The Housing Bubble

Home sales forecast to show sharp fall for December; first decline after 3 straight increases.

WASHINGTON (AP) — Last month’s sales of previously occupied homes are expected to be down sharply from November after prospective buyers were granted more time to take advantage of a tax credit.

Buyers last month were no longer scrambling to qualify for a tax credit for first-time homeowners that was due to expire on Nov. 30. To give the market an added boost, lawmakers extended it until April 30. They also added a new credit of up to $6,500 for existing homeowners who move.

Economists polled by Thomson Reuters forecast that sales completed in December fell 7.3 percent to a seasonally adjusted annual rate of 6.06 million, down from 6.54 million in November. The decline would reverse three straight months of increases.

I was reading up About John Edwards , fancy lawyer & former would-be President, and his problems . When he opens his mouth , he is lying , seems like .. This man had a good shot a becoming President just 2 years back . Is he extra bad , or did he just get caught at it ??

Banks prepare for battle over US reforms
FT | 1/25/10 | By Tom Braithwaite

After the Democrats’ electoral defeat in Massachusetts last week, President Barack Obama beefed up both the substance of financial reform and the rhetoric designed to sell his policies, but stopped short of a major personnel change.

“The elections in Massachusetts sent him a powerful message that he is not doing the right thing - nationalising the liabilities of the banks without nationalising the banks,” said George Soros, the fund manager, who welcomed the subsequent regulatory announcement as a “step in the right direction”.

————

0bama is going to double down. The “marxist one” can’t help himself. Nationalize all commerce is the solution to all problems. Government knows best.

Representing government employees has turned unions into determined supporters of tax increases and more government spending. Higher taxes mean the government can hire more workers and pay higher wages.

Arizona. The Arizona Education Association (AEA) successfully lobbied against a repeal of a $250 million a year statewide property tax.[16] The AEA helpfully identified another $2.1 billion in tax increases for the legislature to pass to forestall spending reductions.[17]

Maine. Mainers rejected a ballot initiative in November 2009 that would have prevented government spending from growing faster than the combined rate of inflation and population growth and require the government to return excess revenues as tax rebates. The Maine Municipal Association, the SEIU, the Teamsters, and the Maine Education Association collectively spent hundreds of thousands of dollars to campaign against the initiative, and it ultimately lost by a wide margin.[20]

Minnesota. AFSCME Council 5 unsuccessfully lobbied state legislators to override Governor Tim Pawlenty’s veto of a $1 billion tax increase in the spring of 2009. Two Democrats joined all the Republicans in the state House to uphold the veto. In response AFSCME endorsed a primary challenger to one of the Democrats.[21] AFSCME is now lobbying state legislators to raise taxes by $3.8 billion.[22]

Oregon. Public employee unions in Oregon provided 90 percent of the $4 million spent advocating two ballot initiatives to raise personal income and business taxes by $733 million.[24] The unions want the tax increases to prevent cuts in the gold-plated medical benefits for state workers.[25]

A few more natural disasters like the one in Haiti and soon we won’t need a fake war in Afghanistan. Gotta keep that military in business.

http://tinyurl.com/yevw33d

If the story in the above link won’t make your jaw drop, you’ve seen more things than me!

Owners: $5.4B NY housing complexes go to creditors
Owners: 2 NYC apartment complexes bought for record $5.4B will be turned over to creditors

New version of the JoshuaTree extension. Now supports Firefox 3.6 (the only change, actually). Can be found here:

http://mysite.verizon.net/drumminj_tx/joshuatree.html

Still working with Verizon to host the file properly, so you have to right click on the download link, “Save as…”, and then drag the downloaded file onto Firefox to install it.

Owners: 2 NYC apartment complexes bought for record $5.4B will be turned over to creditors ~ January 25, 2010

NEW YORK (AP) — The financially troubled owners of two massive apartment complexes that sold for a record $5.4 billion a few years ago said Monday they’re turning them over to their creditors.

The joint venture ownership team led by Tishman Speyer Properties and BlackRock Realty, hurt by the real estate market collapse, couldn’t make a multimillion-dollar loan payment earlier this month for the Stuyvesant Town and Peter Cooper Village apartments in Manhattan.

Over the last few days it became clear the only viable alternative to bankruptcy would be to transfer to lenders control and operation of the 110 buildings and 11,000 apartments overlooking the East River, partnership spokesman Bud Perrone said.

“We make this decision as we feel a battle over the property or a contested bankruptcy proceeding is not in the long-term interest of the property, its residents, our partnership or the city,” Perrone said in an e-mailed statement.

The group bought the complexes, which have about 25,000 tenants, in 2006 at the height of the real estate bubble in the nation’s largest residential real estate de

Halliburton 4th-qtr profit tumbles 48 pct as weaker crude and gas prices hurt demand ~ Jan. 25, 2010

HOUSTON (AP) — Halliburton on Monday reported its fourth-quarter profit tumbled 48 percent to end a volatile year and the oilfield services company said that it expects 2010 to be a transitional year for the industry.

Oil services companies, which assist producers with drilling, reservoir management and other services, struggled in 2009 as consumers burned less fuel. Crude collapsed to less than half of its current price as millions of American workers received pink slips and left their cars at home.

As a result, major oil producers pressured companies like Halliburton Co., and rivals like Schlumberger Ltd., to cut their fees.

US meat sector job cuts to almost 2000 in three days.

In the second shutdown notice by a major US meat company in three days, Tyson Foods said it is going to cut part production of a canning plant.

Tyson said by mid-March, it would move some production capacity at a factory in Council Bluffs, Iowa to sites in Tennessee and Texas.

The shuffle is Tyson’s first major strategic move under new Chief Executive Donnie Smith.

The move, which will axe almost 500 jobs, follows Smithfield Foods’ recent announcement that as of April, it was closing a hog processing plant, also in Iowa. The job loses takes the total jobs lost in less than a week in the US meat sector to 1,930.

However, like Smithfield Foods’ cut, Tyson’s move was cautiously welcomed by investors.

