daimler AG, the owner of Mercedes-Benz, will cede a 9.1% stake to an Abu Dhabi investment firm in a move that shores up its balance sheet and tamps down fear that activist shareholders could push for a strategic shift.

I was thinking some about the “big picture” numbers being discussed some the other day, and wanted to bounce if off the crew, along with a question.

Credit Suisse reported that they estimated that there is $14T “on the sidelines” (I think just in the U.S.), supposedly waiting for things to turn around before starting back up. This includes money that’s in treasuries. So by rough numbers I think that about $8T of that is in treasuries, since the U.S. treasury debt is $11T, and of that about $3T is held by international (mainly China and Japan).

So that leaves about $6T of non-treasury money on the sidelines.

To me - can that $8T or so that’s in treasuries really be considered “on the sidelines? Any individual investor certainly can sell their treasuries and get into equities - however this cannot be done in a macro sense (hold that thought*), because each treasury that is sold must be bought by someone else, with money that otherwise could have gone into equities. So the net flow of EquitiesTreasuries would be zero (other sideline cash aside).

We’ve heard a lot of talk about people “getting out of the market” - pulling their money out of the stock market and buying safe treasuries. But in a macro sense how can this be? Every stock that is sold must be bought by someone, at an equal value. Thus in a macro sense there is no such thing as pulling money out of the stock market. Once it’s in, it’s in permanently; with the only exception being share buyback - but even then it requires an equal cash input into the market (essentially) by the company doing the buyback.

So what’s really happening (I think) is actually a transfer of money from other markets - money markets, CDs, etc. into treasuries, and the equities market is more just a medium for some of that transfer.

*Back to the question of sold treasuries - the one exception now is the Fed buying treasuries with printed money, which changes the macro balance to non-zero-sum. Nevertheless the Fed treasury purchases have been small so far.

What I’m getting to is this - I don’t think this money that’s currently in treasuries can be considered “on the sidelines” at all. These treasuries cannot be sold in a macro sense except to the Fed, which (so far) isn’t close to keeping up with the growth of new treasury issuance - now $1.8T this year. So my theory is that far from being on the sidelines - this money is actually locked into the treasury market, with the situation only getting worse due to the now-rapidly-expanding debt. Thus I’m thinking that (inflation aside) there’s a very hard ceiling on the stock market valuation. Even if earnings started to recover (hypothetically, since we all know they won’t anytime soon) - would we really see a significant recovery in the markets? I’m talking long-term, like 10-15 year period. It seems like not.

Thoughts?

WASHINGTON (AP) — A real estate group says sales of existing homes rose from January to February in an unexpected boost for the slumping U.S. housing market as buyers took advantage of deep discounts on foreclosures.

The National Association of Realtors said Monday that sales of existing homes grew 5.1 percent to an annual rate of 4.72 million last month, from 4.49 million units in January. It was the largest sales jump since July 2003.

Sales had been expected to fall to an annual pace of 4.45 million units, according to Thomson Reuters.

The median sales price plunged to $165,400, down 15.5 percent from $195,800 a year earlier. That was the second-lowest drop on record.

Prices are down about 28 percent from their peak in July 2006.

The first discussion of the next step towards global socialism - China wants a new reserve currency - asks for global IMF-based currency.

“Mr. Zhou didn’t explicitly mention the role of the U.S. dollar, but said having a national currency act as an international reserve currency may have outlived its usefulness and that a desired goal now should be creating an international reserve currency that is disconnected from individual nations and is able to remain stable in the long run.”

The Treasury Secretary says irresponsible risk taking and too much borrowing got the nation into its present crisis. He wants to cure it by removing “toxic assets” from the banking system so lenders will pump money into the economy more generously. Presumably, businesses and individuals will get back to borrowing and spending and the good times will roll once more.

Says Geithner,”The depth of public anger and the gravity of this crisis require that every policy we take be held to the most serious test: whether it gets our financial system back to the business of providing credit to working families and viable businesses, and helps prevent future crises.”

Not a word from Geithner nor any of the mainstream money experts about the root cause of our distress - - a dollar that can’t be trusted to hold its value. How can any nation survive under the handicap of dishonest currency? (Note: No nation ever has.)

