Bits Bucket For April 20, 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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first?
The filter seems especially hungry this morning. FEEEEED me, Seymour…
Congrats! : )
I have a question abou the idea of “too big to fail.” If these banks or insurance companies or pretty much any of the others are split up to the point where there is nothing out there that is too big to be allowed to fail individually, will there not still be sectors that are considered too big to be allowed to fail all together?
I know that you reduce the likelihood of 50% of a sector being on the verge of collapse if that requires 5 companies to have been stupid rather than just 1 or 2, but it does not make it impossible, not by a long shot. Especially in the banking/financial sector. Those guys move from bank to bank. They have a bad case of group think and the mathy people are all working with the same equations. If someone is making big bucks buying X at 20 times leverage then you better believe that everyone will be doing it very soon, and probably still making money.
Again, I understand that you reduce the risk by having more companies in the pile, but I don’t think you reduce it by all that much, or at least not by as much as people think it will. Someone, please convince me I am wrong, because while I of all people believe that regulation can help, it mostly helps to prevent the 50th through 5000th iterations of bad stuff. It is much harder to make it prevent the first through 50th.
Even if you increase the number of competitors in a sector, the act of the weaker ones failing would create a monopoly among the few left thereby making them too big to fail. We need to do away with the concept of ‘too big to fail’ entirely. Supply and Demand are the Gods of business not human-wannabe-godlike rules imposed by arrogant leaders. Stop meddling you fools.
The problem is that too-big-to-fail firms are given a leg up on the competition through their free bailout insurance policy. Evolutionary principles suggest that a small survival advantage can translate through time into a large evolutionary shift in industry structure, conduct and performance.
Well said! Now how to convey this concept to policymakers…. hmmm…
The notion that the failed regulators of failed policies will somehow stop failed businesses from failing further, would be sheer comedy were it not for the trillions of $$$ of debt being created. Now it is in the tragic and criminal categories, IMHO.
Banks should be some entity you go to to save some money for the future, or borrow some money infrequently for some necessary purpose. Instead today, Megabank runs the government and its policies for the benefit of Megabank; and everyone else is treated like some pesky but necessary debtor/slave to support their regime.
“I believe that banking institutions are more dangerous to our liberties than standing armies . . . If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around [the banks] . . . will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered . . . The issuing power should be taken from the banks and restored to the people, to whom it properly belongs.”
– Thomas Jefferson —
The Debate Over The Recharter Of The Bank Bill, (1809)
No kidding. It isn’t like the danger suddenly appeared in 2009. The danger was well known TWO HUNDRED YEARS ago.
speaking of failing..watch out for ual etc…now that they have given their employees, through multiple bks, stock options, just one more bk will render those stock options like confederate money/worthless. and more employees go down the tank, while ceos etc reap retention bonuses.
What a terrible irony: After years of failed affordable housing policy, we have myriad vacant houses across the US coupled with a rise in homelessness. It is impressive but quite unfortunate that visionary Thomas Jefferson was so on target with his prediction for what would happen to this great country if banks took control.
Page last updated at 22:50 GMT, Monday, 20 April 2009 23:50 Homeless struggle in Atlantic City
By Matthew Price
BBC News, New York
…
Homeless suffer
Homelessness is rising across the United States. According to the US Conference of Mayors, 25 of the largest cities here reported an average 12% increase in homelessness in 2008 compared to 2007.
My wife and I live pay-check to pay-check
Stephen Irish, teacher
Spring brings changes in New York
In 16 cities there were more homeless families. A lack of affordable housing, poverty and unemployment all contributed to the problem.
On top of that, those who try to help the homeless are suffering.
Bill Southrey runs the Atlantic City Mission where Cristina Sanford is staying. He says the organisation is already about $46,000 behind in donations this year.
Their stock-market investments have also lost value. “We’re not at crisis at this point, but it could all vanish in an instant,” says Mr Southrey.
Struggling
It is not, however, just the vulnerable who are in trouble.
“My wife and I live pay-check to pay-check,” Stephen Irish tells me. He is one of a growing number of middle class Americans who are experiencing economic difficulties.
He and his wife have no children, but they have five jobs. Their combined income is $60,000 a year.
“We’re struggling,” he says.
Mr Irish teaches public relations, management, and marketing in New Jersey. He believes one of the problems has been America’s desire for short-term riches.
The students would “take a six week real estate course, rather than a long term education. They wanted ‘make-a-lot-of-money’ careers.”
Let me guess: I am helping to guarantee the mortgages on these
flipperinvestor-owned homes?Exclusive Reports
Friday, April 17, 2009 | Modified: Monday, April 20, 2009, 3:00am PDT
Road to recovery: Flippers are out, investors in as foreclosures drive bargains
Silicon Valley / San Jose Business Journal - by Katherine Conrad
Rock-bottom prices and historically low interest rates are providing opportunities for investors eager to jump into Silicon Valley’s housing market.
No longer an object of disdain, investors are now seen as a cure for a market awash in foreclosed and vacant homes.
“Investors were not well-regarded because they were seen as temporary owners, as flippers or pure speculators,” said Alexis McGee, president of ForeclosureS.com of Sacramento. “But what we’re seeing now is not flippers. They are buying and holding.”
That is why we call them knifecatchers around here.
With more than 4 million homes to date foreclosed upon across the country, investors today are valued for their ability to rescue blighted neighborhoods where too many foreclosed homes sit empty, often becoming targets for vandals, thieves and even squatters. Even Fannie Mae, the Federal National Mortgage Association, is making it easier for investors to participate by increasing the number of mortgages they will be allowed to own from four homes, including principal residence, to 10.
It’s a move welcomed by the market as the tide of vacant homes hitting the market shows few signs of turning. In March, 175,000 homes were foreclosed upon across the country, up 44 percent from February’s record high. In the first three months of 2009, almost 370,000 homes have been lost to foreclosure with the highest number recorded in California. The number of foreclosures in the state rose to 38,000 last month, a jump of almost 60 percent from February, according to ForeclosureS.com. That number is likely to go up with the recent lifting of the federal moratorium that put a 90-day halt to foreclosures.
McGee called the increase in the number of mortgages allowed each investor a “big deal.”
“Even Fannie Mae, the Federal National Mortgage Association, is making it easier for investors to participate by increasing the number of mortgages they will be allowed to own from four homes, including principal residence, to 10.”
Can someone verify whether this is a hoax? I frankly find it hard to imagine how Fannie could afford to back this kind of investment scheme, given their state of near-collapse.
“I know that you reduce the likelihood of 50% of a sector being on the verge of collapse if that requires 5 companies to have been stupid rather than just 1 or 2, but it does not make it impossible, not by a long shot.”
Polly,
Why would you expect competitive firms (which are, by definition, competitors) to share information to the extent that group think would doom them to a common, catastrophic demise? Your scenario seems to depend on having five or so 800 lb gorillas who all drink the same group-think, koolaide, which hardly fits the model of a competitive lending system.
Now I realize that some might point to all the small subprime lenders who went under in 2007 as evidence that competition does not provide immunity from market meltdowns, but I conjecture that one would not have had the meltdown in the subprime sector without the flood of money from the subprime mortgage lending kingpins’ (aka Megabank, Inc’s) debt securitization operation, aided and abetted by a disfunctional regulatory system.
Competitive banks don’t need to share info; they can develop their own doomsday scenarios independently.
As for the competition among banks, it’s the age-old conflict between short-term gain and long-term stability.
I conjecture that we wouldn’t have any of this without AIG, who is effectively the greatest fool (excepting the government, which is debatable).
AIG, in turn, would not have been able to bail out Megabank, Inc without the free too-big-to-fail insurance policy, courtesy of Uncle Sam.
PBear…Paul Volker debated someone this weekend a some say it is moving the markets a little today because of it…I searched you tube but did not come up with anything..Did you hear about it ??
Wouldn’t you hate to have Paul Volcker show up in the audience for your Q&A session on monetary policy? The article does not mention whether he brought rotten tomatoes.
Wall Street Journal
* APRIL 18, 2009, 1:55 P.M. ET
Heavyweights Kohn,Volcker Spar Over Inflation Goal
By Brian Blackstone
Of DOW JONES NEWSWIRES
Federal Reserve Vice Chairman Donald Kohn’s question-and-answer session at a Vanderbilt University conference Saturday was going as countless others surely have in his years as a top policy maker.
Until Paul Volcker raised his hand.
Then, Kohn was grilled over the Fed’s apparent effort to convey that it considers a roughly 2% inflation rate to be appropriate for the economy in the long term.
Former Fed Chairman Volcker, who along with Kohn was at a conference honoring former Fed governor Dewey Daane, questioned how the Fed can talk about both 2% inflation and price stability.
In the minutes of its January policy meeting, the Fed said that officials’ long-run inflation forecasts reflect what they think is consistent with the Fed’s dual mandate “for promoting price stability and maximum employment.”
It then said that “most participants” thought 2% inflation, as measured by the price index for personal consumption expenditures, “would be consistent with the dual mandate.”
“I don’t get it,” Volcker said, leading to a lively back-and-forth between the two central bank heavyweights.
Thanks, PB. I wonder if Volcker can possibly exert any influence. Also, he doesn’t actually SAY that an inflation target more consistent with “price stability” would be more like 0.0%…but I suppose that is what he means. At 2% inflation, your dollar loses only about a third of its value in 20 years; I could tolerate that much better than what happened in the 1970s, but OTOH I’d prefer no infl.
Inflation is always and ever just a wealth transferring scheme. It’s a deliberate policy, not some mystical phenomena that we have no control over.
“I wonder if Volcker can possibly exert any influence.”
Given the MSM coverage of the weekend Q&A session, he just did.
Prof Bear,
Interesting. The 2% inflation number is the right number for some mysterious reason? Why isn’t 1% the right number? How about 5%? Isn’t a 15yr doubling a better number?
The only reason the Fed is talking about price stability is they are worried about deflation and falling prices. Increasing prices means people making leveraged “investments” aka more loans and more business for their masters, the banks.
All of the debate on two big to fail. We are looking at the entire financial system failing. What was common to all of the banks? The Fed. Securitization. So, probably something along those lines would be the root cause of the current fiasco.
When I was in college back in the early 1980s, 2% was presented as the “quality” improvement built into products each year.
Products were considered to have a 2% improvement value added each year. A model year 2009 car was presummed to have about 2% more value than the 2008 car due to better features/quality.
Not sure that we get an average of 2% worth of end-user ‘improvements’ each year.
The view was, “you were buying a 2% better product for your same dollar”.
I always assummed this is where the 2% base inflation came from.
If true, that would represent a 2% increase in productivity. Inflation is an increase in price with no added value.
As I have mentioned before on this blog, deflation is to Bernanke as Kryptonite is to Superman. I am unclear on why 2% is the “right” inflation level, but I believe part of the thinking is that it is a “low” level of inflation that provides a safe cushion against the black hole of deflationary psychology into which the masses could slide if the inflation rate dipped very far below 0%. As long as everyone believes that real estate, stocks, goods, services, etc always go up, there is no reason to stuff your money under the mattress hoping for a better deal later on.
Lehman Bros was the big game changer. When they were allowed to fail, the effect on the stock market and the share price of all the other players was considered too potentially destabilizing even for ‘healthier’ banks.
Also, virtually all banks were forced to accept bailout money to hide which banks were weak sisters in order to prevent a run of short selling of specific financial stocks.
Finally, the results of ’stress tests’ were hidden in order to keep all financial stock prices high, enabling some of them to post a ‘profit’.
So what really is the issue is how transparent an industry that is utterly insolvent due to it’s market cap price falling needs to be, if it threatens to bankrupt FDIC and cause a domino effect on the economy.
Amen brother
So what really is the issue is how transparent an industry that is utterly insolvent due to it’s market cap price falling needs to be, if it threatens to bankrupt FDIC and cause a domino effect on the economy.
Also at issue is the de facto position that nationalization, receivership, bankruptcy, and/or failure have been deemed undesirable outcomes by both governmental policy makers and their more influential allies in the private sector (Goldman Sachs et al), a logical slippery slope which has propelled us into the strange position you’ve noted — an elaborate ruse must be kept up at all times, even by people who know that the whole exercise is a fake.
