Bits Bucket For March 25, 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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Name:Ben Jones
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San Diego People:
On Thursday, April 2nd there’s going to be a big auction at the convention center with supposedly 182 homes going on the block (about 25% already seem to be pulled. Registration begins at 5pm and the auction itself at 6:30.
http://www.auction.com/auction-details.php?auctionID=H-071#; Click on the April 2 date for a list of the houses being sold that day.
I’m going to attend (not close to considering buying yet) to get an idea of what the emotion is out there and how the whole auction process works. Does anyone want to attend and maybe do dinner somewhere downtown prior?
I went to three open houses this weekend to see how a specific property shows and what the final price is as opposed to the opening bid. Two seemed like foreclosures – I wouldn’t buy if they were $50,000. One was interesting, other than being on a very busy road and a less desirable but not horrible neighborhood. I can see myself buying a home like that someday: huge lot, good bones, old hardwood under the carpets. Needed work but not tear-downs like the other two. Will be interesting to see what I value these homes at and what they sell for.
If you’re interested e-mail me at sd.re.b at hotmail dot com
My experience in Miami was that you can get better deals on MLS. Weird mentality some people have at those auctions. They get into some bidding frenzy regardless of what the property is worth. There were several properties that sold for a higher price than for what they were previously listed on MLS. Couldn’t sell them on MLS but some clowns at the auction bought them. Some were in horrible shape, completely gutted. I doubt they had any idea what they were bidding on.
By definition, the winner of an auction was willing to pay what NO ONE ELSE was willing to pay.
I track, and occasionally buy, electronic equipment from online sellers. With VERY few exceptions, the price for a given item is bid up higher on Ebay than the price for an identical or equivalent item I see offered on one of the so-called “classified” or “swap” sites. And you can often make an offer to the seller on these sites and obtain the item for less than their asking price.
I’d be curious as to what type of swap sites you’re referring to. I’m assuming you’re not referring to used equipment dealers, those places still have asking prices like ebay doesn’t even exist.
I buy a lot of used electronic instrumentation and supplies off of ebay, and I’m quite pleased with the discounts I’m able to obtain. If the equipment is not bid heavily 10-25% of new is typical. Provided of course that I’m willing to be patient and wait for the right sale, and hold off until the last 15 seconds to put in my final bid. Doesn’t necessarily apply to very popular items, though.
It is interesting that, if you want an ebay sale item to be bid up the most, put it out there with an extremely low opening price and no reserve, and sit back and watch the frenzy.
I’ve always wanted a HP Spectrum Analyzer that could do 22ghz and had the modulation feature (aka, a speaker). I found that there were the best deals on craigslist (searching nationwide) versus ebay. I haven’t looked for them on govliquidation.com and gsaauctions.gov as I figure the refurb companies will give too much competition there. Haven’t bought one yet, though.
Regarding the auction overpayment phenomenon…
I’m a big consumer of used and out-of-print books, and I always comparison shop between amazon, alibris and ebay. It is not uncommon to be able to buy a much cheaper copy from a used bookseller instead of from an ebay vendor.
No sense of competition prehaps?
It is not uncommon to be able to buy a much cheaper copy from a used bookseller instead of from an ebay vendor.
Same is true of used LPs.
I definitely see the “auction mentality” kick into gear with vinyl, too — things get bid past their street value all the time in the last-second sniping melee.
(These days, however, all of eBay seems mighty soft.)
Same of OOP CD’s that I want.
I’ve never actually managed to get even one item on ebay. Ultimately everything I wanted was bought the ol-fashioned way. Somebody offers it for a price you are willing to pay and you pay it.
My observation:
EBay listed items of used PLC equipment often sell for more than my company pays for the same items new from an authorized distributor. In addition, many buyers may not be aware that they seldom are purchasing the lasted firmware revision release.
Sorry; lasted=latest
What PLC firmware isn’t easily upgradable by download anymore? I never have a problem with that.
I’ve never found good deals on PLC’s from ebay, though. But then again my clients and I mostly are happy with our “industrial Wal-mart” Automation Direct gear.
I loved one of my old client’s slogans about Allen-Bradley: “You can find better quality, but you’ll never pay more.”
I seem to recall Cisco buying their own equipment off of ebay after the dot com bomb to keep prices high.
My point was that bidders routinely pay more for items on EBay than our wholesale distributor market price.
I was trying to pick up used PLCs and LCD touchscreen HMIs on ebay just to play with. Prices were meh. Tried craigslist but that kind of stuff isn’t big in my area (Norfolk Ford plant supposedly had a bunch but no idea where that gear winded up).
“I loved one of my old client’s slogans about Allen-Bradley: “You can find better quality, but you’ll never pay more.”
Dang, they stole that slogan from Toll Brothers.
I collect a few types of vintage jewelry and ebay is a wonderful place to see a lot of pieces. The psychology of auctions is interesting. I have bought very nice pieces at prices I liked and no one else was bidding on them. Its a treat and a surprise to win. I think the key is to look for items that are offered at or near the price I want to pay and avoid the ones that start at very low prices to attract a lot of interest. I’ve also noticed a phenomenon like the housing market where some sellers start at absurdly high prices and, of course, they are wasting their time and their item will never sell. Ten to fifteen years ago, before the ebay effect, these items were not very saleable because there was no way to reach a broad market that would want them. Now, people think they can get a windfall from a little tchatchka that Grandma had in a box.
On ebay, only the last bid wins. So it’s only appropriate to be the last bidder. Therefore, use something like the free application jBidwatcher.
San Diego Homes Affordable Again:
http://www.voiceofsandiego.org/articles/2009/03/25/toscano/725pricesreasonable032409.txt
Yes, you read that headline right. In aggregate, and based on their historical relationships with local rents and incomes, San Diego County home prices are reasonable. Not cheap, but reasonable.
Exhibits A and B are a couple of long-term graphs that I’ve updated throughout the years. The first displays the historical ratio of San Diego home prices to San Diego per capita income; the second is the ratio of home prices to local rents. These ratios serve as a gauges of real estate “expensiveness” by measuring how much people have to pay for housing in comparison to how much they earn and in comparison to how much it would cost to simply rent the roofs over their heads.
Both graphs show that while prices became completely severed from economic reality during the boom, they are now solidly in the middle of the range that prevailed in the years before the world went mad.
By these metrics, San Diego housing has still been cheaper in the past. The price-to-income ratio would have to fall 15 percent from this level to equal the all-time low it hit in 1997. And the price-to-rent ratio, which actually set its worst levels in 1986, would have fall 22 percent from here to hit its record low.
But while not dirt cheap, San Diego homes are finally reasonable. Given the astonishingly high home prices that prevailed until somewhat recently, that fact alone is very much worth noting.
These graphs provide a very broad-stroke look at aggregate San Diego housing expensiveness. Following are some things to keep in mind when thinking about them.
First, the graphs tell us how expensive houses are now, not where they’re going. There’s no saying we won’t blow right through the prior valuation lows this time around. The recently burst bubble did after all make a mockery of the former highs, and it’s not unreasonable to suspect that such a dramatic boom could be followed by an equally dramatic bust. Besides, these simple valuation metrics don’t take account of transient market forces such as foreclosures and unemployment, both of which are weighing heavily on the market for the time being.
Second, the data aggregates the entire county together, averaging out differences between San Diego’s various sub-markets. These differences, as I’ve often discussed here, are substantial.
Third, home prices are based on the latest Case-Shiller index release as of December 2008, which (as I’ve also discussed) best represents November pricing. Real-world prices appear to have continued falling since then, so as of right now the ratios are even a little better than they appear on the charts.
Finally, the charts don’t take into account mortgage rates and their impact on monthly payments. I will devote a separate post to this topic on Thursday.
So, as with all data, there is plenty of nuance to consider.
But did I mention that San Diego home prices are reasonable?
– RICH TOSCANO
Tuesday, March 24, 2009 4:48 PM PDT
Well if prices are reasonable it’s time for me to move because I sure haven’t found a home I am willing to live in for the price I can purchase it. (Ok, maybe I am just unreasonable. I’m not denying that possibility.)
Has the New Zealand bubble popped yet?
“By definition, the winner of an auction was willing to pay what NO ONE ELSE was willing to pay.”
Anomalies: The Winner’s Curse
Richard H. Thaler
The Journal of Economic Perspectives, Vol. 2, No. 1. (Winter, 1988), pp. 191-202.
Thaler’s introductory example did not even rely on the presence of sham bids to short change the auction winner…
Introduction
Next time that you find yourself a little short of cash for lunch, try the following experiment in your class. Take a jar and fill it with coins, noting the total value of the coins.Now auction off the jar to your class (offering to pay the winning bidder in bills to control for penny aversion). Chances are very high that the following results will be obtained: (1) the average bid will be significantly less than the value of the coins (bidders are risk averse); (2) the winning bid will exceed the value of the jar. Therefore, you will have money for lunch, and your students will have learned first-hand about the “winner’s curse.”
I saw a little CNN feature on a family in Queens NY going to an RE auction with the house they wanted already in mind (and in their hearts). They paid too much for it. It needed work just to get a certificate of occupancy so they could move in. I do worry about inexperienced, low income buyers plunking down money just to be able to bid at the auction and then following through on their emotional investment, a dream that started with the low auction teaser price that got them interested in the first place and they wind up bidding several times that price.
I am well aware that auction prices are very high right now. Ben and others have written about the experience of going to auctions and seeing the emotions get played. I have also listened to the head of REDC on the Bruce Norris radio program blatantly admitting to placing shills in the audience to drive up prices. Now is obviously not the time to buy, in my opinion either at auction or off the MLS. I just don’t think we’re close to the bottom yet.
That doesn’t mean there isn’t a learning experience to attending an auction right now. Seeing how people are being manipulated and seeing how that type of high pressure sales affects prices is both interesting and provides a defense against the “buy now” family pressures. I also believe that eventually, when real investors should be buying, a huge excess of inventory combined with a population completely burned by real estate will lead to some great buying opportunities including at auctions when they are setting the new low price instead of the new high price. There have been good deals at auctions in the past, before the days of HELOC wealth and the extreme consumer mentality we live with even today. I believe there will be in the future, but even if there are not I still want to have a very good idea of how they work and of what to be aware. Personally I learn best from experience.
I know some people here are completely anti-real estate and always will be. That because of the last few years it will always be a terrible investment and no one should ever think about buying a home or (horrors!) an investment property. I do not fall into that camp. I think starting in 2011 or 2012 (and those dates may change or disappear depending on government intervention) there will be some real opportunities in real estate and I intend to know what I’m doing to be ready for them. Thus going to the auctions and comparing where I think prices will go (currently to 2000 prices with no inflation adjustment – this may also change), versus what I think they should be today, versus what the auction hype causes is both educational and let’s face it, fun.
“I am well aware that auction prices are very high right now.”
It will be interesting to see how those emotions evolve between now and when the housing market bottoms out some time after 2012.
Mine or the sheeple at the auctions?
It will be interesting to see how those emotions evolve between now and when the housing market bottoms out some time after 2012.
—————-
I’m telling you guys, the market is very, very hot right now. A couple of homes we were checking out went with multiple bids within a day.
No sign of capitulation yet. Agree that this is not the bottom.
SD Real Estate Bear:
Would love to join you…but Mr. Cole & I are heading for the Mojave that Friday
Is it possible that your “work” can lead you away from SD Population densities? You & your “buddies” might like a something greater than 44,000 sf and those are going to be plentiful & sweet purchases for anyone above the age of 30 especially, anytime after the not to distant 2011.
Shortly (April), We’ll be going to visit the Midway via the Coaster…Let’s have a “gloom & resignation-to-anything-good-about-wanting-to-keep-hoping-about-a-better-& glorious-day-because-America-is-financially broke-& there-is-nothing-that-can-be-done-about-and besides-it’s-all-Timmy’s-fault-so-let’s -just-throw-back-a-beer-and-cry-’till-way-past-Midnight”
Impromptu beach party!
Hi Hwy:
Right now my only two choices for buying a home are either San Diego (due to my business being here) or if I move somewhere and rebuild my business, the PNW as I love the rain and no state income taxes in WA.
With my desire to have an even larger menagerie and foster injured wildlife and maybe even abused horses I would not mind a ranch. I just don’t know how to make a living in a low-populated area. But definitely let’s talk about it next time you are down. We could make it a real beach party, especially if you are willing to go to one of our dog beaches and I can let the monsters run awhile. (My youngest can outlast even Cole’s energy so that might be a good pairing.)
Speaking of which, I have to say I’m a little concerned by the fact that you allowed Cole to buy Ben beer. Not sure that’s at all appropriate. Wine I could see, but beer? We’ll discuss that too.
I’d be up for that, Hwy. Please let me know if it comes to pass?
You and Cole enjoy the flowers! BTW, if you’ve not been through Arvin, it’s spectacular right now…well worth a detour.
We’d also like to go to the beach with you guys, and we’ll bring our kids this time, too.
Good luck to you!
Here, in Maryland, near-tear downs and “as-is” junk still sells for 4x to 5x median household incomes for any area where one would want to live. It is a disgrace, but it is not going to end as long as the government keeps pumping up the market and as long as idiots are willing to ruin themselves financially to “own” a house.
One person I know at work is intent on buying a house now (she’s probably been brainwashed by some Realtor.) She passed a link to the place she’s looking at to a friend, and it proves how the Bubble keeps on going. The place is easily 3x her income (which isn’t too bad), but it is located in Baltimore City, land of high crime, drugs, high taxes, no parking, etc. The place is a 70+ yaer old dump of a townhouse, 3 bed, 1 bath, all in need of serious work, there may be water damage in the basement based on the online photos, and the property taxes are a staggering $4,000 a year?! What the heck!
So, the Bubble lives on in Maryland…
“Here, in Maryland, near-tear downs and “as-is” junk still sells for 4x to 5x median household incomes for any area where one would want to live. It is a disgrace, but it is not going to end as long as the government keeps pumping up the market and as long as idiots are willing to ruin themselves financially to “own” a house.”
===================
That is what I think too. The govt will not let prices fall any lower. If it means hyperinflation and the destruction of the $USD so be it. Real estate will keep getting bailed out and people who cannot afford their mortgage will have their mortgage paid by Uncle Sam. Which makes the whole discussion of affordability, rent/price ratios moot.
But I’m just a troll so what do I know?
The UK Debt Management Office (DMO) attracted just £1.67bn in bids for its sale of £1.75bn of 2049 gilts this morning, its first uncovered auction of conventional gilts since 1995.
The cover of just 0.93 times is believed to be the lowest in history and far worse than the 0.99 times in 1995.
Dearie me, dearie my!
All doesn’t seem to be proceeding according to plan.
They need to create a Government entity to ‘buy’ the remainder. Someday they’ll figure it out….
I’ll take a “gilt” is their version of a note? At 2049 is that their long bond?
Gilts are the UK government bonds of varying maturity.
Is that where the phrase “gilt-edged security” comes from?
Yep.
The certificates used to have a “gilded” edge.
Is this then presumably a “reserve” type auction - and the reserve values just weren’t met?
Presumably this should drive treasury bond prices down, and therefore yields up - by a lot - right?
What happens next? Is this simply debt that goes unsold, or is it instead bought by the BOE?
(I’ve been expecting this as a long term phenomenon, which is why I’m big on TBT these days. Probably risky, but seems logical.)
Yeah, there was a reserve price.
The gilt yields were on a roller coaster today. All is not well in QE land.
Probably risky, but seems logical.
This kinda thinking will get your head handed to you. Yields can be depressed for the better part of 5 years.
There are far superior bets out there.
My time horizon is greater than 5 years actually - I’m doing this in IRA. Probably 10-15 years. I figure there’s no friggin way the world can buy the $15T or so of new debt that’s in the pipeline, short of worldwide hyperinflation.
Nevertheless I’m curious about your thoughts on superior bets. I might have some of those covered already actually (e.g. thanks for the tip on SRS - I hadn’t realized it got so low until you guys brought it up the other day. Now up 15% or so.)
I do like to spread my bets around - a lot. Some actually counter each other to a great extent.
or “offshore” companies.
i think i read somewhere that we do not even know who buys all of our bonds (allbeit a small percentage). it was speculated that shadow offshore corporations make up that remaining percentage. the implication being that those corps are created by our Fed or government.
For what possible purpose?
To prop up the Bubble.
As long as we keep shuffling money from one pocket (Treasury) to the other (Fed) and back again, it gives other nations the illusion that we’re stable and doing something productive vs. printing money like mad and “inventing” toxic financial products that bring down economies.
Shadow offshore corporations? Well you gotta launder that black market money somewhere.
CA jobless rate to hit 12%.
http://www.cnbc.com/id/29856817
“The projected jobless rate would grow to 11.9 percent between April and June 2010, and average 11.7 percent for that year.”
So, let’s just assume that the bottom in the CA RE market is at least 1 year off, and probably more like 2-3. It’s stinks “bubblesitting” this market, but, at the same time, think of the alternatives. I just don’t want to be the one to tell my GF that we might have to wait longer to buy a house. That’s not going to go over well, she’s got her heart set on the end of the this year/beginning of next.
Fire the GF and find a better one.
Or rent a house instead of buying one.
Michael Fink,
No callous remarks here! Finding a place to rent is the ‘easy’ part. Keeping your LL from bailing on you..? That’s another matter entirely. Invariably their threshold of pain is reached at a time when it’s -the- most inconvenient for you. Hang in there.