Sweden Says No to Saving Saab

By SARAH LYALL, New York Times
March 22, 2009

TROLLHATTAN, Sweden — Saab Automobile may be just another crisis-ridden car company in an industry full of them. But just as the fortunes of Flint, Mich., are permanently entangled with General Motors, so it is impossible to find anyone in this city in southwest Sweden who is not somehow connected to Saab.

Which makes it all the more wrenching that the Swedish government has responded to Saab’s desperate financial situation by saying, essentially, tough luck. Or, as the enterprise minister, Maud Olofsson, put it recently, “The Swedish state is not prepared to own car factories.”

Such a view might seem jarring, coming as it does from a country with a reputation for a paternalistic view of workers and companies. The “Swedish model” for dealing with a banking crisis — nationalizing the banks, recapitalizing them and selling them — has been much debated lately in the United States, with free-market defenders warning of a slippery slope of Nordic socialism.

But Sweden has a right-leaning government, elected in 2006 after a long period of Social Democratic rule, that prefers market forces to state intervention and ownership. That fact has made the workers of Trollhattan wish the old socialist model were more in evidence.

AIG, The Fed, Paulson (as Sec of Treasury)-favors to investment bank friends, Goldman Sacs, etc…The good guys(a few congresscriters)and bad guys (most)… this article is worth your time. Names included. This should be required reading, it’s that good.

http://www.rollingstone.com/politics/story/26793903/the_big_takeover/

OK lets send 300 condom jobs to china….(and sell them at Walmart)

http://www.kansascity.com/637/story/1100966.html

Question to those who may know - when a brokerage house goes under, how are the portfolios affected? I have a brokerage account with Etrade, who’s looking very tenuous these days. I’m wondering how risky it is. Thanks for any feedback.

(P.S. normally I wouldn’t choose Etrade - my former employer used them for its stock program though, and I’ve since just kept the account as is)

Let me reiterate my assertion last week, that we are at the cusp of the housing market’s downturn curve (U-shaped or L-shaped or whatever). Median resale prices were up slightly in February actually, with YoY values down 14.8%.

I think prices will continue down, but I believe the rate of decline is decreasing.

As another piece of anecdotal evidence - see this article about Mountain House, CA. Bidding wars are starting back up in some places. While this is certainly a lot of knife-catching - it’s getting more common now, and is contributing to the curve starting to flatten.

It’ll be interesting to see what the next round of Case/Shiller data shows - I think out this week (for January).

Are these the same as a Gift Certificate or like a mall gift card?
Also, would you have to use dollars to buy these scripts?

`Detroit Cheers’ launched, reviving Depression-era practice of issuing private money

DETROIT (AP) — It’s called Detroit Cheers, and it’s money — just not from the government.

Several Detroit businesses are reviving a Depression-era practice and issuing a form of private money called scrip.

In the 1930s, scrip was a response to the shattered economy and a cash shortage.

Experts say scrip is legal if it doesn’t resemble U.S. currency.

Jerry Belanger owns the Park Bar and Bucharest Grill and helped start Detroit Cheers, which comes in $3 denominations.

Michael Shuman is author of “The Small-Mart Revolution: How Local Businesses Are Beating the Global Competition” and tells The Detroit News about 75 local currency systems have started recently nationwide.

In Traverse City, about 100 locations accept Bay Bucks as currency.

What the government is proposing is to privatize the profits and socialize the losses, to avoid nationalizing the banks. Wall Street likes that.

http://www.marketwatch.com/news/story/Treasury-details-public-private-plan/story.aspx?guid=%7B741B3DED%2D89BB%2D4F5B%2DB7D6%2DCA100B8409D3%7D

Krugman would prefer nationalization.

http://www.nytimes.com/2009/03/23/opinion/23krugman.html

The fear is that with nationalization what you would end up with is crony capitalism from Congress, and an inability to un-nationalize them once Congress gets used to running the sandbox. The other fear is that Congress is unwilling to pay for the cost of really cleaning things up. So there are Democratic and Republican threats to a nationalization plan.

So who is right?

