April 29, 2010

Bits Bucket For April 30, 2010

Post off-topic ideas, links and Craigslist finds here. The DC meetup link at the forum is here.

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Comment by shizo
2010-04-29 22:41:44


Comment by Timmy Boy
2010-04-29 23:13:34

Get a life.

Comment by oxide
2010-04-30 05:00:59

Aw, lighten up. Coffee’s brewing in the coffeemaker, blueberry smoothie’s whipping up in the blender, sun is shining, there isn’t 22 inches of snow on the sidewalks. And it’s FRIDAY! :grin:

Comment by Natalie
2010-04-30 05:18:28

Don’t forget the expiration of the federal homebuyer tax credit. http://www.youtube.com/watch?v=srnC50P0qyQ

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Comment by exeter
2010-04-30 10:51:35

“Don’t forget the expiration of the federal homebuyer tax credit.”

And it’s a beautiful thing. Hurry empty pockets. Get in while you can tire kickers. Anything and everything… no holds barred. Pull out all the stops. Dive in the deep end. DO IT!

Comment by neuromance
2010-04-30 18:36:42

I am very interested in what may replace it, should the housing souffle start to sink again.

Comment by CA renter
2010-05-01 00:57:45

Comment by neuromance
2010-04-30 18:36:42
I am very interested in what may replace it, should the housing souffle start to sink again.


Oh, don’t be a party-pooper! Let’s celebrate while we can.

Woo-hoo!!!! The tax credit is dead!!!! :)

Comment by ACH
2010-04-30 05:35:42

You forgot x4 large espresso, Pullman French toast, and HBB.

P.S. I won’t stop vibrating until noon or so.

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Comment by shizo
2010-04-30 23:00:50

I’d never let you do my taxes.

Comment by Reuven
2010-04-30 08:51:14

Why are we here? The $8000 giveaway will go away today! We need to be out buying houses before they become unaffordable again and nobody can buy them!

Comment by Pondering the Mess
2010-04-30 09:13:20


One needs to buy an overpriced house now to sell to a sucker at a higher price later before houses become unaffordable!

Comment by CarrieAnn
2010-04-30 12:14:58

Diana Olick just warned we might see drops in housing sales and numbers for a bit this summer after the expiration date but then see a rebound in the fall.

Yeah….ah, that’s the ticket!

Comment by Professor Bear
2010-04-29 23:22:24

* The Wall Street Journal
* APRIL 29, 2010, 9:41 P.M. ET

Criminal Probe Looks Into Goldman Trading

Federal prosecutors are conducting a criminal investigation into whether Goldman Sachs Group Inc. or its employees committed securities fraud in connection with its mortgage trading, people familiar with the probe say.

Comment by Hwy50ina49Dodge
2010-04-30 06:18:27

Financial ‘Ethics” violation are not criminal… ;-)

Comment by arizonadude
2010-04-30 06:51:51

Just heard the recession is over.The party is back on.Buy a house now or be priced out forever.Those were some real tough years we went through.

Comment by nycjoe
2010-04-30 07:03:01

But maybe a little mass hysteria will drive down AZ prices another notch? We could dream.

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Comment by rentor
2010-04-30 10:53:47

Isn’t that like saying doctor assisted suicides are ethical violations not criminal…

Comment by Hwy50ina49Dodge
2010-04-30 15:53:54

Key word: Financial

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Comment by Cantankerous Intellectual Bomb-thrower
2010-04-30 06:37:10

Why is Gollum unfairly singled out in this criminal probe? Certainly the other Wall Street Megabanks are also worthy of some probing? Why not go for the all-out witch hunt that Joey repeatedly mentions in his posts?

Comment by Pondering the Mess
2010-04-30 09:15:21

IMHO, Gollum will be “sacrificed” symbolically - they’ll get the biggest fine, etc. Any crooks who leave, however, will just end up at another Wall Street firm or get government jobs in positions of great power. Fortunately, the attention span of Amerikans these days is short enough that they won’t notice.

Comment by neuromance
2010-04-30 18:38:41

I just saw an article about Michael Milken, the Drexel Burnham Lambert junk bond king who went to jail the last time Wall Street was bailed out, in the late 80s, early 90s. The article reported that he’s a billionaire philanthropist.

Turning the rock over just sends the roaches scurrying to new ones.

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Comment by rentor
2010-04-30 10:55:29

In a war its important not to stick your head up. Gollum and its bonuses in everyones face was too big a target. Will the innocent retail shareholder suffer? You bet.

Comment by joeyinCalif
2010-04-30 11:53:14

..witch hunt that Joey repeatedly mentions..

I don’t repeatedly mention witch hunts. I mentioned it once. You saw it repeated in some article, mentioned that I mentioned it at least twice, included my nick in the text, and I responded to your posts.

Why is GS being singled out? Because they are the biggest, strongest and least likely to suffer any serious damage.

The politicians have not changed their course, or had an epiphany and decided to punish the financiers and bankers, and thereby threaten what little economic stability may now exist.
It’s about politics and money.. as usual.

Comment by ecofeco
2010-04-30 14:41:20

They are not being unfairly singled out. They just happen to be the most highly visible.

Many other companies are under investigation.

Comment by bobo4u
2010-04-30 15:39:27

I don’t know how they can prosecute the giant squid without also prosecuting most of the financial advisors to the last 5 or 6 presidents. Not that I’d like to see GS get off, but it sure seems like there’s a bit of complicity on the government side as well–including Obama’s own advisors.

Maybe it’ll turn out like a New York police investigation where they discover that most of the department is corrupt–and the biggest criminals were those we hired to protect ourselves from. OK, I doubt that’ll really happen, but a man’s gotta keep dreaming that justice might prevail somewhere down the line…

Comment by Professor Bear
2010-04-29 23:26:36

Whatever came of this probe; nothing, I assume?

Wall Street Criminal Probe Widens
POSTED: 03:08 PM ET, 09/29/2008 by Derek Kravitz

As news of Congress’ failure to pass a sweeping $700 billion bailout package for Wall Street sent stocks tumbling, investigators continued today to pursue potential criminal cases against firms and bankers accused of contributing to the market collapse.

Federal prosecutors on Friday issued subpoenas for mortgage-finance giants Fannie Mae and Freddie Mac to produce documents dating back to January 2007. Federal prosecutors with the Southern District of New York and officials with the Securities and Exchange Commission would not say what they are seeking.

Bloomberg reported that reviews of the two companies’ books in the weeks before their Sept. 7 takeover by the federal government found that they were using accounting methods that obscured the “low quality” of capital reserves.

The FBI has already begun an investigation into the subprime mortgage collapse. Investigators are looking at 26 companies, including Fannie and Freddie.

Comment by GrizzlyBear
2010-04-30 10:52:02

What federal officials found was probably so deeply disturbing that they had an “oh, sh!t” moment, and hurried up to try to sweep the whole thing under the carpet.

Comment by CA renter
2010-05-01 01:01:58

Yep. I’d bet all my money on them finding the names of some of our most highly-placed politicians in those “papers” and they decided not to pursue it.

Comment by ecofeco
2010-04-30 14:42:53

After being told by the Bush admin to ignore all the fraud that was going on, (yes, you can google it) it’s going to take years to catch up.

Comment by Housing Wizard
2010-04-30 14:45:49

i don’t have any illusion that this is anything but a show to try to make Main Street think that Justice is prevailing while the culprits really deserve a total demise for what they did .

Comment by James
2010-04-29 23:30:46

Well, I missed the day but happy second birthday to this listing in San Pedro.

2646 S PATTON AVE, San Pedro, CA 90731**

590K$ short sale….734 days on the market!

For those of you that don’t know, San Pedro is a borough of LA down by long beach. Kind of a halfway decent place to live in some parts. This is a nice section. Used to be inexpensive. Beach sucks. Crime is pretty nasty.

From what I’m hearing, the short sellers are generally lying about bank approval and the slimy bastards want some off the records cash on the transaction or a sellers fee.

F them. Liquidate the pukes.

Oh, in the incidental crime report, one of my regular lunch places got robbed at gunpoint with many of my coworkers there.

While the economy is sprouting green shoots… some 1 million people are at the end of their 99th week of unemployment.

Things are about to get very very ugly.

Comment by Cassandra
2010-04-30 05:54:20

Green Shoots? Is that what you call comes out the business end of a .12 gauge?

Sorry for the snide remark, but I couldn’t resist. Used to live in Long Beach, down the hill from San Pedro. San Pedro was upscale from my point of view.

Comment by Hwy50ina49Dodge
2010-04-30 06:37:14

Did ya ever make it up to Walker’s cafe? Beer, burgers & 8 languages :-)

Comment by nycjoe
2010-04-30 07:04:29

Bukowski’s old place for sale? Might need some fumigation.

Comment by Cassandra
2010-04-30 09:22:23

In San Pedro? Never spent much time on the other side of the bridge. Lived at PCH & 710.

We used to laugh because we lived there when the show “Beverly Hills 90210″ came out. We lived in Long Beach 90810.

Comment by ET-Chicago
2010-04-30 07:05:11

For those of you that don’t know, San Pedro is a borough of LA down by long beach. Kind of a halfway decent place to live in some parts … Used to be inexpensive.

For those of us of a certain age and inclination, San Pedro will forever be associated with mighty ’80s punkers the Minutemen. (I think the two surviving members still live there.)

Comment by rms
2010-04-30 07:26:10

How did they get a permit to build a two-story place in a single story neighborhood? That facade doesn’t fit the neighborhood either. Someone in planning rubber stamped those plans.

Comment by scdave
2010-04-30 08:55:00

Only two ways to limit the two story house…Either by “ordinance” or by “Deed Restriction” by the original subdivider…

Comment by Jim A.
2010-04-30 09:40:28

Yeah, I’m not sure what the modern American obsession is with uniformity in neighborhoods is all about.

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Comment by packman
2010-04-30 09:43:45


As affected by economies of scale. It’s a lot cheaper to build 100 houses when they’re all 1 design (or 4-5) as opposed to 100 designs.

And IMO that’s a very unmeasured component of CPI. We’re getting lower-quality houses, in terms of diversity, but for the same prices.

Comment by Carl Morris
2010-04-30 09:48:36

I’m not sure what the modern American obsession is with uniformity in neighborhoods is all about.

I think it’s part of the obsession with housing values. Everyone wants their home to be worth the maximum value that it can be, relative to the amount spent. The biggest danger to that (at least in people’s minds) is somebody nearby doing something “odd” with their house. So they make a lot of rules to make sure that doesn’t happen. And they only want to buy in a neighborhood where everything looks “right”. So that’s what kind of neighborhood gets built.

Comment by rms
2010-04-30 11:31:23

“Yeah, I’m not sure what the modern American obsession is with uniformity in neighborhoods is all about.”

I grew up in a planned neighborhood where the developer even selected and planted the trees; it’s still a nice neighborhood today, but I can’t afford to live in a similar setting.

Renting and owning spec homes, where several of the homes on the street have their garages converted into rooms and four cars parked there, define my life. The neighbors often have excess stuff stored outside in plain view too, or a boat or RV parked in the driveway rather than storing it at a rental yard. It’s low class to do that to your neighbors, IMHO.

Comment by Spokaneman
2010-04-30 13:42:09

And the big tract builders (Pulte, Horton etc) only have a few designs for the buyer to choose from, so pretty quickly the patterns begin to repeat.

Even here in Spokane, where the big guys don’t come, the mass builders have their “models” to choose from. Personally, I wouldn’t want to spend $400K to have a house that looks live every fourth one in the ‘hood, but I am old school.

Comment by awaiting wipeout
2010-04-30 18:30:09

You’re singing my song. After owning two PUD McMansions, I am through with two-story jungles of same-ness. I want a single story rancher, that although is an older tract home, has been individualized by numerous owners, and has some character. Picket Fence, some color other than beige, and huge trees 50 yrs old. Yep, that’s my future home. Oh, and driving to my new place, I want to drive through a “tree tunnel”. (I coined that phrase.)

Comment by CA renter
2010-05-01 01:05:04

We’re looking for the same house, awaiting. ;)

Comment by m2p
2010-04-30 10:47:55

I lived in this neighborhood until ‘74. Big sis visited last year and took pictures of the old homestead. The two homes on either side of our old home, both originally <1000sf, are now two story boxes. Apartment buildings were the only two story buildings back then, IIRC.

Comment by Pondering the Mess
2010-04-30 09:20:06

This is aaaaalllll good!

We’ve got crime everywhere, a housing fraud market, no jobs and soon no benefits, and banksters laughing it up on the Hill!

Yeah, I don’t see how this could end badly! Green Shoots all the way!

Comment by rentor
2010-04-30 10:56:39

Pulp fiction

Comment by Professor Bear
2010-04-29 23:30:47

Thai protesters storm major hospital in Bangkok
By DENIS D. GRAY (AP) – 1 hour ago

BANGKOK — A major hospital in the Thai capital evacuated patients and suspended all but emergency surgery Friday after anti-government protesters who occupy a nearby zone stormed in to hunt for security forces they suspected were positioned there.

A group of so-called Red Shirts broke into Chulalongkorn Hospital late Thursday despite pleas from its director, then withdrew back into their enclave after not finding soldiers or police within the sprawling compound.

Parts of Bangkok’s commercial heart have become a barricaded Red Shirt protest camp, forcing the closure of some of the city’s ritziest malls and hotels. The “occupied zone” flanks Chulalonkgorn Hospital and abuts Silom Road, the capital’s “Wall Street” which has become a camp ground for military and police units.

Comment by Professor Bear
2010-04-29 23:33:52

Showdown on Wall Street:
Angry protestors march against banking industry

Michael Pantelidis and Wil Cruz

Thursday, April 29th 2010, 11:05 PM

Demonstrators march against banks in New York on Thursday.
The demonstrators demanded that the financial giants own up to their role in the recession.

You got us into this economic mess - now get us out!

That was the message thousands of protestors had for the banking industry Thursday in Manhattan.

Chanting “Save Our Homes” and waving signs that said “Bust Up Big Banks,” the demonstrators demanded that the financial giants own up to their role in the recession.

“We’re tired. They’ve gotten richer, but we’re still poor,” said Loretta Manning, 37, who mrached with nine relatives. “We’re getting poorer. It’s not fair.”

The protestors took their “Showdown on Wall Street” to JP Morgan Chase and Wells Fargo offices on Park Ave. before converging at City Hall Park.

They called on banks to rethink their lending practices and foreclosure policies that balloon up interest charges.

“We’re here to send a message to Wall St., Goldman Sachs and big banks that it’s time to invest in America, and stop ripping America off!” said James Mumm, 39, of the National People’s Action, a sponsor of the protest. “Enough is enough!”

Read more: http://www.nydailynews.com/ny_local/2010/04/29/2010-04-29_showdown_on_wall_street_angry_protestors_march_against_banking_industry.html#ixzz0mYwWP7sw

Comment by Al
2010-04-30 05:12:23

I think the idea of the march is great, but their messaging sucks.

Comment by packman
2010-04-30 06:58:27

This is only going to get worse.

(Or better, perhaps one could say)

Comment by oc-ed
2010-04-30 23:34:22

Some years back we often used to ponder what inning of the game we were in. Anyone wish to venture a guess at this point?

Comment by CA renter
2010-05-01 01:10:51

I’m thinking fifth inning…

BTW, how have you been, oc-ed? :)

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Comment by Professor Bear
2010-04-30 07:04:26

Do you think it is dawning on Main Street America that recessions are great for Wall Street, which gets bailouts and mattress money loans at zero percent interest rates from the Fed to later snap up assets at fire sale prices, but not so good for Main Street, which gets to enjoy life in the unemployment line?

Protesters descend on Wall Street, New York City banks
By the CNN Wire Staff

April 30, 2010 12:48 a.m. EDT

Protesters march in New York on Thursday, calling for banks to be held accountable for their role in the recession.

* Thousands of protesters hit streets, demand Wall Street accountability
* Group blames financial institutions for lingering recession
* Protesters deliver letters to CEOs for JP Morgan Chase, Wells Fargo

New York (CNN) — Protesters rallied in downtown New York City Thursday to voice their anger over what they perceive as the roles Wall Street and big banks played in America’s economic crisis.

