The Housing Bubble

The city of Manassas Park in Virginia may not be able to meet next month’s payroll or pay creditors due to lack of tax revenue and missing budget projections.

Toll’s Loss Widens as Recession Weakens Luxury Demand (Update1)

By Kathleen M. Howley and Peter Woodifield

Aug. 27 (Bloomberg) — Toll Brothers Inc., the largest U.S. builder of luxury homes, reported a wider loss for the third quarter as the recession weighed on sales. The company said it has begun raising prices as the market starts to recover.

…A recovery may be getting under way in the housing market after a slump that started in 2006. Prices rose in 18 of 20 U.S. cities in June, according to the S&P/Case-Schiller home-price index. The cancellation rate for Toll’s homes in the quarter fell to the lowest since the recession began.

“Declining cancellations and more solid demand indicate that the housing market is stabilizing,” Chief Executive Officer Robert Toll said in the statement. “We are reducing incentives and raising prices in selected communities.”

…“We still haven’t made a significant dent in stopping the tidal wave of foreclosures,” Nicolas Retsinas, director of housing studies at Harvard University in Cambridge, Massachusetts, said before the results were released.

————–

Tool Brothers reports a loss, and then responds by raising prices in select communities! If high price is good, higher price must be better, because it’s more “exclusive!” Problem is, that’s the attitude of only the truly rich.

However, I suspect that Tool Bothers primary customers in the past 10 years were the HELOC fakey rich, the ones who need the incentives, the ones who still have to look at the price. (The real rich would turn up their noses at a Tool Brothers McStucco, and rightly so.) Tool is freezing out its fakey rich customer base.

On a side note, there’s that saying that “Toll Brothers homes. They look good for five years, then they fall apart.” Lots of those McMansions were built 2003-2004. They should be tottering right about now. Are they any reports of Toll Brothers McMansions falling apart yet?

FDIC figures it will need $70B to cover bank failures through 2013. Only $13B in FDIC coffers right now. The choices (a) higher premiums, shrinking current bank profits or (b) borrow from Treasury (as if the Treasury had anything to lend, really).

Ah, the intricacies of a fiat currency…

Chuck Butler, the expert currency trader at EverBank. is just back to his digs in St. Louis from a meeting on the West Coast. “I heard a lot of people talking about the rumor/conspiracy story that there will be a bank holiday at the end of the month (this weekend) and the Gov’t will announce major changes to the currency… Now, before anyone begins to believe that I am on board with that rumor / conspiracy story, STOP! I am NOT! I’ve read all the theories, and I’ve heard all the information regarding this, but just do not understand why this would be done… So… I just wanted to throw it out there, and let you all know where I stand on this…”

Why would the banks would close? The idea of switching into a new irredeemable currency from the current IOU-nothings that circulate as money just doesn’t make sense. There’s no way the Bureau of Engraving and Printing could have been sending out skid-loads of new currency for weeks without some news of it leaking.

What we’d really like to hear is news of a bill in Congress that would order a return to a redeemable currency. Merely following the mandate of the Constitution would get the Ship of State off the shoals and sailing free once more in the open waters.

“The average post on Ben’s once-great blog: Ron Paul. Ron Paul. Ron Paul. Black helicopters. Ron Paul. Ron Paul. Got popcorn? Ron Paul. Ron Paul. Joshua tree. Ron Paul. Ron Paul.”

Funny! From Utube comments:

http://www.youtube.com/watch?v=4lIg3KoAIJ0

You knew this was coming…

Federal Reserve Seeks Delay in Disclosure of Emergency Lending.

Aug. 27 (Bloomberg) — The Federal Reserve asked a judge yesterday to delay enforcement of her decision requiring the central bank to identify companies in its emergency lending programs.

Chief U.S. District Judge Loretta Preska in Manhattan said on Aug. 24 that the Fed had until Aug. 31 to disclose daily reports on borrowing by banks and other financial institutions. The central bank wants Preska to stay her order, made in a Freedom of Information Act lawsuit, until the U.S. Court of Appeals in New York can act on an appeal that the Fed said it intends to file.

The Fed and U.S. banks would suffer irreparable harm if details of the loan programs were made public, according to the central bank’s senior counsel, Yvonne Mizusawa.

The Clearing House Association LLC, an industry-owned group in New York that processes payments between banks, filed a declaration that accompanied the request for a stay.

“There are numerous examples of financially sound institutions collapsing or suffering further financial deterioration from the loss of public confidence,” Norman Nelson, vice president and general counsel for the group, said in the document.

Preska’s Aug. 24 ruling against the central bank rejected the Fed’s argument that the records shouldn’t be disclosed because they are trade secrets and would scare customers into pulling their deposits and exacerbating a run on the banks.

“America is not doomed,” says Peter Schiff, “but the fellows in Washington are pushing for that outcome. It seems that all the characters that encouraged this financial crisis are being rewarded, and Ben Bernanke’s re-nomination is no exception to this rule.”

Schiff believes Bernanke will try to keep the Fed’s juggling act going while the nation really needs a stern taskmaster like Paul Volcker.

Fed chairman victim of identity fraud ring

Wed Aug 26, 7:24 pm ET
WASHINGTON (AFP) – Federal Reserve Board chairman Ben Bernanke was one of hundreds of victims of an identity fraud ring that stole over 2.1 million dollars from individuals and financial institutions, Newsweek magazine reported on Wednesday. The magazine, citing court documents, said the central bank chief became entangled in the scam after a thief stole his wife’s purse in August of last year and began cashing checks on the family’s bank account. The purse-snatcher was working for a crime ring that federal agents and police in several US states had been investigating for months, Newsweek said, adding that Bernanke’s wife, Anna, was not specifically targeted. It said the theft of the Bernanke checkbook became part of a wide-ranging identity-theft investigation by the US Secret Service and US Postal Inspection Service which had been previously underway. Newsweek said the probe culminated in a series of arrests, criminal complaints, and indictments brought by federal prosecutors in Alexandria, Virginia. One of the group’s ringleaders, Clyde Austin Gray, known as “Big Head,” pleaded guilty to conspiracy to commit bank fraud last month, Newsweek said. Gray employed an army of pickpockets, mail thieves, and office workers to swipe checks, credit cards, military IDs, and other personal records, it said, citing his plea agreement and other court records filed in his case. Bernanke, in a statement to Newsweek, said “identity theft is a serious crime that affects millions of Americans each year. “Our family was but one of 500 separate instances traced to one crime ring,” he said. “I am grateful for the law enforcement officers who patiently and diligently work to solve and prevent these financial crimes.”

