The Housing Bubble

I’m tempted to short the Dow this morning, or buy a put on the Diamonds Index, or however one plays the idea that a temporarily high plateau is about to give way. I guess the put (as opposed to the short) would save me from panicking if it goes against me.

Now that the stock market has started ‘always going up’ again, the impetus for regulatory reform is waning.

At any rate, no action is probably a better outcome than creating a SuperCop consolidated Fed. “First do no harm.”

* The Wall Street Journal
* BUSINESS
* JUNE 9, 2009

Finance Reforms Pared Back
White House to Preserve Regulators but Seek Tougher Rules; Avoiding a Political Battle
…
…sidestepping a major regulatory restructuring could spark criticism that the administration has missed a once-in-a-lifetime chance.

“It’s not only an opportunity, they are avoiding a necessity,” says Hal Scott, a professor at Harvard Law School. “I understand all these political forces — they’ve been obstructing necessary change for decades. But we are in a very serious situation. The regulatory system has demonstrated its inability to function, and I really think its incumbent on somebody to do what’s right.”

Just a few weeks ago, top administration officials hinted they would tackle a reorganization. “I personally believe we need to, and I think the president believes we need to have a much more simplified, consolidated oversight structure,” Treasury Secretary Geithner said in May. “Our system now is too complex.”

Rather than seeking additional consolidation, the administration’s plan now appears to be focused on setting up new rules for containing risk.

Government officials believe that if they fill gaps between agencies and eliminate overlaps, banks and other companies will be less able to shop for light oversight.

“History shows that opportunities for real reform are often short-lived,” Federal Reserve Governor Daniel Tarullo, who has close ties to the White House, said in a speech Monday. “Momentum can too easily be lost, and the return of better times too easily leads to complacency.”

It seems that there is at least a modicum of sanity left in this country. Too bad that it had to go to the Supreme court, in order for that sanity to show some respect for the Chrysler creditors.
Its a good thing that we do not live in a tyranical state where the president can order companies into bankruptcy at his whim…
/sarcasm.

Krugman’s comments yesterday stopped the fall, so
today we need another nice juicy comment from some
idiot to keep the market in place….hope we run out
of idjets soon…..

The brown stuff appears to be hitting the rotating blades now in CA state government operations.

BTW, is there any evidence that kids can learn by staring at a computer screen? I have yet to see any, unless you consider playing Club Penguin and Roblox and feeding Neopets educational.

Rise of the machines: Arnold Schwarzenegger terminates school books and tells pupils to go digital

By Daily Mail Reporter
Last updated at 1:49 PM on 09th June 2009

Governor Arnold Schwarzenegger: California is facing a $24billion budget deficit

He’s saved the world numerous times on film, he’s helped California battle devastating forest fires, and now Arnold Schwarzenegger has a plan to save his state’s failing economy - by terminating text books.

The governor is telling children to give up the schoolbooks and turn to digital lessons to help the state avoid bankruptcy.

Jokingly telling a press conference that large books are now only suitable to be used for weightlifting (biceps curls in particular), he said: ‘Textbooks are outdated, in my opinion.’

He continued: ‘For so many years, we’ve been trying to teach the kids exactly the same way.

‘Our kids get their information from the internet, downloaded onto their iPods, and in Twitter feeds to their cell phones … Basically, kids are feeling as comfortable with their electronic devices as I was with my pencils and crayons.

‘So why are California’s school students still forced to lug around antiquated, heavy, expensive textbooks?’

If Wall Street and Detroit received bailouts as rewards for acts which resembled throwing away money, isn’t the largest state similarly qualified?

Barron’s
MONDAY, JUNE 8, 2009
EDITORIAL COMMENTARY
California Screamin’
By THOMAS G. DONLAN

Shortsighted amendments to California’s constitution over the years have brought the state to the brink of bankruptcy. And now the Golden State wants a bailout from Uncle Sam.

WHO REMEMBERS WHY ARNOLD SCHWARZENEGGER wanted to be governor of California? Something about troubled state finances and a governor who couldn’t cope. The “governator” probably also doesn’t remember, or doesn’t want to remember, because state finances are much worse. He, too, can’t cope, after presiding over a 40% increase in state spending.

Last week he told the legislature that the day of reckoning is here: “Our wallet is empty. Our bank is closed. Our credit is dried up.”

With good reason, lenders no longer trust California to pay its bills. State Controller John Chang said California will run out of cash by the end of July, and it probably can’t borrow more without putting a new budget deal in place by June 15.

State voters last month turned down a series of referendums authorizing tax increases and borrowing to close a gap in the state budget for fiscal 2010, most recently estimated at $24 billion, but growing.

“People are writing California off,” Schwarzenegger said to the legislature. “They are talking about the end of the California dream. They don’t believe that we in this room have the courage and the determination to do what needs to be done or that the state is even manageable.”

He got that right, anyway.

Radar Logic data shows San Diego prices remain sticky above $200/sq ft. I plan to rent forever if prices don’t correct below this level, as cheap rentals are sure to remain available for the next fifty years if prices remain this unaffordable.

I didn’t realize Iran participated in the housing bubble too.

Will Iran’s ‘Marriage Crisis’ Bring Down Ahmadinejad?

My friends Farhad and Mahnaz are the quintessential Iranian couple. They are both engineers with a shared passion for hiking and movies and have been smitten with each other for six years — but Farhad and Mahnaz can’t afford to get married because even a one-bedroom apartment is beyond their reach, despite their both having decent middle-class jobs. This reality has preyed on their relationship, compelling them to consider leaving Iran. And they blame the government for their situation.

Good morning everyone!

Anyone else smell that? It’s the smell of burning rubber as housing prices are falling and unreasonable sellers are trying to put on the brakes!!!

Appears the Germans have been cutting back on shopping.

Arcandor Files for Insolvency on State Aid Rejection…

June 9 (Bloomberg) — Arcandor AG, owner of the century-old Karstadt department-store chain, filed for insolvency after attempts to win government help foundered, jeopardizing 43,000 German jobs.

The company said this afternoon that it filed to open insolvency proceedings with the district court in its home town of Essen, citing “threatening illiquidity.” German Chancellor Angela Merkel said the collapse was “unavoidable” after investors and banks offered too little to save the company.

Two pleas for help by Arcandor were rejected yesterday by the government, which said it wanted retail heiress Madeleine Schickedanz and shareholder Sal. Oppenheim Jr. & Cie. to stump up more funds. According to Spiegel magazine, Arcandor Chief Executive Officer Karl-Gerhard Eick told Merkel’s office that he’d decided to file for insolvency rather than proceed with another application for an emergency government loan.

“Surveys have shown that Germans aren’t in favor of state aid, and the leading parties really couldn’t rally for taxpayers’ money to help Arcandor’s billionaire main shareholders,” said Sebastian Hein, an analyst at Bankhaus Lampe in Dusseldorf.

Arcandor, whose businesses date to 1881, may now be broken up as predators including Metro AG and Rewe Group circle assets including Karstadt, the Quelle mail-order business and a controlling stake in Thomas Cook Group Plc, Europe’s second- largest travel business. The retailer’s shares plunged as much as 39 percent to the lowest in at least 17 years today.

‘Not Enough’

Arcandor wanted loan guarantees of 650 million euros ($904 million) from the government’s Economy Fund program as debt came due this week. It also wanted a further 437 million euros from a state-owned bank. Euro am Sonntag said today that the retailer won concessions worth about 750 million euros after overnight talks with suppliers, creditors, landlords and shareholders.

The Obama administration, aided by economics know-nothings in mainstream news media, is pulling the wool over Americans’ eyes by invoking the phrase “jobs saved or created.” The Wall Street Journal explains this game. Media Fall for Phony ‘Jobs’ Claims

Lest you think this is sorehead criticism from the political right, here’s what Senate Finance Committee Chairman Max Baucus (a Democrat) said to Treasury Secretary Timothy Geithner: “You created a situation where you cannot be wrong. If the economy loses two million jobs over the next few years, you can say yes, but it would’ve lost 5.5 million jobs. If we create a million jobs, you can say, well, it would have lost 2.5 million jobs. You’ve given yourself complete leverage where you cannot be wrong, because you can take any scenario and make yourself look correct.”

