The Housing Bubble

O.k., since all of my picks are up at least 15%, I put t-stops on them @10%

I’m just experimenting, so I’m going to let them run wild, but since they’re up, this gives them a little room to wiggle, but protects my initial investment.

Am I missing something?

I listened to T.T. Timmay a few days ago state that ‘they’ want to control the market in such a fashion that we would not experience “boom” markets in the future. This arrogant little twit and his posse can make all the new rules and regulations they want. The market will find ways around them, always has always will.

Treasury asks for control of derivatives market
AP. By ANNE FLAHERTY, Associated Press Writer Anne Flaherty, Associated Press Writer – 1 hr 33 mins ago

WASHINGTON – The Obama administration is asking Congress to extend its oversight of the financial system to include the shadowy market of derivatives, the kind of complex financial instruments that helped bring down the giant insurer AIG.

In a two-page letter sent Wednesday to congressional leaders, Treasury Secretary Timothy Geithner said he wants to create a central electronic-based system that would track the buying and selling of derivatives. He also wants to ensure that financial firms selling the instruments have enough capital on hand in case they default and subject them to stringent standards of conduct and new reporting requirements.

The legislative proposal is the administration’s first major step in overhauling the nation’s financial regulatory system.

“All (over-the-counter) derivatives dealers and all other firms whose activities in those markets create large exposures to counterparties should be subject to a robust regime of prudential supervision and regulation,” Geithner wrote in his letter.

“Key elements of that robust regulatory regime must include conservative capital requirements, business conduct standards, reporting requirements and conservative requirements relating to initial margins on counterparty credit exposures,” he adds.

New rules would deter financial firms from taking undue risk, prevent fraud and ensure they are marketed appropriately, according to the letter.

Current law largely excludes regulation of the instruments, which are referred to as “over-the-counter” derivatives because they are traded privately rather than through commodity exchanges now regulated by the Commodity Futures Trading Commission.

It was unclear how the rules would affect hedge funds, which are large, mostly unregulated entities that use complex trading tactics to earn big returns for high-dollar investors. Many hedge funds use derivatives contracts to offset risk on other transactions.

The proposal is strikingly similar to legislation proposed by a small group of major Wall Street banks. Critics of that proposal say the regime would give the same banks that contributed to the financial meltdown exclusive control over a larger part of the derivatives market.

From Canadian Business magazine, May 18, 2009
Economic forecasting
Investor 500: If you go into the market today

Get four of the world’s gloomiest forecasters in one room and you soon realize: these aren’t teddy bears, and this ain’t no picnic.
By Jeff Sanford

It was a flashy, high-wattage affair that took the trend of economic-news-as-entertainment to a remarkable new level. On a rainy Tuesday evening in early April, 1,500 clearly wealthy clients of Sprott Asset Management filled the ornate Elgin Theatre in downtown Toronto to hear an A-team of economic doomsayers muse about how this recession is going to get much worse yet. The group included a celebriconomist known for his erotic wall art, a formerly obscure Wall Street analyst married to a professional wrestler, and an ex-platoon-commander-turned-financial-historian who divines the cycles of life through market movements.

And so things threatened to veer toward the absurd. But as events go, A Night with the Bears (as the evening was so aptly titled) provided a plausible take on the root causes of our current woes. For the bears, it’s all about the big chunk of consumer debt still outstanding and how that debt is going to be expunged from the system. It’s a story that is more complex than the Twittering of the newspaper reporters could hope to capture. So while good reasons exist to think there may be a market bottom forming right now, and no end of advisers are suggesting investors get back into markets: Be careful. This downturn is an odd one.

The drastic plunge in economic activity is still sending shock waves across markets. A recent report from the International Monetary Fund suggests total financial industry writedowns will hit US$4 trillion — more than many had assumed. And lots of bad news is likely yet to come, possibly enough to swamp this spring’s nascent market recovery and make the bounce one of the dead-cat variety.

Those who pass by these bears without paying attention to what they’re roaring about are putting their wealth at risk.

The big name of the night was Nouriel Roubini, the former Clinton White House staffer who has taken on the sobriquet Dr. Doom for his dour outlook on the economy. He’s garnered a bit of minor celebrity as a result. (Trendy gossip website gawker.com has been following the prurient interest in his wall art and his rising popularity on the New York party scene.) Also up from New York for the event was Meredith Whitney, the former Oppenheimer analyst who was the first to call the debt crisis at Citibank. Joining those two on stage was Eric Sprott, the namesake of the Bay Street firm throwing the event, and Ian Gordon, a genial former investment adviser from Vancouver who was the grizzly bear at this gathering.

Is anyone in the market for a nice horse racing track?

Schwarzenegger eyes selling state assets, including Del Mar Fairgrounds
By Michael Gardner U-T Sacramento Bureau

8:37 p.m. May 13, 2009

SACRAMENTO – Gov. Arnold Schwarzenegger Thursday is expected to propose putting a for-sale sign in front of several landmark state properties – including the Del Mar Fairgrounds – to raise badly needed cash for a state on the brink of insolvency.

The governor’s team estimates that selling the properties could bring in as much as $1 billion, according to documents outlining the plan.

“It’s shocking to me,” said Michael Alpert, a Del Mar Fairgrounds director. “I know these are very tough times, but I can’t even imagine (it).”

The Del Mar Fairgrounds sits on slightly more than 400 acres of prime coastal real estate and is a popular venue for horse racing, the San Diego County Fair and other events.

Schwarzenegger Thursday afternoon is expected to reveal more details as part of his revised spending plan that will reflect twin grim scenarios: a deficit of more than $15 billion that will grow to over $21 billion if voters reject budget-related measures on the Tuesday special election ballot.

State officials also say California could run out of cash by this summer.

“In this time of fiscal challenge it is imperative the state explores every opportunity to raise revenues to avoid cutting programs,” said a report detailing the proposal.

“Changing the way the state manages and thinks about real estate has the potential to generate more than a billion dollars for the general fund to help pay off state debt,” the document continued.

Problemo numero uno with mortgage modifications:

How does one “reduce the debt” without “stiffing the creditors”?

May 14, 2009

U.S. mortgage-aid plan not building momentum
Only 55,000 offers so far; foreclosure filings up 32%
By Tara Siegel Bernard

NEW YORK TIMES NEWS SERVICE
2:00 a.m. May 14, 2009
…
So far, two months after the program went into effect, about 55,000 homeowners have been extended loan-modification offers, according to a senior administration official.

