Bits Bucket For May 19, 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.
May 19, 2009
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Is there a ruling class in America?
Indeed there is. Paul Craig Roberts has a nice essay on “Who Rules America?”. His conclusion? The banksters and the military-security complex. Also Dick Durbin, as he watched his foreclosure relief bill go down in flames, stated that the “banks own us”. Not a fan of Durbin’s necessarily, but he told it like it is.
Obama’s equivocating on this issue and that issue has everything to do with taking direction from the “ruling class”.
“Obama’s equivocating on this issue and that issue has everything to do with taking direction from the “ruling class”.”
I am no fan of Obama, but McCain would be given the same playbook by the Fed, just like Obama is now, had he gotten in.
Republican vs Democrat these days is like professional wrestling, or a puppet show.
Nothing happens that the Boyz upstairs don’t want you to see. With Obama they have a willing and openly corrupt partner who will take the lead in trashing individual and State’s rights in favor of rapidly growing Federal bureaucracy. McCain would have let the Democrats and MSM take the lead, his party appearing always in the defensive mode, the results very similar, but slower in coming.
Republican vs Democrat these days is like professional wrestling
What a great analogy. Showmanship and all! I never thought about it, but it’s perfect.
+1
Good cop/bad cop routine.
Yep. Only you get to choose which is the good cop and which is the bad cop, depending on whether you register as Republican or Democrat.
(”You” being those that don’t know any better)
OMG CB, what a great analogy…
Carefully orchestrated, impressive to watch, but totally unbelievable; lots of yelling, noise, and drama, but at the end of the day both contestants collect their paychecks from the same organization.
Wow.
Very accurate!
We even have insane characters like you’d expect in the WWF - all we need now are no-holds-barred cage fights in Congress and at least we’d all get great entertainment on our way to serfdom.
There is only one party, the inner party.
1-888-WIN-STON for membership information.
Republican vs Democrat these days is like professional wrestling, or a puppet show.
I think you could be right.
Now, if only they all wore more exciting costumes, brightly hued and with sequins and large jewels on them, and had more dynamic hair, and there were midgets in capes darting around performing comic antics (I’ve been watching the Spanish language channel lately, I got hooked when I was sick last week) and had timers to indicate when it was safe to stop watching and quickly go make a sandwich…
Then I would be SO happy, and I would never ever leave the couch again!
“We even have insane characters like you’d expect in the WWF…”
LOL, more accurate than you know. Some of them even think rats should have as many rights as humans.
(The wrestling folks now call themselves WWE after they were sued by World Wildlife Fund.)
Of course we do, every fascist state does. The U.S. government has effectively seized a financial stake GM and Chrysler without any constitutional authority to do so. Economic fascism means the control of private property and business through a government-business “partnership”. This arragement allows government to control and plan private industry. Obama is rolling out planned capitalism, or soft fascism, at remarkable speed. He has shown blatant disregard for property and contract rights. Look at Obama’s unconstitutional actions in threatening Chrysler’s bondholders to give up their rights as secured creditors, in favor of the UAW, his campaign donors.
The senior creditors were plundered while ownership was redistributed to the UAW, whose members are junior creditors. This makes a mockery of U.S. securities law.
Now, the US government will have a controlling interest in General Motors, which amounts to absolute nationalization. At GM’s headquarters in Detroit, there is a cluster of bureaucrats from the government’s task force telling GM how to run its business.
The revolving door between Wall Street and the bowels of Washington is getting a workout. The guys from Wall Street run the government, and the guys from the government run Wall Street. Now, the guys from Wall Street, especially Goldman Sachs, who have taken over the Treasury Department, are taking over control of the domestic auto industry. You know what happened when the Goldman Sachs guys tried to run their own company. Did I miss the part in the Constitution that gives Treasury the ability to empower its hacks to run a private industry?
The GM and Chrysler takeovers are orchestrated political restructurings aimed at serving the larger interests of the U.S. government. The apparatchiks on the Potomac acquire the authority to coordinate production in a manner that compliments their political and social agenda. The White House has not been shy about its ambitions for green policy and the future of American-made automobiles. With this coup, the feds have wrapped their tentacles around the auto industry, and they will use it to ram their green-socialist agenda down our throats.
Another abomination is the use of taxpayer dollars, on the part of the political establishment, to grant preferential treatment to one group of constituents - the labor unions - at the expense of each company’s creditors, the bondholders. Not only is this an illicit use of the executive office for political pandering, it’s a deliberate redistribution of wealth. It’s also a handsome payoff to the loyal unions, who have long supported the Democratic Party.
The funeral bell is ringing a reminder of capitalism’s mortality. And I won’t dare touch on what happens if our liberty is allowed to perish.
Just some interesting ideas from the Ludwig von Mises site.
“Republican vs Democrat these days is like professional wrestling, or a puppet show.”
Makes perfect sense to me: throwing chairs, illegal holds, tag-teaming and scheming…and then there’s the wrestlers.
Don’t forget the Medical Services - Pharmaceutical Company complex. That’s a huge one. It’s not that the government doesn’t want us to use drugs. The government wants us to use THEIR drugs (prozac, alcohol, television, shopping, Viagra, zoloft, etc., etc.) while prohibiting “drugs” like cannibis and psylocibin mushrooms, which are natural substances and have a long history of not only medical applications but also opening up the doors of perception. BTW, John Marco Allegro, one of the original members of the small group of translators entrusted with translating the Dead Sea Scrolls, a set of documents originating from the very area Jesus was supposed to have lived, at the very time he was supposed to have lived, came to the conclusion that Jesus was essentially a mushroom, and elucidated that view in “The Sacred Mushroom and the Cross,” a book which although discredited at the time, has since been vindicated and found to be extremely accurate.
You’re trippin’!
Sheesh…then MY “Come to Jesus Moment” could be the next time I order steak and mushrooms ?
“came to the conclusion that Jesus was essentially a mushroom”
Umm…I really don’t understand that. Not at all. Not even the least little bit.
C’mon, Polly, it makes perfect sense. He’s, you know, Jesus Crimini!
I think he’s implying that “Jesus” is another word for “Shroomin” and that his disciples were all a bunch of long haired hippies strung out on psychodelics and talking about how awesome the world would be if the roman and jewish peoples could just get along, man, and hey wow have you ever looked at your hand? I mean REALLY looked at it?
It kinda makes sense because every picture I see of those guys has them in long hair and beards, just like dirty hippies!
Hey pass that doobie down this way
Bantering, THAT was hysterical.
came to the conclusion that Jesus was essentially a mushroom,
Right! That makes things so much sensibler than before!
*nods head enthusiastically *
He is TOTALLY a mushroom!
But just to be sure, gimme a minute, gonna ask Him…
…He says ‘Yes, He is a Jeebus, and three golden stars for your forehead, bubble-viewer’.
Schrooom - Jeebus?
Late breaking news -
Hubby broke out of the closet (OKay, he’s 6′ + and 195lbs - how long did ya think I could keep in a locked closet, eh?)
WE BOUGHT A HOME~~!!
Yes we did~~!!
Glorious.
Dang, you heard it here first!
Tell me yar happy for me!
Leigh Weeeeeeeeeeeeeeeeeeeeeeeeh
Hooray! I’m happy fer you! Good news.
And now, our darlin’ Leigh, you must tell us all every single tiny detail. All of them.
Especially the garden plans.
oops the troops are deserting…
Wow, Leigh!!!!
Congratulations on your new house! Did you close escrow already? What are the details (like Oly already asked)?
I thought Jesus was beer.
You know, threshed, exposed to the elements, coming back to life after three days (the time needed for malting to occur), the source of spirit in this world… that sort of thing.
Jesus Barleycorn must die!
Wow. Xenos, that’s either complete sacrilege or else the deepest thought I’ve ever heard.
In any case, please observe one of my favorite quotes, from noted patriot and wise-man Benjamin Franklin:
‘Beer is proof that God loves us and wants us to be happy.’
It is the evidence of an anthropology degree gone bad. Once I had this particular brainfart I researched a bit into Egyptian religion (Egyptians invented beer, I think, and would be the likely source of a biblical-era beer cult), but there was not anything in their mythology that was like a John Barleycorn story.
So I guess the three days for malting/arising on the third day is just a coincidence.
So I guess the three days for malting/arising on the third day is just a coincidence.
Once I was brewing a batch of beer in my laundry-room and I got evidently got a super-potent wild strain of yeast and it fermented so furiously that it blew the lid right off the 5-gallon carboy and showered the whollllle room in delicious, fragrant oatmeal stout, including all my silk nighties and some books I had stacked on the dryer. This was in 8 short hours or so.
So what does THAT signify, Mr. Wise-Thinky person?
Isn’t making beer a particularly efficient way of changing grains (carbs) to protein? More efficient than feeding it to meat animals, any way. Of course, the meat animals are healthier on grass and I’ve never heard of making beer out of grass, but I don’t think there is a huge over abundance of pasture land in Egypt.
Polly:
What if jesus was a test tube baby? and the god of the bible was nothing more then a glorified Capt Kirk?
Isn’t making beer a particularly efficient way of changing grains (carbs) to protein? More efficient than feeding it to meat animals
Actually, no. The proteins in malt are partially precipitated out in the process. Some are still in the spent grains you give to the animals, others in the trub you toss out after the boil, or on the bottom of the fermenter. Lots of the carbohydrates are turned into alcohol, thus losing some of the energy they started with (used up by the yeast metabolism).
So unless you make cookies with the spent grain and use the yeast for vegemite spread on toast, you’re losing protein. And you’re definitely losing some caolrie content as well. Still not enough to make me give up beer. Hmmm… a handful of raw, crunchy grain… or a nice, cold, frothy beer? So hard to choose.
Oh, and it was the Mesopotamia area that was more into beer than the Egyptians, IIRC.
“Paul Craig Roberts has a nice essay on “Who Rules America?”. His conclusion? The banksters and the military-security complex.”
“The answer is that the military-security lobby, the financial gangsters and AIPAC rule. The American people be damned.” -Paul Craig Roberts
Remedial math?
“Remedial math?”
And reading, don’t forget reading. Lol…
Math rules!
+You bet! Plus Fifty-eleven for your post!
(Hahahah! Fifty-eleven…haha…ha.
…..I’m not good with math. Sigh)
Many of the CEOs of large corporations deem themselves as the ruling class, and due to their hubris they end up destroying their firms.
And sometimes their countries ( thinking of Iceland here).
Speaking of CEO hubris, did anybody watch that pathetic show “Meeting of the Minds” on CNBC yesterday? Lame. Totally, totally lame. Larry Fink is an imbecile.
PS- I forgot to add that Larry Fink’s most important point was “we need to stabilize house prices”.
So whudda ya goin’ do about it?
Hint: taking on more debt is NOT the answer
Pitchforks? Torches? I have plenty of matches handy.
Hire GHOST BUSTERS
Yes. However, it is not necessary to be born into it, though that can’t hurt.
A ruling class in America?
Why, do you have problem with Corporate Communist Capitalism©®™, comrade?
Is there a ruling class in America?
Yes and it exist in Politics, Hollywood as well as Corporate America. A ruling class will always be there as long as man kind exit. Ruling class might not be bad as long as you are in it and somewhat do good things for the masses.
SUGuy-
Are you a graduate of Syracuse University?
Yes.
Cool. I did my first and last kegstand @ SU.
Always went to the ‘cuse for Halloween.
I was there for Final 4 weekend in 1996….one of the best 4 days weekends EVAH, even though they lost the final game.
Did you drive your KJ there?
No, at the time I was more of a Glock man.
Sweet! Almost went there but alas that was the expensive school on my list.
Still a huge Orange bball fan since the days of Rony Seikaly, DC, and Sherman Douglas.
I had a bad car accident on my way to Syracuse to visit a friend. Hit and run by a tractor trailer during a snowstorm in Prebble. Had the car flatbedded to friend’s house. It never left Syracuse, NY - total loss.
Both my wife and I did our graduate work at Syracuse University. Lived in the area for nearly 14 years before returning to Ohio.
The best thing anyone in Syracuse can do is leave. Last night it got down to 30 degrees and we get about 60 days a year of sunshine. Seasonal effective disorder with low levels of vitamin D is the norm for Syracusans.
Actually, sounds perfect for me. I love cloudy and cool to cold weather.
“A ruling class will always be there as long as man kind exit.”
Man kind may exit sooner than we think if the “ruling class” doesn’t lose its thirst for endless war.
Is there a ruling class in America?
No. I only go by the golden rule. No one rules me.
“Is there a ruling class in America?
No. I only go by the golden rule. No one rules me”
Bill, you flatter and delude your self-importance along with alleged independnce.
All members of any society are “ruled”, molded, influenced, controlled or governed by at least 4 factions and in various degrees.
1. The Family.
2. Society and Class.
3. Religion.
4, Government.
Be it a closed society like Saudi Arabaia with a strict and harsh balance of power between a king and religious leaders or the more open US with our “Consitutional Government” and Bill of Rights.
Call it “ruled”, controlled, owned or whatever, if you get TOO FAR out of line with the “Powers that Be”, you’ll end up anywhere from being disowned, shunned, fined, jailed or dancing with a local SWAT Team.
Feel free to T
sorry(continued)…. JustTrust me on that one Bill
If one community does not want me to live a certain peaceful lifestyle, I can live that certain peaceful lifestyle on weekends, perhaps, in a community where it is allowed.
Don’t like helmet laws in CA? Ride on weekends in AZ. That sort of thing.
Rather than try to convince people to grant you freedom, it is far more easier to go to those places where you can practice your freedom.
Religions, groups, crusades, and government do not stop me from being free.
Usually those people who complain that they do not have freedom are the guiltiest ones themselves for denying themselves the freedom.
Even in Soviet Russia, there were people living under the radar in the black markets. You just don’t make a public spectacle of yourself and you will stay below the radar.
Government wants to make examples out of the ones who brag in public about the loopholes they found. It costs too much energy for government to go after the quiet ones who live the loopholes. By “loophole,” I’m not meaning only tax loophole.
Staying “below the radar” is not what the founding fathers had in mind when they talked about freedom. Are you kidding?
No matter what society, if enough powerful people are aware that you are living a very happy life, they will do something to try to forbid you from that happiness. It’s envy, the dark side of human nature, that kills the individualist for being very happy.
Did you know that asset forfeiture was considered legitimate even by our Founders? You do not have to be convicted to be subjected to asset forfeiture, and it’s like pulling teeth to get all your stuff back once you are declared innocent.
Don’t get me wrong: I admire Thomas Paine and Thomas Jefferson, among some of the greatest heroes in the past.
Did you know that asset forfeiture was considered legitimate even by our Founders? You do not have to be convicted to be subjected to asset forfeiture
The Founding Fathers felt that way? Really??? WTF??? I can see that the police department of Teneha, Texas, might consider the practice legitimate, but I didn’t get that meaning from any of my readings of the Federalist papers, the Constitution, or other related things of that bygone era.
Did you know that asset forfeiture was considered legitimate even by our Founders?
I don’t know about that. I do know that assets of the Loyalists who opposed the American Revolution were forfeited and they were expelled from the new country. Some of them got a few cents worth of compensation afterwards, but it did not make up for what they lost. Then there was the forfeiture of personal liberty by slaves and their children, that was definitely sanctioned by the Founders and written into the new Constitution, one way or another.
Right on, Bill. Who cares if there’s a ruling class. I’ve now been alive long enough to realize that most of what has happened in my life is by my choice and the political party in power or economy has had little to do with it. And I like the life I’ve had even if on paper it doesn’t look like much and I really don’t have any investments or big savings. Most everyone has really understood the game all along, but a bunch deluded themselves into thinking they were something they’re not and now they’re pissed. I just don’t get into this whole Obama a puppet or McCain a bedfellow and it’s all a big conspiracy to keep the common person down. I doubt any of those in power are sitting around thinking about how to screw you. More than likely, they’re just thinking about themselves. They’re plotting how to get more and more. I don’t envy them at all. Never satisfied, never feeling powerful enough, never content. I obviously need more coffee! Rant off.
I rather like this post. Thanks.
The so-called ruling class have their egos to feed. Enough people are awestruck by them to satisfy those egos. By acknowledging the existence of this “ruling class,” is enough to grow those egos.
You are right. There is no big conspiracy. Congress, Geithner, Bernanke, and Obama do not know what the hell is going on anyway. The layman does know what’s going on. What’s going on is called “ineptitude.”
The golden rule: them that have the gold make the rules?
All animals are created equal, but some animals are more equal than others.
– George Orwell –
“You want to become one with the gun. Feel the gun, caress the gun until it’s a living, breathing, vibrating extension of yourself. ”
- Tackleberry-
“You want to become one with the gun. Feel the gun, caress the gun until it’s a living, breathing, vibrating extension of yourself. ”
Why, I do this every morning, right after I’ve had my scrambled eggs on toast and some O.J. and after I take my apron off and head to work.
It just, you know, it makes the wholllle day go better, somehow.
“An anarchist is someone who doesn’t need a cop to tell them what to do.” - Ammon Hennacy
“The desire to rule is the mother of all heresy.” - Saint John Chrysostom
“Put not your trust in princes, in a son of man, in whom there is no help.” - Psalm 146
“You know you love the country; you just can’t stand the government. Get it straight.” - Ammon Hennacy
“Loyalty to the country always; loyalty to the government when it deserves it.” - Mark Twain
(channeling Aladinsane here)
“Everybody run! The Mexicans are coming! We’re all gonna die! Stuff your pants with ingots!”
(channeling Aladinsane here)
We have many Mexicans living in Mexico applying for a US legal immigration by buying a low fee based franchise in the US. Attorney’s in Miami are doing thriving business in this field. Most are migrating to Florida or Arizona.
“Forget Argentina! Forget Zimbabwe! Forget Weimar!
We’re headed for a full-on Mayan implosion!”
(/channel)
Tal-on uaye…
[channeling Mayans]
“Everybody run! The Mexicans are coming! We’re all gonna die! Stuff your pants with ingots!”
‘Is that an ingot in your pants, or are you just glad to see me?’
(channeling Mae West. Wait, is she still alive? Can you channel an alive person? Is there a rule against it?)
‘Is that an ingot in your pants, or are you just glad to see me?’
I’m happy to see you, but yes, I have ingots about my person!
Bill does have a point, but my question is, to what extremes does one have to go to assure that?
My SIL went to Christmas Valley, OR for the “Great Desert Rat Shoot Out” and I… don’t get the impression those folks have ‘anyone’ ruling them?
Your dinner is ordered at breakfast ( before you head out for the day ) and you have (2) choices, a whole chicken or 2 lb. steak. The “cowboy camp” has NO electricity, radio or phone.
Nope, ‘we’re’ calling the shots out ‘here’!
Somebody is always “calling the shots”
I know that you guys don’t but for an example, just start doing some nasty cuzzing or using some heavy duty profanity on this blog and you WILL soon meet the ONE who RULES and calls the shots around here.
mikey states to obvious.
to=the
mikey states the obvious
Hmm, having been to Christmas Valley to shoot desert rats, I’m disappointed I’ve never heard of the Great Desert Rat Shoot Out! Can you provide details?
mikey,
Earlier on in The Bubble I often asked just what lengths one would have to go to escape it’s clutches! We had a thread on Patrick.net on how even “resort-like properties” in the Philippines had skyrocketed in price!
I wondered if perhaps there were some reaches of Borneo where one might go and actually find reasonably priced property?
Wow, does pondering that seem like luxury now!? Gosh, if that were our only problem. Now the debate has shifted to “what is left where you can go just to be free!?” Quite a transition, “I” think.
DinOR,
Seriously, most of us don’t have anyplace left to run to anymore.
Those days of a big plate of magnificent Vung Tau, Vietnamese jumbo shirmp in a wonderful red wine sauce and a beer for under $2 are long gone and part of history now.
You’re probably the only one I know that could find a “chilled San Miguel” and a good home made meal in the Philipines anymore.
Michael Viking,
Again, they’re not a town that’s real big on that internets thing but the event is always in May. I’m told it’s held to help the local farmers keep rodents from consuming too much crop and provide a balance.
The boys said just about anywhere you turn there’s a target! I checked the local Chamber’s web-site and they don’t have it listed but call the Desert Inn and they’ll know when it’s scheduled as that’s the (1) time of year they’re booked solid. Oh and have fun!
mikey,
LOL! Only my guess is that you’d be surprised at what they call “jumbo” any more? And it won’t be for $2 either.
