The Housing Bubble

Terribly trite but I just gotta do it…..First!

Fed Prepares to End Mortgage Program
Officials See Signs of Shaky Recovery
Washington Post September 24, 2009

The economy has “picked up” in recent weeks, Federal Reserve policymakers said Wednesday, as they indicated that the end is within sight for a massive program to support mortgage lending.

But even as the Fed takes another step to unwind one of its unconventional efforts to boost the economy, the central bank remained cautious in its assessment of the recovery, warning that a weak job market could be a drag for some time. The Fed not only left its target interest rate near zero, as was widely expected, but again asserted that the rate will likely remain at “exceptionally low levels” for an extended period.

The decision of the Fed’s policymaking committee gives new insight into the central bank’s exit strategy in its expansive interventions in the economy over the past year.

The strategy is proceeding on two tracks: Policymakers are addressing a fundamentally weak economy by leaving the federal funds rate, at which banks lend to each other, very low for a long time. But they are removing their less conventional programs as soon as they feel they can do so without disrupting financial markets.

“They’re telling us, ‘We’ll take out some of our facilities, but we’re not even close to raising the federal funds rate,’ ” said John Silvia, chief economist at Wells Fargo.

Luxury Hotels in U.S. Risk Default as $850 Rooms Remain Empty.

Sept. 24 (Bloomberg) — Luxury hotel owners risk defaulting on their debt as the recession cuts occupancies and the credit crunch constrains refinancing.

Loans secured by more than 1,500 hotels with a total outstanding balance of $24.5 billion may be in danger of default, according to Realpoint LLC, a credit rating company that tracks commercial mortgage-backed securities. Some of the biggest loans, put on the company’s watch list because of late payments, decreasing occupancies or cash flow, were made to luxury properties where rooms can cost more than $850 a night.

“All segments are showing signs of distress but the luxury segment carries much higher loan balances and is more clearly affected,” Frank Innaurato, managing director of CMBS analytical services at Horsham, Pennsylvania-based Realpoint, said in a telephone interview.

Lodging owners are struggling after adding rooms and properties at the peak of the CMBS market from 2004 to 2007, when $83.4 billion in hotel-backed securities was issued. Occupancy among chains with the costliest rooms fell to 60 percent in the first half from 70 percent a year earlier, according to Smith Travel Research. The decline was the industry’s largest for that period.

“Luxury hotels have been aggressively financed during the peak CMBS issuance years,” David Loeb, an analyst at Robert W. Baird & Co., said in a phone interview. “That’s why luxury hotel loans crowd these watch lists.”

HSBC bids farewell to dollar supremacy
The sun is setting on the US dollar as the ultra-loose monetary policy of the US Federal Reserve forces China and the vibrant economies of the emerging world to forge a new global currency order, according to a new report by HSBC.

“The dollar looks awfully like sterling after the First World War,” said David Bloom, the bank’s currency chief.

“The whole picture of risk-reward for emerging market currencies has changed. It is not so much that they have risen to our standards, it is that we have fallen to theirs. It used to be that sovereign risk was mainly an emerging market issue but the events of the last year have shown that this is no longer the case. Look at the UK – debt is racing up to 100pc of GDP,” he said

Crucially, China and rising Asia have reached the point where they can no longer keep holding down their currencies to boost exports because this is causing mayhem to their own economies, stoking asset bubbles. Asia’s “mercantilist mindset” of recent decades is about to be broken by the spectre of an inflation spiral.

The policy headache was already becoming clear in the final phase of the global credit boom but the financial crisis temporarily masked the effect. The pressures will return with a vengeance as these countries roar back to life, leaving the US and other laggards of the old world far behind.

A monetary policy of near zero rates – further juiced by quantitative easing – is completely incompatible with circumstances in most of Asia, the Middle East, Latin America, and Africa. Divorce is inevitable. The US is expected to hold rates near zero through 2010 to tackle its own crisis.

Larry Edelson
- Weiss Group

The U.S. dollar resumed its swan dive overnight, hitting brand-new, one-year lows.

Meanwhile, gold — the world’s ultimate dollar hedge — surged nicely to within an eyelash of its all-time high.

But it should come as no surprise that global investors are beating the dollar like a red-headed stepchild.

After all — they know that U.S. Treasury Chief Timothy Geithner is going panhandling this week — begging and borrowing every penny he can to fund Washington’s precedent-shattering $1.6 trillion budget deficit.

Today, Geithner will rewrite the history books by dumping an all-time record $43 billion in new U.S. Treasuries on the market in a single day.

PLUS, tomorrow and on Friday, Geithner will return to the trough, borrowing an additional $69 billion to keep the lights on in Washington.

That’s a total of $112 billion in U.S. Treasury borrowing in just three, short days!

Geithner:
“Brother, can you spare $112 BILLION?”
This is truly alarming: If you’re like me, you can remember a time not too long ago when U.S. Treasury borrowing was less than $112 billion for an entire year. Now, we’re borrowing that much in less than one week!

I wish that was the worst of it. It isn’t: So far this year, Geithner has borrowed a mind-boggling $1.41 TRILLION to fund Washington’s debt addiction — nearly THREE TIMES MORE than the Treasury had borrowed at this time last year.