At the same time, foreclosures continue apace. RealtyTrac reported yesterday that foreclosure filings reached 342,000 last month, up 32 percent from April 2008. Moody’s has estimated that more than 2.1 million homeowners will lose their homes this year.
…
Although it is too early to know how effective the program will ultimately be, many homeowners who have tried to gain entrance say they have been successful only through persistence – and sometimes, the help of a lawyer.

What may be a larger issue, however, is the continuing deterioration of the economy, experts say. The longer it takes to set the program in motion, the fewer people will qualify for modifications, they say. The expected rise in unemployment in coming months may keep a growing number of homeowners out of the program.

“We have a debt crisis, and mortgage is at the center of it,” said Alan M. White, an assistant professor at Valparaiso University School of Law in Indiana who specializes in foreclosures. “To get out of it, we need to reduce the debt, and that is not really happening.”

Riverside man allegedly booby-traps foreclosed home - LATimes

9:46 AM | May 13, 2009
A 42-year-old Riverside man has been arrested on suspicion of setting up fake booby traps outside his foreclosed home, authorities said today.

A U.S. Bank representative was checking the house Tuesday in the 1400 block of Orange Street when he discovered several explosives outside the structure. Officers from the Riverside Police Department arrived about 2:45 p.m. and confirmed the explosives were made to look like pipe bombs, officials said in a statement.

At least nine homes in the neighborhood were evacuated, police said.

Former homeowner Daniel Gherman was booked on suspicion of attempting to assemble a device designed to cause great bodily injury and on four counts of assembling or possessing a facsimile explosive, officials said. The investigation is ongoing.

– Ruben Vives

Oh dear!
Leigh

Seeking Alpha

Freedom of Information Act Disclosure Busts Paulson, Geithner, Bair
by: Tyler Durden May 14, 2009

Judicial Watch, which lucked out majorly on a FOIA request to the Treasury, has received several hundred pages of stunning revelations, among which are that Hank Paulson essentially used the same tactics that he used on Ken Lewis on a group of nine bankers at the October 13 meeting which apportioned government investments to the various “critical” banking institutions. The major disclosure was captured in a memo called CEO Talking Points, which delineates the continuous use of strongarming tactics by not just Paulson, but by Tim Geithner, and Sheila Bair, who were also present at the meetings. According to one of the Talking Points:

If a capital infusion is not appealing, you should be aware that your regulator will require it in any circumstance. We don’t believe it is tenable to opt out because doing so would leave you vulnerable and exposed.

Among the banking CEOs who were forced into a pre-envisioned arrangement were:

Ken Lewis, BofA (BAC)
Vik Pandit, Citi (C)
Lloyd Blankfein, Goldman (GS)
Jamie Dimon, JP Morgan (JPM)
John Thain, Merrill
Robert Kelley, Bank of New York (BK)
Ronald Logue, State Street (STT)
John Mack, Morgan Stanley (MS)
Richard Kovacevich, Wells Fargo (WFC)
(cont’d)

Leigh

TheLedger.com

Stimulus Pays for Public Housing Redo, Shuffles Residents

LAKELAND | Elizabeth Wilkins says she’s gung-ho over the nation’s plan to stimulate the economy by putting millions of people to work. She just didn’t expect to lose her home in the process.

The 64-year-old Lakeland woman raising two grandchildren, ages 8 and 9, is being relocated along with dozens of other public housing residents to allow for extensive renovations.

In all, three Lakeland public housing complexes will get an extreme makeover, including Paul Colton Villas, Cecil Gober Villas and John Wright Homes - all built in 1981-82.

Renovations, to include new cabinets, plumbing and other fixtures, flooring and central heating and air systems, are courtesy of roughly $13 million in federal stimulus money available to the Lakeland Housing Authority.

money to modernize public housing

The money is part of the $789 billion stimulus package approved by Congress in February to kick-start the anemic economy. Thousands of housing agencies have received funds to modernize public housing, including the Housing Authority of Bartow, which got $162,231, and the Winter Haven Housing Authority, allocated $457,196. (cont’d)

Leigh

MarketWatch First Take
May 13, 2009, 12:08 p.m. EST
Dump these four states from our housing nation
Commentary: The worst offenders on the way down should sound familiar

CHICAGO (MarketWatch) — Take California, Nevada, Florida and Arizona. Please. Take them off the housing market’s hands and we could start to cheer a recovery.

You know the tale of these states well. They were the same places that reveled in the excesses earlier this decade, when housing prices in many markets within their borders were leaping by double digits every year, in some cases rising 25% or more annually. They were the places where new houses went up everywhere, regardless of whether there were buyers, and where condominium projects not even in the ground were doing a brisk business in contract-trading as investors bid on nothing but paper.

Back then, those places skewed the national housing data to the upside. When people in Bismarck, N.D., or Fort Wayne, Ind., read that home prices were up 9% or 10%, they laughed, because prices sure weren’t moving in their neighborhood. Folks in the Heartland wondered if everybody on the coasts was crazy.

Now see how the data is skewed the other way.

Look at RealtyTrac’s foreclosure figures for April. The realty company said foreclosure filings of all types hit a record last month, up 32% over the year-earlier number — putting one in every 374 U.S. households in danger of losing their home. See Economic Report.

But, gosh, who do we have here as the worst offenders? No. 1 in foreclosures, Nevada. No. 2, Florida. No. 3, California. No. 4, Arizona. Together they accounted for 193,659 foreclosure filings out of 342,038 nationwide — nearly 60% of all the activity.

Maybe I am missing something. But it would appear to me like UAW members voted for Obama in huge numbers. Obama then took over GM and gave 1/2 the company to the UAW as payback. And now the UAW owned and controlled GM will be selling Chinese made cars through its dealer network.

Hey good thing we didn’t elect one of those Republicans that loves to outsource jobs to India. Imagine what that would have done to the manufacturing base in Michigan and Ohio. Phew, we dodged that bullet.

May 13, 2009, 12:01 a.m. EST
Is it time to stress-test the Federal Reserve?
Commentary: Congressional critics ramp up efforts to corral central bank

By Darrell Delamaide

WASHINGTON (MarketWatch) — While not quite in the same league as Tina Fey’s take on Sarah Palin, Saturday Night Live’s spoof on the banks’ stress tests last Saturday was pretty funny.

Will Forte as Treasury Secretary Timothy Geithner explained that the stress test went from being a graded test, to a pass/fail, to a pass/pass-with-an-asterisk, to a pass/pass system, and then he congratulated all the banks for passing. Watch the video.