No my point was that I-have-never seen a poster here say “I don’t have much in the way of savings, no real retirement benefits but I’d like to live in Mid-Town Manhattan on a 1970’s fixed income, and uh.. oh, a doorman would be nice?”
Believe it or not, there’s a reason so many of the gated communities in the P.I ‘look’ just like the ones in SoCal. It’s b/c ‘that’ is where the MEW $’s were coming from! Nearly every Filipino I know has managed to build what I call a “P.I Playboy Peso Palace” back home! And usually on a postage stamp-sized lot. So in my mind, MEW-extraction knew no bounds.
Nearly every Filipino I know has managed to build what I call a “P.I Playboy Peso Palace” back home! And usually on a postage stamp-sized lot.
Tell us about their waste-management systems, if you would, and if you know. I’d be very interested to hear about it.
“Seriously, most of us don’t have anyplace left to run to anymore.”
North Port, Fl is cheap!
Thanks for the thought muggy. I’ll keep it in mind.
“An anarchist is someone who doesn’t need a cop to tell them what to do.”
Beautiful. But you can look at it from another perspective. My dad had an employer attitude from a young age when he worked in the steel mills. He never considered himself an employee, but his own boss. He certainly made agreements with who every paid him, just as any businessman would. Many people unconsciously regard themselves as cattle. My job shop once called me their “employee.” I considered that derogatory.
You always can live by the golden rule and make that rule your rule. The bottom line is that you are a trader and you do certain habits not because someone put a gun against your head, but because those habits are more conducive to expanding your creation of wealth.
Housing Starts, Permits Both Unexpectedly Lower
By: Reuters | 19 May 2009 | 08:34 AM ET
New U.S. housing starts and permits unexpectedly fell to record lows in April, a government report showed on Tuesday, denting hopes that stability in the housing market was imminent.
New home construction
AP
The Commerce Department said housing starts fell 12.8 percent to a seasonally adjusted annual rate of 458,000 units, the lowest on records dating back to January 1959, from March’s upwardly revised 525,000 units.
Compared to the same period last year, housing starts tumbled 54.2 percent.
http://www.marketwatch.com/story/housing-starts-hit-record-low-in-april?siteid=bnbh
“The drop was caused by construction of multifamily housing, which fell 46.1% to a record low 78,000. This was the biggest drop since January 1994.
Starts of single-family homes rose 2.8% to a seasonally adjusted annual rate of 368,000. Single-family starts have shown some stability in the past four months. ”
OK - i get the multi-family (assuming smaller and larger apt units). I am still amazed that single-family is at 368K. Is this in states that did not have over-building (were there any?), or do builders just have to keep building to hang on to skeleton staffs?
“the lowest on records dating back to January 1959″
We have reached the 50’s!
Of course, back then, the population was 179 million. Today it’s closer to 320 million. That means:
In 1959:
2.5 housing starts per 1000 people.
Today:
1.4 housing starts per 1000 people.
Things sound a lot slower today.
FWIW - one wouldn’t expect the level of housing starts to change with population itself, but instead to change with population growth.
Nevertheless, being that our population growth hasn’t slowed significantly - at least officially - the new starts number is *very* low still.
(BTW we are at 306M estimated, not 320M)
I think he was counting the illegals too.
Dennis,
He’d need to be at 400M then.
And about an hour ago, CNN Money noted that the annualized rate of new home sales has been running around 350,000 for the past several months. Thus, the rate of adding unwanted houses to the already-huge inventory has slipped to “only” 100,000 units a year?
PB repeatedly reminds us there are 19 million vacant homes in the US (presumably counting vacation homes that might never come on the market). Whatever…TOO MANY HOUSES!
A couple of days ago, I posted about the president of the second largest bank in Wisconsin suddenly resigning. She was an up and coming star in banking industry. The follow up…
” Associated Banc-Corp to pay former president $1.65 million
By Paul Gores of the Journal Sentinel
Close Exit Agreement
The agreement between Lisa Binder (above) and Associated Banc-Corp means:
She can’t compete with Associated for a year.
She can’t reveal company secrets.
She can’t say anything negative about Associated, and it can’t say anything negative about her.
Recent Coverage
Q&A: Interview with Lisa Binder (May 3, 2009)
Lisa B. Binder, who resigned abruptly Friday as president and chief operating officer of Associated Banc-Corp, will be paid $1.65 million over 10 months as part of a separation agreement.
The payout will be made monthly, starting with a $137,500 payment May 29 and ending with a final installment of $275,000 on March 15, 2010, according documents filed with the Securities and Exchange Commission.
Like most banks, Associated, which is the second-biggest bank based in Wisconsin, has been wrestling with increases in delinquent loans. But Associated has managed to remain profitable during the recession and outperformed the banking industry overall, said Terry McEvoy, a banking analyst with Oppenheimer & Co. in Portland, Maine.”
http://www.jsonline.com/business/45300682.html
Anyone else thinking she learned about something she just couldn’t live with on the books, and they bought her silence for a while?
Sounds like my severance agreement from one of my previous employers.
Except I didn’t get $1.65 million bucks.
“Anyone else thinking she learned about something she just couldn’t live with on the books, and they bought her silence for a while”
As a customer, I told one of their visiting VP’s that they must be cooking the books almost 4 years ago. Instead of $1.65 million, all he gave me was dirty looks and a swift goodbye. My branch manager just cringed and tried to make herself look small.
You know that always seems such a strange way to think of things. WE do have people that need houses. Homeless and such.
Perhaps it does not mean what you think it does?
Ah, but the goal is getting people into DEBT, not housing. The homeless can’t provide the parasite class with steady, huge checks, so they don’t count.
Hey, don’t take jabs at us parasites! …a difference between me and my parasite confreres being, that there are virtually NO year-round vacancies in the MH/RV parks where I do my lending.
… there are virtually NO year-round vacancies in the MH/RV parks where I do my lending.
Exclusivity never goes out of style.
” New U.S. housing starts and permits unexpectedly fell …. denting hopes that stability in the housing market was imminent.”
I would think this was a positive sign that the housing market was heading for stability. Guess it’s just me.
They refuse to admit to over supply. As a result, stable to them means housing construction increases to a point where additional layoffs and reduced hours are no longer necessary, and they are operating profitably.
Just as they refuse to admit that problem is that housing prices are too high for incomes in the area.
As another person said, “up and to the right” for everything (except salaries.)
Up and to the right are the only things that matter when measuring economic progress it would seem.
I guess if housing starts are down 54.2 percent year-over-year, the housing market must have bottomed out? Come to think of it, every housing statistic that comes out these days seems to be interpreted as a sign that the housing market is bottoming out.
I am guessing the home builders will be up on this news, as lower sales today portend higher sales in the future (bovine logic, not mine)?
I’m not sure that even _zero_ housing starts would mean a market bottom. It would still take time to absort the highest vacant inventory in history, esp considering that we are seeing demand-destruction occuring.
Can anyone give me one good reason to buy TIPS?
And yes, I’m on my first cup of coffee………..
I dunno, but I’m trying my hand on the happy side with UYG today.
Must. Touch. Hot. Plate.
Then I’ll stop. Really.
SRS is a great hot plate, especially when plugged
into a 220 socket……
Cherry.
Orange.
Lemon.
Day trading sucks!
I love the smell of burnt fingers in the morning. SSSSSSSSSSST!
Hahaahaha! Nice, SanFran.
Muggy, I owe you thanks and a beer or two. I just got an e-mail that my order to sell those crazy F $5 June calls was executed at a 50% profit in a week! I am tempted to leave the money in my account until I have my next “great” idea, but am sure my next bet will be a loser and I am still paying for some previous bad bets, but it does feel good to finally win a big one. Thanks to our exchange last week I practiced what I preached and not my usual, ill-conceived optimism….. Thanks.
I hear that…sometime you just KNOW something is right, underpriced or whatever. But whenever I forced it I came up snake-eyes.
Can anyone give me one good reason to buy TIPS?
TIPS serve as hedge against the collapse of precious metals since they have a fixed rate of return (cannot have negative yield).
To clean out your ears?
Seriously though, my financial punching bag was trying to get me to buy TIPS last week. I told him I wouldn’t trust the CPI data if we were to see actual inflation.
Because they’re better than most of the current alternatives?
We bought I Bonds on Saturday. At times like this, my I Bond portfolio is a comfort. Plus its returns have beat pretty much everything else over the past couple of years.
The spread between TIPS and regular Treasuries is fairly low, so TIPS can serve as a fairly inexpensive, safe hedge against future inflation. I have my 503b retirement money entirely in TIPS and regular Treasuries (60/40). All signs point to deflation rather than inflation, but I view TIPS as a very inexpensive insurance policy against the collapse of the dollar and it helps me sleep better at night.
Why buy TIPs: I’m not doing it, because I’m not afraid of owning Morgan Stanley’s debt directly. Pays a high yield. Of course that means I believe Geithner and Co. are committed to “No More Lehmans”.
Why buy TIPs: because you are afraid to buy Morgan Stanley bonds. And you might be right.
I have been patiently waiting for SF homes in suburban CT to drop low enough where they make sense as rentals. The market is dropping to meet me. As an occasional reader here, I have been investigating whether rental rates show signs of decreasing in my target communities. What I observe is a cluster of the 3 BR, 1-2 BA 1,200-1,600 sq. ft. houses that are the staple of the SF rental market around here at the typical $1,200-$1,600/mo. and then lots of McMansions built from 2003-2006 that are much bigger where the “wishing rent” is $2,400+ When there are pictures the McMansions are always empty.
Do the wishful thinkers ever adjust their asking price down to compete with the more modest houses?
You have to find someone that that can afford to take the hit on a monthly basis, but is dumb enough to believe a rebound is right around the corner, so they are better off in the long run keeping the money pit rather than cutting their losses and selling it. There are some such ppl, but not many.
If you have nice furniture, are a neat freak, don’t mind leaving upon short notice for an hour, and don’t mind moving too much, you can get reduced rent by renting a house for sale as a live-in stager.
How do you suggest going about finding that type of arrangement?
I live 3+ hours away from Salt Lake, but we now spend more than half our time there on short to intermediate length stays. We have a great arrangement with the nearby extended stay facility (plenty of rooms so they’re willing to deal) but I’m always looking to do better if possible. We’re only interested in short term, fully furnished spaces, so it would seem like we would be the ideal candidates.
I’ve thought about ads on Craigslist, or maybe contacting some realtors who have sellers needing baby-sitting for their expensive overpriced turkeys that sit on the market forever. What do others suggest? Thanks.
In Atlanta, there are many local papers with houses to rent categories. Flipping through them, many ads say things like “$1m home available for rent for only 2k a month, must have nice furniture.” I have not seen such ads listed on Craigslist or other sources. I had a friend that did it once. $1k a month for $600k condo. The lease said that she had to make the condo available for real estate showings upon 24 hours advance notice, and was subject to termination upon one month’s notice. Failure to comply with the terms (which included owner approval of furnishings and decorating) subjected her to immediate termination and no return of the deposit.
There should be a provision that a portion of their rent is reimbursed if the house fails to sell for the $1M advertised value.
Just this morning on Fox’s Fox & Friends show they interviewed a family that was living in a $700K home and paying $600/month rent. The make the place looked staged and lived in. I can’t remember the name of the outfit that sets this up but Fox said they’d link the info on their website.
A house listed at $364k is for rent at $800/mo in our neck of the woods (Pullman, WA), though they haven’t explicitly addressed the lease conditions. I can’t imagine moving into a house that would be shown regularly and have to move with 30 days notice.
Couple of years ago I was posting about a bayfront house that I rented for $1K/mo, which was then listed at about five hundred grand. I do have some nice antiques and artwork, and I think that was part of the reason why my LL was happy with me. Eventually he did get rid of the albatross (for a much lower price) and yeah, when I had to move, I decided to put my furniture in a “permanent” apartment, even though I am a tenant in furnished beach houses both in July and in winter. Will move furniture again when it makes sense to buy a house (maybe never?)
Must have nice furniture? Make available for showing with 24 hour notice?
No problemo. Although the kitchen sink and counter may have the feathers and other remains of the chicken I dressed before I went to work.
So a lot of the best deals probably require that you provide your own furnishings, OK. I want a fully furnished place if I’m going to have to evacuate within a day or two, which I am willing to do.
My furnishings would probably get me rejected
likewise
For someone that thought of themselves as a real estate guru/brilliant investor because they thought there were making a killing in real estate between 2000 and 2007, renting a home for $2k for which they have a $4.5k mortgage payment would be demeaning. What if someone found out? They would look like total losers, especially after all their bragging to family and friends. For many, getting nothing is better than putting something that places them on the losing side of a real estate transaction in writing. The arrogance of those that think they should take a hit on the real estate market is unfathomable. They will not stand for it.
+ one billion
Tim,
Ah ha! But… if RE Infestor Guru has other… “transactions” in the works that virtually assure “someone else” is footing the bill for their specuvestments, well then it’s all right as rain now isn’t it!?
Yeah, seen ‘em a million times. Out local Specuvestor-In-Chief was pulling the same scam.
1. Start a local bank by playing on people’s desire to “deal locally”
2. Lend out money to any clown w/ a pick-up truck and a cell phone
3. Pay yourself hefty salary based on “loan performance”
4. Issue stock that -also- does nothing but “appreciate”
5. Use hefty salary and fluffed stock price as basis upon which to issue yourself even -further- loans w/ which to specuvest!
6. Dip into Vapor Equity to lend yourself even more… and;
7. Get Shut Down By State Regulators, leaving the mess for everyone else to deal with! See, it works out perfectly!
“For many, getting nothing is better than putting something that places them on the losing side of a real estate transaction in writing. ”
There’s interesting research by Kahnemann and Tversky in Behavioural Finance that backs up this concept.
Mathematically, it worked out to people preferring a 50% of losing 2x rather than a 100% chance of losing x even though the probabilistic payout is the same. Taleeb also mentioned it in *Fooled By Randomness*, I believe.
Anecdotally, it worked out to people holding on to a loser, even at bad odds, on the hope that they’d come out even.
In my opinion, it even explains why many investors go wrong: they cut their winners short and let their losers run.
“3 BR, 1-2 BA 1,200-1,600 sq. ft. houses that are the staple of the SF rental market around here at the typical $1,200-$1,600/mo. ”
That isn’t expensive at all. 1200 for 3BR? that sounds like a pretty good deal to me compared to the rents I see here in Austin, TX.
I pay about 1400 a month for 1BR/1BA
I’m guessing you’re downtown, Brett? I used to pay $660/month for a 1/1 in NW Austin. I agree that $1200-$1600/mo for a 3/2 rental is quite reasonable.
Yes, I live downtown. However, there are many new apartments units developed outside downtown where you can easily find 1Br/1Ba for ~1000 or more
My 3/2 2000 sq ft house in Florida in a nice neighborhood costs me $1117/mo on a 15 year mortgage including PITI. Purchased in 2001.
Why would someone rent for $1200 - $1500 when it’s cheaper to buy?
There is nothing I’m more tired of then people that reflect on what they paid in 2001, and rub it in the faces of the young.
Hey, didn’t mean to hurt your feelings. My father bought a 2400 sq ft house (that I grew up in), for $17,000 in 1972.
I thought I was asking a legitimate question. Prices where I live are coming back down to 2001 levels. Is it that people can’t come up with the down payment?
Part of it is job insecurity, I’d wager. The folks who bought during the bubble run-up didn’t worry so much about losing their jobs because they could always sell and recoup. Now, that’s not an option.
On that note, we just purchased a house with a PITI below current rents— for smaller spaces. While I’m sure the bottom will drop below that, it’s good enough for us— and we plan to stay for a couple of decades, at least.
And Evil Rob has the security of no job redundancy. His company needs every person in his division because they’ve always run lean… and since they have no corporate debt and huge cash reserves, they’re doing just fine. This is a company that almost died at one point and came back strong, and that was recent enough they’re not going to rest on their laurels.
Of course, anything can happen, but you can’t spend your life fretting about low-probability outcomes, especially if you have multiple contingency plans. (I don’t fret but I do plan.
)
We pay $1700 for a SFH 3/3 2K sf, with huge yard in a gated community with pools, tennis courts, small gym,and a lake with paddle boats. And that’s last year’s price. Desertdweller can confirm. The rents are crazy great right now out in the desert.
I sold my San Jose home and moved into a rental in Boise back in 2006 - at the peak of the insanity. I rented a 1600 square foot 3/2.5 for $1,025 a month on a 6 month lease, cats OK. I’m not sure if rents here have softened since that time.
Wow. That’s way cheaper than a rental SFH in the DC metro area — inside the beltway, not the ghetto.
Be very careful in CT. I am not sure where you are, but the devastation of hedge Funds nad Wall St. is creaming the market in Greenwich, Darien and all the formerly affluent towns in CT and in Westchester, NY. In those professions, MANY people are chasing very few jobs and at salary levels well below the former levels. I suspect that this will spread to the rest of the state if it hasn’t already. Rhode Island has also been hit very hard, so you are really in one of the worst east coast areas (excluding FL) and I would guess you are nowhere near bottom yet. Just my 2 cents….
100% agreement REskeptic. However, the delusion still runs deep in and around western CT and “Westchestah”, especially among the working class schleps.
I agree that the CT market is nowhere near bottom. I am closer to RI. We only see hedge fund managers for a few weeks in July and August. Although given the “no vacation” post perhaps there will be fewer NY/NJ plates this summer. My comment was exploring whether rents for SF houses will really drop because of increased supply from the newer construction. If the wishful thinkers continue to ask $1K above market because of their high carrying costs they aren’t really competition for a normal house where the numbers make sense. If the FBs decide something is better than nothing and price the rent down to market then of course a renter might choose the bigger house and increased competition may mean lower rents for the modest houses.
I’ve read lots of posts saying rents are bound to drop and I’d just like to hear why people think so. Around here, nothing much except McMansions have been built in the last few years.
Karen,
Based on my observations, rents from on the NY/CT border from Kent(dover, NY) south to Danbury(Brewster, NY) are falling at a pretty good clip. Why? Inventory. Get a copy of the Yorktown Pennysaver and take a look. Page after page of rentals. Rentals out the yinyang.
Rents do drop and have dropped in the areas where the bust is a little farther along, such as south Florida. If incomes in CT drop, rents will likely drop too.
Does it make me a bad person to find great satisfaction in this news about CT’s affluent towns?
No it doesn’t. However if you really feel guilty; stick out your hand palm up, ready, are you ready here goes SWACK. Now that should take care of any guilt you may have felt.
Does it make me a bad person to find great satisfaction in this news about CT’s affluent towns?
If it does, then let’s form a ‘Happy and Satisfied Bad Persons Club’, because I’m afraid I feel the exact same way.
How about we’ll rotate and take turns being President, and Vice-President, and Treasurer and banging a gavel and stuff.
Rent prices in many of the nicer Salt Lake apartment complexes, in or near downtown, have dropped about 20% in the last six months although I’m not seeing it reported anywhere. And best as I can tell, the numerous empty or mostly-empty condo buildings have not yet converted over to apartments, and they will make a substantial impact on rental supply when they do.
At this point, they’re still desperately trying to lure in enough suckers to these condos, to reach an appearance of critical mass. They’ve dropped prices 20-30% since last year, but they’re still at least another 30-50% too high for enormous risk involved.
We just toured a completely empty apartment style condo building on Saturday, it’s been sitting there for almost a year. I’ve been reading about this phenomenon in the major bubble towns, here on HBB for a couple years now, it’s amazing to see it with our own eyes.
People are not taking vacations because they are afraid they won’t have a job when they get back:
http://www.washingtontimes.com/news/2009/may/18/anxiety-over-jobs-keeps-vacations-close-to-home/
They should be. I am in the same boat. Many companies are looking for ppl to lay off or whose salaries can be reduced. Those the least busy are those most at risk for termination or pay cuts. If taking a vacation will result in loss of revenue or billable hours attributable to you, you move further down the line to the most likely get fired/reduced pay next category. Unless I see a dramatic uptick in work this year, I will not be taking a vacation.
My son’s employer called everyone in yesterday and told them that they’d better cancel any and all scheduled vacations until further notice.
Doesn’t that imply they’re needed to work? Vacation time has to be paid, even if someone is fired.
20 hours of billable work in a 40 hour work week (or 50% of normal revenue generation) is better than zero. Also if they are looking for ppl to fire, they usually start with those with the least revenue generation. It’s not the fact that they are paid for the vaction time, it’s that someone has to go to stop the bleeding in upcoming months, and your numbers look the worst. When 20% of the ppl need to be cut, its not the time to bicker over your entitlements at a time when you are not profitable. You have to suck it up and focus on not being a target.