We’re renting a house and LOVE it.
Monthly nugget to own would be about 2X the rent (note, landlords are cash flow positive with a ~$70k mortgage or they have ~90% equity at today’s ‘fair market price’).
That is what you need to find. A home with little to no mortgage. In our case, the landlords plan to move back to this house within 3 to 5 years (depending on a relative’s health).
Oh, rents keep dropping in the coastal areas. Lots of empty homes at ‘wishing rents’ with the ones rented out are deals.
Got Popcorn?
Neil
Neil,
Similar observations. Have been looking for a place for mom to move to on the west coast. She has plenty of $ and talked about renting in Redondo/Hollywood R section.
A bunch of 3/2 rentals that “rent quickly” have been vacant for a month or more. Asking rents have dropped from 2K down to 1.8K and 2.5K down to 2.2K. 10% drop along with a move in bonus.
These are places that are less than a block from the beach.
Seen some Manhattan beach houses, small 3/1 cottages, sitting on the market at 600K now too. Not sure about MB as a neighboorhood. I think I like PV, Torrance, Redondo better.
Not eating popcorn on Atkins.
Got pepperoni?
James
Same with the GF.
Better yet, rent a house and rent a girlfriend.
Good one Bill
New paradigm? If it floats, flies, forecloses or fracks–rent, don’t buy.
I read an article stating that House sitting those empty foreclosed homes or houses that are still way to high..is currently a good thing to do.
+1000
LOL, you guys are harsh.
I already am renting a home (last sale 515K, rent <2K/mo), but that doesn’t stop the nesting instinct.
We have no patience with this line of thought.
Grow a pair or snip then off.
BORING. NEXT.
Or the whining instinct either, apparently.
Grow a pair or snip then off.
Youch!
Snipping them off could open lots of doors for you in the labor market
“We” is too broad. Not everyone here believes relationships are completely disposable simply because one party has a stronger desire to buy than another.
It is hard to think about waiting another 2 years. It sucks to rent, I’ve been doing it for 7 years in a very hot place without air conditioning, and it’s very hard for me to find a better place because of my pets. (And let’s face it my place is cheap and safe and quiet - even though a bit of a dump a good deal for what I pay.) I know how she feels and I can imagine what you are going through.
But look, the first quarter of 2009 is already over and it went fast. Summer’s coming with lots of chances to get out of the house and have some fun. Then the holidays. Maybe in 2010 you can start looking. My idea is to spend a year or two figuring out the exact streets I want to live on so I’m ready to pounce when a real deal opens up. Ok, it’s not going to take me two years to pick out a neighborhood, but it satisfies the need to plan for the future while setting up a barrier to buying. (”I can’t buy yet - I don’t know all the pros and cons of the school district!”) Plus every time I look at open houses the prices still astound me.
Sit down with her and express your concerns about buying. Look at your budget and get an example of the house you could buy today along with what you could buy for the same price in two years if prices fall another XX%. If logic doesn’t help offer a bribe. “Yes Hon, we can’t buy this year, but I’ve booked us a trip to Hawaii in February with all the money we are saving.”
But remember, if you strongly believe prices still have a significant fall ahead, and I do, being talked into buying before you are ready will probably lead to so much resentment, especially if you get trapped in the house years after you outgrow it, that the relationship will dissolve anyway.
Compromise is the key to a healthy relationship. She’s giving up nesting for awhile so what’s her second place dream? Yes, you may have to dress up like a Chippendales dancer or detail her car or spend a weekend rolling in mud at a spa, but isn’t that better than buying a house.
“…you may have to dress up like a Chippendales dancer…” LOL! Now that’s a sacrifice! (I can’t get the image of Chris Farley’s dance-off with Patrick Swaze out of my head.)
Not everyone here believes relationships are completely disposable simply because one party has a stronger desire to buy than another.
I don’t think of relationships as disposable. However, I do believe in setting the financial non-negotiables on the table upfront. It works I assure you.
In fact, I’ll even go as far as to claim that it makes the relationship far more harmonious because it takes away the main bickering point - finances, and it lowers the general stress-level all around which leaves a lot more time for food, drink and … ahem … “horizontal jogging”.
“Fire the GF and find a better one.”
Sounds pretty disposable to me.
Perhaps I should’ve said:
Fire the unreasonable GF and find a reasonable one.
Define unreasonable. He’s just dreading telling her that she has to wait longer because she’s waited so long already AND is already resigned to waiting until 2010. He didn’t say she was going to beat him or cut off his nuts (although you seemed interested in doing that
) or leave him with a crop in the field and four hungry mouths to feed. (Sorry, seems like a country-western type of day to me.) Instead she has waited how many years and now has to wait even more and he doesn’t want to give her that disappointment.
I know exactly how she feels. I’ve waited to buy since 2003. I want a house where I can have guests instead of a studio with no room for them. I hate not having A/C. May seem shallow to you but it was 117 one summer at my house. (Ok, that was extreme but 100 - 110 is very common in August/September.) I’ve been bitching about not being able to afford a house for years and yes, my timeline too keeps moving back as the correction never seems to happen. And I’m the one stopping myself from buying since I don’t have to work with another party and I still get mad at myself for being the bearer of bad news.
She is already resigned to 2010. Now she has to resign herself to 2012. But nothing in his posts said she would not do it. Only that she would not be happy about it. BFD. I’m not happy about it either, and I come on here to complain about it and the unfairness of it all the time and all of you are my support group. I’m guessing the only person telling her what is going to happen is Michael and so far she has listen to him and put off her own dreams. He didn’t say she was somehow going to force him to buy a house, only that she would be unhappy with having to wait longer. Well guess what, if she’s going to be unhappy waiting longer and he knows this is going to occur than SHE IS OBVIOUSLY WILLING TO WAIT. Not happily, but a lot of us are unhappy about it. But she’s listening to him instead of everyone else who are probably telling her to buy now or get priced out forever. And yet based on the fact that she’s not a perfect little Stepford wife denying her emotions you want him to dump the relationship.
Anyone who wants a house that badly, but is willing to listen and behave accordingly to the counter arguments is not someone you should just dump. She listens to reasonable arguments and has the logic skills to see that things are very out of balance based on the discussions she has with Michael. (I am assuming this based on all of Michael’s posts in this thread. Michael please let me know if I am wrong.) Often when we have to give people bad news they do not take it well. But there is a huge difference between not taking something well and ignoring it all together.
So please, based on what Michael has written, tell me how she is unreasonable instead of just human. If he had said she was going to leave him if they didn’t buy a house, or no sex until they bought a house, or she was pregnant with octuplets so they had to buy a house I could understand the argument for thinking about ending the relationship. But this is a person’s life you are playing with and people take your opinions seriously (I know I do and you helped me time my last SKF purchase much better. Thank you.) I know this is only a blog but in many ways I value opinions here much more than in the “real world” because I consider the posters to be more logical and educated than the average person in my life (at least on this subject.) So yes, flippant answers to important concerns do upset me, and I just hope people are aware of the fact they could be dangerous. (Fortunately Michael seems to be able to think for himself.)
She is already resigned to 2010. Now she has to resign herself to 2012.
Life is tough. She might have to wait 10 years to make a financially rational decision. That’s how it works. This is not some fantasy world - bad decisions have huge consequences.
And if she can’t handle it, I’d hand her the walking papers - as in, go find someone else who is willing to put up with this “nesting” cr@pola.
Sorry, we are a pretty resolute bunch here about this - guys and gals - there are plenty of women here who’ve brought their husbands, etc. to heel. This is about financial rationality and sometimes that means hurt feelings.
TOUGH!!!
I know some of those women who have brought their husbands to heel, one in particular. And it hasn’t been without a lot of understanding and acknowledging their husbands feelings of frustration of not being able to buy now. And perhaps some pretty big fights. I’m not saying it’s easy or fun to be around someone who doesn’t openly and happily embrace the idea that waiting is wonderful. I’m saying that successful relationships are based on compromise like letting a partner vent about a situation they hate as well as listening to arguments about why something you really, really want is a bad idea. And again, she is not making him buy which would be a bad decision. She just doesn’t like it.
And I have yet to see you post anything that doesn’t indicate you don’t toss away a relationship if the woman dares to say or do or feel anything you find inappropriate.
How about SHE buys the house and you move in?
That’s the correct response.
Those who have the nesting instinct can pick up the tab and everyone signs a pre-nup. Sounds like an eminently rational plan to me.
She just doesn’t like it.
Not liking it is fine. That’s the base at which you are starting. Such is life! Get used to disappointment or pay for it yourself.
But success is defined by convincing people that they need to see financial rationality. How you do it varies from person to person but it has to be done. Ultimately, they must accept financial rationality or leave.
Is it hard? Of course.
Is there an alternative? Of course, not!
But where is she doing anything besides not liking the situation? She’s not threatening him, she’s not making ultimatums, and she’s not playing games. She’s just not liking it, but obviously agreeing with him since he’s not saying that he has to buy now only that he has to tell her the date is postponed. What crime is she committing, other than your assumption that she is more high-maintenance then you would tolerate, that you are telling this man to leave this woman?
He doesn’t have to tell her to buy it herself - she’s not saying he has to buy it. I don’t disagree with you that you cannot put yourself in financial slavery to meet another person’s demands. But you are telling him to leave her, not because she is demanding that they buy, but because she is not going to like his news. Holy shit. What kind of human being tries to destroy a relationship because they do not like how someone else will respond to a scenario that they do not have to deal with? SHE HASN’T DONE ANYTHING WRONG. Stop trying to ruin a relationship because it’s not one you would be in.
“Ultimately, they must accept financial rationality or leave.”
Where is she not doing this???? Maybe not as gracefully as you would like, but where in all of the above is she not doing this?
but that doesn’t stop the nesting instinct.
or the PREGNANCY instinct once you get the house…..stand firm Michael.
A) Tell her now and get it over with;
B) Do what the Cat says
I’ve been telling my wife to wait for years. Time to grow a set, falla.
+1
Lord, you guys are harsh. She’ll wait, it’s the constant discussions that are starting to wear me down. Once the prices hit the level I feel is reasonable (about 100/sq/ft in my area), I’ll give her what she wants.
Making someone your wife in no way effects their loyalty. If I didn’t think she was a good earner/good partner, I’d never do it. Nothing that happens during a wedding would change that (except I’d be out some serious money). A wedding is a party; how does that determine if someone is able/willing to be a loyal companion?
Michael Fink,
Again, it’s the weak-handed LL’s that turn what ’should’ be a simple arrangement into a nightmare! This weekend will be my big 50th B’day but I’ll spend it helping one of the kid’s friends move.
He t-r-i-e-d what I suggested ( as many others here have ) and ask the LL for a rent reduction! His hours have AND pay have been cut and his new wife’s beauty parlor clients have absolutely evaporated. So dealing w/ unrealistic LL’s is very much a reality.
I ‘wish’ I could make the market do the things “I” need it to do ‘when’ I need it to do it but obviously everyone here has more control over that than I do?
We’re just having a little fun with you, Michael.
But if the discussions are wearing you down, quit talking about it.
Well, I don’t know what things are selling for where you are, but here in Huntington Beach, the houses are still in the 250-300+/sq. ft. range and I don’t ever see them returning to $100. And I agree with you about the marriage thing… unless something goes wrong… and something always goes wrong.
Are you on crack? I wouldn’t trust any woman to remain loyal forever. I should know, I am one. Even if she’s genuinely loyal now, things change.
A house is a longer commitment — and a more binding commitment — than most marriages. If you two are thinking about nesting together under 15-/30 year debt, you may as tie the knot now. This is for your own self-protection. If her emotional loyalties change later, her legal loyalties sure as hell can’t.
No need for an expensive party, just sign some papers at the courthouse. If she hankers for the show-off party, then you can start asking questions about what she’s loyal to.
There’s an old saying: Men marry women assuming they’ll never change. Women marry men assuming they’ll change them. Both end up disappointed.
Women marry men assuming they’ll change them.
I complained about this recently when we were all talking about relationships and why women like ‘bad boys’. It really does seem like a lot of my gal pals deliberately seek out what I think of as ‘project’ guys (aka ‘a*ssholes’).
I just do not understand that. Why don’t they take up crocheting doilies, or making scones, or something useful like that? Pester, pester, pester the crap out of your ‘Project A*sshole Redemption’ Guy…all you end up with is an entirely unredeemed and thoroughly grumpy a*sshole.
Not that it isn’t often funny to see. I love to be right, and I love to say ‘I told you so’. And I get to say it a LOT.
Anyway, not ME! I got no desire to change men. (And not ’cause I’m understanding and wise. Naaah. It’s because I’m lazy.)
I know I wouldn’t take on another husband if mine of 39 years were to die. Too much work.
Olygal
The really good guys know this and act like enough assholes to get the women and then slowly back down (so they never suspect a thing). Plus you get to play cards once in a while.
I’m not sure I see the point of putting off life until the bottom comes. Buy when things are affordable, and a worse than realistic drop doesn’t impede your ability to continue to operate on your terms. Money isn’t a scorecard when you die, it’s a tool you use to get what you really want (even if that’s just more gold, Aladdin
). I told lots of people it was a dumb time to buy a home in 2006 and 2007, but if they were putting 40-50% down and really care if they lost it, liked the home, and wanted some stability to finish the last few years of raising kids, I wouldn’t tell them, “under no circumstances should they consider that”.
I’m in the market for a foreclosure. I’m fully aware that I’ll probably lose real value by the time I sell (we’re thinking the first possible move time is 10 years), but it’s close to both of our works, the neighborhood foreclosed early anyway (so there are stronger hands in many of the foreclosable homes now), I’d like to start gardening/brewing/winemaking and we’ll put enough down that unless there’s a further 40-50% drop that sustains for more than 10 years we’ll be able to sell without bringing cash to the table. Honestly, I’m not asking for advice or validation, just mentioning that there can be opportunity costs that are worse than losing money.
Woman told me about her 50th wedding anniversary. I said congrats, and she whispered to me, while H was sitting next to her, that it was 59 yrs and she was ‘over it’ in so many words.
I think she is tired from his alzheimers.
Ya never know. Seemed like they had a decent run for sure. They looked ‘young’ but, geez, what a horrible way to go.
Michael wrote:
Making someone your wife in no way effects their loyalty.
—————–
Gotta disagree with you here, Michael.
Unfortunately, men and women are valued differently. Men are valued by the opposite sex primarily for their income earning capacity and power/social networking skills. Women are valued for their youth and beauty. Trust me, I don’t like this, particularly because I’m female, and youth and beauty are in God’s hands (it’s random and fleeting), and income/power are more easily controlled by a man.
All women and men are aware of this valuation, even though most of us don’t like to discuss it.
Both men and women make a trade: women trade their youth and beauty for a man’s power and income-earning capacity, and vice-versa. Women’s contributions are front-loaded where a man’s contributions tend to be back-loaded (money and power tend to come later in life).
Women know there is a limited time during which they can make their trade. If a man doesn’t love a woman enough to marry her (implicitly, in her subconscious mind, ensuring she gets his side of the trade in return at some point in the future), she needs to make good use of her time in pursuit of another mate with whom she can complete the trade.
Realize that women are not gold-digging. They are securing future resources for their offspring. You’ll find that women who never want to have children tend not to concern themselves as much with a man’s money and wealth.
does GF stand for girlfriend or greater fool?
i would not buy a house with a girlfriend. only a wife.
I agree, I would never purchase real estate with a boyfriend, only a husband.
Mike Fink, if your girlfriend wants a house so bad why doesn’t she just buy one herself?
“does GF stand for girlfriend or greater fool?”
Maybe both at the same time. For the last decade one has often also been the other.
short the girlfriend.
Maybe he needs a GF with a “call option”.
You mean a “call girl” option?
LOL
Given that you could see another 30% t0 40% drop in value, just ask her how much she is willing to lose on a new home to buy one. Is it worth $100,000? $200,000?
Put the downside into real numbers.
“So, let’s just assume that the bottom in the CA RE market is at least 1 year off,…”
Did you read the gloomy UCLA and UCSB forecasts? Both are predicting double-digit unemployment through 2012 or so. But nonetheless, I guess you are thinking the CA RE market will bottom out in 1 year or so (that would be 2010). Would that possibly be the first ever time in history when a housing market started to rebound while the labor market was in double digit unemployment? I personally find this scenario implausible, but perhaps you know better or could cite a historic example to show how this could happen.
Link Bear ??
State’s jobless rate forecast to pass 12%
By Dean Calbreath
Union-Tribune Staff Writer
2:00 a.m. March 25, 2009
California’s unemployment rate will soar to between 12 percent and 15 percent by next spring and remain in the double digits until at least the beginning of 2012, according to forecasts released by two teams of University of California economists.
The state’s unemployment rate has not reached those heights since the Great Depression.
The projections – one released today by UCLA’s Anderson Forecast, the other last week by UC Santa Barbara’s Economic Forecast – paint a grim picture of declining economic growth, lower retail sales, a troubled housing market and falling office prices lasting through much of 2010.
Dude. I’d rather have a $150K house and new girlfriend than be $150K upside down in a $300K house with an old girlfriend. Think about it carefully.
A government report says U.S. home prices fell 6.3 percent in January from the same month last year.
