The Housing Bubble

First!

This has been discussed many times before. I spoke with a lowly real-a-tor several weeks ago, and asked if they had any idea the number of homes in our area that were in some stage of foreclosure? His response was more than most can imagine, by his observations. So how long does the over inflated foreclosure market drag on, I wonder.

Delayed Foreclosures Stalk Market. WSJ 9-22-09

Debra and Arthur Scriven were served notice in June 2008 that their mortgage lender, a unit of Citigroup Inc., was preparing to foreclose on their home. Fifteen months later, the Scrivens are still in their home near Columbia, S.C., and battling to stay there, even though a dispute with the lender over how much they owe prompted them to stop making regular payments last year.

Legal snarls, bureaucracy and well-meaning efforts to keep families in their homes are slowing the flow of properties headed toward foreclosure sales, even when borrowers are in deep distress.

The Economy is a Lie, too
Paul Craig Roberts
Tuesday, Sept 22nd, 2009

Americans cannot get any truth out of their government about anything, the economy included. Americans are being driven into the ground economically, with one million school children now homeless, while Federal Reserve chairman Ben Bernanke announces that the recession is over.

The spin that masquerades as news is becoming more delusional. Consumer spending is 70% of the US economy. It is the driving force, and it has been shut down. Except for the super rich, there has been no growth in consumer incomes in the 21st century. Statistician John Williams of shadowstats.com reports that real household income has never recovered its pre-2001 peak.

The US economy has been kept going by substituting growth in consumer debt for growth in consumer income. Federal Reserve chairman Alan Greenspan encouraged consumer debt with low interest rates. The low interest rates pushed up home prices, enabling Americans to refinance their homes and spend the equity. Credit cards were maxed out in expectations of rising real estate and equity values to pay the accumulated debt. The binge was halted when the real estate and equity bubbles burst.

As consumers no longer can expand their indebtedness and their incomes are not rising, there is no basis for a growing consumer economy. Indeed, statistics indicate that consumers are paying down debt in their efforts to survive financially. In an economy in which the consumer is the driving force, that is bad news.

My quoting Mahler was questioned yesterday, but I didn’t want to spoil Olygal’s BD with the lyrics of the Drinking Song of Earth’s Sorrow. So here it is today.

Schon winkt der Wein im goldnen Pokale,
Doch trinkt noch nicht, erst sing ich euch ein Lied!
Das Lied vom Kummer soll auflachend in die Seele euch klingen. Wenn der Kummer naht, liegen wüst die Gärten der Seele,
Welkt hin und stirbt die Freude, der Gesang.
Dunkel ist das Leben, ist der Tod.

Herr dieses Hauses!
Dein Keller birgt die Fülle des goldenen Weins!
Hier, diese Laute nenn’ ich mein!
Die Laute schlagen und die Gläser leeren,
Das sind die Dinge, die zusammen passen.
Ein voller Becher Weins zur rechten Zeit
Ist mehr wert, als alle Reiche dieser Erde!
Dunkel is das Leben, ist der Tod.

Das Firmament blaut ewig und die Erde
Wird lange fest stehen und aufblühn im Lenz.
Du aber, Mensch, wie lang lebst denn du?
Nicht hundert Jahre darfst du dich ergötzen
An all dem morschen Tande dieser Erde,
Dunkel ist das Leben, ist der Tod.

Seht dort hinab! Im Mondschein auf den Gräbern
hockt eine wildgespenstische Gestalt -
Ein Aff ist’s! Hört ihr, wie sein Heulen
hinausgellt in den süßen Duft des Lebens!
Jetzt nehm den Wein! Jetzt ist es Zeit, Genossen!
Leert eure goldnen Becher zu Grund!
Dunkel ist das Leben, ist der Tod!

There’s No Flu Shot for the Thrift Bug
by Bill Bonner London, England
You wanna know what is going on? David Rosenberg explains…

“US consumers are cutting back, and where they are not cutting back, they are scaling down. This new cycle is all about ‘getting small’ and it is deflationary. For yet another in the litany of signs pointing in the direction of social change towards thrift, have a look at what is transpiring at the upper echelons of the income strata - Now Even Millionaires See the Benefits of Budgeting on page B5 of the Saturday NYT is a must read.

“Not only are the rich trading down, but the article quotes a high net worth financial advisor who said ‘many of our clients are very happy to be sitting on bond portfolios and cash reserves.’ And see the article on page 2 of the Sunday NYT - Beauty Products Lose Some Appeal During Recession. According to the NPD Research Group, total sales of department store beauty products are down 7% from year-ago levels. Women are apparently opting for the ‘natural look’ - “some people are selectively replacing higher-priced items with cheaper products from drug stores and discount stores.”

Right on, David!

And here’s the CEO of Pepsico:

“The age of thrift is here.”

Even in Japan, after 20 years of coughing and sneezing, people have caught “the thrift bug,” says The New York Times.

What’s a consumer economy need in order to keep growing?

Uh…it’s needs consumer spending.

What do consumers need in order to boost spending?