Not all people are entitled to vacation carry forward or cash out. In addition, in many places, workload is not a fixed number to be divided out equally. People protect their client base, and in many professions, if you are slow, you are expected to be knocking down doors for more work (i.e., not a zero sum game with even distribution). A firm may take the position, if you are slow, you better be working your azz of to save this company, taking a vacation in such circumstances instead shows lack of commitment and loyalty.
VC can always be deferred to “next year”.
Re: Natalie,
Oh, I agree that you don’t want to be seen as slacking when the crosshairs are hovering over you. But what had me confused was that the workplace didn’t want people using their vacation time when, presumably, there is less work to do. Better to have that vacation time paid out when there’s less work, rather than more (or after termination).
In my company, vacation time is use or lose.
Have grief every year from staff who whine over “lost days” when they don’t plan ahead and we can’t let everyone take off on the holiday weeks and keep the business running. (Make them duke it out, and if they can’t compromise, seniority wins…)
I put in all my planned vacation time in January, when my boss is in a mellow mood. And the non-refundable plane ticket is some insurance against a last minute command to cancel.
My mom just lost her 650 hours of sick pay she’d accumulated over 20 years, her 100 or so hours of personal leave, and 8 of her 11 paid holidays. She used to get 3 weeks vacation, and she will now get two weeks total for vacation AND sick time. She was crying. It’s f***ing disgusting what companies are doing to their employees right now. Pigs.
BanteringBear,
Very sorry to hear that. On so many levels. Then we stand around and wonder why young people don’t give a rip about work?
What makes it worse is that these are knee-jerk reactions and short-term solutions.
?!?
That’s not right. That’s a breach of contract.
BanteringBear: The important thing is the executives are getting rich and not taking any pay cuts. Less money for labor, more for them. This happens when a big company comes in and swallows up a profitable smaller company. Squeeze maximum cash from the meal.
That said, sorry to see your mother lose all that hoarded free time. It’s pretty outrageous.
Not in gubbermint. Vacations are in full swing where I work. It’s hard to even get anyone to come to work here anymore. If you take 365 days, subtract out weekends, holidays, vacation days, sick leave, training days, personal leave, bereavement leave, jury duty, parental leave, voting, FMLA, and a couple of other benefits, there’s no real reason to come to work here. Not even mentioning coffee and smoke breaks, and just plain screwing off. Gubbermint workers in my agency are commonly most sick on mondays, fridays and just before and after holidays, too.
My buddies wife has worked for the State for twenty years.
Calls in sick EVERY Thursday, rain or shine………
I’m in no way doubting that IS the case, but again I see it as Bubble By-Product. While a vast majority of us were checking out the latest koi pond displays at Lowe’s and Zillowing our home to see how much it had gone up overnight, those in the public sector were doing the real work.
The real work of making sure their… futures were secured. We… OTOH couldn’t be bothered with pesky issues like public employee benefits! Got a deck to build you know!
That’s interesting.
I work at an NPO in The District (live in NoVA - Alexandria) and just this past friday, our CEO sent out a letter about Q1 performance and things we’re going to need to do to cut expenses to try and meet budget for the year (this is a hail Mary at this point). Anyway, you used to be able to carry over 225 hours from year to year (that’s 30 days based on our 7.5 hour work day). Effective June 1, you will only be able to carry over 150 hours from year to year. So now, you have people scrambling to use up time in the remaining 7 mos of the year so they don’t lose it. (We are a medium-sized organization, 300 or so employees, 90-100 mil revenue per year, 200 mil assets). Management’s thought process is that they can lower the expense for accrued annual leave by only allowing people to carry over 2 weeks as opposed to 1 month. We have some pretty high-paid folk here so, they’re looking at some good cost savings by doing this. I was surprised at the number of people in my department who had in excess of 1 month accrued.
I myself am debating taking of every friday June - Sept and taking time off in September to bring down my balance. DH and I discussed going on a two week Panama Canal cruise later this year based on the terrific deals that are out there, but he works for a for-profit outfit in VA and I’m not sure how they will view him being gone for 12 working days.
It’s a shame you can’t even take a vacation (those of you in the for-profit world) without worrying about your job. We are the most over-worked people in the world and what do we have to show for it?
Just being a math geek here, but at 7.5 hours a day, the 225 hours is 6 weeks at least (30 days at 5 days per week) and 150 hours is 4 weeks at least (30 days at 5 days per week). So people are still going to be carrying over nearly a month of vacation to the next year.
Oops. 150 hours is 20 days, not 30.
What do you mean “What do we have to show for it?”
Why, we lead the world in heart attacks, divorce rates and drug abuse! And our productivity is .02% higher than anyone else’s!
USA! WE’RE NUMBER 1! USA! WE’RE NUMBER 1!
More stuff, yeah, we have more stuff!! Who needs to maintain their health in body and spirit when we can have more stuff?
People are not taking vacations because they are afraid they won’t have a job when they get back:
This just barely happened to my neighbor. Not a frog, a primate further down the street. A complete shock. They moved to this state FOR this job, upper management in a rather restricted niche, and not that long ago. I’m interested to see what happens now. (interested because they’re sorta weenies. If they weren’t, I’d be more sympathetic than interested, but as it is, I’m only mostly interested with a mild tincture of sympathy.)
Nice word, that ‘tincture’. It’s been a while since I’ve seen that used.
On this theme, an unemployed friend of mine told me that her husband didn’t attend a family member’s funeral because even taking a single morning off from work would make him fear for his job . Apparently another close family member felt the same and also did not attend.
I was really saddened to hear that people are having to make those kinds of choices.
I was really saddened to hear that people are having to make those kinds of choices.
I agree. Totally sucky.
…your words make me wonder how many people are getting ulcers and insomnia and other stress-related conditions nowadays. I mean, one morning away from work? And for a funeral? And it’s not doable?!
Jeebus, man. That’s ’stressful’ cubed.
A funeral of a family member, no less.
That’s disgusting.
Aren’t there laws that are supposed to protect employees in these cases???
So sorry to hear about your friend.
Do the poor really pay no taxes?
___
Kudlow has kept talking about the “investor class” which, according to him, are his viewers.
Then he and his ilk have continuously mentioned that 40% of Americans pay no taxes.
I didn’t have an answer.
With no help from any source, I have an answer.
The poor pay for Pampers, Macaroni and cheese and cigarettes.
The “investor class” holds the means of production and distribution for these items.
The investor class gets paid via their shares when Pampers, Macaroni and cigarettes are sold.
Thus, the “investor class” makes his money.
The poor, for the most part, are the grunt soldiers that ensure that the sources for raw materials overseas are protected.
Thus, the “investor class” has it’s assets overseas protected.
The poor do the bed pans in a hospital.
The poor do the waitressing at Dennys.
The poor do the yard work at those plush gardens in Palm Beach.
Thus, the working poor serve the “investor class.”
As to taxes, the waitresses, hospital assistant and even the yard worker pays taxes every day. They just don’t pay taxes on dividends, short term capital gains or on rental properties.
They just don’t pay taxes on dividends, short term capital gains or on rental properties.
A. Or income taxes, if the income is below the deductions (standard or itemized)
B. The poor do pay a huge tax in the form of inflation. This is indeed the largest of all taxes on the poor, since the poor generally spend a larger portion of their incomes on expendable goods, for which inflation has the largest negative effect (e.g. inflation on food is much worse than inflation on houses, since in the latter case you get the gains on the back end when the good is sold).
C. These taxes in the form of inflation are not paid to the broader “investor class”, but to the more specific class of “bankers”, since bankers are the ones who create the new money that causes inflation and collect the interest on that created money. Other industrial investors do not have this benefit. This indeed is why the banking segment of the economy has grown inordinately faster than all other segments.
What about sales taxes? it was in the NYT my electrity bilis almost 18-20% of real estate taxes fees and other add ons
fees for car registration, insurance
a Metocard is $83 a month wether you make $8 or $80 an hour.
If they’re on the books they’re paying payroll tax.
Actually I don’t think the Inflation Tax is paid to bankers, but to DEBTORS. Debtors are the people who actually benefit from inflation — provided their debt is a fixed-rate obligation. Thus, the US Treasury, all the states of union, and every GD FB we’ve ever run into, is a beneficiary of the Inflation Tax.
– az_lender (a member of the Investor Class, though my income is taxed as ordinary income, i.e. full income tax rate)
Actually I don’t think the Inflation Tax is paid to bankers, but to DEBTORS. Debtors are the people who actually benefit from inflation — provided their debt is a fixed-rate obligation. Thus, the US Treasury, all the states of union, and every GD FB we’ve ever run into, is a beneficiary of the Inflation Tax.
This is true - but only if the fixed rate is less than the inflation rate. For how many loans is this true? Even under normal circumstances it’s virtually zero percent of them.
The key is that there spread, which is the tool of extraction.
Also w/regards to debtors benefiting - even if you can beat the spread that’s only true after accounting for the cost of debt. In the case of real-estate for instance you have:
- Closing costs
- Maintenance
- Property taxes
- etc. etc.
only if the fixed rate is less than the inflation rate. For how many loans is this true? Even under normal circumstances it’s virtually zero percent of them.
In normal circumstances of low headline inflation like we’ve had recently, true. But when you look back to the 1970’s and 1980’s, not true at all.
Then, as now, a lot of people had by far their largest loan balance locked in at a fixed rate. No, not their credit card or their car — their home mortgage. And for those who were locked in before inflation, it was a real windfall, since many of them got COLA to their salaries. There is a real chance that this could happen again.
Only if their fixed rate is lower than inflation. Paying 20+% on credit card debt you never pay off is not yet a winning strategy.
A banker lends money created from nothing…. thus creating inflation and you pay him interest. The banker calculates the effect of the new loan on the money supply and charges enough interest to make pure profit.
If the lender actually had to lend money they had earned… well they wouldn’t be creating inflation and thus their interest rate would have to be an order of magnitude higher to realize the same profits as the government banks.
Right, that’s why the interest I charge is 8.4% to 10.5%. And my clients are only those who do NOT qualify for notes that will be sold to Fannie or Freddie.
packman, i think you are describing stagflation, specifically. where inflation on goods is not matched by wage inflation. since the poor tend not to hold cash over long periods of time, they should be less penalized than people who have significant money to save. if expendable goods are inflated, more revenue flows toward all employees along the supple chain, most of whom are lower income. i think inflation is kind of a boogeyman these days. Perpetrated by the Paultards.
Not just stagflation - the same principle applies any time that the money supply expands, as long as the money is actually created and disbursed by the banks.
Years ago under the gold standard inflation was possible if there was a significant amount of gold mined - greater than GDP growth. This in fact happened in the mid 1800’s due to the California gold rush - google it. It’s interesting stuff. The difference then is that the beneficiaries were the miners, not the banks. It is the exact same principle as exists today, with the money now being “discovered” (created) by the Federal Reserve rather than the miners. The creators/discoverers of money don’t actually contribute anything to society, in terms of contributing to the welfare of man; they just reap the benefits of the money creation at the expense of everyone else.
That being said - it’s worth looking at the differences in miner-created gold money vs. banker-created electronic money:
- The miners at least did have to work for it, most of them significantly risking their lives. Not true for bankers. Sure they “work” - but is it really hard, undesirable work?
- Adding gold money to the system did have some benefit in adding “liquidity”, in terms of logistical handling - e.g. it’s a lot easier for someone to physically deal with / divide up 100 ounces of lower-value coins for their daily activities than 10 ounces of very-high-value coins. There’s no such benefit for creating paper or electronic money; though the same devaluing occurs when it’s created.
- Gold money of course has a theoretical limit, thus is not subject to the value whims of oligarchies - paper/electronic money has no theoretical limit.
+25
Everyone that gets a W-2 pays Social Security, no matter how little they make. Quite a bit of that money (the surplus lol ) makes its way into the general fund to be spent on whatever.
Muir,
No revelation ‘there’? When you’ve time may I suggest:
Nickled and Dimed ( by Barbara Ehrenreich ) ?
In George Plimpton fashion she took min. wage jobs from coast to coast and wrote about here experience. It isn’t pretty but it -will- make you a better tipper!
Fabulous book. Highly recommended. The next one she did on job searching (for a mid-level white collar job) was sort of interesting, but no where near as good.
Great book! Y’all should read it. Talk about being on a treadmill…..
Since we need a little right-wing balance here, I’m going to mention that Ehrenreich’s book has been debunked by Cato Institute types who present statistics indicating that very few people (statistically speaking) remain in those low-wage service jobs for the Long Term.
Of course, that was then, this is now. There may be a lot more people remaining in those jobs (or unemployed) in the current environment and the near future.
az_lender,
Good point. I will say “I” never stayed in a job like that for long? I think her point remains though, when I see the BS my daughter’s went through in ‘their’ first jobs I couldn’t help but think what an awful initiation into the workforce that was?
Your daughters started out working for a house cleaning agency? Cause that is the sort of job she described in Nickeled and Dimed. It wasn’t about being a receptionist or low level admin and slowly working your way up to a job with more responsibilities.
polly,
No but they waited tables and worked at assisted care facilities.
“Dad, my check isn’t adding up?”
“Oh it was “just a mistake”, they’ll get it corrected -next- pay period”
Hey d!ckwad, if it was your… check, would we be acting so casual about it!?
( What kind of a way is ‘that’ to introduce young people to the work world? ) Evidently mandatory training.
The Cato Institute?
Puh-leaze.
Yeah, I’ll take the word of lobbyists who worked one summer at college as landscapers or dishwashers and now think they’re the salt of the earth and qualified to relate to and analyze the “disenfranchised.”
In the real world, J6P wages have been stagnate or FALLING for the last 30 years against inflation. Not only has J6P been stuck in those low paying jobs, but those jobs are paying even less.
And it’s getting worse, not better. Here’s more real world data: if you make less than 30K, you ARE poor these days.
That’s part of the country’s problem……nobody can even agree on what the “facts” are anymore.
90% of these so-called “research institutes” are in the business of shading the “facts” to justify whatever policy position their benefactors are pushing.
After all, if you are a sooth-sayer, and keep telling the king that his rule is the cause of all kinds of problems, that will eventually lead to him being parked on the work surface of a guillotine, he is going to find a sooth-sayer that will generate some more optimistic sooths.
Our main problem now is that Washington and Wall Street are still listening to their sooth-sayers, instead of getting out in the real worlds to see what is going on.
This assumes, of course, that they even care. IMO, Wall Street’s Job 1 is to offload this fiasco onto the taxpayer, and the politicos will do what it takes to keep their campaign-cash gravy train on the tracks.
The bottom 50% of income earners pay 3% of federal income taxes. Top 10% pays 70% of income…you know those evil rich people we’re all supposed to hate. That is according to IRS data.
Some “poor” people have a negative tax rate. With schemes like EITC, millions of people not only have a $0 tax bill, but actually get money from the govt as well.
Whenever I hear a liberal Dem talk about a fair tax system I always say Amen to that brother. I want fairness. I want everyone to pay their fair share and not have 90% of people live off the taxes paid by 10%.
One can always look at just one tax, and ignore tax incidence (who the tax is shifted to).
The payroll tax is just a tax, given that all the excess collections since 1983 have all been blown already.
So, does that mean that you do not tune in to Keith Olbermann every night?
I stopped watching the Sunday Night Football pre game show because of Keith Olbermann. ESPN and the NFL channel have better coverage anyway.
(Giggle.)
I also bought my wife a new 09 Toyota which two of our freinds liked so much,they bought Toyota also. We were all life long Ford or GM owners. (laugh) I am now looking to trade in one of my guys Ford F150 on a Toyota pick up.
What is the U.S. military worth to you if you have $50 billion?
What is the U.S. military worth to you if you are in prison for selling cocaine?
Fairness can be looked at from many angles.
You mean the earned income tax credit that was strongly championed by Ronald Reagan and vastly expanded in the 1986 tax reforms? That EITC?
Remember, taxes is what you pay to keep the mobs with pitchforks off your lawn.
I’m not saying our current system is great, but if you let enough of the population live in abject poverty, you will eventually get a revolution.
“The bottom 50% of income earners pay 3% of federal income taxes. Top 10% pays 70% of income…you know those evil rich people we’re all supposed to hate. That is according to IRS data. ”
This retarded yapping has been debunked how many times?
You really need new material.
Debunked on msnbc and on daily kook perhaps. In the real world still true. Look up the data it is at irs dot gov in nice easy to read excel files.
Here is the actual breakdown from the IRS:
Bottom 50% of all tax payers - 3.3% of taxes
Bottom 75% - 15.14% of taxes
Bottom 90% - 31.1% of taxes
Bottom 99% (those really really evil rich people you seem to despise so much) pays 42.87%.
50% pays 3%, 1% pays 43% and yet still the left is unhappy.
Any tax cut is by definition a tax cut for the rich since only the rich pay taxes. A middle class tax cut, like the one Obama talks about is a myth since the middle class pays virtually no taxes.
Despite what Olby, Madcow and the Kooks tell you, this is reality. The poor and middle class life fat and happy off the taxes paid by the evil rich.
The evil rich seem to be living life even fatter & happier. Who are they living off?
Jon,
Those little details never seem to get answered by youngsters.
I’m one of those middle class people that you seem to look down your nose at, pay taxes and sure in the hell doesn’t feel rich.
Until you’re in the top 10 of income earners your tax liability as a % of income is rather minuscule. So either your tax liability is small or you’re not middle class. But not both.
“The evil rich seem to be living life even fatter & happier. Who are they living off?”
Ahh yes I forgot all rich people are exploiting the poor. Anyone who earns a decent income must be lying, cheating or stealing. How silly of me to think otherwise.
Troll, You think? Please prove.
Ahh yes of course the poor and the middle class sucking the rich dry. Anyone that doesn’t fit into your class is just living the good life. The tears, the tears, my heart just bleeds.
My father has done taxes for a few of the chains. He said there are a few that come in and have worked out their working hours to maximize the EITC. So they quit working when they get near earnings of $11K so they can get back the $4000 from the IRS that they did not pay in.
Also poor people play Lotto, and probably fork over quite a bit more to the banks in the way of late fees, check cashing fees, and overdraft fees.
The book “Credit Card Nation” hit on this. Poor people are actually pretty profitable.
“Poor people are actually pretty profitable”
Which is why they’re poor, of course. It takes a special kind of moron to write what you wrote, so congrats I guess.
Now that I think about it, that poor thing is so profitable and comfortable, I think I’ll quit my job and move into the “poor” sector…I hear there are 30% margins.
There’s poor, and there’s scammers, which certainly isn’t the same thing. Maybe if you think being poor is so profitable, you should try it and report back.
Kudlow’s logic is a case of blaming the victim. Reagan cuts tax rates for the rich by half. That, among a bunch of other policies meant to benefit “the investor class,” tax havens and a myriad of loopholes in the tax law, leads to a massive polarization of wealth over the past 30 years. Because of this, more and more Americans driven into poverty are therefore unable to contribute to the tax revenue, while the top 1% and even more so, the top 0.1% see their incomes skyrocket. As a final kick in the face, the poor are blamed for not paying enough taxes. Their tax payments have declined but their incomes have declined faster.
Trickle down economics wants to put money in the hands of the investor class, to promote investment in business. But what is better for business, investment or profit? Investors lend money to build a Pampers factory. But the poor and working class buy the actual Pampers. And the poor aren’t expecting to have their Pampers money returned with interest.
If I owned a Pampers factory, I’d prefer a healthy consumers to healthy investors.
If the top 10% (of which I belong) owns 90% of wealth, shouldn’t they be paying 90% of the taxes?
Can you provide a source for this? A reliable source, not a Daily Kos comment.
And even if you’re right - which I know you’re not - you’re still confusing income with wealth. Taxing people’s income based on their wealth is apples and oranges. You can make $1M a year and have $0 wealth or vice versa.
Jon,
BINGO - Wealth, profits and taxable gains moved up the scale should be born by those that benefit - it’s not a zero sum game. Any gain can be tracked to a loss. We are seeing now that middle America has been run over the coals by the 1%ers.
And Jon, like you I fall in with the 10%ers. I for one am gleeful to watch as those criminals on Wall Street crash and burn. They screwed the very populace that allowed their short-term gains.
KJ - what’s your White Tower story?
That sounds a lot like Walt Whitman.
Yet, even though the Age of America seems to be declining, the poor don’t have to be that way permanently.
They are not all victims.
Horatio Alger, anybody?
