The Housing Bubble

This is a rewrite from last week

THE COVER OF THE ROLLING STONE
Dr Hook & the Medicine Show

Well, we’re big house debtors
We got cashmere sweaters
And we’re loved everywhere we go…..
We love to refi our mortgage
At fifty-thousand dollars a blow….
And we take vacations
But we got no patience
For the bills that we all have grown
But a thrill it’ll gitcha when you get your picture
On the copy of delinquent loans

(delinquent loans…..) Gonna see my picture on the cover
(loans…..)Gonna send five copies to my mother…..
(loans…..)Gonna see my smilin face
On the copy of delinquent loans…. (that’s a very very good idea)

Well we got illegals that`ll walk our beagles
Clean the house and mow the lawn
A credit line, and just in time
Cause the bank said we`re overdrawn
Now it’s all designed to blow our minds
But our minds won’t really be blown
Like the blow that’ll gitcha when you get your picture
On the copy of delinquent loans

(delinquent loans…..) Gonna see my picture on the cover
(loans…..)Gonna send five copies to my mother…..
(loans…..)Gonna see my smilin face
On the copy of delinquent loans….

Well we got our plan, from Suzanne
And here`s what she had to say say
Get a genuine mortgage broker
And he`ll teach you all a better way
We got all the friends that money can buy
So we never have to be alone
And we keep spending money
But it ain`t that funny
When you get your first delinquent loan

(delinquent loans…..)Gonna see my picture on the cover
(loans…..) Gonna send five copies to my mother….. (wa wa)
(loans…..) Gonna see my smilin face
On the cover of the delinquent loans
On the cover of delinquent …….
loans…..) Gonna see my picture on the cover
(talking) I don’t know why we ain’t on the cover yet, Baby….
(loans…..) Gonna send five copies to my mother
(talking) We need help for homeowners….
(loans…..) Gonna see my smilin face
(talking) I ain’t kiddin, we`re 500k upside down….
On the cover of delinquent loans……
(talking) But realestate always goes up, Man…..
What`s a short sale? We’ll be up in the front….
Smilin, Man……
Ahh, beautiful…….

“Hopes” That must equate to success for a gubmint agency.TTT should be proud of himself.

“The government ‘hopes’ to get another $500 million”

Treasury takes $1.6 billion loss on Chrysler loan.

WASHINGTON (AP) — The Treasury Department said Monday it will lose $1.6 billion on a loan made to Chrysler in early 2009. Taxpayer losses from bailing out Chrysler and General Motors are expected to rise as high as $34 billion, congressional auditors have said.

Treasury said Monday that Chrysler repaid $1.9 billion of a $4 billion loan, which was extended before the company filed for Chapter 11. The government hopes to get another $500 million from the company that emerged from bankruptcy, Chrysler Group LLC.

Conspiracy of Banks Rigging States Converged in Mortgage Crash

May 18 (Bloomberg) — A telephone call between a financial adviser in Beverly Hills and a trader in New York was all it took to fleece taxpayers on a water-and-sewer financing deal in West Virginia. The secret conversation was part of a conspiracy stretching across the U.S. by Wall Street banks in the $2.8 trillion municipal bond market.

The call came less than two hours before bids were due for contracts to manage $90 million raised with the sale of West Virginia bonds. On one end of the line was Steven Goldberg, a trader with Financial Security Assurance Holdings Ltd. On the other was Zevi Wolmark, of advisory firm CDR Financial Products Inc. Goldberg arranged to pay a kickback to CDR to land the deal, according to government records filed in connection with a U.S. Justice Department indictment of CDR and Wolmark.

West Virginia was just one stop in a nationwide conspiracy in which financial advisers to municipalities colluded with Bank of America Corp., Citigroup Inc., JPMorgan Chase & Co., Lehman Brothers Holdings Inc., Wachovia Corp. and 11 other banks.

They rigged bids on auctions for so-called guaranteed investment contracts, known as GICs, according to a Justice Department list that was filed in U.S. District Court in Manhattan on March 24 and then put under seal. Those contracts hold tens of billions of taxpayer dollars.