Eddie’s assertion in yesterday’s bits bucket that “the recession ended six months ago,” plus his accusation that I wasn’t including enough factual information in my posts, provided me with the inspiration to take a careful look at the current national U.S. unemployment picture compared to the one in the early 1980s recession. In case you missed this late Sunday effort, here it is again, enhanced by the addition of points 3) — 5) :

Comment by Professor Bear
2010-01-24 21:57:41

“But why let facts get in the way of a good emotion?”

Great question, especially considering the source! Sorry for the lengthy answer; feel free to ignore it if you consider facts irrelevant to your opinion that the economic recovery started six months ago.

Comparing the unemployment rate at the current juncture to that in the early 1980s episode is somewhat akin to comparing LA’s San Gabriel mountains to the Colorado Rockies. Proud Coloradans will note that their 14K+ peaks are taller than the San Gabriels, which max out at just over 10K feet.

However, measuring from the base to the peak gives a different picture; the San Gabriels rise from a base elevation near sea level, for a total increase in elevation near 10K feet, while the Colorado Rockies start out near 5,280 feet or so (remember Denver is the “mile high city”), climbing from there by a total of less than 10K feet to their peaks. Measured from base to peak, the San Gabriels are higher, even though the absolute elevation relative to sea level is lower. The San Gabriels are also more spectacular, due to their steeper gradient.

In a similar fashion, though the peak unemployment rate
seen to date in the current recession of 10.1 percent (in 10/09) has not surpassed the level of 10.8 percent (Nov and Dec 1982) ultimately hit during the second dip of the early-1980s double-dip recession, the early 1980s’ unemployment rate rose off a base level of 5.6 percent (May 1979), while the current recession’s increase in unemployment rose off a trough unemployment level of 4.4 percent (May 2007).

To summarize, the early 1980s recession saw unemployment rise from 5.6 percent in May 1979 to 10.8 percent in November 1982, for a total increase of 5.2 percent over the course of 42 months, at an annualized average rate of increase = 12*5.2/42 = 1.49 percent per year; the present recession saw unemployment rise from 4.4 percent to 10.1 percent for a total increase of 5.7 percent over 29 months, at an annualized average rate of increase = 12*5.7/29 = 2.36 percent per year.

Further points:

1) It is too early to say whether peak unemployment has been reached in the current recession.

2) I am not sure how the picture would compare with a more honest denominator in the unemployment rate statistic — i.e., one that did not ignore so-called “discouraged workers,” defined as people of working age who have given up looking for jobs because none are available. I saw a quote in the SD Union-Tribune just today (I believe it came from Beacon Economics) suggesting California’s unemployment rate would be 20 percent if all those discouraged workers were not excluded from the calculation.

3) Since the peak unemployment rate during the early 1980s recession was reached 42 months after the onset, the comparison to the highest level of unemployment reached thus far in the current episode is unfair, given that we are currently only 32 months away from the point when unemployment began rising. Hence I propose two (albeit crude) alternative comparisons:

a) Where was the unemployment rate 32 months into the period of rising unemployment during the early 1980s episode?

The unemployment rate began to increase after May 1979; 32 months later (January 1982), the unemployment rate was a mere 8.6 percent — considerably lower than its present level.

b) Where would the unemployment rate end up in the current episode if it climbed at its average rate so far out to 42 months?

The current rate is 10.0 percent, reached 32 months after a trough level of 4.4 percent (May 2007). Extrapolating this out to 42 months gives a projected peak level of

4.4+(42/32)*(10.0-4.4) = 11.8 percent.

This is admittedly a very crude projection; nonetheless, it seems just as good an estimate if not better than the one obtained by assuming the peak unemployment rate in the present episode has already been attained.

4) Like the period since last fall, the early 1980s recession was punctuated by a period when unemployment leveled off, and actually fell a bit: This is why they called it a “double-dip” recession. I see no reason this may not also explain the plateauing of the unemployment rate we are currently experiencing. It is anyone’s guess whether it trends higher or lower from here over the next couple of years.

5) My foggy recollection is that even after the unemployment rate maxed out and began to drop during the early 1980s, the housing bust continued to play out in many parts of the country. Perhaps Ben Jones could offer some brief commentary on this, as I believe Texas was one of those places, thanks to the oil bust.

CNN Poll: 3 of 4 Americans say much of stimulus money wasted

Washington (CNN) — Nearly three out of four Americans think that at least half of the money spent in the federal stimulus plan has been wasted, according to a new national poll.

A CNN/Opinion Research Corporation survey released Monday morning also indicates that 63 percent of the public thinks that projects in the plan were included for purely political reasons and will have no economic benefit, with 36 percent saying those projects will benefit the economy.

Twenty-one percent of people questioned in the poll say nearly all the money in the stimulus has been wasted, with 24 percent feeling that most money has been wasted and an additional 29 percent saying that about half has been wasted. Twenty-one percent say only a little has been wasted and 4 percent think that no stimulus dollars have been wasted.

“One reason why the economic stimulus bill is no longer popular with the American public is the perception that a lot of the money has been wasted. Six in 10 believe that the projects in the stimulus bill were included for purely political reasons,” said CNN Polling Director Keating Holland.

“Nearly three-quarters believe that at least half the stimulus money spent so far has been wasted, and one in five say nearly all of it has been a waste,” Holland said.

The old adage, “Politics breeds strange bedfellows,” still holds. It’s all good; if BB were not reappointed, then any subsequent problems in the economy could be summarily blamed on the reappointment failure. Now economic historians will be free to judge whether the myriad experimental efforts to save the planet’s financial system worked or not, without the confounding effect of changing horses in midstream during a financial panic.

MarketWatch First Take

Jan. 25, 2010, 9:13 a.m. EST

A bailout for Bernanke
Commentary: Republicans find something to be in favor of

By MarketWatch

WASHINGTON (MarketWatch) — Ben Bernanke’s future as the leader of the Federal Reserve was in doubt late last week, but he’s been bailed out by a strange coalition: The White House and the Senate Republican leadership.

On Friday, it appeared that Bernanke’s confirmation to a second term as Fed chairman was in trouble, with several liberal Democrats declaring their opposition. Senate Democratic leader Harry Reid was also wavering.

