Bits Bucket For April 8, 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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Good thing all the smart folks are in charge, who would have ever thought of this tack?
Congressional Panel Suggests Firing Managers, Liquidating Banks…
April 8 (Bloomberg) — A congressional panel overseeing the U.S. financial rescue suggested that getting rid of top executives and liquidating problem banks may be a better way to solve the economic crisis.
The Congressional Oversight Panel, in a report released yesterday, also said the Treasury may be relying on too rosy an economic scenario to guide its $700 billion bailout, and declared that the success of the program after six months is “mixed.” Three of the group’s members disagreed with at least some of the findings.
“All successful efforts to address bank crises have involved the combination of moving aside failed management and getting control of the process of valuing bank balance sheets,” the panel, headed by Harvard Law School Professor Elizabeth Warren, said in its report.
Treasury Secretary Timothy Geithner has revamped the Troubled Asset Relief Program to focus on injecting capital into banks and removing up to $1 trillion in illiquid securities from their balance sheets via public-private investment partnerships. The government is also working to unfreeze credit markets through a Federal Reserve program that provides loans to investors in some asset-backed securities.
Warren, in an interview on Bloomberg Television, said yesterday that while “things may be getting a little better” under Geithner, the Treasury still needs to be more transparent about how it is spending the taxpayers’ money.
“We still have a long way to go, a very long way,” she said.
“the Treasury still needs to be more transparent about how it is spending the taxpayers’ money.”
Gee, ya think? As William Black said, Geithner and Paulson are in severe violation of the law. They should be arrested.
Q. When are U.S. citizens above the law?
A. When they are part of the Fed elite.
Q. What is the primary reason that U.S. Government spending is out of control?
A. Because it is in the Fed’s interest.
Q. Why is Geithner propping up bad banks and going nuts with bailouts?
A. Because it is in the Fed’s interest.
Q. Why is the U.S.Government becoming a larger and larger part of the economy?
A. Because it is in the Fed’s interest.
Just imagine that you had an ADD afflicted teenage boy who ran around town making trouble and breaking things. And every time he breaks something, you get a bill in the mail from Easy Money Bill Collectors. If you can’t pay the bill, they automatically loan you the money. In short order, you have run up a hefty tab. Easy Money says no problem, after you die, your house and insurance and pension belong to us. You try talking to your son,but discover he has moved into the headquarters of Easy Money and is completely out of control, breaking things every 5 minutes. Then you find out Easy Money keeps him supplied with booze and weed and crystal meth. Sound like a nightmare? Your son’s name is Congress.
Dayum!
Need. More. Coffee.
Leigh
Its just like the old Soviet Union.
Everyone was equal, just some people were more equal than other.
I just want to be able to use TurboTaxcheat Timmy’s version of Turbo-tax! I think that’s fair!
Nice.
Congress is working with the Government Accountability Office to increase its power to investigate the action the Federal Reserve has taken in response to the financial crisis, Rep. Barney Frank (D-Mass.) said during an online chat Wednesday at the blog Crooksandliars.com.
Frank added that the Financial Services Committee, which he chairs, will hold a hearing to examine the recommendations of TARP watchdog Elizabeth Warren, whose oversight panel recently called for bank executives to be fired and insolvent banks liquidated amid a more aggressive approach to cleaning up the financial system.
“[W]e are working with the GAO to increase their legal right to inquire into the workings of the Federal Reserve where they are involved in the TARP program. In line with this we will be working to support the transparency and oversight recommendations of the oversight panel and that will include holding a hearing,” offered Frank.
What do all the Frank haters have to say about this?
He is the poster boy for what is wrong with our government.
April 8 (Bloomberg) — A congressional panel overseeing the U.S. financial rescue suggested that getting rid of top executives and liquidating problem banks may be a better way to solve the economic crisis.
How soon until the subprime mortgage lending kingpins of Wall Street get liquidated and their toxic assets get sold off at fire sale prices? Screw TARP, PPIP, etc — I want to see the fire sales to begin post haste!!!
Never.
The assets will be liquidated and then placed into the hands of the next group of cronies to come along. Maybe developers who want to tear down housing developments and put in malls and tear down malls to put in housing developments… or slum-lords who dream of Section 8 McMansions… or whatever. The whole point of the game is to shuffle assets around and make money in any way possible from the churn. Letting large numbers of people buy houses they can afford and then - gasp! - live in them isn’t part of the plan since it isn’t as profitable.
Pondering,
I think you nailed it… ;-(
that’s supposed to be
He did nail it.
And there’s the magic word: churn.
Churn is the REAL engine of our economy and our society.
It is awfully nice to be too-big-to-fail or to have too-big-to-fail financial entities owe you lots of money.
[$SPX] S&P 500 climbs 6.70 points to 822.25
David Weidner
DAVID WEIDNER’S WRITING ON THE WALL
Government Sachs is in control
Commentary: Investment bank has strengthened its position through bailout
By David Weidner, MarketWatch
Last update: 12:01 a.m. EDT April 7, 2009
NEW YORK (MarketWatch) — Lloyd Blankfein must be the luckiest guy on Wall Street.
He leads one of the Street’s biggest bailed-out firms, but unlike other companies propped up by taxpayers, Blankfein’s Goldman Sachs Group Inc. is far more profitable. And it’s poised to become a more influential force with greater market share.
Different from American International Group Inc. or Citigroup Inc., Goldman hasn’t had to forfeit an ownership stake in its firm, and its shareholders — many of them management and employees — have benefited. Goldman shares trade above $100. That’s less than half of where Goldman shares traded at their peak, but far better than the $1 and $3 that AIG and Citigroup shares trade for, respectively.
Since the fall of Bear Stearns Cos. a little more than a year ago, Goldman has taken more than $20 billion in taxpayer cash through loans, payments and backstops. Goldman’s latest bailout coup was a $12.5 billion paid out of AIG’s $180 billion government cash infusion.
Until it was fully extricated, Goldman always characterized its exposure to AIG as “immaterial,” and that its $20 billion notional exposure to AIG was hedged. Turns out that it was — through government bailouts that didn’t exist when Goldman entered the contracts.
Even former New York Luv Guv Eliot Spitzer told journalist Fareed Zakaria on Sunday that he thinks something smells.
Ya think Patterson is just keeping the seat warm till he gets reelected? Spitzer as Guv and Cuomo as att. general, the wall street guys don’t have a chance. I voted for spitz and will again.
————————————–
Even former New York Luv Guv Eliot Spitzer told journalist Fareed Zakaria on Sunday that he thinks something smells.
“‘We still have a long way to go, a very long way,’ she said.”
Either you have transparency or you don’t; there’s no partly cloudy in transparency, so I assume she’s referring to outstanding ARMs and C-RE, right? [haven't finished my tea].
I saw Nouriel Roubini yesterday on CBC Business News. Wasn’t coming across as Dr. Doomish at all, but of course he was still more negative than the paid schill economists. He was talking recession all this year, and recession in effect for next year (possibly positive GDP, but unemployment and other challenges so it feels like a recession.) When housing came up, he talked about too much inventory. If anything, I’d have to call him Dr. Obvious, but that’s only because I read stuff here.
HBB bloggers will take the torch in the Reality Will Prevail relay from Dr Doom or any other girlie-man who wants to go main stream fantasy-optimist.
Really, no more girlie-man! Let’s get some women in there!
“This is what is new in this depression, and wherein it departs from history. In previous depressions, a bank that was book solvent and unable to pay its depositors had no alternative. It was obliged to go into bankruptcy and liquidate. A railroad that could not pay its creditors simply went into receivership and was liquidated. And so on. Such a thing as Government going into debt itself in order to assume and underwrite the debts of private enterprise was hitherto unimaginable.”
Quoted from a 1933 essay by Garet Garrett.
And that… is a large part of why the GD was longer than previous depressions, and why this depression may end up being longer still.
I went to a few open houses over the weekend. Every Agent I saw was boasting how FHA will lend up to 729K in this county and how sales were really heating up. I said to one of the scumbags “Great!, now the government wants to really foul things up”.
Some guy (other window shopper) starts laughing. The woman glares at me and says that I shouldn’t be so negative. So I said so you think it’s a good idea? She said government wasn’t going to let housing fall anymore and that prices were going to rise from here. I said to her that what she was saying was speculation on her part and told her that kind of talk is what got us in to this mess in the first place.
She ended up walking away. My point is these folks are still talking the same old smack and have serious wishful thinking going on. I swear I have never met an honest Agent in my life.
“I swear I have never met an honest Agent in my life.”
When are we going to get past this nicey nice don’t be negative BS out on Main St????
When has a realtard EVER been honest, forthright and succinct? These creeps are salesman of the very worst kind and their “advice” can and does devastate the economic future of so many.
yes, they are up there with used car and furniture salesman. It’s like they have no souls or something.
RE sellers are much the same as car and furniture sales types, but there is a big difference. Fake agency. These creeps pretend to protect your interest while screwing you over.
Article 1 of their code of ethics:
“When representing a buyer, seller, landlord, tenant, or other client as an agent, REALTORS® pledge themselves to protect and promote the interests of their client. This obligation to the client is primary, but it does not relieve REALTORS® of their obligation to treat all parties honestly. When serving a buyer, seller, landlord, tenant or other party in a non-agency capacity, REALTORS® remain obligated to treat all parties honestly. (Amended 1/01)”
Yah, that fits with my observations.
I hear you. I have dealt with Buyers Agent (for me) and if I am interested in a house, I ask them to send me recent comps and they always pick the sweetest comps in the hood. I have a friend who is an Appraiser and she sends me all the comps in the hood. The Buyers Agent wants to get a commission too. So they will sell u out. They also, throw in those comments like this one is gonna go fast or this one is priced right and all the other mumbo jumbo these dorks spew out. They also get nervous if you want to offer lower then list price. I guess they are all buddies
RE: I guess they are all buddies
Any other business group would be prosecuted under RICO rackeetering laws.
Seller’s will circumvent disclosures by any means possible.
Seller’s agents-buyer’s agents…all these schmucks care about is the commission.
The appraiser is punchin’ the number for the lender, who only cares about his/her commission.
The home inspector does the bidding of the real estate agents because if he doesn’t he won’t get any referrals.
A weak, uninformed buyer ain’t got a prayer.
Actually our realtor (our 2nd realtor) was/is honest with us. We had originally listed our home with one of the fancy realtors in town (Realtor #1) - she had our home overpriced for the entire year of our listing agreement. I begged her to drop the price - but she said the comps supported the listing price. liar! She kept saying and assuring us that the market would rebound. Because she either a) didn’t know what the heck was going on in the market b) was incompetent c) lying to us or d) all of the above - we lost a year on the market.
We brought in Realtor #2 who told us point blank that she thought we should drop our price by 30% and that we should suck it up and try and short sale the house - she thought values would take 10 to 15 years to get back to where they were *right that minute* (i.e. they are continuing to drop like a hot potato).
So, Realtor #2 is the first (and only) realtor I’ve ever dealt with who has a grip on reality - and the other realtors in town hate her guts b/c she’s actually selling houses in a flat, South Florida market. And ours just went under contract - neighbors are not happy b/c theirs are for sale for much higher lists than ours (with Realtor #1)
Those #1 realtards became #1 because home sellers wouldnt listen to those agents who were more honest in their appraisal of the market; they would give high suggested prices and lock up the majority of the listings. In a rising market they would sell the joint after a few months (or even more) making them look like market gurus; the other junior agents( who stuck around) learned from this process; tell ‘em what they want to hear. Now its a new ballgame, totally.
AMO,
Realtor #1s opinion right now is probably that Realtor #2 sold you guys out just to get a sale. She probably thinks that, given more time, your house would have sold at her price. What she doesn’t get is there’s a reason it was taking so much time - the price.
“When has a realtard EVER been honest”
The realtor that sold me my condo in Rochester was honest. He’s currently in jail for selling drugs.
You give them way too much credit. They follow the party line (NAR) because they aren’t the smartest tool in the shed and because they want to believe it.
IMO - any salesman is a con artist — that’s the nature of the beast.
I know 1.
If he weren’t, maybe we would be rich. But he is honest.
I think, people like to hear what they want to hear. Period.
They want to think they are going to get rich, have a house that goes up. So, those like this agent, and manymany are…tell a story. And suckers want to ‘buy it’. Seriously, most folks do not want to hear or see the Real story. And we just get in the way, get told we are negative. Hell, realism sucks, sometimes.
Just cause ‘he is handsome, doesn’t mean he is good’, same with fems. Some guys, gals do not want to hear their choice of mates are bad choices.
Dweller…tell a story.
hmmm -
Back in the day (insert any day) -
People want to hear “The Dream”
(hey, there’s a famous speech here)…
Oh, my point.
Yeah, oh yeah -
Superficial some are.
Yet there are ones whom make a difference.
Best,
Leigh
IMO, I thought the purpose of the FHA was supposed to assist low income people in buying houses. 729K ain’t low income IMO. No one I know could afford to buy a house that expensive. Artificial govt support of the housing market ain’t gonna work. Good thing all the smart folks are in charge….I doubt that very much. To me it looks a lot like, “You can’t fix stupid.”
Absolutely, 729K for “low income” is nuts. That’s a subsidy for people who make 250K+ per yr? What kind of low income is that? It’s not in your opinion, it’s just nuts, 250K income is the top 2-3% of the population. And these people need a subsidy from the government? And need to make 3% downpayments? It’s insanity; I just don’t understand how anyone can work with these numbers as a “reasonable” level for a low income subsidy.
I think FHA loans are pure garbage. Despite my down payment, a broker I spoke with told me they were pure gold. And then when all of the additional fees (in this case over $3,000), PMI and higher interest rate flushed out I don’t think she even realized that it was a horrible, horrible deal.
“Low income” is all a matter of opinion:
- When the goal is to keep the toxic loans flowing, they probably lend to plenty of “low income” people with whatever the modern version of the NINJA loan is… you know, strawberry pickers making $20,000 a year buying $700,000 houses with a phony 3% down that is given to them by the seller or some nonsense.
So, what are the odds that the FHA will need a Bail-out in a year or so? About 100% I think!
- “Low income” is also a matter of perspective when you consider the probability of eventual run-away inflation thanks to the Fed’s printing presses… or, maybe we’re all “low income” when compared to the Congresscritters, etc.
Here in Maryland, there’s the idiotic Maple Lawn housing development, where tall, skinny (yeah for lots of stairs?!) townhouses started “in the $600’s.” Single family McMansions on tiny lots started at about $1,000,000, though they are down to $800,000 - amazing how a 20% drop can still do nothing for affordabilty. They also had a small percentage of houses set aside for “low income” people where they’d help you get a toxic loan to “fit your needs” so you could lose your house in a few years and they could “flip” it to the next sucker. Care to guess their definition of “low income?” Households making under about $85,000 a year?!
The pain has yet to really begin here, IMHO.
+50
lol..i keep wondering when maple lawn will go bankrupt..it reminds me of the other idiotic project in Maryland, the National Harbor. Tons of empty retail space available. What about the supposed revitalization of route 1 in laurel? Where is the magical mall to make everything better?
How many low income people can afford a $729,750 home? I guess since the FHA has some downpayment requirement, the $729K figure understates the maximum home price they are willing to finance?
I don’t think their definition of “low income” is the same as ours.
Just another thought on this discussion;
Is a $417,000. conforming loan in Detroit low income ??
No, that would be a $417 loan.
Vernon Smith’s WSJ Op-ed piece of two days ago identified the widespread purchase of housing on borrowed money in the face of a very bad economic downturn as a potential leading cause of the Great Depression. I am so glad that our government is trying to encourage people to buy $729,750+ houses on credit at the moment so we can relive the 1930s experience again!
WSJ
The Return of Jumbo Mortgage April 7, 2009
By AMY HOAK
Jumbo mortgages became more expensive and harder to come by as the nation’s credit crisis deepened. That might be starting to change.
“Jumbo” refers to mortgages that are too large to be bought by Freddie Mac or Fannie Mae. The “conforming loan limit” for those government-backed entities is $417,000 in many parts of the country, but goes up to $729,750 in high-cost areas of the continental United States.
Bank of America recently began trumpeting its jumbo program, offering 30-year fixed-rate jumbo mortgages with rates in the high-5% range. “We decided it was time to really go after that market,” says Vijay Lala, a product management executive for the bank.
