The Housing Bubble

Guten Abend, meine Freunde.

Financial reform bill passing on a day of fear and trembling for Wall Street is a mega black swan guano bomb dropped on bovines’ heads. Enjoy the long ride to the bottom, bulls!

The Wall Street Journal
Slowdown Fear Hits Market

New worries about the health of the global economy drove U.S. stocks to their first official correction since the bull market began last March, roiling credit markets and causing big swings in currencies.

I am SO in tune with this guy’s view!

Luckily, I have some chess playing experience under my belt already.

* ROI
* MAY 19, 2010, 9:22 A.M. ET

Klarman: Why Investing Is Like Chess
The deluge of government intervention has thrown a new level of complexity into the system. Anyone rushing to buy more shares or high-yield bonds should think twice, argues Baupost’s Seth Klarman.

The Wall Street Journal

* By BRETT ARENDS

Investing, says Seth Klarman, used to be like checkers. Now it’s like chess–a lot more complicated.

Mr. Klarman runs Baupost Group, a Boston-based investment firm with about $22 billion under management. For the uninitiated, he’s a conservative value investor and one of the most highly regarded in the market. He doesn’t share his market insights that often, so when he does it’s worth listening. Tuesday morning he spoke at a conference for financial industry professionals at the CFA Institute in Boston, in a session hosted by my colleague Jason Zweig.

On the issue of checkers or chess, Mr. Klarman said he was trying to illustrate the way successful investing today involves complicating new factors and dimensions.

In particular, he is looking at the deluge of government interventions to prop up the financial system in the past couple of years and what those may mean down the road. And he is talking about the danger–not a certainty, merely a danger–that governments around the world will trash their currencies in a continuous free-for-all of “handouts and no taxes.” The near-$1 trillion bailout in Europe is just the latest worry.

Where does this leave the ordinary investor?

Anyone rushing to throw more money into shares or high-yield bonds today should think twice. And anyone with a lot invested, especially if they are risk averse, might want to think about taking some chips off the table. Mr. Klarman warns that asset prices have risen too far, too fast, and returns from these levels may be poor. “Given the recent run-up, I would worry that we will have another 10 to 12 years of zero or nearly zero returns,” he said. His firm is holding a remarkable 30% of its assets in cash.

On high-yield bonds, Mr. Klarman’s group found terrific bargains during the financial crisis but that window has long since closed. “The rally’s been indiscriminate,” he said. “On the credit [i.e. bond] side it’s been overblown. Things are now being priced for almost perfection.” (In other words, the prices are already assuming rosy future scenarios. If things get worse investors will be in trouble.)

Most investors, Mr. Klarman warns, have rushed to embrace risk again as if the financial crisis never happened. “The lessons haven’t been learned,” he said. “People are back drinking the Kool-Aid again. It’s very troubling.” By keeping interest rates low and juicing stock markets with liquidity, the government is basically pushing people to speculate, he said. If there were another serious collapse, he said, many investors would be caught out–again.

On the macroeconomic outlook, Mr. Klarman is remarkably gloomy–even by the usual standards of conservative value managers. “I’m more worried about the world, broadly, than I have ever been in my career,” he says. Governments are spending, borrowing and printing money far too freely. Whereas the Great Depression generation learned to live within their means, the Great Recession generation is taking the easy way out, he says. The Greek bailout is just the latest example. Inflation looks like the easy way out. “It’s not clear that any currency is all that trustworthy,” he says. “I worry about paper currencies.”

He goes further, mistrusting some official data and actions. “We don’t know the extent to which we have been manipulated,” he says. He believes the official figures–particularly on inflation–are suspect. “We are being lied to.”
…

As predicted, a similar panic is following in the wake of the Eurozone bailout to the one which followed the TARP. Enjoy the roller coaster ride which accompanies the evaporation of irrational exuberance!

Lucking for housing investors, Wall Street and the housing market are decoupled.

* The Wall Street Journal
* REVIEW & OUTLOOK
* MAY 21, 2010

The Fear Returns
Europe’s policy panic is feeding another financial panic.

Anyone who thought that last week’s IMF-EU bailout would calm markets has had a rude awakening this week, especially after yesterday’s global selloff in stocks. It rarely gets uglier than a 3.6% one-day fall in the Dow and 4.1% on the Nasdaq.

Even more ominous is the return of fear in the credit markets, with interbank risk spreads hitting their widest levels since spring 2009. Investors are fleeing riskier assets and moving back to the relative safety of the dollar and U.S. Treasurys, which means less credit available to finance business and risk-taking. The plunge of the euro has exacerbated this flight to the greenback, and the rapid exchange-rate movements of recent weeks are always more disruptive to investment decisions and capital flows than conventional economic wisdom cares to admit.

Feeding the financial panic is the policy panic, especially in Europe. Instead of keeping cool, political leaders are restricting short sales, banning hedge funds, and proposing to raise taxes on any euro that moves somewhere that politicians don’t like. All of this only speeds the flight out of euro assets. German Finance Minister Wolfgang Schäuble should try not speaking for a day, and see if the euro rises.

With demand for dollars increasing, the U.S. Federal Reserve will have to keep providing liquidity to prevent even greater market overshooting. The European Central Bank will face greater pressure both to follow the Fed to near-zero percent interest rates and to stop sterilizing its purchases of euro zone bonds, thus expanding the money supply. These are risky steps for the ECB’s independence and credibility, but the central bank may not be able to resist if this euro panic grows.

The underlying problem is the collapse of the Keynesian policy bubble. The government spending blowout of the last two years has now turned into a sovereign debt rout, starting in Europe and ending who knows where. The IMF wizards who were urging more and more “stimulus” spending through last year have done a 180 and are now frantically advising tax increases and spending cuts—i.e., more austerity, rather than tax cuts or other pro-growth reforms.