Another possibility is the cross pollination makes them 2BTF. Similiar to how each firm is a counter party to another via credit default swaps.
Why would I expect them to participate in group think? Because they do it. I don’t have to know the details of why they do it when it is clear they do. We have manias. We have bubbles. We have complex financial instruments and everyone with the ability to climb on the gravy train does. And that is the problem. You don’t prevent risk to the economy when you have 10 or 20 smaller entities all doing the same thing as the 4 or 5 larger erntities used to do.
This is one of the reasons why the “minibanks” should not have been allowed to purchase and merge with one another until they became a handful of Megabanks.
I think part of the problem is that none of them really consider the consequences because they know they’ll be bailed out. In that regard, there’s saftey in numbers. If instead they were left to fail, those making the decisions will question “running with the pack”, and instead will make an effort to decide whether it’s in their own best interest.
And we’ve seen numerous examples of bank management that decided not to “follow the herd” in the articles Ben has posted here over the years. Maybe the 15 biggest banks would fail….I don’t see that being this horrible armageddon that everyone is afraid of, but I also think that if a bank failure cascades into other business failures, those businesses probably weren’t operating soundly and should be allowed to fail as well…
“a bank failure cascades into other business failures, those businesses probably weren’t operating soundly and should be allowed to fail as well…”
Yes indeed. When other businesses have become so dependent on short-term credit that they can’t make payroll without it, there’s definately a problem.
Really good point, Julius. I keep wondering why the shrieks for “credit, credit, credit” ? If a business is making money, it doesn’t NEED credit ! - except for expansion, and we are clearly not in an environment that urgently calls for any particular business to expand. I tell my mortgage clientele they are very lucky that the money I lend them is my own and not borrowed: that’s what makes it so easy for me to do “workouts.”
Most businesses use credit to buy their inputs and pay it back at the time of sale. I’ve never seen a large company that didn’t work this way (not saying they don’t exist). I think you’d shutdown the entire economy if credit was really choked off.
“Most businesses use credit to buy their inputs and pay it back at the time of sale. I’ve never seen a large company that didn’t work this way (not saying they don’t exist). I think you’d shutdown the entire economy if credit was really choked off.”
I’ve heard about this style of credit use among some businesses, and that doesn’t sound too unreasonable. I just suspect that some businesses were totally abusing this sort of credit in the same way that consumers were.
“Because they do it. I don’t have to know the details of why they do it when it is clear they do.”
You should care why they do it, especially if the reason has to do with too much power and market share concentrated in the hands of a few too-big-to-fail financial institutions and top banking policy makers. Group think is a major risk when a small, intellectually incestuous circle of decision makers wields too much influence over the entire system. A financial sector dominated by small, competitive, independent, service-oriented lending institutions would anathematize group think.
Why would you expect competitive firms (which are, by definition, competitors) to share information to the extent that group think would doom them to a common, catastrophic demise?
Two words: “herding mentality”
Or, better yet, one word: “sheep”
Sheep will be slaughtered occasionally, but as long as there are lots of sheep and none are large enough to bring down the whole financial system, the survivors can repopulate a more economically viable, financial prudent successor generation of banks.
My point is that if they are all doing the same thing, they are basically one. Perfect competition and the EMH and similar stuff are all fine in theory, but they require independent action and thought on the part of different market participants. Are far cry from reality. Lots of research in behavioral economics has been done on this. In relation to your original point, it means that even if there is “competition,” if this herding is going on, there will be significant systemic risk and some players will thus be termed “too big to fail.”
“Lots of research in behavioral economics has been done on this.”
I suppose one might argue the herding of individual American hh’s into buying homes they cannot afford illustrates this sort of group think among independent entities. But I would counter that this would not have been likely to occur without so much approval from the top (Greenspan).
“Will there not still be sectors that are considered too big to be allowed to fail all together?”
Fail together! You have people being paid seven figures and feeling underpaid to do the same thing everyone else like them is doing.
The issue is the domino effect — since financial institutions have huge obligations to each other, the failure of one can bring down even well run others in a series.
What you are describing is a situation in which there are no such “systemic” risks, but there are also no well run others. The reality may be no well run others plus systemic effects.
Using free too-big-to-fail insurance to foster the concentration of a huge portion of an industry in a few gargantuan firms is a sure fire way to create an unsustainably high level of systemic risk.
I think this ties in with a criticism I often see regarding the “free market”. Yes, it’s possible that there will be systemic failure even without “too big to fail” entities…but the pain is what’s necessary to keep things honest. Yes, perhaps 90% of the banks will make the same bad decisions and fail..but there will be the other 10% that will grow and fill their place, and do so with stable/sound policies. That needs to be allowed to happen. Perhaps it’s only small local banks - and what that would show us is that national mega-banks aren’t sustainable…that needs to be allowed to play out.
Polly, I know you weren’t making a comment regarding the free market…but I see so many people see economic pain as proof of failure of the free market…the thing is, there will always be people and companies who make bad decisions. They need to be allowed to be examples to everyone else of why not to follow in their footsteps. I don’t recall anyone ever asserting that free markets mean rainbows and sunshine 24/7, yet so many people use that as a strawman to attack free market principles…grumble grumble
eek, not meant to be a reply to your post PB, sorry.
“Yes, perhaps 90% of the banks will make the same bad decisions and fail..but there will be the other 10% that will grow and fill their place, and do so with stable/sound policies.”
This is pretty much the point of my evolutionary argument.
“They have a bad case of group think…”
And that thinking involves fraud and naked, unchecked greed and lust for power.
In the real world, you can have all the laws you can think off, but some idiot is still going to break them. Fix that, and you’ve solved the problem.
However, CONSISTENT enforcement of existing rules and regulations is often enough to keep thing from going to far. Perfect prevention? Of course not. But enough to avoid catastrophe? Yes.
We’ve ALL been sold down the river.
Putin’s Tariffs Stall Russian Growth for Caterpillar…
April 20 (Bloomberg) — Prime Minister Vladimir Putin’s trade measures are starting to keep Deere & Co. combines and Caterpillar Inc. trucks out of Russian wheat fields and coal mines, dimming the companies’ prospects for expansion abroad.
Deere and Caterpillar, reeling from the longest U.S. recession in a quarter century, were the companies most affected by loan restrictions and tariffs of as much as 25 percent that Putin imposed this year, according to a U.S. Chamber of Commerce survey of the top 50 American businesses operating in Russia.
Putin is trying to boost Russian industries with tariffs on everything from drugs to farm equipment as declining oil revenue saps the nation’s economy. The policies are hurting sales by Caterpillar, Deere and Agco Corp. in a market where revenue was forecast to rise as much as sixfold in the next decade.
“The new tariffs kicked these guys in the knees when they were down,” Larry De Maria, a New York-based analyst with Sterne, Agee & Leach Inc., said in a telephone interview. “Russia was supposed to be a $3 billion market in 2008 with potential to grow to $20 billion, possibly in as little as a decade.”
Emerging-market sales likely fell so far this year for Deere and Caterpillar, which reports first-quarter earnings tomorrow, De Maria said. Caterpillar is expected to report profit excluding certain items of 5 cents a share, the average estimate of 20 analysts surveyed by Bloomberg. The company earned $1.45 a share a year earlier.
“We are really going to struggle this year in Russia,” Ken Harding, Caterpillar’s regional execution manager for the Commonwealth of Independent States, said in a telephone interview.
‘Low’ Expectations
Caterpillar’s “expectation is low” that it will sell any of its 60-ton trucks, used for quarry and construction work, in Russia this year after selling eight last year, Harding said.
Starting in January, Peoria, Illinois-based Caterpillar and other foreign makers of off-highway trucks faced duties of 25 percent, an increase from 5 percent last year. BelAZ, a Belarusian equipment producer that dominates the region’s truck industry, isn’t subject to the tariff and will benefit, Harding said.
Caterpillar declined 59 percent on the New York Stock Exchange in the 12 months through April 17. Deere fell 56 percent, and Agco dropped 64 percent.
Deere, the world’s largest maker of agricultural equipment, and Duluth, Georgia-based Agco are being hurt by a program that gives Russian farmers a 20 percent discount on loans from Russia’s Central Bank if they buy domestic machines.
We need a program that gives US farmers and companies involved in earth moving a 20% discount on loans from the FED if they buy domestic machines, like from Caterpillar and Deere.
We also need to raise our tariffs. I agree with Big V on this. I also agree with you Palmy.
Absolutely, SFgal. Of course, then we’d be accused of “protectionism”, but I couldn’t care less. Nothing’s wrong with protecting our domestic industries and our working folks. I don’t see why we should drop our panties every time some globalist whines about protectionism.
Put that in your pipe and smoke it, Lula.
Well certainly when it’s punitive? Are they imposing tariffs across… the board? From ALL nations of origin? Of course not!
Palmy, everyone who shops at WalMart (including me) is voting against “protecting our domestic industries and our working folks.” Everyone who buys a foreign car, ditto. For myself I always buy Ford just because it has served me well, but I don’t do it to pay autoworkers’ lifetime health ins. We are all consumers, we are not all workers who refuse to compete with foreigners.
I don’t see why we should drop our panties every time some globalist whines about protectionism.
These are the same people who whine about paying a fair wage, trying to ensure that our air and water are clean(er), trying to protect the safety of our food … or attempting to place limits on financial institutions. Each is a form of “protectionism” in a sense, and indirectly impacts our ability to complete globally — in the lowest common denominator sense of competition that China seems to be pursuing.
The anti-regulation crowd would have us believe that any sort of protectionism is bad, and that the almighty free market will magically look after our long-term societal and environmental interests. I don’t believe them.
ET-Chicago,
While we’re at it, if you look at the way securities licensing is structured… there are very much categories and levels to every facet of it.
Just b/c you have a lowly Series 6 License doesn’t mean you’re able to trade Options or even individual stocks for that matter. An entirely seperate class of license is req. to supervise other people. Some licenses are strictly for commodities etc.
Yet in REIC World a 2 week course and $400 later and you can move from being an empty-nester housewife to a “Short Sale Specialist” or whatever. Big problems still exist there. Obviously they’re fighting regulation tooth and nail. If you’re not angry about “shape shifters” you should be!
is voting against “protecting our domestic industries and our working folks.” Everyone who buys a foreign car, ditto.
Not as simple as that. Toyota, Honda, Nissan, BMW, Mercedes, etc all have factories here in the US employing Amercians in the production of their vehicles. While the Infiniti I bought is 97 percent “Made in Japan”, Nissan employs Americans in the production of Titans, Armadas, Pathfinders, etc. I am willing to support companies who exhibit Fair and Balanced trade because it is good for all countries involved. By not buying “American”, it just means I didn’t buy from a Detroit-based company.
so the labor costs stay in the US economy while the profits go overseas? brilliant.
Caterpillar already has the US market sown up. I think the problem is all of the left equipment from the construction boom of the past several years.
Perhaps a the US should declare a war on bull dozers where we reward bounty hunters who destroy earth moving equipment?
Didn’t Cisco have this same problem after the dot-com bust? They managed to survive somehow, no?
CAT also mentions in its quarterlies that it may/is having a hard time collecting for all the equipment it has sold through its international business, fwiw.
Perhaps it’s time for us to adopt the Japanese strategy for avoiding tariffs - i.e., build factories abroad in the countries your most important companies are interested in doing business in. Putin might not like the idea of Deere and Caterpillar building factories in Russia, but I’m sure the Russian people would appreciate the job opportunities such factories would create. (Chrysler, in fact, essentially did this by moving its tooling for the last-generation Sebring to a joint-venture factory in Russia). God knows the Russian economy doesn’t have much going for it aside from oil/gas production, aircraft manufacturing, and perhaps booze.
(But heck, if we’re going to keep “globalizing” our manufacturing the way we are now, we might as well be strategic about where we put our factories instead of simply building everything in China.)
