The Housing Bubble

So in conclusion, most here are socialists and some are commies.

But we need all these gubmint ’services’.

Tax Bills Put Pressure on Struggling Homeowners.
The New York Times

Hard times are causing more homeowners to fall behind on their property taxes. But in thousands of cases, they are not responsible to their local governments, but to private companies that charge double-digit interest and thousands of dollars in service fees.

“When you think about abandoned properties, foreclosed properties — the cost to the community is far more expensive than the short-term benefits,” Anita Lopez, an auditor in Ohio, said.

This is because in recent years struggling cities and counties have sold their delinquent tax bills to the highest bidder. It seemed a painless way to turn old debts into cash to finance schools or public services.

But housing advocates say the private companies may be exacerbating the foreclosure crisis, pushing out homeowners faster than would governments, which are increasingly concerned about neighborhoods becoming wastelands of abandoned properties.

“In the beginning, you’re getting this immediate windfall of cash,” said Anita Lopez, the auditor of Lucas County, Ohio, which sold off more than 3,000 tax liens for $14.7 million. The county includes Toledo. “But when you think about abandoned properties, foreclosed properties — the cost to the community is far more expensive than the short-term benefits.”

Investors say the arrangement actually benefits everyone. School districts, fire departments and public parks get an infusion of cash. The investors take on a risky but potentially high-yielding investment. And taxpayers do not have to pick up the slack from scofflaw landlords or tax evaders.

Governments, of course, can charge interest and penalties too, and they foreclose on properties for back taxes. But governments charge interest rates that are half what private investors charge — often offering no-interest payment plans — and are also more likely to be concerned about the long-term prospects of neighborhoods.

In Toledo, one of the areas hardest hit by the downturn and by private lenders holding tax liens, homeowners like Richard Fix are facing foreclosure for a few thousand dollars in overdue taxes.

Mr. Fix said he lost his job with Chrysler in January 2008 and took a lower-paying job. As he and his family struggled to pay their mortgage, credit cards and other bills, he said they fell behind on $5,900 in taxes.

“I’m in a no-win situation at this point,” he said.

With the economy faltering and property values plunging, homeowners and landlords are falling behind on their bills or abandoning their property, just as governments are facing huge budget shortfalls.

New home building is starting to gain more traction here in the midlands of S.C. although we have numerous unfinished over grown developments, just sitting idle. I know builders build, but who will absorb these homes? We are way over built.

Treasuries Drop Before Report That May Show Home Starts Rose.

Aug. 18 (Bloomberg) — Treasuries fell, sending 10-year notes down for the first time in four days, before a government report economists said will show U.S. builders broke ground on homes at the fastest pace in eight months.

Yields climbed from the lowest level in almost four weeks as stocks around the world advanced following their biggest rout since April yesterday, and on speculation an industry report later this week on existing home sales will show the U.S. recession is easing. Investors should unwind bets on a rally in longer-maturity Treasuries, according JPMorgan Chase & Co. Investor confidence in Germany jumped to its highest level in more than three years.

“Data in the next couple of months will continue to act as if we’re in the beginning of a solid economic recovery,” said David Schnautz, a fixed-income strategist in Frankfurt at Commerzbank AG, Germany’s second-biggest lender. “That will place an upward pressure on yields.”

The yield on the 10-year note rose four basis points to 3.51 percent as of 10:36 a.m. in London, according to BGCantor Market Data. The 3.625 percent security maturing in August 2019 fell 10/32 or $3.13 per $1,000 face amount, to 100 31/32.

Yields dropped to 3.46 percent yesterday, a level not seen since July 22, as a decline in stocks spurred investors toward the relative safety of U.S. debt. They will trade at 3.8 percent at the end of September and at 4 percent by year-end, Schnautz said.

Broward county get’s ready to raise tax rates (up to 25%):

http://tinyurl.com/m5hnvy

How long is it going to take these morons down here to realize that this is a direct result of SOH and Amend 1 (and, btw, the commend there about Amend 1 is not from me). We need tax caps so badly in FL it makes my head hurt. Something along the lines of the TABOR; or other “revenue neutral” models.

Property prices went up 2-3X in 5 years, mill rates remained unchanged. Property values fall 30-40% in 3 years, mill rates go up dramatically? Excuse my French, but WTF?

And, to make it all a bit worse, we have this little gem (from the above article):

“But the taxable value of property in Broward has declined two consecutive years, falling 10.5 percent this year from $166.4 billion to $147.2 billion.”

On what planet did property values only fall by 10% last year in S. FL? I assume their counting the SOH’ers in there (who are seeing taxes go up, and taxable values go up), but still.. Come on now, property values are down a solid 20-30% over the last year in S. FL, how’s the property appraiser going to deal with the continuing slide in values?

BTW, just as a frame of reference, our property taxes in FL are about 2% of home value per year. The 500K (last sale) place that rent has a tax bill of about 10K/yr.

There will be plenty of back peddling, you don’t get votes when you piss off old folks.

Thousands Quit AARP Over Health Reform
Tens of Thousands Don’t Like the Health Care Overhaul

(CBS) CBS News has learned that up to 60,000 people have cancelled their AARP memberships since July 1, angered over the group’s position on health care.

Elaine Guardiani has been with AARP for 14 years, and said, “I’m extremely disappointed in AARP.”

Retired nurse Dale Anderson has 12 years with AARP and said, “I don’t wanna be connected with AARP.”

Many are switching to the American Seniors Association, a group that calls itself the conservative alternative as CBS News Investigative Correspondent Sharyl Attkisson reports.

Watch Extended AARP Interview Here

Last week alone, they added more than 5,000 new members. Our camera was there Friday when the mail came.

Letters were filled with cut-up AARP cards.

“I think that probably the seniors are most upset with cuts in Medicare,” said ASA President Stuart Barton.

The American Seniors Association is flat-out against President Obama’s plan, which calls for $313 billion dollars in Medicare cuts over ten years. The AARP is widely viewed as supporting the President.

Last week, Obama told a town meeting in Portsmouth, NH, “We have the AARP on board because they know this is a good deal for our seniors.”