We’ve been optimistic that the U.S. recovery could withstand this European panic, but markets are telling us to prepare for heavier weather.
…

LoopNet: Denver-area Q1 commercial real estate sales down 47% from 2009
Denver Business Journal

Denver-area commercial real estate sales for the first quarter were down 47 percent by dollar volume compared to the same period of 2009, according to a report Thursday from LoopNet Inc.

Selling price per square foot, by product type, dropped 27 percent year over year for office buildings and down 13 percent for industrial buildings, but was up 80 percent for retail buildings and up 7 percent for apartment properties.

Leading Index in U.S. Unexpectedly Dropped in April (Update2)

Bloomberg) — The index of U.S. leading economic indicators unexpectedly declined in April, a sign the economic expansion may slow in the second half of the year.

The 0.1 percent decrease in the New York-based Conference Board’s measure of the outlook for three to six months followed a revised 1.3 percent gain in March. It was the first decline for the index in a year.

The NAR will be howling over this, how dare they ask a person to show proof of income. How will real-a-tors be able to sell houses to illegal aliens, and other under the table workers.

Congress aims to put some discipline in lending
With sweeping bank bill, Congress seeks to end ‘too big to fail’ and ‘too good to be true’ ~ May 21, 2010

WASHINGTON (AP) — Congress is getting tougher on both borrowers and lenders blamed for inflating a housing bubble that, when it popped, plunged the nation into a severe recession two years ago.

Under sweeping financial overhauls that have now passed the House and Senate, home buyers won’t be able to get a mortgage without producing pay stubs or other evidence they can make their monthly payments. A new consumer watchdog will police lenders who offer impossible-to-resist subprime mortgages and then jack up the interest rates to impossible-to-pay levels.

Padded Pensions Add to New York Fiscal Woes ~ The New York Times

In Yonkers, more than 100 retired police officers and firefighters are collecting pensions greater than their pay when they were working. One of the youngest, Hugo Tassone, retired at 44 with a base pay of about $74,000 a year. His pension is now $101,333 a year.

Edward A. Stolzenberg collects $222,143 a year, one of the biggest New York State pensions.

WORKING OVERTIME Yonkers has arranged for its police officers to put in overtime as flagmen on Consolidated Edison construction sites. Though a company is paying the bill, Yonkers is reporting the work as city overtime to the New York State pension fund, thereby increasing future payouts.

It’s what the system promised, said Mr. Tassone, now 47, adding that he did nothing wrong by adding lots of overtime to his base pay shortly before retiring. “I don’t understand how the working guy that held up their end of the bargain became the problem,” he said.

Despite a pension investigation by the New York attorney general, an audit concluding that some police officers in the city broke overtime rules to increase their payouts and the mayor’s statements that future pensions should be based on regular pay, not overtime, these practices persist in Yonkers.

The city has even arranged for its police to put in overtime as flagmen on Consolidated Edison construction sites. Though a company is paying the bill, the city is actually reporting the work as city overtime to the New York State pension fund, padding future payouts — an arrangement at odds with the spirit of public employment, if not the law.

Idaho Homeowners may Face Higher Property Taxes

School districts across the Treasure Valley are desperate to cover the funding lost in this year’s budget cuts.

Now many homeowners may find that even though their home values are dropping their property tax may go up.

The Ada County Assessor said home values are expected to fall by $2-billion dollars this year and if it continues to drop the Meridian School district said they will have no choice but to ask voters to increase property taxes for the first time in 15-years.

School districts rely on property taxes to build new schools, maintain buildings, and make big capital purchases like school buses. But as home values continue to plummet schools are seeing a huge loss in funding.

“Last year the market value in the state of Idaho went down by $7-billion dollars in total. $2-billion of that was in our school district,” said Meridian School District spokesman Eric Exline.

Now That Is One SERIOUSLY Hyperbolic Alert On CNBC
Joe Weisenthal

According to CNBC, the “FATE OF FREE WORLD HANGS ON VOTE IN GERMAN PARLIAMENT.”

That would be the vote tomorrow to officially approve Eurotarp.

That’s intense.

In the long run, Keynes’ theory is dead.

JMK, RIP.

* The Wall Street Journal
* REVIEW & OUTLOOK
* MAY 21, 2010

The Fear Returns
Europe’s policy panic is feeding another financial panic.

Anyone who thought that last week’s IMF-EU bailout would calm markets has had a rude awakening this week, especially after yesterday’s global selloff in stocks. It rarely gets uglier than a 3.6% one-day fall in the Dow and 4.1% on the Nasdaq.

Even more ominous is the return of fear in the credit markets, with interbank risk spreads hitting their widest levels since spring 2009. Investors are fleeing riskier assets and moving back to the relative safety of the dollar and U.S. Treasurys, which means less credit available to finance business and risk-taking. The plunge of the euro has exacerbated this flight to the greenback, and the rapid exchange-rate movements of recent weeks are always more disruptive to investment decisions and capital flows than conventional economic wisdom cares to admit.

Feeding the financial panic is the policy panic, especially in Europe. Instead of keeping cool, political leaders are restricting short sales, banning hedge funds, and proposing to raise taxes on any euro that moves somewhere that politicians don’t like. All of this only speeds the flight out of euro assets. German Finance Minister Wolfgang Schäuble should try not speaking for a day, and see if the euro rises.

With demand for dollars increasing, the U.S. Federal Reserve will have to keep providing liquidity to prevent even greater market overshooting. The European Central Bank will face greater pressure both to follow the Fed to near-zero percent interest rates and to stop sterilizing its purchases of euro zone bonds, thus expanding the money supply. These are risky steps for the ECB’s independence and credibility, but the central bank may not be able to resist if this euro panic grows.

The underlying problem is the collapse of the Keynesian policy bubble. The government spending blowout of the last two years has now turned into a sovereign debt rout, starting in Europe and ending who knows where. The IMF wizards who were urging more and more “stimulus” spending through last year have done a 180 and are now frantically advising tax increases and spending cuts—i.e., more austerity, rather than tax cuts or other pro-growth reforms.