What’s going to be the true effect when all the baby boomers start retiring? Don’t they have to start mandatory withdrawals from their 401ks at a certain age? What impact will that have? How about the rising unemployment rates? I can’t understand the bevy of positive news out of the mass media?

Idea for Ben:

Ben… can you create a “BEST OF” quotes from vintage 2006 Blogs… where realtors, FBs & flippers were all defending the “crazy perception” that RE prices will fall in the future?

Me thinks it would show just how delusional the crack-smoking general public was… & still is, to some point.

I never get tired of this discussion between Peter Schiff & Art Laffer back in 8/2006:

http://www.youtube.com/watch?v=IU6PamCQ6zw

Here’s some early morning spin to go with your coffee.

GDP declines 1 percent in 2Q, better than expected

WASHINGTON (AP) — The economy shrank at an annual rate of 1 percent in the spring, a better-than-expected showing and more evidence that the recession is drawing to a close.

I’ve noticed lately that Craigslist has been much less likely lately to admit that they have an REO and you can hardly ever find an add that actually shows you a price on listings without giving personal data. It its apparent that we could have serious price lowering in the coming months without that becoming readily apparent to the general population until significantly later. This dead cat is coming back down after a rancid and much ballyhood rise.

Ben: Don’t you think the plastic combination lockbox will be an iconic symbol for this era much like a rubiks-cube is for the 80’s or a tie-dyed shirt for the 70’s?

How the hell will we pay for it all?
by Martin Hutchinson August 24, 2009 Prudent Bear

As the world awaits with bated breath the revised Congressional Budget Office projections for the federal budget deficit in 2009, 2010 and beyond, one thing must remain perfectly clear. There is no way that the capital markets will put up with sustained US budget deficits over 10% of Gross Domestic Product. Since the current political class is incapable of cutting spending (indeed it appears to want to spend still more, in yet another “stimulus plan”) taxes will go up, no question. The interesting question is: which?

I wrote last week about one tax that could usefully be imposed which would actually do some economic good: a Tobin tax, by which transactions in stocks, bonds, commodities and foreign exchange would be subject to a very small transactions tax on each deal carried out. The purpose of this would be to limit “high velocity trading,” computerized trading with millisecond lead-times by which Wall Street sucks value out of the economy while destabilizing prices and making markets more dangerous and unstable for long-term investors. The yield of such a tax would be only a few billion, but every little helps, and it would assist in re-diverting economic activity from Wall Street rent-seeking into something useful.

If I believed in global warming, I would regard a carbon tax as another such economically beneficial impost. By taxing carbon emissions, it would divert energy usage into less carbon-dependent forms and encourage conservation, therefore preventing the dangerous long-term warming of the planet. The problem is, the evidence does not appear to me to justify belief in global warming; certainly the effect is dwarfed by decades-long natural fluctuations, which have caused global temperatures in the last few years to be significantly below 1998’s peak.

Kearney Construction files bankruptcy.
Tampa Bay Business Journal

Kearney Construction Co. LLC, one of the oldest and largest site developers in the Tampa Bay area, is seeking to reorganize under Chapter 11 of the U.S. Bankruptcy Code.

The company, founded in 1956, estimated its liabilities and assets at $10 million to $50 million in its bankruptcy petition filed Wednesday.

Kearney, which reported 2007 revenue of $105 million, has done site development on many largest commercial projects in the region, including International Plaza at Bay Street and Citrus Park Mall. It was working on Cypress Creek Town Center in Wesley Chapel until last year when the U.S. Army Corps suspended the developer’s wetlands permit for polluting Cypress Creek with stormwater runoff.

Kearney’s largest unsecured creditor is Ferguson Waterworks, which is owed $1.9 million, court records state. Its next two largest unsecured creditors are Middlesex Asphalt, owed $1.35 million, and Ajax Paving, $812,081.

The company and its affiliates, including AVT Equipment LLC and Kearney Construction Company Inc., filed bankruptcy petitions on Wednesday in U.S. Bankruptcy Court, Middle District of Florida.

In June, two other affiliates, Florida Equipment Co. and Florida Trucking Co., filed for Chapter 11 bankruptcy protection.

Kearney’s lawyer, Stephen Leslie of Stichter Reidel Blain & Prosser, has filed an emergency motion asking the court to consolidate the cases.

Really? This is something new? I’ve listened to people bitch about their jobs all of my adult life. Hey you can always quite and get on the dole.

Economy leaves some U.S. workers stuck in bad jobs.

NEW YORK (Reuters) - With the U.S. economy mired in recession, workers are finding themselves stuck in bad jobs with such annoyances as managers who berate employees and bosses who hold meetings in bed.

Unable to make a move when jobs are scarce and some 14.5 million workers are unemployed, many employees feel trapped and are seeking ways to cope, experts say.

“They can’t move,” said Kathi Elster, co-author of “Working for You Isn’t Working for Me,” due out next month.

“They want to leave their jobs because they can’t stand somebody in the office or the politics of the company or they’re overworked or underworked or they don’t like the culture of the company,” she said.

Not only is the economy keeping people from changing jobs, but it’s likely to mean fewer employees doing more work and bosses under pressure from above, the experts say.

“It’s a perfect storm,” said Mitchell Kusy, co-author of “Toxic Workplace.” In his research of 400 business leaders, 64 percent were currently working with a “toxic personality” and 94 percent had done so at some point in their career.

Many workers would change jobs if they could, according to a survey this week that said many U.S. workers plan a switch when the economy improves. It said 18 percent plan to change employers, 14 percent plan to change careers, 13 percent plan to change industries and 18 percent plan to work fewer hours.