ECB props-up Euro? Did TTT hand over the secret formula?

http://www.thestreet.com/story/10758689/1/central-banks-prop-euro-daves-daily.html?kval=dontmiss

More Homeowners Choose to Default ~ Yahoo Finance

“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.

Let it burn. Sad, but probably what has to happen.

http://www.americanthinker.com/2010/05/let_it_burn.html

Happy Shavuos!

(It commemorates the day when Moses received the Torah at Mt. Sinai. Some of you may have seen the movie.)

http://www.ronpaul.com/2010-05-11/senate-rejects-vitters-audit-the-fed-amendment-37-62/

Please take a couple of minutes to see whether your Senator voted to protect the Fed from long-overdue scrutiny into its lending and dirty deals with banksters. As could be predicted, most senators voted with the Fed and its too-big-too-fail bankster allies against US taxpayers. Please note how your senator voted and let them know how you feel about it.

Comment by Sammy Schadenfreude
2010-05-17 19:18:02

Goldman Sachs and Jim Cramer just came out with bullish forecasts on gold. Normally that would mean “sell!”

LOL - sure enough - gold is down $20 this morning.

http://blogs.telegraph.co.uk/finance/ambroseevans-pritchard/100005734/congress-blocks-indiscriminate-imf-aid-for-europe/

Props to Senators Cornyn and Vitter who authored the recently-passed bill that should, in theory, bar Obama and his coterie from providing massive US taxpayer support to IMF bailouts of deadbeats like Greece. Thank God somebody in the Senate is standing up and saying “No!” to all these insane bailouts. I would urge each of you to contact these Senators and thank them for their leadership on this issue.

What are they thinking?…Don’t they have internet access, America’s Broke & Broken, buy Thai!

U.S. sees record capital inflow:
On Monday May 17, 2010, 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.

“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.”

Financial ethics down the rathole: Grantham

http://www.crainsnewyork.com/article/20100517/FREE/100519864#

“It has become a rogue industry,” Mr. Grantham said in slamming the banks and brokerage firms who execute his firm’s trades. “Today, the ethical standard is: Don’t go to jail if you can possibly avoid it.”

“Shame on us,” Mr. Grantham thundered to a hushed audience. “We have allowed the deterioration in ethical conduct to take place. We have made no fight as we slid down the rathole.”

http://money.cnn.com/2010/05/18/news/economy/housing_starts/index.htm?hpt=T2

I noticed the jump wasnt unexpected.

Are good times here again?

Frugal teen buys house with 4-H winnings

Lindsay Binegar was 14 the first time she spent any winnings from years of showing hogs. By the time she graduated from Greenfield McClain High School last June, she had saved more than $40,000 for college.

But her parents had a proposition: They’d pay for college if she’d live at home and commute to Ohio University’s Chillicothe campus.

Her dad, who runs Binegar Auction Service, had a suggestion.

“I said, ‘You should buy a house,’ ” Gary Binegar said.

============================

What a great dad!

==========================

And the reader comments are:

“What A great story about a great girl!!!!. ”

“wonderful parents, wonderful girl!!! ”

“This young lady can be so pleased with her accomplishments.”

“This is what good parenting can do”

I watched a Tivo of the Enron story “the smartest guys in the room” and during it all I could think of was that our entire financial system and government is just one big giant Enron.

OK, now I *am* minding about the stupid house. Her father is clearly playing the Appreciation Game and probably wants her to buy a condotel in Orlando, or some such nonsense.

However, there ARE situations where buying may pencil out. In that part of Ohio or any other rural area in the Midwest, you can buy an old but functional 3/1 on 1/2 acre for ~$100K. Lindsay could go to college for, say, teaching, and probably put away another $20K showing hogs as a part time job. Out of college she would have $60K cash, buy the house with half down for less than rent, and teach at rural school. It’s a low-level, Oil City Plan life, but it’s doable, and it’s certainly more stable than some flashy $100K IT manager with the $700K McMansion, hanging onto his fingernails hoping he’s not supplanted by an H1-B.

Evangelical arithmetic:

(“TrueHypocrite™” + “TruePurity™”) - “TruePurity™” = “TrueHypocrite™”

Indiana Rep. Souder says he’ll resign over affair:

INDIANAPOLIS – Indiana Republican Rep. Mark Souder says he’ll resign from Congress effective Friday over an affair with a staffer.

