New Year Housing Bubble Predictions
What are your housing bubble predictions for 2010? Some from one year ago. “I think it will be so bad in 2009 that no statistics are even made. Like the lost years. The dark ages of the housing market in California lasts until 2012. I’m off to burn a witch.”
One sees this. “It was a rolling bust, so it will be a rolling recovery.”
“I will maintain to the end, however, that the longest suffering will be endured by ‘flyover’ country. As some of you point out, the bubble masked the Rust Belt’s death throes. Stories of fleeing manufacturing were already there eight years ago - for those that cared to put their 401k statements down long enough to look. I remember small mfg. closures being well documented in the Midwest press circa 2000.”
“Given a choice, I’d still cast my lot with the Sun Belt states - over the longer term.”
One looks at migration. “I think the immigrants will have a positive affect on the real estate markets of such cities as Frisco and NY. I’m from NY, and I can tell you that these immigrants from Korea and South America (Savers) are just keeping otherwise slums from being turned into such. It’s all a tug of war, as it were, but in the last downturn, circa 1991, Jamaica, Queens all but folded up. Not now. There are all these immigrant businesses to fill the gap with restaurants, cheap stores, like 99 cent stores, etc. Not upscale, but it does seem to have its own economy.”
Another sees a political angle. “‘When and why’. I will still go with 2012. Reserving the right to amend that estimate as time goes forward!”
“Why not sooner: Prices are still very high by the measure of rents and incomes, and the downward movement of prices, though now accelerated in many areas, would still take a few years to bring prices in line with rents (if rents don’t fall a whole lot). We have often noted that the resets in the Zellman chart and other people’s updates of that chart have a second peak in 2011. I’m not sure if that matters while prices are sinking — foreclosures will feed on themselves without requiring the additional impetus of ARM resets. However, if prices had any other reason to stabilize, the ARM resets would tend to prevent it.”
“Why not later: Let’s just say, Obama, C. Dodd, B. Frank, and Columbia dean Glenn Hubbard, not to mention Sheila Bair (if she’s rehired) will all be trying very hard to arrest the decline. The worst of it is, they may succeed in making the decline go slower and last much longer. But O will be up for re-election in 2012, so it would be good for him if there had (then) been several months in a row of flat-to-upward house-price statistics.”
From TC Palm. “A recent stabilization of home prices is a temporary plateau before another significant drop in 2010, an economist for a leading independent provider of economic and financial research said. They forecast a 24 percent drop in the median sales price of single-family homes in the Port St. Lucie Metropolitan Statistical Area from the third quarter of this year to the third quarter of 2010.”
“Treasure Coast Realtors said they are skeptical of the forecast. Karl Zimermann, president of the Indian River County Realtors Association, said, ‘I look at these predictions with a degree of skepticism because with the environment we’re in, there’s no history to make predictions on.’”
“Skip Radin, who has had a Key West-style three-bedroom home in Windmill Village on Hutchinson Island in Jensen Beach on the market for three years, said he isn’t ready to panic. Radin bought the home for $200,000 in 2000 because he and his wife needed a house close to where her mother lived. When his mother-in-law moved to a nursing home, he listed the house for $679,000 in mid-2006.”
“Radin, who dabbled as a Realtor along with a career in education, has lowered the listed price of the home 10 times and now is asking $329,000. He is on his fourth Realtor, Cheryl Gaydos. Gaydos said she thinks the housing market in much more stable than the Economy.com forecast indicates, especially for homes on or near the waterfront. Radin said he now regrets passing on some earlier offers he considered insufficient at the time.”
“Gaydos said, ‘As a Realtor, you know they want to hold out, but sometimes the first offer is the best offer.’”
The Christian Science Monitor. “The national economy may be in recovery, but most states haven’t yet hit bottom – and many are already facing massive budget gaps halfway through their fiscal year, despite basing those budgets on dismal forecasts.”
“‘Unless you’re North Dakota, you’re probably a state that has had some degree of difficulty or crisis involving finances,’ says Arturo Pérez, a fiscal analyst with the National Conference of State Legislatures (NCSL), which released its survey of state budget situations earlier this month. ‘It’s the worst situation states have faced in decades, perhaps going as far back as the Great Depression in some states.’”
“The result: furloughs, deep cuts to state programs and services, fee and tax hikes. ‘The next couple of calendar years will be some of the worst in terms of the tough choices that elected officials will have to make,’ says Scott Pattison, executive director of the National Association of State Budget Officers, adding that the stimulus funds that benefited states will soon be drying up, make the situation even more difficult. ‘There’s not a lot left to do that aren’t really really tough political choices.’”
“Arizona. Like California, Florida, and Nevada, Arizona is one of the states that was hit worst and earliest by the housing crisis. ‘The fiscal situation is dire,’ state officials states in NCSL’s survey, citing major shortfalls in all budget categories. Lawmakers are forecasting a 30 percent budget gap in the next fiscal year.”
“Nevada. One of the hardest hit by the housing crisis, the state faces a projected shortfall of 33 percent for its next budget year.”
The Las Vegas Business Press. “Locally, the avalanche of foreclosures predicted for Las Vegas has failed to materialize. November’s 1,477 foreclosures represent a 27 percent decrease from a year ago, the fifth month of the year with declining year-over-year numbers. ‘In our view, Las Vegas may be entering a new real estate era,’ consultant Steve Bottfeld of Marketing Solutions said. ‘Whether you call it the end of the beginning or the beginning of the end, there is no question that the residential market is in a transition from what it was to what it will become.’”
“Housing analyst Dennis Smith of Home Builders Research counted 604 new-home sales and 3,696 existing-home sales in November, a 6.1 percent decrease and 46.8 percent increase, respectively, from the same month a year ago. Median new-home prices dropped to $195,000, while existing-home prices fell to $124,000.”
“‘Bottom line is this indicates a very flat recovery,’ Smith said. ‘There (have) been good months and bad months. Good isn’t anything that goes up $1,000. That’s flat. The tax credit … it’s parallel to what’s going on with CityCenter. They don’t know if it’s going to be bad or good for the economy. We know what it did for home sales and we have to assume it’ll work again, but I don’t want to stand here and wave a flag that says next year will be better than this year. A good year will be if we beat the numbers for 2009.’”
The Arizona Republic. “Valley home prices have recovered at roughly the same pace since April, but Arizona State University professor Karl Guntermann sees that nice, straight trend line as more like a tightrope than a solid foundation. ‘While the increases reflect a clear trend, this is still an unstable housing market substantially influenced by foreclosures on the supply side and investors on the demand side,’ said Guntermann.”
“For the past eight months, the ASU index has been in negative territory…In September it reached -23, which means the Valley’s median home price was 23 percent lower than it had been a year earlier. Guntermann said his preliminary data show an index of -20 in October and -17 in November. Meanwhile, the actual median price of Valley homes has been going up. It was about $135,000 in November, preliminary data show - still down 17 percent from a year earlier, but up about 15 percent from this year’s low of $117,500 in April.”
“If the current upward trend continues, the index will cross back into positive territory next summer. But that’s an awfully big ‘if,’ Guntermann said. The high volume of homes passing from bank to investor is but one of several troubling elements lurking in the economic undercurrent, he said.”
“In all likelihood, Guntermann said, the Repeat Sales Index will stay close to zero for a few years once it gets there, with home values remaining relatively flat. ‘Even if we get to zero change in the next year, it doesn’t necessarily follow that the index is going to continue going up,’ Guntermann said. ‘It’s going to take longer, clearly, to get out of this mess than it took us to get into it.’”
The Coloradoan. “Expansion and extension of the homebuyers’ tax credit through April 2010 should boost home sales next year, helping the industry rebound from one of the worst markets in memory. Or maybe not. ‘It’s not going to take a lot of activity to start showing increases … but I don’t see consumers ready to jump back in with both feet,’ said Dave Pettigrew of Prudential Rocky Mountain Realtors and a Coloradoan real estate columnist.”
“Eric Thompson, president of The Group Inc., said the company has seen ‘a good amount of interest’ in the $6,500 tax credit. Even though the $6,500 represents just a fraction of the price of a home, that, combined with good prices and good interest rates, is a motivator, he said. ‘It’s free money.’”
“Builder and architect Dana McBride built what he calls an industrial barn loft in Rigden Farm last year priced just outside first-time homebuyers’ likely price range. At $369,000, the home languished through six potential buyers who had to sell their existing homes before they could purchase his. All deals fell through and the home is now rented.”
“McBride does not expect the $6,500 tax credit to have as much impact as the first-time homebuyers’ credit. ‘Where people need help right now is in the banks wanting larger down payments. The $6,500 is not as a big a factor as it would be for first time homebuyers.’”
“Northern Colorado once benefited from a steady flow of California residents and new jobs created by corporations moving to the region. In this economy, companies aren’t moving and Californians can’t afford to sell their homes in a depressed market. ‘If there are no buyers and no lenders, it’s tough to get (the housing market) going,’ Pettigrew said. He also worries about a ’shadow market’ of owners waiting until the market improves to put their home up for sale. ‘If we do get an influx of buying interest, there is an awful big inventory of homes that will hit the market because sellers are seeing more activity.’”
The Daily Bulletin. “After dropping to $137,000 earlier this year, the median home price in San Bernardino County rose to $160,000 between August and November, according to MDA DataQuick. Still, some experts question whether a true recovery is forming. Richard Gollis, co-partner of The Concord Group in Newport Beach, says the Inland Empire price upswing is because thousands of lower priced bank-owned homes have been cleared away, and now the higher-end foreclosure sales are swinging the median value higher.”
“‘It doesn’t mean the same house went from $135,000 to $160,000,’ Gollis said about foreclosures and traditional sales. ‘It means the mix of houses have changed. You’re seeing fewer of that cheap, cheap, cheap stuff (selling) on the market.”‘
“He estimates lenders are holding almost 40,000 Inland Empire foreclosed properties on their balance sheets.”
The Record Searchlight. “‘Housing production will increase. OK, this is any easy one. In 2009, housing production was at the lowest level ever recorded. It’s not going to go down further. The turnaround will not be rapid, but it’s coming. We all read the recent news stories about California’s slow population growth of late. Keep in mind, though, that even when population increases slowly, the state still adds a lot of people. From July 2008 to July 2009, the population jumped 353,000. That increase equates to a need for roughly 140,000 housing units - or about 40,000 fewer than builders produced in 2008 and 2009 combined. In other words, market demand is going to necessitate more housing production,’ Paul Shigley of the California Planning and Development Report.”
The Fontana Herald News. “The start of the New Year can stir a wide range of emotions, and recently the Herald News held a contest and asked local residents to give their opinions about whether 2010 will create joy or sadness. Jennifer Castro said she thought that 2010 will probably be another bad year in general for Fontanans.”
“‘I don’t see many new jobs because of the economy being so bad,’ she said. ‘The rest of the country brags about unemployment numbers falling, but that’s not the case here in California. I also still see the housing market not doing so well in 2010. So many people in San Bernardino County are still losing their homes.’”
“In fact, she said, her husband is currently unemployed and the family members run the risk of possibly losing their home. ‘He has been looking for work, but it is very hard to find work in this kind of economic downfall. It is nearly impossible to live off of unemployment benefits,’ she said. ‘Hopefully my prediction is wrong, but from the looks of things it will probably be just about the same as this year (2009).’”
The Union Tribune. “Peter Dennehy, senior vice president of Sullivan Group Real Estate Advisors in San Diego, said fewer foreclosures would improve the housing market, at least in the short term. ‘We’d have a healthier housing market if we had a better economy and better job prospects and if people are actually able to pay their mortgages,’ he said.”
“While foreclosures typically carry low prices, Dennehy said first-time buyers often cannot compete against investors or get loans for as-is properties that banks will not pay to repair. ‘What we really want to see is normal people buying and selling homes at all levels of the market,’ he said.”
The North County Times. “It has been an interesting year. And, most interesting to me has been the continued separation between what many people believe and what is reality…At a Christmas party this year, I was chatting with a neighbor who had moved in a couple of years ago and was going through a refinancing. He was surprised that the appraisal was actually higher than the price he paid for the home. And, I’ve heard that from others.”
“I have avoided writing about real estate for some time because, like many issues, there continues to be a difference of opinion about where the market is now and where it is heading. For some reason, the people who disagree with me have attacked me in the most vicious manner.”
“I thought I’d use the opportunity of this, my last column for the North County Times, to share my thoughts on real estate… So, will home prices continue to rally in 2010? Hell if I know. I think they will and I know they will over time. But those who think otherwise are welcomed to their opinion and I respect that.”
I’ll have a bits bucket in the morning and will forward this thread through the weekend. Happy New Year everybody!
Happy 2010, Ben!
Thanks for all your work and effort in providing this blog to us HBB’ers. Your generosity is greatly appreciated!
Ben’s generosity is greatly appreciated indeed, and should be reciprocated by posters who have benefited so greatly from this site.
Agree!
Since we’re discussing investments, how about the old-fashioned idea of diversification?
Not just among stocks, though. You need some gold to protect you against unforeseen events like hyperinflation or massive dollar devaluation.
You could do a lot worse than Harry Browne’s “Permanent Portfolio”, which consists of 25% of each of four investments:
1. US Stocks, e.g., an S&P 500 index fund
2. LT Treasurys
3. Cash (e.g., T-Bills)
4. Gold.
If you rebalance every year, such a portfolio has yielded almost 10% compounded annually since inception in 1981, with the worst year having a drawdown of less than 5%.
Am I doing this? No, because I can’t see how Treasurys or stocks can possibly go up at this point. But it has an excellent track record nonetheless.
Oh, by the way, you can buy a fund that is fairly close to this, and which has nearly the same track record, although its worst drawdown was around 8.5% (in 2008). Its symbol is PRPFX, and it is very tax efficient for those investing outside tax-deferred accounts.
Happy New Year to you and thank you for your help!
Happy New Year to fellow HBBers!
I am a long-time forum lurker. I value the insights of posters here immensely, and would like to humbly ask for some investment advises / opinions.
My New Year resolution is to look for higher return for my assets. I did not participate in the equity market run-up earlier this decade (and its subsequent “correction” in 2008). So I moved $75K of my cash into Vanguard, and keep $15K in my bank account for rainy day fund.
What type of funds should I invest in? My intended investment horizon is 2 - 3 years, and use the fund to purchase a house in 2012ish. I am 30 years old and live with my family (low living expense of ~$1,500 a month, which include rent, transportation, food, etc). No debts, and gross $80,000 a year in a career-track / stable jobs.
Any advise is greatly appreciated. Thank you.
Recent sage advice I offered my Lil’ Sis in a phone call while driving home in a snow storm:
1) Don’t park lots of new money into anything whose value will drop when l-t interest rates rise.
A few asset class examples:
- housing
- stocks
- l-t fixed-income investments (e.g., 10yr and 30yr Treasurys)
2) Paradoxically, if you can dollar cost average money into stocks or housing (maybe through regular investments in a mutual fund or REIT), that might not be a bad move, as these asset classes do offer l-t inflation protection which fixed income investments like Treasurys do not.
