Bits Bucket For May 17, 2010
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The Housing Bubble
Examining the home price boom and its effect on owners, lenders, regulators, realtors and the economy as a whole.
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Lawrence Yun is on Cspan now. He says that children of houseowners are higher achieving than those of renters. And he’s blaming the housing bubble on bankers and ratings agencies. I’m going to throw up now.
Children of homeowners probably are higher achieving than renters on average, but not because of the house. Their parents probably have more income, more education, and more responsibility–all things related to both homeownership and achievement. Bad on FunYun to make a correlation into something causal.
When large amounts of people are walking around carrying open umbrellas it is usually raining. Perhaps we can end drought by selling large amounts of umbrellas to areas prone to drought, and have the people walk around with them open.
With that kind of logic, it is hard to believe he ever made more than 30k a year.
“With that kind of logic …”
Logic? What’s this logic stuff and what does it have to do with anything?
Cause and effect, he’s doin’ it wrong.
And when large numbers of people are wearing orange jumpsuits, it’s usually because they’re incarcerated criminals, so we should all wear orange jumpsuits so the crime rate, awww, never mind.
I can see it now:
“Buy a house (now) and your kid will go to Harvard!”
Suzanne researched it!
Suzanne: Hello. I’m calling to see how you are doing and wondering if you know anyone the is renting and might be interested in taking advantage of some great home buying opportunities. Prices are not going to get any lower and interest rates are expected to rise.
Mark: How did you get this number. It’s unlisted.
Suzanne: I am a good at research.
Mark: Well my husband lost his job, and we were underwater with the house you sold us. He became so stressed he committed suicide.
Suzanne: Life isn’t always fair. So you are renting now?
Mark: Yes, but I just inherited some money. I would like a home but am not sure its the right decision given the economy and all.
Suzanne: It’s never been a better time to buy.
Mark: . . . but I am renting for much less than it would cost me to buy.
Suzanne: You have kids right?
Mark: Yes. Two.
Suzanne: Listen, you lost your husband, you don’t want to lose your kids too do you? If you don’t buy a home research shows they will grow up to be pathetic losers. You love your kids right?
Mark: At times.
Suzanne: Well then lets meet this Sunday to look at a few properties. You owe it to them.
Funny! But Mark had a husband and kids? I don’t remember that from the original commercial.
Mark as is in a potional mark, as opposed to the name Mark.
Natalie!
Thanks for making my Monday! Nothing exemplifies the twisted REIC-logic and “gonna’ have to drive a stake thru their heart” mentality of the RE Crew better than that!
The very plight they’ve -created- now… becomes a trigger mechanism to stimulate traffic. “Listen, you lost your husband” ( like it was an act of God or circumstantial or… well anything but ‘their’ doing! )
Over the weekend I had Guard drill and ran across one of the FAILED builders during PT. I offered usual military courtesy as would be expected and thru those grinding teeth I know he’d “write me up” ( if he -was- senior to me! ) They just can’t let it go. I know for a FACT he’d bail on the Unit if “things got back to ‘normal’ ” cuzz’ “Easy Money* is hard to get out of your mind”.
*Foghat: Stone Blue
I’m surprised the Military lets those types in. I can’t imagine wanting to serve next to somebody so rapaciously irresponsible.
sfbb,
I’m kind of surprised this “kid” ( just turned 30 ) slipped under the wire myself? In the past, if all else failed, join the service!
My motto from ‘97 to ‘07 was: When all else fails ( Join The REIC! ) He’ll -never- spill the beans but just gauging from the scale he was trying to work on, there has to be *millions* in unpaid const. loans.
This is what I mean by under the wire. This isn’t some college kid w/ a $1,500 charge off on student loans etc. Totally different scale! I’d think if anything, the distraction would be having freaking MAJOR creditors calling the base demanding to speak to the Colonel etc?
On a more basic level ( and never underestimate the ability of a REIC’ster to “re-invent” themselves ) is that Aviation is all about disciplines learned at a VERY early age! X-GS Fixer could probably explain it better than I could? It’s about understanding that a pilot can’t “just pull over to the side of the road” if they have a problem and I just can’t imagine anyone schlockier than a damned builder!
I was hoping he wouldn’t be associated with the Army Corp of Engineers, but having ANYTHING to do with military plane flights is probably the only thing as bad I can think of to do with a builder that doesn’t involve nukes of some flavor or another.
It comes down to recognizing your responsibilities, and realizing that corner-cutting will ALWAYS catch up with you eventually. Sometimes you have to explain this (in simple, easy to understand words) to pilots/owners/operators.
OTOH, it’s also realizing that $hit happens, no matter what you do.
My first job was learning under a bunch of “old guys”; first, some old WWII/Korea vets that were retired, but instructing A&P as a retirement job, then working under a bunch of Navy/USAF Vietnam vet crew chief/plane captain types. Especially the Navy guys who had worked on the flight decks of carriers. Easy to get yourself killed there, by making mistakes.
I’ve found that kids today don’t have a huge number of mentors/genuine heros in their lives. All they mostly have is the BS they see on TV. I had the chance to grow up around some genuine, Navy Cross-winning heros. Not that they told anyone about it (I found out about one of them, by reading “The Big E”…..he flew an SBD that put a 1000 pounder into a Japanese aircraft carrier at the Battle of the Philippine Sea, then had to ditch at night, when they ran out of fuel). They all had the self confidence of people who knew they had their $hit together, and didn’t feel like they had anything to prove to anyone.
I have a son-in-law, and a daughter’s former boyfriend who are either in, or training to be pilots and/or mechanics. Not that I encouraged it. It’s not the most financially lucrative job in the world. It does have the advantage of having standards set for good reasons, and knowing that if a person has a certain rating/skillset, they got it because they took the training and passed the proficiency tests, not due to political manuevering, or paying someone off.
(Well, most of the time anyway…….it’s a small world, and the word gets out on the idiots/slackers/ticketpunchers)
X-GSfixer,
Great post, great summation. I guess we always just took for granted that we’d be mentored by some real life heros? I mean not The Govenator type heros, real ones! Some of Naval Officers I served under have been interviewed by the History Channel but the whole time “I” knew them ( only heard about their ex-wives )
You talked a little about “political manuevering” and I only got as far as the house for lunch before I stumbled upon some more. Seems our local micro-brewery was able to secure a “grant” in yet another Private/Public “Partnetship”. Suffice to say I’ve probably paid for it ‘publicly’ but seem unlikely to -profit- from it ‘privately’?
How much more of this are we supposed to take! The whole article they kept focusing on jobs ( yeah I read at ‘lunch’, you do too ) but nearly ALL of them were temporary at best. Then what, maybe a few “server” type jobs? BFD. What happens to the ‘public’ part, when…. they go belly up?
Think of JFK jr and W when you talked about qualified…
Who knows though? Maybe they did pass the tests?
“Buy a house (now) and your kid will go to Harvard!”
Forget about Harvard. After the @ss pounding the people who bought at the top of this market are going to take, they will be lucky if they can afford to send their kid to community college.
Watching their parents get reamed by real estate will BE their education. The School of Hard Knocks has been having banner enrollment the last 2 years, and looks to continue through the next decade or two.
“banner enrollment” LOL, yeah and half of us didn’t even wanna’ go!
I cant wait till the NAR is thrown under the bus by upcoming competition such as zillow.
Was listening to a GM exec a few minutes ago.Evidently they are going have another IPO to get suckers to give them more money.What happened to all the previous shareholders?What a scam.
The “GM is not broke” scam is about as blatant and big as they come nowadays as far as “in-your-face” TBTF lies go. GM sucks and will always suck - their unions suck and all of their executives suck. SUCK.
and the cars suck.
I’ll bet you their kids aren’t even gonnagotocollege.
Well, GM claimed to have magically paid off their Bailout money (while in reality simply swapping Bailout money from one pile to another.) I’d expect nothing less than full corruption from their leaders and utter failure from their cars. It’s the new Amerikan way!
Not to mention the 14 billion plus loan they are getting from the Feds, to tool up for “advanced technology vehicles”.
Whatever those are.
You got that right…you damage something in the house and dad made you clean it up and got pizzed he had to fix it….no landlord to call. So you learn very quickly how to take care of things.
———————————-
and more responsibility–all things related to both homeownership and achievement.
“Bad on FunYun to make a correlation into something causal.”
I doubt he got far enough in his economics training to know the difference between causality and correlation.
I doubt his ‘education’ amounted to much more than drawing lines with crayons.
“Now Funyon, make sure to always use green and black crayons.”
“Okay Ms. Greenspan!”
“Also, make sure the lines goes upwards to the right.”
“Yes Ms. Greenspan!”
Being chief NAR economist causes one to make dumb statements.
Hasnt this organization lost all credibility with the public?Now they are trying to blame others for the bust?Those evil bankers!!!!!
They are stupid beyond all belief. If FunYun had a clue, he would stop trying to drum up the demand side of the market, which has been beaten into a pulp by the recession, and start thinking about how to stimulate supply. If the hidden inventory came out of shadows and on to the market, the NAR’s membership could suddenly go back to work. So long as homes are unaffordably priced and inventory withheld, I expect the used home sales drought to continue.
What if the underlying goal is to shed membership? Let the johnny-come-latelys transition to johnny-leave earlys, and only then unleash the shadow inventory for the veterens to pounce on. Bigger pie AND fewer alive to eat it. Break out the Sbux; everyone’s a closer.
“everyone’s a
closer.”NAR = an industry of dissemblers.
NAR = an industry of dissemblers.
N ever
A cknowledge
R eality
N ot
A nother
R ealtor :-0
Economists were invented by the public university systems to make psychics and mediums and fortune-tellers look like respectable enterprises.
Which one’s claiming to be “economists” promoted by the media complex have you not found to be completely raving idiots??
He says that children of houseowners are higher achieving than those of renters.
Habitat for Humanity frequently uses the above in its fundraising materials.
I worked once with HfH in the Bay Area. I found out the pricing (discounted for helping build your house), and I couldn’t ‘afford’ to buy the houses we were building, and this with my wife and I both having tech jobs.
I didn’t volunteer again after hearing the amount of debt they were putting ‘poor’ people into in the name of ‘helping’ them.
HfH has become the same thing that MADD became; a non-profit run by lawyers who ran off the original founders and really no longer the serve the original purpose.
Is that true? If so, wow, sad.
I hate to say this and I know a lot of folks ( Arizona Slim, ahansen and others do a LOT of volunteer work ) but when I hear stuff along that order, what can it do but affirm your worst fears?
If I remember correctly, the homeowners would be in hock for about 720k for the townhouses.
I can’t find any sales data on the specific project I volunteered for to verify what the homeowners are in hock for.
“”720k for the townhouses”
Good Lord, that is affordable? Hate to see pricey.
Sadly, you can buy much better houses than the townhouses they put up for much less now. They didn’t ‘help’ anybody who’s living there, now, as far as I can tell.
41 % of all births in the USA were to single ‘moms’ last year . For Black kids , it is almost 72% . Big Government is the Sugar daddy, supplying most of the $$$ for raising these kids , and of course most of them are renters . If Sperm shooters were held accountable , a lot of this would correct itself .
Jess- what is the source of your data?
It is a study by the Pew Research Center:
http://pewresearch.org/pubs/1586/changing-demographic-characteristics-american-mothers
And don’t you think that rap and hip hop music has a lot to do with this?? as a DJ i think it does.
There is nothing in today’s radio music which celebrates family..but I know where the good soul funk blues are being made today, and of course there is a lot of this music I cant play because bar owners want all that ghetto crap…
———————-
For Black kids , it is almost 72%
aNYCdj,
( Well other than the Re-re-release of Exile On Main Street! )
God I’m stoked!
check out my handle its a new podcast….
Funny conversation Saturday night… someone told me California lets women apply for government aide with out going after the income of the father(s) of the children.
Hence you get a lot of married women that claim they are single moms to the govt.
The stats are pretty loaded.
I think a few of the smarter states force the women to identify the father and pursue them for child support.
James,
That’s such an excellent point. When it comes to job interviews and employers gleaning your credit report for “potential character flaws” nothing -screams- that more than running out on your own kids!
DUI’s, sure, speeding tickets.., charge-off’s etc. all PALE in comparison! But my guess is that it seldom if ever is reflected on your FICO. Time to get real.
I once overheard a guy say that he “respected” single moms who don’t pursue child support from the unwanting dad. I thought that was really weird. Not rapper type. Probably was a renter, though.
If they need welfare they will have to “pursue” because the welfare machine puts you through the child support loop along with asset screening, job training etc. They have DNA testing now so it’s hard for a guy to weasel out, but I suppose the mother could play dumb about whom to test.
State CS will go after the father to try to get back some of the welfare money they pay out. Saw it happen. A guy has to keep moving, and it can get hard when they move across country but once his location is known and he’s working above the table, watch out.
The people were actually still living with the husbands.
Just were not married according to the state/Feds.
More profitable for them to claim all the free stuff and pretend they are single parents.
Anyhow, hate to hear this because the social safety net is so frayed and we have plenty of problems with people that really need help.
Not true at all. They are REQUIRED to go after the father and they get to recoup any funds they paid out for the benefit of the child. They can suspend your driver’s license, put liens on your property, garnish wages & empty bank accounts.
“41 % of all births in the USA were to single ‘moms’ last year .”
It has been well over 50% for years in the Albuquerque, NM area.
If Sperm shooters were held accountable , a lot of this would correct itself .
Sure, and the ho-bag moms had nothing to do with it.
Male contraception drug could prevent a high percentage of this…Can’t quite understand why it has not been developed…
I think they are still using the rythm method!
Male contraception drug
…will be effective when it’s the male that can get pregnant. And not before.
Male contraception assumes that many or most males are willing to take responsibility for not making an unwanted child. This ignores the reality that many or most guys, especially in the hood, couldn’t care less if the girl gets knocked up or not. Someone else’s problem. “Society” bears the cost, while Democratic Party “community organizers” deliver the riff-raff vote in exchange for ever-increasing benefit payouts.
My husband can’t remember to take out the garbage. You think I’m going to leave birth control up to him? Hah!
He can’t remember to take out the garbage, but he always remembers to put in the junk….
Future voters who will vote for bigger and bigger government and more and more social programs.