We’ve been optimistic that the U.S. recovery could withstand this European panic, but markets are telling us to prepare for heavier weather.

~Clipped from Martin Weiss~ 5-20-10

The Dow’s 1000-point “flash crash” of two weeks ago was NOT a fluke! Nor is today’s 376-point slide in the Dow!

These events are lightning bolts that strike deep into the market’s core

These signals all confirm what we’ve been telling you for the last 60 days:

1. The great rally since March of 2009 is — or will soon be — over.

2. Despite its impressive duration and magnitude, that rally was little more than a temporary interlude — an intermission between two phases of a greater bear market.

3. The first phase came in the wake of the great Housing and Debt Crisis of 2008-2009, wiping out as much as HALF of America’s stock values.

4. The second phase has struck with the Great Sovereign Debt Crisis of 2010, and it’s just now getting under way.

Goldman Sacked; I am thinking there might be a great opportunity to buy the dip just ahead (in six months or so)…

* The Wall Street Journal
* POLITICS
* MAY 21, 2010, 7:04 A.M. ET

Wall Street Firms Brace for Seismic Changes
By RANDALL SMITH

The Senate version of financial regulation hits Wall Street harder than expected, with some analysts estimating it could cut the profits of major financial institutions by roughly 20%.

Critics of a comparable bill that passed the House in December said the Senate version has fewer escape routes and exceptions that leave room for Wall Street firms to work around new restrictions on their riskiest activities.

The Wall Street bull. Some skeptics weren’t convinced the bill would seriously hurt financial firms.

Adam White, a derivatives analyst at White Knight Research & Trading in Atlanta, said it is “miraculous” that the Senate proposals are “stronger than the House and not weaker.”

Some skeptics aren’t convinced that even the toughened bill will seriously hurt Wall Street.

“The lobbyists are firmly in control of Washington, and the reform efforts are likely to be modest,” said Jim Hardesty, president of Hardesty Capital Management LLC in Baltimore. Wall Street firms “can reinvent themselves, and they’ve proved remarkably adaptive over many market cycles.”

The tide shifted after Congress pushed through a White House health-care plan in March over objections from Republicans, emboldening Democrats to follow a similar course for Wall Street. Adding impetus were fraud charges brought last month by securities regulators against powerful Goldman Sachs Group Inc.

The most important set of changes relate to derivatives, which are contracts with prices tied to other market instruments. While the House bill required some derivatives to be cleared to reduce the risk of nonpayment, the Senate version could force Wall Street firms to keep derivatives separate from their bank units—or even spin them off entirely.

Clearing requires both parties to a trade to post collateral with a central clearinghouse to ensure that each side can absorb losses.

Guy Moszkowski, an analyst at Bank of America Merrill Lynch who follows banks and securities firms, estimates that derivatives account for half of all trading revenue at the biggest firms. At J.P. Morgan Chase & Co., the second-largest U.S. bank in assets behind Bank of America Corp., derivatives generate an estimated 8% of the company’s total revenue.

The legislation could cut derivatives-related revenue by 30% to 50%, according to Mr. Moszkowski. Had that occurred in this year’s first quarter without any offsetting declines in fixed expenses or capital, per-share earnings at J.P. Morgan, Goldman Sachs and Morgan Stanley would have been at least 16% smaller than what the three companies reported. Citigroup Inc.’s profit per share would have shrunk by 7%.

Goldman analysts recently tried to quantify the impact of the changes likeliest to survive, including already adopted caps on fees for checking accounts and credit cards, as well as restrictions in the Senate bill on proprietary trading with the banks’ own money and the House curbs on derivatives. Those elements alone could shave 17% off bank earnings, Goldman said. Less-likely changes could boost the hit to 23%.
…

Anyone who follows Gollum’s dumb money losing suggestions is a maroon.

And John Paulson’s brazillion dollar win on shitty mortgage assets looks more and more like a fraudulently rigged short bet than reflective of any kind of market knowledge. At this point, it looks like his brain is more bovine than ursine in nature.

* The Wall Street Journal
* BUSINESS
* MAY 21, 2010

Pro-Growth Collapse Pounds Markets
Unwinding of Risky, Highly Leveraged Investments Sends Dow Down 376.36; Oil, Dollar Join Plunge

By SUSAN PULLIAM And MARK GONGLOFF

A financial professional gestures on the floor of the New York Stock Exchange in the middle of a global selloff Thursday.

The dramatic unwinding of a highly leveraged trading strategy embraced by hedge funds contributed to the global market selloff on Thursday.

The strategy, known as the pro-growth trade, was based on a view that global economies would recover strongly and included bets that commodities, high-yielding currencies and stocks would keep rising, while safer investments such as Treasurys would fall.

The Greek debt crisis and efforts by governments in Asia and Australia to rein in growth have undone the trade in recent weeks and the big moves in the currencies and commodities on Thursday were likely driven by investors selling their holdings to limit their losses.

The stock market reacted to the moves in other markets with the Dow Jones Industrial Average falling 376.36 points, or 3.6%, to 10068.01, its worst day since March 2009, just before it hit a 12-year low. The market, which had its lowest close since Feb. 10, is down just over 10% from its recent peak in late April, marking its first correction since the powerful bull market began last March.

“The markets are telling you the growth trade is over,” says Michael Novogratz, who oversees macro hedge funds at Fortress Investment Group. In recent days, he says, Fortress has unwound many of its positions that reflected its “pro-growth” mindset, including investments in Asian currencies.

The pro-growth trade began to gain popularity about a year ago, when the banking crisis was thought to have passed. Investors, in particular big macro hedge funds that make bets based on their broad economic views, grew convinced that global growth led by China, India and Korea would pick up steam. When the trade worked, other funds jumped on the bandwagon.