The AARP called the President’s statements “inaccurate,” saying it hasn’t endorsed any plan or bill.

Some were left with the feeling that AARP was waffling.

“I feel they’re supporting it through the backdoor, and telling members that they’re not through the front door,” said Guardiani.

Foreclosure fix: Force banks into negotiation
By DARA KAM
Palm Beach Post Capital Bureau
Monday, August 17, 2009

TALLAHASSEE — Banks should be forced to negotiate with homeowners facing foreclosure, a Florida Supreme Court panel recommended Monday.

The panel, appointed by the high court in March, also recommended separating mortgage foreclosures into three groups: residential homes, abandoned properties and rental properties.

The court created the Task Force on Residential Mortgage Foreclosure Cases to suggest ways to deal with the influx of foreclosures clogging the state’s court system. Florida posted the nation’s second-highest number of foreclosure filings in July - a 23 percent increase from the previous year - according to Irvine, Calif.-based RealtyTrac.

The panel’s final report, released Monday, likened the impact of the increase in foreclosures on the courts to a car-jammed evacuation route during a hurricane.

The recommendations include expediting foreclosures on abandoned properties, an idea favored by consumer advocates.

“Required mediation would be good to get the banks to actually do something instead of dragging their feet,” said Bill Newton, executive director of the Florida Consumer Action Network. “It makes sense because it helps out the property values around these foreclosed areas.”

The 15-member panel of judges, lawyers and financiers acknowledged that the state’s budget crisis makes appointing more judges and clerks an unreasonable option for addressing the urgency of the situation.

The recommendations instead include “the least of evils that can work on an emergency basis to immediately begin to meet the challenge of these cases,” the task force wrote.

“We believe it is imperative that the Florida Supreme Court address the explosion of mortgage foreclosure filings as soon as possible for the welfare of our courts, our communities, our businesses, and our state,” the report reads.

Lenders should be required to pay for the mediation, a majority of the panel concluded. But four others, including the recently appointed head of the state Office of Financial Regulation and a representative of the state bankers association, disagreed, saying costs should be shared by borrowers.

Widow selling husband’s tomb above Marilyn Monroe.

LOS ANGELES (Reuters) - An American widow is selling her husband’s burial spot directly above film legend Marilyn Monroe so that she can pay off her mortgage.

Elsie Poncher has put an advertisement on eBay to auction off the tomb in Westwood Village Memorial Park, Los Angeles.

“Here is a once in a lifetime and into eternity opportunity to spend your eternal days directly above Marilyn Monroe,” says the advertisement.

“In fact the person occupying the address right now is looking face down on her.”

The burial plot is currently occupied by the late Richard Poncher, described by his widow as an entrepreneur who bought two tombs from baseball player Joe DiMaggio, Monroe’s ex-husband, as the pair were divorcing in 1954.

Monroe died at the age of 36 in 1962. Poncher died at the age of 81 in 1986.

Elsie Poncher said she would move her husband’s remains over one spot into a crypt intended as her final resting place if the sale is successful, and she would be cremated instead when the time comes.

Bidding for the plot opened at $500,000 and had reached $2.5 million by Sunday. No one from eBay was immediately available to comment on the bidding process or to give more details.

Poncher told the Los Angeles Times that she hoped to raise enough money to pay off the $1.6 million mortgage on her Beverly Hills home.

“I can’t be more honest than that,” she told the newspaper. “I want to leave it free and clear for my kids.”

The Westwood Village Memorial Park is home to many celebrities, including Dean Martin, James Coburn, Roy Orbison, Truman Capote, Natalie Wood, and the recently deceased Farrah Fawcett.

Playboy’s Hugh Hefner bought the crypt beside Monroe in 1992.

Anyone here invested int these municipal tax liens before? I see them on Ebay all the time.

NYTimes
Tax Bills Put Pressure on Struggling Homeowners

By JACK HEALY
Published: August 17, 2009

Hard times are causing more homeowners to fall behind on their property taxes. But in thousands of cases, they are not responsible to their local governments, but to private companies that charge double-digit interest and thousands of dollars in service fees.

This is because in recent years struggling cities and counties have sold their delinquent tax bills to the highest bidder. It seemed a painless way to turn old debts into cash to finance schools or public services.

But housing advocates say the private companies may be exacerbating the foreclosure crisis, pushing out homeowners faster than would governments, which are increasingly concerned about neighborhoods becoming wastelands of abandoned properties.

“In the beginning, you’re getting this immediate windfall of cash,” said Anita Lopez, the auditor of Lucas County, Ohio, which sold off more than 3,000 tax liens for $14.7 million. The county includes Toledo. “But when you think about abandoned properties, foreclosed properties — the cost to the community is far more expensive than the short-term benefits.”

Investors say the arrangement actually benefits everyone. School districts, fire departments and public parks get an infusion of cash. The investors take on a risky but potentially high-yielding investment. And taxpayers do not have to pick up the slack from scofflaw landlords or tax evaders.

Governments, of course, can charge interest and penalties too, and they foreclose on properties for back taxes. But governments charge interest rates that are half what private investors charge — often offering no-interest payment plans — and are also more likely to be concerned about the long-term prospects of neighborhoods.

Greenshoots misses mark:

Construction of US homes falls 1 percent in July, missing analysts’ expectations

WASHINGTON (AP) — Construction of new U.S. homes dipped slightly last month, missing expectations, in a sign that the building industry’s recovery from the housing bust is likely to be bumpy and gradual.

The Commerce Department said Tuesday that construction started on homes and apartments fell 1 percent in July to a seasonally adjusted annual rate of 581,000 units, from an upwardly revised rate of 587,000 in June. Economists polled by Thomson Reuters expected a pace of 600,000 units.

Builders slammed the brakes on construction after the housing bubble burst, and in April housing starts plunged to the lowest point in a half-century. Then construction began a recovery, rising to the highest level in seven months in June before slipping again last month.

Deflation didn’t quite get the memo on greenshoots:

Wholesale prices fall more than expected in July, hit record-low over past 12 months

WASHINGTON (AP) — Wholesale prices dropped sharply in July, and over the past 12 months fell by the largest amount in more than six decades of record-keeping.

