Bits Bucket For May 21, 2009
Post off-topic ideas, links and Craigslist finds here. Please visit the HBB Forum. And see the American Visionaries series from Schwarzfilm.
Examining the home price boom and its effect on owners, lenders, regulators, realtors and the economy as a whole.
Post off-topic ideas, links and Craigslist finds here. Please visit the HBB Forum. And see the American Visionaries series from Schwarzfilm.
Whoa, I’m up WAY too early.
Back to bed I think…
And I’m up way too LATE.
Sleep now or be blogged in forever.
You are up too early, and I am up too late.
Basketball Wednesdays at work. 5 games to 11 full court and I’m the oldest guy out there.
Plus you gotta haul that over-sized noggin around, with yer high-quality mutant brains sloshing around like a margarita in a Sears blender. Tiring, I imagine?
That reminds me, long ago in high school I refused to do basketball layups in gym class and my grounds were that jumping up and down to throw the ball thingie made my blood joggle violently around in my head arteries and stuff—I could feel it—and this was probably bad for my brain and cognitive abilities. Besides, I suc*ked at basketball. My arguments were compelling and I was allowed to exercise ‘alternatively’, which meant leaving that stinky, noisy gym with its annoying echoes and annoying coach and annoying exercisers and scampering outside to the athletic field and stretching industriously for about 30 seconds and then running exercisily across the football field to under the bleachers, where there were most always a few stoner kids skipping Voc-Ag shop classes and swapping drugs.
Those were the days, man.
*sighs nostalgically *
…And look at me! I’m the picture of health nowadays and with an unjoggled brain! Thereby proving the wisdom of my long-ago actions.
“over-sized noggin”
I was falling over so much from being all top heavy until I had the training wheels installed. Now I just get complaints about the glare from my dome.
Hahaahah! Funny.
…until I had the training wheels installed.
Sure, with rivets! I assume these are the roller-ball training wheels that go smoothly in all directions, such as I saw advertised on the teevee, because otherwise it would get all jerky and aggravating as you thundered down the court.
Now I just get complaints about the glare from my dome.
Oh, yeah? Like, from the twinkling off the laser-beam mounts you had installed in your cranium*? Which sometimes go off unexpectedly, such as when you make a jump-shot, and ‘ZAP’, there’s a smoking heap of ashes and some charred bones poking out of the Reeboks sitting there on the polished gym floor, and the game is called, and there’s yet another apologetic note to be sent home to someone’s wife?
I feel sympathetic. We all have our troubles, I suppose.
*I’m going to do that one of these days. Except they’ll be cute little laser-beam mounts, of course, that can be concealed with ringlets and barrettes until I feel like zapping someone.
Here’s a good starter:
Fed’s economic forecast worsens
“NEW YORK (CNNMoney.com) — The Federal Reserve’s latest forecasts for the U.S. economy are gloomier than the ones released three months earlier, with an expectation for higher unemployment and a steeper drop in economic activity.
The Fed’s forecasts, released as part of the minutes from its April meeting, show that its staff now expects the unemployment rate to rise to between 9.2% and 9.6% this year. The central bank had forecast in January that the jobless rate would be in a range of 8.5% to 8.8%, but the unemployment rate topped that in April, hitting 8.9%.”
Contrast that with this later in the article:
“Rich Yamarone, director of economic research at Argus Research, said that the Fed’s new forecasts were “more of a reality check than a revision,” given the deterioration in the labor market and overall economy since January.
But he and other economists said it also appeared from the minutes that the Fed is pleased with how the economy has started to respond to the steps it has taken, including the purchases of mortgages and Treasurys.
And Yamarone said it’s important to remember that the forecasts and minutes are three weeks old, and that economic readings since the meeting, including home sales and the rate of job losses, have generally showed signs of improvement.”
Must admit they do sell the sensationalism, good or bad, considering that they’re painting this as new despite the fact that it pre-dated the green shoots. Not that that will change the ultimate outcome any…
Reaching terminal velocity DOES mean that the rate of increase of descent speed has slowed and stopped. It does not, however, bode well.
I love how they all talk about price decreases leveling off, but never address our lack of a parachute.
What happened to the “green shoots”?
From Marketwatch:
“Private Equity Nabs a Bank-
BankUnited Financial is shut down by banking regulators and sold off to a group of firms including WL Ross, Carlyle Investment Management, Blackstone Capital Partners and others.”
Hmmm, Carlyle Investment Management. Looks like Shrub and Co. are snapping up assets for pennies on the dollar. Along with war profiteering, they’re making money off of a failed economy as well. Nice.
Anecdotes from the street (Southern California, L.A. and San Diego areas):
Though anecdotes don’t necessarily mean anything, I do believe they can be leading indicators if the stories are widespread enough to determine a possible trend.
Here goes…
One friend who lost a job last year and hasn’t made a mortgage payment in about 6 months had been looking for a job all this time. Nothing…until a couple of weeks ago. Five job offers came within just a few days, all from different industries: remodeling (commercial and residential), entertainment, accounting, and others.
Another friend was very worried about job loss, and the employer even filed for bankruptcy earlier this year. After BK, business was really trailing off until the past few weeks, and suddenly things are really booming. This in finance/insurance.
Also, as I’ve posted before, last fall/winter you could visibly see the economy shutting down. Restaurants and other retail establishments empty/closing, less traffic on the streets and in stores, etc. This spring (since Feb or so??), things started jumping again, and everybody appears to be back out spending again. I’ve had multiple retail workers tell me that business was slow and then for some unknown reason started picking back up again.
Some of it might be due to the fact that many people are simply not paying their mortgages and are effectively getting $2k+ **per month** in “stimulus” of sorts. Others, have had their principal or interest rates significantly reduced (yes, they are reducing principal, though not sure about recapture).
Do you have any “optimistic” stories, or are you mostly getting the more pessimistic stories right now? What do you think is behind your observations?
Muni closings are up dramatically since last week. If we get one more major stock market drop over the next 8 weeks, we should be near a bottom as far as the stock market goes. If I see another 10% plus drop, I will start making some long term investments again with some of my remaining 401k cash reserves. I don’t expect a huge quick profit, but am confident I will be fine in 20 years when I will look to make a withdraw, I’m up around 20% this year, and had no losses last year, so can’t complain. I went into a holding pattern after the last run up. As far as real estate, stimulous is having a huge effect, most of it is in the $300k or less foreclosure/short sale side. $500k plus homes in many areas will be dogs for years. Hopefully the 8k tax credit for first time home buyers will expire in December and rates will start increasing dramatically. I don’t want to buy until I can see natural stabilization in housing. I would like to buy a home late next year, but will see how events unfold.
As far as reasons as to some of the uptick, much of it is a confidence game. Until March, drops were worse than ppl were expecting. Thus, even otherwise rational spending was chilled. Since March we have been going pretty much straight up. Thus, putting some fears rest, and making ppl think if they don’t get back into the game they will miss the bottom. Yes, the triggers were the results of manipulation, but momentum is powerful. I suspect most ppl think we are past the recession halfway point, which was not true in March. Most ppl buy on confidence rather than underlying fundamentals. True, confidence alone can’t support markets as we all know too well, but at least confidence and fundamentals are closer now than they were a year or two ago.
I kind of wonder if all the deficit spending isn’t putting us further behind the eight ball/
Yes, but IMHO that’s in the long term. And short term rises and falls in stock valuation are not driven by long term concerns. “Forward looking” means next quarter or maybe the quarter after.
Fed Reluctant to Guarantee Muni Borrowings as Hearings Begin
By Michael McDonald
May 21 (Bloomberg) — The Federal Reserve will tell a congressional committee today that it is reluctant to extend guarantees to California and other municipal market borrowers struggling to sell bonds.
http://www.bloomberg.com/apps/news?pid=20601087&sid=a05o4.vOnXEU&refer=home
They need to pay for credit enhancement/liquidity like everyone else. It’s not something I want my tax dollars spent on. You don’t have the credit, you pay for someone to back it that does. My clients do.
Are there enough insurers left to provide appropriate credit enhancement? Because you have to have cash when you provide credit enhancement to debt that has a good chance of defaulting. And even if you could lock people into long term contracts so the money makes sense eventually, the near term risk is pretty high with the finances of the cities so shakey right now.
I agree it would be difficult, but I have concerns about the Fed stepping in and providing free or substantially reduced cost assistance to States in the form of guarantees of their or otherwise. Same as homeowners that didn’t take risks into account before jumping into huge amounts of debt, isn’t a little pain good for them?
their or = their debt or
Agreed. I was just wondering if there was anyone out there to provide the credit enhancement at all. The appropriate alternative is to not get credit enhancement, live with the rating you can earn and pay enough interest to make your not triple A rated bonds appealing to someone.
On a case-by-case basis, with respect to munis, there are many Letter of Credit providers that have credits the market will accept (big banks now usually rather than insurers - I am seeing a lot of Wells Fargo, U.S Bank, etc). I am not saying these banks are perfect, just that their LCs are moving product and resulting in closings. Also a 7 day floaters with a big bank Standby Purchase Agreement have limited risk. Of course, these entities charge for their credit whereas Uncle Sam is a push over.
Tim,
Thanks for your responses. Good info, as usual.
And yet housing prices are still way too high, particularly in places that were not destroyed by Subprime, but which are instead filled with the other toxic loans - Alt-A and Option-Arms. But so long as they can keep the con game going, more suckers will buy and then we can get housing back up to very unaffordable, which is “good for ‘merika.”
Pondering,
I’m with you here in MD - some drops in expected areas like PG County - but for the most part buyers and sellers living in some kind of dream world. Alt A was big here tho in 2006 and the pain will begin to show soon.
I don’t like to see pain, I’m actually a long-time homeowner here in MD - bought more than 15 years ago. I just am continually amazed that this thing still floats along as “supposed” housing values in my redneck Chesapeake hood increased by more than 400% in less than 10 years.
The cracks are starting to show and some of my over-leveraged, over-improved, over-spent “new” neighbors who looked down their noses at those in my community that did not mortgage to the hilt to knock down our charming 50’s beach cottages to build soulless mcrapshacks are starting to realize they may have screwed up…bad.
Tim:
From last night I asked AZ lender:
Think of the millions of CC holders that have adjustable rates….
Will this new CC law be able to stop the rate increase on the old balances, or will it be passed through because its tied to the prime rate, and not your credit score?
I’ve never seen THAT question asked.
————————————————
and rates will start increasing dramatically
And that’s the wierd* part about the CC bill. Trying to change revolving credit from variable to fixed rates. People have enough problems understanding their bills now. Imagine if there were different parts of their balance with 8 or more different interest rates. Because that’s what will happen if you don’t let the CC companies change the rates on existing balances.
*Ok not as wierd as the guns in National Parks bit, but…
I am not sure I understand the question. The bill proposes that rates not be increased on existing balances. Most of the credit cards I have used have been tied to fixed rates (albeit with some legalize about the ability to change rates in the future). Is the question whether, if there was a variable rate credit card, a reset to a higher rate using the same formula and mandatory reset dates at the time the subject obligation was incurred would be an increase? I have not reviewed the legislation, but from a legal and economic perspective I would argue that the intent was to forbid retroactive changing of the agreed upon rate at the time of purchase, which wouldn’t be the case in such scenario.
Tim:
I think Jim was on point….since its a varibale rate cc the rate this month is 7.85% if the fed raises the prime can they retrocatively raise my old balances since that was the agreed terms……or on just the new charges?
EG: the prime back at 6% my rate 13+%….millions will defualt
I don’t know much about CC billing. Most of the stories I have seen have been about retroactively increasing the rate on prior purchases because of default, etc., as well how much advance notice you have to give for a rate change. I would expect that if it was variable and you got notice of the new rate, you would have to pay according to the new rate going forward regardless of the time of purchase, but they could not retroactively apply that rate to earlier periods, but that is just based my understanding how variable rate debt normally works. The stories I have seen about the legislation have been talking about crack downs on abuse such as retroactive changes. A variable rate reset would not be “retroactive” even if applied to prior purchases as long as it did so on only a going forward basis. Regardless, I do agree that anyone carrying variable rate debt will be screwed as we move into hyper-inflation. Let me know if you find any additional information. If the leglisation was really aimed at preventing variable rate resets applied on an ongoing basis based on time of purchase, I would find such leglislation truely offensive.
Egad NYCdj, did you ask me? I didn’t “hear” that, and I don’t know the answer…all my notes are mortgages, all fixed rate, no revolving, although some borrowers would like to TREAT me as a credit card! By which I mean, they think they can get a cash-out refi any old time.
The latest Work Out involved a woman who phoned last night saying that she was having trouble with payments in Jan Apr Jul Oct because that’s when she has to pay $500 HOA. She now pays $464.45/mo to me. She asked if she could just skip JAJO and tack it onto the end of the mtg. I said no, I thought it would make the mtg 100 years. Figured it out later: only 32 years. However, this is a MH plus lot, not good for 32 yrs IMO. I figured out that if she pays $230 in JAJO and $460 in the other 8 months, her loan will amortize in just under 15 years. That was the offer I shot back. We’ll see if she likes it.
Another thing you might suggest is increasing her payment the other 8 months of the year sufficiently to amortize over the original term of the note, while skipping the JAJO payments. Or figuring out what X is such as her payments (to you plus HOA) are fixed every months–e.g. 8 payments of X to you, and 4 payments of X (500 HOA, X-500 to you).
If she had a constant total housing payment, maybe the predictability would help her learn to live within those means.
would like to buy a home late next year ??
IMO, be prepared to pay a much higher interest rate for your mortgage…
Uh-oh, that’s not going to prop up home prices.
So long as they can strike a balance between higher rates and lower prices, they can achieve the goal of unaffordable housing.
I’m all cash baby! Bring on the higher rates. I would feel like a fool paying all cash during a period of one of the lowest interest rates in history.
Now I got it Tim…Your combo’s cousin
I’m with you, Tim — either hoping to buy all cash, or hefty downpayment.
It’s never a good idea to put your **real** money against specuvestors with 3.5% downpayments and big mortgages with low rates.
We are waiting this out.