“The expression ‘create or save,’ which has been used regularly by the President and his economic team, is an act of political genius,” says former Bush advisor Greg Mankiw.

Bottom line - - even with Obamanomics the Labor Department cannot measure “jobs saved” and count them as jobs created by government spending. Had the Bush administration pulled a gimmick like this media would have shot it down with everything they had.

“Hekmati’s experience is typical of young Iranians, who are finding themselves increasingly priced out of the marriage market.”

My first time. BWAHAHAHAHAHAHA.

General Motors Corp. — new ticker symbol GMGMQ.PK — was making double-digit gains in trading on Monday.

GM stock closed at $1.21 a share on Monday, up 34.5 cents or 39.88%.
In the old days of GM — long before the company filed for bankruptcy reorganization on June 1 — you might say the stock was going up on talk that new GM directors would be announced soon.
While some news might give the stock a pop, GM common stock is still headed nowhere.
Nowhere.
Let’s repeat that: No. . . where.

“GM stock is expected to be worthless,” said Tom Wilkinson, director of GM News Relations. “We are not sure why anyone is still buying it.”
GM stock is trading on the electronic “pink sheets” at http://www.pinksheets.com as the company is reorganizing under Chapter 11.
The no-buy-zone
GM stock is officially in the no-buy-zone for all but the most speculative investors. Experts say the speculators are the ones doing the buying. Short sellers, who previously sold borrowed shares, also need to buy GM to cover those trades.
“The higher the profile of the bankruptcy, the more active stock trading there will be,” said George Putnam, publisher of BankruptcyData.com in Boston.
No one should read the latest rebound — or any other rebounds in the weeks ahead — as any sign that big money is around the corner.
GM was taken off the Dow Jones Industrial Average as of Monday. Once a company files for bankruptcy protection, it is automatically disqualified from being one of the 30 stocks that are part of the Dow index.
GM no longer has shares of its own stock in the 401(k) plans of its employees and retirees.
GM common shareholders will become unsecured creditors in the old GM, and such creditors have very low recovery rates.
The company has noted that the new GM will initially be owned by the U.S. Treasury, the UAW VEBA and certain creditors of the old GM. “Therefore, no shares are for sale to the public now,” the company said.
Wilkinson said that any investor who wants a part of the new GM would have to wait until that new company is formed later this summer and until the owners of the new company — which include the UAW VEBA and the U.S. government — start selling their shares.
Stocks of companies that head into bankruptcy often bounce back a bit after a filing. And yes, speculators do make money trading the stock but not everyone makes money on that bet, either.
“If you get it right, you could make money trading it on the short term,” Putnam said. “It would be more luck than anything else.”

Friday, June 5, 2009
Dave Ramsey on our love of debt

Being in debt used to be a social stigma, but now it seems to be the American way. Tess Vigeland talks to Dave Ramsey, author of “Total Money Makeover,” about how America became a nation of borrowers in love with credit.

Tess Vigeland: Can you imagine living without credit? I know, I know, plenty of you do. Bully for you. No really, it’s great. But lots of us do use credit and that means we have debt. Mortgages, car loans, credit cards, of course. Well, last week we brought you the first part of a conversation with a man who preaches the gospel of being debt-free.

Dave Ramsey hosts a radio show and has written several personal finance books. And we were interested in getting his perspective, which is in many ways different from what we say on this show. Example: we talk about how to boost your FICO score. He says the only reason to have a FICO score — and worry about it — is if you love debt.

Ok. So. Today we’re starting with the question of why and how we became this nation of borrowers and exactly when debt lost its social stigma.

Dave Ramsey: It’s roots are in the 70s, when debt became a product that was marketed by some of the most masterful marketing minds that the planet has ever known. The selling of debt as an absolute necessity to live, is really one of the most masterful marketing jobs in the history of the world. We live in the most marketed culture in the world and the most money and the most sophistication used to sell any product, is used by the banking industry.

The credit card people have done a phenomenal job of integrating their product line into our psyche to where we truly believe that we can’t live without it. That’s amazing marketing. THat began in the 70s. It took deep roots in the 80s and by the 90s we were seeing five and six billion credit card offers a year going out to where, dead people and dogs were issued on a regular basis.

WHAT NEXT FOR THE BOSTON GLOBE? The Boston Globe’s largest union last night narrowly rejected $10 million in wage and benefit cuts, and about an hour later the paper’s owner declared an impasse in negotiations and imposed a 23 percent pay cut on the union’s members, effective next week. Yikes! A 23 percent pay CUT? Next stop in this contentious struggle between owners and union will probably be the federal courts.

Gloom at the Globe.

This case involves the old question “Who owns the job? The worker or the owner?” The answer is: the owner. But unions are reluctant to accept that fact.

Decline in Greenwich home sales continues Town deals down 70 percent in first four months
By Lisa Chamoff
Staff Writer
Posted: 06/07/2009 10:04:29 PM EDT

Home sales in Greenwich were down nearly 70 percent in the first third of 2009 compared with a year earlier, though real estate agents hope that with recent and upcoming closings factored in, figures in the next few months will be stronger.

There were 56 single-family home sales in the first four months of the year, compared with 168 sales during the same period of 2008, according to information from Riverside-based Shore & Country Properties.

The average sale price also fell 23 percent, from $2.8 million to $2.2 million, an amount that Shore & Country owner and partner Russell Pruner says is the largest drop since 1945, though that’s compared to full-year markets and not a four-month segment.

Pruner predicts that while the sales figures for May released next week won’t show much change, maybe reaching 60 percent to 65 percent of 2008, there could be a turnaround soon.

“A lot of the business that has transacted doesn’t close until June or July,” Pruner said.

Realtor David Ogilvy said a four-month chunk doesn’t give a clear picture of the market, and he’s now extremely busy, selling everything from a no-frills house in Old Greenwich for $915,000 to a $23.9 million mansion that went in 10 days for close to the full asking price.

“We just had a very flat early spring,” said Ogilvy, who is also listing late hotelier Leona Helmsley’s Round Hill Road estate for $75 million. The estate came on the market for $125 million

in early 2008. “We’re feeling very enthusiastic.”

Julianne Ward of Prudential Connecticut Realty is not quite as busy. Ward said she’s had five homes go under contract in the last three months, and three of those have closed, which is about a quarter of what she did last year.

Still, she’s positive.

There has been “more activity in May or June than I think there’s been all year,” Ward said. “It feels to me like the dam is almost breaking and it comes in spurts.”

Buyers are seeing opportunity in the desirable Greenwich market that many once thought was unreachable.

Rob Pajer, one of Ward’s clients who closed a month ago on a three-bedroom home on Field Road in Riverside for $1.1 million, said he and his wife were pleasantly surprised by the number of houses that were available.

Pajer, his wife and two young children are moving from a house in Somerset County, N.J. they bought in 2002, and Pajer said he never thought they could afford living here.

“We were going to go for the gold standard, which is Greenwich,” said Pajer, 49. “We wanted to land somewhere we were going to stay.”

Pruner sees this attitude as the reason why the Greenwich market won’t be in free-fall for long.

“Greenwich is still Greenwich and people are still going to want to live here,” Pruner said. “When we are able to focus back on why people buy Greenwich, then I think you’ll see the transactions go up.”

X-GSFixer,

So glad to hear you’ve managed to land some decent work. Sorry… to hear it took (2) jobs to fill what (1) had provided previously… but glad nonetheless!

Anyone see the pictures of the “recovery team” working the Air France flight? They’re out in the middle of the ocean and one of the divers is wearing like a Speedo or something sitting on the tail section of the plane! Gotta’ love those Brazilians.