Journal Editorial Report asks: Will the stunning Democratic move in the Bay State force the President to shift to the center or further to the left? Video courtesy of Fox News.

Bernanke was hounded by opposition from the right and the left. Both groups are upset that Bernanke helped bail out the banks that got us into this mess, and they are angry that the Fed chief didn’t see this economic calamity coming.

Because of Senate rules, it would take the support of 60 senators to bring Bernanke’s confirmation to a vote, and that didn’t look like a sure thing on Friday. After Tuesday’s election in Massachusetts, there are many fewer sure things in Washington.

Things look brighter for Bernanke on Monday.

Over the weekend, Reid came on board and the White House heavily lobbied Democrats. Senate Banking Committee Chairman Chris Dodd and Republican Judd Gregg said in a joint statement that they thought Bernanke would be confirmed.

But the key “endorsement” came from the real leader of the Senate — Republican Mitch McConnell.

Although he wouldn’t say how he’d vote, McConnell signaled that the Republicans wouldn’t mount a concerted filibuster against Bernanke. As everyone knows, a concerted filibuster by the Senate Republicans effectively kills anything. It might even be able to stop the sun in the sky.
…

Would you care for a slice of bulloney?

MarketWatch First Take

Jan. 22, 2010, 1:33 p.m. EST

Golden slope of hope
Commentary: Gold timers became too bullish at beginning of year

By MarketWatch

ANNANDALE, Va. (MarketWatch) — Lots of reasons have been given for gold’s big losses over the last few trading sessions.

An additional one, that isn’t getting as much attention, is the role of sentiment: Gold timers were far too eager earlier this month to declare that bullion’s December correction was over.

According to contrarian analysis, that is not typical of what happens at market bottoms of more major significance.

Consider the average recommended gold market exposure among a subset of short-term gold market timers tracked by the Hulbert Financial Digest.

At the beginning of this year, this average stood at just 10.9%. As of earlier this week, in contrast, the average stood at 60.9%.
…

What about Wal-Mart laying off 11,200 people? Anyone see that yet? That means fewer McMansions to buy on a $12.00 per hour salary in Podunk! Oops!

It appears the PPT has successfully halted the stock market plunge for the time being: BOI-OI-OI-OI-OING

Who’s afraid of rising interest rates? Banks! ~ January 25, 2010

NEW YORK (CNNMoney.com) — Of all the things keeping bankers up at night these days, the direction of interest rates may soon rank up there with loan losses and the heavy hand of the government.

For more than a year now, the Federal Reserve has kept the closely-watched federal funds rate between 0% and 0.25% in an effort to help jumpstart the U.S. economy.

Lenders have benefited handsomely as a result, borrowing money cheaply and making long-term loans with healthy profit margins. But expectations are growing that the nation’s central bank will soon reverse its loose monetary policy stance in an effort to tamp down the threat of inflation.

And that has banking regulators worried.

Earlier this month, the Federal Deposit Insurance Corporation and other bank regulators, issued a stern warning to lenders about interest-rate risk, telling banks to take precautions in case the central bank decides to hike rates dramatically.

WASHINGTON (AP) - Sales of previously occupied homes took the largest monthly drop in more than 40 years last month, plunging far deeper than expected after lawmakers gave buyers extended time to use a tax credit.

The National Association of Realtors says sales fell 16.7 percent to a seasonally adjusted annual rate of 5.45 million in December, from an unchanged pace of 6.54 million in November.

Are the banksters planning to have their PR hacks do the heavy lifting in Davos? I guess since charity to Haitians is a key topic, there won’t be much interest among fat cat bankster CEOs.

Jan. 23, 2010, 9:29 a.m. EST

Bankers scarce as Davos probes post-crisis dangers
Haiti aid among top priorities at World Economic Forum’s annual meeting

By William L. Watts, MarketWatch

Updating to correct the spelling of Goldman Sachs President Gary Cohn’s name.

LONDON (MarketWatch) — Some of Wall Street’s heaviest hitters won’t be in attendance when the world’s top CEOs, economists, political leaders and other movers and shakers arrive in Davos for next week’s annual meeting of the World Economic Forum to discuss the threats to a fragile global economic recovery.

Once the toast of the town, financiers appear reluctant for a second straight year to be seen strutting about an exclusive Swiss ski resort while fending off criticism of record bonuses in the wake of massive taxpayer-funded bailouts.

But with President Barack Obama moving aggressively this week to rein in bank activities, regulatory reform promises to be a hot topic at the annual gathering.

More than 2,500 economists, world leaders and CEO meet in Davos for the World Economic Forurm. On the earnings front Ericsson, Nokia and Siemens report quarterly results.

Among the missing, Goldman Sachs (GS 155.22, +1.10, +0.71%) CEO Lloyd Blankfein, a Davos regular before 2009, doesn’t plan to attend. Goldman President Gary Cohn, however, will be making the trip, a spokeswoman said.

JPMorgan Chase (JPM 39.08, -0.08, -0.20%) CEO Jamie Dimon, one of the few big bankers to make the trek last year, won’t be there. Other executives will attend, the bank said.

Not all will be deterred. Morgan Stanley (MS 27.81, +0.01, +0.05%) Chairman John Mack is registered to attend, and a Citigroup (C 3.23, -0.02, -0.60%) spokesman said CEO Vikram Pandit will make the trip.
…

Get ready for the rally monkeys to drive the DJIA to a 500 point gain on the “surprise” news of Bernanke’s reappointment.

Market Snapshot

Jan. 23, 2010, 10:02 a.m. EST

Bears come out of hibernation
FOMC, Bernanke, State of Union and more earnings could provide fresh bait

By Laura Mandaro, MarketWatch

SAN FRANCISCO (MarketWatch) — U.S. stocks face a lengthy lineup of political and corporate events in the coming week that could reinforce — or derail — a recent bout of selling some analysts are calling a correction.

A Federal Reserve rate meeting, President Barack Obama’s state of the union address and the possibility that Fed Chairman Ben Bernanke won’t get his confirmation vote may take center stage.