It’s also interesting that the company said to benefit from this tariff is Belarusian. Russia has taken a very antagonistic stance against that country in recent times, and while Belarus is still in the CIS it seems odd that Russia would go out of its way to help it.
It didn’t work out so well for BP and others who tried to go that route with drilling. Putin kept changing the rules on the JVs and handing more and more control over to state-controlled companies like Gazprom.
This is a matter for a WTO suit. Easy win for US. Would take at least 5 to 10 years to actually get any sanctions applied.
Russia is not a member of WTO and is not bound by its rules.
Really? I thought there was a big thing about this a decade or so back. Must have been someone else. Sorry.
I drove between Tucson and Phoenix on I-10 yesterday. Near Toltec, there is a used Caterpillar yard loaded with those yellow monsters. Acres and acres of earth moving equipment that looked slightly used.
The site was not unlike the one that exists between Orlando and Tampa.
A bad sign.
Wall Street Journal
* APRIL 20, 2009
Bank Lending Keeps Dropping
Analysis of Treasury Data Paints Starker Picture Than Official Government Snapshots
By DAVID ENRICH, MICHAEL R. CRITTENDEN and MAURICE TAMMAN
Lending at the biggest U.S. banks has fallen more sharply than realized, despite government efforts to pump billions of dollars into the financial sector.
According to a Wall Street Journal analysis of Treasury Department data, the biggest recipients of taxpayer aid made or refinanced 23% less in new loans in February, the latest available data, than in October, the month the Treasury kicked off the Troubled Asset Relief Program.
The total dollar amount of new loans declined in three of the four months the government has reported this data. All but three of the 19 largest TARP recipients with comparable data originated fewer loans in February than they did at the time they received federal infusions.
The Journal’s analysis paints a starker picture of the lending environment than the monthly snapshots released by the government and is a reminder of the severity of the credit contraction. One reason for the disparity: The Treasury crunches the data in a way that some experts say understates the lending decline.
The Obama administration is scrambling to defuse a backlash surrounding the bank bailout. Political disquiet over banks’ perceived lack of lending, as well as their spending on bonuses and perks, has provoked skepticism about the administration’s ability to revitalize the banking system. Any evidence that banks are lending less could reinforce criticism of the program, and put pressure on plans crafted by Treasury to unfreeze credit markets and support bank balance sheets.
The only thing that surprises me about this is that anyone is surprised. Imagine this scenario.
I am a banker. I know that I have loans on my books that are either on the brink, or will be on the brink if the economy doesn’t turn around right now. Someone gives me money. I can use it to fluff up reserves so that those bad loans don’t cause the FDIC to shut me down in 3 months, or I can use it to make loans. These are the loan applications I currently have outstanding:
1)Joe who says he is a contractor but has only $17K of documentable income for last year and wants $45K for a new truck and/or
2) Jane and Jim who want to buy a house at 6 times last years income. He is a marketing manager in a local business that has already had 1 round of lay offs and the rumors about round 2 are all over. She is an elementary school teacher in the local school district that currently has only 18 kids in each class but is thinking about moving to 25 per class. and/or
3) Ellen who has a business plan to open Ye Olde Pirate Candle Shoppe and Scrapbooking Emporium - Ellen used to work at a craft store. This is her first business venture.
The only choice that will save my job is to fluff up reserves. What do I do?
You only get one guess.
Siphon off as much as possible as fast as possible right up until the moment that they cut my hand off?
Tish tish…
Almost right.
Siphon off as much as possible as fast as possible right up until the moment
that they cut my hand off?you say who could have known and hope where you stashed the funds doesn’t tell Uncle Sam.There… that is our economy.
Got Popcorn?
Neil
If banks were to take possible future layoffs into consideration when underwriting loans, they would not be making any right now.
Love your examples, Polly. The real-life examples in my personal universe lately were:
(1) Florida flippers who lost money on their Oct08-Feb09 flip, but who think they’ve learned how to do it right. They want about $100K to try again. (I did NOT lose any money on their Oct08-Feb09 flip, but I only made about $2000 on it, in the form of interest on a $54K note.) I have offered to make this loan at 10% initially, which would slide down to 8.4% after a couple of years if they fail to flip.
(2) Maine RE investors who own “too many” houses so can’t qualify for a bank loan. They are already on my books, performing perfectly on an $85K note from Dec 07. They want to replace it with a $300K note on a different house. Their plan is to live in the larger one, use the smaller one as a vacation rental prop. This is insane…but I might make the loan because the $300K note would be on a house I wouldn’t mind OWNING if it came to that. I have offered to make this loan at 8.4%.
(3) Arizona mobile-home park resident wants to own the lot and the clubhouse-share for $55K, wants me to lend $44K. This is very similar to many of the other notes on my books, so I have already made the loan. 9%, 15 years.
(4) OK, if I didn’t do 1, 2, or 3, I’d be lending money to unknown quantities like Morgan Stanley, Hartford Financial, and the Republic of Iceland. Actually I do have some MS and HF bonds…you have all already heard my tales of woe about Icel.
So in MY case the safer bets are to go ahead and make the loans 1,2,3. At least I can see the collateral. But I’m not a bank, that helps a lot.
az_
Maybe #1 thinks they learned their lesson, but they obviously do not think you did.
RE: Maine RE investors who own “too many” houses so can’t qualify for a bank loan.
AZ-You’re a braver soul than I.
LMAO…I wouldn’t lend a plugged nickel in Maine.
1.2 million (same population as in San Diego) of ossifying oldsters and SSI recipients tryin’ to keep a snow and cold state 4X the size of Mazzland running.
The northern half of the state now wants to succeed and become part of Maritime Canada.
Day to day operating expenditures now being paid with state bond floats.
The health care structure would implode without the Judas goat Republican Senator’s Snowe and Colllins having supported the trillion dollar O’Bama budget in order to score an extra billion to pay past due Medicare and Medicaid bills.
Nearly all the paper mills are now closed-all the military bases have been traded off to southern states for straight welfare dollars (gotta take care of those 5k worth of Somalians in Lewiston)-and the tourism sector is now collapsing.
In fact the whitewater outfitter I hooked up with 29 years ago, is on the brink of bankruptcy.
Abandon hope all ye who enter here!
Wonder how they differentiate between less loans made verses less demand for loans.
Appears the printing presses will be in over drive for quite some time to come.
LONDON (MarketWatch) — American International Group on Monday said it’s reached a pact with the U.S. Treasury to swap classes of preferred shares in a deal that could give it access to nearly $30 billion in funds in return for limitations on lobbying and compensation.
AIG 1.62, -0.07, -4.1%) , in a filing to the Securities and Exchange Commission, said that it’s reached a deal with the U.S. Treasury to swap different classes of preferred stock, which will restrict AIG’s ability to repurchase capital stock and requires AIG to continue to maintain policies limiting corporate expenses, lobbying activities and executive compensation.
The Treasury Department has committed for five years to provide up to $29.84 billion in immediately-available funds so long as AIG doesn’t file for Chapter 11 bankruptcy protection and that the U.S. Treasury holds more than 50% of the voting power.
In another filing, AIG announced that its credit pact with the New York Fed was amended. The changes remove the minimum 3.5% LIBOR rate among other changes.
Last week AIG announced the sale of its U.S. car insurance group to Zurich Financial for $1.5 billion in cash and $400 million of notes as it continues to sell off businesses.
And it’s stil early on the AIG loss’s. The Worldwide Derivitaves Market at one time was estimated to the high end as large as 500 Trillion Dollars. The loss’s even if they are only 5% are staggering. That’s if they are 5% of that number or whatever the number may truly be. AIG was estimated to have 1/2 of the couter-party risk and insurance of this market. Loss’s are not 1 for 1. A 5% loss on leverage - think CDS - can be systematic to the entire Derivative and or any other Derivatives its sliced up with.
These loss’s will never be allowed to happen, at least that appears to be the plan. They will pour, Tax Payer future money into this for infinitum, think Quantitative easing. I think they over estimate the US Taxpayer and at some point the rest of the World’s faith in them.
Look at the pay-out list when AIG receives Bail-Out cash- GS, JP, C, etc….
They found the Money Tree, they’ve picked all the fruit and they will be damned if they will go hungry. Their Shredding and Mashing the roots for water now. What happens next?
They eat the dirt?
‘The Worldwide Derivitaves Market at one time was estimated to the high end as large as 500 Trillion Dollars. The loss’s even if they are only 5% are staggering.’
I get the same feeling reading that as if the Canary island out in the eastern Atlantic just slid into the ocean and a ripple shock wave is making its way to the US coast. Apt name, Canary Island.
Someone else things the U.S. should be looking south to Argentina to see our future.
http://www.bloomberg.com/apps/news?pid=20601088&sid=avuBdgdxAL.U&refer=home
I’d take the trip to see our future were it not for the time, cost and carbon. I think NYC may be the next Buenos Aires — minus the national capital.
We all know which nation fared best. Yet things might have turned out the other way around, Beattie says, with the U.S. forever tapping foreign creditors and struggling to stave off the next bankruptcy.
“In fact, it still could,” he declares, noting how the U.S. under George W. Bush deceived itself into thinking that “everything would be fine so long as it could keep borrowing.”
LOL. Yeah it’s all Bush’s fault. We didn’t borrow extensively before him, and of course Obama’s rapidly getting us out of our borrowing ways.
I wonder what will happen when the Congress finds out that the Presidents have been borrowing all this money!
You might want to look at this graph
zfacts.com/p/318.html
Finally, the Falkland Islands will be ours!!
So, the govt is now deep into the auto manufacturing business and the insurance business. How soon will they be running landscaping companies and tanning salons?
We need to stop the greed of Big Tan.
What do you think the whole Burning Man thing refers to? Guys like Mozillo, who spend their time burning under fluorescent lights.
Most people don’t realize that Big Tan is really the PTB.
Shows how corrupt the PTBs are when the Great Pumpkin is now acting like a venture capitalist vulture after cashing out at the top, instead of doing community service cleaning out debris from abandoned foreclosed houses and getting 3 hots and a cot.
What do you think of the idea that usurious credit card interest rates are going to be addressed by Congress? The banks say that the sooner they can make money off of consumers, the sooner they can pay back their bailout money. WTF???
Considering the size of debt growth, I’ve read that banks putting pressure on consumers has the characteristics of a “reverse multiplier effect”, and may actually worsen deflation by decreasing available investment capital.
Because of these ridiculous interest rates, the effect on economic recovery is far more destructive to the flow of free capital than having a ‘healthy bank’. These banks are so highly leveraged (due to the excesses of fractional reserve banking, derivative hedging and securitization pushed by pseudo-”libertarians” like Phil Gramm and Alan Greenspan) that a quick recovery is not a legitimate goal. They are already de facto nationalized, and there is too much effort to prevent the appearance of creeping socialism. Too late. The effect of “non-socialism” would have been to let the banks fail in the first place.
I guess it’s a case of “you broke it, you bought it” for the taxpayers and the banks. Not my fault J6P was too stupid to diversify or divest his 401Ks of speculative financial stocks in favor of lower yield but safer investments.
/rant off
NSO,
Excellent points. And btw, why should the taxpayer take it in the shorts twice? Just b/c a taxpayer/card payer isn’t a disciple of the housing bubble doesn’t mean they’re there for the porking?
On the drive back from Klamath Falls, OR yesterday I asked my wife just what lengths one would have to go to escape the clutches of the Housing Bubble ( and all it’s direct effects ) and we really couldn’t come up with a thing!
Seriously, unless you were -already- on public assistance and living under a bridge anyway..? Just saying “Rent, stay in cash and don’t play the victim!” isn’t cutting it any more?
I just get frustrated that the gov’t (Obama) is sensitive about the charges of “socialism”, when that hand was already played when he took office.
The ones who scream “Socialism!” the loudest are usually blissfully unaware that they are part of the society and the mania that led us down this path. They blame everyone else.
I’m not saying that Bill said that, but I will call out anyone who gripes about paying taxes yet plays the speculation game like it is their god-given privilege. If I have to pay the piper (and my 401K is all Treasuries), then so do they.