3) If you like Uncle Sam’s credit rating (as assigned by the highly credible judgments of S&P, Experian and Moody’s), then go for inflation protected U.S. bonds rather than Treasurys.
The key point to realize is that l-t interest rates have hit a level last reached when baby boomers were babies. Last time this happened (circa 1960), l-t interest rates started around 3 percent and very gradually spiraled up (over the course of 1/2 an investing lifetime) to a level above 14 percent circa 1980, before commencing on the very gradual three-decade long decline to their current level.
Unless it is different this time, we are at the start of another l-t uptrend in l-t interest rates which will continuously erode the value of investments which depend on low l-t interest rates over the course of the next two decades or so. Plan accordingly.
The key thing to realize about a spike in long term interest rates is the inability of governmental units to pay the interest.
Crank the interest level to 10% and half the federal budget becomes interest payments.
Ditto for California.
OK, but what is the alternative? More devaluation? Or have the financial engineers figured out by now how to get a strong dollar with low rates?
Yes, they have. And scientists have discovered the perpetual motion machine, Oprah has discovered the “burn fat while you sleep” formula, so Bernanke’s discovery of the wormhole to another universe where microscopic interest rates won’t devalue the currency is upon us. Amazing, isn’t it!
Agree, with gradual being the key term.
Good point about the likely interest rate trend. Thus, bonds of 5-7 years’ maturity are fine if you don’t mind just waiting for them to mature. Part of my maturity “ladder” goes out much further — the mortgages, in particular — but no corporate bonds later than 2018. The mortgages tend not to run to maturity, since my rates are high (9%-10%)…people try to retire them early, if they can.
We have arrived at a year (2010) in which I would not necessarily reject the opportunity to buy a residence if it were clearly no more expensive than renting the same thing. Too nervous to follow PB’s advice about the common stocks of builders etc.
“We have arrived at a year (2010) in which I would not necessarily reject the opportunity to buy a residence if it were clearly no more expensive than renting the same thing.”
Happy New Year to you, young lady. I agree with that statement. I am just checking the listings back home. There is one house that was pulled and now re-listed. It is 2,525 square feet. The price is $178,900. It probably would have listed at $300,000 in 2006.
This is an old home that has been updated. That means it looks nice and clean but it also has the old woodwork in it. This is the type of woodwork you will never see again. It is just amazing.
It is not in the perfect neighborhood but at that price you slap in a good security system and you would probably be fine.
In areas like my hometown where prices have dropped 30 - 50 percent buying can make perfect sense. In areas like NYC where people still think $hitholes in Queens are worth the royal dowry then not so much of a good deal.
House buying, like anything, requires some thinking. As we know most people can’t think unless others are telling them what to think. Happy New Year.
NYCityBoy: Happy New Year to you. Are you planning to move back to Minnesota? If so, we must warn those nice people!
My prediction is that there is a 0 percent chance of that happening in 2010.
Whew! We don’t want you to leave New York just yet. Your edginess would be missed.
“Too nervous to follow PB’s advice about the common stocks of builders etc.”
Not sure what advice about builder stocks you read into my remarks, but I have some: Don’t touch these with a ten-foot pole unless you enjoy risky gambles which may end with 100 percent loss of your principle.
I offer a couple of further thoughts on stock market investing:
1) After reading Burton Malkiel’s A Random Walk on Wall Street (now available from Amazon dot com for 33% off the regular price!), I decided to never again trouble myself with investing in individual stocks. I just use a lazy portfolio strategy of dollar-cost-averaging into various stock market index funds and hope for the best. I did up my allocation to stocks in early 2008 after the market had substantially corrected, which turned out to be a mistake, given the effect of the all-out panic which ensued in the fall (which was aided and abetted by “panic now” announcements in the MSM from the Fed Chair, the Treasury Secretary and the Prez which appear in retrospect to have been construed by many individuals that it was time to get out of the stock market).
2) People have different investing styles, and mine is quite conservative. In fact, if I believed the Fed was going to maintain a stable currency going forward, I might just avoid gambling in the asset markets entirely and instead opt for parking our meager savings into a money market. But given the Fed leadership’s proven willingness to use the extremes of experimental creativity to keep the financial ship aright, and the unknown unknowns which await in terms of how the economy will respond to these untested recipes, I feel the need to prudentially diversify our savings into riskier asset classes (stocks, bonds of various flavors, FOREX, etc). Though I don’t have buttloads of TARP money borrowed at zero interest rates to work with, I nonetheless think of myself as more of a household-level hedge fund manager than a saver, in the true sense of the word “hedge,” which is to insure against portfolio risk (e.g. you park all your dough in a money market fund, only to discover that interest rates have been steered by the Fed to zero percent at the same time the dollar’s value is headed south). Unfortunately, this is what financial prudence has come to in a world of financial instability.
3) The only (and I mean the only) reason I can think of to currently go long builder stocks is if you fully buy into the notion that the government’s hair-of-the-dog hangover cure for the economy’s woes will prove wildly successful to the point that the housing market makes a “stronger than expected” recovery. Given my memories of hangovers from years ago when I used to drink on New Year’s Eve and my serious doubts that further drinking on New Year’s Day could have done much to staunch the resultant pounding headaches, I have serious doubts the U.S. home builders will recover for years to come. But I might be wrong, as my crystal ball remains resolutely cloudy at this non-start to a new decade.
I’ll make a prediction, but it’s more of a pipe dream. If the original premise is wrong, then the whole thing goes to pot.
Prediction: Obama and Congress are going to shut off the financial spigot. <— all of 2010-2012 will hinge on this. Extend and pretend may work, but only for a while. There is huge bipartisan agreement in Congress that those billions could be easily put to better use than sneaking it over to AIG or Fraddie.* So at some point, Congress is going to say: “Enough. You want liquidity? Sell your shadow inventory for pennies on the dollar and pay your bills with it. If it’s not enough, you can declare BK and wipe out some debt, just like Kmart did. Live by the sword, die by the sword.” If nothing else, Congress can gum up the works long enough to effect the same effect.
Commercial RE will take out a lot of small banks, and all that will remains is the original FDIC deposits.
I also think that a couple of big-banks will go into simultaneous bankrupt and break-up.
The billions will be put to use creating jobs — even if it’s make-work. If housing prices fall and credit is cut off, you can still live as long as you have a job. Lots of FB’s will go BK as they should, and many will have to squeeze into an apartment or fly without health insurance,** but it will be a life based on fundamentals, more like it was in the 50’s and 60’s, when people lived with layaway and putting a little in the bank.
———-
*The political disagreement is where to put the billions: jobs, education, health care, war, or paying down debt. But it’s pretty established that the money shouldn’t go to the damn banks.
** The health insurance mandate doesn’t kick in until 2013. There’s some time before that.
I’ve been thinking the same thing, oxide. Obama says that he doesn’t care about being re-elected, but I don’t believe him. Everything he does this year will be aimed at increasing his popularity. I think he’ll screw the banks and come up with a bunch of “jobs” programs. FDR mode. We’ll see if it works (politically and/or economically, but it won’t work politically unless it works economically.)
Thanks for the insights.
I am contemplating 33% allocation in health care index fund, 33% into two int’l index funds, and 34% to some blended funds.
Is it too aggressive?
“Is it too aggressive?”
Only if you park all your money in at once. I recommend tiptoeing into the stock market during periods of high volatility — i.e., maybe build up to your long-term allocation into stocks in 60 monthly installments over the next five year period. If you look at the fluctuation in annual U.S. stock market returns over the 1933-1940 period, you will see exactly why.
On the other hand, if your investing style is throwing caution to the wind and going for broke, by all means park as much money as soon as possible, hope for the best, and hang on tight for a wild ride…
“Is it too aggressive?”
One more point: “too aggressive” or not depends in part on how soon you will need the money, and also on how well the government’s financial recovery gambit pans out. If we go Japanese, don’t expect any returns on stocks for the next decade or so. If you are near retirement, any money you park now may turn into a losing investment that you would only be able to redeem at a loss over the next few years. If you are in your twenties, then who cares — you have a lifetime of employment and investing opportunities ahead of you during which to recover from any current gambling losses.
So at some point, Congress is going to say: “Enough. You want liquidity?
If nothing else, Congress can gum up the works long enough to effect the same effect.
First part is silly as CONgress is bought and sold, hookers/whores/johns. I don’t hold out any hope that the majority will be honorable.Ever.
2nd part- says it all.
Read the above. Leshante wants the money in 2 to 3 years. I say that much in stocks it is way too aggressive for that time frame.
Oh my goodness, yes, Leshante. Wait for 2-3 months at least, please. 100% stocks is as aggressive as it gets. Nobody on the HBB would do that. We’re all in cash or gold, except for Eddie.
Leshante,
I would be very careful about investing in health care stocks of any kind, especially health insurance. The health care situation could change on a dime, depending on Congress.
“Only if you park all your money in at once.”
But damn the $3000 minimums! I don’t even want to start with that much, which is still a lot to me.
Any cheap no load funds anywhere else besides Vanguard?
How about ETFs?
Schwab has some funds with $100 minimums…
Leshante,
A two to three year investment horizon is too short of a horizon to risk it in stocks.
I’d be mostly in VMMXX, Vanguard Prime money market for now. From there I would dollar cost average into other Vanguard funds.
interest rates will stay low for all this year I think. In another year they could go way up. I like the VSGBX fund, Short term Federal, which invests in 1 to 3 year government securities. Its 2009 return was 2.79% and its yield about 1.7%. I’d imagine you’d put $2,000 per month into that fund from VMMXX.
However, if you want some risk, put $1,000 to per month into VSGBX and another $1,000 per month into natural gas trusts. I like EVEP. I sold most of my Pengrowth stock in September and bought EVEP instead. Alternatively, maybe set aside $25,000 to make the minimum initial purchase of VGENX (Vanguard Energy Index Fund), and buy $300 per month of that fund.
This is a risk-averse portfolio which assumes interest rates will go up and the cycle of high energy costs will come back to haunt us.
Are health care fund and / or int’l equity index funds a good idea?
Are you sure that those funds won’t go down in that time frame? If not are you sure that you won’t need the money you could lose? If you are not sure about the funds and not sure you could accomplish your goals without the money, then they aren’t appropriate investments for short term money.
Agreed!
VWELX Wellington Fund is a balanced fund for chickens like me. I’m selling out of Bonds but this fund has 1/3 bonds in case I’m wrong plus stocks which I think will do well for the next 6 months.
Balanced fund of roughly two-thirds fairly large, well-known stocks, one-third high-quality U.S. bonds.
Offers high potential for investment growth relative to most other Vanguard balanced funds, with moderate movements in share value.
Fund managers pick investments to try and outperform market returns, which adds an element of risk.
Designed to offer an “all weather” fund appropriate for medium- to long-term goals.
HAPPY NEW YEAR
“‘When and why’. I will still go with 2012. Reserving the right to amend that estimate as time goes forward!” I think this was PB in his funny mood!
I agree with the sentiment and appreciate the suggestion I offered this pithy observation, but I did not. (Quite surprisingly, it was not Eddie who offered it, either.
)
Be careful Prof, Eddie will accuse you of being infatuated with him.
My prediction for 2010 is that Eddie will be on the HBB as long as the “recovery” continues. If the magicians (devils) on Maiden Lane and Broad Street pull the plug on the magic he will disappear like a fart in a hurricane.
Eddie just doesn’t get it. I doubt he ever will. He doesn’t realize that most people on this blog have been here for years. I think I first came on HBB in 2005. That was the boomingest of boom times. We had Eddies all around us telling us how great things were and how stupid we were. But we stood fast in the face of barrages of peer pressure. Wave after wave of, “renting is throwing money away” washed up on the shores. Shells filled with, “buy now or be priced out forever” were exploding all around us.
We looked deep within the data and the statements of the “optimists” and “experts” and understood that Mr. Potemkin was behind the creation of the wonderful village. The Goebbels of the NAR had washed many brains.
As the bombs exploded we walked carefully. Others jumped into the breach and, as we now know, had their heads blown off. I can give many instances where fools rushed in while we feared to tread. And as they lie bleeding on the ground the Eddies of the world never once had the integrity and decency to admit that they caused any part of the mess. They slithered and slinked but never once took responsibility for their stupid statements and their reckless actions.
As we embark on 2010 we are the grizzled veterans of the HBB. Eddie is just some snot-nosed 2nd Lieutenant who has come running onto the battlefield and told us we don’t know what the hell we are doing. We need to “charge up that hill, you dumb sons-of-beyatches”. We look at him and say, “who the f— are you?”
I see many more fraggings for Eddie in 2010 as he insults us and acts like the war has just begun. By about June Eddie will be lying in the HBB graveyard with so many other 2nd Lewies that went before him. Say “hi” to HedgeFundAnalyst when you get to HBB hell. The rest of us will continue to soldier on and preach caution and truth to those we love. We will look out at the carnage caused by Republicans, Democrats, Bush, Obama, Bernanke, Geithner, Greenspan, Rubin, Blankfein, Dimon, Lewis, Paulson, Pelosi, Frank, Dodd, Schumer, Gramm and think, “what a colossal f—ing waste”.
That is my 2010 prediction for our troll du jour.
Nice.
“Be careful Prof, Eddie will accuse you of being infatuated with him.”
That’s the conundrum of his posts: Don’t respond to them, and the blog is littered with disinformation. Respond to them, and he gets the thrill of negative attention.
I have a son who operates similarly (at least with respect to the negative attention side). I have found the best way to deal with his behaviors I dislike is to throw something equally irritating his direction.
Good dad!
I have to remind you of another long-lasting battle with a troll here — a fellow who called himself Gekko. I remember you often were an interested bystander and sometime participant in our tit-for-tat during the period when I enjoyed the pleasure of pounding his specious “buy stocks now” arguments into submission. Not sure whether he ceased and desisted on his own free will, or Ben got fed up with his blatant shillery and tazed him, but his stopped-clock predictions (circa 2005-2007) that the stock market would be a good place to park new money certainly did travel straight to hell by Spring 2009.
‘Say “hi” to HedgeFundAnalyst when you get to HBB hell.’
OMG — I forgot about that troll — he was another one who liked the idea of plowing money into stocks over the 2006-2007 period, on the theory that there was ’so much money sitting on the sidelines.’ Now that we have once again witnessed the Fed flooding the markets with fresh liquidity the way a late January snowstorm in Buffalo, NY piles up snow drifts, one has to wonder whether piles of money sitting on the sidelines is a promising sign for higher future stock prices, or merely the foreboding footprints of the four horsemen of financial apocalypse (Greenspan, Bernanke, Geithner and Paulson).
I have to disagree, NYCityBoy. From what I’ve gathered, Eddie sold at the top and is renting. He hasn’t rushed to buy. I think that he has a decent salary but little savings, because he is young. He just loves to play the devil’s advocate and find disagreement. It wouldn’t surprise me if Eddie goes on real estate blogs and argues with and belittles those who say “it’s a great time to buy.”