Uh…they need more money!

Oh, there’s where it all starts to come apart, doesn’t it? Where do they get more money? They either earn it…or they borrow it. And right now, they can’t earn it - not with 12% unemployment in California! Workers have no bargaining power. And they can’t borrow it either. The banks won’t lend - not with the value of their collateral still falling.

Word comes this morning that mortgage delinquencies have hit a new record. And here’s a headline warning of worse to come:

“$30 billion home loan time bomb set for 2010.”

Even solvent homeowners who aren’t forced into foreclosure still find it beneficial to walk away from their houses. “Strategic defaults,’ says The Los Angeles Times, are becoming a problem for mortgage lenders.

Sigh. Finally going on a boat trip for diving. Go to bed at 11pm. Woken up at 3:30AM to my car alarm going off. People smashed the window and stole the nav/stereo unit. I had to be careful going outside since a week ago 5 black kids beat a guy walking home from work and sent him to the hospital (to steal his cell phone?). Our parking lot is dark as can be, I notified the power company that the light is out, but they have yet to do anything. Probably disconnected from the light rail construction. The price of being a renter.

Pay rules may prompt Goldman to shed bank charter.

NEW YORK (Reuters) - Some investors believe Goldman Sachs Group Inc (GS.N) may try to shed its commercial banking charter to sidestep U.S. government efforts to rein in exorbitant Wall Street pay.

But regulators may force the firm to stay in the banking system.

The U.S. Federal Reserve is proposing new rules to limit pay packages in an effort to curb excessive risk-taking. Banks are expected to bridle under the new restrictions, with Goldman taking particular umbrage because of its history of outsized compensation deals for strong performers.

But Goldman is a massive bank — its $890 billion in assets make it the fifth-largest in the United States — and any difficulty it faces could bring trouble to the financial system. That means regulators are likely to continue to take a keen interest in the bank, investors said.

The stakes are high. Regulators are struggling to ensure that they fix the financial system so that the market meltdowns of 2008 are not repeated.

“The government is going to find a way, one way or another, to include (Goldman) in regulations,” said Walter Todd, a portfolio manager at Greenwood Capital Associates in South Carolina.

http://www.cnn.com/2009/WORLD/africa/09/22/zimbabwe.farmers/index.html

I am very interested in comments on this article….

Obviously, I think this is socialism and social “justice” run amok. This is Robin Hood at it’s extreme. What do you guys think? Who do these farmer’s turn to?

It’s my theory that most societies need rich people. For as Zimbabwe is finding out, if there is no one rich, guess what everyone else is? Poor. In here is the failings of redistribution of wealth…

We have a local builder running a barrage of TV commercials, dispelling housing market “myths”. They run them #1 thru #7, mostley the same old now is the best time to buy retreads. # 7 states that the myth that home prices have farther to fall is just that, a myth.

” With interest rates at all time lows, and buyers incentive tax credits, it is highly unlikely home builders will reduce their prices, any farther”.

Typical urgency drivel, and of course that’s what they do, is sell houses. However they are leaning more and more into the investment adviser category, beyond the now is the time to buy repeats. They lace it with, the think of your families future arena.

Anyway comes across as desperation to me, but there will be plenty rushing at to grab a deal, at what they think is a blue light special.

http://money.cnn.com/2009/09/23/real_estate/home_price_comparison/index.htm?postversion=2009092307

Check out the changes in prices on the same type of home. It must be crazy to live in Cali! The price in Fayetteville N.C. was good. I cant wait to get back home…

http://blogs.wsj.com/developments/2009/09/18/lawler-duh-fha-shouldve-done-this-long-ago/

FHA will tighten lending standards….

Henry Kaufman wrote in his memoirs:

” … most predictions fall within a rather narrow range that does not deviate from consensus views in the financial community. In large measure, this reflects an all-too-human propensity to minimize risk and avoid isolation. There is, after all, comfort in running with the crowd. Doing so makes it impossible to be singled out for being wrong, and allows one to avoid envy or resentment that often inflicts those who are right more often than not.”

Everyone with a pulse knows to fed will keep their lending rate at 0. Once the DOW hits 10,000 there is great expectation amongst so called economists that this will create a much needed psychological boost, and draw in more investors.

Stock futures creep higher ahead of Fed decision
US stock futures rise slightly as investors await conclusion of Fed policy meeting

September 23, 2009

NEW YORK (AP) — Stock futures are creeping higher Wednesday as investors await the Federal Reserve’s decision on interest rates.

Markets overseas were mixed. Asian markets fell slightly overnight, while major European indexes inched up in afternoon trading.

The U.S. central bank is expected to keep its benchmark interest rate at a record low of near zero, but investors are hoping for a clearer indication of when the Fed may raise rates in the future. Investors will also be looking for more clues about the strength of the economy’s recovery in the statement to be released at the conclusion of the Fed’s two-day policy meeting later Wednesday.

Fed Chairman Ben Bernanke said last week that the recession was “likely over,” though high unemployment will be a challenge for some time.