I know you asked for optimistic anecdotes, and things may seem rosy on the surface, but it looks like Cali is in a bit of a pickle.
http://www.google.com/hostednews/ap/article/ALeqM5gtCWUjTUW08PytEz1VoNOaz9pzJQD98AHO3G0
Were just getting started Palmy…Wait until May 2010 and check the deficit…There revenue projections are way to optimistic…
tried to post this yesterday
false hope? new beginning?
Dead cat? Bouncing? I don’t see indicators that would lead to any other conclusion.
I’m still mostly seeing traffic a lot lighter than a couple of years ago, but with an occasional day or week that’s heavier. California sales tax revenues dropped 19% YOY in March and 44% in April (13 percent sales tax increase kicked in April 1st). Mostly, things still appear fairly slow compared to a few years ago. The brief heavier periods appear to be tied to specific events rather than more broad-based increases in economic activity. The week of the World Baseball Classic was heavier, for example, though I don’t know if that event was why. I’m definitely seeing more “For Rent” signs than a year ago.
Yes, definitely seeing more “for rent” signs in North County, too.
RE: many people are simply not paying their mortgages and are effectively getting $2k+ **per month** in “stimulus” of sorts
It’s the “EAT, DRINK, AND BE MERRY”, for tomorrow we all die phenomenon.
Any diz, even those who access some pathetic MSM daily
rag or network news, can read between the lines and easily figure out that the country with all the O’Bama spending insanity is headed into financial oblivion.
Kinda like the mindset of the Berlin Nazi’s; who in a complete state of denial, sat in their special ballrooms, eating, dancing, and drunk out of their minds; while their city lay in complete ruin with thousands of Russian storming the ramparts, hell-bent on revenge and annilation.
What about that H-D bumper sticker:
Screw it. Let’s ride.
Forget H-D.
Ride an Airhead. Simple by choice.
Roidy
I think it was more like they depicted in the movie Downfall. They didn’t look too happy.
Business is sturing again in Ohio as well….
I’m in IT in the retail industry. We furlonged, then terminated a number of people in the warehouse and call center. However, volume has picked up recently, and we are re-hiring most of the workers.
Talked to an IT consultant 2 weeks ago, who works throughout Ohio and surrounding states. He said that businesses basically put all projects on hold last fall, but have recently started moving forward on them again.
I don’t expect a big recovery at this point, but the short-term picture being painted is that companies are coming out of their turtle shell and looking around again.
I’m seeing the same thing here with my biz. That’s not to say that I no longer have to prospect. Matter of fact, I’m doing that right now…
Optimistic story may be starting from California. Today’s LA Times headline is about spending cuts by the People’s Republic of California.
I said it several times in the last few months: Citizens find they have to tighten their belts, so they are outraged by tax increases and spending increases at all levels of government and will not stand for it.
Watch for more new people in both large political party promising spending cuts when they run for Congress.
Watch for the defeat of big spending incumbents up for re-election in 2010.
The problem with doomsayers is they assume no new variables get put into the equation.
“…The problem with doomsayers is they assume no new variables get put into the equation.”
You’re killing me Bill, you see optimists like me have just the opposite problem…for example:
“The total number of people collecting benefits rose to 6.66 million, a record reading for a 16th straight week” = Starmucks coffee (on sale) @ $7.99 (12 oz)
The glass is still half full… even if you are standing on your head
Similar pattern up here in the great white north (Minnesota). Late last year, you could walk into Costco on a Saturday afternoon and enjoy shopping amongst a very, very small group.
A month ago, absolutely packed to the gills.
Same situation at restaurants, dead quiet December-March, all of a sudden in April, packed with hour long waits Fri & Sat night.
Although, I don’t see any uptick in traffic at the local auto dealers.
Could it be that Costco and restaurants sell cheaper stuff than auto dealers? And could it be that people are making their existing cars last longer? (Hmmm, will have to check in with Mike the mechanic. His shop is nearby. I’ll bet he’s busy these days.)
It will be optimism for those who don’t have to play by the rules: get Bailed Out, get your overpriced house reduced in payments, etc. For those who play by the rules, things are only going to get worse, IMHO since we’re the ones who will pay for the fun everyone else is having.
But because you play by the rules, you have been frugal and responsible and are in great shape and lovin life, so who cares who else gets what.
CA renter,
I’m waiting to see how well everyone is going to do once all the cuts start taking place. Don’t forget all the propositions asking for more money has gone down in defeat.
Most definitely, SFGal.
I’m a former govt worker who’s married to a govt worker, know lots of other govt workers, etc.
Mucho pain coming in that sector, and it’s just getting started. We’re hearing of across-the-board pay cuts in municipal and rumor has it the Governor is threatening state workers with BK if they don’t bend. Cal-PERS/Cal-STRS will not exist in their current form, IMHO.
People think govt workers are a drain on the system, but don’t seem to understand how much money they put back into the economy, as so many of them spend everything they earn. If they get cut off, I think they will drag the private sector down with them.
I’m an indie IT guy. I got cut from from a LT contract back in Dec. There was nothing, and I mean nothing until about March, then April got a little busier and this month a little busier still.
Granted, it’s a lot of small, very short term projects, but I was expecting it to get worse, not better.
If the trend continues, I’ll be fine for the rest of the year. Well, “fine” as in I won’t have to seriously look for a W2.
Thanks for all of your responses.
Gleaned from another blog, once removed (the source could be this one, for all I know):
punstress
04/17/2009 1:34 PM Alert
This is from a blog I read:
A buddy of mine called one of the bigger REO agents yesterday to ask him what the hell was going on, and why there are hardly any new REOs being listed. The agent told him that the banks are holding on to all of their properties to try and create a demand in the market, which will in turn drive up prices. … He also said that Fannie Mae is one of the only lenders who is putting properties on the market right now, and that if it wasn’t for their listings, his office would be selling hot dogs on the side of the road.
We’ve all seen this. Shadow inventory is a FACT. I would love see the lenders sued for collusion, price-fixing and racketeering. All we need is a smoking gun and a big pile of money for the lawyers.
Also this same blog talks about how this big REO agent is giving the best deals to a friend for a great price, so they never even get to the MLS. We are not only not getting the opportunity to see the best deals, but we the taxpayers are paying the lenders mortgage insurance off in much bigger amounts (assuming they’re insured by Fannie/Freddie/FHA) than we’d have to if they sold at market rates.
Anybody else mad??
“this big REO agent is giving the best deals to a friend for a great price, so they never even get to the MLS.”
This has been going on forever. Regardless of the market. It is what it is (not condoning it).
Also this same blog talks about how this big REO agent is giving the best deals to a friend for a great price, so they never even get to the MLS.
I am sure that has always been the case. However, I would question these “great” prices. It is still much too early for a “great” price.
No I’m not mad. The banks holding onto REOs are just stupid.
Because regular people who really need to sell are coming on the market every single day, and those sales are setting the comps lower.
Additionally, the infestors who are scooping up “deals” in AZ, FL, etc, will want to unload their infestments ASAP. They are the REO-holders’ competition as well.
If the banks’ REO inventory was the only housing inventory available in this great land of ours, then the case could be made that theirs is a brilliant marketing plan.
Preach it, Phillygal! Here’s a data point from a half mile away:
House was bought as an investment by some gal from California. She tried to sell in late ‘07. The real estate agent even tried orchestrating an auction in December ‘07. Bzzzzt! Fail.
The house was foreclosed on last year. And, guess what? It’s rented out, but it’s *still* up for sale. (Anyone want to buy a real dump that’s right next to Euclid Avenue? Your tenants could enjoy the sounds of 24/7 traffic on one of Tucson’s busiest streets.)
Add to the mix the coming Option Arm explosion. How many of these will end up REO?
From this article posted yesterday’s BB - I’m not sure if anyone noted the key graph in there - showing unsold REO’s now at about 800k, as estimated by Barclays. It’s interesting that they show the number now decreasing a fair amount. I think this might make sense some in that there is definitely a lot of heavy foreclosure sales activity from knife-catchers, and also that homebuilding starts are still *extremely* low. Eventually the constant background population-growth demand will catch up to the supply, and it’s starting to some extent. That being said - the supply is still way, way high relative to historic norms; just now coming off peaks, and very much lagging the price declines, that started 3 years ago.
Here is a smidgen of the logic driving recent investor purchases of foreclosure homes:
“It’s tough times in the Bay area, but this isn’t Detroit,” says Paul Staley, who acquired distressed homes earlier in the decade with Fortress Investment Group and recently teamed up with McKinley. “Everyone is going to need a place to live.”
McKinley plans to resell the houses in about five years for double what it paid and is targeting 20% annualized returns for its investors, which include wealthy individuals.
I target selling my belly button lint for $700 a microgram. Does that make me a good investor?
LOL…
Sounds like a good hedge. I’ll take a nanogram, please.
BTW, I like the part where they add what looks like a qualifier, “which include wealthy individuals.” Why do we need to know that?
The implication seems to be, “The wealthy are smart. The wealthy are investing in RE. You want to be wealthy, don’t you?”
Actually, now that I think about it, my current business plan makes me an entrepreneur since I am generating my own belly button lint for sale. Or at least prospecting for it. In order to be an investor I have to buy other people’s belly button lint, hold it for a time, and then sell it at a mark up.
OK, I am offering limited shares in my private investment partnership in exchange for high quality HBB belly button lint. We will hold it for 5 years and then sell it for at least $700 a microgram. I will require very reasonable capital contributions (cash only) for my duties as general partner - fining new sources of belly button lint, developing a market in belly button lint, safe storage of belly button lint, etc. Actually, that might still make me an entrepreneur, but it would make all the limited partners investors. Details of the partnership agreement come later, but please understand that there are no guaranteed returns and that I will take compensation for my efforts before any investment returns are realized.
And you will all be precluded from suing me under our mandatory arbitration clause. All arbitration to be conducted by my left big toe.
LOL… Nice, polly…
“The wealthy are smart. The wealthy are investing in RE. You want to be wealthy, don’t you?”
I guess I should ignore all the MSM reports I keep reading about wealth people, formerly also described as smart, holding liquidation sales to unload household assets at fire sale prices?
Prof, those people are no longer wealthy as they’re not invested in RE.
“McKinley plans to resell the houses in about five years for double what it paid and is targeting 20% annualized returns for its investors, which include wealthy individuals.”
And until this idiocy ends and we see transparency in the market where individuals with good credit and acceptable income can buy an appropriately priced house, the Bubble isn’t over.
RE: Anybody else mad??
The UAW for all intensive purposes are now government workers.
At least the with their ‘Job Bank” you had to show up to sit in a room looking at 4 walls.
With O ‘Bama coverin’, they can now join all those federal employee swill who never even show up at their jobs.
Plus you can bet they’ll all get Postal employee level health care coverage for life.
hd74man,
Funny you’d mention that. Talking w/ Jag dealer buddy and asked if there were any particular years one should definitely steer clear of? He explained that BL ( British Leyland ) went through essentially the same turmoil in 1988 and 1989.
He said, while Jaguar has had it share of ahem, problems over the years, cars of that vintage were basically assembled by government workers. So if we’re looking for an historic precedent in terms of what to expect..?
I think your Jag Friend may be off on the years. I suspect he meant 1968-May 2009. Wanna watch something good? You Tube “Who Killed the British Motor Industry?” with Jeremy Clarkson- Hillarious!
Why do the Brits drink warm beer?
Because Lucas makes their refrigerators.
Lucas, aka “The Prince of Darkness”
sorry, couldn’t resist.
Not all government workers are bad, the Marines seem to do a pretty darn good job.
I’m a soldier. While I work for the government I don’t consider myself a government worker.
Thank you for serving, Al.
While I work for the government I don’t consider myself a government worker.
I don’t either. For one thing, your posts always seem to be coming out of a smart head.
Oh, and like AZ says, thanks for serving.
Al,
Thank you for serving.
You are owned by the government. GI stands for government issued.
Skip,
Semper Fi! Actually, “I” feel the ‘barometer’ for public pensions, really ’should’ be the military. Most of these guys are getting somewhere between $1,000 and $1,500 a month and they have med. benefits and SGLI and… that’s about it?
Oh.. they have access to “Space A” flights ( but seldom use them ) but remember, many of the guys that are regulars at the American Legion on Magsaysay Drive in Olongapo are getting around $500 a month! ( Old timers )
Of course public employees will scream; “But they can retire as early as 38 y.o!” Right, “retire” on $12,000 a year w/ kids still in school? Not likely. Most will need a second career, or there’s always hanging out in “Gapo”?
Anyone who’s job includes people shooting at them or blowing them up while defending the freedoms and liberties of the citizens of this nation is more than welcome to retire at a young age, IMHO. I sometimes have to remind myself that no matter how bad my day at the office, it is a walk in the park compared to what our soldiers go through. Thanks to all of you!
What IS disturbing though is how clowns that create our problems (politicians, bankers, etc.) get retirements that are orders of magnitude better than those received by our veterans.
I live near quite a few military bases. The military seem to get housing allowances that drive up the rents pretty hardcore. I brought this up on some local forums, and mil wives were complaining about how their hubbys were trying to get out, but no one would pay them what they are making (total benefits including tax breaks, housing allowance, etc).
I see it as a major factor to messing up our housing allowance. I’ve seen military families with orders to move trying to unload homes for $600K locally. One of my parents is retired and was pretty surprised to see what people make now given the position. It wasn’t bad at all.
I always thought it was ‘intents and purposes’. Anyway, the UAW is too big to fail: Give those men million dollar bonuses.
This is the game plan: horde the houses, watch them fall apart, only sell them at stupid-high prices, and keep their book value equal to their 2005 peak value. That way, the banks stay “solvent” and housing remains unaffordable without new forms of toxic loans to produce debt serfs. Everyone - except the citizens - wins!
Bankster Dude, I am so NOT going to pay a stupid-high price for a falling-apart house.
PB,
I’ve heard and seen plenty of stories that back up that post.
BTW, this is directly from the “Making Home Affordable” website:
23. My loan is scheduled for foreclosure soon. What should I do?
Many servicers have made a commitment to postpone foreclosure sales on all mortgages that meet the minimum eligibility criteria for a Home Affordable Modification until those loans can be fully evaluated.
from page 11 (PDF WARNING)
http://www.financialstability.gov/docs/borrower_qa.pdf
http://www.makinghomeaffordable.gov/modification_eligibility.html
Anybody else mad??