It is one hell of a cycle.
The vote of some welfare hood rat crack mom counts the same as a small business owner. Pretty soon the Democrats will have a permanent lock on the levers of power, thanks to the ever-rising entitlement class and both party’s war on the productive middle and working classes. Which goes a long way towards explaining the government we have.
The vote of some welfare hood rat crack mom counts the same as a small business owner.
Yep. This is why I think those that receive government aid should get a fractional vote while they are receiving aid. Those that contribute to the system should have a greater voice in how the system runs and how tax dollars are spent.
That’s the basis for our representational system actually. It’s why we have 2 senators for each state regardless of the state’s population. Thus states with low population but high land mass have a higher per-capita influence in government. The thinking being that those with more land are more important people.
Entire books can be (and have been I’m sure) written on the subject of whether or not that’s appropriate. Plus side is that one could make a good case that those who have larger fortunes (be it land or money; though probably moreso land) tend to be better decision-makers, and thus should have more influence. Minus side is that you’re now on the slippery slope of a government-condoned class system.
Nice thing is of course that the founders worked out what most think is a pretty good compromise.
On the surface I really like the idea of fractional vote if you’re receiving government aid. However that too of course is a very slippery slope - defining what exactly constitutes “government aid”.
Guys,
The truth is; a lot of people talk the talk. I know plenty of over-spending Boomers etc. that are all about free enterprise etc. ( until ‘their’ daughter gets knocked up! )
Then they’re filling out all of the various “assistance” paperwork JUST like Mama’ Hood Rat. See my posts below.
States with the most people should have the most power, because people are smart!
/s
Large corporations receive far more welfare in the form of tax breaks than is ever spent on welfare.
I did we suddenly forget the bailouts?
I’m agreeing with DinOR. My pet peeve is my well-off acquaintances who hide assets so they can put mom or pop in the Medicaid nursing home and keep their inheritance intact. That is a huge drain on society.
I’m agreeing with DinOR. My pet peeve is my well-off acquaintances who hide assets so they can put mom or pop in the Medicaid nursing home and keep their inheritance intact. That is a huge drain on society.
Hmm - kind of like rich Greek folk that hide their swimming pools.
Etc. etc.
It’s the nature of excessive government. The more they spend and tax, the more poor people get screwed, because they’re not as sophisticated in knowing how to collect government aid and to avoid paying taxes.
Rehobbyist,
Well there’s ‘another’ one I hadn’t thought of for some time! I used to have a neighbor that had -everything- figured out to the ‘t’. He has even calculated the amount of time he’ll have to work to qualify for Soc. Sec. down to the DAY! ( Self-employed = under the table in Oregon btw )
When his mother sold ( read gave ) him the lot they built their home on ( rather ‘nice’ home I might add ) he went into a hissy fit when they held up his Cert. of Habitation b/c “mom” was in a Care Facility on the public’s dime!
They caught the asset in his name and you know what, I’m sure he just “figured” a way around it. Last I saw they had all new vehicles in the driveway. I don’t -speak- to the guy! I see him, and ignore him. Sorry, just the way I am.
“Yep. This is why I think those that receive government aid should get a fractional vote while they are receiving aid. Those that contribute to the system should have a greater voice in how the system runs and how tax dollars are spent.”
I’d like to expand on this to include ALL government employees, then.
I’d like to expand on this to include ALL government employees, then.
I agree.
Unrelated,but I’d outlaw public employee unions as well. As far as I’m concerned, unions should be subject to monopoly laws just as corporations are…unions can have a monopoly in the marketplace for labor, and can cause similar damage.
In the case of public employee unions, there is no “free market”, nor competition
drumminj, what are you talking about? Have you not ever heard of “right to work?”
Most states in this nation are “right to work” states. Unions account for only toughly 22% of the workforce.
That is NOT a monopoly.
Most states in this nation are “right to work” states. Unions account for only toughly 22% of the workforce.
eco, I think it’s wrong to look at aggregate numbers across the country.
Look at a single employer where all employees are required to join the union.
Look at a single industry (as is done with corporate monopolies). How many non-union plumbers, electricians, etc are out there?
How many non-union government workers are there?
By your reasoning, I guess one shouldn’t bitch about Microsoft, as there are how many corporations in the US?
Better yet, look at education.
How many non-union teachers are there?
Is that not a monopoly on the labor force in that industry?
There are plenty of lower paid teachers working in the private sector.
—————–
If we ban govt employees from voting, can we also eliminate govt contractors and anyone who provides goods or services for the govt, too?
Then how does that reconcile with the huge percentage of Republican Southern voters? They aren’t voting for bigger and bigger government are they?
They’re all rich in the South, their pastor tells them so.
Hate to tell you this, but around here, most of the daddies are under 21, and making minimum wage, at best. A high percentage aren’t even working. At best, after paying attorney fees, getting child support from a teenager is a zero sum game, at best.
Another thing I’m seeing, is that kids want to be “cool parents”. They want to have kids early, so they can still be “cool” (i.e. 35-38) when their kids are in high school…….so they can be “friends” with their kids.
(my youngest is 17…..she told me this weekend that I was “too old and cranky” to hang around with”….”old and cranky” meaning that I refused to sign on for more piercings, or any tattoos)
I know this is politically incorrect, but the reason a lot of these girls get pregnant is because they get wrapped up in the idea of having a baby, without thinking about the future consequences. So they quit (or never take) birth control.
As far as 15-21 year old boys exercising restraint? Get real. When I was 17, the crack of dawn had to watch out for itself.
All the bleating about “men should be just as responsible for birth control as women” may sound good, but reality tells me that girls/women need to take charge of this issue, since they will suffer from any downside if they get pregnant.
Theory/utopia is good, but I live in the real world.
Whether the baby daddies can pay now or not, DNA testing means the child support division can put the boot to their necks for any future earnings. They will have to leave the country or work totally off the books to escape its reach.
But then the a-hole gets parental rights. And frankly, if you have to take the guy to court to do the right thing, I don’t want the SOB around.
Which is why I took my daughters to the gynecologist when they hit 15, or thereabouts. Oldest daughter just had her first baby, at 28……..which seems to be some kind of record around here.
This ain’t the hood……this is in red-state, middle class suburbia. The family of one of daughter’s boyfriends was actually pi$$ed that she didn’t want to get knocked up right out of high school and “continue the family name” (as if a family of junkie/drunk wifebeaters needed to have their name continued).
Fortunately, he seems to have a few of the brains that the rest of the family is missing. Still see him once in a while, even though the “soulmates” aren’t dating anymore (gee who could have guessed that that first year of college/being away from home could make him change so much?……:)…….)
I’m grateful everyday that my sons aged 21 and 24 haven’t yet reproduced (I’m pretty sure!)
When male contraception is invented?
Not to point out the obvious - condom - been around forever, easy to use and readily available - they only work when used.
Not to point out the obvious - condom ??
But will it be used particularly spontaneously ?
Woman can where a patch or get a injection why can’t men ??
Men can. But the condom is the only thing that is cheap and readily available.
Men can ??
Enlighten me…Never heard of a patch or injection for a male…
And almost every single one of them cannot read, write or speak English…..
So they listen 24/7 to ghetto music and learn that language which is so helpful in finding employment to take care of your kids..
——
Hate to tell you this, but around here, most of the daddies are under 21, and making minimum wage, at best. A high percentage aren’t even working
All the bleating about “men should be just as responsible for birth control as women” may sound good, but reality tells me that girls/women need to take charge of this issue, since they will suffer from any downside if they get pregnant.
Gotta love how the men never want to take any responsibility for any of it — not the birth control, and not providing for the baby.
If you want to play, you have to pay. If guys don’t want to have kids with a particular girl…don’t have sex with her! (or use a condom, naturally!)
“He says that children of houseowners are higher achieving than those of renters.”
So he believes homeownership ’causes’ higher achievement? Does his sample include those who bought at the peak and are now either walking away from their mortgage or going into foreclosure? I can’t believe those who made stupid housing decisions have abnormally high-achieving children.
I doubt it. The kids are too young to sample, and even then it depends on “achievement.” And no, a bumper sticker which says that your kid is an honor student at Rainbow and Pony Elementary doesn’t count. Show me pieces of paper: transcripts, diplomas, pay stubs. We won’t know what this bubble did to kids for another decade.
Well, speaking of “bumper sticker mentality” Yun is reachin’ fer’ sh!t ( why get bent out of shape over it? ) LOL.
whats that thing about correlation and causation?
His reasoning can be used to sell just about anything…from Baby Einstein videos to overpriced college degrees. Parents that can resist such hucksterism are a rare breed nowadays, and becoming rarer by the day was gov’t social engineering policies aren’t doing much at all for them.
Man are they getting desperate or what? Also funny is GM saying they can sell more cars if loose lending comes back ASAP.
Come on, ‘Merikuh - just admit it, the ponzconomy is a sham. “Move on” indeed.
“Also funny is GM saying they can sell more cars if loose lending comes back ASAP.”
But it is back. With people not paying their mortgage and living in their houses for two years rent free they have plenty of free money to buy a car…they just aren’t buying GM!
Yun is using the latest latest twist of the “Oil Spill Defense”.
“Wasn’t me, it was him.” “Nope, wasn’t me.” “She did it.”
We kids attempted to use this classic kid dodge when we about 6-10 years old and just moments before mom implemented old fashioned Family Martial Law, groundings and curfews.
In theory, it looked good.
Until you tried it tried to use it on a responsible ADULT !
Two greatest proven predictors of success: How often does a child move, and do the child’s parents stay together. Interesting, nothing a school can control. Could purchasing a house anchor a child and thus help insure success? I don’t know.
Anecdotally, I’m close friends with a family that lives in one of the worse part of town. They grew up in what has to be the world’s oldest double wide trailer, still has plates on it from the 1950’s. Raised four kids there, all have BS degrees, three have MS degrees. Been there forever. Dad now owns about two city blocks. Next door has also been there forever. She sits on the county board of supervisors.
Each day I’m more convinced that it’s not the house; it’s the frackin’ JOB SECURITY. Not moving becomes a lot easier if you don’t have to relocate every 3-5 years just to keep a job.* And keeping a job and dependable income is a large part of keeping a marriage together too.
———
*I don’t mean moving for a promotion. I mean moving just to stay employed; being sideswayesdly mobile.
We have a winner.
And of course in normal times the BENEFITS of home-ownership accrue mostly to those with stable jobs and family lives. And mortgages are available to the reasonably prosperous. So there’s no surprise that there is a correlation between ownership and academic success.
How often does a child move
That’s also a correlation versus causation issue. The kid has some problems that mean he’s probably never going to be a “success”. Genetics being what they are, odds are his parent(s) have similar problems and move a lot as a result. The moving itself isn’t the problem, it’s a symptom of the problem.
But can’t the kid make better friends if it doesn’t move around a lot? Just sayin. Not like you can’t stay put in a rental or just stay in the same neighborhood without actually buying an overpriced POS.
The moving itself isn’t the problem, it’s a symptom of the problem.
Exactly.
Yun is full of bull.
The boomers could never afford kids in the first place. If it hadn’t been for the credit bubble where they could borrow from their grandkids, there would be far fewer people under the age of 30 today than now. The financially sensible people who never borrowed are financially secure today but they are childless, for the most part.
The politicians are afraid of the birth dearth. Leave it to Yun to cajole people for not reproducing. I get enough nagging from colleagues where I work. Everytime one engineer sees me he asks me if I have a girlfriend yet. Grr! Statistically, it’s too late for a 51 year old male to father a healthy child anyway. This is all from the middle class squeeze.
And I’m a renter of course. I pay my rent on one of my two apartments with my investment income. If I become unemployed, I will downsize to that one apartment of course.
Bill in Los Angeles,
Good for you! And you’re right, the Boomers never ‘could’ afford their kids ( well not when you want to have a 2nd home, motor home, Harley… recreational drugs etc. along ‘with’ them? )
Thanks. The credit bubble disguised the middle class squeeze. And now many boomers have lost their jobs, have less than $100,000 saved for retirement, and all for doing what their parents, “the greatest generation” did - have kids, have homes, and so forth.
The ones born with a gold spoon in their mouths and the few who were successful entrepreneurs or stock investors in the 80s could afford children.
The responsible rest of us have to count on adopting at some point. I will probably end up with a younger woman who has a child from a previous marriage and that would be my answer to finding a beneficiary.
Count me as a dumba$$ then.
If I had been smart enough to forecast in 1980-90 all of the macroeconomic crap coming down the pike, and all the societal pressures at the time, I’d probably avoided getting married/having kids, too.
The prototypical “get married, have a family, support the kids” model worked for society for a few hundred years……until suddenly, it doesn’t.
I personally think that it has less to do with it’s design, than with the rapidly changing circumstances that have been engineered (either on purpose, or accidentally).
Despite all of the trouble in the economy, I hope my children have their own children. Nothing is more fulfilling to me than family. My work and hobbies pale in comparison, and I like my work and hobbies.
Good points all. The big difference “I” see is that Mom & Dad waaaaited to get The Toys until -after- the kids were grown up and gone!
Not lately. I am the only person I know that doesn’t have ANY of the following:
NO second home
NO Motorcycle/s
NO Decked-out SUV, boat etc. etc.
Everyone I know has a least (1)
As a matter of FACT.., it ‘was’ my turn for those leisurely pursuits until Da’ REIC screwed da’ pooch but good?
Yes, if they were willing to willing to live the lives of their parents and grand parents they could have afforded them. Look there are always spenders and savers. But ever higher debt levels have allowed the spenders to spend significantly more than they made. Is it any wonder that more and more people have joined the former camp?
But the debtors’ spending has driven the price up on everything so that the more prudent have to pay more…so they’re also more likely to have to take on debt.
It’s just like the housing bubble — the fools with their buckets of EZ credit are the ones who set the price. Those of us who try to live within our means and keep our fixed costs low are “priced out” by these maggots.
There is no way you want to try to raise a kid at middle age. Those little rascals are full of energy and wear you out wikki wikki. I mean dead, fall over, worn out tired and it just does not stop till you get em to sleep. And if you got one of them thar curious ones well they don’t want to miss a gall darn thing so they push to stay up late and then rise with the sun. Dang there’s jes not nuff hours in the day to get rested up with them kind running round the trailer park.