Wow - the stats in this article are incredible.

WSJ 9/23/09

Delayed Foreclosures Stalk Market

Moreover, there were 217,000 loans in July where the borrower hadn’t made a payment in at least a year but the lender hadn’t begun the foreclosure process. In other words, 17% of home mortgages that are at least 12 months overdue aren’t in foreclosure, up from 8% a year earlier.

That’d be just shy of 3 million homes that are over 90 days delinquent or in the foreclosure process. (The wording implies that the 217k isn’t part of the first 1.2M number, though it seems like it would be; not sure).

More than 45% of Option-ARM mortgages already in default before reset/recast wave that begins in 2010. This is the reason why I mentioned the much-talked about “next wave” of foreclosure starting in 2010-2011 won’t be a spiking event, it is already happening now as almost 50% are already in some kind of default state:

Of the $189 billion securitized Option ARM loans outstanding, 88% have yet to experience a recast event … Of these loans that have not yet recast, 94% have utilized the minimum monthly payment to allow their loans to negatively amortize.
…
Further evidence of option ARM underperformance in the last year lies in the number of outstanding securitized Option ARMs either 90 days or more delinquent, in foreclosure or real estate-owned proceedings, which has increased from 16% to 37%. Total 30+ day delinquencies are now 46%, despite the fact that only 12% have recast and experienced an associated payment shock. Instead, negative and declining equity has presented a larger problem: due to high concentrations in California, Florida, and other states with rapidly declining home prices, average loan-to-value ratios have increased from 79% at origination to 126% today. ‘Negative equity and payment shocks will continue as Option ARM loans recast in large numbers in the c

Here’s apparently part of the reason why equities are up so much lately, and also an explanation for the bank profits and bonuses. If what’s written in this article is true, then I truly have zero hope now for the U.S. economy, since it is completely rigged. The only possible way out of this is to abolish the Fed, and we all know that’s not happening.

A New Bubble Of the Fed’s Creation

What’chyall think about this take on the shadow inventory situation?

This guy is leveling some very serious charges at high level government officials. I wonder whether enough Constitutional checks and balances remain intact for some of these charges to be explored? Or does the financial crisis automatically suspend the rule of law until the sun is shining on the banking sector once again?

So what’s going on here?

Simple: An enormous number of banks are holding loans at or close to “par” that really aren’t. They’re holding mortgages at massively-inflated values, even on defaulted properties, and this is why you are not seeing more foreclosure sales - that is, why inventory is being held back. If they sell it the accountants will force recognition of the loss, which will render them instantly insolvent, but so long as they “extend and pretend” they are marking these loans way, way above recovery value. The upshot of this is that these firms’ balance sheet claims on asset values are massively inflated, regulators know it, and they’re intentionally ignoring it.

I have been sounding the alarm on this for more than a year; it has in fact been the focus of multiple petitions to Congress and the cause of thousands of dollars of personal expense faxing letters and Tickers to members warning them of the danger of letting this sort of accounting misdirection continue.

The claim of banking sector health and “successful rescue by Treasury and The Fed” is in fact false. No such thing has occurred. What’s going on here is nothing more or less than intentional false claims of asset “valuation”, which is repeatedly exposed when the FDIC is finally forced to seize institutions, exposing the lies. Then, suddenly, 20, 30, even 40% losses on alleged “asset books” come out into the light and the taxpayer eats them.

The bank executives and accountants that played this game with the books should have been arrested and the bank thrown into receivership over a year ago.

Oh by the way, just as with all such “extend and pretend” games (otherwise known as fraud when practiced by anyone without a “government can cheat all it wants and nobody goes to jail” card) the longer you play this game, the longer you wait to do the right thing, the more money it costs you (in this case the Taxpayer gets the inevitable bill.)

For those of you who say that the FDIC is “not the responsible party”, that’s nonsense. OTS/OCC are the agencies that perform primary regulation for any federally-chartered bank but the FDIC is the agency that is responsible for resolution, and they are always working together in this regard.
…

No surprise here…

Study shows U.S.bank CEO pay dwarfs rest of world.

NEW YORK (Reuters) - You wouldn’t know it by his pay stubs, but Jiang Jianqing heads the world’s largest bank.

Jiang, chairman of Industrial and Commercial Bank of China, made just $234,700 in 2008. That’s less than 2 percent of the $19.6 million awarded to Jamie Dimon, chief executive of the world’s fourth-largest bank, JPMorgan Chase & Co (JPM.N).

The contrast illustrates the massive differences in pay among the CEOs of the world’s top banks. The compensation of the CEOs of the largest U.S. banks towers above what’s paid to banking chiefs in other parts of the world, according to a Reuters analysis of pay at the 18 biggest banks by market value.

Excessive compensation at banks is expected to be discussed this week when the Group of 20 nations meets in Pittsburgh. But consensus on the issue remains a distant hope as there continue to be vast differences in how bankers are paid, from the CEO on down.

