The Housing Bubble

I’m still having internet connection problems, so please be patient. Moderation may be a bit slow today.

So the BEA released new numbers for the personal savings rate the other day, and wahoo! - Americans are saving again!

Or, then again, maybe they’re really not, and maybe its just that the BEA is pulling a Winston.

Note that not only has the BEA strongly revised their numbers updward recently - but they also removed the pre-1995 historical data the other day! Here’s the current data, however
Google
still has the old data in its cache.

Things that make you go hmmmm…..

Is this the ‘Cash4Clunkerz Top’ ? I certainly hope so. I can’t take too much more.

U.S. Farmland Values Fall for First Time Since 1987.

Aug. 4 (Bloomberg) — U.S. farmland values declined last year for the first time since 1987 as the country suffered the worst housing crisis since the Great Depression.

The value of all land and buildings on farms averaged $2,100 an acre at the start of this year, down 3.2 percent from a revised $2,170 a year earlier, the U.S. Department of Agriculture said today in an annual report. The change compares with a 19 percent drop in urban home prices.

Agricultural commodities including corn, wheat and soybeans plunged from records last year, as the recession worsened and the world’s farmers increased production of some crops. The USDA expects net-farm income to drop 20 percent this year to $71.3 billion from last year’s record.

“Valuations are running sideways,” said Jeff Conrad, a managing director at Hancock Agricultural Investment Group in Boston, which manages about $1.1 billion of farmland. Conrad said prices are beginning to rise again this year on signs of economic recovery.

The most expensive farmland in the U.S. was in Rhode Island at $15,300 an acre, followed by New Jersey at $13,800, according to the USDA. The cheapest was in New Mexico, at $480 an acre. Northeast states were the most expensive of the 10 regions in the lower 48 states tracked by the USDA, with an average price of $4,830 an acre.

Cheapest Land

The least-expensive area was the Mountain states, at $922 an acre. Values fell most in Montana, where farmland plunged 22 percent to $700 an acre. Prices in Corn Belt states including Iowa and Illinois fell 2.2 percent to $3,620 an acre.

A boom in commodity prices followed by a bust sent wheat down 31 percent last year on the Chicago Board of Trade, while soybeans fell 19 percent and corn declined 11 percent. Each of the crops had set record highs during the year.

The Inflation vs Deflation debate continues. Your financial future depends on which will prevail, and when. “Before inflation shows up as a result of the inflated money supply, the massive equity loss in real estate, lost wages, etc.–deflationary events–has to be absorbed,” says George Kleinman. “The government can increase money supply, but if people are unwilling to spend it, and save or pay off debts instead, deflation can occur because the money in circulation can drop even while the money supply is increasing.”

Kleinman includes a startling quote from Dr. Ben Bernanke who answered a question from Rep. Ron Paul.

Ben Bernanke: ” ‘Inflation’ is the change in the price of the consumer price level, which is very stable right now, and the various measure of money, as you know, in the broad measures of money, the measures that cut the measures of money in circulation like M1 and M2 are not growing quickly.”

An amazing response from the Fed’l Reserve chief. And wrong, too. Rising prices are the result of monetary inflating, not inflation itself. This is a well established fact in economics and even reliable dictionaries define it that way.

GS = Gov’t Secure!

Mr. Bear, silly me, I forgotten the definition of “Capitalism” …could you help me out?

“But the fact that so many of their competitors are out of business or severely wounded has put them in a very strong position.

FDIC Backing

“Banks such as Goldman Sachs are benefiting from lower borrowing costs after the Federal Deposit Insurance Corp. in October started guaranteeing bank debt issues that mature within three years.”

“It’s very counterintuitive to think that they’d be able to generate this much profit and this much revenue in the middle of an ongoing recession,”

Goldman Sachs $100 Million Trading Days Reach Record:

Aug. 5 (Bloomberg) By Christine Harper

Real estate speculators in murder-suicide:

http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2009/08/04/BATT191559.DTL

He had met Agustin five years ago while renovating her house. They became partners, buying and flipping houses that he fixed up, said San Diego police Lt. Terry McManus. But when the market crumbled, they lost money and lost properties to foreclosure, prompting tension.