The Labor Department said Tuesday that wholesale prices dropped 0.9 percent last month. That’s triple the decline economists had expected and was driven by big decreases in both energy and food costs. Over the past 12 months, the prices of goods before they reach store shelves fell 6.8 percent.

Core inflation, which excludes energy and food, also was well-behaved. It dropped 0.1 percent in July, better than 0.1 percent gain economists expected.

The declines in the Producer Price Index showed wholesale inflation pressures were even more subdued than prices at the consumer level. The government last week reported that the Consumer Price Index was unchanged in July and over the past 12 months fell 2.1 percent, the biggest decline in nearly 60 years.

For July, wholesale energy prices fell 2.4 percent after having surged 6.6 percent in June. Gasoline dropped 10.2 percent and home heating oil plunged 11.9 percent.

Food prices at the wholesale level fell 1.5 percent last month, reversing a 1.1 percent rise in June. A big drop in vegetable prices led the overall decline, but beef and egg prices also fell.

Housing Starts in U.S. Fell on Multi-Family Units

Aug. 18 (Bloomberg) — Housing starts in the U.S. unexpectedly fell in July, pulled down by multifamily dwellings, while single-family starts which make up most of the industry rose to the highest level since October.

The 1 percent decline in starts to an annual rate of 581,000 was the first drop in three months and followed a 587,000 rate in June, the Commerce Department said today in Washington. Construction of single-family houses, which account for 75 percent of the industry, rose 1.7 percent to a 490,000 rate, today’s report showed.

Single-family home construction has been rising since March, a sign that falling home values and stimulus efforts such as a tax credit for first-time buyers are starting to reverse the housing meltdown that triggered the financial crisis. While the economy is forecast to grow this quarter, foreclosures, tight credit and job losses will temper the recovery.

“It’s still an indication that we’re at a turning point,” Jonathan Basile, an economist at Credit Suisse Holdings Inc. in New York, said before the report. “The housing recovery will look uneven until there’s more visibility in the economy.”

Cindy to BHO - “All we are saying, is give peace a chance”:

Next week, Cindy Sheehan will join other like-minded peace activists to have a presence near the expensive resort on Martha’s Vineyard where President Obama will be vacationing the week of August 23-30.

From her home in California, Ms. Sheehan released this statement:

“There are several things that we wish to accomplish with this protest on Martha’s Vineyard.

First of all, no good social or economic change will come about with the continuation or escalation of the wars in Iraq, Afghanistan and Pakistan. We simply can’t afford to continue this tragically expensive foreign policy.

Second, we as a movement need to continue calling for an immediate end to the occupations even when there is a Democrat in the Oval Office. There is still no Noble Cause no matter how we examine the policies.

Third, the body bags aren’t taking a vacation and as the US led violence surges in Afghanistan and Pakistan, so are the needless deaths on every side.

And, finally, if the right-wing can force the government to drop any kind of public option or government supported health care, then we need to exert the same kind of pressure to force a speedy end to the occupations.”

The last paragraph says it all, see how simple it is. Why didn’t we think of that?

China goes house hunting to rev up economy…

BEIJING (Reuters) - The Chinese government is attempting to pass the baton of growth from state-funded infrastructure investment to the private housing sector, a risky but necessary move to sustain the economic recovery.

Construction cranes sprouting in big cities, busy furniture shops and soaring property sales all show that the transition is going smoothly so far, though officials are wary that house prices may rise too high, too quickly.

China’s biggest listed property developer, Vanke (000002.SZ), lifted its housing starts target for this year by 45 percent, while its rival Poly Real Estate (600048.SS) said sales in January-July rose 143 percent from a year earlier.

On the ground, construction firms, big and small, are trying to meet the demand, last years’ downturn now a distant memory.

“It’s been a long time since we’ve had a day off. Several months, I think, though I can’t remember exactly,” said Zhang Minghui, owner of a small building company in Beijing.

“From late last year to early this year, we basically had nothing to do. Everybody was careful with their money because of the crisis and so projects got delayed.”

Zhang cut his staff to three in November but is now back up to a crew of 14.

The economic importance of the property sector in China is hard to overstate. Investment in residential housing accounted for about 10 percent of gross domestic product before a property boom turned to bust in 2008, roughly the same as the contribution from the country’s vaunted export factories.

The government’s first steps last year to revive the stalling Chinese economy were to offer tax cuts to encourage home purchases, followed by rules to ease access to mortgages.

Funny how this San Diego Union-Tribune article never mentions (as did its rival paper, The North County Times) how there are something like 27,500 homes currently in delinquent status for North San Diego County, alone. When many of these eventually move through the foreclosure pipeline into REO status, this just might put a damper on the budding San Diego home price “rally.”

Principles of objective reporting would seem to suggest including this sort of detail in a major urban newspaper’s article about the state of the local real estate market. But some reporters appear to perceive their role as providing cheer leading services to the real estate market rather than offering objective information to their readers.

County home prices continue slow climb
July sales up 11% from a year earlier
By Roger Showley
Union-Tribune Staff Writer

2:00 a.m. August 18, 2009

San Diego County home prices continued their cautious comeback last month, clocking in at a median of $320,000, up from the recession’s low of $280,000 in January.

Sales passed the 3,800 mark for the first time in three years, indicating buyers are increasingly motivated to grab bargains while they last. The number of sales last month marked an 11 percent increase from a year earlier.
…
Rick Hoffman, president of Coldwell Banker Residential Brokerage, said his 1,500 agents in 24 offices report more sales and interest in move-up houses. Previously, most interest focused on lower-priced foreclosures and short-sales — homes sold for less than their mortgage balance.

He even took heart in the news that four multimillion-dollar homes sold in La Jolla last week.

“I’m starting to feel pretty bullish that, in fact, we’ll see a very active fall, maybe through the holiday season, because of the momentum going in that direction,” Hoffman said.
…
According to the San Diego Association of Realtors, yesterday’s inventory of active listings stood at 8,889, a 2½-month supply at July’s resales pace. At this time last month, the inventory was 13,268.