Prev. was response to Muir.
The poor do the bed pans in a hospital.
The poor do the waitressing at Dennys….
server has serious hiccups.
“Is there a ruling class in America?”
There is more than one.
You have the corporate oligarcy, with their bonuses, privitized profits and socialized losses.
And the political oligarchy, their early retirement and guaranteed unlimited health care, and the right not to do their job if they don’t feel like it without getting fired.
The compromise with each other by screwing the rest of us serfs and the future. The corporate oligarchy is destroying American business, while the political oligarchy is destroying public services, under the leadership of Generation Greed.
It’d be great to have a website that lists these people, then mines their personal data (how much they’ve made, how much they’ve hurt America, etc). Calling people out on it for the public to see would be cool.
Unfortunately, most of them, instead of feeling shamed into giving up some of their undeserved/ill-gotten gains, would merely be affronted at being ‘victimized’ by such actions. Have you ever heard of an overpaid CEO admitting he wasn’t worth the money and perks he ‘earned’? Ha!
“It’d be great to have a website that lists these people, then mines their personal data.”
VaBeyatch in Virginia Beach, you mean like this?
http://www.thecorporatelibrary.com/
And this?
http://www.gao.gov
Just a couple of my favorite websites.
Links coming…
I found this book to be quite enlightened and pretty current(June 2008). When you look at the full spectrum of the privileged class you need to include not just the very wealthy.
David J. Rothkopf - Superclass The Global Power Elite And The World They Are Making.
More bottom-caller fodder comes in the form of a rising (not-seasonally-adjusted) median sale price in the San Diego housing market. But not everyone is sold on the idea that a bottom is at hand. There is something enjoyable about cheerleaders crowing over an increase in the median sale price to a level still below $300,000.
Sign of optimism: Home prices rise
Local builders think bottom has been hit
By Roger Showley
Union-Tribune Staff Writer
2:00 a.m. May 19, 2009
Online: For more on San Diego County home prices and sales for April, go to uniontrib dot com/more/homesales
The median home price in San Diego County rose slightly to $290,000 last month, MDA DataQuick reported yesterday, offering the latest indication that prices might have bottomed out.
It was the third consecutive month that the median has remained unchanged or risen, after falling for 18 of the 19 previous months. The median was up from $285,000 in both February and March and a recent low of $280,000 in January.
Borre Winckel, chief executive at the San Diego County Building Industry Association, said builders believe the local market has reached the bottom. They report more visitors to sales offices and expect to sell out of virtually all standing inventory of completed single-family homes next month.
“The optimism is justified in that we don’t believe it’s going to get worse from here,” Winckel said. “The big question for our industry is how long will we be looking at virtually no change in the situation we find ourselves in today.”
…
“The number of foreclosures slowed down and will pick up again because of the record number of notices of default,” said Rick Winkler, broker and owner of Market Realty.
Another significant figure is the number of active listings, reported at 13,354 yesterday by the San Diego Association of Realtors. That was down about 500 homes from the same time in April and off 27.1 percent from year-ago levels.
If homes continue selling at the current rate, the inventory would be gone in about four months. An inventory of three to four months is considered indicative of a normal market, in which supply and demand are roughly in balance.
But with so many distressed homes for sale and few move-up and high-end properties available, many analysts wonder if sellers might move to list their properties at the first sign of stability and push the inventory up once again.
“We haven’t seen a huge increase in listing activity as we would normally see by May,” said David Cabot, executive vice president of Prudential California Realty.
When he attended a midyear review of the housing market last week in Washington, Cabot said, Southern California was singled out as the most likely region to bottom out and recover first because it was the first to enter the housing slump.
“If we haven’t hit bottom, we will be there next week,” he said, paraphrasing the prognosticators.
Winkler, the broker, said next spring rather than next week is when he expects an upturn.
“I’d be out there buying if I didn’t think there were too many other shoes to drop,” Winkler said.
…
In another sign of optimism, the National Association of Home Builders yesterday reported rising confidence among members that sales will improve in the next six months.
Builder confidence rose 2 points to 16 on the 100-point Housing Market Index, issued by the homebuilders group and Wells Fargo Bank. For Western states, the index rose from 8 to 12.
But both index levels are far below the 50-point mark, the dividing line between optimism and pessimism.
Ross Starr, an economist at the University of California San Diego, said even if housing seems to be stabilizing, real estate and construction are not likely to pull the local economy out of recession.
“The construction industry will not be the leading sector bringing us out of the recession because of the immense excess inventory out there,” he said, citing downtown condominiums in particular.
I think large swaths of the country are at or near the bottom in prices.
California, Florida (Miami), Nevada, NY and Arizona still have a long long way to go.
I’m still thinking long term deflationary trends suck the life out of LA/SF/SJ/SD. Especially since education is falling in the toilet out here.
“Builder confidence rose 2 points to 16 on the 100-point Housing Market Index, issued by the homebuilders group and Wells Fargo Bank. For Western states, the index rose from 8 to 12.”
Dumb logic: Optimism = the absence of extreme pessimism
Can someone please enlighten me on why a drop in housing starts to a fifty year low is good news for home builders? Shouldn’t such a low level of activity portend really low profitability over the next few years? I cannot figure out for the life of me what keeps the builder share prices aloft.
Indications
May 19, 2009, 8:40 a.m. EST
U.S. stock futures trade flat after housing data
By Steve Goldstein, MarketWatch
LONDON (MarketWatch) — U.S. stock futures on Tuesday saw gains dissipate after data showed construction of houses retreating to a record low.
Trading as high as 915.80, S&P 500 futures were up 2.2 points to 909.30 after the data.
Nasdaq 100 futures slipped 2.25 points to 1,386.00 and futures on the Dow Jones Industrial Average were up 24 points.
U.S. stocks rallied on Monday on a rise in a home-builders sentiment index, an increased forecast from home-improvement retailer Lowe’s and upgrades on bank and housing firms. The Dow Jones Industrial Average rose 235 points, the S&P 500 rose 26 points and the Nasdaq Composite rose 52 points.
Bulls are back
Stocks look to extend Monday’s rally as sentiment returns to the bullish side. Plus, bankers and home builders - Monday’s heroes - look to stretch their gains ahead of new home data and more efforts to repay TARP borrowings. Barrons dot com’s Bob O’Brien has your day ahead.
“As soon as any good news comes out, the market is quick to respond,” said Marc Pado, a strategist at Cantor Fitzgerald, in a note to clients.
But that wasn’t the case on Tuesday, as starts plunged 12.8% in April to a seasonally adjusted 458,000 annualized units, weaker than the 519,000 pace expected by economists surveyed by MarketWatch. It is the lowest level since the series began in 1959.
Building permits, a leading indicator of housing construction, fell 3.3% to a seasonally adjusted annual rate of 494,000.
Lower inventory in the future.
The question is, why is any housing being started? To me starts for the forseeable future should be limited to local shortages and rich people who want their own custom-built home. Overall, we have all the housing we need, and we can get more of it just by chopping up the McMansions into normal-sized apartments.
If its profitable to build, why shouldn’t they build?
“Lower inventory in the future.”
For new homes, perhaps. Not so sure about used homes, though, given the dark cloud of shadow inventory hidden behind the mountain and the incipient foreclosures to come over the next few years. Lots of these soon-to-be-foreclosed homes are nearly brand new, anyway, for anyone who does not mind the Chinese drywall.
Where I live, Builder’s can put up & sell a 1600 sq ft house for $110,000. Competitive foreclosed houses are going for $140,000 & f@cked buyers are trying to sell for $200,000.
Jon, where do you live? There isn’t a builder within 20 miles of where I am that would bother putting up a measly 1600 sq ft house. Most of them want to build homes with 3 x that square footage at least.
Central Florida, along the coast. Builder’s want to build the big stuff but nobody’s buying anymore. But there is an opportunity on the low end to undercut the current market.
Most of the folks doing this are smaller developers who don’t have to maintain their price points. The big guys just can’t bring themselves to lowering the perceived “value” of their properties.
1600 isn’t measly, you must live in McMansion hell. Trends today are for smaller, more efficient homes….
http://www.usatoday.com/life/lifestyle/home/2009-03-16-small-homes_N.htm
Jon,
Right, and the FB’s ‘wish’ they were getting $250k. I like your overall observation and if we want to put an end to this we’ve seriously got to stop building, yesterday preferably.
But it seems the Gov. is straddling (2) issues here, supporting existing prices and keeping their NAHB masters “well serviced”.
“Can someone please enlighten me on why a drop in housing starts to a fifty year low is good news for home builders? Shouldn’t such a low level of activity portend really low profitability over the next few years? I cannot figure out for the life of me what keeps the builder share prices aloft.”
Read the full report. Overall number was done. SFH number was up 3%. That is where the profits are. Not saying I agree this justifies a jump in HB stocks, but that’s partly the thinking.
“Can someone please enlighten me on why a drop in housing starts to a fifty year low is good news for home builders? … I cannot figure out for the life of me what keeps the builder share prices aloft.”
1. Why is oil going up even as tankers hold offshore because there is no more storage capacity?
2. Why are stocks going up even as PEs are down?
LOL - rhetorical questions I presume? (given the source)
Thank god it’s not because of speculators… again.
“Why are stocks going up even as PEs are down”
What you mean is, “Why are stocks going up even as earnings are down?” — of course PEs are actually going up, because earnings are falling faster than stock prices are rising.
Because the bottom in sales is about to be reached, and once it is, the recovery will immediately follow.
The new home sales will rise quickly and prices will follow shortly. Homebuilders will start making billions of dollars again, as early as next year.
So investors rush to snap up homebuilders shares before these earnigns materialize, for once they do, their shares will skyrocket to $100s.
Did I miss anything?
Could state and city governments qualify for bailouts if they reincorporated themselves as banks?
Thomson Reuters
Working on help for states but no bailout-Geithner
05.18.09, 04:39 PM EDT
WASHINGTON, May 18 (Reuters) - U.S. Treasury Secretary Timothy Geithner on Monday held the door open to possible aid to states and cities hammered by the recession but said they must work to bring their economies back to health.
Geithner, speaking at a luncheon at Newsweek magazine, said he is working closely with congressional leaders to find solutions, particularly for problems related to financing.
‘Of course, a lot of it will depend on how much confidence they (states) are able to engender in addressing their underlying fiscal problems,’ he said. Many states had deep structural problems before the financial crisis, which then became worse.
As for any assistance, ‘I wouldn’t use the words ‘bailout’ or ‘federal,” Geithner said. ‘I would say we’re in close consultation with people who are looking at ways to make sure these markets are working so states and municipalities can meet their needs.’
As for any assistance, ‘I wouldn’t use the words ‘bailout’ or ‘federal,” Geithner said. ‘I would say we’re in close consultation with people who are looking at ways to make sure these markets are working so states and municipalities can meet their needs.’
LOL - how Orwellian can he possibly get?
‘I would say we’re in close consultation with people who are looking at ways to make sure these markets are working so states and municipalities can meet their needs.’
By the Occam’s razor standard, that explanation falls flat on its face.
Sounds like he is talking about the bond markets. Not sure that addresses any structural issues.
This appears to be a sign of serious economic trouble: Federal Reserve economists are talking in common sense terms about the incipient consumption hangover. It appears that some economists at the Fed are cognizantly aware of household budget limits.
FRBSF Economic Letter
2009-16; May 15, 2009
U.S. Household Deleveraging and Future Consumption Growth
* U.S. household borrowing behavior
* How much deleveraging?
* Effect on saving and consumption
* Conclusion
* References
U.S. household leverage, as measured by the ratio of debt to personal disposable income, increased modestly from 55% in 1960 to 65% by the mid-1980s. Then, over the next two decades, leverage proceeded to more than double, reaching an all-time high of 133% in 2007. That dramatic rise in debt was accompanied by a steady decline in the personal saving rate. The combination of higher debt and lower saving enabled personal consumption expenditures to grow faster than disposable income, providing a significant boost to U.S. economic growth over the period.
In the long-run, however, consumption cannot grow faster than income because there is an upper limit to how much debt households can service, based on their incomes. For many U.S. households, current debt levels appear too high, as evidenced by the sharp rise in delinquencies and foreclosures in recent years. To achieve a sustainable level of debt relative to income, households may need to undergo a prolonged period of deleveraging, whereby debt is reduced and saving is increased. This Economic Letter discusses how a deleveraging of the U.S. household sector might affect the growth rate of consumption going forward.
To achieve a sustainable level of debt relative to income, households may need to undergo a prolonged period of deleveraging, whereby debt is reduced and saving is increased.
I’m somewhat surprised to see such a blunt, common sense prescription from the Fed, but making a reasonable observation and following through on a policy level are two entirely different things. We’ve seen other indicators that Fed economists occasionally get it, only to watch them issue policy that seems contrary to their own prognostications.
The only people I know who are “saving” are those anticipating a layoff in the near future.
All this saving isn’t going to help the economy much, unless you count the bankers who profit off the split between the 1% interest rate they are paying savers, vs. the 10-15% they are charging for loans.
X-GSfixer,
Like a lot of your posts, they make even more sense when you read them aloud! Right, smelling the axe? Time to hunker down!
Other than ‘that’? It’s Party like it’s 1999! But if we can’t even get people to contribute into their 401k’s up ‘to’ the employer’s match, how will we -ever- incentivize saving? Seriously, I’m totally open.
“We’ve seen other indicators that Fed economists occasionally get it, only to watch them issue policy that seems contrary to their own prognostications.”
My guess is that when they compare what is likely to happen with consumers to what is necessary to reignite the FIRE economy, the chasm is so wide that they have no choice but to pump money and hope for a miracle.
And households remain levered at 130%
Since the start of the U.S. recession in December 2007, household leverage has declined. It currently stands at about 130% of disposable income. How much further will the deleveraging process go?
“Then, over the next two decades’ leverage proceeded to more than double”
O.K maybe it is… a Credit Bubble?
Again, either way, it’s hard data like this that makes those that insist this all began post 9/11 so frustrating to deal with.
I told my boss about that story yesterday, his jaw dropped to floor.
Was your boss’s amazement over the story itself, or over the fact that it came out of a regional Fed bank?
Come to think of it, I would only be shocked if such a story came out of the Board or the NY Fed. The regional Fed banks have put out some doozies (including KC Fed Hoenig’s recent “Too Big Has Failed” article).
The 133% peak in ‘07 did it. I’m not sure the average person realizes just how much of what we saw going on in recent years was attributable to debt.
I’m not sure how much the average MSM-cited expert economist realizes just how much of what we saw going on in recent years was attributable to an unsustainable credit binge, either.
This is why no matter what programs or stimuli they try, it’s going to be a long, bitter, downward struggle for most people. I’ve been asking people for years what they think this country would look like if everyone had to live within their means. As long as people were willing to conscript themselves to be debt slaves, prices and aspiration could rise continuously.
“As long as people were willing to conscript themselves to be debt slaves, prices and aspiration could rise continuously.”
And as a remedy for the dire situation, I see all kinds of efforts by top economic policymakers to encourage households to mire themselves deeper into debt.
If anything, 133% sounds almost impossibly low. Maybe it’s because I’m in California, but certainly everyone I know who owns a house is in debt to the tune of at least 300% of their GROSS income, let alone personal disposable income.
There’s a formula for the Fed / banks, that’s been exercised since the 1920’s. This formula takes advantage of normal gains in production efficiency over time, creates economic boom and bust cycles and presents them as if they’re a normal thing, and with each cycle resets the debt level higher, even as a percentage of everything (income / GDP/ etc.). This has been a relatively sustainable model due to the said increases in productivity efficiency. So rather than the citizens reaping the benefits of productivity gains - the banks do. It works like this:
A. Start at some given baseline, with normal productivity gains happening.
B. Pump easy credit into the system - increasing debt but also increasing GDP inordinately - above what normal productivity efficiency would do.
C. GDP increases fuel speculation in some bubble.
D. Speculative bubble inevitably pops, causing a recession as easy credit is removed.
E. Economy crashes to some extent, requiring artificial stimulus - usually from the government.
F. Debt unwinds to some extent, but stimulus prevents debt from unwinding to its previous level in step A.
G. Economy “recovers” - we’re back to step A, but now at a higher debt level.
The banks have now extracted their inordinate portion of the profits due to the production gains. They didn’t do the work, but they reap the benefits.
Society is none the wiser. There is the appearance of a general increase in prosperity, since everyone has more “stuff” over time. However what they don’t realize is that the banks own an ever-increasing percentage of this stuff. Everyone is just borrowing it from the banks now mostly.
“In the long-run, however, consumption cannot grow faster than income because there is an upper limit to how much debt households can service, based on their incomes.”
And the dim bulbs grow brighter! You mean that I can’t just keep buying stuff without money to pay for it? You mean that debt has to be repaid? Hey, I thought “debt was wealth” - that was one of the sayings of the Bubble Years! Hahahaha!
Not that it matters - we’re still at ZIRP and I expect all efforts will be taken to force more debt on people as they ignore the obvious implications of their own words regarding debt and income ratios.
I was beginning to wonder if any of the PTB could see that stagnate/falling wages eventually had to cross rising prices and the obvious consequences thereof.
At least somebody gets it. Damn shame the FIRE mafia never will.
Put Roubini into the “W” camp:
Nouriel Roubini | May 19, 2009
Recent data suggest that the rate of economic contraction in the global economy is slowing down and we are closer than six months ago to the trough of the recent severe global recession. But while the rate of economic contraction is now lower than the free fall and near-depression experienced by many economies in Q4 of 20008 and Q1 of 2009 the recent optimism that “green shoots” of recovery will lead to the recession to bottom out by the middle of this year and that recovery to potential growth will rapidly occur in 2010 appears to be grossly misplaced. A careful assessment of the data suggests that rather than green shoots there are plenty of yellow weeds both in the short term and in the medium term. Here there are three important ways that our views differ from the current optimistic consensus.
First, the current deep and protracted U-shaped recession recession in the US and other advanced economies will continue through all of 2009 rather than reaching a trough in the middle of this year as expected by the current optimistic consensus.
Second, rather than a rapid V-shaped recovery of growth to a rate close to potential US and global economic growth will remain sluggish, sub-par and well below trend growth for at least two years into all of 2010 and 2011; a couple of quarters of more rapid growth cannot be ruled out as we get out of this recession towards the end of the year and/or early next year as firms rebuild inventories and the effects of the monetary and fiscal stimulus reach a delayed peak. But at least ten structural weaknesses of the US and the global economy will cause both a below trend growth and even the risk of a reduction of potential growth itself.
Third, we cannot rule out a double dip W-shaped recession with the wings of a tentative recovery of growth in 2010 at risk of being clipped towards the end of that year or in 2011 by a perfect storm of rising oil prices, rising taxes and rising nominal and real interest rates on the public debt of many advanced economies as concerns about medium term fiscal sustainability and about the risk that monetization of fiscal deficits will lead to inflationary pressures after two years of deflationary pressures.
If Roubini is correct, then the green shoots are visible at the moment only because we are in the eye of the storm.
It doesn’t make a lot of sense why the government and the media keep complaining about houses being more affordable.
Why would they want home to be expensive and out of reach for most people? Why would a government wants its people to spend most of their salary in paying for an overprized home? Taxes maybe?
You would think governments would want their people to have affordable housing so they spent the rest of their money in other things, which could help many other industries.
I think the media/bubble heads/big advertisers exc perceive the bubble and skyrocketing prices were a good thing.
Anything that brings back the bubble and lets things go on that course will be highly praised. Till it makes some other really bad effect like causing the dollar to collapse. Then we will be highly screwed.
It’s talking out 2 sides of their mouth at the same time. They want “affordable” houses, but then do things like FHA/FNM/FRE to push the prices up. Or give new buyers 8K to go buy a home. How does that make it “affordable”?? All those moves serve to push the price of homes up!
It’s like the government has become “Johnny How-Much-A-Month”. The way you make houses affordable is by LOWERING THE PRICE; it’s not by lowering interest rates, or giving people more access to credit. That may make homes more ATTAINABLE, but absolutely does not make them more affordable.
If home financing disappeared tomorrow (cash only), prices would fall 75% overnight, homes would be VERY affordable. But very unattainable for most people. They are 2 different goals, but, in the government’s eyes, have blended into one bastardized goal.. The real goal is “make prices go up”.
+100
Brett,
It makes perfect sense to the REIC-controlled CONgress? I mean, as long as ALL of our consumption is “housing-based” and doled out by the use and access to MEW, they’re assured of having the most control.