At one time the couple lived together, but their romance fizzled, Torres’ sisters said. They said he realized she was unstable and perhaps dangerous, but never got a restraining order.

Sometime after 5 p.m. on July 19, Agustin went to see Torres in the converted garage of a home he was renovating, police said. She shot him with a pistol she had bought…

Is the stock market now a bubble, as a result of absorbing excess liquidity that doesn’t want to go into (low rate high default) bonds, cannot get a return in cash, and has been burned in real estate and commodities?

Those PEs are getting awfully high, even given that the “E” is cyclically depressed by recession. I expect “E” to be structurally restrained by workers no longer able to be paid less and spend more, borrowing the difference, and more and more of what could have been “E” diverted to excess executive compensation and pensions.

Something to digest…

Technical market strength seen in resistance to repeated bear efforts since July 18; very low recent volume attributed to stocks in strong hands (”in the hands of interests not to be frightened by professional drives”). Recent rally having been digested, market considered in good technical shape for further advance.

Market action still seen driven mostly by professionals, not much public or outside buying seen. Conservative observers still believe sustained uptrend unlikely until market breaks through previous resistance levels on good volume.

When was this observation made?

August 3, 1930

Is anyone else actively looking at foreclosures, observing local market trends? Weaker neighborhoods have crashed 100K or more in my area (Jax, FL). Established neighborhoods are sticky but falling. I’m seeing a lot of affordable VA and FNM foreclosures. I expect further price declines, however.

The latest on my cuz Sherry who has had a Maine house on the market since November w/o asking price change. Her agent is saying “NOTHING” is moving. Pure BS. Seventy houses were sold in her county in June at a median price of $185K, down slightly from June 08 median of $197K. Sherry’s house: $399K asking. No offers since November, and only two “lookers.” I don’t know if the agent is insane, or if Sherry is lying (to me) about her own willingness to reduce the price.

WOW. I just flipped through some listings in ‘hoods I haven’t looked up in a while. There are some crazy price drops in Pinellas. I have to say, if I was planning on staying, I would make offers.

Hi. DinOr sorry about your lost, take care.

Eastcoaster and some others who want to buy are impatient that the bubble correction is moving too slowly. But is it ? Look how it has come along just as predicted by many here. Seems to me there’s been lots of progress in the past two years. Where will we be two years from now ?
P.S There used to be a poster called Texas Chic. She day traded a lot and had French pug dogs. What happen to her ?

Hi Guys:

My second try at posting the pics from Monday night. Please let me know if you think of better captions. Enjoy!

http://picasaweb.google.com/SanDiegoREBear/HBBSanDiegoAugust2009#

Well, well…

housingwire dot com/2009/08/05/moodys-says-us-may-wind-down-fannie-freddie/

“Regulators may begin to wind down government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac within the next 18 months, Moody’s said Monday in a global banking analysis report.”

As promised: http://picasaweb.google.com/anngogh7/Ben?authkey=Gv1sRgCPio6bHLwenEjwE#

OT: wanted to share with you all an interview I had just over a week ago. This company has been interviewing me for about 2 months now in Silicon Valley (due to travel, vacation, etc. its been a loooong process). I finally got to meet the last VPs, one of whom was the VP of HR. You are not going to believe this. He fell asleep during the interview! I kid you not. I was stunned, my mouth dropped, my eyes went round and I blurted out “you aren’t sleeping are you?” - I had visions of him clunking his head on the table and I was simply too amazed to think through what I actually should have said.

I didn’t get the job.