Among the major hedge funds thought to have been big players in at least one or more of the pro-growth bets include Paulson & Co., Moore Capital Management and Fortress. Wall Street, in particular Goldman Sachs, provided investment ideas to hedge funds to play the trade. Spokesmen for Paulson and Moore declined to comment.

Among the most popular pieces of the “pro-growth” trade were: bullish bets on the U.S. stock market, the Australian and Canadian dollars and the Brazilian real. Investors bet against U.S. Treasurys and the Japanese yen, which are considered safe havens that rise when investors are worried about growth.

Some investors bought commodities that they thought would be linked to a surge in manufacturing, such as copper. Many investors put on bearish bets on the euro as a hedge against a bet on global growth.

“There was a widespread view among hedge funds that the place to be was long global growth,” says David Kostin, who follows hedge funds for Goldman Sachs Group Inc.
…

Executives who gained–or lost–the most in the economic crisis

By David A. Graham

Who says a financial catastrophe is bad for everyone? A few lucky financiers and policymakers have seen their stars rise as the global economy has fallen. Others, however, have become pariahs, subject to the scorn of their peers and the general public, and are blamed with bringing down the financial system. Here are the five biggest winners and five biggest losers of the financial crisis.

I see the pre-markets have gone from green to red, I’m sure the spin dotors will be pumping/pimping as hard as they can this AM.

Death by CDO: What killed Fort Pierce’s Riverside National Bank and

By Robert Trigaux, The St. Petersburg Times
Posted: 9:54 a.m. Thursday, May 20, 2010

If there’s a mantra small Florida financial institutions should repeat, it is this:

Don’t tug on Superman’s cape.

Don’t spit into the wind.

And above all, don’t mess around with collateralized debt obligations.

If you thought “CDOs” were just part of the alphabet soup of controversial Wall Street creations that get vaguely mentioned in the news but have no practical effect here in Florida, guess again.

CDOs have suddenly cropped up as a principal cause for the recent demise of at least two Florida financial institutions: Eastern Financial Florida Credit Union in Miramar and Riverside National Bank of Florida in Fort Pierce.

In both cases, less-than-savvy managers of these struggling Florida institutions were convinced by Wall Street that heavy, leveraged investing in CDOs somehow could rescue them from their downward spiral brought on by recession and the popped real estate bubble.

As doomsday scenarios go, this sounds awfully familiar.

Riverside, which failed last month, was taken over by Canadian-owned TD Bank.

Eastern Financial, chartered way back in 1937 and sponsored by now-defunct Eastern Airlines, failed last May and its remains were absorbed by the Space Coast Credit Union. It had offices in Hillsborough and Pinellas counties.

Other Florida institutions got bushwhacked by CDOs, too. But let’s eyeball Eastern Financial and Riverside National more closely and see how two such unsophisticated institutions bet so big, and so badly, on investing in CDOs.

So we are clear from the start, CDOs are securities that are backed by a pool of bonds, loans and other assets. Wall Street sells them.

A recent report from the inspector general of the National Credit Union Administration, the federal overseer of credit unions, shows how a naive Eastern Financial got stuck with a concentrated pile of CDOs purchased from Wall Street, how quickly those investments dropped in value, and how effectively they gutted the credit union’s bottom line and led to its failure.

“Eastern Financial’s board failed to understand and manage the level of risk undertaken by management in its acceptance of the strategy to invest in higher risk CDO investments,” the inspector general report concludes.

The sad tale of Riverside National’s demise - death by CDO - is much the same.

One CDO package called “Taberna II” and purchased from Merrill Lynch lost 91 percent of its value. In all, Riverside’s CDOs lost two-thirds of their value.

The Florida bank had crammed its investment portfolio with 27 CDOs. If that does not sound like a lot, consider this. The Federal Deposit Insurance Corp. owns more than 250 CDOs purchased by small institutions that later failed. When Riverside failed, its pile of CDOs by itself nearly doubled the leveraged value of those debt obligations owned by the FDIC.

Many of the 200 bank failures since the beginning of 2009 have been accelerated by losses in CDOs similar to those Riverside purchased.

The End of the Euro

How the crisis in Greece could lead to the demise of Europe’s most ambitious project.

By Niall Ferguson | NEWSWEEK
Published May 7, 2010
From the magazine issue dated May 17, 2010

Crisis—from the Greek “krisis,” for a turning point in a disease—is one of many English words we owe to the ancient Athenians. Now their modern descendants are reminding us what it really means.

Just when it seemed safe to start using the word “recovery,” a Greek crisis is threatening the world economy, and the very existence of the world’s second-biggest currency.

The euro seemed like such a good idea just 10 years ago. Europe had already achieved remarkable levels of integration as a trading bloc, to say nothing of its consolidation as a legal community. Monetary union offered all kinds of alluring benefits. It would end forever the exchange-rate volatility that had bedeviled the continent since the breakdown of the Bretton Woods system of fixed rates in the 1970s. No more annoying and costly currency conversions for travelers and businesses. And greater price transparency would improve the flow of intra-European trade.

A single European currency also seemed to offer a sweet trade. European countries with problems of excessive public debt would get German-style low inflation and interest rates. And the Germans could quietly hope that the euro would be a little weaker than their own super-strong Deutsche mark.

Monetary union had geopolitical appeal, too. In the wake of German reunification, the French worried that Europe was heading for a new kind of domination by its biggest member state. Getting the Germans to pool monetary sovereignty would increase the power of the other members over a potential Fourth Reich. And, best of all, it would create an alternative reserve currency to challenge the mighty U.S. dollar.