Indiana Republican Congressman Mark Souder, a staunch family values conservative who was elected as part of the Republican Revolution of 1994

Souder says in a statement provided by his office Tuesday that he has “sinned against God, my wife and my family by having a mutual relationship with a part-time member of my staff.”

He scheduled a news conference to discuss his future.

The $215 Billion Hole in the Housing Market

http://www.fool.com/investing/general/2010/05/18/the-215-billion-hole-in-the-housing-market.aspx

Here in Norfolk, VA the downtown area is filling in. A good number of new businesses spawning. Granted, most of them are coming from existing business owners, but empty storefronts are disappearing.

(Hwy wonders if there is a “TrueAnger™” PeeParty tea toadlers discount?)

The Palin Barracuda s$$$$$$pawning season is on their “run”

By BECKY BOHRER, Associated Press Writer Becky Bohrer, Associated Press Writer,Tue May 18

JUNEAU, Alaska – Bristol Palin is hitting the speakers’ circuit and will command between $15,000 and $30,000 for each appearance, Palin family attorney Thomas Van Flein said Monday.

Bristol Palin to hit speakers’ circuit:

Bristol Palin, 19, is listed on the speaking group’s website as available for conferences, fundraisers, special events and holidays, as well as women’s, youth, abstinence and “pro-life” programs.

Her fee is denoted by four question marks, meaning “Call to discuss!” The same designation is given to New Orleans Saints quarterback Drew Brees.

Van Flein said Bristol Palin will be selective in the speeches she gives.

He said he believes she’s interested in expanding her message beyond teen pregnancy to include her experiences on the campaign trail and in the media spotlight; her parenting approach; and her outlook on life.”

funny I think this is called “moral Hazard”

• Research from the Chicago Booth/Kellogg School Financial Trust Index found a rising percentage of homeowners are willing to strategically default: The percentage of foreclosures perceived to be strategic was 31% in March, compared with 22% in March 2009. The data is collected through a survey of about 1,000 people.

One possible reason the numbers are rising is some homeowners’ belief that lenders aren’t aggressively pursuing those who default, according to the Chicago Booth/Kellogg School report.

“With more and more homeowners believing that lenders are failing to pursue those who default on their mortgages, there is a risk that a growing number of homeowners will walk away from their homes even if they can afford monthly payments,” said Paola Sapienza, professor of finance at the Kellogg School of Management at Northwestern University and co-author of the report, in a news release. Zingales was a co-author.

People are also learning they often have one or two years before they get thrown out of a home after stopping payments, said Frank Pallotta of RH Reward, or Responsible Homeowner Reward, a program that works with lenders to provide financial incentives for borrowers who are at a high risk of strategically defaulting.

Heckuva job, Oynes-ie.

“The head of offshore drilling at an Interior Department agency criticized after the Gulf Coast oil spill is retiring a month earlier than planned, an administration official told CNN on Monday.

Chris Oynes will step down as associate director of the agency’s Offshore Minerals Management Program at the end of May, the official said. The program is part of the Minerals Management Service.”

“The principle of spending money to be paid by posterity, under the name of funding, is but swindling on a large scale.”
~Thos. Jefferson

Ted Turner: Is God speaking in Gulf Coast spill?

Ted Turner has never been one to keep his opinions to himself.

Sometimes referred to as “The Mouth of the South,” the CNN founder lashed out against religious believers in the past. He once dubbed Christianity a “religion for losers” and wondered aloud whether the Ash Wednesday observers around him at work were “Jesus freaks.” His marriage to Jane Fonda was rumored to become strained when she started finding religion.

And while his stance has certainly mellowed with the years - he apologized for his past comments and joined with churches in 2008 to fight malaria - his suggestion that God may have had a hand in the oil disaster that killed 11 and is threatening the Gulf Coast may take some by surprise.

“Could be,” God’s work, he told CNN’s Poppy Harlow. “He’s sending us a message.”

Turner sat down with Harlow recently to discuss the energy policy in the United States. The full interview is posted on CNN Money.