Some pricing in CA, this is for a listing in Templeton on the market 180 days with 83 viewings:
07/23/2009 Price change $749,000
07/16/2009 Price change $779,000
06/25/2009 Price change $799,000
06/04/2009 Price change $849,000
02/09/2009 Price change $899,000
01/29/2009 Price change $977,000
Another in Arroyo Grande has been up for 41days had a 104 viewings priced @ $795
Another in Templeton,CA 180+ days with 241 viewings:

08/01/2009 Price change $489,000
07/09/2009 Price change $499,900
03/22/2009 Price change $509,900
02/26/2009 Price change $519,000
12/31/2008 Price change $539,000
12/05/2008 Price change $569,000
11/22/2008 Price change $574,000
11/01/2008 Price change $579,900
10/09/2008 Price change $589,000
08/28/2008 Price change $599,900
08/20/2008 Price change $624,000

RealtyTrac - Stats for June 2009
http://www.realtytrac.com/news/Press/newsletter-articles.asp?a=b&ItemId=6959&accnt=216672

Could someone please ’splain the connection between Lockhart’s resignation and the ginormous jump in GSE share prices? Something doesn’t smell right here…Perhaps the Fed is going to be put in charge of regulating the GSEs going forward?

market pulse

Aug 5, 2009, 2:31 p.m. EST
FHFA head James Lockhart to step down: reports

SAN FRANCISCO (MarketWatch) — The head of the federal agency that oversees Fannie Mae (FNM 0.74, +0.17, +30.18%) and Freddie Mac (FRE 0.78, +0.17, +28.31%) , James Lockhart, is stepping down, according to media reports Wednesday, citing an unidentified administration official. The departure date of the Federal Housing Finance Agency head is uncertain, and no decision has been made about a long-term replacement, according to reports.
…

Aug. 5 (Bloomberg) — Almost half of U.S. homeowners with a mortgage may owe more than their properties are worth before the housing recession ends, analysts at Deutsche Bank AG wrote in a report today.

The percentage of properties “underwater” is forecast to rise to 48 percent, or 25 million homes, as property prices drop through the first quarter of 2011, according to analysts Karen Weaver and Ying Shen

PARIS (AFP) – The once ironclad axiom that the wealthier a nation the lower its birthrate is reversed when countries pass a certain threshold of development, according to a study released Wednesday.

Most of the two dozen nations that have passed this tipping point — including Australia, Sweden, France, the United States and Britain — are enjoying modest baby booms, breaking a pattern of declining fertility that has held for decades if not longer.

I suspect it means that wealthier nations have imported a lot of poor people to drive down wages and that has resulted in an increase in birth rates.

Near the end of the article
Japan and South Korea would appear to be exceptions to the new findings, but the fact that both countries rank high on the HDI scale but have among the lowest fertility rates in the world may underscore the relatively unchanging status of women in both societies, the authors suggest.

Or it could be that these coutries have much lower immigration rates.

I posted the link from the other night, but it is in the monitor jail.
set my link free!

Where is OLY GAL? I really miss her. Sure others do too.

Aren’t these the same financially savvy (under-30) Generation Y members who were buying homes at lofty prices circa 2005 when many older potential buyers were watching from the sidelines?

Financial lesson numero uno: REAL ESTATE DOES NOT ALWAYS GO UP.

Aug 5, 2009, 8:01 a.m. EST
Gen Y needs to save

Impatience, financial illiteracy could stunt a good retirement for young adults

By Christina Burton, MarketWatch

WASHINGTON (MarketWatch) — A lack of knowledge about finances could make planning for retirement much harder work for young adults.

Almost half — 47% — of Americans born between 1977 and 1994, also known as Generation Y, are below average when it comes to financial literacy, with little understanding of how to budget and save efficiently, according to a survey by the National Foundation for Credit Counseling.
Back-to-school money pinch

Back-to-school shopping is the second-biggest season for many retailers, but sales this year are expected to drop. Still, a new survey finds that how much is being spent and on what varies widely depending on the student’s grade level.

The survey, which polled 1,000 adults in March, also found that 45% of Generation Y adults have no savings.

Retirement savings are of particular concern for younger Americans because under current actuarial assumptions the Social Security trust fund will be exhausted in 2039, the year the first of Gen Y will turn 62, and benefits could be threatened unless changes are made.

Social Security Administration officials and financial planners continue to emphasize the importance of individual savings, retirement plans — 401(k) accounts and individual retirement accounts — and Social Security benefits for post-work income, what the SSA calls a “three legged stool.”

Both advise not relying solely on Social Security for retirement income.
…

WASHINGTON – Billions of dollars the government is spending to help financially pressed homeowners avert foreclosure are passing through — and enriching — companies accused of preying on the people they’re supposed to help, an Associated Press investigation has found.