Time will tell how useful the stress tests were, but few serious economists or analysts believe the banking problem is solved.

In the meantime, there’s a groundswell in Congress for closer scrutiny of the stress tester - the Federal Reserve itself. America’s central bank is a curious public-private sector hybrid, largely free from any governmental oversight or control.

But as the steward of the nation’s money, the Fed’s actions in recent months to print hundreds of billions of dollars in new money seem to cry out for some sort of democratic review. Congress, after years of fawning over Fed Chairman Alan Greenspan as the maestro of monetary policy, has learned the hard way that, while trust is good, control is better.

So there is a bill before Congress that calls for a full-scale audit of the Federal Reserve System — the Federal Reserve Board based in Washington, and the 12 regional Federal Reserve Banks.

That bill, H.R. 1207, now has 149 cosponsors and counting. It was introduced by Texas Rep. Ron Paul, now nominally a Republican, but a former leader of the Libertarian Party who is still best known for his strong libertarian principles.

Retirement Living

May 11, 2009, 6:04 p.m. EST
Better get used to your 401(k)
New milestone in death of traditional pensions, but hybrid plans may grow

By Andrea Coombes, MarketWatch

SAN FRANCISCO (MarketWatch) — More than half of Fortune 100 companies now offer only a 401(k) or other defined-contribution plan to new employees, the first time a majority of the nation’s 100 largest firms does not offer a traditional pension, according to an annual survey released Monday by consulting firm Watson Wyatt.

The new statistic comes even as many savers rue the day their retirement became dependent on a 401(k), and as criticism of defined-contribution plans grows because these vehicles put the onus on individuals to invest and manage their savings.

Social Security is one of the most reliable sources of retirement income. But people often make mistakes when they tap into the system, inadvertently reducing their monthly payment for the rest of their lives, says Gail Buckner, a retirement specialist with Franklin Templeton Investments. MarketWatch’s Andrea Coombes reports.

As the S&P 500 dropped by about 37% in 2008, many people watched their plans for an imminent retirement disappear. Yet the trend away from pensions isn’t likely to change any time soon.

Today, 55 Fortune 100 companies offer solely defined-contribution plans to new hires, up from 46 at the end of 2007. Four of the companies made the change this year alone, according to Watson Wyatt.

May 13, 2009, 9:21 p.m. EST
California formally asks Geithner for TARP assistance
By John Letzing, MarketWatch

SAN FRANCISCO (MarketWatch) — California Treasurer Bill Lockyer asked U.S. Treasury Secretary Timothy Geithner on Wednesday to authorize assistance for his state from the federal Troubled Asset Relief Program, warning that depressed tax revenues may cut into basic services and halt the building of infrastructure.

In a letter, Lockyer asked Geithner for TARP assistance for California and “other financially strapped states and local governments which face a severe cash flow crunch.”

“If we cannot obtain our usual short-term cash-flow borrowings, there could be devastating impacts on the ability of the State or other governments to provide essential services to their citizens,” Lockyer wrote.

In particular, Lockyer cited fire and police protection, education and social services.

No credit

In addition, Lockyer warned in the letter that California’s cash flow problems may lead to trouble accessing the long-term bond market, which could “eventually even halt our infrastructure construction programs.”

Lockyer estimated that California’s cash flow shortfall in fiscal 2009-2010 will be more than $13 billion.

But weakness in the credit markets will cause difficulties in short-term borrowing to make up that difference, Lockyer wrote, necessitating the use of TARP money to help make funds more easily available through banks.

AIG Will Never Be Worth What We Are Going To Pay For It

In 2004 AIG had 2.6 Billion shares at $78 per share. This makes a total worth of $203 Billion.

So far we have paid them 180 Billion to unwind 1.6 Trillion worth of crap on their balance sheet. AIG has a 2.7 Trillion position that requires unwinding. We will pay $300 Billion of the pleasure of helping them out.

We are not going to get our money out UNLESS Little Bennie Bernanke succeeds in inflation. We will then get all our money back so that we can carry it in wheelbarrows to buy a loaf of bread.

Speaking of a loaf of bread, my wife recently told me that Wal Mart reduced the size of their Harvest bread by 4 ounces while maintaining the same price per loaf.

His Mother must be so proud of him!

Idiot.

Roidy

Wife and I attended a high school organization meeting last night. It was for Del Norte HS, at the western edge of 4S Ranch (sometimes mockingly referred to here as Foreclosure Ranch). This state-of-the-art school is supposed to open this fall. They have a fantastic physical plant, but there are questions about whether they will attract enough students from other parts of the Poway district to be able to open. I cannot help but wonder whether the popping of the bubble severely impacted their projected enrollment, as the land to the west of the school appears to be graded for real estate development, but instead is all open space as far as the eye can see.

Sanity’s been restored Federal Housing Administration loans, which require only a 3.5 percent down payment and allow for lower credit scores

First-time home buyers: The new niche market?
Middle-class workers who couldn’t afford to buy during the boom are having a change of fortune — and snapping up bargains during the bust.

By BARBARA MARSHALL

Palm Beach Post Staff Writer

Thursday, May 07, 2009

For Conniston Middle School teachers Areceli and Alberto Ramirez, the advantage of not being able to afford a house during the boom is snapping up a bargain during the bust.

The couple bought a three-bedroom, two-bath home in Wellington last month for $215,000. A few years ago, it would have cost about $330,000, according to their Realtor.

First-time home buyers Scott and Rose Heard bought a 1925 home with a two-story cottage in West Palm Beach’s Old Northwood for $299,000, about $250,000 less than they would have paid during the housing boom.

“It was a great deal,” Alberto said of the home in Lakeview of the Landings.

So was the $8,000 check they received from the federal government as first-time home buyers, part of February’s federal housing rescue plan.

“We used it to buy furniture,” Alberto said.

First-time buyers like the Ramirezes — teachers, firefighters and other middle-class workers once priced out of Palm Beach County — are rejuvenating the low end of the county’s real estate market.

Instead of being saddled with overpriced homes purchased during the boom, these first-time buyers can take advantage of prices down 34 percent since last year and nearly 50 percent from the height of 2005.

“People can buy a house for almost what they can rent and they’re going to get $8,000 back, which is basically what they’re putting down as a down payment,” said John Diaz of First Nation Realty in West Palm Beach, which holds seminars for first-time buyers.

There are indications that the long standoff between buyers and sellers may be ending, according to new statistics.