Marching from City Hall to Wall Street, the protesters chanted “good jobs for all,” and held signs with messages including “Hold banks accountable,” “Make Wall Street Pay,” and “Reclaim America.”

Comment by scdave
2010-04-30 07:20:30

loans at zero percent interest rates from the Fed to later snap up assets at fire sale prices ??

Exactly….The haves now have more…The have-nots will now pay more…Consumer staples, Ins., VAT, etc….

Comment by Professor Bear
2010-04-30 07:23:09

The haves get to borrow from the Fed at zero percent, and loan to the have-nots at “market rates.”

Sounds fair to me…

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Comment by Pondering the Mess
2010-04-30 09:22:44

After rewriting the rules of the game to make sure no matter what happens, the “haves” win every time and we get the bill for their loot.

This will all end badly, though who knows when that’ll start…

Comment by wittbelle
2010-04-30 10:49:53

I have an idea for a protest. Pay off all debt. Take all of your money out of the bank. Increase your tax deductions to the max. Stop buying anything except the bare necessities and, of those try and barter with others. Home school.

Comment by ecofeco
2010-04-30 15:03:44

wittbelle, 10s of millions of Americans already do that and not by choice.

Comment by GrizzlyBear
2010-04-30 11:26:17

“Do you think it is dawning on Main Street America that recessions are great for Wall Street, which gets bailouts and mattress money loans at zero percent interest rates from the Fed to later snap up assets at fire sale prices, but not so good for Main Street, which gets to enjoy life in the unemployment line?”

This is exactly what’s happening right now. The wealthy are busy gobbling up all of the good assets, while the common man gets the shaft. It’s disgusting. Depressions are great wealth builders for the well connected with deep pockets. This might be the greatest transfer of wealth in the history of our country.

Comment by ecofeco
2010-04-30 15:04:49

Might? Try “is” and also in the history of the world.

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Comment by Professor Bear
2010-04-29 23:36:33

This Undead Pirate Does Not Support Taxpayer-Funded Bank Bailouts

07:22 pm April 29, 2010

Let’s say you’re a fatcat banker and recipient of a taxpayer-funded bailout, looking out into the crowd protesting you. Does the terrifying undead pirate make you think differently about taking the bailout? Or do you think, if the terrifying undead pirate is against me, maybe I’m the good guy?

Really the whole thing would be a lot more interesting if it was Wall Street Bankers versus Army of Undead Pirates.

Comment by jfp
2010-04-30 12:59:52

There’s some sort of underwater joke to be made here, but I’m too lazy to come up with it.

Comment by ecofeco
2010-04-30 15:08:55

Looking out at the crowd protesting you, all you’re thinking about is are you going to be late for that dinner date with the expensive hooker and will they hold your reservation.

Comment by Professor Bear
2010-04-29 23:38:14

Do You Blame Goldman? Government? Both?

April 27, 2010 11:46 PM

It was the government versus Goldman Sachs today on Capitol Hill.

On one side, a senate subcommittee lashing out at alleged conflicts of interest that helped the firm turn a profit amid the financial collapse.

On the other, a company resolute in its denial of any wrongdoing.

Senate Democrats and Republicans, meanwhile, continue to work on reforming the financial world that made so many rich, and left so many more financially wrecked.

But critics say Congress was a prime enabler of the crisis.

So tonight, we ask: Is Goldman at fault, at the very least, for unethical behavior?

Or does Congress share in the blame for turning a blind eye?

Tell us what you think.

Comment by pressboardbox
2010-04-30 04:56:37

I thought the government was a rule-making division of Goldman?

Comment by packman
2010-04-30 07:26:30


People act like it’s an either/or thing. It’s not. It’s both of them.

Comment by Pondering the Mess
2010-04-30 09:25:23

+ 1,000

They are all in bed with each other; it’s a revolving door crime family, basically.

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Comment by wittbelle
2010-04-30 11:08:20

AMEN!!! When are the people of this nation going to wake up? It’s freaking Gullible’s travels out there. Do they really think the government isn’t in on the whole scam? Are they not aware that these banks give all of our leaders money? It reminds me of the South Park Mormon episode,” Dumb, dumb, dumb, dumb, dumb.”

Comment by ecofeco
2010-04-30 15:14:56

“…Gullible’s travels…”

Outstanding! Now THAT’S a good pun!

Comment by are they crazy
2010-04-30 11:08:08

and the public that took the loans & bragged about how rich they were, and the public that did or did not vote. It’s not just the government or the banks, it’s everyone. There’s millions of people that work for banks and/or government. They are regular folks working a jawb. It’s so easy to just blame a big entity. it took everyone trying to get rich quick for any of this stuff to happen.

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Comment by GrizzlyBear
2010-04-30 14:34:38

Another group perpetuating the greed of Megabank, Inc. are their customers. Lots of hypocrites around here, complaining about the banks, yet utilizing their credit cards, bank accounts, etc. I dropped Bank of America like a bad habit last year. No more big banks for me- ever. If everybody would wake up, and stop giving these banks business, they would cease to exist. Cancel the credit cards, close the retail accounts, stop using debit cards and go to cash. Too much of a hassle? Lazy people get what they deserve.

Comment by ecofeco
2010-04-30 15:16:55

It’s not like your vote means anything. If the PTB don’t like the way a vote goes, they take it to court and get it overturned.

Comment by measton
2010-04-30 07:56:41

Correct it’s a trick question.

Comment by SDGreg
2010-04-30 05:24:22

The major blame belongs on GS. No one forced them into unethical behavior and they bought off Congress to be able to do it.

Comment by michael
2010-04-30 06:40:50

blind eye?

Comment by arizonadude
2010-04-30 06:53:15

no eyes like greenspan?

Comment by michael
2010-04-30 09:45:16

they had their eyes all over this mess…their hands out too.

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Comment by James
2010-04-30 09:48:31

Reference to Admiral Horatio Nelson, was signaled to withdraw in a battle. Had signal officer give him a telescope and put it to his blind eye and said “I see no signal telling us to withdraw”.

Anyhow, the expression stayed.

Comment by Hwy50ina49Dodge
2010-04-30 06:54:50

I stand by POV:

1st (SCOTUS person) Dr. Jekyll:

GoldenmanSucks Inc. = “TrueFinancialCult™”

2nd (SCOTUS person) Mr. Hyde:

GoldenmanSucks Inc. = “TrueSerialLiquiditist™”


Comment by mrktMaven FL
2010-04-30 07:00:58

It was a team effort.

Comment by Housing Wizard
2010-04-30 14:41:25

I heard a couple of Cheerleaders make the argument that the Government is at fault because they didn’t regulate . How do you regulate the markets that aren’t transparent ? But yes , the Politicians were bribed to allow a form of self-regulation ,yet
that doesn’t mean crimes weren’t committed and there isn’t laws on the books in which the intend of the law is fair business practice that was violated .

Anyway ,if a criminal commits a felony ,but the cops aren’t around to bust it ,than can that criminal use the excuse once they do get busted that it’s the cops fault because they took to long to bust me? It’s just like they didn’t bust Enron either until they were BK bound . They busted Madoff when he could no longer keep the Ponzi scheme going because clients were calling for redemptions .
In any Ponzi-scheme it doesn’t come to light until the culprit can’t pay on the investment scheme anymore . The bail-outs were a
Obstruction of Justice that delayed discovery on some of these practices and trades that are now in the light .

It’s clear to me that one of the reasons why these financial criminals did their dirty dealings is because of knowledge that
the cops were pre-occupied with other priorities. It’s also clear that the donations to Politicians keep them off the track ,and people on all levels were fools by the bogus ratings on these securities .

Private Health Insurance Companies use to be half way decent also years ago until they got the greed bug and it became a issue of not paying claims but denying care to get more profits while at the same time becoming monopolistic .

The Public/Majority is becoming more and more enraged at the knowledge that they are being fleeced by a rigged deck that is taking their jobs , stealing their wealth and their future standard of living ,just so a small minority of Fat Cats can have stolen wealth in the trillions. .Yes,the wealth was stolen on so many levels by the Market Makers ,who had so much clout that they avoided Justice and got bailed out and dared to flaunt their unearned gains post Tarp bail-outs at the expense of the taxpayers .

Great pain was put on innocent people during the Great Depression of which many never even invested in the Stock Market
or had anything to do with that Mania . Glass-Steagal was good law that came about from the 1929 crash . Now the jerks want to set up a automatic bail out fund for the culprits in new reform ,as if this has any merits or as if 50 billion would be enough to bail out
those casino games .
You have to go back to separating investments from loans because the Government cannot afford to cover TBTF gamblers on investments and casino games and loans should be put back to prudent underwriting standard , and Wall Street Investment Banks should not be allowed to make a Main Street loan .

Comment by Professor Bear
2010-04-29 23:42:24


Friday April 30, 2010

Volatility Jumps as European Sovereign Debt Crisis Infects Asia
April 29, 2010, 11:52 PM EDT

By Katrina Nicholas

April 30 (Bloomberg) — Volatility indexes show Europe’s fiscal crisis is jolting markets in Asia’s largest economies, with gauges in China and India jumping as much as in the U.K.

The AlphaShares Chinese Volatility Index, a measure of implied volatility on stock exchanges in China and Hong Kong, has risen 13 percent this week after Standard & Poor’s cut Greece’s credit rating to junk and downgraded Portugal, mirroring the similar measure of investor sentiment in Britain.

India’s VIX index jumped 15 percent on April 28, the day after the downgrades, and yesterday fell 7 percent. The indexes are based on options prices, and assess near-term expectations for the magnitude and rate of price moves.

“When markets react to a big spike in stress they look at simple indicators like a country’s debt to gross domestic product,” Sebastien Barbe, head of emerging-market research for Credit Agricole CIB, said in a phone interview from Hong Kong. “India doesn’t have any dollar debt, but it does have huge local-currency debt.”

India, Asia’s third-biggest economy after Japan and China, has pledged to cut its budget deficit to 5.5 percent of GDP in the year starting April 1, from 6.9 percent last year. At 13.6 percent, Greece’s budget shortfall is more than four times the European Union’s limit.

Almost $1 trillion of worldwide equity value was erased after S&P downgraded Greece, on concern Europe’s debt crisis may derail the global recovery, data compiled by Bloomberg show.

More From Businessweek
* Hong Kong Drop; Developers Fall Amid Concern on Home Prices
* Hong Kong Proposes Fines, Bans to Improve Disclosure (Update2)

Comment by pressboardbox
2010-04-30 04:59:03


Full LEFT rudder! Ahead Full the printing press! Man the stimulus pumps!

Comment by measton
2010-04-30 07:58:25

Don’t worry the US gov has already re arranged the deck chairs now sit down and enjoy your umbrella drink.

Comment by ecofeco
2010-04-30 15:19:06

What song is the band playing? It sounds familiar.

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Comment by bobo4u
2010-04-30 15:54:16

Good one, Pressboard! LMFAO

Comment by Professor Bear
2010-04-30 06:42:46

April 30, 2010, 5:12 a.m. EDT

Spanish unemployment tops 20% in first quarter
By Barbara Kollmeyer, MarketWatch

MADRID (MarketWatch) — It hasn’t exactly been a bumper week of good news for the Spanish economy.

On Friday, data that showed Spain’s jobless figure topped 20% in the first quarter of 2010 — 20.5% to be exact — served to highlight the tough job the government here is facing in trying to get its finances under control and light a fire under the economy. It marks the worst unemployment rate since 1997.

Comment by eddiamond
2010-04-30 07:50:54

Does Spain use the same formulae as the U.S. for unemployment or is this actually a REAL number that likely mirrors U.S. (REAL) unemployment?

Comment by Bill in Los Angeles
2010-04-30 08:49:51

I think they use the same formula as the U.S. For decades, Europe has had double digit unemployment rates, due to the much higher labor costs imposed on companies than the U.S. labor has on U.S. companies.

Mandated several weeks-long vacations that transfer to new jobs in new companies - you don’t start over again with 2 week vacations, but whatever your time accrued to. I don’t know if they still have 35 hour weeks.

I expect Spain’s real unemployment rate to be closer to 30%.

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Comment by Pondering the Mess
2010-04-30 09:28:02

I don’t see why this is a problem. According to the best Realtor-speak data I have from 2005, jobs aren’t needed in the New Economy, or even to buy a house, so all should be well, right?


Comment by oxide
2010-04-30 10:00:58

you don’t start over again with 2 week vacations, but whatever your time accrued to.

You get that in the US too, at least at the professional level. Or else no one would jump companies.

Comment by Carl Morris
2010-04-30 10:21:28

You get that in the US too, at least at the professional level.

Really? Engineers must not be “professional level”. I’m sure you’re right at the executive level.

Comment by James
2010-04-30 09:50:45

Nothing on Japan these days? Laughing at Spain. 20% is the worst rate since 97. They scoff at our mere 10%.

I wonder what U6 is like at this point.

Comment by aNYCdj
2010-04-30 13:59:54

Well I got my cash off the books intern job…do I count?

I wonder what U6 is like at this point.

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Comment by ecofeco
2010-04-30 15:21:21

U6 as of March was 16.9%.

Oh screw that. 17%

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Comment by Professor Bear
2010-04-30 06:45:59

Views on the news: Greek debt crisis and Goldman Sachs

The fallout from the Greek debt crisis, Goldman Sachs’s shame and Gordon’s gaffe give fuel to comment this week

* Teena Lyons
* guardian.co.uk, Friday 30 April 2010 11.20 BST
* Article history

Bank of Greece HQ/Greek debt crisis

The Greek debt crisis and the banking system are this week’s major talking points. Photograph: Aris Messinis/AFP/Getty

The Great Banking Crisis returned with a vengance this week, with only a certain gaffe to keep it from dominating business news altogether.

Banks are bigger than countries now,” pronounced Sloboch as the crisis unfolded, after Standard & Poor’s downgraded Greek debt to junk bond status: “A tiny elite of smirking suits controls more wealth than the rest of the world put together, thanks to the ability to create worthless money out of thin air and the power to lend massively more money than is held in their reserves. This scam has made a few people very rich and created banks that are ‘too big to fail’. Really, these banks are too powerful to exist.

Comment by packman
2010-04-30 07:27:45

“Give me control of a nation’s money supply, and I care not who makes its laws.”
- Mayer Amschel Rothschild

Comment by Professor Bear
2010-04-30 06:53:29


* The Wall Street Journal
* APRIL 30, 2010

Warning Signal on U.K. Debt?
Value of Default Protection Has Doubled in 2010 and Is Outpacing Spain, Italy


As investors scramble to protect themselves from the next credit flare-up in Europe, their worries are spreading to the U.K.

Investors bought a net $443 million of credit-default swaps to insure against a U.K. default last week, according to data compiled by the Depository Trust and Clearing Corp., taking the total outstanding to $8.2 billion.

That was easily the biggest gain among sovereign borrowers. The size of protection on the U.K. has roughly doubled since the year began, a move that far outpaces the run-up in Greek CDS last fall.

The purchases haven’t yet caused the prices of U.K. swaps to spike, as in other recent credit convulsions. But the market’s behavior in some ways echoes behavior that preceded credit crises in Greece and elsewhere.

In comparison, insurance against a default by Portugal rose by a net $10 million last week, while insurance on Spain and Italy fell. All three of those nations are being watched as the next likely avenues of Greek credit contagion. The data suggest the U.K. could soon be a target, too.

These dollar amounts are small relative to the size of each country’s bond market, which could help explain their dramatic swings. And the U.K. bond market is far larger than Greece’s, diminishing the relative importance of the dollar figure. But observers say they deserve close watching as a potential sign of trouble.

“You can definitely infer from this that the markets are growing more concerned about the U.K.,” said Tim Backshall, chief strategist at Credit Derivatives Research.

Comment by Professor Bear
2010-04-30 06:56:12

Suddenly the big ratings agencies seem to have resurrected from the dead.

* APRIL 30, 2010, 9:31 A.M. ET

Moody’s Downgrades Greek Banks


LONDON—Moody’s Investor Services Friday downgraded its ratings on nine Greek banks as the country’s debt crisis takes a toll on their finances.

