The Housing Bubble

Good Morning No coffee this morning. Just like the cash for clunkers program, drinking coffee makes us believe that caffeine gives us energy, it actually borrows energy from the future.

When you drink a cup of coffee, the coffee chemically stimulates your Sympathetic nervous system. As a result, your level of adrenaline and other stress hormones quickly begin to rise. You don’t get something for nothing, unfortunately and so later in the day your energy level begins to fall even lower than it was when you started. There is a good cure for that low feeling – another cup of coffee. And this is one reason why stimulants are so addictive.

So I am switching to herbal teas and grain coffee such as Bambu, Pero, Postum, Cafix and Inka. Btw they taste shall we say interesting.

Builders gotta build…

Housing, Leading Index Probably Improved: U.S. Economy Preview

Oct. 18 (Bloomberg) — Homebuilders and real-estate agents were probably busier in September, and the index of leading indicators increased, adding to evidence the next U.S. expansion has begun, economists said before reports this week.

Construction started last month on 610,000 houses at an annual rate, the most since November, according to the median forecast of 53 economists surveyed by Bloomberg News before an Oct. 20 Commerce Department report. Sales of existing homes rose to a two-year high and the gauge of the economy’s future course advanced for a sixth month, other reports may show.

Housing is stabilizing as Americans take advantage of government programs, including credits for first-time buyers and efforts to lower borrowing costs, aimed at stemming the recession. Some Federal Reserve policy makers remain concerned the economy will relapse should the stimulus be removed too soon, signaling interest rates will remain low for months.

“The housing market is recovering from very depressed levels,” said Zach Pandl, an economist at Nomura Securities International Inc. in New York. “We’re definitely emerging from recession, finding a bottom in some sectors, but the recovery is still uneven and it’s not particularly vigorous.”

Building permits, a sign of future activity, may have risen to a 590,000 pace, also the highest since November, the Commerce Department’s report on housing starts may show, according to the survey median.

In April, builders broke ground on new homes at a record- low 479,000 pace.

Leading Index

The index of leading economic indicators, due from the New York-based Conference Board on Oct. 22, may have risen 0.9 percent, according to the survey of economists. The gain was probably driven by the increase in building permits, a drop in claims for jobless benefits and an improvement in consumers’ outlooks, economists said.

A sixth consecutive gain in the leading index would mark the best performance since early 2004.

WOO-HOO! At this rate everyone will be working in no time!

Administration: Stimulus kept or created 30K contracting job
USA TODAY

WASHINGTON — Contractors that split $16 billion in federal stimulus money created or saved 30,383 jobs, according to government reports published Thursday that for the first time tally the plan’s impact.

The figure represents only a narrow slice, about 2%, of Obama’s $787 billion economic recovery plan. But it marks the first hard count of the jobs preserved by the spending plan. They are based on reports by about 5,200 companies hired directly by the federal government for work ranging from small park repairs to multibillion-dollar nuclear cleanups.

The impact varied widely from state to state. The reports, released by the administration’s Recovery Accountability and Transparency Board, identified almost 4,700 full-time jobs in Colorado, but fewer than six in Rhode Island, which had the nation’s third-worst unemployment rate in August. In Michigan, which had the nation’s highest unemployment rate, the contracts created or saved fewer than 400 full-time jobs.

Obama has said the stimulus will create or save 3.5 million jobs by the end of next year, but measuring that impact has been difficult. The White House Council of Economic Advisors estimated last month that the stimulus had retained 1 million jobs that otherwise would have been lost. Overall, the economy has shed more than 2 million jobs since Obama signed the stimulus package in February.

This fellow must live under a rock in the wilderness, it’s all good out there. Jobs are being “saved or created” builders are back to building, stimuli is a flowing all over the place. The dollar is strong, gold is cheap,the DOW is on the mother ship heading toward the moon, etc,etc…

Recession Will Be ‘Full-Blown Depression’: Strategist
18 Oct 2009

This global recession will turn into a “full-blown depression,” Nicu Harajchi, CEO of N1 Asset Management, said Friday, adding that global stimulus hasn’t come down to Main Street.

Wall Street is making money, while consumers aren’t, Harajchi told CNBC.

“We have seen the G20 coming out with cross border capital injections of $5 trillion this year… But a lot of this money hasn’t really come down to Main Street,” he said.

“When it comes down to corporate America, corporate Europe or even in Asia, in Japan, we are not seeing Main Street making any money,” he said. “Consumers are losing their jobs. They are struggling with their mortgages, with their credit. And we are just seeing this continuing.”

The $5 trillion injection is “monetary expansion,” according to Harajchi. “At some point, which we believe to be 2010/11, some of the central banks are going to recall some of that money and that will turn from monetary expansion to monetary contraction.”

He also said he doesn’t see the corporates or the public “being able to pay back that debt.”