In Palm Beach County, the number of signed sales agreements climbed 134 percent from March to April (see Page 1A). Sales contracts are contingent on financing, appraisals and inspections, among other things.

Eric Sain, president of the Realtors Association of Palm Beach County, was so shocked at the results that he ran the figures twice.

“Those are spectacular numbers,” he said.

Although Multiple Listing Service does not track how many of those are people buying their first homes, experts say it’s probably the majority.

“Sanity’s been restored. People are realizing there is a chance to get into housing for a lot less money,” said Mike Larson of Weiss Research Group in Jupiter.

Buyers are getting assistance from:

Interest rates, at a historic low of about 5 percent.

Sellers, including banks trying to unload foreclosed properties, offering to pay 3 percent to 6 percent of closing costs.

Federal Housing Administration loans, which require only a 3.5 percent down payment and allow for lower credit scores and are easier to obtain than bank mortgages.

Many area Realtors say they’re busier than they’ve been in several years, thanks to first-time buyers.

“These are people who have been sitting on the sidelines and waiting and waiting,” said Gilbert Orr, with Re/Max Prestige in West Palm Beach.

LOL at this from PB last night:

“Does owning a car debt free qualify us for membership in the Ownership Society?”

No - you don’t count as an owner of something unless you have a loan against it. Didn’t you get the memo?

test

MAY 14, 2009, WSJ
SEC Poised to Charge Mozilo With Fraud
By KARA SCANNELL and JOHN R. EMSHWILLER

The Securities and Exchange Commission staff is readying civil fraud charges against Countrywide Financial Corp. co-founder Angelo Mozilo, in what would be the highest-profile government legal action against a chief executive connected to the financial crisis.

The SEC staff sent a so-called Wells notice to Mr. Mozilo several weeks ago alerting him to the potential charges, people familiar with the matter said. Mr. Mozilo’s lawyers could still persuade the SEC’s commissioners that there isn’t sufficient evidence to bring a case.

http://online.wsj.com/article/SB124224647957816523.html#mod=testMod

In case anyone missed the election news this weekend from Dallas, even though there is a budget deficit in the city budget, the city of Dallas will be entering the hotel business. Yes, $500 million+ will be spent on a hotel:

http://www.dallasnews.com/sharedcontent/dws/news/politics/local/stories/051109dnmetdalwinners.418663e.html

Was just reading through some stuff posted on BB last night after I went to be. One interesting thing was the legislation floated regarding an extra surcharge for CC purchases.

Seems to me like that’s yet another volley in the War on Savers, and may be a prelude to high inflation.

Many of us I know like to still use credit cards, and pay them off each month, taking advantage of some of the cash rebates and also the “float” period. These advantages would be offset (and then some, probably) by the new fees.

Lately that float period has been quite meaningless, since you can’t make any significant interest on the extra money in your bank account during that period. However - if (when) we get to high inflation that will no longer be the case; there will be significant extra savings by taking advantage of the float. So perhaps the proposed legislation is a preliminary shot; to take away this advantage of Savers before it can be used in an inflationary environment?

(adjusts tin foil hat)

Kremlin: Battles over energy may lead to wars.
AP
By VLADIMIR ISACHENKOV, Associated Press Writer Vladimir Isachenkov, Associated Press Writer – Wed May 13, 5:49 am ET

MOSCOW – A Kremlin policy paper says international relations will be shaped by battles over energy resources, which may trigger military conflicts on Russia’s borders.

The National Security Strategy also said that Russia will seek an equal “partnership” with the United States, but named U.S. missile defense plans in Europe among top threats to the national security.

The document, which has been signed by President Dmitry Medvedev, listed top challenges to national security and outlined government priorities through 2020.

“The international policy in the long run will be focused on getting hold of energy sources, including in the Middle East, the Barents Sea shelf and other Arctic regions, the Caspian and Central Asia,” said the strategy paper that was posted on the presidential Security Council’s Web site.

“Amid competitive struggle for resources, attempts to use military force to solve emerging problems can’t be excluded,” it added. “The existing balance of forces near the borders of the Russian Federation and its allies can be violated.”

The paper didn’t elaborate or name any specific nations.

Medvedev’s predecessor Vladimir Putin, who is now Russia’s powerful prime minister, often accused the West in the past of trying to expand its clout in the ex-Soviet nations and push Russia out of its traditional sphere of influence. The Kremlin has fiercely opposed NATO’s plans to incorporate its ex-Soviet neighbors, Ukraine and Georgia.

Russia currently controls most natural gas export routes out of the former Soviet region, but that grip is coming under growing pressure from China and the West.

The European Union, which depends on Russia for about one-quarter of its gas needs, has sought alternate supply routes, including the prospective Nabucco pipeline that would carry the Caspian and Central Asian gas to Europe but skirt Russia.

Intensifying rivalry for influence in the ex-Soviet region fomented tensions and helped stage the ground for last August’s war between Russia and Georgia, which sits astride a key export pipeline carrying Caspian oil to Western markets.

I paid a dollar for freakin’ cucumber today, and all my wife and I are gonna do with it is eat it. Gas is up about 20% over the last month. Glad I started a vegetable garden and work from home.

Karl Denninger is reporting today that Obama FORCED the banks to accept TARP money — with all the concomitant regulations that went with it — without any finding of insolvency, resulting in an unconstitutional taking…

“Judicial Watch, the public interest group that investigates and prosecutes government corruption, announced today that it forced the Obama administration to release documents about the October 13, 2008, Treasury Department meeting that coerced major banks to allow the government to take $250 billion equity stakes. Among the other news, the documents confirm former Treasury Secretary Hank Paulson told the CEOs of nine major banks that they had no choice but to allow the government to take equity stakes in their institutions.”

President Obama’s Treasury Department attempted to prevent the disclosure of these documents, refusing to respond to an FOIA request. Judicial watch sued.

On February 4th The Obama Administration claimed it had no documents related to the meeting, but was forced to recant and release them.

In other words, THE PRESIDENT LIED AND ATTEMPTED TO COVER UP THE FACTS.

These documents show that the banks in question were literally forced to accept the interference of the government in the form of equity investment under the direct threat that their primary regulator (the OTS or OCC, as the case may be) would force them to do so if they refused. Both OTS and OCC are run by Treasury.

The outrage here is not just that these CEOs were forced (literally) to take the money. It is also that they were forced to, at the same time, accept whatever FUTURE restrictions on activity, including compensation, Treasury or Congress desired to impose.

In short the banks were forcibly nationalized without a prior finding of insolvency; this is blatantly unconstitutional as a “taking” without compensation.