Talk about being trapped in your underwater house.

http://www.upi.com/Odd_News/2009/06/08/House-boarded-up-with-resident-inside/UPI-85621244492422/

MINNEAPOLIS, June 8 (UPI) — A Minneapolis man said he was preparing to leave his foreclosed home for the last time when contractors boarded up the house with him still inside.

Sigh, my “funemployment” is temporarily over. I’ve lined up full-time contract work for at least the next month, with a little bit of extra work on the side. Now I’m going to have to remember how to balance work with reading/posting to the HBB.

So at least one person’s recession is over…for now….

Burn, Detroit, burn…
That big plume of black smoke that filled the sky Monday night and was visible from downtown to the eastern suburbs?
It was just the Packard Plant burning.
Again.
And that fire is likely to be burning this morning, because the Packard Plant is too dangerous for Detroit firefighters to enter after dark, so they had to let it burn Monday night.

Fire crews are called to the massive and mostly abandoned complex about once a week, said Lt. Steve Kirschner of Engine Co. 23. The fires stem from scrappers and their acetylene torches and people who like to explore the Packard Plant and think it’s cool to set fires to the huge mounds of trash and other dumped debris in the complex’s large rooms. The Packard complex consists of 3.5 million square feet of space in 43 interconnected buildings. Many of the buildings are filled with trash and dumped articles, including old pleasure boats and shoes. The site is filled with tunnels, open sewers and collapsing walls and ceilings, often the result of scrappers cutting out I-beams. While it is technically not abandoned, the Packard Plant is mind-numbing in its vastness, decay and the large trees growing from its roofs. It is totally open to trespass.

This will help those that make money in the “reverse mortgage” business, and as I’ve been saying, they charge to darn much for those J&J q-tips…

“…A new study from Harvard University finds that 62 percent of bankruptcies are caused by medical bills - a 50 percent increase since 2001. Based on that rate, medical bankruptcies this year will total 866,000 and involve 2.3 million Americans – about one person every 15 seconds”

Medical bankruptcies on the rise:
June 9th, 2009, OC Register by Courtney Perkes

“The O.C.” … “It’s Bren developed”™

“The online commercial real estate site LoopNet reports that the dollar volume spent by big investors and other interested parties on commercial property in Orange County fell $4 billion — or 95% — from the peak of the market during the spring of 2007.

On a year-over-year basis, the sales volume was down 74% from the 12-month period ending in March compared to the year before.

These figures follow forecasts that commercial real estate values will plummet, with foreclosures expected to mushroom in the coming year.”

Big investors show 95% less love for O.C. property:

June 9th, 2009, OC Register by Jeff Collins

The Consequences Have Started to Arrive…
Michael Pento
Posted Jun 9, 2009

The consequences of adopting a weak dollar and inflationary monetary policy to bail out the economy have begun to manifest themselves, although the real effects of the government’s $12.8 trillion dollar recovery plan have only just started to show up. Investors should not be surprised to learn that the commitments, guarantees, and prodigal spending of the past two Administrations have come with harrowing consequences. Surprising or not, these painful consequences are just beginning to appear and are rather insidious in nature.

But the regular readers of my commentaries had been warned that massive money printing and government incursions into the free market would spark higher inflation and a falling dollar. To illustrate the point, the price of oil has increased 53% this year while gasoline has increased 26% in price since May 1st. That move alone should start to ring the alarm bells for everyone. But commodity prices have risen across the board sending the CRB Index up 14% in May alone. In addition, copper is up over 60% this year while cotton is up 18% in 2009 and the US dollar has also lost about 10% of its value since early March. So much for the deflation argument!

The cause of steep rises in basic materials and energy is not so much a U.S. demand story. Asia seems to be faring better; (their economy expanded at a 6.1% annual rate in Q1, the slowest rate in 10 years) while our economy has shed over 6 million jobs since the recession began and GDP contracted at a 5.7% annual rate in the first quarter. But the real cause in the rise of commodities can be found in the weakness of the US dollar.

Even with all of this in mind, the biggest negative effect thus far from the Administration’s profligacy has shown up in surging bond yields. After hitting a secular low of 2.5% on the 10 year note, yields jumped to 3.9%! Meanwhile, mortgage rates leapt from a low of 4.85% to 5.45% last week, following the move in Treasuries.

Therein lays the problem. The progenitor of this crisis was a collapse in real estate prices and it has shown only a few signs of stabilization in sales, but is still far from a marked recovery in prices. In fact, last month’s report on existing home sales showed a drop of 15.4% Y.O.Y. Both mortgage delinquencies and foreclosures reached record levels in Q1 2009 while the months’ supply of existing homes actually climbed to 10.2 from 9.6. So while mortgage rates are on the rise, housing fundamentals continue to exhibit weakness.

Those soaring bond yields and mortgage rates will wreak havoc on our debt-imbued economy. Already we saw a report by the Mortgage Bankers Association showing a drop of 16% in the Refinance and Purchase Index for the week ending May 29th. For an economy that has a total debt to GDP ratio of 370%, we can also expect dire repercussions in everything from credit card loans to municipal bonds.

This is why Mr. Bernanke’s next move on quantitative easing is so critical. Wednesday’s auction of $19 billion in 10 year notes and Thursday’s auction of $11 billion in 30 year bonds will be viewed with great anticipation. If Banana Ben steps up his manipulation of bond prices, the current fall in the dollar along with the rise in commodity prices and interest rates will seem inconsequential by comparison in the not too distant future.

Our government risks morphing what would have been a severe deflationary recession into an inflationary recession/depression in the longer term. Their decision to choose the inflationary route is based on the fact that inflation bails out those in debt. Make no mistake, for a country with $11.4 trillion in debt and a 2009 deficit equal to 13% of GDP, inflation is perceived as the only way out. However, inflation can never bail out anything or anyone, it only helps the very rich maintain their purchasing power while robbing it from the rest of the country. It will also be at the great expense of those who have made the mistake of holding their savings in dollar denominated fixed income instruments and who have not protected themselves by owning hard assets.

Michael Pento
Senior Market Strategist
Delta Global Advisors, Inc.

Hey Mr. Bear, “The O.C.” doesn’t want your stinkin’ San Die-go “fancy pants” hotel…here you can have it back…

O.C. investor giving San Diego hotel to the bank:
June 8th, 2009, OC Register by Jon Lansner

According to a press release from the San Clemente company …

* Competition in San Diego is steep. New hotels include a number of luxury boutique hotels, two additional Starwood-branded hotels and a 1,190-room convention hotel.
* Hotel has a $65 million, 6.14% mortgage due in 2018 — that means principal payments are 30 times the projected 2009 cash flow.
* Company skipped a June 1 loan payment.
* “As a result of negative supply and demand fundamentals in the San Diego market, we believe the intrinsic value of the W San Diego is now meaningfully below the principal amount of its debt. While the Company maintains more than adequate liquidity to support or repay this mortgage, we believe a conveyance of this hotel in settlement of the debt would be in the best interest of our stockholders as it would deleverage the Company.”
* “While the elective default of the W San Diego mortgage was precipitated by a number of unique, market and hotel-specific factors, in the future other factors may lead the Company to pursue similar options with certain of its other mortgaged hotels. The Company believes such cases will be limited in number.”

Green shoots everywhere…

NEW YORK (Reuters) - U.S. bankruptcy filings rose in the first quarter to the highest since 2005, government data show, as rising unemployment, falling housing prices and tight credit made it harder for people to hold off their creditors.

There were 330,477 filings in the January-to-March period, up 10 percent from the previous quarter and up 35 percent from a year earlier, the Administrative Office of the U.S. Courts said this week. Consumer bankruptcy filings rose 33 percent from a year earlier, while business filings rose 64 percent.

For the year ended March 31, bankruptcy filings rose 33 percent to 1,202,503. Experts expect further increases as the unemployment rate heads toward 10 percent and the economy struggles to emerge from an 18-month-old recession.