The companies, known as mortgage servicers, are middlemen who collect monthly payments from homeowners and funnel the money to the banks or investors who hold the loans. As the only link between borrowers and lenders, they’re in the best position to rework the terms of loans under the government’s $50 billion mortgage-reduction program. The companies earn a fee for every successful loan modification.

But the industry has a checkered history. The AP found that at least 30 servicers have been accused in lawsuits of harassing borrowers, imposing illegal fees and charging for unnecessary insurance policies. More recently, the companies also have been criticized for not helping homeowners quickly enough — delays that lead to more fees for homeowners and profits for servicers.

The biggest players in the servicing industry — Bank of America, Wells Fargo & Co., JPMorgan Chase & Co. and Citigroup Inc. — all face litigation, some of which has led to settlements with homeowners. All will receive federal money to modify loans.

But the industry’s smaller players, which specialize in servicing riskier subprime loans and loans already in default, face harsher accusations that they systematically abused borrowers.

“The irony is, in essence, the government is paying servicers to do their job, which is to do loan modifications where appropriate,” said Kurt Eggert, a law professor at Chapman University in Orange, Calif. “And that’s not a part of their job they were ever especially good at.”

The government says it has no choice but to partner with the servicers because they are the only link between borrowers and the investors who indirectly own their mortgages through securities.

Crude prices had jumped from below $63 a barrel last week on investor optimism the U.S. economy, the world’s biggest oil consumer, is recovering from a severe recession.

But oil took a dive Wednesday after the Energy Department’s Energy Information Administration said crude inventories increased by nearly 2 million barrels. That means that in the past two weeks, about 7 million barrels of crude have been put into storage as consumers and businesses pull back.

Any economic recovery is going to rely heavily on consumers, and energy prices can dip when data suggests that people are tucking money away, rather than spending it.

On Wednesday the Institute for Supply Management reported that the services sector contracted more sharply than expected in July. The ISM showed that retailers, financial services, transportation and health care sectors experienced the 10th straight month of declines. Those businesses make up 80 percent of U.S. economic activity.

Still, retail gasoline prices continue to rise because refiners are cutting back on production.Crude prices had jumped from below $63 a barrel last week on investor optimism the U.S. economy, the world’s biggest oil consumer, is recovering from a severe recession.

But oil took a dive Wednesday after the Energy Department’s Energy Information Administration said crude inventories increased by nearly 2 million barrels. That means that in the past two weeks, about 7 million barrels of crude have been put into storage as consumers and businesses pull back.

Any economic recovery is going to rely heavily on consumers, and energy prices can dip when data suggests that people are tucking money away, rather than spending it.

On Wednesday the Institute for Supply Management reported that the services sector contracted more sharply than expected in July. The ISM showed that retailers, financial services, transportation and health care sectors experienced the 10th straight month of declines. Those businesses make up 80 percent of U.S. economic activity.

Still, retail gasoline prices continue to rise because refiners are cutting back on production.

Demand for petroleum products was about a million barrels a day greater last year than it is now, so refiners have been trying to prevent a collapse in prices by making less gas, jet fuel and diesel.

Demand for petroleum products was about a million barrels a day greater last year than it is now, so refiners have been trying to prevent a collapse in prices by making less gas, jet fuel and diesel.

So how is this not price fixing??????????????????????
Where the F is our gov????????

This is exactly why I have an 5 bikes for the family, an electric car, and an electric scooter. Screw all of them Opec,Exxon,Saudi Arabia, Goldman Sachs. Next stop a house and solar panels.

This article offers an amazing shift in opinion from the opening paragraph to the closing one:

Special Report Second 100 Days
Buy foreclosures now - before it’s too late

In many markets, if you want to buy a repossessed property, you better come with your best offer first — and fast.

By Les Christie, CNNMoney dot com staff writer
Last Updated: August 5, 2009: 12:37 PM ET

NEW YORK (CNNMoney.com) — You’ve heard of speed dating? It’s got nothin’ on foreclosure buying these days. In many places, anyone who wants to buy a foreclosure better act fast, or they’re going to come away with bupkus.