“The unemployed people we know who really can’t find jobs are actually happier than the people that are employed because it’s so difficult right now,” said Elster.

‘EMOTIONAL TOIL’

Unhappy workers can be costly, said Kusy. They are less productive, show less commitment to the organization and volunteer for less work, he said.

“Not only is there emotional toil, there’s also this financial burden that occurs in the organization,” he said.

Among some vivid cases, one New York worker described a boss who, while not sick, nonetheless holds business meetings in bed, with employees gathered in his bedroom.

“Right now I’m looking for a new job, the market be damned,” the worker said, not wanting to be identified.

Just for kicks, figured I’d throw out some HB historical discussion. The Toll posts above got me thinking about this.

2005 was very much the pivotal year for the housing bubble, it seems to me.

Up until 2005 - there had definitely been rumblings of a bubble - obvious to some, not so much to others. Regardless though, I’m not aware of any actual signs of the bubble coming to an end before 2005. However everything changed starting that year.

Up until then:
- Homebuilders were building at an ever-faster pace, and were reaping ever-bigger profits.
- As a result, homebuilder stocks were going through the roof, with no end in sight.
- For-sale inventory was incredibly low.
- Prices of course were skyrocketing, with no end in sight.
- Sales prices as a percentage of asking price was extraordinarily high - in many places 100% or more as an *average*.

The first indicators I see of trouble came in the spring of 2005. In a couple of areas where I track data (CA, DC, FL) for-sale inventory starting getting quite high vs. the year before; along about April and May. Apparently enough people at least had an inkling of the bubble, and wanted to get out while the getting was good. One might think that this was due to slower sales - but sales themselves didn’t really slow down until that summer - there seems to be a slight lag there.

By summer a significant portion of people started having “uh oh” moments. That’s right when the homebuilders’ stocks peaked - in about July of 2005. Some builders’ stocks (like TOL) fell a lot then in 2005, though some (like PHM) didn’t fall that much at first, not until spring of 2006.

Through the rest of 2005 - sale price percentage plummeted - e.g. near where I live it went from 100% in May to 96% that winter (before finally bottoming at 91% the next year or two).

Prices in early 2005 continue through the roof, but in most bubbly areas that stopped after summer. In the previous 2-3 years each fall prices still rose (contrary to normal years where prices usually are flat to slightly down in the fall), however in 2005 prices stayed flat in the fall. Then the rest was history - spring of 2006 didn’t see any of the usual price bounce at all, and fall of 2006 prices started plummeting in the bubbly areas.

And of course the key pivotal moment - Ben’s HBB started I believe in December 2005 (though didn’t really get going until early 2006).

“In the Tank Forever”: U.S. Consumers, Retailers in a “Death Spiral,” Davidowitz Says
Posted Aug 27, 2009 by Peter Gorenstein T. Ticker

Retail maven Howard Davidowitz paid another visit to Tech Ticker this week. And despite signs of improvement in consumer confidence and retail stocks rising, Davidowitz is steadfast in his belief the consumer is dead.

Rather than summarize, let me just highlight some of his best one-liners:
On retail:

* “The retail business is terrible… It’s almost all negative.”
* “We’re going to close hundreds of thousands of stores.”

On the consumer:

* “They’re still over leveraged, they’re losing jobs, their credit has been cut back.”

On America:

* “We are in the tank forever. As a country we are out of control, we’re in a death spiral.”

On the stock market:

* “We’re in terrible shape. That’s what the fundamentals tell me. I can’t explain the stock market.”

But it’s not all gloom and doom, believe it or not. Davidowitz, who runs a retail consulting firm Davidowitz and Associates, thinks certain discount retailers, grocers, drug store chains and a select few department stores can survive and prosper in the future.

Most notably he likes the “extreme discounters” like Family Dollar, Dollar Tree (which was up almost 5% Tuesday after the company raised its outlook) and 99 Cents Only Stores. And, in the department store sector, he says, Kohl’s will “be the only winner” because of their cost controls.

Just thought I’d post this - my best friend, who worked at a nationwide resturant supply company with HQ in Chicago was one of 50 laid off yesterday, out of 500 at HQ.

I feel really bad for him - two year old and a four week old at home, always a good guy.

He has the savings having seen it happen to others before, and his wife has a job so the new plan is she’ll stick with going back to work in a few weeks and he’s going to stay home and take care of the kids instead of having two kids in daycare. But some now some child care center just had two kids get pulled out. So that has a ripple effect on someone else’s job too.

Deflationary? You bet.