And still, this is only the beginning: The Congressional Budget Office (CBO) has warned that Obama’s budget will add nearly $10 trillion in new government debt over the next ten years.

If the CBO is correct, our national debt will soar to well over $21 trillion by 2019. That’s more than double the value of all the goods and services our economy now produces in a whole year!

Meanwhile, over at the Federal Reserve, “Helicopter Ben” Bernanke is printing unbacked paper dollars like there’s no tomorrow.

Yesterday alone, in his ongoing attempt to keep Geithner’s precedent-shattering borrowing spree from sending interest rates into the stratosphere, Bernanke had to print more than $4 billion just to BUY treasuries.

THIS is why the U.S. money supply is skyrocketing! THIS is why sophisticated investors worldwide are recoiling in horror.

U.S. credit card defaults rise to record: Moody’s
September 23, 2009

NEW YORK (Reuters) - The U.S. credit card charge-off rate rose to a record high in August, as more Americans lost their jobs, Moody’s Investors Service said on Wednesday, in another sign consumers remain under stress.

The Moody’s credit card charge-off index — which measures credit card loans that banks do not expect to be repaid — rose to 11.49 percent in August from 10.52 percent in July.

The index resumed an upward trend after declining in July for the first time in almost a year, vanishing hopes of stabilization in the industry after record high credit losses.

“We continue to call for a recovery of the credit card sector to begin once industry average charge-offs peak in mid-2010 between 12 percent and 13 percent,” Moody’s said in a report.

Credit card losses usually follow the trend of unemployment, which rose in August to 9.7 percent, the highest level in 26 years. Moody’s estimated unemployment will peak next year at 10 percent to 10.5 percent.

The Moody’s index showed credit card delinquencies — payments more than 30 days late — rose to 5.80 percent in August from 5.73 percent in July.

“Even early-stage delinquencies rose, ending a trend of four consecutive months of improvement,” Moody’s said in a report.

Seems to me, for people like this, this lifestyle becomes a choice. This is what happens when you make bad life choices….

http://www.thesun.co.uk/sol/homepage/features/article2651937.ece

Home credit extension could sway buying decisions: survey.

NEW YORK (Reuters) - Nearly one in five prospective first-time U.S. home buyers said a possible extension of an $8,000 tax credit would be the primary influence on their decision to purchase a home before the end of 2010, according to a survey by a real estate website.

The 18 percent who would be swayed by the move equates to 334,000 buyers who would otherwise not purchase homes from December 1, 2009 to November 30, 2010 — the likely period for an extension, according to the survey published by Zillow.com on Thursday.

Their addition to the market could make the difference between a robust annual increase in 2010 home sales and a flat or negative change, Zillow.com said.

“(An extension of) the tax credit will boost demand at the margin, and that fact will make it easier to work down our current high inventory levels of existing homes on the market,” Stan Humphries, Zillow chief economist, said in a statement.

The $8,000 first-time home buyer tax credit is part of a U.S. stimulus bill to combat the worst economic downturn to hit the United States since the 1930s.

Home buyers who do not currently own a primary residence and have not owned one for the past three years are considered for the credit.

There is speculation the U.S. government could try to pass legislation through Congress to extend the credit for another year. Alternatively, it may scrap the scheme on expectations the U.S. real estate market can recover under its own steam.

First tires, now paper, funny how that works. Watch for an ever increasing laundry list of complaints. Who’d a thunk it.

China faces new US trade complaint over paper as union, 3 producers file antidumping case September 24, 2009

BEIJING (AP) — A U.S. labor union and three paper companies have filed a new trade complaint over imports of Chinese paper, possibly fueling tensions between Washington and Beijing amid disputes over tires and other goods.

The complaint was announced Wednesday as U.S. President Barack Obama and his Chinese counterpart, Hu Jintao, were attending a summit of leaders of the Group of 20 major economies in Pittsburgh.

The case accuses China, along with Indonesia, of improperly subsidizing exports of some types of coated paper that it says have flooded the U.S. market, wiping out thousands of American jobs.

It comes a week after Beijing filed a World Trade Organization challenge to Washington’s decision to raise tariffs on imports of Chinese-made tires. The two governments also are involved in disputes over access to each others’ markets for poultry, steel pipes, music and movies.

The complaint was filed by three paper producers and the United Steelworkers, a union for 6,000 of their employees. The companies are NewPage Corp., of Miamisburg, Ohio; Appleton Coated LLC, of Kimberly, Wisconsin, and Sappi Fine Paper North America, of Boston.

Hey,

We gotta STOP this evaluation of appraisals like this. Realtor’s are losing too much money!

I notice the only ones complaining are those standing to benefit off a house’s sale…

http://money.cnn.com/2009/09/22/real_estate/industry_asks_appraisal_relief/index.htm?postversion=2009092315

A school hall monitor I know just ‘bought’ an investment house in California.

It’s like 2005 all over again.

In a sign of the times…

I was at the dentist yesterday getting some work done. Came to $210 after insurance, which isn’t petty cash but is doable. I pull out the credit card (easier that way, get the cashback, etc.) and ask if they want payment now.