Still, when European Commission president Jacques Delors first proposed monetary union, it seemed a wildly ambitious project. Even when it was formally adopted as the third pillar of the European Union in the Maastricht Treaty of 1992, many economists—myself included—remained skeptical.
…

Financial Shockwaves Around the World
By Katie Paul, Lily Huang. Kathy Jones and David Graham

Wall Street and Main Street weren’t the only places struck with financial fear when the financial crisis hit in 2008. Around the globe, economies large and small continue to reel from the United States’ financial crisis. Once stable European banks faced failure or government bailout. Meanwhile, emerging markets, such as the Baltic states, which enjoyed robust growth in the past few years, were suffering unrest as their economies rapidly deteriorated (at left, rioters in Athens protest the Greek government’s “austerity” spending cuts on May 5, 2010). Here is a look at how an American-made crisis has shaken markets, and nations, the world over.

Sounds to me like once the dust of the current wave of financial panic once again settles on this Senate financial reform bill, Wall Street will be able to take great comfort in the role of the fox-in-the-chicken-coop Fed to execute its provisions from behind their veil of secrecy.

And we already learned from the Fall 2008 collapse of Fannie and Freddie that systemic risk regulators don’t work, as the GSEs had a dedicated regulatory oversight agency all along right until the day they blew up. Guess we get to relearn that lesson again a few decades hence, neh?

* The Wall Street Journal
* POLITICS
* MAY 20, 2010

Senate Passes Finance Bill
Biggest Regulatory Overhaul of Wall Street Since Depression Moves Closer to Law

By GREG HITT And DAMIAN PALETTA

Sen. Scott Brown stands outside of the Senate chamber before voting on Thursday.

WASHINGTON—The Senate on Thursday approved the most extensive overhaul of financial-sector regulation since the 1930s, hoping to avoid a repeat of the financial crisis that hit the U.S. economy starting in 2007.*

The legislation passed the Senate 59 to 39 and must now be reconciled with a similar bill passed by the House of Representatives in December, before it can be sent to President Barack Obama to be signed into law.

The controversial measure, supported by the Obama administration, sets up new regulatory bodies and restricts the actions of banks and other financial firms. It is designed to try to make order of the cascading regulatory chaos that ensued in 2008 when mammoth banks and some unregulated financial firms collapsed, and public funds were used to save them. Among other things, the legislation would:

• Establish a new council of “systemic risk” regulators to monitor growing risks in the financial system, with the goal of preventing companies from becoming too big to fail and stopping asset bubbles from forming, such as the one that led to the housing crisis.

Sen. Christopher Dodd, left, smiles while flanked by Senate Majority Leader Harry Reid (second from the right), Sen. Richard Durbin (right), Sen. Blanche Lincoln (second from the left) and Sen. Mark Warner after the Senate voted to pass Wall Street reform on Thursday.

• Create a new consumer protection division within the Federal Reserve charged with writing and enforcing new rules that target abusive practices in businesses such as mortgage lending and credit-card issuance.

“Simply, the American people are saying, ‘you’ve got to protect us,’ and we didn’t back down from that,” said Senate Majority Leader Harry Reid (D., Nev.). “When this bill becomes law, the joyride on Wall Street will come to a screeching halt.”
…
*It ain’t over till it’s over.

This house builder, Chuck Miller, is going through the numbers on the cost of building a house versus traditional affordability and is doing a right fair job of it, too. He ends this article with a muse about building apartments. I think he is actually getting it.
I’ve included some excerpts. He has the irritating habit of repeatedly asking if this is realistic. House builders should not attempt rhetorical writing styles. They can’t pull it off.
Google this (below) and you’ll find his blog:
Chuck Miller GMB CGB CGP MIRM CMP MCSP CSP
Roidy

“As a Builder, I am extremely interested in the current debate about the home building and mortgage finance industry. One comment I have heard repeatedly over the past several weeks is the need to return to “sound mortgage standards” based on home values of 2.5 to 3 times income, 30 year fixed rate mortgages at 80% loan-to-value and a 20% down payment. But just how realistic is this?

According to the U. S. Department of Housing and Urban Development, the median household income in the U.S. in 2007 was $59,000. If we return to sound mortgage standards, median home values would have to be $147,500 (2.5x) to $177,000 (3x).

So under “sound mortgage standards,” a household earning the median income would have to save $29,500 (2.5x) to $35,400 (3x) - 50% to 58.5% of their annual household income - for their down payment before they could purchase a home. Is this realistic? I did an informal poll of mortgage lenders and found that, home buyers with down payments of 20% or more accounted for approximately 30% of the purchase transactions over the past 12 months and approximately 70% of home buyers purchased their homes with less than 20% down.”

… and so on and so forth. I think he really understands. Really. - Roidy

Felipe Calderon`s Flying Circus

Felipe Calderon Gets Standing Ovation In Congress After Condemning Arizona Immigration Law
First Posted: 05-20-10 01:07 PM

Mexican President Felipe Calderon spoke before a joint session of Congress Thursday and received resounding applause after condemning Arizona’s controversial immigration law.

“I am convinced that a comprehensive immigration reform is also crucial to securing our common border. However, I strongly disagree with the recently adopted law in Arizona,” Calderon said.

Applause then broke out for around 15 seconds, while Democratic members of Congress, Attorney General Eric Holder, Director of Homeland Security Janet Napolitano and Vice President Joe Biden joined in the standing ovation. It appeared that most lawmakers on the Republican side of the aisle remained seated.

AND NOW FOR SOMETHING COMPLETELY DIFFERENT

Wolf Blitzer Questions Mexican President Felipe Calderon
by Maynard on May 20, 2010

BLITZER: So if people want to come from Guatemala or Honduras or El Salvador or Nicaragua, they want to just come into Mexico, they can just walk in?

CALDERON: No. They need to fulfill a form. They need to establish their right name. We analyze if they have not a criminal precedent. And they coming into Mexico. Actually…

BLITZER: Do Mexican police go around asking for papers of people they suspect are illegal immigrants?

CALDERON: Of course. Of course, in the border, we are asking the people, who are you?

And if they explain…

BLITZER: At the border, I understand, when they come in.