Think it will work ? Keep prices high for years and years ? I bet CA has to lay off a bunch of State workers. Whats that going to do for RE ? They are the only ones with good jobs left in that state.
looks like 200 bucks a square foot and higher in N. San Diego County still high for a broke state. Here in Phoenix its less than 100 per S.F. in many areas.
Collusion? Price fixing? Racketeering? From the same people that brought us NINJA loans?
I’m shocked to find fraud going on! Shocked I tell you!!
Housing bubble smackdown: Huge “shadow inventory” portends a bigger crash ahead
Mike Whitney
Online Journal
Wednesday, April 22, 2009
Due to the lifting of the foreclosure moratorium at the end of March, the downward slide in housing is gaining speed.
The moratorium was initiated in January to give Obama’s anti-foreclosure program — which is a combination of mortgage modifications and refinancing — a chance to succeed. The goal of the plan was to keep up to 9 million struggling homeowners in their homes, but it’s clear now that the program will fall well short of its objective.
In March, housing prices accelerated on the downside, indicating bigger adjustments dead ahead. Trend lines are steeper now than ever before — nearly perpendicular. Housing prices are not falling, they’re crashing and crashing hard.
…
According to the Wall Street Journal: “Ronald Temple, co-director of research at Lazard Asset Management, expects home prices to fall 22% to 27% from their January levels. More than 2.1 million homes will be lost this year because borrowers can’t meet their loan payments, up from about 1.7 million in 2008.” (Ruth Simon, “The housing crisis is about to take center stage once again,” Wall Street Journal)
Another 20 percent carved off the aggregate value of US housing means another $4 trillion loss to homeowners. That means smaller retirement savings, less discretionary spending, and lower living standards.
The next leg down in housing will be excruciating; every sector will feel the pain. Obama’s $75 billion mortgage rescue plan is a mere pittance; it won’t reduce the principle on mortgages and it won’t stop the bleeding. Policymakers have decided they’ve done enough and are refusing to help. They don’t see the tsunami looming in front of them plain as day. The housing market is going under and it’s going to drag a good part of the broader economy along with it. Stocks, too.
…
The Truth Says:
April 22nd, 2009 at 10:54 am
The article is true to fact. I am employed by one of the top 10 banks/mortgage companies in the USA and I can confirm that banks are holding 100’s of 1000’s of homes (REO). I have been told that the reason for this is that bank executives are hoping for a market turn before placing them on the market. Their hope is that they will see a reverse in values. We all know that this is not going to happen for a number of years.
Is it SOP for agencies of the federal government to hold REO?
Business Specialties Property Management
CBRE to Handle FDIC’s Portfolio of Owned Real Estate
Nov 26, 2008
By: Coreen Bailor, Research Editor
CB Richard Ellis Inc. has netted a major client: The Federal Deposit Insurance Corp. has tapped the services firm to serve as primary advisor for the residential and commercial real estate it acquires from failed financial institutions.
Well, poor old FDIC, Sheila probably never thought of it as a real-estate management institution. Whereas FNMA and Fred absolutely knew they’d be in that biz.
Why not? We’ve got the FHA, Fannie and Freddie, and Federal Reserve owning real estate - only makes sense to get everyone in on the party! It’s the new tupperware. Gold parties are so last year, and candle parties are so 2007. 2009 is real-estate parties.
Check out the story behind this cozy lovefest:
Citizens for Responsibility and Ethics in Washington (CREW), a public watchdog group, urged the Inspector General’s Office at the Federal Deposit Insurance Corp. on Monday to investigate a contract that the agency awarded to a real estate firm headed by the husband of Sen. Dianne Feinstein.
CREW sent the letter in response to a report last Tuesday in The Washington Times, which disclosed that the CB Richard Ellis Group (CBRE), the firm headed by Ms. Feinstein’s husband, Richard Blum, received a lucrative FDIC contract in November to sell foreclosed real estate from failed banks at compensation rates higher than industry norms.
In January, Ms. Feinstein, California Democrat, introduced legislation sought by the agency that would have routed $25 billion in taxpayer funds to the FDIC for a program to help prevent home mortgage foreclosures.
http://www.citizensforethics.org/taxonomy/term/1598
For those of you calling the bottom, I mean no disrespect, but I’ve got three words for you: jobs, jobs, jobs.
Americans have been effectively put out of business and TPTB are trying vainly to stave off the inevitable. Doing a pretty good job, too.
There must be jobs and productive industry in order to have a recovery.
Re-bloating rotting corpses with gas isn’t going to cut the cheese.
‘For those of you calling the bottom, I mean no disrespect, but I’ve got three words for you: jobs, jobs, jobs.’
But at what pay? The throbbing protoplasm of workers and work to be done is missing a key catalyst.
But at what pay?
Exactly !! Unemployment is a big problem but underemployment and reduced incomes are a much bigger problem…The whole pyramid was built on easy money….Going forward, long term, its a “re-set”… Doing more with less is the name of the game…Needs, Not wants will be the focus…
Yeah, I do think that their plan to pay us all 3rd world wages while demanding 1st world prices (or more for houses) has a few critical flaws. They tried to hide the growing gap with credit, now they are trying to paper over it, but it’s not going to work in the long run. If you want nation where people can buy “lots of stuff” they need to produce “lots of stuff” and be paid well for doing it.
Imagine the audacity of Henry Ford, who believed in paying his workers enough to afford one of his cars.
He didn’t have an able supply of cheap mexicans! Heck, with what minimum wage pays I don’t know why anyone would work for it.
Funny you should mention that VA. (seriously, that’s a good point)
Henry Ford had something even better than illegal immigrants. Fresh off the boat LEGAL immigrants. But instead of using them to depress wages, he created a company run school to teach them to read and speak English and if they needed it, math as well! And he offered this to not only the immigrants, but any of the native citizens he employed that needed it as well.
Plus he paid them well!!
H. Ford had one major character flaw, though. He was a rabid anti Semite. Which was acceptable back in those days. (NO I’m NOT sating it was right)
But one thing he didn’t do was try to screw over his employees. He knew the direct correlation between paying your employees enough money to buy your product and staying in business.
Something our modern Marie Antoinettes, the FIRE mafia, seem to have forgotten. But then crooks aren’t very bright to begin with. That’s why they’re crooks.
The rush to call a bottom might be explained, in part anyway, by the fact that the “investment” mania is so far from dead. Whether it be stocks or houses or commodities, so very many seem obsessed with getting in on the ground floor like never before.
A likely explanation for this collective obsession is that the initial wave of the bust caught so many folks flatfooted that the desperation to go in for a “quick win” is exploding.
So the question is, if stock/house/commodity prices do stage a significant rebound - how long will it last? Because at the end of the day, you’re right Palmy, the income ain’t there to support them.
sigh, edge, I just can’t fathom it, just like I couldn’t fathom the bubble itself. We have another bubble now, the “bailout bubble”. When that bursts, the jig is up.
I think people are desperate for a quick win because otherwise, what’s the alternative? Some crappy job with no sense of accomplishment, benefits or future? I can understand the desperation.
palmetto,
Well I understand too, but the two go hand in hand. I recall in the 90’s people being late to corp. meetings b/c they were daytrading their account on ETrade?
“Dude, I have to go! ( Some BS meeting or… ’something’? )”
In 2005 I had a DINK neighbor couple that rented below me that arrived home every day at around 3:30pm fresh as a daisy from work, got changed into “WORK” clothes and came back after dark utterly exhausted from working on their dream home! ( They were “draggin’ @ss” -every- following morning in a last minute disorganized frenzy to “get this work thing over with” )
Hi, I’m new here and so glad I found this forum! I’ve been looking for some intelligent, realistic discussion about the housing market.
To edgewaterjohn’s point about a possible rebound, it’s not out of the question for us to see another period like the early 90’s when house prices were flat and failed to keep up with inflation. If the bubble is propped up to much from Government intervention/public sentiment etc. we might be in for a very slow trickle sideways/downwards. As a soon to be first time buyer, this is a nightmare scenario. I’d rather have prices fall to reasonable levels asap and be able to buy into a healthier market.
I’d love to hear everyone’s thoughts on what the bottom will look like….
Wait until those unemployment checks start running out.
Anyone laid off last September only has 90 days or so left (in Texas at least, where we refused Fed money to extend).
Excellent point skroodle…
Less than that skroodle. In Texas, you only get a 3 month extension, not 6.
It’s started already.
I think most of us are with you in wanting to get to true market values sooner rather than later. All the efforts to prop up the market just postpone the inevitable. And it is clearly a case of the tyranny of the majority: homeowners putting the screws to non-homeowners for their own personal gain.
so where playing the ‘wait and see’ game?
Penny…Welcome to the blog…What zip code are you in ??
“…I’d love to hear everyone’s thoughts on what the bottom will look like….”
Welcome Penny!
Now for some clarity…all bottoms look the same up close, doesn’t matter the name brand of the binoculars you use.
Good one Hwy..:)
This is my nightmare as well - housing prices doubled here in Maryland and have only fallen 15% so far. If they stay jammed at that point for the long term, housing here may never be affordable, at least not in my lifetime. Oh, sure, I can keep hording money away, but to spend on something that I *know* is grossly overpriced just to keep some crooked bankers and greedy seller/realtors happy? Why? Why should I have to do that? Ugh…
This, too, is how I feel just outside of Philly. I keep reminding myself of how much $$ I can sock away, but it’s so frustrating to think that it’s, essentially, getting me nowhere closer to a house. Of course maybe some day I’ll wake up and realize I can pay cash for something! (Yeah right.)
For a couple of reasons, I left the Fellowship of Homeowners in 2004.
Until owning costs significantly LESS than renting, I’ll never be an owner again. It’s nice being able to do what I want to do on weekends, or go on a road trip for 2-3 weeks if needed, and not have to worry about the house.
IMO, there is going to be a lot of upheaval/displacement in the economy over the next 5 years. Some places that are “desirable” now may go down the tubes; too many things are still undecided. We know the government and banks are trying to string out the losses as long as they can, but it remains to be seen if the plan is going to work.
We also don’t know what kind of scheme they will try next, but whatever it is, it won’t be designed to help out J6P.
Jobs are going to be an issue. Like Bill in LA, people who are able to decamp and move to a new and/or better paying job are going to do better than people who are anchored to a house/extended family.
I personally believe that the old-fashioned stable-employment, stable-homeowner/neighborhood, stable family, stable middle-class economic model has been beneficial to the USA for the most part.
The reality is that plan is being trashed, in place of something else, which appears to be some kind of Brazil/Mexico “Ultrarich/masses of peons” model, with a diminishing middle class being preyed on by both ends of the spectrum.
Until the dust settles (5 years? 10 years?), I plan on being as portable as possible
The portable lifestyle is the way to go. My sister uses the term “portable lifestyle.”
You pinned it down. The market forces are favoring people who have no baggage and no sitting duck property taxes of home ownership.
On the down side, I’m being harrassed by the Phoenix apartment complex where I am hardly ever at. I think they want people to actually live there and be “neighborly.” Well Fug them. I paid them rent for four years and they are trying to attract renters by decreasing rent. I have been overpaying. I’m going to pull out. I have lately began thinking of pulling entirely out of Phoenix and I’m looking for a place where I will want to come home to every two weekends and go to some upscale bars in an urban environment. My choices are San Francisco or Portland, and I’m thinking Portland.
‘Find a penny, pick it up, all the day you’ll have good luck’…
That’s what my gran always told me. She’s bossy about these tradition/folklore thingies, but I’ve noticed she’s also quite lucky, so I patiently go along with it even though I’m a grown-up now. And now that I think of it, I’ve been lucky for a lot longer than I deserve to be.
But enough of this coinage segue: Hello, Penny, and welcome to the coolest blog ever!
Maybe those are the first signs of rising stock prices, rising commodity prices, rising house prices…rising prices, like in inflation. Wouldn’t be suprising with all the money printing going on these days. Once the psychology changes and the velocity of money incrases along with the base money supply we can have very explosive growth in prices across the board. Not saying that wages will necessarily keep up, too much unemployment.
I see foreclosures are selling quickly if reasonably priced. Sales activity has picked up and prices seemed to have found a bottom for now. I am sure the $8K subsidy for 1st time buyers helps as it can easily be turned into another $80K of purchasing power/leverage.
I forsee rising prices for a while, with no or modest gains in income. not a pretty picture.
The only way your scenario can play out is with massive increases in personal debt. Peak personal debt has passed. There is nothing the Fed can to to stop the collapse of the biggest credit bubble in history.
yes they can, it’s called stimulus. Like giving $8K to home buyers. Soon they will be handing out cash to new car buyers. More money on food stamps, etc.
They have to create inflation, if they don’t they’ll have to default on their debt. Inflation is the only way to keep the game going.
Amen brother. This is not a housing bubble
that burst, but a 35 year credit bubble that
has is going to take everything down with it.
In the 20-year period there was a massive shift of government debt to personal debt; as a percentage of GDP at least. The next 10-20 years will see a reversing of that, which started about a year ago - a shifting of personal debt to government debt.
This is where the inflation will come from this time - government debt, not personal. Though stimulus programs, TARPs, etc. etc. In some cases the end user will sometimes see “free money” (e.g. stimulus checks; $8k tax incentives, etc), and in other cases they won’t visibly see it, but it will be there - e.g. with the TARP. The end user doesn’t see the TARP directly, but will instead see it in the form of loans they can get that they otherwise wouldn’t have been able to. This is how the money flows out into the system; with its source as government-debt-created money.
IMO it may well be that the recent rise in T-bond rates; from 2% to above 3.2% now, is the first sprouts of the inflation. It’s worth keeping an eye on.
Agree with Mike and packman.
Inflation is here. All of these large investors (new hedge funds, and players who formerly worked in the financial industry) are getting govt subsidies/guarantees/cheap liquidity, and they are buying stuff up like kids in a candy store.
To J6, this will probably look an awful lot like stagflation (prices will rise because of the investors, but wages will lag or decline). Just a guess.