Instead of yes, I get the answer, that “well, we always like payment now, but we understand times are tight. We can bill you, or if you want, we can do part now on the credit card and you can come back in a month and put the remainder on the card…”

Like I said, I know times are tight and $210 isn’t small potatos, but to immediately have the dentist office offer all sorts of “anything to get our money” possibilities was shocking.

Normally I’d defer payment as long as possible just out of old fashion tightwadness, but I felt bad for the dentist office and cash flow issues.

An intriguing(sp?) article on gold. Read some of the comments by posters. They make some of the most intelligent analysis on gold I have ever read….

http://online.wsj.com/article/SB10001424052970203917304574415193376917198.html#articleTabs%3Darticle

Visiting Toronto for the first time - I am amazed to see all of the new construction going on, the tour bus driver says there are two seasons in Toronto - Winter and Construction. Luxury residences going up as well, “Shangri-la Toronto” with Estates from $2.5 million which seem really high in a market with some pretty nice looking 1200 square foot 2 bedroom condos on the waterfront of Lake Ontario going for $500K. Oh yeah, and signs stating “5% down” also are seen on some new construction.

Perhaps it is different here….but I wouldn’t make book on it.

To the beautiful ladies Jane and Ahansen:

Thank you for the kind words yesterday. Lot of great people on here.

Also, Jane, you hit the nail right on the head. If I would had lowered my expectations re “put up with the boss daughter bullpoopy”, I would not be unemployed today.

If I had it to do over, that is what I would have done. Mistake.

Thanks again.

ATE

A San Francisco lawyer has looked at this notion of independence and concludes: “Although America successfully seceded from the British Empire in 1776, today, more than 200 years later, it is in no way ‘independent.’ Its many dependencies include its reliance on debt to finance its operations; it looks to foreign manufacturers to provide basic goods; it is at the mercy of oil sheiks for its energy needs; and, it depends on global and regional organizations like the United Nations, NATO, and other entangling alliances to conduct diplomacy.”

Independence Requires Independents.

Jerry Salcido is a young fellow who surveyed the social landscape and decided financial debt was a destructive component, not only for individuals but for nations as well. He quotes Thomas Jefferson, who remarked that if the United States were to “preserve [its] independence” Americans could not allow the federal government to burden itself with perpetual debt.

Geithner:
“Brother, can you spare $112 BILLION?”
This is truly alarming: If you’re like me, you can remember a time not too long ago when U.S. Treasury borrowing was less than $112 billion for an entire year. Now, we’re borrowing that much in less than one week!

That is so scary, I literally, literally, got up and threw up in the bathroom. Of course, my nerves are shot right now anyway. I asked my landlord (age 72) who is a smart man, said: “Hey Bill, you ever seen it this bad in your life”?

He said, “I have never seen anything like this, ever”.

http://msn.careerbuilder.com/Article/MSN-2009-Job-Info-and-Trends-10-Stressful-Jobs-That-Are-Worth-It/?sc_extcmp=JS_2009_home1&SiteId=cbmsnhp42009&ArticleID=2009&gt1=23000&cbRecursionCnt=1&cbsid=bad212431ea64f9cabde980864f155c8-307099866-KA-5

msn dot.com’s list of stressful careers…guess what made it.

“Come January 2010, seniors may do a double take after seeing their Social Security checks. The two to three percentage-point increase in benefits they usually get each year won’t be there”.

Hi! Ms. Canary! Carry the Lantern High. (Bill Wyman/Stones).

NPR quote today

Gen Y teens have more discretionary income than Baby Boombers.

Hard to believe.

This article about the expensive housing in La Jolla showed up yesterday in CNN and resurfaced today in the San Diego Union-Tribune. The claim that a plain-vanilla middle manager’s house (2200 sq ft, 4 brs, 3 1/2 baths) in La Jolla was currently valued at $2,125,000 struck me as absurd, so I did a little checking on the MLS. The data I post below represents current list prices for the median-list-price home and a few slightly more expensive listings. Several of them appear to be much larger than 2200 square feet, and all of them are listed below $1,900,000 ($225,000 below the supposed “median value” mentioned in the article).

Don’t journalists have to bother checking their facts anymore these days?

La Jolla called most expensive housing market in U.S. again
Area one of two in top 10 that saw prices increase
By Roger Showley
Union-Tribune Staff Writer

2:00 a.m. September 24, 2009

For the second straight year, La Jolla is the nation’s most expensive housing market, according to Coldwell Banker’s home price index.

The real estate brokerage bases its rankings on the price of 2,200-square-foot homes with four bedrooms and 3½ baths. The La Jolla price was listed at $2,125,000, up $282,333 or 16.6 percent from last year.

The lowest-priced similar home went for $112,675 in Grayling, Mich., a town of about 2,000 that calls itself the “canoe capital of the world.” La Jolla calls itself “the jewel.”

Rick Hoffman, president of Coldwell Banker Residential Brokerage in San Diego, said La Jolla owes its high standing to its unique location and amenities.