“There is a direct correlation with troublesome conditions in the economy: a lack of credit, margins being squeezed, and an inability to refinance,” said Leonard Goldberger, a partner at the law firm Stevens & Lee PC in Philadelphia and former vice president of the American Bankruptcy Institute (ABI). “And bankruptcy is historically a lagging indicator of the economy: today’s survivors can be tomorrow’s victims.”

Many states with large numbers of bankruptcies have been hit particularly hard by the housing crisis. California had the most filings in the quarter with 42,992, followed by 20,701 in Florida and 18,154 in Georgia. Illinois came next, followed by Michigan, Ohio, Tennessee, New York and Texas.

Hey it’s kinda “hailing” behind “The Orange Curtain” today…

He’s kicked out of class when Dad can’t pay tuition:
By GREG HARDESTY / OC Register

“…It’s wrong of the school to do this to my son and to try to squeeze the money out of me,” says Thompson, 47, a nurse who has a second job at an entertainment company….”

“…It’s an increasingly common problem at Orange Lutheran and other private schools, which say they are doing their best to help families through economic hardships.

Schools, however, are paying closer attention to the bottom line – or risk cutting programs or even closure.

Notified last week that Dakota wouldn’t be able to take finals unless an outstanding tuition balance of $8,370 was paid in full, Jeff Thompson scrambled to save his son’s academic status.

In meetings, e-mails and phone calls with school officials, Thompson offered to pay $2,500 immediately – and possibly up to half of what he owes.

Thompson, who is divorced, says that since September he’s been supporting Dakota, himself, and his 21-year-old daughter on his 401-k retirement fund – which he says is down to less than $17,000. He says he’s also fallen behind on house payments.

In a letter sent last week to Orange Lutheran officials, the Orange resident promised to pay what he could now “to show some sort of good faith,” and pay the balance as soon as he could.

But a promise wasn’t enough.

On Friday, Gregg Pinick, executive director of Orange Lutheran, left a message on Thompson’s cell phone that said, in part:

“I truly believe we’re going to need the whole amount for (Dakota) to be able to take finals. I know that’s probably not the words you want to hear.”

Dakota showed up Tuesday anyway, hoping school officials would relent.

They didn’t, and now it’s unclear if Dakota will get credit for the semester.

Regarding California’s budget crisis, I drove through N. California along (the) 5 to Sacramento, over to San Francisco, back to Sac, and back home this weekend. I took full advantage of the shortage, made generous use of my speedometer, and only saw one cop in 3 days.

It looks like they just gave up on Hwy 80 between SF and Sac in both directions. I thought the transitions from newly-paved to oldly-paved areas were going to rip the front end right off the car…but that, and the brain dead left-lane drivers, was the only thing slowing me down.

Total hours worked is equal to the total number of workers employed multiplied by the average length of the workweek for the average worker. The length of the workweek tends to respond at turning points faster than does the number of jobs. When demand is slowing, firms tend to cut back on overtime, and then switch to part-time workers or in some cases cut workers back to partial workweeks, before they lay them off. Conversely, when demand is rising, firms tend to end furloughs, and if necessary ask workers to work overtime, before they hire new workers. (The hours worked measure improved in April 1991 and November 2001 which on other grounds were eventually declared to mark the ends of their respective recessions.) The phenomenon is called “labor hoarding” and it is attributable to the costs of finding, hiring and training new workers and the costs in terms of severance pay and morale when firing workers.

Unfortunately, as reported by Forbes, pursuing this logic leads to second thoughts about whether the most recent BLS announcement was really good news after all. The length of the average work week fell to its lowest since 1964 ! The graph below shows that, not only did total hours worked decline in May, but the rate of decline (0.7%) was very much in line with the rate of contraction that workers have experienced since September. Hours worked suggests that the hope-inspiring May moderation in the job loss series may have been a monthly aberration. If firms were really gearing up to start hiring workers once again, why would they now be cutting back as strongly as ever on the hours that they ask their existing employees to work? My bottom line: the labor market does not quite yet suggest that the economy has hit bottom.

content.ksg.harvard.edu/blog/jeff_frankels_weblog/2009/06/08/the-labor-market-has-not-yet-signaled-a-turning-point/

I got this link from Krugman’s Blog

i think an even better measurement would be average dollars and benefits brought home each week. Pay cuts, benefit cuts, and lost overtime likely make this drop off look even more like a cliff.

Also stated in this article

But I believe that we also agree, on the other hand, that employment is usually a lagging indicator of economic activity. (For example, the economy continued to lose jobs long after the ends of the 1991 and 2001 recessions. Hence the “jobless recoveries.”)

Given that the 1991 and 2001 recessions were ended by increased lending and that we won’t have increased lending this time. Will job losses be a lagging indicator? I suspect it will lag # of hours worked and pay taken home each week, but that we can’t have improved economic activity until more money ends up in more wallets. I think that at some point they need to get money into the hands of those that will spend it, in a way that makes them confident enough to spend.

EDITORIAL: Kneecapping FedEx…
Democrats carry freight for Teamsters and UPS
By | Tuesday, June 9, 2009

FedEx Express is learning what could be the Democrats’ economic motto — “Never Let Success Go Unpunished.”

Led by Rep. James L. Oberstar, Minnesota Democrat, the House on May 21 passed legislation that contains an almost hidden provision — a mere 230 words — that would hobble FedEx Express. It would do so by completely changing the labor laws under which the company operates. Unless the Senate removes the language from the underlying bill reauthorizing the Federal Aviation Administration, a mere dozen or so workers in just one city could hamstring much of the nation’s overnight delivery service.

We Americans take for granted that things can “absolutely, positively … be there overnight” — but it took FedEx Express to make that so. FedEx Express is, of course, one of the great corporate success stories of modern times, having grown from a mere idea in a 1965 term paper by Yale University undergraduate Frederick W. Smith into a company essential to the workings of our modern economy.

It is a little-known fact that FedEx contracts with the U.S. Postal Service to carry almost all of its Express Mail and a large proportion of its Priority Mail. FedEx delivers huge amounts of needed supplies for American military forces, too — and its service is just about the only way to guarantee that some lifesaving medicines reach patients overnight.

Lawmakers have long recognized that certain sorts of transportation companies are the lifeblood of interstate commerce. That’s why they wrote the Railway Labor Act to apply special labor-relations rules to railroads and, eventually, airline-based businesses such as FedEx Express. Since 1926, the RLA has provided successfully for means other than strikes to resolve labor disputes fairly and quickly, without favoring either side.

The RLA does not, however, apply to non-rail, mostly ground-transportation companies such as the United Parcel Service. UPS instead is governed by the National Labor Relations Act (NLRA), the terms of which favor unions such as the Teamsters, which represents UPS drivers. Naturally, this means UPS and the Teamsters both have an interest in kneecapping FedEx Express. Together, the ground-delivery company and the union have executed what The Hill newspaper called a lobbying “pincer movement” to transfer authority over FedEx Express from the RLA to the NLRA.

The UPS corporate political action committee has “given more money to federal lawmakers than any other company over two decades,” according to Bloomberg News, with $77,900 from UPS employees going to Mr. Oberstar since 1989. The Teamsters, who lean heavily Democratic, have donated $86,500 to Mr. Oberstar during that period.

Total hours worked is equal to the total number of workers employed multiplied by the average length of the workweek for the average worker. The length of the workweek tends to respond at turning points faster than does the number of jobs. When demand is slowing, firms tend to cut back on overtime, and then switch to part-time workers or in some cases cut workers back to partial workweeks, before they lay them off. Conversely, when demand is rising, firms tend to end furloughs, and if necessary ask workers to work overtime, before they hire new workers. (The hours worked measure improved in April 1991 and November 2001 which on other grounds were eventually declared to mark the ends of their respective recessions.) The phenomenon is called “labor hoarding” and it is attributable to the costs of finding, hiring and training new workers and the costs in terms of severance pay and morale when firing workers.