But your question cuts to the thick of it. The REIC doesn’t like to take the backseat to anyone, and this is why we saw so many “programs” rolled out to save “the housing crisis”!
Just look at all the valuable time and limited resources we wasted on ‘that’.
Higher housing prices generate higher revenue for government at every level.
The prime directive of government is more government.
The same for corporations, PLUS constantly raising prices.
“Why would they want home to be expensive and out of reach for most people?”
There are countervailing impacts of lower home prices:
- lower assessments = lower property taxes that can be extracted from the extant base of homeowners
- lower value of MBS = larger losses to members of the Megabank, Inc cartel and other bagholders of toxic mortgage assets
- greater incentive for homeowners to walk away from underwater mortgages = more REO inventory dumped on to the banks
But:
- increased affordability = more liquidity in the real estate market, with improving income potential for used home sellers, plus the potential for young families to afford homes and lay down roots in cities where they were formerly priced out.
What politician would argue against the benefits of being able to attract and retain a vibrant young work force?
“against … a vibrant young work force”
The thing is, the vibrant young work force doesn’t vote so regularly as the retired and the parasites.
All they want is everyone to get in a house they can’t afford and fork over absurds amounts of money to the banks while having to refinance (with fees!) every few years to keep their loan “affordable.” Meanwhile, the suckers flip houses to each other at ever increasing prices which will produce a new source of income and hide the fact that jobs are vanishing and salaries have been declining for years.
If people bought houses they could actually afford, the parasite class wouldn’t have as much to gain, hence the efforts to prop up housing prices.
Oh, Pondering, you would have to mention the refinancing (with fees!) thing. Gripes the heck outta me.
I mean, come on. How complex IS a refi anyway? Does it really justify the thousands of dollars in fees? I think not.
When I refinance a client who is already on my books, my fee is sometimes fifty dollars (if I’m in a bad mood) but more often zero dollars.
Pondering,
Right, hence the term “Serial Re-Financing”. But I like ‘your’ explanation better as it puts the focus where it ’should’ be!
Creating nosebleed home pricing plays right into the notion that there’s plenty of money to be made off the poor. Only instead of check cashing fees and late fees etc. we can now play the game on a much grander scale. How nice.
They want it to remain high because the people in the gov’t and those that run the newspapers own houses, and they want the value of their properties to remain high. People who own want the prices high, those who don’t want them low. Renters are not of the ruling class.
Over paying for a house is only a problem for the average American worker. Bankers, realtors & developers make a ton of money.
Bankers, realtors & developers provide the funds politicians need to get elected. Average American workers do not.
“The government” isn’t a thinking being, it has no interests. The people who pay for politicians to get elected have interests. And you will pay for them. You have no choice.
Yep, we have the best government money can buy!
For the map/geography geeks like me–this map has every county on it and lists the foreclosure rate, bankruptcy rate, and unemployment rate.
http://hosted.ap.org/specials/interactives/_national/stress_index/?SITE=CODEN&SECTION=HOME
Nice. Let us know if they if and when they update it.
Good map, thanks for the link!
So I’m not sure why but for some reason my link to a graph I created isn’t showing up. I’ll post my comments now, and then follow up with a one-liner attempt again at a link. A little help maybe Ben?
(Graph to be posted, showing mortgage debt as a percentage of GDP…)
Of note:
- Over the long run, one can see how we’ve been getting deeper and deeper into mortgage debt - not just in nominal terms, but as a percentage of GDP. This obviously is not sustainable; even the the trend line is not sustainable, for obvious reasons. I put in the trend line for reference, just to show the recent bubble, not to indicate that it’s something “normal”. This to me is a strong indicator how the banks’ portion of our economy has grown; and that’s not a good thing IMO.
- This confirms my calculations from other data of several months ago of the scale of the bubble - about $4.5 Trillion on the residential mortgage side (commercial I believe is about $1.5 Trillion, though I haven’t crunched the numbers as closely).
- The increase in debt comes mainly in steps, and interestingly before the early 1980’s it corresponded quite closely with stock market growth (presumably mortgage debt fueling the 50’s and 60’s growth, followed by stagnation in the 1965-1982 timeframe), whereas since 1982 or so it has more closely corresponded with the the larger recessions of the early 90’s and now, but not with the weak 2002 recession, and the correlation is less tied to the market (which for whatever reason completely ignored the strong early-90’s recession but was hammered by the weak 2002 recession).
- The last few months have been very interesting - we did start downward with the debt unwind, but are now actually starting back *up* as GDP shrinkage actually exceeds the rate of mortgage debt unwind. This to me is a very bad foreboding. However that being said - someone asked the other day if maybe this was due in part to foreclosures that have actually already been written off, but haven’t shown up yet in the Federal Reserve data. That could be - I don’t really when this hits the Fed’s books. I would imagine though that there’s not *that* much of a difference.
- An ever-rising mortgage share of GDP is clearly not sustainable.
- The spike above the linear trend you noted in the graph posted yesterday evening portends a hard landing (currently underway).
- Respiking the mortgage lending punchbowl (also already underway) will only serve to prolong the pain.
FWIW - I wouldn’t be so sure about it being unsustainable. It’s been sustained now for almost 100 years - ever-higher steps of mortgage debt levels. I need to add additional data that just now found to the chart - the same thing happened in the 1920’s (recently posted by someone; no raw data but did have charts that the data can be extracted from). I do think of course that the *present* level won’t be sustained - there will be some retraction, but it won’t be back to pre-bubble levels I’m quite certain.
What I do need to find though too is GDP data pre-1930 - I don’t have that yet but could probably find it (it’s not publushed by the white house or federal reserve, that I could find). If anyone has an easy link though let me know.
“FWIW - I wouldn’t be so sure about it being unsustainable.”
Are you expecting the trend to march on up from its recent level near 80 pct of GDP on through 100 pct, 200 pct, 300 pct, etc at a lockstep linear rate over time?
If your answer is no, then you agree with me.
IMO, your linear trend is subject to Stein’s Law:
That which can not go on forever won’t.
–Herbert Stein–
“FWIW - I wouldn’t be so sure about it being unsustainable.”
Are you expecting the trend to march on up from its recent level near 80 pct of GDP on through 100 pct, 200 pct, 300 pct, etc at a lockstep linear rate over time?
I think it can definitely go above 100% - e.g. the way the Federal Debt went above 100% of GDP during WWII. How far beyond 100% it could go remains to be seen.
Keep in mind the debt we’re talking about is cumulative, whereas GDP is annual - so the comparison “as a percentage” is actually not apples-to-apples, though it’s still valid for historical comparison purposes.
To answer your question - theoretically actually yeah it could go on forever, as long as it’s offset by decreasing interest rates. The only thing limiting the size of the debt is how much is spent servicing it. So for example the debt could quintuple to 400% of GDP, and if interest rates were cut from 5% to 1%, then the cost of servicing the debt would be be the same. Then the debt could double again to 800% of GDP if interest rates went down to 0.5%. Etc, etc.
Of course this is theoretical. In practice there has to be a significant spread between the funds & treasury rates and mortgage rates - so it’s not feasible to lower mortgage rates to 1%. So in practice keeping the same trendline of debt growth forever is not feasible. However an “ever-rising” share is in practice possible, if the rise rate eventually slows to near-zero.
In the end though - geopolitical events will overwhelm these debts. No society lasts forever. It may be 5 years or 500 - no clue. But it will happen, and will very possibly be brought about in part by these very debts.
“In the end though - geopolitical events will overwhelm these debts. No society lasts forever. It may be 5 years or 500 - no clue. But it will happen, and will very possibly be brought about in part by these very debts.”
Yeah yeah, in the long run we’re dead etc. But it will not be long before the mortgage debt as a share of GDP drops, because the bursting housing bubble is issuing in a new paradigm, regardless of efforts by the Fed & Megabank, Inc to keep the old one intact.
What happened inside the banking “industry” (wrong word for an unproductive business) with its 30x leverage is just a more cataclysmic version of what is/will happen(ing) to the consumer. I agree w/ PB: the consumer is deleveraging and will continue to do so despite REIC.
Here’s the graph (mentioned last week that I was creating). It includes a trend line for comparison.
impressive
Thank you.
IMO that’s a pretty good boiled-down representation of how the banking sector is taking over our economy. I plan to refer to it often :).
Is anyone getting the feeling this is just too good to be true?
GS almost 100 points above its lows, Buffet making money on the warrants…
they say the tide has changed…yet more building have for rent signs i can’t get some serious potholes near my apartment fixed people are responding even LESS to my resume.
California votes on various budget propositions today.
Why would anyone vote in favor? It is basically a choice between accepting higher taxes from your own state (yes), or sharing the pain with the rest of the USA (no).
The Federal Government has set such a poor precedent/moral hazard with the various bailouts that most CA citizens must expect the Feds to come to the rescue.
Of course no one will vote for increasing taxes, nor should they.
I work for a local government in Florida. What people don’t know is that during the boom, all local governments went out and bonded their taxes for the next 20 years to build all the goodies folks wanted.
When taxes go down, it is catastrophic for the operations budget. You have to pay the debt on the new school, which means you have to cut the teachers you needed to staff the school.
You can’t run the government at the level it was prior to the boom. You have to much debt to service. So you run at staffing levels from 20 years ago. The first things to go are the internal services that keep government accountable. People want cops, not purchasing agents. People want firemen, not accountants.
The level of professional incompetence of our politicians is far worse than most people realize.
“professional incompetence”
No Jon, I think you described it perfectly.
Their only profession is to get themselves re-elected, and they’re pretty competent at that! (high % of incumbents win)
“Credit cards have long been a very good deal for people who pay their bills on time and in full. Even as card companies imposed punitive fees and penalties on those late with their payments, the best customers racked up cash-back rewards, frequent-flier miles and other perks in recent years.
Now Congress is moving to limit the penalties on riskier borrowers, who have become a prime source of billions of dollars in fee revenue for the industry. And to make up for lost income, the card companies are going after those people with sterling credit.
Banks are expected to look at reviving annual fees, curtailing cash-back and other rewards programs and charging interest immediately on a purchase instead of allowing a grace period of weeks, according to bank officials and trade groups.”
LOL. So, they want to get rid of the grace periods, huh? I suppose they figure that the 30% of CC users who don’t carry a balance ALSO don’t have the money in the bank to just pay as they go? What a bunch of morons.
http://www.cnbc.com/id/30824407
“Now Congress is moving to limit the penalties on riskier borrowers, who have become a prime source of billions of dollars in fee revenue for the industry. And to make up for lost income, the card companies are going after those people with sterling credit.”
So Congress is going to step up to the plate to help Megabank, Inc prosecute its War on Savers, then? I guess it is time for us to cut up our credit cards and go to cash, only for purchases. Luckily the Chase ATM machine (formerly known as the Washington Mutual ATM machine) was working just fine as of last Saturday.
And just to remind any of you stock-owning or bond-owning parasites: the debit card associated with your brokerage account carries an annual fee but (if you’re not margining your securities) no interest, no late fees, and no transaction charges.
Yup, they are claiming they will go after the “deadbeats.” The source is this New York Times article.
http://www.nytimes.com/2009/05/19/business/19credit.html?em
And then once they chase away all their good customers, they can get a Bailout - brilliant!
Even more brilliant: The bailouts implicitly are disproportionately funded by creditors and financially prudent individuals who did not mire themselves in unrepayable debt.
Agreed. It’s like they’ve never heard of adverse selection. If they screw their good customers, they are going to so deserve it when they get screwed 10 times worse. This shows incredible lack of foresight on the part of banks/credit card companies. So it’s almost certain it’s what they’ll do.
I’m pretty happy with the fact that I can fly my family of 4 across country every summer with credit card miles. I have never paid a penny in interest.
Dear $h!tt!bank,
You and I go way back, all the way back to 1990. We’ve been good for each other. You get to keep 3% of everything I spend on you, and boy! have I spent a LOT. I’ve earned enough FF miles over the years to send me to Australia, New Zealand, PNG and Indonesia (business class to Bali: heaven on Earth!).
So it was with dismay and a touch of regret that I read today you’ve decided to change the deal. The signs that our relationship was in trouble have been there for a while, but I still wonder: is it me, or you? Did you grow tired of my reliably paying my bills on time? Did I call you once too often to have some ridiculous charge reversed because my check allegedly arrived a day late? Have your eyes wandered to greener pastures, maybe to someone with even bigger spending habits, or who can’t afford or remember to pay their bills on time?
I tried to change with you, going to paperless statements and online bill paying. I even sacrificed big bucks for you last month, when I forgot your bill until a week after it was due (never mind that your statement didn’t arrive by e mail or snail mail!), and I swallowed the usurious finance charge and late fee because I needed to teach myself a lesson. You have to admit I have never treated you the way I do Capital One, sending back those unsolicited offers all torn up in the return envelope just so they get charged for the postage.
We sure were a winning team back in the day. In the end, I just didn’t give enough for you, did I ?
I’ll always spare a smile for you whenever I see your stock price tanking. Good luck with your remaining customers. I hope you learned from our long relationship. I know I sure did.
Regards, Elanor
Megabank, Inc is turning into such a deadbeat these days. I can’t believe they are going to the length of rescinding offers to give away money for paying off credit card balances each month.
Elanor!
Damn that was funny! ( Or I mean it would be funny if it wasn’t so true ) You my good woman have summed up how I’ve felt over creditors for about… oh, the last decade or so?
Oh sure, you can almost always get the late charges reversed when you point out your “paperless billing” isn’t worth the paper it’s not written on! But it takes a half hour on hold and sets a terrible tone for the day.
Why, I believe I’m mute with admiration, Elanor!
A first, btw!
*wonderingly pats mute face, but gingerly, in case it a’splodes *
Cash.
I see far too many purchases for under $20 made with CCs. Look, your “rewards” (sucker!) are not enough to pay for the price padding that retailers have to include on all their sales.
The CCs take from both ends already. From you on the purchase and from the retailer PER TRANSACTION.
Start carrying a 20 around, for crisakes.
LONDON – The powerful speaker of the British House of Commons resigned Tuesday because of a backlash over excessive expense claims by lawmakers, marking the first time in three centuries a speaker has been forced out.
Though Michael Martin has not been caught up in recent revelations about lawmakers expenses — reimbursements for chandeliers, moat cleaning and mortgage payments have outraged taxpayers — he was blamed for creating a climate in which such excesses were allowed.
In an extremely short statement to the House of Commons, Martin said he would leave the post June 21 to maintain “unity” in Parliament.
Pelosi - the skids are greased.
Pelosi - needs to “leave” now!
Pelosi - Another “inconvenient” party leader that nobody trusts, nobody wants, and whose name and legacy is leaving such unattractive marks, swirling the toilet bowl on the way to the political oblivion sewer.
Try to notice how the “Fed”, an international private banking cartel, can make similar things happen in different countries around the globe, at the same time.
Oh my, how truly inconvenient she is.
Try to guess the upcoming headlines here in the U.S.A.
“Speaker Pelosi resigned her office today, claiming she wanted to spend more time with her family.”
I’d drink to that.
I’m a Democrat, and IIIIII will drink to that as well.
Oly:
Reminds me of Band on the Run. The album, of course….
Why? I’m not a Democrat, and my beefs with Pelosi are mostly about policy/substance. What else is wrong with her? (Just an honest question.)
a backlash over excessive expense claims by lawmakers, marking the first time in three centuries a speaker has been forced out.
This issue seemed more related to the UK electorate’s utter dissatisfaction with their Parliament, and each of its Members, than anything to do with the Speaker’s performance. The inflated expenses of the MP’s blew the lid off. Just read some of the UK news sites if you like. One columnist said “Guy Fawkes was right.” The Members put pressure on the Speaker to go, since their jobs will be next.
I don’t know anything that could happen in the USA that could produce that equivalent level of political unrest. I do shudder that Nancy is next in line for the Presidency after Joe Biden.
I guess I won’t be needing my credit card anymore.
Credit cards have long been a very good deal for people who pay their bills on time and in full. Even as card companies imposed punitive fees and penalties on those late with their payments, the best customers racked up cash-back rewards, frequent-flier miles and other perks in recent years.
Now Congress is moving to limit the penalties on riskier borrowers, who have become a prime source of billions of dollars in fee revenue for the industry. And to make up for lost income, the card companies are going after those people with sterling credit.
Banks are expected to look at reviving annual fees, curtailing cash-back and other rewards programs and charging interest immediately on a purchase instead of allowing a grace period of weeks, according to bank officials and trade groups.
http://www.nytimes.com/2009/05/19/business/19credit.html?_r=1&hp
“It will be a different business,” said Edward L. Yingling, the chief executive of the American Bankers Association, which has been lobbying Congress for more lenient legislation on behalf of the nation’s biggest banks. “Those that manage their credit well will in some degree subsidize those that have credit problems.”
Different business? I thought this was business as usual for Megabank, Inc, whose leaders have been heard referring to those with good credit as deadbeats. Even after all the bailout money that was routed from Main Street to Wall Street last fall, the lending industry collectively looks to me like the biggest bunch of deadbeats on the planet. And Congress is now going to help them perpetuate their credit scams. Where is my pitchfork?
What’s in my wallet? No more Capital One if they charge me even $1 of interest when I pay my bill in full every moth or if they charge me $0.01 annual fee.
Come on Capital One, I dare you, I double dog dare you….charge me interest just once. Do you feel lucky punk? Well do ya?
I don’t know why but I hate Capital One with a passion. Every couple of months I have to call up their call center to resolve a dispute. Like for example last time they charged me a $39 late fee because I made my payment online on the date due at 7:00pm. Turns out it has to be in by 5:00pm to be counted that day. OK, but I’ve had that card for 5 years or so and always make payments in the evening and it has never been an issue. Until out of the blue, bam $39 late fee. They took it off, but it took 20 minutes on the phone to do so.
But I am a whore to their miles which are very generous.
Question - but what possible reason do you have to cut it that close? It’s not like your money is earning 20% in a money market account otherwise.
I try to pay off my statements as soon as I get the bills, mainly to avoid such hassles. It serves me well.
No good reason. Just the way I am, leave things until the last minute. Not the most efficient way to operate, I know.
My credit union account is set up to automatically pay off the card in full every month on the last day it is due. So I get the maximum free money with no risk. Of course, they get to hold on to a substantial amount of my money in checking and savings accounts paying virtually no interest.
Perfect, same deal as card-bearing brokerage accounts.
Trust me, you won’t miss it. You just open an account with whatever balance works for you and get a debit/credit card. I use mine only as credit and works fine.
I’ll be shopping for a Credit Union. They don’t have shareholders to answer to.
Credit Union and Bank 5* (max) rating system-Bauer Financial online.
http://www.bankstars.com/
I believe Bankrate online has a system too.
banks like it of you use a debit card as credit because they get higher fees from the retailer… some charge a debit fee but no charge fee to the account holder to encourage this.
http://moneycentral.msn.com/content/Banking/Betterbanking/P86737.asp
I just received a letter that my CC was being closed for lack of activity - zero balance and zero use for 24 months. Guess I should have taken the thing out of the closet once in a while.
Now your FICO score might drop, as an old tradeline is closed. Such a scam.
Don’t know my FICO, haven’t borrowed since 1972 (mortgage), except that time in 1999 when I drove to Sta Barbara accidentally leaving my wallet in Pasadena and had to borrow $50 from my lunch companion.
I do understand that FICO scores are now used to screen JOB applicants as well — and that does seem bizarre, if Cash People like us are being scored low by FICO.
Everyone living in California should make sure to go out and vote today. Vote early - and often.
Anyone want to wager on how the ballot measures do today?
For the non-Californians, what is on the ballot and why do you guys vote on a Tuesday?
I’m an expat Californian, but here goes….
California’s budget was about $16 Billion in the red last fall. So Governor Arnold put up a package of 5 ballot measure which, if all of them passed, would raise revenue to plug the gap.
Since then, the budget has been determined to be more like $25 Billion in the red. Polls show all ballot measures heading for defeat.
I’m sorry if my explanation doesn’t make sense. Truth has that problem from time to time.
I thought everyone voted on Tuesdays.
http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2009/05/19/MNQG17LLVB.DTL&tsp=1
I like the measure that would allow borrowing against future lottery winnings. Sounds like a prudent financial decision to me.
Why is it that when the state does it, it’s called a revenue anticipation note, and when I do it, it is called a hot check?
Can I borrow against my future lottery winnings?
Proposition 1A would boost the state’s rainy day fund, invoke a spending cap and trigger the extension of recent tax hikes for up to two years. Proposition 1B would begin to restore cuts to schools if 1A is also approved. Proposition 1C would allow officials to borrow $5 billion in state lottery money for general purposes.