The Federal Housing Finance Agency says prices, on a seasonally adjusted basis, rose 1.7 percent from December to January.
Home sales included in January’s data were weighted toward areas that haven’t borne as much of the brunt of the housing recession, the agency says.
Oh good! You just weighted the data towards the areas which didn’t decline as much. Which makes the data extraordinarily useful as a comparative tool.
It’s a good thing this is not a banana republic where they massage the data to get the results they desire otherwise we might actually be worried.
Wow - I hadn’t caught that one paragraph yesterday.
It’s amazing how prescient Eric Blair (Orwell) was. I could almost forgive the NAR for fudging the numbers like they have been (e.g. changing the criteria for the affordability index to use ARMs), but for a government agency to do it - that’s bad. Not unexpected, but really, really bodes poorly.
Got a link for that BTW?
P.S. for those that don’t know - the FHFA is a new agency - the merging of the OFHEO and FHFB, created last year by the housing recovery act.
Looks like they’re off to a great start.
packman,
Seriously? Sad, OFHEO was the (1) agency that held the line! ( Can’t be having ‘that’ now can… we? )
OFHEO was created to “regulate” Fannie and Freddie. They had precisely one purpose and they failed even at that!
FPSS,
The one thing we have to give OFHEO credit for was publicly going against the grain and calling others out where “affordability” was concerned.
Gets even better.
“Month-to-month changes in the geographic mix of sales activity explain most of the unexpected rise in prices in January. The January home sales reflected in the FHFA data is proportionately occurred in areas with the strongest markets. While it is difficult to perfectly control for changing geographic mix in estimating house price indexes, the data suggest that if one were to remove those effects, the change in home prices in January, while still positive, would have been far less dramatic.
It also should be noted that sales volumes, in absolute terms, were relatively low in the month. Accordingly, the estimation imprecision associated with the January estimate is relatively large and subsequent revisions to the monthly figure could be significant”
____
Ahh, just suggest you read it again.
I’ll post link to the FEDERAL HOUSING FINANCE AGENCY press release.
http://www.ofheo.gov/newsroom.aspx?ID=500&q1=1&q2=None
Thanks for the link.
This crap is… incredible. Note Figure 2. Quite the instant turnaround, eh? I didn’t know the housing market could *do* that!!
We’re saved!!! Yaaayyyyy!!!!!
Yes, packman.
Looking over that chart, I’d guess the crisis is over, time to buy.
The head of FHA was an executive of Long and Foster - chief operating officer I believe.
gov produces pure sht
next up free-er healthcare
Wow. And they even admit to fudging.
Eventually, the index will be rewritten into something else entirely - maybe they’ll use some made up price vs. the real one, or some similar type of thing from 1984. If that doesn’t work, they’ll just stop publishing it, as they have stopped publishing some of the money supply numbers.
Now, be good sheeple and get out there and buy something you can’t afford today! Argh!
Senator Benjamin Cardin (D-Maryland) has come up with the insane idea that taxpayers should bail out failing newspapers. The Newspaper Revitalization Act would allow newspapers to operate as nonprofits for educational purposes under the U.S. tax code, giving them a similar status to public broadcasting companies. Newspapers would still be free to report on all issues, including political campaigns. But they would be prohibited from making political endorsements. Advertising and subscription revenue would be tax exempt, and contributions to support news coverage or operations could be tax deductible.
Fortunately, Cardin hasn’t picked up support in the Senate for his zany idea, yet, although several struggling publishers think it’s a grand idea. Needless to say, the moment the federal government declared newspapers “nonprofits for educational purposes” broadcasters galore would demand the same status.
One word sums up my feelings on this: Pravda.
Tass minus the T
“Newspapers would still be free to report on all issues, including political campaigns.”
How comforting. They don’t intend to do away with yet another provision in the Bill of Rights.
At least not right away.
Bill,
Right, just what we need, a “print” version of PBS. Great…
By law PBS isn’t allowed to run advertising. Doesn’t seem to have stopped them - there is an awful lot of what I’d call ads on PBS. When I called them on it, the PBS response was “those aren’t advertisements. We call them ‘enhanced underwriting announcements’ and they are thus exempt from the ban on advertisements.”
They are. The rules are fairly complicated, but the essense of them is that an acknowledgement for underwriting can’t include price information or a comparison between the organization’s product and another product. I think the public broadcasters generally keep pretty far away from the extreme edge of what they could get away with. They probably are afraid if they push too much further, they will face a change in the rules.
The rules were changed. It used to be they could only show a “title” of the sponsor with a voice over. The rules were changed so they could run “showcase” softsell ads.
The commercials we see everyday everywhere else are the hardsell, high intensity ads.
I’m coming in late with this - but my all time favorite PBS ad was the old Toyota ad for the Newshour, emphasizing the “American” side of Toyotas, manufactured in the US.
It showed some iconic American scenes, including either a beginning or ending shot of a cowboy on a horse, with a lasso, riding around a herd of HOLSTEINS grazing on what looked like a golden field of wheat stubble, w/ I believe an old red barn in the background.
I thought it was a hoot - but I had to point it out to friends who know much more about dairy cattle and farms and ranches and cowboys than I do.
Which political campaigns you intend to report on and how you intend to phrase an article is a tacit political endorsement.
Why don’t we all just become tax-exempt? Wouldn’t the economy grow at an exponential rate then?
Why do I have this feeling that they would be “freer” to report on some issues more than others?
I can always count on the “leaders” of Maryland to come up with idiotic ideas like this.
Maybe they are just afraid that the Baltimore Sun (a newspaper that makes “Pravda” look honest) is on borrowed time? After all, it would be a shame if those in charge lost some of their mouthpieces - people might do something bad like go to a Blog or something and actually learn the truth… can’t have that!
Sofa surfing: C-ouch! Crisis hits home
‘Housing crash’ has a new meaning, writes Melanie Cable-Alexander.
By Melanie Cable-Alexander
Last Updated: 6:29PM GMT 24 Mar 2009
Sofa surfing conjures up images of teenagers and students leading nomadic lifestyles, crashing out on a friend’s couches. So it is hard to imagine the idea applying to the elegant and sophisticated, blonde, 44-year-old City headhunter Sara Tutchener.
“Oh, but I’ve been sofa surfing ever since I moved to the West Country,” she says. The reason being that she still needs to spend two to three days a week working in London. “It is a wonderfully inexpensive way of staying in town and catching up with friends whom one wouldn’t normally have much of a chance to see,” Tutchener adds. “We turn up like an Arabian caravan with laptops, suitcases and a small dog as part of our retinue.”
Tutchener is part of an increasing trend for even the most well-heeled out-of-town businessmen and women to revert to the sleeping practices of their youth. Which is just what the founder of crashpadder.com , Stephen Rapoport, discovered when he launched last November.
Crashpadder, which matches people with spare rooms – and sofas – was inspired by Rapoport’s travels as a student
http://www.telegraph.co.uk/property/rentingproperty/5044684/Sofa-surfing-C-ouch-Crisis-hits-home.html
awesome…
At my house we adhere strictly to the 3 day rule. After 3 days both fish and guests begin to stink……………..
Great way to get bedbugs!
I don’t know if this would show up if I included the link, but you can go to money dot cnn dot com and under “Latest News” you’ll find a jaw-dropper entitled “Smart House Hunting: They Saved $55,000.”
“Helping make it affordable was the great deal they got on their mortgage. After analyzing their options, they made what many might think is a surprising choice: They financed 92% of the deal with an adjustable rate mortgage (ARM).”
Be sure to check out the picture of the “dream home” to see what nearly a half million dollars buys you within commuting distance to Washington, D.C.
I can’t believe this kind of thing is still happening.
The Senichs figured that their initial savings would keep them ahead of the game for at least 12 years.
They figured wrong. It’s not as if they had $55000 cash lying around to draw on when the five year grace period is up. It’s *poof* money that they used to buy more than they could afford.
Takoma Park is a really nice leafy suburb, but that is NOT a $500K house.
they never figure opportunity cost or time value of money in these things.
Please use the preferred name- People’s Republic of Takoma Park.
The entire close-in DC metro area is still like this. Anything reasonable is half a mill; starter 3br townhouses (with plastic sink fixtures and builder-grade carpet over plywood floors) are $350. There are worse neighborhoods than Takoma Park, but there are better ones too. Lots of petty crime in the area.
northern arlington and vienna virginia is probably the highest price real estate in the country but it seems to always be excluded from the “bubble” city list. i just do not get it.
The better parts of Arlington, VA, remain persistently sticky as well, more so than many other nearby locales.
(Maybe Vienna does, too, but I haven’t looked.)
The amount of pimping and shilling by the Washington Post and local news media is amazing. There are news stories I mean advertisements like this all the time. About a month ago the Washington Post Sunday Magazine had a similar story about a young couple getting a deal on $500K vinyl siding townhouse for $350K. It was off somewhere requiring a terrible commute.
Add in Chevy Chase, a few other bits of Bethesda, Potomac and McLean.
But Chevy Chase was up in some rarified air many years ago, and the horsey farms in Potomac were long the estates of the extremely comfortable.
This is not to say they didn’t get bubbly, but in terms of the ridiculous-o-meter, I doubt a 100% runup in Chevy Chase (or whatever) has quite the impact of, say, half mill condos in Downtown Rockville.
Arlington is a rose that has lost its bloom. There is no ‘nicer’ part of Arlington, if appearances are anything to go by. Its downfall is going to be a laff a minute. (What I mean is, there’s really no enclave away from the rot. The local econ. tanks and the rot will continue on its merry way to the town line.)
There may be something to the value of homes via the severe restrictions on freeway building in the area. Take 66 as an example, by restricting the ability of people outside Arlington County to get to DC, (I-66 for the last 7+ miles into DC is two lanes) they’ve made it possible to capture a lot of the benefits of a short commute in a fairly small (and largely single family home area). It’s possible that even after the bubble pops, there will be a wide difference between home (really land) values in Arlington County and land values moving out from the district (both lower than now but with persistant differences). Eventually, the enconomic centers will move outside the beltway and Arlington may shoot themselves in the foot (if the jobs move from DC->Tyson’s->Reston Arlington might be something like what DC was 30 years ago.
“One place in Glenmont, Md., was almost a keeper; it had a screened-in porch they especially liked. It was $419,000. They bid $405,000, which the seller MULLED OVER.”
Dumb and Dumber, the sequel.
“Discouraged, the couple went through a phase where they checked out homes BEYOND THEIR BUDGET, to see if they could get more for their money.”
Who’s bright idea was that???
“For two months they kept an eye on their Takoma Park home. When the price finally fell to $500,000, they POUNCED, putting in a bid for $475,000. A counter-offer was made and, after negotiations, the seller agreed to $480,000.”
Offer 5 percent under ask, then negotiate higher. Sheesh.
“But they say it (the agent’s commission) was worth every penny. “It was money well spent,” said Sara. “He saved us money on so many things. I contacted the title company for a lot survey and it came back with a quote for $1,800. I called John and he said that’s too high. He found someone to do it for $500.”"
Atta girl!!! That more than makes up for him suggesting you offer 95% of asking price, then go UP from there. Doesn’t it??
Just shakin’ my head.
Typical Maryland attitude: “Everyone is rich here because we live near DC, so I must be rich, too, and heaven forbid I don’t OWN a home and keep up with my neighbors even though I have a total of $500 in my name, etc.” The central regions of this state can easily compete with anywhere for fake people living on credit and demanding handouts for the wealthy (toxic loans, etc.)
And I bet this idiot couple has a high enough income to afford to spend about $500,000 a force. Sure, they must make about $170,000 a year ($100,000 more than the median household income for the Wheaton-Glenmont area)… no doubt… right… And let’s talk about down payments, or are we still ignoring those thanks to the 3.5% folks at the FHA (next year’s top pick for Bailout Winner!) But no price is too much to pay for a screened-in porch, right?
That looks infinitely nicer than any $500k house in Silicon Valley or San Francisco.
That’s a 100K around my parts.
This wasn’t a home bubble it was a land bubble. From peak to trough the cost of constructing a home went from about $100/square foot to $140 (maybe) to about $80 (now). Most of the value change should be properly attributed to legal rights to build a home on land. If those legal rights are easy to get (say in Houston or parts of the Midwest) than the value of the land didn’t increase nearly as much, rather vastly more homes than necessary were built as people bought additional homes there. In areas where that’s harder (because of land use restrictions, mostly filled building areas, etc) the price shot vastly higher than it should have.
There is no such thing.
Which is why your statement makes sense.
Everything is infinitely nicer than nothing.
Unless you’re in the process of renunciation, in which case the reverse is true.
“At closing they had to pay their buyer’s agent, Sullivan, 1/2% of the home price, or $2,400, out of pocket. The remainder of the 3% fee was paid for through Sullivan’s split of the listing agent’s 5% commission.”
Am I reading this right? Sullivan, as the buyer’s agent, received 3% commission separately. The listing agent received 5% commission, which was split between them and Sullivan, who must have received at least half of it in order to pay the closing costs. So the combined agent commission on this house was 8%?
In other words:
Sale price: 480,000
of which 8.5%, or 40,800 was commissions and closing costs.
So assuming a 50-50 split of the listing agent commission:
closing costs (3%) : 14,400
Sullivan (3%) : 14,400
listing agent (2.5%) : 12,000
I guess that’s not so bad (in terms of expenses), but why are they not breaking it up as above instead of implying that Sullivan magnanimously paid the closing costs when he was merely a pass-through for the buyer’s money? Wondering if there’s some tax break here for somebody.
You’re reading it wrong.
Commissions come from sales. In this case, the person selling the house put up a 5% commission, which is split between selling and listing agent. The selling agent is the one that was working with the buyer.
In addition, the buyer also paid their agent (the “selling agent” who was also getting paid as a buyers agent) 1/2% fee, presumably for working on their behalf.
How anyone would think that a person getting paid by two parties with diametrically opposite interests can be legit is beyond me.
But anyway, the selling agent got a 2.5% commission from the seller and also got a 1/2% from the buyer. Total = 3%.
Are you sure about this? Because from what you’re saying, Sullivan got nothing since the entirety of his 2.5% (plus the extra 1/2%) went towards the closing costs.
I just read the story and don’t see anything suggesting Sullivan paid any closing costs.
Evidently, the buyers had an agreement with Sullivan he would recieve 3% of the cost of the house. In this case, the part he got from the seller as the normal commission oof being on the purchase end was 2.5%, so they had to make up the remainder 1/2%.
Durable goods up 3.4% in Feb
Another data point to be ignored, refuted and mocked right? Along with a jump in retail sales, pending house sales, housing starts and of course the 17% rally in stocks. All meaningless.
Oh and almost forgot, the 33% rise in mortgage applications…which I know, I know is to be ignored because most of was financing and financing doesn’t count. But we also should ignore the fact that when re-finance from 7% or 8% to 4.5% mortgages, they are less likely to foreclose.
‘Another data point to be ignored, refuted and mocked right’
I don’t understand what your point is. When I was in Las Vegas, I had HBBers come up to me and brag about the profits they’ve enjoyed recently. Most of the people I know here are interested in the truth, not spin. And the truth is, right now, we are in a situation we’ve never seen before.
So buy a house already. But your wasting your breath here, IMO.
Since I don’t think it’s possible to “short” a house purchase, does that mean that prices are indeed rising where HBBers are buying?
“Since I don’t think it’s possible to “short” a house purchase”
You _can_ short a house purchase, in certain markets: short the Chicago Mercantile Exchange Real Estate Futures markets. Liquidity is low, though, so you’ll pay more to get in and out of positions.
Settlement is based on the Case-Shiller data when it releases for a given contract.
I’ve been reading your blog for a long time. I was in the doom and gloom forever camp as well. There was good reason to be in that camp.
My point now: things have changed. People assumed the worst about housing and retail for 2009. The numbers say things aren’t great, but they’re a lot better than the predictions of complete collapse.
You can dismiss one or two outlying pieces of data. But when day after day retail and housing data says things are improving, I don’t see how you can just stick your head in the sand and say no, none of this is really happening.
You’re no different than NAR reps in 2006 saying bubble, what bubble?
‘I was in the doom and gloom forever camp as well’
That proves you don’t know a damn thing about me. I’ve always said affordable housing was inevitable and desirable. There’s no gloom in that. The fact that some people will get their head handed to them in the process is beside the point.
Manny, I’m not knocking you, I’m just curious about where your present line of thinking is coming from with the negative economic trends, housing and job indicators. I don’t believe Ben or anyone else wanted or predicted a complete collapse of the economy or housing.
It does appear to me that we are in the well prodicted and expected “trough or calm” of the storm right now.
The next wave housing and MTG defaults is just building. This will again influence housing and the economy one more. These are not just our feelings but FIRE and industry data and stats.
Do you feel somehow feel that the feel that the monthly mortgage rates projections for the resets of Prime, Alt-A , Subprimes and Option Adjust Rate for 2Q 2009 through 2Q 2012 has changed for some reason ie, Gov’t intervention or something?
“I don’t believe Ben or anyone else wanted or predicted a complete collapse of the economy or housing.”
Actually, if you went to the trouble of digging into the blog archives circa 2006, you would learn otherwise. Many posters on this blog were ridiculed at the time as gloomsters by legions of trolls for making predictions which seemed (even to me) outlandishly dire. But the most pessimistic predictions from back then appear in retrospect to have been far more accurate than anything remotely close to what any professional economic forecaster could come up with.