Comment by Pondering the Mess
2010-04-30 09:30:16

I guess Moody’s is struggling for relavance… At some point, I expect them to downgrade Goldman Sachs Super-Duper Mortgage Funds from “AAA” to junk…

Comment by packman
2010-04-30 09:31:57

So - at what point do the ratings agencies get downgraded to junk?

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Comment by Professor Bear
2010-04-30 11:08:28

When they lose their oligopolistic stranglehold on the market for ratings.

Comment by Housing Wizard
2010-04-30 14:53:06

When they default by 97 % than some jerk might determine that the investment is junk . They call these securities “toxic waste ” in the business . Why invest in Wall Street investments
on any level if its all smoke and mirrors and the smart guy in the room is the one that sells to the greater fool .

Comment by Professor Bear
2010-04-30 09:19:37

My guess is some high-level officials in the global central banking cartel could answer this question:

* APRIL 30, 2010, 11:34 A.M. ET

Debt Crisis Mystery: What’s Holding Up the Euro?>


LONDON — It’s a mystery that has currency experts scrambling for answers.

Given the breath-taking carnage in euro-zone bond markets, why is the euro still trading in the $1.30s versus the U.S. dollar?

After all, Greek government bonds collapsed this week, building on the rout that had already forced Greece to request the activation of the joint European Union-International Monetary Fund aid package.

The spread between 10-year Greek and German bond yields stretched to more than 10 percentage points at one point while sharply rising Portuguese and Spanish yields signaled that investors were beginning to get really nervous over the idea Greece could be forced to restructure or default on its debt, triggering a run on debt-strapped members of the offensively-acronymed PIIGS fraternity, made up of Portugal, Italy, Ireland, Greece and Spain.

But while the yield premium demanded by investors to hold peripheral euro-zone bonds rather than German bunds soared over the past month to levels unseen since the single currency’s debut, the euro is down just 1.8% versus the dollar over the same period, noted strategists at RBC Capital Markets.

The euro first came under pressure late last year as worries about Greece’s fiscal position began to mount. The single currency has lost nearly 20 cents versus the U.S. dollar since trading above the $1.50 level in December. On Thursday, it notched a new one-year low at $1.3112.

But the roughly five-cent drop seen since the euro’s April 12 high has been about on par with the slide seen in the first two weeks of December or the last two weeks of January. Given the intensification of the credit market rout, “should euro/U.S. dollar be 10 big figures lower?” asked the RBC strategists, Elsa Lignos and Adam Cole, in a research note.

Comment by jeff saturday
2010-04-30 03:13:36

It`s the 30th, better have that contract signed by midnight.

Comment by pressboardbox
2010-04-30 05:01:39

I sure the savvy (shady) homebuilders have a stack of pre-post-dated contracts complete with pre-deposited money in escrow to cover late buyers.

Comment by eastcoaster
2010-04-30 06:28:11

Done! Settle in 2 weeks. (But didn’t do it for the credit…although not turning away free money - need a new heat pump.)

Comment by jeff saturday
2010-04-30 07:32:39

eastcoaster of all the 1.8 million that cashed in on the tax credit, you are the only one that I know of that I am happy for. Get your new heat pump and enjoy your new home. Congratulations!

Comment by Ki
2010-04-30 06:47:28

There will be plenty of contracts signed in the next few weeks that will be dated 4/29/2010. There is no way to verify when the contract really was signed. The real deadline is closing by 6/30/2010.

Comment by scdave
2010-04-30 07:29:08


Comment by arizonadude
2010-04-30 07:59:26

I thought realtors had ethics?

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Comment by Ol'Bubba
2010-04-30 09:13:56

Good one, AZdude.

Comment by mikey
2010-04-30 09:58:11

“It`s the 30th, better have that contract signed by midnight.”

Not me, I’m waiting for after the Dead Cat bounce after the Spring bounce which is after the the Superbowl bounce in 2013…if I don’t fall asleep after all the moneypit bouncing.



Comment by Hwy50ina49Dodge
2010-04-30 10:16:13

No worries mate, the housing market has adopted new technology to keep things bouncing up, up, up & awaaaaaaaaaayyyyyyyyyyyy… :-)


Comment by jeff saturday
2010-04-30 03:34:13

Home buyer tax credit ends Friday

By Jeff Ostrowski Palm Beach Post Staff Writer
Posted: 4:25 p.m. Thursday, April 29, 2010

With today’s deadline for a federal tax credit looming, the prospective home buyer called real estate agent Ed Farah and wondered if he could tour properties and ink a signed contract in 24 hours.

Farah, an agent at Better Homes and Gardens Real Estate in Port St. Lucie, advised the procrastinator not to bother.

“I said, ‘I think you waited too long. It’s just not going to happen that easily,’” Farah said.

But Farah has been working “feverishly” on another deal that he hopes to complete in time.

As the flurry of activity at Farah’s office shows, there’s a last-minute rush by buyers looking to take advantage of a soon-to-expire tax break.

To spur the nation’s moribund housing market, Uncle Sam has been dangling a tax credit worth up to $8,000 for first-time home buyers and up to $6,500 for those who already own homes. To collect the credit, the buyer must sign the contract on or before April 30 and close by June 30.

The tax break seems to have boosted sales. Nearly 1.8 million Americans had cashed in on the credit as of Feb. 20, and March home sales in Florida jumped 24 percent compared with a year ago.

Now real estate experts wonder what comes next. Many fear sales will slump once the federal tax incentive is gone.

Others worry that some buyers who have signed contracts won’t be able to close by the June 30 deadline. John Mike, an agent at Prudential Florida Realty, said one of his recent sales was delayed for two weeks as the buyer waited for her mortgage to be approved.

He blamed changes to a key mortgage law earlier this year, along with lenders’ general caution following their boom-time recklessness. Meeting the closing deadline “will be the real scramble,” Mike said.

But mortgage broker Jim Sahnger of Palm Beach Financial Network said borrowers should have plenty of time, so long as they have good credit scores and enough income to pay the loan.

“For people that are prepared, closing in 60 days shouldn’t be an issue,” Sahnger said.

But if the property is a short sale, all bets are off, said Myles Minns, owner of Continental Properties in West Palm Beach.

“If anybody anticipates closing a short sale in two months, they’re insane,” Minns said. “It’s like trying to win the lottery.”

Comment by jeff saturday
2010-04-30 05:18:12

“If anybody anticipates closing a short sale in two months, they’re insane,” Crazy Eddie said.

Comment by RioAmericanInBrasil
2010-04-30 08:16:56


Comment by Bad Chile
2010-04-30 05:38:09

My relatives overpriced POS got an offer a couple days ago, so they turned around and made a full-price offer on a larger overpriced POS that is over half-a-million dollars that just came on the market. Their offer was acceepted, so they turned around and accepted the offer on their original POS. All for a $6500 tax credit. (Shaking my head).

If the buyer of their original POS has any brains, they’ll play hardball on the inspection. Not that I’d like to see my relatives lose, but still…when you’re in a great negotiating position…

Of course, these relatives are in full knowledge prices are going to fall in the next few months, but since they HELOC’d the heck out of the existing house and are stretching (despite being in their 40s) for the new house, they need the $6500. Hubby might need to sell a few toys (extra cars, etc) to make it work. They’re not worried about interest rates rising and causing prices to fall because they have no cash anyway. Downpayment? Likely 3.5%, maybe a little more if a car sells before they close.

Comment by scdave
2010-04-30 07:33:25

3.5%, maybe a little more if a car sells before they close ??

In their 40’s and need to sell the car so you can pump up the 3.5% down ?? Sounds like maybe they should not be buying at all…

Comment by Al
2010-04-30 07:57:04

Come now scdave, you’re being a little harsh aren’t you? After all, once they have the place paid off in their 70s, then they can start to focus on saving for retirement. Plenty of time.

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Comment by Bad Chile
2010-04-30 08:57:06

No kidding. They are not savers, not at all.

Comment by Pondering the Mess
2010-04-30 09:34:24

No, no - we need to keep The Game going and the Kool-aid flowing! Everyone needs to buy something they can’t afford as they enjoy the Merry Go ‘Round of Debt!

Did they even NEED the new, bigger house, or are they buying it just because it’s bigger and they know somebody that has a larger house than they do, so clearly they need to get deep into debt to “catch up?!”

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Comment by Bad Chile
2010-04-30 11:04:44

I’ll take door #2, Pondering….

Comment by Cassandra
2010-04-30 05:59:49

Sales 101: Sense of Urgency

Comment by Ki
2010-04-30 06:51:10

““If anybody anticipates closing a short sale in two months, they’re insane,” Minns said. “It’s like trying to win the lottery.”

We looked at a short sale in February. There was an offer on it already that was made in September. The people who made the offer got fed up and walked away, tired of waiting. It was a nice house, pretty good price too, but I didn’t want to wait 6-8 months either.

Last I checked about a week ago, it was still for sale.

Comment by scdave
2010-04-30 07:35:29

Short sale with only one loan is much easier to navigate and get an answer…Multiple loans are a nightmare…

Comment by Pondering the Mess
2010-04-30 09:36:12

If that short sale sold, a bank somewhere would have to recognize the new value of the place and take a loss. We can’t have that, so the house will sit… and sit… and sit…

Comment by NewZealandRenter
2010-04-30 03:57:24

got one baby, harassing REINZ used house salespeople

Comment by Bad Chile
2010-04-30 04:14:27

MADRID - Spain’s jobless rate has surpassed 20 percent for the first time since 1997, the government said Friday as it offered more dismal news for a recession-plagued economy that is being dragged into Europe’s debt crisis.

I’m not sure “dragged” is the word I’d use. “Dragged” implies “kicking and screaming” and “resisting”; I believe Spain went willingly, if not screaming “are we there yet?”

Comment by edgewaterjohn
2010-04-30 04:26:19

That’s a heckuva number considering the lengths the Euros go to in order to employ the most people possible. (relatively generous vacations, work rules, loose disability requirements, early retirement ages, etc.)

It’s okay though. Now that the West has reached the ultimate state of human enlightenment - as evidenced by the CBs’ success in perfecting an economic perpetual motion machine - why should anyone even bother with the primitive concept known as “work”?

Comment by SDGreg
2010-04-30 05:39:39

“That’s a heckuva number considering the lengths the Euros go to in order to employ the most people possible.”

While unemployment benefits are considered to be generous, doesn’t unemployment tend to be relatively high even in better times (not 20+ percent, but high relative to the U.S.)? Note that German unemployment during the past several years was mostly fluctuating between 6 and 12 percent:


Comment by ET-Chicago
2010-04-30 06:51:09

That’s a heckuva number considering the lengths the Euros go to in order to employ the most people possible. (relatively generous vacations, work rules, loose disability requirements, early retirement ages, etc.)

By law, a company in Spain that fires an employee must pay severance of at least 20 days per year worked, and many corporations go beyond that — that’s in addition to Spain’s quite generous UI, of course. I’d imagine a lot of middle-aged, middle class types are enjoying an extended “fallow” period.

Meanwhile, unemployment among Spain’s under-30 demographic is allegedly closer to 40 percent.

Comment by packman
2010-04-30 07:31:02

Not to worry - socialism will work much better in the U.S. because… because… well, just because. We’re different this time.

(Excuse me - “corporatism”)

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Comment by ET-Chicago
2010-04-30 12:55:51

Not to worry - socialism will work much better in the U.S. because… because… well, just because. We’re different this time.

Yar, it’s the corporate socialism we need to worry about, IMO … but you knew that already.

Comment by scdave
2010-04-30 07:38:25

+1 ejohn….

Comment by pressboardbox
2010-04-30 04:52:01

The way I see it, this country needs at least $2 trillion of porkus stimulus a year to get by and maintain a bubble living standard. We just watched this last year and how this money was added to the system and which means were used to justify the “injection”. I am left wondering what next years’ method will be to keep the money flowing at this rate?

Comment by scdave
2010-04-30 07:43:59

what next years’ method will be to keep the money flowing at this rate ??

Larceny ??

Comment by Pondering the Mess
2010-04-30 09:39:27

Higher taxes, VAT, more insane printing press action, and even more “incentives” to get people to buy unaffordable housing.

Comment by jameshar1
2010-04-30 05:49:20

Race is on for homebuyers to meet tax-credit deadline
By ALEJANDRO LAZO - Los Angeles Times

LOS ANGELES — The expiring federal tax credit for home shoppers has put some froth back in the real estate market: People are ditching work to search for new digs, plundering savings for down payments and striking as fast as they can to sign contracts ahead of the Friday deadline.

Buyers can get a tax break of up to $8,000 for first-time purchasers and $6,500 for some current homeowners if they reach agreements by April 30 and seal their deals by June 30.

California lawmakers sweetened the package last month by passing a $10,000 credit that kicks in Saturday. Now, some buyers in the state can qualify for as much as $18,000 in federal and state tax relief if they time their purchases just right.

The dual incentives have created a mind-set reminiscent of the bubble years, particularly among first-timers, who stand to gain the most money.

“I am looking at properties almost constantly, and it is just kind of a feeding frenzy right now, which frustrates me,” said Zeenath Shareef, 30, a Venice Beach, Calif., renter and finance director for a consulting firm who took half-days off to look for a home.

“In my mind, properties are going more quickly, and in some cases for more than what they would normally sell for, because people are in such a rush to buy ahead of this deadline,” she said. “I hear people saying, friends of mine saying, ‘I have to buy, I have to buy, I have to buy.’ ”

Los Angeles shoppers opened contracts on 911 houses in March, a 32.2 percent increase from March 2009, according to data from the California Association of Realtors. While that increase was sizeable sizable, it also reflects a rebound from a period last year when the nation was gripped by the financial crisis and talk of a second Great Depression abounded.

In Santa Ana, buyers opened contracts on 190 houses in March, an 8 percent increase from the same month a year earlier. In San Diego, buyers opened contracts on 721 houses in March, a 7.5 percent increase from March 2009.

Similar data for April weren’t available yet, but real estate professionals said the incentives had added kerosene to the traditionally busy spring season and analysts expect sales and prices to rise in coming months as contracts close.

In March, California lawmakers approved a credit of as much as $10,000 for people buying a new or first home. Buyers must claim the California credit over three years.

“The stimulus has worked,” said Rick Hoffman, president of Coldwell Banker Residential Brokerage in San Diego and Temecula Valley. “Buyers are confident that we have seen the bottom of the real estate market and that we are on the way back up.”

But many economists warn that once the effects of the credits wane, sales and prices are likely to drop.

“We had a serious uptick due to the tax credit, but whatever boost that gave us is now at the end,” said Dean Baker, co-director of the Center for Economic and Policy Research in Washington. “So I think we will see resumed declines. The only real question is how fast.”

The federal tax credit was created in 2008 by the Bush administration as a $7,500 incentive for first-time purchasers, who were required to repay the money in a series of installments. Congress increased the amount to $8,000 in February 2009 when it passed the economic stimulus package and waived the repayment requirement. As an initial deadline for the credit loomed last November, Congress extended and expanded it to include as much as $6,500 for some current homeowners.

“The bulk of the money is going to people who were going to buy anyway,” said Roberton Williams, a senior fellow with the Tax Policy Center in Washington. “It is a short-term fix to the market that is going to be reversed to some degree sometime down the road.”

Despite the criticism that the tax incentives are giving an artificial boost to the market, they do appear to be motivating buyers such as Keith Alvarez, 25, who works in human resources for the reality television company Bunim Murray Productions.

Last December, Alvarez and his partner, Levon Aharonyan, 24, a nurse, grew fed up with paying rent, so they cut back on meals out, worked overtime shifts and filed their 2009 taxes in January to save up for a deposit.

Factoring in the benefits of the federal tax credit, they grew confident they could become homeowners and in March began scouring the market for good deals. Alvarez and Aharonyan were outbid on some properties and didn’t bother putting in contracts on others they thought too expensive. The deadline to qualify for the federal credit loomed.

Then, on Wednesday, the couple received the news that their offer of $300,000 for a short-sale property had been accepted.

The race is now on to close before the June 30 deadline and qualify for the credits.

Alvarez said he and Aharonyan planned to use the money to rehabilitate the four-bedroom, two-bath house on a quiet, tree-lined street in Van Nuys, Calif.

“The carpets are a mess, the tiles need to be redone, the kitchen cabinets are horrible and God knows what was in the refrigerator,” Alvarez said. “It needs some work. But what really caught my eye was the backyard. The backyard was huge.”

