Bits Bucket For June 22, 2009
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The Housing Bubble
Examining the home price boom and its effect on owners, lenders, regulators, realtors and the economy as a whole.
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St. Louis heat wave. Brutal week ahead, and most of last week was miserably hot.
Heat and humidity is great for the tomatoes. I start mine from seed, so right now they are puny compared to the neighbors who buy seedlings.
Yeah, but I ain’t no tomatoe. I am a raccoon. Oly is a beat. This raccoon has to wear a suit (a/k/a “dress”) in this stuff.
beat =beet.
beatrice.
Ya poor be-suited raccoon.
Alas, beets also have to wear clothes when they go to town, even when that town is Olympia. I’m being oppressed!
*shakes fluffy beet-head mournfully *
…also have to wear clothes when they go to town, even when that town is Olympia.
Haha, not always, though. Although I missed this year’s Evergreen graduating class streaking celebration, I happened to be driving along Mud Bay at the right time last year and laughed so hard I about swerved off the road and into the water. A bunch of cheery and very, very pale nekkid people were dashing in a noisy thunderous herd over the tidal mud-flats. It was great!
Glad the PNW still has a sense of whimsy. In Florida, those kids would be beaten and tasered, then given sex offender status.
Wow.
*makes studious note to self to never, ever, ever go to Florida *
*makes studious note to self to never, ever, ever go to Florida *
Just keep your clothes on.
Ate,
What is happening in St. Louis toward west end? Ladue, Chesterfield, so on? Did things get bubbly and are declining or what?
Hey Don’t: Sorry for late post. I don’t really know re Ladue/Chesterfield. Except a Dr. friend said property is “down” in Chesterfield. As you know, midwest didn’t get hit quite as hard as Fl AZ CA, etc. Down, I would say 15-20%, but more to come, I am sure.
Thanks. I grew up in St. Louis and now reside in CA. I sometimes miss those thick, can’t breath, humid summer nights/days if you can believe that!
It’s been a pretty nice spring around here (cooler than normal).
Today: High 90’s, Heat Index 110 degrees………inside the airplane cabin/tailcone, 140 degress (measured with a certified thermometer).
I’m getting to old for this.
Nice 80’s and kind of dry out this afternoon with lots of sun. A good old-fashioned summer is shaping up here.
Over 100 in Phoenix but dry
Insiders Exit Shares at the Fastest Pace in Two Years…
June 22 (Bloomberg) — Executives at U.S. companies are taking advantage of the biggest stock-market rally in 71 years to sell their shares at the fastest pace since credit markets started to seize up two years ago.
Insiders of Standard & Poor’s 500 Index companies were net sellers for 14 straight weeks as the gauge rose 36 percent, data compiled by InsiderScore.com show. Amgen Inc. Chairman and Chief Executive Officer Kevin Sharer and five other officials sold $8.2 million of stock. Christopher Donahue, the CEO of Federated Investors Inc., and his brother, Chief Financial Officer Thomas Donahue, offered the most in three years.
Sales by CEOs, directors and senior officers have accelerated to the highest level since June 2007, two months before credit markets froze, as the S&P 500 rebounded from its 12-year low in March. The increase is making investors more skittish because executives presumably have the best information about their companies’ prospects.
“If insiders are selling into the rally, that shows they don’t expect their business to be able to support current stock- price levels,” said Joseph Keating, the chief investment officer of Raleigh, North Carolina-based RBC Bank, the unit of Royal Bank of Canada that oversees $33 billion in client assets. “They’re taking advantage of this bounce and selling into it.”
This is why I’m waiting for my next Roth IRA contribution until the next leg down in the economy.
“If insiders are selling into the rally, that shows they don’t expect their business to be able to support current stock- price levels,”
Exactly. Doesn’t take a rocket scientist to understand this.
Did you see, from the Guardian: Goldman is paying the highest bonuses (boni) ever for a record year. The article did say that part of it was due to “lack of competition”.
Meanwhile, a group of German seniors kidnapped a financial investor who defrauded them. They transported him to Bavaria, some 250 miles away (quite a feat, I think), and held him in the basement of an elderly couple’s house, trying to get some money back.
Did you see, from the Guardian: Goldman is paying the highest bonuses (boni) ever for a record year. The article did say that part of it was due to “lack of competition”.
Lehman’s gone the FDIC is shutting down smaller banks and the FED which is infiltrated by GS is in charge of the competition. They got their full AIG insurance payout thanks to Paulson and now they are sitting on easy street. They’ll of course give as much of the earnings as they can to managemen.
I like boni - you can ask people at the beginning of the year - “did you get boned by the company last year?”
I hope those seniors haff vays off makeeng fraudsters talk.
“Is it safe?”
The Great PPT Engineered Stock Top is beginning to collapse of its own weight (P/E north of 125).
Look out below, as they say.
My own observation is that where many HBB’ers were spot on rejecting the housing bubble, they were perplexed by the “green shoot rally”.
This is understandable, given the influence of the MSM and supply side analyst obfuscation. However, please let me implore those who have not yet gotten the message:
This is where you stand to lose a great deal of your accumulated savings and wealth!
The equity and Real Estate markets are collapsing at the same time the dollar is eroding. Unemployment is spreading like cancer throughout much of the industrialised world. This means there is LESS money to support R/E prices or stocks. Central banks are therefore doing whatever they can to inflate economies out of thin air. This will have enormous consequences later on. In the meantime, protect yourself, and refrain from speculating on stocks or investment properties. Try to become as self-sufficient as possible given your own individual circumstances. Try to build up some reserves of basic necessities.
Try to support Ben and the HBB with a donation! This is a really unique and valuable forum!
The “green shoot rally” reminds me of the Looney Tunes cartoons, specifically Wile E Coyote. He runs off the cliff but doesn’t fall, at least not until he looks down and realizes there’s nothing underneath him. We know what should be happening, but too much of the world just won’t look down so gravity continues to be defied. Of course cartoon characters have nothing to lose by not looking down, we do.
Al,
This is pretty much the analogy I give people when explaining the stock market rise in the past couple of months.
Once that coyote looks down - watch out.
Would it be fair to say that great minds think alike?
RE: The equity and Real Estate markets are collapsing at the same time the dollar is eroding. Unemployment is spreading like cancer throughout much of the industrialised world
http://www.kitco.com/ind/Wieg_cor/roger_jun182009.html
…renters note the 3 to 5 year time frame for getting into a house.
The current stock market is the second biggest bubble in history.
When stocks tank, bonds will look attractive. The “flight to safety” will keep rates low and allow Government, Inc. to keep spending.
“When stocks tank, bonds will look attractive. The “flight to safety” will keep rates low and allow Government, Inc. to keep spending.”
Danger,
Welcome to the gonernments new teeter-totter.
They will find it increasingly difficult to have simultaneous stock bubble AND low borrowing costs from here out.
Pick Your Poison, so thy say.
“second biggest bubble in history” — I agree. Some of you know I am awaiting the inflation-adjusted 1974 low (600 then, 3000 now). In the meantime, I have an August 7500 put on the Dow and, while not committed to holding it to the end, am comfortable holding it today. In the black since I bought the put 6/11/09.
My take on the situation exactly…
“The current stock market is the second biggest bubble in history.”
I don’t get it. IMO, the biggest bubble in history is the housing bubble. The second biggest bubble would be the stock market of a few years ago and 14k. The current stock market is a shell of it’s old bubble self.
I don’t get it. IMO, the biggest bubble in history is the housing bubble. The second biggest bubble would be the stock market of a few years ago and 14k. The current stock market is a shell of it’s old bubble self.
I was thinking that too. Not sure though Danger was necessarily referring to the *current* level but just the size of the bubble in general.
In terms of craziness IMO it doesn’t compare with some other bubbles like the late ’20’s stock market or the tulip bubble - but in terms of sheer magnitude - especially length of time (over 20 years now), it’s got them beat for sure.
FWIW I’m not really sure why everyone associates bond prices with a “flight to safety”, when this chart says otherwise.
Note that bonds stayed level during the October stock plunge, then stocks stayed level during the December bond plunge.
Bonds did rise a little during the Jan-Mar stock plunge, but not at all during the latter part of it, which was the worst period for stocks. Since then both have risen together.
In short I do not see this supposedly “flight to safety” relationship that others apparently do.
yes that was the flight to Money market treasuries pure panic
Green-shoots-engineered flight-to-quality:
Financial Times
Recession worries rattle world markets
By Dave Shellock
Published: June 22 2009 18:37 | Last updated: June 22 2009 18:37
Equities, commodities and emerging market currencies suffered hefty losses on Monday as risk averse investors shifted to the perceived safety of the dollar, the yen and government bonds.
“Risk aversion has resurfaced as market participants take profits on riskier exposures amid the World Bank’s downward revision of its global growth forecast for 2009,” said Samarjit Shankar, director of global strategy at Bank of New York Mellon.
“Renewed concerns about the extent of the ongoing global recession and the sustainability of the green shoots of recovery have combined with the instability unfolding in Iran and North Korea to lend an air of pessimism to investor sentiment.”
EDITOR’S CHOICE
US stocks fall on recession worries - Jun-22
Dollar and yen advance as Euro falls back - Jun-22
Dana Orlick gets testy. Just the facts, ma’am.
http://www.cnbc.com/id/31493713
Insiders have been buying my company’s stock like crazy around late February and early March. Since then, they’ve been selling shares, but in miniscule amounts in comparison. On the 1700 shares I bought March 2, they are up 86%.
I wonder how many insiders were candid about their company’s prospects BEFORE they dumped.
I’m thinking ZERO.
To be fair, I can think of several companies that were cautious with forward projections (going by annual meeting comments). The market didn’t care, at least not over the last three months. For weeks, if not months, its been no secret that the fundamentals don’t exactly support S&P 900+.
“June 22 (Bloomberg) — Executives at U.S. companies are taking advantage of the biggest stock-market rally in 71 years to sell their shares at the fastest pace since credit markets started to seize up two years ago.”
Who moved my green shoots?
Didn’t move. Just got fried. Brown or black is the new green
Is BB and his “green shoots” fairy tale the first Fed chairman to engage in corporate stock pump-and-dump operations, or does the Fed have a history of this kind of thing? (I realize AG advocated the use of loans which unlocked the magic of home equity wealth withdrawals, but I don’t recall him trying to lure sheep into buying stock during periods of economic collapse…)
Economic disaster management plan: Rob Peter and screw Mary in order to pay Paul. (Paul is the banker in the story, of course.)
“You’ve got to by some more Magic Beans if you want to see those MSM/Gov’t greenshots Folks. Hey young fella, you with that milkcow and the big 2009 Chevy Silverado , step right on up here son !”
…and the fairytale continues…
I gave my eighty-year-old parents a Father’s Day call yesterday. When the subject drifted to the economic situation, without a bit of prompting from me, my parents suggested the “green shoots” were a propaganda exercise intended to bolster confidence.
If he can’t fool financially unsophisticated eighty-year-olds, then who exactly does BB think will buy into his economic fairy tales? (My guess: Bovine-brained Wall Street traders…)
“Who are you going to believe? Me, or your lyin’ eyes?”