But Erik Weichelt, association president, said the listings have declined partly because of a change in definition. In cases where lenders have to approve a short-sale, those properties are now considered as contingent sales and no longer count as active.

“It still means we don’t have enough inventory,” Weichelt said. “We’ve got to get more inventory.”

But with prices down 38 percent from the 2005 peak, nondistressed owners apparently are not seeing this as an opportunity to sell.

“A lot of people don’t want to sell because the price is so much lower than it was a few years ago,” said Gary Kent of Re/Max Associates. “What we’re seeing is people who need to sell or have owned a long time.”
…

I thunked the “credit market emergency” happened and ended last fall?

Fed, Treasury extend emergency credit program
By Edmund L. Andrews
NEW YORK TIMES NEWS SERVICE

2:00 a.m. August 18, 2009

WASHINGTON — With banks still tightening their lending standards, and borrowers skittish about taking on debt, the Federal Reserve and the Treasury extended one of their main emergency credit programs — the Term Asset-Backed Securities Lending Facility, or TALF — for several more months.

Despite signs of an economic recovery, and vast government assistance to financial institutions, the Fed reported yesterday that banks were still tightening their lending standards and did not expect to reverse course until the second half of next year.

In the Fed’s latest survey of senior loan officers, about 30 percent of banks said they were still tightening standards for both consumer and business loans. That was a smaller percentage than the Fed’s survey in April, but it meant that, on balance, banks were still clamping down as they worried about the economic outlook and tried to conserve capital.

About 55 percent of banks said their lending standards for business loans would remain tougher than long-term average levels until the second half of 2010. A similar percentage predicted that standards for prime home mortgages would remain tougher than average for another year, and about 40 percent said mortgage standards would be stricter than average for the foreseeable future.

At the same time, consumers and businesses are still reluctant to borrow. About 40 percent of banks reported that demand for loans by big corporations was weakening, though that was a smaller percentage than in April. More than half of banks said demand for loans from small businesses was weakening.

On the consumer side, low interest rates have spurred demand for home mortgages, mostly by people refinancing their loans. But the Fed reported that mortgage demand increased much more slowly in July than in April — probably because mortgage rates inched slightly higher.

“While banks appear more willing to lend, borrowers are less willing to borrow,” said Paul Dales, an economist at Capital Economics. “This may be the economic equivalent of leading a horse to water, but not being able to make it drink.”
…
You can hand money to a banker, but you can’t make him lend it.

You can offer money to a consumer, but you can’t make him spend it.

This sounds like a healthy California real estate market recovery

Brett Arends’ ROI
Aug 17, 2009, 7:00 a.m. EST
No light yet at end of California real-estate tunnel
Commentary: Despite some claims, situation actually may be getting worse

By Brett Arends, WSJ dot com

NEW YORK (MarketWatch) — Is California’s real-estate crash finally hitting bottom?

Some people think it might have.

But color me skeptical.

OK, there is some good news.

Subprime blight areas in the Central Valley and the Inland Empire, which led the crash, have been collapsing at a slightly slower pace recently.

According to Zillow, the real-estate information company, median prices in Stockton — a contender for the title of Subprime Central — have been falling by a little over 2% a month for the past three months. That may sound pretty bad — and it is pretty bad — but everything needs context: Last winter the rate was more than 3% a month, and early last year the rate was nearly 4%

In places like Modesto, San Bernardino and Riverside, the story is similar.

Stan Humphries, Zillow’s chief economist, sees grounds for optimism. “It points to a bottoming of the market,” he says.

Mark Hanson, an independent (and bearish) real-estate analyst, agrees that there are some signs of life. He says there’s a lot of bottom-fishing going on. In the worst hit areas, the cheaper homes are actually being snapped up right now. “Supply is at a multi-year low,” he says. “It’s down 60% from last year. You’re seeing 15 offers for every house.”

The main buyers are first-timers, armed with their one-off $8,000 taxpayer gift, and investors.
…

They already make them, they just charge $20,000

Extra8/18/2009 12:01 AM ET
A $4,000 car from GM?
The company sees a market for an ultra-low-cost compact, a segment automakers are focusing on after the plunge in sales in North America and Western Europe.

By The Wall Street Journal
General Motors is targeting the emerging ultra-low-cost car market with plans for a compact for around $4,000, possibly producing it in Asia.

Ah yes, the 5% solution:

Let’s juxtapose two stories. First, from Bloomberg:

Aug. 14 (Bloomberg) — More than 150 publicly traded U.S. lenders own nonperforming loans that equal 5 percent or more of their holdings, a level that former regulators say can wipe out a bank’s equity and threaten its survival.

Ok. Now how about this one?

WASHINGTON (MarketWatch) — Delinquency rates for loans and leases at U.S. banks increased to a record 6.49% in the second quarter from 5.58% in the first quarter, the Federal Reserve announced Monday.

So let me see if I get this right.

At 5% of non-performing loans a bank is at risk of being insolvent.

But the entire banking system in The United States had its non-performing loan ratio increase from 5.58% in the first quarter to 6.49% in the second, a record, and higher than the 5% level at which the survival of a bank(ing system) is threatened with collapse.

Hmmmm…. So should we take from this that the entire US Banking System is about to collapse?

This much we know for certain - you’re being screwed - systematically - to cover the sins of these banksters who made loans to people who they had no reason to believe could pay:

Being in debt is about to get a lot more expensive for millions of Americans. Credit card issuers have been rushing to raise rates in advance of this Thursday, when the first provisions of the Credit Card Accountability Responsibility and Disclosure Act (CARD) will go into effect, with other protections starting in February 2010.

Right. Including those who are good credit risks.

This is the problem with allowing the blatant and outrageous fraud in our system to continue: Those who are prudent, who have done only good and not bad things, get reamed repeatedly and are forced, at gunpoint, to pay for the sins of those who committed that fraud.

Yet we, as Americans, permit this.

We absorb 20, 25, 30% interest rates (while the banks borrow at zero) so the bank executives who knowingly granted credit to those who could not pay, then sold worthless securities to investors, do not go to prison for fraud.