Eddie is actually Mr. SRSS, self-righteous show-off snob, kinda reminds me of that character in American Psycho. He’s a 1 %er with some protected, gov’t back consultancy job and brags about buying fugly 1K designer purses that aspiring bourgeoisie acrylic-nailed women sport (whoop-tee-do), and egging on some type of class war with his snarky comments about anyone who doesn’t have his bloated salary. Even if I had the big bucks I wouldn’t be such an ass about it. He must have suffered some narcissistic wound as a child. On a good note, he does offer reminders that many people are thriving in this economy.
I tend to agree. With anonymity in posting, any of us can make up any story about ourselves that we like.
Eddie’s schtick is breezily flippant contrarianism. No underlying principles required, although there are probably at least a couple involved. He’s already shown a tendency to grab and run with most any topic that will work as appropriate comment bait. He happened to choose this blog, although it could have just as easily been any other blog with at least some political overtones and a lively commentariat.
Boredom and/or axes to grind will prod people into spending enormous amounts of time on amazingly foolish pursuits.
Jeez… Poetic NYCB. Well done again.
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HAPPY NEW YEAR and a Prosperous, Healthy 2010 for us all.
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Thanks Ben, again, get and stay well, Ahansen, Ate, keep safe stpn, and Sanfrangal hope your mom gets well and all others too!
I missed a few, but awaiting etc… take care!
Noice Festivus banner:-)
Happy New Year to all,
And to all a good night!
Seems like all the Happy New Years are on this thread so I will drag mine over from the Bits,,,
I would like to wish everyone on the blog a healthy and peaceful New Year…
Thanks to all of you, including Eddie
that bring your insights and data mining for all to enjoy…
scdave…
Happy New Year, DD, and to all of the wonderful posters at the HBB.
Let’s all hope we have a better year; it gives us something to work for. Happy new year all, especially Oly….where ever she is!
Yeah, I miss Olygal too.
I hope that she and some of the other good people in the HBB that haven’t posted lately will stop by and say Hi this year just to let us know how they are.
Yeah…Oly’s disappearance disturbs me a little also…
Me 2- hope she visits!
DD,
Hope you had a Happy New Year. Love the banner.
Thanks SFO and you too! Hint… only for your eyes.. copy/paste-save!
I predict a tragic loss of scam opportunities for mortgage lenders and brokers starting in 2010, due to newly standardized mortgage cost disclosure forms. This is not to suggest that some consumers will not still be flummoxed by the finer points of mortgage finance, but those in this group who might have qualified to buy in 2010 would have already been lured by the $8K tax credit into a previous home purchase.
P.S. When Uncle Sam pledges to help, watch out for your wallet!
The Wall Street Journal
* REAL ESTATE
* DECEMBER 31, 2009
Rules to Clarify Cost of Mortgages
By JAMES R. HAGERTY
Americans have long struggled with the complexities of shopping for home mortgages. Now Uncle Sam is trying to help.
Federal rules that take effect Friday require mortgage lenders and brokers to give consumers better estimates of the barrage of costs they incur when taking out home loans. The new rules mandate a standard three-page Good Faith Estimate that urges consumers to shop around for the best loan and helps them compare lenders’ offerings.
The rules, announced by the Department of Housing and Urban Development in November 2008, are an update of the Real Estate Settlement Procedures Act, a 1974 law known as Respa. Though the changes come too late to help the millions of Americans who made poor loan choices during the housing boom, “it’s going to be a help,” said Jack Guttentag, a retired Wharton School finance professor who operates a mortgage advice Web site http://www.mtgprofessor.com.
One difficulty of shopping for mortgages is that the lender with the lowest rates often isn’t offering the best deal. High fees can wipe out the benefits of low rates, and little-noticed features such as prepayment penalties can burn borrowers. Even for savvy consumers, it is hard to compare different combinations of rates, “points” (paid in exchange for a lower rate), fees and other terms. Lenders often sprinkle in lots of confusing charges, such as processing and messenger fees. Dickering over the smaller fees could distract borrowers from the bigger picture of total costs.
To address those problems, the new estimate form requires lenders to wrap all the fees they control into one “origination charge.” Mr. Guttentag recommends that borrowers focus on two items as they shop: the interest rate and the “adjusted origination charge,” which includes any points paid to lower the rate.
Good Faith Estimates have been around for decades, but there was no standard format. Under the new rules, lenders and mortgage brokers will be required to give consumers the estimate forms within three days of receiving a loan application.
…
I predict that any common sense rules that are passed will just as quickly be undone. Or did we forget how quickly they undid their decision to require down payments? That lasted about 10 minutes.
Ha!
BTW, I am glad you got all the capital letters back in your handle. I was worried yesterday that some troll had taken over your identity and was trying to provoke boxing matches between HBBs…
I don’t think that the RE recovery will begin any time soon in FL. There is still an incredible number of foreclosures and abandoned houses that aren’t on the market. With interest rates so low it doesn’t appear that the banks have much incentive to move these houses.
I think the bottom end of the market has stabilized in ca and az.The higher end is going to take a major hit this year.Dont get greedy and buy what you can afford.Buy when everyone else is sh@tting in their pants and sell when it seems times are too good to be true.
Happy new year to all, including mr eddie!!!!!!!!
I think the bottom end of the market has stabilized in ca and az.The higher end is going to take a major hit this year.
Really? What makes you say that? I will wander around the valley ( onlywhere I want to live) and review the stuffed flyers to see if the prices have come down. AZ, as you know it is “different here” where we live, to a degree- no snowball throwing!- in that it is high season now for our areas. So you and I have lots of Canooks that have $.
I don’t think it is at the bottom, wait till May when the snowbirds go home.
PS. that one open house I mentioned 2 mo ago, Spec $2.8, background $$$ investor said NO to $2.3, then builder/2nd pos owner told us they owed $1.8 on the total notes and would be open to offers- 1 yr after mkt corrected. Well the fancy furnishings they bought to Stage the home were on CL and they were nice stuff but went for 1/2 cash of original purchase price.
I see lots of staging firms on CL selling their warehoused furniture.
“I think the bottom end of the market has stabilized in ca and az”
Not sure about CA, but in AZ if you are referring to areas like Maricopa, Suprise, Buckeye, SanTan and such as the low end, then you are probably correct. The low end of areas closer in still have not come down to where they would be in line with median incomes.
Ok, here goes…
I don’t think the real estate market will stabilize yet, though some places will have bigger price drops than others. There may even be a stupid and brief resurgent mania or two in some big cities.
Unfortunately, what will continue is ineffectual attempts by the government to “rescue” the housing market. Things like tax credits, homebuilder bailouts (direct and/or indirect), continuing low interest rates and funky FHA-like subsidies will be invented by politicians. Shadow inventory will continue to grow.
One good thing that may happen is that sellers will become more restless and rebel against the REIC, and the MLS will not have a monopoly on information like in years past. Realtors will continue to dwindle in numbers, and commisions will decrease in size. Sellers advertising their home on Craigslist may become the norm, even for banks.
Well, that’s all I can think to say…I’m gonna sleep off the Moet and I wish you all a good weekend and a Happy New Year!
Agree. The guy in Ben’s post who said “recent stabilization is a temporary plateau” has my vote for Sensible Economist, even though one doesn’t know what tricks the Obama/Dodd/Bair team will pull next.
“Happy New Year Everyone”
I predict 2010 and on as the decade of increased bank failures, endless, endless lawsuits and prolonged (true)economic statnagion…that’s if we are lucky and I’m an actually a optimist.
That being said, mikey checks his Claymore mines and pops back down into his bunker to check the realignment of his machine gun ports.
*** Please call ahead and KNOW the correct password prior to visiting***
M&I sues shuttered Florida bank
By Paul Gores of the Journal Sentinel
Posted: Dec. 31, 2009
M&I Bank is suing the parent company of a Florida bank that was shut down by regulators in November, accusing it of failing to repay a $17 million loan….
…Among the 140 bank failures in 2009, Orion’s came with an unusual twist. Only four days before Orion was shut down, the Federal Reserve issued a harsh order against the bank, accusing its chairman and chief executive, Jerry Williams, of lying to regulators and demanding he be fired.
…In cases where the Federal Deposit Insurance Corp. is the receiver, as it was in the Orion failure, the FDIC has priority claim on assets involved. That means M&I ultimately may have to deal with the FDIC as it tries to recoup its losses from the Orion loan.
And the gov’t and taxpayers gave M&I 1.7 billion in bailout money already.
Sheesh…it must have been to help them pay for more lawyers in Arizona and Florida.
http://tinyurl.com/yzu5hsn
“I predict 2010 and on as the decade of increased bank failures, endless, endless lawsuits and prolonged (true)economic statnagion…that’s if we are lucky and I’m an actually a optimist.”
Can I have some perp walks to go with that?
Roidy
P.S. I am not an optimist. I still believe that we are getting closer to catastrophe.
Happy New Year.
advertising their home on Craigslist may become the norm, even for banks ??
Not with the legal mine field that needs to be traversed in the transaction…Until the banks get the legal right to act as real estate brokers, a service they desperately want to offer I might add, they will seek the liability cover of offering the property for sale through a licensed real estate broker.
Happy New Year, all! (And a Happy New Year out into the ether to HBB “absent friends.”) I’m in GMT +3 and although I had no glass to tip I tried to post at midnight, but alas, no connection.
Hey, I was in Tanzania last week, where are you?
Tanzania, az_lender! You must describe your experiences, please.
Watch out for the ‘devils’.
Post photos! Or email them!
But then again the tazmanian devils are having a major bout with cancer lately.
tasmanian devils in Africa? please.
idiocy lives in america..
nah, just testing.
Hungover and testy?
it is cancer in the testicles.
Maybe some kangaroo meat will help me to overcome the throes of testiness
I read the article about tasmanian devil cancer today. It’s an implantable cancer. Tasmanian devils bite one another and implant tumor cells in the face, which grow. Tasmanian devils are endangered as a result. Humans don’t get cancer by implantation (thank god.)
“Humans don’t get cancer by implantation (thank god.)”
With the exception of one of my sons, humans also seldom bite each other…
az, I’m in Sudan (hence the lack of a glass to raise in a New Year’s Eve toast).
I remember you said a while back that you were taking your nephew (or great-nephew?) to Tanzania. Did you go on safari? How was it? Did you get to Zanzibar?
I haven’t been in mainland Tanzania since 1988, but I went to Zanzibar two years ago with friends. I hope to get back to both in the next couple years - safari and see how things have changed on the mainland, Zanzibar and Pemba again, visit the island in the marine reserve…
I predict Q1 of 2010 will see a continuation of the mania in the housing and stock markets, with housing **inventories touching lows** only seen near the peak of the bubble. Housing prices will rise in many areas due to the lack of inventory, low interest rates, the tax credit, and relatively low prices (as perceived by buyers who think 2005 prices were “normal”). The power of low interest rates cannot be overstated.
The GSEs will become the ultra-super-SIV, and principal reductions will become the norm on GSE loans. IMHO, one of the reasons inventory has been kept off the market is because the PTB wanted housing prices high enough that borrowers can refi into GSE loans. I believe a good portion of the toxic loans now belongs to the GSEs, and they can now do what they’ve wanted to do, without the complications of multiple layers of investors in the private, securitized market.
Conspiracy time: It’s possible we’ll discover that a lot of the “shadow inventory” was sold off in bulk, possibly to creditor nations (like China) in exchange for our Treasury debt — another possible reason for them wanting to keep prices high for the time being.
Rates will be kept low, and housing prices will be kept high until late spring/early summer, when some of the housing investors, bulk purchasers, and regular sellers (who’ve held off in anticipation of a better market) see strength in the market and inventory begins to build again around June-September.
The DOW hits ~11,500, and the S&P hits ~1,400 by September. Gold goes to 985 in January, then goes back up to the 1,200-1,400. The dollar rallies to 78.21 in the first few months of the year, then declines as more govt programs are announced at the end of April and the Fed continues to force rates down. No change in interest rate policy until Q3, when they raise rates 1/4 pt. with a disclaimer that they will drop them if need be.
Unemployment drops for the first three quarters, then rises again next winter.
Overall, 2010 is relatively flat, with bullish tendencies for the first 2-3 quarters. IMHO, 2011 will see another “official” recession with multiple state/municipal bankruptcies and bailouts, and housing prices begin to take another leg down.
“Housing prices will rise in many areas due to the lack of inventory, low interest rates, the tax credit, and relatively low prices… The power of low interest rates cannot be overstated.”
I have to question that logic based on a recent example. What were Japanese interest rates like over the period (roughly 1990-2009) when their housing prices crashed spectacularly, never to return?
This chart only goes back to 2000, but I believe it makes my point. If not, please supply a chart going back to 1990. I believe Japanese interest rates have been at string pushing levels for two decades or so, but I defer to anyone who has the data to prove me wrong.
You know we could all get together and discuss this in person.
Hi there, SD Bear!
Happy New Year to you!
PB,
Here’s what Rich (Piggington) has to say:
…housing prices are no longer at an extreme. This can be seen in a semi-recent update to my price-to-income and price-to-rent charts, which show local home valuations returning from orbit and heading back to earth over the past several years. It’s pretty easy, when homes are stunningly overpriced, to forecast that they will eventually reach something quite a bit closer to their fundamentally justifiable values. But once the valuations go from “extreme” to “somewhat reasonable,” you just don’t have that same analytical wind at your back.
http://www.voiceofsandiego.org/toscano/article_6c6cbc80-4bcc-5edb-8f8e-2a4e2bc1bb1b.html
———————
I’m actually seeing some examples where PITI payments would be roughly equivalent to comparable rents. This is **entirely** due to the very low interest rates we’ve witnessed in 2009, especially when they were under 5%. When I’ve run some numbers on various homes we’ve looked at, I’m always surprised by how low we can get the monthly payments.
For those who’ve been waiting a long time, I can see why many have jumped in this year. If we were looking to borrow a lot of the purchase money, we probably would have bought, too. However, for those who are looking to put down a more significant chunk of change or buy all-cash, I think they need to wait for the high rates. Problem is, I’ve been waiting for higher rates since 2004!
I think a 100 basis point move will be a big deal. Right now, rates are rising a bit, and things are looking hopeful (for those of us who want higher rates and lower prices), but we’ve seen this head-fake before.
What happens from here is a gamble on whether interest rates can remain low, and even given low rates, whether home prices can stay permanently high relative to incomes. I still see more downside risk, in the forms of the risk of higher rates or the risk that “higher than expected” foreclosures at the high end will sink everything of lesser value, than I see the risk of getting “priced out forever” again. Further, I am willing to live with the latter risk; I would rather get priced out of San Diego and live out my days in a part of the world with saner home prices, then to get stucco and kick myself forever for failing to follow the sane advice I have freely dispensed here over the past several years.
“Problem is, I’ve been waiting for higher rates since 2004!”