Pump and Dump!
Yep. The third oldest profession in the world.
What are the first two?
I think 1 -is advertising/marketing.
2- prosti tution
2 is the result of 1.
unless we really are talking gov.
‘Vanilla’ home loans could benefit borrowers
Obama administration says ‘plain vanilla’ home loans would benefit borrowers.
By Alan Zibel, AP Real Estate Writer
On Monday June 22, 2009, 7:11 am EDT
WASHINGTON (AP) — If President Barack Obama gets his way, consumers who take out mortgages would automatically get a “plain vanilla” loan — such as a traditional 30-year fixed-rate mortgage — unless they opted for a riskier variety.
Obama’s plan to revamp financial regulation aims to protect borrowers from the confusing and high-risk mortgages that fed a pandemic of delinquencies and foreclosures, led to the worst financial crisis in decades and thrust the nation into a deep recession.
Obama is expecting opposition to the plan, and cautioned Saturday in his radio address, “While I’m not spoiling for a fight, I’m ready for one.”
Government officials want to make the process of getting a mortgage as simple and abuse-free as signing up for a retirement savings plan: A growing number of companies now automatically enroll new employees in 401(k) plans unless they opt out.
For mortgage brokers, though, the plan threatens to shrink the fee income some have received from encouraging the use of adjustable-rate, interest-only and other sometimes risky loans.
Obama’s plan to overhaul financial regulation, unveiled last week, would create a Consumer Financial Protection Agency to monitor consumer financial products and revamp the entire home-loan process.
It’s the administration’s latest step to tackle the aftermath of the housing bust. The administration in March launched a $50 billion plan to give the lending industry financial incentives to modify mortgages to lower payments.
But that plan is off to a slow start. Many housing counselors say it hasn’t made much of a difference nationwide because lenders have been slow or reluctant to cooperate. As of mid-June, about 50,000 borrowers were enrolled in three-month trial modifications under the plan, according to the Treasury Department. The administration initially had said up to 4 million households could be helped.
Critics in the mortgage industry are denouncing Obama’s plan for government-approved mortgages. Some call it a paternalistic intrusion that would restrict borrowers’ options and make loans harder to get and potentially more expensive.
I don’t see that reducing in any way the number of exotic mortgages issued. If people signed without reading before this law is passed, why would they stop to read now. I’d also venture a guess that most people with exotic mortgages were - if not well informed - at least privy to the idea that the payments would rise sometime in the future.
Of course, I hope it works, because it will crash home prices as the exotic loans are pulled out of the system…
Yeah, people CHOSE these mortgages. It WOULD be worthwhile to make sure that in the future those were well informed choices. I suppose that you could make sure that everybody who got an exploding mortgage COULD afford a 30 year fixed, but ISTM that’s where the market is going without further government intervention.
And we and our grandchildren will be paying it off for them.
Like the bumper sticker says, “Honk if I’m paying your mortgage”
I can’t believe Joe Biden would allow this to happen.
It’s true that many people chose these mortgages, but in some cases these “products” were fraudulently sold to them as the only option available:
Bank (Wells Fargo) Accused of Pushing Mortgage Deals on Blacks
This story is so disgusting. There really is a special place in hell for these people.
“Both loan officers said the bank had given bonuses to loan officers who referred borrowers who should have qualified for a prime loan to the subprime division. Ms. Jacobson said that she made $700,000 one year and that the company flew her and other subprime officers to resorts across the country.
“I used to joke that ‘I’ll pay for your kids to go to private school if you give me clients,’ ” Ms. Jacobson said in the interview.
Ha ha ha ha ha ha! What a funny joke, Ms. Jacobson!
Pesky details, or as we used to say in the newsroom, don’t let the facts get in the way of a good story!
“Loan officers employed other methods to steer clients into subprime loans, according to the affidavits. Some officers told the underwriting department that their clients, even those with good credit scores, had not wanted to provide income documentation.
“By doing this, the loan flipped from prime to subprime,” Ms. Jacobson said. “But there was no need for that; many of these clients had W2 forms.”
Other times, she said, loan officers cut and pasted credit reports from one applicant onto the application of another customer.
“It’s true that many people chose these mortgages, but in some cases these “products” were fraudulently sold to them as the only option available:”
This is a fact. In fact, there was outright collusion to ONLY offer that option to even the best customers.
You’ll see.
When you make something foolproof, they manage to make a better fool.
True, but it would be nice to have fools who have even less plausible reasons to whine that they didn’t know what they were getting them selves into.
I see two kinds in our current situation, those who “knew” but thought they were smart enough to handle it and the naive who got caught up in the momentum and are genuinely surprised about how they shot themselves in the foot, even though they should have known better
The Policymakers do not seem to get that it was a crime wave real estate mania and equity appreciation was the goal and at the time any loan would do .
If it was really just a simple matter of putting people into fixed notes ,this real estate loan problem would of been solved two years ago . The problem was inflated prices that crashed and when you go down in value 30 to 60 % no new loan is going to save you ,if your looking for equity ,income from rents ,or looking to sell .
The people that just bought a home to live in and could afford their payments are looking at the value of their neighborhoods
being destroyed and those people are starting to walk also .Its fine to try to re-write as many loans as possible that were the result of the inflated market ,but the real problem is a equity crash ,or a price crash combined with oversupply of homes .
The government cannot change what happened and try to paint it with a brush that it was simply bad loan product .The bad loan products allowed borrowers to buy into a fake value
market riddled with fraud .Money was so available at the time that anybody could get into gambling on the housing frenzy .When you have entire tracts that were sold to flippers (sometimes called investors or speculators ),the whole tract is going down ,and a new loan is not going to stop that process.
Exactly. As I often ask, who was it that ultimately approved those loans? The borrowers… or the bank itself?
I don’t think Obama’s plan will work, because everything is about Howmuchamonth.
Case in point, one of my clients just emailed me and asked if I finance Travel Trailers. No I don’t! However, this particular client owes only $33K on a property that today would list for $100K+ and perhaps sell for $75K. She needs only $12K to buy the TT. I said I would rewrite the mortgage note, raising the interest rate somewhat, extending the term a few years, increasing the balance to $45K, and raising the monthly payment from $358 to $450. She was thrilled, because all she saw was, $92/mo to add the TT. (I don’t even want a note on the TT, how would I repo it if it travels?)
Similarly, people will be quoted lower initial payments on ARMs than on fixed-rate mortgages, so they’ll choose the ARMs.
(I don’t even want a note on the TT, how would I repo it if it travels?)
You call the Repo man.
Repo man….
Bud: Credit is a sacred trust, it’s what our free society is founded on. Do you think they give a damn about their bills in Russia? I said, do you think they give a damn about their bills in Russia?
Otto: They don’t pay bills in Russia, it’s all free.
Bud: All free? Free my ass. What are you, a fuckin’ commie? Huh?
Otto: No, I ain’t no commie.
Bud: Well, you better not be. I don’t want no commies in my car. No Christians either.
…Man, what a great movie.
“Hey man, let’s go do some crimes!”
Lets get sushi and not pay for it.
Which of course brings us around to Blood Simple
Private Detective Visser: [narrating] The world is full o’ complainers. An’ the fact is, nothin’ comes with a guarantee. Now I don’t care if you’re the pope of Rome, President of the United States or Man of the Year; somethin’ can all go wrong. Now go on ahead, y’know, complain, tell your problems to your neighbor, ask for help, ‘n watch him fly. Now, in Russia, they got it mapped out so that everyone pulls for everyone else… that’s the theory, anyway. But what I know about is Texas, an’ down here… you’re on your own.
az_lender, it seems you’ve been increasing your risk profile lately, no? The loan to the folks trying to flip in FL, and now essentially financing the purchase of the trailer (though it sounds like you have plenty of room to increase the loan balance backed by the “house”). Is there a reason for this?
Sorry if I’m reading the situation wrong..I’ve always been intrigued by your lending, and am curious about how you approach your decisions I suppose.
I don’t think Obama’s plan will work. People think only of Howmuchamonth.
Yesterday one of my clients emailed me to ask if I finance travel trailers. I said NO … but this particular client owes only $33K on a property that would right now list for $100K, sell for maybe $75K. Wants only $12K for the TT. So — cash-out refi, INCREASING both the interest rate and the term of the mortgage, as well as its balance; but increasing the monthly pmt by “only” 92 dollars. So all the client is thinking of is the $92, sounds low to finance a $12K travel trailer. (Of course I’m not taking a note on the TT, I don’t know how to repo traveling vehicles.)
Similarly, loon officers will show how ARMs are “cheaper” (ha ha) than 30-yr fixed, so people will fall for it.
Loon officers. I like that one.
RE: Loon officers. I like that one.
Been washing his socks in Maine too long.
Back when I applied for my mortgage, our economy was deep in housing bubble mode. Despite the mortgage sales rep’s insistence on an ARM (”It’ll lower your monthly paymemt!”) I demanded a 30-year fixed rate mortgage. And that’s what I have.
Back in 2004, there was quite a bit of incentive to sell ARMs. The commissions on them were higher than on the 30-year fixed. That’s why the sales rep was trying to strong-ARM me.
But I’d done my homework, and, to me, those ARMs looked like trouble.
Housing Eludes Recovery as Job Losses, Foreclosures Climb…
June 22 (Bloomberg) — Unemployment and consumer debt are putting home ownership beyond the reach of would-be buyers even as U.S. home prices reset to 2003 levels, according to a report today by Harvard University’s Joint Center for Housing Studies.
“Clear signs of a recovery have yet to emerge, and job losses and the steady stream of foreclosures are keeping many markets under pressure,” researchers for the Cambridge, Massachusetts-based center wrote. “Sales of both new and existing homes continued to struggle to find a bottom.”
Tight residential real estate markets and low mortgage rates fueled a five-year property boom as the number of U.S. households paying more than half their incomes for housing jumped from 13.8 million in 2001 to 17.9 million in 2007, the researchers said.
The federal government is now trying to stabilize the market by offering incentives for lenders to modify the terms of delinquent mortgages and the Federal Reserve has pledged to buy as much as $1.25 trillion in mortgage-backed securities to free up funding for new home loans.
When recovery comes, immigrants and children born to the post-World War II baby-boom generation will lead it, the Harvard researchers said.
So-called “echo boomers will help keep demand strong for the next 10 years and beyond” as they turn 25-44 years old, according to the report.
“Even under the low immigration assumptions, minorities will fuel 73 percent of household growth in 2010-20, with Hispanics leading the way at 36 percent,” researchers found.
Unemployment
Minority households have been hit harder by the recession and the housing slump than whites, according to the report.
The unemployment rate for black residents in April was 15 percent compared with 8 percent for whites, the report said. In low-income minority neighborhoods, the median foreclosure rate was 8.4 percent compared with 6.3 percent in low-income white neighborhoods from January 2007 through June 2008.
Even as falling prices have made homes more affordable, roadblocks to
“echo boomers will help keep demand strong for the next 10 years and beyond” as they turn 25-44 years old, according to the report.”
Echo boomers. What does that even mean? You know, there are marketing firms and consultants that get paid the big bucks to come up with this stuff. Seriously.