CALDERON: Yes.

BLITZER: But once they’re in…

CALDERON: But not — but not in — if — once they are inside the — inside the country, what the Mexican police do is, of course, enforce the law. But by any means, immigration is a crime anymore in Mexico.

BLITZER: Immigration is not a crime, you’re saying?

CALDERON: It’s not a crime.

BLITZER: So in other words, if somebody sneaks in from Nicaragua or some other country in Central America, through the southern border of Mexico, they wind up in Mexico, they can go get a job…

CALDERON: No, no.

BLITZER: They can work.

CALDERON: If — if somebody do that without permission, we send back — we send back them.

BLITZER: You find them and you send them back?

CALDERON: Yes. However, especially with the people of Guatemala, we are providing a new system in which any single citizen from Guatemala could be able to visit any single border (INAUDIBLE) in the south. And even with all the requirements, he can or she can visit any parts of Mexico.

Recent college grads won’t be buying housing any time soon:

http://www.bloomberg.com/apps/news?pid=20601109&sid=a8f9A4GYLECE&pos=14

“Ten months after graduating from Ohio State University with a civil-engineering degree and three internships, Matt Grant finally has a job — as a banquet waiter at a Clarion Inn near Akron, Ohio.”

“Schools from Grant’s alma mater to Harvard University will soon begin sending a wave of more than 1.6 million men and women with bachelor’s degrees into a labor market with a 9.9 percent jobless rate, according to the Education and Labor departments.”

Students who graduated in the early 1980s — when two recessions drove unemployment to a peak of 10.8 percent — suffered wage losses of more than $100,000 in the next 15 years compared with those who came into the job market during the decade’s boom years, according to Kahn’s research.

“They get shifted down into a lower level and lower pay scale,” she said. “They are working for worse firms, they’re not learning as many skills and they’re not moving up the career pyramid as quickly.”

“Unemployment among people under 25 years old was 19.6 percent in April, the highest level since the Labor Department began tracking the data in 1948.”

For all of the efforts to prop up financial firms, the economy’s still fundamentally broken with near depression level unemployment. How does housing or anything else recover amidst that backdrop?

European markets slide despite German vote- AP

Europe’s stock markets slid again Friday even though German lawmakers approved a massive eurozone rescue package — another sign that worries over the continent’s debt crisis and the future of the euro currency itself have not gone away.

Calif. City Takes Stand Against Illegal Immigration as Ariz. Boycott Battle Rages ~ FOXNews.com

A California city mere miles from the metropolis that imposed a boycott on Arizona over its immigration law has just weighed in on the other side of the debate — voting to declare itself a “Rule of Law City” where illegal immigrants are not welcome.

A California city mere miles from the metropolis that imposed a boycott on Arizona over its immigration law has just weighed in on the other side of the debate — voting to declare itself a “Rule of Law City” where illegal immigrants are not welcome.

The decision by the Costa Mesa City Council comes after the Los Angeles City Council voted last week to suspend official travel to Arizona and end future contracts with state businesses in protest of Arizona’s immigration policy. That decision sparked a war of words between Los Angeles and Arizona officials, who this week warned the city their Arizona-based power supply could be at risk.

Predictions for the stock market today?
1. PPT defibrillator set on high?
2. “He’s dead, Jim?”

~ As of Wednesday the nation’s debt clock was ticking ever closer to the $13 trillion mark. Not to worry! Congress recently voted to raise the debt ceiling to $14.3 trillion so it can keep spending money it doesn’t have until after the November elections.

Cool, we gots Mo Money! Hopefully we can hit 15 trillion over the next year. We’re #1.

Wonder what percentage of people in prison are evil pot smokers and small time drug dealers?

“With less than 5 percent of the world’s population, the United States has almost a quarter of the world’s prisoners.”

~ Laurence Vance

QUESTION FOR ALL HBB’ers:

My boss who has consistently overpriced his house and can’t sell it, thinks the thing to do is to get a ReEVERSE MORTGAGE.

He’s 62, retiring , has significant savings, but has already bought his dream condo in So. Cal. (near John Wayne Airport) on the other side of the country.

I told him he would be better off just making a huge price reduction and selling the thing.
Thoughts?

FNM is going below .90 today, gubmint better get to pumping it up.

O’Bummer Sings “Bomb Bomb Bomb, Bomb Bomb Iran” and the MSM Conveniently Freezes:

As if uncontrollable economic contagion was not enough for the administration, Obama is now willing to add geopolitical risk to the current extremely precarious economic and financial situation. Over at Debkafile we read that the WH occupant has decided to “boost US military strength in the Mediterranean and Persian Gulf regions in the short term with an extra air and naval strike forces and 6,000 Marine and sea combatants.” With just one aircraft carrier in proximity to Iran, the Nobel peace prize winner has decided to send a clear message that peace will no longer be tolerated, and has decided to increase the US aircraft carrier presence in the region by a 400-500% CAGR.

Big drop right off the bat…

NASDAQ Composite ~ Change:Down 113.97 (4.96%)

Chase closing facility; 600 to lose jobs ~ May 21, 2010 News-Post

Six hundred employees of JPMorgan Chase will lose their jobs by the end of the year with the closing of the company’s credit card center in Frederick .

Tim Keefe, a spokesman for the financial company, said the decision to close the center on Presidents Court was announced to employees on Wednesday. Keefe spoke from the company’s credit card operations headquarters in Delaware.

Declining delinquent accounts and a need to create more business efficiency drove the decision, Keefe said. The center dealt primarily with delinquent credit card accounts.

Rand starts digging

What I don’t like from the president’s administration is this sort of, ‘I’ll put my boot heel on the throat of BP,’” Paul said in an interview with ABC’s “Good Morning America.” “I think that sounds really un-American in his criticism of business.”

OK BP has jeopordized the livelyhood of how many Americans and we shouldn’t say any harsh words. This makes me wonder how Rand views Wall Street? Should we not say anything bad about GS.