If it is any comfort to you, the last time there was a substantial recession (7/90 - 3/91), interest rates stayed low until 1994, at which point they rose steeply. I expect something similar this time — that is, the end of the recession preceding the onset of higher rates by a period of a couple of years, and the period of higher rates in turn preceding the end of the housing price bottom by a couple of years. Similar timing to the early 1990s episode suggests we should not expect to see housing prices bottom out until at least 2013. I am guessing the bottom will be “lower than expected,” due to the shock which is likely to accompany a move towards capitulation in the wake of so much misplaced optimism which is currently flooding the MSM economic propaganda channels.
Agree with all your points, PB. Just wish my very patient DH could get on board with the “rent until we retire to a dirt-cheap place” idea.
Since a prediction is a sort of an expectation I humbly submit a “useful” word for 2010:
diminished:
made to seem smaller or less (especially in worth)
Spelling Bee contestant:
“Can you use it in a sentence please?…”
1st judge, eddie:
“The sucking sound of the National economy has diminished.”
A sure lesson of 2009 is that crazy hangs on longer than anyone expects.
I see an increasing number of people thinking that the worst is probably well behind us and we should start getting back up to normal just any time now. Most of my friends are much worse prepared for another shock than they were in the fall of ‘08, many of them say they could not survive another round of trouble. More than a few of these poster children have loaded up on debt in ‘09 to “maintain”, wasting a valuable stretch of time to better prepare.
My take is that Normal, in the sense of something sustainable, is still a long way down there. We are headed there in fits and spurts, dragging and clawing all the way. Likely we will get in a wave at Normal without the train stopping at the station.
The lesson for me is not to take the day as an end game, but to live, work, play and love hard all along the way. In the last year of this decade I see good things for Blue Skye:
Overhauled engines in my boat.
Ten pounds lost before I lie naked on the beach at Oka again with my beautiful Canadian Redhead.
A superb vintage of applejack.
New and interesting projects at work.
Living below my means whatever comes.
Freedom from debt.
Happy New Year all!
Blue,
Save me a spot on the sand for me and my cooler. We agree on what’s coming down the pike.
Behold, a pale horse.
As the evening progressed, I was reminded that the entire decade sucked big time and 09 was no prize.
I sold before the climb, CA mkt was still flattish/low in late 99/00
‘01 was 9/11, then #587 JFK. Lost many close friends, entire industry went down. Small biz didn’t flourish- lesson is to either 1- be gay, 2-have diff biz. not antiques. 3. candle/pirate shop- IXNAY!
‘03 got salary reduced -35% and continued threats by corp.
Only bright spot was discovering HBB/Ben. Prices were stratospheric in CA, so as HBB took over- depression subsided! Enlightenment ensued. Knowledge is power. And rent is reduced till sanity ie: prices per sq ft, return!
wrong spot- sorry- want to be beachside too!
I know a multi-millionaire ex-CEO of several companies over the decade who is back to being a used stock salesman. But without current licenses, restarting as an intern at 60.
It was shaping up to be such a nice decade, until about September 11, 2001.
> A sure lesson of 2009 is that crazy hangs on longer than anyone expects.
Well, guys like Skip “up 240% in 6 years - ha - but still should be up 5.6% a year over 9 years” Rabin are still in the hunt for the pot of Fool’s Gold.
I think we have hit bottom and will stay there for a very long time. People have too much debt to start buying and housing is not going to rebound giving us a feeling of wealth. The feeling of wealth will have to come from someplace else. Our economy needs to change by creating something we can sell to the world and create new jobs. Maybe our educational system can provide the knowledge to create new ideas for a different economy, but people are going to have to give up on the idea of entitlement and put in some honest work.
I think we have hit bottom and will stay there for a very long time.
How can we possibly speak of “bottoms” in the light of trillions of dollars of bailouts and stimulus that have held us up so far? If the government, and The Fed (where does one end and the other begin) can keep pumping money into the system then we may be able to talk of a bottom.
Anybody that doesn’t believe The Fed and the federal government can keep pumping in Viagra to the out of work porn star, known as the U.S. economy, cannot yet speak of bottoms.
If you believe we are at bottom then you believe the actions of Bernanke and Geithner can continue indefinitely with no external force calling their bluff.
I think I heard what you meant to say.
Yep, I think I’m on another planet trying to understand exactly what was said. Maybe he
could paraphrase that for us.
Maybe he
could paraphrase that for us.
“We’re f—ed.”
“We’re f—ed.” ??
That kind of summed it up
Okay…I will take my simplistic shot here at a prediction for twenty-ten;
More deflation mainly in the things we want…Slight inflation in the things we need greater in the things we must have i.e. medical care & medicine…Cash & Cash Flow will still rule…
Maybe this instead: That tired old hooker otherwise known as the U.S. government is blowing like there’s no tomorrow and the American economy is still kinda soft.
SDGreg…Creative mind
Hey Eau Claire Dude AKA Fresno Dude.
I’ll still get off the by-pass and chow down at the Eau Claire Perkins or Taco Bell when I stop to fuel up. Your economy is safe with me.
Keep my pitstops open as I need energy whenever I hit the gate at 98 heading towards Canada and on the rebound.
Thanks,
loyal customer mikey
I agree with you, ex-Fresno dude.
This is an L-shaped recovery for the most part. But I think house prices will drop another 10 to 30% by 2012.
A year ago this time I had an unstable source of income and about $18,000 debt. Now my debt is about $4800 and in my time share, and I still have an unstable source of income.
I’m better able to withstand another 2008 stock crash.
I thank the Bernanke/Geithner fakers for keeping false hopes alive so that I could buy time to save more and pay off more debt before reality catches up to Keynesianism.
Okay, now wait a minute, Bill…
Haven’t you been telling us all these years that you have $700K-$1MM in stocks, bonds, gold, etc.? Why in the world do you have any debt at all?
Not trying to give you a hard time, just trying to understand why you would have any debt.
I don’t have an answer for you, honestly!
Okay then, I’m going to play “mom” here and tell you to get rid of that debt before you buy a single gold coin, stock, or bond!
Seriously, my mom (R.I.P.) pounded that into my head from the day I was born. Get rid of the debt at all costs.
You certainly have enough “savings” to tide you over if you should face some uncertain event(s). Pay off the debt first, then save.
Happy New Year, Bill!
I’ve seen “Mom” in action. You should listen to her or she’ll come to LA and make you listen to her.
WTC scratches his head in puzzlement - are there two Bill in Los Angeles? Maybe the original Bill fell prey to Ate-up much as Olygal apparently did.
WTC scratches his head in puzzlement - are there two Bill in Los Angeles?
Me 2. Doesn’t sound like the original.
I predict that 2010 will be another unpredictable year. That is what happens when there are no rules.
A lawyer that taught constitutional law was sworn in as president of the USA in 2009. His first act of office was to throw the constitution out the window, much to the delight of his hardcore followers.
A little humbug of a man running the Federal Reserve completely usurped his power, working in sheer darkness, and conjured up monetary madness that was beyond the imagination of even the most skeptical amongst us.
A Democratic Congress sat on the laps of Wall Street and Goldman Sacks and said, “I will give you anything you want for Christmas, Easter, Arbor Day, St. Patrick’s Day, Valentine’s Day and Kwaanzaa. All you have to do is ask.”
The people around us heard the word “recovery”, got physically aroused and threw away an excellent opportunity to prepare for further shocks. Instead they bought into the “green shoots” propaganda and have decided that they will just yell “victim” if any more bad $hit happens.
In the light of all of this how can we make any predictions for 2010? I won’t be making predictions. I will just be giving those around me the same advice I have for nearly 5 years. “Be careful.” I want to see them, and all of you, lead as good a life as possible in the face of all of this madness.
“I predict that 2010 will be another unpredictable year. That is what happens when there are no rules.”
Granted that top economic policymakers have acted as though they had a super-legal mandate to stop the financial crisis by any means necessary. But there is still a predictable aspect to the situation:
- Market forces will make the housing prices correct downwards towards equilibrium (market-clearing) levels.
- Interventions will attempt to use various forms of stimulus to offset Mr Market’s desire to correct.
- The epic struggle between Mr Market and Uncle Sam pretty much guarantees the housing market will remain FUBAR.
Housing is a horse that is dead as a mackerel and all that can be done is render the carcass for any residual value. (Sorry for mixing a metaphor)
Just my opinion. Oil prices will have a destabilizing effect as they inch ever higher.
The worlds growing appetite for a diminishing asset will have many unknown effects on all the
markets.
“Just my opinion. Oil prices will have a destabilizing effect as they inch ever higher.”
This may end up being the story for the second half of 2010 and much bigger in the years that follow. Gas is already around $1 per gallon than at this time last year. With the typical seasonal increases, gas in California and other high cost areas could be pushing $4/gallon by summer. That was more than enough to push a teetering economy over the edge in 2008. The economy now seems even less capable of handling that type of stress. That may be a bigger factor than the ineffectiveness or weakening of stimulus measures in a decline in the economy for the second half of 2010 or early 2011 that some see.
But however bad that may seem, it may pale in comparison to the impact of the loss of Mexican oil imports in the next few years, the result of steady depletion of Mexican oil production. There will be much pain on both sides of the border.
- The epic struggle between Mr Market and Uncle Sam pretty much guarantees the housing market will remain FUBAR.
FUBAR, or just moribund?
I don’t disagree that prices will continue to correct toward equilibrium, but it seems to me that the litany of interventions has kept (most) housing markets from going completely FUBAR. The Powers That Be have succeeded in slowing the inevitable in a somewhat controlled fashion — I was expecting considerably more chaos, despair, weeping, and gnashing of teeth.
FUBAR, as in
- little or no private mortgage lending
- Subprime Sam continuing to play the role of easy money mortgage lender of last resort.
“…conjured up monetary madness…”
Be careful with terminology. I would argue that most of the actions to which I assume you refer lie far outside the realm of conventional monetary policy operations, and hence are fair game for a Congressional inquisition, er, I mean, audit.
No, a lot of people fortunate enough to stay employed without salary cuts took this false recovery as an opportunity to buy time and pay off debt, as well as increase savings in short term securities and precious metals. I think more people are prepared this time to withstand a major stock market drop and job loss than they were a year ago.
I’m going to be at least as frugal this year as last year. Maybe to the point of being austere!
A DemocraticALL of Congress sat on the laps of Wall Street and Goldman Sacks and said, “I will give you anything you want for Christmas, Easter, Arbor Day, St. Patrick’s Day, Valentine’s Day and Kwaanzaa. All you have to do is ask.”A Democratic ALL of Congress sat on the laps of Wall Street and Goldman Sacks and said, “I will give you anything you want. All you have to do is ask.”
Nothing new from since ‘93.
My predictions are reruns from previous years:
Cash will remain king as banks and other financial entities continue to relentlessly absorb money from the economy rather than recycle money they receive back into circulation. This subtraction of circulating money will force consumers to cut back on non-essential consumption - not a good thing in an economy where 70% of economic activity depends on this consumption.
Because money will be tight people with money will tend to save rather than spend, which will act to restrict money velocity and will make money all the more scarce.
The war on savers will end; The war on spenders will begin.
Those who need money the most won’t be able to get it, at least not on terms favorable to them as they were in the past. This means those with money will get to call the shots, will get to set the terms.
Historically bankers have always loaned money to those that didn’t need it, while making it difficult for those that did. It’s called the three “C’s”.
What are the “three C’s” these days? My guesses:
charactercorruption,collateralcollusion andcapacitycrap loansNice catch, Prof.
Truer words have never been spoken. Nonetheless, I believe it it important to diversify a bit. Just as a hedge.
What I thought would happen in 2009:
- Economy:
My thoughts: unprecedented credit crisis meets unprecedented Fed/Treasury action, prevents GD #2 and it flat lines. US saving rates rises significantly as I posted.
Result: true first half of the year, but the GDP has grown higher in Q3 and probably Q4 than I was expecting (even though it is only artificial). Saving rates did climb as expected.
- Inflation/Deflation:
My thoughts: Not much either way except in housing, same reasoning as above.
Results: deflation, other than in housing, didn’t become a big issue. Inflation hasn’t show up much either.
- Stock market:
My thoughts: Would keep falling and not recover much, if any.
Results: recovered a lot more than I expected, thus missing out on much of it. Also lost money on some short positions.
- Housing:
My thoughts: would keep falling through out the year.
Results: Fell much of the year but 4 straight months of rises (albeit temporary) due to Fed/Treasury pump.
- Banks:
My thoughts: Fed will have to run out of ink first before letting one single bank fail.
Results: my best prediction of 2009, thus having no worries plowing money into banks even thought balance sheet don’t look good.
My 2010 predictions:
- Economy:
Double dips in 2nd half 2010 or 1st half of 2011.
- Inflation/Deflation:
Deflation resumes in 2nd half 2010 or 1st half of 2011 for assets you own and inflation of assets you need.
- Stock market:
Double dips before June 2010.
- Housing:
Double dips by 2nd half.
- Banks:
FDIC borrows load of $ and save more banks, but continue de-leveraging by businesses and consumers make as if banks have failed and not lending (zombie banks, aka Japan).
Ditto
Ditto X2.
Volatility in 2010 is a given…and the Goldman Sucks of the world know how to make boatloads of profits from volatile markets, so I expect Wall Street will do all it can to make sure those volatility waves have very long wave lengths (to sucker in lots of greater fools before the next wave crest hits the beach) and very high crests (to maximize profit potential for strong hands with lots of chips with which to gamble).
(to maximize profit potential for strong hands with lots of chips with which to gamble).
to maximize profits for strong hands who make money gambling with other peoples money.
Si, señor…
As always, some very astute predictions from the many wise posters here. Happy New Year to the veterans of Troll War II.
Olygal was last seen with an enormous geoduck fleeing the country.
I predict the stock market will fall fast and furious in the next 3 months. Then Obama’s trillion $ war chest will kick in and make things look fabulous until the election. All along the way, foreclosures will gradually increase, but prices will be sticky with some false rises to coincide with the Summer selling season. State budgets and commercial real estate collapse will keep the ptb spinning like whirling dirvishes all along the way.
The next leg down of GR2 begins in late November of ‘10 and will extend until Spring of ‘12. Social upheavel will accompany it.
You are probably the most correct, according to my intuition. More of the same until it doesn’t work anymore.
Demographics, Structural capacity and Financial finageling will be the trademark of the next decade in Real Estate and all other investments.
It’s already begun, but will make a long steady drag on the US Economy.
The end of WWII began the longest and largest population boom from native Americans referred to as the “BABY BOOM”.
Those children are now entering retirement. The boom started in 1945.
Retirement, unless you are a priviledged government leach, usually begins at age 65. The “investments” into stocks, bonds and other assets will begin seeing a syphoning effect as the growing retirement population begins to cash-in its investments to meet living expenses, which will be rising. This will put a drag onto an economy that is already in trouble.
Those same Boomers began effecting public policy in the 60’s and 70’s, with such foolish ideas as “zero population growth”, sustainable development, changes in Immigration Laws, and the War on Poverty.
This has led to a huge demographic shift, from a largely white European nation, to one of the most “diverse” countries in the world. The new lie is that our “strength is our diversity”. Nothing can be further from the truth. It is our end.