Uh huh. And just watch as they revise those numbers DOWN. Anyone who believes these published numbers is a fool. Oh wait, I forgot about all the new road building and bridge building and school refurbishing jobs that are coming. Yeah, that will fix it. LOL
Manny,
I understand that a lot of the mall operators -have- reduced their hours but I agree, the pessimism was WAY overblown. According to a lot of descriptions, many would fold even -before- the holiday shopping season and would be inhabited by roving gangs of post-apocalyptic mutants by now.
“would be inhabited by roving gangs of post-apocalyptic mutants by now.”
Those forecasting roving hordes were always on the wingnut end of things. You can’t say this is almost over just because the wingnuts turned out to be wrong.
DinOR Manny:
Pessimism is REAL….just apply for a job today. NOBODY will even answer your resume Not even just to touch base and to make a personal contact. And forget doing it in person thanks to 9-11 almost all buildings have security and they wont let you in with out an authorization from the company.
I see more and more buildings with for lease will subdivide signs then anytime in the 9 years we haved live here
And don’t forget all those luxury apartments just sitting empty and waiting for the Bear Sterns Merrill Lynch stockbrokers to buy their million dollar apartments with a Manhattan view.
And even if you get get any response it almost always a commission only scam. Overblown??? its not over yet.
The Palm Beach Mall here in South Florida almost exactly matches DinOR’s description. It has lost every single anchor store and, after 40 years in operation, will soon be closing. There is even a little write-up on Wikipedia. The article says “the mall started operating under reduced hours to negate the lower foot traffic” but in reality it reduced the evening hours to ward off the “roving gangs of post-apocalyptic mutants.”
http://en.wikipedia.org/wiki/Palm_Beach_Mall
Part of the reason I love this blog is the local updates and observations. Some, though, tend to believe their local observations should always apply nationwide. Like Manny, I also think we may be nearing a U-shaped bottom in some areas of South Florida. We differ in that Manny thinks he sees signs of increased economic activity in his area, while I believe some areas of South Florida have reached a bottom by default, because things can’t possibly get much worse. I don’t foresee things getting substantially better in the short-term, or possibly ever, but if they deteriorate much farther South Florida will become a third-world area on par with its Caribbean island neighbors.
Prime,
Agreed, and I’m not calling a bottom by any stretch. But you have to admit, the “fringe” was taking up a lot of elbow room? IIRC there were quite a few ( and hardly just here? )
Manny –
Fess up, bro’ — how many infestment homes do you own that you are trying to unload on greater fools?
At least the stock market is cheerful that house prices are coming down. That’s the other side of the coin of being cheerful about more knifecatchers buying houses.
Where is “Manny” located ??
Probably too late…but I’ll reply.
I’m in Atlanta.
I have said a couple of time I am renting my house.
I lived in Las Vegas for several years. I owned my house and an investment home. I sold one in 2006 and the other in 2007. I saw the mania and knew it couldn’t last forever. I missed the peak by about 6 months, but close enough, no complaints.
I foresaw the housing collapse. I’m not saying housing will go up 50% a year anytime soon. However I think that we are about done with the declines. I’ll give you my old home in LV. Homes in that subdivision are now selling for $60-100K less than what I paid in 2003 and the prices are around what the homes cost new in 2001 before the bubble.
I think that is about as low as prices will go. One man’s opinion.
Manny sounds like David Cee.
Tax returns–this happens every year.
+10
Actually you bring up something I hadn’t thought of. I’ll bet tax returns are much higher than normal this year, due to big writeoffs of investment losses in 2008.
Probably not a big difference in the scheme of things - but it may be enough to cause a bigger-than-otherwise-would-have-been spring bounce.
Some refunds are higher because people got laid off - withholding done assuming that total income for the year would be $70K, turns out to be $40K or $30 - big difference. Now I hope that doesn’t send them out to spend on a bunch of crud, but there is always the possibility.
Yes that is true.
Though I’m guessing most people in that condition are crapping their pants, and not likely to spend a refund check vs. paying down the ever-mounting debt (one can hope anyhow).
I had the opposite happen actually. I was laid off last year, but found a new job quick enough to double-dip for a while on severance and a retention bonus. So I owed a fair chunk to the IRS this year. I would imagine there aren’t many like me though.
I actually owe this past year after getting laid off due to no withholding (in TX) for unemployment insurance, by default. So, it’s possible that others might end up in the same boat, as they might have expected that UI is tax-free.
Regardless, what you propose has some merit, as I owe “less” than expected due to the withholding when I was employed.
“when re-finance from 7% or 8% to 4.5% mortgages, they are less likely to foreclose.”
And when they’re trying to refi a house that’s underwater, they’re also less likely to be approved.
Applications are meaningless……show me how many are actually getting approved.
Blano,
I’m trying to glean ’something’ to be positive about too, but applications are fairly meaningless in the best of times ( let alone now ) Kind of like NAR foaming at the mouth over their Pending Commissions ( I mean Pending ‘Sales’ )!
Exactly.
And it’s hard to be positive when a) the reality around me seems otherwise, and b) you have gov’t. entities flat out admitting they’re fudging numbers (see Pussycat’s thread about the FHFA above).
“Applications are meaningless……show me how many are actually getting approved.”
Amen. I think the refinance boom could actually hasten the downturn, given the MSM has been full of stories about record low interest rates, what a great time it is to refinance into a fixed rate, blah, blah…it just means lots of FB’s will get the bad news in black & white as to just how underwater they really are. No more fantasies about what their home is “worth”. It will mean they are stuck with their toxic loan and paying for a house that is no longer worth what they paid for it. More jingle mail, if you ask me.
Durable good orders for January were revised down to below -7%.
“Offsetting the gain in February somewhat was a sharp downward revision to orders in January. The government said that orders for durable goods fell a revised 7.3% in January, much worse than the previous estimate of a 4.5% decline.”
He didn’t read that part.
He read it but ignored it.
And it’s not like February’s data will be revise downward… that just “can’t” happen… haha!
No, we’re just in a “Hope Now!” BS phase. Those in charge need the sheeple to get back in so they can be sheered, hence the collective push upwards in the market, the promise to print money the Fed and its cronies, the manipulation of the housing sales and price data (”changes in geographic regions”) and all this. The sheeple were starting to deviate from the path to the sheering station/slaughterhouse, so more spin is being applied to get them back in line. More phony numbers, Bear market rallies, and all around nonsense for a while now until the next drop begins. Nothing has fundamentally changed: the economy is still in the tank and buried in debt, jobs are still vanishing, housing is still unaffordable, and corruption is still the name of the game.
We’re on the same wavelength. The Spring of 2009 is a crucial battleground for the PTB and the stakes are raised by the need for the new adminstration to have a tangible success to point to at the 100 day mark.
Agree. We still have a long way to go.
Manny, YOY durable goods down 22%. Also, note January was revised down, meaning this number could also be revised next month.
could should be will.
Is that you Cocaine Larry Kudlow?
i cannot take lary kudlow serious. he just seems like a SNL phil hartman character.
Then watch Bloomberg.
I like Bloomberg. I specially like the guy with the pierced tongue and the loud, mismatched outfits. I think his name is Matt. He’s got personality.
wittbelle,
( It’s just w/ the way people have carried on you’d think it was state sponsored w/ zero alternatives? )
If only we could direct a third of that venom to NAR/Yun etc?
I know, huh? CNBC’s Larry Kudlow is no more legitimate than Fox’s Glenn Beck. Speaking of Glenn Beck, did anyone else catch Stephen Colbert’s “Doom Bunker” in response to Beck’s “War Room”? If you haven’t, you absolutely MUST youtube/hulu it. It’s probably one of his best bits ever. (Forgive me FPSS. I know this episode appeared a few weeks ago, and I’m SOOOO last week, but it’s worth mentioning for those here who don’t watch every episode of the Colbert Report and might have missed it.)
Yeah, I saw the “Doom Bunker”. Funny stuff.
I think people are taking Glenn Beck’s piece out of context. He was trying to present a very worst-case scenario to prepare people for what **could** possibly happen. He stressed that point a couple of times.
Glenn Beck deserves a lot of credit for being the only commentator (at least that I’m aware of) who’s tried to get the truth out. He sounds like a reader of this blog, quite frankly. He’s done an excellent job trying to cover what’s going on from a different perspective — one that is very similar to many of ours.
The January figure for durable goods was revised down from 5.2% to 7.3%.
Believe what you want. I’ll start paying attention when I stop reading about hundred-year-old companies shutting down, huge lay-offs, and when my out-of-work friends and acquaintances have some job prospects.
Median house prices (of what sold) are still above three times median income in this burg, and income is about to go down. Laborers (skilled) tell me that their income has gone down, overtime is down, and the university is gearing up to announce massive, nasty layoffs (round 2–they laid off around 100 last year). Rental vacancies are skyrocketing. This thing is set to overcorrect in a nasty way on the downside. Ain’t seen nothin’ yet.
Manny, I am also not in the doom-forever crowd, but I still believe we have ways to go before this “decession” is over. Economy does not go down in a straight line, it can appear to stabilize for a brief period of time before it takes a second leg down. The data points you refer to are indeed evidences that the plunge in the economy since the Lehman bankruptcy in Sept has slowed and maybe recovering a bit, albeit temporarily.
Every important economical indicator or ratio should go back to the historical average overtime, overshooting on the upside or downside from time to time, but the point is eventually the revision back to historical norm occurs. That’s why I don’t believe some of the doomsayers stating as a fact that housing will not see another bubble ever again as I do believe human have a short-term memory when it comes to asset prices and speculation in general.
But the thing you have to ask yourself is, what is the cause of the current economic problem? If you say housing, you are wrong. Housing (and its derivatives) happen to be the biggest components of the over-spending, over-indulgence and total lack of common sense by the US Consumers during the last 10 to 15 years. The real problem is lack of savings, the over consumption vs production and the necessity of borrowing huge amount of money from overseas to finance this over-indulgence and the perceived ever-increasing living standard. Housing bubble happens to be the vehicle in which the US Consumer used to facilitate this behavior once real income from real jobs stopped going up vs. inflation. Look up the history of personal savings rate, the trade deficit and the current account deficit to get sense on what was happening in the last 1-2 decades in the USA and then maybe you will realize that this type of imbalance will NOT be corrected in 2 quarters (2008 Q4 and 2009 Q1), which is what the latest data set will have you believe.
Check out the recent commentary by Stephen Roach, the former chief economist at Morgan Stanley and the original Dr. Doom, before the current holder of that title, Roubini came to prominence. Read closely what he says about the historically high % of the current GDP that is still dependent on consumer spending and the historically high personal debt vs. overall GDP. Both of those numbers will have to be reset back to the historical norm, sooner or later and 2 quarters aren’t gonna cut it, not even close. I have said before that I think before the worst is over American will be saving again at the historical average, close to 10% of their net income. We used to be at 0 or slightly negative much of this decade; with recent economic crisis it has risen to 5% in the latest monthly data available. We are half way there at the most, assuming we don’t overshoot. So if much of our GDP is based on consumer spending, how much more pain is there? Quite a bit more I am afraid.
Oh one more thing I like to add that even though I disagree with your call that economy has bottomed, I do not for a minute think you are a troll or needs to “re-educated”, people are entitled to their own opinion. One thing I would say is use LONG-TERM data points to gauge things, and not just the latest monthly or quarterly data points as those things are notoriously unreliable by themselves. 1-2 decades of over-indulgence and no-sacrifice can’t be corrected in 2 quarters, no matter how much we like to believe the gov’t can just save people from having to make touch choices.
+1.
I do lots of data collecting via Excel sheets. In most cases I “smooth out” the short-term blips by averaging several months-worth of data (or several quarters-worth, depending on the stat).
Unemployment data is an excellent example. Meaningful trends can only be ascertained from at least 2-3 months’ worth of data, even though new data is actually released every week.
We have a name for that. It’s called Dead Cat Bounce.
Actually, it’s called a moving average. The moving average, set at a particular time period, shows the trend. For example, a 90 day moving average will indicate how an investment, asset, what have you, has been doing over that 90 days on average, which is actually a sort of median. Hope this helps.:)
Both of those numbers will have to be reset back to the historical norm ??
IMO, Numbers for “Everything” are getting reset…Going back to the old standard of needs vs. desires….Its been out of control for toooooo long…
Manny, a few thoughts:
I personally think you are WAY too early with this call.
There is still far too much hope out there that this thing will be only a few quarters long, with improvement late in 2009 or early in 2010. My belief is that economic systems model physical systems, and that the economy was like a pendulum pushed WAY to one side by the debt bubble. The size of the down-swing will be equal and opposite to the size of the imbalance, which was huge. In other words, we might be there when the despair has reached levels comparable to the unbounded optimism of 2005/6.
But I do salute you for being open-minded and willing to swim against the opinion of the crowd. My fear is that when the whole rest of the world is convinced that the economy will _never_ improve, I will not be able to be contrarian enough to recognize it and act. Because that will be exactly the time when I want to be getting long. My expectation is that that will not occur for at least a couple more years.
But I hope I’m always willing to consider that I might be wrong along the way.
This reminds me of the GD. There was a wicked bear market rally and many began to hope that the worst was over. It was not. The next tumble took many more investors out (and then the banks failed). This is not over by a long shot.
Of course, this does not mean that no-one is making money right now.
Some people are doing quite well!
http://www.nytimes.com/2009/03/25/business/25hedge.html?hp
the fellas over at itulip see a 30 - 40% decline from here.
40% brings P/E, etc. in line with something reasonable if relatively rich.
Not a bad guess. I’d agree with that.
Manny:
I think the problem for some of us (at least for me) is you keeping promoting MSM headlines as “proof” things are turning around in spite of the fact we have refuted the hype ad nauseum. You use month over month data as evidence things are better while ignoring the fact that the year over year data proves quite the opposite. The headlines keep screaming wonderful news, but if you actually read the article they are usually disproved in the second paragraph which shows the data isn’t as good as the headline indicates. Like “but compared to last year prices are down 25%.”
If you think things are much better maybe it’s time for YOU to buy. I and many others here are simply not seeing the same thing you are either in the data or in our personal experiences. And until we see some changes that are substantial to us we are not going to change our viewpoints. Trying to get us to agree with you when we do not see any reason to do so is a losing cause. Express your opinions, listen carefully to the answers to see if they convince you of another path, and make your decisions from that. But for now you have not posted anything that will make me change my mind that 2009 and 2010 are going to be very rough years with big price declines still coming (in coastal California.) If you decide you are right, ignore our rebuttals and buy, there is always the chance you will be right. If three years from now we can look back and see it was the best time to buy and most of us blew it, I for one will be very willing to admit you were right and I was wrong. For now, many of us disagree with you and will continue to refute your arguments both to try and help you and to educate others.
As I’ve said before there is always a chance the group think on here will mean missing a change in the economy because we are all too busy agreeing with each other about how much worse it’s going to get. We’re all adults and most of us are aware of this danger. And there are some extreme voices who see a “Mad Max” future and are well-stocked on ammo and liquor. Nothing wrong with that either, but no matter how loudly they rant I do not believe civilization is going to collapse and therefore I will not take the same actions they do. However, I’m glad to have all the voices because it does make me think and analyze for myself what I believe rather than just following blindly along with the group. (And there are a huge amount of opinions on here – some are just louder than others.)
Most of all don’t be too upset when people attack you or your ideas here. It’s an anonymous blog and often that brings out the nasty, hateful side of people. I’m tired of hearing the words stupid and idiot in relation to a poster (not to most politicians or talking heads, though
) and the often personal attacks when someone disagrees with a position. You can express your opinion. We can disagree. The truth will not be known until the future actually happens. But if you really think things are changing you have to do what is right for you. I personally think homes can fall up to another 50% (lots of variables) in San Diego which is the area I try to keep up with, so if you’re in my area I hope you don’t buy because I hate to see you go through losses. But that doesn’t mean I think every buy right now is a stupid idea. Even if most are a bad idea in hindsight, each transaction has its own pluses and minuses and not all will turn out to be devastating in the long run.
Good luck and remember most of us disagree with you only to save you from a fate worse than death! (At least in our minds.)
And if you are a troll, please, please, please stick around as we need you! Life is boring when everyone just sits around agreeing with each other.
1. Unemployment increasing, forecasts for CA are grim 1-3 years out according to UCLA and UCSB economic forecasts
2. Alt-A ARM resets won’t peak until 2011
3. Shadow inventory being held off the market but the carrying costs and a few tax payments will bring them on eventually
4. Median incomes flat, I know my raise and bonus were cut in half this year
Come back in 2012 and we’ll see if inventory and employment trumps your durable goods, stock rally (8 bear market rallies during the great depression), and increased housing starts (more inventory yah!)
Manny is actually Manny Mustard Seeds Kudlow…verified by IP address search.
Your anecdotes are interesting.
Here’s one: Maryland malls shorten their hours. These are some big malls too:
Consumers might want to check the closing and opening times of their favorite stores or mall next time they head out to shop.