Like “green shoots”. Now, just take the two o’s from the word “shoots” and replace it with a single “i” and you’ve got the reality.
“Like “green shoots”. Now, just take the two o’s from the word “shoots” and replace it with a single “i” and you’ve got the reality”.
Yep, the “green shoots” are far more like “brown squirts”!
Yep - any simple look at population growth stats shows that the “echo boomers” theory is a myth.
According to echo boom theory there should be a smaller “boom” between the mid-60’s and the mid-80’s.
Um… not so much.
Yeah…. “echo boomers”. That one somehow reminds me of Bob Hole Toll suggesting we’ll all be living with mummified remains of mom and dad until we’re old enough to afford one of his slapped together $hitboxes at age 70.
I love it every time someone dredges up this quote from that high-flyin’ joker.
I heard that term at least 20 years ago. It was used in my college marketing classes.
Despite the stupid term (”echo boomers”), the idea that these are the folks that are going to be going out and buying all sorts of houses is even more stupid. First of all, the older part of the group (30 to 44) already have houses. They are a significant chunk of the FB’s. They bought younger than other generations because they were sure they would make a bundle even if they were only going to stay in the place for a year or two. Even the younger part of the group are very likely to be FB’s in condos and they are in even worse shape since the condos are likely to be uninhabitable without enough money to maintain the common areas.
Also, this group is very likely to have jobs that do not provide health insurance. So the ones that don’t have insurance and have encountered any expensive health problem, they are either hopelessly in debt or have a bankruptcy on their records.
And - and this is the structural one - this group has huge student loan burdens. They can’t save downpayment money. They are busy paying for their education - even 20 years later. Some of them will never get out from under those loans.
Yeah, relying on GenX (slightly less stupid name for echo boomers)to save the economy is the way to go forward. Great idea. Let me know how it works for you. [sarcasm button off].
Correct me if I’m wrong in the stupid terminology department, but I thought the “echo boomers” were the generation after Gen X — i.e., the span in the ’80s and early ’90s when births spiked upward to Baby Boom levels (after a generational dip). The oldest people in this segment are just now reaching their late 20s / early 30s, and have been raised on hyperconsumption.
That was my understanding as well, they’re the ones after X - Gen Y and echo boomers are interchangable.
Bottom line — younger generations are worse off than older generations. So forget about selling them houses (and stocks) for big bucks.
(After looking it up) - You’re right. I had assumed (post above) that “echo boomers” referred to an echo of births of baby boomers themselves - but apparently that’s not the case, since the timeframes for that and for Gen Y (which is the echo boomers - per Wikipedia anyhow) don’t match up. Baby boomers kids would be born in the mid 60-’s to mid-80’s or so but that’s mostly Gen X.
Indeed there was a mini boom of births starting in the early 90’s. No clue why though - Wikipedia doesn’t say.
Boomers were the first to really put off having kids to any appreciable degree (en masse). This has changed the game a bit.
“Indeed there was a mini boom of births starting in the early 90’s. No clue why though - Wikipedia doesn’t say.”
It was the biological clock thing for the boomers. I knew a woman who had her first and only baby at about 40, and it seemed to spread like wildfire to her circle of friends. And so it went.
RE: I knew a woman who had her first and only baby at about 40, and it seemed to spread like wildfire to her circle of friends. And so it went.
Classic example of herd mentality.
You are correct. The eldest “echo boomers” are now about 30 years of age; the youngest are just becoming teenagers.
There’s a huge number of people in this age group - about 70 million. Nearly as large a group as the Boomers themselves, who’ll start dying off in 10 years.
Don’t overlook simple demographics, guys. Population numbers across generations are immensely important
If we weren’t so in debt due largely to social welfare programs, a boom time would be just around the corner. Oh well.
P.S. - I also first heard about echo boomers about 12-15 years ago. It’s hardly a new term.
First of all, the older part of the group (30 to 44) already have houses.
Except me
“A growing number of companies now automatically enroll new employees in 401(k) plans unless they opt out.”
What exactly do they get automatically enrolled into?
This is a blurb from the National Association of Government Defined Contribution Administrators website:
Qualified Default Investments Alternatives (QDIA) (target date funds, managed accounts, blended, value of stable value funds)
For automatic enrollment to exist, so must the designation of a default vehicle. The Department of Labor (DOL) regulations identified three Qualified Default Investment Alternatives (QDIAs) for plans with automatic enrollment programs. The utilization of one of the QDIAs generally means that plan fiduciaries won’t be held liable for losses that arise from participants’ investment in a QDIA. The approved QDIAs are:
* Lifecycle or Target Retirement Date Funds,
* Managed Accounts - professionally managed portfolios that allocate account balances among existing plan options, taking into account the individual’s age or retirement date, and
* A Balanced Fund that takes into account the characteristics of the group as a whole.
Also, a stable-value or capital preservation fund can be a temporary QDIA, to hold participant’s money for a maximum of 120 days, ensuring principal protection during the enrollment and opt-out period.
This was supposed to be a comment to the wmbz’s posting above.
Asparagus, I didn’t understand anything past your preface about the blurb. But then again, maybe I’m not supposed to.
From here, it looks like the stock market needs some new victims. Hence, the automatic enrollment push.
His article mentioned the automatic enrollment. I don’t know much about it, so I went hunting for information on what funds would you be automatically enrolled into. The above are the choices I found first.
It’s a real tangent from the purpose of his original posting.
I’ll work on my transitions….
Exactly Arizona Slim. You may think you’re making a joke, but it is in fact, the truth.
Somebody said on another board I visit, not to long ago “I don’t work for Goldman Sachs!” I replied, “You wanna bet?”
Tax increases here,there and everywhere, no surprise, just a little more change you can believe in.
States Turning to Last Resorts in Budget Crisis…
Rich Pedroncelli/Associated Press
By ABBY GOODNOUGH
Published: June 21, 2009
In Hawaii, state employees are bracing for furloughs of three days a month over the next two years, the equivalent of a 14 percent pay cut. In Idaho, lawmakers reduced aid to public schools for the first time in recent memory, forcing pay cuts for teachers.
And in California, where a $24 billion deficit for the coming fiscal year is the nation’s worst, Gov. Arnold Schwarzenegger has proposed releasing thousands of prisoners early and closing more than 200 state parks.
Meanwhile, Maine is adding taxes on candy and ski tickets, Wisconsin on oil companies, and Kentucky on alcohol and cellphone ring tones.
With state revenues in a free fall and the economy choked by the worst recession in 60 years, governors and legislatures are approving program cuts, layoffs and, to a smaller degree, tax increases that were previously unthinkable.
All but four states must have new budgets in place less than two weeks from now — by July 1, the start of their fiscal year. But most are already predicting shortfalls as tax collections shrink, unemployment rises and the stock market remains in turmoil.
“These are some of the worst numbers we have ever seen,” said Scott D. Pattison, executive director of the National Association of State Budget Officers, adding that the federal stimulus money that began flowing this spring was the only thing preventing widespread paralysis, particularly in the areas of education and health care. “If we didn’t have those funds, I think we’d have an incredible number of states just really unsure of how they were going to get a new budget out.”
The states where the fiscal year does not end June 30 are Alabama, Michigan, New York and Texas.
Even with the stimulus funds, political leaders in at least 19 states are still struggling to negotiate budgets, which has incited more than the usual drama and spite. Governors and legislators of the same party are finding themselves at bitter odds: in Arizona, Gov. Jan Brewer, a Republican, sued the Republican-controlled Legislature earlier this month after it refused to send her its budget plan in hopes that she would run out of time to veto it.
In Illinois, the Democratic-led legislature is fighting a plan by Gov. Patrick J. Quinn, also a Democrat, to balance the new budget by raising income taxes. And in Massachusetts, Gov. Deval Patrick, a Democrat, has threatened to veto a 25 percent increase in the state sales tax that Democratic legislative leaders say is crucial to help close a $1.5 billion deficit in the new fiscal year.
“Legislators have never dealt with a recession as precipitous and rapid as this one,” said Susan K. Urahn, managing director of the Pew Center on the States. “They’re faced with some of the toughest decisions legislators ever have to make, for both political and economic reasons, so it’s not surprising that the environment has become very tense.”
Kentucky is taxing Cell phone ring tones!
Prepare for the dark ages…..
I dunno, in and of itself that’s not a bad tax. I mean from what I witness on the bus and train it’s not like America’s best and brightest obssess about their ringtones.
If anything this is a very regressive tax, and regressive taxes by nature hammer the very consumers that the pols think are riding to the rescue.
As for the rest of us, we just use the g*d d*mn ringtones the phone came with.
Other things worth taxing the living crap out of:
1. Bling bling
2. Aftermarket car parts - neon undercar lights, amps, exhausts, spoilers
3. Timeshares
4. Video games
5. Ski paraphernalia (i.e. anything other than the skis/skateboards)
6. Business class travel
7. Any shop with the word “luxury” or “spa” in its name. If it has both words, it should be taxed twice.
8. Imported bottled water
9. Nail saloons
10.Private schools
Ok did I manage to offend everybody yet?
No, I’m not offended. If anything, I’m motivated to add to your list.
In addition to aftermarket car parts, how about taxing the carp out of those super-bass car stereos. You know, the ones you can hear six blocks away.
And, while we’re at it, those mufflers that amplify the sound of your car. Tax the bejeezus out of those too.
Tax replacement mufflers, shocks, brakes, tires, and the money will really roll in.
Oh, and a 50% surtax on restaurant meals over $25 a person. Should work until the non-fast-food restaurant industry collapses.
I say Uggs, tix to Adam Sandler movies, and Red Bull knock-offs.
100% tax on CROCs, or make it illegal for anyone over the age of 21 to wear them in public.
Oh, yeah, almost forgot: Any MLB cap that can be worn askew.
Don’t the gangstas and wannabes know how ridiculous they look? Spanky MacFarland has nothing on them.
I repeat my call for a $5 tax on blog posts. $10 if it’s a post calling for new taxes. Except for this one.
5. Ski paraphernalia (i.e. anything other than the skis/skateboards)
b..b..but the Snow Bunnies ! Think of the poor Snow Bunnies, do we want them running around and skiing in their undies or something… !?!
On second thought and after careful and due consideration, Tax the Hell out of those Snow Bunnies !!
Hey, I had full RGB LED based undervehicle “neon” on my big cargo truck. I *LOVED* it. It’s illegal to run it while on the road in Virginia. But it’s beautiful! Have two of the tubes here in the office, and use some that only do 7 colors at home above the cabinets. The truck also had a 72″ rear projection display on the side, never got pulled over for it. Driver (me) couldn’t see it so… I love you, ground effects kits.
LOL - Nail Saloons - I love drinking a beer and painting my toenails while sitting on the back porch.
“Hawaii, state employees are bracing for furloughs of three days a month over the next two years, the equivalent of a 14 percent pay cut.”
Bbbbbbut!!! Only millionares live in Ha-Ha-Hawaii! And millions more millionares are just dying to live there!…………………..sez my lunatic brother as the phantom equity went right to his head and that was as recently as Aug2008.