More lenders may soon join in, says Guy Cecala, publisher of Inside Mortgage Finance.
He says Bank of America appears to have lower jumbo rates than its giant banking competitors Wells Fargo, J.P. Morgan Chase and Citibank. “I suspect the others will slowly follow suit,” Mr. Cecala says.
Big Drop in Rates
The rates on 30-year fixed-rate jumbo mortgages averaged 6.5% for the week ended March 27 — the lowest since May 2007, according to HSH Associates, a publisher of consumer loan information. On Oct. 31, a recent high point, the average rate on a 30-year fixed-rate jumbo mortgage was 7.9%, according to HSH data.
GMAC also has been pricing its jumbos aggressively, says Paola A. Kielblock, national product specialist for Fairway Independent Mortgage, a mortgage broker and banker based in Madison, Wis. (Cont’d)
Sigh,
Leigh
I am very curious whether the San Diego drug gang mortgage fraud scheme drew on government guaranteed loans from the FHA or the zombie GSEs? I cannot imagine any household buying falling knife real estate in this market, but it would make perfectly good sense for drug lords to take advantage of government lending programs if they can figure out how to make it work for them.
P’Bear,
Great point, and most probable!
Leigh
Jumping in just as the high end market starts to crumble. Impeccable timing as usual.
yes - buy high, sell low baby!
rock on.
The 8K tax credit is stimulating sales.
Quit worrying.
I think falling prices are stimulating sales a lot more.
What I’m thinking about this… we are slowing the rate of decline of an over valued asset here. Eventually the tax credits will go away and the prices will decline further. Yeah, its only 8,000$ but still a substantial portion of a resonable priced house. If you are in the under 200k market, its a lot of homes price. 4%! So, another haircut when that goes away.
In the much lower priced markets like stockton, its a huge haircut. Another 8%. There goes several years of equity.
All the sitting on REO properties, probably by default as banks do not have resources to handle them. OK, so that inventory gets sold to investors or slow bled into the market. Either way prices are suppressed over a longer period of distressed sales.
The rolling over bad loans into new bad loans. We have heard plenty of loan modifications on here. Even some cramdowns. What does that do? Just pushes the day of price discovery into the future. In the case of cramdowns you cement the affordability factors in stone with a judge causing further deflation.
What are the people going to do in 5yrs when they have to sell or ten years?
This is going very much the way of Japan here. We have zombie banks sitting on bad loans. We are increasing public works projects and increasing government debt. Increasing taxes will not necessarily make our businesses more profitable and will probably make them less so. Again a downward spiral.
The Fed is banking on inflation but is sitting on a big pile of bad debt. Unless the employment and income picture improves dramatically, prices will continue to push downward.
Fully expect home builders to come out and buy cheaper land, with cheaper labor and lower cost materials to build lower cost housing to further undercut values of existing monstrosities.
Demographics will also push home prices down. Could go even further if people fall in love with thrift again.
I could see a lot of the variety of gold digger type women getting forced into prostitution at various levels. That might cause a social shift much like the Lykis revolution about not getting married. Guys are already extreemly wary of getting hitched. As more desperate women stike out in search of married treasure, I expect the social backlash to increase. Would expect this to temporarily accelerate the population decline as birth rates drop.
Poor economics may also drive illegals, aka immigration, downward or increase outmigration. Anchor babies aside, people will leave if opporitunity isn’t there.
All of this is pushing prices down. Inevitable. Can understand the desire to see more forced inventory and getting this over with quickly.
There is a substantial chance that buying will not be a good deal in the rest of my working years and lifetime. Just like the chance that a dollar collapse will occur. Seemed a remote possibility a few years ago but now is a substantial probability.
There will be no way to force the driving functions here. Rents are tied to incomes. Incomes are negativly impacted by global wage arbitrage.
Sudden shifts in trade policy will cause a massive economic contraction, shortages of critical materials exc. Consequenes likely to be dramatically negative.
Again points to a slow rebalance of trade as China trade balances out.
Also think consumption trends have been permanently altered. This will also have a negative impact on prices.
Treasury is a wild card and cause actual inflation by physically priniting dollars and pumping it into the economy through entitlements and spending. Not prinitng treasuries. Cash. We all know how that ends if you do it on a large scale. Unfortunatly, unless the people are producing, the capital will just flow offshore to someplace like China.
So. All trends point to prices dropping. Rate may be effected but it is inevitable.
Additionally note, one thing we should have learned is that buying a house isn’t necessarily a needed thing. Its not an investment. Its not savings. Unless you are a cash buyer and plan to rent it out. Again, it must compare to the equivalent rent. Relax. Rent/save.
James
Incomes are negativly impacted by global wage arbitrage
For arguements sake, what makes you think that protectionism won’t win here?
While I see lower wages for domestic production, I think the impact of global wage arbitrage will falter as economies look to protectionist policies because the public will demand it. The bankers may be having their way with Washington now, but eventually public opinion will turn in favor of protecting jobs and buying domestic products.
That path seems clear in my mind…
Hello Northeasterner,
Well.
It is certainly possible that protectionism wins out. In fact, some of the other posters wrote impassioned pleas for a return to protectionism. BigV pops to mind.
While that might help create some inflation in the long haul, in the short run it would be devestating to a large number of businesses.
Basically, we still sell substantial amounts of goods overseas. A large number of American corporations with interests overseas would be crushed.
In the long run this might be a good answer. In the short term, say 10 years, it will cause even more unemployment. The additional unemployment will do nothing to help pricing in housing. Remember there will be a substantial time delay before industries can form and jobs created to take up the consumption. That would be several years.
Also from a long term stance, protectionism probably equates to economic inefficiency. Hence, we are restricting our own markets along with creating scarcity. So, you would probably result in some reduction in quality of life.
Remember, you still have not effected the problem of too much housing inventory and over production. Even on our own, with out China, we can still over produce. We did it with housing and we have done it with automobiles.
This sounds suspiciously like the argument that goes: “We’re experiencing hard times and have to layoff and cut wages, but when good times comes around, we have to layoff and cut wages to meet Wall St. expectations.”
Here’s a clue: a 75% consumer driven economy (that’s us) CANNOT survive on declining wages and high unemployment. This means ALL businesses will suffer, not just SOME.
Remember, it’s good to save money in business, but you can save yourself right out of business.
Let me poke another hole in your ridiculous argument: if wages rise, thus enabling increased consumerism (remember, our economic engine) then why would the overseas interests not share the prosperity? Are you saying we would NEVER import competing products? As for scarcity: that old bogeyman? What? I wouldn’t get my obscure wine from some overhyped obscure region made from some grape I’ve never heard of nor care about?
You need to remember that SOVEREIGNTY is paramount and always will be. You CANNOT change human nature, and people demand group affiliations, or “tribes” if you will, that differentiate them from other people. And the largest cohesive tribal system to date is a Nation.
And this will demand this to the point of war.
Crap. Damn near perfect until the very end.
“And THEY will demand this to the point of war.”
Oops.
Ecofeco,
I’m seeing this as a discussion with someone who doesn’t understand money and inflation.
Your response does not make sense. My point was that restricting markets might help with wealth concentration in the long run. In the short term there would be further disruptions.
In the current environment wages have been falling. Earnings have been falling. Nothing about that says inflation.
I would argue that rising wages only indicate inflation. If you are doing the same work but are paid more, then what does it indicate? Either the product is desirable and in short supply or you are seeing inflation. If there is higher demand, and you’re a business owner, wouldn’t you just hire more employees? Inflation does not necessarily correspond to increased standard of living. So, you might push wages up by restricting labor. However, you will push up prices in other goods, at least relative to housing which will fall to oversupply. Hence, housing would remain flat and everything else would become somewhat less affordable.
I mean why don’t you get that prices track wages unless you throw a bunch of credit in there. Why aren’t we all rich making 50K per year average income? Maybe because inflation happens to both prices and wages.
While protectionism might flatten out wealth distribution over a long time; it does not follow that it will increase the standard of living. The net effect might be worse standard of living.
Again, in the short term, the fine bottle of wine comes from California and is a major export. Along with the almonds and lots of other good stuff.
My point was that globalism is creating downward pressure on wages. Not justifying it or arguing for it. Just saying it is what it is.
Getting away from globalism and becoming protectionist isn’t an easy or quick fix. Didn’t the great depression teach you anything?
I certainly think the nations overseas are sharing in little of the prosperity. We are getting the lions share of the prosperity in low cost goods. They are getting fairly little in return.
The mercantilism policies of China, and previously Japan, both resulted in economic inefficiencies. Basically we are only sending them debt that will either be defaulted on or devalued over time. China will have major problems with over production. Japan was rolling out huge amounts of loans to subsidize business. Corrupted their entire banking system. China is devaluing their currency at a furious pace and grabbing a lot of business. However, the result of their policy are going to be large scale over production and eventually more bad debt.
My brother is on the planning board (unpaid position) of an upstate NY town and hears a lot of information that doesn’t get much play in the news. School enrollment in Fulton Cty is down 20% in the last 5 years. Many upstate NY school enrollments are down 10% in the last 5 years. Big drop in a short period because the jobs continue to dry up. There are places in NY where kids spend over 3 hours a day on the school bus to and from high school. The average cost per student is $20,000 in those rural areas and most of it is state money. The local politicians like to gouge the summer-home people but with the drop in real estate values, those summer-homers are filing lawsuits about inflated appraisals.
The rural areas will have to depopulate. Other people will not like subidizing their services because there’s no one with a job to pay any taxes. Those folks will have to move some where and they will need housing. I can see where housing and housing prices will start up again in some areas of the country. It all seems to come together at one time with the politics of the country. Rural areas were SO polarized for the Republican last year and Republicans are so out of power.
I moved out of the city of Fulton 5 years ago (technically, I lived 30 yards outside the city, but was in the school district). I had 1 kid in school there, and another ready for pre-school.
(we’re talking about the Fulton that is 20 miles north of Syracuse, right?)
Fulton and Fulton County are two different places but nearly identical in terms of their economic decline.
Plaid, I’m all too familiar with the area…. Gloversville, Johnstown, mayfield and areas around the reservoir. The property taxes in those areas are downright unimaginable given the prospects for earning a living and these areas will continue to depopulate(as you mentioned) and will put increased pressure on the burgeoning inventory of houses and more compression on the price structure.
Too much can be said for the voting trends of these naive folks. Desperate people will believe anything that has a glimmer of hope in it and the willing ignorance of the truth is downright mind numbing. The housing bubble was a real vacation from the secular economic decline there. The bubble is behind us now and it will be interesting to see how folks deal with reality again. The real estate collapse just arrived in upstate NY in February and I think most are unaware of it so far, generally speaking. BlueSkye has made confirmation of the collapse out her way near Elmira.
There is definitely two topics here; Firstly, our primary fundamental on this blog and second, the economic forecast in our own geographic areas and those areas we’re familiar with.
My brother is a retired dairy farmer who has common sense, reads a lot, and is an intelligent person who is interested in the world. So! A lot of stuff that he learns about local government is brand new to him but he’s the type of person who wants to understand. One thing that came up last year at a regional meeting of local planning boards was a fellow moving his business out of the area who came to the meeting for the express purpose of telling them that if they don’t get high speed internet not a single new business will locate in their areas. Told them about a download necessary for his business that took 11 seconds that would have taken 11 hours to download at his old location. A local politician - state senate, I think - was there and said he’d look into it - IOW, the state senator had never thought about. But currently, there is nothing in the planning for these areas to get high speed internet. These local planners sit around and talk about how they want to get businesses that will pay taxes but even a doctors office needs high speed internet and the planners weren’t even thinking about it; they had to be told. Its the lives and livelihoods of everyone in that area that are at stake but how can you fault people who are just part of an antiquated system of “planning” by local people who are unpaid and probably would not want to be paid if it meant being accountable.
My brother runs into a lot of people who listen to talk radio. They are angry at “the government” - meaning the state and federal governments.
Same nonsense here in Maryland: The government won’t let housing prices fall (to affordable levels), BRAC will bring a billion people to the state who will each rush out and buy the most unaffordable house they can find, “it’s different here,” paying 4x your salary for a condo makes sense, Baltimorgue is a great place to live and houses there will be worth millions of dollars in the future, etc.
Total nonsense, but we got to keep the “sheeple” beliving the Lie and in debt!
Pulte and Centex merging! Now you can buy a cheesy new home from Pultex!
http://247wallst.com/2009/04/08/pulte-centex-create-major-homebuilder-merger-phm-ctx/#more-29889
I saw that. I’m shorting CTX, so will get slammed really hard today of course. A lesson for other shorts out there.
I thought for sure shorting CTX was obvious since they were headed towards bankruptcy. I do still think there’s a chance the deal may fall through, but probably not. Pulte is in a strong cash position.
There is probably going to be a *lot* more homebuilder consolidation come up.
uh-oh…this means another empty building in downtown Dallas.
I’m shocked, SHOCKED that $6 billion more may not be enough.
http://www.freep.com/article/20090408/BUSINESS01/904080302/6B+may+not+cut+it+for+Chrysler
WOW Blano - those comments sure are entertaining!
Lots of emotion on this subject.
Whew.
Leigh
Iceland’s Central Bank Lowers Benchmark Rate to 15.5%
“The economy will slump as much as 10.5 percent this year following the collapse of the north-Atlantic island’s banks and currency, the IMF estimates. The central bank sees scope for “significant” rate cuts, according to the minutes of its March 19 meeting. Prices dropped a monthly 0.6 percent in March, the biggest decline since at least 2002. That sent the annual rate down to 15.2 percent last month, the lowest since September.
The failure of Iceland’s biggest banks slashed more than two thirds off the value of the krona last year, pushing price gains close to 19 percent and sending unemployment to a record high. The krona, which moves inside a managed float, gained 0.2 percent to trade at 168.07 against the euro as of 9:34 a.m. local time.
Inflation
The krona has slumped more than 6 percent against the euro in the past week, offsetting the impact of declining demand on prices. Still, Sedlabanki expects inflation to be “close” to the bank’s 2.5 percent target in 2010.
“The only concern is the recent depreciation of the krona, which will be the only inflationary pressure,” Bender said.”
I don’t understand. Why can’t Iceland just print their way out of their predicament like the USA? What’s the big deal?
They took out loans in foreign currency, so can’t print their way out. See my post on Michael Hudson’s essay below.
The loan rates are tied to the CPI of Iceland. So as Iceland prints more money and causes inflation, the interest on the loans rise as well. Very ingenious.
The only solution would be a revolution with the new regime repudiating the contracts made by the prior regime and issuing a new currency. Either that or declaring war on the US and having us invade and rebuild their economy(hey - that might make a good book).
Since Iceland is soo small, either should be able to be accomplished over a long weekend.
It did make a good book: “The Mouse That Roared”.
It was a good book. Good movie too.
I thought that was Lichtenstein or Luxembourg or some other more rinky dinky place.
Iceland has a total population of around 300,000. Exclusive of walruses and other non-human critters. Pretty darn rinky-dinky.
“The economy will slump as much as 10.5 percent this year”
“more than two thirds off the value of the krona last year”
If you measure in terms of a currency which has lost 70+% of its value and are still off 10%, isn’t that like a 73+% drop in real GDP?
I see another Cramer rant coming:
http://apnews.myway.com/article/20090408/D97E86U80.html
Snip from the article -
“Cramer is a buffoon,” said Roubini, a New York University economics professor often called Dr. Doom. “He was one of those who called six times in a row for this bear market rally to be a bull market rally and he got it wrong. And after all this mess and Jon Stewart he should just shut up because he has no shame.”
Cramer recently wrote in a blog that Roubini is “intoxicated” with his own “prescience and vision” and said Roubini should realize that things are better since the stock market’s recent bottom in early March.
Thanks for the morning tickle!
Leigh
Cramer just rang the opening bell, he can’t be wrong can he?
Cramer IS a muppet, he’s not a real person…right !?!
Hey don’t insult the Muppets
yeah - not cool.
Hey!
I just read Cramer is hosting his 1000 episode tonight.
Whoop-de-fracken-do.
Leigh
999 too many…
Reuters
Two dozen charged in alleged gang-led mortgage fraud
Wed Apr 8, 2009 2:02am BST
LOS ANGELES (Reuters) - Two dozen people were indicted on racketeering and other charges for allegedly conducting a wide-ranging mortgage fraud based in San Diego and led by a street gang member, according an indictment unsealed on Tuesday.