Comment by Ki
2010-04-30 07:28:20

“Last December, Alvarez and his partner, Levon Aharonyan, 24, a nurse, grew fed up with paying rent, so they cut back on meals out, worked overtime shifts and filed their 2009 taxes in January to save up for a deposit.”

I shake my head when I read this. So they file taxes in Jan to get their refund early. Hey, geniuses, don’t overpay on taxes and you get a refund every 2 weeks with your paycheck.

Comment by Bad Chile
2010-04-30 09:00:38

No kidding. Heck, the Chile’s are anticipating a change in employment situtation for Mrs. Chile in a few weeks ago. I submitted revised withholding information a month ago, and today’s paycheck reflects that change. Would rather owe than be owed with the way things are going now.

Comment by m2p
2010-04-30 10:50:54

Might be EIC.

Comment by RioAmericanInBrasil
2010-04-30 08:22:09

LOS ANGELES — The expiring federal tax credit for home shoppers has put some froth back in the real estate market: People are ditching work to search for new digs, plundering savings for down payments and striking as fast as they can to sign contracts ahead of the Friday deadline

I can’t leave for 2 years without you guys going nuts up there or what?!!??

Comment by sleepless_near_seattle
2010-04-30 13:31:04


All to receive $8000. It might make sense on a $40-100k house. By working…saving…waiting for stimulae to go away, they’d get much more back than that, IMO.

Comment by Pondering the Mess
2010-04-30 09:41:44

What a group of morons…

If any buyer thinks they are getting ANYTHING out of this fraud incentive, they are idiots. All they are doing is paying AT LEAST $8,000 (or whatever the bonus may be in CA) to the seller since the seller is obviously going to jack up the price to more than balance out the tax credit. And let’s not even start on dolts who are getting in bidding wars for the chance to overpay for a house.

Comment by edgewaterjohn
2010-04-30 10:07:04

No kidding! That $8k is going just about everywhere except to the buyer. Sure, some are using the credit to buy baubles but that’s only because they paid too much for the house!

It’s the same as the buy a house/get a car incentive - they’re financing those baubles over thirty years.

Comment by sleepless_near_seattle
2010-04-30 13:32:54

Well, I don’t think they are jacking up the price, since the $8k isn’t coming from them. But they ARE causing the price to not drop by at least $8k.

Comment by ecofeco
2010-04-30 18:10:53

On property costing over 150K, how would you know they aren’t jacking up the price?

Trust me, they will do anything and everything to capture that 8K.

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Comment by jeff saturday
2010-04-30 06:02:40

Maybe it aint easy, but it`s lucrative being green.

Al Gore buys $9 million seaside home
April 29, 12:53 PM Climate Change ExaminerTony Hake

Al Gore’s home in Nashville, Tennessee is said to use
twelve times as much electricity as the average Nashville home.
Will his new villa in Montecito, California be more green?
Apparently not as worried about dangerous sea level rises as he touts in his speeches, Former Vice President Al Gore and his wife Tipper have purchased a seaside villa in Montecito, California. The Nobel Laureate reported paid $8.8 million for the property.

The Los Angeles Times, via the Montecito Journal is reporting that the home is on a 1.5 acre lot complete with a swimming pool, spa and fountains in an area that is also home to Oprah Winfrey and other Hollywood celebrities. The Gore’s will have plenty of room for guests and entertaining with five bedrooms and nine baths in the home as well as six fireplaces.

Gore has come under fire in the past for leaving a carbon footprint far in excess of the average American leading to charges of “do as I say, not as I do.”

His 10,000 square foot mansion in Nashville, Tennessee was the subject of much discussion three years ago when it was revealed that it used 12 times as much electricity as the average home in the area. Similarly, he flies tens of thousands of miles a year further adding to his role as a lightning rod in the debate about global warming.

The former vice president says he lives a ‘carbon neutral’ life by purchasing carbon offsets. Those are purchased largely from Generation Investment Management, a firm in which Gore serves as chairman and profits from. The U.K. Telegraph speculated last year that Gore would become the world’s first “carbon billionaire.”

Comment by Bill in Los Angeles
2010-04-30 08:53:25

I’ll comment on how I hate Gore. There. That “dam” hypocrite.

Comment by SV guy
2010-04-30 09:45:15

I am almost ashamed to say I voted for the weasel.

Probably didn’t make a difference anyway.

P.S. I’m at my property in Montana staying blissfully ignorant of the most recent developments in our race to the bottom. Have I missed anything worthwhile?

Comment by mikey
2010-04-30 10:07:30

“P.S. I’m at my property in Montana staying blissfully ignorant of the most recent developments in our race to the bottom. Have I missed anything worthwhile?”

Not much other than I think they made Montana a state a while back.


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Comment by Pondering the Mess
2010-04-30 09:46:50

Ah, Carbon Credits - the next wave of fraud that’ll make the Housing Bubble look small. At least a poorly built McShack is something that has some nominal value (or the land it is on does), but what *is* a carbon credit? You can’t eat it, see it, use it for fuel, etc…. it’s almost like some fraud currency, backed by nothing, that exists just to make clowns like Al-Gore rich.

Has Goldman Sachs starting selling Carbon Credit based fraud securities yet?

Comment by oxide
2010-04-30 10:07:50

Was Al Gore always this much of a fruitcake? He seems to have fallen off his rocker in the last decade or so, and I mean that in a serious mental-diagnosis sense. Maybe losing in 2000 loosened some screws.

The real environmentalists, btw, are the homesteaders and the self-sufficiency movement. Probably one of the lowest footprints out there.

Comment by aNYCdj
2010-04-30 14:09:19

With a wife like Tipper you have to ask????????????

Was Al Gore always this much of a fruitcake?

Comment by GrizzlyBear
2010-04-30 14:49:09

“The real environmentalists, btw, are the homesteaders and the self-sufficiency movement. Probably one of the lowest footprints out there.”

Exactly. Al Gore is a fraud. He has done a disservice to true environmentalists.

Comment by Professor Bear
2010-04-30 06:49:30

* MAY 1, 2010

The Big Alienation
Uncontrolled borders and Washington’s lack of self-control.


We are at a remarkable moment. We have an open, 2,000-mile border to our south, and the entity with the power to enforce the law and impose safety and order will not do it. Wall Street collapsed, taking Main Street’s money with it, and the government can’t really figure out what to do about it because the government itself was deeply implicated in the crash, and both political parties are full of people whose political careers have been made possible by Wall Street contributions. Meanwhile we pass huge laws, bills so comprehensive, omnibus and transformative that no one knows what’s in them and no one—literally, no one—knows how exactly they will be executed or interpreted. Citizens search for new laws online, pore over them at night, and come away knowing no more than they did before they typed “dot-gov.”

It is not that no one’s in control. Washington is full of people who insist they’re in control and who go to great lengths to display their power. It’s that no one takes responsibility and authority. Washington daily delivers to the people two stark and utterly conflicting messages: “We control everything” and “You’re on your own.”

All this contributes to a deep and growing alienation between the people of America and the government of America in Washington.

Comment by nycjoe
2010-04-30 07:11:48

I usually grind my teeth when I read something by Noonan, but it is an amazing, fooked-up time we’re living in.

Comment by mrktMaven FL
2010-04-30 07:32:45

What’s not to like about cheap non-unionized labor? Think of all the benefits — no EEOC complaints, no OSHA complaints, zero workman’s comp benefits, low food inflation….

Comment by Ki
2010-04-30 09:11:21

Non-unionized….for now.

Why do you suppose every union in the land is frothing at the mouth to get amnesty signed? Not only will the Dems get 20 million new voters, the unions will get 20 million new members.

It’s a double win for everyone….except the 90% of Americans who aren’t in unions.

Comment by are they crazy
2010-04-30 12:09:04

I’m not sure I’m ready to blame wall street for who gets elected. All that money spent on whatever makes no difference if the public doesn’t vote the way wall street wants or doesn’t vote at all.

Comment by bobo4u
2010-04-30 16:25:30

Ah, but they do, grasshopper. The public will vote for whomever/whatever issue with the best advertising. Did you forget about the recent supreme court ruling that allows corporations to spend unlimited amounts of money in support of their fav candidates/issues? Wouldn’t be surprised to see rebates for votes next.

Comment by ecofeco
2010-04-30 18:17:24

It’s far more subtle than that.

Wall St. (and the REAL PTB behind that) are not looking just for lapdogs, but scapegoats as well as the token do-rights. A mix that is guaranteed to confused the idiot populace.

Need proof? You’re reading it.

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Comment by ecofeco
2010-04-30 18:13:01

“We control everything” and “You’re on your own.”

Got that right.

Comment by mrktMaven FL
2010-04-30 06:50:25

With the broad expansion of the financial services industry and the creation of a plethora of neatly packaged financially engineered products, coupled with the off-shoring of most of our manufacturing base, can we conclude the US’ economic model is one of Financial Mercantilism? Further, is this the end of the Paper Empire?

Comment by packman
2010-04-30 06:56:15

I wanted to follow up last evening’s discussion on Rand/libertarianism with some commentary.

First off - I wanted to state that even though I very often play the role of Rand apologist, I am most definitely not a acolyte; neither of her nor of any kind of total free-market systems (essentially anarchist, as some seem to believe). Specifically:

1. I believe she truly preaches a selfish philosophy. Her view seems to be generally that any help to those who are less able is counter-productive. As a Christian and as (what I hope) a relatively charitable person I believe this is wrong - that it is our responsibility to help those who are less able and less fortunate than us.

Where I draw the line though is government involvement. I strongly feel that charity is not the government’s responsibility. This is for three reasons - a) It is fraught with fraud; moreso than the also-sometimes-fraudulent private charty, b) It is forced and not voluntary; thus it is government forcing moral ideals upon the people. c) It is usually taken too far, way past the point of actually increasing dependency on the charity. I believe the current extension of unemployment benefits to insane lengths is a good example. There’s no doubt in my mind that these extensions, in addition to increasing our debt, have contributed greatly to the level of unemployment itself.

2. I believe in principle of the Tragedy of the Commons, and that it is the government’s role to get involved in this - because (by its nature) it is a role that otherwise no other entity will take, and thus if if the government doesn’t then society as a whole will be worse off. This, and its converse (”Benefit of the Commons” maybe? - not sure if it has a name) applies to many areas:
- Environmental protection
- National/state/etc parks
- Military
- Some infrastructure, like interstate highways (though I think this is debatable)
- Some level of scientific research (I hold this principle, though haven’t really delved into the details much. A couple of examples would be the CDC and NASA.)
While I think that most libertarians at least believe in the ToC principle, they (my impression at least) are still mostly for a “hands off” approach in government, which I disagree with.

3. I believe that a free-market capitalist system does not preclude regulation - in fact it requires it. Specifically for instance regulations are very much required to prevent fraud. This does also imply/require some level of transparency - e.g. banks need to be audited to ensure they have enough reserves, etc. Actually I believe most libertarians - including Rand - would agree with this. I just wanted to call this out because for some reason some people on HBB don’t feel this to be true.

4. Her writings are indeed very unrealistic from a lot of standpoints. E.g. the protagonists in her story are somehow always single people with no burdens of families, health issues, etc. For the most part (though not always) she does have a relatively fine delineation between protagonist and antagonist - though in the real world such a delineation is much more broad.

5. Aside from that even - she’s a horrible writer.

Usually (as was the case yesterday) the defense of Rand is in response to the initial shot being fired by someone else. I end up being a Rand apologist partly to try and correct misconceptions, and partly because we have swung (and are swinging) so far to the opposite extreme of nanny-statism. And yes I attribute this to both sides of the aisle - Republican and Democrat; though usually in different aspects and degrees.

Comment by ET-Chicago
2010-04-30 08:22:01

Dang, I’m sorry I missed it. I usually enjoy some good Rand-bashing. I’m not going to stir the pot when you’re being so reasonable, however.

Comment by RioAmericanInBrasil
2010-04-30 08:48:13

Great and well written post and I agree with the vast majority of it. I would add universal health-care to your list of government areas of responsibility but you know that already.

I had actually mostly forgotten Rand (her, not the basic philosophy) for over 20 years now and I’m really kind of surprised about her current relevance (for good and bad) to the current situation.

Comment by packman
2010-04-30 09:05:42

Yeah - the current situation seems to have brought about some polarization, and it’s our nature to find a flag to wave in the name of that polarization. Rand appears to the flag that’s been picked up and dusted off for the purpose. Certainly the libertarian philosophy existed before Rand, but she seems to have been the one to most popularly put it into words.

E.g. I saw a poll done recently by the Washintgon Times I think (very conservative obviously) about what two books people thought Obama should read - the two picked where the Bible and Atlas Shrugged.

Comment by Jim A.
2010-04-30 09:58:53

On 3. Of course the usual illustration of what happens when you DON’T have regulations is the illegal drug trade. Without access to laws for the enforcement of contracts, there is only the threat of violence.

Comment by mathguy
2010-04-30 11:20:21

I take your point, but really, there is regulation of the drug trade. The regulation is that corporate/pharma meds are the only thing you are allowed to buy, and if you think some pot or laudnum will help you then you are going to go to jail for “possesion”.

Comment by mathguy
2010-04-30 11:25:56

Sorry if it’s unclear, but my point is, it is actually the regulation of banning that drives the price sky high, and creates an atmosphere of huge risks and rewards. In a truly unregulated illegal drug market (aka it’s all legal) the price would fall pretty rapidly as people started growing weed in their backyards and selling it to their neighbors for 1/5 the cost of “street weed”. How cheap is a pack of smokes? How about a bottle of caffeine pills at Rite aid? Or ginseng at GNC?

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Comment by ET-Chicago
2010-04-30 11:33:13

+1 after the clarification …

Comment by Green Shoots
2010-04-30 06:57:39

The residential construction industry seems to be making a strong comeback.
The Wall Street Journal
* APRIL 30, 2010, 8:56 A.M. ET

D.R. Horton Swings to Surprise Profit; Orders Soar

Homebuilder D.R. Horton Inc. swung to a surprise fiscal second-quarter profit, its second-straight period in the black, helped by a focus on key first-time buyers.

Comment by ecofeco
2010-04-30 18:20:23

16.9% UE on the U6 as of March.

Who ARE these buyers?!

Comment by Brett
2010-04-30 06:58:07

In days like these, I hate welfare and wall street…. I just got a nice 20% raise two weeks ago, and today I got the first ‘new’ paycheck.

Total deductions ~25% (not including 401k)

Go free healthcare!
Go bailouts!
Go first-time homebuyer credit!

F8ck the system!!!!!!

Comment by Captain Credit Crunch
2010-04-30 07:20:49

Odd, my taxes haven’t changed at all since those things were passed.

Comment by Ki
2010-04-30 07:30:51

Do you buy glasses? Do you buy contacts? Do you buy OTC medicine? Do you buy any medical devices such as a thermometer, pacemaker, etc? Do you smoke? Do you make over $200K?

If you answered yes to any of those questions, your taxes did indeed go up both in 2009 and in 2010.

Comment by Brett
2010-04-30 08:00:30


Taxable income is over 78,850
But not over 164,550
The tax is 16,056.25
Plus 28% of the amount over 78,850


Taxable income is over 32,550
But not over 78,850
The tax is 4,481.25
Plus 25% of the amount over 32,550

I was borderline prior to the raise, which ended up putting me a different bracket…. there’s a slight 25 vs 28% tax

It still pisses me off to see all these handouts with my money… This government punishes good behavior (no debt and savings with such low interest rates) and rewards f8ck ups.

Comment by cactus
2010-04-30 10:36:05

Yes Thats the problem with raises

pay more taxes

I bet you have raised your 401K contribution though

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Comment by scdave
2010-04-30 08:32:23

20% raise two weeks ago ??

You work for the government ??

Comment by Brett
2010-04-30 08:41:32

Nope… I don’t work for the government
I’m an engineer :-)
I guess my boss really likes me job and didn’t want me to go and work for the competition across town

Comment by Ki
2010-04-30 09:14:11

So here you are posting about a 20% raise surrounded by posts about how bad the economy is. Someone even mentioned we are living through a Depression. Interesting.

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Comment by scdave
2010-04-30 09:01:10

Engineering…That explains the raise…Congrats..