The original settlers had NOTHING to help them in their struggles to build a nation. They built log cabins. With primitive tools. The early immigrants had NO support from the government. When they “failed” to make it here in America, many simply went back home.
We now have a welfare state where anyone who is not White is given all kinds of “benefits” just for showing up. Even women are “minorities”.
Ridiculous.
The consequences of this shift is not a strengthing of America, but a long-term decline. Education is bad and getting worse. The so-called knowledge-based economy was based on the ingenuity of “Americans”.
Well, now, anyone who wants to cross the border is a new American, so where is this Knowledge base supposed to come from? It won’t happen.
The entire economy is based on government cohersion and stealing from such mechanisms as the Equal Employment Opportunity Commission, whose only goal is to extort money from businesses who don’t have “right” racial, sexual, ethnic and ideoligical mix within their so-called private companies.
With 20 to 30 million illegal aliens, whose wage base and income will not support higher housing prices, and will not provide taxes for government programs, the trend will be to soak the “rich” to try and maintain current support programs. The new “health care” bill will lead to massive fraud and more billions of dollars of missing money.
This will cause a need to reduce other programs and/or the need to find ways to find finance for goverment programs, by way of bond issuance.
The loss of revenues will create an environment of rising interest rates as governments need to attract more capital for running their agencies.
As noted by another poster, this will be a long-term trend.
Finally, the goverment stooges at the highest levels will try to game the system by printing more money and providing more “stimulus”.
This will fail and create greater deficits that will need to be dealt with by the Post_boomer generation. The FED should be ENDED and the ponzi-scheme of money printing for the Banks should be stopped, but as we have seen, it will not.
Combining these factors, I see housing as staying depressed for years to come (in fixed dollars. Housing could be a million for a shack if the dollar gets substantially devalued). The drain from the retiring Boomer generation, combined with rising interest rates, and a dwindling native population, supplanted by “immigrants” seeking a better life provided by government benefits, a faltering education system that will only get worse by non-English speaking imports, will drag the system for a generation. 2010 is the demarcation line.
Just like Roosevelt, the current and subsequent Administrations will try to game the system and will cause the depression to drag on for many years. Housing will be seen for what it is, an EXPENSE, that should be kept to a minimum. Rising interest rates will make afforability even less, so prices will need to decline.
Finally, what was primarily American Industrialization, after WWII, when America was the only player left standing, has now been “off-shored” to cheaper labor markets. Those markets have grown exponentially and demand commodities, such as timber, concrete, copper, and OIL. We must now compete with the world we created.
American workers will lose ground as Commodities become scare and prices work higher, not supported by wages. America has not seen a rise in wages in more than a decade, lost a lot of money in stocks, and then in housing. We are a poorer country as a result. The drag with Government “healthcare” won’t help. Think Cuba, or Venezuela.
This will lead to consumer prices in areas that need OIL, including Agriculture. Needed products like groceries and gas will go up in price, and may cause less demand in other areas causing prices in non-necessities to decline.
It will be mixed bag, but houses will need to be cheaper, not more expensive.
My conclusion: Housing is in for a long-term decline. We may see some short-term “ups” because of government finageling with various programs to keep prices high, but I don’t see the long-term trend as “up” over the next decade.
Dio,
I couldn’t have said it better. I agree on all points. May I pass this on to a few friends?
Interesting summary Dio….If that came from your brain to your key board then you are a pretty sharp tack…
“The original settlers had NOTHING to help them in their struggles to build a nation.”
Disease was a biggy, that helped whitey quite a bit.
Sheesh…they had guns, nails, the fear of God and all the high technology background of their day.
Plus I thought that the illegal immigrant colonists traders did rather well swapping blue beads, buttons and trinkets for RE with the indians like in Manhattan.
Some of these Floundering Fathers DID have current visas before they came a’stealing…didn’t they ?
Disease was a biggy, that helped whitey quite a bit ??
The Winchester rifle helped a bit…
Please forgive me while i choke.
Are you one of those who claim the white man stole America from its Native inhabitants and we “owe” them? We decimated the populations with typhus, typhoid, diptheria, malaria, etc. etc?
Or are you saying the POX that spread throughout Europe as a result of the Syphilis that Sailors brought back to The Continent was a benefit to whitey? The Black Death that wiped out 1/3 to estimates as high as 1/2 the population wasn’t caused by rats. It’s a good mythology, but doesn’t work out logistically. Just not enough migrating rats, except the 2 legged kind.
I’m sorry. The history of Mankind has been invasions, conquests and border movements of one racial/ ethnic group over another. The idea of “countries” based on Boundaries and anybody who moves into them is part of the group is relatively new. With the exception of conquering tribal invaders, most populations did not migrate far from their native lands. Romans stayed in Rome and brought back conquered people as slaves for the new empire.
Does Ghengis Khan owe the Ukrainians for his invasion? Think the Mayans lived peaceably amongst their fellow natives? Get real. All of the vast Soviet Empire was one big takeover, and most liberal ideologues didn’t have any problem with it. They loved Stalin. They loved the expansion and many still hoped it would spread.
It’s all disintegrated now, back to more ethnic tribal divisions, which we are trying to combat under the so-called war on “terror”.
The first time i ever heard of a war waged on a concept, except perhaps the failed war on poverty.
Within the confines of this United States we have witnessed relative peace and security for a long time, with the exception of Lincoln’s war on the States. This is an aberration, not the norm.
From it was built a great civilization, as an outgrowth of European religious and civil society.
The “natives” fought to maintain their way of life and lost. I don’t agree with the “reservation” settlements that were reached, as nations within the nation, but that is where we are.
Now, we have new invaders. We conquered POLIO, Tuberculosis and Malaria here. Now, TB and other diseases are being brought back to us by a government that refuses to recognize our rights to our own sovereignty and destiny. We are not fighting the new invasion. Our government is welcoming it. It will bring us new diseases, too.
The AFrican that boarded the plane to Amsterdam and then headed to Detroit came from a disease infested country. He wasn’t stopped, even though he was a TERRORIST threat. He was also a national disease threat. Aids is rampant in Africa, along with numerous other diseases, such as malaria. Quarantine stops the spread of infectious disease, but we have a perverted view of “immigration”.
Perhaps enough new diseases will make there way across the border to have a real Montezuma’s revenge.
Will that make you feel better?
I used to think you were smart. Now it’s evident you’re a plain old generic racist…. just like the slave owning “forefathers” you hold in such high regard.
He is smart. You’re stuck in the 60’s.
“There are none so blind as he who will not see…”
Ex is more correct.
?
Bravo for your post!
I tend to be bearish on growth (in my opinions), but I bet against my own pessimism. In other words, I don’t trust my own predictions. This helped me in 2009 to get to my all time high net worth.
Demographics is the key though. The question is: In fifteen years will most people my age (at 65) really be able to afford to retire? If people realize they cannot afford to retire early, perhaps they will focus on preventive health care (fitness, nutrition, quitting smoking), cosmetic surgery to help stave off old age appearance, and stay in the work force longer. This also means they will work on those catch up 401ks and catch up IRAs.
I’m going heavy into Roth IRAs this year. I’m going to convert half my tax deferred retirement funds into Roth IRAs. Because I could be working into my 70s.
“Because I could be working into my 70s.”
That’s my plan, working into my seventies.
But, what’s that saying? Man makes plans, and God laughs?
Man makes plans, and God laughs?
Good one combo…
Hey Combo, for us non-believers, can we substitute “dog” for “God??
Dog laughs, as in “the little dog laughed as the dish ran away with the spoon”?
I just now passed your question along to God and He told me He was okay with it.
Off topic: I worked with a guy who invariably replied “Thank you” whenever I mentioned how nice a day it was. It took me quite a while to catch on.
I’m going to convert our rather small IRAs into Roths this year. Not that I expect to make much by investing them, but they are nicer to inherit than regular IRAs or 401Ks. I just don’t think that any investments are going to pay off for me in the future. I invest conservatively and am bubble-phobic.
I just did one IRA conversion this morning. It was a non-deductible Traditional IRA. So my witholding tax is going to be miniscule on that particular conversion. The tax will amount to less than 1% of the balance.
The sweet thing about converting is you have no required distribution by age 70 1/2. So you could draw on Social Security (if it exists) without being taxed on the benefits until you take the Roth distributions at, say, age 80.
If you think America as you know it will cease to exist in 30 years…like we go into severe dictatorship and scrap the Constitution for good, I would say you have a point.
But even in the idiocracy level that we have, people do know there is only one nation, to use the phrase, “conceived in liberty,” with such a radical individualistic Declaration of Independence and a powerful Bill of Rights.
That flame will not die in us. The pendulum will swing back to small government and big growth capitalism at some point. Think “cycles!” Cycles apply to all markets and to politics.
But even in the idiocracy level that we have, people do know there is only one nation, to use the phrase, “conceived in liberty,” with such a radical individualistic Declaration of Independence and a powerful Bill of Rights…………
which is why it must be destroyed.
Think Hitler, think Stalin, think Mussolini, Chairman Mao, Pol Pot, Hugo Chavez, Ghengis Khan, Fidel Casto, and then think
Nancy Pelosi and Barack Obama.
Bad things happen when lunatics gain political power.
You forgot Cheney & Rove.
Yes, all you say is true, Diogenes. Unless a needed commodity such as oil and gas starts coming up out of the ground (like where I am at present), then there’s little hope or relief from the damage that these social engineers have done to us.
Witness the health care bill. No illegals are covered, it says. The Soviet engineer’s plan? Make them legal. Can’t pay? They’ll make us pay for them.
The only hope is for a middle class (white) backlash that will make the diversity mongers sit up and take notice.
Cowardice breeds hatred. I do appreciate you guys reminding me of certain dangers that lie ahead for us all. Spiritual preparation will trump physical preparation.
Ever been to Colonial Williamsburg, Diogenes? How about St. Petersburg? Minneapolis? San Francisco? Albuquerque? Any other early population center in the US? All established and built as military/profit centers with corporate funding and the labor of “illegal” immigrants and indentured/slave labor.
Asserting that rugged individualists in buckskin and Bowie knives founded and developed this country is beyond naive. It was a corporate venture from the get go and still is. Those who set out to build log cabins on the frontiers were encouraged and subsidized by the government with land giveaways, access to timber, farmland, water and nascent infrastructure, and heavy subsidies to sponsoring religious organizations by parent churches “overseas.” Hudson Bay Company, Jamestown Pact, the railroads that made frontier settlement possible? Corporate profiteering. Why do you think we fought a revolutionary war against London? Or a civil war against NY banking interests? (Hint: it wasn’t ideology- although that was the excuse they used to get the rabble involved.)
Every time corporate interests tipped the economic balance against the survival of their serfs and subclasses, a revolution occurred. Some ended up being called “wars,” and some were simply a reshuffling of the economic deck to avoid bloodshed and civil dislocation, as in the “foolish” war against poverty in the 1960’s. Remember the Watts riots? The Panthers? The middle class student uprisings? Bank burnings? To those of us on the front lines, it was war. Fortunately it was settled without huge destruction to life and property, the deck was re-dealt in a vaguely more concilliatory fashion and a new game commenced which was soon co-opted by…international financial interests who gave us the current pre-revolutionary scenario.
Please keep in mind that it is your vaunted white business interests that have created the market give-and take you so disparage. And that the Scots-Irish genepool you presumably descend from is every bit as “welfare” draining to this country as the Mexican financial refugee. As for African terrorists, two words: Timothy McVeigh.
Thanks Ahansen. Wanted to say the same thing. History gets in the way of some folks vision and they can’t see the facts for their fear and hysteria.
And some folks are innumerate. The terrorist acts committed here in the good ol’ USA are disproportionately committed by Muslims. Only about 1 to 2 percent of the population here is Muslim, but any time there’s a mass shooting or a bomb involved it’s almost always done in the name of jihad. That fact has nothing to do with fear and hysteria. That’s a clear-headed, sober look at facts.
Columbine. Definitely Muslims.
Haymarket riots. Muslim
Shooting up the Capitol dome last year. One ‘a them.
Bombing of abortion clinics. Yep.
Charleses Whitman and Manson. Islamic Fundies both.
Metesky and Kaczinsky? You got it.
and on and on anon.
Boogeymen and arsehats come in all persuasions, Wolfie, and the ranks of the Seriously P’ed Off are rife. No one has a lock on guerilla warfare, it’s an equal opportunity destroyer of innocents.
Again, Ahansen…you’re innumerate. I’ll repeat…Muslims are 1 or 2 percent of the population here, but commit FAR more terrorist atrocities than is proportionate for their population. The Muslim violence problem is enormous in Europe and will continue to grow here as more Muslims immigrate here. And I haven’t even mentioned all the Islam honor killings of family members.
So Ahansen…is your contention that Muslims commit only 2 percent (the percentage of their population here) of all terrorist acts on US soil? While you’re correct that nobody has a lock on guerilla warfare, some groups are more involved than others. Some a LOT more.
I forgot, Timothy McVeigh was a muslim? The Unabomber?
…two words: Timothy McVeigh.
Splendid!
Here are my predictions for 2010
—————————————————-
1. Ben Jones finally gets national recognition from major publication
2. ET - Chicago becomes ET - SLO
3. I get a vasectomy (TMI, I know)
4. I thank my lucky stars for not buying a house in 2009
5. Eddie disappears (I agree with NYCityBoy - sometime around summer)
6. Homegrown small-scale terror attack
7. GMC painfully BK, but won’t actually go BK until 2011
8. Rush Limbaugh dies
9. Tiger Woods does something reckless to harm himself (not suicide, but cry-for-help thingy)
10. The Precious goes to $3,500/oz. and Aladinsane buys 3 more firehoses for his mountain property
2. ET - Chicago becomes ET - SLO
ET and family stay where they are!
Despite the awesomeness of the job in Cali, we decided to stay closer to friends and family. The wife’s current workplace also stepped up with an immediate raise and promotion — funny how a good offer on the table will grease the slow-moving cogs of bureaucracy. So it worked out.
Congrats. Hope to see you someday soon in ORD land. HBB meetup
Great news, ET. Congratulations to you and your wife on the raise, and on your decision to stay near friends and family. IMHO, moving away from your “home base” can be pretty discomforting.
Rush Limbaugh gave a press conference today to announce that his coronary arteries were clean on a cardiac cath. So you are already behind, Muggy. But I enjoyed your predictions.
“we decided to stay” + “his coronary arteries were clean” Damn! 0 for 2 on day one!
I wonder if UCF is hiring.
“Treasure Coast Realtors said they are skeptical of the forecast. Karl Zimermann, president of the Indian River County Realtors Association, said, ‘I look at these predictions with a degree of skepticism because with the environment we’re in, there’s no history to make predictions on.’”
Hmm. That hasn’t kept almost all of your ilk from shamelessly proclaiming that “there’s never been a better time to buy”, every day for the last 4 years, has it? Finally getting a little wobbly, eh?