An Honest Conversation with the Fed

Fed: The economy is in the early stages of a recovery
Joe Schmoe: That’s great. Then we can stop Cash for Clunkers
Fed: yeees. Perhaps. Never say never.
Joe Schmoe: Oh. Did it not work?
Fed: It worked spectacularly, better than we could have dreamed. In fact, mission was accomplished way ahead of schedule.
Joe Schmoe: Too bad housing is still down
Fed: Housing picked up five months ago and will no longer be a drag on economic growth
Joe Schmoe: Five months? Why is Dough for Dumps still going on then?
Fed: We said until November. We cannot go back on our word.
Joe Schmoe: So the program will be stopped in November?
Fed: Err.. maybe. Sorta. Or we might extend it and expand it to $15000.
Joe Schmoe: WHAT? I thought you said housing had recovered?
Fed: We never said that. It’s “picked up”, but only enough so that people should be optimistic and continue to buy.
Joe Schmoe: Where are we getting this money from? I thought we had record deficits?
Fed: Deficits don’t matter. Banks, REITS, etc have been able to raise a lot of capital. This shows that capitalism is strong and the markets are strong, the dollar is strong and our fundamentals are fundamentally sound. So foreigners are still buying our debt.
Joe Schmoe: How did the markets get so strong?
Fed: Markets are forward-looking. They clearly see growth. The high P/E levels indicate tremendous earnings six months from now.
Joe Schmoe: Yes, 50% off the lows is indeed tremendous.
Fed: All signs point to recovery. Job loss slowing, factory orders up, housing stabilizing, and the economy picking up.
Joe Schmoe: Sigh. I guess there’ll be interest rate hikes soon then.
Fed: No. Not really. It is too soon to consider hiking interest rates.
Joe Schmoe: You’re not even CONSIDERING it? How about 3 months from now?
Fed: That’s way too early
Joe Schmoe: What about inflation?
Fed: There’s no inflation on the horizon.
Joe Schmoe: What about all the money we printed?
Fed: We lost more money than that in toxic asset losses. So the net is negative, actually. We might need to cut rates some more in fact.
Joe Schmoe: “We” lost money in toxic assets?
Fed: Well, the financial institutions did. But it might as well have been you and me. If they fail, we fail.
Joe Schmoe: So did it work?
Fed: Did what work?
Joe Schmoe: Throwing money at the people who lost their shirts? The stimulus?
Fed: Oh yes. Banks are hugely profitable now. Like I said, they are independently raising money now by selling stock. No hand-holding there. Liquidity is good. Credit markets have stabilized. We averted armageddon. I’d say the stimulus worked, wouldn’t you?
Joe Schmoe: Didn’t you pooh-pooh armageddon just a couple of years ago when some people pointed out the possibility?
Fed: Yes but it wasn’t a possibility then. It was only a possibility when we had to pass the stimulus package. If we hadn’t passed it then there would have definitely been armageddon. We explained how it would happen step by step in Congress so it’s not like we were fearmongering or anything. Only the traitorous bears do that. By passing the package (just the vote; the money didn’t start to be spent until weeks later and in fact is still not all used up) we averted the armageddon that would have happened in seven days.
Joe Schmoe: So you’re not giving the banks free money anymore?
Fed: Well they still have the 0% discount window.
Joe Schmoe: Why is that? I thought they didn’t need any more hand-holding?
Fed: We need to continue to encourage them to lend. We can’t suddenly stop these things. Markets can lose confidence if things are not gradual.
Joe Schmoe: Yet it was necessary to pass a $787 billion stimulus practically overnight?
Fed: Don’t be silly. There is no reason to delay anything that benefits the consumer.
Joe Schmoe: Do you realize the banks are fleecing the consumer by jacking up all their fees while resuming their ginormous bonuses?
Fed: That’s capitalism for you. They need to retain their top people.
Joe Schmoe: What do they actually produce?
Fed: Nothing. But they enable the production of everything. Without their money, you would not be able to buy a house, a car, send your kid to college, etc.
Joe Schmoe: My money, you mean. How about six months?
Fed: What?
Joe Schmoe: Six months until rate hikes? Consistent with the forward-looking period of the markets?
Fed: No, not six months, not nine months, not for the foreseeable future. In fact, we don’t even talk about it at our meetings.
Joe Schmoe: The recovery looks like a mirage to me. It doesn’t seem like we’ll ever get there.
Fed: The recession is over. Consumer confidence is up. Ben Bernanke has just navigated this ship out of the worst economic situation since the GD. We should be proud and grateful!

September 26, 2006
You can’t go anywhere without hearing people talk about “the real estate bubble.” Such talk drives me to distraction, and I’ll tell you why. It’s because there is no real estate bubble. Bubbles are for bathtubs.

~Kendra Todd

my favorite bubble bimbo quote.

This is truly great news for the future of America. Our nation cannot withstand the size of the gap between rich and poor which was building until the onset of this housing bust. Now if just a few more Wall Street bankers could fall from their privileged too-big-to-fail guaranteed positions, we could get back to work at rebuilding our economy.

Rise of the Super-Rich Hits a Sobering Wall
Chris Richards for The New York Times

John McAfee is auctioning off this property in New Mexico to pay bills. His worth has fallen to about $4 million from a peak of about $100 million.

By DAVID LEONHARDT and GERALDINE FABRIKANT
Published: August 20, 2009

The rich have been getting richer for so long that the trend has come to seem almost permanent.

For Decades, the Richest Pulled Away, but Since 2007, They Have Become Poorer

They began to pull away from everyone else in the 1970s. By 2006, income was more concentrated at the top than it had been since the late 1920s. The recent news about resurgent Wall Street pay has seemed to suggest that not even the Great Recession could reverse the rise in income inequality.

But economists say — and data is beginning to show — that a significant change may in fact be under way. The rich, as a group, are no longer getting richer. Over the last two years, they have become poorer. And many may not return to their old levels of wealth and income anytime soon.
…

Whad’ya know — stock market weakness is good for old Uncle Buck’s health!

Currencies

Aug 27, 2009, 11:18 a.m. EST
Dollar rises overall, dips vs yen on economic jitters

By William L. Watts & Deborah Levine, MarketWatch

NEW YORK (MarketWatch) — The U.S. dollar gained ground on Thursday, even as it fell back against the Japanese yen, as traders sought low-yielding currencies and scaled back holdings of assets perceived as carrying relatively high risk.

A warning by Chinese officials indicating they would attempt to curb capital spending demand triggered some safe-haven flows into the Japanese yen starting in Asian trading hours.

The dollar gained ground versus other currencies, namely the euro and British pound, after U.S. equities and crude prices fell despite data showing the U.S. economy was not weaker than previously reported in the second quarter, while jobless claims continued to decline.

The U.S. dollar traded at 93.67 Japanese yen, down from 94.22 yen in New York trading late Wednesday.

The dollar index, which tracks the greenback against a trade-weighted basket of six major currencies, turned up to 78.686, from 78.660 late Wednesday after falling below that level in earlier trading.
…

The depression is caused by debt and the government is creating more o f it instead of letting it decrease through people paying it off or walking away. If debt is the problem, the economy is not going to recover - ever. The Japanese have had this problem for 20 years.

The future is must more of the same. I don’t see the economy recovering until someone comes in and just says no more debt. Like that is going to happen.

Depressed in South Carolina

Insurers May Reap $375 Million as Customers Trade in ‘Clunkers’

Aug. 27 (Bloomberg) — Progressive Corp. and Berkshire Hathaway Inc.’s Geico Corp. are among insurers that may benefit from the U.S. “cash for clunkers” program as drivers pay higher premiums to protect new cars.