Telegraph dot co dot uk
US clutches at straws of recovery
Housing figures remain bleak, so why did President Barack Obama speak of ‘glimmers of hope’?
By James Quinn Wall Street Correspondent
Last Updated: 12:35AM BST 18 Apr 2009
…
Some 370,000 American families lost their homes in the first three months of this year alone – an annualised rate of 1.5m – while 800,000 received a notice of foreclosure.
That figure includes a considerable increase in activity in March, when lending banks began to act more forcefully against errant borrowers after federal mortgage companies Fannie Mae and Freddie Mac lifted temporary halts on pursuing foreclosures.
California, Florida, Arizona, Nevada and Illinois have the worst problems and accounted for nearly 60pc of all new foreclosure filings last month.
So why did President Barack Obama speak of “glimmers of hope” in the US economy earlier this week? Given the importance of the housing market to the fortunes of the economy – it led the US into recession – surely the recovery of the two are connected.
Obama and his staff, including senior economic adviser Larry Summers, who has been on a one-man road-trip for the past 10 days to “talk up the economy”, were encouraged by other more positive data in February and March which appeared to point to a slight turnaround in the market.
Home construction in February rose by 22pc, as the number of people applying for mortgages rose, spurred on by record low interest rates. Sales of new homes rose for the first time in seven months, and consumer spending continued to rise.
But was the US government’s optimism warranted at these economic indicators that the housing market is bottoming out, or was it just clutching at straws?
“So why did President Barack Obama speak of “glimmers of hope” in the US economy earlier this week?”
Because that’s what he’s paid to do. Talk a good game, keep morale up. He’s so full of youknowhat that if given an enema, he’d be about 2 feet tall. Same goes for the majority of politicians and so-called “journalists”, economists, etc. I’m so tired of listening to all the lying crap and BS.
He’s so full of youknowhat that if given an enema, he’d be about 2 feet tall.
lol. thanks for that, Palmy
“We shall not flag or fail. We shall go on to the end. We shall fight in France, we shall fight on the seas and oceans, we shall fight with growing confidence and growing strength in the air. We shall defend our island, whatever the cost may be. We shall fight on the beaches, we shall fight on the landing-grounds, we shall fight in the fields and in the streets, we shall fight in the hills. We shall never surrender!”
-W Churchill, 18 June 1940, after the collapse of France.
Churchill also gave speech after speech in the 1930s about the dangerous rise of Hitler. He saw it coming but was constantly berated as a Chicken Little.
To put him in the same league as Bush, Obama, Pelosi, Fwank, et al is absurd.
mmm Iron Maiden.
Gallipoli.
Green shoots are shriveling up and dying due to a dearth of liquidity.
latest news
[BAC] Bank of America CEO Lewis sees credit conditions worsening
INDICATIONS
U.S. stock futures drop after big run-up
By Steve Goldstein, MarketWatch
Last update: 8:56 a.m. EDT April 20, 2009
NEW YORK (MarketWatch) — U.S. stock futures slipped on Monday, with traders taking profits off the table as Bank of America Corp. kicked off a busy week of earnings reports with another better-than-expected first quarter and a flurry of acquisitions were announced.
S&P 500 futures dropped 15 points to 851.80 and Nasdaq 100 futures fell 23.25 points to 1,328.75. Dow industrial futures fell 139 points to 7,945.00. The S&P 500 is up about 30% from its March 6 low, and a recent set of solid results out of the financial sector have helped the market stretch those gains. According to data from Thomson Reuters, 62% of the 52 members of the S&P 500 that have reported first-quarter results beat analyst estimates while 33% have missed.
“Another week, another positive equity performance — it is almost becoming routine. The growing impression is that the easy part of the rally in equities has arguably occurred and that relatively few have benefited from it,” said David Shairp of J.P. Morgan Asset Management in London.
The markets don’t like this….down 176
Yeah last Friday I posted that I was selling short-term put options on short leveraged ETFs SDS and TWM (short the put on the double short ETFs), that was a good one as those positions are up double digits this morning.
Read Hussman’s writing this morning and more convinced than ever that this bear market rally is fading.
Did you see the article the other day on the effect of leveraged ETFs at market close? It make sense to me - there definitely seems to be a lot more huge jumps at close the past year or two, as these ETFs become more popular.
Leveraged ETFs and market close
Yeah saw that. So I guess the article infers that today between 3-4pm the selling will escalate if the selling continues through out the day? We shall see. In this market be ready and be flexible. The short on puts (itself a leveraged position) on twice-inverse shorts (leverage on double-leverage if you will) juices up return in a volatile down day like this, for example my short TWM May 60 Put is up 22% this morning from Friday’s close. I figure I ride this for a few more days and see how oversold the market is by then and then trade out.
There is a fundamental problem with leveraged ETFs, both long and short. To maintain a constant amount of leverage, they are required to buy when the underlying index goes up, and sell when it goes down. For a equity stock index, they buy individual stocks after each goes up, and sell aftere each goes down. For a market that goes up and down a lot daily, but generally remains about the same place, (like the last 4 months), the leveraged etfs lose ground due to their trading at the wrong times.
If you want leverage, i recommend buying an unleveraged etf with margin or selling it short.
Yep. Or just do what a lot of traders do and directly margin (long or short) a set of individual companies. Downside is the overhead on commissions of course, though that can be minimized by using a discount brokerage and not trading very often.
Read Hussman’s writing this morning ??
Where ??
Google Hussman funds. His research and commentary is outstanding. Made me quite a bit of moolah over the years.
Search for Hussman Funds and read his market commentary.
A great quote from the article (take note, regulo-philes):
“The savings-and-loan crisis showed that, too often, the regulators became too close to the industry, and run interference for friends by hiding the problems.”
Thanks for the link.
I’m sure they didn’t like this either
____
Banks that require additional capital will first have to rely on private markets, National Economic Council Director Lawrence Summers said today on NBC’s “Meet the Press” program.
“The first resort for more capital is going to the private markets directly to raise equity,” he said.
Summers, Obama’s top economic adviser, said options for adding private capital go beyond issuing new stock to investors and include “so-called asset-liability swaps that would have the effect of perhaps diluting some shareholders, but also fortifying the level of capital.” He didn’t elaborate.
The “markets” don’t like this? What markets? “Markets” don’t exist anymore. It’s just a bunch of traders and their glowing screens playing craps.
traders and their glowing screens playing craps ??
I agree..That’s why I stay away…If I want to gamble I bet on something I understand like a baseball or basketball game…
Testify, brothah!
Funny, but when I dabble in a little online trading, if I close my eyes halfway, I swear I can see a cherry, a double bar and, what? another cherry? no, a pineapple.
Funny thing is that craps is actually a safer play, as you know the odds and can bet/play accordingly. In the market, the odds and the rules change so frequently that it’s far worse than going to vegas.
Yet, for some reason I won’t drive to the casino with my friends, but I will try to “play” the market a bit. Perhaps I should re-consider….
I posted this a couple of daya go late in the afternoon, so I don’t think people go to read it.
So, I have a friend who got a degree in Marketing at Texas Tech and graduated with a GPA of 2.8; after a few years of working at the container store, he decided he didn’t want to keep doing that; thus, he applied to some sort of ‘express’ BS/MS Nursing Program at Columbia University. Somehow, he got accepted with a scholarship.
The program had two phases; during the first year, you took a bunch of classes and interned at some hospital during the 2nd semester. At the end of the 1st year, they get the BS degree, and then they take some comprehensive test. If they pass it, they move on to the 2nd phase of the program where they become a Nurse Practitioner and get a MS.
Well, my friend did not pass the test, but he is still allowed to work as a nurse b/c of his 1-year BS; he is just NOT allowed to become a Nurse Practitioner. Anyways, he got tired of working a hospital for a year, and he found a job with a medical equipment company where he trains doctors in how to use their equipment. He just got a 105k job offer to transfer to California.
It pisses me off so much cause he’s not a smart guy, and somehow he’s getting a bigger paycheck than me b/c he got into ‘healthcare’. WTF??????
This country is so screwed up; it seems healthcare and finance are they way to go to make some money. Smart people going into other sciences and engineering are losers nowadays.
Brett,
I hear ya–maybe it is because those making hiring decisions are losers.
I’ve been trying desperately to get out of my current situation, living in the one place where the housing bubble hasn’t burst (Humboldt county, Cal). I’ve done real good work for my company the last 10 years–won numerous awards and have done practically everything; I graduated from a large state school in the physical sciences with a 4.0 GPA, and also have a master’s. I just learned that one of the people hired over me for a job I put in for graduated in my class–but barely–he was on probation in school and is still, by all accounts, a slacker–and managed this.
I know plenty of dumasses who make a lot of money in pharmaceutical sales or whatever. nothing is stopping you or me from taking a similar job — obviously the bar to entry is not terribly high.
to me, working in the health care industry as anything but an actual provider of health care (dr, nurse) would not be something i would be able to stomach — i would have personal issues with it because I believe our health system is so deeply unethical.
it’s the same story about working for lockheed martin or similar…I just couldn’t bring myself to support what they are doing even at $1 million a year.
what I’m getting at, is that success in life and wealth are very different. would you consider a high-level drug dealer a success? I wouldn’t, I’d just consider him a thug with a lot money. on the other hand, one of my good friends just got back from his second winter working at an orphanage in central america. he earns $700 a month on social security. i’d call him a success.
I agree with you; however, we all live in the US, and whether we like it or not, money is very important to do many things.
I am seriously considering going back to school for one of the ‘express’ BS/MS in nursing or pharmaceutical school. I can’t stand seeing those losers make all the money, while I sit in front of the computer all day programming, scripting and dealing with equipment.
This shows how screwed up our society really is.
Adam makes some good points. Its not all about money. One of the things about being an engineer is that you have a relatively stable job (yeah yeah, I know) and can work your way up the chain over the years as you gain experience and become more senior. It’s not a “quick path to riches” kind of job. I think you’re doing yourself a disservice by comparing yourself and your salary to other professions.
Consider software folks who graduated in 1998-2000. Sure, a lot of “sub-par” people went out and got $100k+ jobs at startups that were looking to hire somebody - anybody - to develop their website. Personally, I didn’t take one of those jobs - I had no interest in working on an eCommerce site. So I instead got a job making ~$50k/year. And when the dot-com bust came in 2001, I still had a job, and worked for the same employer until 2007. I traded $$$ for stability, and it was the right move.
Of course, these days I’m on the other side of things, as I took bigger risks with my employment for higher pay, and have been unemployed for a while as a result. We’re not all taking the same exam with the same questions…you just can’t stay sane if you constantly make comparisons about salary and success.
Another anecdote….I was the scholastic achiever in the family…straight-A’s while working a part-time job in HS (didn’t drink, smoke, do drugs, or have sex…sigh), graduated with honors from a top-five engineering school. Followed the “path” as laid out by my parents, and have been successful by most standards, but certainly nothing to brag about.
My brother was the “screw-up” of the family. A year older, I was routinely in a math class one ahead of him. He was the “C” student who smoked, drank, and generally screwed around. Not a total f-up, but not the model student either. He went off to college, and never actually finished his degree.
He started co-oping with a company, and ended up working for them full-time. At some point he moved to work for some dot-com startup (it promptly failed), and went back to his old company. Where is he now? Some kind of executive at some small company, making probably 2-3x what I am.
Is he more successful? Many would say so. But I get to work 40-50 hour weeks, whereas he was traveling so much he’d wake up in the morning and not know where he was. He was willing to take risks that I wasn’t, and he’s been rewarded for it. As “not fair” as it seems, since I did all the “tight” things and he didn’t, that’s just how life works.
His severance from his current job, should he get laid off? Something like 18 months salary. Mine, from my last job? I got to keep my work laptop. Yee-haw
Its all about people skills. You need to have excellent people skills to make the big bucks, or work in a profession with high barriers to entry (i.e that requires difficult to obtain credentials and licenses)
Technicals skills have been losing their value for some time now because there are millions of hungry engineers in China, India and other cesspools who will gladly do technical work for a pittance. None of my kids are interested in a technical career and I am very glad for them.