“We see 2010 becoming a much more risky year than 2009,” he said.

Home » Business Business

Bankruptcies up nearly a third this year in Wisconsin
By Paul Gores of the Journal Sentinel

Posted: Oct. 17, 2009

“Unable to stay current on monthly bills and other debts in the face of lost income and a recession, an increasing number of people in Wisconsin are giving up and declaring bankruptcy.”

“…Among those declaring themselves insolvent are small-business operators and real estate owners who have burned through retirement savings and home equity in the hope that the economy would turn around in time to save them, bankruptcy attorneys said.”

http://tinyurl.com/yhqkbwd

Do any posters have thoughts or opinions on PEOs (Professional Employer Organizations), staff leasing companies, etc? Upside and downside for employees? (I know what all the upsides are for the employers, plenty of public relations blather about that on the Internet). Buddy of mine was working a part time gig for a little extra cash and then all of a sudden the company popped this on him. Strange language in the contract about not being permitted to work out of state, they could reduce the pay to minimum wage at will, etc. He got a bunch of PR talk about benefits, etc., but the original company he was working for didn’t give him any benefits to begin with. Seems kind of fishy.

I thought I’d repost this from our reader in Spain from last night:

Cruzcampo

Hello friends.

We are living a very calm month in october. There’s not green shoots neither bad news. I thought this month became the reality, the bad news about the economy. But everything is still. I think is the calm before the storm. we’re aproaching to a new 1,5 dollar vs euro and 75$ the oil barril. But there’s no news. Our goberment have done a great job for cause good impression about economy is in recovery.

In spain we have a economist called Santiago Niño Becerra. Since 2006 he was predicting what now is happening. As he says, this is not a normal crisis but a sistemic crisis. And now we are living in the precrisis. The real crisis will become in 2010. Your spanish fellows are in a forum called “burbuja inmobiliaria” in this link “www.burbuja.info” and most of people there believe in things that Santiago says, not that goberment says.

If you know how to read spanish here you can read his articles: http://www.burbuja.info/inmobiliaria/burbuja-inmobiliaria/51307-articulos-de-santiago-nino-becerra-post-oficial.html

In anyway I go to translate the last article of SNB. Maybe is interesting for you. Sorry for my spelling mistakes, I’m not english and yesterday were too much beers.

Tomorrow.

It’s curious (no: it isn’t) that is emerging a new worry: inflation: as states continue to have injected and injecting massive amounts of money into the system, there may be a danger that the money, when recovery has occurred , triggering an inflationary surge.

This reasoning forget two elements: 1) inflation arises when consumption is greater than supply (I use ‘consumer’ and not ‘demand’ on purpose), and 2) prices can be reduced by improving productivity, and uses reasoning: the system will continue operating as it has worked up until now through interactions where monetary and financial manipulations of interest rates, money supply, trading and role of states, will remain the essence of economic scenario.

From the outset, I think what will come of this systemic crisis will be a completely different reality that has led to a systemic crisis we’re going to have to go (we’re going to have to go because it is inevitable because follows the evolution of things), why should I think?, because it is absurd that it becomes a situation identical to that which caused the crisis that produced the change. The latest example is the Great Depression.

Consequently, instruments that have so far been used in reality and the elements that have hitherto characterized the reality will change. These instruments were designed to avoid price increases occurred and turn them off, and reactivate the cyclical downturns that were unleashed, the aim was growth through consumption-global-with everything imaginable, so that the global-supply-of should not have any restrictions. The recent past and present are known.

But that happened in an atmosphere of wasted resources, inauthentic use of factors and virtual payment and collection of what is bought and sold. And the future, I think, is going to be just the opposite because that procedure, which has led to dramatic increases in GDP, though fictional, is exhausted.

Systemic change will emerge from this crisis have to do with efficiency and productivity, and the necessary consumption and supply measure, and with the goal of zero waste. In a scenario like that unemployment of labor as we understand it today if it is a problem, but inflation?.

Of course it is always possible to artificially inflate prices by regulating the supply or via taxes to curb consumption spending for commodities is lower than it is, but that inflation would be another completely different inflation.

(It is said. In the USA the support will continue until “well into 2010″ (El País 10.10.2009, p. 28), while the OECD said that between the second and third quarters of next year, Spain will grow positively, but USA has it that painful, and for completing the arrangements, the Index of Consumer Confidence in the kingdom in September fell 9.2 points reaching the same level as showed in June, with the section ‘Expectations’ the most dropped: 10 , 8 points, leading to the perception of the economic situation of Spain recede 12.9 points (Dossier Econòmic 10-16.10.2009).

My impression (mine) is that, who can / have to, are tinkering with reality. ‘Are we being misled? “Says the fund, not that I know, but what if I think is that with Adobe Photoshop type software is actually more Light composing a less aggressive, more digestible. After tomorrow it will not do any good, of course, but tomorrow. Tomorrow).