What really bothers me about this current dead cat bounce on Wall Street (the second of this recession, by my count) is that it seems so absolutely divorced from the realities of the economy right now.

I keep hearing of so many boneheaded money decisions made over the last 5 years or so by friends and family that I just can’t help but be shocked. Take, for instance, the latest from a couple I know that doesn’t live too far from me. The husband was in college for 6 years but dropped out w/o a degree because he got his wife pregnant 2 years ago. The wife has completed training to be a hairdresser but she hasn’t taken the licensing exam yet because she has to stay home watching the kid. He had a job working at a machine shop until about a month ago; then he got laid off.

Here the plot thickens. He and his wife are living in an in-law apartment on a detached garage on his parents’ property. His mother always said she wanted to “live on a commune”, and she’s done her best to make one; both of his sets of grandparents, his best friend, his 27 year old sister, his parents and somebody else who I’ve never met all live in the main house. (Now providing room and board for grandparents is noble and a good thing to do, but for random friends and other people?)

But here’s where it gets crazy. His dad just lost his job as a chemical engineer. His mother has no job. The family is struggling to stay afloat because when his parents moved into their current house a few years ago they never sold their old house. Why? Because the goofy (and unemployed, uneducated, and frankly lazy) 27 y/o sister still has 4 horses stabled there, and the mother can’t bring herself to make the daughter give them up. Why? “She deserves to have a hobby”. (On top of that, the horses have been very poorly taken care of; they look tired, sickly, and miserable whenever I’ve seen them, and apparently they’re not sellable because of their poor maintenance…but I digress.) On top of that, the family is paying to have 2 ADDITIONAL horses stabled at a professional stable somewhere.

So now his parents are on the verge of losing both houses…which would put both his sets of grandparents, his own fledgling family, and everyone else in that house on the street. And his mother is still resisting trying to sell the old house because of the horses.

Good grief.

Palm Beach County homes sales continue to rise in February; prices still fall

By JEFF OSTROWSKI

Palm Beach Post Staff Writer

Monday, March 23, 2009

Palm Beach County home prices continued to fall in February, but sales spiked as bargain hunters snapped up foreclosures and short sales.

The median price of a single-family home in Palm Beach County was $228,100, down 34 percent from a year ago and off 2 percent from January. However, 532 homes sold, up 33 percent from a year ago.

In the Treasure Coast, the median house price was $122,100, down 29 percent from a year ago and less than half the 2005 peak. But the Treasure Coast median price rose above January’s levels, and sales rose 41 percent, creating hope that the hard-hit area might finally have reached a bottom.

How and Why Athletes go broke :

http://vault.sportsillustrated.cnn.com/vault/article/magazine/MAG1153364/1/index.htm

Nothing earth-shattering, but a good read.

Someone I know just made some money indirectly off Citi — Citi (or an ad agency working for Citi, more accurately) licensed a song of his for use in TV spots.

He’ll make low-to-mid five figures after his label takes a cut. A drop in the bucket for Citi, but a nice windfall for a working musician.

In the past, this particular guy was loathe to license music for corporate ads, but I guess he figures he should be happy for the money given the state of the economy.

NEW YORK, March 23 (Reuters) - The U.S. Federal Reserve bought $2.692 billion of Fannie Mae (FNM.P), Freddie Mac (FRE.P) and the Federal Home Loan Bank’s debt on Monday, the New York Federal Reserve said on its website.

Dealers submitted $4.176 billion for consideration in the purchase, in which the Fed bought debt maturing between April 2011 and November 2012.

On Friday, the Fed said it would buy agencies with debt maturing between April 2011 and February 2013.

Agency purchases by the Fed now surpass $49 billion. The Fed last week doubled its commitment to buy agencies, saying it was ready to purchase up to $200 billion.

Orwellian Word Watch:

Apparently the term “toxic assets” is no longer seen as a useful descriptor and has been supplanted by the much more benign-sounding “legacy assets.”

Witness the official Treasury Dept. Fact Sheet on the “Public Private Partnership Investment Program,” which uses the term “legacy” approximately 40 times. “Toxic” does not appear once.