My prediction for this year is that the esteemed super financial geniuses running the Administration, Congress, and Federal Reserve will at long last begin to confront the limits of their ability to monetize debt, with predictable results to follow. It may not happen until much later in the year, as they’ve pretty clearly telegraphed their intentions over the past couple weeks as being pedal to the metal for the time being. Hold on tight, it’s going to be a wild one.
Diogenes, Thank you for your post.
Just reading it shows me that there is hope out there.
Dio, I know there are many Americans who see the state of our country, the same way that you do. I am one of them.
To all those who are reading this, lets all make a 2010 resolution:
“Lets make 2010 the year we take back our country”.
When I say lets take back our country I mean take it back from the traitors in congress and the senate that looted our country’s treasury and sold our childrens futures to the big banks, and the ethnic lobby’s. When I say lets take our country back in 2010 lets make the politicians pay with their offices, The people that need to pay are the likes of Barbara Boxer, DIane Fienstein, Barney Frank, John McCain, Nancy Pelosi, the looter in Chief Barak Obama. Any politician that voted for the bail-outs, amnesties and gifts to the banking industry.
Folks the revolution has already started, it began with the Tea Parties.
Lets join the Tea Party Revolution, we have everything to gain and nothing to loose.
Folks the revolution has already started, it began with the Tea Parties.
Lets join the Tea Party Revolution, we have everything to gain and nothing to loose.
Um, Greg, are you aware that the so-called Tea Party Revolution has been taken over by K Street whores like Dick Armey and his corporate-owned “Freedomworks”? Before you call on people to join a movement, you should do some basic due dilligence to ensure you aren’t being duped and manipulated by the same wire-pullers who landed this country in its current mess. “Meet the new boss - same as the old boss.”
Also, learn to spell if you want people to take you seriously.
Thanks for pointing out that fact, Sammy. The party was taken over, excuse me, was started/backed by THE Monster the party says it wants to get rid of. Due Diligence is necessary.
diligence. Sorry, Sammy, I couldn’t resist.
But I agree with you. I didn’t feel hope when I read Diogenes post at all.
I’m not too concerned about people taking me seriously, so I don’t much care about the occasional spelling error.
The Tea Parties?
I just wish this country would go back to being a secular representative republic. All of the religious faith that our politicians spout off about is so much hot air. It all makes me tired.
I’d like to see someone say, “No, I don’t believe in God. Now, about this economic mess we are in. I have some specific, practical ideas that if we implement them …”
Of course, an atheist is considered to be below pedophiles, convicted felons, Wall Street bankers/analysts/brokers. You can be gay, straight, corrupt, an adulterer, and found with $90k in your deep freeze, but just claim that you don’t believe? No election win for you.
Roidy
No elected official should be reelected at any level this year! Maybe they’ll get the idea. But unfortubately they have ACORN and the SEIU to get them back in.
pismo, get over it already, and add in some real facts to your f.e.a.r.
Abolish the Dept. of Education, Energy, Housing,
and Agriculture for a start, then get rid of the
ATF.
+ 1 Rancher….Ditto here…
ATF is the most unconstitutional agency….
The 2nd Amd says the Feds can’t simply “regulate” firearms.
The 21st Amd says the Feds have no jurisdiction over alcohol: reserving to the states the power to regulate alcohol.
I guess it’s OK for them to regulate tobacco….
Winston’s market machinations will be undermined by sovereign debt issues.
Winston - wasn’t that the protagonist in Orwell’s “1984″? Time to reread that oh-so-timely classic.
Who is this mysterious Winston character of whom you often speak?
“Who is this mysterious Winston character of whom you often speak?”
Dear PB,
He’s the boogeyman. He used to scratch upon on my 2nd floor bedroom window pane when I was 5 yr old.
My mom used to say “That’s just Winston”. What in the hell did she know !!
http://www.campaignforliberty.com/article.php?view=486
Peter Schiff on the past decade and what lies ahead. Schiff is running against Chris Dodd - the poster boy for ill-conceived government intervention in the housing market.
Long-term Prediction: No return to boring financial news until at least 2014. Hence over the course of the next half decade, HBB addicts may need to occasionally sit on their hands to stanch posting binges…
Addicts? What addicts?
I don’t have a problem, I can quit at any time!
Every holiday visit to my LDS inlaws, I quit drinking coffee for a full week just to remind myself that I am not really an addict. Of course, I resume my highly-enjoyable caffeine habit immediately upon our return home.
“Smoking is an easy habit to break. I’ve done it hundreds of times.
– Mark Twain –
What a decade our family chose to move to America’s Finest City!
My compliments to John Wilkins his gripping retrospective. The question of whether the decade has ended yet is one for purist historians to settle.
An era of anxiety
Americans charting new directions after a decade haunted by devastation and despair
By John Wilkens, UNION-TRIBUNE STAFF WRITER
Friday, January 1, 2010 at 12:01 a.m.
We began the first decade of the 21st century confused about what to call it. The Two-Thousands? The Aughts?
One suggestion turned out to be especially fitting: The Oh-Nos.
Think how many times that phrase must have been uttered in the past 10 years in San Diego County and around the world, uttered under our breaths, behind hands drawn to our mouths in horror, in our sleep.
Time magazine recently dubbed it the Decade From Hell, “the most dispiriting and disillusioning” one for Americans since the end of World War II. Hard to disagree, even with the unprecedented election of the nation’s first black president, and his subsequent selection of the country’s first Hispanic justice for the U.S. Supreme Court.
Early on, the decade brought terrorist attacks on U.S. soil and two wars that continue to this day. In the middle was Hurricane Katrina, the largest natural disaster in American history. And at the end came the worst economic recession in more than 70 years.
In San Diego County, we suffered landslides and epic wildfires, school shootings and political corruption. The New York Times dubbed the city of San Diego “Enron by the Sea.” It wasn’t a compliment.
No wonder, then, that when the decade ended yesterday, most of us were happy to call it gone.
“My sense is that people feel we need to move in other directions,” said Richard Madsen, a sociology professor at the University of California San Diego and co-author of “Habits of the Heart,” a 1985 book that foreshadowed many of the recent moral and financial scandals.
…
—————————————————————————–
(List follows of top-of-front-page photos in the dead tree edition of the SD Union Tribune:)
Clockwise from top left: Firefighter Eric Brue defended homes in Scripps Ranch in October 2003; 2,600 homes burned and 17 people died. - UT
Rep. Randy “Duke” Cunningham was sentenced to prison for conspiracy and tax evasion on March 3, 2006. - UT
Hijacked airliners slammed into and brought down the twin towers in New York on Sept. 11, 2001. - New York Times
A Saddam Hussein statue seems to fade away behind Staff Sgt. Nick Popaditch on the day Baghdad fell, April 9, 2003. - AP
Newly inaugurated, President Barack Obama paraded with first lady Michelle Obama on Jan. 20, 2009. - CNP
California voters, frustrated by what they saw as a state government in disarray, forced Gov. Gray Davis out of office in a 2003 recall. AP
Specialist Justin Bohan watched stocks plunge Oct. 9, 2008, amid an agonizing collapse on Wall Street. AP
On May 1, 2003, President George W. Bush declared the end of major combat operations in Iraq. AP
Sonia Sotomayor, shown at her confirmation hearing before the Senate Judiciary Committee on July 13, 2009, became the first Latino and third woman to serve on the U.S. Supreme Court. Associated Press
Evelyn Turner (right) of New Orleans waited with the body of her common-law husband, who died in the aftermath of Hurricane Katrina in August 2005. AP
Embroiled in problems over the city’s pension system, San Diego Mayor Dick Murphy announced his resignation in April 2005. U-T
John and Susie Kaelin hugged their daughter Dalas near Granite Hills High after a student fired a gun, wounding five people in March 2001. U-T
Joe Villarosa was among about 20,000 people who marched from Balboa Park to the County Administration Building on Nov. 15, 2008, to protest Proposition 8, the ban on same-sex marriage. U-T
IIRC Ben Cardozo was the first hispanic Supreme Court justice…
“Eric Thompson, president of The Group Inc., said the company has seen ‘a good amount of interest’ in the $6,500 tax credit. Even though the $6,500 represents just a fraction of the price of a home, that, combined with good prices and good interest rates, is a motivator, he said. ‘It’s free money.’”
What a disgusting, evil person. Apparently, my tax dollars, which subsidize this nonsense is “free money.” My blood, sweat, and tears mean nothing to Eric Thompson, president of “The Group, Inc.”
This is excruciatingly irritating, isn’t it? I despise scabs.
This is the sort of societal leech that I hope loses everything and ends up living in a cardboard box.
2010 Prediction:
Washington will finally capitulate and declare California to be a TBTF financial entity; hence the gusher of money flowing out of the Fed’s liquidity fire hose will be at least partially redirected towards the Left Coast as a policy response.
California Will Begin 2010 With Massive Budget Gap
by John Myers
December 31, 2009
California’s dismal financial straits this year are just a prelude to what the state can expect in terms of budget woes in 2010. Legislators and the governor battled through much of 2009 to close a $60 billion budget gap. Now they are looking at another, bigger tidal wave of red ink in coming months.
STEVE INSKEEP, host:
Arnold Schwarzenegger begins his final year as governor of California in 2010. It’s another year that begins with another multibillion-dollar state budget deficit. Schwarzenegger is looking to the federal government for help. John Myers of member station KQED has more.
JOHN MYERS: At an event just a few miles from the state capital in Sacramento, Arnold Schwarzenegger was asked whether he had any New Year’s resolutions in mind.
Governor ARNOLD SCHWARZENEGGER (Republican, California): Jobs, jobs, jobs. That’s the only thing that I can think of. Because to me, you see, you know, you can talk about all the details in the world but the people in California need jobs.
MYERS: California’s unemployment rate exceeds 12 percent, a sign the state’s economy continues to struggle. That struggle over the course of 2009 left Schwarzenegger and legislative leaders having to find more than $60 billion worth of ways to erase the state’s budget deficit.
The long political battle over the budget also took its toll on California’s reputation nationwide.
(Soundbite of machinery)
MYERS: When IOUs started rolling off the printing presses this past summer, it was a symptom of a budget process that had gotten so bad it had starved the state of actual cash to pay its bills. Even now, California is living off of borrowing - both from internal special funds and billions more from Wall Street investors. In fact, a state report shows over the last 10 years, annual interest payments on debt have risen 138 percent, while California’s revenues have only grown 24 percent - and it may only get worse.
California’s credit rating is now dead last than all states, and lower than some countries. That makes borrowing much more expensive, a fact driven home at a recent legislative hearing by the state’s treasurer, Bill Lockyer.
Mr. BILL LOCKYER (State Treasurer, California): Compared to, you know, Indonesia, the Philippines and so on, we’re paying substantially more than third-world countries, merging markets, are paying for their debt.
…
What’s a merging market? Is that the opposite of markets that are decoupling?
It’s the age of the internet:
e-merging markets.
Alternative prediction, contingent on my above prediction not panning out:
At least one CA newspaper (perhaps the LA Times) will publish an edition featuring the headline, “Obama to California: DROP DEAD!”
* The Wall Street Journal
* DECEMBER 31, 2009
California Pushes for Federal Help
By STU WOO
Facing a $21 billion shortfall through June 2011, California leaders want billions of dollars in budget relief from Washington that could head off deep cuts expected to state programs.
Gov. Arnold Schwarzenegger will ask the White House to waive rules that require the state to spend its own money on certain programs to receive federal funds, according to California officials briefed on the Republican’s coming budget proposal.
Such relief, combined with additional stimulus funds, could save the state as much as $8 billion in the next 18 months, the officials said.
State Senate President Darrell Steinberg, a Democrat, will visit Washington in coming months to lobby Obama administration officials and the California congressional delegation for aid. His message: The national economy will depend on California’s recovery.
Messrs. Schwarzenegger and Steinberg will also use a longstanding argument that the state sends more tax dollars to Washington than it receives in return.
“Under President Clinton, we got 94 cents back on every dollar we sent,” said gubernatorial spokesman Aaron McLear, citing data compiled by the nonpartisan Tax Foundation. “Now it’s 78 cents on every dollar. It makes no sense that California should be subsidizing programs in other states.”
…
It never made sense that other states subsidize programs in Calfornia.
Ya got it backwards (see the post below yours…).
Thanks. You have to go back to the ’80s to see a subsidy in California.
Federal spending by taxes paid. California one of the losers.
http://www.taxfoundation.org/research/show/266.html
One sees this. “It was a rolling bust, so it will be a rolling recovery.”
“I will maintain to the end, however, that the longest suffering will be endured by ‘flyover’ country. As some of you point out, the bubble masked the Rust Belt’s death throes. Stories of fleeing manufacturing were already there eight years ago - for those that cared to put their 401k statements down long enough to look. I remember small mfg. closures being well documented in the Midwest press circa 2000.”
Two very good points that seldom get airplay here.
Look…. I’ve maintained all along that no-where land will get slammed and I’ve often characterized it as “the resumption of the long slow descent into post-industrial economic decay”. Of course the level of denial associated with the forecast for flyover country can be heard EVERYWHERE from EVERYONE and is typically spoken something like “we never had a bubble here so prices won’t fall”. What they fail to disclose is that many flyover areas DID experience escalating prices where they were in fact falling prior to the Great Housing Fraud years. When these people (usually natives/locals) are reminded of this, they seldom have an answer. I go on to explain that the job base isn’t growing and actually shrinking in many cases, local incomes flat or falling. These facts leave them little room for a logical retort and if they do respond, it’s typical mindless realtor-speak.
The “rolling bust”.
I don’t think we need anymore evidence to prove that the Housing Price Collapse has played out in an asynchronous way. And with the ALT-A resets/recasts looming just 3 months away that will extend into 2013, we’ll see just how unscathed flyover country will be as the collapse continues to extend into geographies where “there wasn’t a bubble(so prices won’t fall)”. From my perspective, the genesis of the bubble began in FL, CA and close in suburbs to major metro areas back in the mid to late 1990’s. Monetary fuel was added to the fire in flyover country by 2000 at a slow rate. As FL/CA raged, more fuel was added and prices doubled in Flyover by 2005 and prices countinued their uptrend as the fenders came off the FraudMobile in the Sunbelt in 2006-2007. It wasn’t until early 2008 did we see any official evidence of declining prices in Flyover and not until late summer 2008 was their any widespread acknowledgement that prices were slipping and even then the deniers were saying “prices will go down just a little bit and then keep going up”.
I suppose when your only hope of escaping post-industrial decay is grossly inflated housing prices, I’d be denying reality too.
The problem is that “flyover country” is poorly defined….
Michigan is toast. Illinois is toast. But some states like Idaho have diverse economies based upon mining, timber, agriculture, and high tech. We probably will do OK here. We have lots of precious metals still in the ground, so if the price goes up we can extract them. Lots of corn here so if the government stupidly keeps hawking ethanol fuels we do fine. Lots of dairy, lots of semiconductors, laserprinters, et al.
Southwest states still face the long-term problem of no water.
Lots of corn here so if the government stupidly keeps hawking ethanol fuels we do fine.