Comment by cactus
2010-04-30 10:41:52

Engineering…That explains the raise…Congrats..”

yes Engineering is hard , and hiring is picking up ,

I’m expecting an offer any day now and then the move.. always the move ugh

Your boss was smart to keep you hard to find good Engineers these days.

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Comment by RioAmericanInBrasil
2010-04-30 08:54:44

Total deductions ~25% (not including 401k)

But you can be a little happy too. A job, a raise, it’s Friday.

Comment by eddiamond
2010-04-30 10:19:05

20% raise and complaining about the taxes? I thought only slot machine jackpot winners and lottery winners did that! Congrats on your new raise, I’ve been out of work for a year so I am looking for a 100% raise. BTW, no unemployment benefits, food stamps or welfare..just paid taxes for 30+ years but not eligible for any assistance.

Comment by Ki
2010-04-30 11:20:13

Why no unemployment? There is no means testing for unemployment benefits.

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Comment by ecofeco
2010-04-30 18:24:27

Yes. Yes there is.

Most states require that you work W-2 a min amount of time before filing a claim. Usually anywhere from at least 1+ year or more.

If you work for yourself, contract or had a small business, you are SOL.

Comment by Spokaneman
2010-04-30 13:55:13

You must not live where there is a state income tax. If there is, you are seriously under-withheld.

Comment by Brett
2010-04-30 15:12:05

No state taxes in Texas… YEEHAW! unless you’re a homeowner, your property taxes are somewhere between 2.5 to 3% in Austin , TX

Comment by Ki
2010-04-30 06:59:13

20% sounds high and it is. But the UE rate was 16% in 2000 and only dropped to about 9% in the entire decade.

US went from a low of 5% in the mid 2000s to 10% today.

Spain went form a low of 9% to 20% today.

In both countries the rate doubled. Spain just started out in a much worse position. But relatively speaking, Spain and the US are equally worse off compared to their lowest level.

Comment by Professor Bear
2010-04-30 07:05:55

“US went from a low of 5% in the mid 2000s to 10% today.

Spain went form a low of 9% to 20% today.”

How much of the difference is due to details of the respective calculations; for instance, does the Spanish UE rate calculation exclude ‘discouraged workers’ from the labor force?

Comment by Ki
2010-04-30 07:35:06

Relatively speaking the rates doubled in both countries and that is independent of the methodology - as long as the methodology has stayed constant in both countries. It has in the US. I don’t know about Spain, but I would assume it is more or less the same.

Comment by ecofeco
2010-04-30 18:26:04

On the U3, you are correct Ki. On the U6, it is 16.9% as of March.

Comment by nycjoe
2010-04-30 07:17:21

Anybody read the NYT editorial on AZ? No big surprise that they shut off comments after 30 posts. No, not foaming-at-the mouth redneck opposition (though maybe some that were rejected?), but a calm, rational, 4- or 5-to-1 repudiation of their nonsense.

Comment by mrktMaven FL
2010-04-30 07:46:31

If we are going to get through this Depression, we have to stop acting like victims and start harnessing the resources around us. All this hand-wringing is not adding any value to the prosperity equation.

Comment by Bad Chile
2010-04-30 09:05:04

As the late Joe Strummer (The Clash) said:

“When you blame yourself, you learn from it. If you blame someone else, you don’t learn nothing, cause hey, it’s not your fault, it’s his fault, over there.”

Comment by ecofeco
2010-04-30 18:27:32

I’ll let you know how marching up to the PTB on Wall St. and giving “what for” works out.

Care to place your bets? :lol:

Comment by sleepless_near_seattle
2010-04-30 13:52:48

If you are talking about “Stopping Arizona” it looks like it has 176 comments.

Comment by Professor Bear
2010-04-30 07:30:02

Don’t you have to wonder whether Gollum is shorting its own stock today?

market pulse
April 30, 2010, 10:01 a.m. EDT
S&P downgrades Goldman Sachs to sell

By Greg Morcroft

NEW YORK (MarketWatch) — Analysts at Standard & Poor’s on Friday downgraded shares of Goldman Sachs (GS 148.23, -12.01, -7.50%) to sell from hold and trimmed their price target for Wall Street’s most profitable investment bank to $140 from $180. The rating agency cited a Wall Street Journal report that said the company is now the target of a federal criminal probe into its mortgage dealings as the reason for the downgrade. “Though traditionally difficult to prove, we think the risk of a formal securities fraud charge, on top of the SEC fraud charge and pending legislation to reshape the financial industry, further muddies Goldman’s outlook,” S&P analysts wrote to clients Friday morning. Goldman Sachs shares fell 6.8% in early trade.

Comment by Professor Bear
2010-04-30 07:46:33

Outside the Box

April 30, 2010, 12:01 a.m. EDT

Feeling the heat
Commentary: This time it’s different for ratings agencies

By Neal Lipschutz

NEW YORK (MarketWatch) — When the major credit ratings agencies found themselves on the hot seat some years ago after the accounting scandals at Enron and Worldcom, their defenses were reasonable.

If those fraud-ridden companies were essentially handing out inaccurate financials, it meant the ratings agencies were being duped like everyone else. After all, you couldn’t expect Standard & Poor’s and Moody’s Corp. to act as auditors. So, their ratings of the companies were too high when the companies’ real and troubling situations tumbled into public view.

Around the same time, the business models of the major ratings agencies were called into question — they are paid by the issuers whose securities they rate. The ratings agencies said they knew how to handle the apparent conflicts, and, because they were employed by so many issuers, the potential conflict was diminished as no one company represented a large percentage of the raters’ revenue.

Now the major ratings agencies are feeling heat again. This time it’s about the way they rated mortgage-backed securities, often AAA, before the housing collapse.

Those earlier defenses no longer hold up.

Comment by Hwy50ina49Dodge
2010-04-30 10:34:16

Rating Agencies = “TrueSerialEnablers™” :-)

Comment by Professor Bear
2010-04-30 07:47:44

The more important signal behind the Goldman downgrade: Honest ratings are the enemy of Megabank, Inc’s profit machine.

Comment by measton
2010-04-30 10:12:15

More like kryptonite

Comment by ecofeco
2010-04-30 18:28:49


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Comment by Spokaneman
2010-04-30 09:16:24

The trading desk is probably shorting like crazy, but the brokerage desks are calling every client they know screaming “BUY< BUY< BUY”

Comment by Pondering the Mess
2010-04-30 10:02:39

Hahaha - exactly!

I’ve already seen at least one or two shmuck articles since this mess started telling people to buy bank stocks. Oh, look - the stocks then go down! What a “surprise!”

Comment by Jim A.
2010-04-30 10:01:55

Biting the hand that (used to) feed them.

Comment by Professor Bear
2010-04-30 10:51:01

Friday April 30, 2010

Goldman Sachs Falls on U.S. Prosecutors’ Review, BofA Downgrade
April 30, 2010, 9:57 AM EDT

By Justin Blum and Michael J. Moore

April 30 (Bloomberg) — Goldman Sachs Group Inc. fell in New York trading after reports that federal prosecutors are weighing criminal fraud charges against Wall Street’s most profitable firm and the stock was downgraded to “neutral” from “buy” at Bank of America Corp.

Comment by Spokaneman
2010-04-30 13:59:00

I have to believe that the trial lawyers are foaming at the mouth to get started suing GS et al for this mess. That, and the loss of any modicum of trust by GS’ clients is where the real damange to GS and its ilk lies.

Comment by joeyinCalif
2010-04-30 11:23:25

.. Don’t you have to wonder whether Gollum is shorting its own stock today?

Of course they are, and they will make a fortune. They are encouraging share holders to sell, not buy..

You think this Congressional probe is a coincidence? That the SEC threatening to press criminal charges is an example of honest government?

This phase of the plan is purposely designed to hit GS’s stock price.

It’s amazing how easy it is to manipulate and confuse even the most steadfast anti-banksters.. make them forget that Goldman controls all those people. Congress and regulators are just puppets.. this whole thing is a setup.

Comment by Professor Bear
2010-04-30 07:37:36

Irrational exuberance lives on. Thank you, Fed!

Mark Hulbert

April 30, 2010, 12:01 a.m. EDT

Extraordinary bullishness
Commentary: Nasdaq timers now most bullish in nearly a decade

By Mark Hulbert, MarketWatch

ANNANDALE, Va. (MarketWatch) — These are times that try contrarians’ souls.

Maddeningly, it’s unclear whether the mood out there is too positive (which would be bearish), or too negative (which would be bullish).

On the one hand, individual investors remain profoundly skeptical of the stock market. Domestic equity mutual funds, for example, over the last year have actually suffered a net outflow. That’s extraordinary, since the usual pattern is for investors to pour huge amounts of new money into the stock market in the wake of rallies as strong as the one we’ve experienced over the last year.

Furthermore, according to the latest data for April, there is no sign that this trend is about to change. (Read my Apr. 27 column).

On the other hand, investment advisers are bullish right now — more bullish, in fact, at least by some measures, than they have been in a decade.

Since I devoted a column earlier this week to discussing the mutual-fund flow data, I’m focusing this column on the data showing the mood to be too optimistic.

Comment by packman
2010-04-30 07:50:28

Here’s a quandary. Not sure if it’s new or not - if it isn’t then I don’t know what it’s called. So - I’ll call it “Packman’s Quandary”.

Packman’s Quandary
The indecision of how to invest during what you know to be asset bubble, due to the uncertainty of not knowing how long the bubble will last. There are competing forces in this quandary:

A) The knowledge that you’re in an asset bubble will lead one to avoid investing in the bubble, and possibly even to bet against it.


B) The indeterminate length of the bubble, which means that you main incur serious opportunity costs by not investing in the bubble, or real costs if betting against it. Noting that some bubbles can stretch out to a significant portion of one’s lifetime - e.g. the 20-year stock bubble that ended in 2008, but now appears to be rebuilding again.

Comment by Professor Bear
2010-04-30 09:17:55

Never been a better time to DCA!

Comment by packman
2010-04-30 09:25:14

I have DCA. IMO it’s an invention by the investment houses to maximize their profits from commissions.

My preference is diversification across asset classes. I’m a “put it and leave it” kind of person. Though of course one should occasionally evaluate and tweak as necessary.

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Comment by packman
2010-04-30 09:27:00

I have hate DCA , I meant to type.

Comment by SV guy
2010-04-30 09:52:58

I agree with Packy regarding DCA.

It’s nothing more than a buzzword to make the herd feel savy.

Comment by Pondering the Mess
2010-04-30 10:11:44

DCA is a great way to lose your money at a slower rate while paying higher commission fees.

Not saying it never works or that tossing all your money in one place at once is the right idea, but “DCA = win!” is almost as bad as “the market only goes up!”

Anyone who DCA’d into the market over the past 10 years probably has barely gotten above “break even.” - and that’s assuming we don’t go crashing down again if/when all the Bailouts and fraud support for the market end.

Comment by Bad Chile
2010-04-30 11:09:57

Bingo. And keeps the 9-to-5ers buying the 401(k) lotto ticket every two weeks. Gotta have hope, because saving more than 10% of your income when you gotta buy a bigger house, a shiny green lawn tractor, a summer car, a winter car, a minivan, a project car, a big screen tv, new closet system, new refridgerator, new snowblower, and fancy food is utterly impossible.

(See my post above, about my relatives…flat stinking broke, but lots of shiny toys they spend most of their time working on while complaining about not having any free time).

Comment by sleepless_near_seattle
2010-04-30 13:58:11

“My preference is diversification across asset classes.”

What if you DCA into multiple asset classes and rebalance over time? Or does the rebalance disqualify it as DCA?

Comment by packman
2010-04-30 14:19:58

What if you DCA into multiple asset classes and rebalance over time?

Then you’re paying a buttload of commissions.

I’m speaking of pure brokerage here. 401k is different. Usually when people speak of DCA they’re referring to individual stocks, which would be the former.

With 401k DCA is pretty much built in. The overhead’s still somewhat high, but not as much as doing it manually in a brokerage account. What makes 401k’s useful is company match - otherwise there’s not really any reason to use them.

Comment by packman
2010-04-30 14:25:27

P.S. from Wikipedia:

Analysis supporting dollar cost averaging has been criticized because it often ignores transaction fees,[dubious – discuss] which can be substantial. Numerous[citation needed] studies of real market performance, models, and theoretical analysis of the strategy have shown that in addition to having the admitted lower overall returns, DCA does not meaningfully reduce risk when compared to other strategies, including a completely random investment strategy. [8]

Which I agree with completely.

I do see in the discussion page that there are apparently mechanisms that you can do DCA “without transaction fees”, but I’d be willing to bet that’s similar to “no closing cost” mortgages - they just hide the fees in the overhead rather than remove them.

Comment by sleepless_near_seattle
2010-04-30 14:31:11

Sorry, I guess what I meant was DCA into multiple funds such as at T Rowe Price where, for as little as $50 per month (the only ones who do this at that low of a barrier to entry to my knowledge), you can select funds in different sectors/categories.

You do, of course, pay management fees but no commissions on the buy or sell, which allows you to rebalance if necessary.

Comment by sleepless_near_seattle
2010-04-30 14:43:08

I’d argue there’s more value to 401k (assuming you have what you feel are decent investment options) than just the match. The tax advantage can be just that, but the problem is the uncertainty of knowing how that money will be taxed in 30-40 years.

Comment by RioAmericanInBrasil
2010-04-30 15:06:15

Asset Allocation:
I really don’t know that much and have been a little lucky compared to many. I feel grateful that I am still American middle-class. But compared to most in the world, I’m “rich”. I’m going to a party tonight and will eat like a king! Then I’ll have a great (late) breakfast tomorrow. Thank you god and fate.

Diversification can protect money most of the time but it is not a method to hit home runs ever but I’ve never been a home run hitter.

For over a decade, diversification amongst global stocks or even PMs has not helped at all during crashes however I think one day PM’s will rise in a crash.

After a huge run up in stocks lately and the “sell in May and go away thing,” I wouldn’t worry too much about buying US stocks here. The downside is greater than the upside. I do believe in DCA which helps a lot when markets are trending down. (You lose less I think)

But we can only worry so much about trends or opportunities “missed” these days. There will always be enough of those to fill a book but that book is not worth re-reading.

Other than my house in Rio my balance: (roughly)
US dollars “cash” 20%
Precious metals 20% (but have not bought any in years)
Foreign Bonds 20%
US stocks 20%
commodity stocks $20

Right now, I’m probably too US dollar negative and too many commodities are in my positions but I’m a lazy investor and nobody knows what’s going to happen anyway.

I should have more food for emergencies and I miss the American right to have a 12 gauge sawed-off shotgun under my bed.

Comment by RioAmericanInBrasil
2010-04-30 15:17:34

Asset Allocation:

PS: All of my accounts, cash, stocks, mutual funds are in US banks. Not in Brazil.

Comment by sleepless_near_seattle
2010-04-30 15:22:37

I’ll admit that’s what I don’t like from the diversification pushers. What to put where? I mean, at some point, if all you’re doing is making 8% on PMs while stocks decline 8% you’re not making anything.

That’s why I threw in the “rebalance” qualifier. To be able to make any strategy pay off, you either have to get lucky with the right diversification percentages or rebalance and book your winnings.

When the “experts” do talk about rebalancing though, they tell you to re-direct the winnings to the underperformers. But that strategy assumes that everything always goes up in the long term. So I diversify, rebalance (take winnings), and wait for the right opportunity to re-invest the winnings.

Ugh. It’s a tough one trying to keep it all straight and stay sane at the same time.

Comment by Carl Morris
2010-04-30 15:31:38

I miss the American right to have a 12 gauge sawed-off shotgun under my bed.

Well…saw it a fraction of an inch too short and you can end up like Randy Weaver. So yeah, we partially have a right to think for ourselves up here.

Comment by Spokaneman
2010-04-30 09:22:54

Lots of retail investors with significant money have gotten to the age that they cannot afford another ride down. I am in that category. Plus, having been burned a couple of times in recent memory by bullish investment advisors right up to the day the bus goes over the guardrail, we’ve finally learned that chasing returns, particularly transparently false returns is a fools game. If we are going to retire with anything left of the 401-K money we have been putting away since 1983, caution is the name of the game.