Q. Once land prices begin deflating, for how long can deflation continue?

A. For a really, really long time.

Japan Home Prices Slump to 24-Year Low as Recession Deepens
By Katsuyo Kuwako

March 23 (Bloomberg) — Japanese residential land prices fell to a 24-year low as job losses and wage cuts discouraged homebuyers, while tighter credit markets choked off funding for property developers.

Residential land prices fell 3.2 percent in 2008 to the lowest since 1984 and average commercial land prices dropped 4.7 percent to a three-year low, the Ministry of Land, Infrastructure, Transport and Tourism said today in a report. Overall property prices declined 3.5 percent, erasing two years of gains that followed a 15-year slump.

The decline in residential land values, which are about half of what they were at the height of Japan’s bubble economy in 1991, may continue as the recession deepens. The central bank forecasts the sharpest economic contraction in more than 60 years as an unprecedented decline in exports forces companies to cut production and fire workers.

“Money for investing in real estate has been flowing out of Japan” because of the credit crunch and recession, Akiyoshi Inoue, president of Tokyo-based Sanyu Appraisal Corp., the nation’s biggest appraiser, said. “Price gains in the past few years are being wiped out.”

Global recession stalls skyscraper construction
Mon Mar 23, 2009 10:58am EDT
FACTBOX: Many skyscrapers on hold due to global recession
10:58am EDT

By Andrew Stern

CHICAGO (Reuters) - There is a gaping hole where one of the world’s tallest buildings is supposed to go up.

The planned 150-story Chicago Spire would be 2,000 feet tall if it gets built atop its completed foundation, ranking the tower the tallest in the Western Hemisphere and the sixth-tallest among the world’s planned skyscrapers.

The Spire was supposed to be finished by 2012 and the Irish developer staged a global marketing campaign. Buyers snapped up a third of its 1,194 luxury condominiums priced between $750,000 and $40 million. Ty Warner, creator of the Beanie Baby toys, opted for the top-priced penthouse.

But after digging a 76-foot-deep hole and sinking caissons, construction on the twisting Spire — inspired, its famed architect Santiago Calatrava said, by swirling smoke from a Native American campfire — was stalled in January by the credit crisis that is stifling construction worldwide.

Chicago has long been a showcase for tall towers since the steel-framed skyscraper was invented, its history full of developers whose ambitions sometimes crashed on the rocks of economic slowdowns, said John Norquist, president of non-profit group The Congress for the New Urbanism.

For people living in the hundreds of new condominiums near the planned Spire, the unbuilt site “starts to look like a blight,” Norquist said.

“When everybody’s feeling buoyant and they all think they’re going to be billionaires overnight, that’s when these ‘biggest’ plans come about. If you get them going before the bust hits, they get built right away. Otherwise you’ve got to wait and sometimes they don’t get built at all,” he said.

Globally, work has been halted on 142, or 11 percent, of 1,324 skyscraper projects, including 29 of 301 U.S. projects, according to Emporis GmbH, a German company that tracks development. Work is stalled on the five tallest buildings on five continents, including the Spire — Emporis refers to these landmark buildings as “Babel” projects.
…
MASSIVE JOB LOSSES

The U.S. economic downturn has probably been felt most acutely in the construction industry. Some 2 million American construction workers are unemployed and the industry’s 21.4 percent jobless rate is the highest of any sector.

“Every month we see massive job loss in the construction industry and every month it gets worse … The construction industry is in a near depression,” said Terry O’Sullivan, head of the Laborers’ International Union of North America.

The recently passed U.S. economic stimulus bill was expected to funnel $150 billion into building and repairing infrastructure, which the union said would employ 700,000 workers, for a while. The stimulus funding is viewed as only a downpayment on the $2.2 trillion engineers say is needed to rebuild the nation’s infrastructure. Fewer workers are needed to perform maintenance than build from scratch, laborers say.

“If there’s no buildings going up, what do you do?” said James Connolly, a Laborers’ union manager. “Prepare yourself because it’s going to get worse before it gets better.”

Test

PBS American Experience series tonight has a re-broadcast of 29 Crash. Insert “houses” and “housing market” where they say “stock” and “stock market” for big fun.