The lead defendant, Darnell Bell, a documented member of the Lincoln Park street gang in Los Angeles, received at least $9 million in proceeds from the enterprise, prosecutors said.
Bell’s status as an active member of the Lincoln Park street gang helped him recruit straw buyers for 220 properties with a total sales price of $100 million, and later maintain discipline among them, according the indictment.
“It was relevant not so much to running the (real estate) scheme but to managing (the people),” Assistant U.S. Attorney Nicole Acton Jones said.
Another defendant, Stanley Gentry, let the conspirators use his real estate license in exchange for a $10,000 monthly payment and a percentage of the commission and broker’s fees from each purchase, prosecutors said. (Cont’d)
Well, it’s a start I suppose.
Leigh
White collar crime for dummies. It’s so easy even gang members can do it. It’s also more profitable and less risky to rob the bank with a pen instead of a gun.
If you get caught and convicted, you serve less jail time and do so in a minimum security prison instead of a maximum security prison.
The downside is that it’s much easier to get caught IF the authorities care enough to pursue.
Hell I think the FED should higher this guy and his gang to drive housing prices back up. I mean that’s what the FED wants right?
RE: Well, it’s a start I suppose.
It’s like a flea on a camel’s back.
IF a 20-something gutter gangsta clips the mortgage system for a cool $9 mil noting, “this was easier an easier scam than dealing drugs…”: then nationwide, how much have the sophisticated big boyz, stolen ?
These parasites must be in a complete frenzy knowin’ that the incompetants at FHA and HUD are now the idiot savants doin’ the sub-prime deals.
“Hello”, Tony Soprano here, calling for Victor the FHA appraiser
I’m pretty sure I read something in the news about how mortgage fraud had become the “crime of choice” vs drugs in Camden, NJ.
For those not familiar with Camden, NJ, imagine the worst inner city ghetto you can, and then get a little bit more creative and you have Camden: where everything goes to die.
Stringer Bell lives!
Didn’t there used to be a poster here under the name staterepresentativeclay?
Hey, that was Russell “Stringer” Bell, not Darnell.
BTW, did you know that when Clay Davis did a radio interview to proclaim his innocence after he was charged with acts of corruption, he was interviewed by Larry Young, the expelled State Senator whom the Clay character was partially based on?
Loanz in da hood…
Pimp My House!
April 8 (Bloomberg) — JPMorgan Chase & Co., Goldman Sachs Group Inc. and the eight other banks that have dominated the credit-default swaps market for a decade are now ceding some power to their clients as regulators push for transparency.
Pacific Investment Management Co., Elliott Management Corp. and three other investment firms will join 10 dealers this week on a committee that will make binding decisions for the first time on how contracts are settled. Such decisions have influenced payouts and, at times, had the potential to almost double the amount investors made or lost.
The committee may help boost confidence in the $28 trillion market, where banks, hedge funds, insurance companies and investors speculate on the creditworthiness of borrowers or hedge against losses on debt. Market decisions, while not binding, were made previously during conference calls between dealers, with no clear rules in place to ensure all sides were being considered.
“It’s largely in the past been seen as a closed-door process,” said Brian Yelvington, an analyst at debt research firm CreditSights Inc. in New York. With the committee, “the transparency and the fact that you should get some consistency gives people a lot more confidence than they’ve had,” he said.
The committee is part of a broader effort being pushed by regulators including the Federal Reserve Bank of New York to curb the risk of systemic losses from the privately negotiated market, where outstanding contracts ballooned to as much as $62 trillion at the end of 2007.
Cataclysmic Shift
The overhaul, dubbed the “Big Bang” because it’s considered a cataclysmic shift for the market, aims to bring a fresh set of standards to existing and new trades.
The 2,023 entities that had signed up as of late yesterday in New York, as measured by the International Swaps and Derivatives Association, will agree to abide by the committee’s decisions and auctions that determine the value of underlying securities. The auctions effectively set the size of the payout when borrowers default.
Both the auction and the credit-swaps committee are necessary for another effort pushed by regulators: moving the derivatives through clearinghouses designed to absorb the failure of a dealer collapse.
Without a panel to make binding decisions, clearinghouses would be at risk of having a firm on one side of a trade disputing a so-called credit event while the other side demands payment. After more than a week of debating, dealers last month overruled some objections and declared a credit event for contracts guaranteeing the debt of a unit of Montreal-based AbitibiBowater Inc., North America’s biggest newsprint maker.
Fed Support
Credit-default swaps pay the buyer face value if a borrower defaults in exchange for the underlying securities or the cash equivalent.
The Fed began pushing for clearinghouses last year after the near-collapse of Bear Stearns Cos. in March 2008 and the failure of Lehman Brothers Holdings Inc. in September triggered concern that banks were too interconnected.
“JPMorgan Chase & Co., Goldman Sachs Group Inc. and the eight other banks that have dominated the credit-default swaps market for a decade are now ceding some power to their clients as regulators push for transparency.”
How about if the American people get repaid their involuntary TARP tax payment that was wrenched away from them against their will last fall and handed over to failed Wall Street firms? That would get Megabank, Inc to cede some power back to Main Street.
Nothing short of torches, pitchforks and public floggings is going to get “Megabank, Inc to cede some power back to Main Street.”
And no, it’s not going to happen. The sheeple are too well trained for that.
Nothing short of torches, pitchforks and public floggings is going to get “Megabank, Inc to cede some power back to Main Street.”
Megabank, Inc. will just hire MegaMerc, Inc. to protect its interests from physical harm. How quickly did AIG execs hire personal security teams when many were outed about bonuses? I bet that was paid for by the taxpayer, err. company…
“Megabank, Inc. will just hire MegaMerc, Inc.”
Hungry mob vs guy with gun: hungry mob wins. You can only change mags so fast. But to paraphrase Sleepr Cell, the sheeple are too well fed for that.
RE: You can only change mags so fast.
I can change out a 100 round AR-15 Beta-Mag in about 5 seconds.
Heavy mo’fo’s, though…
Hungry mob vs guy with gun: hungry mob wins. You can only change mags so fast.
Not to belabor the subject as we all agree it won’t happen anytime soon, but automatic weapons and fire discipline training make all the difference… from the fire team up through squad and platoon level, you are trained to maintain a steady fire volume. Fire team members alternate the reloading of weapons so that at least half are firing at all times. Heavy weapons utilize 3-5 second bursts, etc. This is standard military training which most if not all professional mercs have had…
I don’t know about you, but I’m not charging into a hail of automatic weapons fire unless I have my own base of fire supporting me, smoke, heavy cover evenly dispersed throughout the AoA, and body armor. Even then, it’s a crap shoot whether I come out the other end alive… stealth and surprise is always better than direct confrontation in my mind.
HD man: What about changing melted barrels? how fast can you do that?
What about changing melted barrels? how fast can you do that?
By firing using controlled 3-5 second bursts, you allow the barrel a chance to cool between firing and prolong any need to change out barrels.
As to how quickly to change barrels, it’s about 15-20 seconds on an M60 or M249. On an AR-15, depends on how long it takes to get those heat shields off. For me, that was always painful. Of course, I never carried a spare barrel for an M-16 or M249, so changing them was moot…
You don’t have to shoot the whole mob……..just the guys in front, yelling and pointing in your direction.
Hungry mob vs guy with gun: hungry mob wins. You can only change mags so fast. But to paraphrase Sleepr Cell, the sheeple are too well fed for that.
Tell that to Sadam, as I recall he held the majority of hte population under his thumb for a long time. The only way the mob wins is if some outside source buys them guns and bombs. I don’t see it happening here, the US can’t even manage a sizeable demonstration against this crap.
April 8 (Bloomberg) — The Federal Reserve may offer investors longer-term loans at higher interest rates to buy commercial mortgage-backed securities, aiming to protect the central bank’s balance sheet while acceding to an industry plea.
Lobbyists in the commercial mortgage-backed securities industry say the Fed needs to provide loans of at least five years, rather than the current three-year limit, to avert a meltdown in the market. Fed officials, wary of granting the request outright, are considering a compromise in altering terms of its $1 trillion emergency-lending program.
“The Federal Reserve may offer investors longer-term loans at higher interest rates …”
I have a suggestion: Have the Treasury issue them and call them long-term Treasury bonds.
Bloomberg.com
Party Ends for Russian Rich After $230 Billion Losses (Update1)
By Anastasia Ustinova
April 8 (Bloomberg) — Champagne and caviar are out in Moscow, and vodka and pelmeni dumplings are back in.
Snips -
Rich Russians, stung by the end of the biggest economic boom in their history, are tempering the opulent lifestyles that made the city of 10 million the bling capital of Europe.
Demand for private jets and $500,000-a-week yachts has collapsed, while a survey by restaurant consulting group Restcon found revenue at high-end eateries has halved. Luxury-clothing boutiques selling brands such as Alexander McQueen and Stella McCartney are closing down.
“A new lifestyle mentality is taking shape,” said Roman Trotsenko, 38, the millionaire founder of airport builder Novaport. “People aren’t really in the mood to party.”
…
You just can’t party when others are starving,” said Boris Teterev, president of Rolls-Royce Motor Cars Moscow, which opened in 2004 to cater to Moscow’s nouveau riche.
…
Many oligarchs are seeking state protection from Western creditors and don’t want to irritate the Kremlin with outlandish behavior at a time when the government has declared social spending its top priority, Dobrovinsky said.
“The private jets are still there, but the names of the owners have been scratched off,” said Dobrovinsky.
…
There’s no sign of crisis, either, at Most, a French restaurant a block from Red Square that recently charged a couple $16,000 for dinner. “Our guests are used to this lifestyle,” General Manager Mikhail Dolgi said.
Moscow authorities last month allowed dozens of people to demonstrate downtown against ostentatious spending, with placards saying, “Glamour is a party during the plague.”
“The glamour lifestyle is promoted by those who agree with the pro-American lifestyle and want to destabilize our society during these difficult times,” said Alexander Bovdunov, a spokesman for Eurasia Youth Union, which organized the event.
In February, Medvedev banned his staff from vacationing abroad without permission after three Kremlin officials were spotted partying in the glitzy French ski resort of Courchevel, according to the Kommersant newspaper.
Mikhail Prokhorov, then CEO of OAO GMK Norilsk Nickel, embarrassed the Kremlin two years ago by flying in a planeload of women for a private party and getting arrested on suspicion of pimping. He was cleared of any wrongdoing because the judge ruled there wasn’t enough evidence…
Appear frugal, preach frugal. Pretend not to be lavish.
You just can’t make this stuff up!
Leigh
RE: a French restaurant a block from Red Square that recently charged a couple $16,000 for dinner
Tsk, tsk…The unbridled arrogance which exudes from the aristocracy when the masses have no access to guns as a means of protest.
Interesting that now the Oligarchs want to be protected from their foreign creditors. It sucks to owe money, as you really never get to own anything. It would be interesting to see how much these Russian Millionaires are worth once they pay off their creditors?
Might more than one of them have been swimming naked? Nahhh…
Why do we still have U.S. troops in Germany? They have all of their soldiers who can’t possibly leave the country, so why can’t they handle defending it without us? If they don’t have enough soldiers, enlist more of those muslim immigrants into the military.
What? The Russian Bear is resurgent? We must support the cool kids in Europe!
Move the troops to Poland then.
Bloomberg.com
Vacancies at U.S. Retail Centers Hit 10-Year High, Reis Says
By Hui-yong Yu
April 8 (Bloomberg) — Vacancies at U.S. malls and shopping centers rose to their highest in more than 10 years as consumer spending fell and stores closed in the recession, according to first-quarter data released today by Reis Inc.
More empty stores and lower rents are ahead “unless conditions change dramatically,” said Victor Calanog, director of research at the New York-based real estate research firm. He forecast the declines would last through next year.
“This outlook assumes positive job growth and an increase in consumer spending beginning in early 2010,” Calanog said in a statement. (Cont’d)
Yeah, that pesky little thing called positive job growth.
This will end well.
Leigh
Nice post Leigh….
Thanks, I tell ya Dave, some days I shake my head so much I get dizzy.
Do these people read what they write?
Lawd,
Leigh
I heard on the radio that the next bailout is insurance companies. Prudential and others were mentioned. I am assuming derivatives.
“I am assuming derivatives.”
I would assume all manner of vanishing collateral.
Poof.
Combo, every time you say, “poof…”
I do this —>
Looks like it is limited to life insurers that are bank holding companies? I’m a P&C gal, and not too savvy on the life side of things. Either way, the whole idea of separating insurance from banking is looking more and more like it was a good thing.
I expect policyholder surplus has taken a pounding across the board. I am wondering how reinsurers will do. If/when they start toppling, it will be bad news for all insurance.
RE: it will be bad news for all insurance.
Hey! Don’t forget the surf board rental shop guys!
They want some bail-out monies too!
http://www.latimes.com/business/la-fi-hawaii8-2009apr08,0,3342226.story
Or insurance companies who quickly bought into banks so as to be bailout-worthy.
The WSJ mentions that Prudential, Hartford, and Lincoln National have all applied.
Bank holdingcompanies were already eligible for TARP money IIRC.
Leigh
Which is not surprising since they are the three most levered insurers.
Prudential’s leverage is an eye-popping 108! Hartford and Lincoln are at 94 and 39 respectively.
108!! 94!! 39!!
Speechless.
Leigh
Yeah, well! I’m extraordinarily UNSURPRISED.
They are the three-most levered. Undoubtedly they crashed first.
thats just funny.
“please sir, I want more.”
HIG rallied hard on the news. 7.50’s puts at 80 centavos.
http://www.reuters.com/article/marketsnews/idINN0747118320090407?rpc=33
“WASHINGTON, April 7 (Reuters) - The U.S. Treasury Department is planning to delay the release of any completed bank stress test results until after the first-quarter earnings season to avoid complicating stock market reaction, a source familiar with Treasury’s discussions said on Tuesday.”
Awww, poor wittle banks.
“…to avoid complicating stock market reaction….”
What on earth does that mean?
The Treasury gaming the stock market? This is the scariest news I’ve heard in a few months.
Complete F-ing meltdown as whatever money is left runs for the exits when they realize just how deep down the rabbit hole the banks really are.
THATS what that means.
Exactly.
Though one would think that anyone with an ounce of sense could’ve guessed the probable outcome of the “stress tests” months ago (even though it’s likely the tests underplay the severity of damages), it’s still infuriating that the Treasury is trying to hem and haw and avoid the issue.
(Hi Muggy! Hope the fire ants aren’t flockin’ yet.)
What I find so scary, is how open they are about it.
I mean, what’s their time horizon for trying to keep the markets stable (inflated)? Are they looking at 3 months? 6 months? 4 years? 20 years? Or until “the crisis is over”, which appears to be just around the corner.
Forever.
I can fully imagine long lines of poor people waiting for soup in a jobless, crumbling nation that looks like the worst of Detroit cheering as they watch the news on GovTV that “the market is up again!” for the 100th day in a row. And as the sheeple cheer, they’ll all have forgotten how they ended up in the soup line or that they don’t have any real money in the market anyway.
What on earth does it mean? The last line in the cited article says it all: “The last thing Treasury wants to do is set off a panic, the source said.” As long as very few understand that the major banks are insolvent, we will muddle through this somehow, youbetcha.
It means we’re FUBAR.
WW3 anybody?
I’m very confused: I thought the whole point of the “stress test” was to basically give every bank a passing grade, declare victory and solvency, and then toss in another trillion dollars of Bailouts as a reward - why do this? It just causes confusion…
That’s the idea. The confusion creates a smoke screen until TPTB finish deciding who gets what and who gets screwed, as well as giving time for their buddies to consolidate and reinforce their economic positions and how close we can come to WW3 without actually going there.
NBC26.com
Appleton Man Charged with Arson
Posted: April 7, 2009 08:43 AM CDT
An Appleton man, accused of torching an apartment building says he wasn’t thinking when he used gasoline to clean his apartment. Ernest Krajnaik suffered non-life threatening burns during the fire at East Haven Court, last week. Krajnaik told investigators the fire started when he tossed a lit cigarette into a pile of gas soaked clothes. No one else was injured.
You just can’t make this stuff up!