The pump monkeys at the big 5 banks can run the market up with free money, but I for one, ain’t gonna chase ‘em.

Comment by edgewaterjohn
2010-04-30 10:16:47

Yeah, but for everyone like yourself there’s probably ten that are desperate for a Hail Mary. They’ll be fleeced but good.

Desperate Boomers or naive first time housebuyers - they both make for great “volunteers”.

Comment by Professor Bear
2010-04-30 08:09:45

There’s trouble in River City! Beware the 10 pct or so falling knife price drop predicted for the next year. Unless median prices are $80,000 or less in your market, this will more than completely offset the value of the $8,000 tax credit.

Tomorrow’s real estate trouble spots

The housing crisis is expected to get worse in these cities, where buying a home could be a gamble.

List: Tomorrow’s Real Estate Trouble Spots

While metros like Miami, Las Vegas and Los Angeles have gained notoriety for plummeting home prices, it’s not those markets that have the most to worry about now. These new housing trouble spots, most of which saw home prices peak after the national average, are set to see major price corrections in the next year. To identify them, Local Market Monitor, a Cary, N.C.-based real estate research firm found the Metropolitan Statistical Areas where it forecast the biggest average-home-price drops in the next 12 months, and where the actual average home price was 10% or more above what it would be without market volatility. Forbes relied on Local Market Monitor to rank each metro.

1. Metropolitan Statistical Area: Atlantic City-Hammonton, N.J.
Equilibrium Home Price: $159,117.00
Overpriced: 54%
12-month Price Forecast: -9%

2. Metropolitan Statistical Area: Provo-Orem, Utah
Equilibrium Home Price: $136,247.00
Overpriced: 44%
12-month Price Forecast:-12%

3. Metropolitan Statistical Area: Portland-Vancouver-Beaverton, Ore.-Wash.
Equilibrium Home Price: $189,818.00
Overpriced: 31%
12-month Price Forecast: -9%

4. Metropolitan Statistical Area: Glens Falls, N.Y.
Equilibrium Home Price: $177,003.00
Overpriced: 22%
12-month Price Forecast: -11%

5. Metropolitan Statistical Area: Bellingham, Wash.
Equilibrium Home Price: $230,024.00
Overpriced: 22%
12-month Price Forecast: -9%

6. Flagstaff, AZ
7. Salt Lake City, UT
8. Charleston - North Charleston - Summerville, S.C.
9. Eugene - Springfield, Ore.
10. Salisbury, Md.

Comment by Ki
2010-04-30 09:19:30

Unfortunately none of those 10 cities are somewhere I want to live anytime soon. Portland would be nice, but I couldn’t take the winter depressing weather.

Comment by Spokaneman
2010-04-30 09:26:36

Bellingham WA is a beautiful place. My daughter went to College there. But, I always wondered what folks who lived there did to support the R/E prices. There just did not seem to be enough commerce to provide the income to support the housing prices. But, I suppose people with money will miagrate to beautiful locales.

Comment by Ki
2010-04-30 11:26:49

That can be said about a lot of places. What commerce is there in Santa Barbara to support real estate prices? Not a heck of a lot. Yet real estate prices there have been out of this world for decades.

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Comment by Professor Bear
2010-04-30 20:00:12

“What commerce is there in Santa Barbara to support real estate prices?”

The commerce is in the hedonic value of beautiful surroundings, cultural amenities and proximity to the LA movie industry. If you were a big name movie star, would you rather live in gritty, congested LA or beautiful, scenic, close-enough-to-access LA Santa Barbara? I know my answer…

Comment by Sagesse
2010-04-30 15:04:35

Did you notice that the photos all showed nice sidewalks, but no one walking on them?

Comment by jane
2010-05-01 10:25:32

What on earth is in Glens Falls to buoy up prices? And with New York taxes to boot! Is Glens Falls the repository for the returning snowbirds who need more medical services than MiaScottsNix can provide?

Also, I can’t imagine that Salisbury, MD is anything other than an impoundment center for ‘weekend homes’. What posesses people to hock themselves?

Comment by RioAmericanInBrasil
2010-04-30 08:14:59

FRIDAY SMACKDOWN! (Winner to determine nation’s policy)


Lets get it on!

Atlas Shrugged by Ayn Rand and War and Peace by Leo Tolstoy are two great novels written to share two conflicting philosophies with their readers. Their philosophies are so different that Rand once said “I cannot stand Tolstoy . . . his philosophy and his sense of life are not merely mistaken, but evil…

The philosophies in Atlas Shrugged and War and Peace differ in their views on human rationality, reality, the purpose of life, happiness, religion, and free will.

In Atlas Shrugged, Rand emphasizes rationality as the basis of our humanity. …..In War and Peace Tolstoy illustrates the irrationality of mankind by showing how often we do things that are contrary to our desires…

In War and Peace Tolstoy shows his belief in an unseen force that governs the actions of the masses. He says that the only way to explain the events that happened is belief in an unseen force that is beyond human reason. This contradicts Rand’s belief that reason is the only way to discern truth…

Ayn Rand believed that the purpose of life is for man to pursue his own happiness (Atlas Shrugged 927) and to exist for his own sake with a rational self interest (”Introducing Objectivism”). She also believed that for a man to truly live he must have reason, purpose, and self-esteem (Atlas Shrugged 932). She said that living for the good of others forces you to admit that you are worth less than the rest of society (Atlas Shrugged 943) and that you shouldn’t sacrifice your values for the sake of anyone (Atlas Shrugged 923). In fact one of the protagonists in Atlas Shrugged proudly declares “I’m selfish, conceited, heartless, cruel. I am. I don’t want any part of that tripe about working for others. I’m not”..

Rand has an extremely negative view of religion. She says that if those who believe in God declare good to be a god who is beyond man’s comprehension, then they invalidate man’s rationality and consciousness

In War and Peace Tolstoy shows religion positively. He shows how religion isn’t just a system of beliefs used to explain the world but that instead it should be a way of life and demonstrated through actions and words.

Atlas Shrugged emphasizes free will a great deal. It emphasizes the ability of those who were being oppressed by the government to stop the oppression by simply withdrawing from society

In War and Peace Tolstoy emphasizes the lack of control we have over the people around us. He says that large events cannot be caused by one man’s will (1222) and says that we have free will in respect to our own actions (raising your hand) but when other people are included nothing is guaranteed.

Tolstoy also says that great men’s actions aren’t really the result of any special genius or ability but are really caused by series of coincidences that just happen to benefit them. Another point he makes is that collectively humans seem to be influenced by an unseen divine force and also seem to follow certain historical laws.

In conclusion, Atlas Shrugged and War and Peace have very different philosophies. While Rand emphasizes the rationality of humans, Tolstoy emphasizes the irrationality. While Tolstoy stresses the existence of an unseen force unable to be explained through reason, Rand declares reality to be only determinable by reason. When Tolstoy says the purpose of life is to love humankind, Rand says a selfish and rational ambition for happiness is the reason for our existence.

Tolstoy and Rand seem to agree on a definition for happiness but Tolstoy includes loving others and being loved in his definition, something Rand excludes from hers. Rand shows a passionate dislike of religion due to its disagreement with her philosophy, while Tolstoy shows a positive attitude about religion due to its agreement with his. While Rand shows her belief in the free will of humankind, Tolstoy shares his belief that individually we have free will while collectively we are bound by an unseen force and historical laws.

My conclusion: Both have something to say but I’d base an entire economic system on neither.


Comment by Bill in Los Angeles
2010-04-30 08:57:52

So the middle ground between relying on an “unseen force,” and relying on a knowable universe and the recognition that man has the tools to know, is what?

Comment by Hwy50ina49Dodge
2010-04-30 10:52:04

Here’s a starting point for the shortest complete philosophy ever written…

Chapter One:

The Tao that can be told is not the eternal Tao.
The name that can be named is not the eternal name.
The nameless is the beginning of heaven and earth.
The named is the mother of ten thousand things.
Ever desireless, one can see the mystery.
Ever desiring, one can see the manifestations.
These two spring from the same source but differ in name;
this appears as darkness.
Darkness within darkness.
The gate to all mystery.

Tao Te Ching by LAO TSU
Translation by Gia Fu Feng
and Jane English

You can view online here:

Comment by jane
2010-05-01 10:47:31

That’s beautiful, thanks.
I have a hard copy, one of the signature versions, but the translation is so hackneyed it belies the content.

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Comment by RioAmericanInBrasil
2010-04-30 14:24:22

So the middle ground between relying on an “unseen force,” and relying on a knowable universe and the recognition that man has the tools to know, is what?

Now that’s complicated and there is no one answer. But I’ve always believed in a combination of both, and this is represented in my belief that God created evolution.

I think Packman’s post below addressed this middle ground well in regards to selfish, and selfless behavior and the interplay and relationship of both.

Another guy who found pretty good middle ground between “tools to know what is” (scientific in his case) and an unseen force was Isaac Newton:

Sir Isaac Newton, upon whose work nearly all of classical physics is built, was a deeply religious Christian, who saw the hand of God in all things. To him, all of the great laws of physics which he discovered, were the laws of God that testify of his design. He would have been appalled to know that centuries later, atheists would be claiming that he had really discovered self-existent laws, which explain the universe so well that God is no longer needed in the equation.


Comment by packman
2010-04-30 08:59:46

I’m going to act as the spoiler, and say “both”. :-)

E.g. W/regard to self vs. others:
a) One of the purposes of life is to act in one’s own self interest.
b) One of the purposes of life is to act in the interest of others.

Our sense of ethics determines not which of the two exists - but where we draw the line between the two in our own lives.

However in fact there is not actually just one line - there are two, because there are three types of actions:
1. Actions which benefit me solely, and may or may not be detrimental to others (e.g. playing a video game, stealing, or other…. personally-gratifying… activities)
2. Actions which benefit me and others (e.g. performing some work in exchange for money)
3. Actions which only benefit others (e.g. giving money to someone from whom you will not be repaid in any way)

So actually our sense of ethics determines where we draw both lines. IMO one should maximize the total of 2 and 3.

As an aside - it’s worth noting that sometimes actions which appear to be part of 1 are actually part of 2 - or at least can be. E.g. browsing the internet (say - the HBB) may appear to be 1, but if such browsing increases one’s knowledge, and the knowledge is later applied to help others in some way (2 or 3), then the browsing actually is 2; at least partially so. (Browsing porn - not so much.)

Comment by RioAmericanInBrasil
2010-04-30 09:21:54


My conclusion: Both have something to say but I’d base an entire economic system on neither. Rio (Me)

To add to my conclusion: I think Tolstoy more completely understood the human condition.

One example: Rand’s hostility and dismissal of religion. Even if Religion was BS in their own mind, a great philosopher could not dismiss it in such a manner if they were attempting to define and influence society and the human condition going forward.

Why? Because religion is part of every recognized society in the world past and present. Therefore to dismiss it the way she did shows a lack of appreciation and/or understanding of a central component of the human mind and condition. IMO

Comment by packman
2010-04-30 09:30:54

Agree w/respect to Rand’s view on Religion (can’t say w/regards to comparison with Tolstoy). Rand has a valid point in that religion is often used as a power tool to influence the masses (sometimes strongly and even violently so); the problem is she throws the baby out with the bath water.

Comment by measton
2010-04-30 12:32:35

Why? Because religion is part of every recognized society in the world past and present.

Why? because fear of the unknown, of death, of being powerless, and of being alone are universal.

Religion gives you answers (not necessarily the correct ones) It gives you a large group of people who validate these answers, and fight anything (Theory of evolution, earth revolves around the sun etc) that threaten your view. It answers the biggest question of all, what happens when I die.

Religion gives you the power of conviction, and of numbers.

Religion gives you friends and community. The softball team might not invite you to their party but you can always go to church. You might never spend time talking to your neighbors up the street as everyone is busy but not at church.

I guess the ubiquitous nature of religion does say a lot about the human mind and condition. I’m not sure you can say a philosiphor can’t dismiss it though. There are many destructive qualities of religion. Spirituality I have no problem with.

Comment by RioAmericanInBrasil
2010-04-30 14:06:24

I guess the ubiquitous nature of religion does say a lot about the human mind and condition. I’m not sure you can say a philosiphor can’t dismiss it though. There are many destructive qualities of religion. Spirituality I have no problem with.

Good post, and some questions and comments:

You just went over some of the reasons WHY a “great” philosopher can’t dismiss religion in the dismissive/hostile manner as she did and and still do a good job to define, explain and meaningfully influence the human condition.

It’s like a society would give up on or seriously modify thousands of years of tradition, beliefs, structure, values and morals (all aspects of religion) because one smart lady was able to teach a few people how to “reason”?? Huh?

Is that a realistic expectation even for a genius? I don’t think so.

How can you have much problem with religion if it is the vehicle that brings spirituality (which you have no problem with) to maybe 80% of the people who are “spiritual”?

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Comment by measton
2010-04-30 21:06:54

Why ?

I don’t think it brings spirituality, I believe that it manipulates it and harnesses it, sometimes for good but often for evil.

Truth to me is best defined by the scientific process and observation not by who or how many people support my view. The fact that religion asks me to believe things that do not fit with what I observe and insists that I believe what a book or a preacher or a group thinks, is a great sin in my book. I believe in the individual and the pursuit of truth, not absolute truth.

Comment by Happy2bHeard
2010-05-01 12:00:36

Anyone who thinks we are or can be rational beings doesn’t understand human nature. In most cases, emotional decisions are justified using reason.

Comment by ecofeco
2010-04-30 18:35:27

Both are tedious and overrated.

Comment by wittbelle
2010-04-30 08:25:09

Anyone else read the “Looting Main Street” article in Rolling Stone April 15?
Matt Taibbi wrote about bonds issued to Jefferson County, Alabama to build a new sewer system. A bunch of people were charged with accepting bribes, JP Morgan was fined. At the end of the article, he writes, “…the way that big banks like JP Morgan and Goldman Sachs have systematically set out to pillage towns and cities from Pittsburgh to Athens…isn’t capitalism. Its nomadic thievery.” I like that: Nomadic Thievery.

I didn’t quite understand why so many municipalities around the world were broke, but now I do. Even after the SEC canceled JP Morgan’s fees to Jefferson County, it still owes debt equivalent to $4800 per resident. It just goes to show that government from top to bottom needs an enema.

Comment by ET-Chicago
2010-04-30 08:57:01

It just goes to show that government from top to bottom needs an enema.

Doesn’t it show that the financial industry needs a far bigger enema? Am I missing something here?

Comment by wittbelle
2010-04-30 09:34:52

Yeah, actually, you are. The financial industry isn’t paid by us to serve us. Our government (supposedly) is. The reason JP Morgan and Goldman Sachs were even involved in this little transaction is because they were bribing the mayor of Birmingham, among many others. Here’s a link to the entire article.

Comment by wittbelle
2010-04-30 09:49:06

Here’s a video:

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Comment by packman
2010-04-30 09:08:52

Actually one doesn’t need to be nomadic if one’s tentacles are long enough. Just stay in place (WS) and reach.

Comment by edgewaterjohn
2010-04-30 10:24:57

Geography is nearly irrelevent to the bankers anyway. A more perfect empire the ceasars never imagined.

Comment by ecofeco
2010-04-30 18:37:22

But the Medici did.

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Comment by sleepless_near_seattle
2010-04-30 14:11:52

I drink your milkshake?

Comment by Ki
2010-04-30 09:28:31

So the town is another in a never ending parade of victims. Of coursem why not. Everyone is a victim these days. Buy a house you can’t afford, you’re a victim. Sign up for bonds your town can’t afford, you’re a victim.

The only people that aren’t victims are the idiots out there living within their means, paying their taxes and not breaking the law.

Comment by wittbelle
2010-04-30 09:41:45

Actually, the county residents ARE victims of the county leaders criminal activities. I don’t think voting on a bond measure, (that doesn’t happen to mention that it got on the ballot because the bankers that are going to issue the bonds are buying the head of the county commission lavish gifts), makes one complicit.

Comment by joeyinCalif
2010-04-30 14:33:11

..I don’t think voting on a bond measure [snip] makes one complicit.

Does electing the crooks make the voters complicit?
Does citizens failure to keep a watchful eye on their elected official’s shenanigans make them complicit?