Plus, 12 members of the Dow Jones Industrial Average (INDU 10,180, +7.41, +0.07%) and 130 companies in the S&P 500 (SPX 1,096, +4.41, +0.40%) report results. And China may again spook markets if data or policymaker comments signal Beijing is getting closer to raising rates.

A flood of earnings reports are coming up, along with a State of the Union address and more on the bank, job and health-care fronts. Oh yes, and there’s an Apple product announcement. Stacey Delo reports.

Global monetary policy, U.S. politics and corporate results can take much of the credit for stocks’ sorry performance in the past week.

“This is a correction precipitated by fear about a Chinese slowdown, uncertainty at the Fed and populist rhetoric by Mr. Obama on banks,” said John Praveen, chief investment strategist at Prudential International Investments Advisers.
…

Sounds like Bloomy is trying to cause a little panic…

Knickerbocker ~ January 25, 2010

Bloomberg warns of 19,000 layoffs if state cuts aid
Mayor Bloomberg warned today that he would have to lay off nearly 19,000 city employees - including 3,150 cops — if the state Legislature cuts aid to the city.”Let me tell you the voters of New York City aren’t going to take it,” the mayor declared in testimont before a legislative budget hearing in Albany.

Mayor Bloomberg warned today that he would have to lay off nearly 19,000 city employees - including 3,150 cops — if the state Legislature cuts aid to the city.

“Let me tell you the voters of New York City aren’t going to take it,” the mayor declared in testimont before a legislative budget hearing in Albany.

Bloomberg’s possible doomsday cuts included:

* Layoffs for 8,500 teachers; 3,150 cops; 1,050 firefighters and thousands of others.

* Shutting 15 senior centers.

* Eliminating funding to 500 soup kitchens.

The mayor said the stood to lose $1.3 billion next year under a spending plan proposed by Gov. Paterson.

That was nearly double the $750 Paterson had estimated.

NYTimes today gives a heads-up on Obama’s SOTU speech. (I may skip it and watch Steve Jobs announce the tablet instead)

Basically, more attempts at buying votes with “middle class” tax cuts, like caps on student loan payments. This, of course, will only keep the college tuition bubble inflated! You can’t have that pop, too.

Nothing, of course, to help small business, or old people trying to live off interest from a lifetime of savings. (Screw them, if his constituency can have the free houses they deserve!)

Goldman: It’ll Be a Disaster If Bernanke Raises Rates
Investing, Recession, Banking
From The Business Insider, Jan. 25, 2010:

Not only does Goldman say the fed won’t raise rates, but they even say that the Fed shouldn’t; which if Goldman-conspiracy theorists are right essentially means the Fed won’t.

Even for the rest of us, Goldman is basically setting themselves up so that if Bernanke raises rates before they forecast him to, it will be his error, not theirs, since they say U.S. isn’t ready for it yet.

While some economic data makes it look like it’s time to tighten, they argue that in reality it isn’t time yet.

CWCapital LLC (CW), a subsidiary of CW Financial Services, and a full-service, national lender to the multifamily and healthcare real estate industries, today announced it closed over $1.3 billion in loans through its Agency lending platform in 2009, representing substantial growth for the company in what continues to be a “down” commercial and multifamily real estate market.

Note on the economy here in LA:
At the kids school.. about 1/2 the kids couldn’t afford to go to space camp. 225$. Not exactly a small amount of money but still says a lot about how things are going.

Another kid in my child’s class is looking disheveled every day. Turns out her mother and three siblings (all girls) were evicted from their apartment. The father(s?) apparently are in prison. They are currently living in the back of a Hyundai. Single mom too. Sort of.

Had a couple of other families get evicted from apartments as well.

I believe we got the parent to finally move the girls to a shelter.

Anyhow, not sure what to say here. I’d like to help this woman out but the bad choices are just overwhelming. Of course, you want to keep a polite distance so bad things don’t happen to your own family as well.

Cause I called the bubble and meltdown, people think that I have an idea when construction will rebound. At this point I am lying to them and saying things will turn around next year. Too depressing to tell the truth. Looks more like a protracted recession for construction till at least 2012. Maybe a bit longer. I tell a lot of people to get the hell out of LA. Likely that manufacturing rebound will be stronger in lower cost areas. Leave while you still have the wherewithal to do so.

Scientologists ‘heal’ Haiti quake victims using touch ~ Jan 23
Church of Scientology Sends Healing Teams to Haiti

Amid the mass of aid agencies piling in to help Haiti quake victims is a batch of Church of Scientology “volunteer ministers”, claiming to use the power of touch to reconnect nervous systems.

Clad in yellow T-shirts emblazoned with the logo of the controversial US-based group, smiling volunteers fan out among the injured lying under makeshift shelters in the courtyard of Port-au-Prince’s General Hospital.

A wealthy private donor provided his airplane to fly in 80 volunteers from Los Angeles, along with 50 Haitian-American-doctors, in a gesture worth 400,000 dollars, said a Parisian volunteer who gave her name as Sylvie.

“We’re trained as volunteer ministers, we use a process called ‘assist’ to follow the nervous system to reconnect the main points, to bring back communication,” she said.

“When you get a sudden shock to a part of your body the energy gets stuck, so we re-establish communication within the body by touching people through their clothes, and asking people to feel the touch.”

Jim Rogers and Kriby Daley go after Bernake on CNBC - asking for his resignation. Rogers said the only good thing about keeping Bernake around is that it will become even more obvious what a bad job Bernake has done when things get worse. The two predict that if Bernake stays, Geithner will go within a few months.

http://www.bloomberg.com/avp/avp.htm?N=av&T=Jim%20Rogers%20Says%20Bernanke%20Part%20of%20Problem%2C%20Not%20Solution&clipSRC=mms://media2.bloomberg.com/cache/v53lo3XZw1oU.asf

I am not sure it is fair to talk about Bernake’s horrendous performance without mentioning what he walked into from Greenspan. Is it realistic to have the new guy taking over (Bernake) suddenly turn-coat and dump all the policies of the guy who was considered a G*d at the time? Rogers and Daley were wrong to not consider or at least mention the unique environment Bernake walked into.