Leigh
greenbaypressgazette.com
Why you shouldn’t clean with gasoline while smoking.
More information and a nice photograph of this genius, as I’m sure you’re all curious. haha.
Leigh
Is this some kind of sly metaphor for the PPIP/TARP programs? Is the guy really Secretary Geitner? BB?
Cleaning the house with gasoline…with a cigarette…
Do you know what happens if you throw a lit cigarette into a puddle of gasoline? Nothing. Eventually the gasoline puts out the cigarette.
No fire. It’s when you strike a match or flick your Bic that you can ignite gasoline vapor.
Contrary to Hollywood chemistry, a lit cigarette does not even approach the temperature needed to cause a gasoline fueled fire or explosion. “Smoking” could, due to the act of lighting up with a flame.
In the story above, if you put a lit cigarette deep into a pile of rags, you might get a fire, might not.
From the greenbay article -
Witnesses told police Krajniak bought gas twice that day at a nearby station. He told police he planned to clean his apartment with the gas, and pulled everything out of his closet and piled it in the bedroom. The pile was near about five gallons of gas he had poured into plastic ice cream buckets.
Krajniak told police it was a mistake to throw the cigarette and he was sorry for what had happened.
Hey, I swear I didn’t make it up!
Leigh
You can douse a cig in kero, but not in gasoline. It the vapor pressure.
All I know is you can soak a tennis ball in Everclear and play flaming tennis for about 30 seconds.
LOL. It’s hillarious to know someone ELSE also did that.
At 3:00 AM after drinking a significant portion of the aforementioned everclear.
How do you serve the ball?
Very carefully apparently.
“How do you serve the ball?”
Damn, we should have videotaped it.
You bounce it off the ground with the racket — after it’s lit.
As it bounces along the court it leaves little pools of ignited Everclear and makes an awesome, thick fireball sound. We actually had a few good volleys.
I will demonstrate when we have a Florida meetup.
Doesn’t it explode when the air inside heats up? Or does the higher pressure just mean that it rebounds better until the fuzz burns off?
No, all the fuzz burns off and then it just sort of melts.
Oh my Gawd…How do you guys think this stuff up
They spit out the morning meds that Nurse Racheted hands out scdave
I’ll bet you never tried bottle rocket torpedos, either, huh?
Since he survived, he won’t be eligible for the next Darwin awards.
2009 Darwin Awards
“Semifinalist #2:
Three Brazilian men were flying in a light aircraft at low altitude when another plane approached. It appears that they decided to moon the occupants of the other plane, but lost control of their own aircraft and crashed. They were all found dead in the wreckage with their pants around their ankles.”
The winner was described as an “amateur rocket scientist.”
Wow–that’s so sad. How many is a brazilian again?
And ladies and gentlemen -
This is why my number one rule when reading the HBB is AVERT EYES before tipping liquid to face!
ROFLMAO!
Leigh
“Florida Sen. Bill Nelson says he’s taking the state’s Chinese drywall issue all the way to the top… the senator said he’s urging President Barack Obama to become involved.”
http://www.baynews9.com/content/36/2009/4/7/457832.html?title=Nelson+wants+Obama+to+tackle+Chinese+drywall+issue+
Obama’s gonna pay my mortgage and fix my drywall!! Geez, do anything of these numbskulls understand priorities?
Hmmm….
1. Loose nukes
2. Weaponized biological pathogens
3. Chinese Drywall in FL chitbox
4. Financial crisis
5. My steak is overcooked
Trade toxic drywall for toxic debt.
senator said he’s urging President Barack Obama to become involved ??
Translation…Give me a government bail out…
Don’t forget covering your leaky muffler.
How much per house did that builder save by using Chinese drywall? Might not have saved $500 per house. We bought a new house once and the appliances were awful. Stove, dryer and dishwasher all had to be replaced within 5 years. Learned -the hard way - that there is a special grade of appliances called “Builders’ grade”! For the builder to save small amounts, he will stick you with junk that costs you far, far more to replace. Well, you can learn about that with appliances and put it in the contract that you have to choose your appliances but for drywall !!!!
How many other components of a house could be cheap crap and I hate seeing the taxpayers get dunned while the builders live like kings. Screams for regulation and builders having to provide insurance on their products. I wonder if Sen. Nelson, one of those “conservative” Democrats, is the type who would propose homebuilders providing, say, 10 years of paid insurance on the quality of their product.
This is GOOD!!
See, by selling people toxic cr*p, it stimulated the economy! Then, they have to buy NEW toxic cr*p, which keeps the slaves in China employed. Whenthe toxic cr*p eats out the victim’s lungs, that also keeps people employed.
If they had just build a quality house and sold it as a reasonable price, there would be no money to be made from flipping loans, refinancing, buying new junk the replace the old junk, etc.
Consume, Consume, CONSUME!!!
Argh…
Exactly! It’s ALL about the CHURN!
The fine, & wealthy, Senator is an ex-developer himself. Notice he didn’t call for any investigations into the builders.
And what’s this about regulation! What are you, a commie? If you want to buy a house, be responsible. Have teams of craftsman, scientists and lawyers, tear the house apart, test every item and review every word of every contract before purchasing.
The 1200 sq. ft. house might cost $2,000,000 when you’re done, but it’s how we have to live nowadays.
I need the President to fix my plumbing. (Oh, gawd, I said that on the HBB!)
But seriously, I am still seeking a plumbing contractor to replace my aging water line. It’s developing senility (as in, it’s “losing it” as we speak.)
Hey! Eventually someone we “negotiate” with is actually going to give us something in return for all our carrots.
Just a random thought to throw out here:
What about facing up to the utter failure of Megabank, Inc (Goldman Sachs, JP Morgan, Bank of America, etc) and our Fed to run a stable financial system and scrapping the whole thing? It’s time for a change, IMO.
Part of Perestroika could be to purge all Goldman Sachs employees out of the top ranks of government.
Just a random thought here, as I said.
It is funny for The Economist to point out so many crimes against society recently committed by the fraudential sector, then to suggest in the same breath that it would be a mistake to take decisive action.
I also dispute their equating the rotten financial system with “the wealthy.” There is no reason one could not have a well-functioning financial system where individuals made themselves wealthy through hard work rather than through kleptocratic governance of others.
I say purge the whole system clean or else scrap it entirely. A rotten structure should be repaired or, if too rotten, torn down and rebuilt.
Leaders
The rise and fall of the wealthy
The rich under attack
Apr 2nd 2009
From The Economist print edition
Going for the bankers is tempting for politicians—and dangerous for everybody else
The Bridgeman Art Library
STONES thrown through a banker’s windows in Edinburgh, workers “bossnapping” executives in France, retrospective 90% tax rates proposed in Washington, and now a riot in London as G20 leaders arrived for their summit (see article). A sea change in social attitudes that could have profound effects on politics and the world economy is under way.
The rich are certainly not the only targets in the current populist backlash. Frightened by the downturn, people are furious with politicians, central bankers and immigrants. But a rising wave of anger is directed against the new “malefactors of great wealth”. Today’s villains are a larger and more global bunch than the handful of American robber barons Teddy Roosevelt denounced a century ago; and most of them are bankers and fund managers, rather than owners of trusts and railroads. Yet the themes are similar to those at the end of that previous gilded age: rising inequality—the top 0.1% of Americans earned 20 times the income of the bottom 90% in 1979 and 77 times in 2006—and a sense that the greedy rich have cheated decent working people of their rightful share of the pie.
Some of this cheating has been of an old familiar sort: building Ponzi schemes and bribing politicians to secure favourable deals. There are greyer areas, in which the rich hide their cash in tax havens and get tax law written to their advantage—witness the indefensible treatment of private-equity profits. But what makes the rich’s behaviour so galling for many critics is that their two greatest crimes were committed in broad daylight, as they were part of the system itself.
Now I know why my wealthy relatives dress like homeless folks
Nah, it could still just be they are allergic to soap.
Here’s a thought.
Confidence and optimism are up since the Geithner plan came out and the market has rallied.
Unfortunately, the Obama team is wrong and Wall Street is wrong. This is a Bear Market rally and the toxic asset plan is not going to do it (time to nationalize the zombie banks).
But when things fall again (Dow drops to 5000?, 4000?, 1000???) what happens. Do people push for a bank take over and do what the Professor suggest (I agree). Or do they decide to turn from Obama and say to give the Republican ideas a try. Ideas that would be so much more disastrous than anything Obama has suggested. (You do NOT cut spending and taxes on the wealthy in a Depression).
Also a random thought.
The fact that the entire Wall Street investment banking sector folded shop last fall ought to be a warning sign to US policymakers that something is amiss and needs to be radically overhauled. All I see thus far are denial and hair-of-the-dog stimulus programs to try to get Americans all confident again so they can resume spending themselves into oblivion.
In other words, top US economic policy makers are stuck in the denial phase of the housing bubble stages of grief. GET A GRIP!
Oh, and don’t forget to pay your taxes next week, Mr Treasury Secretary
You might try using Turbo Tax — my wife just finished using it to calculate what we owe last night, same way she has every year since the software product came out.
More Stimulus - Reuters
HSBC pledges £1 billion for homebuyers
Wed Apr 8, 2009 12:42pm BST
LONDON (Reuters) - HSBC Holdings (HSBA.L) said it has earmarked 1 billion pounds for new mortgage products for borrowers with a deposit as small as 10 percent, targeting first-time buyers who have seen offers dry up.
Europe’s biggest bank said the products with a maximum loan to value of 90 percent will only be available to its HSBC Plus account and Premier customers — respectively current accounts that charge a monthly fee or are for wealthy customers.
HSBC said the offer is part of its commitment to boost mortgage lending. It has said it will lend up to 15 billion pounds to homeowners this year, up 20 percent from 2008.
The loans will charge annual interest of 4.99 per cent, fixed for 2 years.
Leigh
“The loans will charge annual interest of 4.99 per cent, fixed for 2 years.”
Taking on ARMs at a time of historically low interest rates…is it summer rerun season already?
What about all the GFs rushing to buy something hard after the dotCom bubble collapsed? That’s when this thing spun out of control. You couldn’t stop some of them. Yes, WS provided the money. However, MS duped itself. Mania is mania.
“What about all the GFs rushing to buy something hard after the dotCom bubble collapsed?”
I read somewhere that something like 30 pct of US home purchases in 2008 were seconds. So I see a similar rush of greater fools into the vacuum created by the housing bubble collapse.
30 pct of US home purchases in 2008 were seconds ??
Yep.. and that market is going to get crushed…Its just going to take a long time…
Ha ha ha, Professor! That’s good: purge gubmint of all Goldman Sachs employees. Why, that’s like asking Saudi Arabia to purge itself of its Royal Family.
More like asking Saudi Arabia to purge itself of ties to the Bin Laden family.
utter failure of Megabank, Inc ??
Kind of on the lines of what Meg Whitman said in the interview with Forbes as it relates to CDO’s
Hawaii, suffering tourism drop, appeals to Obama
http://www.latimes.com/business/la-fi-hawaii8-2009apr08,0,3342226.story
Get in line, CHUMPS! Obama’s gonna wax my surfboard!
“State officials urge the president to block any policies that would limit business travel.”
Unemployment - that puts a crimp on business travel.
This new president needs to nip this idea that he can solve everyone’s problems in the bud. This is really starting to look like a huge joke and once it’s revealed that HeliBen’s timetable for recovery is a feel good sham - look out!
What’s business travel? The last time I sat in a plane on a business trip was 5 years ago.
These days its all teleconferencing and Microsoft NetMeeting. We can only travel if we are visiting a customer.
A friend went on business travel to Hawaii a couple of years ago. But he had to physically interact with equipment.
Just got back from a 9 day vacation in Hawaii. Tickets cost $400 round trip, about half what they were going for this time last year. Got a great 1000+ square foot condo for $60 a night. What a paradise. I can’t wait to return.
On a side note, it seems that Hawaii is having an identity crisis. On the radio, one minute you’d hear a paid spot from the Hawaii tourism industry asking Hawaiians to show “aloha” to guests and the next minute would be a song whining about how “they” took Hawaiian culture.
Anyhow, we had an awesome time. The volcano was incredible; saw three colors of sand. It seems a good time to travel!
From the article -
Obama himself may have contributed to what many tourism officials see as the vilification of business travel during an Indiana town hall meeting in February.
Asked about corporate spending and the federal bailout, the president said: “You can’t get corporate jets, you can’t go take a trip to Las Vegas or go down to the Super Bowl on the taxpayer’s dime.”
Later, the White House tried to clarify the statement, saying the president encouraged travel, except for companies accepting government bailout money.
So, what’s her beef?
In a letter to Obama last month, Gov. Linda Lingle and 95 government leaders, business owners and tourism officials urged the president to block any policies that would limit business travel in the future.
Hey, no travel on taxpayers dime.
Jeesh, what’s she want? Mr. President, please make an announcement clearly stating it’s okay for business travel to Hawaii and leave out that pesky TARP stuff?
Leigh
http://online.wsj.com/article/SB123681439092901753.html
Are Life Ins Co Bailouts Next? WSJ Online
The seniors have annuities. Money will have to be borrowed, paid by younger generations, to guarantee them.
When we’re old, it’s dog food no matter how much we save, it seems.
You are right about that. The Wall Street - Washington kleptocracy apparatus is set up to keep bleeding wealth away from the young to the old and from the the middle class towards the rich and the poor socioeconomic strata. Eventually those young folks whose potential savings were bled away from them to support government Ponzi schemes will face the consequence of old age with low savings and a much higher dependency ratio than when the Social Security program was enacted.
That article is from March 12. Has something changed since then?
Gotta funny story to tell you about life insurance…
A couple of years ago, I was seeking a change in my homeowners insurance. Went to a local American Family agency, got the owner’s assistant to help me with the application, and all was hunky-dory until she went into…
The Life Insurance Sales Pitch!!!
Now, speaking as someone who isn’t married (hooray!) and has no dependents (yippee!), I need life insurance like I need a hole in the head. So, I had to use the word N-O.
Repeatedly, in fact.
The gal’s persuasive effort eventually landed on the “You could use it for making charitable gifts!” square.
The N-O reply was repeated by Slim. (Sorry, Toots, but if I’m going to make charitable gifts, I can do so without running ‘em through an insurance company first.)
Long story short, I didn’t switch to American Family.
And now for today’s Captain Obvious Momemt - apparently government regulations and backstops may actually ENCOURAGE excessive risk-taking! Who’da thunk?
Plan to Expand Financial Oversight May Add New Risks
The Obama administration’s plan for a sweeping expansion of financial regulations could have unintended consequences that increase the very hazards that these changes are meant to prevent.
Financial experts say the perception that the government will backstop certain losses will actually encourage some firms to take on even greater risks and grow perilously large. While some financial instruments will come under tighter control, others will remain only loosely regulated, creating what some experts say are new loopholes. Still others say the regulation could drive money into questionable investments, shadowy new markets and lightly regulated corners of the globe.
…
Electricity Grid in U.S. Penetrated By Spies…
WASHINGTON — Cyberspies have penetrated the U.S. electrical grid and left behind software programs that could be used to disrupt the system, according to current and former national-security officials.
The spies came from China, Russia and other countries, these officials said, and were believed to be on a mission to navigate the U.S. electrical system and its controls. The intruders haven’t sought to damage the power grid or other key infrastructure, but officials warned they could try during a crisis or war.
“The Chinese have attempted to map our infrastructure, such as the electrical grid,” said a senior intelligence official. “So have the Russians.”
The espionage appeared pervasive across the U.S. and doesn’t target a particular company or region, said a former Department of Homeland Security official. “There are intrusions, and they are growing,” the former official said, referring to electrical systems. “There were a lot last year.”
Link please (or at least mention the source).
I’m a week too late, but that reminds me of an old practical joke I heard about - maybe an April fool’s joke from years ago. There was a news report that the phone company was going to be cleaning out the phone lines, and so they asked that everyone leave their phones off the hook one night, and that they might find some dust under their phones in the morning that had blown through.
Apparently lots of people fell for it, though the phone companies weren’t too enthused.
Wall Street Journal… Not an April Fools joke…
http://online.wsj.com/article/SB123914805204099085.html
I don’t need a some funky known unknow foreign cyberspy attacks to shut my computer down or screw things up…I PAID good money to have MS Windows VISTA to do THAT for them!