The United States is home to four of the nine largest banks in the world — JPMorgan, Bank of America Corp (BAC.N), Wells Fargo & Co (WFC.N) and Citigroup Inc (C.N). It is also home to four of the six most handsomely rewarded bank CEOs.

“The U.S. executive pay levels have always dwarfed pay for companies elsewhere in the world,” said Sarah Anderson, a fellow with the Institute for Policy Studies, which is critical of Wall Street, and co-author of the recent study “America’s Bailout Barons.”

“They have claimed it is impossible to recruit people without paying such compensation. Yet, if you look at the pay levels in Europe and in a lot of Asian countries, somehow they manage to find people who can run major global firms while making a fraction of what they make in the U.S.,” she said.

Just got back from my little branch bank (regions) two people I knew in the mgt. dept. were layed off yesterday. I asked the mgr. what happened, she said that mgt. apps were down and many that they are getting do not qualify. So it goes, more brown squirts.

ITEM: Congress is not going to be anywhere close to passing a budget bill for the start of the new fiscal year a week from Thursday. Consequently, a bill calling for an extension of present spending provisions through the month of October has been prepared. < This is a charade Congress plays every year and voters pay little attention to it.

If Congress doesn’t care enough to meet a budget deadline why should taxpayers get bent our of shape trying to meet the annual April 15th tax deadline?

This is dumb. Don’t Wall Street’s rampaging bulls realize the stock market always goes up on Fed meeting days?

Safety sought on sidelines

Investors seem content to wait out the Federal Reserve’s announcement on monetary policy due at 2:15 Eastern.

The fate of the US economy rests on whatever the string-pushers say.

FOMC
Decision day

There’s virtually no chance that Fed policy makers will move on interest rates, so what they say about the economy will be topmost in investors’ minds.

So CorusBank finally went kaput on Sep 12th, taken over by MB Financial. They decided to shut down all CDs outside of Illinois and that includes my CD, so I spoke to MB just now and the check (principal + interest) is on the way to me. No big loss here as my CD was suppose to expire in Oct anyway.

The question is now what I do with the two recently matured (Corus & Alliant) and another upcoming maturing CDs (WaMU). USD seems to be reaching a technical low based on charts, stock market is foolishly high, short positions risk getting pummeled by the PPT, money market is paying 0.5% and precious metal is being pitched on TV to J6P. I am tempted to short US Treasury bonds but if the stock market falls again the rush to safety will go against that move and the uncertainty of Fed action on buying Treasury bonds is always a risk.

The investing landscape is most confusing and uncertain to say the least.

(Reuters) - A former analyst with Moody’s Corp (NYSE:MCO - News) has accused the credit ratings agency of issuing inflated ratings, and has taken his concerns to U.S. congressional investigators, the Wall Street Journal reported on Wednesday.

In a letter dated July, obtained by the paper, Eric Kolchinsky accused Moody’s Investor Service of issuing a high rating to a complicated debt security in January, in spite of it being aware it was planning to downgrade assets backing the securities.

“Moody’s issued an opinion which was known to be wrong,” Kolchinsky wrote, along with detailing other instances of inflated ratings issuance, according to the paper.

The paper said a Moody’s spokesman declined to comment on the January rating under scrutiny, but had said Kolchinsky refused to cooperate with an investigation into the issues he raised, and was suspended with pay.

Now that Autumn has officially arrived, it seems Fall is in the air here in sunny Mesa, AZ.

Swimming pool season is over for me. The water is 79 degrees. It is 0800 in the morning and 78 degrees air temp. 16% relative humidity. The speculative animal in me feels like the stock market and precious metals will take a dive soon. The purpose of the markets in general is to ruin as many people as possible.

My BIL has been a professional landlord for 22 years now. He has 14 rental units here in Mesa, a triplex, two duplex, and 7 SFH. As of yesterday they are all current on rent. The last two SFH he bought were foreclosures for about 75K each. Prior to that he sold one SFH of about the same size in 2005 for 200K. My BIL does 95% of the maintenance on these units himself and they are all within 3 miles of the home he lives in. He started off by buying the triplex 22 years ago. My point is, despite amateur landlords and bank REO, there is a steady income to be had in rentals if worked properly, at least here in Mesa. My BIL was your classic ADD type kid. Always in trouble at school. Did not graduate High School. Now manages his 14 rental units and is cash flow positive on every one. No student loans.

I still think the Fall is coming in many things.

Wish me luck guys. I am ready for either way though. Going back to my old job, volunteer to work two works for free, and show some humility. Even though I was right, I was also wrong too.

I miss the girls there, and they miss me too. I seriously ask this question: How many 52 year old single guys have two lovely young ladies age 22 and 24 come up and give you back rubs while you are working?

I am Uncle Greg. They love me, I love them, and I miss them.

Please ignore all stories about a recession in Europe. They are false and misleading!

(Story from today’s Cyprus Mail)

Paphos bracing for slow winter
By Bejay Browne

MORE than 12,000 tourist beds will be lost over the winter period as more hotels and holiday apartments than ever before shut down for the season in Paphos.