We pay more than $30 billion in overdraft charges and allow banks to “shuffle” deposits and withdrawals to generate the maximum in these fines so that the bank executives who are knowingly mis-marking “assets” at higher than their true values can “cover” their sin and do not go to prison for fraud.

We pay the FDIC “assessments” and “loans” from Treasury, as taxpayers and banking customers, so that the FDIC can repay depositors after it absorbs a loss that it should not have incurred - a loss that happened because OTS, OCC and the FDIC failed to close banks in a timely manner that were cooking the books when they either knew or will willfully blind to the control fraud taking place at these institutions.
(From K. Denninger)

The private sector is offering a solution where the Obamanomic Dream Team’s remedies have thus far fallen flat: Using “nonviolent terrorism” to gently encourage mortgage lender CEOs to offer favorable mortgage restructuring terms.

(This item was featured in this morning’s edition of American Public Media’s Marketplace, but I have no link yet…)

SAVE THE DREAM TOUR

NACA’s Save the Dream has been an incredible success with over 180,000 participants and many thousands having their mortgage restructured with interest rates permanently reduced to as low as 2%. NACA has legally binding agreements with all the major lenders/servicers to achieve this. All of NACA’s services are FREE.

Dumb question of the day:

How are the PTB’s housing bubble reflation efforts panning out so far? Is there any evidence the hair-of-the-dog cure has successfully alleviated the housing bust hangover?

Earnings data help stocks regain ground after drop
Stocks rebound after sharp drop despite mostly weak housing data, mixed retail earnings.
Tuesday August 18, 2009, 12:03 pm EDT

NEW YORK (AP) — Some better-than-expected retail earnings reports are drawing investors back into the stock market.

Stocks rebounded Tuesday from the previous day’s selloff, with major indicators rising nearly 1 percent. Investors were still wary about consumer spending and the economy as a whole, but found enough good news in retailers’ reports and the Commerce Department’s latest take on the housing market to justify the comeback.

Some bounce back was to be expected after Monday’s big drop, which took the Dow Jones industrials down 186 points on growing fears that nervous consumers won’t spend enough to lift the economy into recovery.

The earnings reports from retailers showed that American consumers are still shy about spending, but results weren’t quite as bad as analysts expected and that helped calm some of investors’ nerves.

Home Depot Inc. said its second-quarter profit fell 7 percent, but its adjusted results beat Wall Street’s expectations, as cost cuts partly offset weak revenue. The world’s largest home improvement retailer also lifted its forecast for full-year earnings.

Target Corp.’s quarterly profit also fell but it surpassed analyst estimates. And TJX Cos. said its second-quarter profit rose 31 percent as its discount-oriented stores continued to lure in cost-conscious shoppers. Not all the reports were positive, though. Luxury department store Saks Inc. said its loss widened from a year earlier.

Meanwhile, the Commerce Department reported that construction of new homes and apartments fell 1 percent last month to a seasonally adjusted annual rate of 581,000 units, from an upwardly revised rate of 587,000 in June. Economists polled by Thomson Reuters expected a pace of 600,000 units.

There was some good news in the report, however. Construction of single-family homes rose 1 percent to the highest level since October 2008. It was the fifth straight monthly increase.

“Always love your country — but never trust your government!

- Robert Novak

One Hundred Years Ago

The Dow Jones Industrial Average was comprised of these dozen issues in 1909:

Amalgamated Copper
American Car & Foundry
American Smelting & Refining
American Sugar
Colorado Fuel & Iron
General Electric Company
National Lead
Peoples Gas
U.S. Rubber
U.S. Rubber first pfd.
U.S. Steel
U.S. Steel pfd.

Constantly replacing failing and fading companies on the list (now grown to the DJIA 30) has, over time, grossly overstated its measurement of the true economy and industrial performance, IMHO.

Fifty Years Ago

In August 1959 the Dow Jones Industrial Average consisted of these 30 stocks:

Allied Chemical
Aluminum Company of America
American Can
American Tel. & Tel.
American Tobacco B
Anaconda Copper
Bethlehem Steel
Chrysler
Du Pont
Eastman Kodak Company
General Electric Company
General Foods
General Motors Corporation
Goodyear
International Harvester
International Nickel
International Paper Company
Johns-Manville
Owens-Illinois Glass
Procter & Gamble Company
Sears Roebuck & Company
Standard Oil of California
Standard Oil (N.J.)
Swift & Company
Texaco Incorporated
Union Carbide
United Aircraft
U.S. Steel
Westinghouse Electric
Woolworth

Centex, Pulte shareholders OK takeover
AP Real Estate Tuesday, Aug. 18, 2009

Pulte Homes Inc. says shareholders for the homebuilder and rival Centex Corp. each voted to clear Pulte’s takeover of Centex, creating the largest homebuilder in the United States.

Richard Dugas Jr., chief executive of Bloomfield Hills, Mich.-based Pulte, said Tuesday the companies’ shareholders approved the deal by a margin of more than 90 percent. The deal is expected to close by the end of the day.

Under the terms of the deal, investors in Dallas-based Centex will receive 0.975 shares of Pulte common stock for each Centex share they own.

The acquisition is valued at around $1.53 billion based on Pulte’s stock price Tuesday afternoon.

Was on errands this morn.

In the past, I’ve mentioned a neighbor who took out a reverse mortgage in late 2006. You know the one — she went on a truly baffling spending spree, then fell and broke a leg in December 2007. House has been empty ever since.

After surgery and a spell in a rehab center, she was moved into her eldest son’s house in northern Arizona. House was fixed up cosmetically, then put up for sale in June 2008. Sign stayed up until February 2009, and Yours Truly had assumed that the place had been sold.

Wrong-o.

This past June, I heard that it had been foreclosed on. This morning, I spied a NOTS on the front of the house. Among other things, the NOTS showed the Deed of Trust amount to be $285,500. I assume that this figure was the amount of the reverse mortgage.

IMHO, that was way, way, way, WAY more than that house was ever worth. When the lady was living there, she had quite a fondness for stray cats. Place stunk so bad that some of us neighbors took to calling it The Cat House.