PS…Thx a lot Bill
How hard can it be to map the infrastructure when most of the electrical lines can be seen on google earth or just by driving around?
You need to map the computer systems you’ve backdoored / trojaned with what it turns off
Hey…I had one al Qaeda suicide squirrel with a tree branch trip out my power lines and transforner for 7 hours last summer. It didn’t help that they had outsourced the local 2 1/2 man power crew to Outer Mongolia, China or someplace.
Well, he might have just been a low tech REIC squirrel but regardless, nobody will have to “worry” about feeding that evil little roof rat again
The russians are coming! BOO!
A horny squirrel at a substation is probably more of a threat.
CNN DOT COM, 17 Sept 2004
“Rampant fraud in the mortgage industry has increased so sharply that the FBI warned Friday of an “epidemic” of financial crimes which, if not curtailed, could become “the next S&L crisis.”" Boo.
And the e-terrorist/electric grid fear mongering is thematic of the last 30 years of similar hobgoblins floated by the military hardware elite feeding on the Pentagon.
The comparsion between it and the housing fraud that was so obviously transparent as early as 2002 is a very poor analogy indeed.
boo hoo.
Yeah well, if foreign agents can now turn off the lights at will then that doesn’t reflect very well on “The War on Terror”, does it?
Why spend a couple billion burying power lines when you can spend a couple trillion blowing up foreigners?
Judging by my last electric bill, the only terrorists plugged into my electrical grid are my OWN Power Company’s INVESTORS !
Actually, our electrical grid is under pretty thorough electronic controll via the internet and if some outside entity really wanted to crash it they probably could.
The story reminds me of somthing that I became aware of a few years ago concerning the public water utilities. An enterprising grad student put together a VERY comprehensive database of all pumping stations, reservoirs, main supply lines, storage towers etc using nothing but public records. Apparently it had never been done before but as soon as his research became known the feds classified it. I did some work for DCWASA (Washington water and sewer authority) and found out about this. Our public utilitities are shockingly vulnerable.
When I was young I used to wardial. I had control over temperatures in local movie theaters. I remember turning an anchor tenant at the local mall into a disco. They were all using Trane Tracer 100 systems for automation. Good times! I had scripts I wrote to brute force the accounts. Now it looks like it should be possible to sit with a laptop computer and turn off the power at select homes in the neighborhood! Go go technology! Don’t even need a phone line anymore. Oh yes, and those foreigners are coming at us full scale, I just hope we’re attacking them as well.
Don’t forget a moron with a back hoe.
As someone who has spent some time working in this area, this is a lot easier than most people would want to imagine. It’s easy to do something to the process control system that will cause millions of dollars in damage and take a generator offline for weeks or months. Additionally, the process control systems at power plants have some of the poorest security I’ve ever seen. The only thing that’s kept them safe in the past was making sure that they weren’t exposed to the internet at all.
“The only thing that’s kept them safe in the past was making sure that they weren’t exposed to the internet at all.”
That’s the only sensible way to design the system in the first place! To be resistant to intrusion from the net, don’t connect the d*mn thing to the internet! Yeesh.
Well, it’s a good thing we’re cutting back on defense spending considering how friendly our old enemies continue to be… yeah, this will end well… not…
If you think the utility system is vulnerable now, just wait until we get the new “Smart Grid!”
A while we’re at it, let go ahead and tie Social Security into the stock market like we were gonna do!
Honestly, I’m having a hard time figuring out who the REAL terrorists are. Who are these rocket surgeons running our country?
NEW YORK (Reuters) - The U.S. Treasury Department plans to extend the Troubled Asset Relief Program to certain life insurers, The Wall Street Journal reported on Tuesday, citing people familiar with the matter.
The Treasury is expected to announce within the next several days the inclusion of life insurers that are bank holding companies or own a thrift, the Journal reported on its website.
Several life insurers have applied, including Prudential Financial Inc, Hartford Financial Services Group Inc and Lincoln National Corp, the Journal reported.
No decisions have been made yet about which applications will be approved, sources told the Journal.
Sources told Reuters in February that the Treasury was likely to approve insurers for TARP funds.
In recent months, some insurance companies have received approval to acquire banks, paving the way for them to participate in the government’s $250 billion capital injection program, which is part of the larger bailout fund.
Am I following this correctly?
Life insurance companies that got involved in banking are in trouble, so the Treasury is going to encourage more life insurance companies to acquire banks? Isn’t this an example of moral hazard?
Probably a fairly simple question for folks here: My sister owns a condo and needs a bigger place for her, hubby, and baby on the way. But she says that if she takes my advice to temporarily rent, sells, and then rents a bigger place for a few years, that she’ll have to pay cap gains on the profit off her place.
Whereas if you roll all the money into a new place, you don’t pay tax?
I assume there will still be a profit cause she bought in 99.
cap gains are, i believe, tax free independent of roll over.
could be wrong.
regards
evil
Please have her seek the advice of an tax expert, but last time I checked the exclusion applies to a property “if, during the 5-year period ending on the date of the sale or exchange, such property has been owned and used by the taxpayer as the taxpayer’s principal residence for periods aggregating 2 years or more.”
I also note, however, that I do not believe we are at a bottom. Renting the place may cost her 10% or more per year of current equity, not to mention that unless you are in the business and can do repairs easily, understand lease/eviction law, etc. its a hassle with little or no benefits. In a year, the property may be returned trashed, with avg prices down 15% or more from current levels. As far as ppl I know with no experience that rented out property they owned, they were burned about 80% of the time. In a time of property in some areas depreciating at 30% or higher per year, that number would probably be greater than 90%.
One more thing, as I keep getting distracted. I thought the rollover rules were elimited in the Taxpayer Relief Act of 1997. In addition, there are dollar limits on the exlusion.
Yes, if it is under $500,000 and jointly owned, it is not even reportable. $250,000 for a single owner. “Profit” doesn’t matter if you are under these limits.
I find it interesting that no one happened to mention that this was 1 of the 2 contributions from the Clinton Administration in where much of the problem came from. That and signing the repeal of the Glass Siegel act that allowed the leverage to go to 40 to 1.
Course then we have to mention the Bush administration continued these failed policies and worse. Don’t want one side gettin all the accolades when they are just as equal in the Blame Game
Its the Glass-SteagallAct from 1933 that was repealed. Where the heck did I get Siegel from?
IIRC tax free up to 500K.
Rollover was old rules. $250,000 exemption per person if house is primary residence and lived in for at least two years is current rule. If you turn your main residence into a rental you start counting down the time you have to claim exemption. If you turn rental into primary residence (to avoid paying capital gains) it’s not just two years.
I agree - tell her to spend an hour and a few bucks and see a tax expert in your area so she can explain her exact situation and what different scenarios will do to the bottom line. People seem way too willing to do incredibly stupid things listening to the guy next door instead of talking to a CPA.
People seem way too willing to do incredibly stupid things listening to the guy next door instead of talking to a CPA.
Yeah, we’re talking maybe 10’s of thousands here and they don’t want to spend a couple hundred bucks to understand the tax implications? wtf. :/
Verify this information with an accountant or tax specialist, but the rule for cap gains on a residence is $250K for single/$500K for married tax free if the house sold was claimed as a primary residence for at least two of the last five years prior to sale.
You do not have to roll that money back into housing. You can claim the 250K/500K exemption as many times as needed as long as you follow the rule of 2/5 for a primary residence.
The rule used to be like that, now it is different. Generally they can exclude up to 500k from income (iow its tax-free for federal) in gains from principal residence.
Consult an accountant.
I’m pretty sure the above are correct about profits on a primary residence (verify of course)…
I have always assumed this change in the rules was some of the fuel for the bubble as people “traded up” they used the profits for the consumption machine.
What makes you think she’ll sell at a profit?
Here is the confirmation that everyone else is calling for:
http://www.irs.gov/newsroom/article/0,,id=106951,00.html
See the link to more complete information in publication 523 at the bottom of the page.
By the way, method for accessing this information:
Go to irs.gov.
Type “selling a house” in the search box.
Click on first item in the results list.
Can we trust this source?
Seriously polly, I find it amazing how easy it is to find information these days thanks to the Internet.
San Diego and SoCal People:
The “2009 San Diego Economic Forecast Conference” featuring Chris Thornberg will be next Tuesday, April 14th. Subtitled “Recession or Depression in 2009? How bad is it really going to get?” It looks like a very interesting way to spend half a day.
http://www.beaconecon.com/events/sandiego09.php
I’ll be attending. If anyone else is interested in going e-mail me at sd.re.b at hotmail dot com.
He’s also doing a similar presentation on May 19th at the University of Redlands:
http://www.beaconecon.com/events/inlandempire09.php
PS Went to my first REDC auction last Thursday. Will have the write up on that out tomorrow or Friday.
SDRE Bear….How far is the Hyatt from the airport…The earliest flight puts me there @ 7:50 and the program starts @ 8:30…
Close enough that if I picked you up at 7:45 we’d make it.
Sorry SD Bear…Checked the calendar and I will be on the beach in Pismo Tuesday, Wednesday & Thursday that week…Its easy for me to blow out of here for a day…Airport is five minutes and the flights are all day long basically…Next time…
I think he does these all year in various CA locations so you may be able to find one closer to home too. I’ll let everyone know how it goes and a summary of what he says.
Maybe it is not so smart to hold vacant homes off the market for an indefinite period of time until a buyer with a bucket of money and a box of stupid happens along. I expect in a few months, we will read about a San Diego theft ring (or maybe more than one) which systematically stole the valuable furnishings of vacant upscale homes in the area.
County’s largest bank-owned home missing $1 million worth of furnishings
By Tanya Mannes (Contact) Union-Tribune Staff Writer
4:46 p.m. April 6, 2009
Since title was surrendered to this mansion in Encinitas, it has been stripped of many furnishings including windows. - John Gastaldo / Union-Tribune
ENCINITAS – After a high-profile foreclosure, the county’s largest and possibly most luxurious bank-owned home is missing an estimated $1 million worth of furnishings, from antique doors to top-of-the-line toilets.
So far, no suspect has been named in a grand theft investigation opened by the San Diego County Sheriff’s Department in March.
“It’s like a car up on blocks,” Sheriff’s Detective Steven Ashkar said. “It’s been stripped.”
The 16,000-square-foot Spanish hacienda-style house on 1.24 acres is surrounded by trees on Fortuna Ranch Road in Encinitas.
Decorated with 300-year-old doors from Egypt, carved teak pillars from Antigua, stained-glass windows, crystal chandeliers and handmade tiles from Mexico, the home cost $13 million to build and furnish. In February, it failed to sell at a bank foreclosure auction with a starting bid of $2.3 million.
This “monster house” story is amazing, I’ve been watching this drama unfold for weeks now. It’s a lead story in San Diego. Here’s the link to the UT article, the reader comments are hilarious. Folks are really hopped up on this story which is a real life “who done it?” Everyone thinks that the former owner Suzie Brown, is the culprit.
http://www3.signonsandiego.com/stories/2009/apr/06/bn06monster-home-missing/?zIndex=78442
Hmm. The author has to learn the difference between furniture and fixtures.
How about this plan?:
-Spec out a cheap house (Chinese drywall, 2×4s 36 inches on center, cheap roofing and siding, etc), out in Bumf##k
-Make everything portable (light fixtures, doorknobs, kitchen appliances) top of the line, or made out of solid gold.
-Move in on zero down mortgage.
-Accidentally on purpose forget to make payments, get foreclosed.
-Remove the high dollar stuff, replace with cheap stuff.
Then (as Snagglepuss used to say)
“Exit……..stage right……”
(Or was that El Kabong?)
Mortgage applications rose 4.7% last week: MBA
MarketWatch
“Mortgage applications filed last week rose a seasonally adjusted 4.7%, increasing even as interest rates charged on home loans experienced an upturn from the week before, the Mortgage Bankers Association said Wednesday.
Filings to refinance existing loans increased 3.2% for the week ended April 3 compared with the week before, while mortgage applications to buy homes rose a seasonally adjusted 11.1%, also on a week-to-week basis, the MBA’s latest survey showed. The survey covers about half of all U.S. retail mortgage applications.
The four-week moving average for all mortgages was up 13.3%, mainly reflecting strength in refinancing activity, according to the Washington-based MBA.
Overall, applications last week jumped an unadjusted 67.6% compared with the same week in 2008.”
FBs need to refinance to save their homes but they cannot because they don’t have the equity. The ones with equity probably don’t need to refinance to save their homes but they’ll benefit from lower rates.
Again I say…..applications are meaningless (not aimed at you Muir). What percentage are actually closing??
This breaking story helps to explain how San Diego home prices became so ludicrously decoupled from local incomes.
24 people indicted in mortgage fraud plot
$11 million netted in S.D.-area scheme
By Greg Moran
Union-Tribune Staff Writer
2:00 a.m. April 8, 2009
Federal prosecutors indicted 24 people in a massive mortgage fraud scheme that they said was led in part by a gang member from San Diego and netted participants $11 million in profits.
In an indictment unsealed yesterday, prosecutors laid out a wide-ranging racketeering conspiracy that ran from 2005 to 2008 and targeted homes across the county. Among the identified leaders was Darnell Bell, a documented member of the Lincoln Park street gang.
Bell, 38, used his status in the gang to recruit other members for the scheme and “maintain discipline,” according to the indictment.
The sweeping conspiracy involved almost every element in the real estate transaction chain. The defendants include a real estate broker, a group of straw buyers, an escrow officer, an appraiser, tax preparers and a notary.
Prosecutors allege the network used fake buyers to purchase homes for more than the asking price, with the defendants pocketing the overage. Lenders were duped into funding mortgages for the inflated price and later suffered losses when the buyers walked away and the property was foreclosed.
The value of the properties involved is estimated at $100 million.
At a news conference, U.S. Attorney Karen Hewitt said the enterprise was the largest such scheme ever uncovered in the San Diego area. Both she and Keith Slotter, special agent in charge of the San Diego FBI office, said it was the first time that the federal Racketeer Influenced and Corrupt Organizations law, known as RICO, was used anywhere in the country for a real estate scam.
“From our perspective, this is an extremely important case because it involved properties throughout San Diego,” Hewitt said. She indicated that federal authorities are not finished.
“Please know our work in this area is far from over,” Hewitt said.
Straw buyers and kickback scams proliferated during the housing boom, said Todd Lackner, a San Diego appraiser who has uncovered hundreds of suspicious transactions. But this one stands out for its size.
“It was pretty rampant, but this was the biggest one I’ve ever seen,” he said yesterday. “This was a very large scheme.”
“…but this was the biggest one I’ve ever seen. This was a very large scheme.”
Aw, that’s cute.
Gee, for a sleepy little town of a million, we always manage to do things in a big way.
The damage from these loan fraud cash back schemes are more
extensive than the cash back that was received by the crooks .
The fake appraisal comps got into the system and inflated the price of other property ,so, the damage goes way beyond the 11 million these thieves got . When you use a market comp system to determine the value of real estate ,you better be sure that the comps aren’t fraudulent ,but how could other appraisers
of known which comps where bogus . Also ,making loans to people who can afford the loan or making loans to short term flippers is a form of fraud because it increases demand that should not of been there that inflated the prices .
Lenders/REIC encouraging liar loans and breaching their duty to underwrite loans was the greatest crime . In truth ,all of these
big Banks and Investments firms ,and Insurance companies would of been sued silly for their role in this Real Estate Ponzi Scheme ,and I don’t like bail outs that obstruct Justice and cover up the crimes . People talk about Industries that are to big to fall ,but I think it’s more like to big to prosecute and bring to Justice .
RE: When you use a market comp system to determine the value of real estate ,you better be sure that the comps aren’t fraudulent ,but how could other appraisers
of known which comps where bogus
Lemme tell ya Whiz, when the appraisal management firms are doling the lender’s work out on the basis of how cheap will you work; and how quick can you get this assignment back to us
(Wells Fargo demanded 24 hours), due diligence on the quality of sales comparables is not part of the equation.
Of course all of this reverts back to the incompetance and impotence of each state’s individual Appraisal Standards Board-who were advised of the status quo by the legions of honest appraisers who were being put out of business by the number punchers.
The real victims in this appraisal charade?
All the residential property tax payer’s who had to ante up to cover an artificially inflated market.