Hoping for change… This fellow got a nice little bump. Nothing new here.

Contract for Afghan Work to Dem Donor
James Rosen- FOXNews

Despite President Obama’s long history of criticizing the Bush administration for “sweetheart deals” with favored contractors, the Obama administration this month awarded a $25 million federal contract for work in Afghanistan to a company owned by a Democratic campaign contributor without entertaining competitive bids.

The contract, awarded on Jan. 4 to Checchi & Company Consulting, Inc., a Washington-based firm owned by economist and Democratic donor Vincent V. Checchi, will pay the firm $24,673,427 to provide “rule of law stabilization services” in war-torn Afghanistan.

Why do we do business with these guys again?

BEIJING (AFP) – China on Monday reiterated rules that most of the screen time in the nation’s cinemas be given to domestic films, after it cut short the run of US blockbuster “Avatar”.

The State Council, or cabinet, also called for steps to boost the Chinese film industry, such as building more digital cinemas and having studios raise funds through bank loans and by issuing shares and bonds.

I just don’t understand what we are getting as a country from trading with and empowering China.

Yegads! Not more bad news on the commercial RE front — I thunk’d it had bottomed out and was on the way back up again?

Jan. 25, 2010, 11:49 a.m. EST

Stock market on alert over commercial real estate exposures
Costliest-ever deal in U.S. for single residential property now ends in default

By Kate Gibson, MarketWatch

NEW YORK (MarketWatch) — U.S. stock market investors would be wise to look at the commercial real estate exposure of financial institutions, particularly regional banks, with the collapse of a high-profile deal one example of the trouble hitting lenders across the country.

“There is going to be an overhang of souring commercial real estate loans through 2012, so when you look at smaller regional banks you have to make a distinction to see what kind of loans they are holding,” said Andrew Neale at advisory firm Fogel Neale Partners.

That said, Neale’s investment firm is looking closely at some regional banks on the belief those without “too much commercial real estate exposure are starting to look undervalued.”

“The big commercial real estate shoe just fell,” analyst T.J. Marta wrote of news that an investor group led by Tishman Speyer Properties had given over the Peter Cooper Village and Stuyvesant Town apartment complex in Manhattan to creditors. Read more about the Tishman group defaulting on $4.4 billion in debt.

Regional banks tend to have higher exposure, as a percentage of assets, as opposed to larger money center banks, Neale said.

Bigger players aren’t immune to the troubles arising from commercial real estate that are plaguing banks across the country as builders default on loans and property valuations decline, however.
…

“Tough Monday — the Jets lost!”

AM Report: Bernanke’s Vote Battle
Jan. 25, 2010

A majority of senators are undecided whether they will vote for Ben Bernanke’s second term, prompting a charm offensive from White House officials to gather votes for the Fed chairman, the News Hub panel reports.

Senate vote count on Bernanke reappointment (despite weekend “big public push” by Geithner, Summers and Emmanuel in support of reappointment):

In Favor 31
Against 17
Undeclared 52

Here’s a good one:

http://www.dallasobserver.com/2010-01-21/news/better-off-deadbeat-craig-cunningham-has-a-simple-solution-for-getting-bill-collectors-off-his-back-he-sues-them/1

This does not sound to me like it is any of the Fed’s business. How is the foreclosure crisis relevant to the conduct of monetary policy?

Push Banks to Lend, Senate Leader Urges Bernanke
Published: Friday, 22 Jan 2010 | 3:49 AM ET

Senate Majority Leader Harry Reid Thursday urged Federal Reserve Chairman Ben Bernanke, whose bid for Senate approval of a second term must wait until next week, to do more to help Americans keep their homes.

After a private meeting with Bernanke, whose four-year term expires in 10 days but who is expected to win approval despite some opposition, Reid said: “I believe more pressure needs to be applied to banks to lend money to small businesses and keep more Americans in their homes.”

“As the Senate prepares to take up Chairman Bernanke’s nomination, I look forward to hearing more from him about how he intends to address these issues,” Reid added in a written statement.
…

Try not to catch yerself a falling knife…

Home Prices Not Rising Anytime Soon
Jan. 25, 2010

Expiring tax credit for home buyers pressured home sales in December and then the credit was extended, so we’re in uncharted territory in terms of volatility, according to Trulia CEO Peter Flint, who says prices aren’t going up over the next six to 12 months. Stacey Delo reports.

What will become of asset prices at the tail end of this Great Repression?

My hunch:

- Since by all appearances, measures are currently in place to prop up asset prices, values are currently artificially inflated above fundamental value.

- The Fed has made clear its intentions to withdraw support as the economy comes out of Repression.

- The upshot: Artificially inflated current prices coupled with gradual withdrawal of price support at the end of the Repression spells “lower than expected” returns on asset price ownership for the next couple of decades.

NYTimes reporting on a speech BHO gave today:

Previewing a theme that is sure to dominate his State of the Union address this week, Mr. Obama unveiled a package of modest initiatives intended to help families pay for child care, save for retirement, pay off student loans and care for elderly parents.

Now, Obama and congress just gave TRILLIONS of dollars of middle-class tax cuts in the past years, in the form of excepting income tax on forgiven morgage debt, tax-free cramdowns, and that $8,000 first-time homebuyer tax credit. When we have a HUGE deficit, why his he giving away even more?

“Help Families pay for child care”? That translates into keeping the “child care” bubble propped up, and allow people to get all sorts of tax breaks to put grandma on the payroll.

“Save for retirement”? Probably just a way to force money into the stock market, to keep that inflated. (And, most of these programs like the 401K or IRA are means-tested or limited, so they don’t help the real taxpayers)

“Pay off Student Loans?” Why on earth am *I* being punished for graduating college with $0 in student debt? I worked my way through school, and took as many courses as possible in a community college to keep costs low. Now, in times of a budget deficit, I have to work harder to pay more taxes so other students don’t have to do what I did.

“Care for elderly parents.” I guess you have to keep the elder-care price bubble inflated!

1,336 mutual funds cease to exist in 2009 USA TODAY
The mutual fund universe continues to get smaller.