A recent Ticker commented on the nascent bill to provide a “backstop” to state and local municipal bond issuance. I believe it is quite safe to say that the precise same sort of thuggery used with the banks will be employed with the States, if we do not stop it. After all, there is zero evidence that this changed with the Obama Administration; they in fact tried to prevent the release of the FOIA’d documents from Treasury, redacted an awful lot of the material, refused to provide Geithner’s notes on the matter and further, have failed to act to restructure that odious “trust” document mentioned above.

We are no longer a nation of laws; this is a bigger scandal, by far, than Watergate and it is 100% bipartisan.

If we the people allow any of this to stand we can consider our nation’s founding document to be nothing more than toilet paper.

We need a special prosecutor, we need indictments and impeachments, and we need them now.”

Bankruptcy helps the undeserving—and that’s the way it should be.
by Megan McArdle

http://www.theatlantic.com/doc/200906/bankrupcy

Jobless claims over expectations and the market is up. What happened to the green shoot of declining jobless claims? Is it a green shoot now even when jobless claims rise? (What’s more the previous week’s were revised up.)

This week’s was blamed on the auto industry and the market is treating it like a one-time event, an outliner. These people aren’t going back to work anytime soon, what’s more, their layoffs will affect other workers down the supplier chain. What is the market seeing with future jobless claims that I’m not?

Mumbai authorities tear down ‘Slumdog’ star’s home May 14, 2009 10:42 AM ET

All Associated Press news MUMBAI, India (AP) - City workers bulldozed the home of a “Slumdog Millionaire” child star Thursday as part of the demolition of dozens of shanties in a Mumbai slum.

Azharuddin Mohammed Ismail was asleep when a police officer woke him up and told him to leave his family’s home, he said. Shortly after that, the shack and about 30 more were destroyed.

“A police officer took a bamboo stick to hit me, and I was frightened,” said 10-year-old Azhar.

Authorities say his family will be given a new home elsewhere.

Eight Oscars and $326 million in box office receipts have so far done little to improve the lives of the film’s two impoverished child stars, Azhar and Rubina Ali — who were plucked from the slum to star in the blockbuster.

When will WalMart start taking toxic debt as cash? Just think how much more crap they could sell if they accepted unpaid utility bills, mortgage notes, late car payment notices, cell-phone bills, bounced checks, etc for goods. I sense a new Obama plan here if he reads this. Hope is is too busy reading his prompter today…

Bill From L.A. You got it right. Today the masses do not see the once in a century change coming. Social Securty will be saved. The great industrial might of America will return in some fashion. Government will back off. Don’t know how but it will happen.

Who would have thought the 13 little insignifecant colonies on the New Continent would buck the kings of Europe. They Did. That was a world shaking event.

We are about to have another one.
So. Be. It.

It’s another story in the City of London, where office rents in the U.K.’s main financial district are falling to 1991 levels as job losses and a mistimed building boom depress prices.

Rents will drop to 40 pounds per square foot by the end of this year, the same as 1991 when Canary Wharf got its first tenants, analysts at London-based King Sturge International LLP estimate. Prices declined to 46.50 pounds per square foot in the City during the first quarter from a high of 65 pounds in mid- 2007. Rents fell to as low as 30 pounds two years after Canary Wharf opened.

BWAHAHAHHAHAHAHHAHAHAHHAAHHHHHHHHHHHHHHHHH!!!

I stopped out on FAZ and SRS…

Rumors of another Friday bank failure on my fav tin foil site. SKF is so sexxy. I even like saying, “Skiff.” FAZ sounded too much like fizz. NIA

More signs of pickup in UK housing market

http://finance.yahoo.com/news/More-signs-of-pickup-in-UK-apf-15241587.html?.v=2

Dollar down versus krona currencies:

USD-SEK 7.8495 -0.0650 -0.8219% 14:08
USD-DKK 5.4646 -0.0119 -0.2173% 14:08
USD-NOK 6.4798 -0.0402 -0.6173% 14:08
USD-CZK 19.7090 -0.1260 -0.6352% 14:09
USD-SKK 22.1060 -0.0486 -0.2194% 14:09

Does this suggest krona is king?

“You Can’t Drink Yourself Sober”:

Financial Crisis Far from Over, Ritholtz Says
Posted May 14, 2009 12:34pm EDT by Aaron Task in Investing, Banking
Related: C, BAC, XLF, MS, WFC, KEY, PNC
The financial sector continues to bask in the afterglow of last week’s stress test results and subsequent capital raises by numerous banks, with PNC and KeyCorp. joining the parade.

The fact bank stocks have rallied and many have been able to raise private capital is a positive, but it’s folly to believe the crisis is over, says Barry Ritholtz, CEO of Fusion IQ and author of the forthcoming Bailout Nation. “You can’t drink yourself sober and you can’t leverage your way out of excess leverage.”

Many big banks remain technically insolvent and “are only being held together by spit, bailing wire and tape,” says Ritholtz.

Banks like Citigroup and Bank of America are being “propped up by the grace of Uncle Sam,” which can’t afford to let go because bad loans continue to rise and demand for credit is falling, says the money manager and Big Picture blogger.

The banking system needs more time, at least three to five years, to deleverage before it can be left to its own devices, Ritholtz says, suggesting only time can heal the sector’s wounds.

That said, because the government is propping up “zombie” banks, you can’t rule out the Japan scenario of a decade (or more) of economic malaise, he says.

Not sure if anyone else has posted this, but I thought many here would appreciate it… from the Wall Street Journal.

WSJ Headline:
SEC Poised to Charge Mozilo With Fraud

The Securities and Exchange Commission staff is readying civil fraud charges against Countrywide Financial Corp. co-founder Angelo Mozilo, in what would be the highest-profile government legal action against a chief executive connected to the financial crisis.

The SEC staff sent a so-called Wells notice to Mr. Mozilo several weeks ago alerting him to the potential charges, people familiar with the matter said. Mr. Mozilo’s lawyers could still persuade the SEC’s commissioners that there isn’t sufficient evidence to bring a case.

David Siegel, a lawyer for the 70-year-old Mr. Mozilo, declined to comment on the investigation and said there is no “fair basis” for any allegations against the former Countrywide chief executive.

The charges the SEC is considering include alleged violations of insider-trading laws and alleged failure to disclose material information to shareholders, according to people familiar with the matter.

Here’s why shorting this market is a fools play.

I was wondering why the market was going up on a day where in the morning everything was pointing down.
Then I read this.
The title is misleading.