(Lacartadelabolsa you’ve read in a long, long: Spanish financial institutions have sub-prime: loans, real estate and not to be outstanding as the working population will lose their jobs and businesses when it begins to rain cancellations orders and non-payments, said that such was the subprime Spanish and good: it’s coming to light. Lately been Moody’s, but a reader sent me something much wilder: this: FT Alphaville »Blog Archive» Are spanish banks hiding their losses?. Of course, all this can be believed or not deny, qualify, but the debts are financial institutions are there, as everyone must have income to pay their debts, if not … ).

(In a few days will discuss this matter in greater detail, is an advance. I do not think we are in deflation, but we are moving towards a deflationary environment, outright; is your cause?, Sinking consumption (almost all); ” the reasons for the collapse?, falling final monetary income (money you have in your pocket to reach the end of the month) and depletion (long ago) of debt capacity. “Increased savings?, not at all: no-consumption, which is not the same, ie unable to consume: the saving is something thought, planned, non-consumption is something, yes, but the desperate).

Santiago Niño Becerra. Professor of Economic Structure. IQS Faculty of Economics. Ramon Llull University.

thank, google translater

From Bits Bucket For October 17, 2009, 2009/10/18 at 5:00 AM

We’re nearing the end of the redemption period that the former attorney has to repay her balloon note on the office that she borrowed money from my husband to buy when he was her clientv twelve years ago. Every time she goes to court & the state bar Ethics Commission she has lost. We’re expecting another lawsuit, but so far, nothing. Our attorney got sick of her abusive, ranting emails, so he blocked her a couple of weeks ago. She’s been warned to get her stuff out, and some of her larger possessions such as her desk, computer, and a few legal file boxes are gone, but the rest is just so much trasth, and looks like it’s going to be left there. We asked our attorney what we should do with any legal documents that are left behind, and he sent her a letter that told her we were not going to be responsible for storing her papers securely. We’re not a rental storage unit, anyway. We know she got the letter because she fired off several nutty, raving emails. I guess she wants us to store her junk in the office indefinitely, while paying the taxes and utilities on the place. No can do.
I found a couple of “clean-out” services on Craigslist today and we’ll be calling them to do a clean sweep. Our attorney, my husband, a locksmith, and a couple of county sheriffs will be doing the scheduled lockout toward the end of the month. We’re very excited. We’ve been paying off two sets of back taxes and it’s been an expensive summer. Luckily, our attorney takes monthly payments. We are quite good customers ( ! ), and are usually paid almost up-to-date, which I understand a lot of attorneys’ clients are not. Besides, he’s very excited to see the end coming to this saga, which was as much his as ours.
Somewhat surprisingly, we already have a professional interested in the office. He’s looking for a larger office space to possibly own, so we’re very pleased. He asked us for the address and wants to see it once we get in there. I hope it all works out. We just want to get this put behind us.

Trasth = trash. It might actually be trasth, for all I know. We have to peek in thru the little holes in the blinds at night to see what’s going on. No one is there, and it’s our office, so I guess we can peek in at it. Besides, we want to make sure she hasn’t broken holes in the walls, stripped the place, etc.

Based on the above article in Spain, plus many other warnings we’ve seen posted here, we’re smart to get out from under the office asap since are now able to foreclose on it. We’ll be able to do something else with the proceeds. We don’t want the office. There is some usual talk about “hanging onto it until the economy is better”, but we don’t want the burden. Besides, there is sooooo much empty office space out there.

WASHINGTON (AP) - What is $1.42 trillion? It’s more than the total national debt for the first 200 years of the Republic, more than the entire economy of India, almost as much as Canada’s, and more than $4,700 for every man, woman and child in the United States.

It’s the federal budget deficit for 2009, more than three times the most red ink ever amassed in a single year.
And, some economists warn, unless the government makes hard decisions to cut spending or raise taxes, it could be the seeds of another economic crisis. Horrific Deficit.

What Congress must do is to sharply increase taxes and violently cut spending in order to avoid worsening the economic catastrophe. What Congress does not have the courage to do is sharply increase taxes and violently cut spending. Mentioned this so you’ll know whom to blame for the disaster that looms dead ahead.

Peter Schiff is gearing up for a run for the U.S. Senate from Connecticut. I wish him luck. We need more people in Washington who understand the nation’s money mess and also know where the escape hatch is. A sensible economist in the Senate would be helpful.

“Foreign governments can lecture us all they want about the need for prudence but if they keep lending, we’ll keep spending. Any parent knows that if you give your child a curfew yet never impose any penalties when it’s violated, it will not be respected.

SP Times is hot today.