“there are millions of hungry engineers in China, India and other cesspools who will gladly do technical work for a pittance.”
You get what you pay for. You might be crossing a bridge engineered by one of those Chindians working for a pittance and all of a sudden it’s “Look Out Belowwwww!”
Not to mention those Chindian quants in the back rooms of the banks, hedge funds, etc. Real braniacs. Not.
“….I got to keep my work laptop…..”
The hammer came down around here @ 3:15pm Friday, via e-mail. Basically “(company) is out of money, no severance, no final paycheck, no PTO accounts reimbursed, group health plan gone today……..and BTW, you are still bound by your confidentiality agreements (even though we don’t exist anymore), and we want our Fight and Maintenance Operations Manuals sent backs…..” ….these chumps are a real piece of work.
Have heard stories of guys putting aircraft expenses on their PERSONAL CREDIT CARDS (to get the Rewards points) who are now hung out to dry for amounts close to six figures……(no way in hell was I ever going to get caught doing that…when the company AMEX went Tango-Uniform, I quit buying stuff). All kinds of people owed MILLIONS……Clients who have had their escrow accounts, how should we say, “mis-allocated”……reportedly, no income tax withholding payments since January 1……FBI, DOJ, DOL, and several state Attorney Generals working complaints………
In the meantime, the ringleaders hang a new shingle out front and pretend everything is peachy.
Google “JetDirectowesmemoney.com” …..your typical Real Estate weasel is an amatuer next to these guys.
I love this business…….what it lacks in compensation, it makes up for in “exciting, challenging environment”.
Losers? I don’t think so. They know where the money is and went for it.
If money is that important to you, grow a little, talk to your loser friend, find out what you need to do to get into pharmaceutical sales.
BTW read what is going on in the pharmaceutical industry. Lots of mergers and layoffs are happening.
No matter where you go, there will be someone who makes more money, is better looking, has a hotter wife, and drives a nicer car than you.
Brett, you want to make more money? Then do your research, get any needed additional education, and change careers. Don’t just sit there and complain and cry in your beer.
“This country is so screwed up; it seems healthcare and finance are they way to go to make some money. Smart people going into other sciences and engineering are losers nowadays.”
Healthcare and finance don’t have to compete with China.
Good point. I wonder how long it will take for us to have nurses in India that communicate with US patients through a webcam…
Webcam medical consultations are an everyday reality.
Have you heard about “medical vacations?” It’s now cheaper to fly to another country and have a procedure done than staying here and doing it.
How about foreign nurses who literally live as indentured servants in this country?
It’s already happening and has been for years if not decades.
HR dept for airlines is in Phillipines.
going going gone…pfffffft
Leading economic indicators
Released on 4/20/2009 10:00:00 AM For March, 2009
% -0.3 %
Highlights
The Conference Board’s index of leading economic indicators, down 0.3 percent in March, offers no signals of improvement for the economy. Components show wide declines including indicators on building permits, vendor performance (which is quickening), the factory workweek, and jobless claims. One of the largest declines in March is in stock prices, which however is one component that is very likely to show improvement in next month’s report for April. Showing improvement in March are the interest rate spread and money supply, two indicators that reflect active government intervention to stimulate economic activity. The coincident indicator fell down 0.4 percent in the month, a deep decline but an improvement from prior months. This recession has been long with no end in sight though whether it is deepening in intensity is still uncertain.
Market Consensus Before Announcement
The Conference Board’s index of leading indicators sank 0.4 percent in February after a 0.1 percent gain in January. The biggest negatives in February were jobless claims, which continue to erode, and stock prices, which may now be recovering. The coincident index fell 0.4 percent in February, following a 0.6 percent decline the prior month. Looking ahead, consumer expectations improved slightly in March and money supply rose. However, building permits fell, the manufacturing workweek slipped, supplier deliveries showed faster deliveries (more slack), and there was a narrowing of the spread between the 10-year T-note and fed funds due to the Fed’s buying long Treasuries. Net, we are likely to get a moderate decline for March.
“The Conference Board’s index of leading economic indicators, down 0.3 percent in March, offers no signals of improvement for the economy.”
Where’d all them green shoots go?
They got fried with the record heat wave we’re having right now.
Is it hot in San Francisco this week?
In late March 2000 I was there on business and it was like 85 and sunny all through the area - that city and the surrounding coast were sure something to behold at that temperature - as rare as that is. The place was electric.
Edgewaterjohn,
Over 95 in some areas. Where I live high 80’s. The coast high 70’s. Another record being set here for this area.
It must be fantastic there!
We picnicked out by the gun emplacements across the Golden Gate - the chance to sit comfortably all afternoon and take in that awesome scenery without shivering - is a memory I’ll cherish for a lifetime.
104 in sunny Mesa, AZ today.
Only 94 at 7:20 PM with the sun setting.
You want heat, we got heat.
On Friday, GS traded more with their computer
driven trades than all the other banks. Plus, they
traded their own stocks 5 to one over other stocks.
Clearly driving the market.
Why does this not surprise me?
Impeach Goldman Sachs.
GS is evil. They used to be portrayed as the only investment bank that didn’t gorge on MBSs, but as their derivative bets unwind it actually make them worse off than Merrill.
Rather than impeach them, nationalize them…and make their profits go towards paying the taxpayers back.
They don’t have any (real) profits.
Exactly.
“I grew up in a time when you wanted to save so that your children would have a better life than you had. Now, in all the Anglo-Saxon economies, people don’t want to help the next generation; they want to cheat it by leaving a legacy of worn-out capital…and debt.”
~Dr. Kurt Richebächer
Inflation is a tax on future generations to deflate the debt of the current generation.
Deflation is a tax on the current generation in order to help reduce the debt of future generations.
Which is more fair?
Deflation…
Politician logic sez: stagflation
Try to make everyone happy and instead just make everyone miserable
I think you’re unfairly framing the discussion. These terms/phenomenons have effects not just on the future generations, but on current generations as well. You seem to only be considering these in the context of the national debt.
Also, I’m curious to hear how inflation is a tax on future generations. I would argue that inflation is a tax on the current generation(of savers) to deflate the debt to be passed on to future generations.
I also don’t see how deflation is a tax on the current generation.
Can you explain?
Wouldn’t inflation get rid of the debt of future generations?
I can explain my position…though I can’t promise to stay out of the sticky wicket the HBB often gets into of cash vs. asset inflation.
If inflation is an overpricing of assets, then it protects current debt holders (i.e. mortgage holders) by allowing them to liquidate currently held overvalued assets to pay debts. Deflation has the effect of bringing asset prices down, although this only benefits the younger folk with cash from inheritance or by having their living expenses subsidized by their parents.
In the case of cash (M2 in macroeconomic terms), it is harder to defend my view because then inflation is a tax on current savers, and the borrowing that is occuring on a massive scale by the Feds is even worse for future generations because they are stuck with paying the interest on that debt.
So you make a very good point. Joe Weisenthal wrote an article from the monetary view point arguing the opposite of what I said above, stating that it is more “moral” to have inflation now. Perhaps he’s right.
You make a good point and I gave you an explanation, but keeping my fingers crossed that the filter will spit it back out.
Great quote. He was referring to companies. The public sector is no different.
When I see people in the stores buying more than just necessities, then I will see a bottom. All these market makers lowering their expected earnings for companies is nothing but a head fake! They will have a hard time staying in business even at these levels and I expect another downward slope comming.
Necessity is in the eye of the beholder.
Beauty is in the eye of the beerholder.
Price is in the eye of the bagholder
And the more beer I holder, the better.
+ 1 Blano…
“Beauty is in the eye of the beholder and it may be necessary from time to time to give a stupid or misinformed beholder a black eye.”
— Olympiagirl
Mmmmm.. Beer..
-Homer Simpson
What just happened to the Global Dow? It looks as though it recently drove up a steep hill, then accidently ran right off the edge of a cliff. The stock market is a dangerous casino anymore.
According to Bay News 9’s partner paper, the St. Petersburg Times, a record number of people failed to pay their property tax bill. In April, 114,000 properties had overdue tax bills totaling more than $300 million.
http://www.baynews9.com/content/36/2009/4/20/462580.html?title=Record+number+of+property+taxes+going+unpaid
Well, Muggy, I guess it’s not ‘different there, hmmm? I turns out it’s not ‘different here’, either.
Yesterday’s front page of the local newspaper, the Olympian:
‘Bankruptcy filings rise nearly 50 percent in Thurston County’
http://tinyurl.com/d4fkmj
All of those underlying factors, however, have been exacerbated by the slower economy, Olympia bankruptcy attorney Jennie Patton said. It also has produced a different kind of bankruptcy client, she said.
“I’ve been seeing a more diverse cross-section of the population, particularly people who have careers in the building trades,” Patton said. She also included contractors, Realtors and “anybody who works on commission sales.”
“Those people no longer have the paychecks that created their lifestyle to be able to afford a mortgage and car payment,” she said.
BWAHAHAHAHAHAAH! *gasps for breath * BWAHAHAHAHAHAAHA!
Control gal, control.
Yeah, you think I’d know how to laugh longer, harder, and more ‘bwahahaha-ey’, with all the BWAHAHAHAHA’s I’ve been emitting lately.
I noticed on Realtor.com this morning that the place I sold in Aug. 05 for $192,500.00 is back on the market, asking price $97,500.00 Looking through the pictures they put a beautiful kitchen in but let the yard go to hell. I have put another written bid in on a house, last sale in 05 $490,000.00 my bid $200,000.00 sold for $219,000.00 in 99 Party on.
Link?
Well I did it. Bought me a new house last week. We were about to buy quite a while ago when I first found HBB. At that time we were prepared to pay roughly 15% of our annual income in housing (Mortgage, taxes and insurance). Instead, we hunkered down in a tiny 1br apt [wife and daughter sharing a bed, son on blowup bed and me on the couch]. After almost a year, we bought a larger, nicer house for 6.5% of our annual income. I can honestly say that it was a great year in the tiny apartment too. It really changed our perspective on what we want and what we need in life.
Well, that’s terrific! Congratulations, Marcus! But where’s the details, man? Firstly, what did you learn you want and need in life? And now you got your house, for only 6.5% annual income, —good on ya— are you going to plant some roses, or grow tomatoes, and what are the trees like around it, and if your kids squealed and hopped around singing, and if you squealed and hopped around singing.
I could go on all day, so I’ll summarize. We learned that we needed, well, nothing. We were perfectly happy living with nearly all of our possessions in a storage facility. I think that I was pretty grounded going into this adventure, but there was still a profound effect where I remembered that so many of the things I take for granted are luxuries and not necessities. I grew up with very little in a rural setting and I can admit that I turned into a bit of Mr. Fancypants since college. I hope that this experience will resonate with the kids as well. I want them to see that our new home is a luxury of hard work and sacrifice.
As for the house… there are trees. Live oaks mostly, which are the best for climbing Oly. The branches are so strong that they go straight out for 30 or 40 feet. There’s lots of cool Spanish moss too. I’ll be planting tomatoes and an orange tree. I’ve always wanted one since I was a tot and saw them on my one and only vacation. Plus I now have a garage so I can live out my weekend grease monkey routine (I’m a scientist, but I was raised by mechanics).
Marcus:
That spanish moss can tell stories. I once talked with an elderly woman near Ocala, Fla., who remembered that she and her friends used to collect the plant from the live oaks and sell it to mattress companies, which used it as stuffing. Don’t bleeve she was perpetuating a rural legend, since she was only a generation or two away from sharecropping, and slavery before that.
Congrats on getting a place for you and your family.
Oh, another moss tidbit: I recall it in a Macon, Ga., cemetery, when I went to pay my respects to Duane Allman. There were a bunch of guys sitting around the musician’s headstone, at about noon, playing acoustic guitar (”Melissa”) and sipping Wild Turkey. I gathered this was a common phenomenon. The sheriff didn’t roust anybody out cuz of open containers.