___

Fed May Revise Limits on Use of Credit Ratings, Bernanke Says

“The U.S. Federal Reserve may revise rules that currently favor Moody’s Investors Service, Standard & Poor’s and Fitch Ratings, Fed Chairman Ben S. Bernanke said …

“That review encompasses the ratings of securities of all types accepted as collateral at all our recently established credit facilities as well as collateral accepted to secure regular discount window loans,” Bernanke wrote. David Skidmore, a Fed spokesman, didn’t return calls seeking additional comment.

The Fed currently only accepts collateral ranked by the “major” nationally recognized statistical ratings organizations, or NRSROs, Bernanke said. Because “the number of NRSROs is expanding” the Fed is conducting its review, he said.”

____

The money quotes:

1. “That review encompasses the ratings of securities of all types accepted as collateral at all our recently established credit facilities as well as collateral accepted to secure regular discount window loans”

2. “The Fed currently only accepts collateral ranked by the “major” nationally recognized statistical ratings organizations, or NRSROs, Bernanke said. Because “the number of NRSROs is expanding” the Fed is conducting its review.”

__

Has anyone here heard about the large overnight bank transaction loan that failed last night? This rumor is spreading on the internet today. They say its anywhere from $10 to $30 billion dollars.

Stocks still face deflationary collapse: Prechter

http://www.reuters.com/article/ousiv/idUSTRE54D4IL20090514

Re: Buffalo NTSB report

Missed the comments in the “Bits” yesterday. Just some info to further the education of the HBB………since you guys have helped further my financial education, I thought I might reciprocate, with apologies to those who already know this stuff.

-”Stick shaker” and “Stick pusher” are two different devices.

Lots of airplanes give no “natural” stall warning before the wing quits flying. The stick shaker is a system that shakes the control column of an airplane when the system senses an impending stall. Since the stall speed changes depending on flap and/or slat position, the system computer compensates accordingly.

The “Stick pusher” (basically) is an actuator device that physically pushes the control column forward/aircraft nose down, when an impending stall is sensed. The pusher is a newer device, and is mostly installed on Transport Category airplanes certified in the past 10-15 years or so, because it was decided by the PTB that the stick shaker wasn’t adequate.

According to the report, this crew didn’t monitor airspeed, lost 50 knots airspeed in about 20 seconds, stick shaker went off and stick pusher pushed the column forward. Pilot evidently physically overrode all the devices by pulling back on the column, stalled the airplane, and spun in. The NTSB detirmined that the ice accumulation on the airplane was insignificant.

While this was going on, copilot retracted the flaps…..if flaps were full down, and she retracted them to 15 degrees from 35, this may have helped (although this may have aggravated the stick shaker issue…..you get a pitch change ususally with a change in flap position)…..if retracted from 15 to zero, (IMO) this would have been a mistake. I frankly would have retracted the landing gear first.

Of course, one of the the NTSB’s solutions to this will be to put ANOTHER idiot light/EICAS message/aural warning on the airplane.

From what I get from the report, the co-pilot had approx 600 hours or so Total Time when she was hired. Our company requires an ATP rating (minimum of 1500 hours), and a minimum of 200 hours in type before hiring. IMO, unless you have an ATP, you have no business flying Part 121 or 135.

All the issues concerning low pay (forcing the crews to fly long commutes from home to duty station) and crew rest have been flogged to death for years, and nothing has changed……all I can say is that “the flying public gets what they will pay for”

(Example……..at my former employer, they were having a hard time retaining A&P mechanics, so they formed a “TQM” team to study the problem……they did exit interview, shop questionaires, etc.

SURPRISE!…..the study concluded that they weren’t paying enough for one……..the second was all of the forced overtime 700-800 hours a year, three out of four weekends/month, plus O/T during the week, holidays, etc. (My own personal “best” was almost 1100 hours). Most of the forced overtime was due to shortages in staffing, because they didn’t pay enough, then they ran everyone else into the ground until they quit.

Of course, this required the company to spend some money to address …….can’t do that. Report disappeared, never to be seen or mentioned again.

From TDR… B.Bonner

Without the financial sector puffing up assets, prices will tend to go down, not up. And without the financial sector adding debt…and giving American consumers the wherewithal to dig themselves deeper holes…the whole world economy needs to be restructured. Manufacturers in China can’t depend on the consumers of first and last resort in America anymore. People in the US are no longer buying what they don’t need with money they don’t have. Because no one will lend them money. And so, global commerce slumps. Ships wait at loading docks; where are the containers? Factories wait for orders and stores wait for customers; but where are the customers? The customers aren’t going to show up. Because if there is one thing Americans have learned from this crisis it’s that they must stop spending so much money. They’re facing what the Washington Post calls the “Baby Boomers’ Retirement Bummer.” They have no choice; they have to pay off debt, not add more of it.

We’re hearing that China is recovering. We don’t believe it. Who’s buying?

They say the US economy is close to a bottom, too. We don’t believe that either.

Wait…let’s ask Alan Greenspan. Here’s the Bloomberg report:

Former Federal Reserve Chairman Alan Greenspan said on Tuesday that “the seeds of a bottoming” in plunging U.S. home markets were becoming visible.

Speaking to a National Association of Realtors summit, Greenspan said there were reasons to believe that bulging inventories of unsold homes were dwindling and that should bring some stability to prices.

“It looks to me, judging from the balancing of household formation on one hand, conversions, mergers, demolitions…that we’re at the edge of a major liquidation in that excess of inventories which I suspect and I hope will be of such a pace that it will stabilize prices,” the former Fed chief said.

“So as I look at the housing market…we are finally beginning to see the seeds of a bottoming,” he added.
We can imagine seeds of a recovery. We can imagine signs of a bottoming. But we don’t know what the hell “seeds of a bottoming” is supposed to mean.

Do the seeds grow downward? And turn into a bottom? Then what happens?

But that confirms it for us. If the former Fed chief thinks he sees the “seeds of a bottoming,” a bottom must be nowhere in sight. And how could it be? You can’t hope to erase the errors of a 50-year debt build up in a single year.

Opinion
California’s fiscal crisis is about to hit home

If the budget propositions fail, Sacramento may force local governments to hand over property tax revenue used for everything from keeping us safe to cleaning our streets.

By D.J. Waldie
May 14, 2009

Cynicism and contempt. Isn’t there anything new from the state’s budget mismanagers?