Jobs for sure. That brings up the next shoe to drop. The numerous and large commerical BAD loans. Lots of banks are on the hook for them and that’s going to really CLOSE a lot of teller cages in local and regional banks…big time.
Yeah, Edge: That ownership society is not working out so well for the masses. Turns out ownership requires work, tenacity, research, stability and a whole bunch of stuff most people can’t/don’t want to do.
Especially that “job stability” part.
Offshoring anyone? Illegal immigration? Temp work?
“A likely explanation for this collective obsession is that the initial wave of the bust caught so many folks flatfooted that the desperation to go in for a “quick win” is exploding.”
Great point, John…
“Double or nothing, baby!!!” (shaking dice vigorously while blowing on them)
It’s more like “Double my losses or nothin’!”
They’re desperate to break even, not to double their winnings.
12.9 percent in Michigan now.
“Re-bloating rotting corpses with gas isn’t going to cut the cheese.”
Wow. So repugnant.
And yet so apt.
I should think it WOULD cut the cheese…but not the mustard.
smart!
That deserves a rim shot!
Good one!
For those of you calling the bottom, I mean no disrespect, but I’ve got three words for you: jobs, jobs, jobs.
Got some inside info on what’s happening at Philly metro’s biggest realtor: layoffs across the board - not agents, but marketing, admin, acctg staff, etc. The local press is busy cheerleading a “recovery” - against the obvious backdrop of more houses for sale than ever. Even my real estate permabull buddy has noticed.
Any property that isn’t under contract by June 30 this year is dead in the water. Add layoffs at Big Realty to increasing inventory, and you’ll have agents pressuring sellers to come down off their wishing prices. But the best tidbit of info that I got was that the higher-ups are building a case against the hag that I worked for. Seems she was cooking the books to make her dept. appear more profitable than it was.
And who is ready to step into her shoes:
A younger, prettier version of her. The one she depended on to be her hatchet man. (So to speak)
“building a case against the hag that I worked for” LOL!
Good to hear, was she a “toothless bearded hag” or just a garden variety hag?
A pretentious Grace Kelly wannabe hag.
phillygal,
LOL! Says it all for me!?
Perhaps if findings are not in her favor she is always welcome to become the editor for my soon to be out magazine dubbed: MEW Lifestyle!
(Somehow I was picturing Tim ( I likes to be paid upfront ) Blixseth’s wife? ( ‘There’s’ a piece of work? )
“toothless bearded hag”
Come back, you fat, bearded, b*tch!
~ Lord Dark Helmet
Reminds me of a sign I saw yesterday:
Witch Parking Only
All Others Will Be Toad
Any property that isn’t under contract by June 30 this year is dead in the water.
How so? Just curious.
Families want to get in the new house before school starts.
Typical time to close from date contract is signed is 60 days.
(RE agents dread the coming of July 4 wknd if there’s too much inventory still available.)
This is what I keep hoping will help me. I plan to buy in the same school district I currently live in and could care less if I move midway during the school year or not.
Families want to get in the new house before school starts.
Ah, makes sense.
Thanks.
eastcoaster -
I’ve seen two homes in my area, similar to what you’re looking for - slash their wishing price, from around 240k to 210-220k. Sellers are beginning to get the picture.
It will happen in Montco and Bucks as well.
Well, at least you have something to look at while listening in disbelief, right?
Being a born and raised Pennsylvanian, news from the Keystone State is of great interest. And Arizona Slim’s Mom would like to add the following to phillygal’s report:
There are a lot of houses that have been for sale for months, if not years. Some of them toggle back and forth between being for sale and for rent.
Mom gathers her observations through her drives in and around West Chester, PA. She also walks the dog around the neighborhood and is VERY good at chatting up anyone and everyone she meets. (Did I mention that her father was a detective?)
hey if Mom gets any good intel about REALLY motivated sellers…give her my number!
There may be one across the street. Lady’s graduated from nurse’s training and got a job. Now that she’s working, no more alimony from Mr. Ex.
Right now, the Slim family thinks that the house is way overpriced.
“…but I’ve got three words for you: jobs, jobs, jobs.”
Shelby’s Corker McConnell: Alabama/Tennessee/Kentucky
Now listen hear America, you just need to follow our Southern lead…just create 5-8 million new jobs between $6.50 & $14.00 per hour… then America can get back to buying houses @ $275,000+ and automobiles @ $20,000+ …Oh, and save enough for child care because both parents will need to work, it’s just that simple…Besides who cares to save money if it only returns 1.12%?
Yep. We’re screwed.
‘Cause paying people decent wages is just plain socialeest/commie talk! (never mind they can no longer to buy the stuff our 75% consumer driven economy requires to keep running)
Palmy, John Mauldin’s latest piece is really interesting. I forget who actually wrote it, Mauldin borrowed it as he often does. Argues that the only way to overcome the incipient massive deficit runups is with policies that will seriously promote growth, not give-aways targeted at increasing consumption. The prescriptions are, infrastructure investment, education investment (not to be confused with giveaways to teachers’ unions), i.e., make us more competitive w/ Chindia et al. Also argues that massive further investment is needed in recovering available petroleum, as renewables will not make up looming shortfall. Doesn’t say what to do when oil seriously runs dry…
Chindia can make the same investments in infrastructure & education. In fact, they have been and are doing a much better job than us.
Actually they can build more infrastructure & schools and hire more teachers at lower cost than we can.
The trouble with the Chindian educational systems is that they are based on rote learning. Not that rote is all bad. It’s the best way to learn things like the multiplication tables, rules of grammar, the Periodic Table of the Elements, etc.
However, when it comes to (cliche alert!) out of the box thinking, Chindia doesn’t fare as well. Yes, a case could be made for the notion that formal education isn’t the best place for nurturing such thinking.
So, we’ll need to look to our culture. As compared to say, Europe and Asia, the United States has a long tradition of risk-taking, innovation, and entrepreneurship. So, I think we have an edge there.
The above being said, we still need to do a better job of teaching our children.
I tend to think that rote learning is what happens in the American education system through high school. At the collegiate level, the US does a great job of teaching “out of the box” thinking. Sadly, most of the the students in science and engineering in the US are chindians, taking those abilities home to their own school systems.
keep that kind of thinking az and you’ll wake up one day and realize that chindia is ruling technology. notice the percentage of them excelling in the UC system, for example? very much skewed in their favor, both in sheer number and percentage.
Plamy:
There ARE Millions of jobs in America….nobdy has to be without work in America
The problem today is Getting PAID to work.
I get 20-30 job offers a week all commisson only or intern lo /no pay jobs.. The laws are so azzbackwards you cant work for Free and keep your skils updated unless you are in school or work for a non profit It violates the Fair labor Standards Act
This is the change we need asap….you can work as an intern or go to school while on unemploment and a WPA program for us to get recent job trainng on our resume so we look more employambe…but how do i pay my rent?
NPR station announced this morning that Montgomery County MD wants local businesses to hire lots and lots of young people (presumably teens and under 22’s) this summer. The businesses don’t even have to pay them. The county will pay their salaries. I was very irked. I know that the munchkins are more likely than adults to cause trouble when they don’t have anything to do, but, in this economy aren’t there plenty of grown ups who could use those jobs that traditionally go to teens?
Pondering the Mess, have you heard of this one?
If I could hire kids to code valid XHTML and CSS for me, I’d be all over this jobs program in a heartbeat. But I’m not in the business of babysitting kids who need to be gotten off the streets for the summer.
CSS = cascading style sheets?
That’s what it equals, phillygal.
Polly its so bad even Lawyers blatantly advertise for Recent college grads…
Knowing they have Nothing to fear from EEOC……but i could file a complaint just to pizz them off…and who knows i might make more $$$ threatening to sue then actually working……
Every commission only job I have ever looked into turned out to be some sort of scam or pyramid scheme.
jobs, jobs, jobs?
That is so 20th century; jobs are for chumps. We dont need no stinking jobs. Get with the program. Here is how things work in the USA 21st century
Lend anyone with a pulse 300,000 to buy a house. When the banks stop doing it, get FNM, FRE, FHA to do it. When these institutions become insolvent, give them more money. People not buying houses, give them a $8000 tax credit. Cant make your payment, thats ok we will let you stay 18 months before eviction. Need to keep california and expensive houses elevated, raise the conforming limit to 750,000.
No jobs or industry needed. Just have the government print trillions of dollars and lend it to the people to buy houses.
“For those of you calling the bottom, I mean no disrespect, but I’ve got three words for you: jobs, jobs, jobs.”
I thought jobs were a lagging indicator of business
“I thought jobs were a lagging indicator of business”
That’s what the PTB want you to think. That way they can inflate stock prices and pay themselves bonuses without bothering to hire anyone.
Like anyone else in BK you are going to give up some stuff. May I suggest you give up Alaska.
” Most ppl buy on confidence rather than underlying fundamentals.”
Most people buy on emotion be it houses or in the stock market. Time is either you ally or your friend and patience is always rewarded. You buy for me, I like vicarious living!
I don’t have the feeling that the remaining equities I hold will recover, no matter how patient I am.
If there are new stock market lows ahead, a palatable choice might be selling out stock losses now, parking funds in MM or FDIC and catching things on the way back up after the next big drop. What other alternatives exist for those with stock losses and a day job that doesn’t allow ongoing intensive market analysis and moving money every 48-98 hours?
The last two months have proven the stock market is far from capitulation. Why wouldn’t the next run-up rise just as fast and far as this one? IMHO capitalizing on the never-say-die DNA in people is about the only viable strategy in town these days.
Lots of other folks on the web have recently been discussing some of the same shadow inventory questions brought up here yesterday (and on many previous occasions).
So, where are all the foreclosures?
User Forum Topic
Submitted by Oxford on April 11, 2009 - 11:47pm
Our own Rich Toscano raises this question in this article:
http://www.voiceofsandiego.org/toscano/
“Housing Demand Grows While Supply Shrinks — Except for Those Foreclosures?”
He doesn’t know the answer and neither do I.
Could it be a mass collusion of banks to keep foreclosures off the market and ease them back in so to not to put housing prices in a death spiral? How long can they wait? What will it eventually mean to the housing market and the economy.
We are seeing active springtime home buying and low interest rates. The low end is getting snapped up and other mid/high inventory is low. There seems to be a “sense of recovery” in the air (well, to me). But is this all an illusion?
Is the other shoe about to drop HARD in the form of withheld foreclosures? What then?
Pigs, wallow forth please with your wisdom.
“Pigs, wallow forth please with your wisdom.”
Are you speaking to US? (hee hee)
PB,
Well, before we agonize over this any longer… I’ve no doubt Megabank Inc. has carried out the math to realize even if huge swaths of their FC inventory slides into utter disrepair, the losses will be less painful than dumping them ALL on the market at the same time?
If you can sell off 10% of your inventory at a time in a controlled crash ( eating losses every step of the way ) isn’t it really just a matter of FIFO and dealing w/ the write offs in some future quarter? I have to imagine much of what we’re seeing come on the market just ‘now’ was from Teaser loans taken out in 2004? Oh and stopped making payments after the first re-set in 2006.
I commented on this on the long thread yesterday but it was at the very end of the day. It seems as if the combination of the FASB’s relaxed accounting rules and the massive bailout/backstopping of Big Finance is what makes this all pencil out for the lenders.
As long as banks can “mark-to-fantasy”, they’re arguably better off not liquidating so they can keep up the appearance of solvency. And the Fed and Treasury, by their bailout strategies, knowingly make all of this possible. With the beneficial side effect (to them) of keeping prices higher than they would be if true fire sales started to commence.
So if we remain on this course, the propped-up banks will have to trickle out their toxic junk for most of the next decade. People should consider this when considering going long on financials any time in the foreseeable future.
iftheshoefits,
I can’t thank you enough! And right, if it takes a decade to bleed through all of this RTC-style, well then I guess it does?
By upgrading from mark-to-myth all the way up to mark-to-fantasy, the numbers are what we ’say’ they are! Everyone’s cheering for the Fire Sale ( and secretly so am I ) but the consequences have so many dark possible outcomes, it’s simply a risk they can’t take right now. We’ll kick the can thank you!
“As long as banks can “mark-to-fantasy”, they’re arguably better off not liquidating so they can keep up the appearance of solvency. ”
Agreed. If they dump their REOs, the waves of lower prices will result in more defaults and jingle mail. The longer they can convince their performing debtors that the bottom is in, the more payments they can collect. Combine that with their ability to mark-to-fantasy and drink the “hold out to get higher prices on existing inventory” kool-ade, and there you have it.
Thinking this through a little.
What should be the downside of hanging on to this inventory. Answer: a loss of income for the bank. And if revenues aren’t adequate you should have negative cash flow showing a quickly dwindling cash reserve, leading eventually to bankruptcy. Right?
But what if the mortgage is securitized? As a bank, your just servicing the loan. Holding onto the house instead of putting it back on the market doesn’t hurt you, it just hurts whomever holds the tranche(s) with that mortgage.
So these investors might be taking the hit, and who are they? Pension funds? China? Can they force inventory back onto the market?
Jon, good points but your assumptions of negative cash flow being a killer pertain more to a somewhat normal situation without all the bailout and backstopping being available, I would think.
At present, the consensus amongst the smart folks seems to be that almost all of the megabanks are severely undercapitalized, with public information about their true situations being carefully managed (i.e., suppressed). Therefore, maintaining the appearance of unrealistic portfolio valuations, while TARP, TALF, PPIP etc preserve the cash flows, is what is keeping them alive, as far as I can tell. I’m not defending this, just trying to figure out what the calculations really are.
I’ve seen this before.
It’s a game of chicken. The lenders will hold on to the inventory until the cost of holding equals the loss they would have taken or they get some kind of bailout.
Many will lose. There were some GREAT deals by the end of the Savings & Loan debacle.
Why am I even posting?
Never mind. The post delay was pretty bad today.
Fear the shadow
A turnaround in the housing market could bring a flood of new listings, according to Zillow.
In Zillow’s recent survey, 31 percent of owners said they would be at least somewhat likely to put their homes on the market in the next year if they saw signs of a recovery, Stan Humphries, the Seattle-based real estate Web site’s vice president of data and analytics, noted in a blog post.