The government’s vehicle trade-in initiative could yield as much as $375 million in premiums, said Robert Hartwig, the chief economist of the New York-based Insurance Information Institute.

“When they buy that new vehicle, the insurance generally will cost more,” Hartwig said in an interview. “It’s a newer vehicle and people will normally take out full coverage of the car. Any auto insurer would stand to gain.”

A rebound in auto sales amid the clunkers program may bring relief to auto insurers facing pressure from rising medical costs, reduced consumer purchases and declines in the value of fixed-income holdings. Progressive last month reported its first quarterly gain in net income since 2006, and Geico’s profit fell 63 percent in the second quarter on an increase in claims.

Maybe equity investors are smarter than bullsh!t spreaders think?

MARKET SNAPSHOT
Not giving good news its due

U.S. equities investors have been displaying a perhaps troubling tendency to sell in the face of upbeat indicators and developments.

Where do bottomless insurance pools hide their money tree?

MarketWatch First Take

Aug 27, 2009, 12:05 p.m. EST
Four sources for the FDIC
Commentary: Ignore the depleted insurance reserves, banks are safe

‘Beer prices are going up’
http://tinyurl.com/mwkeor
Beer prices in the U.S. have been rising despite the recession. In July, the price of beer, ale and other malt beverages sold for consumption at home had risen 4.6% from July 2008, according to the Labor Department’s Consumer Price Index. The year before, prices rose 5.3%.

No! NO! NOoooOOOOOooooOOOOOOO!!!
Okay, NOW it’s gettin’ serious!

Ben,
I have a feeling you will find this hilarious!

http://www.youtube.com/watch?v=PwldcXUSHCQ&feature=related

For reference, new weekly claims above 400,000 are generally viewed as indicative of recessionary conditions.

Economic Report

Aug 27, 2009, 11:25 a.m. EST
Jobless claims fall for first time in 3 weeks
Some concern that people may be exhausting benefits

By Greg Robb, MarketWatch

WASHINGTON (MarketWatch) — First-time filings for state unemployment benefits fell by 10,000 to a seasonally adjusted 570,000 last week, marking the first drop in initial claims in three weeks.

Both initial claims and continuing claims ticked down in the latest readings, the Labor Department reported Thursday.

Economists surveyed by MarketWatch were expecting initial claims to drop back to 565,000. A year ago, initial claims were at 433,000.

Claims had risen by 26,000 over the past two weeks. Read full report.

Although claims have fallen below the 600,000 level that prevailed earlier this year, economists are disappointed with the pace of improvement in the data.

Many analysts, including top Federal Reserve officials, are worried the recovery will be “jobless” as businesses hold off hiring until the economic expansion is assured.

“It seems that since falling below the 600,000 mark in early July, when the data were volatile due to auto-related distortions, the underlying pace of layoffs has settled around 560,000 to 570,000. The good news is that this confirms the slowdown in layoffs, but the bad news is that the pace of layoffs is still extremely high,” said Omair Sharif, economist at Royal Bank of Scotland.
…

Aug 26, 2009, 11:19 p.m. EST
China wealth-fund chief tips buying spree

By MarketWatch

LOS ANGELES (MarketWatch) — The president of China’s well-financed sovereign wealth fund said his group plans a massive, ten-fold expansion of its overseas investment this year, according to reported comments from an interview Thursday.

China Investment Corp. President Gao Xiqing said the fund’s foreign holdings will go from $4.8 billion last year to “several tens of billion dollars,” Reuters reported, citing Gao’s interview with Japan’s Asahi newspaper.

Gao was quoted as saying CIC held about 90% of its management funds in cash or similarly liquid forms at the end of last year, but that this will change now that financial markets are no longer in a state of crisis.

Among possible new investments under consideration are Japanese companies and property, given prospects for a recovery in that country’s economy, Gao said.

Reuters also cited unnamed sources from an earlier report as saying CIC plans to invest up to $2 billion in U.S. mortgages.
…
Come on, ahansen, ‘fess up

There has never been a better time for taxes to go up in Caleeforneeaah.

State taxes going up because of deflation
Kathleen Pender

Thursday, August 27, 2009

California taxpayers just got hit with another increase in state income taxes, and it didn’t require a vote from a single legislator.

The culprit: deflation.

In 1982, California voters approved a proposition that indexed state income tax rates to inflation. So each year, the California Franchise Tax Board adjusts tax brackets and certain deductions and credits for inflation. The annual adjustment is tied to the California Consumer Price Index, and it usually goes up. Indexing is designed to prevent people from paying higher taxes as their incomes rise proportionately with inflation. But when inflation turns negative, indexing works in reverse. Tax brackets and credits are adjusted downward. If your income remains the same, the result is a tax increase.

The Franchise Tax Board has just released adjustments for 2009, and for the first time since 1983 they are down, reflecting a 1.5 percent drop in the California Consumer Price Index between June 2008 and June 2009.

As a result, everyone’s state taxes will go up by a modest amount this year. The amount will vary depending on taxpayers’ income, whether they itemize deductions and how many personal exemptions and other credits they claim.
…

Big difference between 1982 and today: Volcker had already done the hard work of wringing the excesses out of the economy. Propping up prices on a permanently low plateau simply does not have the same effect as sending the economy through a period of excruciatingly high interest rates. But maybe it is different this time, and I am missing it?

Obama Channeling Reagan Needs 5 Quarters of 7% GDP Growth Surge
By Michael McKee

Aug. 27 (Bloomberg) — President Barack Obama, like Ronald Reagan, has decided to keep a Federal Reserve chairman after what at the time was the longest recession since the 1930s. Unlike Reagan, Obama probably won’t get a strong recovery, or the political boost that it brings.

Under Fed Chairman Paul Volcker, the economy grew at a more than 7 percent annual rate for five straight quarters following the 1981-1982 recession. Reagan, after reappointing Volcker in 1983 and declaring “it’s morning again in America,” won 49 of 50 states in the following year’s election.