Wal-Mart Stores Inc., the world’s largest retailer, is seeking to take over U.S. transportation services from suppliers in an effort to reduce the cost of hauling goods.

The company is contacting all manufacturers that provide products to its more than 4,000 U.S. stores and Sam’s Club membership warehouse clubs, said Kelly Abney, Wal-Mart’s vice president of corporate transportation in charge of the project. The goal is to take over deliveries in instances where Wal-Mart can do the same job for less and use those savings to reduce prices in stores, he said.

Say goodbye to independent truckers.
My guess is that this will also increase the costs to businesses other than Wal-mart that buy from these same suppliers.

Jobless rates drop in 34 states and DC, sign employment picture is improving

WASHINGTON (AP) — Unemployment rates fell in a majority of states last month as improved economic conditions spurred hiring.

The Labor Department said Friday that 34 states and the District of Columbia reported lower jobless rates in April. Six states reported higher rates, while 10 saw unemployment hold steady.

That marked an improvement from March when 16 states and D.C. reported declines in unemployment, 22 states saw increases, and 12 had no change, according to revised figures.

South Carolina’s rate fell to 11.6 percent in April, from 12.2 percent in March. That marked the largest monthly drop of any state.

After cutting their work forces to the bone during the recession, companies are starting to boost hiring as their sales and profits improve.

Nationwide, employers added a net 290,000 job in April, the most in four years, the department reported earlier this month. The U.S. unemployment rate, though, rose to 9.9 percent as hundreds of thousands of job hunters — feeling more confident about their prospects — resumed or started searches.

Colorado Department of Labor borrowing millions to pay unemployment benefits

DENVER - The state’s Unemployment Trust Fund has run out of money forcing the Colorado Department of Labor to borrow more than $250 million in federal funds to keep paying thousands of people who are out of work.
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Because of the swell of unemployment claims during the recession, the Colorado Department of Labor says its unemployment fund has reached insolvency.

As of May 11, the state has borrowed $254 million in federal funds to continue to pay benefits to people who are unemployed.

“Thankfully we’ve been able to give the same benefits going forward even though we are borrowing money,” Executive Director of the Department of Labor & Employment Don Mares said.

Although people who are unemployed will not see a change in their checks, businesses across the state will feel the pinch in the form of unemployment insurance rate hikes.

Well known tax cheat, little Turbo Tax Timmy, will be traveling the globe calming the waters and instilling CON-fidence…

US, Britain and Germany to discuss debt crisis

WASHINGTON(AP) – Treasury Secretary Timothy Geithner will confer with finance officials in Britain and Germany next week about ways to restore global confidence in the financial system.

The Treasury Department announced the trip Thursday after a rough day on global financial markets. The Dow Jones industrial average fell 376 points, its biggest point drop since February 2009.

In a statement, Treasury said that Geithner will “meet with European officials to discuss the economic situation in the region and the measures being taken to restore global confidence and financial stability and to promote global recovery.”

Investors are concerned that the debt problems in countries like Greece and Portugal will spread across Europe and threaten to derail the economic recovery in the United States and elsewhere.

April mass layoffs rise led by manufacturing ~ May 21, 2010

WASHINGTON (Reuters) - The number of mass layoffs by U.S. employers rose in April led by manufacturers who shed workers even as the economy began to recover.

The Labor Department said the number of mass layoff events — defined as job cuts involving at least 50 people from a single employer — increased by 228 to 1,856 as employers shed 200,870 jobs on a seasonally adjusted basis.

The number of mass layoffs in the manufacturing sector totaled 448 resulting in 63,616 initial jobless benefit claims, the department said. That was more than 24,000 higher than the previous month, but well below the 125,000 initial jobless claims in the manufacturing sector a year ago.

The Labor Department said the manufacturing sector accounted for 23 percent of all mass layoffs and 28 percent of the initial claims filed in April.

It’s all good, just raise taxes, UK.

U.K. Posts Record April Deficit as Budget Looms (Update4)

May 21 (Bloomberg) — Britain posted its largest April budget deficit since monthly records began in 1993, highlighting the scale of the squeeze to come as Chancellor of the Exchequer George Osborne prepares to deliver an emergency budget.

The 10 billion-pound ($14.4 billion) shortfall compared with 8.8 billion pounds a year earlier, the Office for National Statistics said in London today. The result was below the 10.9 billion-pound median forecast in a Bloomberg News survey.

The report sets the scene for what economists say will be the sharpest cuts in public spending for a generation. Osborne has ordered departments to find 6 billion pounds of savings this year and will set out further measures in his June 22 budget.

“This is a hole that they’ll have to fill not just by spending cuts but also by tax rises,” said Peter Dixon, an economist at Commerzbank AG in London. “They have no room for maneuver.”

http://www.dailymail.co.uk/news/worldnews/article-1280155/Pecking-order-Jackal-nipped-nose-trying-snatch-hungry-vultures-scrap-meat.html

This picture of a jackal getting nipped on the nose by a vulture cries out for a fitting caption by our gifted HBB snarks.

It’s GOOD to be the Banksta!

WOah. THe PPT kicked it into gear at 3:45

Things seem to be a bit ABNORMAL in Normal, AL

Boy, there seems to be a lot of CORPORATIONS that are not cheerful about Lil’ Opie’s… Hope & Change activities…

Farmers tell feds poultry companies control them:

Farmers tell feds considering antitrust action that big poultry companies control industry

Christopher Leonard, AP Agribusiness Writer, On Friday May 21,

NORMAL, Ala. (AP)

“Friday’s hearing was packed with farmers, lobbyists and agribusiness representatives who are keeping a close eye on the hearings, eager to see what new rules or federal lawsuits might result.”

Kay Doby, a former chicken farmer from North Carolina, said government intervention is long overdue. Companies lure farmers into borrowing money to build chicken houses, then threaten to cancel their contracts if farmers complain about pay or refuse to invest more money to upgrade the buildings, she said.