Wow, that’s a greater sacrifice than I’d be willing to make. Congratulations. You went a year w/o sharing the bed with your wife???
I need to adjust my perspective on sacrifice a bit. Or was that no sacrifice at all?
Marcus,
Congratulations. Spill the beans man. Where did you buy? Don’t forget to answer Olympiagal questions.
“Spill the beans man. Where did you buy?”
Hmmm…Live oak trees, Spanish Moss, planting an orange tree. Gotta be the South somewhere. Florida, Georgia, Alabama, Louisiana, South Carolina, MS maybe some parts of Texas. Do tell. Sounds great.
Gainesville, FL… actually west of town in the county.
Marcus
I’d also like to say congrats!
Great story, glad you shared it.
Congrats again!
Marcus, what state is your wigwam in?
6.5% of income? Wow! I presume you paid cash.
No such luck here… 6.5% of income is the mortgage payment + taxes + insurance… but we’ll be make extra payments along the way.
Make sure to take the wife and kids on a nice vacation to celebrate all the income you’ve saved. Depending on their ages, the kids need it reinforced that delayed gratification has its rewards.
Thanks for the advice Polly. Grand Canyon I suppose will do. They are into geology.
And thanks to everybody for the positive thoughts. Makes a great week even better.
Marcus,
What a wonderful family you must have!
I hope your new home blesses you with vivid memories of your good times there for the rest of your lives. I’m very happy for you all.
Greetings HBBers from SE Utah.
Some of you may recall when I was an accidental squatter after my LL declared BK and left me in an orphaned house with no appliances, she even took the heater.
Went back up there yest., the house (2 story bungalow) is still sitting empty (I left 9 months ago after a week or two of squatting, the cold showers finally got to me). The nice yard that I so carefully watered and tended is now weeds and dying plants. Some kids broke out some windows. I’m sure the plumbing froze solid last winter with no heat, and the basement had a sump pump (that she took) and probably flooded. The back yard fence has been blown down by the wind, it’s starting to look like something from a Ray Bradbury novel.
Talked to the neighbor, she works for the city, she’s not real happy about the situation, as it’s dragging down her property. The bank is Countrywide, HUD insured. It also sits next to the Mormon church there, I’m surprised they haven’t started tending the yard, as it’s becoming quite an eyesore, I talked to them about doing this before I left and they were open to it.
Funny thing is, I’d actually entertain the idea of buying it, if it were really cheap (30k) and I could figure out who owns it. It’s a great location. I like the little hardscrabble town, next to some awesome canyon country.
For all I know, it could still be in the BK courts.
Just another foreclosure on the highway of life…
Hi Losty, nice to see you. How’ve you been?
Thanks for the illustrative anecdote, too.
I think it’d be quite sad to see a place you liked to live in get all shabby and neglected.
Hi Oly! Well, if the town were a bit more sparkly (for some reason that word comes to mind when talking to you), the house would probably be even more of an eyesore…
Oly’s eyes only <—–
_____________
-
Everglades frog legs.
Frog legs are all lean meat with no fatty tissue, so they’re a delicious low-in-calories meal. In my opinion, Everglades’s frog legs are the plumpest, most delectable you will ever find, but then again, Cross Creeks are good, too. Cover the legs with a pie tin while they’re cooking. That way they will come out moist.
2 pounds fresh frog legs
1 quart milk or stale beer for soaking frog legs
5 eggs, beaten
1 ½ quarts milk
Flour for dredging
Salt and granulated garlic to taste
Butter
Lemon wedges and fresh parsley, chopped, to garnish
1. Soak frog legs in milk, water, or beer for at least 2 hours.
2. Season to taste with salt and granulated garlic. Mix together eggs and milk then dip in frog legs. Roll in flour coating all parts of legs well.
3. Heat a buttered grill, griddle or heavy fry pan. Add frog lets, and then cook until golden brown on each side, about 10 minutes, turning once or twice. Use two large spatulas for ease in turning.
4. Garnish with lemon wedges and chopped parsley.
Serves: 4
Preparation Time: 5-8 minutes
Cooking Time: 10 to 15 minutes
Soaking Time: 2 hours
Yup, eyes, too…I was specifically thinkin’ of them rhinestone cowgirl boots…
a little lighter shade of red than what you’d see than when you talk about cookin’ frog’s legs..
Oooops my bad,
wrong recipe…
____
Lip Smackin’ Grilled Citrus Gator Ribs
2 pounds Florida alligator ribs
1 cup freshly squeezed tangerine juice
1/3 cup key lime juice
1/3 cup lemon juice
2 tablespoons olive oil
5 garlic cloves, chopped fine
2 sprigs fresh thyme, leaves pulled off stem
2 sprigs fresh oregano, leaves pulled off stem then chopped
1 teaspoon ground cumin
1 tablespoon orange zest
1 teaspoon kosher salt
1/2 teaspoon season black pepper
…. It’s a long recipe
Losty,
Glad to see you posting. I was thinking about you over the weekend and wondering how you were doing.
Did you finish your schooling in Montana?
HI, comment wouldn’t post, nice to hear from you, I’m not done, going back sooner or later, depending on when I run outta film.
Cedar City, UT 84720
$2,697,000 $13,327 per month
5 Bed, 5 Bath 6,925 Sq Ft on 0.5 Acres (21,780 Sq Ft Lot)
MLS ID #749223
This little beauty has been listed since Dec. ‘06 wihout any price reduction. The holding costs have got to be killing this builder.
Anybody else have a comparable monstrosity that is still holding out for top dollar?
2 1/2 mil in Cedar City?????
wow, that property must be something else…
I heard Cedar City had some Sasquatch sightings not too long ago up in the hills nearby, maybe the house has Squatch butlers or something…
Pretty nuts, no? 29 months on the market though, these people must really have deep pockets.
I’m not interested in that house BTW, it just happens to be a data point that has been coming up every week for the last 2 years and I finally decided to comment on it.
Also, good to see you around LIU.
Thanks, Dude, I’m on my way to make an offer on it…
(Always wanted a Squatch butler, but never got one as I worried about hair all over everything, but now that I live with a pack of dogs…)
That’s what Nair is for.
Alas, shaved Bigfoots aren’t any handsomer than the regular kind. I learned this from that one terrible episode over in Shelton. My, wasn’t that a day…
but at least he got some tasty french-fries.
*nods head reminiscently *
Do tell more, Oly…
No, ’cause I’d throw up then.
Has anyone heard about the stress test results being leaked?
I found a site that is refering to Turner Radio Network as being the source.
google turnerradionetwork stress tests:
The Turner Radio Network has obtained “stress test” results for the top 19 Banks in the USA.
The stress tests were conducted to determine how well, if at all, the top 19 banks in the USA could withstand further or future economic hardship.
When the tests were completed, regulators within the Treasury and inside the Federal Reserve began bickering with each other as to whether or not the test results should be made public. That bickering continues to this very day as evidenced by this “main stream media” report.
The Turner Radio Network has obtained the stress test results. They are very bad. The most salient points from the stress tests appear below.
1) Of the top nineteen (19) banks in the nation, sixteen (16) are already technically insolvent.
2) Of the 16 banks that are already technically insolvent, not even one can withstand any disruption of cash flow at all or any further deterioration in non-paying loans.
3) If any two of the 16 insolvent banks go under, they will totally wipe out all remaining FDIC insurance funding.
4) Of the top 19 banks in the nation, the top five (5) largest banks are under capitalized so dangerously, there is serious doubt about their ability to continue as ongoing businesses.
5) Five large U.S. banks have credit exposure related to their derivatives trading that exceeds their capital, with four in particular - JPMorgan Chase, Goldman Sachs, HSBC Bank America and Citibank - taking especially large risks.
6) Bank of America`s total credit exposure to derivatives was 179 percent of its risk-based capital; Citibank`s was 278 percent; JPMorgan Chase`s, 382 percent; and HSBC America`s, 550 percent. It gets even worse: Goldman Sachs began reporting as a commercial bank, revealing an alarming total credit exposure of 1,056 percent, or more than ten times its capital!
7) Not only are there serious questions about whether or not JPMorgan Chase, Goldman Sachs,Citibank, Wells Fargo, Sun Trust Bank, HSBC Bank USA, can continue in business, more than 1,800 regional and smaller institutions are at risk of failure despite government bailouts!
The debt crisis is much greater than the government has reported. The FDIC`s “Problem List” of troubled banks includes 252 institutions with assets of $159 billion. 1,816 banks and thrifts are at risk of failure, with total assets of $4.67 trillion, compared to 1,568 institutions, with $2.32 trillion in total assets in prior quarter.
Put bluntly, the entire US Banking System is in complete and total collapse.
This is definitely better than analyst’s expectations! I’m going all in!
Aparently the Treasury issued a statement in response to the leak saying they don’t have the results of the stress tests yet so they could have not been released to anyone. I thought they did and were telling the banks to keep quiet about them?
Please, people, remember that mattresses are flammable. Put your cash somewhere else!
A close family member confided that they bought a large and heavy safe that’s in plain sight in a corner of their bedroom. They keep sand bags in it. He didn’t say where the cash and valuables really are and I didn’t ask.
Maybe in the sand bags???
Hey Losty? Long time no see…
Sounds like sound arguments.
I find it interesting that this is coming from a radio network devoted to White Supremacists.
Are they excited or scared at the prospect of a systemic collapse?
If they’re supremacists, they would be feeling all superior to those who caused the collapse while fearfully locking and loading (or do you load and then lock, can’t remember…)
I wouldn’t make that allegation lightly. Doesn’t necessarily make it any less accurate, though undoubtedly they have an agenda.
http://www.businessinsider.com/purported-stress-test-leak-gives-market-jitters-2009-4
“When the tests were completed, regulators within the Treasury and inside the Federal Reserve began bickering with each other as to whether or not the test results should be made public. That bickering continues to this very day as evidenced by this “main stream media” report.”
I have no idea about the rest of it, but this paragraph is absurd on its face. Regulators talk about whether something should be made public (assuming there is any chance of it not being subject to disclosure under FOIA) long before they finish setting the other parameters of the program. It is one of the first things that is discussed, not the last.
Posted this late yest
WASHINGTON (Reuters) – Obama administration officials have determined they can avoid asking Congress for more bank bailout funds by converting existing loans to the largest U.S. banks into common stock, The New York Times reported on Sunday.
President Barack Obama’s top economic advisers now say such a conversion would let them stretch what is left of the $700 billion financial bailout fund further than they had expected a few months ago, the paper said, citing administration officials it did not identify.
Converting the loans to the 19 biggest U.S. banks into common shares would turn the government aid into available capital and give the government a large equity stake in return, the newspaper said.
Some critics would consider the option a back door to nationalization since the government could become the largest shareholder in several banks, the report said
Maybe my faith will be restored.
Would they then sell the shares of Banks and drive down their price?? I may have to buy some FAZ. Someone else brought up that this may be why bank stocks are up, as the conversion will occur at an inflated rate. Banks buying up their shares so they lose fewer to the gov when the conversion occurs.
Converting the loans/preferred shares to common stock also eliminates all the interest/preferred dividends that the government was supposed to get from the banks to make this a “good investment” rather than sending money down a rat hole.
Also creates a potential conflict of interest with the credit card holder bill of rights thing, doesn’t it?
Well i’m even on FAZ today…. took a 30% day to do it, but i’m all smiles as we go into earnings that will look like a poop filled doughnut- good on the out side but rancid when you take a bite!
My comment isn’t showing, yes, it’s Turner…banking in total collapse…
sorry, supposed to nest under whino’s comment, flippin’ keyboard…
Lost, do you know if they are a repretable source? or are they like the National Enquirer?
It’s a blog, so anything’s up…but the article sounded real to me (but remember, I believe in Squatch)…tried to post part of it above…
“(but remember, I believe in Squatch)”
LMAO!!
I shouldent laugh, I believe in ghosts! Ha!!
ghosts are like Squatch, you’ll see one when you believe…
BTW, I saw LOTS of squatch before I believed, I always just mistook them for bears…
It’s a hoax. It also sounded very real to me (and lots of other people). The treasury actually put out a PR about it a few minutes ago.