When people choose to play the part of helpless, innocent sheep they should expect to be shorn once in a while.. and not complain about it.

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Comment by Professor Bear
2010-04-30 15:58:12

“When people choose to play the part of helpless, innocent sheep…”

That’s why I like your frequent suggestion to conduct witch hunts to uncover fraud and other crimes in the banking sector. It says nowhere in the U.S. Constitution that shorn sheep have no right to bite their shearers.

Comment by ecofeco
2010-04-30 18:39:48

They say true class and civility are not how you act when everyone can see you, but how you act when nobody is around.

Comment by Professor Bear
2010-04-30 10:11:29

It just keeps getting harder and harder for greenback pirates to make a living any more!

market pulse
April 30, 2010, 1:05 p.m. EDT
Dow average off 106 points; J.P. Morgan falls 3.8%

By Laura Mandaro

SAN FRANCISCO (MarketWatch) — The Dow Jones Industrials Average (INDU 11,074, -93.71, -0.84%) fell 106 points to 11,066.73 points on Friday, further deepening its weekly loss, as major bank shares sank further in the wake of reports of a criminal probe into Goldman Sachs Group, Inc. (GS 145.58, -14.66, -9.15%). J.P. Morgan Chase (JPM 42.44, -1.56, -3.55%) shares led the Dow’s declines with a loss of 3.6%. Bank of America Corp. (BAC 17.71, -0.59, -3.22%) shares fell 3%. The S&P 500 (SPX 1,193, -13.46, -1.12%) fell 2%, led by financials. Goldman Sachs shares fell 9.3%. The Nasdaq Composite (COMP 2,478, -33.57, -1.34%) lost 1.3% to 2,478.

Comment by wittbelle
2010-04-30 10:59:33

Ha! Does this spell the end of the sucker’s rally? I doubt it. It’ll be green again by the end of the day. As long as people actively participate in this corrupt system, it stays alive and kicking.

Comment by measton
2010-04-30 12:14:39

No it just goes to show you that Wall Street needs to be decapitated.

Comment by wittbelle
2010-04-30 12:50:57

Capitalism can regulate itself, don’t you know that?

Comment by ecofeco
2010-04-30 18:42:09

Yes, wittbelle. It’s the same technique they used on Greece.

Comment by cactus
2010-04-30 08:32:03

From a guy who works at BofA used to be Countrywide

I’m currently working on an enhancement a foreclosure application because the business is expecting a big surge.

MHA projects are moving fast in my group; lots of new analysis and programming work http://homeloanhelp.bankofamerica.com/en/mha-announcement.html

Comment by Bad Chile
2010-04-30 09:11:13

By the way, I was on travel status last week and missed Bank Failure Friday (BFF). I just realized - it was an all-Illinois edition, with seven banks in that state taken down.

Anyone seen a bunch of strange men flying into their state? What state gets it today? I got my eye on Minesota. Just thinking the FDIC waiting until it was warmer to go to the northern states, having concentrated on southern states during the winter.

Comment by m2p
2010-04-30 13:49:20

Not a state, yet, but looks like three failures in Puerto Rico:
Westernbank Puerto Rico
R-G Premier Bank of Puerto Rico
Eurobank, San Juan
FDIC insured.

Comment by measton
2010-04-30 12:11:59


Call it the do-it-yourself stimulus.

With tonight’s expiration of the government’s homebuyer tax credit, real estate firms, developers and home owners are already taking matters into their own hands-offering incentives or refunds to buyers after the credit expires.

The expiring credit-which gives first-time homebuyers and some current homeowners a tax credit of up to $8,000 if they sign a contract by midnight tonight and close the sale by June 30-has been widely viewed as helping boost home sales in recent months.

For that reason, some real estate firms are pushing home sellers to offer incentives of their own, usually by agreeing to refund some of the purchase price to the buyer

ie lower your price without actually lowering my commission, or dropping the value of housing so that my customers get scared.

Comment by Professor Bear
2010-04-30 13:57:28

Sale price = $400,000

6 percent commission = $24,000

Commission less $8K ‘do-it-yourself’ credit =

$24,000 - $8,000 = $16,000.

Sounds like a win-win for starving Realtors trying to hide falling home prices…

Comment by sleepless_near_seattle
2010-04-30 15:04:11

But it doesn’t sound like the realtors want to take the hit. Sounds like, by the sound bite measton provided, they want the house to sell for $400k, collect commish at 6% of sale price, and have the seller pay $8000 out of THEIR winnings back to the buyer.

Pretty sneaky, sis.

As measton suggested, I’d rather them lower the price by $8k so I don’t have to finance $8k for 30 years. Seller makes less, realtor makes less, buyer saves financing assuming they hold past some breakeven point. THAT, if anything, is an incentive to the buyer.

Comment by sleepless_near_seattle
2010-04-30 15:35:20

And seen in a more infuriating light, realtors won’t give up $480 (or, $240 for each side) in commissions…

[$24k - [($400k-$8k)*.06]] = $480

…so I, the buyer, can save $45 per month ($8k over 30 years at 5.5%) for the next 30 years…or $16,200.

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Comment by Housing Wizard
2010-04-30 21:35:02

Right, lets just do all that seller cash back fraud to keep the deals coming and the prices inflated .

Comment by Professor Bear
2010-04-30 13:59:09

Friday April 30, 2010

High-Frequency Trading Faces EU Market Abuse Probe (Update1)
April 30, 2010, 8:20 AM EDT

(Adds Barnier’s comments on fines in eighth paragraph.)

By Ben Moshinsky

April 30 (Bloomberg) — High-frequency trading faces a European Union clampdown, as regulators investigate whether traders could use the practice to manipulate financial markets.

The European Commission, the EU’s executive arm, said it’s summoning hedge funds and banks “in the coming months” for fact-finding talks on the practice, as it considers stricter rules on market abuse due before the end of the year.

High-frequency trading entails hedge funds and other firms using powerful computers to execute orders in milliseconds to profit from tiny discrepancies in the prices of shares.

“The high-frequency trading case is difficult because no- one is saying it does any harm,” Simon Gleeson, a regulatory specialist at Clifford Chance LLP, said in a telephone interview in London today. “No one has complained about it.”

Abusive Trading

The current Market Abuse Directive, which came into force in 2005, sets common rules across the 27-nation EU. The law requires firms to report suspected abusive trading to regulators.

“I will look at the Market Abuse Directive to extend its coverage,” Barnier said in a speech in London last month. “We cannot have different sanctions in case of non-application of the rules or abuse.”

Changes to the law would need to be approved by finance ministers and members of the European Parliament before entering into force.

The practice now accounts for 42 percent of the U.S. market, Celent, a consulting firm in Boston, said in a study in December. Proponents of the technique say it has lowered fees, boosted liquidity and increased volume. Firms such as Citadel Investment Group LLC, Getco Holding Co LLC, and Optiver Trading U.K. Ltd. operate high-frequency trading in Europe.

Comment by NoVa RE Supernova
2010-04-30 14:18:30


Eurozone meltdown spurs calls for mega-bailout (of bankers with public money).

Comment by Green Shoots
2010-04-30 14:24:25

The stock market always goes up, even in months that end with selloffs! Buy now or get priced out forever.
———————————————————————————- * APRIL 30, 2010, 4:44 P.M. ET

US Stocks Cap Worst Week Since January But Post Monthly Gains

By Donna Kardos Yesalavich

NEW YORK (Dow Jones)–U.S. stocks tumbled Friday, led by financial stocks including J.P. Morgan and Bank of America, following the report of a criminal probe into Goldman Sachs.

While stocks ended in negative territory for the week, marking the biggest weekly declines since January, they still rose for April, marking the third-straight month of gains.

The Dow Jones Industrial Average fell 158.71 points, or 1.42%, to 11008.61. The measure fell 1.75% this week, snapping an eight-week winning streak, but rose 1.4% in April.

All of the DJIA’s components ended Friday in the red, led by J.P. Morgan, which dropped 1.42, or 3.2%, to 42.58. Bank of America was also particularly weak with a slide of 47 cents, or 2.6%, to 17.83. The declines in the financial sector came as investors grew increasingly concerned about how a criminal investigation into Goldman could eventually affect other big banks.

The probe, being conducted by federal prosecutors, is looking into whether Goldman or its employees committed securities fraud in connection with its mortgage trading. Goldman, which isn’t a DJIA component, tumbled 15.04, or 9.4%, to 145.20. It dropped 14.9% this month, the stock’s worst monthly loss since October 2008.

The Nasdaq Composite fell 50.73, or 2.02%, to 2461.19. It climbed 2.64% in April but dropped 2.73% this week, ending an eight-week winning streak.

The Standard & Poor’s 500 slipped 20.09, or 1.66%, to 1186.69. This week, it fell 2.51%, although it climbed 1.48% this month.

Comment by NoVa RE Supernova
2010-04-30 15:27:52


Goldman Sachs debacle raises questions about BRIC.

Comment by RioAmericanInBrasil
2010-04-30 16:20:16

Goldman Sachs debacle raises questions about BRIC.

The “B” in BRIC is really for “British,” because the Brazilian banking system is dominated by the Spanish Banco Santander, which is fused with the Royal Bank of Scotland as an integral component of the Rothschild-created Inter-Alpha Group. The function of Brazil within BRIC has been to divert the agenda onto slight modifications of a global financial system which in reality is utterly bankrupt, while boosting its own prowess in the speculative “carry trade” as exemplary of so-called emerging market growth.

Interesting and complicated article. I agree with these parts.
1. If China goes down Brazil goes down. (But for how long, China needs raw materials anyway)
2. The Brazilian carry trade and the GS type things are probably too big a part of Brazilian financial dealings.

But I don’t understand the part about “the Brazilian banking system is dominated by the Spanish Banco Santander” at all. Here’s a quote saying Santandar is the smallest of 4 banks which together have 60% of Brazil’s banking market share. It sounds to me like Santandar is a Jr. partner in the Brazilian banking system.

Santander Brasil is the smallest member of Brazil’s lucrative four-bank oligopoly, which controls about 60% of the system’s assets. As with Itau Unibanco and Banco Bradesco , we think Brazil’s conservatively regulated and highly profitable banking system, along with the country’s attractive demographics, will provide lush grounds for Santander Brasil to profitably grow in years to come despite the short-term challenges it faces.


Comment by NoVa RE Supernova
2010-04-30 15:42:02


EIR To Publish Exclusive Interview With Anti-Euro Professor

April 29, 2010 (EIRNS)—Prof. Joachim Starbatty, one of the four German Professors who will file a constitutional complaint against the EU bailout policy, has given an exclusive interview [that will] come out in the next issue of EIR.

In the interview, Starbatty says that as soon as the German government issues a bill for participation in the Greek bailout, the four professors “will proof the text and immediately act.” If the Constitutional Court supports the complaint, “this will create a dynamic situation. This means that an exit of Germany [from the Euro] is not excluded.” If this happens, other nations would follow, giving birth to “a new, stable bloc,” he said. This would be less painful than it seems, and “the United States would gain an ally in any future reorganization of the world currency system and the global economy”.

The EU intention to introduce a control mechanism on national budgets amounts to “the development of the EU into a quasi-federal state through the back door. This conflicts with the ruling of the German Constitutional Court on the Lisbon Treaty.” Article 136 of the Lisbon Treaty, used by EU leaders to back their intentions, “is no basis for a transfer of political competencies. The Bundestag must express its opinion on that.”

Prof. Starbatty exposes the shock therapy to be imposed on Greece as “fatal.” He added: “It is like German Chancellor Brüning’s policy in the early 1930s: in a severe recession, to cut expenditures, increase taxes, freezing and cutting wages. Brüning did that in order to gain reputation on the international capital markets. The Greeks are currently in a similar situation. No other industrial country carries out this Brüning-like policy because it leads from a recession to a depression.”

Instead, Greece should leave the European Monetary Union (EMU) and its “Euro-debts should be cut down according to the [currency] devaluation. The banks should participate in the consolidation; they consciously took a high risk.”

Comment by OCBear
2010-04-30 15:58:08

They just effectively postponed the downturn in California for God knows how long.


Now I understand better why the banks have not been processing the foreclosures in my area and pushing them out infinitum. Free Money for the Banks - again.

They are impressive to watch, they are getting what they want, can kicking and therefore successful in their endeavor.

Comment by aNYCdj
2010-04-30 16:33:23


New twist on this…Neighbor lives in moms basement collects unemployment and Food stamps..( does lighting and rigging for corporate AV companies not much work).went to court to get a $1500 CC bill dismissed just like the last 3…but surprise….Lawyer refused to dismiss, and judge made a new court date for Feb 11th….2011!

Extend and pretend…hoping he will miss the date and have a summary judgment against him….

Comment by Hwy50ina49Dodge
2010-04-30 16:06:58

Well, since “Ki Ki Dee” fired me as an “entry level cost benefit analyst … all’s I got to say is:


11 dead , $560 million dollar rig gone, 5,000 barrels per day (42 x 5,000 = 220,000 gallons of crude per day, est.), a slick the size of Jamaica, US military involvement, Shell + everyone else giving a helping $$$$$$$ hand, Insurance claims to follow, damaged environment & animals…


$500,000 for an acoustic automatic shut-off valve

“Hwy50, …”you’re fired!” Ki Ki Dee

By Anna Driver and Bill Rigby, Reuters News

US Gulf oil spill set to trigger lawsuit flood:

“This is a multi-billion dollar event,” said Keith Hall, an attorney with the firm Stone Pigman in New Orleans. “There are going to be huge environmental clean-up costs.”

The explosion killed 11 workers and sank the rig. The oil well, which the companies have been unable to cap, was gushing about 5,000 barrels of crude per day.

The rig was owned and operated by Zug, Switzerland-based Transocean Ltd (RIGN.S). British oil major BP Plc (BP.L) hired Transocean to drill the well, and oilfield services companies Halliburton Co (HAL.N) and Cameron International Corp (CAM.N) were also doing work on the rig.

Comment by Hwy50ina49Dodge
2010-04-30 16:11:11

Oh,lookig here, I nearly missed the details:

Halliburton Co


Comment by Hwy50ina49Dodge
2010-04-30 16:24:39

(42 x 5,000 = 220,000 gallons of crude per day, est.)

hic: (210,000 est.)

Note, calculation preceded by: BWAHAHAHicHAHAHicHAHAHAHAHicHAHAHic* (DennisN™)

Comment by Ki
2010-04-30 16:46:56

Your analysis was still very poor from a risk management point of view. Risk management does not mean 100% risk mitigation…it means, uhm, managing it

Rather pathetic of you to be BWA HA HA ing the death of 11 people in either case. Par for the course for your type though.

Comment by Hwy50ina49Dodge
2010-04-30 17:03:03

$500,000 ounce of prevention… verses… 2.5 BILLION+ pound of cure…

“KiKi Dee = eddie haskell’s girlfriend…but, but, but”

See I can separate your poor assessment of my observation of cost-benefit analysis verses the tragic loss of 11 peoples lives…now who is “objective”?

Comment by Hwy50ina49Dodge
2010-04-30 17:16:58

Hey, Haskell girlfriend, let’s keep it simple…(since we were not talking “risk management” before)

Riddle me this Bat-girl: “what is their ROI on this rig & this Sit-U-Ation?”


Comment by Watching and Waiting
2010-04-30 16:10:37

Question about foreclosures: There is a house in my Maryland neighborhood that just went on the market as a foreclosure, listed on the MLA. I went to go look at it, and I like it, but am suspicious. Deutsche Bank is listed as the owner, with a Florida address. They took possession of the house in March for $387,000; it last sold in 2007 for $582,000. It is now on the market for $317,000. Why would the bank be willing to take a $70,000 haircut after only one month? Does this suggest the house has major issues and they are just cutting their losses? After my tour, I believe the house needs a new roof, re-painting inside, minor drywall and trim work, new light fixtures (most have been removed, but what are left are still operational); a French drain installed in one section of the basement, and possibly a furnace replacement (from the current oil to maybe a heat pump). Would that be enough work to cause the $70k adjustment? Of course I would have an inspection first if I were going to make an offer … but I’m not at that stage yet. Still mulling it over. Appreciate any insight, thanks.