Like Rosasharon said, “I’m tard Ma, jes tard”
Now insofar as Mr Yun is concerned, if I felt that man had one iota of intellect I would wonder if he was also impeaching renters as a source of opinion when it comes to the status of housing. If renters kids suffer educationally then it may infer that the renters themselves are less educated than those who have mortgaged their soul to acquire the prestigious label, “”home owner”. Thus, any comment from that quarter can be dismissed because they are obviously uninformed and delusional when it comes to the complex issues involved in the sophisticated borrowing required to transfer ones wealth into the hands of the REIC. And this also sets up the us/them dynamic we have all been exposed to when the bubble was in full swing. It seems important for FBs to feel superior to non FBs. In my experience when someone hungers that much for a feeling of superiority it is a huge flag that they are lacking confidence in their position. Confident people have no need to seek approval or fabricate superiority.
“There is no way you want to try to raise a kid at middle age.”
No so true. Depends on the individual. I didn’t want kids early on and had my first at 37yrs and my last at 49yrs. Empty nest now at 70 yrs and the wife and I are enjoying ourselves. We just had our first grandchild in 2009, but then again I married a woman 15yrs my junior and no I don’t need any little blue pills either.
Agreed—totally depends on the individual, and I think fitness-level plays a role as well. I play hockey with a guy who is 50 and has a couple of toddlers. He seems to have a ton of energy, and certainly doesn’t appear worn-out in the least!
It ain’t the toddlers that are the problem.
Wait until he hits 65 or thereabouts, and they are in high school.
My youngest thinks I’m a tired, worthless old fart, and I’m 52.
PrimeisContained,
I grew up in Chicago and making the HS hockey team was every bit as big a deal as football. More exclusive really. My reserve unit has a men’s team but they play Sunday nights so I’m hoping to play next year.
I’ll be 52 like X-GS but still feel totally up to it. I can see that raising children falls into very different timelines, but for me, I just don’t think I’d have the patience? Energy I ‘got’.
DinOR: go for it! I swear it is a healthier/safer sport to play at an older age than many of the others. Heck, the soccer team I used to play on had had way more injuries than my hockey teams ever have!
“We just had our first grandchild in 2009, but then again I married a woman 15yrs my junior and no I don’t need any little blue pills either.”
Reminds me of Anthony Quinn!
The boomers could never afford kids in the first place.
I don’t buy it. In the age before ipods and cell phones, kids were pretty cheap.
You fed them and cloth them (pasta and sears tough skins). You send them to a free public school. Two to a room. Hand-me-downs are even cheaper.
Everything else was on pretty much on them except the family visit to see Uncle Bob on the Jersey Shore.
Makes for resourceful kids.
I have to agree that kids can be cheap. But that was when there were plentiful low-skill jobs for everybody, with low-cost acceptable housing to match. Or when the kids were free labor on the farm. You just signed them up for free Parks and Rec.
Nowadays, the competition for jobs is so strong that the kids have to start very early, which makes for expensive equipment, be it sports equipment or computers or math tutors or SAT classes. I’ve heard of parents holding their toddlers back a year so that they are bigger than their classmates, in hope of getting an athletic scholarship to college. There are day care places that offer Spanish. Or starting the kids in ballet or the electronics set so that the kid can attract attention as THE best of something by junior high. Kids don’t play anymore; it’s work.
And that’s if the kid stays healthy. On my co-worker’s kids broke his arm: $36K. One of my friends has a family chock full of medical issues — tonsils, ears, speech problems, ADD, you name it. Luckily the husband/father is in the Army.
It took us three years to find a good ranch hand. One that showed up on time, could take direction and didn’t need supervision.
I could tell him what we wanted and leave, and if he finished up early, either that day
or a few days later, he’d look for something
that needed doing. He made $750 a week with benefits and we supplied lunch.
We had some HS kids come out for summer work that didn’t even last till lunch.
Now that we’ve sold the ranch and live in town, we use the local HS as a screening agent and couldn’t be more pleased. Two
17 yo kids who work great, both well mannered and polite, smart as a whip, and both from hard working families.
These two kids told us the school is divided into two distinct groups; the yuppie kids who spend all day texting, and the other kids who work after school and on weekends to help their families. One of the young men contributes all he makes to his family because his dad lost his job and they
need every cent to put food on the table.
He’s the oldest of four and a great example.
Needless to say, they always get a little bonus every week for just being there…..
2banana,
Very true, it certainly doesn’t ‘have’ to be expensive? In line w/ some of the other comments though, parents need to learn to sack-up at an early age and let kids know that any ‘nice to have’ stuff will have strings attached!
I have a good friend who’s X is absolutely -killing- him by making sure the “kids” ( Christ they’re 17 & 18 ) pester ‘him’ for all the NTH junk in the world. First mo. Ipod bill? $400 bucks. Just killing him, SackTFU!
Been there. The ex is an R.N., and she was getting $1000/month plus in child support from me, yet they never seemed to have shoes, clothes, fees for field trips, money for school lunch, etc., etc.
And no, they didn’t want the latest/greatest Nikes, crap from Abercrombie. The nicest stuff they ever get is from American Eagle, and only because their oldest sister gets them an employee discount.
Nothing chaps my azz more than the “I’m a single mother, I’m a hero” bleat. Sure. I’ll believe it when I see it. My ex did it. When the kids were growing up, she spent 90% of her time at home in the bedroom with the door locked, watching Oprah/Dr.Phil tell her how tough she had it, and reading romance novels. According to reports from about 50% of the married guys I know, this is not an uncommon SOP. (No, I’m not bitter……..
……)
Hang in there guys, and do what’s right. The kids might not recognize it now, but they will when they get older.
X-GSfixer,
I watched on in horror as my brother went thru that. He was a finish carpenter and when the money was good it was good. When. But he usually delivered when he could.
Yet I’m amazed my nephew has:
Never been on a ski-lift
Has no idea how to act in a rest.
Never was able to go out for sports
The list goes on! I finally had to ask him what he ‘has’ done? Yeah, I’ve no idea where the money went.
I am the female version of bill and I’m still cute!
The funny thing is this is normal for people who don’t have kids. Women are less worn down from not having gone through pregnancy. Even men look younger from not chasing around or worrying about their kids. I inherited good genes because I have a full head of brown hair with a touch of gray sideburns and the back of my neck.
“Women are less worn down from not having gone through pregnancy.”
Its not the pregnancy so much as the 6-12 months that follow it!
Pregnancy sure didn’t do me any favors!
A classic “post hoc” fallacy. Full name: “post hoc ergo propter hoc”. Pronunciation: “post hoke ergo prope-tur hoke”. Meaning, “Because of this, that.” Example: Because I do a little dance, the sun comes up every morning. Example: Because a family buy a house, their kids get smarter.
I’m sure the FB with the Cadillac truck and the McMansion, but without two nickels to rub together, has smarter kids than a financially prudent renter who pursues hard work and deferral of gratification.
Yun has a vested interest in reflating the bubble so. But, I am surprised that he admitted the existence of any sort of housing bubble at all. I would assume he would try to paint the bubble as a normal market, with the current market being the anomaly. Reminds me of the Indian (South Asian) character on the Simpson warning Homer (the lead Joe Six Pack character) that, “Your country is dangerously underpopulated.”
Nowhere do ‘politicians’ form a more separate and powerful section of the nation than precisely in North America. There, each of the two major parties which alternately succeed each other in power is itself in turn controlled by people who make a business of politics… It is in America that we see best how there takes place this process of the state power making itself independent in relation to society… we find two great gangs of political speculators, who alternately take possession of the state power and exploit it by the most corrupt means and for the most corrupt ends - the nation is powerless against these two great cartels of politicians who are ostensibly its servants, but in reality dominate and plunder it.
Friedrich Engels (1891)
That was before the two cartels formed a joint partnership in the Federal Reserve. Now it’s just one cartel pretending to be two - and doing a dang good job of it.
Last year, I was able to negotiate a 10% reduction in my rent. I was just offered another 5% off for next year if i renew. The condition of the property is the same. In a free market, this shouldn’t be good for housing prices. I, however, am still seeing condos that rent for $2,200 (not that I would pay that much for just me) listed at $450k or more. Makes no sense.
The question is, do they ACTUALLY get $2,200/month or is that just what they WANT.
Decent two bedroom highrise condos around here actually rent for $2,000 and up. They are listing for sale at an average multiplier of around 200x - 250x monthly rental price. Not much is selling now. They used to get much more. I can’t get anything to pencil out at over a 120x multiplier.
condos around here ??
Where ??
It’s weird how some people will pay nosebleed rents like that, even while other people are paying a lot less for a better place. I remember paying $1700/month for a 2-1 in the “best part” of San Jose. Meanwhile, I had friends paying $2000/mo for noisy apartments. I truly cannot explain how this happens.
Oh, forgot to mention, the 2-1 was a house, not an apartment.
I truly cannot explain how this happens.”
bad credit can’t rent a house and have to settle for a over priced apartment
thats one idea that comes to mind esp. since I’m applying to lease a home in Newbury Park they go fast this time of year
I have good credit so am able to beat out many applicants, kind of a drag for them I guess ? They go off to apartments I guess or just get forced out of the area ??
It was tough when I was younger which was one big reason I bought back in 1989
Natalie- this is a bit late and off-thread, but I want to thank you for your thoughtful response to my asset allocation question last week.
Thank you.
Thank you Natalie for taking the time to respond to Ol’Bubba. I learned something new.
Police: Foreclosure Led to Murder-Suicide
HOUSTON - Homicide investigators say a northwest Houston home under foreclosure apparently led the struggling residents to take their own lives.
Police arrived at approximately 11 p.m. Sunday to the home on Arncliffe Drive near Antoine Drive and found a married couple shot to death.
The couple left notes that indicated the shootings were suicides and a result of financial difficulties including the foreclosure of their home.
Investigators say the couple were found on their bed with the suicide notes alongside of them.
Because investigators say their corpses were decaying for more than one month, the stench of their bodies could be smelled across the street. The smell apparently alarmed a neighbor enough to contact police.
One gun was found inside the home.
Sad. Just, sad.
It is sad how they damage the BANK’S property in this final act of selfish arrogance.
That they didn’t take their Realtor with them?
sfbb,
( Way to put a positive spin on things! )
You’ve redeemed my Monday!
GM wants more subprime buyers; will lender agree?
GM wants to lift sales with more subprime buyers but its main lender keeps purse strings tight
DETROIT (AP) — If your credit isn’t good, General Motors Co. still wants to sell you a car.
The problem is, it can’t. At least not in big numbers. That’s why the automaker wants more control over its lending again.
GM’s top North American executive Mark Reuss, under pressure to quickly sell more cars and boost GM’s value as it gets ready to sell stock to the public, said a shortage of subprime lending is holding back sales in the U.S.
But the automaker’s main lender, Ally Financial Inc., has little appetite for risky loans, having spent the last few years cleaning up its own financial mess caused mainly by its failing mortgage lending business. Both companies are majority-owned by the U.S. government.
For decades, GM owned Ally, writing its own loans through the so-called captive finance arm. Nearly every automaker makes loans in such a fashion. But a cash-starved GM sold most of Ally — formerly known as GMAC — in 2006.
I would never buy stock in this phony company.They will screw you just as fast as they did last time.I’m sure they will find another round of suckers though.
That this is coming so soon is very revealing. Projections and expectations are really starting to outrun reality. Now it’s going to get interesting.
Sure they’re spinning this as a sign of strength, but basically they’re admitting that in a grow or die world - the new normal will not do.
So, they’re basicly admitting that selling people cars that they can’t afford IS their business model?
Why not? It works for houses too!
Hey keep that quiet, we have new stock to sell.
What do you think Fannie and Freddies business model is?
“What do you think Fannie and Freddies business model is?”
A wing and a prayer…at best.
So, they’re basicly admitting that selling people cars that they can’t afford IS their business model?
This goes back to what I was saying the other day, that there is a worldwide glut of expensive cars being built and the future belongs to those who can build cars that cost between 5 and 10K. As wages continue to stagnate and even fall in the US there will be less and less demand for vehicles priced over 20K. This will be especially bad for American brands as they will be the first to go over the cliff. GM might find itself selling mostly cheap tinny cars made by its Korean subsidiary (the same guys who brought us the Chevy Aveo).
I found it interesting that two of the few winners, at least in the US, these past few years have been Hyundai and Kia. Hyundai is moving upmarket now (and undercutting Toyota, Nissan and Honda) while Kia remains the bargain basement brand, at least until the Chinese cars show up.
“Hyundai is moving upmarket now (and undercutting Toyota, Nissan and Honda) while Kia remains the bargain basement brand, at least until the Chinese cars show up”.
mikey just bought a low milage Certified 2007 Hyundai Azera Limited Ulitmate. It has everything button and gadget known to man except built in navigation but I take my orders from girls, green turtles or my Garmin anyway.. It’s supposed to be Sage Green but looks metallic gold to grey in different light. Damned thing changes colors at no extra charge.
I get a lot of compliments and love the auto/manual shift. It suprizes many cars that are in my size class at stoplights. Gas milage isn’t the greatest for that year but considering what I paid, I have a riot in cheap luxury.
This photo is my color with black leather interior.
http://tinyurl.com/2cyne5f
Disclaimer: I do not work for Hyundai but they do give me Free Car Washes and as many Free machine made French Vanilla Cappuaccinos as I can drink whenever stop at the nearby dealership. I’m hooked on them and I do tend to lay a little rubber when I leave.
“I’ll call it the XKE Factor”
I believe this factor, very much a reality, will lead to future difficulties at Harley Davidson.
I could use a new car, but any midsize or larger car nowadays seems to sticker for somewhere north of $30K.
OTOH, I can’t see paying 50% of original sticker for a truck with 100K miles on it.
I’ve wanted a Dodge Challenger for about 35 years. New ones equipped the way I want are over $35K, and restored 1970-71 R/Ts are still going for crazy money.
So, it looks like that money will go into my Charger and Road Runner projects, and I’ll be waiting another 35 years.
http://sfbay.craigslist.org/eby/ctd/1735169987.html
buy it used, X-GS. We want you to be happy!