As retailers and malls deal with one of the worst sales climates in years, many are shortening their hours to save money during times when fewer shoppers are coming in anyway.
http://www.baltimoresun.com/business/realestate/bal-te.bz.mallclosings24mar24,0,4937439.story
Following up on last night’s thread about whether banks are necessary for society, I offer (via Wendy McElroy):
14 Reasons Your Mattress is Better than Your Bank
14. Your mattress doesn’t hassle you for withdrawing cash.
13. Your mattress doesn’t need to “Know Its Customer.”
12. Your mattress doesn’t hold fractional reserves.
11. Your mattress doesn’t demand your Social Security number.
10. Your mattress doesn’t ask where a cash deposit came from.
9. Your mattress will never assess a service charge.
8. Your mattress will never seize your money.
7. Your mattress is open 24/7.
6. Your mattress doesn’t send reports to the government.
5. Your mattress is friendlier.
4. Your mattress will never be closed to withdrawals.
3. Your mattress isn’t about to go bankrupt.
2. Your mattress will never experience a run on deposits.
1. Your mattress doesn’t ask for bailouts.
.. and how about, your mattress won’t kick you out of your house?
makes for a helluva fire though.
Not to mention burglary, home invasion robbery and what not if somehow someone got a wind of your “cash-stuffed” mattress.
There is no such thing as 0% risk cash holding nowadays.
Hide it well. Have protection.
I’ll take my chances w/ a robber I can see vs. the “bank”… at least I can shoot the home invader!
If you think you can out-gun the would be home invaders (yes they usually work in a crew), yes by all mean stock up on guns & amos and be prepare to shoot it out and don’t forget to buy the wife and kids a couple of bullet-proof vests. Speaking just for me, I am not going to go down that route.
“I got two guns, one for each of ya.”
- Doc Holiday
“Speaking just for me, I am not going to go down that route.”
For your safety you might want to post a sign in your front window. Something like: We are unarmed. Please don’t hurt us.
“If you think you can out-gun the would be home invaders (yes they usually work in a crew), yes by all mean stock up on guns & amos and be prepare to shoot it out and don’t forget to buy the wife and kids a couple of bullet-proof vests. Speaking just for me, I am not going to go down that route.”
Unless you are dumb enough to advertise “I GOT GOLD & CASH IN MY MATTRESS” on your front lawn, why would they pick my house over yours? And I’m already stocked up on ammo and guns, but thanks for asking.
“Unless you are dumb enough to advertise “I GOT GOLD & CASH IN MY MATTRESS” on your front lawn, why would they pick my house over yours?”
Stuff happens. People who aren’t out there advertising their wealth get robbed all the time, although less likely than someone who does. It could be a slip of the tongue, friends and relatives who accidentally let one slip, someone who has access to your house for a brief period of time, etc.
See my “Hide it well” comment in the first comment box.
But you are right about the slip of tounge- cash and gold are easy to hide. Guns and ammo, not so easy. I can tell you the chook-chook sound of a 12 ga shot gun is a pretty good way of sending a clear message to someone that should not be there. Most will exit thru the closest window or door open or not. When in doubt empty the clip/chamber!
In Texas, we do outgun the home robbers, which is not to say that homeowners still don’t get robbed or killed or that home robber are smart enough to not get killed either.
But the favor is definitely with the homeowner with the gun. By about 100 to 1.
A lot of Katrina refugees got schooled the hard way the last few years. Which is sad, don’t get me wrong. But I have no sympathy for hard core criminals either.
cougar91,
Even leaving the obvious ‘physical’ risks out of it, my company has issued several bold warnings about near insolvent banks offering above-market-rate CD’s to shore up their reserves. Auction Rate Securities are worthless and a number of mmkts have had problems.
If you’re saving up for a down payment on your home, that’s (1) thing, but all of this “fence post bank” mentality is getting a little hard to take, isn’t it?
Yes the bailouts are getting long in the tooth but if I had a few thousand dollars of savings, ok hiding in the mattress isn’t too far of a stretch. But if I had to remove all of my cash from banks and hide them under my mattress, well let’s just say I don’t have enough mattress in the house to go around. And if I have a fire I am screwed totally, 100% loss, even if the chance of that is small.
BTW, don’t know if you read my posts previously on how I played “need capital so offer higher CD rates” game: I specifically look for these type of banks and put money into CDs (under the FDIC limits of course). So far two have either failed or bought just before failure: Indymac & WaMu. First was taken over by FDIC and second one by JPMorgan. Both CD rates were honored. Perhaps like Aladisane used to say I been lucky so far because it’s still early in this game of the entire banking & gov’t going kaput like he predicts so my tactics have worked OK so far, but I still believe the gov’t will print money until they run out of ink (like buying long-term Treasury recently) to save the FDIC if it comes to that. However as each CD is expiring I am now buying into gold, silver and Aussie dollars as diversification going forward.
cougar91,
And I have no problem w/ that. Funny to note that ICELAND was offering insane rates several years before they went belly up. So it’s happening at a lot of levels.
It’s just surprising that so many have lost the distinction between various asset classes and in ways, I can’t blame them. When you’re laying awake nights worrying about your CD..?
LOL.
It’s a helluvalot easier to steal money from a mattress than a bank though.
Problem is - we need to treat banks as the entities they one were - a place to store our money. Not as a place to actually make money for us.
You know - what the word “bank” actually means.
“It’s a helluvalot easier to steal money from a mattress than a bank though.”
Don’t tell that to your typical Wall St. banker. It seems as if they would take it as a challenge, these days.
Problem is - we need to treat banks as the entities they one were - a place to store our money.
The whole point of banks is to act as intermediaries between borrowers and lenders (i.e. savers). If banks didn’t do this someone else would (well actually someone else does, e.g. the bond market). They are supplying a market need.
Actually you’ve got it backwards. Banks have always loaned out deposits, and they started loaning out deposits before they were called banks. They were called goldsmiths.
I think it is much easier to steal money from a bank. Look at the CEOs of some of the banks that have folded(Countrywide, Wamu, etc). They stole lots of money and don’t even have to worry about giving it back or jail time.
Wendy McElroy has been one of my favorite Voluntaryists for decades. If you are not hard core libertarian, you would not know what a voluntaryist is.
Sure. If it’s mandatory–I’m against it.
Congress isn’t, that’s for sure. Just check out H.R. 1388. Obama Youth, goose-stepping through a village near you.
{straps on Kevlar}
Last night Obama said that house prices are beginning to stabilize. I don’t believe him — or at least, I think house prices are just in a plateau on the way down. Obama’s refinance/cramdown programs, whatever they are, won’t stop ever foreclosure, and it only takes one fire sale to set a comp.
FB’s will have a choice: refinance/cramdown and watch prices drop around you. Or, declare BK and wait for the bottom. This might be a good thing. The FB’s get to “stay in their homes” and start spending, bottom feeders get their low prices.
First cuts deep. The office types were herded together yesterday at my company and half sent home with the afternoon off while the other half were being “seperated”.
Outside staff meets tomorrow.
First layoff in 200 years. This company operated without debt for two centuries until the new “debt is wealth” generation took the helm nine years ago. The layoffs so far will not cover our new mortgage for the ultra green building we built two years ago.
Spent the evening taking calls from old friends now standing on the edge of the dark abyss. Six months severance should help them get over the pants peeing.
Blue Skye,
Adams Express? Heinz? John Deere?
“This company operated without debt for two centuries until the new “debt is wealth” generation took the helm nine years ago.”
Oh, I see. I didn’t know that an entire generation ever “took the helm” at any specific point in time.
And of course, during the virtuous reign of Billy and Hillary, there were no bubbles or massive frauds of any kind, just honest hard work, another day another dollar.
Excellent way to throw some politics into a non-political discussion. Perhaps someone can throw in an Atlas Shrugged reference as well.
Quick! Where’s lainvestorgirl?
Since lainvestorgirl is not here, I shall sacrifice my dignity for the greater cause.
____
The Meaning of Money
By Ayn Rand
“To the glory of mankind, there was, for the first and only time in history, a country of money - and I have no higher, more reverent tribute to pay to America, for this means: a country of reason, justice, freedom, production, achievement. For the first time, man’s mind and money were set free, and there were no fortunes-by-conquest, but only fortunes-by-work, and instead of swordsmen and slaves, there appeared the real maker of wealth, the greatest worker, the highest type of human being - the self-made man - the American industrialist.”
Since lainvestorgirl is not here, I shall sacrifice my dignity for the greater cause.
Thanks.
Since my efforts are appreciated.
One last one then, for good measure.
“But money demands of you the highest virtues, if you wish to make it or to keep it. Men who have no courage, pride, or self-esteem, men who have no moral sense of their right to their money and are not willing to defend it as they defend their life, men who apologize for being rich—will not remain rich for long. They are the natural bait for the swarms of looters that stay under rocks for centuries, but come crawling out at the first smell of a man who begs to be forgiven for the guilt of owning wealth. They will hasten to relieve him of the guilt—and of his life, as he deserves.”
LVG,
I’ll respect Skye’s privacy by not pushing him on that any further but IIRC, that conversion seemed to have happened overnight. When old-line CEO’s saw the rockstar status dot.com CEO’s enjoyed ( w/ NO track record ) they seem to have collectively asked themselves… why not US!?
Here we’ve got all this cash and we’ve increased our dividend every qtr. for the last hundred years and look at our stock price, now look at THEIR’S! All of a sudden it was like they’d been doing things ‘wrong’ all along? IMHO.
At my previous job back in the dot.com era, while waiting for the other passengers to show up for a flight, the company CFO was killing time, talking with us flight department types……was as mystified as the rest of us at the “market value” of some of the dot.coms, when they are generating little revenue, and were losing money right and left. Predicted that the whole thing would not end well.
This was about six months before the dot.com crash.
Not a global statement. The management at my company does change generationally. Family owned. The elder grooms a successor, who takes over in good time. The older group of managers retires and the younger get promoted.
Blue Skye,
Thanks for sharing that real world case study. It’s recently been asked if the business schools don’t have a share in the responsibility for what’s unfolded? I vote yes.
Funny that you say that,
I have a cousin who studied for 2 MBA’s. In his second one in International business, he was asked to build a case study for opening up shop in china.
After much discussion of things like housing for the employees (slaves) and bribes for the local gov. officials, i told him to have a radical idea….
Not open up shop in China. Tell the teacher that there are better places, without many of the complications that China has, plus if you go to some places in Latam, you can short ship things in, making it much more attractive from a management point of view.
My beef with it, is that the exercise led people (students) to believe that the ONLY option was to go and open up a factory in China!. Talk about limiting your options.
My respect for MBA’s after that dropped off a cliff, and that was about 7 years ago, at the height of “ship all the production to China”
BTW, he did get an A+ in the assignement, because it ended up being the one that made the most sense….
“Not a global statement. The management at my company does change generationally.”
OK, I misunderstood. I will admit to being a little touchy because of all the endless “Shrub/Cheney/Republicans are the source of all evil” guff that pops up randomly around here.
“First layoff in 200 years.”
U.S. Bonded Winery No.1?
Sorry Blue, not trying to blow your cover.
I came up through the ranks with about 100+ educators, many of whom will be cut in May…
If I was holed up in Pleasant Valley, I’m sure there would be room for you and we soon would forget what it was we were talking about!
Warren Buffett’s Berkshire Hathaway Inc (NYSE:BRK-A - News; NYSE:BRK-B - News) may lose its “AAA” credit rating from Standard & Poor’s within a year if the insurance and investment company’s capital levels or value of its equity holdings face more downward pressure.
S&P late Tuesday revised its rating outlook for Berkshire to “negative” from “stable.” It said any downgrade would probably be only one notch, to “AA-plus.”
Well, that is going to knock Fidelity’s Contrafund on its behind. One of their more recent moves (not all that recent) was into BH.
I think BRKa is overvalued.
Don’t get me wrong - it’s a great company but it’s not a value at all at current levels.
“Don’t get me wrong - it’s a great company ”
I worry about all companies that seem to be too dependent on one person. I don’t know what the reality is behind Berkshire, but they don’t spend much time trying to disabuse people of the idea that WB is in control of everything all the time no matter what.
I don’t see how it can really be valued at all, it has so many subsidiaries, and their financials aren’t public record.
Any reasonable metric - free cash flow, economic profits.
Their balance sheet is not that hard to read. Try $hittibank for a different perspective.
Ah, yes. Realtors and the MSM. A match made in heaven. Investors are back. So get in there now and get you some real estate…
http://www.viddler.com/explore/bowser44/videos/10/
Will there be anyone left recommending investment in real estate when real estate prices are low enough for the investments to cash flow?
Rephrased:
Will there be anyone left with cashflow to buy when real estate prices are low enough?
Per the article posted on this blog last week, “infestors” are in fact catching falling knives and publicly regret it.
There is always someone with cash. RE prices will be low enough, when people with cash are buying.
I hope not. I was thinking the same thing as I watched that.
Will we ever go back to the days when RE investing was one of those fringe things that only a few dabbled in? Seems like everyone and their brother is an RE expert still.
“Seems like everyone and their brother is an RE expert still.”
Just another sign we are nowhere near done.
Precisely.
The bubble is alive and well here in coastal San Diego. Multiple bids over list price, sold in a day or so, packed with lookers/potential buyers the first day on the market, etc.
There is no shortage of buyers, and presumably, no shortage of cash.
When I purchased my first rental property it cash flowed with 5% down….
Down in LA visiting family, friends, many of whom now hail me as a Nostradmus of doom (thanks in large part to Ben). I was absolutely floored yesterday by the number of businesses which have shuttered along Montana Ave. in Santa Monica. For those unaware, it’s become the high-end, boutique area. I would estimate that 30% of the shops are gone, including old-timers like Le Marmiton and Shabby Chic. Even for a gloomer like myself, this was pretty eye-opening.
That’s exactly what I observed. It goes to show that people living in Santa Monica were doing exactly the same as those living outside their zipcode! It just took longer for the pain to become apparent.
Quite frankly, the rents are ridiculous. I don’t know how any business does well there.
One business is doing great, LA Architect, Didio’s Italian Ice. Drop in if you’re in the area. They ices are terrific and the owner, Robert, is a good guy.
Put an ice cube in and get a sno cone out, yum yum fun is what it’s all about! The new Snoopy Sno-Cone machine!
IMHO, the beach communities in Orange County are way behind the curve on this whole thing. It really seems like business as usual around here…still lots of cars at South Coast Plaza, Fashion Island. People are still driving around in Hummers… I saw a brand new Escalade the other day. I still wonder where all the wealth is coming from…
We were in the Anaheim area on vacation last Summer. My son mentioned the it seemed that locals either had awesome cars or beaters, but nothing in between.
How funny! It was the same way when I lived there back in the early 90s.
What’s up with that?
LOL - I was checking out a Washington Post article, and noticed at the bottom it has “From our partner” - The Onion - with a bunch of articles listed.
Guess the WaPo is now officially admitting that they’re a bogus newspaper.
(will post a link…)
El Linko
Too funny! The headlines are just as believeable as WaPo’s.
New home sales number just out - 337k, higher than expected. Homebuilder stocks are soaring.
Early indications are the reinflation attempts are having some effect. My God - we are screwed. I really don’t want to send up like Amsterdam, with a perpetual housing bubble.
Someone talk me off the ledge.
yeah, but prices are down. That can only mean that inventory isn’t shrinking.
FWIW - *new* home inventory is shrinking some (I’ve been following various homebuilders’ data - they’ve indeed been selling more than than building). However this is more than offset by foreclosure rates right now, though foreclosure data is fuzzy. This is why the homeowner vacancy rate put out by the census bureau hasn’t gone down any yet (still at 2.9%).
This is what bothers me - people are so clueless that they’re still buying houses thinking that we’re at a bottom; that prices will be going up again any day now. And this is all based media-fed (and now government-fed) propaganda.
Meanwhile we’re going trillions and trillions further into debt, and these same people complain about it - and don’t put 2 and 2 together.
Sigh.
(vent off)
Packman, higher than expected, yet still the lowest sales on record for February (records going back to 1963).
People are stupid. Business News reporters are stupider. Sales are ALWAYS up in February over January, always! But sales are DOWN by almost 50% from last year and this was the lowest level of new home sales since they started charting them in the 60s.
New home sales are dismal. It’s just that the media doesn’t know how to read the data.
There is also a lot less inventory to choose from.
I’m not saying that the only reason for the low sales is low inventory, but it is A reason. Most builders who aren’t building are sitting tight because of the foreclosure rate in their particular market, making it very difficult to determine where the bottom is in pricing. So they wait. The longer they wait, the fewer new homes there are for sale, and the fewer new homes actually sell.
I think those that are still building are doing so because building a home is the best way to sell their land without being completely clobbered by the market. In other words, the builder can raise more cash by selling a home at less than their cost than they can by selling the lot without a home on it.
This is mainly because buyers of land are doing so without any debt (since none is available), which drives the prices of the land WAY down (shockingly low in many cases), while buyers of homes can still borrow money for their purchase.
The biggest challenge in building new homes, when markets DO stabilize, is going to find debt willing to lend on construction, and subcontractors to do the work (since they are out of business). My cousin is a plumbing contractor who still has a business. He has retained all of his current builders, and has picked up a number of new clients in the downturn since competitors have gone out of business, but is mainly doing maintenance work, and cut staff to a minimum. When builders want to build again, and call him, he will have limited capacity in the near term.
Any demand driven recovery in the near term will be muted due to the inability to increase supply quickly.
We shall see what this does to prices, but I suspect there will be a quick (and minor) blip up after we have bottomed in any particular market, followed by a long, flat, line.