REOs, the industry term for homes repossessed by lenders and put back on the market, are often selling in a day — sometimes in less.

“We’re seeing REOs go very quickly. Offers come in immediately after the listing comes on the market, within 24 hours,” said Brad Geisen, founder of Foreclosure.com. Some homes have been put into contract in less than 90 minutes.
…
Bubble markets

The hot spots for this fast-paced foreclosure activity are former bubble markets where foreclosures soared — places like California cities Sacramento, Riverside and San Bernardino.

In Sacramento, for example, the inventory is down to less than 30 days, making it a cut-throat market. The agents specializing in REOs “have nothing to sell,” said Brandemuehl.

On average, inventories of California homes under $300,000, the most popular price point for foreclosure buyers, have shrunk drastically, from a nearly 10-month supply a year ago to less than three and a half-month supply today, according to the California Association of Realtors.

Nationally, the number of bank-owned properties diminished by 26% from June 2008 to June 2009.

The industry attributes the drop in inventories to foreclosure prevention efforts by President Obama and various state governments. In particular, they cite moratorium programs that, at the very least, postponed foreclosures.

The bad news is that as the moratoriums lapse, more REOs will likely hit the market. That’s because these efforts tend to delay foreclosure rather than stop it.

“Every lender I talk to has been telling me there’s every indication that a tsunami of new properties coming to the market later this fall,” Sakmar said.

Geisen sees the same flood, but he attributes it to consumers failing out of Obama’s foreclosure-prevention program, Making Home Affordable. He believes that many of the modified loans will fall back into foreclosure — especially if the economy doesn’t perk up soon.

In fact, last year the U.S. Comptroller of the Currency found that 53% of loans that were modified in the first half of 2008 fell back into arrears. Although, that was before Making Home Affordable standardized the terms and qualification process.

Still, Geisen said, “There’ll be another wave of foreclosures. The wave that Obama stopped — temporarily.”

For all you bicyclists here’s a great video

http://video.telegraph.co.uk/services/player/bcpid1137883380?bctid=21337502001

Financial Times
Bonus breakdown
Published: July 30 2009 18:47 | Last updated: July 31 2009 23:04

JPMorgan Chase and Goldman Sachs paid the most million-dollar bonuses in 2008, while two banks that lost almost $28bn each last year, Citigroup and Merrill Lynch, also made hundreds of their employees millionaires, according to a newly released report on bonus payments by government-supported banks.

Aug 5, 2009, 2:28 p.m. EST
Geithner’s outburst on regulatory reform
Commentary: What the (expletive deleted) is going on?
…
A supervisor in the private sector who used obscenities, as Geithner reportedly did, would be running the risk of a harassment suit. But perhaps it’s the Rahmbo influence beginning to pervade the administration; White House chief of staff Rahm Emanuel is famously fond of using expletives.

When Richard Nixon used obscenities on his infamous White House tapes, it was widely seen as yet another sign of his moral turpitude. But those were more innocent times, no doubt.

Geithner has as yet been unable to stand up to bank chief executives and make them pay for their mistakes, but perhaps he feels that with the regulators he has a captive audience of underlings to whom he can safely vent.

The problem is that none of these regulators are under the authority of the Treasury secretary. They are the heads of independent government agencies, appointed by the president and confirmed by the Senate, and only can be removed for serious malfeasance. They expressly do not report to the Treasury or any other government department.

And, in fact, Geithner’s reported outburst on Friday did not stop Bair, or Comptroller of the Currency John Dugan, or acting director of the Office of Thrift Supervision John Bowman from repeating their contentious opinions at a Senate hearing on Tuesday.

Bair, a holdover from the Bush administration, insisted on her preference for a council of regulators to monitor systemic risk, as opposed to the administration’s plan to have the Fed play this role.

This is not, strictly speaking, defending her (expletive deleted) turf, as Geithner is said to have charged. It would give the FDIC a bigger role than it might otherwise have, so it’s really more like a power grab.

The problem for Geithner is that Bair and the others have found sympathetic ears in Congress for any opposition to giving the Fed more power. Lawmakers feel that the Fed fell down in its existing regulatory role and should not be rewarded with even more authority.