Comment by joeyinCalif
2010-04-30 17:14:43

..Does this ($70K price reduction) suggest the house has major issues..

That it’s one among millions of unsold homes in a fast declining market might be the major one.

Comment by pressboardbox
2010-04-30 16:31:30

“They” have forever lost “Us”.

I was flying my airplane today far away from this blog (mercifully for all of you - I am sorry for posting my venting incessantly latley) and I thought about things. The biggest net effect of this whole F-ed up thing - you know all of the exend and pretend, bailout the irresponsible bs - is that forever “We” (the real free-thinkers, and if you ask me the only people that will ever matter on this planet) have forever grown mistrustful of our leaders. And I don’t just mean the usual amount of mistrust that all of us have always had since our teen “question authority” days. This time it truly is different (and Elena if you ever were still monitoring this blog since Valentine’s day when you last posted here, please aknowledge). “We” will never trust “Those people” ever again. I feel that somehow this is actually significant. I know you might not agree with me right now, but I know that I am right. “We” really do matter. Thank you Ben for at least letting me at least say this.

Comment by Hwy50ina49Dodge
2010-04-30 16:47:04

“You had me at…free-thinkers” Hwy50 ;-)

Comment by aNYCdj
2010-04-30 16:55:06

Ya know pressboard we owe Ben a lot for letting us vent about being angry, depressed, frustrated about what has transpired. I know I am guilty.

And since I have been working for an Internet radio station, lots of healthy food political, quite an interesting bunch of people….I would love it when Ben comes to NYC to do a live show and get all the nyc crew in the studio nycboy fpss, WT, nycjoe and anyone else i missed…

We used to have a live RE show but I guess they were too upbeat for the callers. Check the new podcast page I do get involved with the hosts


Comment by joeyinCalif
2010-04-30 17:27:33

Knowing someone can’t be trusted is infinitely preferable to not knowing.

Comment by Professor Bear
2010-04-30 19:55:51

‘This time it truly is different … “We” will never trust “Those people” ever again. I feel that somehow this is actually significant.’

Can’t really say whether things are getting worse or I am simply getting older, wiser and more cynical.

Comment by Hwy50ina49Dodge
2010-04-30 16:41:17

So, begs the question: Who’s the head steer at GoldenmanSucks? ;-)

Ap news, RAMSAY, Mont.
Cletus, the nearly 3,000-lb steer sold at auction:

“He had a nice life, just eating and sleeping,” McIntosh said.

Cletus was used as the lead steer, which keeps the herd calm and headed in the right direction. A steer is a castrated male.

Comment by Cantankerous Intellectual Bomb-thrower
2010-04-30 19:49:06

This financial reform legislation is a band-aid on a gunshot wound which is expected to fix nothing in the broken financial system.

Friday, April 30, 2010

Listen to the show
Weekly Wrap: Goldman Sachs, reform
A Wall Street sign

Freelance business journalist John Carney and Fortune Magazine’s Leigh Gallagher talk with Tess Vigeland about the latest with Goldman Sachs and where we are with financial reform.

Comment by Professor Bear
2010-04-30 19:53:29

Always bear in mind that a closely-watched pot never boils over.

Friday, April 30, 2010

Listen to the show
The mortgage crisis
Why the rise in ’strategic’ defaults?
Mortgage help

A new study finds a spike in the number of so-called “strategic” defaults. That’s when someone can afford payments, but abandons a home because it’s worth less than the mortgage. Jeff Tyler reports.

Tess Vigeland: If you haven’t yet signed on the dotted line to buy a house, you will have to do it without Uncle Sam’s help. The homebuyer tax credit expires today. Gotta have a contract in hand. But there is also news today on the other end of the market. A new study finds a spike in the number of so-called “strategic” defaults. Also known as walking away from your mortgage.

Marketplace’s Jeff Tyler has more on what’s behind the willingness to just hand the keys to the bank.

Jeff Tyler: The Financial Trust Index is a quarterly snapshot of just that — our collective trust in the nation’s financial system. The study found that the number of strategic defaults rose to 31 percent of all U.S. foreclosures in March. That’s up about 10 percent from a year ago.

Paola Sapienza: It’s a little bit like a contagion effect, like a disease.

That’s Northwestern University finance professor Paola Sapienza, who co-wrote the study. She says people consider more than their bank balance when thinking about defaulting on a home.

Sapienza: Do I have to move my kids to a different school? Do I lose my friends because they are looking at me in a way that I don’t like that, so here is the social stigma.

But Sapienza’s research found that fear of social stigma is eroding.

Sapienza: If everybody else is doing it, then it may become more acceptable, socially.

Overall, foreclosure activity is up about 16 percent compared to the same time last year.

Rick Sharga follows foreclosures for Realty Trac. He’s noticed what he calls a new mentality.

Rick Sharga: I think we’re looking at a different social construct than what we’ve seen historically, where your home was your castle and you would fight just about to the death to do anything you could to avoid losing it.

He says we could see another avalanche of foreclosures begin this summer, as adjustable loans reset at higher rates. In psychological terms, those higher rates could help borrowers rationalize defaulting on a home.

I’m Jeff Tyler for Marketplace.

Comment by Professor Bear
2010-04-30 20:17:59

Given that the state is $20 bn or so in the hole, where do they find all this money to give away to home buyers?

Note that $200m = 20,000*$10,000 = enough stimulus credit for 20,000 additional CA housing purchases. Sounds like enough to keep the CA market artificially liquid until the next stimulus program starts. Meanwhile, UHS can continue with their fictional narrative about how the housing market is back on its own two feet.

Friday, April 30, 2010, 1:55pm PDT
State opens homebuyer tax credit

Sacramento Business Journal - by Michael Shaw Staff writer

A new homebuyer tax credit is available in California beginning Saturday. The credit will provide $10,000 or 5 percent of the purchase price of a newly built home, and a $10,000 tax credit for first-time purchasers of an existing home.

Gov. Arnold Schwarzenegger in March signed the credit into law.

The credit will remain available through December 31, or when funding is exhausted, whichever comes first. The $200 million allocated for the program is split evenly, with $100 million going to purchasers of new homes and $100 million going to first-time buyers of existing homes.

Read more: State opens homebuyer tax credit - Sacramento Business Journal:

Comment by Cantankerous Intellectual Bomb-thrower
2010-04-30 20:55:24

You can be sure that any endeavor so heavily dominated by Uncle Sam’s footprint will turn into a huge money loser down the road. And I expect the buyers who got into these government-sponsored loans to complain loudly when they realize they caught themselves falling knives with Uncle Sam’s encouragement.

* The Wall Street Journal
* APRIL 30, 2010, 7:46 P.M. ET

U.S. Role in Mortgage Market Grows Even Larger

The U.S. government’s massive share of the nation’s mortgage market grew even larger during the first quarter.

Government-related entities backed 96.5% of all home loans during the first quarter, up from 90% in 2009, according to Inside Mortgage Finance. The increase was driven by a jump in the share of loans backed by Fannie Mae and Freddie Mac, the government-owned housing-finance giants.

By providing a steady source of liquidity to the mortgage market, the government has helped housing markets to stabilize. However, “Fannie and Freddie have to get smaller and less relevant in order to revamp them, and instead, every day they’re getting bigger and bigger and bigger,” said Paul Bossidy, chief executive of Clayton Holdings LLC, a mortgage analytics firm.

The collapse of the mortgage market in 2007 steered more business to the Federal Housing Administration, which insures loans, and Fannie and Freddie, which were taken over by the government in 2008 as rising losses wiped out thin capital reserves. Congress also increased the limits on the size of loans that Fannie, Freddie and the FHA can guarantee, raising the ceiling to as high as $729,750 in high-cost housing markets such as New York and California.

Over the past year, rates on those “conforming-jumbo” loans have improved, and more banks have stepped up their offerings, helping to boost the government’s already hefty share of the mortgage market, said Guy Cecala, publisher of Inside Mortgage Finance. By the end of 2009, the share of jumbo loans that were sold or backed by government entities exceeded the non-government jumbo share of the market.

Comment by Professor Bear
2010-04-30 20:58:45

There might be a great opportunity for anyone left financially solvent at the point when the housing market finally bottoms out to go with an interest-only (100% tax deductible) Fannie loan.

* The Wall Street Journal
* APRIL 30, 2010, 6:24 P.M. ET

Fannie Mae Tightens Underwriting for Interest-Only Mortgages


Fannie Mae on Friday said it will tighten lending standards on adjustable-rate mortgages and “interest-only” loans that helped fuel the housing bubble and have led to a disproportionate share of losses for the mortgage-finance giant.

The changes, which will take effect in September, will require lenders to qualify borrowers based on whether or not they can afford potentially higher payments once adjustable-rate loans reset, and will require much more stringent criteria for interest-only borrowers.

Comment by Professor Bear
2010-04-30 21:11:01

* The Wall Street Journal
* MAY 1, 2010

FDIC Closes Three Banks in Cleanup in Puerto Rico
Four banks in Michigan, Missouri, Washington Are Also Shuttered


WASHINGTON – Regulators shuttered seven banks in Puerto Rico, Michigan, Missouri, and Washington Friday as the banking sector continues to shrink under the weight of bad loans, bringing the total number of failures this year to 64.

Regulators are still expecting the total number of failures in 2010 to eclipse the 140 that failed last year, but Federal Deposit Insurance Corp. Chairman Sheila Bair said Friday that conditions in parts of the banking industry were improving and that fewer banks would fail this year than previously estimated.

The seven failures cost the FDIC’s deposit insurance fund more than $7 billion.

Comment by Professor Bear
2010-04-30 22:29:21

The Financial Times
Papandreou braced for fresh fury
By Kerin Hope
Published: April 30 2010 22:35 | Last updated: April 30 2010 22:35

George Papandreou stands at the centre of a storm that could soon turn into a hurricane.

Social unrest looms as the Greek prime minister’s government braces itself for a wave of strikes and street protests in response to the launch next week of the toughest economic reform programme ever undertaken by Athens.

His Panhellenic Socialist Movement (Pasok) is increasingly divided over the harsh measures needed to stabilise the soaring public debt and put the country back on track for growth.

Mr Papandreou’s response has been a mixture of nationalist rhetoric and behind-the-scenes consensus-building – hoping to stop the volatile situation getting out of hand.

The tensions stirred by the country’s debt crisis run deep. Greeks of all political persuasions feel resentful over the humiliating prospect, as they see it, of surrendering sovereignty to the International Monetary Fund and Greece’s eurozone partners.

The IMF’s imminent arrival also taps into an enduring seam of anti-Americanism in Greek politics.

To left-of-centre Greeks, the government’s willingness to take instructions from a Washington-based supranational institution seems a throwback to the cold-war era, when US political and military support helped rightwing Greek governments stay in power.

“This is the most difficult moment the country has faced since 1974,” said Andreas Loverdos, the social affairs minister.

He was referring to the summer when Greece’s military regime collapsed within days of threatening to go to war with Turkey over its invasion of northern Cyprus – and democracy was unexpectedly restored.

“We’ve come under tremendous pressure to take very painful measures indeed,” said Mr Loverdos, who had to bring forward his plans for a gradual consolidation of the state pension system after tough negotiations this week with the visiting team from the IMF and the European Union.

Comment by Professor Bear
2010-04-30 22:34:44

Is anyone in the mood for a game of the sovereign debt version of kick the can?

The Financial Times
Lessons for the Greek crisis from Philip II of Spain
By Alan Beattie
Published: April 30 2010 21:31 | Last updated: April 30 2010 21:31

If you want to go back to the roots of Greece’s financial crisis, you could always start with Philip II of Spain. Born in 1527; acceded to the Spanish throne in 1556; defaulted on the national debt in 1557, 1560, 1575 and 1596; died in 1598. Now there’s a sovereign who knew how to renounce sovereign debt. Philip would leave an Argentine finance minister standing.

The path of default he laid down has seen heavy traffic across the centuries from monarchies and republics, democracies and dictatorships. Europe – and increasingly the world – is now watching the chaos in Greece and wondering if this is a Lehman Brothers of the public sector. So it is striking that after all this time the world still treats restructuring, or the rewriting of sovereign debt contracts, as an act of extraordinary calamity.

Despite the sounds of garment-rending catastrophe that generally accompany them, defaults are not at all unusual. Outstanding historical research by Ken Rogoff and Carmen Reinhart, which forms part of their drily titled book This Time is Different, shows defaults coming in waves. Some reflect the cost of maintaining armies: there was a flood of defaults during the Napoleonic wars. Others simply reflect a downturn when a sudden stop in capital flows and economic growth makes previously tractable debt burdens unsupportable.

The wave of defaults triggered by the Great Depression extended to the 1950s, when nearly half the countries in the world were in default. Even the US in effect repudiated obligations by legislating forcibly to sever a link between Treasury bonds and the gold price. Greece itself built up a rich history of welching on its debts. Crises starting in 1826 shut it out of capital markets for 53 years; its Depression-era external default lasted from 1932 until 1964.

In 2010, there are widespread sovereign debt problems. They are unusually concentrated in the advanced world. The proximate cause is governments taking on massive private sector debt as part of their financial sector bail-outs. But that came on top of nearly a decade of underlying fiscal deficits in many rich countries, funded by borrowing and often masked by a short-lived surge in tax revenue pumped up by a housing boom and an asset bubble.

So that is how we got here. And there is a big divide between official and private views of how to get out. Most economists and investors think Greece will have to restructure – the fiscal arithmetic is too unpleasant and Greek society too divided to deliver the cuts needed. But European finance ministers and the International Monetary Fund insist that is unthinkable.

Public musing about restructuring may indeed incur costs. Yet history suggests that hanging on can make matters worse. On the way to the world’s biggest sovereign default in 2001, Argentina managed to extract misconceived IMF loans with the implied threat that the fund would be blamed if it pulled the plug. In the meantime, Buenos Aires undertook a bond swap, which bought it a few months’ respite at the cost of a rise in the debt burden, worsening the default when it came.

Although there are differences, Greece looks increasingly like Argentina on the Aegean. If Athens does start to draw down large amounts from the eurozone-IMF rescue loan package, it could merely throw good (public) resources after bad (private) money. If Greece loads up on IMF and eurozone government debt it will merely push existing creditors further down the pecking order in any restructuring without making much difference to the probability of default.

Comment by Professor Bear
2010-04-30 22:38:08

Friday April 30, 2010

Rogoff Says Greece May Not Be Europe’s Last Bailout (Update1)
April 26, 2010, 5:53 AM EDT

More From Businessweek

* Spain’s Tax-Dodging Landlords Add to State’s Burgeoning Debt
* Dollar, Euro, Pound Are All ‘Ugly Sisters,’ HSBC’s King Says
* Rand Rallies to 7-Week High as Sarkozy Pledges Greece Support
* Papandreou Aid Request Angers Greeks as Cuts Readied (Update1)
* Feldstein Says Greece Will Default and Portugal May Be Next

(Updates yield spreads in ninth paragraph. See {EXT3 } for more on Greece and {GMEET } for IMF meetings.)

By Simon Kennedy

April 26 (Bloomberg) — Greece is unlikely to be the last euro nation to need an International Monetary Fund bailout, with Ireland, Spain and Portugal “conspicuously vulnerable,” said Harvard Professor Kenneth Rogoff.

“It’s more likely than not that we’ll need an IMF program in at least one more country in the euro area over the next two to three years,” Rogoff, a former IMF chief economist who has co-authored studies of financial and sovereign debt crises, said in a telephone interview. “The budget cuts needed in Europe in many countries are profound.”

Portuguese, Spanish and Irish bond yields jumped last week as investors questioned their ability to reduce budget deficits and avoid Greece’s fate. Greece on April 23 triggered a 45 billion-euro ($60 billion) rescue package from the IMF and the euro region after its soaring deficit sent borrowing costs surging and sparked concern about a default.

At 14.3 percent of gross domestic product, Ireland had the euro region’s largest deficit last year. Greece’s was 13.6 percent, Spain’s was 11.2 percent and Portugal’s 9.4 percent.

The likelihood is “better than 50-50” that others in the 16-nation euro area will end up requiring help from the Washington-based lender, said Rogoff, 56. He expects the IMF will eventually dispatch more loans to Greece than the as-much- as 15 billion euro it’s currently offering.

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