“I’m not a real religious person, but I’m somewhat religious. And I’m just wondering if God is telling us he doesn’t want us to drill offshore,” he said. “And right before that we had that coal mine disaster in West Virginia where we lost 29 miners,” as well as repeated mining disasters – “seems like there’s one over there every week” – in China.

“Maybe the Lord’s tired of having the mountains of West Virginia, the tops knocked off of them so they can get more coal. I think maybe we ought to just leave the coal in the ground and go with solar and wind power and geo-thermals where it’s applicable.”

The Housing “Recovery” Is Just Another Government Subsidy, Says Whalen
Posted May 18, 2010 by Henry Blodget in Investing, Recession, Banking, Housing

Homeowners and the real-estate industry have been heartened over the past year, as house prices have staged a startling recovery. In recent months, that recovery has started to wane, but in many parts of the country, prices are still higher than they were a year ago. And that’s welcome news for anyone who owns a house, makes their living selling or building houses, or is underwater on their mortgage.

But it’s all a mirage, says Chris Whalen, managing director at Institutional Risk Analytics. Or, more accurately, it’s all a product of government subsidies.

House prices have risen, Whalen says, because the government is desperately trying to get them to rise — to bail out banks who would otherwise be taking even bigger losses on the underwater mortgages. Similarly, house-building has restarted in earnest because some states are subsidizing house building, in part to address sky-high unemployment.

While these subsidies may have some positive benefits (jobs, happier homeowners), they also come at a cost: Our housing and debt binge will take longer to work through. Instead of dealing with the problem quickly, Whalen says, we will punish the economy for years. House prices may not fall much more, but they won’t likely take off, either. Instead, they’ll move sideways, as banks work through all the lousy loans they made in the last years of the bubble, and the country works through all the needless housing inventory we have now resumed building.

We’re gonna need Mo-Money…

Calif pension fund asks state for additional $600M
California pension fund, facing large losses, tells struggling state it needs an extra $600M

SACRAMENTO, Calif. (AP) — Facing massive investment losses, a key committee of California’s giant pension fund voted Tuesday to make the state increase its contributions to employee retirement benefits by $600 million in the coming fiscal year.

The demand comes as California grapples with a $19 billion budget deficit and a threat by Gov. Arnold Schwarzenegger to eliminate its welfare program.

The contribution increase would be for one year starting in July, but the California Public Employees Retirement System is likely to require similar increases in future years. Local school districts, already facing their own budget struggles, also will see their pension contribution rates grow.

The development is driven largely by CalPERS’ huge investment losses, but also because people are living longer and retiring earlier.

CalPERS, the nation’s largest public pension fund, lost $55.2 billion, or a quarter of its value, during the 2008-09 fiscal year.

“The biggest reason why we need increases is the investment losses,” said Alan Milligan, interim chief actuary for CalPERS. “Quite frankly, there’s more to come.”

The vote by CalPERS’ Benefits and Program Administration Committee will go to the full pension board on Wednesday.

No more selling if you’re naked and short…

Germany to Ban Naked Short-Selling at Midnight (Update2)

May 18 (Bloomberg) — Germany will temporarily ban naked short selling and naked credit-default swaps of euro-area government bonds at midnight after politicians blamed the practice for exacerbating the European debt crisis.

The ban will also apply to naked short selling in shares of 10 banks and insurers that will last until March 31, 2011, German financial regulator BaFin said today in an e-mailed statement. The step was needed because of “exceptional volatility” in euro-area bonds, the regulator said.

The move came as Chancellor Angela Merkel’s coalition seeks to build momentum on financial-market regulation with lower- house lawmakers due to begin debating a bill tomorrow authorizing Germany’s contribution to a $1 trillion bailout plan to backstop the euro. U.S. stocks fell and the euro dropped to $1.2231, the lowest level since April 18, 2006, after the announcement.

“You cannot imagine what broke lose here after BaFin’s announcement,” Johan Kindermann, a capital markets lawyer at Simmons & Simmons in Frankfurt, said in an interview. “This will lead to an uproar in the markets tomorrow. Short-sellers will now, even tonight, try to close their positions at markets where they can still do so — if they find any possibilities left at all now.”

Has anyone participated in “credit based insurance scoring”?

Specifically, if you have a good credit score, is there any disadvantage in letting your insurance company run your score to determine your premiums?