Before the house was fixed up, several weeks of cleaning were required. I heard that the cats had done their business all through the house, and getting rid of that odor was quite the job.

BTW, when the house went up for sale, the initial wishing price was around $220,000. No deal. The family dropped the price into the mid-$100,000s, but, obviously, that didn’t work either.

Oil up nearly $2.50 per barrel for no reason whatsoever.

It’s now being reported that auto sales are poised to drop off a cliff. Looks like cash for clunkers was a short term frenzy.

Extreme Oil Forecasts Are “Ludicrous”
Aug 18, 2009 Tech Ticker in Investing, Products and Trends, Commodities, Recession.

The oil forecasting bulls and bears are at it again.

Citing supply bottlenecks and a recovering global economy, Goldman is forecasting crude prices again will surge, as they did in July last year. On the other side, bear Robert Prechter of Elliott Wave International forecasts oil plunging to $10/barrel during the next decade. So who’s right?

Edward Morse, head of research for LCM Commodities and LCM, says both extreme forecasts are “ludicrous.” Morse added there’s just enough lack of transparency in the oil industry to allow for such diverging forecasts. The disagreement focuses on two key issues: (1) production capacity and (2) demand outlook.

With a V-shaped economic recovery unlikely and peak summer refining season winding down, Morse believes oil is fairly valued in the mid-to-low $60 range and likely to remain in a $50 to $75 range for the foreseeable future.

“Mexican drug smugglers tied to California fire”

“Wildfire investigators in California are looking for marijuana growers tied to a Mexican drug cartel whom they suspect ignited a blaze that has charred more than 87,000 acres of a national forest…A joint statement issued Saturday night by the Santa Barbara County sheriff’s office and the Forest Service said the blaze was sparked by a “cooking fire in a marijuana drug trafficking operation … believed to be run by a Mexican national drug organization.”

http://news.yahoo.com/s/nm/20090818/us_nm/us_wildfire_marijuana

We really, REALLY need to tighten up our border security, and send these dirtbags packing.

One View From Across the Pond:

By Gerald Warner (UK Telegraph)

The white flag is flying over Camp Obama, which makes a pleasant change from the red flag that, metaphorically speaking, has been flying there since January 20. Barack Obama’s plan for socialised health care on the Stalinist model across the United States is now in full retreat. Not only will it not play in Peoria, it will not play anywhere.

Politicians returning to Washington after scrubbing off the tar and feathers acquired at town-hall meetings are bringing with them a blast of reality that has been absent from Obama’s dreamland regime since his inauguration. For months Obama had been trumpeting the indispensable nature of his “public option” in a new health care system. Suddenly, it is no big deal. Kathleen Sebelius, the Health and Human Services Secretary, is now telling Americans that taxpayer-funded insurance was “not the essential element”.

So, President Pantywaist is in full retreat; but he is desperate for some face-saving measure to pretend he has achieved revolutionary reform. The Senate should not oblige. Obama has no interest in genuine health care reform: as a Senator he voted against all the moderate, achievable measures that were proposed. So far as he was concerned, the worse things got for 48 million uninsured Americans the better: it might persuade them to buy into his socialist scheme, the primary objective of which was not relief of suffering but expansion of Big Government.

Aug. 18 (Bloomberg) — Pacific Investment Management Co. strategic adviser Richard Clarida said growth of about 2 percent paired with an elevated unemployment rate will likely be the “new normal” as the U.S. economy recovers.

“We don’t see the V-shaped recovery” experienced in past rebounds from recessions that featured higher rates of growth, as consumption remains low, Clarida said in an interview with Bloomberg Television in New York.

“Normally when you come out of recession, the best performing sectors tend to be the early cyclicals, retailers, homebuilders, airlines,” he said. “That was true in the first part of this rally, and I don’t think it’s going to be sustainable.”

The economy is “really dependent” on sectors driven by public spending, said Clarida, who teaches economics at Columbia University in New York.

So who’s the bigger socialist, those who want big business to use us and abuse us, or those who want big government to use us and abuse us?

River Road Hotel Partners files for Chapter 11

Aug 18 (Reuters) - River Road Hotel Partners LLC, owner of the InterContinental Chicago O’Hare hotel, and five affiliates, filed for Chapter 11 bankruptcy protection, underscoring how the hotel industry has been slammed in the economic downturn.

In a filing on Monday with the U.S. Bankruptcy Court for the Northern District of Illinois, the company listed estimated assets of up to $100 million and estimated liabilities of up to $500 million.

The InterContinental O’Hare hotel is located close to the O’Hare International Airport in Chicago. The hotel, which is managed by Portfolio Hotels Rosemont LLC, employs 147 full-time and 15 part-time employees, court documents showed.

The recession has hit hotel chains hard because leisure and business customers are traveling less or demanding lower rates.

Did Big Government Save Us From A Second Great Depression?
Aug 18, 2009 09 Henry Blodget in Investing, Recession, Banking

Now that it looks as though the economy won’t fall into the abyss, economists have stopped arguing about what the government should do to save us and started arguing about what the government did that saved us.

For example, nobel-laureate and New York Times columnist Paul Krugman argued two weeks ago that our savior was Big Government. Specifically, he said that the vast Wall Street bailout (however loathsome) combined with the government’s willingness to run up huge deficits kept the spending pumps running when private-market demand collapsed.

Megan McArdle of the Atlantic isn’t so sure.

First, there’s the problem with arguing that we have been saved from something hypothetical. (Would the world really have ended if we hadn’t bailed out AIG? Are we sure?) Then there’s the fact that the stimulus designed to save us has barely kicked in yet–so it’s hard to argue that Keynesian spending increases are really the white knight here. Third, it’s not actually clear that we have really been saved yet. (What about the threat of a double-dip?)

Lastly, there is the fact that our government did not make the same boneheaded mistakes that plunged the country into the Great Depression–such as tightening the money supply (ours has been kept extremely loose). The absence of these mistakes, not Big Government, may be the real savior here.

Not to mention that there’s been massive overbuilding of hotels in the last few years.