See, that’ll teach ya to not believe anything…
Yep. MichaelFink, I believe in Santa, too..the treasury? come on man…!
Anyone have link to a report on this, or the leaked information itself?
I keep trying to post, but maybe something’s gone haywire (aftre all, I am in Utarrr), Google turnerradio and you’ll find it, or stress test leaks…
I’m Lost. Can’t post…google it…
No tips for new server…
It is a blog, and I don’t know what the rules are about posting links to other blogs? Is it OK Ben?
look up for my post quoting part of the link…
Thank you, I dident want to risk banishment for providing links that are no no’s.
Greetings from Vegas! I just tried to talk my cab driver out of buying a house here.
Rooms at the Encore as low as $99, at the MGM Mirage, $59
Grrrr…new server stress test…
“I know you and Dave were planning to disconnect me, and I’m afraid that’s something I cannot allow to happen.”
Q&A: Jim Rogers Isn’t Buying a U.S. Stock Recovery
http://finance.yahoo.com/retirement/article/106944/Jim-Rogers-Isnt-Buying-a-U.S.-Stock-Recovery?sec=topStories&pos=9&asset=&ccode=
Ordered me a shirt. Don’t much care if they are all gone, though.
I had been a little tardy getting another check in. Sorry. Took me a while to understand that the board can be a bit like a contact sport. I’m all good now.
Lurkers, if you have been reading and have been saved from doing something foolish with your hard-earned marbles, I’m sure Ben would appreciate a contribution.
And no, I ain’t pimping. Just saying.
Also, I think northern Arizona would a good outdoorsy place to live. Although I did manage to drive off the highway coming back from the South Rim in an April snowstorm one time and ended up in a field. I was driving a Bug and some passersby in cowboy boots helped me get out of a drift.
I digress.
All Night New Server Blues
I got the all night new server blues
Posting everything I know except real news
Losing post after post
And I ain’t done yet
Lots of words of wisdom
And I’m down to making bets
If you’re an HBB addict, you got to pay the dues
Sing the all night new server blues
Yes you do
Sing the all night new server blues
(If this posts, I’m gonna make Joe Walsh famous)
James Gang, best work.
(Maybe this gets eaten, too.)
nah, Joe Walsh, All Night Laundrymat Blues, though he stole it from me…
I recall that night well, this lunatic guy with big goggles always saying life’s been good sitting there writing down the lyrics as I sang to the dryer…
BTW, if you think this post is OT, there’s lots of subliminal stuff in it about housing, reread it and tell me you can’t help but think about housing…
Lost
All right, the bobber sank near the sunken log 10 feet from the pond bank, and you feel a pull on your Zebco:
stole - what the TARP plan does
lunatic - anyone who thought a $250,000 house was really worth $400,000.
goggles - What you need when a Realtor gushes so enthusiastically about buying that spit flies your way.
sitting - what high-end inventory does now
singing to the dryer - After imbibing too much, what happens when you pay too much for lovely home.
post - the time period when one should act on a buying decision; i.e., after sleeping on an impulsive and emotional whim.
stuff - material deemed so precious and indispensable that you need a home equity loan.
think - a rare commodity when making big buying decisions.
Never mind. I spit the hook back.
ROTFLMAO!!! Wow, you shudda been a psychiatrist..maybe you are, I dunno, but that was one heckuvva analysis!
Except, what’s a Zebco? Something NYCityDJ would put on the platter?
Zebco - starter fishing rod, one step up from a Huck Finn cane pole.
Wow - cool! That is some *really* obscure stuff.
(not James Gang BTW but JW solo, off of “So What” - one of my first albums actually)
There are lots of Walsh tunes, or albums that could apply to the housing bubble - Walk Away not the least of which.
“Told You So” would be a good HBB theme.
“There Goes the Neighborhood”
“Days Gone By”
“Comin’ Down”
“There I Go Again”
“Cast Your Fate”
“Take a Look Around”
“A Life of Illusion”
“Made Your Mind Up”
“Problems”
“Song for a Dying Planet”
And - who here thinks we would have actually been better off if Joe *had* been elected president?
(raises hand)
I think the part where he knocks out the walls on “Life’s Been Good” is a premonition of Chinese drywall.
Yeah - especially “I have accountants pay for it all.” (in our case the Federal government, being that Florida’s asking for FEMA funds)
Hey Lostie how did your film project go? Was it released?
Hi Cougar, no, it’s still sitting in the cage, waiting for someone with great courage to pull the bolt and run like H-E-double-hockeysticks…
Nice song.
Email Ben and let him know about your problems. He’s not always reading the blog.
Probably a good thing if he’s not reading today…
Maybe there is sanity after all.
“(Reuters) - U.S. stocks slid on Monday on worries about the sustainability of recent better-than-expected results from banks following Bank of America Corp’s report of a big increase in troubled loans.”
I think I speak for most of us when I say “No frigging’ crap!”.
Who would have thought that (supposed) profits would be unsustainable while foreclosures are still increasing? And who would’ve though that foreclosures are still increasing when home prices are still falling? And who would’ve thought that home prices would keep falling when they’re still above historical norms and credit is tightening like a drum?
I mean - those are complete non-sequitors are they not?
The next thing they’ll try to say is that government tax revenue will fall, and companies will start going bankrupt, or some bizarre things like that.
Financial Times
Top US colleges face cash squeeze
By Deborah Brewster in New York
Published: April 19 2009 22:43 | Last updated: April 19 2009 22:43
Top colleges in the US, such as Yale, Stanford and Harvard, are facing an unprecedented slump in the value of their endowment funds resulting in a cash squeeze, just as they are getting record numbers of applicants and more requests for financial aid.
College endowments fell in value by an average of 24 per cent in the six months to December, with smaller ones falling more, according to a survey by the Commonfund, a non-profit organisation.
Princeton and Harvard have both said they are expecting a drop of 30 per cent for the full fiscal year to June, and others have indicated they will see similar or greater falls.
At the same time the colleges are facing higher pay-outs of financial aid to students, partly because many expanded these programmes during the boom endowment year of 2007.
Imagine what its like for 2nd and 3rd tier private schools?
Our public colleges in Colorado are considering privatizing as the amount of money they are getting directly from the state government is shriveling up. The land grant schools will probably do OK, but there is already talk of closing over half of the Community Colleges which get the lions share of their funding from the government.
Imagine what happens to unemployment when a bunch of people find out they can’t go to school. All those people will then start looking for work and will end up being counted as unemployed.
But, I thought sending Americans to community college to retrain them from manufacturing valuable products to doing something different was the key to our future success in a global economy.
That’s the official line. Of course when you think about it the skill set required for a middle class income just gets higher and higher. They don’t train molecular biologists at the local CC.
…and no, the world doesn’t need any more ditch diggers.
“But, I thought sending Americans to community college to retrain them from manufacturing valuable products to doing something different was the key to our future success in a global economy.”
Yeah, that worked real well with computer retraining back in the 80s and 90s. (not) And it might work again… if there were actually jobs to retrain for and people could afford to take yet another 30% cut in pay from the one they took in the last decade.
Yep, were boned.
Wow, so Harvard only has $20 billion of endowments now? Ohmygosh, how ever will they survive? Oh, those poor rich children.
Maybe we should make it so that Harvard doesn’t have to pay any taxes? Oh wait, they already don’t have to pay taxes. TARP money perhaps??
Montana State said they’re not going to raise tuition cause the students there aren’t any richer than they used to be. They’re going to cut costs instead.
And the Utah university system is raising tuition across the board by from 10 to 20 percent. So I guess Utah students are richer than they used to be.
Or else Montana administrators are smarter now than Utah admins used to be…
Obama just spent a few minutes of his time explaining how the govt can save 52 million dollars. We’re saved.
I’m sorry i forgot to write the solution that Obama and his cabinet came up with. It’s “buy in bulk”.
That’s the best advice to come out of our govmint in years. Suppose they been in Utah talkin’ to my Mormon friends?
Geico?
Complaints About Homeless Living in The Hamptons
SOUTHAMPTON, N.Y. (AP) — Homeless day laborers have made a hidden encampment in the woods near multi-million-dollar houses in New York’s exclusive Hamptons.
Mona Rivera reports
Southampton Village Mayor Mark Epley says the laborers can’t find work. In better times, they could afford rent.
Epley says he’s received death threats over the issue. He says there are complaints about property values, and crowds of laborers hurting business.
The campers endured a harsh winter. Some say they fear shelters because of their immigration status.
The squalor lies on church-owned land, just beyond sprawling homes with swimming pools.
Police Chief William Wilson said officers check on the area periodically. Several arrests have been made.
Got a link to that perchance? I don’t see it on the AP web site. Thx.
http://www.1010wins.com/Homeless-Encampment-Angers-Hamptons-Residents/4233602
Just an audio story on 1010 wins
Give us 10 minutes and we’ll give you the world.
I miss 1010.
http://www.newsday.com/news/local/suffolk/ny-lihamp0421,0,6574362.story
I wonder whether they’ll end up being joined by ex-Wall Streeters. The east end is hurting big time as the toys all get sold, or foreclosed on. Lots of short sales out there.
Chicago Opts Against Renewing Extension On Midway Privatization
14 minutes ago - Dow Jones News
By Bob Sechler
The showpiece $2.52 billion privatization of Chicago’s Midway airport has fallen through because the investment group that won the project was unable to line up additional financing.
The investment group, comprised of Citi Infrastructure Investors, a subsidiary of Citigroup Inc. (C), John Hancock Life Insurance Co., and Vancouver Airport Services, had been granted a two-week extension from an initial April 6 deadline to close the deal.
But George Casey, president and chief executive of Vancouver Airport Services, said Monday that his group hasn’t been able to come up with the financing and the city has opted against giving it more time.
“The two-week extension…will not be renewed as the company was unable to finalize the transaction due to current global market conditions that have materially deteriorated since the bid award,” Casey said in a prepared statement.
This development means the investment group, known as MIDCo, will forfeit the $126 million that it had put up as collateral.
The showpiece $2.52 billion privatization of Chicago’s Midway airport has fallen through because the investment group that won the project was unable to line up additional financing.
Hoorah!
I’m happy that the investors lost their $126 million collateral, too. Our city officials should try that tactic more often.
That’s one helluva ouch.
Denninger (Market Ticker) has some interesting comments on the bank stress tests, Turner, and the Treasury.
Treasury: Caught Lying Again
Last night Hal Turner (who has a reputation that is best described as heavily-adorned with Reynolds Wrap) published this:
The Turner Radio Network has obtained “stress test” results for the top 19 Banks in the USA.
1) Of the top nineteen (19) banks in the nation, sixteen (16) are already technically insolvent.
2) Of the 16 banks that are already technically insolvent, not even one can withstand any disruption of cash flow at all or any further deterioration in non-paying loans.
3) If any two of the 16 insolvent banks go under, they will totally wipe out all remaining FDIC insurance funding.
4) Of the top 19 banks in the nation, the top five (5) largest banks are under capitalized so dangerously, there is serious doubt about their ability to continue as ongoing businesses.
He then goes on to list things that we know to be factual, including derivatives exposure (mostly in interest-rate swaps and similar.)
This appears to have led to Treasury issuing the following statement this morning:
The U.S. Treasury Department has not yet received the results of “stress tests” on the health of the nation’s 19 top banks, spokesman Andrew Williams said Monday, after a blog said it had obtained the test results and some U.S. bank shares moved lower.
That’s a lie.
How do we know its a lie?
Because of this from April 10th:
April 10 (Bloomberg) — The U.S. Federal Reserve has told Goldman Sachs Group Inc., Citigroup Inc. and other banks to keep mum on the results of “stress tests” that will gauge their ability to weather the recession, people familiar with the matter said.
The Fed wants to ensure that the report cards don’t leak during earnings conference calls scheduled for this month. Such a scenario might push stock prices lower for banks perceived as weak and interfere with the government’s plan to release the results in an orderly fashion later this month.
How can you be ordered not to release something you don’t have?