I’ve been sorta looking around for a late-model minivan but they seem to be getting rather rare. I thought since I wasn’t going for an SUV it might be easier to find something reasonable but it’s not, at least not here.
If GM and Chrysler go, what will happen to the minivan? Toyota and Honda models are spendy.
X-GS,
Well, it’s not like I -don’t- hear you, I do BUT!
DennisN has this wonderful formula and I’ll call it the XKE Factor? He and I were touring Boise last fall and talked about collectible cars.
His theory was that, the cars in the greatest demand ( at the time ) are for the 45 to 50 Male demographic and… when he was a kid, the Jaguar XKE was just hitting it’s stride. Crazy expensive. Well the guys that were of an age to find them enviable in the 60’s & 70’s are now… well, in their 80’s!
So it’s a constantly shifting scene. Dennis can explain it better than I can but I’ve seen that shift first hand.
If GM and Chrysler go, what will happen to the minivan? Toyota and Honda models are spendy.
Toyota and Honda are the high end and Kia is the low end.
You see a similar thing happening to 30s classics, and 55-57 Chevys. The guys that think they are really cool are dying off, and prices are getting soft on them.
I don’t know about the 60s-70s muscle cars. The are “different” (
). High school kids think they are cool. My daughters are constantly wanting to borrow the 340 Dart to drive to high school and college.
Yeah, you can make a Subaru or V-Tec run as fast. As soon as you have NOS it out the azz, and/or replaced every single component in the drivetrain. Put a set of slicks on it, and see how long those transaxles and halfshafts last. $30K bucks to run 12.99s? Can you breathe going that fast?
Muscle cars worked, because they can go real fast, without a huge expenditure of money. Parts are still cheap, and you can fix them at home. All the “poor handling” issues can be addressed, mostly by putting modern performance radials tires on them. (unless you have something like a 440 in a Duster/Dart……then it sucks. Not that anyone should view that as being a problem.
).
And burnouts using the front tires just look silly
Yeah, always be careful not to ‘chirp’ the fronts coming off a stop light, unless you want to look ‘totally’ stupid?
Oh, no doubt the muscle cars will continue to have a loyal following, and per your description in terms of maint., probably always will.
I just don’t think the dollars will be ‘as’ demanding going forward. They’ve crossed over generations but unlike our cycle, not ‘all’ young HS guys today will find them appealing? Things were a lot better when everyone followed their own preferences. Again, we’re finding the same issues w/ vintage guitars where ‘everyone’ congregates around but a handful of models.
$30K bucks to run 12.99s?
Hah hah, not even. I bought a 1991 AWD turbo Mitsubishi Galant VR4 back in 99 for $3500. Made a few mistakes that wasted a couple grand…learned my lessons and spent a few more thousand over time and ended up with a car that ran mid-12s at high elevation(!) that I daily drove until now. Second gear is going out, and I’ve got 255k miles on it, so I’m thinking it’s time to retire it. I’ve got an offer for 2k from a guy who wants all the parts off it, and I’ll probably take it.
Sure there are stupid people out there who pay a lot more for a lot less, but I have no complaints about how that car has worked for me. At this elevation muscle cars require insane power or slicks or both to run with me. I grew up with BBCs and I love them…but I like traction on a daily driver running all-seasons even better.
It’s been their business model for nearly two decades. That and leasing. Basically, RE and the auto industry thrived on people buying things they couldn’t afford. The whole moral hazzard thingy started years ago. The auto industry got me thinking about a false economy, back in the mid nineties. Of course, they want to go back to easy credit, if it fails the Gov’t bails them out.
They would do better to spend their money buying more Senators which would be willing to vote for Public Optio/Single Payer health care. Then they could unload HUGE obligations.
Good gravy, why not just admit you can’t cut it as a car manufacturer already? The company should be allowed to die. The money we blew ’saving them’ could have been spent as grants and low cost loans for spinning up new car companies without their overhead.
“Once upon a time, old timers would tell us that one day things would get so bad that we would all have to stand in bread lines. Well, today food stamps are the new bread lines.”
~ Pravda
It is OK comrade, the market is up.
“Well, today food stamps are the new bread lines.”
At least with food stamps, you don’t have to waste your life standing en queue.
Yeah, plus you can spend more time at the cell phone kiosk getting the latest phone on which to share your life of unbounded success with your food stamp colleagues!
“food stamps?” Those are sooo 20th century. Now it’s an “independence card.” Probably a little bit less susceptible to fraud and definately cheaper to administrate.
Check the website: Some of these “Link” cards can be used with a PIN at any ATM for cash withdrawls. Now that is regulation we can believe in.
“Well, today food stamps are the new bread lines.”
I was at Walmart recently standing in line behind a young tattooed woman with a grocery cart who stayed busy texting on her cellular phone. When she got to the counter out comes the food stamp credit card. For the large bag of dog food she peeled two twenties from a thick wad of large bills.
But ending these kinds of programs would cause children to starve!
Ahhh, the underground economy at work.
How can you tell it’s a food stamp card? I’m always wondering when I’m at Walmart.
In MT,
Sounds ’snoopy’ but you kind of have to look at the items they’re getting ( or more specifically -not- getting ) It takes a trained eye but when you see them getting their beer & cig’s seperately “in cash” it’s a dead give-away.
OK I confess that I’m thrilled that my 53-year-old sister has finally applied for a food stamp card. We pay her housing and utilities but not for food. She didn’t want to receive any kind of government help - she has no health insurance and has never applied for any services. She hasn’t worked in years - mentally ill - and I would feel sorry for anybody who hired her. I’m happy to have one thing we’re not responsible for providing for her.
Yup, that’s why entitlements are so popular. Takes us all off the hook except for taxes.
“She hasn’t worked in years - mentally ill - and I would feel sorry for anybody who hired her.”
If she is really too mentally-ill to work, she should be eligible for the “gold ring” of aid: SSI.
REhobbyist,
I’m sorry to hear that. Mental illness is real. God love you for putting up w/ that all these years. Of late, my youngest sister has gotten, well “agoraphobic”? (sp?)
Se -refuses- to leave the home, won’t return calls, emails, cards etc. Her husband is a great guy and works as a jr. partner in a SoCal acctg. firm so we know they have the coverage to seek help.
It must be that in their minds ( they really ‘are’ doing the right thing? ) Is she there locally or are you supporting her from a distance?
Divorced long ago. Unfortunately she refuses to get any kind of mental health evaluation or treatment. She’s functional - can keep house, cook, etc, and actually is charming until you get to know her. She’s just impossible to be around. She was homeless for awhile until the bubble burst and we (my other sister and I) were able to buy her a little house. She will never receive SS until she’s 67,and then it will be half of what her ex-husband receives. We figure that we’ll have to support her forever, or until her kids are old enough to help (if they are willing.) Luckily we can afford it.
And DinOR - I hope her husband can get her some help or their marriage is doomed.
“How can you tell it’s a food stamp card?”
In Washington state it’s a white card with the state’s border outline and George Washington’s face; there’s no mistaking it, even from a distance. Lots (~40%) of people rely on them up here in the Columbia Basin.
Fears Intensify that Euro Crisis Could Snowball
17 May 2010 | The New York Times
After a brief respite following the announcement last week of a nearly $1 trillion bailout plan for Europe, fear in the financial markets is building again, this time over worries that the Continent’s biggest banks face strains that will hobble European economies.
In a sign of the depth of the anxiety, the euro fell Friday to its lowest level since the depth of the financial crisis, as investors abandoned the currency as well as stocks in favor of gold and other assets seen as offering more safety.
In trading early Monday morning, the euro declined again, managing at one time to reach a four-year low relative to the dollar.
The president of the European Central Bank, Jean-Claude Trichet, in an interview published Saturday, warned that Europe was facing “severe tensions” and that the markets were fragile.
For Europe’s banks, the problems are twofold. Short-term borrowing costs are rising, which could lead institutions to cut back on new loans and call in old ones, crimping economic growth.
wmbz,
As you read further, they pointed out that this is actually a “bailout” for France & Germany that own so much of Greece’s debt. Kind of like when you’re starving and attempt to eat your own leg.
“This shark, swallow you whole.”
-I think we’re going to need a bigger bailout.
pressboardbox,
I just had a depressing thought. Even if all of these Gov’s could “expropriate” each and every DIME from the drug/sex/crime trades, you -still-wouldn’t have enough to fill the hole?
Someone refresh me, what’s the definition of ‘vice’ again?
I personally suggest that anyone who is more than $50K underwater on a mortgage should strategically default if it works out to their advantage as a household business decision. Why should Main Street America give away still more of their collective wealth to the greedy banksters?
Moreover, it may be beneficial to the long-run health of the U.S. mortgage lending sector, as banks that threw away money on bad mortgages will get drummed out of existence, leaving behind lenders who follow more prudent lending practices. Why shouldn’t banks that are bad at banking go out of business?
Amy Hoak’s Home Economics
May 17, 2010, 8:06 a.m. EDT
More homeowners choose to default on loans
Choosing not to pay has consequences beyond damaged credit scores
By Amy Hoak, MarketWatch
CHICAGO (MarketWatch) — “Strategic defaults” are on the rise as more borrowers who are underwater on their home loans decide it’s not worth it to stay current on their payments each month. That trend could have repercussions for the housing market, and for borrowers, in the future.
Strategic defaults are when borrowers who owe more on their homes than they’re currently worth choose to stop paying their mortgage but continue to meet other financial obligations, according to a definition by Morgan Stanley in a research report on the topic.
In other words, these homeowners neglect their monthly principal and interest payments, but still pay other bills on time, including credit cards and auto loans.
The Morgan Stanley report estimates that 12% of mortgage defaults in February were strategic. Other reports estimate an even higher proportion of this type of loan default.
Growing social acceptance of this behavior could have ramifications not only for personal credit histories and the health of neighborhoods, but also for the future of mortgage lending, according to those studying the issue.
For one, there’s a contagion effect: As more people watch their friends or neighbors choose to default, the more it becomes a viable option for homeowners who may otherwise wait years just to return to a positive equity position in their properties, said Sam Khater, senior economist for CoreLogic, a provider of consumer, financial and property information. The volume of foreclosures on the market today is also chipping away at the stigma that used to come with defaulting on a home loan.
“If you know someone who has defaulted strategically, you’re more likely to declare you’re willing to do it,” said Luigi Zingales, professor of entrepreneurship and finance at the University of Chicago’s Booth School of Business.
…
“If it really does become a legitimate problem, the implications are pretty dramatic for anyone that wants to buy a home in the future,” said Rick Sharga, senior vice president of RealtyTrac, an online marketplace of foreclosure properties. “The lenders would have to build this into their risk models with either larger down payments or higher interest rates.”
Why is that a problem for buyers and not sellers? Won’t sellers have to cut prices to make up for the higher interest rates and downpayments buyers face?
The thing is that sellers can’t cut prices precisely because they are underwater, which is why they’re walking in the first place. So now the seller is the bank, and they are the one with the problem…and we can’t be havin’ any o’ that, oh no precious…
And they say that lenders “would have to” build down-payments into the risk models, as if this were something new.
“If it really does become a legitimate problem…”
If?
You saw that too? Where HAS this buy been living?
the more it becomes a viable option ??
I suspect that the consensus among these strategic defaulters is that the “punitive” repercussions of a bad credit report are over blown…Two or three years will go by and all will be forgiven and forgotten..
What I have not seen “yet” is articles on lenders pursuing deficiency judgments in the states that they are allowed…I cannot imagine that they would not…Why not…You could probably hand it off to some bounty hunter collection agency..
I suspect, for some of these people, the possibility of a deficiency judgement may be what keeps them from doing a strategic default…
I think there is some political pressure being applied to the banks *not* to pursue deficiencies in recourse states, like Florida for instance, despite the fact they have no non-recourse laws on the books.
Well I would expect banks to sell that debt to those who WERE willing to do collections work. In a year or two I suspect there will be a cottage industry of companies going after ruthless defaulters. Certainly collections agencies seem to owe their existance at least partly to the fact that it is a good idea to “outsource the @ssholes” in collections and avoid the negative reputation that nagging gives you.
CIBT,
This is like waving a red flag in front of joey.
Paging joey, paging joey, paging joey.
Joey’s been MIA as of late…
I almost threw up this morning; one of the cafeteria people was showing me pictures of her single, non-working, 19-year-old daughter and her first grandkid (born last week).
I wonder who’s paying for the hospital…
“Nearly 40 percent of babies born in the United States in 2007 were delivered by unwed mothers, according to data released last month by the National Center for Health Statistics.”
And of course, the cafeteria lady and her daughter were born in Mexico…
“While 28 percent of white women gave birth out of wedlock in 2007, nearly 72 percent of black women and more than 51 percent of Latinas did.”
Out-of-wedlock kids impose huge societal burdens. However, since this constitutes a huge and often lifelong entitlement class for the Democrats to pander to, the system will only encourage such rampant and irresponsible breeding.
Yeah, but one of them might grow up to be president one day.
(tongue pokes hole in cheek)
+1
See movie “Idiocracy” for more detail.
Or visit your local Wal-Mart and take a look around.
system will only encourage such rampant and irresponsible breeding.
Until the money runs out.
Reproductive rights continue unabated in war ravaged areas.
Proper response: “And you’re proud of this because….???”
Because breeding is an achievement to these
people; it’s like going to college for us!
Brett-
How’s the healing going? (I did the same in my 30’s.)
Healing is going great; it’s been slowler than what I thought, but painless for the most part (thank God for medications).
Thanks for asking!
Brett,
Good to hear. I recall it took a while for the final settlement. You did the right thing for you. I have no regrets.
I can’t tell you ( well yes I ‘can’ ) just what a BURDEN an unplanned pregnancy forces upon grand parents. And for ‘us’ it couldn’t have happened at a worse time.
We always assumed… our eldest daughter would be the first to get married and have a child. Even though both of our daughters are married to great guys w/ bright futures, the -cost- ( both psycholigical and financial ) has been enormous.
WE… have ponied up for every penny of it. And it has sucked. But, they are OUR kids! My wife and I are just NOW getting our finances back in order. Our SIL graduates next June and already is interning for his future employer. The Burden is near it’s end. But not before it ate thru our savings and sanity. We look on our grand daughter w/ pride and daughter #2 will be RE-enrolling in the Fall. It’s just life guys.