“This ’shadow inventory’ will likely be one of the contributors to a recovery that is more ‘L’-shaped than ‘V’-shaped,” he wrote. In other words, prices hits bottom and then stay there a while, thanks to the inventory influx.
…
Interoffice memo:
re: Winston
subject: tardiness
9:30 EST Let it be noted that as of stated time, the subject has yet to report for duty; whereas others have been called to assist in subjects’ duties, let it be further noted, that unapproved reports were disseminated in subject’s absence.
I talked to an old friend recently. We’re both retired and he and his wife are “stuck” in Maryland because they don’t want to sell now and give up the gain they would have had if they had sold three years ago. Even when I pointed out that home prices are down everywhere, and if he has to sell at a lower price there he will be able to buy at a lower price pretty much anywhere. I also reminded him he’s not getting any younger.
It either didn’t sink in, or they have been serial refinancers and now have little or no equity. Yet they’ve been in the house for close to 20 years.
Can anyone point me to a web site that posts Frederick County, Maryland property records? All I’ve ever been able to find are subscription sites for that county’s records.
This site has data - not individual records that I’m aware of, but does show price and sales trends, including for Frederick county.
http://www.mris.com/reports/stats/monthly_reti.cfm
Here you go:
http://sdatcert3.resiusa.org/rp_rewrite/
And if you need to see the land records, titles etc, then go here:
http://www.mdlandrec.net/msa/stagser/s1700/s1741/cfm/index.cfm
http://sdatcert3.resiusa.org/rp_rewrite/
OK. Attempt to post # 2:
http://sdatcert3.resiusa.org/rp_rewrite/
Bill…I may be able to help you out…Send a email to Ben so I can get your email address unless you want to post it here on the board…
The Shadow Inventory seems to be ubiquitous, creeping up everywhere on local markets formerly known as a bit frothy.
Home sales decrease in April
However, there is potentially good news as year-over-year pending sales increased for the first time since April 2007
By Diane Dietz
The Register-Guard
Posted to Web: Saturday, May 16, 2009 12:10AM
Appeared in print: Saturday, May 16, 2009, page D3
Business: Home: Story
Housing prices in the greater Eugene-Springfield area continued their downward slide in April as the supply of for-sale houses outstripped the demand from credit worthy buyers, although year-over-year pending sales increased for the first time since April 2007. Pending sales were up 8.2 percent this April, compared with a year ago, and up 22 percent compared with a month ago.
At the current rate of sales, the supply of houses on the market would take 10.5 months to clear, according to the monthly report from the Regional Multiple Listing Service released on Friday.
But the “shadow inventory” of houses that sellers are waiting to put on the market until it improves is raising some concern among bankers and real estate professionals.
The shadow inventory, which doesn’t show up in monthly real estate statistics, includes houses that banks are in the lengthy process of repossessing, houses that families need to sell but can’t and houses that builders started during the boom years that are sitting empty now.
“There’s a vacancy factor around Eugene of houses waiting to go on the market,” said Eugene appraiser Craig McKern.
A large shadow supply can be a hazard to a local real estate market because, when prices start to climb again, their owners are tempted to rush them onto the market, creating a price depressing oversupply.
“You will see more stuff come back on the market, which means buyers will have more choices, which means prices will not recover as fast as you think they will,” McKern said.
“You will see more stuff come back on the market, which means buyers will have more choices,”
Mr. Bear, to be clear…he’s referring to buyers that have jobs, right? Jobs that pay slightly more than $6.50+, right? Because I’m thinking that there is a relationship between 30 year mortgages & jobs that last for more than 12 years, kinda a new economic model motto:
“Jobs, like real estate, are local”
“Jobs, like real estate, are local” ??
Exactly Hwy….The Eugene/Springfield area housing market was “Goosed” by all the funny money from both retirees and speculators from California…That is now gone and now the housing prices will have to stand on the fundamentals of jobs & income…
“You will see more stuff come back on the market, which means buyers will have more choices, which means prices will not recover as fast as you think they will,” McKern said.
Actually, the reverse is true. If banks were forced to dump all their REOs by the regulators, we’d see housing prices recover to normal levels much more quickly. The more stuff on the market, the sooner we recover.
Oh wait, you meant recover to ridiculous bubble valuations? HAHAHAHAHA! Good luck with that.
+2000, sfbb!
I can’t stand how they think a “recovery” means we get back to 2005 levels.
To me, a recovery means we get back to 1999 levels.
Beauty is in the eye of the beholder.
Dollar Is Dirt, Treasuries Are Toast, AAA Is Gone: Mark Gilbert
Commentary by Mark Gilbert
May 21 (Bloomberg) — The odds on the dollar, Treasury bonds and the U.S. government’s AAA grade all heading for the dumpster are shortening.
While currency forecasting is a mug’s game and bond yields can’t quite decide whether to dive toward deflation or surge in anticipation of inflation, every time I think about that credit rating, I hear what Agent Smith in the “Matrix” movies called “the sound of inevitability.”
Several policy missteps suggest that investors should stop trusting — and lending to — the U.S. government. These include the state’s pressure on Bank of America Corp. to buy Merrill Lynch & Co.; the priority given to Chrysler LLC’s unions over the automaker’s secured creditors; and the freedom that some banks will regain to supersize executive bonuses by giving back part of the government money bolstering their balance sheets.
Currency markets have been in a weird state of what looks almost like equilibrium for the past couple of months. What’s really going on is something akin to an evenly matched tug of war that fails to move the ribbon tied around the center of the rope, giving the impression of harmony while powerful forces do silent battle until someone slips.
“All currencies are being debased dramatically by their central banks at extraordinary speeds and so in relative terms it appears there is no currency problem,” Lee Quaintance and Paul Brodsky of QB Asset Management said in a research note earlier this month. “In reality, however, paper money is highly vulnerable to a public catalyst that serves to acknowledge it is all merely vapor money.”
This is the disaster scenario.
On the other side is the rising personal savings rate. If we can balance our trade and finance our own debts, things might eventually turn around.
These are the two indicators I’m following.
I gather you mean international trade?
Hmm, since the United States has long since abandoned its manufacturing base, it boggles the mind how the trade imbalance could even be trimmed. But that would be a good starting place for improving national stability.
Simple, force asian countries to let their currencies float or tax imports from them for the difference. Their would be an immediate pants wetting scenario where wal-mart shoppers would see prices double, but over the long term they’d be able to get decent jobs to pay for those products (or make those products themselves).
I wouldn’t mind containers backed up at our ports.
(Cue Bruce Springsteen, “Born in the U.S.A.”)
Simple? I don’t think so. Am aware of the marionette-qualities of the yuan.
What to do? Maybe Pat Buchanan was right (though I make no claim that those wisps of understanding are in larger proportion to hot air.)
If the buck’s in a bad way, doesn’t it look as though the federales will have to raise interest rates? Y’know, to make the buck look attractive as compared to other currencies?
If so, I’m looking forward to a higher ROI on my savings
The FED is tring to lower interest rates to help Mortgages stay low. QE in play however the 10 year Treasury bond is still creaping up and today its up with the stock market down, and thats unusual
Currencies
May 21, 2009, 2:32 p.m. EST
Dollar index falls to its lowest level of 2009
By Kate Gibson & Deborah Levine, MarketWatch
NEW YORK (MarketWatch) — The dollar slumped on Thursday, with an index measuring the greenback against major currency rivals falling to its lowest level of the year as climbing Treasury yields and commodity prices pointed to higher inflation.
“Today’s price action underscores the importance of higher commodity and equity prices to fuel foreign currencies at the expense of the greenback,” said Michael Woolfolk, senior currency strategist at the Bank of New York Mellon.
His causality is backwards. It is a declining dollar which will support commodity, equity and foreign currency prices, not the other way around.
Amazing how all those commodities tend to jump in price simultaneously and coincidentally, causing the dollar to fall.
FWIW - odd thing today is that oil is down. Presumably due to economic projections. Today’s weird in that there’s a flight to certain safe havens (e.g. gold) but it’s been *away* from other things that were considered safe havens a few months ago - e.g. oil and treasuries.
Bad omen?
“FWIW - odd thing today is that oil is down.”
Perhaps the demand implications of a 35 mpg US fuel standard is gradually sinking in to oil traders’ heads…
Interesting how a ratings agency that totally missed on MBS can sink an entire country’s currency…
Wall Street Journal
* FOREIGN EXCHANGE
* MAY 21, 2009, 7:30 A.M. ET
S&P Move Sinks U.K. Pound
By KATIE MARTIN
LONDON — Buyers of the pound faced an unexpected reversal of fortunes Thursday, after ratings agency Standard & Poor’s Corp. lowered its credit-rating outlook for the U.K. to “negative” from “stable.”
The pound had soared in recent trading sessions. However, it fell sharply in response to S&P’s move, dropping by around 2% against the dollar and by 1.5% against the euro, as traders hedged themselves against the chance of a damaging future ratings downgrade for the U.K.
“Sink” might be a bit of an exageration when describing a short-term 1.5% decline. Anyway its recovering now, down 0.57%.
I often wonder who made the ratings agencies ‘Masters’ of the financial world.
Us tinfoil hat types love to ponder this stuff in the middle of the night.
I wonder who bothers paying attention to them. Have they been correct over the past several years?
The US government for one….and all the other world governments.
They’re only wrong if you’re on the wrong side of the trade.
Ask not for whom the bell tolls…
24/7 Wall Street
UK Debt Trouble Moves Soveign Borrowing Problem Closer To US
Posted: May 21, 2009 at 4:32 am
No one in the US worried much when S&P downgraded the sovereign debt of The Ukraine or the Republic of Kazakhstan. Now, the trouble has moved much closer to home as the credit agency lowered its credit rating outlook for the UK from “stable” to “negative.” The agency is concerned about the increase in government debt and decrease in GDP. The action may make it more difficult for the British government to raise money or, alternatively, it may force the country to pay higher interest rates.
The UK’s problem brings the trouble of rising deficits and falling GDP and tax collections closer to the US. The largest purchaser of American Treasuries, China, has already voiced concern about the profligacy of spending that is part of the plan to pull the US out of a deep recession. If China cuts back its purchases of Treasuries, even a bit, interest rates on paper issued in the future could move up substantially.
If China cuts back its purchases of Treasuries, even a bit, interest rates on paper issued in the future could move up substantially.
A big pet peeve of mine is this fixation on China debt purchasing. China’s only purchasing about $20B per month; being that our debt is running at $150B per month that means they’re only purchasing about 13% of our debt. I’m more worried about the other 87% of borrowers - most of whom are internal to the U.S.
See discussions below on today’s auctions that didn’t go well. This is the new big story. Sure China has a hand, but is only one small piece of the debt pie. The bigger picture is simply our attempt to expand the debt so fast that we can’t find new borrowers.
“If China cuts back its purchases of Treasuries, even a bit, interest rates on paper issued in the future could move up substantially.’
What the FED will just buy more of its own debt and make us pay for it. QE
Joking aside you are right which is one reason I may jump back to buying TBT
I may jump back to buying TBT
I’ve been there for a while now, and plan to stay - QE be damned. Up 4.5% today.
Treasuries are no longer seen as safe-haven. Inflation here we come.
Sorry Ben, this one’s gonna be long:
Why I’m Leaving New York
I love New York. But how much should it cost to call New York home? Decades of out of control budgets, spending increases and relentless borrowing have made New York simply too expensive.
Politicians like to talk about incentives: incentives for businesses to relocate, incentives to buy local and incentives to make smart decisions. After reviewing the 2009 budget I have identified the most compelling incentive of all: a major tax break immediately available to all New Yorkers. To be eligible, you need only do one thing: move out of New York State.
Last week I spent 90 minutes doing a couple of simple things-registering to vote, changing my drivers license, filling out a domicile certificate and signing a homestead certificate-in Florida. Combined with spending a 184 days a year outside New York these simple procedures will save me over $5 million in NY taxes annually.
That savings doesn’t include that Florida has a 6% sales tax compared to NY’s 8% or more. Florida has lower utility taxes. Lower gasoline taxes. Or that the Florida homestead certificate guarantees my property taxes will not grow more than 3%.
By moving to Florida I can spend that money on worthy causes like better hospitals, improving education and worthy projects like the Clinton Global Initiative. Or maybe I will continue to invest that money in fighting the status quo in Albany. One thing is certain, that money will not continue to fund Albany’s bloated bureaucracy, corrupt politicians or regular handouts to the special interests.
How did we get here in the first place? It all starts with spending, spending and more spending.
BUDGET SPENDING
New York’s budget was $72.7 billion in 1999. Ten years later it has ballooned to $131.8 billion. That growth is astounding but it continues to get worse. Each year, New York’s budget has had 6% compounded growth, double the average rate of inflation (2.8%). Florida’s budget, on the other hand, went down 8% this year.
HEALTH CARE SPENDING
New York spends $2,283 per person on Medicaid. That’s the highest per capita spending in the nation and twice the national average. In the last decade the Medicaid budget has grown by 50% ($30 billion in 1999 and $45 billion in 2009). In almost every sector (hospitals, nursing homes, medicine, clinics, and home and community care) spending per recipient regularly exceeds the national average.
Faced with escalating costs and diminishing returns, Albany and their allies, the health care unions (SEIU has over 300,000 politically active members), had only one answer: increase taxes.
EDUCATION SPENDING
New York spends the most, per pupil, in America on education, spending 63% above the national average. Costs went up about 60% in the last decade ($12.7 billion in 1999 and $20.7 billion in 2009). Like health care, education is something worth spending on and worth investing in but we’re spending more and getting less. New York City schools graduated 54% of high school students in 2007. Buffalo 47% and Rochester 45%.
Why? Perhaps it’s because the New York State teachers union with its $114 million budget is always trying to convince Albany to spend more. Maybe it’s because it’s mandatory that all teachers pay union dues. Whatever the cause, when faced with potential cuts, the union and their allies have one response: increase taxes.
LOCAL GOVERNMENT SPENDING
It’s not just the state. It’s the range and breadth of many layers of governments and special taxing districts. In New York, the average state and local tax burden is $5,260 for every man, woman and child. That’s by far the highest in the country. Like Albany, when faced with a difficult problem, these municipalities have one answer: increase taxes.