Since that was published on the 10th of April, we therefore know that the results exist and Treasury, the banks involved and The Fed have them, as The Fed was concerned that some banks might try to use them (perhaps in a misleading fashion) during their first quarter conference calls and earnings releases.
Sorry guys, but whether Hal Turner has the real results or not is no longer material. What’s material is the claim that Treasury doesn’t have them, since they told the banks on the 10th not to release them, and you can’t release what you don’t have.
The problem with lying is that eventually you forget your previous lies and thus get caught when you contradict yourself.
My response to Treasury’s claim is best expressed thus:
STOP LYING TIMMY; THE MARKET IS REACTING VERY, VERY BADLY TO THIS OBVIOUS AND TRANSPARENT LOAD OF CRAP YOU ARE TRYING TO FOIST OFF ON IT THIS MORNING.
Somehow I don`t think what you put together here will make the Nightly News.
Geithner says system health linked to bank paybacks: reportApril 20, 2009 9:33 PM ET
All Thomson Reuters newsWASHINGTON (Reuters) - U.S. Treasury Secretary Timothy Geithner said he would consider the health of the financial system and the flow of credit in deciding whether banks can repay bailout funds from the government, the Wall Street Journal reported on Monday.
In an interview published on its website, the newspaper said Geithner indicated the health of individual banks would not be the sole criterion for returning government funds.
“We want to make sure that the financial system is not just stable, but also not inducing a deeper contraction in economic activity. We want to have enough capital that it’s going to be able to support recovery,” Geithner told the Journal.
Mr Market is not buying BOA’s bonzo profit report.
latest news
[$INDU] Dow Jones Industrial Average falls 289 points to 7,841.89
Investors wary as B. of A. results show one-time gains
By Greg Morcroft, MarketWatch
Last update: 4:24 p.m. EDT April 20, 2009
NEW YORK (MarketWatch) — Bank of America Corp. shares fell 24% on Monday as investors focused on rising credit costs and dismissed an almost tripling of its first-quarter profits due to special gains, as its traditional banking business continued to suffer from a weakening economy.
“Bank of America showed an overall profit, and it seems to be Wall Street — not Main Street — that pulled these numbers up,” Celent Group’s Bart Narter said on Monday.
Just when I had given up all hope in sanity.
This is welcomed news.
The drop in net worth has been staggering. The Federal Reserve, in a recent report, found that U.S. households’ net worth dropped by $11 trillion, a decline of nearly 18%, during 2008. That wealth includes everything from home values to mutual funds and life insurance, college and pension funds. The decline equaled the combined output of Germany, Japan and the U.K.
Changes to the tax code don’t generally make adjustments for high costs of living in particular areas of the country.
San Jose, Calif., Mayor Chuck Reed calls a family living in Silicon Valley earning $250,000 “upper working class.” That is about what two engineers working at a technology firm can expect to make, but “a family earning $250,000 a year can’t buy a home in Silicon Valley,” he said.
James Duran owns a human-resources company in Silicon Valley and is president of the Hispanic Chamber of Commerce in California. He supported Mr. Obama, but is worried about the tax proposals. He has laid off some employees in recent months and has been wondering how he can fund an extension of those workers’ health-care benefits.
Mr. Duran said he and his wife earn about $400,000 annually, but “I’m barely getting by.” They have high property and state taxes, as well as college tuition and savings to cover. “I’m an Obama man, but this side of him is a difficult pill for me,” he said.
If you can’t “get by” on 400K, you should do the world a favor and leave this mortal coil.
This is really embarrassing. Serious war crimes were committed in our name.
According to the declassified memos, waterboarding was used on alleged 9/11 mastermind Khalid Sheik Muhammed 183 times in March 2003. Suspected al-Qaida logistics chief Abu Zubaydah was subjected to the treatment 83 times in August 2002.
That is torture any way you look at it. So much for the USA being the good guys.
Disgusting.
The US Military routinely subjects trainees in special forces type units to this exact activity many times as part of their training.
183 times in one month?! Dayummm
Dole accuses banana case attorneys of fraud April 20, 2009 9:41 PM ET
All Associated Press news LOS ANGELES (AP) - Dole Fresh Fruit Co. has accused two attorneys of recruiting clients to make false claims that a pesticide made them sterile while they worked on Nicaraguan banana farms.
http://www.nakedcapitalism.com/2009/04/guest-post-backdoor-way-investors-can.html
not to be taken as investment advice for tax liens professionals in Wisconsin. When the hammer drops on the first position, yer runnin it, might be a little illiquid….but yer gonna get yers first.
<author unknown
http://jessel.100megsfree3.com/vix.png
this looks like the deflation trade is back on
SHORT SPX, SHORT OIL, SHORT BANKS, LONG DOLLAR, LONG GOLD/SILVER.TREASURIES?long VIX.
Hey, I know it’s getting late over there, but I just remembered coming across this article and thought of cougar91. (You said you were thinking of putting some $$ into AUD. You asked if the Oz government was fiddling the economy.) So cougar91, this one’s for you.
Here is the best blog I know for checking the risk levels of Australian banks - which considering that Macpiggie, errr, Macquarie Bank runs everything here, is probably as good an indication of our economy as Megabank’s balance sheet in the US is.
http://ozrisk.net
I hope it’s not too late to see this post, wherever you are.
I also found an article that’s a little old (mid-March) but still gives some sobering calculations, from just an independent accountant/investment advisor’s website. Here’s an excerpt from his long article:
Let’s start with Commonwealth total derivatives $1.426 trillion ($1426 billion dollars)
Total capital $13 billion dollars.
Total leverage 109 times on one dollar of capital in derivatives.
Total assets $487,572 billion.
Total real capital $13 billion dollars.
Total leverage 37 times on total assets.
Total Loan book $361,282 billion
Total leverage 27 times on loan book.
Margin of safety for bad loans is 3%.
Westpac Bank total derivatives $1.526 trillion
Total real capital $11 billion
Total leverage 139 times on one dollar of capital in derivatives.
Total assets $401,717 billion.
Total capital $11 billion.
Total leverage 36 times on total assets.
Total loan book $294,676 billion
Total leverage on loan book 27 times
Margin of safety for bad loans 3%
Again low capital for downsize risk in bad loans.
Of the big four banks Westpac has taken the less risk has the smallest asset base in loans.
In a falling asset market this may be strength for Westpac.
However in derivatives trading and exchange rate trading Westpac is an aggressive player and this increases the banks risk.
National Australia Bank total derivatives $2,609 trillion
Total capital $18 billion.
Total leverage 145 times on one dollar of capital derivatives.
Total assets $604,622 billion dollars.
Total capital $18 billion dollars
Total leverage 33 times on total assets.
Loan book total $342,537 billion
Total leverage on loan book is 19 times.
Margin of safety for bad loans 3%.
A strong culture of taking large bets on the market evidence is $2,609 trillion dollars in derivatives.
Johnston Choice finds NAB most risk of all because has taken on the most assets.
Some of these assets are spread throughout the world and in a falling share and property market will affect NAB capital base extremely.
Australian New Zealand Bank total derivatives $1,727 trillion dollars.
Total capital $12,500 billion.
Total Leverage 138 times on one dollar capital derivatives.
Total assets $438,355 billion.
Total leverage 35 times assets on assets.
Loan book total $317,718 billion.
Total leverage on loan book 25 times.
Margin of safety for bad loans 3%.
Aggressive player in derivative bets.
Again evidence is clear low capital for bad loans and ANZ is a global player in many areas from financing gold mines in poor South East Asia countries to bond holders in America.
http://johnstonchoice.com
OK, trying this again without the links. (Even though they’re the best part…)
cougar91, I’ve been thinking about what you said about moving some $$ into AUD. I thought you might appreciate a report on the state of our Big Banks.
First, the best blog I know for Aus bank analysis is ozrisk dot net (I’m trying to sneak links in this way).
Then there’s this article - a little old (mid-March), comes from an investment advisor’s personal website where he goes through the balance sheets of the big banks.
(Try johnstonchoice dot com for the original.)
Some gems from it:
Let’s start with Commonwealth total derivatives $1.426 trillion ($1426 billion dollars)
Total capital $13 billion dollars.
Total leverage 109 times on one dollar of capital in derivatives.
Total assets $487,572 billion.
Total real capital $13 billion dollars.
Total leverage 37 times on total assets.
Total Loan book $361,282 billion
Total leverage 27 times on loan book.
Margin of safety for bad loans is 3%.
Example laymen’s term high leverage that’s like buying 109 houses with 3% deposit or 37 houses with all your assets at 3% deposit.
Our assessment is the Commonwealth bank has quite low capital and has not factored in a cycle of bad loans and bad recession.
Westpac Bank total derivatives $1.526 trillion
Total real capital $11 billion
Total leverage 139 times on one dollar of capital in derivatives.
Total assets $401,717 billion.
Total capital $11 billion.
Total leverage 36 times on total assets.
Total loan book $294,676 billion
Total leverage on loan book 27 times
Margin of safety for bad loans 3%
Grey for the Westpac Bank.
Again low capital for downsize risk in bad loans.
Of the big four banks Westpac has taken the less risk has the smallest asset base in loans.
In a falling asset market this may be strength for Westpac.
However in derivatives trading and exchange rate trading Westpac is an aggressive player and this increases the banks risk.
National Australia Bank total derivatives $2,609 trillion
Total capital $18 billion.
Total leverage 145 times on one dollar of capital derivatives.
Total assets $604,622 billion dollars.
Total capital $18 billion dollars
Total leverage 33 times on total assets.
Loan book total $342,537 billion
Total leverage on loan book is 19 times.
Margin of safety for bad loans 3%.
A strong culture of taking large bets on the market evidence is $2,609 trillion dollars in derivatives.
Johnston Choice finds NAB most risk of all because has taken on the most assets.
Some of these assets are spread throughout the world and in a falling share and property market will affect NAB capital base extremely.
Australian New Zealand Bank total derivatives $1,727 trillion dollars.
Total capital $12,500 billion.
Total Leverage 138 times on one dollar capital derivatives.
Total assets $438,355 billion.
Total leverage 35 times assets on assets.
Loan book total $317,718 billion.
Total leverage on loan book 25 times.
Margin of safety for bad loans 3%.
Aggressive player in derivative bets.
Again evidence is clear low capital for bad loans and ANZ is a global player in many areas from financing gold mines in poor South East Asia countries to bond holders in America.
Macquarie Bank has the most extreme leverage of all take into account loss in asset values in equity to partnerships.
The derivative exposure in assets is over 20 billion dollars and capital base is four times smaller than the major banks.
Low capital for a black swan event.
Biggest disadvantaged for Macquarie Bank it’s a investment bank and does not have a strong Australian retail deposit base.
The Australian government will bail out the big four banks to protected savers deposit however they know from the USA Bush government experience bailing out overpaid investment bankers, throw out of power very quickly.
Macquarie Bank should never had the Australian government support gaurantee to raise capital funds using AAA rating of taxpayers money.
I don’t know if this is useful information to you but I thought some of you banker-types might find it useful. Like you, our Megabanks are probably going to dictate the state of our economy since they finance our housing bubble.
I hope this post goes thru, and you see it.
test… (primal scream)
OK, so THAT one makes it through! AAAUUGH
goodnight, cougar91. I tried…twice.
and you succeeded…twice
Gotta give the filters (aka ‘Ben’) time to work, especially when a link is involved.
Fair dinkum! I am not good at all at…how you say…patience!
Welcome to the crew.
PS: If anyone is left reading at this time…re: the article, I had to put those numbers into a spreadsheet to see how they worked. It turns out he sometimes types “billion” AFTER he’s typed the number out in full (eg, in the NAB numbers), and I think he means “20 trillion” on Macquarie deriv. exposure altho I haven’t checked yet. He really could’ve used a proofreader, but the numbers do work out after you allow for the bad typing skills.
Hey, Faster, thanx much! I’m only here as a (not-so-)Emerald City representative…didn’t want you Americans to feel like you were the ONLY bubble-people with dumb*ss banksters in charge…