“It’s a very desirable place to live,” he said, and its prices have held up better than many neighborhoods locally.
—————————————————————————–
From ZipRealty dot com:

1353 WEST MUIRLANDS DRIVE La Jolla, 92037
$1,899,000
Est. Monthly Payment: $12,634*
Beds: 3 | Baths: 3 | Sq. Ft.: 3,330 | $/Sq.Ft.: $570 | Lot Size: 17,424 Sq. Ft.
Year Built: 1952 | Listing Date: 01/21/09

Why is the US stock market suddenly so dependent on home sales? A couple of years ago, an army of trolls posted on this blog to suggest the housing market and Wall Street were fundamentally decoupled. What changed?

It is kind of hilarious when financial journalists comment on the significance of two or three point up or down movements on the DJIA at levels approaching 10K. It looks to me as though the PPT is holding the line just fine so far this morning.

market pulse

Sept. 24, 2009, 10:06 a.m. EDT
U.S. stocks dip into red after housing data

NEW YORK (MarketWatch) — U.S. stocks turned lower on Thursday after disappointing news on the housing market. The Dow Jones Industrial Average (INDU 9,750, +1.59, +0.02%) fell 3.70 points to 9,743.41. The S&P 500 declined 1.82 points to 1,059.05, while the Nasdaq Composite (COMP 2,121, -10.87, -0.51%) fell 5.62 points to 2,125.80.
…

Sept. 24, 2009, 8:50 a.m. EDT

Former Fed Chief Volcker backs keeping central bank power
Volcker: proposals to remove the Fed’s supervisory authority would be mistake
By Ronald D. Orol, MarketWatch

WASHINGTON (MarketWatch) — Former Federal Reserve Chairman Paul Volcker on Thursday said he opposed congressional calls to take away the central bank’s authority over everything bank related except monetary policy.

Volcker, who chair’s President Obama’s new economic advisory panel, said in testimony prepared for delivery to the House Financial Services Committee that removing the Fed’s supervisory authority over banks would be a mistake. The Fed currently completes onsite exams and sets capital and liquidity standards for financial institutions.

“The Federal Reserve Board should not become an academic seminar debating in its marble palace various approaches toward monetary policy without the leavening experience of direct contact with, and responsibility for, the world of finance and the institutions through which monetary policy is effected,” Volcker said.
…

Phasing out the $8K “first-time homebuyer’s” tax credit could be an excellent measure to help restore housing market affordability. But some NAR representatives are sounding alarm bells that doing so would result in a double-dip recession. Doesn’t economic recovery depend on affordable housing, which can help entice workers where they are most needed in a recovering job market?

The idea that there would be no buyers without the $8K credit is misguided, as it ignores the market’s ability to simultaneously adjust price levels and the flow of sales.

Economic Report

Sept. 24, 2009, 10:01 a.m. EDT

Existing home sales drop 2.7% in August to 5.10 million pace
Realtors push for extension of federal home-buyer subsidy

By Rex Nutting, MarketWatch

WASHINGTON (MarketWatch) - Resales of U.S. homes dropped 2.7% in August to a seasonally adjusted annual rate of 5.10 million, the first decline in five months, the National Association of Realtors reported Thursday.

Inventories of unsold homes on the market declined by 10.8% to 3.62 million, representing an 8.5-month supply at the August sales pace, the lowest since April 2007. The inventory figures are not seasonally adjusted. The drop in inventories was much larger than the historic norm for August, the trade group said.

The August existing-home sales figures represent “a mild retreat from a very strong gain in July,” said Lawrence Yun, chief economist for the real estate trade group. The August sales pace was the second highest in 23 months, he said.

The decline in sales was unexpected by most economists. The median forecast by economists surveyed by MarketWatch was for a small gain to a 5.40 million annual rate from 5.25 million in July.

Sales are up 13.6% from January’s bottom.

“We are very close to reaching the point of a self-sustaining recovery,” Yun said. The realtors are still “lobbying very hard” for Congress to extend and expand the $8,000 tax credit for first-time home buyers. Yun defined “self-sustaining” as stable or rising prices, which would encourage buyers who are waiting for prices to bottom out before taking the plunge.
…

Sept. 24 (Bloomberg) — Sales of existing U.S. homes unexpectedly fell in August for the first time in four months, signaling the housing recovery will be slow to gain speed.

Purchases dropped 2.7 percent

Given the pending deadline for the 8k credit this is shocking, and it makes a 15k credit seem more likely.

A moment of crystal clarity… an epiphany if you will…

This whole gig is about Devo covering “Satisfaction” 28 years ago. Now my tummy feels better.

Gold’s tanking today, re housing data.

That is why I don’t pay too much attention to what it does day-to-day…

August hotel occupancy falls to 58 percent
Orlando Business Journal September 24, 2009,

Orlando’s hotel occupancy continued to decline for the month of August with a 8.9 percent drop.

Orlando’s occupancy numbers dropped from 63.7 percent in 2008 to 58 percent in 2009, said Smith Travel Research.

In addition, revenue per available room — a key factor used to assess hotel profitability — fell from $56.75 in August 2008 to $44.26 for the same period this year, a 22 percent decline.

Average daily room rate followed the same trend with a 14.4 percent decline from $89.11 in 2008 to $76.29 this year.