“Around 200 hotel units, including hotel villas and holiday apartments are closing up for winter,” manager of the Paphos regional board of tourism said, which is the largest number of winter season closures ever.

The figure could be even higher, as not all owners and managers inform the tourism board that they will be closing. According to Hadjigeorgiou there will be at least 2,000 fewer beds available than last year.

“The main reason is the economic crisis. There just aren’t the customers to make it viable for the hotels to stay open,” Hadjigeorgiou added

Although a handful of hotels, such as the Pafian Bay and Droushia Heights are closing for renovations, most of them are being forced to shut due to a lack of custom. Hadjigeorgiou said that the feedback from the main tour operators suggest that the coming winter period will be far worse than 2008-2009 winter season.

“The UK market affects us, and this hits Paphos especially hard. We are concerned for the future of tourism here. We are aiming to keep the existing clientele, build on what we have and find alternative markets.”

The secretary general of SEK trade union in Paphos, Neophytos Xenofontos, confirmed that the number of hotels closing during the winter would be more than previous years, but added exact numbers would not be known until October.

General secretary of DEOK trade union, Andreas Deogenous, said that the hotel closures will increase local unemployment by around 5,000 people.

He urged the government to take serious measures to push forward the commencement of projects in the district, to help tackle the rising number of unemployed.

Hadjigeorgiou said he hoped things will start to rebound, particularly if plans to increase tourism from Russia proved tenable. “But we won’t see positive growth in tourism in Paphos before 2011 and afterwards.”

According to Hadjigeorgiou, the Paphos regional board of tourism are aggressively promoting the town and the special offers available at many of the hotels.

“Some of the hotels need to upgrade the product on offer, and there are many things underway which will help to reposition Paphos competitively in the market,” he said. “Of course you can always find things which are cheaper, but I believe in Paphos we are now very competitive.”

For Iraklis Christoforou of Pandream Hotel apartments closing in winter has become an unwelcome annual event. “It’s not profitable for a hotelier to run a hotel business anymore. We will be closing at the end of October and will open again in April 2010,” he said.

“There aren’t the customers in the winter season, and although it’s bad to close and then open and so on, especially as have to re employ and re train staff every year, it’s the only option open to us.”

Copyright © Cyprus Mail 2009

Recession in Europe? Absolutely not monsieur!!!

(Headline story from today’s Cyprus Mail)

Paphos bracing for slow winter
By Bejay Browne

MORE than 12,000 tourist beds will be lost over the winter period as more hotels and holiday apartments than ever before shut down for the season in Paphos.

“Around 200 hotel units, including hotel villas and holiday apartments are closing up for winter,” manager of the Paphos regional board of tourism said, which is the largest number of winter season closures ever.

The figure could be even higher, as not all owners and managers inform the tourism board that they will be closing. According to Hadjigeorgiou there will be at least 2,000 fewer beds available than last year.

“The main reason is the economic crisis. There just aren’t the customers to make it viable for the hotels to stay open,” Hadjigeorgiou added

Although a handful of hotels, such as the Pafian Bay and Droushia Heights are closing for renovations, most of them are being forced to shut due to a lack of custom. Hadjigeorgiou said that the feedback from the main tour operators suggest that the coming winter period will be far worse than 2008-2009 winter season.

“The UK market affects us, and this hits Paphos especially hard. We are concerned for the future of tourism here. We are aiming to keep the existing clientele, build on what we have and find alternative markets.”

The secretary general of SEK trade union in Paphos, Neophytos Xenofontos, confirmed that the number of hotels closing during the winter would be more than previous years, but added exact numbers would not be known until October.

General secretary of DEOK trade union, Andreas Deogenous, said that the hotel closures will increase local unemployment by around 5,000 people.

He urged the government to take serious measures to push forward the commencement of projects in the district, to help tackle the rising number of unemployed.

Hadjigeorgiou said he hoped things will start to rebound, particularly if plans to increase tourism from Russia proved tenable. “But we won’t see positive growth in tourism in Paphos before 2011 and afterwards.”

According to Hadjigeorgiou, the Paphos regional board of tourism are aggressively promoting the town and the special offers available at many of the hotels.

“Some of the hotels need to upgrade the product on offer, and there are many things underway which will help to reposition Paphos competitively in the market,” he said. “Of course you can always find things which are cheaper, but I believe in Paphos we are now very competitive.”

For Iraklis Christoforou of Pandream Hotel apartments closing in winter has become an unwelcome annual event. “It’s not profitable for a hotelier to run a hotel business anymore. We will be closing at the end of October and will open again in April 2010,” he said.

“There aren’t the customers in the winter season, and although it’s bad to close and then open and so on, especially as have to re employ and re train staff every year, it’s the only option open to us.”

Copyright © Cyprus Mail 2009

Austin American Statesman today:
Foreclosure postings spike to highest since 2001
1,481 Central Texas properties are listed for October auction, up 72 percent from last year.

In February, George Roddy Sr., the company’s [Foreclosure Listing Services, Inc] president, said he thought foreclosures had peaked in Central Texas, although at high levels, but noted that future job losses were a big unknown that could change his prediction.