Oh my point ( other than misspelling psycholOgical ) was that, having to foot the Bill ( yourself ) really makes you think long and hard before having ANOTHER! )
Any time my wife brings up having a child to our ‘oldest’ daughter, invariably her responses involve $’s & Sense.
It’s so hard for me to understand unplanned pregnancies at this point in time…
There are condoms, birth control pills, morning after pill, planned parenthood… why are teens still getting pregnant and having children?
That was nice of you to help, DinOR. Just be glad your daughter at least got married though. Otherwise, she’d have to buy a house to make up for the lack of husband, ya know.
Q: why are teens still getting pregnant and having children?
Because they want to. I have tutored multiple kids in the process of flunking out of high school who got pregnant/intended to get pregnant quite deliberately. I’d guess the %age of unplanned pregnancies among the teen set is unexpectedly low. Lots of reasons they choose to get pregnant, some financial and some emotional. It’s a bitter cycle.
It’s so hard for me to understand unplanned pregnancies at this point in time…
The things you mention aren’t 100% effective, and unfortunately one can’t force a woman to go with Plan B or get an abortion….
“And you’re proud of this because….???”
Ah, you hate children! My hubby’s side of the family is rife with these blessed events. One of my most dreaded family duties is going to the b-day party for let’s see, the 3rd baby ago, and all the baby mama’s friends and relatives who are also baby mamas themselves and the few baby daddies that are around, and about 21 babies.
Big V,
Thanks. But it’s not a matter of being “nice”. The world works better when those that ‘can’, take care of their own issues.
And I have no problems w/ those that -don’t- have the resources to help their own and there are times when it is circumstances beyond their control?
What irks ME is when you have neighbors ( that live in a LOT nicer, newer, bigger home than ‘you’ do ) and they feel “because they have ‘other’ kids in college!” that it’s their Right to go down and get Sissy on the Dole, leaving the REST of us stuck with the bill!
I’m not looking for a pat on the back here, but just statistically speaking, if you have 3 daughters.., (1) of them will get pregnant before she gets married? This is about Ending The Cycle. Look, SELL the 2nd home, sell the motorhome but please, don’t make your problems ours.
DinOR,
It sounds like you are taking care of your progeny (which is great), but can you elaborate on how you are making sure your daughter is learning responsibility while you are footing the bill? I’m not being snarky here, I really want to know for when I have kids how other people have dealt with irresponsible situations their kids get into and how to put the “dread” into them even when they get past the 18+ stage. I will want my kids to know that I will help them no matter what situation they get themselves in, and I will still love them, but I will also want them to take responsibility for their actions *before* doing dumb things so that I don’t have to. I hope you get my point, and that I am just asking for your thoughts on the situation.
“The things you mention aren’t 100% effective, and unfortunately one can’t force a woman to go with Plan B or get an abortion….”
drumminj, you are correct: nothing is 100% effective. But it turns out that if you take a 99% effective method, and combine it with a 97+% method, you end up with something that is remarkably effective.
They have babies because it gets them attention and empathy that they are not usually getting. And then there are the ones who just want to have another person they can control in a life where they have almost no control.
And you can blame the guys all you want, but it takes 2 to tango. Both are equally to blame.
mathguy,
Just so we’re clear here, the LAST thing daughter #2 wanted was to get pregnant! She was using BC and.., things happen. Our’s was a very different situation and our SIL comes from a very decent, well established family that has pitched in endlessly as well.
They knew each other since childhood, dated for a long time before they actually slept together. ‘He’ has been a total stand up guy and in many, many regards, we’ve been more fortunate than ‘most’.
Trust me, I’m an old school military hard @$$ and D-2 knows… there are no free lunches. She also knows this in now way excuses her from MAKING something of her life and putting her best foot forward -every- day. She will be working it off in my firm and be given a stipend.
But it’s not like we’re trying to make this “punishment” ( just a need for their to be consequences and have the math ‘work’ ) So, at 23, we still have high hopes for her and she is giving every indication that aims to live up to them.
“The things you mention aren’t 100% effective, and unfortunately one can’t force a woman to go with Plan B or get an abortion….”
I think this problem is 99% don’t-give-a-s***.
drumminj, you are correct: nothing is 100% effective. But it turns out that if you take a 99% effective method, and combine it with a 97+% method, you end up with something that is remarkably effective.
Yes, and being one who does not want offspring, that is the route I have gone. It’s not as much “fun”, but it sure beats the time and monetary responsibility of having a kid.
Sometimes you have to smile because crying is the only other option.
Reshuffling the deck chairs on the Titanic seems to not have worked out as well as anticipated.
May 14, 2010, 3:22 p.m. EDT
The second debt storm
Who will bail out the countries that bailed out the world’s corporations?
By Alistair Barr, MarketWatch
SAN FRANCISCO (MarketWatch) — The financial crisis never really went away.
The debt mountain that brought down some of the world’s biggest banks and dragged the international financial system to the brink of disaster has simply shifted to governments. Now it’s threatening countries around the globe — and, if left unchecked, could rip the very fabric of Europe’s economic system and wreck economic recoveries in the U.S., China and Latin America.
The impact on markets has been severe. The euro has slumped more than 12% against the dollar since the sovereign-debt crisis flared in southern Europe. Gold has marched to new highs as investors seek a safe haven and, perhaps most alarming, it is now more expensive to buy insurance against national default than it is to insure against corporate failure.
“The sovereign-debt crisis spun out of control in the past week, and we see no easy way to resolve it,” said Madeline Schnapp, director of macroeconomic research at TrimTabs Investment Research.
…
It’s GOOD to be the Banksta!
So it looks like they went with the original “Bad Bank” plan (ie a bad bank would take toxic assets off the hands of the banks) - but it became the governments that became the “Bad Bank”.
There are those who think this course of action is consequence-free. I think though, that the price will be paid in declining living standards and further income stratification.
Politicians, with their love of borrow and spend and campaign donations, allowed this to happen in the first place. It’s time to replace the regulators.
“Who will watch the watchmen?” In our system, the voters do. Hopefully they won’t be asleep at the switch too.
There are those who think this course of action is consequence-free. I think though, that the price will be paid in declining living standards and further income stratification.
———————
Yep. Good thing all those “talented” folks at the financial firms don’t have to worry about a lower standard of living. Heck, they’re making record profits!
Just us lowly plebs have to worry about the future. The banksters have taken good care of themselves (again).
The Clintonista bond vigilantes are back. Where have they been hiding?
May 17, 2010, 9:20 a.m. EDT
Sovereign debt ‘vigilantes’ put Europe on notice
Bond market’s big movers are skeptical of Greece, other weak governments
By Jonathan Burton, MarketWatch
SAN FRANCISCO (MarketWatch) — The bond vigilantes are on the attack, and Greece may be only their first victim.
The world’s most powerful bond investors have lost patience with governments that threw a public-sector party with money borrowed on the cheap and now are scrambling to pay debts and provide for their citizens.
Greece, with its cooked books and spendthrift ways, was an easy target for the vigilantes’ guns, but Spain and Portugal also are under fire, and the bond-market masters are keeping a close eye on how the U.K. handles its finances. In fact, no government appears safe, not even the U.S.
The global debt crisis is in its second stage as governments deal with the debt absorbed from the private sector, and record gold prices have been reflecting these worries, according to SCM Advisors strategist Max Bublitz. Laura Mandaro reports.
“There’s a tremendous clash between the bond vigilantes on one side and reckless governments on the other,” said Ed Yardeni, president of Yardeni Research, an independent global-markets strategy firm. “The bond vigilantes are trying to establish some fiscal and monetary law and order.”
Who, or what, are “bond vigilantes?” They are the bond market’s heavy hitters, taking fiscal policy matters into their own hands. Yardeni coined the term in the summer of 1983, when Treasury holders smacked the U.S. over high deficits. Yardeni recognized these hedge funds, mutual funds, pension funds and other institutional investors as a fearsome mob, ready to pillory profligate politicians and lax central bankers.
“If the fiscal and monetary authorities won’t regulate the economy, the bond investor will. The economy will be run by vigilantes in the credit markets,” Yardeni noted then.
…
Bond vigilantes? You could also call them investors who are concerned with return OF principal. Argentina offered 25 cents on the dollar to its debt holders after it defaulted. Obama offered what, a few cents on the dollar to the GM debt holders?
Interesting how deciding to NOT lend out your money makes you a vigilante. Kind of reminds me of the NorKs declaring that boycotting them is some sort of act of war.
NorK’s?
?
North Koreans.
In contrast to ROKs from the Republic of Korea.
DennisN,
Thanks! ( I knew it had to be ‘North’… something? ) And -not- Kansas.
Heh Where’s My Recovery (Empire Index)
Brace for impact!
*U.S. EMPIRE STATE FACTORY INDEX AT 19.1 IN MAY, FED SAYS
*U.S. MAY EMPIRE FACTORY INDEX COMPARES WITH FORECAST OF 30
*U.S. MAY EMPIRE FACTORY FUTURE INDEX AT 42.1 AFTER 55.7
*U.S. MAY EMPIRE FACTORY EMPLOYMENT INDEX AT 22.4 AFTER 20.3
*U.S. MAY EMPIRE PRICES-PAID INDEX AT 44.7 AFTER 41.8
*U.S. MAY EMPIRE FACTORY SHIPMENTS INDEX AT 11.3 VS 32.1
*U.S. MAY EMPIRE FACTORY NEW ORDERS INDEX AT 14.3 AFTER 29.5
*U.S. EMPIRE STATE FACTORY INDEX AT 19.1 IN MAY, FED SAYS
From Marketwatch:
The bank’s Empire State Manufacturing index decelerated to 19.1 in May from 31.9 in April. The drop suggests the pace of growth slowed in May. New orders and shipments moved lower but remained in positive territory.
Yeah, way down from estimates.
(From K. Denninger)
I thought the recession was over.
Hold on to your seats, investors! The DJIA declining and the dollar dropping against most major rival currencies in synch is a very inauspicious sign, indeed.
From Bloomberg:
CURRENCY VALUE CHANGE % CHANGE TIME
EUR-USD 1.2380 0.0022 0.1750% 09:54
GBP-USD 1.4465 -0.0071 -0.4915% 09:54
USD-CHF 1.1324 -0.0012 -0.1081% 09:54
USD-SEK 7.7416 -0.0040 -0.0520% 09:54
USD-DKK 6.0101 -0.0078 -0.1292% 09:54
USD-NOK 6.2342 -0.0124 -0.1980% 09:54
USD-CZK 20.6210 -0.0480 -0.2322% 09:54
USD-SKK 24.3260 -0.0315 -0.1292% 09:54
USD-PLN 3.2410 -0.0079 -0.2424% 09:54
USD-HUF 224.5120 0.1825 0.0814% 09:54
USD-RUB 30.4950 -0.0103 -0.0337% 09:54
USD-TRY 1.5412 -0.0042 -0.2702% 09:54
USD-ILS 3.7642 -0.0090 -0.2385% 09:53
USD-KES 78.6500 0.3500 0.4470% 09:29
USD-ZAR 7.5504 0.0016 0.0219% 09:53
USD-MAD 8.9012 -0.0139 -0.1559% 09:53
I love it when the MarketWatch headlines are directly contradicted by violent market volatility. There has never been a better time to pull out of the stock market!
market pulse
May 17, 2010, 9:40 a.m. EDT
U.S. stocks begin tentatively higher
By Kate Gibson
NEW YORK (MarketWatch) — U.S. stocks opened tentatively higher on Monday as caution prevailed amid worry over the health of Europe’s economy. The Dow Jones Industrial Average (DJIA 10,594, -26.60, -0.25%) rose 36.35 points to 10,656.51. The S&P 500 Index (SPX 1,133, -2.36, -0.21%) added 5.46 points to 1,141.14. The Nasdaq Composite (COMP 2,346, -1.10, -0.05%) climbed 14.19 points to 2,361.04.
William shatner is still all over the tv pimping priceline, PCLN.
This company has pets.com all over it.
aww come on…lay off the Shat.
Honesty in government, British style….
Speaking at a press conference yesterday, Mr Laws said: “When I arrived at my desk on the very first day as Chief Secretary [to the Treasury], I found a letter from the previous chief secretary to give me some advice, I assumed, on how I conduct myself over the months ahead.
“Unfortunately, when I opened it, it was a one-sentence letter which simply said ’Dear Chief Secretary, I’m afraid to tell you there’s no money left’, which was honest but slightly less helpful advice than I had been expecting.”
Britain’s political parties engage in the same racketeering as their Republicrat counterparts in the U.S. Already the Conservatives are backing away from their previous, impossible campaign promises and blaming the mess left by Labour. Next they’ll call in the IMF to impose a brutal austerity program that ensures the bankers get paid off while everyone else suffers. They’ll claim they have to accept the IMF dictates in order to gain access to “capital markets.” In other words, so they can go on enriching the bankers who own them.
What a puppet show.
Sammy,
Absolutely. We can’t have “crapital muckets” shut down for one SECOND just to see if that thwaping sound under the car is a corpse or the muffler dragging! Not-One-Second.
link http://business.timesonline.co.uk/tol/business/economics/article7128665.ece
DennisN,
Normally I’m a fan of British humor but seriously, that was just too far. Why doesn’t the former Sec. just set hiw ‘own’ trial date w/ a snide and damaging remark like that. Not funny.
“I’m a fan of British humor but seriously, that was just too far.”
I agree. How dare they throw such a stiff-necked bloke in front of us like that! That his first time on camera?
Any large corportation form response to any sensitive questions:
The real answer that they wish they could say.
We did the corrupt thing that any large corrupt organization would have done as part of the organized collusion of the network of corruption that exists at this high level of power. Our corruption keeps America working. That is all you need to know. Go do your job while we do ours.
Which most people could live with… if they were sharing some of that loot.
How bad can unemployment be if this guy can get a job?
http://finance.yahoo.com/news/Dick-Fuld-ReEmerges-at-Legend-tsmf-1358252516.html?x=0
What is “Kachingle”? I just noticed it in the sidebar. Does anyone else on here know what it is?
LOL. I don’t see it, but I can guess - sounds like a catch phrase for strategic default - i.e. the cash-register sound one makes when one does the jingle-mail thing after doing a big cash-out refi or the like.