My insurance company keeps harassing me about how much money they want to save me by doing this, but I’m guessing their motivation isn’t necessarily in my best interest. (if they don’t know my score, how do they know they’re going to save me money?)

YES! Dr. Rand Paul, son of Ron Paul, has trounced his empty-suit RINO opponent in the KY GOP Primary. Sleazy plutocrat puppet Mitch McConnell and his Establishment GOP hacks went all out to try to install one of their hand-picked Wall Street whores in the Senate. Fortunately, enough people in KY have been sufficiently screwed over by the Powers that Be that they came out in droves and voted for REAL change. And don’t believe for a minute that endorsements from a certain insubstantial bon vivant posing as a national political figure and talk show host was what put Rand over the top.

Now excuse me while I do another End-Zone dance and hoist another brew.

May 17, 2010, 6:27 p.m. EDT

How to profit from the sovereign debt crisis
If U.S. debt levels have you worried, there are ways to put your money to work

By Laura Mandaro, MarketWatch

SAN FRANCISCO (MarketWatch) — Skidding currencies, plunging stock markets, soaring government bond yields — if the type of debt crisis that just hit Greece heads to U.S. or other shores, investors may think the safest place for their savings is the mattress.

Yet plenty of strategists say there’s a way to make money off the next phase of the sovereign debt crisis.

Strategies range from the obvious — trimming holdings of long-term U.S. Treasurys and buying gold — to the esoteric — buying Brazilian reals while shorting the Czech koruna.

But the concept behind all of the approaches is that the current turmoil will last a long time.

For the debt crisis, “we’re in the middle innings of that game,” said Max Bublitz, chief investment strategist at SCM Advisors. Read more on the second debt storm.

Investors should prepare to wait and perhaps suffer some pain along the way, money managers say. Many suspect the U.S. economy could suffer low growth and bouts with deflation before high debt levels give rise to an upturn in interest rates.

“If you put these trades on, you have to be in it for the long term,” added Russ Koesterich, head of investment strategy for scientific equities at BlackRock.
…

Does anyone have a sense of whether the stock market crash in response to the Greek bailout is going to last for weeks, months or years?

Just curious…

May 19, 2010, 12:18 a.m. EDT
Asian Shares Lower; Exporters Weak As Euro Tumbles

By Leslie Shaffer

(Adds information, quotes, updates/adds market levels)

SINGAPORE (MarketWatch) — Asian markets were broadly lower Wednesday after shares on Wall Street dropped Tuesday on Germany’s decision to ban naked short selling in certain financial instruments. Though stocks in Shanghai had erased early losses, led by gains in metals companies.

Investors were taking cover after Germany’s move surprised markets. “The action appears to have backfired, fuelling uncertainty over its impact, potential replication by other European countries, how and to whom it would apply as well as how it will be enforced,” said Credit Agricole in a note.

“Once again a single euro-zone country has enforced a unilateral measure in an uncoordinated fashion. It is unclear whether other euro zone countries will follow Germany’s actions but it is clear that the measure has led to a further bailout from European asset markets,” the report said.
…

Stopped clock real estate expert housing recovery prediction:

REAL ESTATE ALWAYS GOES UP, IN THE LONG RUN.

Home Prices to Rebound in 2011

Economists and other housing analysts surveyed by MacroMarkets predict, on average, a rise of about 12% in the five years ending Dec. 31, 2014.

* U.S. NEWS
* MAY 19, 2010

Home Prices Projected to Begin Rebound in 2011

By JAMES R. HAGERTY

U.S. home prices will begin a gradual recovery by next year, according a survey of 92 economists and other housing analysts by MacroMarkets LLC.

Separately, the U.S. Census Bureau reported that single-family housing starts in April surged to a seasonally adjusted annual rate of 593,000, up 10.2% from March. Ivy Zelman, chief executive of research firm Zelman & Associates, said builders stepped up production ahead of the April 30 deadline for sales qualifying for a federal tax credit, but since then have cut back.

The analysts surveyed by MacroMarkets on average expect home prices, as measured by the S&P/Case-Shiller national index, to rise about 12% in the five years ending Dec. 31, 2014. As of Dec. 31, that index was down about 28% from its peak level in mid-2006.