We’ll see if his skull is still empty around the July4 reunion.
If you’re nor racked with debt and living from paycheck to paycheck, a furlough could be welcome break to add value to other parts of your life.
1. Paint some rooms in your home
2. Read up on trends in your industry
3. Do some job searching.
4. Fix some of the broken stuff in your home (if an owner)
5. Attend to your personal finances.
6. Start a garden to grow some of your own food.
7. Make something made out of wood.
8. Read, read, read….
All in all, you’re not getting paid, because you’re not working. It seems pretty fair. It does not have to be seen as a loss of value. Maybe less income, but not necessarily less value.
I heard a lot of the salaried employees are not able to find time to take their furloughed days, many are working out of fear.
Yes, there is the assumption that you do not work on furloughed days. Obviously, the ones that do not work are not team players and are indispensable.
For most companies, the HR department will insist that the PTO is used up - it would not be seen as not being a team member. Just trying to get all that vacation pay off the books.
It is the government we are talking about after all.
Vacation not paid is money not spent.
Not my company, days of “Paid Time Off” (vacation and religious holidays etc.) are use or lose, and no $ when you leave or are laid off. And you must arrange all leave around “the needs of the business” so lots of people don’t get permission to take all their days, esp. now that very short staffed due to layoffs.
After I was laid off from my first post-college job, I went bicycling in the Upper Midwest and Canada. A great way to see the country. And realize that there’s a whole lot more to life than piling up possessions.
It’s much easier to bicycle like that when you’re in your twenties than it is when you’re in your fifties (or forties).
Preach it, Bubba. I had to give the long distance bike touring up. At age 35, my knees just couldn’t do it anymore.
So, I ride around town now. Have a blast doing it too.
(SERVER TIME-OUT - sorry if this posts 2x’s)
We are voting next Monday to give up our COLA (3%) so there will be no lay-offs… We were told that our city is doing great just few months ago- BIG change in tune now. Upper management has said that since local businesses are crumbling we need to cut back- so we appear to “feel the pain”, too.
Our department froze all but imperative spending 6 months ago. Others have gone on a mad spending spree knowing they must spend or next year will be cut tremendously. Our dept has always been EXTREMELY frugal so we are ready. We have had the same # of staff for 20 years even though this boom.
I should be reviewing about 60-80 permits right now… I have 4. I used to approve approx $1M worth of development (on ave) per day. Now? I’d guess $50K (a small home every other day, maybe). I don’t remember the last 5K SF+ home I approved, it has been a long time. Just 2 short years ago I approved a home on the river that had 2 skylights in, get this, the walk in closet. I joked w/ my cohort that I was going to ask them if I could rent the closet to live in while they were living in their other home the rest of the year.
Where are you located?
Coeur d’Alene, ID
Hmmm…so does not COLA mean no inflation?
Diet COLA is no inflation
That’s hilarious!
We are voting next Monday to give up our COLA (3%) so there will be no lay-offs…
COLAs have been AWOL from Corporate America for at least 10 years.
Ok then… Where’s my tax payer funded million dollar bonus?
Local government. SE Wyoming. 1.5% COLA this year. 3% for the firemen. What recession?
That’s right folks. It is ALL the Democrats fault. Republicans had ABSOLUTELY NOTHING to do with this mess. In fact, Republicans stood up and opposed the repeal of the Glass Steagall Act. Yep, it was that evil Clinton and his commie Democrat buddies that came up with the whole thing!
Oh…wait. Time to get back to REALITY.
The bill that ultimately repealed the Act was introduced in the Senate by Phil Gramm (Republican of Texas) and in the House of Representatives by Jim Leach (R-Iowa) in 1999. The bills were passed by Republican majorities on party lines by a 54-44 vote in the Senate.
You mean the Republicans not only came up with this crazy idea to repealing the Glass Steagall Act, but they actually ALL voted for it, while all the Democrats voted against it? The only thing I can conclude from all this is…
It’s Clinton’s fault! Yep, that can be the only conclusion drawn from these facts!
Okay, sorry to interrupt wmbz. Keep blabbing.
Once again…….
Clinton signed the bill into law. He’s a Democrat, as you may recall.
Just for the record……my personal judgement is that the Republican/Democrat responsibility ratio for this mess (up to 1/20/2009) is about 60-40%, or therabouts. I’m going to give the Democrats 18-24 months before I make a call as to whether they made the situation worse (and they will get 100% of the credit/”blame”, since they basically have no organized opposition in Congress right now.).
Right now, there’s not a dime’s worth of difference between the Bush and Obama plans (save the banks/Wall Street, let everyone else go down the crap tube), except that Obama plans on spending/printing a lot more money.
“Right now, there’s not a dime’s worth of difference between the Bush and Obama plans (save the banks/Wall Street, let everyone else go down the crap tube), except that Obama plans on spending/printing a lot more money”.
Very true, and quadrupling the deficit right off the bat leads me to believe there is no slow down on the money printing and pumping insight. Eye of the hurricane with the backside heading our way.
I’d say it is 90/10 the Republicans fault, but I say it will be 80/20 the Democrats fault for making it worse. As far as comparing Obama to Chimp, please don’t go there. At least Obama has a brain. Chimp needed Rover for that.
Also, Obama inherited the whole damn thing from Chimp. I fault him for making some wrong moves, but ultimate blame rests with Chimp. Now watch people come out and say…but Chimp doesn’t make the laws! It wasn’t his fault. But…but…Clinton is to blame for signing the repeal of Glass Steagall?
You CANNOT have it both ways folks. If you are going to sell Clinton down the river for Glass Steagall, Chimp should be tried for treason for the mess we are in now. If you want to blame Congress…ANY Congress…the GOP has their fingerprints all over so many messes it isn’t funny.
I blame Clinton for signing it, but in fairness he was going to have his veto overridden anyways. But he had nothing to sign if Republicans hadn’t come up with it in the first place.
Or are we going to blame Clinton for coming up with it too?
What this country has is a COMPLETE LACK OF RATIONAL THOUGHT.
I admit, I like Obama. But liking him and agreeing with him on everything are two different things. I think he made a huge mistake bailing out Wall Street. But I don’t know what he knows, so maybe there is more to it. I doubt it, but I think he is doing the best he can with a HORRIBLE SITUATION he DIDN’T CREATE.
Now…if Obama doesn’t get universal health care through, with a public plan, I am done with the Democratic party. Stick a fork in it. If we cannot get it done now, it never happens. I’ve written Boxer and Feinstein letting them both know they will not have my vote again if they blow this. These idiots are claiming that we cannot have a public plan because the health insurance industry cannot compete??? I thought “universal health care” was so horrible that nobody would want it? That was what we’ve been told for decades. Now we find out these same companies have no chance against a government run plan? Sounds like bullshit to me.
I am FAR LESS partisan than the people that post here from the right.
Clinton, Rubin, Greenspan, Reagan, Bush, Barney Frank, Dodd, Newt, …
Oh this mess has a little of everybody in this.
Including your personal savior, BO.
Minimal share to a few like Ron Paul who tried to stop it.
Plenty of Joesixpacks that got into all the spending. Along with Janesixpacks too.
A little helping of Sadam and Bin Ladden too.
Of course there are our buddies in China to think of as well. They are enabling this too.
We are voting next monday to give up our COLA (3%) so there will be no lay-offs… We were told that our city is doing great just few months ago- BIG change in tune now. Upper management has said that since local businesses are crumbling we need to cut back- so we appear to “feel the pain”, too.
Our department froze all but imperative spending 6 months ago. Others have gone on a mad spending spree knowing they must spend or next year will be cut tremendously. Our dept has always been EXTREMELY frugal so we are ready. We have had the same # of staff for 20 years even though this boom.
I should be reviewing about 60-80 permits right now… I have 4. I used to approve approx $1M worth of development (on ave) per day. Now? I’d guess $50K (a small home every other day, maybe). I don’t remember the last 5K SF+ home I approved, it has been a long time. Just 2 short years ago I approved a home on the river that had 2 skylights in, get this, the walk in closet. I joked w/ my cohort that I was going to ask them if I could rent the closet to live in while they were living in their other home the rest of the year.
“Legislators have never dealt with a recession as precipitous and rapid as this one,” said Susan K. Urahn
Oh honey! That’s the money shot - our incumbent pols built their little incestuous nests during an unprecedented period of peace and prosperity. Flat out, they are not up to the task at hand.
I am very curious what the local idiots running Maryland will do. As we all know, everyone here is rich, money falls from the sky (as do tornados judging by this past weekend), and the Candy Cra*pping Unicorn makes his home nearby, so all is well!
What new taxes in an already over-taxed state will they think of?
Baltimorgue is trying to charge a 25-cent tax per plastic bag. I’m sure that’ll go over well. Not sure if it covers body bags!
They’ll come up with some new ideas, I’m sure.
Cessna workers begin a 4-week furlough starting July 17. There will be another 3-week furlough later this year. There have been about 12K aircraft workers laid off in Wichita so far between Beech, Cessna, Spirit (formerly Boeing) and Boeing Military.
Y-O-Y home sales in Wichita are down 26%, if you believe the local Realtors association.
Please only post a bit of an article, or it’s not going to go through.
Yes, maybe like an an intro paragraph or two, and a link.
It’s a shame links take so long to go through, though (I understand why that happens, and am glad that there’s effectively a ‘filter’). Though, based on hip’s post yesterday it looks like omitting the ‘http colon slash slash www’ is enough to skip right by it…
Maybe forget the link completely. Play news editor/writer and edit/cut/paste to capture the essence and list the source. Takes a few seconds of time and thought, but blog is worth that.
I agree - it’s nice to have a summary - but it’d be nice to provide a link for those who are so inclined as to want to read the entire article. Primary sources and all that.
If you give the exact title of article and include source publication, google will bring it right up for anybody that wants it and typically puts the article at the very top of all hits. You could even give the search paramaters:
Source Search:
“Soaring Condo Sales Show Green Shoots In Upper Vardar” Bloomberg
30-Years of Inflation Coming, But “Deflation Scare” Not Over Yet, Cycle Maven Says
Everyone is right to fret about inflation but the “deflation scare” isn’t over yet, says Charles Nenner, founder of the Charles Nenner Research Center. Renowned for his cycle work, Nenner sees deflation remaining dominant until year-end and inflation not picking up for another 18 months. But that will be the start of a 30-year (yes, year) upcycle for inflation says Nenner, who spent 12 years as a market-timing consultant for Goldman Sachs.
The investing implications of this scenario are clear:
Nenner is bullish on gold for the long-term and even more bullish on gold mining stocks, which he says are currently cheap relative to bullion. After a secular decline, Treasury yields are set to rise, with Nenner predicting the 10-year yield will reach 5.50% by Spring 2013, a 45% rise from Friday’s close of 3.78%.
What a NeenerRod. Did he sleep through the 30 year inflation and speculation bubble we just had? Maybe it is time to stop speculating, find something productive to do and watch the great unwinding. That’s what cycles do Neener.
I can’t help but think neener, neener.
neener, the wiener…….
I’ll bet he was “pantsed” a lot in grade school.