Unfortunately, as reported by Forbes, pursuing this logic leads to second thoughts about whether the most recent BLS announcement was really good news after all. The length of the average work week fell to its lowest since 1964 ! The graph below shows that, not only did total hours worked decline in May, but the rate of decline (0.7%) was very much in line with the rate of contraction that workers have experienced since September. Hours worked suggests that the hope-inspiring May moderation in the job loss series may have been a monthly aberration. If firms were really gearing up to start hiring workers once again, why would they now be cutting back as strongly as ever on the hours that they ask their existing employees to work? My bottom line: the labor market does not quite yet suggest that the economy has hit bottom.

I got this link from Krugman’s Blog

i think an even better measurement would be average dollars and benefits brought home each week. Pay cuts, benefit cuts, and lost overtime likely make this drop off look even more like a cliff.

May be a repost

Why should you pay the slightest attention to what this nearly 94 year old lady says about the economy? Because Anna Schwartz has been a respected working economist since 1935 and has been with the National Bureau for Economic Research since 1941. She co-authored the noted Monetary History of the United States with Milton Friedman, and still works every day!

Later today she will tell National Public Radio’s “Marketplace” that we brought the present financial crisis on ourselves and we’ll have to pay for it. (It was her pal Friedman, remember, who came up with the phrase “There is no such thing as a ‘free lunch.’

This should come as no surprise, but to all the dupes who buy/bought into to the global warming scam, the good news is they will feel the ‘change’ like everyone else.

MidAmerican Sees Carbon Trading Adding $120 to Bills (Update1)
By Jim Polson and Peter Cook

June 9 (Bloomberg) — MidAmerican Energy Holdings Co., the utility owner controlled by Warren Buffett’s Berkshire Hathaway Inc., said carbon-emissions trading as proposed under pending U.S. legislation would add $120 a month to an average customer’s power bill.

A so-called cap-and-trade system for reducing carbon emissions would raise power costs without cutting emissions from plants, MidAmerican Chairman David Sokol said today in an interview in Washington.

“It creates a false tax,” said Sokol, whose Omaha-based company owns utilities and power plants in the U.S. West and Midwest. “For the average family, it’s a $120 per-month increase in their electric bill, and nothing of value comes from it.”

The bill’s target, an 83 percent reduction of carbon dioxide emissions by 2050, can be achieved, Sokol said.

Utilities must replace coal-fired and gas-fired power plants or develop commercial technology to strip carbon dioxide from their exhaust, he said.

“That’s where the money should be spent,” Sokol said. “Adding this trading regimen is a duplicative cost.”

MidAmerican would spend $9.3 billion over the next 20 years on physical plant improvements to meet the bill’s carbon-dioxide reduction target, Sokol said. Buying emissions allowances would add another $9 billion of costs, he said. The brunt of the additional costs would be passed on to consumers.

The legislation would require refiners, utilities and manufacturers to acquire carbon dioxide pollution allowances that could be traded on a market as part of an effort to cut emissions 17 percent below 2005 levels by 2020. The House Energy and Commerce Committee approved the bill May 21 and it is awaiting review by other panels.

Some allowances would be given away free to companies and states, who might sell them to finance carbon-dioxide reduction.

Here is the Pullman, WA market in a nutshell (and many other places I presume):
pullman.craigslist dot org/reo/1213101817.html

2 bedroom luxury condos built in 2007-08, originally listed at $250k. Almost nothing has sold, and the units are now marked down to $183,500… supposedly selling at cost. Rents listed at $1350/mo, but they’ve been trying to rent these for a year and only found two suckers stupid enough to pay that price for a 2 bed with zero yard (not even a backdoor or window). Real rental value, perhaps $1000/mo (even that is a bit high for 2-bedroom, right next door 3 bedroom 10-year old townhomes with small yards rent for $1000/mo).

So the developer feels like he is “giving” these units away. But they still don’t pencil out. Eventually this development will pull the developer under, but it will be at least a year before these are foreclosed and come back on the market… probably at a too-high price. Then another year for the lender to accept the loss and mark these puppies down to a reasonable price.

Bottom line: This bubble is going to be unwinding for several more years. Time to renew that lease.

I sold my house!!!!!!! Moving to the good, uncrowded part of CA to get a better deal!

Test… Have I been Borked?

From the U-T article:

“This hotel is down so much, but the economy is the biggest issue,” said Arthur Buser, president and chief executive of San Clemente-based Sunstone. Sunstone said it made the decision to default on its June payment after its loan servicer rejected a proposal to modify its loan.

“San Diego is one of our worst-performing markets,” Buser added. “Over Memorial Day, people were saying they could get rooms for $99 or $109 a night in the San Diego luxury market. When you see how low people are dropping prices and how big the debt is and how much additional money we’d have to commit to debt service, it is clear this hotel will not be worth the principal amount of its debt for the foreseeable future.”

” For the first four months of this year, the average room rate for downtown San Diego luxury hotels was $194, a 12 percent drop from a year earlier when the rate averaged nearly $221, according to Smith Travel Research. Similarly, occupancy dropped 11 percentage points to 66 percent through April of this year.”

““Most people in the hotel industry are expecting a fire sale on distressed assets that in some cases are 30, 40, 50 percent of the original value.”

” The W’s biggest problem, several observers agree, was that Sunstone purchased it for far more than it was worth at a time when the lodging industry was much healthier. Sunstone acknowledged that the $250,000 debt per room at the W is roughly twice that of its other mortgaged hotels.”

That’s a stunning number, debt of $250k per room!

“You’re supposed to buy low and sell high, and they did the reverse,” said San Diego hotel consultant Jerry Morrison. “They were probably running 10-year projections and market studies that told them the market would inflate, but the bottom line is the market doesn’t work that way.

Obama Tells American Businesses to Drop Dead:
Kevin Hassett

June 8 (Bloomberg) — I’ve finally figured out the Obama economic strategy. President Barack Obama and his team have been having so much fun wielding dictatorial power while rescuing “failed” firms, that they have developed a scheme to gain the same power over every business. The plan is to enact policies that are so anticompetitive that every firm needs a bailout.

Once that happens, their new pay czar Kenneth Feinberg can set the wage for everybody and Rahm Emanuel can stack the boards of all of our companies with his political cronies.

I know, it sounds like an exaggeration. But look at it this way. If there were a power ranking of U.S. companies, like the ones compiled by football writers for National Football League teams, Microsoft would surely be first or second to Google. But last week, Microsoft Chief Executive Officer Steve Ballmer came to Washington to announce what Microsoft would do if Obama’s multinational tax policy is enacted.

“It makes U.S. jobs more expensive,” Ballmer said, “We’re better off taking lots of people and moving them out of the U.S.” If Microsoft, perhaps our most competitive company, has to abandon the U.S. in order to continue to thrive, who exactly is going to stay?

At issue is Obama’s policy to end the deferral of multinational taxation.

The U.S. now has about the highest combined corporate tax rate, second only to Japan among industrialized countries. That rate is so high that U.S. firms have an enormous disadvantage versus competitors. The average corporate tax rate for the major developed countries in the Organization for Economic Cooperation and Development in 2008 was about 27 percent, more than 10 percentage points lower than the U.S. rate.

Tax Burden

U.S. firms have nonetheless prospered because our tax code allows a business to set up a subsidiary in a low-tax country. When that subsidiary earns profits, they are taxed at the rate of that country, and don’t face U.S. tax until the money is mailed home.

The economically illiterate partisan Democratic view is that this practice is unpatriotic and bleeds jobs from the U.S. The economic reality is that American companies use this approach to acquire market share overseas. The alternative is losing the business to foreign competitors.

Don’t just take my word for it. A recent paper by Harvard economists Mihir Desai and C. Fritz Foley and Berkeley economist James Hines and published in the distinguished American Economic Review, gathered data on American multinationals to explore the impact of foreign investments on domestic U.S. activity.