Some of the forecasters surveyed by MacroMarkets were far from the average. Joseph LaVorgna, an economist at Deutsche Bank, sees home prices rising 37% by the end of 2014. Both Anthony Sanders, a professor of real-estate finance at George Mason University, and Gary Shilling, president of A. Gary Shilling & Co., expect declines of about 18%.

Mr. Shilling, whose firm provides economic consulting and investment advice, said excess inventories, including those from looming foreclosures, will pull prices down. Mr. LaVorgna said a rapidly recovering job market should soak up most of that supply. He added that much of the excess supply is in remote or economically depressed regions and so isn’t relevant to most potential buyers, who will instead bid up prices in more desirable areas.

MacroMarkets, based in Madison, N.J., was co-founded by Robert Shiller, an economist at Yale University who helped create the Case-Shiller indexes. MacroMarkets creates securities that let people bet on the direction of various types of assets, including residential real estate. The survey by MacroMarkets was the first of what it says will be a monthly series involving about 100 analysts.

Mr. Shiller, who didn’t contribute a forecast for the survey, said in an interview that the average prediction of a 12% price rise over five years was “a plausible scenario.” During the housing boom, Mr. Shiller drew attention for bearish house-price comments that were far gloomier than the consensus but eventually proved to be on the mark.
…

Here is a term, “beggar-thy-neighbor,” which I have not seen in MSM print since the onset of the credit crunch. In fact, other than my own HBB posts, the last time I saw it in print was when I took an International Monetary Policy course over fifteen years ago.

The Financial Times
Single currency bloc plays ‘beggar-my-neighbour’
By Martin Wolf
Published: May 18 2010 20:24 | Last updated: May 18 2010 20:24

Might the eurozone break up? Until recently I would have answered: absolutely no. This is not because I thought the currency union a wise idea. I thought it a risky idea, made more so by the decision to accept member countries so different from those of the zone’s northern core. But the commitment to make it work seemed fundamental to the policies of Europe’s principal powers. Is that still true? I do not know.

So what has gone wrong? What is happening now? What happens next? What does it mean for both the eurozone and the world economy?

On the first question, the European orthodoxy is that the crisis is, at root, fiscal. Marco Annunziata of UniCredit summarises it in a recent note: “In hindsight, it seems obvious that the flaw in the eurozone’s institutional setup is both extremely serious and extremely simple: first, a currency union cannot work without sufficient fiscal convergence or integration; second, the eurozone has been unable to create incentives for fiscal discipline.” Mr Annunziata’s chart shows that this view is wrong. Just consider the frequency of breaches of the rules requiring fiscal deficits of less than 3 per cent of gross domestic product. Greece is a bad boy. But Italy, France and Germany had far more breaches than Ireland and Spain. Yet it is the latter that are now in huge fiscal difficulties.

The fiscal rules failed to pick up the risks. This is no surprise. Asset price bubbles and associated financial excesses drove the Irish and Spanish economies. The collapse of the bubble economies then left fiscal ruins behind it.

It was the bubbles, stupid: in retrospect, the creation of the eurozone allowed a once-in-a-generation party. Some countries had vast asset price bubbles; many had soaring relative wages. Meanwhile, Germany and the Netherlands generated huge current account surpluses. The union encouraged a flood of capital to the surging economies, on favourable terms. When private spending imploded, fiscal deficits exploded.
…

Japanese share prices always go down.

market pulse

May 18, 2010, 8:31 p.m. EDT

Japan shares fall; chip makers among big decliners
By Myra P. Saefong

TOKYO (MarketWatch) — Japanese shares fell Wednesday morning in Tokyo, tracking losses on Wall Street, with the Nikkei Stock Average losing 1.4% to 10,102.74 and the broader Topix falling 1.2% to 902.85. Chip-maker shares were among the bigger decliners following news reports that some of the world’s largest memory-chip makers are expected to settle the European Union’s price-fixing charges later Wednesday.

Not only does Whitman have Gollum behind her, but now she has Cheney’s voice of support!