Obama is putting his trust in Ben S. Bernanke ahead of time, nominating him to a second four-year term even though the recession isn’t officially over. Growth is forecast to average just 2.2 percent over the next year, according to a Bloomberg News survey of economists this month.

“It’s going to be much, much tougher to jump-start the economy now,” said Stephen Roach, chairman of Morgan Stanley Asia in Hong Kong, who in 1983 was in the first year of his career as a Wall Street economist. “It’s a totally different dynamic playing out today in our post-bubble, overly leveraged world.”
…

AIG lunacy

Posted by: Matthew Goldstein

American International Group is a $50 stock. Yeah. Sure. But that’s what the market says it is today so it must be.

Shares of AIG are soaring today in part because the insurer’s new CEO Robert Benmosche tells a Reuters reporter that he doesn’t intend to conduct a firesale of the company’s divisions. He also says he’s been seeking guidance from former AIG CEO Hank Greenberg–the former Wall Street titan who just doesn’t know when to go away.

This is a great scoop for my Reuters colleague Adam Tanner. But come on. In my book, a CEO who jets off for a vacation to the Adriatic coast to a massive villa just days after taking over AIG doesn’t have a lot of credibility. So nice of Benmosche to take time out from his Croatian siesta to field phone calls from a reporter and reportedly wine and dine Greenberg.

At middday the stock was up nearly $11. Nearly 92 million shares have been traded already–more than four times the normal trading volume.

And it’s nearly doubled since AIG conducted a 1 for 20 reverse stock split in July. Shares have risen 71% since Benmosche took over on Aug. 10. Over the past two weeks, it’s been quite common for more than 100 million shares to change hands each day.

But does that “news” coming out of AIG really justify an nearly 30% pop in the stock on higher than normal volume? (There is some speculation of Greenberg putting together a bid to buyout AIG, but it is too ludicrous to repeat.)

What’s going on with AIG is more than just short covering, or mere speculation. It was easier to speculate in AIG when it was down in single digits–not at these levels.

It seems AIG has become a big momentum play for daytraders, hedge funds and of course–high-frequency traders.

To be sure, the surge in AIG shares is great news for the federal government, which effectively owns the insurer that needed a mega emergency bailout last fall. But what’s going on in AIG shares is beyond the pale and really calls for some sort of investigation, in light of the federal government’s big hand in managing the company.

This surge in AIG is making a mockery of the federal government’s intervention in the insurer and makes it appear that Wall Street has learned nothing from last fall’s events.

What a great way to mark the upcoming anniversary of Lehman Brothers’ collapse.

It must be nice to be able to issue “revenue anticipation notes”.

California calls in it’s IOUs: http://tinyurl.com/l6u5mn

When I issue revenue anticipation notes the attorney general calls them hot checks.

Ha ha ha. In their desperate effort to couch all news in a positive light, the MSM are tying themselves into knots. Just heard the following on KGO newstalk radio news (in reference to the GDP contracting by less than “expected” this quarter):

“The economy’s growth slowed less than expected”

I read it back a few times and *still* don’t understand precisely what it means

who = whom

No Green Shoots per K.D.’s Macro Economics:

Unemployment Report 8/27 - Flat And Bad
Nothing to like here….

In the week ending Aug. 22, the advance figure for seasonally adjusted initial claims was 570,000, a decrease of 10,000 from the previous week’s revised figure of 580,000. The 4-week moving average was 566,250, a decrease of 4,750 from the previous week’s revised average of 571,000.

Yeah, ok - a quick look at the table shows the following:

There has been no meaningful change. Today’s number was 570k, last week 580k, August 8th 561k. Right up the middle. Oh, last year was 433k.

The insured total dropped to 6,133,000, a drop of 119,000. But it looks like (we don’t have current-week numbers) most of that “drop” was in fact people rolling off onto extended benefits, where they’re no longer in the headline number.

The bottom line remains that the employment situation remains extremely weak and shows no real sign of improvement. Yes, it is leveling off - but we’re more like flat on our back than anything else.

No consumer, no economic recovery. No jobs, no consumer.

Its pretty simple folks.

Is it good news from the banking sector that is driving the headline US stock market indexes skyward today?

Preparing for a major bank shakeout

Rising failures and a weak economic recovery could accelerate a decades-long trend towards fewer, bigger banks.
By Colin Barr, senior writer
August 27, 2009: 2:34 PM ET

NEW YORK (Fortune) — The problem bank list is just about the only part of the industry that’s growing right now.

The sector’s financial problems, outlined by regulators in excruciating detail on Thursday, could speed a shakeout that already has slashed banks’ ranks by almost half over two decades.

“We could end up with a couple thousand fewer banks within a few years,” said Terry Moore, managing director of consulting firm Accenture’s North American banking practice. “You could say we’re overbanked right now.”
…
I’d go so far as to say we are overbanked, overindebted, and undermonied.

America can compete

US Call-Center Jobs — That Pay $100K a Year

“BusinessWeek profiles a call centre company called iQor which has grown revenues 40% year-on-year by (shock) treating employees as critical assets. It’s done this not by nickel-and-diming, but by expanding its U.S. operations (13 centers across the US now), giving employees universal health insurance, and paying salaries and bonuses that are nearly 50% above industry norms. The article notes that outsourcing will continue and globalization will continue to change the world’s economic landscape. ‘But the US is hardly helpless. With smart processes and the proper incentives, U.S. companies can keep jobs here in America, and do so in a way that is actually better for the company and its employees.’ Now if only other companies get a clue as well.”

via slashdot

another highly-productive american company:

http://finance.yahoo.com/banking-budgeting/article/107615/meet-getco-high-frequency-trade-king.html

This represents the cutting edge of what we make here in America - which is nothing!

The Portrait Artist as a Not-So Young Gal:

Lender Sues Annie Leibovitz, Seeking Her Homes to Pay $24 Million Debt (NY Times)

IF money and fame are the yardsticks, Annie Leibovitz is one of the most successful photographers of all time. She has a seven-figure salary from Vanity Fair and commands tens of thousands of dollars a day from commercial clients like Louis Vuitton. Her latest book, “At Work,” made best-seller lists, and an exhibition of her classic images — Demi Moore naked and pregnant, Mikhail Baryshnikov on the beach — has been touring the world for over two years.