Encourage Overseas Sales

Their conclusion was striking. The authors found that “10 percent greater foreign capital investment is associated with 2.2 percent greater domestic investment, and that 10 percent greater foreign employee compensation is associated with 4 percent greater domestic employee compensation. Changes in foreign and domestic sales, assets, and numbers of employees are likewise positively associated; the evidence also indicates that greater foreign investment is associated with additional domestic exports and R&D spending.”

So when firms expand their operations abroad, taking advantage of the lower foreign tax rates, it helps their workers in the U.S. Higher sales abroad (surprise, surprise) are good for domestic workers.

It is worth noting that this study, which is confirmed by a boatload of evidence elsewhere, was coauthored by the same James Hines who recently wrote a sweeping review of international tax policy with Obama’s top economist, Larry Summers. Summers has to know what the literature says.

Calling PB/GS, calling PB/GS…

How does the PPSF work out on this beauty?

(From the Chicago Tribune today)

The U.S. Postal Service postal service announced Tuesday that, after more than a decade of trying to sell the 3-million-square-foot former Chicago facility through conventional channels, it has decided to auction it to the highest bidder.

While the suggested opening bid for the facility that spans the Eisenhower Expressway is $300,000, there is no minimum bid, said postal service spokesman Mark Reynolds.

300 million or 300k?
sounds like a good place for a new green auto manufacturing plant.
No sale just a takeover.

http://madison.craigslist.org/reo/1213347475.html

This seemed like an especially stupid listing to me. To this point I’ve avoided harassing sellers/UHS for stupid listings, but I’m in a bad mood and that may end today.

10 banks were given the go-ahead to pay back TARP funds today. They will most likely celebrate with large bonuses, hiring of cheaper, foreign workers, and the standard thumbing of their noses at all that is fair and ethical. Should they see another leg down, they’ll most certainly come back begging for more help. Our response should be “HELL NO!” There should be stipulations for any institution exiting the TARP program that they will no longer qualify for help under it, and be allowed to fail should they find themselves in the same predicament. No more corporate welfare.

The economically illiterate partisan Democratic view is that this practice is unpatriotic and bleeds jobs from the U.S. The economic reality is that American companies use this approach to acquire market share overseas. The alternative is losing the business to foreign competitors.

Pure BS It’s a tax dodge pure and simple.

Why do you think so many companies are fighting for that huge market share in the Cayman islands.

Again I say let Microsoft threaten to offshore labor, which they already do. US threat can be evaluating their status as an unregulated monopoly.

Court puts legal cloud over foreclosure sales

By Jerry Kronenberg | Tuesday, June 9, 2009 | Real Estate

A Springfield judge’s ruling has thrown the entire Massachusetts foreclosure market into disarray by bolstering claims that lenders improperly seized thousands of Bay State homes.

Experts say Land Court Judge Richard Long’s recent decision to void two Springfield-area foreclosures over procedural flaws has gummed up resale of foreclosed homes across the state.

“It’s just stopped everything,” said North Andover broker Linda Kody, who specializes in reselling foreclosed properties for banks.

Kody said Long’s ruling, first reported yesterday by industry publication Banker & Tradesman, has halted at least 12 of her resale deals.

Would-be buyers can’t get title insurance on homes with “clouded” ownership, Kody said, and banks, in turn, generally won’t OK mortgages without title coverage.

Long ruled that due to faulty paperwork, U.S. Bank and Wells Fargo Bank don’t really own the Greater Springfield homes that each foreclosed upon separately in 2007.

The judge found that the banks held foreclosure auctions even though both lacked documents at the time proving that they really owned the homeowners’ mortgages. That “clouded” each property’s title, discouraging any third party from bidding on the homes, Long ruled.

“None of this is the fault of the (homeowner), yet the (consumer) suffers due to fewer or no bids in competition with the foreclosing institution,” the judge wrote in his decision.

Experts say paperwork flaws are common in foreclosures these days, as mortgages often changed hands over and over again during the 1998-2005 housing boom. Any missing paperwork can call into question whether a bank really owned a loan it foreclosed upon.

Lawyer Gary Klein, who’s filed a federal class-action lawsuit aimed at undoing some 2,000 Bay State foreclosures on such grounds, said Long’s ruling strengthens his case. “Lenders simply stopped following the law for their own convenience,” Klein said.

A snippet…

Two Ways to Deleverage an Economy
by Bill Bonner
London, England

The dumb money is fairly easy to spot. It’s the money that always shows up late to the party, wearing yesterday’s fashions. It watches TV and thinks the reality shows show reality…it thinks Ben Bernanke is a great economist…that the SEC protects investors from fraud and misrepresentation…and that Tim Geithner makes sure the economy keeps running smoothly.

It’s the dumb money that thinks you can correct a generation-long period of credit growth in 24 months…with less than 10% unemployment…

Stocks have now been in a rally for three months. The longer this goes on, of course, the dumber money gets. People come to think the bounce is a permanent bull market.

Yesterday, not much happened. Stocks held steady. Oil too. Gold fell $8…closing at $952. And the dollar rose to $1.39 per euro.

But while the dumb money has its eyes on the stock market, the smart money is watching the economy.

Unemployment has risen to 9.4 million in the United States. Experts think the rate of job losses is slowing. But month after month, more and more people are not collecting wages. Instead, they’re coming to rely on handouts from the government. The press reports that one in every six Americans is now on some form of government life-support. (More on that…tomorrow…)

Same thing in the housing sector. Robert Shiller says the housing slump has already knocked prices down 32%…and has a long way to go. This alone guarantees a long period of adjustment. Bad decisions - usually those with huge debt bombs attached - will blow up…then they need to be cleaned up…and then, after the destruction, comes the constructive rebuilding. All that takes time…years.

People whose houses are going down in price…and whose incomes are falling…do not buy more stuff. Sales go down…profits go down…and dividends go down. Why would investors buy stocks when earnings and dividends are falling? Good question. Pull your shorts up, dear reader…pull your shorts up.

House prices are still going down - but not as fast. Still, big resets, defaults and foreclosures are still on the way - in prime and Alt-A mortgages. But there is still time to protect yourself from this second wave of defaults. Get all the information you need in this special report.

Meanwhile, when companies don’t sell…they don’t ship either.

The trucking industry says traffic is off 13% from a year before - the biggest drop in 13 years.

Airplanes are carrying 21% less cargo. And the commercial airline industry says it is losing $9 billion this year.

As for shipping…well, don’t even bring it up. Shipping has been in a catastrophic slump since last year - with cargo rates down 90%.

Congress stirs in its deep sleep: U.S. House lawmakers on Tuesday said they would file a subpoena to compel the Federal Reserve to turn over internal notes and emails detailing the central bank’s role in encouraging Bank of America Corp. to complete its acquisition of Merrill Lynch & Co.

Combo, you’re doing well on your FEED. It looks like you know who you are!

Here’s just one more crock, being rammed through…

The Environmental Protection Agency (EPA) recently issued a proposed rule saying that greenhouse gases endanger the public health and welfare.

Under this endangerment finding, the EPA could rule that carbon dioxide and five other so-called greenhouse gases are a threat to public health. Specifically, EPA Administrator Lisa Jackson plans to use section 202(a) of the Clean Air Act to regulate these emissions. This, despite the fact that it’s questionable whether the EPA even has the authority to pursue such a drastic regulation.

Even recent EPA leaders disagree with this approach. According to Stephen Johnson, former EPA administrator, “…the Clean Air Act, an outdated law originally enacted to control regional pollutants that cause direct health effects, is ill-suited for the task of regulating global greenhouse gases.”

Make no mistake: This drastic regulation will cost jobs and raise the price of nearly all goods and services U.S. consumers purchase.

If the unelected bureaucrats at the EPA get their way, every sector of the U.S. economy could be blamed for a wide range of health problems. And, the new regulation will open a floodgate of unfair litigation aimed at small businesses, farmers, public utilities and nearly every other sector of our economy as opportunistic trial lawyers seek to pad their already deep pockets.