State and national occupancy numbers also declined, by 7.1 percent and 9.9 percent respectively.

Revenue per available room dropped 16.7 percent in Florida from $56.18 in August 2008 to $46.79 for the month this year.

National revenue per available room fell 19 percent, from $72.37 last year to $58.65 in 2009.

The Debtorship Society
More Americans became “homeowners” while owning less and less of their homes.
Tim Cavanaugh | October 2009 Print Edition

Real estate used to be a pretty lowbrow business. When my grandmother opened her agency in the 1950s, it was mildly groundbreaking for a lady to be involved in the grimy, pushy, mold-concealing business of hawking houses. When I accompanied my father on his own real estate agent rounds on a South Jersey barrier island during the Carter/Reagan years, the job seemed to alternate between long hours of cleaning up every form of human waste, heavy volumes of legal documentation, and brief, tense altercations with deadbeats, squatters, and shady contractors. The preferred weapon for this last exchange was a baseball bat.

http://reason.com/news/show/135716.html

Builders Design’s Model Home Annex Showroom To Close After 33 Years
Gaithersburg Maryland - September 24, 2009 — the Model Home Furniture Clearance Center Annex store developed by Builders Design will soon close its doors forever.

Since 1976, Builders Design has been recognized as the home building and construction industries preferred choice for all their interior design requirements. Builders Design has received numerous national and regional rewards from professional builders. The Model Home Clearance Center and the Annex are used to sell the display furniture from large projects all over the country. The slow-down in the housing market has resulted in a huge overstock of quality home furnishings from famous makers like Bernhardt, Flexsteel, Bassett, Hooker, Lexington, Pennsylvania House, Stanley, and many others. They also offer hundreds of one-of-a-kind fine handmade oriental rugs.

“The Annex Store Closing total liquidation is now in progress ,” said Anna Toretch showroom manager. “There are 2 showrooms and a very large warehouse on the property. All locations will be liquidated wall-to-wall. Now that the decision to close the annex has been made the general public will have a unique opportunity to see and buy the finest quality home furnishings at discounts below wholesale”. Toretch went on to say, “We have reductions of up to 75% on every item in the both showrooms. Over $2 million of home furnishings and handmade rugs will be sold as quickly as possible at the lowest prices in the area.” Toretch continues, “Every item in the multi-million dollar inventory will be sold, regardless of cost…This is a store closing total liquidation.”

The decision to close the annex showroom was made revealing plans for the closing event. In announcing the closing, Toretch stated, “The decision to close has been a difficult one. Everyone in the housing industry is struggling and we need to liquidate this inventory fast.

Is $1000/oz the new official target price of The Precious™?

There are three for sale REOs within 1,500 feet of my house. One on market for 18mn, one 12 mn, and one 2 mn. All with different not local, not big boy companies. One has a Virginia phone #, house is in MD. One is listed by MD-REO Reality.

Do banks bid out REO listings? Even if the out of area REs are on the MLS system the other children will not play with them.

Mightn’t this news be a Wii bit deflationary?

Sept. 24, 2009, 10:10 a.m. EDT · Recommend (2) · Post:
Nintendo cuts price of Wii console to $199
Reduction follows similar moves by Sony, Microsoft as game sales slow

By Dan Gallagher, MarketWatch

SAN FRANCISCO (MarketWatch) — Nintendo Ltd. cut the price of its popular Wii console by $50 to $199, the latest price reduction by video game console makers who have watched sales fall sharply over the last six months.

Late Wednesday, Nintendo (NTDO.Y 33.32, +0.54, +1.65%) issued a statement announcing the reduction, which had been widely expected across the gaming industry after rivals Sony Corp. and Microsoft Corp. scaled back the prices of their own consoles earlier this year.

It is the first time the Wii has seen a price reduction since its initial launch on the market in late 2006 — the longest a game console has ever gone at its initial price.

“We expect the price cut, coupled with the release of several key first-party titles, to spur demand for the console, helping to provide the console with some momentum going into the holiday season,” Edward Williams of BMO Capital Markets wrote in a note to clients Thursday.
…

Fed Cuts TAF, TSLF Loan Amounts
MarketWatch Pulse September 24, 2009

NEW YORK — The Federal Reserve Bank of New York said Thursday it would again reduce the amounts of credit offered under its Term Auction Facility and Term Securities Lending Facility, citing continued improvements in financial market conditions. The amount of some TAF loans will be reduced as low as $25 billion, down from $75 billion in the most recent operations and $150 billion offered during worse periods in the credit crisis. The 28-day operations scheduled through January will continue to be for $75 billion to account for possible year-end pressures. TSLF offerings will be reduced to $50 billion in October and $25 billion in the subsequent three months, after already reducing the frequency of operations and the type of securities accepted for exchange.

Yo stimulator bucks at work… 25,000 new gubmint jobs, sweeet! That’ll get er done.

Stimulus funds boost number of federal jobs
USA TODAY
WASHINGTON — The $787 billion economic recovery package also is stimulating growth in the federal government as agencies hire thousands of workers and spend millions of dollars to oversee and implement the package, according to government records and spokesmen.