So as the news has spread in recent months that Ms. Leibovitz is facing extraordinary financial troubles, with the possibility of losing her Civil War-era town houses in Greenwich Village, a home in upstate New York and the rights to decades of her work, many have formulated the same questions: How is this possible? How could an artist of her standing be in such financial straits? If Annie Leibovitz can’t make it in New York, who can?

On July 29, Ms. Leibovitz was sued in State Supreme Court for nonpayment by a company that had lent her $24 million, and which demanded access to her homes so it could begin the process of selling them to satisfy her debt. Ms. Leibovitz had taken out the loan last year, pledging as collateral properties in Greenwich Village and in Rhinebeck, N.Y., her negatives and the rights to her photographs. The lender, Art Capital Group, claims Ms. Leibovitz is behind on hundreds of thousands of dollars in unpaid fees associated with the loans.

The photographer, 59, declined to comment. Friends and colleagues said that despite her many successes, Ms. Leibovitz has been shadowed by a long history of less than careful financial dealings. Public records show that in the last two years, Ms. Leibovitz has faced tax liens of $1.4 million and two lawsuits claiming that she has not paid more than $700,000 in bills for photography services.

Fat, Drunk and Stupid is No Way to Go Through Life
James Quinn Prudent Bear

Dean Wormer: “Did you boys see your grade point averages yet?”
Hoover: “They’re not posted yet, sir.”
Dean Wormer: “I’ve seen them. Mr. Kroger, two C’s, two D’s and an F - that’s a 1.2 grade average. Congratulations, Kroger, you’re at the top of the Delta pledge class.”
[Bluto gives Kroger a congratulatory nudge]
Dean Wormer: “Mr. Dorfman.”
Flounder: “Hellooooo.”
Dean Wormer: “0.2. Fat, drunk and stupid is no way to go through life, son. Mr. Hoover, president of Delta House - 1.6. Four C’s and an F. A fine example you set. Daniel Simpson Day has no grade point average. All courses incomplete. Mr. Blu- [looks up to see that Bluto has stuck pencils up his nose] Mr. Blutarsky. Zero POINT zero.”
─ Scene from Animal House (1978)

Wormer was correct. Fat, drunk and stupid is no way to go through life. An immeasurable swath of America has not heeded his advice. According to the Centers for Disease Control, 66% of adults over the age of 20 are overweight or obese. That is approximately 140 million adults. Somewhere between 15 and 20 million Americans can be classified as alcoholics.

There are 225 million people over 18, and 32 million of them do not have a high school degree. There are 32 million adults – 14% – who are illiterate (23% in California, 22% in New York, 20% in Florida, 17% in New Jersey). The United States’ spending per pupil in public schools at $9,266 is in the top 5 in the world. New York and New Jersey spend $14,000 per pupil and one-fifth of their adults are illiterate.

The American people’s ignorance and disinterest in the governance of this nation have allowed an oligopoly of politicians, bankers, and powerful corporations to seize control of the country and loot its riches for personal gain. By failing to educate themselves, millions of Americans have lost all of their power and are now dictated to by the few with knowledge. The elite who dictate the path of our country do not want the masses to become educated. Their power would be in jeopardy. The American public school system insures the retention of their power and wealth.

More Cash-4-Clunkers, please?

The silver lining: The stock market always goes up, especially on bad news about the pace of real economic activity, as the worse the real economy looks, the closer the economy must be to reaching a bottom.

Japanese exports continue to fall

(Cargo containers at port near Tokyo
Falling car sales were partly blamed for declining exports)

Japanese exports slid in July at a faster annual rate than June, raising fears the effects of global stimulus measures are starting to decline.

Exports from the world’s largest exporter were down 36.5% last month compared with July 2008.

Slower car sales to the US, Middle East and Russia were blamed for the decline, which followed June’s 35.7% fall.

Figures released last week showed that Japan’s economy grew between April and June, ending its year-long recession.

But economists said these latest export figures indicated that reports of a global recovery could have been premature.

“Falls in exports have been moderating in recent months on companies’ restocking efforts and government stimulus worldwide, but the July data indicate that the recovery momentum is losing steam,” said Seiji Shiraishi, chief economist at HSBC Securities.

“It is questionable whether exports will continue to recover once the stimulus effect runs out.”
…

EXCLUSIVE: AIG CEO defends holiday, slams “lynch mob” attacks
Thu Aug 27, 2009 2:31pm EDT
…
“We have the ability. I know that I am telling people we are allowed to,” he said. “What I don’t know is if people (employees) are willing to. A lot of them feel hurt, embarrassed, a lot of people have lived in fear because of what I call lynch mobs with pitchforks.”

Benmosche was referring to severe criticism of the bonuses paid to some AIG staff at the financial products unit at the center of its meltdown. The verbal assaults by politicians and in the media led to several demonstrations, including a bus tour of employee homes near the unit’s Wilton, Connecticut headquarters, and threats to others.

“People think it is funny but it is not when it is your children,” he continued, his voice rising in anger. “It is not when you come home and you find people in front of your home and you had to sneak your children out in the middle of the night so that they are not attacked in a country called America.”

“It was wrong. I think that when you do that, when you incite that kind of feeling in people, it makes it difficult to come to work the next day and say ‘I’m going to work hard.’”

“It was a horrible period of time and I am hopeful that it is over.”

A year from now, Benmosche said he hopes to wow people with AIG’s performance.

“I think we will be clear as to what the vision is, what the reality of that vision is. We’ll have a better sense of what our strategic companies will be worth, and what the marketplace will be worth, and people will say, wow, AIG is performing well,” he said.
…

I noticed long ago how popular garage sales are in “wealthy” California, but this is over the top:

Aug 27, 2009, 5:45 p.m. EST
California wants to turn junk, trunks into cash at garage sale
Schwarzenegger signs state’s old cars to lure buyers

By Brittany Levine, MarketWatch

SAN FRANCISCO (MarketWatch) - -The U.S. government paid for clunkers, but California wants it the other way around.