Ritchie Bros. still sellin’ ‘em
http://www.tampabay.com/news/business/realestate/article1044655.ece

Economists whistled all the way to the cliff
http://www.tampabay.com/news/business/article1044601.ece

Hope this doesn’t put them in a bad Moody:

http://www.mcclatchydc.com/227/story/77244.html

As the housing market collapsed in late 2007, Moody’s Investors Service, whose investment ratings were widely trusted, responded by purging analysts and executives who warned of trouble and promoting those who helped Wall Street plunge the country into its worst financial crisis since the Great Depression.

Instead, Moody’s promoted executives who headed its “structured finance” division, which assisted Wall Street in packaging loans into securities for sale to investors. It also stacked its compliance department with the people who awarded the highest ratings to pools of mortgages that soon were downgraded to junk. Such products have another name now: “toxic assets.”

I dedicate this link to OlyGal

http://www.tampabay.com/news/education/article1044637.ece

Gettin’ they nails did…

Epicentre contractor files bankruptcy.
WCNC

CHARLOTTE, N.C. — A construction company that didn’t pay subcontractors for work done on the Epicentre has filed Chapter 7 bankruptcy.

Now, hundreds of businesses could be out more than $5 million.

Chapter 7 bankruptcy is a liquidation. Legal experts say Chapter 7 typically means selling assets and using the money to pay its debts

However, Advanced Construction and Consulting’s bankruptcy filing lists no assets to liquidate.

Meanwhile, subcontractors, like Luna Stone, are left without payment.

Luna Stone held a ribbon cutting ceremony Friday, two years after it opened.

“We’re looking at teetering,” said co-owner Scott Codespoti.

The business isn’t sure how long it’ll be around.

“It’s been day to day,” said co-owner Karen Codespoti.

It’s been that way ever since Luna Stone didn’t get paid nearly $40,000 by Advanced Construction and Consulting for installing granite at the Epicentre.

Their company’s name is one of hundreds of businesses owed money by ACC, according to the bankruptcy filing.

“That’s a lot of pages,” Scott Codespoti said while rummaging through the paperwork.

In the filing ACC lists no assets and $5.1 million in liabilities.

“That’s a lot of money,” Codespoti said.

ACC previously said subcontractors would get paid once it got paid $1.8 million from the Epicentre’s developer, Afshin Ghazi.

Ghazi said that money wasn’t owed. ACC filed a lien for it.

A $1.8 million payment would still leave ACC more than $3 million in debt, according to the filing.

“It looks like they were using one job to pay for another job,” Codespoti said.

Ghazi also alleged that’s what ACC did.

Luna Stone’s owners realize they might never get their money.

“Doesn’t seem like anyone is going to get anything from ACC,” Codespoti said.

“I guess that’s the stress of doing business with the wrong people,” Karen Codespoti said.

As far as that ribbon cutting, Karen says why not? Sometimes a party takes the edge off of worrying, which is something she’s been doing for months.

“At least we tried and tried hard,” she said.
Luna Stone is now going after Ghazi to try to get its money.

Dumb questions of the day:

At what point did Megabank, Inc overthrow the US government? Or did they always run the government, and I am just now awakening from my long torpor to notice?

If Fast Eddie works for Megabank, Inc, and Megabanks only survive on government handouts, doesn’t that make Fast Eddie a socialist?

I looked high and low for an answer to my question in yesterday’s bits bucket about whether the Fed’s “No Megabanker Left Behind” zero interest loans constitute lending discrimination, and I saw no response by Polly or anyone else, so let me rephrase my question in the form of an example:

Suppose the head of some low-income minority household has lost their job, and hence the household is facing foreclosure. They could be rescued with the help of, say, $100,000 in the form of a zero-interest-rate loan from the Fed; in fact, they could pay off their entire mortgage balance with such a loan. Is there a way for this household to apply for a zero-interest-rate loan to pay off their mortgage loan, with a promise to repay the loan when they get back on their feet?

Please explain the difference between this household’s eligibility for zero-interest Fed-funded financing and Megabank, Inc’s eligibility. Is it the fact that this low-income household is not “too-big-to-fail” that makes them not qualify?

I need a little advice: I’ll be moving in a month and need housing. (I’m very specific about location.) How safe is it to rent a house a these days? I mean, to start renting a house. On Craigslist, I saw two cute SFH for rent for the same price as apartments, but I’m afraid the house will be foreclosed under me. I also think it’s a red flag when they don’t give the exact address (they don’t want me looking it up on county clerk or even Zillow?). PLus, one of the houses is obviously a failed FB flip.

I’m leaning toward a managed apartment complex for now just to get used to the area. That would give me time to dig deeper.

Here’s an item for a Sunday morning: oddball strange homes for sale.

http://finance.yahoo.com/loans/article/107967/strange-homes-for-sale?mod=realestate-buy

I wonder whether that “bat cave” house is poised to fall off the cliff in the next LA earthquake.