Not judging by what local government leaders heard from Gov. Arnold Schwarzenegger on Monday. He told them to brace themselves for more. He said that he plans to release two summaries of his budget today. One optimistically assumes that the budget propositions on Tuesday’s ballot will pass (something that is increasingly unlikely). The other — based on defeat at the polls — will contain, among other nasty surprises, a forced loan from cities and counties to the state for 8% of their property tax revenues.

According to the League of California Cities, L.A. would be forced to loan the state $67.7 million. The county would be particularly hard hit, giving up as much as $250 million. The overall impact on local government — and your neighborhood — is estimated at just over $2 billion.

Taking 8% of the property taxes now used to fund local governments would force deep cuts in the services and programs delivered by your city and county. Worse, a property tax shift fixes nothing. The state is obligated to repay the local governments — with interest — in three years. That just kicks the state’s deficit down the road. This might make cynical sense for termed-out legislators and Schwarzenegger. But the state will have dug itself a deeper hole from which it’s less likely to recover.

Forced lending is a provision of a proposition voters approved in 2004, which was supposed to stop the state’s dipping into the funds for city and county services. Between 1991 and 2003, the state budget had shifted more than $40 billion from cities, counties and redevelopment agencies to pay for state programs. Voters who overwhelmingly supported curbs on extractions from local governments probably thought they had put a firewall between their neighborhood and the cynical and contemptuous authors of the state budget. It turns out that the wall of separation is dangerously porous.

Taking from local governments comes at a time when they are struggling to cope with the lower property and sales tax revenues that have come with declining property values and curtailed spending.

My city has budgeted carefully, put reserves aside for rainy days and taken care to keep programs and services in line with revenues. We thought we might be lucky, that fiscal good sense would get us through these tough times. Our reward is the state’s indifference.

My Personal Credit Crisis

http://www.nytimes.com/2009/05/17/magazine/17foreclosure-t.html?_r=1&hp

If there was anybody who should have avoided the mortgage catastrophe, it was I. As an economics reporter for The New York Times, I have been the paper’s chief eyes and ears on the Federal Reserve for the past six years. I watched Alan Greenspan and his successor, Ben S. Bernanke, at close range. I wrote several early-warning articles in 2004 about the spike in go-go mortgages. Before that, I had a hand in covering the Asian financial crisis of 1997, the Russia meltdown in 1998 and the dot-com collapse in 2000. I know a lot about the curveballs that the economy can throw at us.

But in 2004, I joined millions of otherwise-sane Americans in what we now know was a catastrophic binge on overpriced real estate and reckless mortgages. Nobody duped or hypnotized me. Like so many others — borrowers, lenders and the Wall Street dealmakers behind them — I just thought I could beat the odds.

(From the New York Times.)

What in f***’s name is this man griping about? Somebody loaned him close to a million dollars without him having to pay back anything. And he doesn’t have a skill in his bone.

If I ever saw this man homeless, I would make sure I p*ssed all over him after consuming a bottle of Chateau Margaux 1982!

This is possibly more than any of y’all are willing to express in decent society but I want my pound of schadenfreude.

Has the Fed’s War on Savers ended in defeat? And how will the cloudy outlook change if GM joins their Chrysler brethren in declaring BK?

Wall Street Journal

* ECONOMIC FORECASTING
* MAY 14, 2009

Economists See Long Road to Recovery

By PHIL IZZO

Economists in the latest Wall Street Journal survey see an end to the recession by autumn, but say it will take years for the economy to fully recover.

On average, the 52 economists who participated in the survey project that the recession will end in August. They expect gross domestic product to contract 1.4% at a seasonally adjusted annualized pace in the current quarter, compared with the 6.1% drop recorded in the first quarter. Slow growth is expected to return by the third quarter, with the economy expanding more than 2% in the first half of 2010.
video

The survey was conducted before the Commerce Department’s report this week that retail sales fell 0.4% in April from the previous month, which left some economists questioning whether consumer spending is ready to rebound. Initial unemployment claims released Thursday brought more gloomy news: Seasonally adjusted claims in the week ended May 9 increased 32,000 to 637,000 from a revised 605,000 in the preceding week. Most of the losses can be chalked up to Chrysler LLC’s 27,000 layoffs following its April 30 bankruptcy filing.

Separately, the April producer price index, which gauges prices at the wholesale level, rose 0.3%, driven by growth in food prices. The core price index, which excludes food and energy, was up 0.1%.
About the Survey

The Wall Street Journal surveys a group of 54 economists throughout the year. Broad surveys on more than 10 major economic indicators are conducted every month. Once a year, economists are ranked on how well their forecasts have fared. For prior installments of the surveys, see: WSJ.com/Economist .

Even before the new data were released, economists were expecting a major pullback in consumption. Nearly three-quarters of survey respondents said the recent increase in the U.S. saving rate is the beginning of a major behavioral shift.

“Savings rates will remain above pre-bubble levels,” said Scott Anderson of Wells Fargo & Co.

Excerpt from story in today’s New York Times:

“When I first called Chase in October, a representative named Sarah said I didn’t qualify for a loan modification because I wasn’t yet 90 days past due. The only “loan modification” she could offer me was a “repayment plan” under which I paid $400 more per month for six months until I was current again.

“It sounds as if I would be better off waiting to fall 90 days behind,” I said. “I think I’ll wait for that.”

It took a while, but Patty and I found we could get past blaming each other. We had seen each other’s worst sides, but we were still together, and that helped us to get closer. We started listening to each other. Patty began to find her way in the work world, and I was learning that I didn’t have all the answers. And we saw how our children were thriving. My three sons transferred to schools in our neighborhood and made scores of friends. Emily, Patty’s daughter, was a sparkling 10-year-old who loved her home and her school as well as all her brothers. Even if we lost the house, we had gained in other ways.

I called Chase back in January, when I was 90 days past due. Another representative told me that I would automatically be evaluated for a loan modification.

“You should just wait until you hear from one of our negotiators,” he told me politely.

Another two months passed without anyone calling, so I tried again in late March.

“I’m sorry, but our analysts have been backed up,” yet another Chase rep told me, even more politely than the previous one. She said each analyst had about 500 distressed borrowers to deal with, and it had been taking about five weeks for customers to get a direct response. The delays seemed to be getting longer.

I was actually beginning to feel sorry for Chase. It seemed to be so flooded with defaulting borrowers that it didn’t have time to foreclose on my house. Eight months after my last payment to the bank, I am still waiting for the ax to fall.”

Eight months of not paying a mortgage and playing the waiting game. I guess those of us who’ve made good on our mortgage obligations/debts are the real suckers in this something for nothing environment.