“This system takes hardworking farmers and makes them indentured servants on their own land,” Doby said. “I can’t tell you how many times I’ve heard that our contract would be canceled if we did such and such.”
Friday’s hearing was the second of five workshops that the Obama administration will hold this summer and fall to examine competition in agriculture, where seed, cattle, chicken and hog markets are dominated by a few large corporations.

Staples and other farmers said they have been putting up with more demands and smaller payments from the poultry companies. In some regions, farmers only have one or two potential buyers, so it’s hard to make demands. Staples owes more than $1 million on his farm, and he doesn’t want to upset Pilgrim’s Pride.

“The chicken companies know they don’t have to treat you fairly,” Staples said.

Staples, the 57-year-old Alabama poultry farmer, said he feared Pilgrim’s Pride would retaliate against him for his testimony, a notion that made the Army veteran choke up during his testimony.

U.S. Attorney General Eric Holder and Agriculture Secretary Tom Vilsack, who both attended the hearing, said stepped up antitrust enforcement in agricultural businesses is a top priority for the Obama administration. If that happens, farmers might earn more, but food prices might also increase.

Holder suggested during a news conference that the Justice Department hasn’t been vigilant enough in pursuing antitrust cases against big poultry companies.

“There is a new attitude in the antitrust division,” Holder said. “Everyone should understand. There is no hesitancy on the part of this antitrust division, in this administration, to take action where we think it is needed. This antitrust division is open for business again.”

BP swamped by criticism (But not from Rand-y Paul):

HOUSTON/VENICE, Louisiana (Reuters)
By Anna Driver and Matthew Bigg Anna Driver And Matthew Bigg
(Additional reporting by Anna Driver and Chris Baltimore in Houston, Matt Spetalnick in Washington; Tom Bergin in London; Writing by Pascal Fletcher; Editing by Bill Trott)

Boy, they put that “team” together in a flash…it would have taken the Gov’t what?… 3 years & how many hearings…If the Gov’t would just get out of their way,…BP would have this DEBACLE solved in24 hrs…

“BP said it was working with a newly created Flow Rate Technical Team to determine the exact amount of oil escaping.

Suttles said BP had spent almost $700 million on the spill response and had “thrown absolutely everything” at the job. BP also is drilling a relief well to try to plug the leak but it probably would not be finished until August.

On the Louisiana coast, fishermen counted the cost to their livelihoods. “This is going to keep killing stuff and it will make whole areas incapable of supporting marine life,” said George Barisich, president of the United Commercial Fishermen’s Association.

BP has promised to pay legitimate damages claims and faces billions of dollars in expected cleanup and damages costs.

“TrueDoNothing™ / “TrueObstructionists™ / TrueGridLokers™” &
“TrueAnger™” PeeParty tea toadlers might be sippin’ on some old Kentucky bourbon this weekend…

Fellow Republicans and even his ‘tea party’ backers steer clear of his remarks on the BP oil spill and civil rights laws.:

By Kathleen Hennessey, Tribune Washington Bureau May 22, 2010

“…Privately, Republicans said Friday that if elected, Paul and his vote would be welcomed into the caucus, but his more controversial views might not.

“Very extreme statements like the one on civil rights won’t be tolerated,” said a former leadership aide, speaking on the condition of anonymity to avoid angering party officials. “He’ll be treated much like Ron Paul is treated in the House — he caucuses with the majority, but they won’t have him on every vote.”

This simpleton is off to the jacuzzi with some vino, alas… tomorrow beckons…

Doomsayers Beware, a Bright Future Beckons
By JOHN TIERNEY Published: May 17, 2010

“The first school despairs because it foresees inevitable ruin. The second school is hopeful — but only because these intellectuals foresee ruin, too, and can hardly wait for the decadent modern world to be replaced by one more to their liking. Every now and then, someone comes along to note that society has failed to collapse and might go on prospering, but the notion is promptly dismissed in academia as happy talk from a simpleton.

“Empires bought stability at the price of creating a parasitic court; monotheistic religions bought social cohesion at the expense of a parasitic priestly class; nationalism bought power at the expense of a parasitic military; socialism bought equality at the price of a parasitic bureaucracy; capitalism bought efficiency at the price of parasitic financiers.”

Progress this century could be impeded by politics, wars, plagues or climate change, but Dr. Ridley argues that, as usual, the “apocaholics” are overstating the risks and underestimating innovative responses.

“The modern world is a history of ideas meeting, mixing, mating and mutating,” Dr. Ridley writes. “And the reason that economic growth has accelerated so in the past two centuries is down to the fact that ideas have been mixing more than ever before.”

But with new hubs of innovation emerging elsewhere, and with ideas spreading faster than ever on the Internet, Dr. Ridley expects bottom-up innovators to prevail. His prediction for the rest of the century: “Prosperity spreads, technology progresses, poverty declines, disease retreats, fecundity falls, happiness increases, violence atrophies, freedom grows, knowledge flourishes, the environment improves and wilderness expands.”

Search FT com
Friday May 21 2010
UK government spending
Prepare for age of austerity, says Laws
By George Parker and Chris Giles

Published: May 21 2010 22:24 | Last updated: May 21 2010 22:24

The Liberal Democrat minister in charge of Britain’s biggest postwar spending squeeze has said he is ready to make “aggressive” cuts to bring down the £163bn budget deficit, admitting the choice lies between “the unpalatable and the disastrous”.

David Laws, Treasury chief secretary, will on Monday set out £6bn of savings this year, but told the Financial Times that this was just a start. “We are moving from an age of plenty to an age of austerity in the public finances,” he said.

In his first newspaper interview since moving to the Treasury, Mr Laws said he was “mentally prepared for getting a lot of representations from angry people” as the cuts begin in earnest next year.
…