Eating pizza with friends in Norfolk Saturday night (before a hot day scuba diving in the quarry) I overheard people behind me. Bits of their conversation was that loans are still there to buy new homes at 100%. Sellers are paying closing costs. One person said they had to write a check to sell their condo last year. Another said they couldn’t sell their condo for what they owe. A friend is stuck in this position, actually. Kind of sucks for him, he didn’t want to flip it or anything, I think he thought he was just doing what was proper. Not fancy.

“Monsanto Does ‘Dust and Ditch’ Destroying Local Organic Farm”

“Grinnell Heritage Farm is 152 years old. Andrew Dunham is the fifth generation of his family to work this land about 50 miles east of Des Moines… Andrew and his wife Melissa are a few months shy of receiving their formal certification as an organic farm.

Across the road, due north of their land, is a field of corn that is owned and managed by the Monsanto seed corn plant… On July 6th, a rustic-looking old biplane swooped in to spray Monsanto’s field. To put it mildly, the pilot’s bombardiering skills were not what one would hope.

Dunham’s crew was in the field picking broccoli and spinruts (”turnip” backwards-a Japanese form of the root vegetable). They witnessed the plane as it failed to shut off its spray mechanism, and the fungicide drifted into their fields. “The ground is in the third year of transition and would have become organically certified on September 1st,” Andrew said. Now, probably not.

You’d think that this would be a clear-cut cause of action, as the legal folks would put it. But the clever folks at Monsanto hire the crop dusters as contractors, and they in turn use a corporate shell with no assets, so when something like this happens and a victim sues, they simply file bankruptcy and then form a new corporation.”

http://www.organicconsumers.org/articles/article_18638.cfm

From the horses mouth, so to speak:

The President Exhibits Crazy
Speech Patterns
By Cindy Sheehan
8-18-9

As I listened to clips of Obama’s speech to the VFW on August 17th, 2009, I was wondering if his speechwriters were on vacation and they just recycled an old Bush/ Cheney/ Rumsfeld/ Rice speech.

While the so-called left is focused on the health care debacle and is allowing the so-called right to define the debate when it should be: Medicare for all, and all for Medicare; Obama and his neocon foreign policy team are preparing for a decades long, bloody foray in Af-Pak.

As Yael T. Abouhalkah, an editorial writer for the Kansas City Star, put it:

President Barack Obama did his best imitation of former President George Bush Monday at the VFW national convention in Phoenix.

Obama sounded downright hawkish — and, yes, presidential — when he addressed the issue of terrorism in front of the veteran-laden crowd. Dick Cheney could not have said it better.

This is one of the reasons I am leading protests next week on Martha’s Vineyard where President Obama will be vacationing. The anti-war movement cannot allow itself to be co-opted by the Democratic Party any longer.

We cannot allow the War Party and other elites to define the terms of the War Debate.

Obama actually had this to say in his speech in front of the Veterans of Foreign Wars (VFW):

We must never forget. This is not a war of choice. This is a war of necessity. Those who attacked America on 9/11 are plotting to do so again. If left unchecked, the Taliban insurgency will mean an even larger safe haven from which al Qaeda would plot to kill more Americans. So this is not only a war worth fighting. This is fundamental to the defense of our people.

Wal-Mart to offer “Hard Candy” to woo high-end shoppers…

NEW YORK/SAN FRANCISCO (Reuters) - Wal-Mart Stores Inc is rolling out a new line of cosmetics by Hard Candy, hoping to dazzle shoppers with glitter eye shadow and volumizing mascara by a brand that is sold at more upscale retailers, like Sephora.

At a launch event held on Tuesday in the penthouse suite of Manhattan’s trendy Bryant Park Hotel, Wal-Mart showcased the line, which will be introduced in 3,000 of its U.S. stores in September. It will be rolled out internationally next spring.

The new line is being made specifically for Wal-Mart.

The cosmetics will range in price from $5 to $10, or $6.40 on average, and are designed to appeal to 18- to 35-year-old women who are looking to have fun with their makeup.

“The more bells and whistles, the more excited our customer will be,” said Carmen Bauza, vice president of beauty for Wal-Mart.

APPEALING TO HIGHER INCOME SHOPPERS

Wal-Mart has said it is attracting higher-income shoppers to its stores as recession pressures household budgets and consumers adopt a frugal mind-set.

But investors have questioned its ability to keep those shoppers once the economy improves and customers have more money to spend. Wal-Mart has been adamant that it will retain those new shoppers and plans to do so by introducing new product lines, like Hard Candy.

“New, higher spenders have found Wal-Mart,” Bauza said.

Many, many thanks to Professor Rogoff for weighing in on the critical need for banking regulation. My fear is that the opportunity will (again) pass by without meaningful reform, thanks to the stellar rescue job executed by the Fed.

Financial Times
Why we need to regulate the banks sooner, not later
By Kenneth Rogoff
Published: August 18 2009 20:11 | Last updated: August 18 2009 23:12

…it is dangerous to point to the nascent restoration of profits in the financial sector as clear evidence of a corresponding benefit to the economy. There is an element of arbitrage, as banks borrow at low rates against the implicit guarantee of a government bail-out in the event of a crisis. Do people really believe, as some argue, that moral hazard is a non-issue? Why should large systemically critical financial institutions be allowed to heavily leverage themselves with short-term borrowing? What would be lost if regulators placed stricter capital requirements to discourage arbitrage activities that excessively expose too-big-to-fail banks to systemic risk? Certainly economists have models of why it can be efficient for lenders to keep borrowers on a short leash. Yet these models do not explain why the leash has to be wrapped around borrowers’ necks three dozen times, as in the case of a highly leveraged bank.

The fact is that banks, especially large systemically important ones, are currently able to obtain cash at a near zero interest rate and engage in risky arbitrage activities, knowing that the invisible wallet of the taxpayer stands behind them. In essence, while authorities are saying that they intend to raise capital requirements on banks later, in the short run they are looking the other way while banks gamble under the umbrella of taxpayer guarantees.
…

Can’t find the original post, but to whomever submitted the link to the hammer.ucla.edu lecture by William K. Black …..Thanks! It was long, but worth the watch.