Umm…I seem to recall that going all in equities is not the prudent move these days. Something about the market being rigged.
The Jack Welch MBA Coming to Web — Business Icon Lends His Name to New Online University Program; ‘It’s a Real Education,’ He Says
22 June 2009
The Wall Street Journal
Don’t think kids will ever give up going to college in person. But this could help deflate the higher ed bubble.
Permit me to add an even more heretical thought: There are fields that you can prepare for without (gasp!) needing to go to college.
Take, for example, my field of Web design/development. This is my 14th year in it, and, like many of my colleagues, I got into it without any formal classroom training. (Back in 1995, there was no such thing as classroom training for Web work.)
The Internet was, and still is, my primary classroom.
I am an online educator. It works very well given a few adjustments to what people view as “credit mills” (mostly accountability and timely, deep feedback).
Also, I am a professional composer and can neither read nor write music.
I maintain an odd paradox of loving formal education and dismissing it completely.
Also, nearly everything I have learned about trading, real estate, tiaras, etc. I’ve learned here at HBB over the past few years.
I’ve said it before, but HBB is a perfect example of an interest-driven small learning community… ideally all education would function like this.
Dean Ben…Start the press and print up the HBB Phd in Online Financial Common Sense T-shirts.
A flying beer can on a Purple Haze background might be nice, We’ll leave the “school” motto up to you and PB.
I dunno, the graphic should be a man putting his fist through a laptop screen, or woman spitting coffee all over a laptop screen.
I wonder how Jack Welch would have performed if he just took over GE 2 years ago? He basically took a solid, American manufacturing company and turned it into wall street investment bank.
“I predict deflation will continue until inflation resumes its normal course.” Seems like a safe prediction to me, so long as he doesn’t have to tell us how long deflationary pressures will last (e.g. they continued for two decades after Japan’s RE market went bust in the early 1990s).
In fairness, I guess he calls for eighteen months, but this is unpredictable, IMO. Eighteen months from now, either he will be right and trumpet the fact, or wrong and never mention it again.
I predict that sunshine will prevail until clouds move in.
You got the story backwards, pal: I predict the clouds will prevail until sunshine moves in and spurs some green shoots growth.
Here’s a tale all you HBBer’s might enjoy:
We’re moving, so our current house is up for rent. So far about a dozen people have seen it, but it remains unrented. In addition to the landlady showing it there is also now a broker. On one occasion last week, I even got to show the house - which was fun because I was drinking wine and entertaining the neighbors at the time.
Anyway, we went camping over the weekend and the landlady called to say she wanted to come over to show the house. She likes me to be there for safety reasons. So I say, bring along a friend, we won’t be there. I also apologize for the dirty dishes in the sink (I try to keep the house clean), and ask if she could please bring in the mail.
So we get home on Sunday, the clean dishes are lined up on the counter and there is a realtor card right next to them. Now I’m sure it was the landlady and not her realtor who tidied up, but nevertheless the juxtaposition of dishes and business card was too amusing to keep to myself.
Oh yes, I also forgot to mention that they’ve taken over the yardwork for us as well.
It has to be asked: Are they feeding your squirrels?
No, but I’ll be sure to leave them a note to that effect next time!
Hello all,
Just back after a week away for vacation/family reunion on the other coast. I peeked in a few time last week, but couldn’t post from where I was. I’m glad to be home and able to kibitz here again…
Welcome back Prime! Family reunion is always a good time to catch up on what’s going on in the rest of the family + chance to file grievances and address consequences from decades of failure and mental abuse.
Festivus anyone?
Welcome back, Primey! I knew there was something wrong last week with the PNW, a subtle wrongness, a weakening in ‘The Force’… now I understand—it was ’cause you were off in furrin’ lands.
I hope you had a fun reunion and dispersed and caused some good gossip.
While having dinner out Saturday evening I overheard a conversation from the next table. The father was telling his 20 yr old something of a kid “I have a guy at work that just bought a $200K house here in Salinas and he said that if prices go down he’ll be on a plane back to Egypt in no time and that the government can’t do anything about it”. How many other so called immigrants are we unloading property on right now at higher levels to keep the game going.
Everything that I’ve seen for this area that might be nice are around $250K minimum overpriced and even more than that if you look closely at the construction (Redfin.com and trulia.com).
Salinas, it was crap hole when I was stationed there at Fort Ord. I havent been there sense 92 but it can not be better after the base closed.
“he said that if prices go down he’ll be on a plane back to Egypt in no time and that the government can’t do anything about it”
Or he can mail in the keys and stick around and the government won’t do anything about it.
I just drove by a condo complex where a bunch of people were holding signs that said, “HOA = Prison”
Muggy.. Where? IIRC, you’re in FL, right? That’s classic, hopefully some of the newspapers are out there taking pictures of it!
Yeah, I am in Florida, Pinellas County.
The town was either Seminole or Largo — I don’t know the boundaries in that area. There were about 10 people, mostly retirees, and the complex seemed very old. I would have stopped and chatted them up, but I had an appt. to make.
I’m sure it will be on the news soon. That kinda stuff gets coverage all the time down here.
I just drove by a condo complex where a bunch of people were holding signs that said, “HOA = Prison”
Will the revolution be led by malcontent condo owners?
Give me amenities or give me death!
“Let me park an RV in the driveway or give me death!”
I regret that I have but one life to give for my gaudy pink flamingo display.
I regret that I have but one wife to give for my condo.
HAHAHAHAHA! Funniness galore!
Man, I love this blog.
8 Ball, will the revolution be led by malcontent condo owners?
“Yes”
Oh, snap!
What happens if the CEOs of these government owned and operated companies just say “no” to the request to relax condo lending standards?
Fannie, Freddie asked to relax condo loan rules: report
Mon Jun 22, 2009 10:48am EDT
(Reuters) - Two U.S. Democratic lawmakers want Fannie Mae and Freddie Mac to relax recently tightened standards for mortgages on new condominiums, saying they could threaten the viability of some developments and slow the housing-market recovery, the Wall Street Journal said.
In March, Fannie Mae said it would no longer guarantee mortgages on condos in buildings where fewer than 70 percent of the units have been sold, up from 51 percent, the paper said. Freddie Mac is due to implement similar policies next month, the paper said.
In a letter to the CEO’s of both companies, Representatives Barney Frank, the chairman of the House Financial Services Committee, and Anthony Weiner warned that a 70 percent sales threshold “may be too onerous” and could lead condo buyers to shun new developments, according to the paper.
The legislators asked the companies to “make appropriate adjustments” to their underwriting standards for condos, the paper added.
…
I’m sure they’d prefer if they shifted to 0% must be sold for them to buy loans.
Barney Frank is a complete stooge.
I love you,
You love me,
We’re a happy family,
with a great big hug,
and a kiss from me to you,
Won’t you say you love me TOO!
I love you,
You love me,
We’re best friends like friends should be,
With a great big hug,
And a kiss from me to you,
Won’t you say you love me too
How’s your lunch hanging now America ?
Time for a little hair-of-the-dog condo lending standard debauchery?
Wall Street Journal
* JUNE 22, 2009
Changes Urged to Rules on Condo Loans
By NICK TIMIRAOS
…
In a letter to the chief executives of Fannie and Freddie, Reps. Barney Frank, the Massachusetts Democrat who is chairman of the House Financial Services Committee, and Anthony Weiner (D., N.Y.) warned that the 70% sales threshold “may be too onerous” and could lead condo buyers to shun new developments. The legislators asked the companies to “make appropriate adjustments” to their underwriting standards for condos.
…
… the 70% sales threshold “may be too onerous” and could lead condo buyers to shun new developments. The legislators asked the companies to “make appropriate adjustments” to their underwriting standards for condos.
Given the known-knowns, the known-unknowns, and the unknown-unknowns (to view this through a Rumfeldian prism), I have to wonder why the parties on either side would agree to looser thresholds or “appropriate adjustments.”
(Just what is an “appropriate adjustment” under current conditions?)
I posted roughly a month ago about a little variation on this “change the rules in the middle of the game” idea here in NJ. Seems 55+ developments around the state were approved by municipalities eager get the property tax revenue without the net losses they sustain from households with schoolchildren. Needless to say, there’s now no demand for “active senior lifestyle” digs, so what’s a developer to do? Why, talk to his legislator pals and have them enact a law that ex post facto strips the currently approved developments of the 55+ restrictions. The local pols are squawking that that’s not what was approved initially? That’s OK; they’ll be bought off with some provision in the law that will, at least through the next election cycle, require the state to pick up the tab for increased education costs.
All this nonsense just so we purportedly will put back to work members of the construction trades.
LOL. Do the crime, you do the time
You know, most people who move into HOAs never read the CC&Rs and therefore are clueless about what they’ve signed up for. Yet they want all the services, and uniformity…. and their ludicrous “gated community.”
U.S. investor Rose eyes rebound, one house at a time
Mon Jun 22, 2009 10:15am EDT
NEW YORK (Reuters) - Bruce Rose, founder of hedge fund Carrington Capital Management LLC, and a pioneer in the roller-coaster market for mortgage credit, is set for the next phase of the housing crisis: recovery.
Carrington is planning several new funds, at least one of which will step into local real estate markets expected to recover first, Rose said in a rare media interview at his office in Greenwich, Connecticut.
Another fund has already seen success with properties in Texas and Colorado, he said during the interview last week.
Rose is also rejecting lower estimated prices for his portfolio of homes that has grown through foreclosures, noting that fire sales by banks are exaggerating the market downturn. He is selling his properties one by one — and making much more money than rivals in the same position.
“We began to sense a bottoming of the market with the new (U.S.) administration, and began to focus on areas that we believe will recover early,” he said.
The U.S. housing market is entering its third year of downturn that has triggered huge losses as homes are foreclosed and investors shun mortgages. The recession is adding to the fallout, and home prices are still sliding despite White House efforts to save 9 million homeowners with cheaper mortgages.
The pronouncement is a rare insight from Rose, 51, who left a life as aircraft mechanic and charter flight operator in 1980 to enter finance and sell ultra-safe mortgage bonds issued by Ginnie Mae, the agency that pools government-backed loans.
It is amazing how many bubble specuvestors are eager to jump back in long before a bottom is reached.
Wahoo! Two commentators on CNBC are predicting that house prices will continue to fall until 2010, and possibly 2012! Finally some capitulation. Maybe these knucklehead sellers will hear that and start to lower their prices.
An orderly price collapse is the soft landing David Pinocchio Lereah referenced? Maybe.
Went to some open houses yesterday. A couple of agents really pushing the “rates could go up soon” line.
Last week’s line was “the spring selling season started late this year”
” A couple of agents really pushing the “rates could go up soon” line.”
Proper response to that line:
“Finally! How high? How far down do you think that will drive housing prices? I’m hoping for something in the mid teens, and prices down 30-40%, but that’s just me.”
““We began to sense a bottoming of the market with the new (U.S.) administration, and began to focus on areas that we believe will recover early,” he said.”
Now, try saying this out loud in your best Maxwell Smart voice. Adds new meaning, no?
“Maybe these knucklehead sellers will hear that and start to lower their prices.”