Propositions 1D and 1E would transfer money for budget use that currently is set aside for children’s and mental health services. Proposition F, the only one that polls show voters leaning toward approving, would ban raises for legislators and state officeholders in years when California runs a deficit.
If voters reject the slate of ballot measures, Schwarzenegger has warned that the budget shortfall could reach $21.3 billion, resulting in severe cuts to education, public safety and health care.
So, do the severe cuts already. You’ll be amazed at how the world keeps turning.
I’m betting they all fail.
Yup. Agree
People will vote to raise their taxes to build a local fire station or a ball field for their kids.
People will never vote to raise their taxes to balance the budget.
The Sacto Bee has the results broken out by county.
http://www.sacbee.com/
So far I’ve only seen the measures passing in SF county.
What? No one dicussed the NYT article about credit card companies looking to nickel and dime on-time payers due to our CONgress’ move to protect the deadbeats. (stealth socialism)
In a nutshell: Proposed legislation to limit penalties and interest rates on deadbeat credit card holders will push the grubby banks to impose a range of fees, and possibly eliminate the 30 day grace period, on those who pay off their cards each month.
We will have to see what happens, but should this occur I for one will not only switch to entirely to cash/debit - but will also urge those businesses that will subsequently be losing my patronage that they should write their elected officals and personally hold them accountable for the loss of said business.
Hooray for all the attention to the abusive practices of the credit card industry. However, I don’t think that it’s enough to just focus on consumer abuses. Small businesses also take quite a bit of abuse from the credit card companies.
For one thing, you’re pretty much forced to accept plastic. But the fun doesn’t stop there. The credit card companies are notorious for charging this, that, and the other junk fee just because they can. Those fees can really add up, and I’m speaking from personal experience.
And, if you should try to cancel your account, get ready for a hefty cancellation fee. When I decided that my business merchant account (which gave me the ability to accept plastic) was too costly, I closed it. That action incurred a $500 cancellation fee.
For further info, read the “Generally Speaking” article in my food co-op’s October 2008 newsletter. The article, written by the co-op’s general manager starts on the front page:
http://www.foodconspiracy.org/events/newsletters/
My gripe is changing interest rates retroactively even if there hasn’t been any trigger. That’s just not right.
Oh the CC companies are guilty of plenty, some of them are even guilty of putting payments in the circular file so that borrowers get late penalties. But they don’t really change rates retroactivly. The very nature of CC is they they are a new loan every month, NOT an installment plan. That’s why it’s called “revolving credit.” Now one of the proposals is they give 45 days notice instead of 15 when they change your rates, which is well and good. But you can always avoid the new rate by paying off the ballance.
Very interesting link, Slim. The $28k in credit card interchange fees that the coop paid probably would entirely cover the cost of an additional minimum wage position, including the extra costs of employment (FICA, etc.). As the article states, there is no free lunch. The additional cost means pennies have to be pinched elsewhere to keep the enterprise afloat. And this is just at one food co-op. If Americans paid $42 billion in these fees in one year… that could be a lot of jobs as opposed to bankers’ bonuses. And now the banks complain that unemployment is causing their charge-offs. Well, boohoo, you greedy… I won’t finish that sentence for fear of angering Mr. Jones.
There was also a recent post on interchange fees on the blog creditslips.org. It’s a very good blog for all things credit-related. Now that I think about it, I’m pretty sure I originally got the link from txchck here on this site a few years back.
When I shop at the co-op, I make it a point to pay cash or write a check. Anything to avoid dinging the store even further with the plastic interchange fees.
Eliminating grace periods? Highly unlikely. Credit companies may not like us deadbeats paying off our bills every month, but they sure do love the 3%+ they get off of our purchases.
Empty threats from an industry under fire.
Arizona Slim,
Fair enough, I think one of the reasons a lot of us haven’t been more vocal about the C/C abuses is because… we simply don’t have them? Myself included.
But in order to have true debt reform across the board, this definitely needs to be one of the cornerstones of the entire conversation! How many FB’s re-fi’d simply b/c the terms of their 2nd mortgage were a HELL of a lot more generous than the terms on their plastic!?
Not to make excuses for for people but I suppose for many, it’s just that clear cut. I think this whole idea of “debt swapping” needs to be looked at from a fresh and new perspective. Had this ocurred in an investment account, it would have been considered “churning”.
I like your answer, so I’ll agree with it.
Bottom line, however, credit cards are a priviledge and not a right. The fact that this gov’t approaches this issue the way it does reveals just how much of a sham this economy really is.
It used to be. Tried renting a car or a movie without one? How about getting a cellphone? Utilities in your new apt.? Set up check cashing at your local merchant?
I can’t tell you how many places I’ve seen that want a credit as a second form of ID. Really, an ID?
Eliminating grace periods? Highly unlikely. Credit companies may not like us deadbeats paying off our bills every month, but they sure do love the 3%+ they get off of our purchases.
You make a good point, but I expect the shiftiness of the credit card companies (shortening grace periods, moving mailing addresses, changing rates at the slightest provocation, etc.) will continue, and perhaps get even more shifty. They’re playing a percentage game, and most American consumers don’t play close enough attention to catch every ruse.
I can tell you this. I will be watching for any mail that comes in from our CC company with new terms. If they even try to screw with me I am going to cancel the card. Just try it. I will pay cash for everything, or go to a credit union.
Just give me an excuse to cancel it. I’d love to.
You inspired me — I canceled a credit card today. Hadn’t used it in a year anyway. It’s just been a-sittin’ in my wallet slowly warping to the shape of my arse.
Boy, did they try to talk me into keeping it. The industry’s servile suck-up sales patter is somewhat amusing under the right circumstances …
Wouldn’t it be great to see a CC outfit go bankrupt like they’ve bankrupted so many others?
+1.
I use the thing for online purchases because a friend had her bank account cleaned out when her debit card was stolen. I like that it has no access to my actual savings and I can dispute charges if i need to. I pay it off every month.
But dammit i’ll find another way to do things if they give me a reason.
Michigan 90-day foreclosure bills go to Granholm May 19, 2009 11:34 AM ET
All Associated Press news LANSING, Mich. (AP) - Legislation that would give Michigan homeowners facing foreclosure a 90-day window to stay in their house and potentially work out a resolution with their lender is headed to Gov. Jennifer Granholm.
The state Senate unanimously approved the bills Tuesday. The House passed the legislation last week.
The legislation lets homeowners delay foreclosure proceedings for 90 days after getting a notice of foreclosure if they meet with a housing counselor and the bank. Lenders refusing to rework loans for those qualified homeowners would have to go to court to finish the foreclosure.
Only homeowners meeting certain financial standards could qualify for modified mortgage payments.
The legislation will not take effect until 45 days after it becomes law.
I didn’t know she was on the list for the upcoming Supreme Court vacancy? Blano, oh Blano - what’s your take?
Blano has been MIA for a couple of weeks now. I think he got publicly spanked so he left HBB?
90 days free rent! Woot!
I just watched the foreclosure auction of the house a couple of doors down from mine. Here’s the sales history.
11/18/2004 $168k
08/17/2005 $215k
10/25/2005 $362k
05/19/2009 $155k +5% to the auction house.
Its not clear whether or not they met the sellers reserve price.
This is in the North end of College Park, just inside the beltway. A fairly solid and quiet post-war (1950) working class neighborhood. 936 Sq ft on two stories. The lot is 5,500 sq ft. The house needs some work and has a distinct mildew smell in the basement.
The other house that they auctioned off was in Capitol Heights
5/3/2001 $5,000!!(not arms length)
1/4/2005 $150,000 (arms length)
3/16/2009! $135,832 (not arms length)
5/19/2009 $85,000 +3k auction fee
- 50k in two months, that gotta sting.
My guess is the $135K is the value of the mortgage when the bank ” bought” the house at a foreclosure auction. If so, that’s an above average recovery for the bank.
You’re probably right. They were on the ball pretty quickly getting the place sold after the foreclosure too.
oops, in the first example that should be
10/25/2006 $362
Now there were about 20 bidders, so 19 people WEREN’T willing to pay more.
INDIA’S STOCK MARKET ROSE BY 20% IN 20 SECONDS. WTF IS GOING ON? THEY RE-ELECTED A FAILING GOVT. ALL WORLD ECONOMIES ARE ON STEROIDS AND THEY ARE THINKING REAL GROWTH.
THOUGHTS????
Capslock is not cruise control for cool.
I think you’re pretty excited, for one thing, Martin. You don’t want to blow a gasket. Here, have a beer and chill your mechanism for a bit.
And have some curry with your beer, because that would be pleasingly congruent, as well as delicious. I think a light bubbly golden beer would be best, here.
Im long EPI.
hows that for a thought.
How dare this guy speak the truth! What about all those green shoots?
Pimco’s El-Erian Sees More Regulation, Slower Growth
A greater role for government in private markets and a smaller banking system will lead to economic growth rates of 2 percent or less in the U.S. over the next five years, El-Erian said. The age of consumers’ “entitlement” to purchase more than they make in income is over, he said.
http://www.bloomberg.com/apps/news?pid=20601087&sid=agjKTtVI6VjU&refer=home
Always nice to see the con men blame the marks.
Anecdotal and other data from the ground here in San Francisco:
Seems as if about 80% of all streets in the city have at least one FOR RENT or FOR SALE on each block. It’s pretty amazing. I’ve lived her 20 years and have never seen anything like it. From 1997-2007 you never saw FOR RENT signs, as housing has been so tight here.
According to zillow (I know, they are not that accurate), the single family house we rent has lost 200K in value the past 18 months. Whoa.
Houses are still selling, though. Some sit and sit, but others sport SALE PENDING signs within a month or two.
Since I have been reading this blog for some time now (3-4 years?) and scattering my opinions about real estate, folks have now begun asking me if I am ready to buy. Lots of people think this is the bottom. Dumb f#%*cks.
Rents have decreased here more than any other major US city: http://www.sfgate.com at /cgi-bin/blogs/ontheblock/detail?entry_id=39453
Lots of condos still going up. Huge multi-condo projects in residential neighborhoods. Can’t find the article now, but a few weeks ago I saw an article about how there are more buildings going up in SF this year than any of the past 5 years.
No real capitulation here. YET.
DinOR:
Read your link yesterday. Welcome to the dirty little secret that the airlines don’t want people to know about.
Open a Part 145 Repair Station, hire a few English speakers to staff the Q.C. department, hire a $hitload of unlicensed people to turn wrenches, and poof!…….work on as many airplanes as you dare, and/or the Q.C. staff has the nerve to “sign off” the work.
The typical FAA review of a 145 Repair Station consists mainly of checking out the Q.C. department’s paperwork, and making sure the manuals are up to date …..unless of course, there is a smoking hole in the ground somewhere, in which case they do a more thorough investigation, if a maintenance issues were involved.
Better yet………the FAA is obligated by treaty to accept signoffs done by aviation authorities in countries we have treaties with. Okay, as far as the UK/Germany/Japan is concerned, not such a good deal when you are talking about some other countries.
When the media was beating up on American and Southwest last year over maintenance issues (over mostly, a lot of “fly crap in the pepper” stuff, IMO), they didn’t bother to mention that a bunch of airlines DON”T HAVE their own mechanics (and avoided all the scrutiny)………they send their work to the Part 145 guys. They are “supposed” to review the maintenance completed by their vendors, but the reality is that all that gets reviewed is the paperwork……..nobody goes out on the airplane and checks to make sure it was done right.
This kind of crap is why I work on Bizjets. The Straight Shooter/Weasel ration is a lot higher. I’ve found that the movers and shakers (for the most part) like to make sure things are done right, when THEIR butz are in the airplane.
X-GSfixer,
To be truthful, even the military is much more concerned w/ maint. ‘records’ than actual maint! We have our “big inspection” coming up and people are already freaking out to beat the rush.
Still, I just can’t believe… the Quest For Cheap Labor has been allowed to seep into aviation? When I think about all the QA guys I’ve had stand over my shoulder ( and I’ll be getting a Personal visit from the AF Reserve Investigator for my background check! ) it’s just so damned insulting!
All those years of getting b!tched out over minor stuff and here we have guys that should be working at a car wash putting pressure on wages? Perfect…
I guess I don’t feel bad about not flying on biz trips or vacations anymore.
I’ve found that the movers and shakers (for the most part) like to make sure things are done right, when THEIR butz are in the airplane.
Our CEO gets a 200K annual allowance to use the corporate jets for personal use. I guess he and his family are too good to fly first class.
OK HBBrs
Find of the Day!
_____
What the U.S. economy may need is a dose of good old-fashioned inflation.
So say economists including Gregory Mankiw, former White House adviser, and Kenneth Rogoff, who was chief economist at the International Monetary Fund. They argue that a looser rein on inflation would make it easier for debt-strapped consumers and governments to meet their obligations. It might also help the economy by encouraging Americans to spend now rather than later when prices go up.
____
I LOVE this part:
“They argue that a looser rein on inflation would make it easier for debt-strapped consumers and governments to meet their obligations.”
If it were so easy, why haven’t they done it yet, kimosabe?
Answer is simple if you actually crunch the numbers.
All I have to say is, 51 percent off what?
LA Times Business
Southland median home price falls to $247,000 in April
The price drop drives homes sales up. April sales are at record or near-record levels in foreclosure-heavy inland areas; higher-priced coastal areas are seeing record or near-record lows in sales.
By Peter Hong
10:31 AM PDT, May 19, 2009
Southern California’s median home price in April was $247,000, down slightly from the previous month, a real estate research firm reported today.
The price drop — a decline of 51% from the 2007 peak — came after three months in which the median price had held steady at $250,000, according to the data from San Diego-based MDA DataQuick. The brief respite from price declines had raised hopes the housing market may have been close to its bottom.
Last month’s price drop, however, drove home purchases up. The total of 20,514 homes sold in six Southland counties last month was up 5.2% from March and up 31.4% from a year ago, DataQuick reported.
The rise in home sales is an important step to housing market recovery, said UC Irvine economist Kerry Vandell, because the sales help to clear the surplus of homes — many vacant — still flooding the market.
“There seems to be some market clearance going on,” Vandell said. Among lower-priced homes, “product is moving, which will in fact stabilize that [segment] of the market.”
Previously foreclosed homes — many of them deeply discounted — accounted for 54% of the sales total. April was the seventh consecutive month in which the majority of homes sold in Los Angeles, Orange, Riverside, San Bernardino, San Diego and Ventura counties had been foreclosed.
Sales were at record or near-record levels in foreclosure-heavy inland areas. Higher-priced coastal areas, including Malibu, Pacific Palisades, the Palos Verdes Peninsula and Manhattan Beach, as well as Beverly Hills, saw record or near-record lows in sales.
A tale of two markets is clear in Southern California, with low-priced areas appearing close to recovery, while wealthier areas face greater uncertainty as sales languish amid an economic downturn.
In lower-priced markets, “we’ve seen signs you’d expect to see not long before prices would normally stabilize: robust investor and first-time-buyer activity, 10-plus months of year-over-year sales gains, and less price erosion, if any,” said John Walsh, MDA DataQuick president.
Wealthier areas may face new troubles because “we still face two big threats to price stability: layoffs, which can cause foreclosures across the home price spectrum, and possibly a new round of foreclosures triggered by defaults on ‘option ARM’ and ’stated income’ loans used in mid- to high-end markets,” Walsh said.
My, my won’t all those savvy investors snapping up those inland houses look silly when the coast cracks?
That is about the time I expect to hear many bemoan the collective realization that “real estate is the worst investment.” We are not there yet, no matter what the myriad bottom callers claim.
Wait for the TIME magazine front cover…..
then start looking seriously at buying, you will be very close to the real final bottom.
That’s good advice. Time is always a near-perfect contrarian indicator of where the market is headed.
P.S. Their 2005 cover story about the never-ending housing boom is a perfect case in point.
The high end of the market has a long way to go, but they are really starting to crack. Over the next 24 months the biggest declines will come from the higher priced areas.
Another reason I am trying to spend as little as possible on my home.
The good thing (and what the MSM has thus far completely missed) is that any declines in prices of high-end homes translate into lower prices of everything of lesser quality.
I’m still seeing substantial sales and declining inventory. I think the PTB have managed to give the debt wheel another spin. So, probably have to watch another round of speculators get burned to a crisp.
We might also be seeing a big transfer of wealth to the richest people in the form of the bailouts along with a large decrease in velocity of money. Esentially higher reserves and lower leverage in the banking system implies lower velocity going forward. The dirrection of the bailouts seems towards rewarding large bond holders, banks exc. So, the richest manage to maintain themselves.
Meanwhile the lower 97% of us will have to deal with high debt payments, on all levels govt and private, lower available money and assets priced out of our reach.
Perhaps this is the end game that I raved about the other day.
We are seeing a deviation in M2 and M3 with a large increase in M0 going to the richest of us.
All the bailouts a waste. GM, Chrysler, AIG, Citi… all the money pushed into fewer hands.
Shades of the fall of the Roman Empire.
Testing 1-2, testing 1-2
‘Hamptons Homes Decline Most Since Realtors Kept Records in 1982′
http://tinyurl.com/p6oqup
Sculptor Fredi Cohen expected the hand-carved sinks and tubs in her East Hampton, New York, home to stand out in the real estate market and help sell her three- bedroom house for $1.25 million. Almost two years later she’s still waiting. “People have stopped buying real estate,” said Cohen, who designed the kitchen and bathroom tiles herself. “Now I would sell it for $999,000.”
….The median price dropped 28 percent from a year earlier to $698,461, mostly on a decline in sales of $5 million or more, Town & Country said. The total value of all Hamptons real estate sold in the first quarter fell 78 percent to $140.2 million.
Hahahahaah! I guess it’s NOT different there!
You know, I’m not getting tired of schadenfreudey laughter yet. I can laugh and laugh and yet I still want more stories like this one.
Patience. Not only will there be more stories, but better ones as well!
but better ones as well!
Better? Better than THIS fare? Man, that’s hard to believe, but I guess I’ll hang out and see, huh?
Anecdotal and OT:
I like to shoot trains (photograph them) and I’ve spent about four out of the last five or six days hanging around RR tracks in various RR towns.
Haven’t seen ONE train. Used to have to get out of the way a lot when I went on these forays, even just last year I nearly got run over a couple of times.
(Heard a song for the first time called “Daddy What’s a Train?” - a folk song by Utah Phillips.)
Is my timing really that bad or are their fewer trains? What are the hobos gonna do?
On another OT note, I also managed to get myself locked INTO the wilderness yesterday… went up a rugged wild canyon on a road with an open gate, when I came back down, the gate (very heavy tubular steel) was locked. I had my cell phone and it had rare coverage, and I called my brother. His response: “All your life you’ve tried to get outta civilization and now you managed it and you want back in. I don’t understand you.” He was lots of help.
Obviously, I got out. Oh well, maybe next time…
Shipping IS down.
I also managed to get myself locked INTO the wilderness yesterday… went up a rugged wild canyon on a road with an open gate, when I came back down, the gate (very heavy tubular steel) was locked.
Hahahaah! HAHAHAHAH! Oh, golly! Hahahaha! HAHAHAHAH!
It is impossible to convey the sympathetic merriment and the flood of nostalgia that now assails my wee noggin! Thanks, losty!
Ahhh…the memories…
That happened to me for the very first time when I drove a jeep full of my pals up onto ‘Y’ mountain there in Provo, Utarr. You know, where the big stupid white ‘Y’ is painted all over the face of the mountain? (For those of you who don’t know, that’s for BYU–Brigham Young University—college for the Righteous Youth of Zion and all…)
Anyway, it was the weekend and the plan was, we were gonna put out blankets and drink beer and suntan our pale college-girl bu*ms and that the Big White Righterous ‘Y’ would be a good place for this. For one thing, it was early spring and the thought was that a giant white ‘Y’ would attract more sunrays and we’d get more tan bu*ms. Anyway, we came back down eventually and the gate was locked! Oh, no! What to do!
I decided to drive around it. A locked gate and 3 feet of cliff edge ain’t stoppin’ ME! By crackey, nowhow! Hahaha!
So everyone screamed and tried to get out the side that was still anchored upon the cliff and that righted the center of balance long enough for me to scoot around the gate, so that we made it.
Happy ending, huh?!
Obviously, ’cause here I am.
Since then I never go anywhere without bolt-cutters. They come in handy more than you’d think.*
*Which I bet you know, eh, losty?