If you cannot view on TV, you can view online at:
http://www.pbs.org/wgbh/amex/crash/

Seriously? I’m a troll because I think that the Great Depression Part 2 might not be at hand after all? I’m telling you what I experienced Saturday. The malls was packed, the restaurant I ate at was booked to capacity.

I’m a pragmatist. If I see signs that things are turning around, I’m no going to stick my head in the sand and pretend otherwise.

From the Agora 5…

Not to be outdone by the Fed, the Treasury announced its own trillion-dollar bailout plan this morning.

Showing its desire to out-alphabet the old New Dealers, too, Geithner and crew unveiled the masterfully named “Public-Private Investment Program” (PPIP). The program is essentially a fully revised and updated version 2.0 of the Resolution Trust Corp. (RTC) set up in the late ’80s to deal with the S&L crisis.

In this episode, Uncle Sam will be teaming up with private investors to buy toxic assets, rather than failed S&Ls. Suspiciously, the most easy-to-understand explanation we’ve found detailing the program came from the government. Here’s how they described it to the New York Times:

“A pool of bad residential mortgage loans with a face value of $100 is auctioned by the FDIC. Private investors would submit bids. In the example, the top bidder, an investor offering $84, would win and purchase the pool. The FDIC would guarantee loans for $72 of that purchase price. The Treasury would then invest in half the $12 equity, with funds coming from the $700 billion bailout program (TARP); the private investor would contribute the remaining $6.”

See? They’re solving a complex leverage problem with a complicated system of more leverage –plus federal guarantees and loans. The government will initially finance up to $500 billion in toxic purchases, expandable up to $1 trillion. The Treasury insists that profits, should they magically appear, will be split 50/50 with the private sector.

OK. I need the board’s help on an issue.

I have a friend who was dragged into real estate through his family and is now at his wit’s end. He tried to help a parent out who’s been through some real troubles. He has one more property to sell and is under water on it. I told him that he can:

a) continue to “feed the alligator” so that the rich d-bags that we went to school with can still afford to send their kids to our school and continue the cycle of robbery and never see the house price back at 2005 levels in real terms

b) try for a short sale

c) walk away

I am pushing for c) but I don’t know anything about the laws (or much of what I’m talking about). I’d just hate for him to hope/believe that the market is coming back when it isn’t. Anyone have a site or link that could help him? This info could also help my brother who is in the same position. Perhaps my parents… [Apparently, I am a cassandra]

He says that he is the guarantor of the loan (through his corporation–probably an LLC), but I figured that the contract was that, in the event of non-payment, the bank would get the house. He is 0.8 X total household earnings on his own house and his wife has excellent credit. He lamented that his credit would be destroyed. But I said, “Who cares? Why do you need credit? And it’s only for 3 years or so.”

Thanks for thinking on this question and any help that you can give. I have another that I’ll post in a bit [Oh yay!]

MrBubble

PS: It’s never been a better time to be a friend to or enemy to MrBubble!

Playboy Enterprises closing its New York City offices amid gloomy economy

NEW YORK (AP) — Playboy Enterprises is closing its Manhattan office and laying off employees as it struggles with falling advertising revenue and a gloomy economic climate.

Company spokeswoman Martha Lindeman says Playboy employed about 100 people at the Fifth Avenue office in midtown. A majority of those jobs will be lost when the office is expected to close May 1.

Lindeman says some employees received letters notifying them that their jobs were eliminated. Others were given the chance to transfer to Chicago.

Playboy announced in February on a conference call that it would save $5 million annually by closing the office.

test

Spanish restaurant lets diners pay at will

http://biz.yahoo.com/ap/090323/eu_spain_honest_dining.html?.v=1

How does Prof. Bear do that Scooby doo impression?
Is it Rut Roo?

Dubai World division sues MGM Mirage amid concerns over Las Vegas CityCenter project

DUBAI, United Arab Emirates (AP) — The Dubai developer helping build the $8.6 billion CityCenter complex on the Las Vegas Strip said Monday it is suing struggling partner MGM Mirage amid concerns about the project’s viability.

http://biz.yahoo.com/ap/090323/nv_dubai_vegas_lawsuit.html?.v=2

Part II: Geithner, Obama Kowtowing to “Massively Corrupted” Banks, Galbraith Says
Posted Mar 23, 2009 12:07pm EDT by Aaron Task in Newsmakers,

Like it or not, many people seem to be resigned to the idea there’s no alternative to the public-private investment fund scheme Treasury Secretary Geithner detailed this morning. (Click here for part one of our discussion of the plan.)