It’s a legitimate point of view, as is Bair’s contention that the pooled wisdom of the various regulators, each with their own special perspective on things, might have a better chance of spotting the next disastrous trend in our financial system.

Now all we need is a smallish earthquake to get things really rolling:

San Francisco boasts balmy weather, seaside diversions and the best baseball stadium in the country.

But despite the perks, the Bay Area is losing people at an even greater clip than Miami–and ranks second on our list. Rental vacancy rates swelled from 4.7% to 7.1%; homeowner vacancies more than tripled from 1.1% to 3.4%. Why the dramatic change?

“One of the things we’re noticing is that rents are still high,” says Ken Shuman, a Bay Area-based spokesman for real estate data provider Trulia.com. “What we’re also seeing is the economy. San Francisco, of all cities, is the most transient. People flock here when times are good–they don’t mind paying high rent as long as pay is high. Now, in many cases, wages are frozen or reduced.”

And that’s if you’re lucky enough to still have a job. According to the Bureau of Labor Statistics’ latest reports, Bay Area unemployment has more than doubled since last year, up from 4.6% to 9.4% as of April. Many laid-off workers aren’t sticking around.

“People are migrating. It happened after the dot-com bust too,” says Shuman. “As much as it’s a beautiful place to live, you really have to think about lifestyle. There’s no point in being here if you can’t enjoy it.”

FT Editor: News Sites Will Charge Access Within One Year.

A lot of companies are predicting that online content will not be free anymore. The Financial Times Editor is the latest person to discussion a subscription-based model.
In a speech in London, Financial Times Editor Lionel Barber said that within the next 12 months, news agencies will be charging access to their websites. The only thing that will be discussed, according to the editor, is whether they should charge per month or per article or possibly even both.
“I confidently predict that within the next 12 months, almost all news organisations will be charging for content.”
This speech comes the same week after Digital Journal reported that the CEO of ask.com said that the “era of online content is coming to an end.” The New York Times is also planning a subscription-based model that would charge users $5 per month to gain access to its online content.
Currently, the discussion between the two models, pay-per-article and per-month subscription, is to decide which is more cost effective and revenue based. Pay-per-article would mean that you would pay for every article you read, very similar to the $0.99 songs on iTunes.
The other model is to charge users per week or per month. For example, $1.99 per week, or the New York Times’ plan on charging $5 per month.

Boy are you HBBr’s every right about elected officials just trying to reinflate the bubble. To heck with the taxpayers…full speed ahead!

Condo buyers find it tough to get mortgages

sfgate.com/cgi-bin/article.cgi?file=/c/a/2009/08/05/BUCT190GMM.DTL

“The quagmire prompted Reps. Barney Frank, D-Mass., and Anthony Weiner, D-N.Y., to call on Fannie and Freddie to back away from their stricter requirements.

But the entities say they’re just being responsible and protecting taxpayers’ money”

Dumb questions of the day:

1. What gives the Fedury (Fed + Treasury = President’s Working Group = Plunge Protection Team) the legal right to make Megabank, Inc more than whole while throwing Main Street under the bus?

2. Why are Wall Street and Detroit too-big-to-fail, but not California (which, if it were a country, would be one of the world’s largest economies)?

3. If the bubble problem was largely do to super-high housing prices supported by super-low Fed-engineered interest rates, why has the Fed reinstated super-low interest rates as a policy objective?

4. Why does Timothy Geithner’s nose so closely resemble Pinocchio’s? (I sure wish a caricature artist would pick up on that fortuitous anatomical anomaly!)

Was it really legal for Bank of America to screw over their shareholders, then turn around and pay massive TARP-funded bonuses to their managers? Does the fact that the Fed was involved some how make it legit? This sure does stink to high heaven, if you ask me.