“Ka-ching!” + “Jingle Mail” = “Kachingle”
It’s right underneath the PayPal logo.
Must depend on the browser - it’s not there for me (Firefox). Or perhaps it’s blocked by my work firewall - though usually then I get an indication.
I could not find it either…
I am moving to Phoenix in July 2010. At a guess, how much downside is left in the single family home market ?
Bottomless pit ? OK time to buy ? Pls advise
I don’t know the Phoenix market, but you can always use the traditional metrics:
don’t buy unless you can buy for less than 120x monthly rent
dont’ spend more than 2.5x annual income
etc.
I have a residence in southeast Phoenix (the Ahwatukee area). I think there is another 20% to 30% downside in Phoenix.
I like the area of Lincoln Blvd (the base of Camelback Mtn), Scottsdale north of Indian Bend, and Ahwatukee west of 42nd st. In the latter case, I am watching the price of a house across the park from my apartment at $289,000. Very nice looking house. It dropped in price $10,000 in the last three weeks.
The burst is not over for Phoenix.
Bill:
What do you think of Carefree and Cave Creek?
I drove in the areas of them years ago. I hardly ever go up that way anymore. I mostly mountainbiked the desert between Scottsdale and Cave Creek in the winters - tons of single track trails that make me not care about never going to Moab, Utah.
I heard talk that Cave Creek has issues with loud Harley bikers. So you wonder what type of people are there.
Carefree is supposedly upscale from that point. I heard Hugh Downs lives there. The late Paul Harvey lived there for decades.
Those places are about as far away as Anthem from the center of Phoenix. My preferences are closer in, such as those areas I mentioned in my previous post.
Thanks, appreciate your feedback.
I think 100x monthly rent is probably a better multiplier for a place like Phx. Phx has always been really, really cheap.
I would try to get a firm handle on the water situation (past, current and future) in Phoenix by area in the city before you buy, irrespective of prices. There’s a lot of information out there and water could become a key issue going forward.
MrBubble
From yahoo and NYT…. Euro dropping… how long till they figure out they can’t pay off all the debt? How long till we figure it out?
How long till China figures it out? Rising rates and deflation at the same time! Come on baby!
Fears Intensify That Euro Crisis Could Snowball nytimes
On Monday May 17, 2010, 3:00 am EDT
After a brief respite following the announcement last week of a nearly $1 trillion bailout plan for Europe, fear in the financial markets is building again, this time over worries that the Continent’s biggest banks face strains that will hobble European economies.
In a sign of the depth of the anxiety, the euro fell Friday to its lowest level since the depth of the financial crisis, as investors abandoned the currency as well as stocks in favor of gold and other assets seen as offering more safety.
In trading early Monday morning, the euro declined again, managing at one time to reach a four-year low relative to the dollar.
From Yahoo again… as I posted a while back, I expected people to flee the Euro in a big way… course threw a lot of my retirement money into stocks.
Fortunately my bonds are doing quite well making up for getting squat in stocks. I’m all in.. ‘cept my retirement plan keeps me from doing something mega-stupid.
Seeing mortgage rates under 5% still.
U.S. sees record capital inflow
reuters
On Monday May 17, 2010, 11:06 am
By Steven C. Johnson
NEW YORK (Reuters) - Foreigners bought a record $140.5 billion of long-term U.S. securities in March, the Treasury Department said on Monday, and more than doubled purchases of U.S. government bonds.
China remained the largest holder of Treasury debt and added to its holdings for the first time in seven months. Net Treasury purchases by all foreign investors jumped by $108.47 billion in March from $48.1 billion in February.
“Long-term purchases exceeded our best expectations and clearly show foreign investors have not satiated their appetite for U.S. securities,” said Michael Woolfolk, senior currency strategist at BNY Mellon in New York.
March’s net long-term inflow was roughly three times the $47.1 billion inflow in February and shattered a previous record set in May 2007. The Treasury began compiling the data in the 1930s.
Investors said some of the Treasuries buying may have been driven by worries about Greece’s debt crisis and fear of exposure to the euro.
Demand for U.S. assets was particularly broad in March, with foreigners snapping up $16 billion in corporate debt, snapping a nine-month streak of net selling. U.S. agency debt purchases spiked to $21.9 billion from $2.4 billion.
CHINA ADDS TO TREASURY HOLDINGS
China bought $17.7 billion worth of U.S. government debt in March, swelling its total holdings to $895.2 billion. It was the first time China added to its Treasury stash since September.
Japan remained in second place with $784.9 billion, up from $768.5 billion in February.
“This is a vote of confidence, of course, and we’re impressed with the breadth of buying and the ‘quality’ of those buyers — UK, Japan, China, OPEC, Canada, Germany,” said David Ader, head of government bond strategy at CRT Capital Group, Stamford, Connecticut.
China’s net Treasury purchases may be “the first tentative signs that maybe they really are hostage to the U.S. dollar and are really struggling to find an alternative to the dollar,” said Alan Ruskin, chief international strategist at RBS Securities in Stamford, Connecticut.
Some analysts said the worsening of a European debt crisis that resulted in a $1 trillion bailout for troubled euro zone governments may show foreigners increased U.S. asset purchases in April and May.
The euro has lost more than 13 percent against the dollar so far this year, hitting a four-year low beneath $1.23 on Monday.
“The data essentially means the dollar is very well supported on a trade and investment flow basis, which drives the long-term value of the currency,” Woolfolk said.
Overall inflows, which include short-term securities such as Treasury bills, also rose in March, with foreigners buying a net $10.5 billion, compared with an upwardly revised $9.7 billion inflow the prior month.
U.S. banks’ own dollar-denominated liabilities to foreign residents also decreased sharply, by $123.8 billion. Analysts said that could be partly tied to dollar-demand from investors in Europe.
Doctors’ Medicare payouts to be cut 21% June 1
May 17, 2010
NEW YORK (CNNMoney.com) — For the fourth time this year, doctors face a potential huge cut in the fees that the government pays them to treat Medicare patients.
Physicians will be hit with a 21% cut in Medicare reimbursements as of June 1, unless lawmakers decide to patch over the issue — as they’ve done for years. Congress is now debating the matter, and to stop the cut lawmakers would have to vote to pass a new patch sometime in the next two weeks.
If the proposed cuts go through, physicians are worried their practices will be so strapped that they’ll have to drop some of the 43 million Americans who are covered under Medicare.
If the proposed cuts go through, physicians are worried their practices will be so strapped that they’ll have to drop some of the 43 million Americans who are covered under Medicare.
Yeah, right, like all their fixed costs (rent, malpratice insurance, staff wages, equipment rentals/pruchase, will decrease if they don’t take Medicare patients.
Welcome to our world heathcare providers! A world of declining wages that don’t cover the education costs to get there.
Basically, just like pretty much every other industry in the USA.
Better not tell those 83 gazillion people in or going back to school that “health care” may not be such a bright future after all.
(Conservatively, I’m guessing that 75% of the people in college are working toward some kind of health care degree, assuming that my circle of friends/family/acquaintances are typical.)
Patient-facing care is one of the few jobs that truly cannot be easily outsourced. The wages may not be that great if too many people go into it, but there will always be jobs there.
Oh I think they’ll figure out something using flatscreens, livestream from India and remote testing.
They already have.
And then there’s medical vacations. This is where you travel to another country for surgeries or treatments because even including the travels cost, it’s literally 5000 times cheaper.
That’s ok… we’ll just import doctors from Asia to take care of our medicare people.
Houston had (and may still have) some trouble back in the 1980s and 90s bringing in illegal Filipino nurses and literally holding them hostage while paying them almost nothing and charging them room and board so that they had never had any money.
Yeah right. US doctors will stop working if they aren’t paid 10x more than the average college-educated American. Whatever.
They should retrain to do “God’s work”. Oh wait…
Housing market diagnosis: Bipolar ~ May 17, 2010
NEW YORK (CNNMoney.com) — Bipolar is what comes to mind when diagnosing the post-homebuyer tax credit market. There are two separate forces pulling it in opposite directions, and experts aren’t yet sure which path the market will take.
On one hand, sales and prices are rising, indicating recovery. On the other hand, so are interest rates and repossessions, which most certainly do not. And then there are the millions of foreclosures that need to be sold but haven’t yet been listed — so-called shadow inventory — that could derail a real recovery if they hit the market in floods.
The prognosis? Negative short term but turning positive by the end of 2010.
“In the short run, I see a mini-collapse,” said Richard DeKaser, an independent housing market analyst and founder of Woodley Park Research who correctly predicted a downturn back in 2005 when he was chief economist for National City Corp.
“On one hand, sales and prices are rising, indicating recovery. On the other hand, so are interest rates and repossessions, which most certainly do not.”
Wouldn’t rising interest rates indicate “growth” (and therefore “recovery”) has been achieved and the need for low, low financing has passed? Who’s making these definitions?
1000 Point Drop In The Dow? This Is Just The Beginning…
By Giordano Bruno
“Anyone who has been following the fundamental underlying details of the economic downturn since 2007 recognizes that the mainstream financial media have regularly misreported facts in order to quell public concerns over the true magnitude of the collapse we are facing. More often, they choose to simply leave out certain details which might alert people to the greater problem, or underreport vital facts and hope that the truth is eventually buried by the gravity of the great “memory hole”. However, there are instances under which they will lie blatantly and outright about the state of the economy if a piece of information is highly damaging to the establishment. The 1000 point drop of May 6th was one of those instances”.
http://neithercorp.us/npress/?p=291
Stock market just got “fat-fingered” down 100 dow points in ten minutes.
You crack me up, pressboard. LOL.
Yes, it looks like the stock market continues to strengthen (get closer to its actual value).
The Fickle Finger of the PPT comes to the rescue!
Don’t you mean the smelly finger of the PPT?
LOL!
Hi HBBers. Long time no drop by. Got a question for ya about renters’ rights when a house is going into foreclosure. If the bank of record wants the tenant to stay, can the landlord/nominal home”owner” evict the tenant?
I have a friend renting a very nice house, whose LL is terminating her lease in the third year of four, as he legally can do according to the lease terms. The problem is that the house is being foreclosed upon by the bank, but the court documents haven’t gone through yet. The bank wants her to stay and pay them rent, but the LL doesn’t want the bank to get the rent money. (This is her side of things, anyway). She has about six weeks to find a new place and move. By then, the foreclosure may or may not be official.
If the LL no longer owns the house in six weeks, it doesn’t seem that he gets a say in whether she has to clear out or not. Can she stay as a ’squatter’?
Any particular reason she wants to stay in that particular house?
What state, and how quickly can the bank get the foreclosure done?
How fast can a “landlord” force an eviction?
I wouldn’t send the bank squat, unless she has some kind of document covering her payments…… like a lease. How can the bank sign a lease without clear title to the property? Her “lease” is with the “landlord”.
How high is her tolerance for BS/hassles? How “portable” is she?
Time to go look for a new place, IMO. Sounds like a migraine looking for a place to happen. Unless she is prepared to find and move to a new place at the drop of a hat.
The state is Illinois, and the problem is relative lack of portability. Fourteen cats (yeah, that’s not a typo) and mountains of cloth from the sewing/designing business she runs out of her house.
Around here it would take longer than six weeks to evict someone, so - depending on the laws and process in your area - it could be a moot point. What are the odds she will get her security deposit back?
She should check with a real estate attorney and simultaneously get something in writing from the bank stating they want her to stay on as tenant.
Thanks Kim. Already told her she needs an attorney. It’s a huge project for her to move. She thought she had another year in this house, and uprooting her business and furry companions, all 14 of them, is a big job.
YES she will probably need to sue the landlord and the bank. and let a judge decide.
If the landlord does anything really stupid like lock her out shut off the utilities or any self help eviction, he can be arrested…..just call the police …
I would ask a similar question:
What is the motivation of the LL? Why does he want her out?
If the pain of the move is that much to her, can she pay him 2 months rent (or whatever value plays best in her favor) up front to get him to back off? Why would the LL want her to leave if, in all likelihood, he’s going to lose the house soon anyway?
Perhaps the landlord thinks he/she can live rent free if he kicks the tenant out and moves in himself/herself.
Laws vary from state to state.
The first thing they need to do is find out how long an eviction takes. Here, it takes about 30 days. You easily find this information on-line.
Also, most evictions allow the tenant to explain any extenuating circumstances that may prevent or delay an eviction. In this case, the banks wants them to remain if they take possession.
If they are not sure the bank will regain possession, start looking now for a new place. This will cover their A. They don’t need to sign a lease or put up deposit, just look. Signing to move in can take less than 3 days if the new place isn’t in bad repair.
Some raw meat for y’all:
Borrowers flunking out of trial mortgage modifications
“NEW YORK (CNNMoney.com) — The number of troubled homeowners falling out of President Obama’s foreclosure rescue plan soared in April.
More than 122,000 borrowers had their trial mortgage modifications canceled in April, bringing the total to 277,640 since the program began about a year ago, according to federal statistics released Monday. Meanwhile, only about 68,000 homeowners were converted from these trials to permanent modifications.
Under the program, known as HAMP, eligible troubled borrowers are put into trial modifications to determine whether they can keep up with the lowered payments and to give loan servicers time to verify income and hardship.
Some 295,348 people have received permanent long-term help under the loan modification plan, but another 3,744 have had their permanent modification canceled.”
“Meanwhile, only about 68,000 homeowners were converted from these trials to permanent modifications.”
“Some 295,348 people have received permanent long-term help under the loan modification plan”
So which is it? 68K or 295K?
Someone here told a story about how someone they knew (a relative I think) got a trial payment restructuring and even though they successfully met every qualification at the end of the trial, they were still denied, without cause, and ended up losing the house.
So you have to wonder how many are being arbitrarily kicked of the plan?
There’s an add for “RealtWhores’ that’s running on the radio now.
I’ll paraphrase it here:
Wife: (To Husband): What are you doing, digging in the backyard like that?
Husband: I’m trying to find the bottom of the housing market!
Wife: Nobody can do that! And you won’t find it next to our irrigation plumbing.
Then they cut to a voice over that says, contradicting this scene, that only a RealtWhore [TM] knows when the bottom of the market is, and there’s never been a better time to buy!