Red Rock Drive Castle
Phoenix, Ariz.
Listed with Remax/Excalibur

Year Built: 1977
List Price: $3,500,000
Average Listing Price in ZIP Code: $155,000

Talk about overbuilding for your zip code.

Do not rent in an apartment complex!
Or a condo complex unless it’s built like a fortress!

Will the 2010 census attempt to count how many families recently abandoned their homes?

Foreclosures pose challenge, cost to census count

Families who abandon home harder to track, more costly to tally

Associated Press

October 18, 2009
…
Director Robert Groves said he expects some of the census questionnaires mailed out in 2010 will land at empty homes in areas hard hit by the housing crisis. That means census workers will need to make more door-to-door visits to verify whether anyone lives at these addresses, and that costs more money.

“One absolutely unambiguous impact of the foreclosures is there’s going to be more people knocking on doors. It’s going to be more expensive to do that,” Groves told reporters during a visit to Los Angeles.
…
Groves said census workers will need to focus on reaching out to families that have doubled up with relatives until they can get back on their feet. He said many may believe their housing situations are only temporary, but they need to be counted wherever they are living next spring.

He also said census workers are paying extra attention to counting the ranks of the newly homeless, such as previously upper-middle-class families hit by the recession.
…

This was posted some year(s)? back on this blog, seems appropriate for a Sunday afternoon.
P.S. Very cool here in S.Carolina today, low tonight 38, damn cold for us, this time of year.

From Sterling Hayden’s autobiography Wanderer published in 1963, as cited in Wikipedia:

To be truly challenging, a voyage, like a life, must rest on a firm foundation of financial unrest. Otherwise, you are doomed to a routine traverse, the kind known to yachtsmen who play with their boats at sea… cruising, it is called. Voyaging belongs to seamen, and to the wanderers of the world who cannot, or will not, fit in. If you are contemplating a voyage and you have the means, abandon the venture until your fortunes change. Only then will you know what the sea is all about. I’ve always wanted to sail to the south seas, but I can’t afford it.” What these men can’t afford is not to go. They are enmeshed in the cancerous discipline of security. And in the worship of security we fling our lives beneath the wheels of routine - and before we know it our lives are gone. What does a man need - really need? A few pounds of food each day, heat and shelter, six feet to lie down in - and some form of working activity that will yield a sense of accomplishment. That’s all - in the material sense, and we know it. But we are brainwashed by our economic system until we end up in a tomb beneath a pyramid of time payments, mortgages, preposterous gadgetry, playthings that divert our attention for the sheer idiocy of the charade. The years thunder by, The dreams of youth grow dim where they lie caked in dust on the shelves of patience. Before we know it, the tomb is sealed. Where, then, lies the answer? In choice. Which shall it be: bankruptcy of purse or bankruptcy of life?

20k more job cuts at steelmaker

BERLIN - GERMAN steelmaker ThyssenKrupp will cut up to 20,000 more jobs in the next fiscal year after already eliminating 12,000 positions due to the financial crisis, a report said on Saturday.

‘Through disinvestments and restructuring, the company’s personnel will in the next fiscal year be reduced again by 15,000 to 20,000 positions,’ ThyssenKrupp chief Ekkehard Schulz told the daily Frankfurter Allgemeine Zeitung.

Most of the cuts will come from the sale of some branches of the group.

But between 2,000 and 2,500 jobs will also be eliminated from its administration in Germany and abroad, Mr Schulz said.

ThyssenKrupp cut 12,000 jobs in Germany, France, Britain and Romania in the 2008-2009 fiscal year which ended in September.

Oct. 18, 2009,
Positive news expected in housing reports

WASHINGTON (MarketWatch) — The U.S. housing market is coming off of its worst downturn in more than 60 years, boosted by a combination of market forces and government assistance, economists say.

Major housing indicators should rise again in September, according to a survey of top economic forecasters ahead of a relatively light week for economic data. Data on housing will dominate the headlines this coming week.

“We expect to see some positive news” on the housing market, wrote economists Brian Bethune and Nigel Gault of IHS Global Insight.

The turnaround in housing has been real. Since January, sales of existing homes are up 14% from the bottom and have risen in five of seven months and Since January, housing starts are up 23% and starts of single-family home are up 34%.

Some economists warn that new construction may weaken again, reflecting uncertainty about both the strength of underlying demand, and the impending expiration of Washington’s first-time home-buyer tax credit at the end of November.

The tax credit has enlivened the market, but the gains have been largely at the bottom end, where first-time buyers can afford to buy. The National Association of Realtors figures the credit will boost sales by about 350,000, while the homebuilders’ group thinks the net number of additional purchases will be 200,000.

Mr. Bear, I lost track…how many ground zeros & canary’s can there be without getting the fairytale message confused?