Moreover, the EPA is attempting to stifle public opinion by shortening the public comment period from 120 days - the typical comment period on EPA’s work - to 60 days. Such drastic regulation surely deserves the most time possible so that everyone affected may respond.

June 9 (Bloomberg) — The Wall Street firms that trade directly with the Federal Reserve say speculators betting that interest rates may head higher this year are wrong.

Policy makers will keep the target for overnight loans between banks in a range of zero to 0.25 percent this year, according a survey of the 16 primary dealers of U.S. government securities that trade with the central bank. A majority predict no increase until at least the second half of 2010.

Yields on two-year Treasury notes surged 44.4 basis points June 5 and 8, the biggest two-day increase since Sept. 18 and 19, and Fed funds futures contracts showed a 58 percent probability yesterday of a rate increase by November on signs that the economy is bottoming. Implied yields on eurodollar futures, also used to speculate on changes in central bank policy, increased even as the U.S. government said on June 5 that the unemployment rate rose to 9.4 percent, the highest since 1984.

“The market seems wrong on this one,” said Eric Liverance, head of derivatives strategy in Stamford, Connecticut, at UBS AG, one of the dealers. UBS predicts that the Fed will remain on hold until June 2010. “High unemployment and a continued bad housing market will prevent the Fed from raising rates.”

‘Significant Headwinds’

Policy makers reduced the target rate to a record low in December after the collapse of the subprime mortgage market froze credit markets and pushed the global economy into the first recession since World War II. President Barack Obama and Fed Chairman Ben S. Bernanke have pledged, committed or spent $12.8 trillion to thaw credit and ramped up government spending to revive economic growth.

“The Fed is not likely to tighten this year or next because it still faces significant headwinds out of the financial and housing sectors,” said Lawrence Dyer, an interest-rate strategist in New York at HSBC Holdings Plc, one of the primary dealers. “Credit is still tight. The market is now better than it was before, but that is a healthy stability. It is not an economic recovery.”

There’s a “harvest moon” going on in “The O.C.” today!

BWAHAHHAHAHAHHAHAHHAHHAHAHAHHHHHHHHHHHHH!!! (fpss™)

‘Real Housewives’ Coto home in default:
June 9th, 2009, OC Register by Mark Eades

“Jeana Keough of the ‘Real Housewives of Orange County’ TV show confirms that creditors have filed notices of default on her Coto de Caza home.

According to ForeclosureRadar.com …

* Lender Washington Mutual — now Chase — last month filed a notice of default for a $1.3 million mortgage made in 2003. Unpaid was $37,538.
* The Coto homeowner’s association filed a similar motion in April, claiming its owed $3,732.

Jeana told The Register that she recently got some paperwork from lenders and “I’m trying to doing a loan modification.”

She admits that she controls four homes — the other three are rental properties — and all are in trouble. “I think all four of my houses have notices of defaults on them, as I’m trying to get loan modifications on them. To get a loan modification you have to stop making payments to qualify. I have renters in the other three now. I don’t know if I’m going to sell it, or what I’m going to do.”

Jeana, who when she isn’t acting is in real estate sales, added: “The realty business is so bad. You’ve got to come up with $10,000 a month. It’s a tough market, everybody’s struggling. My kids don’t really need this news right now.”

What’s the home worth?

* A Zillow Zestimate of the home’s value pegs it at $1.382 million.
* The county tax collector puts assessed value for the current tax year at $1,537,549 with a $17,286 tax levy for 2008-09.

This just in…

The enrollment at the high school my wife works at is down 22% YOY, and summer just started. It’ll be interesting to how bad it is when school starts in August.

MarketWatch
Paul B. Farrell
Jun 8, 2009, 10:19 p.m. EST
10 reasons Terminators destroy ‘Twitter-brains’
Hypnotized, you’ll forget dot-coms, subprimes, the next Great Depression
…
Folks, this is too real to make up. Less than a year ago, Wall Street banks were insolvent, near bankruptcy. Then in a swift “disaster capitalism” maneuver by Henry Paulson, Wall Street’s Trojan Horse in Washington, they raided our Treasury and the Fed, while our clueless reps in Congress stood by.

Eight short months later, Wall Street’s back in “business as usual” with bigger salaries and bonuses, while taxpayers hold the bag for over $5 trillion in new debts, a record $546,668 per household reports USA Today.

Hello, droogies! It’s 3:38 here PNW time and I’m at home now, because I’m taking the next few days off, since I’m tired and becoming disinterested in bossing and arranging the affairs of my fellow man*, which is a new and alarming development, and one that will never do to maintain.

But what I wanted to say is, I notice a light orangey tint to the leisurely afternoon light right now that to me indicates there is a fire somewhere downwind.
I HATE that—- unless, of course, I lit the fire, which I would not do, unless it was needed or at a party— but anyway it’s bugging me. It must be the genes, because right now I feel like dashing away through the woods.

*Tired of bossing the affairs of my stupid fellow mans. I don’t care what the rest of you do. I assume YOU can take care of yourselves.
…all 129 of you that exist.

*surly snort *

“Investors should not be surprised to learn that the commitments, guarantees, and prodigal spending of the past two Administrations have come with harrowing consequences.”

The new administration has been in office five months. It’s first budget is due in October. It was advised by everyone — left, right, center — to enact a huge stimulus package to preserve the value of pieces of paper held by older Americans that say they have a growing right to everything produced by younger generations.

Everyone not on this blog, of course.

Republican? Democratic? No, it’s Generation Greed.

Weird, it seems like one of my comps is blocked.

Anyhoo — enrollment at my wife’s high school is down 22% or so YOY, and it’s not even August yet! I wonder what the new academic year will look like as the bust grinds on.

That has everyone freaking out, and Pinellas was with the declining enrollment curve all along.

The “Tan Man” has a shot at boosting his defense:

The MSM and [now poorer] CEOs have been claiming that “no one could have foreseen this crisis”. If this is accepted as truth, Mozilo is cooked because how could he have seen it unless by insider information?

“Easy,” replies his lawyer. “Mr. Mozilo has been reading the Housing Bubble Blog [holds up sheafs of past postings by the HBB Luminaries] for some time now and all those studs figured this bubble thing out back in ‘06 so he just took their advice and started selling.”

“Mr. Defense Lawyer,” the judge says slowly, “you expect me to believe that a bunch of non-REICsters posting on some two-bit blog were able to figure out what the whiz kids at Lehman Brothers/Bear Stearns/Merrill Lynch/Fannie Mae did not??”

“It’s all right here, your honor.” [hands over HBB docs]

“Hmm,” says the judge after some perusal. “We’re taking a one hour recess! Bailiff: call my broker now!”

*surly snort *

Party people
Yeah Tag Team music comin’ straight atacha
That’s me DC the Brain Supreme
And my man Steve Roll’n
We’re kicking the flow we’re kickin’
And it goes a little somethin’ like this
Tag Team back again check it
Wreck it - let’s begin
Party on party people let me hear some noise
DC’s in the house jump jump and rejoice
There’s a party over here
a party over there
Wave your hands in the air
Shake the deriere
These three words mean you’re gettin’ busy

Whoomp there it is
whoomp there it is

Upside down and inside out
I’m about to show all you folks
What’s it’s all about
Now it’s time to get on the mic
And make this party hype
I’m talking it back to the old school
‘Cause I’m an old fool who’s so cool
If you want to get down
I’m gonna show you the way whoomp there it is
Let me hear you say
whoomp there it is

Whoomp chak a laka chack a laka chak a laka chak a
Point blank gin and juice I drank
Gettin’ bent and bent and as I puff on a dankt
Rock the mic
uh
oh I see rave skin
Rip skit find a honeydip to dip it in
Slam dunk it stick it flip it and ride
That is double O D D Y oh my
Ooh that it come on come on
Whoomp there it is I’m done

Tuesday, June 9, 2009

Taking Stock
Taking Stock: History lessons
Economist Anna Schwartz

Revered economist and monetary policy expert Dr. Anna Schwartz talks with Kai Ryssdal about how the Federal Reserve and government have performed while in the economic hot seat. And she isn’t too pleased.