I suspect they will not lower their prices until lenders pry their foreclosed homes out of their cold, dead fingers.
GS to pay out record bonuses…and the president thinks we should pass laws limiting executive salary.
i say no to pay limit laws…i say…DON’T BAIL OUT THESE FRIGGIN’ COMPANIES IN THE FIRST PLACE!!!!
sorry…got a little carried away.
DON’T BAIL OUT THESE FRIGGIN’ COMPANIES IN THE FIRST PLACE!!!!
I’m with you on that one. Don’t limit salary nor bonuses. Just let the bastards go bankrupt when they f up.
I’m wondering if the rush by some banks to repay their TARP money isn’t just to get the bonuses flowing again, but also an admission that they’re doomed either way. The books are so bad that as they have to realize their losses, no amount of TARP money will keep them alive. The best remaining plan for them: continue looting the joint while working on the “no one could have seen this coming” speach to use when they declare bankruptcy.
Al ..My guess is the reason they are paying back the TARP money is they now want the Government to simply take over loans and insure them and the taxpayers pay the loss . Passing the loan loss packages to to the public has always been the overall plan IMHO . The fact that Paulson used the TARP money to shore up the reserves of the banks was necessary and now it’s a matter of getting the toxic assets off the books somehow .
Any way you look at it these massive losses are being picked up
by the tax-paying public in one way or another .
I just googled realturd. Funny stuff. Realturd this, realturd that.
Down with realturds.
Realtors urging hike in conventional loan limits
By JEFF OSTROWSKI
Palm Beach Post Staff Writer
Sunday, June 21, 2009
Three years ago, anyone with a pulse, a dismal credit score and an optimistic view of his financial future could score a mortgage for half a million dollars or more.
Today, even borrowers with hefty down payments, stellar credit scores and big personal balance sheets find it nearly impossible to land so-called “jumbo” mortgages, as loans of more than $417,000 are known.
“It’s horrible,” says Bobby Bashwiner, a loan officer at Group One Mortgage in Jupiter. “You have to have at least 30 percent down. You need a 700 credit score. You can hardly find a fixed rate. And if it’s a condo, lenders won’t even look at it.”
In another symptom of how drastically the real estate market has changed in the past three years, lenders have all but stopped making jumbo loans. The credit crunch is one reason the housing recovery of recent months has skewed heavily toward low-cost homes, while properties priced for more than $500,000 can languish on the market for months or years.
Realtor Randy Bianchi of Paradise Properties in West Palm Beach has a $600,000 listing in a gated community that has been on and off the market since 2006. “There’s just no activity,” Bianchi says.
“There’s much more activity in the under-$500,000 category right now than the over-$500,000 market, that’s for sure,” says Scott Agran, head of Lang Realty in Boca Raton.
The trend is the same nationally. Inventories of over-$750,000 homes have soared in the past two years, the National Association of Realtors says.
All of this raises this chicken-and-egg question: Is the high-end housing market so slow because there are so few jumbo loans? Or are there so few jumbo loans because there are so few buyers of high-end homes?
Dennis S. Hudson III, head of Seacoast National Bank in Stuart, says the jumbo credit crunch is only part of the problem.
“A far larger issue is lack of buyers,” Hudson says. “The folks who have been hit hardest in many ways are wealthier folks.”
But the National Association of Realtors sees the lack of jumbo loans as a significant obstacle to high-end sales.
“The jumbo loan problem has been hindering that market,” says association Chief Economist Lawrence Yun.
That is not expected to change when the latest existing-home sales figures are released Tuesday. As a result, the Realtors group is urging Congress to raise conventional loan limits to as much as $729,500 for high-cost markets such as New York, California and Hawaii. President Bush raised loan limits to those levels for 2008, but the move was nearly meaningless for Palm Beach County, where jumbo limits rose from $417,000 to $423,500.
Do we really need to subsidize the MTG rates of households making 250K+ per year (the min necessary salary for 750K homes)? Is that really a policy goal that we think is important to the taxpayers of America? It’s a TINY fraction of the population that can afford a home >750K (<1% would be my gut feeling on it). Why on earth is this a public policy item if REALLY rich people can’t get low cost loans? That makes no sense at all.
I can afford a 750k home, and I want NO jumbo loan subsidies so when I finally go to buy I don’t have to compete with strawberry picking burger flippers.
I don’t have to compete with strawberry picking burger flippers in conjunction with nose picking, lying realturds.
How do you expect to compete with a dual income earner, who both flips burgers AND picks strawberries? Doomed from the get go you are.
Anyone see a quote from the NAR’s Yun on the condo finance requirements? It’ll turn up later verbatim, I’m sure; I got only a quick glimpse on MSNBC. The impression I got was that the NAR is trying to turn the debate over condo requirements into a civil rights debate; said something like, “It’s troubling that mortgage applicants are being judged on the basis of property classifications rather than on the content of their individual situations.” Yup. The NAR has “a dream that one day. . . “. Boy, are they smart.
Especially since it’s the condoze being discriminated against. If they wanted to buy a unit in a building that wasn’t a financial death trap, Freddie and Fannie will buy the loan.
That’s like when your dad won’t loan you 500 bucks to buy the beat up mustang without an engine that will be super-sweeeet once you put in a little elbow grease, but will pony up for the reliable station wagon that will get you to your part time summer job.
…and if you thought the story on radioactive granite countertops was good, I’m sure you’ll get a kick out of the “moldy under-plywood” granite countertops…
Mold and bacteria in granite countertops
Posted 6/21/2009 10:22 AM PDT
A real estate broker recently mentioned mold growing on plywood under granite countertops. I could not find any scientific studies by reputable researchers, so I contacted a cabinetmaker with decades of experience in residential kitchens. He confirmed that he has seen it happen. Water can seep through countertop granite, providing the moisture needed for mold growth on the plywood backing.
All granite has microscopic cracks and fissures, allowing gases and liquids to penetrate. I already knew from conversations with a physicist that radon gas easily penetrates granite slabs. It seemed plausible that water could penetrate granite as well, just as water penetrates concrete.
When liquids are left standing on the surface of a granite countertop, those liquids can seep through the stone to the plywood underneath. Mold grows very well on damp plywood. Food residue on countertops provides nutrients for bacteria to grow as well.
My cabinetmaker friend relayed some colorful stories about mold growth under granite countertops, even “icicles” on the underside of the plywood in a particularly unhygienic situation. However, I suspect that common cleaning practices are generally adequate to prevent growth of mold and bacteria.
A concerned homeowner would be wise to keep any food preparation surface scrupulously clean. Wipe spills promptly, and use easily cleaned cutting boards for raw meats and fish. Never use the same surfaces for preparing uncooked meats and vegetables.
Granite sealers reduce moisture penetration, but they do not eliminate it. My own kitchen has several bamboo cutting boards for vegetable preparation. I never use my veggie boards for raw meat, fish, or eggs. A glass cutting board is reserved for animal products. The few spills that escape the cutting boards are easy to clean with a damp sponge.
However, I will admit to some trepidation when I checked the undersides of my countertops. I breathed a sigh of relief to see there was no sign of mold and the wood was dry. My rather relaxed housekeeping habits appear to be adequate.
Hmmm….Guess what I’ll be doing tonight?
Gotta say, for all the grief dished out here about granite countertops, I love mine! I haven’t taken a Geiger counter to them, though.
LOL. I feel ya!
I love the Volga Blue granite in my kitchen. Its a relatively new stone quarried in the Republic of Ukraine. I work in the biz (architecture) so I get everything at cost (one of the ONLY perks) and I buit the cabinets myself.
My kitchen is beautiful but I admit, I’m a little affraid to take a geiger counter into it
Near an eletric generation plant called: “Chernobyl” perhaps?
God, I certainly hope not!
If my cats start glowing in the dark though I’ll know what did it.
Don’t be so nervous. A little bit of ionizing radiation never hurt anyone. A lot of it will, though.
Hmm, on second thought, stick to neutrinos. They don’t ionize anything.
Roidy
Don’t be so nervous. A little bit of ionizing radiation never hurt anyone. A lot of it will, though.
Yeah. Relax.
Just don’t eat your cats, is all.
Wall Street Journal
* COMMERCIAL REAL ESTATE
* JUNE 22, 2009
Land Deals Help Builders Stay Alive
By MICHAEL CORKERY
In Indio, a small city east of Los Angeles, the supply of foreclosed houses for sale is plentiful. Even so, work crews are finishing a batch of new homes for Lennar Corp.
While the recession wiped out many small builders, mortgage lenders and homeowners, the nation’s biggest builders have hung on, in part through favorable land deals, loan agreements and tax strategies.
Now, the worst appears to be over for most of them.
…
Lennar, based in Miami, was one of the largest home builders in states hit hardest by the housing collapse — California and Florida. As the housing market was heading toward a cliff, it pulled off two complicated deals that got lots of risky land off its books before the market fell apart. The buyers: Morgan Stanley Real Estate Fund and the California Public Employees Retirement System, the giant pension fund known as Calpers.
AKA bagholders…
How did the term “commercial real estate” get confounded with residential construction?
And about the Morgan Stanley Real Estate Fund, they were desperately hawking it to their employees as a “special deal” for “valuable employees”.
It was quite the entertainment - I even have a (forwarded) copy of that “special deal” somewhere in my house. You know that you shouldn’t throw stuff like that out!
$40 million in 2008 property taxes unpaid in St. Lucie County
June 22nd, 2009 by TCPalm.com
ST. LUCIE COUNTY — More than $40 million in property taxes went unpaid on more than 11,000 county parcels this year.
Though the number of parcels increased from 11,272 in 2007 to 11,786 in 2008, the total dollars owed to the county in delinquencies went down to $40,382,130 from $45,715,977 in 2007. Though the total number are down, the county had only 4,230 parcels owing $7,879,193 in 2004.
Foreclosures, unemployment and declining real estate value probably affected the numbers, St. Lucie County Assistant Tax Collector Larry Clancy said. Some people simply forgot or thought they had paid.
St. Lucie County School Board Chair Judi Miller said she thought her husband paid the $3,678.19 on a non-homesteaded parcel listed as Sea Palms Unit 906.
“As soon as we get back (from vacation), I’ll check on that,” Miller said Thursday.
Supervisor of Elections Gertrude Walker said she thought she paid $953.01 total on two vacant lots in October. She said she has since submitted the check.
“I don’t know what happened,” Walker said. “I’m just sorry if I caused any pain.”
For investors, the taxes owed could present financial opportunities. After Internet auctions cleared all but $3.5 million of the taxes owed, individuals or corporations who purchase the debt will get 18 percent interest in the county now that the auctions are over, Clancy said. The auctions — where investors could bid down prices — resulted in investors getting an average 10.28 percent, up from 8.75 percent the previous year.
I didn’t know roaches could talk, never mind sing but shine a little light on them and they’re all doing a chorus of “The check is in the mail”
GLOBAL ECONOMICS
World Bank: Deeper in the mire
Banking body’s global outlook hardly puts it in green-shoots camp.
Doug Kass wrote an interesting article about the summer market this morning:
Summer has set in with its usual severity.