Upstate New York has been particularly hard hit. Add unreasonable real estate taxes to the uncontrolled state spending and you have whole communities decimated. The assessment process is unfair, unworkable and unreasonable and the result is that 15 of the 20 highest taxed counties in America are right here in Upstate New York. While homeowners in other areas build equity, we just pay more taxes.
NO ONE’S HOME
This problem did not begin with the current recession. New York faced a $6 billion shortfall before the economic downturn. However in the face of economic turmoil Governor Paterson, Speaker Silver and Majority Leader Smith looked to the unions and special interests who answered with one voice: raise taxes.
Among other taxes and fees, they raised the marginal tax rate on the most successful (and most mobile) New Yorkers to 8.97 percent, the second highest rate in the nation.
It was irresponsible and it may just prove to be counterproductive since the top 1% of earners account for about 50% of state revenue. We’re the one who can-and will-leave.
It’s not an easy decision but I’m being forced away from my family and friends, pain shared by too many parents and grandparents in this state.
I’m leaving. And by domiciling in Florida I will personally save $13,800 every single day. That’s a pretty strong incentive.
Like I said, I love New York but I’m not going to pay any more for the waste, corruption and inefficiency that is New York State government.
TOM GOLISANO
Responsible New York
“the Florida homestead certificate guarantees my property taxes will not grow more than 3%.”
Well, yes and no.
Save Our Homes caps property taxes in that your taxes can’t be raised more than 3% each year. EXCEPT. In a number of counties, they are currently discussing raising the millage rates to make up the shortfalls from the bust (they got used to all that money when all those people were paying $500K for houses now worth around $200K). If/when mill rates increase (and I think it’s a given), even SOH homeowners will see their taxes go up, and by much more than 3%.
Property taxes in Texas run close to 3%. If you have a $200k house, your prop taxes alone would be close to $6k.
Makes the tax burden of those New Yorkers living in $800k apartments and paying only $5k down right affordable.
No state income tax in TX makes a HUGE difference. Keep in mind, NYC has its own little income tax racket - upwards of 3%.
In New York, the average state and local tax burden is $5,260
According to the post, the $5,260 includes state income tax and that does not really seem to be that bad of a tax burden considering that salaries in NY are among the highest in the country.
$5,260 works out to be the taxes on a house in Texas appraised around $175k. Property taxes do vary a little in Texas depending on which city/county/school district you are located in.
I hope that guy doesn’t move to Texas he is in for a big shock.
I think that’s why there was never much of a housing bubble in Texas - the taxes act as a cap on how much the median person can afford.
“the $5,260 includes state income tax and that does not really seem to be that bad of a tax burden”
That’s because of the low cost housing/low mil rates in far flung areas of the state. In my Syracuse burb, housing in that price range you’re looking at $7700 - $8700/yr, the high end being a 40 year old home with the $1200 village tax add on. Everything I’ve looked at in the village below $250k shows $9200 - $9400 despite being 30-50 years old. That’s the bill before the next purchase (The county RE sales were up 6.4% last month YOY)
These tax burdens are mostly school taxes. Most budgets get overwhelmingly voted through. This particular town sports about a 20% rate of over six figure incomes and a sizable number of residents w/plus $500k incomes so it’s the “snowflake” thing. But after recently switching districts I can testify this higher tax district is night and day from the last so they’re turning me into a believer of you get what you pay for. My kids are really, really happy here and doing well in a district known for a tough curriculum. That’s strong teaching/admin support skills.
“While homeowners in other areas build equity, we just pay more taxes.”
Another upstater that can’t conceptualize the bubble, IMHO.
you pay 13k a day in state income taxes?
wow.
oops..just googled the name.
moving along.
“It’s not an easy decision but I’m being forced away from my family and friends, pain shared by too many parents and grandparents in this state.”
Well Tom, you’re not being forced. And if your state taxes are $5M, then I’m betting your take home is around $10M. So let’s be honest here. You are more than willing to abandon your family and friends cause you can’t stand to have to live on a measly $10M.
And where’d you get that $15M/year Tom? Selling CDO’s to pensions?
Wow! This guy is definitely a finalist for “Whiner of the Year!”
$15M? You’re having trouble living on $15M Mr. Whiner?
Does “Let them eat cake” rings any bells?
“the union and their allies have one response: increase taxes.”
The local school budgets were up for vote Tuesday. 97% of them passed. Sounds like the taxpayers are on board for the increases.
“Last week I spent 90 minutes doing a couple of simple things-registering to vote, changing my drivers license, filling out a domicile certificate and signing a homestead certificate-in Florida. Combined with spending a 184 days a year outside New York these simple procedures will save me over $5 million in NY taxes annually.”
The gentleman needs to seek the advice of a competent tax attorney. If I recall correctly, if one is already a resident of NYS and has access to a permanent residence (owned or rented, all that is required is that you can go stay there when you choose) in NYS, then you cannot abandon your NYS residence simply by setting up a permanent home elsewhere and staying out of NYS for a little over half the year. In order to abandon NYS residence, you may not be in NYS for more than 30 days of the year.
I hope that is still the rule and that they nail his butt to the wall.
Good morning, Muggy.
If you are still interested in trading I suggest you get hold of the book “Market Wizards”, by Jack D. Schwager, and read his interview with Ed Seykota.
Hey Combo! I quit trading and now you suggest it!? Twilight zone alert! All kidding aside, I have always appreciated your commentary. I have stopped day-trading (I just wanted to try it), but I am still interested in picking up some stocks, since I won’t be buying a house anytime soon. I did look up Seykota the other week when you first suggested him. He’s awesome.
I believe myself and other posters have similar questions of you –probably because you are one of the steadiest creatures on the planet — when you say stocks of value, do you mean companies that actually do something (being serious)? As in buying stocks for dividends?
I suggest you read Ben Graham’s “The Intelligent Investor”; Graham was all about determining value.
Gadzooks, Muggy, I thought you’d written that thing yourself, until I came to the statement about saving $5 million a year by moving out of NY. I thought you were already in Florida, and I was SURE you were not paying $5 mil/yr in state taxes. Why? Because something about your youthful (?) ramblings re your securities trading tells me you are not Uber Rich.
Anyway, this is what Donald Trump has been saying, that very wealthy people will be moving out of NYC in larger numbers. He thinks they should all come to P Beach.
And this is all part of why I think NYC is heading for a very dark period. Maybe not ’70s-level dark, but very dark.
Calling the bottom is kinda like trying to predict the end of this sub-tropical system we’re having here in Florida. Unbelievable. Any of my fellow Floridians started quacking like a duck yet? Sheesh, it just keeps on coming. Don’t get me wrong, we’ve had a three year drought and can really use the rain, but I just wonder how much of it will just be useless runoff. I’m also going to be interested to hear the development fallout, where areas that didn’t used to flood, now have flooding problems.
Saw that - many you guys are getting wet indeed. I’m going to be down there in about 3 weeks. Make sure it’s gone by then, eh?
Ditto on the quacking like a duck. Here in Tucson, where it’s normally dry at this time of year, we’re getting rained upon. Bigtime.
And the prognosticators are saying that this year’s monsoon season will come early.
“Here in Tucson, where it’s normally dry at this time of year, we’re getting rained upon. Bigtime.”
Good some rain here in Phoenix as well.
I’m going to Tucson tomorrow going to spend the weekend maybe my last AZ adventure for awhile. Going to mnt lemon Friday and then Bisbee on Saturday. Tucson is nice compared to Phoenix but most Phoenix folks I work with don’t like Tucson at all, say its hotter than Phoenix etc.
My observations on Phoenix people for the last 3 years, nicer than Cali folk and also stupider. its time to go.
Saturday is my 16th wedding anniversary. We love boating, golf, tennis, motorcycles, the beach. But it’s still expected to be raining. I’ve got indoor activities that’ll last maybe 20 minutes with cuddle time. After that I’m at a loss for indoor activities.
Do the indoor activites again. Repeat until rain stops.
Congratulations on your 16th anniversary, Jon!
Plenty of “indoor activities” to keep you guys busy. Enjoy!
“Sorry Ben, this one’s gonna be long:”
Famous last words:
There are no bears in this cave.
Cut the blue wire first.
My husband won’t be home for hours.
“hold my beer and watch this”
“awww man…i can do that”
Hold the wheel while I smoke this …
“Buckle up. Imma try sumpin’”
“Buckle up. Imma try sumpin’”
Hey, you appear to be channeling me. But you can’t, because I’m still alive. And channeling someone who’s still alive is against the rules, or sumpin’.
You guys missed the most obvious one!
“how much a month?”
Don’t worry, I’ve done this before.
Of course I know what I’m doing.
Done this a hundred times.
It’s not THAT big.
It’s not THAT far.
It’s not THAT hot.
“This could suck.”
Public Sector Pay
For the skeptics who have doubted my comments regarding pay scales for Mazzland coppers…
Get a load of six-figure overtime income with subsequent 80% of “high five” retirement pensions doled out at 45.
Badge Boyz-the new financial elite for a nation of hysterical soccer mommies and no ballz Mangina “Chicken-littles”.
People get the government they deserve.
http://www.myfoxboston.com/dpp/news/undercover/State_Troopers_Too_Much_Airport_OT_052009
Ah, but Wall Street executives who run their companies into the ground earn more. That’s all the public employee unions want to talk about.
Neither thinks much of the serfs.
Well, you tell me. With a finite supply of outrage available, where should it most profitably be directed?
Hard to say. The supply of outrages seems infinate.
General strikes would hit both the corporate and political class oligarchies, and that’s where we are going when the serfs wake up.
The beauty of American suburbia and the 2 income household is that you can’t create the critical mass necessary for a general strike.
We have a winner.
“…Gov. Deval Patrick makes $140,535 a year. We found more than 70 troopers at Logan earning more than the governor.”
So, I ASSUME that…they must have a low turnover rate & high moral.
“It’s outrageous that State Police managers at Massport are earning these types of salaries through overtime when it’s the troopers who are the boots on the ground, working around the clock to protect the public in a post-9/11 era under greater security mandates. We will continue to continue to put the public’s protection first,” said Rick Brown, president of the State Police Association.
When in a corner, always mention 9/11.
“Badge Boyz-the new financial elite for a nation of hysterical soccer mommies and no ballz Mangina “Chicken-littles”.”
Haha! I’d laugh harder if I weren’t a no ballz Mangina Chicken-little myself.
(NBMCL)
hd74man,
This is a commonly used tactic by law enforcement types. Because of the way their ret. is structured the chief allows them to ramp up their OT in the final years of service to juice up the pension checks. As if things weren’t juicy enough already?
Retired at 45? You’re kidding me, right?
Wow hd,
Can you give us a post without slamming women?
Don’t hold your breath.
The season finale of Criminal Minds had a great line, “Hope is paralyzing. Pain… it happens and you move one.”
Oh, man, this is SO true.
Yeah - but did he really get shot…. great show. Along with 24, House and now Fringe its the only other show I really try to watch, though I do miss from time to time.
There’s still a lot more pain to come, as long as people like this “Economou” guy (I know we’ve read about him before) are still running around loose:
http://www.sun-sentinel.com/business/realestate/sfl-condo-sales-052009sbmay21,0,1158019.story
So how are you guys able to post links? My posts won’t show up whenever I try to post a link.
Several things tend to toggle on “must be approved by moderator.” Links, replying to your own comment, commenting twice in less than a minute.
Have you ordered at least one HBB T-Shirt???
LOL! If the correlation fits…
More tentacles….
http://www.washingtonpost.com/wp-dyn/content/article/2009/05/19/AR2009051903061.html
U.S. May Add New Financial Watchdog
The Obama administration is actively discussing the creation of a regulatory commission that would have broad authority to protect consumers who use financial products as varied as mortgages, credit cards and mutual funds, according to several sources familiar with the matter.
…
If Elizabeth Warren is the main proponent, it’s gotta be a bad idea. In her universe, the borrower is never to blame.
Looks like a good excuse to create more federal jobs. Just what we need. Yawn.
Elizabeth Warren is one of the few people I actually trust in the Obama circle. She’s spot-on in her research and publications, IMHO.
Consumer protections?
I just hope that in this adminstration’s headlong rush to make sure everyone can take on as much debt as humanly possible - that someone - somwhere - is also looking to strengthen those other consumer protections at the USDA, FDA, etc.
During the decider’s reign one hear a lot about how terrible food safety enforcement had lapsed - you don’t hear much about that nowadays. Now it’s just this fanactical drive to push debt.
Hidden at the bottom of page D7 of the WSJ is this gem:
Lump-Sum Distributions Become Harder to Get
The option of a lump sum on retirement is likely to disappear for a lot more workers this fall.
…
The 100 largest pension plans ended 2008 with $217 billion in liabilities, compared to an $86 billion surplus at the end of 2007. The funding status dropped from about 106% at the end of 2007 to less than 80% at the end of 2008.
The Pension Protection Act begins to restrict lump-sum payouts when a plan is less than 80% funded, says Judith F. Mazo, senior vice president, director of research at the Segal Co., a consulting firm. At that point, workers can receive only half of the amount in a lump sum, with the other half as an annuity. Plans that are less than 60% funded are forced to freeze and provide only an annuity.
…
Interestingly - Wikipedia makes no mention of this provision in the Pension Protection Act. Slipped in “under the radar” I guess.
(yesterday’s WSJ actually) - link
You won’t take your lumps and you will like it.
LOL - good one!
US Dollar to be Replaced as the World’s Reserve Currency?
“…. While the dollar’s status as the major reserve currency will not vanish overnight, we can no longer take it for granted. Sooner than we think…
Traditionally, empires that hold the global reserve currency are also net foreign creditors and net lenders. The British Empire declined — and the pound lost its status as the main global reserve currency — when Britain became a net debtor and a net borrower in World War II. Today, the United States is in a similar position. It is running huge budget and trade deficits, and is relying on the kindness of restless foreign creditors who are starting to feel uneasy about accumulating even more dollar assets. The resulting downfall of the dollar may be only a matter of time.”
It aint easy being green.