I wrote a post on this blog many moons ago about the various spurious premiums in home prices, including the fraud premium. It is looking like the fraud premium was a pretty important factor in San Diego pricing, and stamping out mortgage lending fraud here would go a long way to restoring affordable home prices.
“The fake appraisal comps got into the system and inflated the price of other property ,so, the damage goes way beyond the 11 million these thieves got .”
Bingo, Wizard! The MSM report I heard on teevee last night suggested this fraud scheme was somehow destroying the value of neighboring properties, completely missing the connection between the straw real estate transactions and overinflated comp prices which resulted.
“It was pretty rampant, but this was the biggest one I’ve ever seen,” he said yesterday. “This was a very large scheme.”
This guy needs to turn on the TV every once in a while and keep up with current events. You have to wonder if he’s even heard of “Wall St.?”
When I first moved to San Diego, my boss would try to explain to me how there were so many rich hedgies and entrepreneurs driving home prices to lofty heights. He would hint that I should try to purchase some kind of crap housing just to get a foothold, since San Diego real estate always goes up and all.
I guess he thought every other home around town housed an entrepreneur or a hedge fund manager. I never bought into his analysis, and it now appears that his real estate empire is getting crushed by falling prices.
You might surmise that I seldom discuss the housing situation with him any more these days…
This news item does not suggest that the economy will bottom out by year-end 2009. And BTW, I am a bit puzzled by the negative reading on this CEO optimism index; aren’t these diffusion indexes set up so they lie on a positive range? I have never previously seen a negative reading in a confidence index number.
BUSINESS BRIEFING
Index that tracks outlook of CEOs hits lowest level
2:00 a.m. April 8, 2009
In a sign of the deep pessimism gripping corporate America, an index tracking the outlook of chief executives of some of the country’s biggest companies dropped to its lowest level since the survey began in 2002.
The Business Roundtable index of CEOs’ six-month forecast fell to -5 in March from 16.5 in November. An index reading of 50 or lower is consistent with economic contraction, while a reading of 50 or higher is consistent with expansion.
So who can “create” more jobs?
These sour puss CEOs or Barry and Boom Boom?
Neither?
We have a winner!
Maybe -5 on a CEO confidence index means there is going to be a little gun in the mouth activity. A few swan dives from the exec suite. If so, this may be the first positive indicator of a turn around
Mmmmm . . . Glocksicles.
Glocks are so “20th century”
SIGs (in .40 S&W) are the what the discerning autopistol buyer is getting now.
Very true, nice gun.
Palmetto, thanks for linking that profound essay by Michael Hudson the other day. The piece is long and a bit repetitious, but the main points come across loud and clear. To save others some time, I will try to summarize them.
Legally, a debt is a debt is a debt. But as Hudson shows, it has been recognized, throughout history and by all the world’s major religions, that there are times when one needs to mark down or cancel debts without demanding onerous terms. He gives examples of this idea going back to ancient Mesopotamia, and cites Adam Smith’s observation that no nation has ever fully repaid its loans.
Hudson distinguishes between “productive” and “extractive” loans, the former designed to build up a person’s or nation’s earnings capacity, the latter focussed on bleeding him, her, or it dry. He maintains that it is a shared responsibility between creditor and debtor to make sure a loan is productive, and when it is not, the debtor has a moral right, and the creditor a duty, to modify or cancel it. In particular, he believes that, rather than trying to pay everything due on (an impossible) schedule, Iceland should itemize all its debts, ask its creditors how they expect it to pay in full, and demand sweeping changes or else default outright.
Some of his examples are clearly a stretch too far, like the claim that the U.S. behaved oppressively towards the Soviet Union’s support of debtors’ interests. Nor do I share his enthusiasm for Keynesian economic policies or public utilities or other public assets. But he makes by far the most detailed and compelling case that I’ve seen for debt repudiation. I recommend reading the whole article– if you can spare an hour or two.
Hey, Lehigh, thanks and I’m glad you enjoyed the article. Yes, there was much repetition and it did bog down at times, but I was fascinated by the linkage between modern day debt servitude and latter day serfdom and the historical background.
Yes, that was an excellet read! Kept me awake on my entire train ride home to Baltimore.
It’s particularly interesting how he notes that underlying the western concept of ’sin’ is dept and in older translations the two are synonymous. Dept slavery is a pernicious thing and its alive and well in the USofA.
I’ve been following the musings of J H Kunzler and Dimitri Orlov on this subject for a while now and this isn’t going to end nicely.
I’ve been an Engineering Dept. slave at my current emplyer for almost 15 years!
Default is not an option as Iceland is no longer self-sufficient. Without diesel fuel, the fishing boats won’t be able to even catch fish.
I think we are witnessing the birth of corporatism where a sovereign government is now at the mercy of multinational corporations.
This makes no sense. Are you saying that the value of the fish catch doesn’t cover the cost of the fuel needed to catch it?
Regarding corporations, once again, they are chartered, organized, and run under government-issued laws. Governments can only be at their mercy if they choose to be.
Don’t forget that assets of Icelandic banks were seized under terrorism laws.
Iceland has no army, air force or navy.
How will they obtain the dollars necessary to purchase oil?
If they cancel the debt, what banks would loan them dollars/Euros/Yen/Pounds with no collateral and no guarantee of pay back??
They would be back to a barter economy with nothing to barter.
I think we are witnessing the birth of corporatism where a sovereign government is now at the mercy of multinational corporations.
You’re at least a century too late on that. You are witnessing the mature phase of corporatism where they start devouring their hosts.
Yep.
Will there ever be a population without greater fools?
Greater fools serve a purpose. For instance, greater fool seals jump in the water first and get eaten by killer whales. This tells the rest to stay on the ice for the time being. Let the greater fools buy their houses. There’s not quite enough blood in the water yet.
Ah yes, moat fillers….
As Richard Pryor described it…….there’s always one gazelle that says “What???”…..when everyone else is shouting “CHEETAH!!!!!!”
It looks like the banks are starting to dump REOs here in backwater Western NY.
I follow two local realator’s listings, they run about 20 properties apiece. There are now four “Foreclosure” listings. The properties are listed for 35 to 50% of assessment. I’ve never seen this before.
Three of the properties are trashed. One is A++. It’s HERE.
I can’t help but think that if one bought a house assessed at $150K for $50K, that the taxes somehow would still be based on the $150K. At 3+%, taxes would be higher than the mortgage.
I could buy a house cash and retire in joyful frugality…except for the taxes. Not wanting to be a wage slave to the state of New York for the rest of my life, I cannot imagine buying one of these houses at any price. Being a permanent boat/RV dweller keeps looking better and better.
Hey Blue, thanks for the update. I look at the taxes, and sometimes can’t imagine moving back. Those plans are on hold for now.
It’s also not hard to imagine PI being surpassed by TI, in New York, as is happening here in Florida.
I think the gubmint is eventually going to go after live-aboards. Some municipalities here in Florida have already begun.
At least the live aboard can play hide and seek. Hard to do that with a brick house!
“Three of the properties are trashed. One is A++. It’s HERE.”
I told you so. NY’s February numbers were self-evident.
Is it fair to say that Geithner is a major champion of too-big-to-fail bailouts for any financial entity the Treasury deems to be qualified?
CAPITOL REPORT
White House ponders: Are some hedge funds too big to fail?
Expect regulatory battle over who would pay to unwind hedge funds, buyouts
By Ronald D. Orol, MarketWatch
Last update: 4:27 p.m. EDT April 7, 2009
WASHINGTON (MarketWatch) — When the $9.2 billion Connecticut hedge fund Amaranth Advisors collapsed in 2006, securities attorneys jumped all over each other to express gleefully how the markets absorbed such a mega-fund failure.
In fact, the markets did soak up the implosion fairly well.
However, two and a half years later, policymakers aren’t so sure the volatile and fragile markets of 2009 could handle another mega-hedge fund collapse.
‘Why should taxpayers pay for hedge-fund failures?’
— Professor Vikas Agarwal, Georgia State University Business School
In an effort to limit the fallout from any future major hedge fund collapse — or private equity implosion — Treasury Secretary Timothy Geithner proposed on March 26 a framework for regulatory reform that not only included registration of hedge funds managers, but also called for new rules for buyout shops, venture capital and insurance companies.
Nevertheless, Geithner’s proposal leaves more questions than answers.
“Why should taxpayers pay for hedge-fund failures?” asked Georgia State University Business School Professor Vikas Agarwal who argues that already disgruntled taxpayers and legislators are sure to take issue with a government bailout of a major hedge fund.
U.S. Taxpayers should pay for Hedge Fund bailouts for the same reason U.S. Taxpayers are on the hook for everything else that has been shoved down their throats in the U.S.:
It serves the Federal Reserve Bank, an international banking cartel which has effectively seized control of U.S. monetary and financial policy decisions, if not the political process altogether.
When you seek answers to questions about why things happen in the great and grand old USA in the 21st century, follow the money.
All the billions and trillions and quadrillions of $$$ lead straight back to the “Fed”.
Those who control the currency and debt of a nation, of course, control the nation.
Democrat vs. Republican is like a cartoon show. For entertainment purposes only. To keep your eye off the ball. Strike three. You’re out.
“It serves the Federal Reserve Bank, an international banking cartel which has effectively seized control of U.S. monetary and financial policy decisions, if not the political process altogether.”
How does one free the U.S. government of the Creature from Jekyll Island?
“How does one free the U.S. government of the Creature from Jekyll Island?”
Professor Bear,
Thank you! This is a question seldom asked. Therefore it is one of those questions upon which possible worlds of the future hinge.
First, a great change would need to come upon the minds of people who are now distracted and confused by many winds of doctrine and political posturing.
Second, a courage to act upon the new mindset would need to accrue.
Third, the courage to act as a population,
and throw off the yoke of the oppressor,
cannot be assumed, or taken for granted.
I believe that the international moneymen are currently “banking” on the supposition that we are suffciently divided, so as to have ZERO national will, or courage.
Time, and people of courage, will tell.
IN CONGRESS, JULY 4, 1776
The unanimous Declaration of the thirteen united States of America
When in the Course of human events it becomes necessary for one people to dissolve the political bands which have connected them with another and to assume among the powers of the earth, the separate and equal station to which the Laws of Nature and of Nature’s God entitle them, a decent respect to the opinions of mankind requires that they should declare the causes which impel them to the separation.
We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness. — That to secure these rights, Governments are instituted among Men, deriving their just powers from the consent of the governed, — That whenever any Form of Government becomes destructive of these ends, it is the Right of the People to alter or to abolish it, and to institute new Government, laying its foundation on such principles and organizing its powers in such form, as to them shall seem most likely to effect their Safety and Happiness. Prudence, indeed, will dictate that Governments long established should not be changed for light and transient causes; and accordingly all experience hath shewn that mankind are more disposed to suffer, while evils are sufferable than to right themselves by abolishing the forms to which they are accustomed. But when a long train of abuses and usurpations, pursuing invariably the same Object evinces a design to reduce them under absolute Despotism, it is their right, it is their duty, to throw off such Government, and to provide new Guards for their future security.
…
‘…international moneymen are currently “banking” on the supposition that we are suffciently divided…’
The international moneymen have their plants (i.e. Geithner, Summers, Bernanke, etc) in top policy posts within the US government. What do the little people have to counter that kind of concentration of clout?
Enron was the “Test Case”
The fact that NONE of the principals involved in the Enron fiasco ended up with a bad case of lead poisoning, even with a bunch of the screwees being TEXANS in TEXAS, sent as clear a signal as the government did when they decided some were “too big to fail”.
If nothing happened in Texas, you KNEW nothing was going to happen to those pukes in New York.
Of course, it’s early yet…….right now, it appears that friends, acquaintances, work associates, and local law enforcement agencies are the defacto “Secret Service Agents”. The anger is there, it’s just being channeled in the wrong direction.
“How does one free the U.S. government of the Creature from Jekyll Island?”
I would never advocate violence, so this is just what I think will happen, I won’t be a participant.
We’ll hear about X bank being firebombed, then we’ll hear about a flaming sack of crap being left on the doorstep of bank Y.
Pretty soon a day won’t go by without a report of another branch up in smoke. By the time the givernment(tm) stops the press reports it will be too late. We won’t need press reports, we’ll be able to see plumes of smoke.
Can you tell I’m feeling optimistic today?
Dude — Have you ever heard of Porter Rockwell? Something in the tone of your post brings his name to mind…
(Google him and read the Wikipedia entry if you want the scoop… or read “Under the Banner of Heaven”)
My best friend’s mom wrote a biography of the man. I know quite a bit about him. I think the truth lies somewhere in the middle of the various histories.
I wish I had some of his qualities. As I said above I don’t think I’ll be participating in any armed insurrections. I’ve got too much to lose.
My great grandpa was a marshal in northern arizona in the late 1800s. He killed a few men, including a second tier desperado of some notoriety. Those were very different times, and civilization such as it was needed different solution to continue to function.
My main concern is that on a local, national, and global scale the wolves have taken jobs as sheepdogs.
Dude —
Thanks for sharing your personal connection to Porter Rockwell. My wife, Daughter of the Utah Pioneers though she is, never heard of him. I told her she needs to read more books written about the Mormons, such as “Under the Banner of Heaven” and “A Gathering of Saints.” She did not appreciate my remark…
As I’ve said before, revisionist history on either end of the spectrum rarely gives a good account.
I’d highly recommend the biography of Joseph Smith called, “Rough Stone Rolling”. The LDS historian who are in with the in crowd don’t like it much, but I learned a lot from it, and it didn’t change my opinion of the prophet, but I think I got to know the man a bit more.
Dude –
Did you read “Under the Banner of Heaven”? I am curious if you consider it to be “revisionist history” and why. My impression was that Krakauer had no ax to grind against the LDS church, but I also understand why The Church might find the narrative objectionable, as it talks a good deal about fallen missionaries and polygamists — stuff that interests me but probably not so much the mainstream LDS faithful.
I haven’t, but I’ll look for it. If the guy lumps the separatist polygamists in with the “mainstream” after 1878 then I guess I’d have issues with him as well.
Fallen missionaries is no secret from what I can tell. So many say the LDS are blindly obedient. Why then do so many decide they can’t live by the church’s standard and leave. Nobody makes them stay. Excommunication isn’t a big deal if you aren’t a believer in the first place.
Would the hedge fund manager automatically still get his 2/20% of the bailout?
I say let the hedge funds burn! In fact, douse them with gasoline and train a flame thrower on them in order to make sure they burn white hot.
NO MORE BAILOUTS OF FAILED FINANCIAL ENTITIES!!!!
PB,
[shocked]
Professor Bear shows emotion!
Muir, I think this emoticon would go perfect with your post.
Absolutely!
Well considering you had to have a substantial amount of money to invest in them…your point is well taken.
———————————
I say let the hedge funds burn!
Your post makes me hope that Ben lets my post above through.
We just had some snow flurries for about 10 minutes here in Queens.
Two inched on the ground yesterday in Geneva. Happy Spring!
Moody’s Investors Service assigned a negative outlook to the creditworthiness of all local governments in the United States, the agency said Tuesday, the first time it had ever issued such a blanket report on municipalities.
There seem to be an awful lot of “firsts” lately.
Don’t tell me they are actually trying to get in front of events for once?
I read that.
If that doesn’t scare the beejezzus out of ______________
(fill in the blank)
this market, only the dull thud of the closing bell being tipped over at noon by the mob will.(my suggestion)
Haven’t the rating agencies been completely discredited after their prolonged see-no-evil cheerleading?
Is this a belated attempt to win back some cachet?
I’d just say they are succumbing to the inevitable before the cascading waterfall.
In July 2005, while predicting a 15% gain in Orange County home prices, real estate prognosticator Gary Watts put about $77,000 down and bought a $765,000 rental home in Rancho Santa Margarita.
Today, however, Watts has defaulted on the home’s loan after the price dropped 22% from that original sale price. He’s currently in escrow, seeking his lender’s approval to sell it for nearly $93,000 less than he owes on it.
“I can make the payments. That’s not the issue. It’s a business decision,” Watts said. “I tried to work with the lender. The lender didn’t help. They said, go ahead, do a short sale. It’s strictly business.”
Are y’all having a schadenfreude moment?
Lol, why doesn’t he just rent it out?