What amazes me is how they can legally give investment advice with no disclaimers. Companies like Fidelity, etc, can’t do it without a lot of fine print.
Funny story: A woman I volunteer with is constantly complaining about illegal immigrants and the scourge that they are on our great nation. So, last week, she tells me that her cleaning crew was over the day before and one of them got some glass shards in her eye while cleaning the kitchen. My friend ended up having to run the cleaning woman all over the place to cheap clinics because, you guessed it, the cleaning woman is illegal. Turns out, my friend is also completely broke and about to lose her house, which has had all this cliched remodeling done to it. I suppose if I were Lawrence Yun, I would deduce from this story the following: Right-wing hypocrites have no style. (This might actually be true!)
Wait. She’s broke and she still pays someone (illegal or not) to clean her own house? Seriously? We are so FUBAR.
That’s just the tip of the iceberg. She’s delusional. Credit has provided the illusion of wealth to everyone. And with the media backing us up, we all feel entitled to live like the HIltons! No one wants to tell their kids the hard truth, that we can’t afford everything they want, that they may just have to work if they want something beyond the basics. No one wants to drive a used car or be a “RENTER”, to buy second hand clothes or furnishings, to shop in the clearance center. Everyone wants to pretend they are above it all when they are out in the marketplace, but can’t get their hands out fast enough when they mysteriously can’t make ends meet. It’s basic accounting, but no one wants to teach it to their children.
But…their children “deserve” a better life dammit!
As you all know, I’m a doctor and a real estate agent and I still have time to keep my house clean.
We do have a guy (born in the USofA) who helps us with yard work, as my husband has a bad back. He also does handyman jobs for us and most of the neighborhood. He has little formal education, but there’s nothing he can’t do.
If you hire any service you must assume that they hire illegals. Until there are penalties for employers, it will continue.
Why should immigration enforcement be an employer’s responsibility?
Why should immigration enforcement be an employer’s responsibility?
DAMN good question. I am so tired of all this whining about how we need tougher penalties on employers for not checking people’s papers. An employer pays taxes like everyone else, and should be able to assume that if someone is in the country, the immigration service has done its job and the person is here legally.
Why should immigration enforcement be an employer’s responsibility?
Uh, because they go out of their way to hire illegals?
Why should immigration enforcement be an employer’s responsibility?
Because it’s the easiest, cheapest, least intrusive, most effective way of controlling IEs. A fence alone ain’t gonna do it.
“An employer pays taxes like everyone else, and should be able to assume that if someone is in the country, the immigration service has done its job and the person is here legally.”
You know what happens when you assume. And aren’t you one of those “private sector always better than the gummint” types yet you want to rely on the gov’t rather than the private sector in this instance? Strange.
It’s the employers’ responsibility because they enable and perpetuate it. Oh, and every job app I’ve filled out over the last 20 years already asks if I’m legal to work in this country.
What kind of a dumb question was that?
Surely you aren’t saying that it’s o.k. for employers to run every known kind of background check EXCEPT if you are here legally?
Surely you aren’t saying that it’s o.k. for employers to run every known kind of background check EXCEPT if you are here legally?
Of course they can check if they want to. But if they don’t check, why should they be punished? If an employer hires someone who’s fit for the job, and pays them more than minimum wage and withholds taxes as required, what’s the problem? Why is this the employer’s responsibility? Considering that your president seems to have a rather lax attitude towards punishing illegals, it seems odd that you then come down like a hammer on employers.
Why should they be punished? What is this, stupid question night?
Because helping a criminal is called “being an accessory.”
In case you haven’t noticed Chris M, most Americans are NOT represented by our politicians.
Because it’s the easiest, cheapest, least intrusive, most effective way of controlling IEs. A fence alone ain’t gonna do it.
What fence? If the government isn’t going to take this issue seriously, how can you expect employers to?
No one… everyone… no one… everyone…
But what about us wise folks here on HBB? I know I live within my means. I could afford it, but I’m way too cheap to pay someone to clean my house.
If your friend is still current on her homeowners, that cleaning lady better file a lawsuit ASAP!
As she was telling me the story, the scene from the Peter Sellers’ movie, “I Love You, Alice B. Toklas!” came into my brain. He’s an attorney and is representing an entire Mexican family. They are all sitting in his office, (I think there are like nine of them), all with whiplash rings on their necks! That is absolutely what I see in her future, without a doubt.
lol…right wing hypocrites. kinda like the lefty’s that get in their SUVs and blame bush for the gulf oil leak.
BINGO! Except for the smug ones in their $30K hybrids, who somehow think that electricity generated by burning “clean coal” is better for the environment than burning gasoline. Yah, yah…
Every time I see a hybrid, I’m reminded of the Southpark episode about them and San Francisco. I laugh BECAUSE I live there.
Smug Prius owners aren’t limited to the Left Coast.
They are just as smug out here in Red-State land.
I purposely do burnouts in front of them, to make their self sacrifice meaningless……
Guys, guys, guys!
The absolute Best Scene was in the short-lived Michael Richards ( of Seinfeld fame ) where they are doing a chase scene in an electric car!
Cramer ( I mean Michael damn it ) was chasing this guy and was starting to really get into it! So he goes to the black guy riding with him at the time and says “Hey, this is pretty exciting, mind if I fire up some “chase music!?”
So Cramer ( screw it, he’ll always be Cramer ) cranks up the radio.., but almost instantly, the car begins____to____slow….
Aaaand CUT!
Totally hysterical.
None of the currently available hybrids use any electricity from “clean coal” or nuclear or any other source. They simply use less gasoline to go the same distance. The “plug-in” hybrids that will be available in the near future will still be an improvement, although not as much as they think.
another notion to consider for the hybrid folks.
Wiki Jevons Paradox.
“We have witnessed to rise of gold from $270 to a recent new nominal high of $1,246. All along the way, we have heard repeated claims that gold was a “bubble” or otherwise over-priced. The loudest protests came in 2006 when gold reached $720. We, however, have maintained our 2001 forecast that gold prices are likely to peak in this geopolitical structural Great Shift in the range of $2500 to $5000.” - Eric Janszen - itulip.com
hmmmm…nobody has been more right about this economy than this guy IMHO. interesting indeed.
michael,
Love itulip! Only so many hours in the day though.
Goldman Sachs and Jim Cramer just came out with bullish forecasts on gold. Normally that would mean “sell!”
Have a question. Have converted all my IRA, 401K and savings to cash and they are in money market funds. Any suggestions on other relatively safe investments for right now ? Thanks in advance.
Best of luck to you.
Thank You.
I’m in the same boat,Terence. I have no plans to invest until interest rates go up, at which time I’ll go back to bonds.
Thanks REhobbyist. I too plan on investing in bonds when rates do go up but fear that it will be a long long wait
Have converted all my IRA, 401K and savings to cash and they are in money market funds. ”
how long until you need the money? I have all my retirement in stocks and I’m 49
hard to time the market
Yahoo finance writes Gold is hot right now so probably its a very bad time to buy and bonds will go up and more deflation will follow.
seeing that MSM is mostly wrong and can be a tool to front run the big investment banks as they get out of an asset.
I really don’t know, I may buy a house in the next few years if deflation does not make a come back.
Hi Cactus,
I am 39 and normally should not need the money till I retire. I agree its hard to time the market. I did not have much during the 2000 crash and got lucky last year having pulled out early enough and then re-invested in the market early after the recovery began. Hopefully I will get lucky this time ! Am a bit nervous as things look ominous right now.
All the best to you !
Plastics……
NEW YORK (Reuters) - U.S. stocks staged a comeback in late trading on Monday as bargain hunters snapped up beaten-down shares, setting aside concerns that efforts to tackle the euro-zone debt crisis could stifle the global economy.”
so much volatility after a run up, isn’t this similair to what we see before major sell-offs? often in the fall ?
like a few years ago ? and the tech bubble peak of 2000 ? just wondering ?
U.S. Offshore Oil Chief Quits 4 Weeks After Rig Blast (Update1)
May 17 (Bloomberg) — The chief U.S. oversight official for offshore oil drilling resigned today, four weeks after a rig disaster in the Gulf of Mexico that killed 11 workers, sank the vessel and triggered leaks that have spewed millions of gallons of crude into the sea.
Chris Oynes, associate director of the offshore energy and minerals management program for the Interior Department’s Minerals Management Service, has left his job, Bill Lee, an agency spokesman, said in an interview.
Oynes left amid heightened scrutiny of the rigorousness of rig-safety inspections and mounting criticism of what U.S. Representative Darrell Issa, a Republican, described as the agency’s “too cozy” relationship with the energy industry.
Interior Secretary Ken Salazar announced plans last week to split the minerals service into separate agencies with safety and revenue-collecting duties. The minerals agency is the largest source of U.S. Treasury funds behind the Internal Revenue Service, generating about $13 billion a year.
I’m sure his new job at Exxon or BP will pay 10x’s as much.
Ya think?
Builders in U.S. Turn Less Pessimistic as Sales Rise (Update1)
(Bloomberg) — Homebuilders in the U.S. turned less pessimistic in May as a government tax credit boosted sales.
The National Association of Home Builders/Wells Fargo confidence index rose to 22, exceeding the median forecast of economists surveyed by Bloomberg News and the highest level since August 2007, from 19 in April, data from the Washington- based group showed today. Readings lower than 50 mean more respondents said conditions were poor.
Americans rushed to sign contracts ahead of an April 30 deadline for a tax credit of as much as $8,000, spurring demand and trimming the inventory of unsold properties. While lower prices and borrowing costs have brought houses within reach of more buyers, additional job gains are needed to sustain demand and limit foreclosures that depress values.
“The second homebuyer tax credit has brought both buyers and sellers back into the market,” said Ryan Wang, an economist at HSBC Securities USA Inc. in New York, who accurately forecast the index. “We still have a long, long way to go.”
“Homebuilders in the U.S. turned less pessimistic in May as a government tax credit boosted sales.”
Didn’t anyone explain to them that the credit which made them less pessimistic just ended? The feeding tubes are shut down; time now to learn whether the Terry Schiavo housing market can get up and walk on its own or not.
Borrowers flunking out of trial mortgage modifications ~ May 17, 2010
NEW YORK (CNNMoney.com) — The number of troubled homeowners falling out of President Obama’s foreclosure rescue plan soared in April.
More than 122,000 borrowers had their trial mortgage modifications canceled in April, bringing the total to 277,640 since the program began about a year ago, according to federal statistics released Monday. Meanwhile, only about 68,000 homeowners were converted from these trials to permanent modifications last month.
Under the program, known as HAMP, eligible troubled borrowers are put into trial modifications to determine whether they can keep up with the lowered payments and to give loan servicers time to verify income and hardship.
A total of 295,348 people have received permanent long-term help under the loan modification plan, but another 3,744 who were converted to permanent status were later cut from the program anyway.
Modifications are usually canceled if the borrower fails to make the adjusted payments, or if during the trial period, does not meet the program’s criteria or hand in the required income verification paperwork.
Administration officials said they were not surprised to see the number of canceled trial modifications spike. That’s because borrowers had been allowed to enroll in the trial program by simply stating their income. But they are being dropped if they cannot prove the figures they provided.
“As those decisions get made, it’s certainly expected that there would be some that fall out of HAMP,” said Phyllis Caldwell, chief of Treasury’s Homeownership Preservation Office.
H eartbreak
A nd
M ore
P ain
Manufacturer closing 2-year-old Chattanooga plant
CHATTANOOGA — Madem Reels Inc., which manufactures wooden reels used to hold electrical and steel cable, is shutting down its Chattanooga operation and laying off 64 people, according to information released by the Tennessee Department of Labor and Workforce Development.
Layoffs at the 1312 E. 42nd Street plant began April 30 and will take place through June 30, according to the Labor Department.
The unfortunate timing of economic conditions brought about the closing of the Chattanooga plant, Leandro Mazzoccato, global sales manager for reels for the Brazil-based company, said in a statement reported by the Chattanooga Times Free Press on May 5.
Madem Reels Inc. opened its 143,000-square-foot facility in November 2008 as its first U.S.-based operation, according to the Chattanooga Area Chamber of Commerce.
Fed to Blame for Gold Surge, Currency Woes: Ron Paul
Monday, 17 May 2010 | CNBC
The Federal Reserve’s practice of indiscriminately printing money is the chief culprit that has led to the surge in gold and demise of the euro, Rep. Ron Paul (R-Texas) told CNBC Monday.
As gold hits a succession of all-time highs and the euro struggles for mere survival, Paul said debt overloads at the base of the recent currency trends can be traced directly to the US central bank.
“The Federal Reserve behind the scenes has the power to create money out of thin air. It’s very bizarre,” Paul said. “They can bail out their friends and let the people they don’t like fail, and create a trillion dollars or more out of thin air in order to prop up some companies at the expense of others … It’s absolutely bizarre and, yes, the American people right now I think are waking up to it.”
About 5% of the American people are waking up to it. The rest are as zombielike as ever.
I’ve been wide awake for some time now.
Local television network did their six o-clock broadcast from a foreclosure assistance program where people in trouble could call for legal assistance. The rep being interviewed said as long as the homeowners cooperated they were experiencing a high level of success.
I guess its ok to admit its not different here now.
In the things that if you have to say it means it isn’t true….
Paulson “our banking system is sound”… a few months later TARP.
From AP….
Jean-Claude Juncker, who led ministers’ talks Monday, said “we trust that the euro is a credible currency” after it hit a four-year low against the dollar earlier in the day
Euro. is. toast.
I see FNM - Fannie Mae closed under a dollar today, that will not be allowed very long.
BWAHAHAHicHAHAHicHAHAHAHAHicHAHAHic* (DennisN™)
Toll Brothers Chief Robert Toll Replaced by Yearley:
By Kathleen M. Howley and Prashant Gopal May 17 (Bloomberg)
“…The new CEO isn’t planning a major shift from the strategy Robert Toll established to weather the housing crisis.
“We manage in a similar way,” Yearley said in a telephone interview.
Toll Brothers Inc. replaced Chief Executive Officer Robert Toll with Executive Vice President Douglas C. Yearley Jr. after the company reported 10 consecutive quarterly losses
This makes no sense. Or did I read that wrong?