Wall Street Journal

* BUSINESS
* AUGUST 6, 2009

Behind BofA’s Silence on Merrill

Emails Show Higher Loss Views, but Bank Officers Saw Them as Not Material

BY DAN FITZPATRICK

Bank of America Corp.’s loss projections for Merrill Lynch & Co. swelled by nearly $2 billion two days before shareholders approved the securities firm’s takeover, but bank executives concluded that the losses weren’t severe enough to disclose publicly before the vote, according to company emails and people familiar with the situation.
…

Breaking up AIG sounds like a good start towards eliminating systemic risk. Next we need to break up Goldman Sachs, Citigroup, J P Morgan, Bank of America, and the Fed. Who did I miss?

Wall Street Journal

* BUSINESS
* AUGUST 6, 2009

AIG Breakup Is Fee Bonanza

BY LIAM PLEVEN AND AARON LUCCHETTI

Wall Street banks and lawyers could collect nearly $1 billion in fees from the Federal Reserve Bank of New York and American International Group Inc. to help manage and break apart the insurer, according to a Wall Street Journal analysis.

That would represent one of Wall Street’s biggest paydays — four times the fees paid to break up AT&T Corp. in 1996, and nearly double those paid for Visa USA’s 2008 initial public offering, the largest U.S. IPO ever.
…

HedgeCo dot net

Geithner’s Rant, Obama Administration’s Desperation?
Posted By Bret Rosenthal, August 4th, 2009

This story is quite disturbing. The Obama administration is sliding down a slippery, or should I say, slimy slope. In Q4 of last year fear mongering was the tactic of choice to push policy (e.g. auguring global financial ruin if senators didn’t quickly pass questionable legislation.) In Q1 & Q2 of this year financial market manipulation was the potion incorporated to conjure up support for far-reaching and possibly destructive government controls. Apparently Q3 ushers in a new age of coercion. When I read the story below I wonder: Is this a show of unbridled audacity (to use an Obama term) or is this the beginnings of something altogether more desperate? As ratings slip and agendas meet resistance is this how our “esteemed” president and his “brilliant” entourage conduct themselves?
…
Geithner vents as overhaul stumbles - WSJ

WSJ reports Treasury Secretary Timothy Geithner blasted top U.S. financial regulators in an expletive-laced critique last Friday as frustration grows over the Obama administration’s faltering plan to overhaul U.S. financial regulation, according to people familiar with the meeting.
…
Among those gathered in the Treasury conference room were Federal Reserve Chairman Ben Bernanke, SEC Chairman Mary Schapiro and FDIC Chairman Sheila Bair. Friday’s roughly hourlong meeting was described as unusual, not only because of Mr. Geithner’s repeated use of obscenities, but because of the aggressive posture he took with officials from federal agencies generally considered independent of the White House. Mr. Geithner reminded attendees that the administration and Congress set policy, not the regulatory agencies. Mr. Geithner, without singling out officials, raised concerns about regulators who questioned the wisdom of giving the Federal Reserve more power to oversee the financial system.
…
I would curse too if I were a couple of hundred grand underwater on my mortgage.

Here is the City News

Only In America!
last updated: 5 August 2009

Welcome to America - the land of the free market system, where entrepreneurs are encouraged and success is rewarded. Wrong.

Such is the state of things over in Obama-land, that Lloyd Blankfein, the CEO of Goldman Sachs, has allegedly had to warn his troops not to go out and make ostentatious purchases which may draw unwanted attention to the success of individuals and the firm. The New York Post quotes one unnamed Goldman staffer, who said: ‘This is a sensitive time for us, and (Blankfein) wants to make sure that we’re not being seen living high on the hog’. So Goldman’s finest keep their cash in their pockets, and the economy has to look to Obama’s stimulus plan for a kick-start (the same stimulus package that is unlikely to stimulate much until 2010). Only in America.
…

My lovely wife picked up the most amazing book for me to read today at the local library. It is entitled “The Foreclosure of America — The Inside Story of the Rise and Fall of Countrywide Home Loans, the Mortgage Crisis, and the Default of the American Dream,” by Adam Michaelson. While the author has a muddled understanding of free market economics (for instance, he does not seem to understand that a free market economy is supposed to be governed by a rule of law in order to function properly) and he carefully avoids mentioning any names (e.g., Christopher Dodd) in his discussion of the Friends of Angelo program, his epiphany while working at Countrywide must have been quite remarkable. At the end of the book, he offers a set of policy recommendations which would go far to protecting future generations of Americans from a repetition of the bubble.