That’s hogwash, says University of Texas professor James Galbraith, author of The Predator State. Of course there’s an alternative: FDIC receivership of insolvent banks.

Aside from being legally proscribed, the upside of FDIC receivership is the banks are restructured and reorganized for potential sale (either in whole or parts), Galbraith says. Such was the fate in 2008 of, most notably, Washington Mutual and IndyMac.

Crucially, FDIC receivership also means new management teams for insolvent banks; and Galbraith notes new leaders will have no incentive to cover up the fraudulent or predatory lending practices of their predecessors. Given the entire system was “massively corrupted by the subprime debacle,” the professor believes criminal prosecutions on par with the aftermath of the S&L crisis - when hundreds of insiders went to jail - is a likely (and necessary) outcome of the current crisis.

But don’t expect to see many “perp walks” if Geithner’s current plan comes to fruition. That’s one reason Galbraith called the plan “extremely dangerous” in part one of our interview.

So why isn’t the Obama administration pushing for FDIC receivership? “Political influence of big banks,” the economist says.

NEW YORK (Reuters) - U.S. stock exchanges and their most active traders are bracing for transaction fees to increase more than four-fold, which could affect trading strategies in a market that so far has managed to keep churning despite the severe sell-off.

There will be at least some impact on trading volumes when the fees — levied on stock sellers by U.S. regulators — jump next month, forcing smaller firms in particular to adjust strategies for making money in the recently volatile markets.

The fee increase is intended to avert a possible funding shortfall for the U.S. Securities and Exchange Commission, the federal watchdog that regulates stock and options trading.

The SEC needs $1.02 billion to do its job, and beginning on April 10 it will charge $25.70 per $1 million in securities sales, up from the current $5.60, for equity and option trades on exchanges and over-the-counter markets.

Especially hard-hit will be institutional, high-frequency traders, who submit hundreds of orders per day. These private firms represent about 65 percent of overall matched volume and drive the vast majority of volatility that whipsaws stocks.

With high-frequency trading firms grabbing a growing share of the market, experts say any possible drop in trading volume depends on how well these firms weather the higher fees.

“We’re talking about a significant amount of money and certainly it will impinge on the high-frequency traders’ volumes a little bit, but it is spread out across the industry,” said Joe Gawronski, president of Rosenblatt Securities, an agency broker specializing in market structure.

The SEC’s so-called Section 31 fee fluctuates regularly. The current, $5.60 fee is the lowest in a decade, while the highest fee came in 2003, at $46.80.

BIGGER WORRIES

At the moment, market operators, who derive revenue from trading volume, are relatively sanguine about the fee hike — possibly because they have bigger worries on their plate. Of greater concern are possible new rules to curb short selling and the prospect of a transaction tax.

With the new Section 31 fees, high-frequency trading firms “may not be as aggressive as they could be, had that fee not been there, but by a de minimis amount, maybe 1 to 2 percent reduction in overall activity,” said Bill Karsh, chief operating officer at Direct Edge, the fast-growing alternative trading venue that executes 11 percent of U.S. equity trades.

WASHINGTON (Reuters) - Nobel-prize winning economist Paul Krugman said in remarks published on Monday that the latest U.S. Treasury bailout program is nearly certain to fail, triggering a sense of personal despair.

U.S. Treasury Secretary Timothy Geithner on Monday unveiled a plan aimed at persuading private investors to help rid banks up to $1 trillion in toxic assets that that are seen as a roadblock to economic recovery.

“This is more than disappointing,” Krugman wrote in The New York Times. “”In fact it fills me with a sense of despair.”

“The Geithner scheme would offer a one-way bet: if asset values go up, the investors profit, but if they go down, the investors can walk away from their debt,” the Princeton University economist said, citing weekend reports outlining the plan.