Unemployment Spike Compounds Foreclosure Crisis

In the first quarter, most foreclosures came from prime, not subprime, loans as more unemployed people got caught in foreclosures, economists say.

By Renae Merle
Washington Post Staff Writer
Tuesday, August 18, 2009

The country’s growing unemployment is overtaking subprime mortgages as the main driver of foreclosures, according to bankers and economists, threatening to send even higher the number of borrowers who will lose their homes and making the foreclosure crisis far more complicated to unwind.

Economists estimate that 1.8 million borrowers will lose their homes this year, up from 1.4 million last year, according to Moody’s Economy.com. And the government, which has already committed billions of dollars to foreclosure-prevention efforts, has found it far more difficult to help people who have lost their paychecks than those whose mortgage payments became unaffordable because of an interest-rate increase.

“It’s a much harder nut to crack, unemployment,” said Mark A. Calabria, director of financial regulation studies at the Cato Institute. “It’s much easier to bash lenders than to create jobs.”
…

Financial Times
HP profit plunge dashes hopes of tech recovery
By Joseph Menn in San Francisco
Published: August 18 2009 23:06 | Last updated: August 19 2009 00:37

An expected recovery in technology markets that could add to early indications that the world is heading out of recession has yet to take hold, according to figures released on Tuesday by Hewlett-Packard .

The group damped enthusiasm in the industry, announcing a 19 per cent drop in profit amid continued weakness in the European economy and a reluctance among corporate buyers to upgrade.
…

* The Wall Street Journal
* AUGUST 19, 2009

Reluctant Shoppers Hold Back Recovery

By ANN ZIMMERMAN and SARA MURRAY

Major retailers reported that American consumers are continuing to hunker down, casting a cloud over the durability of the U.S. recovery and underscoring the importance of overseas demand in restoring the world economy to health.

Retailers across the spectrum provided foreboding reports. Discounter Target Corp. reported that sales at stores open at least a year were down 6.2% from a year earlier in the quarter ended Aug. 1, while luxury purveyor Saks Inc. reported a 15.5% drop in same-store sales over the past quarter as shoppers stuck to buying basics. Building-supply chain Home Depot Inc. saw total sales drop 9.1% in the quarter ending Aug. 2, and it reaffirmed expectations of a 9% sales drop this year.

Retail executives said they don’t expect conditions to improve until next spring. Some stores are girding for slow back-to-school and Christmas seasons by cutting inventories.
…

Fooled by randomness, not to mention hubris?

* WALL STREET JOURNAL
* COMMON SENSE
* AUGUST 18, 2009, 10:34 P.M. ET

Ivy League Schools Learn a Lesson in Liquidity

By JAMES B. STEWART

Just a year ago, in the midst of the subprime meltdown, many of the nation’s top universities and colleges were reporting significant gains. This year, the University of Pennsylvania is being hailed for Ivy League-leading results—with a decline of 15.7% for its fiscal year ended in June.

Results from other schools are still trickling in, but Harvard University has said it is expecting to report a drop of 30%, and Yale University about 25%. Considering the size of these endowments, these are staggering losses in absolute terms—many billions in the case of both Harvard and Yale.

Students soon will be heading back to larger classes, curtailed extracurricular activities and cheaper dining-hall fare. But the results are also of more than academic interest to investors like me, who have to some degree modeled their portfolios on the diversified asset-allocation model pioneered by Yale’s chief investment officer, David Swensen. What I refer to as the Ivy League approach for individuals calls for diversification along similar lines as the large university endowments—equities (domestic and foreign), fixed income, and real assets (which includes commodities and real estate), but with a much higher allocation to so-called nontraditional asset categories: emerging-market equities and debt, energy and commodities. Yale allocated just 10% to U.S. equities and 4% to fixed income, with 15% in foreign equities and 29% in so-called real assets as of June 30, 2008.

The major difference is that most individual investors didn’t qualify or otherwise couldn’t invest in the hedge funds and private equity and venture-capital partnerships that make up a large part of university endowments. At Yale, 25% of the endowment was in what the university calls “absolute return,” mostly hedge funds, and 20% was in private equity.

The irony is that turned out to be a huge advantage for individual investors this past year, when, in the midst of unprecedented market turmoil, many endowment managers learned the true meaning of “illiquid.” The exits for most private equity and venture-capital funds slammed shut. Existing positions yielded no cash flow even as investment partnerships made new demands for funding. Many investors were forced to sell their liquid investments into weak markets to fund cash needs and to meet prior commitments to investment funds. Asset allocations went wildly out of balance, overweighted to illiquid partnerships as the value of equities plunged. It’s a wonder that last year’s results weren’t even worse.

Liquidity turned out to be the Achilles’ heel of the Ivy League model. But what about its core premise—diversification? True, nearly every asset category declined at some point in 2008, even those that were supposed to be uncorrelated, like equities and high-quality corporate bonds.
…

If real estate transaction data were more easily accessible, appraisal could be a cake walk.

* The Wall Street Journal
* AUGUST 18, 2009, 10:41 A.M. ET

Reappraising Home Appraisers

By JAMES R. HAGERTY

After being blamed for helping to inflate home values during the housing boom, the appraisal business is again coming under fire.

Squeezed by a drop in fees, some appraisers are compensating by driving long distances to handle more assignments. Their wanderings are raising questions about whether they know enough about the neighborhoods to accurately assess the value of homes—which has implications for both home buyers and owners.

Bob Blake, a flight-test engineer who lives in Palm Beach Gardens, Fla., was shocked when an appraiser who traveled 44 miles from Port St. Lucie, Fla., valued his home at $228,000 in late May. Mr. Blake’s mortgage broker, Skip McDonough, protested to the appraisal-management company, Nations Valuation Services Inc., that the appraiser had failed to look at comparable homes. Eventually, Nations sent another appraiser, who valued the home at $295,000. The dispute delayed Mr. Blake’s refinancing by more than six weeks.

A spokesman for Nations Valuation declined to discuss the details of the appraisals but said, “We feel we handled it properly.”
…