Since then, Austin’s job market has weakened, with unemployment at 7.2 percent last month and the annual job loss rate hitting a six-year high of 0.9 percent.

“Every time we think we’ve hit the plateau, it seems to spike a little bit higher a few months later,” Bonnie Brown, the company’s vice president, said Tuesday.

Brown said the numbers are expected to remain elevated for some time.

The main reason: Through September, loans for homes posted for foreclosure in Central Texas were made, on average, in 2005, she said. Potentially troubled loans made since then, especially in 2006 and 2007, before the housing markets slowed, have yet to reach the foreclosure stage, Brown said.

In addition, various loan-modification programs designed to assist financially stressed homeowners so they can keep their homes are not helping everyone, said Hugh Parrish, a veteran Austin real estate broker at Parrish & Associates.

“Many people have applied for modifications, and some have been successful,” Parrish said. “Many others could not be salvaged” because the homeowners did not have enough income to cover even reduced monthly payments.

Update to last nights auction: 3400 sq ft house, ex pot house confiscated by FBI, now REO. sold for $1.1m in 05. listed at $699k all summer, no takers. Sells at auction for $625 + 5% auction commission. WTF? People are dumb. It is an off the shelf Home Depot house, cheap stuff, vinyl windows… hilarious that someone pd $1.1mill.

Forbes.com

Cheery Outlook For Cheerios

General Mills said that higher sales, combined with lower ingredient and fuel costs, were the main factors behind the surge in earnings. The company also benefited from stronger advertising and marketing efforts, and the tendency of consumers to prepare meals at home during the economic recession.

hmm.. I need to add things related to home cooking to my recession proof industries list. Anyone know what corporation owns Spatula City?

My friend is a civil engineer in LA. He was recently forced to work 4 days per week and take one day of vacation. Over the weekend he informed me that he is now being paid overtime. Once Bernanke announced that the recession is over, his firms clients all called back wanting to complete their projects based on the original timelines. The clients fear they will lose funding if the projects are not on time.

It is one extreme to the other, from mandatory furlough to overtime in the course of a few weeks.

Hey Olygal,

Somehow I missed the celebration for your day yesterday! I was hanging out on the later threads I guess.

Anyway, I’d be remiss if I didn’t step out and say I hope you had a happy, happy b-day! Cheers.

Oh, and I’ll probably be saluting with Knob Creek. Then I’m off to sample Buffalo Trace and Woodford Reserve (I saw your other post from 2 days ago re: KY grown bourbon…)

Quick shut down the refineries!…We have to keep gasoline at a permanently “high plateau” so that… the efficient “free markets” can use the “invisible hand” to allow the magical phenomena of “Supply & Demand” to deliver the necessary goods to the American citizen, like a cup of coffee @ $2.25!

“…But crude dropped swiftly through the $70 and $69 levels after the Energy Information Administration reported a 2.8-million-barrel rise in crude oil inventories for the week ended Sept. 18. Analysts surveyed by Dow Jones Newswires had expected crude stocks to drop by 1.5 million barrels.”

By David Bird, DOW JONES NEWSWIRE SEPTEMBER 23, 2009:
OIL FUTURES: Crude Drops Below $69/Bbl After US Oil Data

Here’s a quote Mr. Bear would appreciate:

“Overall gasoline weakness is bringing down the house,” said Tony Rosado, a broker at GA Global Markets in New York.

To think that he drinks a diet cherry coke with his corn-fed steak…

Daffy: “That’s just desssspiiiiicable!”

“…It’s 12 months later and Warren Buffett’s Berkshire Hathaway is $3 billion richer.

“One year ago today, on September 23, 2008, with the financial world still reeling from the collapse of Lehman Brothers just days before, Buffett stunned Wall Street with a massive vote of confidence for Goldman Sachs.”

Buffett’s money, and his endorsement of Goldman, didn’t come cheap.

Goldman agreed to pay Berkshire a 10 percent annual dividend on the preferred stock. That’s $500 million a year, and the payout didn’t depend at all on what happened to Goldman’s common stock price.

Ken Burns Hails Rockefeller, Muir in TV Parks Series:

Interview by Zinta Lundborg, Sept. 23 (Bloomberg)

Burns: “There’s always the complaint that it’s socialism or government run rampant, but nobody minds when a giant air force base gets built, or an interstate highway. In order to save Yosemite and Yellowstone, they had to say this was worthless land.”

Burns: “It was first proposed that the Grand Canyon become a national park in 1882. After 37 years, Theodore Roosevelt had to use the Antiquities Act, designed to save monuments, and the hue and cry that went up in Arizona belies the fact that it’s now on their license plate.”

market pulse

Sept. 23, 2009, 2:55 p.m. EDT
Fed to buy fewer MBS beginning this week

WASHINGTON (MarketWatch) — The Federal Reserve will gradually reduce its purchases of mortgage-backed securities and agency bonds beginning this week, the New York Fed said Wednesday. The Federal Open Market Commmittee announced earlier that it would slow its purchases and extend its program to buy nearly $1.5 trillion in mortgage-related debt through the first quarter of 2010. The New York Fed said it would gradually reduce both the size and frequency of its purchases. By the first quarter, the New York Fed would buy agency debt only every other week.