Feds give $50M in aid to towns hit by auto layoffs May 21, 2009 10:08 AM ET
All Associated Press news DAYTON, Ohio (AP) - The federal government is making $50 million in federal funds available for green energy job training in communities hurt by layoffs in the auto industry.
President Barack Obama’s director of recovery for auto communities and workers, Ed Montgomery, announced the program Thursday in Dayton, Ohio.
He says funds will be used to train workers for jobs in energy efficiency and renewable energy sectors. It also will provide counseling and placement services to laid-off autoworkers.
The $50 million is part of $500 million provided to the U.S. Department of Labor through the federal stimulus law.
And I assume those towns all have jobs available in the renewable energy and energy efficiency sectors.
They don’t?
Huh.
I guess they’re all getting trained to install weather stripping, then.
Installing weatherstripping isn’t such a bad thing. I’d love to have it installed here at the Arizona Slim Ranch.
So do it. It’s not exactly rocket science.
Sure, once I finish re-outfitting the innards of one of my toilet tanks. It’s now down to the washers around the tank to base bolts. Dang things are the wrong size. Which means that johnny’s leaking…
Ah, toilets. It seems like you can’t replace one part of them without making another part start leaking. It’s almost best to just get entirely new innards from the pipe to the bowl whenever it starts acting up.
And as I’ve predicted these towns are going to be the ones to lure greentech manufacturers - if they don’t go overseas.
My state, OR, keeps suggesting they want to be the leaders in greentech, but with a newly hungry workforce, existing mfg infrastructure and hungry state coffers, why wouldn’t mfgs move to MI, IN, or OH? And if these companies are so ‘green’ why build new as opposed to reusing existing infrastructure assuming it is as efficient as a new plant?
Only reason I could think they’d choose CA or OR would be that shipping costs might be less.
I would love to see more money go towards building nuclear power plants.
Hey now, that’s crazy talk! Everyone knows nuclear power plants make you speak French!
Google “mini nukes power plants.”
The graft and fraud ridden behemoths of yesteryear are outdated dinosaurs.
Sounds like the Fed better use whatever tools it has left in the shed to make sure home prices flatten out. Glad to learn AG agrees with almost everyone else that the stress tests were too easy.
U.S. Stocks Decline on Jobless Claims, Greenspan Warning
By Eric Martin
May 21 (Bloomberg) — U.S. stocks fell for a third day, extending a global slump, as jobless claims topped forecasts and former Federal Reserve Chairman Alan Greenspan said the financial crisis isn’t over.
…
Comments from Greenspan after the close of trading yesterday suggested he sees a bigger capital shortfall in the banking system than reflected in regulators’ stress tests.
“There is still a very large unfunded capital requirement in the commercial banking system in the United States and that’s got to be funded,” Greenspan said in an interview in Washington. He also said that “until the price of homes flattens out we still have a very serious potential mortgage crisis.”
“…very serious potential…”
The turtle head has serious dementia…evidenced by his striking use of clarity in his words and future looking prognostications!
Trouble’s coming our way….
NEW YORK (AP) - Weak demand at a Treasury bond auction touched off worries in the stock market Thursday about the government’s ability to raise funds to fight the recession.
The government had to pay greater interest than expected in a sale of 30-year Treasurys. That is worrisome to traders because it could signal that it will become harder for Washington to finance its ambitious economic recovery plans. The higher interest rates also could push up costs for borrowing in areas like mortgages. …
“That is worrisome to traders because it could signal that it will become harder for Washington to finance its ambitious economic recovery plans. The higher interest rates also could push up costs for borrowing in areas like mortgages. …”
uhhh…Ya Think!?!?!
“The higher interest rates also could push up costs for borrowing in areas like mortgages. …”
There are some folks on this blog who would love to see mortgage interest rates go to 14%+…
Run Hwy…run!
I would laugh in glee as I lowballed like a madman.
Yep. Bring on the 14% rates!!!!
There are some folks on this blog who would love to see mortgage interest rates go to 14%+…
Add me to the list, wouldja?
Hell, make it 18%
Higher interest rates on my savings? Bring it on!
Woo for the higher ROI on savings! Yeah!!!
yea I saw that too.
NZ hunts accidental millionaires…
Police in New Zealand are searching for a couple who disappeared after a banking blunder deposited NZ$10m (£3.9m, US$6m) in their account.
The couple had applied for a NZ$10,000 overdraft but received NZ$10m in their business account instead, part of which they withdrew, local media report.
They are said to have run a service station in Rotorua, North Island.
Police believe the couple have left the country and Interpol has been alerted for assistance.
The deposit was made by the Australian bank Westpac, which has about 10 million customers.
Police said that part of the money had been recovered, without specifying the amount.
“The individuals associated with this account are believed to have left New Zealand and police [are] working through Interpol to locate those individuals,” said Detective Senior Sergeant David Harvey of New Zealand Police.
“Westpac Bank has recovered some of the money which had been inappropriately withdrawn.”
Westpac media relations manager Craig Dowling said the bank was “pursuing vigorous criminal and civil action to recover a sum of money stolen”.
Adding that the incident had prompted a review of how it had occurred, he said he would not comment on the specifics of the case due to the police investigation and court actions requiring confidentiality.
Hey, maybe their renting aladinsane’s place up in the Sequoia’s, might explain that odd Three Rivers local ad…House for rent, private well, total solar, ham radio, no cats…must pay in gold.
wmbz,
Didn’t these fools know that it’s WAY easier to rob your OWN house than to rob a bank! How many RE/MEW fraudsters have Interpol on their azz? Just curious.
How is this robbery? They applied for a loan and got it.
The bank is only mad because they didn’t buy a mansion with it.
Agreed, this should be civil matter. In Monopoly you always got to keep the bank errors in your favor.
Thank God those refi ads with the jiggling women are back! I love those…
So… captivating… must… stare…
This post is USELESS without PICTURES!!!
Or at least a merciful link….
Why would you ever click on those? Then the jiggling women go away and you have to do something boring like fill out online forms.
Wifey isn’t hanging around is she?
I hear that NY Times magazine article about the economics editor who is an FB is all over the news. It was front page on Salon yesterday, and on the TV earlier today.
In case any of you missed it, here is the link again.
http://www.nytimes.com/2009/05/17/magazine/17foreclosure-t.html?hpw
“If there was anybody who should have avoided the mortgage catastrophe, it was I. As an economics reporter for The New York Times, I have been the paper’s chief eyes and ears on the Federal Reserve for the past six years.”
“But in 2004, I joined millions of otherwise-sane Americans in what we now know was a catastrophic binge on overpriced real estate and reckless mortgages. Nobody duped or hypnotized me. Like so many others — borrowers, lenders and the Wall Street dealmakers behind them — I just thought I could beat the odds. We all had our reasons.”
Sounds like that guy should find cheaper women. $4k/month is crazy money.
That dude is a poster boy for emasculation.
‘Patty was brainy, regal, sexy, fiery and eclectic.
Oooh! Like the skinjob Cylon #3 series on ‘Battlestar Galactica’!
(That’d be Lucy Lawless, to those of you who foolishly did not watch BSG intently and eagerly.)
But I bet this ‘Patty’ human version couldn’t bend steel with her pretty little hands, huh?
Moving on…
We had very different ideas about money. Patty spent little on herself, but she refused to scrimp on top-quality produce, Starbucks coffee, bottled juices, fresh cheeses and clothing for the children and for me. She regularly bought me new shirts and ties to replace the frayed and drab ones in my closet. She thought it wasn’t worth agonizing over nickels and dimes. I was almost exactly the opposite. My answer to any money squeeze was to stop spending. I would skip lunch at work to save $7.
Ahhh.
In the previous December alone, we charged $2,845 on the Chase card for Christmas gifts, food, gasoline, clothing and other expenses. The charges included almost $350 for groceries, $700 in clothes from J. Crew, $179 at GapKids and $700 for airplane tickets for two of Patty’s children to visit their father in Los Angeles. Our balance climbed from $14,118 to $17,135, and in January 2006 we maxed out at our $19,000 credit limit. And there were other expenses on other cards: $1,200 in dental work for Patty’s son Ben; $1,600 to rent a beach house the previous year for us and all the children.
Ahhh…?
Wait, I have to go laugh a bit, then I’ll be back.
Back yet from laughing?
Lucy Lawless was also Xena Warrior Princess
Lucy Lawless was also Xena Warrior Princess
Well, of COURSE, my good SanFran! But to me, she will always be first and foremost: ‘Cylon version #3′.
*lapses into reverie *
I remember her, back when that series was watchable. I turned it off not long after Lucy showed up. Too preachy and too many people acting like idiots all the time.
Too preachy and too many people acting like idiots all the time.
Just like Utarr! Except with more dragons and gleaming breast-plates! Oh, and more snakey-headed evil chicks*.
*….No, wait. Utarr’s got plenty of those. So, probably a draw in that category.
http://finance.yahoo.com/news/Reports-Treasury-set-to-lend-apf-15313183.html?sec=topStories&pos=1&asset=&ccode=
Prepare for auto sales to soar and soon to follow auto loan defaults as nearly “free money” is given to consumers to support GM and Chrysler. However, where does this leave Ford who hasn’t taken any gov’t money? It would seem they will be at a sales disadvantage since financing rates would be higher to purchase their cars compared to its sick brethren. Once again, the ones that made poor decisions get rewarded while those that didn’t get punished.
“Analysts suggest the infusion, along with the merger of Chrysler’s financial arm would make GMAC a lending powerhouse that would give GM and Chrysler a huge advantage over their competitors — including Ford Motor Co., which hasn’t taken any aid from the government. A U.S.-controlled GMAC would have the power to offer better loan terms to buyers of GM and Chrysler cars and trucks as a way of steering business to the troubled automakers.”
Excellent. Let’s drive our one healthy car maker out of business by fraudulently using taxpayer money to drive business to the companies that are on their last legs. Was this move proposed by Toyota?
“However, where does this leave Ford who hasn’t taken any gov’t money?”
They made the mistake of not qualifying for a bailout, and will have to learn to live with it.
Looks like bond investor just called the Fed’s bluff on “quant easing”… UST 10/30 yield up, up and away…..
Worth mentioning that l-t mortgage interest rates are normally about 99 percent correlated with l-t T-bond yields…
Also, for those who have trouble connecting the dots, higher mortgage yields imply lower housing demand, and hence a lower equilibrium house price, except to the extent that the effect on demand of lower budget limits are offset by increased future inflation expectations. Psychobabble economics considerations notwithstanding to the contrary, when expectations conflict with budget constraints, budget constraints normally win.
One also should keep at least one eye on hedge fund and Megabanker investors armed with helicopter drops of recently printed dollars who might be able to incite a short squeeze by outbidding all the end users in the local market with cash offers for the homes that did not remain hidden away in shadow inventory. Hopefully an avalanche of inventory will eventually turn most of these late great fools into knifecatchers.
Oh I hope so - I *really* hope so.
Ditto.
It is frustrating.
My LBO let me know this morning that 2 of the 4 props for which I had given him offers are pending.
We are nowhere near the bottom. Knife catchers are everywhere.
http://dqnews.com/Charts/Monthly-Charts/LA-Times-Charts/ZIPLAT.aspx
April zip numbers out from DQ.
I know not all of you are financial planners, but I’m sure many of you have slept at a Holiday Inn. So, I wanted to pose a question and get some viewpoints.
Say you were anticipating buying a house sometime in the next year or so, if the price was right, and you had enough money in CDs to pay cash. Would you keep the money in CDs and take out a fixed loan at these low rates, hoping that interest rates would increase in the following years and you would be making more on the CDs (or other investments) than you were paying on the loan? Or, would you just pay cash and be done with it?
I’m sure there are angles to this I haven’t considered, and that’s why I’d like to hear your opinions. Thanks in advance.
The business of borrowing money to put in a savings account sounds kind of masturbatory.
You’ll be paying the house a big cut on both ends, and loosing while you wait.
That’s a tough one, and I’ve been struggling with the same question from a current-owner’s perspective. I have a 4.875% loan and have been thinking about using cash to pay down the principle some - but am holding off since I think there’s high inflation ahead, and it’s always nice to have a good amount of liquid padding.
It’s really hard to say - it’s based on the conjecture of whether or not you think high inflation is coming, and if so how soon. If don’t think that there’s high inflation ahead (say more than 10%) in our mid-term future (say 5-10 years), then you’re probably best off paying cash, making sure you allow for a comfortable liquidity pad. If instead you do think there’s high inflation ahead, and you plan on holding the house for a long time - then a fixed-rate mortgage would be a good thing.
Or to hedge your bets you could put down 50%. Doesn’t have to be all or nothing.
No, putting down 50% is the worst choice. 100% down means no mortgage, so no chance of foreclosure from not paying it. 0% down means the bank takes it in the shorts if it forecloses. But putting down 50% means the bank might actually get its money back if it forecloses, so that puts you right in the crosshairs if you get behind.
“Would you keep the money in CDs and take out a fixed loan at these low rates, hoping that interest rates would increase in the following years and you would be making more on the CDs (or other investments) than you were paying on the loan?”
yes
30 yr fixed rate on the house.
Use only what you need for a respectable down payment. This is important. Make a decent down payment but don’t get crazy.
Keep the rest of your CDs in CDs
Overpay your 30yr monthly when possible. If worse comes to worst, you can go back to the regular 30yr monthly. This will give you wiggle room.
You will probably not stay there for 30 years. Within the next 30 years, I can almost guarantee you that rates for mortgages, CDs, CCs, general loans and other things will change.
Next Wave of Defaults Building
The next wave of mortgage defaults is almost certain to contain a significant percentage of non-subprime loans and may include a significant wave of defaults in the mid to high range.
We know that there is a mortgage default season because we know that there is a new home buying season. Most new homes are purchased in the summer, and most ARM mortgages reset roughly 3 months later (after their 3 to 5 year interest holiday), usually in August, September and October. Many market watchers have been waiting to see what those months will have in store for us this year. According to Bloomberg, it almost certainly won’t be contained to subprime mortgages and may include a significant wave of defaults in the mid to high range.
In February, JPMorgan analysts almost doubled their projections for losses on jumbo mortgages (loans over $417,000 in most areas) to as much as 10 percent because of increasing defaults.