They’re going to do exactly what the guy they fired did? Say what?
I guess Robert Toll will have to make due on the Brazillions for which he sold reams of his company stock at the bubble peak…
wmbz how did miss this?
market pulse May 17, 2010 WSJ
Saks Fifth Avenue to close Charleston, S.C. store:
SAN FRANCISCO (MarketWatch) — Saks Inc. said Monday it plans to close its Saks Fifth Avenue store in Charleston, S.C. by July 17. “The planned closing of our Charleston store is consistent with our focus of utilizing our resources in our most productive stores,” said Steve Sadove, chairman and chief executive of Saks, said in a statement. About 60 employees affected by the closure will be offered transfer opportunities or receive severance packages.
Just saw ahansen on Inside Edition (no mocking, I don’t normally watch it, I saw her mentioned in the teasers)- she had facial surgery on another show (the Doctors?) and looked great. Maybe we’ll hear from her soon?
There will be mocking nonetheless! (so consider yourself mocked)
Actually, that reminds me. I saw her on Animal Planet a few weeks back. Sorry, A. I know you hate the cut they’ve been using of you. But it did make me wonder where you’ve been and hope that things are well for you. Hope to see you back on here soon…
Filed under: “Sometimes, it’s what you learn & when you learn it” …or…”Dad, really…I don’t need a limo ride to the 4-H awards ceremony…”
Hog wild? Not this girl
Frugal teen buys house with 4-H winnings
Monday, May 17, 2010
By Kathy Lynn Gray THE COLUMBUS DISPATCH
“By the time she graduated from Greenfield McClain High School last June, she had saved more than $40,000 for college.”
O.K., now the details…did she get to use a portion of the $8,000 Gov’t tax credit?
That’s actually a cool story. Thanks for sharing, Hwy. I had a few friends from Chillicothe in college.
The Financial Times
New battle plan needed for a crisis-prone world
By Stephen Roach
Published: May 17 2010 16:40 | Last updated: May 17 2010 16:40
The pace and severity of financial crises has taken an ominous turn for the worse. Over the past 30 years, a crisis has occurred, on average, every three years. Yet, now, only 18 months after the meltdown of late 2008, Europe’s sovereign debt crisis has hit with full force. With one crisis seemingly begetting another, and the fuse between crises now getting shorter and shorter, the world economy is on a very treacherous course.
Each crisis has its poster child – from Thailand, to dot-com, to subprime. But they all have one thing in common – easy money. The “Greenspan put” – the notion that central banks would be quick and aggressive in backstopping financial market disruptions – was the short-term anaesthetic that repeatedly set the stage for the next crisis.
In the aftermath of the Asian financial crisis of the late 1990s, über monetary accommodation fed the equity bubble. Once that bubble burst in 2000, another dose of extraordinary monetary ease set the stage for massive property and credit bubbles. The aftershocks of that post-bubble carnage have now brought Europe to the brink.
Sadly, central banks are doing it again – policy rates near the zero bound in nominal terms and negative in real terms. And in the parlance of the Federal Reserve, this destabilising condition is likely to persist for an “extended” period. As day follows night, this is a recipe for the next crisis. Whether that crisis is spawned by another asset bubble, a credit binge, or CPI inflation is impossible to say. But any – or all – of these options are conceivable in yet another undisciplined post-crisis climate.
Breaking this daisy chain won’t be easy. But a new approach is desperately needed. History gives us a guide as to how and where to find the answer. Think back to the late 1970s. At the time, there was a deep-rooted sense of despair and hopelessness over the seemingly intractable Great Inflation. Politicians and policy makers were convinced that the system was unwilling – or perhaps unable – to accept the pain of the cure. Sound familiar?
Paul Volcker dispelled that notion – breaking the back of inflation by pushing the federal funds rate up to 19 per cent in 1981. Just as monetary discipline was the answer nearly 30 years ago, I suspect it is the only way out today. For a world in the depths of crisis and despair, another “Volcker moment” may well be at hand.
No, I am not suggesting that central banks tighten monetary policy in the midst of a crisis. But it is high time to banish the moral hazard of macro policy – the false sense of security provided by open-ended fiscal and monetary accommodation as the world lurches from crisis to crisis. Central banks need to lead the way in regaining policy traction by laying out credible and transparent exit strategies from the unprecedented stimulus now in place.
…
It seems as though the U.S. Senate is not quite on board with the “one world government of the people, by the bankers, for the bankers” concept just yet:
* The Wall Street Journal
* BUSINESS
* MAY 18, 2010
Senators Seek Curbs on Foreign Bailouts
By GREG HITT And VICTORIA MCGRANE
The Senate approved Monday a measure that could make it harder to deploy U.S. funds in rescuing foreign governments, signaling Congress’s unease with the sort of global economic aid recently given to Greece.
The measure, adopted by a 94-0 vote as an amendment to the financial regulatory overhaul bill the Senate is considering, would require the Obama administration to certify that any future loans made by the International Monetary Fund would be fully repaid. Absent such as certification, U.S. representatives to the IMF would be required to oppose the lending. The U.S. is a major funder of the IMF, which provided loans to Greece as part of a larger support package.
“American taxpayers should not be involved in bailing out foreign governments,” said Sen. John Cornyn (R., Texas), chief sponsor of the amendment. “Greece is not by any stretch of the imagination too big to fail.”
“The thrust of the amendment is the correct one,” added Senate Banking Chairman Chris Dodd (D., Conn.). “This is a good amendment deserving of our support.”
In a recent interview with Bloomberg TV, Treasury Secretary Timothy Geithner voiced concern about the proposal. He said the U.S. has “never lost a penny” while supporting the IMF. “We have a big stake in helping Europe manage through these things and we’re going to do it in a way that is sensible for the American economy and the American taxpayer,” he said.
The bipartisan support for the amendment underscored the desire of lawmakers to avoid any measure that could be seen as a taxpayer-funded bailout.
But in practice, it is not clear how significant Mr. Cornyn’s proposal would be. Country loans of the sort extended to Greece require the approval of a simple majority of the IMF board. That means no single IMF stakeholder—even the U.S.—can block them. Moreover, IMF loans rarely proceed without already being assured of wide support.
Historically, countries supporting IMF activities haven’t lost money when a recipient nation defaults on its obligations.
…
Since market fundamentals have been rendered FUBAR by the Fed’s endless supply of easy money, I expect more flash crashes in the coming days, as the artificially supported market eventually adjusts to fundamental reality.
* The Wall Street Journal
* MARKETS
* MAY 17, 2010
How the ‘Flash Crash’ Echoed Black Monday
May 6 Selloff Had Parallels to 1987; Electronic Trading Magnified Selling Pressure This Time
By SCOTT PATTERSON
The Black Monday crash on Oct. 19, 1987, above, sent the Dow industrials down 508 points—or a startling 22.6%—in a day
Soon after the Black Monday crash of 1987, exchanges and regulators scrambled to enact new rules to prevent a repeat of the biggest stock market shock in 50 years. Even then, they worried they hadn’t done enough.
“I simply cannot give you assurances that we have fixed the system,” the chairman of the Securities and Exchange Commission at the time, David Ruder, told the Senate Agriculture Committee in early 1988.
After two decades of rule-changing and technological advancements, those comments seem haunting, especially as investigators of May 6’s “flash crash” stumble upon echoes of the Black Monday meltdown.
Technological innovation has been widely touted as having made the market more efficient—and more resilient. Instead, the May 6 drop—while much smaller than the 1987 crash—showed that technology mainly served to speed up trading and magnify the market moves.
On May 6, “The velocity of the volatility was stunning, beyond anything I had ever seen, with the exception of October of 1987, when I was on the trading floor,” said Ted Weisberg, president of Seaport Securities in New York.
“There’s a strong parallel between the Black Monday crash and the flash crash,” said Michael Wong, an analyst at Morningstar who tracks stock exchanges.
On Oct. 19, 1987, the Dow Jones Industrial Average tumbled more than 20%, and the swoon extended into the following day, before a rebound. Floor traders, working by telephone, dominated the action and computer-generated trading was still in its infancy. Dark pools and high-frequency trading were the stuff of science fiction. Trading reached 600 million shares, according to the SEC.
Fast forward to May 6, 2010: The worst part of the lightning descent lasted roughly 10 minutes and the decline hit 9.8% at its worst. Trades, many executed in milliseconds, reached 19 billion shares.
In both cases, troubles first appeared in the stock futures market, which precipitated a decline in the regular “cash” market. The two created a feedback loop, dragging both markets lower.
Perhaps the most concerning parallel was how professionals abandoned the market. In 1987, some human market-makers on the floor of the exchange stopped providing bids for certain stocks.
Two decades later, in a market dominated by technology, high-speed traders who often provide liquidity for the market, just switched off their computers. Other big players, including fast-trading hedge funds, also pulled out of the market, according to traders and exchange officials.
“Go back to the 1987 crash, every major firm pulled out,” said Chris Concannon, a senior partner at Virtu Financial LLC, a New York electronic market making firm, which continued trading during the May 6 turmoil. “In every break you find evidence of major firms withdrawing their buying and selling interest from the market.”
…
Here is one way U.S. taxpayers become the bagholders for shitty assets:
* The Wall Street Journal
* BUSINESS
* MAY 18, 2010
Toxic CDOs Beset FDIC as Banks Fail
By ROBIN SIDEL
The FDIC has inherited hundreds of potentially worthless bonds that have come back to haunt the Wall Street firms that sold them, the credit-rating firms that graded them and the hundreds of small banks that bought them.
The Federal Deposit Insurance Corp., and by extension the U.S. taxpayer, owns more than 250 collateralized debt obligations that were purchased by small institutions that later failed. Although the bonds have a book value of more than $400 million, they are a headache for the agency as it grapples with the toxic assets flowing from many banks around the country.
“We’re getting more of [the CDOs] all the time,” said Miguel Browne, an assistant director in the FDIC’s division of resolutions and receiverships. The agency has inherited such securities from about two dozen banks that have failed in the current crisis, including Omni National Bank in Atlanta, Venture Bank in Lacey, Wash., and San Diego National Bank.
The FDIC’s mountain of bad securities has grown even bigger in recent weeks following the failure of Riverside National Bank of Florida, a small firm that had stuffed its investment portfolio with 27 CDOs known as trust preferred securities. Although it was a community bank with 58 branches in Florida, its pile of CDOs has almost doubled the notional value of bonds owned by the federal agency.
Now, in an unusual move, the FDIC may be preparing battle back directly. It has asked a New York court for permission to replace Riverside as plaintiff in a six-month-old lawsuit in which the bank accused more than a dozen financial firms of misrepresenting the value of the CDOs.
The FDIC’s focus on CDOs comes at a time when the financial instruments are being scrutinized by regulators and prosecutors. Several Wall Street firms, including Goldman Sachs Group Inc. and Morgan Stanley, have attracted particular attention in recent weeks for what they told investors about the nature of the CDOs when the initially sold them.
The problem is that it is difficult to pin down the value of something for which there may be no market. According to FDIC estimates, that the book value of the CDOs that the agency now holds is more than $400 million. But “a lot of these things will have little or no market value,” Mr. Browne said.
The agency hopes to auction off any CDOs that have value this summer. If it can’t unload them, the FDIC could be forced to write off their value, saddling taxpayers with the losses.
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The lingering stench of shitty assets lasts for a very long time.
* The Wall Street Journal
* HEARD ON THE STREET
* MAY 18, 2010
The Lingering Stench Of Bad Home Loans
By PETER EAVIS
Just how many home loans written during the craziest days of the boom were rotten?
That is the central question for investors as they assess how big a liability banks could face for bad mortgages written during the housing boom. Companies that insured home loans and mortgage-backed bonds, as well as investors in such bonds, have booked big losses as home-loan defaults have soared. But now they are sifting through thousands of mortgages to see how many didn’t comply with agreed guidelines on some criteria, like borrower income.
If it can be shown that a high proportion of loans breached underwriting guidelines, the firms that sold or originated the mortgages may have to reimburse insurers and investors for large sums.
In some cases, banks and insurers are squabbling over this issue in court. Bond insurer MBIA is separately suing Credit Suisse Group and Countrywide Financial, now owned by Bank of America. In other cases, disputes have been resolved privately. Either way, banks in recent quarters have substantially increased the amounts they set aside to cover potential reimbursements.
Just how widespread were the alleged underwriting missteps? In one Countrywide complaint, MBIA said a review of some defaulted second mortgages showed that 91% had “material discrepancies from underwriting guidelines.” On a Credit Suisse deal, MBIA said 85% of a loan sample had issues. And a 2009 Securities and Exchange Commission complaint against Countrywide executives said the firm wrote an “increasing number” of loans in the boom that “failed to meet its already wide underwriting guidelines.”
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Deadbeat borrowers used be called šhits.
Here is an op-ed piece by the author whose book I am thinking of burning. There is no purpose for a textbook on the fundamentals of asset pricing in an era when our Fed has completely obliterated rationality in the market price mechanism.
* The Wall Street Journal
* OPINION
* MAY 18, 2010
Greek Myths and the Euro Tragedy
Letting someone lose money on sovereign debt is the acid test for the euro.
By JOHN H. COCHRANE
Last week the Greek bailout ballooned into a gargantuan 750 billion euro (nearly $1 trillion) debt stabilization fund, including a $39 billion line of credit from the International Monetary Fund. This coincided with the European Central Bank (ECB) announcement that it would immediately begin purchasing junk-rated Greek debt.
It won’t work. The problem isn’t liquidity, psychology or speculators. Germany and France simply cannot borrow or tax enough to cover Europe’s debts and looming deficits. So, barring a fiscal and growth miracle, we will either see sovereign defaults (larger and more chaotic for having been postponed) or the ECB will have to print euros to buy worthless debt, leading to widespread inflation. Since inflation lowers the value of promises to state workers and pensioners, and also is easy to blame on others, it will be an especially tempting escape.
Notice who is missing: Greek bondholders are not being asked to miss a single interest payment, reschedule a cent of debt, suffer any write-down, take a forced rollover or conversion of short to long-term debt, or any of the other messy ways insolvent sovereigns deal with empty coffers. Those who bought credit default swaps lose once again.
But why? The reasoning behind the Greek bailout is founded on several myths that need exploding:
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