“Welcome to Ground Zero,” said Melinda Opperman, vice president at the Riverside branch of Springboard, a nonprofit counseling group that helps homeowners avoid foreclosure. “This is where the canary died.”

In wake of housing crisis, what lessons learned?:

http://www.reuters.com/article/gc03/idUSTRE59F3LJ20091016

It’s interesting the predictions from the Spaniard. Yes, worldwide the stock market may take a huge hit, which would make the 2008 to March 2009 crash look like a dent.

I think a 60% drop in stock indices in some developed nations may happen. A Dow 4,000, say. In such a case, I am taking a gamble that gold will once again perform the way it did from September 2008 to April 2009. That is, end the period higher than at the beginning, while stocks end the period lower than at the beginning.

Gold is insurance against economic crises. And if the people are right about their predictions, the deeper the crisis, the higher gold will go. If the people are wrong and some unforeseen positive event occurs to help the stock market, my 56% allocation in aggressive growth stock funds will do better than my 11% allocation in gold.

The worst thing I can do is to change my investment style everytime some nervous nellie pessimist or pump and dump optimist make a prediction of either extreme. A 56/11/33 stocks/gold/government securities allocation is perfect for me.

These are interesting times.

~AP The 99 bank failures this year compare with 25 last year and three in 2007. It’s the highest number in a year since 1992 during the savings-and-loan crisis, when 120 institutions collapsed.

The most severe financial crisis since the 1930s has hit banks large and small. With unemployment rising, consumer spending slack and businesses shuttered, experts say up to 400 more banks could fail in the next couple of years.

A comment in the Chinese press: “Obviously, foreign investors are not ATMs without limit. No wonder many experts worry that the [U.S.] debt bubble will be a greater crisis some day in the future.”

~ Xinhua~ writers Liu Lina, Liu Hong

The onset of the so-called Credit Crunch was in August 2007. It has already lasted for 26 months and still seems to be going strong. Does anyone have a realistic prediction of how much longer this will continue? And what would constitute a sign it is ending? I am thinking capitulation in the housing market would be a good indicator, but I am not sure when that will come about, either.

Finance and Economics

Credit in America
Slim pickings, no appetite

Oct 15th 2009 | NEW YORK
From The Economist print edition
Constrained lenders and wary borrowers explain falling levels of credit

Harvard’s Bet on Interest Rate Rise Cost $500 Million to Exit.

(Bloomberg) — Harvard University’s failed bet that interest rates would rise cost the world’s richest school at least $500 million in payments to escape derivatives that backfired.

Harvard paid $497.6 million to investment banks during the fiscal year ended June 30 to get out of $1.1 billion of interest-rate swaps intended to hedge variable-rate debt for capital projects, the school’s annual report said. The university in Cambridge, Massachusetts, said it also agreed to pay $425 million over 30 to 40 years to offset an additional $764 million in swaps.

The transactions began losing value last year as central banks slashed benchmark lending rates, forcing the university to post collateral with lenders, said Daniel Shore, Harvard’s chief financial officer. Some agreements require that the parties post collateral if there are significant changes in interest rates.

“When we went into the fall, we had some serious liquidity management issues we were dealing with and the collateral postings on the swaps was one,” Shore said in an interview yesterday. “In evaluating our liquidity position, we wanted to get some stability and some safety.”

Harvard sold $2.5 billion in bonds in the fiscal year, in part to pay for the swap exit, even as the school’s endowment recorded its biggest loss in 40 years, the report released yesterday said. This is the first time the university has detailed the cost of exiting its swaps.

Further Pressure

“Substantial losses” in Harvard’s General Operating Account, a pool of cash from which bills are paid, further put pressure on the school, the report said. The net asset value of the account fell to $3.7 billion from $6.6 billion during the fiscal year, according to the report.

On a beer run…

http://boortz.com/nealz_nuze/2009/10/beer-run.html

AURORA, Ontario, Oct. 16 (UPI) — A municipality north of Toronto is trying to accommodate Asian residents by letting them remove “unlucky” numbers from their street addresses.

The city council of Aurora, Ontario, voted this week to alter street addresses where possible to appease people from Eastern Asia who dislike the number four, the Toronto Star reported.

Marco Ramunno, the city’s director of planning and development services, told the newspaper the number four “has a bad luck connotation for people from East Asia,” and it was decided to allow renumbering of streets where there is a wide enough numbering gap.

The Star said in some Asian languages, the number four sounds like the word “death.” The number 14 is also considered unlucky by Cantonese-speaking Chinese, the report said.

As for the Western superstition of the number 13 being unlucky, Aurora eliminated it from addresses years ago, Ramunno said.

Ironically, the central telephone number for Aurora’s regional government ends with 4444, the Star said.