According to Bloomberg, The number of U.S. homes entering the foreclosure process with values qualifying them for jumbo-loans jumped 127 percent during the first 10 weeks of this year from the same period of 2008. The rate rose 72 percent for homes valued at less than $417,000 and 78 percent for all homes, data compiled by RealtyTrac, Inc. of Irvine, California, show.
About $500 billion of prime-jumbo mortgages are bundled into bonds, according to Memphis, Tennessee-based FTN Financial. President Obama’s Homeowner Affordability and Stability Plan has no provision to help jumbo mortgage borrowers. That plan focuses on conforming loans, loans small enough to be bought by Fannie Mae and Freddie Mac.
From Bloomberg:
“There was this unrealistic view that the crazy financing was limited to subprime when of course it was across the board. A lot of jumbo mortgages were nothing down with high debt-to-income ratios.” - Andrew Laperriere, Washington-based managing director at research firm International Strategy & Investment Group
Those stress test worst-case scenarios still looking realistic to anyone?
“The rate rose 72 percent for homes valued at less than $417,000 and 78 percent for all homes, data compiled by RealtyTrac, Inc. of Irvine, California, show.”
72 versus 78 pct may not seem like much difference at a glance, but given the dearth of sales above $417,000 these days, it is. For illustration, suppose 20 percent of homes sold were above $417,000 and 80 percent were below, and let x stand for the rate increase for homes above $417,000. One solves the following equation to find x:
20x + 80(72) = 100(78), so
x = (100(78)-80(72))/20 = 5(78)-4(72) = 5(6)+72 = 102 percent increase.
Way OT, but funny:
Persistent bird provides annoying backdrop to Presidential speech
The video didn’t load. Was the persistent bird Pelosi?
Consumer Legislation Would Make Auto Finance Less Friendly…
By Aparajita Saha-Bubna
Of DOW JONES NEWSWIRES
BOSTON -(Dow Jones)- A bill pending in the U.S. Senate Judiciary Committee is striking fear in the heart of Steven Pittler, who lends to auto buyers with spotty credit.
The legislation, called the Consumer Credit Fairness Act, carries serious consequences for auto-finance lenders such as Pittler. If passed into law, the bill would also hit the market for used cars, whose values took a battering last year from high gas prices.
The bill would allow borrowers to avoid payments on expensive consumer debt, including auto loans, when they file for bankruptcy protection. It would also eliminate lenders’ ability to reclaim vehicles as collateral to cut losses.
The bill faces a steep climb in the Senate, which recently rejected a measure to allow strapped homeowners to reduce their mortgages in bankruptcy.
Legislators supporting the bill argue it is a necessary check on unfair lending practices and would ease the debt burden on strapped Americans. The bill “is intended to help consumers struggling under the burden of high-interest debt by encouraging lenders, including auto sellers, to keep interest rates low,” said Alex Swartsel, a spokeswoman for Sen. Sheldon Whitehouse, D-R.I., who with Sen. Dick Durbin, D-Ill., are the bill’s co-authors. “Laws on retaining property in bankruptcy estates vary from state to state, but in general, the bill will make it easier for people entering bankruptcy with high-interest debt to keep their cars.”
The bill would deal a blow to lenders such as GMAC LLC and Ford Motor Credit, whcih provide crucial financing to car buyers of the domestic struggling auto makers. For General Motors Corp. (GM), Ford Motor Co. (F) and Chrysler LLC and their financiers, this would come on top of steep declines in sales and higher delinquencies on auto loans.
“The pendulum is swinging too far on the other side,” says Pittler, president at Friendly Finance Corp., a private auto-finance company that lends to subprime, or less credit-worthy, consumers in 10 states.
The bill is aimed at voiding contracts for costly debt in bankruptcy filings. It defines this high interest rate at 15% plus the yield on a 30-year Treasury bond (currently this adds up to a little over 19%).
Interest rates can be around these levels on auto loans to subprime borrowers, including such loans for used cars. The bill essentially means that an auto loan carrying these rates will be voided if the borrower files for bankruptcy protection.
The critics of the bill warn that the legislation would restrict credit at a time when Americans need it most. The lenders defend the business practices as necessary to protect themselves when providing money to consumers with patchy credit.
If the bill is passed, “it’s hugely significant,” says Michael Benoit, a partner at Hudson Cook LLP. It would leave the auto-finance lender “holding the bag. In the short term at the least, there will be contraction of credit at a time when we really can’t afford that.”
A reluctance to lend to subprime borrowers will shut out a large swath of potential car buyers. In November, GM said nearly three-fourths of customers had a credit score below 700. The median credit score for U.S. consumers is about 723. Different lenders define subprime borrowers differently; typically, these consumers have credit scores of 620 and lower.
If the bill is passed, lenders would no longer be able to cut their losses by reclaiming the vehicles of borrowers who have defaulted on their payments and filed for bankruptcy.
“As a lender, not only do I lose my claim against the borrower, I can’t repossess the vehicle,” says Bill Himpler, executive vice president of federal affairs for American Financial Services Association, an industry lobby group.
A spokeswoman at Ford Credit declined to comment. A GMAC spokeswoman wasn’t available for comment.
Friendly Finance’s Pittler estimates a loss of about $7,000 for every repossessed vehicle that is then sold off in an auction.
“You can imagine the losses the lender would incur if he can’t reduce the borrower’s balance by selling the repossessed car,” says Pittler. “This bill encourages people to file for bankruptcy; essentially they get rewarded with a free car.”
This bill could very well cut off credit to non-credit worthy borrowers. Which is just fine. Because anybody making auto loans at 20% is not planning on the person actually paying off the car. So I don’t care if they get hammered by this law.
Also, not lending to the people who were previously only able to get loans at usurious rates might make them buy cheaper cars or find alternative transportation.
Credit isn’t a right.
“This bill could very well cut off credit to non-credit worthy borrowers.”
It’s the least they could do if they are going to force taxpayers to take possession of GMAC.
Absolutely. Of course, they’re doing the exact opposite. Taking over/bailing out failing lenders and then demanding they lend out money using the standards JUST PROVEN to be ruinous.
Our tax dollars at work.
“This bill could very well cut off credit to non-credit worthy borrowers.”
After GMAC gets that 7 billion from the gubmint they will be forced to make loans on a 600 credit score. Probably 0% for 86 months. Gotta keep that UAW going.
GMAC has already gone back to subprime borrowers and scores like that.
Government giving GMAC $7.5B in new aid May 21, 2009 7:14 PM ET
All Associated Press newsWASHINGTON (AP) - The Treasury Department said Thursday it is providing auto lender GMAC with $7.5 billion in fresh aid to enable it to make new loans for General Motors Corp. and Chrysler LLC vehicles.
The department said the investment will help provide a reliable source of financing to auto dealers and people looking to buy GM and Chrysler vehicles.
Treasury said it won’t immediately expand its equity interest in GMAC but will exercise in the near future its right under an earlier agreement to exchange an $884 million loan it made to General Motors for an equity share in GMAC.
“This new arrangement with GMAC will help provide a reliable source of financing to both auto dealers and customers seeking to buy cars,” said Treasury Secretary Timothy Geithner.
Strengthening GMAC will help stabilize the country’s auto financing market, which should help the economy, he said.
Kokusai Cuts Treasuries as Fukoku Sees End to Rally (Update2)
By Wes Goodman
May 21 (Bloomberg) — Bond investors in Japan from Kokusai Global Sovereign Open Fund to Fukoku Mutual Life Insurance Co. are trimming their holdings of U.S. Treasuries, betting that the biggest slump in U.S. debt in 15 years will likely continue.
Kokusai Global Sovereign, Asia’s largest bond fund, reduced its bet on long-term Treasuries in March, while Nippon Life Insurance Co., Japan’s biggest life insurer, plans to focus its new purchases on yen-denominated debt, it said last month. Fukoku Mutual says it will buy yen bonds because a 10-year rally in U.S. debt will end this year.
Japanese government securities are outperforming Treasuries in 2009 for the first time in a decade, according to indexes compiled by Merrill Lynch & Co. Investors in the Asian nation trimmed their purchases of foreign bonds in April to the least this year, the Ministry of Finance in Tokyo said. Investors say bonds will fall as a recovery in the U.S. economy sparks inflation and lures money into higher-yielding corporate debt and stocks.
“Japanese bonds are relatively more attractive,” said Masataka Horii, one of four investors for the $47.1 billion Global Sovereign Open Fund based in Tokyo. “Economic indicators show some bottoming out in the U.S. In Japan, the situation is still bad.”
Japan’s gross domestic product fell by an annualized 15.2 percent in the first quarter, a record, the Cabinet Office said yesterday. That’s worse than the 6.1 percent contraction in the U.S. economy. Japan’s economy is likely to shrink by 6.8 percent this year, versus 2.8 percent for the U.S., surveys of strategists by Bloomberg show.
Worst Start
Signs of a bottom in the U.S. economy helped send Treasuries down 3.3 percent this year through yesterday, the biggest slump since 1994, according to Merrill’s U.S. Treasury Master index. Japanese government bonds are down 1 percent, the Merrill figures show.
Federal Reserve Chairman Ben S. Bernanke is trying to reduce U.S. consumer borrowing costs by purchasing Treasuries, promising to buy as much as $300 billion of them by October as he works to snap the deepest U.S. economic recession in 50 years. Some Fed officials judged last month that the central bank may need to boost its purchases of assets to secure a stronger recovery, minutes of the April 28-29 Federal Open Market Committee meeting released yesterday in Washington showed.
Some Fed officials judged last month that the central bank may need to boost its purchases of assets to secure a stronger recovery, minutes of the April 28-29 Federal Open Market Committee meeting released yesterday in Washington showed.
I see $1K gold again in our future soon… easy.
Japanese bond investors to issuers of dollar-denominated debt: “Fukoku”
It brings to mind the punch line of another bad racist joke:
“Fluctuations.”
“Fluck you Americans.”
Green shoots are dead; fear factor is back, as evidenced by the VIX spike.
P.S. I love that word, exacerbated…
Financial Times
Wall Street slumps on economic fears
By Kiran Stacey in New York
Published: May 21 2009 14:07 | Last updated: May 21 2009 21:51
US stocks fell for a third consecutive session on Thursday on further signs that economic green shoots could wither before flowering into a recovery.
Rumours circulated the market during the day that the US could be next after the UK to have the outlook on its sovereign debt downgraded, and fears over what this could mean for government policy sparked a sustained sell-off.
“A similar move in the US is possible, and that would restrict stimulus efforts,” said Doug Roberts, chief investment strategist at Channelcapitalresearch dot com.
Those worries exacerbated anxiousness over the economy after figures showed more people than expected claimed jobless benefits for the first time last week, and the number continuing to claim hit a new high.
Investors were also concerned that manufacturing in the Philadelphia area contracted at a sharper rate than analysts had predicted.
The Vix index, a measure of implied volatility known as Wall Street’s fear gauge, spiked back above 30 as the falls intensified over the afternoon. It climbed 8.1 per cent to 31.39, its biggest daily rise since April 20.
The benchmark S&P 500 index closed down 1.7 per cent at 888.33, the Dow Jones Industrial Average fell 1.5 per cent to 8,292.13 and the Nasdaq Composite index dropped 1.9 per cent to 1,695.25.
“The uptrend was broken a week and a half ago. It may feel like a major pull back but when you think that we rallied from 660 [on the S&P], it doesn’t look so big,” said Marc Pado, chief market strategist at Cantor Fitzgerald.
They should feed those green shoots vi@gra! I hear it keeps the withering to a minimum.
And it SEEMS like this might be the tippy part of the bear rally. Quick, everybody short some more!*
*Not actual investment advice, but it’ll probably turn out to be true because I’m not doing it.
I was a good day.
10 more days like this and ….
May 21 (Bloomberg) — Treasury Secretary Timothy Geithner said the Obama administration is committed to reducing the federal budget deficit after concerns rose that the U.S. debt rating may eventually be threatened with a downgrade.
“It’s very important that this Congress and this president put in place
whatever we can get away withpolicies that willdivert public attentionbring those deficits down to a sustainable level over the medium term”Eco, you still around? A while back, you gave me some netbook specs. I remember this: Eee PC 1000HE
What else?
Feds close largest Florida-based bank, sell it to group that includes Palm Beach investor
By JEFF OSTROWSKI
Palm Beach Post Staff Writer
Thursday, May 21, 2009
CORAL GABLES — The largest financial institution based in Florida on Thursday became the largest bank failure of the year.
In a transition that they promise will be mostly invisible to depositors, federal regulators closed BankUnited and sold its assets to a group of investors that includes Palm Beach resident Wilbur L. Ross.
The arrangement was the “least costly” outcome for the troubled thrift, the Federal Deposit Insurance Corp. said in a statement - but the failure still will cost the FDIC $4.9 billion.
BankUnited, which had 86 offices and assets of $12.8 billion, was felled by bad bets on the Florida real estate market. The bank will keep its name but will be owned by WL Ross & Co. and Carlyle Group. It will be run by former North Fork Bancorp Chief Executive John Kanas.
BankUnited customers will see little change, the FDIC said.
Its 86 offices will open as usual today. Deposits will be insured by the FDIC. Customers can continue to use BankUnited FSB’s checks, ATM cards and debit cards. Checks drawn on the bank will continue to be processed. Loan customers should continue to make their payments as usual, the FDIC said.
The FDIC and BankUnited will share in the losses on $10.7 billion in assets covered under the agreement.
The new BankUnited will recapitalize the institution with $900 million in capital, the FDIC said.
BankUnited will not assume $348 million in brokered deposits. BankUnited customers who have questions can call the FDIC at (800) 451-1093.
BankUnited is the sixth-largest financial institution in Palm Beach County, where it has 17 offices and deposits of $1.6 billion.
May 22 (Bloomberg) — The U.K. refused to release the results of stress tests conducted on British banks, two weeks after the Federal Reserve said similar reviews showed 10 U.S. lenders needed to raise a total of $74.6 billion.
Publishing the information may increase instability and force the government to take further action to shore up the U.K. financial system, the Treasury said in response to a Freedom of Information Act request by Bloomberg News…
Good to know that’s all behind us, right? Green shoots forever!