Activia Growth didn’t grow enough. Dreyfus Passport is among the departed. HealthShares Cancer lost its long struggle.

All told, 1,336 mutual funds — counting each share class separately — were liquidated last year, says fund-tracker Lipper. Counting each individual portfolio, about 425 funds died last year. In 2008, fund managers liquidated 826 funds, or 145 individual portfolios.

Why funds join the Choir Invisible:

•Lack of interest. HealthShares Cancer was part of a series of specialized health funds. It never attracted enough investors to make it worthwhile for its management.

•Redundancy. Dreyfus already has several international funds. The New York fund company got Passport when it bought the Founders funds.

•Performance. The Investment Company Institute, the funds’ trade group, counts about 7,700 funds, and 4,664 of those are stock funds. Investors have plenty of choices, and they won’t put their money into funds with rotten results.

Frontier MicroCap, one of the worst funds, this month said that it would liquidate, distributing its $53,157 in assets to its 87 long-suffering shareholders. The fund lost an average 35.6% every year for the past 10 years.

ArcelorMittal slashing W.Va. work force by 171
The Associated Press Monday, January 25, 2010

MORGANTOWN, W.Va. — Steel giant ArcelorMittal will lay off 171 steelworkers at its tin mill in West Virginia so it can remain competitive amid “extraordinary economic conditions,” a company spokeswoman said Monday.

About 35 workers were cut this week, said Mark Glyptis, president of United Steelworkers Local 2911. Another 100 or so have been on rotating, voluntary layoff since last year, and those layoffs will now continue indefinitely, he said.

The union is now trying to identify a few dozen workers who will volunteer for the additional cuts.

The Weirton local has about 850 members with an average age of about 57, Glyptis said, and almost every employee has at least 30 years of service. Some have 50.

“I’m confident we’ll figure out a way that no one will lose their job on an involuntary basis,” he said.

The Big Bang! Stimulus tracker…

http://money.cnn.com/news/specials/storysupplement/stimulus-tracker/index.html

“You can’t really fault Mr. Obama for doing the silly things he has done, either. He’s been too busy to think deeply about how an economy works. That’s why he has advisors. Unfortunately, his financial team is made up of mostly jackasses, fools and opportunists - such as Larry Summers, Ben Bernanke and Tim Geithner, not necessarily in that order”.

Only “Tall Paul” Volcker has any clue what is going on. To his credit, he’s made some brave critiques of the banking industry. He’s probably giving Mr. Obama some decent advice, here and there.

But what can he say? Obama is president of all the Americans. He needs to “do something” to make the pain go away. His party is counting on it. The voters demand it.

Mr. Volcker knows you can’t really make the pain of a correction go away. It has to run its course. It has to do its job. All you can do is to try to control the banks so it doesn’t cost so much to bail them out.

Mr. Volcker may also realize that feds are only making things worse - with their bailouts, deficits, subsidies, and boondoggle spending. But so what? Fish gotta swim, remember. Democratic governments gotta play to the voters. And the voters want solutions! They want leadership! They’d rather have a bunkum, harmful solution than no solution at all.

And that’s what they’ve got.

~ Bill Bonner

Apple Rockets to Most Profitable Quarter Ever- AP

Apple Inc. says it rocketed to its most profitable quarter ever over the holidays. The iPhone’s rollout in several major new markets, including China and South Korea, helped fuel the company’s nearly 50 percent jump in net income over the same period a year earlier. Revenue also hit an all-time high, jumping 32 percent.

* China’s Karaoke Crackdown

China’s karaoke bars are being monitored as part of the government’s crackdown on vulgarity and dissent.

Nearly 180 bars in the city of Chongqing and hundreds more around the country have installed the government’s National Karaoke Content Management System or “The Black Box” as it is more popularly known, which monitors the playlist remotely and automatically calls the police if a warbler selects a vulgar tune or banned song.

The system is also aimed at stopping piracy, as it logs unlicensed imports of music.

NYC Off-Track Betting threatens shutdown. 1-25-10

State-owned agency wagers that setting March 30 deadline will spur action from Albany and the racing industry to provide financial assistance.

The state-owned Off-Track Betting agency threatens to shut down.

The New York City Off-Track Betting Corp., which filed for bankruptcy reorganization last month, said it would close its doors by March 30 unless it gets financial help soon.

“Cash flow continues to deteriorate,” said Sandy Frucher, chairman of the state-controlled outfit, during a board meeting Monday, adding that “with serious trepidation and sadness” the OTB would send layoff notices to its nearly 1,500 employees.

The announcement is apparently an effort to get the attention of the state, city and the agency’s business partners, which share in about $1 billion of annual revenue generated at the parlors.

NEW YORK (Fortune) — Here we go again.

Less than two years after the housing market collapsed, the U.S. economy is threatened by a new bubble in asset prices. This time, four billowing balloons are hovering: two commodities — gold and oil — stocks, and government bonds.

Don’t be fooled into thinking that last week’s 5% drop in the S&P, and the recent sell-off in oil, remotely makes them fairly valued, let alone bargains. Equities and commodities, as well as Treasuries, which actually rallied as stocks dropped, still have a long way to fall. The reason: They’ve already seen huge run-ups that put their prices far above their historic averages, and far above the levels justified by fundamentals.

Two examples: Most companies can’t possibly grow earnings fast enough to support their lofty valuations, and oil and gold are so expensive that we’ll see what high prices always bring, a surge in new supply. That makes a price-pounding glut inevitable.

From Jackson Hole:

“A longtime valley real estate analyst declared this week “the market has hit bottom.”

“In 2009, the number of real estate transactions fell to 223, down from a market peak of 1,122 in 2005 – a drop of 80 percent, according to The Hole Report. The real estate review was started 15 years ago by David Viehman who is now a principal with Jackson Hole Real Estate Associates”

“The latest report was released Tuesday and summarizes the 2009 valley real estate market. The dollar volume of property transactions fell from a peak of $1.57 billion in 2007 to $333 million last year, a drop of 79 percent, the report shows.”