They should try this in the D.C. cesspool, in the spirit of ‘unity’. May be a vast out break of pig flu though.

SARAJEVO, Bosnia-Herzegovina, Oct. 16 (UPI) — The head coach of Bosnia-Herzegovina’s national soccer team said he is boosting team unity by having players kiss one another on the lips.

Miroslav Ciro Blazevic wrote in a column on a Croatian news Web site that team bonding is an important part of his World Cup victory strategy, The Daily Telegraph reported Friday.

“I take two of my players and tell them, ‘Love him! Kiss him!’ and he kisses him,” Blazevic wrote. “I tell them they have to kiss each other straight to the lips.”

“The secret of my success is in a unity of a squad. You can’t do anything without an atmosphere in a team,” the coach wrote.

The kook wing of the dim party is none to pleased… These folks are great entertainment.The perma-pissed are a hoot.

Huffington calls for Biden to resign over Afghan troop build up.

As the war effort in Afghanistan faces increased resistance from the Taliban on the ground and from many in the U.S. Congress, political news personality Arianna Huffington suggests Biden should resign if Obama agrees to more troops.

Biden’s position has caught the attention of the more liberal wings of the Democratic party - who outright oppose the conflict. Political news personality Arianna Huffington used her blog site to suggest that Biden resign from his position should the request for additional troops in Afghanistan go through.
Huffington cites a Newsweek piece in demonstrating how Biden compares the war in Afghanistan to the conflict in Pakistan, drawing an uneven line among U.S. investments in both challenges.

See how easy it is, what’s with the global warming whiners…

Moscow Mayor Promises a Winter Without Snow
Time.com

Pigs still can’t fly, but this winter, the mayor of Moscow promises to keep it from snowing. For just a few million dollars, the mayor’s office will hire the Russian Air Force to spray a fine chemical mist over the clouds before they reach the capital, forcing them to dump their snow outside the city. Authorities say this will be a boon for Moscow, which is typically covered with a blanket of snow from November to March. Road crews won’t need to constantly clear the streets, and traffic - and quality of life - will undoubtedly improve.

The idea came from Mayor Yury Luzhkov, who is no stranger to playing God. In 2002, he spearheaded a project to reverse the flow of the vast River Ob through Siberia to help irrigate the country’s parched Central Asian neighbors. Although that idea hasn’t exactly turned out as planned - scientists have said it’s not feasible - this time, Luzhkov says, there’s no way he can fail.
Controlling the weather in Moscow is nothing new, he says. Ahead of the two main holidays celebrated in the city each year - Victory Day in May and City Day in September - the often cash-strapped air force is paid to make sure that it doesn’t, well, rain on the parades. With a city budget of $40 billion a year (larger than New York City’s budget), Moscow can easily afford the $2-3 million price tag to keep the skies blue as spectators watch the tanks and rocket launchers roll along Red Square. Now there’s a new challenge for the air force: Moscow’s notorious blizzards.

“You know how every year on City Day and Victory Day we create the weather?” Luzhkov asked a group of farmers outside Moscow in September, according to Russian media reports. “Well, we should do the same with the snow! Then outside Moscow there will be more moisture, a bigger harvest, while for us it won’t snow as much. It will make financial sense.”

It sounds like the Bank of Canada is in the bubble reflation business, too. Are they a private bank, like the Fed, or a government entity? I am wondering if Canada has a federal law against price fixing like the US does?

House market bubble could bring quick end to low interest rates
By Julian Beltrame (CP) – Oct 7, 2009

OTTAWA — The Bank of Canada’s efforts to spark a rebound in the domestic housing market may be working too well.

A new TD Bank report shows house sales and prices have defied gravity during the severe economic recession and are poised to end 2009 at higher levels than they were before the downturn hit Canada last fall.

Economists credit the central bank’s policy of slashing interest rates the past year with reviving a dormant housing market - perhaps too much, too fast - leading to speculation that bank governor Mark Carney may have to reverse course and raise rates earlier than expected.

“We’re not calling what we see presently a housing asset bubble,” says TD economist Grant Bishop,

“We think it will moderate, but should it fail to moderate, it will no doubt be concerning to the bank.”
…

How can a bank which has lost multiple billions of dollars possibly afford to pay bonuses and also uphold their fiduciary duties to shareholders? I am really missing this guy’s point.

The Financial Times
Barclays chief warns on regulation
By Patrick Jenkins, Banking Editor

Published: October 18 2009 23:14 | Last updated: October 18 2009 23:14

The chairman of Barclays has warned that Britain’s banks will be damaged if regulators are too rigorous in their implementation of a global crackdown on bonuses and capital requirements while other nations, such as the US, are lax.

“There is the real risk of regulatory arbitrage,” Marcus Agius said in a video interview as part of the Financial Times’s new series The Future of Finance.