So, I was going to post to complain about health insurance premiums going up….My COBRA premiums are going up 15% this year..and the deductibles are being raised.

BUT…

I got a letter today saying they dropped me for non-payment. It appears they didn’t get my May check, and they don’t tell you they never received it..they just kind of drop you. No mention of it when I called a week and a half ago to ask about the whole stimulus COBRA premium subsidy stuff…

So, I go 4 weeks without UI benefits because I actually did some work one week….(took 4 calls to finally get someone to fix that)…and now I’ve been dropped from health insurance. Woohoo!

Anyone want to point me to a good insurance provider/plan for a healthy, single, 30 year old male? I think I can re-elect COBRA through the stimulus bill, but I might be better off going it alone….

Sigh. Maybe I should just get a job…

My apologies if this is a reprint here, but this is the most cogent and concise explanation I have seen for “what went wrong;” it seems worth repeating even if it is a repost. The only thing I have to add is that one of the key reasons it could happen like this is that the checks and balances of US constitutional governance don’t quite reach quasi-government entities like Fannie and Freddie or the Fed. They acted as though they had a license to play G_d in the mortgage market, but they were not up to the task.

Above all, I share the writer’s view that a clear and transparent understanding of the problem is necessary to avoid repeating the pitfalls of the bubble. Since the Fed has not openly recognized the housing bubble’s root causes (particularly the moral hazard problem caused by providing free too-big-to-fail insurance for Wall Street banks), I am not optimistic that glasnost or better policy is on the way.

* The Wall Street Journal
* OPINION
* MAY 23, 2009

Moral Hazard and the Meltdown
Everybody felt too big to fail.
By SCOTT E. HARRINGTON

An appropriate government response to the bursting of the housing bubble requires a full understanding of what went wrong and why. Many commercial banks, investment banks, savings and loans, mortgage originators, subprime borrowers, and insurance giant AIG obviously placed heavy bets on continued housing-price appreciation. They gambled; the losses have been huge and widespread.

Why did so many players place these large, risky bets? A simple yet significant part of the answer is that the potential gains and losses were asymmetric. If housing prices continued to climb, or at least not fall, the participants could achieve large profits. If housing prices failed to appreciate, or even fell, the losses would be largely borne by others, including taxpayers. “Heads” and the bettors would win — “tails” and others would lose.

On the supply side, de facto — and now de jure — government guarantees of Fannie Mae and Freddie Mac debt lowered their financing costs and thus amplified mortgage-credit expansion and housing-price appreciation. Bank deposit insurance and implicit guarantees of bank obligations encouraged risky mortgage lending and investment, especially given strong pressure from Congress for more subprime lending. The shift to corporate ownership of investment banks, with limited liability, encouraged them to take greater risk in relation to capital, especially given expanded competition with investment-bank affiliates of bank holding companies that followed the Gramm-Leach-Bliley Act in 1999.

Moreover, the Security and Exchange Commission’s adoption in 2004 of “consolidated supervision” of the largest investment banks allowed them to increase leverage substantially, in significant part by taking on more subprime-mortgage exposure.

Meanwhile, AIG facilitated investment in mortgage securitization by domestic and foreign banks and investment banks by selling cheap protection against default risk. Subprime mortgage originators were often new entrants that had little reputational capital at risk, and didn’t have to hold the mortgages.

On the demand side, many subprime borrowers acquired properties with little or no money down. They faced relatively little loss if housing prices fell and they defaulted. Many people took cheap mortgages on investment property to speculate on housing-price increases. Others took cheap second mortgages to fund current consumption.

The Federal Reserve played a key role in making these bets attractive to borrowers, lenders and investors. It kept interest rates at historically low levels until it was too late to prevent the eventual implosion. This deliberate policy and public statements by then Fed Chairman Alan Greenspan fueled demand for credit and housing and encouraged lenders to relax mortgage-lending criteria.

Given what we know about the bubble’s causes, the main objectives of legislative and regulatory responses should be to encourage market discipline as a means to promote prudence, safety and soundness in banking and securities. We should avoid extending explicit or implicit “too big to fail” policies beyond banking.

Unfortunately, the most conspicuous proposals on Capitol Hill — the creation of a “systemic risk” regulator and expanded federal authority over financially distressed insurers and other nonbank institutions — could easily undermine both objectives by protecting even more institutions, investors and consumers from the downside of their actions.

Mr. Harrington is a professor of health-care management and insurance and risk management at the University of Pennsylvania’s Wharton School.

“…one way to minimize the too-big-to-fail assumption is by showing that at least one big institution can fail.”

How about two: Lehman Brothers and Bear Stearns? Shouldn’t that have been enough to minimize the assumption?

* The Wall Street Journal
* REVIEW & OUTLOOK
* JUNE 10, 2009

Making Failure an Option
As some banks leave the TARP, what to do about Citigroup?

The Hotel Geithner — a.k.a. the Troubled Asset Relief Program or TARP — is poised to set up its checkout desk this week. Big banks that have successfully raised capital from private sources, including J.P. Morgan and Goldman Sachs, may be among the first to get their walking papers.

But amid the debate over whether it’s too soon or too late to let the country’s biggest banks repay their TARP money, the question the Obama Administration should be asking is how to prevent return trips to the bailout trough for banks that were deemed too big to fail only eight short months ago.

Those banks that have been able to access the capital markets without government guarantees deserve the chance to get out from under the TARP. But only if they can really walk away from all the government guarantees that they have benefited from since last fall (deposit insurance excepted). That includes the FDIC’s debt-guarantee program for commercial paper, but it should also mean the implicit guarantee that comes with being a member of the too-big-to-fail club.

Unless we can put the kibosh on that unofficial designation for the biggest banks, their obligations ultimately remain potential taxpayer liabilities (see: Fannie Mae, nationalization of). Let them check out for sure, but make sure that they don’t come back, or we’ll be left with a financial system full of government-sponsored banks with an implicit guarantee should they run into trouble.

The question is how to do that. It’s not enough to say the banks that pay back the TARP are on their own — “and this time, we really, really mean it.” The markets won’t believe it, and over time these banks will have a lower cost of funds because lenders will assume, a la Fannie, that they will be rescued. One possible answer is a new mechanism for regulators to resolve — that is, seize, then sell or recapitalize — the biggest banks. But while we’re waiting, one way to minimize the too-big-to-fail assumption is by showing that at least one big institution can fail. Last fall, at the height of the panic, regulators deemed this too dangerous. But this need not be an eternal truth.

It happens that we have a test-case at hand in Citigroup. Regulators remain at odds over how much trouble Citi is in. But this spring’s stress tests revealed Citi to have a $63 billion hole in its balance sheet, which the feds papered over by giving the bank credit for converting its government-owned preferred into common shares, a move that will put no new money into the bank. Citi has also been slow to raise private capital since the stress-test results were revealed, even as the capital markets have opened up to its competitors. More broadly, Citi has proven itself unmanageable by having already failed three times since the 1980s, requiring government bailouts in one form or another during the sovereign debt crisis in the ’80s, the 1990s real-estate bust and again, twice, during the panic of 2008. Its turnaround plan has also been less than impressively executed.
…

Driving home today, I noticed Pardee homes is flying the “make-you-want-to-buy” banners over newly opened areas of Carmel Valley. Large billboards advertise new two-story, 5br+ homes “from $1 million.” I am wondering how those are going to sell, given the extant glut of $1m+ San Diego foreclosure homes I reported here last weekend.

California could fix its budget deficit by making people who own million dollar homes pay representative property taxes. $17k is only like 1%. That’s insanely low.

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