“This isn’t really about letting markets work. It’s just an indirect, disguised way to subsidize purchases of bad assets,” he added.

Krugman called it a recycled idea of former Treasury Secretary Henry Paulson, who later abandoned the “cash for trash” proposal.

“But the real problem with this plan is that it won’t work,” he says, adding that bad loans may be undervalued because there is too much fear in the current climate.

“But the fact is that financial executives literally bet their banks on the belief that there was no housing bubble, and the related belief that unprecedented levels of household debt were no problem. They lost that bet. And no amount of financial hocus-pocus — for that is what the Geithner plan amounts to — will change that fact,” Krugman wrote.

While the real economy is being hurt by the meltdown of the financial system itself, Krugman says this is not the first or the last time this has happened. And there are lots of roadmaps to get us out.

“It goes like this: the government secures confidence in the system by guaranteeing many (though not necessarily all) bank debts. At the same time, it takes temporary control of truly insolvent banks, in order to clean up their books,” Krugman said.

Time is running out on the Obama administration to take control of the banks - and the crisis.

“If this plan fails - as it almost surely will - it’s unlikely that he’ll be able to persuade Congress to come up with more funds to do what he should have done in the first place,” he wrote.

The White House strongly disagreed with Krugman’s assessment, defending the administration plans on the morning talk shows.

“I think Paul’s just wrong on this one,” Christina Romer, head of the White House Council of Economic Advisers, said on ABC’s “Good Morning America” show just ahead of the plan’s release.

“This is really tails both the government and the private sector win, heads both the government and the private sector lose. We both are going to have, as the saying goes, skin in the game.”

To the SKF-istas.

TOLD YA!!!

FPSS –

What about SRS < 50? Is it safe?

MrBubble

Knife catchers

One in Five Americans Plan to Buy a Home Despite Economic Conditions

http://realestate.einnews.com/article.php?nid=7030

OK, now that the stock market has roared its approval of Geithner’s toxic asset removal scheme, is it safe to assume that stocks and real estate will hence forth resume always going up again?

China calls for new reserve currency

By Jamil Anderlini in Beijing

Published: March 23 2009 12:16 | Last updated: March 23 2009 23:51

China’s central bank on Monday proposed replacing the US dollar as the international reserve currency with a new global system controlled by the International Monetary Fund.

In an essay posted on the People’s Bank of China’s website, Zhou Xiaochuan, the central bank’s governor, said the goal would be to create a reserve currency “that is disconnected from individual nations and is able to remain stable in the long run, thus removing the inherent deficiencies caused by using credit-based national currencies”.

Analysts said the proposal was an indication of Beijing’s fears that actions being taken to save the domestic US economy would have a negative impact on China.

“This is a clear sign that China, as the largest holder of US dollar financial assets, is concerned about the potential inflationary risk of the US Federal Reserve printing money,” said Qu Hongbin, chief China economist for HSBC.

Although Mr Zhou did not mention the US dollar, the essay gave a pointed critique of the current dollar-dominated monetary system.

“The outbreak of the [current] crisis and its spillover to the entire world reflected the inherent vulnerabilities and systemic risks in the existing international monetary system,” Mr Zhou wrote.

The Recession’s Early Winners
by Brett Arends
Monday, March 23, 2009

It’s only six months into the crash, but the stock market is already starting to make some early calls. The market isn’t a perfect seer of the future, but it has a pretty good track record. And a few of the calls it’s making now are challenging the conventional wisdom.

IPhone nation lives. Shares in cellular companies tanked when the crisis first hit. Sprint crashed 85%. Apple fell by more than half. The conventional wisdom: Cellular contracts and fancy handhelds are very expensive. Even a $60 a month habit is costing you $720 a year. Desperate consumers would drop these plans, or scale back sharply, as they were forced to slash their household budgets.

So far? The market’s having a dramatic rethink. Shares in cellular companies have jumped about 40%, on average, from their November lows. During that time the rest of the market has gone nowhere. Sprint’s doubled from its distressed levels. Apple, Black Berry’s Research In Motion, even Palm have risen a long way.

me: So what? This industry still has questionable profitability going forward. A phone is a commodity, competition is fierce. I seem to recall MOTO had a horrible year, and RIMM is one of those perennial stock promotes, always sending out press releases about “moving” X units even though only X-N actually sold … the rest are inventory “pushed” on retailers. Brilliant.