I don’t know about selling the Del Mar fairgrounds, but shutting down and selling San Quentin is a long-overdue idea. There is no logical reason to perpetually devalue one of the most scenic pieces of real estate on the planet with an ugly hell hole, when there are plenty of desolate pieces of land across the great state of California which could be used for the same purpose. As I heard it explained years ago, a key reason San Quentin continues to exist at its present site is due to its proximity to a group of death row attorneys over in San Francisco who serve its inmates. I see no reason attorneys cannot relocate their businesses, but it is not possible to relocate waterfront property in Marin County.

To do this correctly, the State would need to first make clear that relocating San Quentin’s inmate population far from Marin County is part of the plan. The value of the land would skyrocket if this were done correctly.

Schwarzenegger Seeks $6 Billion Loan, Orders Cuts (Update1)
By Michael B. Marois and William Selway

May 14 (Bloomberg) — California Governor Arnold Schwarzenegger proposed the state seek a $6 billion loan from Wall Street and called for deep cuts in education and welfare program to help erase a resurgent $15 billion deficit.

Schwarzenegger, a 61-year-old Republican, said the state should sell $6 billion of revenue anticipation warrants, a type of cash-flow loan that can be repaid over two years. He also proposed cutting an equal amount in spending, mostly from schools and colleges. The proposals are part of his annual May revision to the state’s budget plan.

The worsening economy is forcing Schwarzenegger to open a new fight over the budget just three months after he slashed spending and raised taxes by $12 billion in a failed bid to erase what was then a record shortfall. Schwarzenegger said there’s no will in the Legislature for another battle over tax increases, forcing him to find other fixes.

“Sacramento is not Washington, we cannot print our own money,” Schwarzenegger said today. “To look for new revenues is out of the question.”

Among his proposals are moves to sell some of California’s landmark buildings, including San Quentin State Prison, where California’s condemned inmate executions are conducted. The 157- year-old prison occupies prime waterfront property on San Francisco Bay.

http://i117.photobucket.com/albums/o72/muggyFL/Idiocracy_Plus_SKF.jpg

Wall Street Journal

* MAY 15, 2009, 2:54 A.M. ET

German GDP Posts Sharpest-Ever Fall

By MARCUS WALKER and NINA KOEPPEN

German gross domestic product in the first quarter posted its sharpest fall since records began in 1970, as economic activity was much weaker than expected, data from the Federal Statistics Office showed Friday.

First-quarter real GDP shrank 3.8% from the fourth quarter of 2008, below economists’ forecasts of a 3.2% fall. The quarterly data are adjusted for seasonal and calendar effects.
[A German store advertises a sale] Getty Images

That was the fourth straight quarterly decline in GDP, underpinning the view that Europe’s largest economy will contract by as much as 6% this year.

“The recession has returned the German economy to its size of late-2005, and the last three years of economic growth have gone up in smoke,” said Carsten Brzeski, an economist at ING Bank.

As California budget mess deepens, Schwarzenegger proposes huge new cuts

By Mike Zapler

Mercury News Sacramento Bureau
Posted: 05/14/2009 03:02:40 PM PDT
Updated: 05/14/2009 09:47:34 PM PDT

SACRAMENTO — Thousands of low-level criminals would get out of prison early. Funding for public schools would drop by billions of dollars. Strapped local governments would see their coffers raided once again. And programs that aid the poor, aged and disabled would be slashed.

Those drastic proposals are among the ideas Gov. Arnold Schwarzenegger offered in his revised budget plan Thursday, as the state faces yet another enormous shortfall that could top $20 billion this summer.

“Every single thing we’re doing here is very tough,” the governor said. But there is little choice, he added: “We have no money.”

Keep your eye on those rising l-t T-bond yields. Since they are 99 pct correlated with mortgage lending rates, when coupled with a still-weakening labor market and an ever-growing black cloud of foreclosure inventory behind the mountain, they portend a “longer and deeper than expected” period of U.S. housing price declines.

Indications
May 15, 2009, 8:42 a.m. EST
U.S. stock futures drift lower to wrap up down week
By Steve Goldstein, MarketWatch

LONDON (MarketWatch) — U.S. stock futures drifted lower Friday to wrap up a week of consolidation, as gains for insurers on approval to get government money weren’t matched elsewhere.

Continuing a week that’s featured three losses in four sessions, S&P 500 futures fell 3.3 points to 886.20 and Nasdaq 100 futures fell 6.75 points to 1,347.00. Dow industrial futures slipped 38 points.

Futures were still in the negative camp after data showing U.S. consumer prices were flat on a monthly basis and down 0.7% on an annual basis, the biggest drop in 54 years.

Core prices excluding food and energy have climbed 1.9% over the last year.

A separate release showed manufacturing activity in the New York area contracted at the slowest pace since last August.

Still to come is March investment flow data, April industrial production and the preliminary University of Michigan consumer sentiment gauge for May.

GDP data was released across the globe, including figures showing Germany’s worst quarterly performance since 1970.

The German economic data hit the euro, which dropped 0.6%, and the dollar fell to two-month lows vs. the Japanese yen.

Yields on 10-year Treasury bonds rose to 3.105% after the data. Yields move in the opposite direction to prices. Oil futures fell 77 cents a barrel.

Tinfoil hat moment:

Is some financial entity with massive fire power plunge-protecting San Diego home prices? I will present the evidence here once, then drop the subject. Before I do so, I acknowledge that, like most other tinfoil hat theories, this one can not be proved by only looking at the indirect evidence, and there may be other explanations consistent with the data (i.e., “green shoots”, “housing market has reached bottom”, etc).

On the transaction date of 24-Sep-08, Radar Logic’s 1-day-average price index for San Diego dipped below $200/sq ft for the first time this cycle, to a level of $198.81. By the next “transaction day” shown in this data (26-Sep-08) it bounced up by $17.34 to $216.15/ sq ft.

Subsequent to this first dip below $200/sq ft, the daily index crossed back and forth over the $200/sq ft threshold a total of 20 times through 13-Mar-09, with an average move of $17.34 to return to a level above $200/sq ft. By contrast, the average daily change (”mean absolute deviation”) in the daily index level over the period has been $10.24.

Tentative tinfoil hat conclusion: Some financial entity with massive fire power is plunge-protecting San Diego home prices at a level at or near $200/sq ft. Too bad this will create a massive financial train wreck when coupled with rising foreclosures, a huge shadow inventory glut and rising unemployment.