Fourteen of the top federal agencies responsible for spending under the American Recovery and Reinvestment Act say they’ve hired about 3,000 workers with stimulus money. That’s helped fuel the continued growth of the federal government, which increased by more than 25,000 employees, or 1.3%, since December 2008, according to the latest quarterly report. During that time, the ranks of the nation’s unemployed increased by nearly 4 million, Labor Department statistics show.

Overall, there are about 2 million federal workers, the data show.

Thirteen agencies that report stimulus-related administrative expenses separately on their weekly spending reports say they’ve spent $186.8 million so far on salaries and other overhead. Those agencies have reported spending $46.1 billion in stimulus funds overall.

The new workers are tackling such tasks as managing stimulus-funded contracts, processing Social Security benefit claims and investigating possible cases of fraud and waste. They’re overseeing about $288 billion in tax cuts and nearly $500 billion in federal spending, much of it in the form of transfers to state governments for education, health care and jobless benefits.

Sept. 24 (Bloomberg) — New U.S. home sales may jump 30 percent next year, buoyed by low mortgage rates and a “greater than 50 percent probability” that Congress will extend a tax credit for first-time buyers, Goldman Sachs Group Inc. said.

New home sales in California will lead as property values rise and transactions climb to more than 525,000 nationally, analysts led by Joshua Pollard wrote in a note to investors. The firm raised its recommendation for D.R. Horton Inc., Meritage Homes Corp., Toll Brothers Inc. and M.D.C. Holdings Inc.

I just ran out and bet it all on these companies. Thanks Goldman Sachs.

what does this mean?

http://news.yahoo.com/s/afp/financeeconomyg20forexuschina

This Shit is Going To Explode Paradigm of Thought.

Question…

When?

I say 3 years.

(Money pumpin’ works wonders, for a period of time).

The Financial Times
Volcker warns of ‘intractable’ problem with reforms
By Tom Braithwaite

Published: September 24 2009 13:52 | Last updated: September 24 2009 18:32

Paul Volcker, the former Federal Reserve chairman and adviser to the White House, on Thursday expressed continued doubts over the Obama administration’s plan for financial regulatory reform and lent his support to new taxes on banks.

In a sign of the on going struggle over the detail of the bill, Mr Volcker warned that the plan to deal with systemically important financial institutions contains a seemingly “intractable” problem — how to draw the dividing line between companies seen as ‘too big to fail and those that are not.

Large companies, under close supervision and held to tougher capital standards by the Federal Reserve, “will feel competitively hobbled by stricter standards. In times of potential crisis, it would be the institution left out of the ‘too big to fail’ club that will fear disadvantage”.

His testimony at the House financial services committee followed Tim Geithner, US Treasury secretary, who on Wednesday defended the plan to deal with the failure of large institutions – such as Lehman Brothers and AIG – whose collapse would threaten the entire system.

Although Mr Volcker is broadly supportive of the administration’s plan, which is facing challenges from politicians, banks and regulators, he said he was concerned that “moral hazard” was reinforced, not reduced, in the administration’s scheme for dealing with large interconnected institutions, which other observers have warned could benefit from an implicit government guarantee.
…

A big philosophical rift is developing between the former Fed chairman and the current Treasury Secretary. It will be interesting to see whether Volcker’s concerns affect the outcome.

In his evidence to Congress this morning, he (Paul Volcker) zeroed in on the problem that a range of big institutions, now including investment banks such as Goldman Sachs and Morgan Stanley, as well as traditional commercial banks and hybrids such as JP Morgan Chase, are being designated as “systemically important”.

The clear implication of such dsignation, whether officially acknowledged or not, will be that such institutions, in whole or in part, will be sheltered by access to a federal safely net in time of crisis; they will be broadly understood to be ‘too big to fail’ . . .

In fair financial weather, the important institutions will feel competitively hobbled by stricter standards. In times of potential crisis, it would be the institution left out of the ‘too big to fail’ club that will fear disadvantage.

Compare that with the evidence of Tim Geithner, the Treasury Secretary, yesterday:

Identification of a firm as a Tier 1 financial holding company will not convey a government subsidy - it will be no guarantee of extraordinary governmental assistance in the event of financial distress. To the contrary, it will be a guarantee of substantially stricter supervision and regulation by the government - an intensity of government oversight that will serve as a strong disincentive for forms to become too big, complex, leveraged and interconnected.

Is the fed planning on becoming US landlord?

U.S. Economy: Existing-Home Sales Unexpectedly Fall

Stocks fell on concern the housing market remains dependent on government tax credits and purchases of housing debt by the Federal Reserve. The central bank yesterday said it would extend its program to buy $1.25 trillion in mortgage- backed securities, as well as $200 billion in agency debt, through March while noting that “housing-market activity has increased.”
“The improvement in the housing market is not going to be a smooth rise, but a choppy, upward trend,” said Zach Pandl, an economist at Nomura Securities International Inc. in New York, who projected sales would fall. “The real test will be if the market can weather the end of government stimulus.”

http://www.bloomberg.com/apps/news?pid=20601087&sid=aIHod.Mpqglk

Aw crap, now the prisoners may die of pig flu…

Alcoholic hand gel removed from prison after inmates use it to make ‘hooch’ Daily Mail

Alcohol hand gel used to combat swine flu has been banned from a jail after inmates got drunk on the liquid soap.