It sounds like Gary’s short sale is in the bag.
Oh I disagree, Foreclosure is another likely option.
Gary’s jingle-mail is in the bag!
I would point out that at least Gary was being relatively honest back when he made pie-in-the-sky prognostications back in 2005-6. We mocked him at the time, of course—but arguably he was making more of an honest mistake than a calculated deception. Compare his actions to homebuilder CEOs, who were trumpeting optimistism while doing HUGE dumping of their own stocks.
He did in fact vote with is wallet. He just voted wrong, obviously.
I wonder how Lereah’s condos are doing??
real estate prognosticator
More like ‘Real Estate Proctologist’
“I can make the payments. That’s not the issue. It’s a business decision,” Watts said. “I tried to work with the lender. The lender didn’t help. They said, go ahead, do a short sale. It’s strictly business.”
Hmmm…kinda sums up the next wave of defaults. I have to believe a whole lot of those AltA, Option ARM and Prime FB’s are going to make the same “business” decision as Mr. Watts.
What’s the point of hanging on to a debt trap if even the “professionals” are turning in the keys?
He bought this house TO RENT. At least that’s what he told the newspaper. You wonder if he told the lender the same thing. If that’s true, then he might not be eligible for the forgiven-debt-as-income exclusion handout that passed in 2007….
If he can make the payments, why would they approve a short sale? Why not just make him pay the difference?
The fact that he CAN make the payments does not change the fact that he is NOT making the payments. The lender will approve the short-sale just to get out of the situation where they cannot extract the payment from the borrower. In a no-recourse state, what choice do they really have?
DEEEEEEEE-lightful!
Maybe he could buy a dozen more, and make it up on volume?
I gotta tell y’all, the worry is huge in Florida right now… a lot of people are in fear, waiting for the outcome of the budget sessions. *Every one* I work with is making contingency plans, including foreclosure, bankruptcy, moving in with relatives, etc.
The end of May is going to be one huge reset.
Muggy,
I work for Brevard County. I’ve been asked to present 20% and 40% budget cuts. 40%!!! 40% is the same as 100%. Doom and gloom. All productive activities have ceased…
I am guessing 80% or more of your cuts need to come from laying off people?
We’ve been cutting hard for 2 years already. Downturn started for us in fiscal year ‘06-’07. I’ve already reduced staff by 25%. Everybody is already matrixed managing multiple IT systems with 1 person as a backup. I have significant costs in circuits and system maintenance contracts (which I have renegotiated). Everything else is people. We are going to increase risk by getting rid of some of the lower risk maintenance contracts, but everything else is people. Which means essentially shutting down systems. That’s at 20%. At 40%, everything is unsustainable, so it you might as well shut it all down.
Sad thing is, they could just put off construction of 1 big park and that would cover the entire County’s shortfall. But no… politicians have to bring home the bacon.
In Pinellas it’s getting nuts. I don’t think anyone here knows how much needs to be cut - which is part of the problem - but you name it, the blade is coming.
DROP is the current polarizer.
“40% is the same as 100%”
Really, since in goverment pensions, retiree health care, debts and political appointees and sweetheart contracts comprise the other 60%, and can’t be cut.
Out here only cops and firefighters get pensions. All other muni employees get a 401(k) type of plan (403(b)?). The employee contributes 5% and the city kicks in another 8%.
Bawn and bred in Brevard County…
In Cali we just raise everyone’s taxes, ‘cuz we no there couldn’t possibly be any unintended consequences to that.
Watch what happens after the 15th of April when the dolts get told by the bean counters that projection have fallen off a cliff.
It looks like SunCor is bailing out of its planned communities, not only here in Boise but elsewhere.
http://www.idahostatesman.com/localnews/story/723707.html
Avimor, northwest of Boise, was the first of more than a dozen planned community applications in Ada County in the past three years. It was one of only five to get approved and is the only one that actually has started construction - albeit slowly.
SunCor wants to sell this development along with most of its assets in Arizona, New Mexico and Utah, including thousands of acres in planned communities, commercial developments and golf courses.
Avimor - along with all the other so-called “planned communities” around Boise - has been a bone of contention to county planners for a long time. Many were proposed during the real estate bubble but so far only Avimor has built any houses. A grand total of 20.
I’ve been to some of the county planning meetings and was amazed how many planned communities were proposed. Many were out in desert bluff areas with no water rights. Someone was smoking something funny - about 100,000 new homes in the Boise area, presumably to be bought by rich Californians selling their megabucks 3/2’s in LA and SF at retirement.
It ain’t gonna happen.
How many county commisioners will lose their seat in the next election?
Zero.
One difference between this bust and the late 1980s/early 1990s is the lack of inflation. That is making all the losses nominal.
An identical house on my block sold for $300K in 1987, and we bought for $209K is 1994, or a decrease of less than 1/3 in nominal dollars. But in 1994 dollars the 1987 sale price was $391K, and the decrease was nearly half.
(Co-ops and condos fell more).
This time, a decrease of half may really be a decrease of half, unless the Fed manages to create an inflation “money illusion” to make these and other losses seem less bad.
They can create a “Money Illusion” if they can get the money in the peoples hands, ie wage increases. I have yet to hear a good, clear, detailed opinion of how they might do that in the current environment. Just theory…like everyone is gonna work for the Government. I am still looking for the answer to this little question.
How do the powers that be create Wage inflation in a deflationary environment? It feels right now, like the whole country has to lose their jobs and be hired back at lower wages. where’s the inflation in that. If somehow they do create inflation , my guess it will only be in energy and food, stuff you need to stay alive. Add that to the increased Tax Payer obligation and it doesn’t feel very Happy.
“How do the powers that be create Wage inflation in a deflationary environment?”
I don’t know, but NYChk told us that in Russia during the 1990’s, there was hyperinflation and high unemployment at the same time.
High unemployment does not mean necessarily deflationary environment. See the collapse of USSR and Eastern Europe, Argentina, and so on.
There is a difference between a default of country debt, which leads to collapse of the local currency and hyperinflation, and an attempt to “reinflate”, which the FED is trying currently.
Welcome to Stagflation.
Super Stagfaltion
Not my term, but it seems appropriate.
Us Americans, we always gotta Super Size.
Wages down, taxes up - Taxflation!
Bank bailouts - TARPflation
People can now only afford McDonald’s - Flatulation
Obama’s gonna chill out Earth!
“The president’s new science adviser said Wednesday that global warming is so dire, the Obama administration is discussing radical technologies to cool Earth’s air.”
http://www.breitbart.com/article.php?id=D97ECHLG1&show_article=1
I can’t tell if I’m laughing or crying.
We can all install our window air-conditioners backwards, to cool the outside!
Someone did a study, and determined that a 50% reduction in worldwide economic activity would halt, and actually reverse the effects of Global Warming.
Mission Accomplished.
And 50-75% off housing cures the need for “Affordable Housing” programs.
Problem solved.
“..actually reverse the effects of Global Warming.”
Too bad the mother Earth does not share that view; she does not belong to this religulous (stolen from Maher) “manmade disaster” sect.
And a 50% increase in worldwide economic activity would prove that global warming is just a bunch of BS.
“Climate Change Deniers are Flat-Earthers” http://digg.com/d1lynv
A cloud of fiat money that will block out the sun for several decades would be doable.
Charles Krauthammer nailed it the other day: “He’s not here to warranty your muffler. He’s here to warranty your life.”
I hope the technology decreases the output of the Sun because that is what is causing any warming. Even Mars is heating up and I don’t think that is because of coal factories and SUVs the martians are using.
You actually believe that it is the sun that warms the earth!!!!!
Anyway, I read Edgar Rice Burroughs books as a kid, and believe me, those Martians are up to something.
Has it ever occured to you that it could be anthropogenic AND natural forces that are causing the planet to overheat?
Whatever the causes, we SHOULD be looking seriously at ANY AND EVERY option to slow the trends. That things are accelerating is a clear fact. The previous climate models didn’t predict that the artic ocean would be ice free in summer for at least a few more decades. Its happening NOW. This has obvious feedback affects because the dark ocean surfaces has a much lower albedo than ice (i.e., it heats up much more under direct sunlight). The idea of tipping points is not something to be dismissed lightly.
Of course, if you are in the denial camp you are simply and idiot and I won’t waste my time arguing with someone so deranged.
camp? I didn’t realize that I was camped. In tents sometimes is all.
I enjoy a logical discussion, but I was raised by Baptists. That ole “your and idiot” argument doesn’t have much traction.
Speaking of TRUTH; one of the glow bugs here mentioned that global warming was going to bring on the next ice age in Europe. Does that mean that only this side of the north pole is melting? How global is that?
The theory that brings an ice age to Europe involves the shutdown of the gulf stream, which keeps relatively more northerly latitudes temperate compared to Siberia or Canada at the same latitudes.
Anyone who thinks that we as a race can control or reverse global warming (assuming we have a hand in it) needs to spend some time thinking about the Jevons paradox.
We need a warmer globe so we can farm in Greenland like the Vikings used to do before all this global cooling took place. Thankfully the trend is finally turning so we will not all starve to death.
My folks were Vikings, back in the day. Hence the name Skye. Bring it on!!
Crain’s — distressed sales as a percentage of all sales in Chicago:
* 29% in January
* 37% in February
* 46% in March
Almost one in two of the paltry sales are distressed here in the Gotham of the Midwest. What’s the ratio down in the big Florida metro areas?
Distressed = willing to sell at the current market crisis, rather than remain priced in forever waiting for the summer of 2005 to return.
Yeah, I think the term “distressed” is over used.
FASB uses the term distressed to mean something other than an orderly transaction in which all the customary amount of marketing has been done. (that’s a rough definition from memory, may not be exact)
It occurs to me that just because a company or party is distressed (e.g. FB or bank) doesn’t mean an asset hasn’t gone through the normal marketing in an orderly market.
Houses sold at auction may be distressed in that they certainly don’t go through the customary amount of marketing but houses which were foreclosed and then are listed and/or sold normaly are not distressed assets.
BTW: I *finally* saw MaxedOut. Interesting, because it was done before TSHTF (but just before). I’d love to find out what happened to the Realt-Whore in the opening and closing scenes.
It was a little one-sided though. I feel very bad for a college kid who kills himself, but the compulsive spending behavior could have been just a part of a spectrum of pathological, depressive behavior that these kids suffered from, and the credit card debt may have been more of a symptom than a cause. Credit card companies are extremely sleazy; but you can’t fault them for wanting to get paid back.
I made my college freshman daughter watch that when I found it. It should be required viewing for every high school senior.
“…but you can’t fault them for wanting to get paid back.”
That is a bunch of hooey. If they loan money to people in amounts that are unlikely to ever be repaid and at interest rates that fail to include a default risk premium, it is basically their faulty underwriting which shoots themselves in the foot. You cannot squeeze blood out of a turnip.
Well, sure. I think they were assuming these college students would be effectively underwritten by their parents. Before the age of on-line shopping and gambling (which can get you in a hole fast!) this strategy may have worked.
Good article on msn questioning the idea of housing prices never recovering… the author talks about his family’s experiences in a NY neighborhood and the history of that neighborhood from the 1920’s to present.
And as a nod to the discussion regarding falling rents with Prime_is_contained and FPSS a few days ago, this comment stood out: “The depression hit just as this wave of building had reached its peak. Queensboro was left holding many of the co-op shares and was forced to rent apartments at ever-decreasing rents.”
Link here
Ugh, should be “discussing the idea of housing prices never recovering”. He is questioning the idea of a rebound in housing prices anytime soon…
This shouldn’t be news. I rented a place in 2002. The asking rents were down about 30% from the dot-com peak, and I still negotiated another 15% off.
Sorry, this is not even ancient history. This is barely a scant seven years ago.
And a casual drive along West End shows the tens and tens of thousands of condos they have built. Who’s gonna occupy them?
Rents in my nabe are already down 25% and we are nowhere near done here.
The equilibrium pricing is much much much lower.
On a completely unrelated note, that whole line along the 7 train (and orthogonally the N/R line) has some of the best food on the planet.
You can hop to a different “country” from restaurant to restaurant, eat three meals a day, and not repeat a meal even if you did it for six straight months.
Heck, you can region-hop “within” a country and not repeat a meal for two weeks.
I just thought I’d say that to bug my buddy, Northeastener.
You talking about Flushing, Queens, right? Yes they do have a ton of ethnic restaurants along that part of the “city” (don’t wanna offend Manhattanites who consider only their little island as NYC). Best Asian food variety, even beating Chinatown in lower Manhattan.
POLL now on fastmoney.cnbc.com
is the housing market at the bottom?
Yes.
No. still a money pit?
Actually, the “Yes” response is, “Yes, stocks are signaling it is.”
Don’t these fooks know the stock and housing markets are completely decoupled from here on out? The stock market will be roaring back long before Joe the Plumber is feeling confident enough about his future income stream to purchase a home.
Luckily the stock market always goes up, in the long run.
Fed minutes curb ‘green shoots’ hopes
By Krishna Guha in Washington
Published: April 8 2009 20:30 | Last updated: April 8 2009 20:30
The Federal Reserve sharply downgraded its economic outlook at its last meeting only three weeks ago, minutes released on Wednesday revealed, challenging the view that green shoots of recovery are now plain to see.
While there has been more positive economic news since the March 18 meeting, the tenor of the Fed discussion suggests most policymakers will treat this data with some scepticism.
“Most participants viewed downside risks as predominating in the near term,” the minutes say. Officials worried about “adverse feedback effects as reduced employment and production weighed on consumer spending” and a “weakening economy boosted the prospective losses of financial institutions, leading to a further tightening of credit conditions.”
Now here’s a craigslist find! lol
http://montana.craigslist.org/rts/1106896636.html
Do you want to own a home this year? Do you need money for your down payment? Do you want your closing costs paid? Do you want to know how to qualify for the 8000 tax credit? Do you have a job? If you have said yes to any of these, then call me today! I know the in’s and out of these government packages. The US government wants you to buy a home this year. They want buyers like you to buy and buy NOW!
Mark Twite
Twite Realty
406-880-1956
advised several restaurants to cut busboys.
In many states, it’s cheaper to keep servers on the clock than bussers because of a loophole that allows restaurants to pay servers who earn tips less than the minimum wage — as little as $2.13 an hour. Bussers must be paid at least $6.55 an hour.
********************************************************************************8
If a Half-Eaten Burrito Lingers, There May Be No Busboy to Blame
By Janet Adamy
Plainfield, Illinois — On a busy Saturday afternoon, waitress Audrey Baker raced to clear the dishes from a table at a Bob Evans restaurant here.
For two decades as a Bob Evans waitress, Ms. Baker relied on a busboy to clear syrup-plastered dishes and wipe biscuit crumbs from her tabletops. But with restaurants in a sharp downturn amid the recession, Bob Evans is among a growing number of full-service eateries that are eliminating busboys to cut costs. Instead, servers are primarily responsible for clearing their tables.
That isn’t always going so smoothly. At restaurants across the country, plates are lingering longer on tabletops, floors aren’t getting cleaned and spoons, servers say, are mysteriously disappearing. Some servers are refusing to clear tables, forgetting to wash their hands afterward and even quitting their jobs over the change, managers and consultants say.
Several franchised T.G.I. Friday’s locations in Wisconsin, North Dakota, and Omaha, Nebraska stopped using table bussers last fall after sales started to slow. Sammy’s Woodfired Pizza, which has 16 locations in California and Nevada, finished eliminating the busboy position last month after staffing restaurants with as many as three of them on busy nights.
“The busser is a luxury that, in this environment, is very difficult to justify,” says Mark Godward, president and founder of SRE, a Miami consulting firm that has advised several restaurants to cut busboys.
In many states, it’s cheaper to keep servers on the clock than bussers because of a loophole that allows restaurants to pay servers who earn tips less than the minimum wage — as little as $2.13 an hour. Bussers must be paid at least $6.55 an hour.
Waiters and waitresses at most full-service restaurants always have shared some responsibility for clearing their tables, and plenty of sit-down eateries historically have gotten by without busboys. But at restaurants that have long employed them, their departure is making the already demanding job of waiting tables more hectic. Servers depend on bussers to stock ice bins, roll silverware into napkins, refill water glasses and deliver bread to tables.