Try restating that. Pharma/Med/Monsanto hawking, and gov listening due to being paid off/bought-sold.
CornMONSANTOpharmaceutical industry etc will prevail with more junk food, more injections into the food supply with pesticidesMonsantoSOY will further increase the bad health and diabetes epidemic being sourced to MegaAgriMonsantoBIZ. MED biz grows due to bad foods, GMO(genetically modified) foods/animals etc, then pharmaceutical industry “if you have a twitchy leg” we’ll make a drug for it. It could kill ya, but your leg won’t twitch anymore. Although you COULD add more magnesium into your diet and your leg won’t twitch anymore…FINE PRINT!
But… you have to live in Idaho.
If you are going to be poor, might as well do it in a Mediterranean climate.
I wonder how many of the Alt-A mortgages have either been refinanced, the property sold, or have already gone to foreclosure. I haven’t seen any stats as of yet - I guess we will find out in the months to come..
“‘We’d have a healthier housing market if we had a better economy and better job prospects and if people are actually able to pay their mortgages,’ he said.”
REALLY???
“there is no question that the residential market is in a transition from what it was to what it will become.”
Awesome insight.
/sarcasm
Sounds like Yogi Berra is now selling real estate…
I took a look at San Diego recent sales on Zillow.
Some examples:
1361 Hornbled St $516K for 1500 sq ft sold 8/09
1836 Reed Ave $635K for 1400 sq ft sold 10/09
4052 Promontory $880K for 1975 sq ft sold 11/09
4020 Gresham St $655K for 1176 sq ft sold 10/09
This is the great San Diego housing crash?
You cherry-pick data like the best global warmenist out there. What were you saying yesterday about listening to some dude running his mouth on some blog or somethin?
More cherry-picked examples from the resident troll.
Next…
Where is the most recent upchuck from Gary Watts ???
He’s MIA these days…seems The OC home prices didn’t keep going up as he predicted they would, and he vanished from the scene.
Just found his prediction for 2010. Will post it in the next Bits Bucket I can get to early enough for people to see it.
Very surprising…
You could find similar such sales when prices were crashing. Most of the fraudsters have not been prosecuted and are still free to go about their business. Why should we necessarily believe these are clean sales?
I’d like to point out that, I assume, that most of us have lost out on the recovery since March, including me! ( Except for the precious!) Next correction, I’m going to buy and hold!
I guess there are still enough idiots in this country who bite $8000.00,fearing that it is going to end soon, but it seems to me honorable Fed. will continue to print more of the stimulus money to pay “first time home” buyers credit… Soon they probably will start to pay credit for buying U.S. companies stocks…
“Soon they probably will start to pay credit for buying U.S. companies stocks…”
Isn’t making sure the stock market generally goes up sufficient compensation for U.S. stock market investors without adding a tax credit to the mix?
I predict that the real cost/value of housing will continue to trend down for some time. What that means in nominal dollars depends in the inflation/deflation debate.
I don’t expect another plunge, barring a new Dark Age. In most places (not NY) enough has come off the price to restore affordability, and the cultural preference for owner occupancy remains strong.
But interest rates are going to go up, either slowly or catastrophically, and supply will continue to exceed demand for some time in most locations. And falling real wealth and income will force Americans to cut back on something, with housing near the top of the list.
In the aggregate I predict the economy will stop getting worse soon but get no better until 2012. For every aspect of it that will improve, another will get worse. What 2008 was for the financial markets and 2009 for the job market, 2010 will be for commercial real estate. A public finance crisis follows toward the end of the year, into 2011, and for years after.
By 2012, I predict my marginal tax rate (federal, state, local, FICA) will hit 60%, and I will either be told those in my generation will have to wait to 70 for Social Security and Medicare, or not get them at all, to ensure the federal government will have the credibility to borrow enough to provide the benefits those born before 1958 have promised themselves.
to ensure the federal government will have the credibility to borrow enough to provide the benefits those born before 1958 have promised themselves.”
Thats going to go away sooner rather than later. I think universal health care is a way to get us workers to pay rather than the government which will be struggling just paying the interest on its debt as rates go up.
Sammy, I beg to differ with you, but the Tea Parties are non partisan and are not controlled by any person or group.
They attract individuals that are horrified by the debt our Government is incurring, and the crony capitalism that is swallowing our economy. As well as other problems that have gone unchecked for years, such as Illegal Immigration.
Sammy you can smear us all you want, but we are basically the only thing that is putting up any resistance to the the looting and the treason.
Greg,
I don’t know how long you’ve been reading the HBB, but I am one of the individuals who is horrified by the debt our government is incurring and its increasingly socialistic tendencies. I am not “smearing” the tea parties or the people who take part in them. It is a fact, though, that what started as a genuine grass-roots movement has been co-opted by Establishment Republican operatives (hacks) like Dick Armey. “Freedomworks” is a corporate front aimed at mobilizing Useful Idiots, Leninist style, to give a populist veneer to agendas being pushed by the corporate cartels. To me it is far more effective to help true mavericks like Ron Paul or Peter Schiff get elected and expand their influence, than to have anything to do with GOP front organizations. Today’s GOP is a zombie party for Wall Street, the neo-cons, and the military-industrial complex. True patriots will avoid them like the plague.
sammy what you said is true. The original concept and followers have been completely usurped by the mega $$ corps-gop origination to be used as a front.
Sammy, you quote Peter Schiff, don’t you know that Peter Schiff is part of the movement.
Sammy, if you think as I do that the bail-outs and the Fed enduced bubbles, and the crony capitalism and the bank looting is crushing our country, why don’t you join us in the resistance?
Peter Schiff has.
We need the help of all Americans, come join us, you have nothing to loose and everything to gain.
Greg, see my note above. I have been very active in supporting people like Ron Paul and Peter Schiff who are part of the solution to out-of-control government and predatory capitalism. As far as hoping for the support of “all” Americans, don’t be naive - most are too passive, stupid, and complacent. It is only necessary to have the support of the most energetic and thoughtful segment of the populace, which does not exceed ten percent.
http://firedoglake.com/2009/04/13/corporate-lobyists-raising-money-for-tea-parties/
Greg,
My point isn’t that resistance to bailouts and taxpayer-subsidized Wall Street swindles is bad. What I’m telling you is that before you tout the Tea Party Movement as a vehicle of change, you should be aware that corporate-owned GOP operatives like Dick Armey have oozed in to subvert the tea party movement and exploit popular anger for their own purposes. Don’t be a pawn or dupe for people who do not have Main Street’s best interests at heart. The beginning of real change is to recognize that both major parties are equally corrupt and compromised.
My impression, and i could be wrong, is many of the people who show up for these tea party events are the very people who receive the entitlements they are decrying, like Joe the Plumber whose family was on welfare when he was growing up. They’re being used for a political agenda larger than their own interests. I’m all for less government and less welfare, but let’s get real.
These wouldn’t be some of the same people that decry government involvement in health care, but wouldn’t dream of giving up their Medicare benefits would it?
There’s a real case to be made for reform in many areas, but being tools for those that have no interest in reform won’t get it done.
“Valley home prices have recovered at roughly the same pace since April, but Arizona State University professor Karl Guntermann sees that nice, straight trend line as more like a tightrope than a solid foundation. ‘While the increases reflect a clear trend, this is still an unstable housing market substantially influenced by foreclosures on the supply side and investors on the demand side,’ said Guntermann.”
This observation caught my attention as it highlights the weak underpinnings of the recovery in housing, such as it is. You’ve got weakly capitalized investors buying up housing because it’s “cheap” compared to the peak of the bubble, thinking they’ll either sell it in the next few years as housing prices go back up and/or rent it out in the interim until that happens.
Except that even with the declines, that housing is not necessarily cheap historically and rents are poised to trend lower so they may not even be able to make enough in rent to cover the mortgage, even with the lower purchase price and low interest rates. When I see vacancies for good rental properties still running 5 to 10 percent, rents are going to have to come down. But as with housing prices when they first started declining after the peak of the bubble, will be sticky on the way down. At some point though, apartment owners will tire at the rate of turnover and begin to lower rents.
And as for how long they might have to wait to be able to sell profitably? They might have to wait a long time. I have a hard time seeing any real, sustained recovery in housing prices without growing wages. In the next decade we’re more likely to continue to see an erosion in overall wages that won’t be offset through borrowing as occurred in the past decade. People won’t be able to pay more for their housing unless they wish to do so at the expense of everything else. If for sale housing prices remain stuck at the current elevated levels, many more people will be renting, and paying a lot less than if they owned.
But even within this overall declining price scenario, better located areas may experience much weaker declines while poorly located areas could trend toward zero. Rising oil prices in the middle to latter part of this decade should really put the squeeze on some areas.
Any predictions for Maryland, specifically Ellicott City area. I might have to move there for work reasons. What is the best site to find the most accurate housings values in a market.
Thanks.
Nice enough area. However housing is expensive, decent schools, easy access to fun parts of Baltimore. Almost easy access to fun parts of DC on the weekend.
Sammy, I am with you in being horrified by our Government debt and its current socialistic tendencies. We have that view in common. I am glad you support Ron Paul and Peter Schiff, so do I.
I understand your frustration with the GOP, and your statement that it is a zombie party for wall St. and the Neo Cons. The bail-outs should be criticized as well as the Neo cons.
In your criticism though, you forgot to mention a few details, such as how Obama and the Dems. trippled Bush’s debt in Obama’s first year, and most of the money is a gift to the banking industry. As well as the Democrates association with Acorn and promises of amnesty for the Illegal aliens.
Where I differ with you Sammy is where you call people like me who support the Tea Party movement “usefull idiots” and “true patriots” avoid the GOP like the plague.
Sammy people like me, Ron Paul, and Peter Schiff are all true patriots, and are members of the Republican party. Instead of avoiding it like the plague we are trying to reform the party. We do so because we believe it is the best way.
Believe me I would have joined the Democrate party a long time ago, but its a diehard party of Socialists and the ethnocentric lobby.
It seems to me Sammy you are part of the resistance, Join us in 2010 and vote out any politicians that voted for the Bush / Obama bail- outs.
Never a Year Like ‘09
Can anyone offer comment on the relationship between issues raised in the article I post below and the uncorking of the $400 bn GSE credit line from the Treasury Department?
The U.S. Government Continues To Blow Hot Air Into A Deflating Housing Bubble
By: Sentiment Beat Monday, December 28, 2009 10:15 AM
The U.S. housing market beginning no later than the fall of 2010 year will start the next leg down of the housing market correction. We already know the latest date, since that is when the next spike in U.S. mortgage resets kicks-in. Without a major restructuring of current mortgages and continued cash infusion by the U.S government via continuing tax credits and artificially low mortgage rates there will be no way to stop the onset of the next leg down for the housing market.
There are two differences between the first spike in mortgage resets and the second. Not only will the second spike last for at least two years (longer than the first), but it will be much harsher. A majority of the loan resets will occur between the spring of 2010 through the summer of 2012.
Roughly 75% of these mortgages are either “option-ARM” loans, “Alt-A” loans, loans through Fannie (FNM))/Freddie (FRE)/FHA, with a sprinkle of sub-prime loans in the mix. Put another way, only about a quarter of these mortgages are “prime”. These “prime” mortgages are also experiencing their highest level of defaults in history.
The largest category are the option-ARMs, the category of loans which has already had the highest level of defaults. With the a majority of these mortgage-holders having made minimum payments on these mortgages, their monthly mortgage payments will increase to multiples of their current payments; even with interest rates at record-lows. Many of these loans are negative amortization type loans adding to the problem.
The next-largest category in this group, the so-called “Alt-A” loans were supposed to be of a better quality than sub-prime. The default rates on Alt-A mortgages approaching the levels for sub-prime. Many of the Alt-A mortgages was limited documentation loans or “liar loans”.
Then we have the agency mortgages, from Fannie Mae, Freddie Mac, and now the FHA. If the massive losses which these quasi-government entities have already suffered on previous loans aren’t enough to frighten people about the future wave of defaults coming from this source, then their current lending practices should certainly do the trick. U.S agency mortgages make up over 90% of all mortgage-funding for new home loans, the U.S. government has essentially nationalized the U.S. mortgage-market (which is insured by U.S taxpayers), but with the free-loading bankers able to act as “middlemen” - taking a cut of profits for themselves, while having zero, personal risk.
The level of risk the U.S. government is taking on with many of the FHA loans is insane. The U.S. government is taking miniscule down-payments on these mortgages, over 90% of the time less then 4% down payment is out down and with the other hand the U.S government is handing out an $8,000 check, paid for by the U.S taxpayers.
…
“Can anyone offer comment on the relationship between issues raised in the article I post below and the uncorking of the $400 bn GSE credit line from the Treasury Department?”
The Goverment has poor business sense but its not really their money is it ?
“What are your housing bubble predictions for 2010?”
My self serving prediction is that Coastal California and more expensive areas dependent on option ARMs generated in 2004-2006 will see the same leg down in 2010-2011 that the cheaper areas like inland California and Nevada saw in 2008-09, that is at least a 20-25% price drop from current levels.
Of course I was totally wrong that consumer discretionary stocks would drop off a cliff in 2009 and early 2010 . . . and my puts on TIF, WSM and similar nonsense have cut me deep! I still think they will, but the market pattern in 2009 resembles the 1930 “recovery” and 2010-2012 will resemble that of the early 1930s when equities did fall off a cliff. Such a comment will inevitably generate the standard apparently erudite response that this was due to the fed being overly controlling in 1930, but I’m not sure it was so simple. I think the markets in 2009 were a part of a fairly predictable cycle, and 2010 will see significant losses in equities and housing prices overall.
I’ve been commenting on this blog now for four years but I’m thinking of tuning out permanently now as it seems dominated by the right wing ideologues who seem to crawl out from wherever and spend all their time spewing. Yes, the government is inefficient but it is the only sustainable institution we have. The corporatist approach to solving market problems in a period of complete lack of oversight and meaningful regulation requires these multi-trillion dollar bailouts every few years. Yes the injustice of taxpayer subsidized anything should be discussed openly and intelligently, but I believe a fundamental role of government is to facilitate the common welfare of its citizens by insuring they have access to reasonable infrastructure, water, food, health care, basic shelter, transportation, and the necessities of life. While this was clearly the intent of the framers, it has in the past 150 years been stretched into any number of bizarro policies from $300 band-aids in hospital ERs to wars for Pipelinistan, the vast majority of which are crafted merely to enrich corporatists who own and operate lobbyists, the unintended fourth branch of government that has now rolled over the other three branches. Political campaigns should be publicly financed with strict limits and we can again elect representatives based on ideas rather than choosing between corporate parrots. The market solution is often the most efficient solution if there are common sense restrictions on the owners of that solution, but this is clearly not the case if we just shovel all our money into its master’s boiler rooms as fast as we can while they produce nothing of real value for our society. This increasingly describes the housing/finance industry which is no longer about providing meaningful housing solutions but about playing shell games with money we never actually create but somehow live off of.