The hygiene gel dispensers were introduced on wings to prevent the spread of swine flu earlier this month.

But within hours crafty inmates had started drinking the liquid soap, mixing it with fruit, sugar and water to make the alcoholic drink known as hooch.

There were reports that one prisoner was so intoxicated that he started a fist fight with another inmate at HMP The Verne, although this was denied by prison officials.

Now the governor of the Category C jail on the Isle of Portland in Dorset has banned the detergent.

A source at the Verne claimed: ‘The cleansers were put out on a wing to combat swine flu but as soon as they were put out, the prisoners started drinking the stuff straight out of them.

‘There was a fight after one of the prisoners got violent after drinking the gel.’

Andy Fear, a member of the Verne’s Prison Officer’s Association committee, said ‘We were informed of an incident within hours of the gel being available.

‘In one of the wings it is believed an inmate was using it inappropriately. When you get something called alcohol gel you can see what is going to happen.

‘We had concerns when we heard these were being given to inmates. You don’t want drunk prisoners running around the prison.’

It’s going to be even harder to buy a condo in South Florida thanks to new FHA rule

By DANIEL VASQUEZ
South Florida Sun Sentinel
Wednesday, September 23, 2009

It may be a buyer’s market for those looking to purchase a South Florida condominium, but a new FHA rule putting an end to “spot approvals” for home loans may burst the shopping bubble and make it much more difficult to qualify for a loan.

By extension, the same rule may also mean more bad news for condo sellers, already suffering through a bad economy which has sent property values into the Dumpster, since it impedes buyers’ ability to purchase. And the financial pain could eventually spread to all Florida homeowners by way of higher property taxes, say experts.

What is happening: Beginning Nov. 1, a new Federal Housing Administration rule goes into effect that disallows a loan process called “spot approvals,” which gave loan underwriters the authority to approve individual units rather than an entire building.

The reason such authority was so helpful to buyers is the cost and paperwork for a condo association to get an entire building approved by the FHA is onerous at best, costing tens of thousands of dollars for appraisals, structural engineering reports and other reports.

Spot approvals, in comparison, only require an association representative to spend 15 minutes filling out a single-page form. Those loans are prized by buyers because they generally have lower interest rates and require much lower down payments, about 3.5 percent of the purchase price compared with conventional bank loans, which may require up to 30 percent down.

Now, without spot approvals, condo buyers and owners will not be able to get an FHA loan for units in a non-approved building and will have to rely on conventional bank loans or pay cash, said Theresa M. Schmitz, a senior underwriter for Amerifirst in Fort Lauderdale.

“This poses a potential downward trend in condo values because many people can’t afford to put such a large down payment down on a condo,” Schmitz said. “And if there is a smaller pool of buyers, the market value of condos will decline even further and a condo unit will only be worth what a cash buyer is willing to pay for it.”

Ripple effect: It also stands to compound the current real estate market problems that have caused cities to raise tax rates, Schmitz said. “Single family homeowners may think this doesn’t affect them, but indirectly it will. When the condo assessed valuations plummet, our collective tax base will decline. Single family homeowners will pick up the slack with a hike in the millage rates and property taxes.”

When will decoupling start to show up in the form of independence in trans-Pacific share price movements? This article goes so far as to blame Japanese stock price declines on the bad US home sales news. That seems like quite a big stretch.

Asian shares skid south

Asia stock markets suffer in the wake of a downbeat day on Wall Street, with Japanese shares leading steep declines.

Developments on the fairway ain’t all that no mo’…

* The Wall Street Journal
* REAL ESTATE
* SEPTEMBER 24, 2009

Teed-Off Residents Drive Developer to Brink of Ruin

By WILLIAM M. BULKELEY

Bonita Bay owner Michael Lissack, shown above with a colleague, has accused Bonita Bay of owing back taxes on golf fees.

NAPLES, Fla. — It’s not easy living on a golf course.

Bonita Bay Group, once a premier developer of upper-crust golf communities in this upper-crust town, is on the verge of collapse. The company says it will be forced to file for bankruptcy if it has to refund $245 million in golf-club membership fees some homeowners are demanding, in a battle that’s pitting residents against each other and against the company that sold them lavish dream homes during the height of the boom.

Through the 1990s and the earlier part of this decade, Bonita Bay was regarded as one of the leading developers in the Naples area, which has the highest per capita income of any locale in the country except Stamford-Greenwich, Conn. Bonita Bay launched seven Naples-area communities where houses sold for up to $12 million and came with access to exclusive golf clubs with restaurants, tennis courts and pools. Its homeowners have included Richard Schulze, the billionaire chairman of Best Buy Corp., opera diva Kiri Te Kanawa and New Jersey Nets President Rod Thorn.

Clouds Over Bonita Bay

Today, like many other Sunbelt developers, Bonita Bay is being squeezed by debt and plunging sales. But its biggest problem is a dispute over the deposits homeowners plunked down for memberships in the golf clubs, a marina and other clubs. Many members want to quit the clubs and get their money back for reasons ranging from cheaper golf elsewhere to the desire for ready cash. Their membership agreements say the deposits — up to $185,000 per member — are refundable on demand, a relatively unusual stipulation homeowners say was a big part of the appeal of joining.