Some restaurant executives see this as a worrisome trend. To ensure good service, “it would absolutely be the last place I’d cut,” says Nelson Marchioli, chief executive of breakfast chain Denny’s Corp.
One of the first to move away from bussers was Bob Evans, a chain of 570 home-style restaurants that began overhauling its table-bussing system two years ago when the restaurant industry started struggling. Instead of having as many as five bussers on the floor at a time, restaurants go without them most days, or get by with one or two during only the busiest shifts.
Randy Hicks, executive vice president of restaurant operations at Bob Evans, says the company placed most bussers in other positions, though some may have lost their jobs over the change. He declined to say how many.
At the Bob Evans in Plainfield, a suburb 30 miles south of Chicago, general manager Darien Harris says some servers initially refused to bus their tables. Others would clear the dishes off the tables, but would only pile them next to the dish tank without scraping the leftover food off the plates and placing them in their designated bins of soapy blue liquid.
That irked Ms. Baker, a fast-moving 40-year-old. “I’m scraping and stacking,” she told Mr. Harris. “Why aren’t they scraping and stacking?”
With the busboys gone, Ms. Baker noticed something odd: Spoons started disappearing. So many were missing that the restaurant sometimes ran out of clean ones during peak times.
Mr. Harris asked managers at other Bob Evanses and learned it was happening at their locations, too. “Was this an act of rebellion because we have to do this now?” he asked. One manager suggested putting magnets inside trash-can lids to capture any spoons.
At Bob Evans Farms Inc. headquarters in Columbus, Ohio, management had to increase the number of new spoons it bought companywide during the first three months after bussers were cut. Mr. Hicks says Bob Evans restaurants historically have gone through more spoons than other utensils, though it isn’t clear why so many vanished with the change. The most likely explanation, employees said, is that servers and dish washers were simply throwing out silverware in their haste to scrape dishes clean; spoons get thrown away more easily than forks or knives because, the theory goes, they are lighter.
At a Sammy’s Woodfired Pizza in San Diego, servers got so backed up after a recent football game at nearby Qualcomm Stadium that patrons had to wait for tables because there was no one to clean them off. Regional manager Carly Ward says the change has gone smoothly, though she concedes floors aren’t getting swept as often.
Amanda Ali, a 24-year-old who recently ate at the Plainfield Bob Evans, said she could tell bussers had been cut because her French toast plate sat for 10 minutes before it was cleared. Her waitress “looked really frantic trying to get everything picked up and help everyone,” she says.
For Ms. Baker, having to clear her own tables has had an upside. Constantly running plates to the dishwasher in the back of the restaurant, “I lost 4 pounds,” she says.
Write to Janet Adamy at janet.adamy@wsj.com
© 2009 Microsoft
The servers have to make at least minimum wage in tips though, or you have to cover the difference, IIRC. And it was common practice for servers to fudge their cash tips to prevent having to pay taxes..
“The busser is a luxury that, in this environment, is very difficult to justify,” says Mark Godward, president and founder of SRE, a Miami consulting firm that has advised several restaurants to cut busboys.
Cutting busboys is a good way to lose servers too. I never would have worked anywhere that laid off the bus staff.
And when the manager of a Denny’s calls you cheap.. you’re cheap.
In this employment environment, beggars can’t be choosers.
You’re probably right. But waiting tables is one of those jobs that’s always available. Just about every restaurant in the world is hiring wait staff at all times. Maybe things have changed recently.. but I doubt it.
Bailout for the restaurant industry!
RIght Now…
fastmoney.cnbc.com
Poll…
Is the bottom near for housing mkt?
Yes -
No- still a money pit?
Did you like the movie Gattaca?
BBC
“A revolution in genome screening has been promised by a biotech company in the US.
Complete Genomics, says it will sequence one thousand complete genomes between June 2009 and the end of the year and one million over five years.”
——>
” The future that we all envisage is the day when every infant has their genome sequenced at birth and we utilise that information to optimise health throughout their life”
“…and we utilize that information to better exploit them throughout their life.”
Fixed.
These people are being very loose with the term “complete”.
People pilloried Greenspan for holding rates low for too long. And low rates were one of the sparks that ignited the housing bubble.
What will be the blowback of not only low rates, but gargantuan sums being pumped into the economy now? The pledged amounts are approaching GDP (12.8 trillion pledged according to Bloomberg. I feel confident that business will find a way to soak up that money).
Being worried about rates being held low too long seems positively quaint.
You should probably think of it another way. What is the blowback of not being able to cut rates below zero?
Think Japan.
“What will be the blowback of not only low rates, but gargantuan sums being pumped into the economy now?”
Think of the stock market as a heavy mass at the end of a long bungee chord. Ben Bernanke’s Fed anchors the other end of the chord. Fundamentals have rocketed the heavy mass towards the ground at a sufficient velocity to result in a hard crash landing. To obviate this potential outcome, the Fed is running the liquidity pump on high blast, which has the effect of lifting the anchor rapidly enough to offset the downward velocity of fundamental requilibration. This will continue until the bungee chord has reached its maximum extension, at which point the stock market will begin to rocket upwards. Bottom callers will claim the recession is over, even though unemployment will continue to climb in opposition to the signal delivered by the spring-loaded stock market.
I’ve seen this movie before
Spoiler: The movie ends with stock market inflation and dumbfounded sheeple wondering why their bank savings built up during the recession are rapidly losing purchasing power.
So there’s a *lot* of stuff not showing up today in BB. Any idea what gives? Guess Ben’s busy?
long gold, short oil message is forming.
So I’m a half wit? Long gold, long oil.
Long oil = short dollar, but the value of the dollar must be preserved or else the dollar loses its reserve currency status…
And how exactly do “they” go about preserving reserve?
I’ve got an idea, why don’t “they” create about 4 trillion dollars by making entries on balance sheets?
second look says long silver, short oil.
hmmmm…….
Im already long both.
long dollar.
long dollar claims on money.
long claims on oil regarding the value of dolla/loonie.
thats a lotta long.
I do not own silver other than personal possessions..
I have to put money to work or money fails. Its difficult, but we are pivoting…the message is
PUT MONEY TO WORK
Got the message loud and clear: There has never been a better time to put money to work, provided you have any to spare.
Moody’s downgrades Berkshire’s ‘Aaa’ credit rating
http://finance.yahoo.com/news/Moodys-downgrades-Berkshires-apf-14887604.html
It seems we’re getting into a downgrade-orama here.
Commodity crash alert!
Falling, yes I am falling
And she keeps calling me back again
Financial Times
De Beers braced for turnover to fall
By William MacNamara
Published: April 8 2009 23:30 | Last updated: April 8 2009 23:30
De Beers, the world’s biggest diamond miner, is planning for its turnover to halve this year, it emerged on Wednesday, in the latest sign of how the once-mighty group is struggling to cope with a downturn in an industry it no longer controls.
With diamond prices tumbling by at least 30 per cent over the past year, De Beers has cut production at its mines by 40 per cent year-on-year and mothballed its flagship mines in Botswana.
Its two new Canadian mines, whose costs led the company to take on so much debt, lowered production soon after they opened in August.
As the diamond market faces one of its bleakest years in a generation, Christopher LaFemina, an analyst at Barclays Capital concluded that De Beers was “bleeding cash” and that its problems might be “under-appreciated” by the market.
However, in a rare public fightback, the South African group, which mines 40 per cent of the world’s diamonds, has told the Financial Times it is convinced it can survive two more years of recession.
“Trading conditions are tough,” said Stuart Brown, De Beers’ finance director. “But because we saw it early and took very dramatic steps around the business, we are in a position to weather trade in 2009 and 2010 without any recourse to shareholder funds.”
Only rare commodities can crash. Diamonds are far from rare, and what we are seeing here is the equivalent in this industry of new house builders being undercut by REO.
If my wife wants to upgrade her rock do you think she’ll be going to De Beers, or down to the pawn shop?
That’s just it — however scarce diamonds in the ground may be, there is a gargantuan, long-lived above-ground supply.
More commodity crash news: Greenie’s favorite inflation indicator is down by over 50 percent in a few month’s time. Got deflation? — BOOOOO!!!
The scrap-metal market
Nothing glisters
Apr 2nd 2009 | BALTIMORE
From The Economist print edition
Falling metal prices cripple the scrap industry
…
Today, half-empty warehouses dot the seven-and-a-half-acre yard of Terrapin Recycling, an industrial scrapyard just north of Sparrows Point. To an outsider all appears busy enough. A baler noisily crushes steel into easily shippable cubes; workers are dwarfed by towering bins of car-parts, copper wire and turnings that glisten softly like huge metal snowdrifts.
But Terrapin’s volume is down by 60% since the middle of 2008, a pattern repeated throughout the industry. Bruce Savage of the Institute of Scrap Recycling Industries says the industry “fell off a cliff”, starting in September and October. In the middle of 2008 copper was selling for $4 a pound; by year’s end that price had fallen to $1.40. Aluminium fell from $1.50 a pound in the middle of the year to 66 cents. Both foreign and domestic demand have declined. In 2007 the United States exported $21.7 billion-worth of scrap; if current trends continue that figure could fall by half, or worse.
The men behind the curtain are doing a poor job of offsetting this fundamental evidence of deflation, IMO. Run them virtual electronic printing presses faster, boys…
Buffeted by the great recession:
Wall Street Journal
* BUSINESS
* APRIL 9, 2009
Moody’s Strips Berkshire of Top Rating
By SCOTT PATTERSON
Warren Buffett’s Berkshire Hathaway Inc. took another blow from a rating company, this time from Moody’s Corp., a big Berkshire holding.
Moody’s on Wednesday lowered the long-term issuer rating of Berkshire to Aa2 from its top Aaa rating. It cited the weakening economy and “severe decline in equity markets.” Berkshire has had big losses in its portfolio, which includes large financial companies such as Wells Fargo & Co. and American Express Co.
Mr. Buffett is weathering one of the toughest markets since he took over Berkshire in 1965. Its shares are down 33% over the past year. Further downgrades could impact borrowing costs, and hurt its ability to charge maximum rates for insurance policies written by its subsidiaries.
One of the companies most affected by the market downturn is Moody’s itself, whose stock has slid about 70% since early 2007.
Fed officials are upset over the prospect increased American household savings.
I SUGGEST YOU SAVE ALL YOUR HARD-EARNED CASH UNDER THE MATTRESS. STARVE THE PARASITIC BANKS UNTIL THEY DIE. A DEAD BANK DOES NOT HAVE A LICENSE TO STEAL.
Wall Street Journal
* APRIL 9, 2009
Fed Officials Split on Best Path
By BRIAN BLACKSTONE
Federal Reserve officials were divided last month on plans to ramp up purchases of mortgage and Treasury securities, meeting minutes showed, though they eventually chose to pump more than $1 trillion of additional funds into the economy.
Fed officials were swayed into bold action by an eroding economy when they met March 18.
Staff economists marked down their economic forecasts, with a slow recovery not expected until next year amid rising joblessness, according to the minutes of the March 17-18 meeting released Wednesday.
“Overall, participants expressed concern about downside risks to an outlook for activity that was already weak,” the minutes stated, citing “fragile and unsettled” financial markets and an “apparent sharp fall in foreign economic activity.”
Several officials noted “tentative signs of stabilization” in consumer spending, but others worried that unemployment fears and falling wealth would drive savings higher, further damping consumption.
We have already stated the obvious.
Wall Street Journal
* OPINION
* APRIL 9, 2009
Twelve Years Down the Drain
The credit crisis has cost us a dozen years’ wealth in a matter of months.
By ELIZABETH WURTZEL
Anyone who toils in the legal-industrial complex — better known as Big Law — should be able to tell you how we got here. Corporate attorneys like me, even those with the eyesight and insight of Mr. Magoo, all should have been able to see this financial collapse coming.
The market has lost a dozen years worth of wealth in a matter of months. Millions of hours of manpower put in by investment bankers on Wall Street and the lawyers who enabled them — the kind that brought home those bright shiny bonuses that are now causing a populist uprising in the hinterlands — have been wasted away by what is kindly called the credit crisis. And whatever lessons the powers that be might learn from this adjustment — that salary structure should change, or that the billable hour is an anachronism — it seems no one has stated the obvious: The whole system is warped.
Real Time Economics
Economic insight and analysis from The Wall Street Journal.
* April 3, 2009, 9:06 AM ET
The Full Picture: Broader Unemployment Hits 15.6%
By Sudeep Reddy
Americans are giving up on their job searches at a faster pace. The nation’s official unemployment rate jumped to 8.5% in March from 8.1%, putting U.S. joblessness at its highest since November 1983.
But the Labor Department’s most comprehensive gauge of unemployment surpassed even its early 1980s levels. The government’s broader measure, known as the “U-6″ for its data classification, hit 15.6% in March — a big leap from 14.8% in February.
…
The U-6 figure includes everyone in the official rate plus “marginally attached workers” — those who are neither working nor looking for work, but say they want a job and have looked for work recently; and people who are employed part-time for economic reasons, meaning they want full-time work but took a part-time schedule instead because that’s all they could find.
Many forecasters expect the official unemployment rate to top 10% by early next year. If the path of the broader unemployment rate continues, it’s likely to top 18%. For people in this group, comparisons to the Great Depression (when 25% of Americans were out of work) may not look so wild even if overall economic activity is holding up better.
The latest snapshot of the Fed’s balance sheet includes $236.156 bn in mortgage-backed securities. What is the Fed doing purchasing MBS? Are they trying to reflate the housing market or something?
I don’t think it will work, unless their objectives happen to be increasing the problem of unaffordable pricing and adding to the historically high stock of vacant homes.
One thing that comes across when you read about the Fed’s balance sheet and play around with the interactive graphic: The financial economy is held together by sticks and glue.
Wall Street Journal Blogs
Real Time Economics
Economic insight and analysis from The Wall Street Journal.
* April 9, 2009, 1:12 AM ET
A Look Inside Fed’s Balance Sheet
By Phil Izzo
In response to the most severe crisis in financial markets since the Great Depression, the Federal Reserve has expanded its balance sheet to unprecedented heights.
At the Federal Open Market Committee meeting last month, officials decided to increase the balance sheet further through purchases of some $1 trillion in Treasurys and mortgage securities. Minutes to the latest meeting show that FOMC members were concerned about a worsening economic outlook and took forceful action in response.
In an effort to track the Fed’s actions, Real Time Economics has created an interactive graphic that will mark the expansion of the central bank’s balance sheet. Every Thursday afternoon, the chart will be updated with the latest data released by the Fed.
In an effort to simplify the composition of the balance sheet, some elements have been consolidated. Portfolios holding assets from the Bear Stearns and AIG rescues have been put into one category, as have facilities aimed at supporting commercial paper and money markets. The direct bank lending group includes term auction credit, as well as loans extended through the discount window and similar programs.
She was late on her call, yet still received death threats.
Wall Street Journal
* WRITING ON THE WALL
* APRIL 9, 2009
When Meredith Whitney Calls, Should You Listen?
A bearish call made her the oracle of Wall Street. But she, like many others, failed to predict the market meltdown.
* WRITING ON THE WALL
* APRIL 9, 2009
When Meredith Whitney Calls, Should You Listen?
A bearish call made her the oracle of Wall Street. But she, like many others, failed to predict the market meltdown.
By DAVID WEIDNER
The Meredith Whitney myth might be in line for a downgrade.
The bearish banking analyst has been the toast of Wall Street and Main Street since Oct. 31, 2007, when she predicted Citigroup Inc. would have to raise capital, sell assets or cut its dividend. Ms. Whitney’s was a gutsy call that got results. Investors bailed. Citi’s chief executive at the time, Charles Prince, resigned two days later. She got death threats.
How good was The Call? If an investor sold Citi the next day, they would have saved themselves a 92.8% loss through Tuesday. Citigroup shares were above $40 the day Ms. Whitney issued her report; they have not closed above that mark again.
“The easiest call I ever made,” Ms. Whitney told an interviewer last year.
Ms. Whitney has made something of a living on this mythical call. Her visibility has grown even more in recent weeks with the launch of her new firm Meredith Whitney Advisory Group LLC. She’s done talk shows and given interviews. She’s about as close to a household name as an analyst can get.
And she’s moving markets again. The rally in financial stocks lost steam when she said first-quarter bank profits will be short-lived, if they happen at all. The stocks cooled further this week when she predicted housing prices would fall another 30%.