For now though, we still need to bleed through the foreclosures, which is actually happening pretty quickly in some markets.
due to the inability to increase supply quickly ??
Respectfully, I could not disagree more…Builders can “Ramp Up” @ hyper speed…
Where is the money coming from? Some public homebuilders (who were only 23% of the market in 2005), may have a war chest of cash, but for the small, local private builders (the vast majority of the prior market), it will be very difficult to get financing from banks and/or investors. I know of plenty of formerly strong private builders who have gone bankrupt. These builders need to retrench and rebuild their companies.
How many finished lots are available in your market? Most markets that we are aware of, if things were “ramped up” quickly, the finished lot inventory would dry up quickly (in one market that I know, where there is a “normal” pace of home construction of 1,000-2,000 homes per year, there might be 500 finished lots), meaning that more land would need to be finished (which is a several month lag, even if the money was there).
How long is the entitlement process if your tentative map on your unfinished land has expired (most have limited lifespans, unless extended by the government, or by prior agreement)? In some cases they have been extended, in other cases, the project will require a redesign, as smaller homes on smaller lots may be more economical given the times. In some markets (CA for instance), the entitlement process to get more tentative maps approved can take years. Most of this entitlement effort has been halted, as people are trying to figure out what product should be built. It will take more time to get more land approved for construction, and thus more finished lots into the hands of builders.
I’m not naive enough to believe that public builders couldn’t plunk the cash down in front of the subcontractors that are left and start some homes tomorrow on their finished lot inventory, but I have also seen the carnage of the private builders and smaller subcontractors. Their industries have largely been destroyed, and today, there is little WILLING capital to help rebuild it. Investors and banks are NOT going to jump in with both feet, but will be stepping carefully into new building projects.
I’d like to see them ramp up at hyper speed, as it will further depress prices for us renters to perhaps buy at a later date, and get people back to work to help the economy, but realistically, I don’t see it happening.
“People are stupid. Business News reporters are stupider.”
News reporters get their money from newspapers. Newspapers get their money from builders & real estate folks. Not stupid, just doing their job.
And they are buying new homes - badly built end of a huge bubble new homes that will probably melt in a few years.
Relax. Unless debaucherous lending standards are reinstated, and until the labor market recovers (some time after 2012 in CA), the trend in prices will be downwards.
Tinfoil hat concern:
I know the Fed has announced nothing of the sort, but so long as they are snapping up MBS, is there any chance they might also decide to buy single family homes to prop up the value of their collateral?
If they do this, will they also need to set up an REO branch? Maybe they could unload all the vacant homes that dot the landscape on the hordes of wealthy foreign investors waiting for the chance to buy U.S. residential real estate at fire sale prices?
And the silver lining:
- The more housing is artificially stimulated before a fundamental bottom (at affordable prices) is reached, the more overbuilding will occur on to the extant record glut of vacant housing.
- The more overbuilding occurs, the lower rents will be for the next quarter century.
So long as you don’t mind renting forever, there is no cause for alarm if the housing market undergoes a near-term debt cat bounce.
They don’t need to buy the physical houses - they only need to buy the underlying debt securities. SURPRISE!! Already happening.
Once the writeoffs happen - the sunk costs of the homes now in essence become zero. So they just get the banks to do their dirty work for them - sell them for a song, which is still a few notes worth of profit. Or in many cases - just hold them indefinitely until the market “recovers”. Even though the houses are vacant - the fact that they’re not on the market means they don’t contribute to supply-driven price pressures.
No need for the Fed to get their hands dirty in the RE business.
“Even though the houses are vacant - the fact that they’re not on the market means they don’t contribute to supply-driven price pressures.”
Vacant homes tend to physically depreciate at a much faster rate than the owner-occupied variety; in the latter case, an owner has a clear incentive to maintain the value of their household’s primary asset, while in the former case, so long as the value is already written down to $0, there is really no reason to bother with the expense of upkeep. My hunch is that having a record number of vacant homes with no motive to sell them at affordable prices to willing buyers will have the effect of throwing a great deal of real wealth down the drain.
Let me see here, is that deflationary or inflationary?
“Even though the houses are vacant - the fact that they’re not on the market means they don’t contribute to supply-driven price pressures.”
Huh? You wanna bet? Real money?
Well. Given that US citizens and permanent residents are taxed on their world wide income, if the US was smart, it would open up some new, fast track green card, dependent on buying american property.
And then sit back and give the IRS a nice, big, budget for auditing them.
I further note that there is little evidence that policymakers on high have left the denial stage of the housing bubble stages of grief, as they have not really recognized the magnitude of the housing glut nor proposed viable solutions for dealing with it. So long as the various remedies and rescue plans address a straw man characterization of the housing market situation instead of reality on the ground, no recovery is imminent.
Headlines everywhere: “Home sales are up!” I guess the problem’s solved! Barack has
price-fixedstabilized prices! (Nobody mentions that prices are still falling which can only mean inventory is growing….)Another related story:
http://www.google.com/hostednews/ap/article/ALeqM5iYcXSApfCjyyY8kSBLU8Pxl0-wBAD974QP8O1
SBA loans intended for poor/minority development zones are rife with fraud. It’s the same problem you get when you try to “outlaw redlining”. The fraudsters move in.
ben, sorry if it seemed like i was bragging. merely grateful for this blog which significantly influenced my investment decisions
Good morning HBB! Happy B’lated B’day Ben!
I’m on vacation this week in Utahrr and as usual I appear to have attracted a bodacious blizzard. I’m at my sisters house up on the bench in Orem and there is about 6 inches of new snow this am. But I digress…
The purpose of my post was to describe my drive here from socal last Friday. We left Palmdale at 4pm. We only hit one slow bit of the I-15 on the uphill grade before Baker due to no truck lane and trucks passing. The rest was full speed ahead. This on a late Friday afternoon with a vacation week ahead for many.
At state line the McDonalds had one family eating at 7pm. We didn’t eat there, just used the pisser. For those who’ve been there you know that Friday night at rush hour that gas station and the restaurants and the outlet stores are packed. I wouldn’t say it was a ghost town but it looked more like a Wednesday mid-morning.
Anyway that’s my story and I’m sticking with it!
Nice story. Wash, rinse, repeat N. Az, too.
I forgot to mention that the mothball lots north of Vegas by the speedway are getting bigger.
Do the auto manufacturers think they’ll make this up on volume?
So the headline is that Obama got angry with a reporter yesterday. As someone that actually watched it, I can tell you the media is lying through their f@cking teeth. Obama didn’t get angry. This is all manufactured. Nice to see the media back on the job though. They must be restless after taking 8 years off. But then again, they needed the vacation after working around the clock attacking Clinton.
The news media is so anti-Democrat it is laughable.
Don’t believe me? Watch the video. Tell me if Obama even remotely got angry. I guess now they can label him the angry black man. All part of the plan to make sure a Democrat doesn’t get re-elected.
Scum is the only word that describes these people accurately.
Aladinsane Part 2.
CNN anti-Democrat??? HAHAHAHAHAHA!!!!!!
Give it a rest dude.
You again? I think we need to agree to disagree. We are never going to see eye to eye on anything.
Disagreeing is ok in and of itself, but your diatribes have gotten real old, real quick.
Especially accusing the media of being anti-Democrat. Did you just wake up from a 30-year snooze??
“Aladinsane Part 2″
Naw, he doesn’t pet “his precious”.
The guy asked him why he didn’t voice outrage for a day or two after the news broke about the AIG bonus issue.
His response
Because I want to know what I’m talking about before I get outraged. Everyone laughed. Media just phrases it like that so people will read the article. They want to make money and sensationalism does the trick.
The reporter tried to push the “what did you know and when did you know it” meme that had been bouncing around the cable news all week. And then, the reporter had the gall to bring up the First Daughters, implying that if Obama didn’t balance the budget This Very Minute, then he was being a bad daddy.
Obama was annoyed, and justifiably so.
But he really didn’t show it, and it never came off like this…
Obama Fires Back at Reporter
The buzziest moment came about 35 minutes into the press conference when Ed Henry of CNN asked the President why he didn’t spew outrage as soon as he learned about the AIG bonuses. Why, Mr. Henry asked, did the president wait several days before speaking out? The president, with an icy stare, responded that he “likes to know what he’s talking about” before he speaks. It was a pretty testy exchange that brought about nervous laughter from the other reporters.
Again, total bullshit. I think they want to paint Obama as the angry black man. They also mentioned that he didn’t use a teleprompter, as if he ever needs it. The insinuation was that he was an empty suite. Strange, considering we had an empty suite for 8 years and it didn’t bother them until now. They even fact-checked him. Hmmm…they didn’t do this for 8 years, but now they are.
It is so obvious.
He didn’t look annoyed to me. Not one bit.
“The guy asked him why he didn’t voice outrage for a day or two after the news broke about the AIG bonus issue.”
Which is actually an outrageous question to ask. It isn’t like he sat on it for a month. Speaking out within a day or two is FAST in my book. You hear this, then you put in a few calls. People get back to you. Let’s have a meeting. This was on a weekend. And they still responded within a day or two.
WTF?
The obvious bias is outrageous. Screw the news media. Liars.
Actually, many reporters couldn’t stand Bush (it started early, with the “major-league a-hole” comment between Bush and Cheney) but they were forced to adopt the posture of simpering state catamites in order to win the all-precious “access” to the White House.
It’s all about money–commercial news orgs needed it or they wouldn’t be.
So why aren’t they interested in access now? Come on people. The press is anti-Democrat big time. You will be seeing a lot less news stories about blonde girls missing in Aruba, and a lot more tough scrutiny of the government.
Don’t get me wrong. I like tough scrutiny as long as it is fair, and it is equally used for either party. This is not the case.
Because the Obama team hasn’t told them they have to simper or get exiled.
Honestly they don’t give a crap about access. All they care about is making their bosses happy. And their bosses are Republicans.
Period.
I worked in the biz and you are correct.
…but they were forced to adopt the posture of simpering state catamites…
Nice.
Get over your mindless party affiliations. The media is pro-Republican AND pro-Democrat and anti-3rd party. The media is just a big propaganda arm owned by the major bankers. If they criticize the government in one area, you can be sure it is over a lessor issue (AIG bonuses?) in an effort to distract the public from the real issues (massive money printing, counter party bailouts, etc). Once you realize that it is all a big show, then you can start meaningfully contributing to the discussion. Until then, you are blinded by your blue-tinted glasses.
You are way off base Dan. I agree that the media will take the Dems over a 3rd party (i.e. a real democracy) but since they only have to choose between Dems and Pukes, they always seem to side with the Pukes. This isn’t spin. It’s just a fact. And I was a registered Republican most of my adult life. But this bullshit is outrageous.
For the record I don’t own blue-tinted glasses. But the obvious bias is outrageous and it is hurting the nation. Fair and balanced my ass.
CNN is as bad as the rest of them.
Banana -
Once again you’ve started a 100% politics based thread here. This is NOT a political blog. The blog owner has already asked nicely for this type of nonsense to stop.
Why don’t you take this crap somewhere else?
Yawn.
Manny, here in San Diego, there also seems to be some positive signs when you look at sales data broken down by price point.
http://www.californiahousingforecast.com/commentary/2009/3/23/shortage-of-homes-for-sale.html
What is everyone’s opinion for Los Gatos/Campbell area - unfortunately my husband rides with a realtor and he is being advised by his cycling bubbies that now is the time to buy! Ugh!!
To keep him happy I had a look at a few open houses, which we have never done before, but I look at everything and can’t see it recovering for at least another two years.
Tell him to knock it off or you’ll cut him off.
Ask him if his buddies are buying……if not, why not??
I don’t think we are even close over in Los Gatos. The big declines have not even begun and all this govt intervention is just going to drag this thing on longer. Two years to bottom may be to optimistic now.
opinion for Los Gatos/Campbell area ??
Stay away from Los Gatos unless you prefer to be with “Upper Crust”…Prices are Ridicules and the “Wanna Bee’s” are quite willing to pay to rub elbows with the well to do….
Campbell is a great city with good planning…Prices are still lofty but thats where I would park….I would look East of the Pruneyard…
East of the Pruneyard???? Sorry, you can tell it’s not our normal area - but I do appreciate your help. I can see us going to some more open houses.
Claire,
I have lived in the south bay virtually my entire life.
Los Gatos is very nice and very expensive. If you are looking for value I think it’s too early to buy unless you happen to find a special deal. If money is no object…………..
Campbell is nice, though not as nice as LG. I looked at homes there in the late 80’s. IMHO the same scenario applies there as well.
And Dave is right about the Wanna B’s. More so in LG than Campbell.
Mike
Thanks for the replies. To be honest I would like to stay in the area we are in currently due to being established (kids friends/school our friends and our rent has remained stable for mroe or less 6 years now) - Mountain View - but it seems that other areas offer better value for money and better schools - although I want to hold out longer because I want to know what’s coming with the Alt-A’s.
However, my husband is really ready to buy a house now - he wants to get on the “ladder” and doesn’t want to miss out (you can tell he is being brainwashed by his buddies) - I understand in a way - I would really like our own house too - but not at these prices…..
Frank Partnoy, former derivatives trader and author of the book Fiasco: Blood in the Water on Wall Street (1997), is on the NPR program Fresh Air today talking about the recent history of the derivatives market. Some good discussion, especially on the politics behind the rise of the derivative market.
FedEx says Boeing orders hinge on Congress…
NEW YORK (Reuters) - FedEx Corp will cancel an order to buy 15 Boeing Co jets, as well as an option for a further 15 planes, if Congress passes legislation that makes it easier for FedEx workers to organize under labor unions.
At issue is whether FedEx loses its status under the jurisdiction of the Railway Labor Act which protects companies from local labor action.
FedEx expects to take delivery of 15 Boeing jets starting this year under an existing contract, spokesman Maury Lane told Reuters. But “30 out of 45 airplanes we won’t be buying if our RLA Status is changed by Congress.”
The portion of the Boeing order that FedEx cannot cancel totals $2.5 billion, according to a FedEx regulatory filing.
In January, the company exercised an option with Boeing to purchase 15 additional 777 aircraft, and it has an option for another 15 planes. At list prices, 30 such jets are worth about $7.5 billion to Boeing.
The Boeing contract includes language that enables FedEx to cancel the order and the option, if the company’s FedEx Express employees are no longer covered by the Railway Labor Act (RLA), which covers airlines.
“We will look very hard on how to move FedEx forward with a new regulatory environment,” Lane said.
Asked if he expected Boeing’s support on Capitol Hill, Lane said: “They understand the issues related to these airplanes, they know that if RLA is changed, then we won’t buy these additional aircraft.”
Boeing has not taken a position on the legislation.
The world’s second-biggest airplane maker said the 15-plane order it lists as firm in its backlog is unaffected by the language in the contract.
“It remains firm and deliveries will begin in September,” said spokesman Jim Proulx.
FedEx Corp will cancel an order to buy 15 Boeing Co jets, as well as an option for a further 15 planes, if Congress passes legislation that makes it easier for FedEx workers to organize under labor unions.
At issue is whether FedEx loses its status under the jurisdiction of the Railway Labor Act which protects companies from local labor action.
Yet another attempt to demonize and marginalize labor unions, this time from a corporation that by most accounts is well-run and managed.
It’ll be interesting to see if FedEx can successfully pressure Boeing into taking a position at odds with a large portion of its US workforce.
(Aside: I wonder what percent of FedEx employees are covered by the RLA.)
Fed-Ex and UPS have always been tough on unions. The unions got some concessions (ie, pay was higher than other Class B operators) so they just started hiring college kids part-time and picked up other part-timers as “contractors”. Solved that problem.
This is what happens when unions ignore supply and demand
Labor unions violate the right to contract between free individuals. Labor unions are demons in that they only have power due to threat of violence (government’s gun).
Labor unions are violent against both the companies AND the unemployed who would be willing to work for less in exchange for a job!
Thanks god businesses don’t act way!
…and to do a little of my own Olygirl channeling “…being all fair and family like with nothing but good intentions and warm fuzzy feelings to their own employees!
It’s always them dang unions messing things up with their stupid demands of livable wages and safety and firing for cause and real merit reviews and such. Why… they are just plain uppity!”
Don’t get me wrong, I also know how bad unions can be, but they wouldn’t exist if there wasn’t a reason.
My guess is Fedex thinks their operating costs will escalate to the point that they will lose the equivalent of 15 planes worth of business. It’s a shame that these articles don’t have enough detail to understand why the change would cause this.
The only thing I really get out of this article is that Fedex management is either bluffing or deeply afraid that they will be outwitted by union negotiators.
I think that they will lose those 15 plane loads of business anyway.
Well I can say for a fact that they need at least ONE new plane.
At issue is whether FedEx loses its status under the jurisdiction of the Railway Labor Act which protects companies from local labor action.
The Railway Labor Act does not necessarily protect companies from labor actions(it allows secondary boycotts and intermittent chaos type strikes) and gives the President the power to stop strikes and order settlements.
It does however, prevent strikes over minor issues.
Airlines have been trying to get away from the Railway Labor Act for years.