Thanks for that wise and reasoned post, Rubble. Rather than despairing, please hang around and join the fray? After all, a sense of disassociation from simplistic chatter is why we sought this blog out in the first place; and visceral reaction to inane blathering is reason unto itself to respond–as you so eloquently did.
Don’t wimp out on us. Lively conversation is what this blog is all about!
Cheerz.
I second what ahansen wrote. That was an excellent post, Awaiting.
Don’t leave, BubbleRubble
“I’ve been commenting on this blog now for four years but I’m thinking of tuning out permanently now as it seems dominated by the right wing ideologues who seem to crawl out from wherever and spend all their time spewing.”
Meh — Eddie barely climbed out of his hungover stupor to muster a post today…
pb, he was referring to the past several days of blather from the militant fundamentalists we have here, didn’t think he meant ed. But ICBM.
Hey Bear don’t leave us…i just want us to blow up their mosques while the towel heads are aiming at mecca…let’s give them their ultimate wish to die for allah…
so is that left wing right wing or just out in the ozone?
Thanks Bubble Rubble for your post. You express very well many of the observations and concerns I share.
Now a few questions. I also tend to believe this market will eventually play out something like the 1930’s, i.e., with another big leg down. I tend to think the amount of intervention this time has resulted in a bigger bear market rally and delayed the next leg down. However, if this is the case, how much longer will the next leg down be delayed, maybe til late 2010 or early 2011, and will it take a different form this time versus the 1930’s? For example, will it be just as crushing as the 1930’s with new lower lows in many areas, stocks much lower than Nov. 2008 and another sizable decline in housing prices?
The other question, with the noted economic problems and the greater systemic problems in other areas, do we begin to make the necessary reforms or increasingly have greater non-economic problems such as happened in some countries in the 1930’s?
Awaiting, plz stay and continue to give it your best hit outa the ball park. Your points were well taken and obviously to reasonable for those unable to show up and spew only f.e.a.r. and righteous gun waving, bible thumping anti gov. drivel.
Great post. I come here less and less often due to the inane political discourse. You can talk about bad policies and propose good policies without trying to score points for “your team.”
still don’t get it. why does the gov believe that a “homeowner” deserves mtg payments of up to 31% of income but… let 25% of renters in Boston (but true in other main metro areas) pay 50% or more of their income renting?
why not helping renters with affordable rents up to 31% of their income? FNM and FRE REOs imho should be used to help out renters by providing affordable rental units. that would stop the flipping mania and the “get rich by owning a home” illusion. a mobile labor force is what the country needs, not a bunch of RE gambles.
I’ve still not figured out why some activist lawyers haven’t filed a discrimination lawsuit, as most “poor” people tend to be renters.
If renters stop paying rent for 6 months (or 3 years??), would they have the media slobbering all over them to highlight their “victim” status and decry the evil landlords for evicting them?
Perhaps the sudden and unexpected exposition of “Global Warming” as a fraud in late 2009 was one of those black birds with big wings and a long neck. When a megatrend gets smacked down suddenly, it ripples through the system, precipitating unexpected changes and opportunities. It would be a stretch, but one could hope that an era of profound practicality might be in store.
Wingnut, but that would be my hope for the year, and the decade to follow, and for my children’s society.
“Perhaps the sudden and unexpected exposition of “Global Warming” as a fraud in late 2009 was one of those black birds with big wings and a long neck.”
Except Global Warming isn’t the fraud that the deniers think it is. People, however, are free to act on their own set of beliefs, even if those beliefs aren’t supported by facts.
Maybe Greg, but your position looks less crowded than it did a short time ago.
Those not swept up quickly in a mania are always derided as traitors or idiots.
I suppose my comment would fly here better without religious indignation if I referred to the housing mania. No intent to disturb your belief system, only a proposal of crumbling momentum.
I spent two days over the break reading on the Crusades. Holy Epoch mania. Peter the Hermit was eventually exposed as a fraud, yet the true believers threw themselves on the pyre, wave after wave, for over a century. What we have seen here are just a few little manias.
I understand the skepticism on climate change that exists. However, the mania of the housing bubble was never supported by the economics. The science on climate change is much more solid, though there’s still much to learn about the potential impacts.
Americans are not strong in scientific literacy. We’ve still got a majority of people that believe in creationism versus evolution after all. In matters of science, following the herd isn’t necessarily the best way to go. The herd might be correct, but not necessarily because the herd understands the science.
I’d rather be correct than in a crowd, or at least hedge my bets on the better information that seems to be available.
“Americans are not strong in scientific literacy. We’ve still got a majority of people that believe in creationism versus evolution after all. In matters of science, following the herd isn’t necessarily the best way to go. The herd might be correct, but not necessarily because the herd understands the science.”
Exactly! Well said Greg.
I suggest that in neither science nor investing is following the herd the best way to go.
I think one of the great tragedies and downsides to the amount of purposeful misinformation we’ve been fed in so many areas over an extended period of time is that many no longer trust much of anyone, even those we probably should still trust.
It’s no longer enough to digest good information and make reasoned judgments and decisions. We often also have to decide what is good, accurate information. For many of us in many areas, that may be far beyond our area(s) of expertise.
Even if one isn’t being purposefully ignorant out of comfort, ease, convenience, etc., it’s very easy to make poor decisions even with the best of intentions.
“The national economy may be in recovery, but most states haven’t yet hit bottom.”
Am I the only one who doesn’t get this statement?
Because the national numbers are cooked and there is no recovery, national or otherwise?
You can’t even say that a few states are doing really well, enough to offset those that aren’t. You seem to have maybe at most a few states that are doing so-so at best. That shouldn’t begin to offset those that still haven’t yet hit bottom.
It can’t be a great sign that the state with by far the largest economy (which would have been something like fifth in the world before the dot coms bombed) is totally screwed, at least economically speaking.
“It can’t be a great sign that the state with by far the largest economy (which would have been something like fifth in the world before the dot coms bombed) is totally screwed, at least economically speaking.”
Agree 100%. Not only is CA by far the biggest single economy in the U.S., but we tend to be an important source of innovation which then leads to job creation. CA is on life support from what I see around me.
My DMV renewal fee was 30% higher than last year, even though my car is a year older. The town where I live is issuing parking tickets left, right & center. It’s all about coughing up revenue from every source possible, smack in the middle of a serious recession.
http://www.washingtonpost.com/wp-dyn/content/article/2010/01/01/AR2010010101196.html?hpid=topnewsl
“There has been zero net job creation since December 1999. No previous decade going back to the 1940s had job growth of less than 20 percent. Economic output rose at its slowest rate of any decade since the 1930s as well. Middle-income households made less in 2008, when adjusted for inflation, than they did in 1999 — and the number is sure to have declined further during a difficult 2009.”
“And the net worth of American households — the value of their houses, retirement funds and other assets minus debts — has also declined when adjusted for inflation, compared with sharp gains in every previous decade since data were initially collected in the 1950s.”
“The trillions of dollars that poured into housing investment and consumer spending in the first part of the decade distorted economic activity. Capital was funneled to build mini-mansions in Sun Belt suburbs, many of which now sit empty, rather than toward industrial machines or other business investment that might generate economic output and jobs for years to come.”
“The problem is that we mismanaged the macroeconomy, and that got us in big trouble,” said Nariman Behravesh, chief economist at IHS Global Insight. “The big bad thing that happened was that, in the U.S. and parts of Europe, we let housing bubbles get out of control. That came back to haunt us big-time.”
“The housing bubble both caused, and was enabled by, a boom in indebtedness. Total household debt rose 117 percent from 1999 to its peak in early 2008, according to Federal Reserve data, as Americans borrowed to buy ever more expensive homes and to support consumption more generally.”
“The first decade of the new century was an experiment in what happens when an economy comes to rely heavily on borrowed money. A big part of what happened this decade was that people engaged in excessively risky behavior without realizing the risks associated.”
A question for the housing bulls or at least the less bearish of the bears, absent massive intervention, how is it possible given the surplus of housing and the erosion of jobs and incomes, that housing isn’t priced at levels of 2000 if not lower?
“You can’t even say that a few states are doing really well, enough to offset those that aren’t”
Historically It’s different in Jackson Hole:
January’s scheduled activity still does not compare to foreclosure activity for the month of December, which set a record for the value and number of properties sent to auction.
According to data provided by the Teton County Sheriff’s Office, 21 properties were scheduled for forced sales, totaling about $43 million in opening bids, for the month.
The banks took back 12 properties, with opening bids valued at about $30 million. Other sales were postponed to January or cancelled.
For the year, the sheriff’s office received 81 properties for foreclosure, with starting bids totaling about $95 million. The value of opening bids this month represents about 45 percent of the value for the entire year.
Historically, Teton County has had few foreclosures.
Actually, Wyoming was the one state that came to mind that is doing better. However it’s so small the impact nationally should be minimal.
WY is the least-populous state in the country: pop. 400K. My brother lives there - not that I’m saying there’s any cause and effect between the two.
I just got back from there and mentioned that they were being held up as an example of a place that was doing relatively well. Their reaction was a mix of mirth and horror at that thought.
not that I’m saying there’s any cause and effect between the two.
sometimes Dennisn you just crack me up.
“I thought I’d use the opportunity of this, my last column for the North County Times, to share my thoughts on real estate… So, will home prices continue to rally in 2010? Hell if I know. I think they will and I know they will over time. But those who think otherwise are welcomed to their opinion and I respect that.”
Bubble-era thinking lives on in many San Diegans’ minds.
•HOUSING: Caught in the crash, Murrieta family nears losing it all
•REGION: Suspected DUI, wrong way driver crashes on I-15
•Tough year, good films: Best films of 2009 cover courage and hope —- and one runaway house
•ESCONDIDO: Girl, 14, facing life in prison for knife ambush
•PALA: Temecula woman suspected of DUI in injury-crash
•HEMET: Gang task force building rigged to explode
These are the other articles linked from yours, George. Great advertisement for life in CA.
All the people shivering are probably muttering… there but for the grace of God live I.
Optimism for ’10? Let’s just say ‘It’s Complicated’
By Dean Calbreath, UNION-TRIBUNE STAFF WRITER
Sunday, January 3, 2010 at 12:01 a.m.
Photo of Dean Calbreath
Out of all the titles of the movies produced in 2009, which one do you think most accurately describes what faces us in 2010?
When Allianz Life Insurance posed that question in a poll last month, 29 percent of respondents optimistically answered “Up,” a succinctly upbeat title for a movie that deals with a house being carried to stratospheric heights by an unsustainable bubble — I mean, a cluster of helium balloons. Nine percent picked “Transformers: Revenge of the Fallen,” presumably with Jane and Joe Public transforming into the role of the vengeance-seeking Fallen.
…
I guess my earlier post didn’t make it.
So this will be short ; interest rates will start going up and bonds will get hammered. High end home prices will fall in N San Diego Co. Low end will stay flat low end being around 400K its crazy expensive here but the weather is like heaven.
Happy new year
Why don’t you think the Fed will stand in the way of higher interest rates? And in case they opt to continue standing in their way, what makes you think their efforts will fail?
In the last raise, the Fed rates went up from 1 to 4 (?) and the long term rates didn’t rise much. Of course, the banks weren’t all Too Broke To Give Bonuses then…
Honest appraisals of what homes are worth are getting heaps of blame for scuttling deals. Why not instead blame deluded sellers who don’t realize the housing bubble has popped?
Foreclosures weigh on home appraisals
By ALEX VEIGA, AP Real Estate Writer
Sunday, January 3, 2010 at 10:34 a.m.
LOS ANGELES — It wasn’t the first time that Katherine Scheri ruined a real estate agent’s day with a low property appraisal.
Scheri, a real estate appraiser, had sized up a three-bedroom, two-bath house in Santa Ana, Calif., for $30,000 less than what the buyers offered to pay. A typical deal-killer for a seller.
The agent urged the lender to force Scheri to consider several other properties that could back up the original $310,000 sale price. Then he tried good old-fashioned guilt, telling Scheri her appraisal was going to ruin the buyers’ shot at the American Dream.
“That’s what he laid on me,” Scheri recalled. “And I said, ‘Don’t you care they could be potentially spending $30,000 too much for a house?”
Across the country, agents and homebuilders are complaining too many appraisals are coming in low, scuttling deals.
…
Perhaps the relevant question at this point is not whether the homebuyer tax credit will be extended again (it sounds increasingly unlikely) but rather what equivalent or greater housing market stimulus measure the PTB will serve up to replace it.
Parallel example: The Fed says it will stop its MBS purchases, but then hands the reins of the program over to the GSEs, right at the point when their budget constraint is eliminated.
HOUSING SCENE
No more extensions of tax credit for first-time home buyers
The provision that puts up to $8,000 in buyers’ pockets won’t be renewed a third time, industry leaders and lawmakers say.
…
Obviously, we need to extend it to peope who were foreclosed within the last two years. That vast pool of underserved experienced buyers
“Arizona. Like California, Florida, and Nevada, Arizona is one of the states that was hit worst and earliest by the housing crisis. ‘The fiscal situation is dire,’ state officials states in NCSL’s survey, citing major shortfalls in all budget categories. Lawmakers are forecasting a 30 percent budget gap in the next fiscal year.”
Time to reroute the Fed’s helicopters from Wall Street to the Southwestern desert, as the liquidity drought out here is killing the economy.
Like they care.
2010 Predictions:
Housing will continue to rise with the rate of inflation. Only a few areas will experience undue speculation. Being under-built, housing construction will increase and home builder equities will rise faster than market indexes. Mortgage debt increases bringing the countries total mortgage debt as a percentage of GDP to 4% up from 3.5% in 2009. Mortgages will be involved in 65% of total house sales with an average down payment of 15%. The average term of the mortgages will be 17 years fixed at 8.5%
Government programs will continue to benefit the poor and middle-class. Because of strict import controls, the industrial and manufacturing sectors will continue to expand adding purchasing power and enabling the middle-class to grow for the 12th straight year. Consumer goods will remain expensive. Exports will rise slightly and therefore increase the trade surplus. Poverty and hunger will be reduced further. The rich will tolerate such things because “inexplicably” (for supply-siders), their wealth will continue to increase as well. These are my 2010 predictions for BRAZIL.
2010 predictions for the United States of America:
Housing: The hard hit, low-end areas will rise 8% and the thus far “immune” fortress areas will fall 12%.
Economy: Interest rates will rise 1.25%. The Dow will end at 9000-10000, Gold at $900-1000 and oil at $70. The fudged unemployment numbers will end about unchanged.
Politics: Republicans will experience moderate gains in Congress. The country will become even more politically polarized at the extremes however…
Political/Social: 2010 will see an emerging movement from the rational center. Leaders will rise with a message that damns both parties for the sake of America’s survival. Bailouts, lost jobs, lost hope and hijacked government will be the Rubicon crossed.
Real, grass-roots movements will involve both the Right AND the Left. The clear and present danger of our corrupt 2 parties will be recognized as the greater danger allowing many to put aside differences for the greater good.
Let’s just hope that the housing market continues to improve defying dark predictions for 2010.