I can’t say I agree 100% with all his suggestions, but they collectively represent a big step in the direction of restoring sanity to the mortgage market. Too bad I see little evidence the members of the Obamanomics Brain Trust are very much interested in making sure the bubble will not soon recur. I have heard next to nothing from them on the topic aside from the Geithner / Bernanke campaign to put the Fed fox in charge of regulating the financial hen house, and populist promises to rescue millions of households who are facing foreclosure, whether or not such a rescue is whatsoever fair to many millions of other Americans who did not buy homes they could not afford.

P.S. I also very much like the quote at the start of Chapter 12:

I see in the near future a crisis approaching that unnerves me and causes me to tremble for the safety of this country … corporations have been enthroned and an era of corruption in high places will follow, and the money power of the country will endeavor to prolong its reign by working upon the prejudices of the people until all wealth is aggregated in ta few hands and the Republic is destroyed.

– Abraham Lincoln, November 1864 –

(letter to Colonel William F. Elkins, after passage of the National Bank Act)

I wouldn’t exactly call this a “green shoot”:

“TAYLOR, BEAN & WHITAKER MORTGAGE CORP. (“TBW”) RECEIVED NOTIFICATION ON AUGUST 4, 2009 FROM THE U.S DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT, FREDDIE MAC AND GINNIE MAE (THE “AGENCIES”) THAT IT WAS BEING TERMINATED AND/OR SUSPENDED AS AN APPROVED SELLER AND/OR SERVICER FOR EACH OF THOSE RESPECTIVE FEDERAL AGENCIES. TBW HAS UNSUCCESSFULLY SOUGHT TO HAVE THE TERMINATION/SUSPENSION DECISIONS OF EACH OF THOSE AGENCIES REVERSED. AS A RESULT OF THESE ACTIONS, TBW MUST CEASE ALL ORIGINATION OPERATIONS EFFECTIVE IMMEDIATELY. REGRETTABLY, TBW WILL NOT BE ABLE TO CLOSE OR FUND ANY MORTGAGE LOANS CURRENTLY PENDING IN ITS PIPELINE. TBW IS COOPERATING WITH EACH OF THE AGENCIES WITH RESPECT TO ITS SERVICING OPERATIONS AND EXPECTS TO CONTINUE TO SERVICE MORTGAGE LOANS AS IT RESTRUCTURES ITS BUSINESS IN THE WAKE OF THESE EVENTS. WE UNDERSTAND THAT THIS COULD HAVE A SIGNIFICANT IMPACT ON OUR VALUED EMPLOYEES, CUSTOMERS AND COUNTERPARTIES, AND ARE VERY DISAPPOINTED THAT A LESS DRASTIC OPTION IS UNAVAILABLE.”

About 5,000 people were reportedly laid off at the close of business yesterday and the company has essentially shut down.

5000 laid off, but just think of all the new jobs at ACORN.

The Bad News Bulls:

More BAD News (Unemployment Claims)
I love how the media (CNBC in particular) “spins” the weekly unemployment report.

Let’s dissect it - again.

Continuing claims is the key number. It rose 69,000 from the week previous on a seasonally-adjusted basis.

But look down the table in that report. 139,291 people rolled off the continuing claims numbers into “extended benefits.”

Those folks are still unemployed, yet they understate the continuing claims number by a whopping 140,000.

This is the distortion that creeps into the numbers, and over time it gets quite ugly. What’s worse is that we’re now starting to see people drop off the extended programs, and this will accelerate into August and beyond (although Congress is threatening to extend those benefit times once again.)

The market spiked on the release but again, the issue for the economy is consumption going forward. Government money dumps ultimately must be funded and while this has so far “worked”, it cannot continue forever.

Only the actual number of people who do not have a job matters, not those who are claimed in some headline release.

In order to support an economic recovery people need purchasing power - that is, jobs!

Beware buying the hype; euphoria feels real good while you’re on the right side of it, but the hangover can truly suck when the drugs wear off.

(From K. Denninger)