Hahahaahah!
hey, Oly, you read my mind, went out today and bought a new pair and also a hacksaw…
were we twins separated at birth ya think??
It could be! That would be awesome, and worthy of a Spanish Channel soap-opera!
So, are you the ‘Good Twin’, or are you the ‘Evil Twin’, I must wonder now*?
*That was rhetorical. I already know the answer.
*assumes a virtuous, pious, annoying expression *
IIIIII am the ‘Good Twin’… (until I get amnesia.)
Wait, now that I think about it, how DID you get out? Since you had no bolt-cutters handy?
Did you levitate?
No way to go around it, big drop off on one side and cliff on the other. I always go prepared with camping gear, it would’ve been neat to be the only one up there, but I forgot the coffee, so I did the courageous thing any good American would do and dialed 911.
Dispatch said they’d send someone up when they could find the key, IF they could. Ha. This was Whitmore Canyon above Sunnyside, Utah (Tavaputs Plateau), and I went up there looking for bighorn, the road isn’t usually open except the water guy was up there and didn’t see me, so locked the gate on his way out (Grassy Trail Reservoir, city water supply). I’d never been there, so didn’t know it was usually locked.
They finally showed up with the key. I was going to do some Bigfoot wood knocking while I was up there (some sightings in that area), then run like H-E-doublehockeysticks if one showed, good thing I didn’t, he would’ve caught me at the closed gate.
OTOH, maybe I would’ve got some good photos. But hey, it occurred to me the other day, maybe the reason all Bigfoot photos are blurry is that Bigfoot is actually a blurry creature. Is the one in your shed blurry?
I posted about how I got out, but it won’t show cause it’s a big Houdini type secret…and what if we’re triplets and SanFranBAGal is the third, that would be COOL…
and what if we’re triplets and SanFranBAGal is the third, that would be COOL…
That would be ineffably cool! Like ‘X-files-y’ cool!
Let’s go ahead and assume this is so. And now we can swap barettes and shoes, which I was waiting for all this time.
Is the one in your shed blurry?
Nope.
My old ones were all used up from all those “projects” I find all over everyplace.
Hey, where are all my profound posts? Only the dumb ones are showing up…
The main Union Pacific line bypasses Boise about 7-8 miles south. So it’s about 4 mile south of my house. That’s one heavily traveled set of rails. You can see how highly polished they are just driving across them. I’m used to hearing that lonesome train whistle between midnight and early morning.
Many of the trains have 4 locos and dozens of bulk cargo cars.
Quite a few of the crossings are equipped with only a stop sign. The locals around here treat those stop signs with respect. Dumb kids don’t, and I’ll bet some of them won’t last until adulthood.
I love the lonesome whistle…sigh…can’t hear it where I live.
None of this market narrative makes much sense without including the Fed’s punchbowl respiking efforts as part of the story. The logic that current market conditions are somehow bullish for hope builders seems particularly suspect. How can one make much in profits with low prices, comatose demand and few sales?
May 18, 2009, 4:34 pm
Bulls Thwart Bears Attempt To Wrest Control of Equities
Posted by Bob O’Brien
The bulls recorded another entry in their ”Rocky”-esque quest to assert their dominance over the equities market: the upstarts’ success has been a little improbable, often seems a little fragile, and occasionally acknowledges it doesn’t have an answer to the bears’ mechanical professionalism. But every time the bulls seemed punched out, they’ve found a new reservoir of adrenaline. And, just like the club fighter in the Shamrock Meats bathrobe who’s in love with Adrian, the deeper into the contest this improbable pursuit goes, the likelier it seemed to ultimately prevail.
Case in point: Monday’s trading, as the bulls got back more than half of last week’s 5% declines by market averages in an elegant and convincing rally. The S&P 500 Index (GSPC) shot up 3% in the session, paced by gains by banks, energy and home-building and other housing names. The index shot back above the 900-point mark, and seemed to have established the 880-point level - where the index bottomed out Friday - as a key support level, at least on a technical basis.
And, once again, it fashioned a sharp rally on frippery, rather than fundamentals, and signs that things stopped getting worse rather than indications they’ve gotten better, and, ultimately, on the triumph of constructive sentiment over real evidence of improvement.
Take the housing stocks, as they rallied impressively: Pulte Homes (PHM) gained 7%, Lennar (LEN) increased 14%, and Toll Brothers (TOL) advanced 5%. This after a report on housing sentiment showed that homebuilders felt better about the business environment than they’ve felt in 8 months … though mostly because the home-buying environment has turned so favorable. So, in effect, the dreadful conditions the housing market finds itself in has resulted in low prices, plenty of inventory - including a record number of foreclosed-on residences - and a persistent buyers’ market.
600 Banks Fail Stress Test…
Posted May 19, 2009 08:20am EDT by Joe Weisenthal in Investing, Recession, Banking
From The Business Insider, May 19, 2009:
The Wall Street Journal has run its own version of the the Fed’s stress test on 900 small and midsize institutions, and it claims they’ll see losses of about $200 billion by the end of next year.
In such a scenario, at least 600 of the banks would see their capital levels shrink to a level that would be deemed unsafe by regulators.
The biggest culprate? You guessed it, commercial real estate, which could contribute about $100 billion in losses. Continued home loan losses is next, at about $49 billion.
WSJ: “They are in just much worse shape” than the big banks, says Terry McEvoy, an Oppenheimer & Co. analyst who reviewed the Journal’s analysis. “There is a lot less earnings power at these banks.”
The Fed this month estimated that the 19 stress-tested banks could face losses of $599 billion if the agency’s gloomiest economic scenario comes true. For the 10 large companies found to need additional capital, most of the shortfalls are manageable.
Few smaller banks are likely to attract the bargain-hunting investors now expressing interest in recapitalizing the industry’s giants. Many smaller banks are trying to bolster their capital by selling assets and making fewer loans.
What’s somewhat amusing here is that throughout this crisis, there’s been a lot of trumpeting of small banks, as somehow being either a) less stupid or b) less greedy than their Wall Street counterparts, as an explanation for why there hasn’t been as much of a crisis on the smaller levels.
Well, a better answer may simply be that their portfolios are different, and haven’t been hit in the same way yet. And to the extent that small bankers are greedy and stupid, too? Well then this just means that those terms cease to have any useful meaning.
Interesting.
Isn’t the capital data necessary to do these tests private “inside” data - available only to institutions like the FDIC and Federal Reserve? I wonder how the WSJ got access to it?
If indeed the WSJ did a good assessment here - then color me surprised; I did think the local banks would have done more due diligence than the biggies.
That being said - it’s worth noting that this assessment was done on just over 10% of the small/regional banks in the U.S.; I’d be curious how well-spread this 10% is across the spectrum. If it’s 10% on the “big” side, then this result wouldn’t be surprising since the regional banks probably weren’t as careful as the community banks.
Here’s an interesting graph attached to the article.
http://online.wsj.com/article/SB124269114847832587.html#articleTabs_interactive%26articleTabs%3Dinteractive
“I did think the local banks would have done more due diligence than the biggies.”
Due diligence = Real estate prices always goes up.
That’s due dil in a nutshell.
The Wisconsin Legislature just passed a ban on smoking in all public places, work, bars, restaurants. I think its a great idea. BUT, and theres that word again, what ever happened to personal choice. If I don’t like second hand smoke in my favorite bar, I can go to the owner and complain, or not go there. Same with restaurants. As far as wok places go, I don’t have to appy if I don’t like the enviroment. It a personal choice and a freedom. My point is this, if you let the gov pass a law forcing an issue on others that you may or may not agree with, are you not opening the door to more restrictions on personal choice? Will fat and obese people be banned from health care? Will premature babies be denied intensive care, because they cost too much? Will the old and aged be denied care, because they are going to die anyway? This is a serious matter. Take away the second hand smoke issue and go to the bottom line. The more you rely on government to restrict others freedoms, the more likely yours will be taken.. AND remember” nits make lice”
‘….AND remember” nits make lice”
Nice little Mormon historicky reference there, although that particular example of intolerance does not fit the structure of your points, to my mind.
Anyway, personal choice comes into being fat, (I believe so, anyway) but NOBODY gets to pick whether or not to get old and frail, and NOBODY gets to pick if they wanna be born early as a sick baby.
Those aren’t issues of personal choice, so if there’s gonna be a discussion on if and how private personal choices should be regulated, then those examples should be untwined from the main issue, which is, it appears to me, that you don’t want to be told what to do.
*Except for me. I’ve considered the matter and I’ve decided ‘no’.
*Except for me. I’ve considered the matter and I’ve decided ‘no’.
I meant: ‘I’ve decided not to get old’. The asterisk after ‘old’ went away somewhere.
And I mean it! You can’t make me, either! Getting old is nothing but an evil plan, foisted off upon us by ‘The Man’! So there!
Smoking is an interesting situation vis-a-vis liberty. I’m an ex-smoker. Love cigarettes. I freaking adore cigarettes. Because of that, I know I can never, ever smoke even one more. But enough about that.
So does one’s person’s desire to smoke trump another person’s desire to not have to smell the smoke? If I am not smoking, I’m not bothering you. Why do you have the right to bother me?
It is the same as public sex. Does the majority have the right to band together and inflict their own personal desires on the minority? In the USA, the answer is pretty much an unabashed yes!
Unlike what we would like to believe, America was founded by religious busy-bodies, not libertarians. Toleration is not a founding principle here. God, guns & guts are. And by God there should be no smokers or homos gettin’ married!
Smoking is an interesting situation vis-a-vis liberty. I’m an ex-smoker. Love cigarettes. I freaking adore cigarettes. Because of that, I know I can never, ever smoke even one more…
I smoke a corn-cob pipe sometimes, when it’s a purple dusky evening and the rain is pattering down and I feel like sitting on the porch and puffing fragrant blue smoke out of my mouth. I only wish I had a rocking-chair at such times.
How this happened was, I read ‘Huckleberry Finn’ again about 2-3 years ago, you know how when they ran away to the island and decide to be pirates? So I got the desire to have a corn-cob pipe, so I got right up and found my pocket-knife and made one from a corn cob after I ate the corn off it, with the chewed on kernels still adhering and everything. I used a hydrangea twig for the stem and used blue masking tape to secure it in the cob and eliminate splinters. They aren’t very durable pipes, but when I haul one out I am fully satisfied.
It’s for the style, mostly. I’m not attracted to smoking full time, which is strange, because I pretty much embrace most every vice I encounter with fond gladness.
I suppose I’m like you, Jon; once it stops becoming a vice and becomes a necessity then, well, it just isn’t any fun anymore, so I just won’t do it.
It is the same as public sex.
Ahhh…? Now, there you’ve entirely lost me.
I’m confused. So this is an unabashed pro-public s*x argument?
I’m there, dude, i’m sooooooooooooooo there.
Riverside Park - they got mushrooms and they got quiet spots - I just wish I could eat morels while doing it in public!
Riverside Park - they got mushrooms and they got quiet spots - I just wish I could eat morels while doing it in public!
“Just wish, just wish”, my b*um!
I bet you have, and I bet you did, you unsavory gourmand. In fact, you’re probably the subject of some widely-available blog in Japan with a million hits per day, all by yourself.
But, to return to the subject, I only found one (1) morel in my yard this spring. I was pretty dejected.
“Unlike what we would like to believe, America was founded by religious busy-bodies, not libertarians.”
They were so busy that their behavior led to intolerance by those in the Old Country who had to live near them. Ironically, intolerance in the Old Country led to the founding of America by intolerant busy bodies.
Something similar happened to the founders of Utarr.
Is it me - or is today’s extraordinarily narrow trading range… weird?
Bouncing against a ceiling? Taking a breather?
Trading volume sure is dropping off on my bullish ETF hedges, as opposed to their bearish counterparts.
Here’s Bay Area Delusion at its finest. I hope the formatting works okay.
Look up MLS : 80083106
3603 Reposo Way
Belmont, CA 94002
Here’s the sales/listing history :
May 18, 2009 Price Changed $1,099,888
Apr 17, 2009 Listed $1,100,000
Aug 18, 2008 Delisted
Nov 20, 2007 Price Changed $1,100,000
Oct 01, 2007 Price Changed $1,000,000
Aug 17, 2007 Listed $950,000
Jun 13, 2000 Sold $600,000
Aug 20, 1996 Sold $327,000
What’s the thought process of this guy? Oh, it won’t sell because I UNDERPRICED it? Finally he catches on that it’s too expensive, so he drops the price by $112.00? Yah, that extra benjamin and change is going to tip the scales, buddy.
I like how the May 18, 2009 price knocked $112 off the Nov 20, 2007 price. I am sure the buyers are going to jump all over that discount…
Not only that, it’s 112 bucks off the price he couldn’t get for it in Nov, 2007.
That’s the funny part. Apparently he has not tuned in to recent CAR and DataQuick reports about the huge percentage declines in Bay Area market values.
But he HAS figured out that putting 8’s in the price guarantees a sale!
It’s just a mystery why he went to 1,099,888 instead of 1,188,888
That’s 90k he’s leaving on the table!
Bottom callers beware…
May 19: Robert Shiller on the outlook for house prices
Both UK and US price could yet fall further
DUH!!!
Rents are dropping so price has further to catch up. It’s only rocket science for academics who need to run a regression.
For my taste, his explanations are long on psychology and short on budget constraints.
Budget constraints are quantifiable; psychology is merely estimable not quantifiable.
And shockingly, for once, the more quantifiable entity is the “rate-determining” step!
So what’s the freakin’ holdup?!?
Psychology certainly is bullsh!table, though.
Can’t really listen right now at work. Was it basically just an ad for his ETF’s like his article the other day was?
Psychology certainly is bullsh!table, though.
Nonsense, man!
…So, PB. Tell me about your mother….
His mother doesn’t exist. It’s bulls**t.
Your Mother Should Know. ( On a Beatles kick, Faster..).
I have a buddy who’s a cognitive scientist, which means he generally perceives himself to be a genius. For the last few years I warned him of the coming equity and real estate crash, and, when it finally occurred, he expressed some amazement (I’m a lowly clinician). Recently he was offered a job at a top-rate private university and must sell his house. While he was visiting the university he bumped into a renowned math modeler who convinced him that real estate had all but bottomed. He is so convinced in fact that if he doesn’t get what he thinks is right for his house, he’s decided to rent it out and sell in a few years when the market recovers. I told him he’s insane, that our debt will eventually blast a hole in our punch bowl and interest rates will skyrocket. Despite my prescience (largely thanks to sites like this one) in predicting the bubble pop, once he got within earshot of a real math modeler with a PhD, he wouldn’t listen to me any more. He deserves what he will get (or not get).
I am seeing early warning signs of high-end capitulation in our zip code (Rancho Bernardo West — 92127), in the form of a substantial drop in the median list price, coupled with chaotic clustering of wildly divergent quality level homes at the same price point. Since I have been paying attention, the median list price has dropped from $1,395,000 a couple of years ago to its current level of $1,050,000 — a $345,000 haircut (25 percent). I don’t believe this reflects the full decline in market value, as homes price at or above the median list price tend to sit on the market indefinitely while most of the action is down below, closer to the recent median San Diego home sale price levels below $300,000.
For illustration of what I mean by “chaotic clustering”, check out how different are the two homes currently listed at the median price (aside from the fact that both have been on the market for a very long time):
8260 SANTALUZ VILLAGE GREEN S, SD - Rancho Bernardo, CA 92127**
Neighborhood: Rancho Penasquitos School District: POWAY UNIFIED
Beds: 2 Type: SFR Sq. Ft.: 2,200 Lot Size: N/A MLS #: 080072162
Baths: 3/0 Built: 2003 $/Sq.Ft.: $477 List Date: 10/20/08 On Market: 211 days
7362 RANCHO CATALINA TRL, SD - Rancho Bernardo, CA 92127**
Neighborhood: Rancho Penasquitos School District: POWAY UNIFIED
Beds: 5 Type: SFR Sq. Ft.: 5,299 Lot Size: 13,741 Sq. Ft. MLS #: 076078880
Baths: 4/1 Built: 2005 $/Sq.Ft.: $198 List Date: 10/02/07 On Market: 595 days
ZipRealty Price Track
Price Reduced: 10/16/07 — $1,680,000 to $1,599,000
Price Reduced: 10/18/07 — $1,599,000 to $1,499,000
Price Reduced: 11/16/07 — $1,499,000 to $1,395,000
Price Reduced: 03/06/08 — $1,395,000 to $1,385,000
Price Reduced: 07/18/08 — $1,385,000 to $1,285,000
Price Reduced: 08/14/08 — $1,285,000 to $1,240,000
Price Reduced: 09/22/08 — $1,240,000 to $1,200,000
Price Reduced: 10/15/08 — $1,200,000 to $1,150,000
Price Reduced: 01/25/09 — $1,150,000 to $1,125,000
Price Reduced: 04/15/09 — $1,125,000 to $1,050,000
Glug, glug, glug, glug, glug, glug…
Another sign of incipient high-end capitulation in 92127: The number of listings on ForeclosureTown dot com now outnumber the number of MLS listings by 249 to 208. And this may merely be the tip of the iceberg, as the whisper word is that many hh’s in the area are struggling to avoid foreclosure.
The median ForeclosureTown list price is $547,000. This is not really comparable to the median MLS list price I cited above, though, as the latter is only for SFRs, and I don’t know how to get this from ForeclosureTown w/o paying them something for it…
Fed = Toxic asset investor of last resort
Isn’t it interesting how closely an independent central bank can work with the executive branch? I guess the normal rules don’t apply during a crisis.
Financial Times
Fed offers spur to buy bubble-era securities
By Krishna Guha in Washington and Aline Van Duyn in New York
Published: May 19 2009 22:07 | Last updated: May 19 2009 22:07
The Federal Reserve will provide loans to finance the purchase by investors of bubble-era commercial mortgage-backed securities from July onwards in a move officials hope will stem a financing crisis in the commercial real estate industry.
The initiative is part of a wider effort by the US authorities to restart trading in illiquid toxic assets – now rebranded “legacy assets” – with the aid of government financing. Policymakers believe that addressing toxic assets will support parallel efforts to boost new lending through securitised markets.
The Fed is expected to eventually provide financing for investors to buy bubble-era subprime and jumbo (large denomination) mortgage-backed securities as well – though formally it is only evaluating this.
The Obama administration is pushing ahead with plans to invest equity from the Tarp bail-out fund alongside private sector investors and has drawn up a final shortlist from an initial pool of about 100 would-be partners.
Meanwhile, the Federal Deposit Insurance Corporation is pushing ahead with plans for a pilot sale of $1bn (€740m, £650m) in bubble-era loans next month. However, the FDIC pilot sale will not involve government co-equity investment and instead will use a combination of loans and warrants to share any profit.
With private sector investors wary of investing alongside Tarp money because of fear of political risk, many policymakers believe the overall balance may end up tilted towards debt-only financing rather than debt plus government equity.
Policymakers envisage a range of structures, including the option for banks to sell off “bad bank” vehicles in chunks on government-financed marketplaces.
‘Policymakers envisage a range of structures, including the option for banks to sell off “bad bank” vehicles in chunks on government-financed marketplaces.’
This is where I get confused. What is stopping these toxic assets from getting sold today, at prices the market will bear? I suspect the lack of liquidity is due to bankers never-ending hopes the government will inject a taxpayer-funded (Fed-printed?) bailout premium into the sale price for otherwise worthless toxic bubble legacy assets.
Which comes first: existing homes or new construction?
We’ve been considering both existing homes and building our own home (I’d probably act as GC). Finally, developers and home sellers are cutting prices and are willing to seriously negotiate off wishing prices for houses and lots. But what is likely to fall faster: (1) existing homes, new or used; OR (2) the cost to build a new home? Should we be making low ball offers on houses or lots?
I realize that there is no “right” answer, but humor me with anecdotes from different regions in the country.
Forgot to mention: I’m in a small rural college town in the Pacific Northwest. Very little foreclosure activity to date, though with the university cutting 300+ positions, that might change.
I’m in a small rural college town in the Pacific Northwest.
Oh, yeah? Which one? Are you in Pullman, where the newest news indicates that coyotes just pop up and hang out and eat your garbage in broad daylight, carrying on and laughing in the streets, like unsanitary hippies with more fur than normal hippies, and then they steal your jeep for a joy-ride, or are you somewhere else in WA, where the news is not much better, but only boring-er? I imagine proximity to state-jobs makes a difference.
However, I will contribute this: Olympia’s colleges aren’t doing so good lately. No more extended education at TESC, which I already expressed my sorrow over, because now no welding class for me.