Former VP Cheney backs Whitman in Calif. gov race
The Associated Press
Posted: 05/17/2010 01:12:07 PM PDT
Updated: 05/17/2010 02:55:44 PM PDT

SACRAMENTO, Calif.—Former Vice President Dick Cheney has endorsed Meg Whitman in the Republican gubernatorial primary, saying she can do for California “what Ronald Reagan did for America.”

Cheney’s endorsement came in an op-ed column published Sunday in the Orange County Register. In it, he said the former eBay chief executive is the only candidate in the race with the leadership skills needed to turn around California’s economy.

“America cannot afford to have its largest state teetering on the edge of financial collapse,” Cheney wrote. “California needs a proven executive who has the mettle to stand up to the entrenched special interests in Sacramento and cut spending.”

Specifically, he praised Whitman’s commitment to enacting tax cuts for businesses, reducing the pension benefits of state government workers and reforming the welfare system.

“Meg’s conservatism is rooted in the optimism that people can achieve great things if government doesn’t stand in their way,” Cheney said. “I believe Meg Whitman can do for California what Ronald Reagan did for America.”

California accounts for 12 percent of the nation’s gross domestic product but has struggled with high unemployment and high home foreclosures for the past three years. The recession has hit its economy hard, leading to a dramatic tumble in the tax revenue coming to state and local governments.

The state faces a $19 billion deficit in the coming fiscal year.

Against that backdrop, Whitman and her opponent in the June 8 GOP primary, state Insurance Commissioner Steve Poizner, have focused on economic issues. But Poizner, who has been trying to catch up to her in the polls, also has made strides with conservatives in recent weeks by attacking Whitman on other issues, including illegal immigration.

He accuses Whitman of favoring amnesty, a charge Whitman denies. In his op-ed column, Cheney sought to counter the perception that Whitman may be soft on the issue, saying “she has a strong and practical approach to securing the border.”

Cheney also challenged Poizner as someone who does not always adhere to conservative principles. He wrote that Poizner donated to then-Democratic presidential candidate Al Gore in 2000 and opposed the Iraq war.

In an email response, Poizner spokesman Jarrod Agen said the candidate supported the invasion of Iraq but believes parts of the invasion were bungled. He also said the donations to Gore were made on behalf of Poizner’s wife, a Democrat, through the couple’s joint checking account.

Poizner was a fellow in the Bush White House working with the National Security Council in 2001 and 2002.

Whitman spokeswoman Sarah Pompei declined to say whether the campaign sought Cheney’s endorsement, which was featured prominently Monday on the campaign website.

Cheney’s support might help Whitman secure votes in the June 8 Republican primary but also could be a hindrance during the general election. California voters generally held a dim view of the George W. Bush administration.

Gollum claims to look out for its clients, while screwing them with sh!tty assets.

And Moron declines to comment.

Bloomberg
Goldman Sachs Hands Clients Losses in ‘Top Trades’ (Update1)
May 19, 2010, 12:39 AM EDT

(Adds U.S. lawsuit against Goldman in third paragraph.)

By Ye Xie

May 19 (Bloomberg) — Goldman Sachs Group Inc. racked up trading profits for itself every day last quarter. Clients who followed the firm’s investment advice fared far worse.

Seven of the investment bank’s nine “recommended top trades for 2010” have been money losers for investors who followed the New York-based firm’s advice, according to data compiled by Bloomberg from a Goldman Sachs research note sent yesterday. Clients who followed the tips lost 14 percent buying the Polish zloty versus the Japanese yen, 9.4 percent buying Chinese stocks in Hong Kong and 9.8 percent trading the British pound against the New Zealand dollar.

The struggles for analysts at Goldman, which is fighting a fraud lawsuit from U.S. regulators who accuse the company of misleading investors in a mortgage-linked security, show the difficulty of predicting market movements as widening budget deficits, a fragile global economic recovery and tighter financial regulations increase volatility. Stock and currency fluctuations rose to the highest in a year this month as Europe pledged about $1 trillion to stop a debt crisis in the region.

“This says that Goldman’s guys are only human,” said Axel Merk, who oversees $500 million as president and chief investment officer of Merk Investments LLC in Palo Alto, California. “No one is always right. There are a lot of cross currents in this market.”

Gia Moron, a spokeswoman for Goldman Sachs, declined to comment.
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