“In 2007, commercial transaction volume was $268 million for 51 sales. In 2009, the volume was $22 million for nine transaction. In that span of time, commercial transaction dollar volume decreased 92 percent, and the number of sales decreased 82 percent.

“Currently, the supply of commercial space exceeds the demand,” Pruett wrote. “Vacancies are up to an 18-year high, causing lease rates to decline and driving commercial prices lower.”

AEES closing Mich. plastic components plant
PLASTICS NEWS January 25, 2010

FARMINGTON HILLS, MICH. (Jan. 25, 4 p.m. ET) — Electronics and electrical distribution company AEES Inc. is closing its Mattawan, Mich., plastic components division, cutting 372 jobs.

Officials for the Farmington Hills, Mich.-based company could not be reached immediately, but the firm filed a notice with the state of Michigan that it would close the plant. The closure is due by June 1, sources said, with some equipment and work slated to go to other AEES facilities before that date.

AEES was part of Alcoa Inc.’s Alcoa Electrical and Electronic Systems group, which also included AFL Automotive business. The unit makes electronics used in the auto, telecom, medical and consumer electronics industries. Its plastics components unit injection molds close-tolerance parts for those electrical systems.

In all fairness to the best and the brightest, no one cold have seen it coming.

The Financial Times
Struggle not over for battered Bernanke
By Tom Braithwaite in Washington
Published: January 25 2010 19:31 | Last updated: January 25 2010 19:31

Ben Bernanke may now have the votes to remain chairman of the US Federal Reserve, but the institution he heads faces the biggest overhaul in almost a century, with the political challenge to its authority more forceful than ever.

A White House and Treasury campaign over the weekend, which included phone calls from President Barack Obama to undecided senators, means Mr Bernanke’s chances of being confirmed for a second term are more assured.

Alan Blinder, the Princeton University economics professor and former vice-chairman of the Federal Reserve, came out strongly in favour of Mr Bernanke to the Financial Times – even though he himself is frequently touted as a possible replacement. “Should Bernanke, a not-very-political leader who has performed admirably, be rejected, that would be horrible for the Fed – not to mention for the nation,” he said.

That may be true – the alternative belief espoused by Richard Shelby, the senior Republican on the Senate banking committee, is that markets would quickly recover from the shock – but the Fed has plenty of upheaval to contend with, whoever is at the helm.

According to one growing school of thought, Mr Bernanke’s likely reconfirmation will stiffen the resolve of both the Fed’s critics and more balanced sceptics in the drive to subject the central bank to sweeping audits, remove its regulatory roles and shake-up the appointments process for regional Fed boards.

Mr Shelby, who has pledged to vote against Mr Bernanke’s confirmation, is at the forefront of moves to redefine the Fed’s roles. But even supporters such as Chris Dodd, who chairs the Senate banking committee, are sticking to a plan to hive off the Fed’s banking supervision duties to a new unified banking regulator.

Some bank executives and Fed supporters are opposed – not, they say, because the central bank gives the industry an easy ride as regulator. Rather, it is because the Fed’s standing as a pre-eminent force in world economics helps attract the best and brightest. Those staff, they say, have shown themselves to be nimble and adept at handling a crisis, even if they did not foresee this one.
…

“NEW YORK (CNNMoney.com) — Apple Inc. reported another strong quarter Monday…The Cupertino CA., company said net income for the quarter ended Dec. 31 surged 50% from a year earlier to a record $3.4 billion, or $3.67 per share….Apple’s sales rose 32% to a record $15.7 billion”
______________

What was that? Record revenue? 50 net income growth? 32% sales growth? Sounds just like something a consumer electronics company would say during the worst recession ever.

DETROIT (AP) — Ford Motor Co. will add 1,200 jobs at its Chicago assembly plant later this year to build the new Explorer sport utility vehicle, a person briefed on the matter said Monday.

The company and Illinois Gov. Pat Quinn are scheduled to make the announcement on Tuesday at the factory, but Quinn told reporters in Chicago Monday that 1,200 new jobs were coming to Illinois.

_____________

Wait what? Ford adding 1200 workers….but Ryo says this recession is not even close to being done because he read something about Minnesota.

“McCrery says each LED light will save the city about $50 a year for a total of about $2,500.

The 50 lights cost about $46,000. They are being paid for with a federal Department of Energy economic stimulus grant.”

From the Lewiston Idaho local paper, your stimulus dollars at work. Hey, an 18.5 year payback ain’t all that bad.

Here is an interesting tracker tool for unemployment by state.

http://projects.propublica.org/unemployment/

apologies if this is well known already …

Just because politicians are dumber than rocks when it comes to basic economics (especially with respect to the causes of the financial crisis) won’t stop them for an instant from piling on to anyone but themselves to whom they can easily shift blame. Consequently, the chances for meaningful reform to fix the problems that led to the meltdown look mighty slim.

* REVIEW & OUTLOOK
* JANUARY 25, 2010, 10:41 A.M. ET

The Bernanke Nomination
The politicians turn on a political central banker.

The White House said yesterday it has damped down a political revolt against Ben Bernanke and now has the votes to secure the Federal Reserve Chairman’s second four-year term. Whether or not Mr. Bernanke is confirmed, the lesson we draw is that overly political central bankers will eventually be undone by politics.

There’s no doubt that some of this reconfirmation panic is nothing but political opportunism. When we opposed Mr. Bernanke’s reconfirmation on December 3, the facile consensus was that the Fed chief was a master of the universe who had saved the world from depression. But after Scott Brown’s victory in Massachusetts last week, Senate Democrats are suddenly looking for a financial political sacrifice. President Obama doesn’t look ready to throw over Treasury Secretary Tim Geithner, so Mr. Bernanke is the designated spear catcher.

The Democrats’ loudest complaint, moreover, is that Mr. Bernanke and the Fed haven’t been easy enough in printing money. Majority Leader Harry Reid declared his support for Mr. Bernanke on Friday, but not before extracting what he said were concessions about future Fed policy.

The Fed chief promised, said Mr. Reid, that he would “redouble his efforts” to make credit available and that Mr. Bernanke “has assured me that he will soon outline plans for making that happen, and I eagerly await them.”