Yep, Pullman on the Palouse. I didn’t know about the Coyotes, but yesterday afternoon a deer bounced past me on the sidewalk, right in the middle of campus. The little fella’ didn’t seem to be in any particular hurry to get anywhere, just checking out the campus architecture I guess.
WSU is getting hammered as well, 300+ positions cut as of July 1, and a total budget cut of $54 million. I’m guessing this will have a negative impact on home prices, no?
My guess: If you are up to handling GC duties, you might do better looking at lots, unless the banking industry is somehow controlling local prices (not out of the question, IMO!).
Reasons:
1) The construction slump suggests that there might be numerous construction workers competing for whatever work is available.
2) Drop in construction should also result in lower cost of building materials.
3) One would guess that the popped bubble would free up land that might have previously been bought for new home construction with bubble-era prices in the developer’s mind.
4) Owners of raw land are more market-savvy than individual homeowners, which means that unless someone with lots of market power is hoarding local supply, you are more likely to find land available at prices that reflect current market fundamentals than houses that do so.
5) Most people are not capable of handling GC duties, which means you have a comparative advantage to exploit.
So my LL wants to keep rent the same. Hmm…
I should add that I was expecting it to go down.
There’s only one way outta this: I have to day trade myself to millions. :smiles:
Have you considered finding a new LL and giving the old one the finger?
I highly recommend it.
THE ENGLISH VS FRENCH
Giving the Finger - Before the Battle of Agincourt in 1415, the French, anticipating victory over the English, proposed to cut off the middle finger of all captured English soldiers. Without the middle finger it would be impossible to draw the renowned English longbow and therefore be incapable of fighting in the future. This famous weapon was made of the native English Yew tree, and the act of drawing the longbow was known as “plucking the yew” (or “pluck yew”). Much to the bewilderment of the French, the English won a major upset and began mocking the French by waving their middle fingers at the defeated French, saying, “See, we can still pluck yew! PLUCK YEW!”
No. FPSS is right — evaluate your options, as follows:
1) Find out what other places where you are willing to live cost to rent.
2) Figure out the difference in annual cost for the least expensive of these versus where you live.
3) If your cost of moving (including aggravation costs) is less than the savings in renting a cheaper place plus whatever nonmarket value you place on the joy of telling your landlord to stuff it, then tell your landlord he has to reduce your rent to the rent on comparable places or else you are moving.
My lease is up in August. I’m expecting a hike even though I’m paying market rent.
Luckily the US economy is decoupled from that of its trading partners; otherwise this news might be worrisome for the US economic outlook.
BTW, for how many more years will the Goldman Sachs economist who floated the decoupling story have to be wrong before he can claim he was right all along?
Wall Street Journal
* MAY 19, 2009, 8:09 P.M. ET
Japan Economy Shrinks by Record
By TAKASHI NAKAMICHI
TOKYO — Japan’s economy shrank at its fastest pace on record in the January-March quarter, battered by a record drop in exports amid a global slowdown and weak domestic demand, government data showed Wednesday.
Gross domestic product fell price-adjusted 4.0% from the previous three months, Cabinet Office data showed. The decrease translates into an annualized 15.2 drop, and comes as business and consumer spending fell sharply along with exports.
The decline was sharper than the U.S. or Europe’s biggest economies, highlighting how Japan’s heavy reliance on exports has magnified its pain from the global economic malaise.
Economists polled by Dow Jones Newswires had expected a fall of 4.4% on quarter and 16.5% in annualized terms.
The Cabinet Office also revised down figures for the October-December period. GDP in that quarter fell 3.8% from the previous three months, or an annualized 14.4%, rather than sliding 3.2% on quarter, or an annualized 12.1%, the data showed.
As well as being the sharpest fall since Japan’s government adopted the current data format in 1955, the latest figure also marks the first-ever four-quarter run of declines, demonstrating the severity of Japan’s worst recession since World War II.
Exports of goods and services fell a record 26.0% on quarter, the data showed. That marked the second straight quarter of decline and the biggest drop on record. Imports were down 15.0% after rising for two quarters in a row.
This decoupling thingy isn’t treating Germany all that well either.
Sometimes I suspect the decoupling story was a smoke screen for he polar-opposite underlying reality of globalization’s Great Unraveling.
Generally speaking, I have noticed that the prostitutes of the economics profession can often be heard reciting nonsensical arguments that provide good camouflage for scams their employers execute.
How come you can say ‘pros*titutes’ and not be blocked, but IIIII can’t?
Economic prostitutes are different (and ubiquitous).
What the hell, I’m probably wrong. I’m sorry Ben, (usually am). I’ll still read though!
OOOOOOPPPS. That one got printed!!! I am totally embarrassed! Issues, I guess! Where’s Oly!! Oly, I AM nuts!!!!!!!!!!!!!!!!!
My apologies to the best site I have been on, and just was blocked, and wondered why. I am just a normal person, not as intelligent as a lot of you, and enjoy the comradrie (sp) of the site.
Love,
Greg
What’d I miss?
Where’s Oly!! Oly, I AM nuts!!!!!!!!!!!!!!!!!
Probably. And now we also know your real name is ‘Greg’.
(I don’t think you were blocked. I think you just have to be patient.)
bink:
Just my stupidity and over-emoting. Not much, really.
Thanks for asking, though.
Best suggestion I ever heard (from a fellow musician):
“Don’t ever put yourself down. Plenty of others will be happy to take the trouble to do this for you.”
And then did they hit you with your flute, after delivering this good advice?
Serious, why you being so coy with telling us what you play, and why? Yer among friends, here. We’d probably even listen to you if you played polka music.
And that’s saying something!
The conductor who said this tormented his orchestra by persuading us to play outdoor concerts in the midsummer St Louis heat, then conducting terribly to boot. (And he was a Juilliard School grad!)
So what happened to the flute?
It is kind of funny that nobody has connected the dots between Obama’s newfangled auto efficiency program and a huge crash in oil demand from the world’s largest consumer of the black muck. Perhaps Chindia will be driving enough SUVs by the time our 35 mpg emissions standards are fully operational so the world’s oil markets will not notice the difference. I know they aren’t making any more black gold, but it sounds like they are looking for it much more slowly at the moment. If I were a gambling man with bank (I’m not), I would consider gambling on lower, not higher, oil prices by five years from now. (Of course, Megabank, Inc’s coordinated reflation plan is a wild card in the mix.)
Wall Street Journal
* MAY 20, 2009
Downturn Sets Up Surge in Oil Prices
By SPENCER SWARTZ
LONDON — Energy investment is “plunging” because of the recession, paving the way for oil-price surges within three years, the International Energy Agency warned in a new report.
The Paris-based watchdog for the world’s major energy-consuming nations said that in recent months, oil companies and investors have canceled or postponed about $170 billion of investment equivalent to roughly two million barrels a day in future oil supply.
[Oil Spending]
An additional 4.2 million barrels a day in future oil-supply capacity has been delayed by at least 18 months as companies slash spending.
The study will be presented to energy ministers from the Group of Eight industrialized nations this weekend in Rome and to G-8 leaders at a July summit.
The report highlights the growing risk that the crude supply — though currently abundant because of weak global consumption — could tighten quickly once the world economy gets back on its feet.
“What we’re saying is that come around 2012 the impact of this big recession on oil investment and capacity, if current trends continue, could be severe with much higher oil prices,” said IEA chief economist Fatih Birol. The IEA is funded by the world’s 28 biggest energy-consumers, notably the U.S. and Japan. It has long argued for more aggressive investment in building oil capacity.
Obama’s plan for new vehicle fuel ecomomy standards seems mighty far-fetched to me. Does anyone remember Planet of the Apes? They had a really strong government with a strong military with really poor tecnology and poorly designed machines. Example: their guns. Seems like where we might be headed…
I don’t get your comment. You think our current batch of 13 mph vehicles are well designed, and seeking better fuel economy reflects poor technology? .
I always loved the beautiful horror of the moral hazard problem created by COLI since I first heard of it.
Caution to employees of Megabank, Inc:
If it seems as though your employer is literally trying to work you to death, your perceptions just may be completely accurate.
The more of you die, the bigger the bonuses your bosses get to enjoy.
It gets even better, as it was recently reported that the life insurance companies are soon due to get their share of the bailout money.
Wall Street Journal
* CAREERS
* MAY 20, 2009
Banks Use Life Insurance to Fund Bonuses
Controversial Policies on Employees Pay for Executive Benefits, Help Companies With Taxes
By ELLEN E. SCHULTZ
Banks are using a little-known tactic to help pay bonuses, deferred pay and pensions they owe executives: They’re holding life-insurance policies on hundreds of thousands of their workers, with themselves as the beneficiaries.
Banks took out much of this life insurance during the mortgage bubble, when executives’ pay — and the IOUs for their deferred compensation — surged, and banking regulators affirmed the use of life insurance as a way to finance executive pay and benefits.
Bank of America Corp. has the most life insurance on employees: $17.3 billion at the end of the first quarter, according to bank filings. Wachovia Corp. has $12 billion, J.P. Morgan Chase & Co. has $11.1 billion and Wells Fargo & Co. has $5.7 billion. (Wells Fargo acquired Wachovia at the end of last year.)
I recall the presentation I first heard on this subject was entitled, “COLI/VOLI/BOLI”…
Suggested academic study for any economist or actuary who can get their hands on suitable data:
Does COLI lead to an endogenous increase in mortality rates? I would think Megabank, Inc would be tempted to try to work its lower level employees to death, in order to increase their bonuses. Could this help explain why life insurance companies need bailouts, too? Perhaps mortality rates are “worse than expected”?
I love stories like this. How can I contribute to this guy’s cause? Perhaps Ben could put a link to his organization on the sidebar?
Wall Street Journal
* REAL ESTATE
* MAY 20, 2009
Activist Financier ‘Terrorizes’ Bankers in Foreclosure Fight
By JAMES R. HAGERTY and RUTH SIMON
Bruce Marks doesn’t bother being diplomatic. A campaigner on behalf of homeowners facing foreclosure, he was on the phone one day in March to a loan executive at Bank of America Corp.
“I’m tired of borrowers being screwed!” Mr. Marks yelled into the phone. “You’re incompetent!” Before hanging up, he threatened to call bank CEO Kenneth Lewis at home to complain about the loan executive.
Mr. Marks’s nonprofit organization, Neighborhood Assistance Corp. of America, has emerged as one of the loudest scourges of the banking industry in the post-bubble economy. It salts its Web site with photos of executives it accuses of standing in the way of helping homeowners — emblazoning “Predator” across their photos, picturing their homes and sometimes including home phone numbers. In February, NACA, as it’s called, protested at the home of a mortgage investor by scattering furniture on his lawn, to give him a taste of what it feels like to be evicted.
In the 1990s, Mr. Marks leaked details of a banker’s divorce to the press and organized a protest at the school of another banker’s child. He says he would use such tactics again. “We have to terrorize these bankers,” Mr. Marks says.
Being a millionaire ain’t all that any more.
Wall Street Journal
* REAL ESTATE
* MAY 20, 2009
At Estates of the Fabulously Rich, Gilded Era Is Going, Going, Gone
Mr. Peacock Offers It All in a 1-Day Auction: Mansions, a Ferrari, the Head of an Elephant
By ROBERT FRANK
VERO BEACH, Fla. — Richard and Amanda Peacock spent five years building their dream home, a 10,000-square-foot, orange mansion overlooking the ocean here. They filled it with leopard-skin chairs, pinball machines, antique Coca-Cola signs and six sports cars. It had a room full of 100 hunting trophies — including a hyena and the head of an elephant — and an aviary out back housing eight rare parrots.
On a recent Saturday, they held a one-day auction to try to sell it all.
“Four million, do I hear four and a half?” shouted auctioneer Dean Kruse, as he took bids for the mansion. “Come on, people — the good Lord stopped making oceanfront property a long time ago.”
Lifestyle Liquidation
On a recent Saturday, the Peacocks put their two homes and most of their possessions on the auction block.
In a sweltering auction tent on the Peacocks’ front lawn, the bidding got especially heated for the road signs, hunting trophies and the couple’s 2004 Ferrari. Frank Burden, a local landscaper, picked up Mr. Peacock’s Pennzoil sign for $75. Bidding on the scarlet Ferrari, with only 5,000 miles, reached $110,000, a steal compared with its $207,000 purchase price. Marie Davis, a Florida vacationer, picked up several exotic hunting trophies.
“I got a wildebeest for $250!” she said. “What a deal.”
Mr. Peacock’s auction marked a new moment in the fall of the latest Gilded Age. Fire-sale auctions of mansions, yachts, sports cars and other trappings of wealth have become increasingly common as the rich become less rich. But Mr. Peacock is in the vanguard in attempting to downsize in just one day. The event was less an auction than a lifestyle liquidation, a clearance sale on a decade’s worth of conspicuous consumption.
He has plenty of company among the once-wealthy. Half of all millionaires have lost 30% or more of their fortunes during the financial crisis, according to a recent survey from Chicago-based Spectrem Group. Whether unable to pay their bills or loath to appear lavish at a time of national thrift, many millionaires and billionaires are unloading their baubles. In a twist on the estate sales of deceased celebrities, “living estate sales” have become increasingly popular.
Todd Good, president of Accelerated Marketing Group in California, recently auctioned off a 15,000-square-foot mansion in Walla Walla, Wash., along with a collection of more than 70 motorcycles, a large wine cellar, antiques and artwork. The house, which was listed for more than $13 million, sold for $3.5 million.
silly Mr. Peacock this country isn’t run for millionaires, you must be a billionaire to get special treatment. Since the rest of the country is tapped out the billionaires will have to feed on a shrinking middle and upper middle, and sub elite class.
Did Congress pass a “No Bankers Left Behind” act and I didn’t hear about it? If the Fed had injected all the aid it has handed banks into U.S. households, the economy would be looking a lot healthier right now, as households cannot generally afford to hoard money the way greedy bankers can.
Wall Street Journal
* REAL ESTATE
* MAY 19, 2009, 3:58 P.M. ET
Fed Boosts Efforts to Aid Commercial Real Estate
By MAYA JACKSON RANDALL
WASHINGTON — The Federal Reserve is broadening efforts to get credit flowing to the commercial real estate market, announcing Tuesday that it will soon accept older bonds as collateral under its Term Asset-Backed Securities Loan Facility.
Starting in July, existing commercial mortgage-backed securities, which the Fed calls legacy bonds, will become eligible as collateral under TALF, the Fed said in a statement. The change makes commercial real-estate bonds created before 2009 eligible, expanding the scope of securities covered by the government lending facility.
The Fed had previously only agreed to accept newly issued bonds as collateral under TALF, a key program that aims to unfreeze credit markets by providing investors with loans to buy securities. Under those terms, investors could only purchase new commercial mortgage-backed securities, or CMBS, issued this year.
The Fed said the TALF expansion should help borrowers finance new commercial properties and refinance old mortgages on better terms, enhancing its efforts to revive the commercial real estate mortgage market, which came to a standstill in the middle of last year.
“The objective … is to restart the market for legacy securities and, by doing so, stimulate the extension of new credit by helping to ease balance sheet pressures on banks and other financial institutions,” the Fed said.
If only the Treasury had handed the TARP money to families who need homes to live in instead of to the mavens of Megabank, Inc, I doubt thatso many investment monies would be currently used outbid end users for housing. Unless a foreclosure home needs a facelift, I fail to see what value this latest generation of investors can add to a real estate transaction, other than to drive up the price.
Single family houses really make no sense as an investment, except as a flip or an inflation hedge. But since the Fed continuously issues thinly-veiled hints of its intention to reflate home prices, I can see why Megabank, Inc employees are “pouncing” on foreclosure homes right and left.
Wall Street Journal
* REAL ESTATE
* MAY 20, 2009
Investors Pounce on Distressed Homes
By MICHAEL CORKERY
The pace of housing sales has been rising in many markets this year, but it is only partly because families seeking affordable housing are returning to the market.
It also is because of investors like former Deutsche Bank managing director Matthew Cooleen, whose firm has spent $30 million buying pools of foreclosed houses from banks.
His newly formed Greenwich, Conn.-based firm, HudsonCross Financial, is betting it can make a profit reselling in beaten-down markets in states like Nevada, Arizona and Florida and in Southern California because it is paying so little for the homes.
Outside San Francisco, a former Morgan Stanley executive director’s new firm is buying four houses for 75% less than they cost four years ago, and is raising $6 million to purchase others.
In Phoenix, meanwhile, Mark Allen, a former division president at D.R. Horton, the nation’s largest home builder, is reselling homes he is buying at courthouse auctions with funding from Gorilla Capital, an Oregon-based firm that targets foreclosures.
“It’s the only way to make money in Phoenix residential real estate right now,” Mr. Allen says.
After mostly retreating from the housing market after the bubble burst, investors are returning in droves, hoping to take advantage of the distress. In many cases, Realtors say, investors also are outbidding first-time home buyers and other would-be occupants because they often come to the table with all-cash.
Some of the new investors profited while home prices boomed and are now trying to cash in on their decline. Far from their trading rooms and executive suites, some are spending their days looking for deals in far-flung suburbs and staking out courthouse auctions.
Considering how deep in the financial hole members of Megabank, Inc find themselves, it is slightly amazing to me that they can come up with cash to invest in residential real estate.
California financial outlook: More pain, with a heaping dose of denial. Perhaps it is time to legalize marijuana, to help alleviate the budget pain and establish a new, more reliable source of tax revenues than voter initiatives.
Looking on the bright side, at least we still have real estate infestors willing to catch falling knives in the state’s housing market. I am getting more and more optimistic that “larger than expected” losses going forward will wipe out lots of these newfangled carpetbagger infestors.
New York Times
Calif. Voters Reject Measures to Keep State Solvent
David McNew/Getty Images
A voter cast his ballot on Tuesday at a fire station in Pasadena, Calif., in a special election.
By JENNIFER STEINHAUER
Published: May 20, 2009
LOS ANGELES — A smattering of California voters on Tuesday soundly rejected five ballot measures designed to keep the state solvent through the rest of the year.
The results dealt a severe setback to the state’s fragile fiscal structure and to Gov. Arnold Schwarzenegger and the state legislators who cobbled together the measures as part of a last-minute budget deal passed in February.
The measures, which would have prolonged tax increases, capped state spending, earmarked money for education and involved the state in a complex borrowing scheme against its lottery, were rejected by roughly 60 percent of those who voted. The failure of the measures, combined with falling revenues since the state passed its budget, leaves California with a $21 billion new hole to fill, while foreclosure rates and unemployment remain vexing problems here.
“Tonight we have heard from the voters, and I respect the will of the people who are frustrated with the dysfunction in our budget system,” Governor. Schwarzenegger said in a prepared statement. “Now we must move forward from this point to begin to address our fiscal crisis with constructive solutions,” Mr. Schwarzenegger said.
Uh oh — bovines are starting to suspect “manufactured rallies.” Do you think they noticed who made up the “green shoots” clap trap?
May 20, 2009, 12:01 a.m. EST
It’s make or break for the market
Commentary: Keep eye on comfortable chair in case the music stops
By Todd Harrison
NEW YORK (MarketWatch) — We often say that technical analysis is a better context than catalyst. Yet with so many market crosscurrents competing for our collective attention, a reactive world is breathlessly watching several levels.
We said last week that battles and wars were being waged. The retest of the S&P 500 at the 875 level — where the market broke out — proved to be an intuitive first step. On cue, the market probed that region Friday and bounced, which was to be expected on the initial test.
That battle was circled on most major trading desks but the war will arrive at 950, a juncture where resistance, moving averages and trend lines intersect. It will take massive buying power to surmount that level, and may well be the most important crossroad of 2009.
As we edge toward the thin holiday stretch, investors are wondering whether last week’s 5% haircut in the S&P was a pause that refreshes, as the bulls would like to believe. Or was it the beginning of the end for the bear-market bounce and the other side of the aforementioned “W” formation? See link.
My view — one I secretly hope is wrong — is that contrary to popular opinion, the socioeconomic landscape is getting worse. While price is the ultimate arbiter of variant financial views, the recent rally was manufactured, much as it was at the turn of the decade.
———————————————————————————
“All great masters are chiefly distinguished by the power of adding a second, a third, and perhaps a fourth step in a continuous line. Many a man had taken the first step. With every additional step you enhance immensely the value of your first.”
–Ralph Waldo Emerson
Test
:barf:
:smiley:
:chuckles:
:stuffspantswithingots: