The Housing Bubble

Happy Solstice Day, and I have a question for you all:

Do you think the housing market will come back after the Souper Bowl?

And if so, in which year?

Dec 15 2009, 10:42 am by Daniel Indiviglio
Was Too Big To Fail Really The Problem?
…
I have trouble answering this question in the affirmative. Let’s say that all of the banks who received bailout money had been able to fail. Well, um, we’d have very, very few banks left — and zero investment banks. Citi, Bank of America, Wells Fargo, Goldman Sachs, Morgan Stanley, JP Morgan and probably over a hundred more regional banks would be gone. So would some finance companies like Capital One and American Express. All of these institutions received bailout money.
…
The trouble is that this writer is dumber than a board (or at least he appears to be from this article). Hence cannot even envision a world where investment banks are smaller, more competitive, and less of a threat to the global economy if they blow up than members of Wall Street’s Megabank, Inc cartel. Bankmail needs to be made a crime so that too-big-to-fail Megabanks can no longer fleece American taxpayers with their collapse-now/collect-bailouts-soon business plans. Perhaps the Congressional auditors could check with the Fed whether their bank regulators have considered the possibility that too-big-to-fail bailouts are part of Megabank, Inc’s business plan?

* The Wall Street Journal
* DECEMBER 21, 2009, 12:30 A.M. ET

FOCUS: Fears Of Moody’s Downgrade Weigh On Greek Markets

(This story was originally published Friday)

By Alkman Granitsas
Of DOW JONES NEWSWIRES

ATHENS (Dow Jones)–Fears of another ratings downgrade, this time by Moody’s Investors Service, are weighing on Greek financial markets even as the government scrambles to convince investors of its plan to lift the country out of its debt crisis.

A downgrade by Moody’s, considered the most august of the three major ratings agencies, seems all but inevitable following a visit by agency representatives to Greece earlier this week, analysts say. On Oct. 29, Moody’s announced that it was considering downgrading Greece’s A1 credit rating amid concerns about the country’s deteriorating fiscal position.

A fresh announcement could come at any time in the next few weeks and after similar moves by rivals Fitch and Standard and Poor’s this month, both of which cut Greece’s sovereign debt rating to BBB+ from A-.

“Moody’s has a much higher rating (on Greece) than the others and it has been a while since they have downgraded us,” Finance Minister George Papaconstantinou said at a news conference Friday. “And it has said that it will make a decision within the next few weeks.”

That will put further pressure on Papaconstantinou who spent this week crisscrossing Europe to reassure other governments, investors and the press that Greece will do whatever it takes to rein in its deficits.
…

Editorial: California’s long-term debt costs are growing at alarming rate
MediaNews editorial
Posted: 12/20/2009 12:01:00 AM PST

THERE WAS A time when nearly 60 percent of the budget for capital projects in California came from the general fund and special funds. But in recent decades, the state has looked mostly to general obligation bonds to finance large infrastructure investments.

Fortunately, the payments on servicing the bonds were a small percentage of the general fund. In the 1980s, debt service was less than 2 percent of general fund revenues and only about 1 percent in the first half of that decade.

In the 1990s, the debt service ratio (the ratio of annual general fund debt-service costs to annual general fund revenues and transfers) rose to 5.4 percent. It dropped back to 3 percent in fiscal year 2002-03, a level that was acceptable to bond-rating agencies and investors.

But in the last few years, bonded indebtedness has skyrocketed, while general revenues stalled. As a result, California’s now has a record 6.7 percent debt-service ratio, one that is above the 6 percent level that concerns investors. It is also one reason why this state has the lowest bond rating in the nation.

The lower bond rating means that California’s general obligation bonds, backed by the state’s taxpayers, are more difficult to sell. This year, the state has been forced to increase bond interest payments from an anticipated 3 percent to a more costly 4 percent, and that is with nearly zero inflation rates.
…

California’s state government can play the TBTF threat card, too:

State defaulting on debts? Sadly, it’s up for debate

* Posted December 20, 2009 at 10:44 p.m.

It’s the holiday season and we’re feeling merry. We will optimistically predict that California will not default on its bonds in the coming year.

But it’s a grim sign of just how low our state has fallen that academic economists are actually debating the question.
…

The revolving door continues to revolve…

Posted this late yesterday, and re-posting here.
—————————

Comment by CA renter
2009-12-20 18:19:29
Neel now works for PIMCO (surprise, surprise)…

In addition to hiring a top equity team, we have also recognized the need for an experienced person to work closely with PIMCO’s Executive Committee to lead our entry into this and other new businesses over time. Accordingly, Neel Kashkari is joining us on December 14 to lead new investment initiatives. Neel will be based in our Newport Beach office.

…All these steps are part of PIMCO’s evolution over the last decade that has already taken us beyond being solely focused on core fixed income. By adding active equities to the range of solutions PIMCO provides, our primary aim remains the same as it as been throughout PIMCO’s history: to serve as a trusted advisor to our clients around the world. Importantly, this has not, nor will it distract or detract us from our ongoing management of our fixed income products. It’s an evolutionary process-not a revolutionary event-that has been driven by the needs of our clients, the entrepreneurship of our colleagues, and the robustness of our investment process and platform.

http://dealbreaker.com/2009/12/pimco-hires-neel-kashkari.php
—————————

I included that second paragraph because it tells me that the “big dollar” fixed-income guys are seeing inflation in the future, IMHO. This is what I’m referring to WRT the fixed-income investors being forced further out onto the risk curve because of the ultra-low interest rate environment.

China exporting cheap labor

Investors cash out of money funds in droves.
BILLIONS POUR INTO BOND FUNDS IN 2009 ~ USA TODAY

Investors are yanking money out of money funds and moving to bond funds — but some are just cashing out.

Investors pulled a net $490 billion from money funds this year through October, according to the Investment Company Institute, the funds’ trade group. A record-shattering $313 billion went to bond funds. And $1.9 billion fled stock funds.

“More money is flowing out of money funds than is going into bond funds — something that’s only happened twice in 26 years,” says Vincent Deluard, strategist at TrimTabs.com, which tracks fund flows. “It shows how deep the recession is: They may be taking money out to pay the bills or the mortgage.”

Normally, investors chase after stocks during periods of red-hot returns, and this year has produced rip-snorting returns for many stock funds. The average stock fund has soared 27.4% this year, according to Lipper, which tracks the funds. And 36 funds have soared 100% or more in 2009, led by the tiny Oceanstone fund, up 260%.

But investors aren’t chasing hot returns. And since the end of October, money fund assets have fallen an estimated $176 billion, the ICI says. An estimated $9.4 billion has fled stock funds. And $50 billion has poured into bond funds.

Some investors are probably leaving money funds because yields are tiny: The average money fund yields just 0.03%, according to iMoneyNet, which tracks the funds. Many yield zero.

Use of virtual doctor visits expanding For $45, anyone in Texas can use NowClinic, whether or not they are insured, by visiting NowClinic.com. Doctors hold 10-minute appointments and can file prescriptions, except for controlled substances. Eventually they will be able to view patients’ medical histories if they are available. It is possible for competent physicians to make accurate diagnoses in such a manner. Real disasters are also possible. (A patient who has fainted may not tell the doctor her family then did CPR on her.) There was no mention of how such patients might afford commonly done blood tests, such as CBCs and chemical profiles. (There is at least one program that is now doing this in NE OH.) Xrays performed in the USA are now being transmitted digitally to India and interpreted by radiologists there. The next step will be outsourcing virtual doctor visits to places like India.

Plumbing of Supervolcano Under Yellowstone Exposed This might be the cure for Global Warming.

What are some of you here’s predictions? I heard that the FHA will disconinue purchasing MBS’s in 2010, and that they were the only buyers left. Anyone else hear that?

If true, who will continue to buy mortgage backed securities, and if MBS’s disappear as an instrument, will qualified buyer(s) also disappear en masse in 2010.

What effect would this have on things like mortgage rates, other underwriting standards, and prices if banks start having to keep their loans “in house”? Will 30%DTI maximum for a real estate loan be the new normal loan leverage limit, as opposed to the 50% it can be now?

What if down payment requirements get tough, rather than just the 3.5% down, or gasp, 5% down? Not to mention homebuyer credits that allow funding of down payments, and cash back at closing from sellers that helps pay for funding, what if that stuff goes? Or even if reserve requirements are increased to historic metrics.

Where will buyers come from? What will keep current homedebtors from foreclosing in a steady stream, what with low but not rising quickly median incomes that were leveraged recklessly?

Any takers? Happy Holidays, I wish I woulda run into this place sooner, so I too could a been a happy renter.

Calling on Leakers to Help Document Local Misdeeds It was a simple idea: use the power and elusiveness of the Internet to publish secret documents that someone, somewhere thought should be made public. And dare the government, any government, to shut you down. Would this be of use in uncovering / publicizing shadow inventory?

Wife talked to a neighbor who said they got a letter from the home owners association that said the monthly fees were going up. The letter said that 15% of the 160 houses were in foreclosure. RealtyTrac shows there are 2. That is 20+ in the shadow.

Hey, Californians (especially Central Californians): How bad is it out there, really?

My spouse was just offered a very good job at Cal Poly in San Luis Obispo — a good enough job that we have to seriously consider it. Our major concern is moving farther away from family and friends, but we’re also concerned with the state of the state, cost of living, affordability, etc. (Cal Poly is a public school, but is apparently less dependent on state funding than many school in the Cal system.)

We’re somewhat familiar with LA and the Bay Area, but we don’t know much about the Central Coast.

Any thoughts?

Borrowers with modified loans falling into trouble
Report says homeowners whose loan payments are cut by 20 percent or more still falling behind.

WASHINGTON (AP) — Homeowners who get a substantial cut in their monthly mortgage payments still stand a good chance of falling behind again, a report by two federal regulators says.

Nearly 40 percent of homeowners who received a loan modification that reduced monthly loan payments by 20 percent or more were at least two months late again within a year, the Office of the Comptroller of the Currency and the Office of Thrift Supervision said Monday.

That’s an ominous sign for the Obama administration’s plan to stem the foreclosure crisis, which was launched in March. Only about 31,000 modifications have been made permanent under that plan.

I had brunch w a friend yesterday. We both live downtown in Austin, but he owns an 800 sq ft condo, while I rent a 900 sq one. We love about 3 blocks
from each other. I pay about 1500 a month in rent, while he pays a 1700 mortgage, plus 250 a months in HOAs and roughly 7000 a year in taxes or roughly 600 a month. Property taxes in Texas are between 2 and 3%. His total is about 2550 a month.
He kept saying I’m throwing my money in rent, but
I see no incentive in buying when there’s such a gap between rent and a condo payment.

Fed’s Evans sees U.S. economy growing 3-3.5 percent in 2010
Mon Dec 21, 2009

NEW YORK (Reuters) - Charles Evans, president of the Chicago Federal Reserve, said on Monday he expects the U.S. economy to grow 3 to 3.5 percent in 2010, but that low inflation will give the central bank room to keep monetary policy accommodative for an extended period.

Economy

Next year “will definitely be a better year” than 2009, Evans told CNBC in an interview.

However, Evans said he expects the jobless rate will edge up “a few tenths” in 2010.

Evans, a voting member of the policy-setting Federal Open Market Committee this year, said the Fed’s extended period means about three to four meetings.

“I’ve said before, that to me that seems like about three to four meetings,” Evans said.

He said inflation expectations seem well-anchored and that substantial resource slack is “diminishing the trajectory of inflation”.

Holiday plans, celebrations, and unorganized mayhem - getting into the “cheer”!

Past-time bloggers have reported getting all tanked up pre-holiday and then getting the urge to fling an empty bottle through the TV screen.

Needless to say, this could startle the kids and annoy the spouse. Not the best way to kick off Christmas vacation.

Now, let me offer the cobaltblue alternative.
Tune in to Discovery channel and “Sunrise Earth”.
The “Augustine Volcano” episode is highly recommended.

Observe the running water, pretty flowers, and blue sky. Notice the splashing bears and flying insects? In a perfect world, we would all be friends.

Try to remember all the $$$ you saved by reading the HBB! Surely a bit of those savings could be reinvested in a good single malt scotch?

Best of the season to everyone.

Being driven barking mad — and walking away from the mortgage (PDF file)

Priest in UK advises the poor to shoplift & outrages the police

More than 100 line up early for up to 4,000 Census Bureau jobs in Palm Beach County

By Sonja Isger
Palm Beach Post Staff Writer

Updated: 11:15 a.m. Monday, Dec. 21, 2009
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WEST PALM BEACH — The U.S. Census Bureau needs to hire about 4,000 people in Palm Beach County to help with the 2010 Census, and it’s taking applications today.

More than 100 people had already arrived at the Urban League doors in West Palm Beach by 10 a.m., when the job fair began. But they learned upon arrival that the actual test won’t be given until noon today. Those who came early, instead got a shot at a practice test similar to the official one given by the federal government.

“The test is more difficult than most people would think, especially if you’ve not taken a test recently or are not used to standardized tests like the SAT or ACT (taken for college admission),” said Kevin Bledsoe, community director of the Urban League of Palm Beach County. “You probably need at least a solid 10th grade education,” he said.

The fair is one of several being held in South Florida. There is another at the same time Wednesday at the Urban League, 1700 N. Australian Ave. in West Palm Beach. But there are other offices where the test can be taken, Census Bureau officials told a flood of callers to the Urban League offices.

Applicants should bring two forms of government-issued identification.

The jobs, which pay $14 to $15 an hour, are temporary and will likely end in early summer.

That was just fine with Jupiter resident Sharon Ventura, who waited outside the league’s door for the test to begin.

“I’m looking for a job. I’ve been downsized twice,” said Ventura, whose hours as a call center manager have been cut in half twice in the last year. “I’ve got to pay my mortgage.”

Janis Silver, 62, of Lake Worth, has been looking for a job all year. She now has a part-time job with a company that sells to manufacturers, but she said she needs another part-time job to cover the bills.

“This looked like a great opportunity,” said Silver, who took the practice test online.

Job candidates must pass an exam and a criminal background check. The exam has 28 multiple-choice questions that measure clerical, number, reading and organizational skills. The test may be taken in Spanish but the applicant must pass an English proficiency test.

Practice tests are available online at http://www.2010censusjobs.gov. You can take the test more than once.

The workers will visit residents who did not return their Census form, encourage them to fill it out and assist them, if necessary.

The Urban League offered its offices for the event in hopes of giving job seekers an easy place to find and a safe setting to take the test, Bledsoe said.

Bledsoe said he also was eager to draw minority applicants. Minorities, he said, are often undercounted and are more likely to welcome a Census counter when that counter is also a minority.

So…. About a year ago, I recounted on a HBB BB thread a conversation with my LL. I had called him to discuss the possibility of making a few improvements (paid for myself) that I was considering making to the house—things like insulation (there is none in the attic of my old rental), which he has no incentive to pay for since he doesn’t pay the utilities, and which I would have no incentive to pay for if I’m not going to be there long enough to hit a break-even point on utility savings. I was hoping that we could arrange a mutually-beneficial arrangements, where I would improve the property and he would offer a rental concession, or at a minimum a longish no-rent-increase guarantee.

Instead, at the end of the conversation, he mentioned that he was considering a rent increase in approx six months time. And my desires to invest any extra money in the house pretty much evaporated, though my desire to have the improvements did not.

So to figure out whether the rent increase was justified, I started trolling CL weekly, printing out the good comps.

Six months came and went, with no mention of a rent increase from my LL.

After a year, I finally worked up my nerve, called my LL, and described what I was seeing in the market. I told him that I thought my rent was above market, and that I was seeing similar places for a couple of hundred dollars less; some of them even looked quite a bit nicer, and had the improvements that I was considering doing to the property already done. I offered to provide him with the 150 or so good comps that I had printed out over the pas tyear. He told me he would assess the market (CL) himself and get back to me.

This morning, he dropped me an email and offered me a rent reduction of about 10%.

Now I just have to decide whether that is enough. The comps I’m seeing at that price point ARE nicer, but I do like my current house, and there is a definite hassle factor to moving… And I really like the fact that if I stay, I won’t have to vet a new LL to figure out whether he/she is an FB.

Incredible that the stock market continues to be in la-la-land, ignoring the still-eroding economic situation. I’m talking real indicators, not the very misleading headline stuff - e.g. U3, GDP, etc.

Dept. of Labor’s unemployment stats out the other day -

- Exhaustion of benefits still skyrocketing, a new record every month. Current rate is 53.73. Previous record was 43.8 in 2003; even in the early 1980’s it only got to 40.8

- Duration of unemployment also setting new records every month - now up to 18.24 weeks; previous high in 1983 was 17.54 weeks.

And of course we all know the foreclosure stats.

Federal Reserve H.3 data out. Some interesting stuff going on.

link

- Total reserves still going up very fast (left column). Excess reserves (near the middle) are skyrocketing, and just topped $1 Trillion

- Monetary base just topped $2 Trillion

- Surplus vault cash going down-down-down.

One would expect these values to return more to normal as we get into our “recovery”. Doesn’t look much like stability to me. Looks like the banks are doing more hunkering down than ever before, by far, at least since this data collection started in 1959.

I’m guessing this may have been posted earlier, but here it is again. Newsweek Magazine had a December 7th cover story entitled “How Great Powers Fall: Steep debt, slow growth and high spending kill empires - And America could be next”.

This is how empires decline. It begins with a debt explosion. It ends with an inexorable reduction in the resources available for the Army, Navy, and Air Force. Which is why voters are right to worry about America’s debt crisis. According to a recent Rasmussen report, 42 percent of Americans now say that cutting the deficit in half by the end of the president’s first term should be the administration’s most important task—significantly more than the 24 percent who see health-care reform as the No. 1 priority. But cutting the deficit in half is simply not enough. If the United States doesn’t come up soon with a credible plan to restore the federal budget to balance over the next five to 10 years, the danger is very real that a debt crisis could lead to a major weakening of American power.

http://www.newsweek.com/id/224694/page/1

Safety net for SC homeowners about to vanish
The Associated Press ~ Monday, Dec. 21, 2009

CHARLESTON, S.C. — South Carolina homeowners are in danger of losing their financial protection because state officials didn’t apply for federal money that pays for free foreclosure counseling.

The Post and Courier of Charleston reported Sunday that the decision not to apply left local officials scrambling to find money elsewhere without success.

And the state’s top counseling program is in question, putting South Carolina in a position to run out of money before even some of the hardest hit states.

“We don’t know where the next funding is coming from, and the free foreclosure counseling is in jeopardy if another round of funding (doesn’t happen),” said David Geer, executive director of Family Services Inc.

The free foreclosure help could start up again in the spring because Congress passed another $65 million for the program this month. South Carolina’s housing agency and nonprofits would have to compete for that grant money, which could trickle down to the groups as early as March.

But Family Services’ roughly $2.5 million in foreclosure help money will be gone by then.

As a result, more South Carolina homeowners will have to move through the loan modification process alone, leaving them with a worse chance of saving their home. People who receive professional counseling are 60 percent more likely to avoid foreclosure, according to the Washington, D.C.-based Urban Institute.

Looks like more and more people are going down with the ship.

Serious U.S. mortgage delinquencies up 20 percent ~ Dec 21, 2009

WASHINGTON (Reuters) - Serious delinquencies among U.S. prime mortgages rose nearly 20 percent in the third quarter from the prior quarter, as the percentage of current and performing mortgages fell for the sixth consecutive quarter, banking regulators said on Monday.

The report by the Office of Comptroller of the Currency and the Office of Thrift Supervision, which are part of the Treasury Department, covered about two-thirds of all U.S. mortgages.

It found 3.6 percent of prime mortgages — those made to the most credit-worthy borrowers — were seriously delinquent in the third quarter. That was more than double the year-ago quarter and up nearly 20 percent from the 2009 second quarter.

The report defined “serious delinquencies” as those loans 60 days or more past due and loans to delinquent bankrupt borrowers.

Big U.S. banks and thrifts carried out 2.4 million home loan modifications, trial period plans or payment plans in the quarter, spurred mostly by a government plan offered by President Barack Obama, according to the report.

Most came from the government’s Home Affordable Modification Program. Mortgage servicers carried out 274,000 trial plans in the third quarter, up 240 percent from the second quarter when the plan was launched.

But only 1 percent of those had been converted to permanent modifications as of September 30, 2009, the report said.

A major cause of this disconnect is that loan servicers are finding that many borrowers who initially appear to qualify for the program do not, according to the report.

The Treasury Department has been pressuring lenders and mortgage servicers to do more to ease the harm from rising foreclosures.

Loan modifications made outside the new aid program fell in the third quarter by nearly 8 percent, the report said.

America’s Best Days
66% Favor Smaller Government With Fewer Services, Lower Taxes
Thursday, December 17, 2009

Sixty-six percent (66%) of U.S. voters prefer a smaller government with fewer services and lower taxes over a more active government with more services and higher taxes.

That’s the second highest finding of the year: In August at the height of the congressional town hall controversies over the health care plan, 70% felt that way.

A new Rasmussen Reports national telephone survey finds that just 22% prefer a government with more services and higher taxes. Eleven percent (11%) aren’t sure which is best.

Eighty-eight percent (88%) of Republicans and 63% of voters not affiliated with either major party like a smaller government better. Democrats are more narrowly divided: 51% favor a smaller government, but 37% opt for a larger, more activist government.

Sixty-five percent (65%) of liberals chose a government with more services and higher taxes. Eighty-six percent (86%) of conservatives think a smaller government is better.

Sixty-two percent (62%) of all voters say tax cuts are a better way than more government spending to create jobs and fight unemployment. Only 21% say additional stimulus spending is a more effective tool.

Contrarian Clarity.
Trillions Of Troubles Ahead ~ Bert Dohmen
A crushing burden of debt threatens to sap America’s growth for years to come.

Not too long ago, a billion dollars in a governmental budget was a lot of money. Then we got into hundreds of billions. People understood that this was a lot, just because of all the zeros. Now, unfortunately, the number has become small: the world “trillion,” as in $1.2 trillion for health care reform, seems so tiny. But it has 12 zeroes behind it, which is so easy to forget.

If the government stays on the course it’s been on for the past forty years without a radical change, the federal government will soon have a $10 trillion budget.

In other words, the federal budget deficit will be $1.4 trillion. Just to make the size more visible, that’s $1,400 billion.

Our colleague Rob Arnott, who always does terrific research, wrote in his recent report that “at all levels, federal, state, local and GSEs, the total public debt is now at 141% of GDP. That puts the United States in some elite company–only Japan, Lebanon and Zimbabwe are higher. That’s only the start. Add household debt (highest in the world at 99% of GDP) and corporate debt (highest in the world at 317% of GDP, not even counting off-balance-sheet swaps and derivatives) and our total debt is 557% of GDP. Less than three years ago our total indebtedness crossed 500% of GDP for the first time.”

Add the unfunded portion of entitlement programs and we’re at 840% of GDP.

The world has not seen such debt levels in modern history. This debt is not serviceable. Imagine that total debt is 557% of GDP, without considering entitlements.

There’s an article in the December 2009 Atlantic called “Did Christianity Cause the Crisis”.

Worth a read.

One thing I noted: Take the data from the Pew foundation that gives county-by-county levels of religiosity, and overlay that on a map of foreclosures by county. The correlation is near-perfect.

As I was snowbound on Saturday and wishing I lived within walking distance to friends, I got to thinking about a fun condo complex I used to live at in the western `burbs of Chicago. A bunch of my friends all lived there, too (some rented from the condo owners, some owned). It was a fun place (I called it our own Melrose Place).

Anyway, thinking about that place prompted me to look them up to see what they’re selling for these days. When I moved back to PA in 2001, the 2BR were selling for the low to mid $70s. During the run-up, 2BRs sold for the low to mid $100s. They are now back to selling in the $70s even though Zillow has them Zestimated at the low $100s.

This prompted me to look at more real estate out in those `burbs (I’m talking Westmont / Willowbrook area). To my surprise, I found that there are homes that I could actually afford to buy out there now! Which got me to wondering…is this area really that much of a lag? And, if so, when does reality return?

To the PC correct:

Please accept with no obligation, implied or implicit, my best wishes for an environmentally conscious, socially responsible, low-stress, non-addictive, gender-neutral celebration of the winter solstice holiday, practiced within the most enjoyable traditions of the religious persuasion of your choice, or secular practices of your choice, with respect for the religious/secular persuasion and/or traditions of others, or their choice not to practice religious or secular traditions at all. You are ENTITLED to it. I also wish you a fiscally successful, personally fulfilling and medically uncomplicated recognition of the onset of the generally accepted calendar year 2010, but not without due respect for the calendars of choice of other cultures whose contributions to society have helped make America great. Not to imply that America is necessarily greater than any other country nor the only America in the Western Hemisphere . Also, this wish is made without regard to the race, creed, color, age, physical ability, religious faith or sexual preference of the wisher or wishee.

To everyone else:

Merry Christmas and a Happy New Year!

The red firemen hat posted on the back of so many 50K trucks plus toy haulers in CA, what are they for to keep them from being ticketed?

Or just to show pride thet they can spend 100’s of thousands on toys because they make 100’s of thousands per year?

Just wondering didn’t see that in AZ

yield curve steepining ( long bonds have to pay more interest compared to short bonds ) is a predictor of future inflation or at least less fear of Deflation.

And that is what is happening these days. What this means for home prices I don’t want to guess I’ll just wait and see. but Bond prices might come down as the economy recovers. I think I’ll sell my GNMA fund next year. Continue to rent in 2010 I would guess its a 50-50 chance that home prices may go higher here. Interest rates should go up as well that may get buyers to buy now before rates go up.

http://www.telegraph.co.uk/finance/newsbysector/constructionandproperty/6853039/UK-property-black-hole-threatens-banks-lending.html

UK property black hole threatens banks’ lending

Britain is at risk of a mass sell-off of distressed properties that would send values into a double dip and impair the lending ability of banks.

***********
Commercial property taking the plunge. Have banks been quietly building reserves in preparation for this round of shocks on a worldwide scale? Are there layers of CDS and other derivatives based on this debt too or have these positions been unwound knowing the deluge was coming?

New York’s has a grumpy state of mind: study finds it’s nation’s most unhappy

By Kerry Burke and Larry Mcshane
DAILY NEWS STAFF WRITERS

A New York state of mind? Try sad.

A new study declares residents of the Empire State rank dead last in happiness among the 50 states - with warm-weather spots boasting the most satisfied citizens.

The results were - no surprise - greeted unhappily by New Yorkers, who insisted Friday they were upbeat despite a wintry afternoon.

“We’re the happiest people in the nation,” said Roman Khan, 34, a clothing manufacturer from Brooklyn. “This is the place to be.

“We have all colors and cultures in one state. New York is happiness 2-4/7.”

The authors of the study, published Friday in the journal Science, didn’t see it that way.

The rankings were based on an annual nationwide survey of 1.3 million people by the Centers for Disease Control and Prevention.

The participants were asked, among other questions, how satisfied they were with their lives.

A pair of economists then compared the results compiled between 2005 and 2008 with other data covering quality-of-life issues - including taxes, crime, commuting and cost of living.

New York emerged as sadder than the rest, just behind Michigan and its 14.7% unemployment rate. The nation’s most populous state, California, rated No. 46.

The top five happiest states, in order: Louisiana, Hawaii, Florida, Tennessee and Arizona. The authors acknowledged Louisiana’s ranking probably benefited from unhappy residents leaving after Hurricane Katrina.

Cheyenne Smith, 48, and his wife, Alvalyn, of Queens weren’t ready to abandon New York for anyplace else - or to give up their wide holiday smiles.

“Unhappy New Yorkers? You met the two wrong people,” said Cheyenne Smith, wearing an elf hat with a snowman pin. “We may not show it, we may not talk about it, but we’re happy.

“We have an image to uphold - we’re tough,” he continued. “But really we’re soft on the inside.”

His wife - sporting reindeer antlers - echoed her happy husband’s comments.

“It’s a great city,” the 47-year-old accountant said. “I have no idea why they’re complaining.”

Where are my posts today?

The New York Times
Editorial
Even Bigger Than Too Big to Fail

Published: December 14, 2009

Asserting that it “is among the strongest banks in the industry,” Citigroup announced on Monday that it would soon repay $20 billion of federal bailout money. This from a bank that has been in the red for most of the past two years, that is expected to limp through 2010 amid a torrent of loan losses, that saw its stock price close after the announcement at a measly $3.70 a share — and that, like other big banks, is still reluctant to lend.

Meanwhile, the Treasury Department, which seems to have no qualms about Citigroup’s self-proclaimed strength, plans to sell its $25 billion stake over the next six to 12 months.

Citigroup’s planned exit from the bailout — like Bank of America’s earlier this month — would be welcome if the banks were the picture of health. But their main motive is to get out from under the bailout’s pay caps and other restraints. The Treasury Department’s approval is a grim reminder of the political power of the banks, even as the economy they did so much to damage continues to struggle.

Over the weekend, President Obama summoned the nation’s biggest bankers to Washington, but some of the biggest recipients of taxpayers’ money, including Citigroup and Goldman Sachs, didn’t bother making the extra effort to get there ahead of time to avoid the predictable winter weather that grounded their flights.

Mr. Obama was right when he said the banks owe “an extraordinary commitment” to taxpayers, and he got some promises to lend more. But that would have been more convincing if the administration had held the banks’ feet to the fire in the first place and had not agreed so quickly to freeing them from the bailout restraints. The truth is that the taxpayers are still very much on the hook for a banking system that is shaping up to be much riskier than the one that led to disaster.
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“If we have learned anything over the last couple of years, it is that banks that are too big to fail pose too much of a risk to the economy. Any serious effort to reform the financial system must ensure that no such banks exist.”

The widest gap ever could also represent an inflation risk premium that investors are demanding for holding l-t Treasurys in times of easy money. There is no way without further information to gauge to what extent the record yield curve gap reflects recovery optimism versus inflation fears — a classical identification problem.

* The Wall Street Journal
* CREDIT MARKETS
* DECEMBER 22, 2009

Bonds Are Signaling a Stronger Recovery
By EMILY BARRETT and JOANNA SLATER

A closely watched bond-market measure of investor optimism hit a record Monday, amid signs the U.S. economy’s recovery is strengthening.

That measure is the yield curve — the difference between short-term and long-term interest rates on government bonds. That number is at its highest level ever, surpassing the record set in June, and signals that investors are expecting a stronger economic turnaround ahead.
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The yield curve steepens when the Federal Reserve, which controls short-term interest rates, keeps them low to spur the economy. But at the same time investors, expecting growth to resume and with it the possibility of inflation, sell longer-term government bonds, which sends their prices down and their yields up.

The difference between the yields, in this case on 2-year and 10-year notes, is the main gauge of the yield curve. On Monday, the difference reached 2.81 percentage points. The gap between short- and long-term yields tends to stretch on the way out of economic trouble.

Before this year, the yield curve was last near these levels in 1992 and 2003. In both instances, the economy was pulling out of a recession, and staged a sustained recovery. However, on both occasions it took a year or more before the Federal Reserve decided the economy was strong enough to warrant interest rate increases.

The gap could widen further, said Tony Crescenzi, a portfolio manager at Pacific Investment Management Co. in Newport Beach, Calif. The previous peaks “didn’t occur until the expansion was gaining some steam, and we don’t know yet that’s the case,” Mr. Crescenzi said. The steeper yield curve is being driven by investors selling off government bonds. The 10-year Treasury tumbled Monday, sending its yield up to 3.686%, the highest since mid August. The yield on the 2-year Treasury rose to 0.872%.

The widening gap stems from a bout of optimism about the U.S. economy, combined with a sense that the Federal Reserve is still months away from raising borrowing costs. The gap is great news for banks, because they can borrow for the short term at low rates and then lend at higher long-term rates.

In the 1990s, a steep yield curve helped pull the U.S. banking industry out of a catastrophic crisis, making it much easier for financial institutions to borrow money at a lower rate, lend it at a higher rate, and put the difference in their pockets. By the end of the decade, earnings growth, fueled by the favorable gap in interest rates and strong consumer spending, had risen to as much as 20% a year.

A rash of better-than-expected economic data in recent weeks has pushed investors to expect better growth. That could lead to inflation, which could eat away at the value of government bonds, making them less attractive. Meanwhile, the Fed has said it intends to maintain its benchmark interest rate near zero for an extended time, which helps keep a lid on yields of shorter-term government securities. “The Fed isn’t going anywhere, at least for now,” said Dan Greenhaus, chief economist at Miller Tabak & Co. As a result.

At this time last year, the gap was 1.27 percentage points. At the crisis onset, in June 2007, the yield curve was inverted: a phenomenon in which short-term yields are higher than long-term ones, a development which often augurs a recession.
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