“The same principles will apply in different ways in different capital markets with different outcomes. This is a global financial system. It is fungible. So I am very concerned there should be a level playing field.”

In particular, Mr Agius said, the communiqué from last month’s G20 meeting, ruling that the bulk of bonuses should be deferred over three years rather than paid upfront, was “susceptible to different interpretations . . . Regulatory gaming certainly wouldn’t be good for the City of London.”

The US Federal Reserve has indicated it sees one G20 recommendation – that 40-60 per cent of bonuses should be deferred – as an “example” rather than a binding proportion.

Mr Agius’s warning comes as banks that have prospered recently gear up to pay near-record bonuses for this year. Goldman Sachs last week said it was on track to pay its staff an average of nearly $700,000 (£428,000).

Mr Agius warned regulators not to impose excessive additional capital requirements. “As long as the banks are not nationalised, and are operated as commercial companies, they have to generate enough returns to satisfy their shareholders. . . The next time the banking system wants capital, it won’t be supplied [if] the potential new investors [don’t] see the [attraction],” he said. “One of the other consequences will be that credit will become more expensive and [that] is not conducive to . . . a return to economic growth around the world.”
…

* OCTOBER 18, 2009

Eighty Years After the Great Crash — ‘Is It the ’30s Again?’

By BRETT ARENDS and DAVE KANSAS
[Sunday Journal WSJ dot com]

Editor’s Note: It was the worst thing to happen to the U.S. since Fort Sumter. October, 1929. Wall Street crashed and helped drive the country into the Great Depression—a deep economic and spiritual wound that has afflicted three generations of Americans. Eighty years later, as the country struggles through the harsh aftermath of another crash, two Sunday Journal contributors mark a grim anniversary and weigh the question that haunts everyone: “Is this the 1930s all over again?”

Markets and the economy look less cataclysmic than they did earlier this year. And so they should, following a torrent of monetary easing.

But that doesn’t mean happy days are here again.

If you want a second opinion, don’t look at the Dow Jones Industrial Average. Look at three other markets: bonds, gold and the dollar. All of them are flashing amber, or red.

Take the bond market: Yields on U.S. Treasurys have collapsed to historic lows. The 30-year bond is yielding just over 4.2%, well below long-term averages. This is usually a strong signal of tougher times ahead. It’s almost impossible to reconcile this with the stock market’s sunny vision of a swift economic rebound.

Meanwhile, the dollar has been slumping on world markets. It has been the cornerstone of the global economy for nearly a century, but is quickly losing its credibility. No wonder gold, in its stead, has been surging to new highs.

These ominous signs should hardly surprise us. Despite the cheerleading in Washington and on Wall Street, we have barely begun to address the fundamental problems that led to the crisis in the first place.

Americans (along with many other Westerners) are hocked up to the eyeballs. When compared with the size of the economy, U.S. debt levels are off the charts.

That’s true for government, corporations and ordinary families. Thirty years ago, the average U.S. household had debts equivalent to about 32 weeks’ income. Today it’s 59 weeks.

That’s why comparisons with previous recessions ring so hollow. The U.S. came out of the slumps in the early 1980s and early 1990s with much stronger balance sheets. Households and corporations had much greater ability to borrow and spend.

The last time the economy tried to climb out of a deep slump while already this deeply in debt was…the 1930s.
…

BUTTE AMERICA
4:51
In this clip, the Granite Mountain mine fire killed 168 miners, sparking a strike. BUTTE, AMERICA premieres Tuesday, October 20 PBS. Hosted by Maggie Gyllenhaal, t
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The good professor is back to being bear. Maybe he should just pick one side and stick to it?

Professor Robert Shiller: “Irrational exuberance is back in both the Stock and Housing market”

Posted Oct 19, 2009 12:30pm

Are we on track for a repeat of irrational exuberance?

With the stock market up more than 50% since March and the Standard & Poor’s Case/Shiller Index on the rise for the last three months, it’s a worry, says Yale Professor Robert Shiller. “Somehow we got into this really speculative mentality and I don’t think we’re out of it yet.”
Given the current economic environment, “these booms [in the housing and stock markets] that we’re seeing now can’t be trusted to continue,” Shiller tells Tech Ticker in the accompanying video, taped at last week’s Buttonwood Gathering. (Click here for part one of the interview.)

The author of Irrational Exuberance and Animal Spirits characterizes the stock market rally as an “amazing rebound” without much historic precedence, “you have to go back to the Great Depression to see such a turnaround in the stock market.”

According to his cyclically adjusted P/E valuation model - stock price divided by average 10-year earnings - stocks are overvalued today, but “not massively overvalued.”

The market’s rebound isn’t likely to be derailed by valuation in the short term, Shiller says, but if one looks to the classic bear market rally of 1933-1937 as a guide, stocks may eventually crater as they did then.

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