Hey Everyone, I’ve been gone for quite a while - unemployed and working hard to establish as a freelancer (and doing well, yay!), haven’t had time to read here.

I’m back because this is probably the best place to tell this anecdote, interested in your opinions:

I was just going through my statements on a “Cash Reserve” account I’ve been holding for almost 10 years at a well-known major financial firm. It’s basically a money-market type account that a self-employed type person can use like a savings account, to earn some interest and keep some cash stashed as a reserve to deal with uneven income flow.

Over the past 6 months, the interest rate on this account has been slashed by something like 90%. It wasn’t very high to begin with, in line with most “online savings” accounts at something around 1%, but now it is literally showing at .000092%. I’ve earned about $0.60 cents on over $6,500 cash balance.

As you can imagine, I called the firm to ask what was up. The CSR that I talked to seemed like he’s knowledgeable in the HBB sense, and told me (not in so many words) that the company’s policy had been deliberately changed to completely destroy the interest-generating properties of accounts like this one, in order to get people to take money out of them and go spend it to “help revitalize the economy.” He hinted that pretty much every financial company is doing the same thing, and looking around at a random sampling of bank interest rates out there, I think he’s right.

He even said, “It seems like people are being punished for saving money rather than spending it.”

So, how about that? A financial-industry-wide *real* War on Savers.

I saw that on most of the savings account interest rate charts, there are now many many divisions of amounts in the account where the interest rate changes. Mostly it looks like $0-4999 has ridiculously low rates, $5000-$9,999 has not quite so ridiculously low, and then on up from there. What I would call a “decent” interest rate (given the circumstances) doesn’t seem to happen until you’re over $25,000, sometimes $50K or $100K.

So hey, if you’re already rich, you’re fine!

Anyone else notice this stuff?

The Fed likes to think of interest rates as a “fundamental” determinant of housing prices. To my thinking, “fundamentals” are exogenous — i.e., not controlled by central banks. Am I off base here?

Currencies

Sept. 23, 2009, 3:36 p.m. EDT · Recommend · Post:
Dollar slumps as Fed extends mortgage purchases

By Deborah Levine & Polya Lesova, MarketWatch

NEW YORK (MarketWatch) — The dollar fell to fresh lows for the year on Wednesday, reversing earlier gains, after the Federal Reserve left interest rates unchanged near zero, as expected, while it extended programs to provide liquidity to the housing market.

“Bottom line, the Fed is still a long ways from executing an exit strategy,” said Sal Guatieri, senior economist at BMO Capital Markets, in a note, referring to the eventual end of the central bank extensive measures to support a U.S. economic recovery.

The dollar index (DXY 76.08, -0.04, -0.05%) , which measures the U.S. unit against a basket of six major currencies, stood at 75.952, compared with 76.177 ahead of the announcement, and compared with 76.070 in late New York trading on Tuesday — near its annual low of 76.

In a statement after its widely expected decision on rates, the central bank said that economic activity has “picked up” and noted improved conditions in financial markets.

It also extended through March the timeframe for its $1.25-trillion program to buy mortgage-backed securities and its $200 billion program to buy agency debt. The programs, aimed at keeping rates low to support the U.S. housing market, were originally set to expire in December.

“There were a few concerns ahead of the announcement that the Fed might cut short this program,” BMO’s Guatieri said.
…

NEW YORK (AP) — The dollar hit a fresh 12-month low, then bounced back a bit in later trading as the Federal Reserve left interest rates at a range near zero, saying it will keep them there for a long time amid gradual improvements in the economy, and did not announce any new liquidity measures.

Keeping interest rates this low can drag on the dollar as investors transfer funds to currencies in countries with high interest rates, including many developing economies, where they can earn higher returns.

Is this my INFLATION ?? imported goods will cost more like gasoline ?? How can I pay back my debt unless I get more income !! will my income go up as the dollar goes down or will it just be another tax to pay for the RE bailout ?? Does a lower currency help did it help Iceland ??

Does “retail demand” in this case include purchases by the Fed and its minions?

Sept. 23, 2009, 5:40 p.m. EDT
California sells $8.8 bln in notes to record retail demand

By Laura Mandaro & Deborah Levine, MarketWatch

SAN FRANCISCO (MarketWatch) — The state of California completed an $8.8 billion sale of short-term debt on Wednesday with yields far below earlier expectations, though rates still proved higher than those on some comparable debt.

Aided by a record $6.64 billion in orders from retail investors, which amounted to 75.4% of the total, California sold the revenue anticipation notes at yields of 1.25% to 1.5%. They mature in May and June of next year.

Ahead of the sale, some analysts had anticipated the notes would yield more than 3%.