Similar to many, I am trying to grapple with the market’s outlook for the next few months.
From my perch, the short-term market mosaic is particularly hard to decode. Indecision reins and is reflected in a relatively range-bound market, with the S&P 500 having been contained between 875 and 950 since early May and activity characterized by lackluster volume.
In summary, I have concluded that a sideways correction or a deep correction are most likely, with a combined probability of 75%, and that a continued rally holds about a 25% probability.
Scenario No. 1: The Sideways Correction (Probability of 40%)
I have previously suggested that a sideways correction remains the most likely market outcome this summer.
Scenario No. 2: The Deep Correction (Probability of 25%)
Fundamentally, a continued weakness in retail spending could precipitate lost confidence and a deeper dive. So could weakness in business spending (as a byproduct of ever lower capacity utilization rates). Technically, a reversal in the Coppock Curve indicator — it gave a technical buy at the end of May and is now in a sell mode — and weakening Lowry’s buying power augur for a plunge.
Scenario No. 3: The Continued Rally (Probability of 35%)
While giving the scenario only slightly better than a one-third chance, a new up leg is not out of the question. If the replenishment of depleted corporate inventories begins to occur in July, evidence of an impending production boom could be interpreted by market participants as a sustainable economic leg higher (an outcome with which I happen to disagree), which will carry expectations of improving corporate profits.
http://dqnews.com/Charts/Monthly-Charts/LA-Times-Charts/ZIPLAT.aspx
May dataquick numbers for socal zips.
I saw green shoots today! My sweet corn has sprouted.
The ones in my garden are the only “green shoots” I’ll trust right now. When I hear some babling twit in the MSM noise machine say it I’m certain it’s poison ivy.
If this suckers rally lasts through October I’ll be amazed.
BTW, My corn’s about 2′ tall now and loving all the recent rain.
Hey Combo, I noticed FEED is down to $5.65 and RAD $1.24
When you do a “technical analysis,” do you keep stops in place?
Desperate lenders offer £25,000 to take your mortgage away to a rival bank in bid to balance debt…
By James Coney Daily Mail U.K. 22nd June 2009
Struggling mortgage firms are so desperate to offload borrowers that they are offering to write off a sizeable chunk of customers’ home loans if they move to a rival bank.
In some cases, tens of thousands of pounds are being paid off to give customers a better chance of finding an alternative lender willing to take them on.
The offer is being made by some of Britain’s biggest mortgage firms who are willing to take a hit of as much as £25,000 to get the loans off their balance sheets to see them through the credit crunch.
For sale signs
Mortgage firms gave out billions of pounds of high risk loans during the housing boom but now want capital quickly
They gave out billions of pounds of high-risk sub-prime and buy-to-let loans during the housing boom but now want capital quickly, resulting in the extraordinary offer.
But for those mortgage-holders being targeted by the struggling lenders, it offers the opportunity to reduce their home loan payments drastically.
Those being contacted initially are borrowers whose home equity has been wiped out by falling house prices, making them an unattractive proposition for other lenders.
Case study - Tom Stockham
Tom Stockham was offered £7,550 to move to another lender
One lender claimed its initial pilot scheme had chosen mainstream customers who have not missed mortgage repayments, making it more likely that a rival company would be willing to take them on.
Richard Morea from mortgage brokers London & Country said: ‘This is an extremely innovative approach that these lenders are taking.
‘The positive aspect of these pilot schemes is they offer a lifeline without which, many borrowers would be unable to remortgage or move home.
‘If you are lucky enough to be approached it will knock thousands of your bill.’
Among the lenders offering the deal is GMAC, part of troubled U.S. car maker General Motors.
It handed out almost £10billion of home loans in 2007, making it the UK’s tenth biggest mortgage lender.
Another question to the HBB braintrust……
Daughter is signed up to start college (at a state university) this fall. No problem getting a student loan. Plan is for her to live at home and go to school for two years, then transfer to the state college with classes more in line with her career goals/interests.
The question: Continue with this plan, or think about a 1-2 year delay, while saving money to pay tuition in cash/minimize borrowing? And…..does anyone see a correction in tuition pricing over the next 2-3 years? Being semi-governmental organizations, I can see major resistance from the colleges/state governments against cuts in the cost of tuition.
X-GSfixer,
Can you daughter go to a junior or community college? Much cheaper. She would probably be able to transfer most of the credits she received to the state university.
There is an excellent community college two counties over. (50-60 miles). If my main job disappears in the next few months, it might make sense to move over into that county (lease is up on August 31)……it’s probably too far to drive.
(This “One foot in the grave, the other on a banana peel” situation with my main job is starting to $uck/stress me out. All kinds of decisions are being held hostage.)
And…..does anyone see a correction in tuition pricing over the next 2-3 years?
I think what’ll happen is that the rate of tuition increases will flatten out at state schools, first-tier private schools, and small liberal arts schools. So no massive tuition increases (unless administrators are idiots), but no significant reductions, either. I expect that lots of less successful/less lucrative programs at better schools will be scrapped for budgetary reasons, however.
The third- and-fourth tier private schools and ill-managed or badly focused state schools are where one might actually see tuition reductions, as they fight to remain competitive in the marketplace. But I doubt your daughter wants to go to any of those places anyway.
I posted a reply, but it has a link, so it’ll take a while. My short answer is no: FL state tuition will continue to rise.
Well, put it this way: all higher ed tuition cannot rise at the same pace it was over the last decade. Too much debt, too scarce credit, too little ROI.
Perhaps Florida is different, but all those schools charging $30K, $40K, even $50K per year in tuition and fees for an undergraduate education have to show the consumer some sort of differentiator — right? Or are people still drinking the Higher Ed Hi-Debt Koolaid?
There’s already quite a bit of talk about higher ed being the next bubble to burst. Chronicle of Education did a story not long ago. David Frum cited that story in a delicious little commentary in The Week.
Slim:
It staggering the amount of people with 4+ yr degrees who have no street smarts or common sense.
I think the only way to get America working is to have short term intensive re training 6 mo-1 yr 35-40 hr week school vocational training etc while collecting unemployment or welfare. Its the time frame that has to be condensed.
4 yrs in college is a luxury most people don’t really need today. Back before the Internet DSL Fios texting 1000 channel cable, I phones you only knew of other people customs nationalities when you meet them and college was a great place to get exposed to this.
“does anyone see a correction in tuition pricing over the next 2-3 years?”
No way, FL universities are still cheap and kids from all over the country want to party here. I know that sounds like a “it’s different here,” statement, but USF is up YOY.
http://www.tampabay.com/news/education/college/article426139.ece
Agreed. The State of Florida deeply subsidizes college tuition and cannot continue to afford to do that with the budget deteriorating on a daily basis. Tuition rates will continue up for the next couple of years.
I would suggest this is the best time to be getting an education, when the prevailing economy is in the toilet and getting worse.
Agreed, this would be a good time to be in college, IF she can come out the other end without debt that will limit her future.
I was in college in the mid to late seventies and it was one of the best times of my life: able to live with no worries and no hurry and litttle concern about “stuff”.
In my opinion the only reason to consider a postponement would be if taking a year or two off can make her status, when being considered for financial aid, as independent of her parents contribution… Don’t know what the rules on this are anymore, but had a college classmate who was estranged from her family that was somehow able to prove that her parents were not a source of support in in the eyes of the financial aid office.
I would add to this that if she’s anticipating graduate school and on, earlier is better for schooling. Having been in a Ph.D. program after 5 years in the workforce, I can tell you that the hours and low-to-no-pay you get in grad school/post doc seriously interferes with life ‘milestones’ that show up in the late 20’s early 30’s like marriage and children. A year or two off isn’t a big deal, but 5 is starting to push it.
“seriously interferes with life ‘milestones’ that show up in the late 20’s early 30’s like marriage and children. ”
Take it from a guy in grad school with a baby here and one on the way… I am very busy and I can’t wait until I’m done. Not being able to dig deeper has taken some of the fun out of the academic process as well.
Yeah, get as much done, as early as possible.
Interesting: my wife and I found a little pocket of a quasi-rural area that we liked the other day in East Lake, FL. One of the things we’re doing while we bide our time, is investigate what’s here (in FL) so we can make an informed decision when it’s time to move back home, or buy a house down here. Anyhoo, the development consists of 62 houses; 32 were sold in 2005, 4 in 2006, 4 in 2007, and 8 in 2008.
So basically the whole ‘hood is bubble-priced… not so stable = FAIL
I’m glad I am so neurotic when it comes to research. That’s a horrible place to buy for as far as any time horizon I can imagine.
From The Agora5.
“These are some of the worst numbers we have ever seen,” said Scott Pattison over the weekend.
Who is Mr. Pattison? Not a man you should know, but certainly one worth listening to: He’s the head of National Association of State Budget Officers, and he’s rightfully freaked out.
The fiscal year will close in about two weeks for all but four states — New York, Texas, Michigan and Alabama. The 46 others have until midnight June 30 to figure out how to wrangle the $121 billion budget gap coming due over the next fiscal year. That task is so daunting, states have stopped increasing spending for the first time since the S&L crisis in 1983:
Cutting state government spending by a whole 2.2% certainly won’t save our states. Personal income tax revenues are down 6.6% and cooperate tax revenues have fallen 15.2%. The proposed $24 billion in new state taxes and fees for the fiscal year 2010 won’t even cover a quarter of the projected shortfall — a projection, we hasten to add, that’s counting on the recession to bottom sometime in the current calendar year.
We’ll keep an eye on this crisis yet to be. In the meantime, watch for some bizarre budget tricks. Proposals in various states include: Furloughs, pay cuts, park closures, early prisoner release (seriously), benefit cuts and odd new taxes (Kentucky is looking into taxing the purchase of cell phone ring tones.)
California, the state in the most fiscal hot water, is in danger of a “multinotch” credit downgrade, Moody’s warned late Friday. The ratings agency, oddly still relevant, says that “if the [California] legislature does not take action quickly, the state’s cash situation will deteriorate to the point where the controller will have to delay most nonpriority payments in July.”
If the Golden State can’t mend its budget woes, Moody’s is threatening a credit downgrade of at least two notches. California is already rated A2, Moody’s sixth highest grade and the worst of any U.S. state. A2 is also just five notches from “junk” status.
If California were a country, it would be the 10th largest economy in the world… and almost a junk bond? Scary.
To be fair, the ‘early release’ prisoners in Cali are non-violent offenders. If they let every non-violet pot convict out early, they’ll swell the unemployment numbers, but probably not increase violent crime. (Theft, however, is another story.)
Hopefully Cali will push for legal heavily taxed pot, prop 13 gone, and gov pension cuts to 40% max (retroactively, too!)
With apologies to Robert Frost:
Two loans diverged in a yellow wood
And sorry I could not be one borrower
And borrow both long I stood
And peered down one as far as I could
‘Til it bent around the undergrowth.
And then took the ARM as just as fair
For it was sassy and had a lot of flair
But as for that passing there
Had worn both about the same [not!]