Distinguished Ladies and Gentlemen of the HBB. Please allow me to introduce the new US Currency backed by whatever’s left of the “full faith and credit of the US government”
I give you, The Fuffle
http://energybulletin.net/node/48421
Spend em as freely as you like. I’m sure they will print more
International Business Machines Corp. is expected to inform a large number of U.S. employees in its global-business services unit that their jobs are being eliminated, with the work of many of them being transferred to IBM employees in India, according to people familiar with the situation.
The planned cuts show that even companies that are successfully navigating the global recession are continuing to slash …
RALLY RALLY RALLY
It’s peanut butter jelly time peanut butter jelly time
peanutbutterjelly
peanutbutterjelly
peanutbutterjelly with a baseball bat
Yeah, that’s on of the little details that gets left out - that even in the worst of times these guys are at each others’ throats trying to gain the advantage.
This is the definition of capitalism.
“Capitalists hate the idea of competition, and their primary goal is eliminating it (John Rockefeller even called competition a “sin”), as Adam Smith observed. It is the essence of capitalism. Capitalists eliminate the competition any way they can. If their competitive adversary is too big, they either collude with them or buy them out. If their adversary is somebody small, they squash them using the system they control, which includes the press and legal system.”–Wade Frazier
My neighbor next door has dodged the IBM layoff bullet about 4 times ad in the process been demoted 2 levels (from 2nd level mgr to individual contributor). Last time he almost bit the dust, but found a new position before time ran out.
Thats very strange.
There is a tech shortage in the US right now and all the lobbyist for the tech companies are trying to get the H1-B visa limits lifted from 80,000 to infinity.
Why would IBM be jettisoning these employees that are hard to find and recruit?
There is no tech shortage.
IBM is using this downturn as an excuse to shift jobs. Do not expect these jobs to ever come back even when the economy rebounds.
I am agnostic on this development. It’s bad if you’re being laid off; great if you’re getting hired elsewhere. It’s what it is.
It’s bad if you sell things to people who are getting laid off. If you collect taxes on people who get laid off. If you pay taxes to help the people who get laid off. Live next to people who get laid off. If you live in the USA.
A lot of these folks aren’t really techies. IBM does a lot of semi-bespoke systems that have to be individually configured for each installation. It involves looking at business processes, and then a lot of data and rule entry on what is by all accounts a horribly designed system.
They go by the name of consultant, and spend 4 days a week on the road. It’s not a lot of fun.
What happened? Did someone trip over the PPT power chord?
Winston: The Funadamentals are broken
O’Bammy: The Authorities have put in place the tools for recovery.
Winston: The problem is too much debt.
O’Bammy: The party says credit is the solution, and more credit is going into place for the recovery.
Winston: But Credit is the same as Debt.
O’Bammy: The authorities have put in place the tools for recovery.
You seen the “carrying marks” that banks are carrying their portfolios at?!?
Hoo-boy, this is gonna end badly!
I saw that yesterday. Was that all right on their FS or did you get it somewhere else?
It’s all over the place - FT as well.
Ministry of Ringfence has confirmed you Vital C annotation from yesterday.
Won’t the Geithner plan basically insulate banks from ever having to write down their portfolios before they get to offload the toxic debt onto someone else’s plate?
Only if you believe in their infallibility.
Didn’t work for Japan. Why would it work here?
No, they’ll pull a rabbit out of their hat today.
+1 for you today at the end.
See!
HAAA! I’m stealing that line fo’ sho’.
Postal chief says agency crashing…
Postmaster General John Potter says the financially strapped U.S. Postal Service will run out of money this year without help from Congress. Despite staff cutbacks and postage increases the U.S. Postal Service is suffering from lack of cash flow. It’s not asking for a bailout - just “some help from taxpayers.” Also, the prospect of cutting off Saturday postal delivery looms large.
Post office in dire straits.
http://finance.yahoo.com/news/Call-for-Help-Postal-chief-apf-14741729.html
Saving snail mail, they can add this rescue to that bill designed to save the newspapers. Now all the pols have to do is reanimate the buggy whip makers. What better way to avoid facing the future than trying to recreate the past?
Besides, the PO nowadays is just subsidized shipping for the junk mail advertisers. Meaningful parcels can go Fed Ex or UPS.
subsidized shipping for the junk mail advertisers ??
Amen to that…95% of what I get goes “Round File” Immediately…Times that by the number of mail boxes in the US…Horrible waste of energy and resources….
I sort of welcome the daily pile of ‘Refinance NOW!” and unasked for Landsend catalogs that is 99% of my Mail (the other 1% being bills).
We bought a cheap shredder, and use the resulting shred as mulch and compost.
Probably not what the advertisers had in mind when they lovingly handcrafted their ads, but at least its another use for them.
Toxic assets…….legacy assets.
Bailout……”some help from taxpayers.”
Looks like the PPIP euphoria lasted for exactly one day. FAZ/SKF/SRS chugging along nicely.
FPSS, what’s your exit point for this cycle? When do you think Shitti will be exposed, for surely that will mark a sizeable spike in FAZ/SKF.
If I am right and this is a VERY big if that you should take with a ginormous mountain of salt, you should hold on.
This is the part of the bear market where the news just keeps getting worse and worse, and it keeps ratcheting down very slowly into the abyss. Like 2002 where everything just keeps knocking it down - earnings, layoffs, bad data, sentiment, etc.
You will not see movements like last October’s. It’s the slow descent into depair.
There is a very strong tendency to take your winnings off the table. Let them run.
Can you explain what just happened in the last 5 minutes of the trading day? In my trading account I started off with a 5k loss, which later became a 10k gain, only to lose the entire 10k within the last few minutes!
The govt debt auction was weak today apparently. Doesn’t that mean we should start giving back the 500 points from Monday?
I suppose the key word in your post is ratchet. I can handle that.
Holding on for now, regardless.
Never argue with the tape.
- Jesse Livermore
As in don’t try and attribute reasons to it of dubious verifiability. If you can, great; if not, it’s what it is.
Next time anyone here wants to throw away a few thousand (hell! or more!) dollars, drop me a line.
The Ecofeco Personal Economic Recovery (EPER) program will guarantee better results! Better than nothing that is.
It Looks Like Citi And Bank Of America Are Already Gaming The System
The huge subsidy to banks hidden inside of Tim Geithner’s public-private partnership program may already be leading banks to load up on securities they plan to sell at inflated prices.
According to the New York Post, Citi and Bank of America have been aggressively buying up Alt-A and ARM mortgage backed securities, sometimes paying more than the going rate of around 30 cents on the dollar.
Mark DeCambre reports:
One Wall Street trader told The Post that what’s been most puzzling about the purchases is how aggressive both banks have been in their buying, sometimes paying higher prices than competing bidders are willing to pay.
Recently, securities rated AAA have changed hands for roughly 30 cents on the dollar, and most of the buyers have been hedge funds acting opportunistically on a bet that prices will rise over time. However, sources said Citi and BofA have trumped those bids.
This raises serious questions about how the banks are using TARP funds. Instead of stimulating the economy by making new loans, B of A and Citi seem to be spending money to buy up old loans. That’s probably a bet that the Geithner plan will create renewed demand for MBS.
speechless
They have to.
The entirety of Turbo-Tax Timmay’s plan is to get someone to overpay for the assets so that others don’t need to mark-to-market. They are trying to pull a Rockefeller Center and Pebble Beach and kick the can down the road.
This is gonna fail epically!
It is a bit of a conundrum to have to publicly kowtow to the need for greater transparency while stealthily pursuing policies whose primary objectives are obfuscation and avoidance of price discovery.
Man, you guys nailed this!
You, PB and some others really saw all this so clearly.
I’m slow, but learning, btw, great call on SRS.
I thought that today with all the fake news you’d have to be patient.
Is the failed U.K. bond auction what turned the market around today at 1:00 EST?
“…turned the market around today at 1:00…”
Yellen’s speech had the effect of throwing cold water on overly eager bulls trying to avoid getting left behind in the rally.
“Is the failed U.K. bond auction what turned the market around today at 1:00 EST?”
It appears that repeated attempts over the last three days to break 825 on the S&P have failed.
“This is gonna fail epically!”
Would you consider sharing your failure scenario? (I am not doubting you — just don’t have the vision thing to realistically picture what to expect going forward…)
Well, it’s a combination of math, financial calculus and some level of political awareness.
They’ve gone “all in” on this plan. If it doesn’t work out (and I’m betting it doesn’t - explanation below), they are toasted politically. It’s going to be extraordinarily hard to come with a Plan 12 or whatever - I’ve lost count!
Why won’t it work out?
We know that the banks are marking their portfolios at extraordinarily high numbers (*) and we can reasonably assume that people who buy this stuff aren’t complete idjits so I’m just guessing that a few months go by, nothing much happens, and we are back to where always were.
I’d be more willing to bet on some form of nationalization than this.
(*) I have data on this. Some are marking it at 100%. How do you “overbid” for that one? Dial it up to 110%?!?
“It’s going to be extraordinarily hard to come with a Plan 12 or whatever…”
You have to give them credit for (1) always coming up with yet another plan when the latest one fails and (2) keeping alive the pretense that this plan is the one that will work.
“Plan 9? Ah, yes. Plan 9 deals with the resurrection of the dead. Long distance electrodes shot into the pineal and pituitary gland of the recently dead”
Plan 9 from Outer Space
“They’ve gone ‘all in’ on this plan.”
Unfortunately on a straight of jokers.
“It Looks Like Citi And Bank Of America Are Already Gaming The System
The huge subsidy to banks hidden inside of Tim Geithner’s public-private partnership program may already be leading banks to load up on securities they plan to sell at inflated prices.”
Wouldn’t enabling them to sell devalued MBS at inflated prices be a more politically attractive way to recapitalize Megabank, Inc than to go back to Congress for TARP II, TARP III, TARP IV… ?
Geithner’s goal: Turn the banks’ fictitious overvaluation of their toxic assets into a reality. Paulson couldn’t pull it off, but I guess we have collectively forgotten that failed attempt now that change has happened?
latest news
Jobless rate will still be high at end of 2011 - Yellen
DARRELL DELAMAIDE’S POLITICAL CAPITAL
Word to the wise: Vultures don’t do favors
Commentary: Obama’s team has stumbled down a dead-end street
By Darrell Delamaide
Last update: 2:30 p.m. EDT March 25, 2009
WASHINGTON (MarketWatch) — Did you hear? All those hedge funds and investment firms that have been waiting like vultures to scoop up undervalued assets from the financial collapse are going to do us all a big favor and scoop up undervalued assets.
One of President Barack Obama’s lesser-known economic advisers, Christina Romer, wanted to make sure we all appreciate their kindness. In a Fox News interview on Sunday, Romer cautioned about overreacting on the bonuses by American International Group Inc. (AIG: Last: 1.20-0.19-13.67% 3:29pm 03/25/2009) because we don’t want to scare off investors.
“What we’re talking about now are private firms that are kind of doing us a favor, right, coming into this market to help us buy these toxic assets off banks’ balance sheets,” she told Fox’s Chris Wallace. “We need them — you know, we’ve got a limited amount of money that the government has to go in here, so we need to partner.”
The problem remains that the banks will be reluctant to sell these assets at anything like a realistic price, as long as they can maintain the fiction that they are worth more.
If Larry Summers, director of the National Economic Council, sounded a little tone-deaf when he shrugged off the AIG bonuses a week ago as something that, sadly, we couldn’t avoid, being a country of laws and all, then Romer, chairman of the Council of Economic Advisers, sounded downright out of it if she thinks these vultures are doing us any favors.
Mr Market has not thus far shown much faith in the plan…
Financial Times
Caution urged as toxic assets fail to rally
By Krishna Guha in Washington and Aline van Duyn in New York
Published: March 25 2009 18:55 | Last updated: March 25 2009 18:55
Amid the euphoria over the Geithner plan to tackle toxic assets there is one note of caution: while bank stocks have rallied strongly on the plan, the underlying toxic assets have not.
The ABX index, which tracks subprime mortgage-backed securities, has barely lifted from its record lows. The leveraged loan LCDX index has gained a little but is still sharply down on the year. Top-rated commercial mortgage-backed securities have rallied, but are only back to mid-February levels, while lower-rated tranches are substantially down.
“lower-rated tranches are substantially down”
“substantially down” - as in “wiped out”
I know the few moonbats will say anything to smear Prez BO without cause but did the rest of you catch his second public reference to grossly inflated housing prices during last nights public address?
“Reckless speculation, inflated home values and maxed out credit cards is not a sign of a strong economy”.
Bullseye.
I agree but neither is borrowing trillions of dollars on bailouts to help prop-up failed institutions and assets, to fund trillion dollar budget deficits as far as the eye can see, and on “stimulus” bills to build bridges to nowhere.
I have to admire OBwan as the first political leader to stand up and address the economic problems at hand, rather than some straw man characterization thereof.
“Help me OBwan, you’re my only hope.”
“the first political leader to stand up and address the economic problems at hand”
Did I miss the sarcasm lamp lighting, or did you just fall off the turnip truck?
How many have come out and said
1. Medicare and SS need to be addressed
2. That we have a credit card economy that is not sustainable. The US needs to manufacture something.
3. That all of us are going to have to sacrifice.
Unlike GW he is in front of the press on a regular basis. As I recall you could count GW’s press conferances on one hand.
Good on-the-point statement by B.O., I have to admit.
“…a sign of a strong economy”
Opie, is a cute lil’ feller ain’t he…
Strong economy = “Ability to start x2 wars, while giving the wealthiest American’s a bountiful tax reduction & cheap drugs!”
(Hwy begins running away from a yelling, angry, paddle swatting Cheney)
I have to say I love the speed at which the media converted this Bush disaster into an Obama disaster. And the hordes of mindless morons in this country are going to be thinking…yeah, Obama caused all this.
This country doesn’t need a stimulus. It needs an exorcism.
Somebody needs a burp and a nap.
that’s why he will be a one-termer
Remember when Clinton handed the baton to Bush?
As of today, everything that happens is yours…..see ya chump.
It’s why Aladinsane quoted John Galt and voted for the worst of all evils. A conspiracy theorist could say that Barack is going so socialist so fast that maybe he is really a closet John Galt. We’re going down fast. Taxes are going to head up fast. Uncertainty will be more pronounced. This 20% stock gain is going to catch the greater fools before the huge plunge to pre-Reagan year lows. Maybe Barack is deliberately promoting irresponsibility and heavy handed government to shock the sheople into waking up about how bad it will be to give up ones own responsibility.
I love when MarketWatch dot com serves up contradictory bylines!
Countdown to the close: 57 min 27 sec
INVESTOR ALERT
Bulls buy into ‘toxic assets’ plan
March 25 2009 3:02 P.M. ET
Deflation fear knocks stocks
Stocks turn lower after rising early on strong durable-goods orders and improving new home sales as Fed’s Janet Yellen says that deflation poses a greater risk than inflation.
Bear in mind that the effects of monetary policy are transmitted with long and variable lags. Since the Fed drives while looking out the rear view mirror, what hope is there that they will lift their foot off the monetary accelerator before they slam into an inflationary brick wall?
latest news
Fear ‘overdone’ that Fed policy will stoke inflation: Yellen
THE FED
No policy retreat until recession surrenders: Yellen
Inflation fears ‘overdone,’ with greater risks of disinflation, deflation
By Greg Robb, MarketWatch
Last update: 1:52 p.m. EDT March 25, 2009
WASHINGTON (MarketWatch) — The Federal Reserve won’t retreat from its innovative policy tools until the downturn is over, and fears that they will spark runaway inflation are overdone, Janet Yellen, the president of the San Francisco Fed, said Wednesday.
“I understand these concerns, but I don’t believe they warrant a retreat from our current broad approach,” Yellen said in a speech to an economist group in New York.
PARIS – French workers burned tires, marched on the presidential palace and held a manager of U.S. manufacturer 3M hostage Wednesday as anger mounted over job cuts and executive bonuses.
Rising public outrage at employers on both sides of the Atlantic has been triggered by executives cashing in bonus checks even as their companies were kept afloat with billions of euros (dollars) in taxpayers’ money and unemployment soars.
Me thinks it’s time to invest in CEO security companies.
and held a manager of U.S. manufacturer 3M hostage
How’s that Globalization working for ya!
Anyone know if HP’s Mark Hurd has body guards? I recall that Czarly did, even when on HP property.
In other news, the Czech government was tossed out yesterday due directly to the current economic disaster.
Obama’s Toxic-Asset Plan: End-Run Around Congress?
The Obama administration’s complex plan to deal with toxic assets may have answered Wall Street’s questions about shoring up the balance sheets of financial firms but it is raising other serious ones about the government’s approach to funding and oversight.
The plan, known as the Public-Private Investment Program for Legacy Assets, is the latest initiative on the part of the executive branch to rely on loans and guarantees, as opposed to budgeted funding, and also asks the same government entities running the programs, to essentially oversee them.
“They’ve been extending their authority for the last year,” says Washington-based economist Dean Baker, co-director of the Center for Economic and Policy Research. “This is really a stretch.”
Read The PPIP Fact Sheet
In particular, the PPIP will use a small, amount of money from the second round of the TARP ($75 billion to $100 billion) money approved by Congress and use the Federal Reserve’s emergency lending powers to leverage that by as much as a 6-to-1 debt-to-equity ratio.
Funding Issues
“This is an end-run around Democracy,” Rep. Brad Sherman (D-Calif.) told CNBC.com. “No one even imagined we would see trillions of dollars shifted from Washington to Wall Street that no member of Congress ever voted for.”