The state entered into the RAN sale, the largest of its kind, to meet its cash-flow needs throughout its fiscal 2009-2010 year.

Total orders exceeded the amount of notes on sale by $430 million. The retail purchase was the largest retail total ever attained in a municipal bond or note deal, Treasurer Bill Lockyer’s office said.

“We have a lot of work to do to fix our structural budget defects. But in the short term, this successful sale will help restore the state’s fiscal equilibrium,” said Lockyer in a statement.
…

Geithner addresses ‘too big to fail’ problem
By Tom Braithwaite in Washington

Published: September 23 2009 16:49 | Last updated: September 23 2009 17:55

Tim Geithner, US Treasury secretary, and Barney Frank, chairman of the House financial services committee, on Wednesday insisted that large institutions would not gain an implicit government subsidy.

The Treasury’s desire to prevent large failing financial companies such as Lehman Brothers and AIG from threatening the entire system has sparked fears that large companies will benefit from lower borrowing costs because they are implicitly protected by the government.

But Mr Geithner said there would be no public list of so-called “too big to fail” companies but they would be constrained by close supervision from the Federal Reserve and tough capital requirements.

“It is very important that these institutions that matter, whose future could threaten the economy as a whole, are subject to higher constraints on leverage in the future, more conservative cushions of capital and liquidity, so that they can absorb losses they face when they make big mistakes,” said Mr Geithner.

“So what we’re trying to do is to make it clear that, if you have this particular source of threat to the system, we’re going to hold you and subject you to more conservative constraints on risk-taking.”

Mr Frank said regulators would ensure that a failing large interconnected company would be unwound in a way that would protect taxpayers. “There will be death panels enacted by this Congress” – in a reference to the healthcare debate - “but they will be for non-bank financial institutions that will not be considered too big to die.”
…

Thirty Years Ago Today -

The Dow Jones Industrial Average was comprised of these thirty companies in September 1979:

Allied Chemical
Aluminum Company of America
American Can
American Tel. & Tel.
American Tobacco B
Bethlehem Steel
Du Pont
Eastman Kodak Company
Exxon Corporation
General Electric Company
General Foods
General Motors Corporation
Goodyear
Inco
International Business Machines
International Harvester
International Paper Company
Johns-Manville
Merck & Company, Inc.
Minnesota Mining & Mfg
Owens-Illinois Glass
Procter & Gamble Company
Sears Roebuck & Company
Standard Oil of California
Texaco Incorporated
Union Carbide
United Technologies Corporation
U.S. Steel
Westinghouse Electric
Woolworth

I was reviewing wikipedias page on the FED and found this paragraph

Preventing asset bubbles
The board of directors of each Federal Reserve Bank District also have regulatory and supervisory responsibilities. For example, a member bank (private bank) is not permitted to give out too many loans to people who cannot pay them back. This is because too many defaults on loans will lead to a bank run. If the board of directors has judged that a member bank is performing or behaving poorly, it will report this to the Board of Governors. This policy is described in United States Code:[44]

Each Federal reserve bank shall keep itself informed of the general character and amount of the loans and investments of its member banks with a view to ascertaining whether undue use is being made of bank credit for the speculative carrying of or trading in securities, real estate, or commodities, or for any other purpose inconsistent with the maintenance of sound credit conditions; and, in determining whether to grant or refuse advances, rediscounts, or other credit accommodations, the Federal reserve bank shall give consideration to such information. The chairman of the Federal reserve bank shall report to the Board of Governors of the Federal Reserve System any such undue use of bank credit by any member bank, together with his recommendation. Whenever, in the judgment of the Board of Governors of the Federal Reserve System, any member bank is making such undue use of bank credit, the Board may, in its discretion, after reasonable notice and an opportunity for a hearing, suspend such bank from the use of the credit facilities of the Federal Reserve System and may terminate such suspension or may renew it from time to time.

The punishment for making false statements or reports which overvalue an asset is also stated in the U.S. Code:[45]

Whoever knowingly makes any false statement or report, or willfully overvalues any land, property or security, for the purpose of influencing in any way…shall be fined not more than $1,000,000 or imprisoned not more than 30 years, or both.

I was initially thinking man we should be sending some people to jail, but then I noticed the clever wording “not more than 30 years” and I have to admit that sending no one to jail for any years is < 30 years.

Sept. 24 (Bloomberg) — Japan’s exports fell in August as the economic recovery struggled to gain traction.

Shipments abroad dropped 36 percent from a year earlier, less than a 36.5 percent decline in July, the Finance Ministry said today in Tokyo.

From a month earlier, exports fell 0.7 percent, the second straight drop, indicating the boost in demand from abroad that helped the economy expand in the second quarter may be fading. Some $2 trillion in spending by governments worldwide has boosted sales for companies from Toyota Motor Corp. to Sharp Corp., while material makers are filling orders from manufacturers rebuilding stockpiles.

“So much of what’s keeping Japan’s economy going is temporary: the inventory, the stimulus measures,” said Junko Nishioka,

We need more ferilizer and green paint in aisle 3