To reduce government waste and raise money, the state is selling thousands of items including old cars — some have Gov. Arnold Schwarzenegger’s signature on the visor–at what it’s calling the Great California Garage Sale. The sale is taking place at a Sacramento warehouse on Friday and Saturday, and on Ebay and Craigslist.

Last month, Schwarzenegger signed an executive order to reduce the state’s motor fleet by 15% following reports of waste and abuse as independent reviewers found state employees often took cars home. The executive order influenced a spring cleaning of sorts across state agencies, which added old laptops, coat racks and box cutters to the garage sale inventory.
…

Mexican unemployment at 6.2%?

Hell let’s move to Mexico! Illegally of course!

America’s Cheapest Homeownership Markets
When It’s Better to Buy than Rent

By Diana Holden

One of the biggest lessons of the recent housing collapse is that not everyone can afford to own a home. Too many people were suckered into mortgages with zero down-payments only to be hit later by usurious interest rates. But in some markets, homeownership has become surprisingly affordable—without having to resort to smoke-and-mirror mortgages. The reason is that in these cities the annual average cost to own a home has fallen to little more—and in some cases less—than the cost of renting. Where are these places? Read on to find out.
…

Land of the Rising Jobless?:

August 27, 2009, 8:15 pm EDT
TOKYO (AP) — Japan’s unemployment rose to an all-time high in July, and prices fell at a record pace, the government said Friday.

The jobless rate in the world’s No. 2 economy hit a seasonally adjusted 5.7 percent, the highest level in the post-World War II era and worsening from 5.4 percent in June, according to the Ministry of Internal Affairs and Communications. The previous record was 5.5 percent, last hit in April 2003.

The total number of jobless in July jumped 40.2 percent from a year earlier to 3.59 million. Those with employment fell 2.1 percent to 62.7 million.

The labor ministry also reported Friday that the ratio of job offers to job seekers in July fell to an all-time low of 0.42. That means there were 42 jobs available for every 100 job seekers.

The specter of deflation intensified amid the labor market worries.

Japan’s key consumer price index, which excludes volatile fresh food prices, tumbled a record 2.2 percent in July from a year earlier, the government said.

Lower prices may seem like a good thing, but deflation can hamper growth by depressing company profits and causing consumers to postpone purchases, leading to production and wage cuts. It can also increase debt burdens.

The nationwide core CPI, which excludes volatile fresh food prices, has dropped for five straight months. The figure marks steepest decline since the officials began compiling comparable data in 1971.

The core CPI for Tokyo retreated 1.9 percent in August, suggesting that prices nationwide are headed further south. Prices in the nation’s capital are considered a leading barometer of price trends across Japan.

Meanwhile, a separate government report showed that families spent less. Average household spending, a key barometer of individual consumption, in July declined 2 percent from a year earlier.

News from behind “The O.C” curtain:

‘Real housewife’ may be evicted from her home Thursday…for real this time:

August 26th, 2009, by KELLI HART, THE ORANGE COUNTY REGISTER:

“Though TMZ is reporting that “Real Housewife” Lynne Curtin and family have received an eviction notice and are supposed to be out Thursday, there were no signs of moving at her Laguna Beach house today.

“We were unable to confirm the eviction because a clerk at the Orange County Superior Court informed us that the documents are sealed, but court documents confirm that Curtin and her husband were evicted from their Capistrano Beach home in late May.”

According to court documents, Curtin and husband had a writ of possession, or five-day eviction notice, served to them from their landlord in late May for an unpaid amount of $13,480 in rent and damages in Dana Point. “Writ of possession” is fancy for, “if you don’t move out, we’ll send law enforcement to kick you out.”

From the “comments”: ( Hey Neil, this poster could use some of your FAMOUS popcorn & Ben’s favorite micro brew!)

Chefgal says:
August 27, 2009 at 10:22 am

It’s only a misfortune if they actually were living within their means and came upon hard times. Nope, this familiy and thousands others live a life they never could afford to begin with. They were living off an image. So yeah, I think it is hysterical that this ‘misfortune’ happened to them. Most people should be learning the lesson in their early 20s when they quickly learn that you can’t live outside your means. These are grown adults with adult children themselves who never learned how to be comfortable with who you are rather than what people think of you and trying to uphold an image you cannot afford.

If would only be a true misfortune if they were living modestly and simple while something tragic happened that caused them to by no real fault of their own be in this situation. That…didn’t happen. Therefore, I would love to bring beer and popcorn to their home and watch them move out with lots of other people such as myself that do live a simple modest life.

wheresthebeef says:
August 27, 2009 at 12:23 pm

I wonder who will rent to this family now after being evicted from 2 separate homes within a few months? My guess is no one.

All the negative feeling to these people are well deserved. OC as a whole is filled with people like this. During the boom years, they thought they literally ruled the world. Driving a leased 100k car, flashy wardrobes and working as RE agents or in the mortgage business (usually with high school diplomas), and thumbing their noses at the “other” people in the world…I personally knew of plenty of these types of people. It was all about image and they thought the party would never end. Oh, how times have changes…and I’m enjoying every minute.

JohnTheBaptist says:
August 27, 2009 at 10:39 am

Orange COunty. . . Where the faux rich and famous lease their lifestyle. Pretty soon, these wives will be for lease as well

TheAllKnowing says:
August 26, 2009 at 10:50 pm

“Oh, you could not write a better plotline that this, as it all comes crashing down around these horrible, fraudulent people. This is the funniest thing I’ve heard of all summer long!”

Yep, this whole situation seems like it was taken straight from the movie “Startup.com” - a great movie that takes place in the dot com boom days about a company that was going to make untold fortunes. It wa an interesting movie that was filmed in real time… so you got to see the company go from thinking they were going to rule the world to going to the end of the unemployment line.

I am late to the party as usual. Really bites - not a morning person, and lucky enough to still have a job that is much better than a McJobbe.