The daily latte may not be toast. Starbucks stock was another early victim of the crash. The shares collapsed. Everyone beat them up last fall, because an expensive latte habit is one of the easiest budget cuts a hard-pressed consumer can make.

The market’s rethinking this one, too. Starbucks stock has now jumped 55% from the lows. Sure, sales and profits are well down. But management is fighting back with cost savings and new initiatives. More than 750,000 people have signed up for Starbucks loyalty cards, triple what the company expected. (And that’s a wireless play too: They give you some free WiFi with your beverage.) The coffee shop has become an important part of many people’s day. Shares in rival coffee chain Peet’s are up about 10% too.

whatever. they are so inept at what they do, they are bound to fail. A photo alone of their nasty bkft sandwiches destroys my appetite. Did you miss even more announced store closings? I’ve been in there, same store sales are down. And McD (which has managed to hold onto market cap through this crisis) is now selling lattes for $1 less. THEIR bkft sandwiches are tasty!

Dotcoms strike back! Shares in most regular retailers have slumped over the past six months, for obvious reasons. Expect more bricks and mortar stores to close as overstretched consumers retrench. But when it comes to online retailers, the story changes. Amazon stock, which tanked initially, has doubled since November. Hype over the Kindle electronic book reader has helped. Online jeweler Blue Nile has also bounced.

me: Blue Nile was shorted into oblivion last winter, of course it bounced. Amazon is another momo–they never make money. Kindle, gimme a break. A friend has the Sony one–causes eye strain worse than a damn LCD. Looks like an Etch a Sketch. No, not kidding. Even has screen artifacts when you “turn the page”. AMZN sends me more stupid emails than ever, even though haven’t bought in months. Desperation.

And look at Netflix – its stock just hit a record high, surging over $40 for the first time. The Internet-based movie rental company is one of the big winners of the recession so far, as consumers stay home and order in movies. And it makes sense: A Netflix subscription, typically about $14 a month, is much cheaper than cable.

sort of wish I were long this … almost did go long Netflix a few years back. always been happy with the service. as for the competition (rental places) they are closing up shop left and right. can’t beat the selection & no late fees. ever.

Oh, RGR (guns) was way up today. Funny how this shill writer skipped over that ‘trend’.

http://www.imf.org/external/np/sec/pr/2009/pr0905.htm

“The authorities have a clear strategy to address the challenges they face. They have already adjusted the exchange rate and put in place tight fiscal and wage policies. The measures already taken and announced are strong and, with resolute implementation, will be sufficient to restore stability. Together with planned structural reforms in key areas, these measures should help return the economy to a higher growth path by 2010-11.”
—-
Welcome to the rally Mr. Orwell.

You want more on the IMF Orwellian World Currency?

jeez ben

Ya know when I hear all the fuss about budgets and forecasts I like to point out just how absurd the numbers can be. Take the widely acclaimed bi-partisan CBO forecasts for example. What was the Congressional Budget Office estimate last year (2008)? Well I looked it up and they had it pegged at 694 billion deficit. So somehow they now think it’s going to be 3.6 trillion? Well they missed it by a factor of five last year. Who can trust any thing that comes out of the government.

http://www.cbo.gov/ftpdocs/89xx/doc8917/01-23-2008_BudgetOutlook.pdf

BlackRock and PimpCo are first in line to help out with the toxic asset clearance program.

Tim/Barry’s plan may have had a better chance of succeeding if they didn’t spend the last year eliminating any tax consequence or criminal penalty for mortgage fraud.

We now have:

1. No tax on forgiven mortgage debt — with no investigation required to see if the mortgage application was truthful
2. Foreclosure moratoriums that delay the inevitable, allow people to rent out their houses and pocket the money, and don’t give investors looking at these toxic derivatives a true picture of the number of foreclosures
3. No investigation of truthfulness on applications: not only income, but occupancy requirements.

…all making these toxic assets doubly toxic. Thanks, Congress!