Redouble? The Fed has already kept interest rates at near zero for more than a year, and it is buying $1.25 trillion in mortgage-backed securities to refloat the housing bubble, among other interventions into fiscal policy and credit allocation. Is the Fed going to buy another $1.25 trillion, or promise to keep rates at zero for another 14 months?

Mr. Reid’s declaration of a confirmation quid pro quo will not reassure global investors who already fear that the Fed lacks the political will to withdraw its historic post-crisis liquidity binge soon enough to avoid new asset bubbles.

Our own view is that Mr. Bernanke is already far too susceptible to political pressure. As a Fed governor, he was Alan Greenspan’s intellectual co-pilot last decade when their easy money policies created the housing mania. When Congress later put political pressure on the Fed to direct credit toward housing, and even to student loans, Mr. Bernanke (who was then chairman) also quickly obliged.

More ominously for the next four years, Mr. Bernanke continues to deny any Fed monetary culpability for creating the mania. Shortly after the New Year, even with his nomination pending, Mr. Bernanke issued an apologia that was striking for its willingness to play to the Congressional theory of the meltdown by blaming bankers and lax regulators. We won’t rehearse our decade-long monetary argument with Mr. Bernanke today—see “Bernanke at the Creation,” June 23, 2009. But the chairman’s refusal to acknowledge any mistakes is one reason the dollar is so weak in global capital markets. Investors are hedging their bets in commodities and nondollar assets.
…

The SF Chronicle tells us that now is the time to buy a house in the Bay Area.

Their reasoning? Now that prices have fallen, the premium you have to pay to own versus rent a comparable property is now only 233%, down from “the usual” 296%. They cite some crap Forbes article for this wisdom because apparently they no longer employ any actual journalists, just half-assed bloggers.

If not now, when? Research shows now may be time for San Franciscan renters to buy

www dot sfgate dot com/cgi-bin/blogs/ontheblock/detail?blogid=58&entry_id=55934

http://money.cnn.com/2010/01/22/news/economy/paul_sanders_fed.fortune/index.htm

Fed bashers: Washington’s odd couple

(Fortune Magazine) — “These are vulgar, obscene people who, in many cases, I really do believe, have serious emotional problems. In this country we have people who have drug problems, people who have alcohol problems.”

Just who are the addicts that Bernie Sanders, his white hair mussed, is getting all worked up about on this frigid Washington afternoon? “Compulsive moneymakers,” he says. And Sanders, Vermont’s independent junior senator and a onetime college radical who still pockets an authentic 1920 EUGENE DEBS FOR PRESIDENT key chain, is just getting started.

He saves his most biting criticism for a man who stands accused of embracing, coddling, and enabling Wall Street’s rampant greed: Federal Reserve chairman Ben Bernanke. “There’s no doubt that Bernanke is Wall Street’s guy,” the senator says icily. Sanders wants to block a second Bernanke term, insisting the Fed chief has presided over a financial system that “has not been as unsafe, unsound, and unstable since the Great Depression.”

On the other side of the Capitol, Rep. Ron Paul, the Texas obstetrician-turned-gold-bug, peddles his own blistering critique of Bernanke and the Fed. For three decades the libertarian Republican and former presidential candidate has blamed Federal Reserve monetary policy for creating destructive business cycles.

He has likened the relationship between the central bank and Wall Street to the slogan in George Orwell’s Animal Farm. (”Everybody is equal, but remember some people are more equal than others. Now, Goldman Sachs happens to be more equal than anybody else.”) Greed isn’t Paul’s big worry — unlike Sanders, he’s an enthusiastic capitalist.

But he tells me he’s certain the Fed is engaged in “shenanigans” to underwrite the risks that those well-paid capitalists on Wall Street choose to take. And so he is promoting legislation to open the agency’s operations to a congressional audit.

Blocking Bernanke is Smart Economics, Smart Politics for Dems

If the Democratic Party wants to lose – or, to be more precise, wants to lose badly in 2010 and 2012, it need only maintain its current loyalty to the most powerful interests on Wall Street.

The United States already has a party of Wall Street. It does not need two.

Yet, despite an occasional populist turn (like his current bank bashing), President Obama has with his absurd nominations and even more absurd policies given every indication that he intends to position the Democratic Party closer to corporate interests than all but the most reprehensible Republicans.

Forget about Obama’s rhetorical flourishes. As a candidate and as a president, he has too frequently chosen to side with multinational corporations rather than working Americans.

After he secured the 2008 Democratic presidential nomination, Obama told Fortune magazine that business executives did not need to worry about his talk of reforming U.S. free trade policies; despite some nice rhetorical flourishes on the primary campaign trail in hard-hit industrial states, Obama said, he had no intention of embracing or implementing a fair trade agenda.

Once he was elected, Obama selected as his chief of staff the Democratic party’s most ardent advocate for free trade and the broader corporate program, Rahm Emanuel. Then, the new president peopled his administration with Wall Street insiders like Treasury Secretary Tim Geithner and economic adviser Larry Summers.

When it came time to push for stimulus legislation, Obama accepted a plan that squeezed necessary spending for job creation in order to pay for tax cuts for wealthier Americans. Now, instead of the promised unemployment rate of 8 percent or below, we’re in double digits.

When it came time to fund an automobile-industry bailout, Obama implemented a plan that shifted tens of billions of money from then U.S. Treasury into the accounts of firms that then announced they would close more than two dozen U.S. auto plants and use the federal money to fund the opening of new factories in China and Mexico. At the same time, those companies forced thousands of auto dealerships to shut their doors and layoff more than 100,000 workers.

In the fight over financial-services regulation, Obama and his aides have repeatedly rejected serious moves to hold banks and brokers to account – creating a circumstance where Democrats in the House and Senate must battle not just Wall Street and the Republican Party but the White House if they hope to achieve meaningful reforms. Even now, as Obama tries to surf some of the anger at big banks, polling tells us that Americans are skeptical – and rightly so, as the president’s party continues to collect campaign contributions from, you guessed it, the big banks.

http://www.thenation.com/blogs/thebeat/521547/blocking_bernanke_is_smart_economics_smart_politics_for_dems