Sherman is referring to the PPIP and other recent Fed lending programs, including the recently launched Term Asset Lending Facility.
Though the Fed’s authorized to use its balance sheet for such lending activity under “unusual and exigent circumstances”, according to section 13.3 of the Federal Reserve Act, lawmakers and analysts alike have become increasingly concerned about the consequences.
Sherman, who voted against the TARP, calls the Fed’s balance sheet “the endless multiplier”, while Baker says the once all-important TARP money (not to mention its original sticker shock) has been reduced to “almost a fig leaf” in the effort to rescue the financial sector.
Moreover, some in Congress say the PPIP, once again, puts the central bank in an awkward position.
“The Obama administration’s complex plan to deal with toxic assets may have answered Wall Street’s questions about shoring up the balance sheets of financial firms but it is raising other serious ones about the government’s approach to funding and oversight.”
What a coincidence — that is almost exactly what I said above!
When was the last time Bush was mentioned in relationship to the mess he helped create?
All the blame instantly shifts to Obama. Convenient.
Not buying any of this bullshit.
“No one even imagined we would see trillions of dollars shifted from Washington to Wall Street that no member of Congress ever voted for.”
All-important question: How will Congressmen get a piece of this money if they never voted for it?
PPIP - privative the profits and socialize the losses on a grand scale.
Is it only me, or does it seem to others as though the Treasury Secretary’s job description has morphed into dreaming up politically palatable means of funneling money from Main Street to Wall Street? Or am I just behind the times, and it has always been this way?
It’s just you because the Treasury’s real job is being the Fed’s boytoy.
Seriously? Yeah, it’s always been this way. “K Street” ring a bell?
Financial Times
EU leader condemns US ‘road to hell’
By Tony Barber in Brussels and Edward Luce in Washington
Published: March 25 2009 20:00 | Last updated: March 25 2009 20:00
European Union hopes for a new era in relations with the US were thrown into chaos on Wednesday when the holder of the EU presidency condemned American remedies for the global recession as “the road to hell”.
Barely a week before Barack Obama is due to arrive in Europe on his first official visit as US president, Mirek Topolanek, the Czech Republic’s prime minister, put the 27-nation EU on a collision course with Washington.
Isn’t this the same minister that just got a vote of no confidence?
He must be doing something right then.
Toosed on his rear as of yesterday.
“Tossed!” dang it.
I preferred “toosed” — good coinage
Distinguished ladies and gentlemen of the HBB, please allow me to present the new public currency backed by whatever’s left of the full faith and credit of the US Treasury.
I give you
The Fuffle
http://energybulletin.net/node/48421
Please feel free to spend as many as you like. They will certainly print more
All those weeks at the Hospital and the battle was lost .People who know me know what I’m talking about .
Sorry Housing Wizard. That has to be one of the toughest points in anyone’s life (along with losing a parent).
HW,
My heartfelt sympathy. I am about 5 years down the road ahead of you.
There is a hope that we will meet again one day, and live without infirmity.
Skye
My condolences, HW. That’s a hard row to hoe.
I am so sorry to hear about the loss of your wife Housing Wizard. My deepest sympathy to you and your family. Don’t hesitate to reach out to your loved ones, friends and acquaintances here on this blog.
Housing Wizard
So sorry to hear you lost your wife. I too, send my heartfelt condolenzes.
Keep posting, so we know you’re doing as ok as you can be right now. We’re your family, too.
I am so sorry Housing Wizard. Our thoughts and best energy are with you. Please let us know if there is anything we can do for you. Hugs.
Very sorry to hear it, Housing Wizard. My condolances. You’ll be in our thoughts…
Very sorry, Wiz.
Sorry to hear that. God bless you.
Condolences, wiz. I didn’t know about this, must have missed some posts - I miss a couple weeks periodically.
As others have said, you have friends, acquaintances, and a community here. We care about you and feel for you, and whatever our differences, when it comes to the loss of someone we love - we’re all in the same boat.
Housing Wizard,
I can’t imagine what your pain must be like. Hang in there the best you can.
My sincere condolences,
Mike
HW - our condolences, thoughts, and prayers are with you.
I’m terribly sorry to hear, hw…
Sorry for your loss.
HW, I too would like to send you my condolences. You’ll have a rough road ahead of you for awhile but it does get better with time. My father passed away 9 months ago and its still hard on my mom at times. I wish you the best and hope you will continue to post your wisdom and insights here. Take care of yourself and we hope to hear from you soon.
Wiz,
So sorry to hear about your wife. I didn’t realize she was that ill. Like the others have posted, if you need to talk or vent about how you’re feeling, please feel free to lean on us. God bless you, Wiz!
Housing Wizard: I’m so sorry for your loss. I cannot imagine your grief. It must be utterly heart-wrenching.
Have no fear. You will meet again. And in the meantime, pay attention. In the coming weeks/months/years, she will visit you in your dreams, through music and nature. I have more stories than I can possibly repeat here of this phenomenon.
I will tell you this one story: My father-in-law loved birds, especially the pair of cardinals that he used to feed off of his back porch. At his funeral, as the procession was leaving his grave side, a single male cardinal flew alongside the limousine his family was riding in. It flew from grave stone to grave stone and stayed right along side us the whole way out of the cemetery. Even the most skeptical of the bunch had to admit that it was a bit mysterious.
So, I will say it again: Pay Attention.
You’re getting close Kallyfornia, but we’re still number one:
http://www.freep.com/article/20090325/BUSINESS06/90325095/Michigan+jobless+rate+reaches+12+
I know you but I forget the story.
Financial Times
Letter reveals AIG paid bonuses early
By Francesco Guerrera in New York and Tom Braithwaite in Washington
Published: March 25 2009 19:03 | Last updated: March 25 2009 19:03
AIG paid more than $40m in controversial retention bonuses to staff at its troubled financial unit in December, three months ahead of schedule, according to the resignation letter of an executive at the insurance group.
News of the decision to pay bonuses of $165m to staff at AIG sparked political outrage and protests in the US Congress, after the insurer was bailed out with $173bn of public money last year. Before the publication of the letter, momentum on draconian legislation to claw back bonuses had begun to slow.
Jake DeSantis, a manager in AIG’s Financial Products unit, said AIG “accelerated by three months [the payment of] more than a quarter” of the $165m of retention bonuses due to the division’s employees.
“That action signified to us your support and was hardly something that one would do if he truly found the contracts ‘distasteful’,” Mr DeSantis wrote to Edward Liddy, AIG’s government-appointed chief executive, in a letter first published in The New York Times.
Mr Liddy earlier called the bonuses “distasteful” in an appearance in the House of Representatives.
EDITOR’S CHOICE
Business Life: Bonus rage turns violent - Mar-25
Michael Skapinker: We need new rules for top executive pay - Mar-23
Democrats push on with bonus tax - Mar-24
Financial Times
When bonus rage turns violent
By Emma Jacobs
Published: March 25 2009 15:56 | Last updated: March 25 2009 19:03
For top bankers and other high-profile company executives, it pays to be a little paranoid about personal safety these days. As public distaste at taxpayer-funded bail-outs has turned to “bonus rage” directed at specific individuals, the fear of physical harm has grown appreciably. For a vilified few, they really are out to get you.
On Wednesday, it emerged that the Edinburgh home of Sir Fred Goodwin, the former head of Royal Bank of Scotland widely denounced for his lavish pension arrangements, had been vandalised. Although Sir Fred is not thought to be living at the address, windows were smashed and a Mercedes damaged. E-mails from a group claiming responsibility for the attack branded all bank bosses “criminals” and warned: “This is just the beginning.”
EDITOR’S CHOICE
Sir Fred Goodwin’s house attacked - Mar-25
Lombard: This desire for punishment has to be curtailed - Mar-25
City braced for wave of protest - Mar-23
Editorial: Goodwin’s honour - Feb-27
Q&A: Sir Fred Goodwin’s pension - Feb-27
Goodwin stands firm on £16m RBS pension - Feb-27
‘I’m having a very good crisis,’ says Soros as hedge fund managers make billions off recession
By Mail Foreign Service
Last updated at 5:13 PM on 25th March 2009
George Soros said the current economic crisis has been the culmination of his life’s work
A hedge fund manager who predicted the global credit crunch has said the financial crisis has been ’stimulating’ and the culmination of his life’s work.
George Soros, who predicted the global financial crisis twice before, was one of the few people to anticipate and prepare for the current economic collapse.
Mr Soros said his prediction meant he was better able to brace his Quantum investment fund against the gloabal storm.
But other investors failed to take notice of his prediction and his decision to come out of retirement in 2007 to manage the fund made him $US2.9 billion.
And while the financial crisis continued to deepen across the globe, the 78-year-old still managed to make $1.1 billion last year.
‘It is, in a way, the culminating point of my life’s work,’ he told national newspaper The Australian.
Soros is one of 25, top hedge fund managers from across Wall Street who have defied the credit crunch crisis to reap a total of $11.6billion (£7.9bn) last year.
The managers made their profit by trading above the pain in the markets, according to Institutional Investor’s Alpha Magazine.
Former maths professor James H. Simons, who has made billions in hedge fund Renaissance Technologies, earned $2.5 billion running computer-driven trading strategies.
And John A. Paulson, who made his fortune by betting against the housing market, came in second earning $2 billion.
Jingle mail for zombie banks
* Jessica Irvine
* March 25, 2009
* Page 1 of 3 | Single Page View
The global financial crisis may be destroying life savings, but it’s also giving birth to a new vocabulary. This gallows humour, bred of tough times, includes “zombie bank”, “ninja loan” and a strange condition called “brickor mortis”. The new lexicon allows us to poke fun at what is a scary and little understood crisis engulfing the global economy.
As financial markets digest the details of the latest US bail-out of its troubled banking system, a recap of the best of these “credit crunch-isms” provides a useful start to understanding the causes of, and potential solutions to, the current mess.
Man, the positive spin is in high gear. Obama says we’re already making progress, Cramer says the market is forecasting sunny skies ahead, now Kudlow is going on and on about his mustard seeds.
Some guy on Kudlow says there’s more bad news ahead, but “we’ve turned the corner.” So we can all go long and be happy, yes??
Anybody (still) loading up on FAZ, SRS, etc.??
I’m still on the sideline in that regard but when it comes time to pull the trigger (hopefully this week) it will be to short FAS, not long Faz.
Curious…..why one and not the other??
FAS gives you the gift of decay.
Blano, there’s a guy on the SRS board at Google Finance who’s been calling SRS really well for the past month. His name is Maloy. I’m not saying he’s been 100% right, but pretty close. I’ve been making money following him. Proceed with caution, however.
Thanks for the heads up, I’m curious what he has to say.
Zombie Banks can also be people with savings waiting for inflation.
That is why I suggest anyone with savings plan carefully to diversify into inflation hedges, just in case inflation accidentally happens at some future point.
“accidentally”
LOL!
Who will take the coal from the mine?
Who will take the salt from the earth?
Who’ll take a leaf and grow it to a tree?
Don’t look now, it ain’t you or me.
Who will work the field with his hands?
Who will put his back to the plough?
Who’ll take the mountain and give it to the sea?
Don’t look now, it ain’t you or me.
Chorus:
Don’t look now, someone’s done your starvin’;
Don’t look now, someone’s done your prayin’ too.
Who will make the shoes for your feet?
Who will make the clothes that you wear?
Who’ll take the promise that you don’t have to keep?
Don’t look now, it ain’t you or me.
Chorus
Who will take the coal from the mines?
Who will take the salt from the earth?
Who’ll take the promise that you don’t have to keep?
Don’t look now, it ain’t you or me.
If interest rates go up will that be a hedge?
Just a historical nugget
Those who voted against Phil Grams repeal of Glass Steagle
Boxer, Bryan, Dorgan, Feingold, Harkin, Mikulski and Wellstone
Those who voted against it.
Everyone else.
I think I’ll make another donation to Feingold
One more Richard Shelby.
Not quite correct — the vote you refer to is the vote after the bill came back from reconciliation with the House version, when it’s already a done deal.
The actual vote on the bill, while still lopsided, was more like 68-28-ish. If I have time to find the correct record tomorrow, I will.
Not to come across as some kind of PermaBear,
but, the DJIA has come all the way up to significant resistance, the way I chart things.
So my unsolicited free advice is:
SELL!!! SELL!!! SELL!!!
It is free advice, and always remember, that you get what you pay for.
“Sell every rally” my theme song for a while.
I have a better idea than sharing the bill: Carve up Megabank, Inc into little bitty, too-small-to-bail sized pieces, then sell the pieces off at fire sale prices.
Financial Times
We need to share the bill for bail-outs
By John Gapper
Published: March 25 2009 21:16 | Last updated: March 25 2009 21:16
One thing we have learnt in the past year is that some banks are definitely too big to fail. We may yet discover something even more disturbing: that some are too big to save.
Are these banks with all the newfound savings the very same ones which are under capitalized? I sure hope it does not appear in retrospect as though all these born again savers were set up for a genocide in the War on Savers.
Financial Times
US retail investors flee to savings
By Deborah Brewster in New York
Published: March 25 2009 23:37 | Last updated: March 25 2009 23:37
US retail investors poured close to $250bn (€184bn) into bank accounts in the first months of this year, sharply accelerating a flight to safety as they continued to flee volatile stock markets.
Bank savings deposits rose by $246bn to a record $4,343bn in the nine weeks to March 9, according to data from the Federal Reserve. This is more than the whole of 2008, in which savings deposits rose by $229bn.
Think FDIC. These savers will be okay.
They will be OK unless inflation or devaluation takes away the value of their savings before they have a chance to diversify. I honestly have no sense of the risk of this happening, but I can say it happened to many savers in the U.S. during the late 1970s.
The savers of the late 1970s had inflation to deal with. This time it’s different.
Today is more like the Thirties than the Seventies.
Former treasury secretary writing about meltdown
http://finance.yahoo.com/news/Former-treasury-secretary-apf-14747949.html
Financial Times
Surge in short selling clouds rally prospects
By Anuj Gangahar in New York
Published: March 25 2009 20:54 | Last updated: March 25 2009 20:54
Short interest on the New York Stock Exchange rose to its highest level since the collapse of Lehman during the month to mid-March and at its highest rate in more than a year as hedge funds increased their bets against the rally in US equities during that period.
From February 27 to Friday March 13, the benchmark S&P 500 index rose about 3 per cent, prompting talk among participants of a lasting rally in the US stock markets, which have been battered by the recession.
But over that two-week period, as the equity market rallied, short interest rose to 4.2 per cent of all shares outstanding, up from 3.8 per cent at the end of February.
Short sellers aim to profit from betting on falling stocks prices. They borrow shares and then sell them, hoping to buy the shares back at a lower price, return them to the lender and keep the difference.
The broader stock market rally was eclipsed by several prominent stocks, but short sellers took the view that the gains by these stocks, particularly those most affected by the crisis so far, were unsustainable.
For example Citigroup, which was down 79 per cent for the year to the end of February, rose 19 per cent over the first two weeks of March.
But short sellers appeared to take the view that the gains were unsustainable and increased their short position in the stock by almost five times over that period.
In fact Citigroup was the most shorted stock on the NYSE over the period with a short position of 998.7m shares. The second most shorted stock was Ford Motor , followed by General Electric, AIG and Bank of America.
Borrowing securities to short has become more difficult and expensive in recent times as pension funds and endowments have cut back the amount they lend out to custodians and third-party lenders.
US regulators are pondering the best way to regulate the activities of “naked” short sellers whom many blame for mounting bear raids on companies which can artificially drive down their share prices and even push them to failure.
Wall Street Journal
* REVIEW & OUTLOOK
* MARCH 26, 2009
China and the Dollar
Markets don’t like Treasury talking down the dollar’s status.
As if the dollar didn’t have enough problems, Timothy Geithner took China’s bait yesterday and said he was “quite open” to its suggestion this week to displace the greenback with an “international reserve currency.” The dollar promptly fell and stocks followed, before the Treasury Secretary re-emerged to say “the dollar remains the world’s dominant reserve currency. I think that’s likely to continue for a long time.”
Mr. Geithner is learning on the job, and yesterday’s lesson is that it isn’t smart to fool with currency markets when you are already tempting fate with a gigantic U.S. reflation. Treasury and the Federal Reserve are flooding the world with dollars to break the recession, and the world is rightly getting nervous. The solution floated by Chinese central bank governor Zhou Xiaochuan — an increased role for the International Monetary Fund — isn’t desirable. But his warning about the dangers of dollar weakness and exchange-rate instability is still worth heeding.
Since the collapse of Bretton Woods in 1971, the global economy has tried to function with floating exchange rates, in which the “market” is said to set currency prices. As the world discovered in the 1970s and the Bush Treasury forgot, however, the market for currencies isn’t the same as for apples or copper. Central banks control the supply of currencies through their monopoly on money creation. Often, as at the Alan Greenspan-Ben Bernanke-Donald Kohn Federal Reserve this decade, they get policy wrong, with disastrous consequences. Amid the global economic downturn, some central banks, like Vietnam’s, are also turning to currency devaluation for a trade advantage.
“15% appreciation - It’s in the bag” guru Gary Watts defaults on his own property
http://lansner.freedomblogging.com/2009/03/25/oc-prognosticator-defaults-on-rental-house/17639/#more-17639