And on that morn both equally lay
With eaves no rot had painted black
Oh I left the first for another day
But knowing how way leads on to way
I doubted I would ever pay it back
I’m telling this with a sigh now that the bubble has burst hence:
Two loans diverged in a wood and I,
I took the greedier one and
That has made all the [solvent] difference
A+
Visa just sent me an invite to get a Black Card.
annual fee-$495.00
sign me up so I can contribute to the Bailout blues
I told my CC companies to drop my limits down to 10 K each several years ago . I figured if I’m in so much trouble that can’t make it to the banks, my safe or swing it with 30k of plastic, some sheriff has finally CAUGHT and HUNG me and my rotten little kid gets his free decked out Toyota Trundra after all.
SEC charges firm, 4 people with fraud
SEC charges Cohmad firm, four people with fraud in raising billions from investors for Madoff
On Monday June 22, 2009, 2:01 pm EDT
WASHINGTON (AP) — Federal regulators have charged a brokerage firm called Cohmad Securities and four people with securities fraud, accusing them of funneling billions of dollars from investors into Bernard Madoff’s pyramid scheme.
The Securities and Exchange Commission announced the civil fraud charges on Monday against Cohmad, its chairman, Maurice Cohn, chief operating officer Marcia Cohn and broker Robert Jaffe. Also named in the SEC’s lawsuit was California-based investment adviser Stanley Chais, who allegedly oversaw three funds that invested all of their assets — nearly $1 billion — with Madoff.
Madoff secretly controlled New York-based Cohmad and used it to procure a constant stream of funds for his multibillion-dollar fraud scheme, the SEC said.
VIX Soars as Signs Increase For Summertime Stock Blues
On Monday June 22, 2009, 2:19 pm EDT cnbc
Wall Street’s favorite fear gauge soared more than 13 percent Monday, reflecting trader sentiment that the stock market is likely to move lower.
The Chicago Board Options Exchange Volatility Index (Chicago: VIX) again climbed past the 30 level amid a gloomy outlook for the global economy that presaged a sharp negative move from stocks. A reading of 30 or better is generally indicative of high volatility and seen as a bearish sign for the broad-based Standard & Poor’s 500 index.
Options traders have been betting on a higher VIX recently. More signs have begun to indicate the VIX was likely to keep gaining as investors look for the long-awaited pullback from the massive three-month rally that has sent stocks about 35 percent higher from the March lows.
“Fear is definitely back in the market,” said Dave Rovelli, managing director of US equity trading for Canaccord Adams. “It’s a huge move. People don’t know what to do.”
“WaMu’s Stephen Rotella sells mansion”
blog.seattlepi.com/realestatenews/archives/171785.asp
Stephen Rotella, former president and chief operating officer of former bank Washington Mutual, has finally sold his Capitol Hill mansion.
Rotella and his wife, Esther, bought the Federal Avenue East house for $3.78 million in June 2005, according to county records. The were initially asking $6.25 million but sold for $4.7 million on May 26, according to records.
Zillow estimates the home’s value at $4.69 million, down from a high of $5.32 million in late 2007.
The 7,430-square-foot house has five bedrooms, 4.5 bathrooms and three fireplaces, and sits on three quarters of an acre. The Coldwell Banker Bain listing blurb is still up, at this moment, showing the list price at $5.25 million.
China Business
Jun 23, 2009 China steels for a showdown.
By Olivia Chung
HONG KONG - China, a growing and often welcome presence in the international financial world, appears ready to give another display of its impotence in global corporate matters as the country’s steel industry joins in annual price talks with newly muscled-up iron ore suppliers.
The China Iron and Steel Association is seeking a 40% to 50% cut in iron ore prices compared with last year’s contracts, which expire on June 30. The industry body represents steelmakers whose profits have been squeezed by overcapacity and a collapse in demand since the onset of the financial crisis last year. Prices of iron ore, their key raw material, have quadrupled since 2004.
Across the negotiating table are Australian miners Rio Tinto and BHP Billiton, the world’s second- and third-largest iron-ore producers, which together sell more than US$20 billion of ore to the Chinese.
This month, the two companies reached a non-binding agreement to set up a 50-50 joint venture covering their vast West Australian iron ore operations. The tieup could lead to US$10 billion in savings, Rio said. China, heavily reliant on imported iron ore, says the pact will give the two miners unfair pricing power over steel buyers.
Jun 22, 2009, 2:09 p.m. EST
Leaving home
Many believe homeownership is no longer a way to build wealth: survey
By Amy Hoak, MarketWatch
CHICAGO (MarketWatch) — Nearly half of American adults who participated in a recent survey said they no longer believe that homeownership is a realistic way to build wealth, the National Foundation for Credit Counseling reported on Monday.
The findings, from a recent survey of about 1,000 people, run counter to the long-held perception that a home should be part of a person’s financial strategy, the NFCC said.
“It had been considered the cornerstone of wealth building,” said Gail Cunningham, spokeswoman for the NFCC. Homeownership had been a significant tool that most people felt was necessary to prepare for retirement, she said in a phone interview.
…
“Nearly half of American adults who participated in a recent survey said they no longer believe that homeownership is a realistic way to build wealth”
Right, because now that the rush is over and the unsustainable BS RE price inflation has gone the way of the dinosaur. Reality slowly seeps into their brains, but fear not they will be on the prowl for the next sure fire way to get rich without effort.
Personal story:
My 25 y.o. step daughter is being offered a “teacher’s aide” position at the private Catholic school where she has been a teacher for the last 2 years. Her pay will be cut from $17.00/hour to $11.50, though she will be able to keep her benefits (health, pension, etc…).
Her school has a projected enrollment of 240 students next year, down from 380 this year & 460 last year. Tuition for the current year is $365/mo. What’s up with the declining enrollment? Apparently the complete collapse in the local economy. Too many parents are fully dependent upon the real estate industry. Builders, realtors, mortgage writers, construction workers, furniture salepeople. All gone.
The school is looking to the Orlando diocese to subsidize it, otherwise they might have to close down altogether next year. My step daughter has resumes out throughout Brevard and Orange counties and has received no calls. Her 2 best friends, all U. Central Florida grads & teachers, have lost their jobs in Orlando and also have received no calls on their resumes.
Fortunately, her husband is a mechanical engineer & makes enough money to cover both of them. Though he says a S. Korean company just came to market with a competing product that costs 1/2 of what his company’s costs (vacuum chambers).
She would have lost her job completely if her grandfather wasn’t the Church/School’s free accountant.
If enrollment is down by almost 50%, then I think she is fortunate to have even the downgraded job. Sounds like St. James or the one on the Trail.
Please forgive the off topic -
Does anybody know how Polly is doing after her surgery?
The lady is a candidate for the second coming of Zena, the Warrior Princess, with her determination to do the jury duty thing despite her knee recovery regimen.
Thank you, back on topic. How ’bout them T-Bills!
Hey, Jane. I’m doing OK. Actually got the car out and drove today (Jiffy Lube and then for an emmissions test - passed with flying colors, bless the 12 year old thing).
My number got called for jury duty so I am off to do my civic duty tomorrow. I’ve tried to go off the percocet this afternoon, but advil just doesn’t do as good a job with the pain at this stage in the healing. I do not expect a judge to let anyone on narcotics on a jury in any event, so it will just be the one day.
Had a few calls from family wanting to be sure that I wasn’t on the red line Metro train that had the problem. Hope the same was true of all our HBB DC area buddies.
Not feeling very Xena-like. Didn’t she throw stuff at people and kick them? I’m more likely to bash someone over the head with a bag full of library books or a cane right now.
I’ll check in when I get back tomorrow.
Economist Phelps Says U.S. Wealth May Take 15 Years to Rebound…
June 22 (Bloomberg) — U.S. households may take as long as 15 years to rebuild wealth lost in the recession, said Columbia University professor Edmund Phelps, winner of the Nobel Prize in economics in 2006.
“The only way we’re going to get a healthy, full recovery is over a long period of time, involving households rebuilding their balance sheets and companies in trouble rebalancing their balance sheets,” Phelps said in an interview today with Bloomberg Television. “There’s no silver bullet that’s going to get us into good shape quickly.”
U.S. household wealth fell by $1.3 trillion in the first quarter of this year, with net worth for households and non- profit groups falling to its lowest level since 2004, according to a Federal Reserve report released June 11. Wealth dropped by a record $4.9 trillion in the last quarter of 2008.
Phelps said that economic recovery will be unlikely until producers exhaust their existing inventories.
“When that happens there will be a sigh of relief that we’ve hit bottom,” he said in the interview from Paris. “Then we’ll see a little bounce in consumption demand” and “people won’t be bracing themselves at the prospect of losing their jobs,” he said.
Phelps predicted that unemployment will stabilize at 7 percent for the next three to five years. The jobless rate reached a 25-year high of 9.4 percent in May.
The only silver bullet is the one our greed put in through the temple of our economy.
Apparently the “flight to quality” is back on. Reals got a black eye today.
The latest salvo from the credit card companies appears to be raising the minimum payment requirement. I just got notice on one of my Chase cards increasing the minimum payment from 2% to 5% percent of the closing balance. That’s a new minimum payment of 2.5x the previous minimum payment. I expect the effect will be to push a lot of people into bankruptcy.
I guess we know the Fed is covering the losses……..or else they would have gradually raised it over the next 2-3 years.
Or more sinister..the banks had 90 days to comply with Ohbahma new credit card law so they can’t raise the interest rates that would be a PR disaster…. so why not the minimum payment…..and say they are forcing American to be frugal and pay off their debts.
They’ve already lowered limits and raised rates. Now it’s raising minimum payments. However this isn’t a small increase in the minimum payment. A minimum payment of $200 per month now becomes $500 per month under the new terms, for example. I expect the effect will be similar to loan resets on home loans in that it will start a cascade of defaults.
Lowering limits and gradually increasing minimum payments should have been sufficient to get consumers to pay down debt if that was the goal. However, lowering limits, sharply increasing rates, and sharply increasing minimum payments in combination virtually guarantees a large increase in defaults.
Or how about a mass CC burning in front of Chases headquarters?
What would happen if a couple of million people said NO MAS…I aint a payin you no mo money….sue me chase scumbank!!!!
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virtually guarantees a large increase in defaults.
Anyone left on here who might know if there’s a way to get a pdf version of the whole WSJ online? There are links on the website for the first page only of each section.
Oftentimes they have graphs or charts that are very useful in the print edition, but that aren’t in the online edition - drives me nuts. A2 today has some great summary charts, but I don’t see them online anywhere.
Thx
Dumb question of the day:
So far, the “green shoots” rhetoric from the top brass at the Fed seems disconcertingly out of touch with economic reality. Will we eventually reach a point when the message from the PPT closely aligns with ground-truthed economic reality, or will their rhetoric continue to drive a wide gulf between the economically plausible and the fancifully whimsical?
You answer my question and I’ll answer yours.
The source of this crisis was the separation of lenders/originators from repayment risk.
Any long-term solution must force lenders/originators to bear the repayment risk.
Here’s a good Craigslist house for you in Idaho - FREE!
Some moving required.
http://boise.craigslist.org/zip/1228403647.html
Owyhee county is about the wildest county in the lower 48.