Yet Bonita Bay says the agreements also stipulate that the rules “may be amended from time to time,” thus allowing it to cancel the refund policy at its discretion — and that at any rate, it can’t pay the money.

Angry residents have filed at least 15 lawsuits against Bonita Bay seeking the return of their deposits and accusing the company of civil fraud. They say the right to amend the rules doesn’t apply to the refund policy. The Florida attorney general, responding to a citizen complaint, is investigating Bonita Bay to see whether the way it sold and refunded membership deposits was a Ponzi scheme. One Bonita Bay resident and former Wall Street executive, Michael Lissack, has filed a whistle-blower’s complaint against the company with the Internal Revenue Service, saying it owes back taxes on profits it made by holding the deposits.

Bonita Bay’s bind is one of the strongest signs yet that putting up houses around fairways — a hallmark of the real-estate boom — has lost its cachet. Several other developers of golf communities have already entered bankruptcy proceedings, including the high-end Winchester Country Club in Auburn, Calif., and Promontory in Park City, Utah.

In an interview, Bonita Bay Chairman David Lucas scoffed at the idea that the company is running a Ponzi scheme — in which investors are paid returns from money that comes from later investors — or doing anything else that is wrong. Mr. Lucas says the deposits were used to meet operating costs, and aren’t taxable. He says the developer is simply in a financial bind as a result of bad land purchases combined with the real-estate downturn, and that members of his wife’s family, which owns the closely held company, have poured in funds to keep Bonita Bay going. He says losses in the past three years have “completely wiped out” prior profits.

Bonita Bay has already closed the golf club at Twin Eagles, its latest development, where most of the lots are unsold and weeds are sprouting from the bunkers. In addition to threatening a bankruptcy filing if it has to refund deposits at the other clubs, the developer says it might have to shut down the clubs entirely unless residents come up with millions of dollars to buy them — a prospect that has homeowners doubly steamed.
…

* The Wall Street Journal
* LETTERS
* SEPTEMBER 25, 2009

Acorn’s Problems Are More Than a Few Bad Apples

In response to your editorial “Acorn Live!” and John Fund’s op-ed “Acorn Runs Off the Rails” (both Sept. 16): It now should be apparent that community organizers such as the Association of Community Organizations for Reform Now are subject to the same malignancy that plagues Wall Street and Washington—the seductive nature of working with other people’s money (OPM). It is human nature to behave differently when someone else is footing the bill. That’s why investment managers and mutual fund companies are heavily regulated and held to a high fiduciary (or “prudent man”) standard. Lack of internal risk controls and regulatory due diligence are why Bear Stearns, Lehman, Fannie Mae, Freddie Mac, Countrywide, etc., made imprudent bets that ultimately will be paid by taxpayers.

It was clear a year ago that Acorn had more than a “few bad apples” involved in voter registration fraud, yet the organization (and its affiliates) continued to receive tens of millions of dollars as well as an assignment to help conduct the 2010 U.S. Census. It also was clear that Acorn had lobbied aggressively and effectively over many years for subprime housing loans to low-income borrowers, adding to, if not causing, the mortgage market meltdown.

Now, several more Acorn employees are caught on videotape offering creative ideas for financing a brothel made up of child prostitutes from Central America. The focus, however, should not be on the reprehensible behavior of this latest barrel of Acorn bad apples. Instead, any community organizers and their affiliates (and particularly Acorn) that receive government funds ought to be as heavily regulated as banks and subject to periodic audits—perhaps conducted by an ordinary group of taxpayers who are the source of OPM. Oh, and while it’s at it, Congress might want to adopt some prudent-man fiduciary standards for its own members that will hold them accountable the next time they dole out large amounts of OPM to an organization full of rotten fruit.

R. P. Graham

Orlando, Fla.

The Fed has inflation fears on the boil. Is this part of their plan?

The Frightening Spike in the Price of Gold

The price of gold has been hanging near its historic highs, selling for more than $1,000 per ounce. In times of crisis — the terrorist attacks of Sept. 11, 2001, the collapse of Bear Stearns in spring 2008 — gold has spiked, as fearful investors grabbed for something they could hold onto.

But that’s not the case today. The U.S. is technically out of its Great Recession, Fed Chairman Ben Bernanke recently said. New jobless claims unexpectedly fell last week. The stock markets are riding a 50 percent rally since March. And yet, gold keeps going up.

That means a growing number of investors, traders — and, most troublingly, foreign governments — don’t believe in the strength of the U.S. dollar, analysts warn. People buy gold when there’s fear.

“It’s not the fear of an event of some sort,” such as a terrorist attack, said Peter Boockvar, equity strategist at Miller Tabak, whom I spoke to this week. “It’s the fear that the piece of paper in your pocket you call money will devalue over time.”
…

The madness continues. A $299k single acre parcel of RAW land in Kitsap County, WA (across the water from Seattle) is pending sale, on a golf course in a “luxury” community which is in foreclosure. This bubble’s got legs. Wake me up in 15 years.