Bits Bucket For May 27, 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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Name:Ben Jones
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Next stop for home sales?
Sales of New Homes in U.S. Jump to Two-Year High on Tax Credit
May 26 (Bloomberg) — Purchases of new homes in the U.S. jumped in April to the highest level in two years as buyers rushed to qualify for a government tax credit before it expired at the end of the month.
Sales climbed 15 percent to an annual pace of 504,000, the most since May 2008, after surging a revised 30 percent the prior month, figures from the Commerce Department showed today in Washington. The median sales price dropped 9.5 percent from the same month last year, which may reflect increased demand from first-time buyers seeking the government incentive.
To receive a tax credit worth as much as $8,000, contracts had to be signed by the end of April, meaning demand will probably wane in coming months. Rising foreclosures and falling stock prices caused by concern over the European debt crisis may hamper any recovery in sales and construction into the second half of the year.
The takeaway here is people will buy if they perceive a good deal. Whether $8K or ridiculously low interest rates or whatever the new giveaway for buying is. I think a way to get more people to buy is make the whole mortgage tax deductible not just the interest, but I digress.
My point is there are still plenty of people out there willing to buy. They just need convincing.
I’m not saying everyone should buy. I am however saying that the idea of the whole world being broke and unable to buy is incorrect.
If you think it is important to convince people to buy, please feel free to offer them cash rewards to do it. Just leave me out of it.
I read something about the new TARP program has funds set aside to “loan” our unemployed FB’s up to 50k to keep their homes if it looks like they have the potential to repay it in the future.
The United States of America has now officially and collectively lost it’s damned mind.
Moving right along to the next minor and immediate problem…
“Got …Oil BP ?”
Letting prices fall to their natural support level will also lead to people being motivated by a deal.
In my opinion, lots of places have found that level. I think we will find that the $8k was a giveaway, and moved some buyers forward in time, but didn’t really drive prices higher.
A few places may have found their level in terms of “how much a month,” especially with interest rates so low, but too many people still don’t have cash for a downpayment. There are still relatively few people who could borrow at current levels using traditional downpayment standards (especially that part where you had to prove you had saved the downpayment yourself rather than getting it as a gift or loan from a relative). Which really means that if we were dealing with private lending, the pool of qualified buyers intending to occupy the house would be miniscule at almost any price.
But, Rental Watch, haven’t you been saying this the whole time? Even before prices started falling, you were on here talking about “great deals” and “cash flow”. As prices continue to fall, you continue to report that many areas have reached equilibrium. How will you know when they actually have?
“Whether $8K or ridiculously low interest rates or whatever the new giveaway for buying is. I think a way to get more people to buy is make the whole mortgage tax deductible not just the interest, but I digress.”
I have a suggestion: Why don’t you figure out which of your fellow Americans agrees with your idea, and get together with them to set up a ‘home purchase stimulus’ charity organization? Then those Americans who believe in the social benefits of encouraging others to buy homes can put their own money where their mouths are, and leave me out of it.
I cannot see the govt letting mortage rates go up anytime soon.They will give the banks as much money as possible to keep rates down.If mortgage rates go up substantially stick a fork in the whole darn economy!!!!!!!!!!
Why don’t you figure out which of your fellow Americans agrees with your idea, and get together with them to set up a ‘home purchase stimulus’ charity organization? Then those Americans who believe in the social benefits of encouraging others to buy homes can put their own money where their mouths are, and leave me out of it.
+1
Making the whole mortgage tax deductible? (shakes head)
Ki - did your ancestors perhaps own slaves in the 1800’s, and now you feel slighted? Because that’s what you’re talking about instituting - debt slavery.
“…debt slavery…”
Ki must sell houses for a living. I can’t imagine anyone else who would think debt slavery was a desirable state of existence.
“I think a way to get more people to buy is make the whole mortgage tax deductible not just the interest, but I digress.”
I often agree with you, but this makes no sense. You think that if you put zero down on a home, the taxpayers should pay a third of the purchase price, but if you put down all cash, the taxpayers should pay 0% of the purchase price. If I’m understanding correctly, that is insane. The reverse would make more sense.
FWIW Natalie - taxpayers already subsidize home purchases by about 1/5, just by having the interest tax deductible.
Note that I’m not trying to defend Ki’s proposal - it’s indeed insane. I’m just saying that you may not realize how far into insane we already are. Many, many, many purchases - from homes to business purchases, to corporate R&D, etc. are heavily subsidized by the government in the form of tax deductions and even direct subsidies. This result in massive misuse of capital.
Yes, but that has been baked into the numbers for decades and is non-discriminatory. The bad thing about changes to the status quo is that they can have a negative impact on those that planned wisely based on existing law (i.e., reward fools and punishcareful planners).
The fools SHOULD be those that stay in debt. The banks, with the help of gov’t tax law, keep people foolishly in debt. When a contraction occurs, the sheeple get fleeced, and the banks get bailed out. I know many people that can pay off their mortgage, but are addicted to that spring tax refund. Many others that ran up credit cards and paid them off with refi’s because, after all, it’s the smart thing to do- it’s tax deductable!! That was their careful plan.
Our system rewards fools. If you are a fool, FB, crook, have no savings, you will get a small place in a nursing home when you are old and the govt will pay for it. If you are a careful planner, responsible person with savings in the bank you will get a small place in a nursing home when you are old and YOU will pay for it. So, who is the winner in the long run?
“Yes, but that has been baked into the numbers for decades and is non-discriminatory.”
Nope. It actually is discriminatory in favor of those who buy (and can afford) bigger, more expensive houses — you know, them McMansion thingees that dot the American landscape?
Examples follow below, based on an assumed standard deduction of $10,700.
Couple A owns a mortgage-financed home in flyover country that generates interest of $11,000 a year (assuming a five percent interest rate, this is roughly the interest on a principle loan balance of $11,000/5% = $220,000). Assuming they have other deductions of $3,000 that they can put on the Schedule A, the increase in tax deduction of the mortgage interest deduction relative to the standard deduction is $11,000 + $3,000 - $10,700 = $3,300. Assuming the couple faces a 15 percent marginal tax rate, the tax savings (relative to the standard deduction) due to the mortgage interest deduction is a paltry sum of
15%*$3,300 = $495.
Couple B owns a largish California McMansion financed with a GSE-securitized affordable housing loan whose principle balance is $729,750, also assumed to carry a 5% interest rate for comparison purposes. This would generate annual interest of 5%*$729,750 = $36,787.50. If they have other deductible expenses of $6,000 (California living is expensive, ya know!), the relative effect on itemized deductions compared to the standard deduction is
$36,787.50+$6000-$10,700 = $32,087.50.
Assuming the household is in the 28 percent tax bracket (all Californians are rich!), the value of the mortgage interest deduction is a generous 28%*$32,087.50 = $8,984.50.
So there ya go: A generous $8,984.50 versus a paltry $495. Do you still consider that “nondiscriminatory”?
The cost of the home one purchases is within the purchaser’s control. In addition, the size of one’s income is also to some extent within their control, and the increase in deduction as a result thereof is linked to the fact they are paying higher taxes in general because of deviations in tax brackets. As to the deviations in standardized and itemized deductions, that should have been taken into account at the time of the home purchase. So all in all, it still falls within my loose definition of non-discriminatory although it does in fact have a disparate impact. I would not have voted for it at inception and believe it is bad policy, but because major investment decisions were made in reliance of the law I would also not vote for its repeal.
“So all in all, it still falls within my loose definition of non-discriminatory although it does in fact have a disparate impact.”
Since the point of my numeric example was apparently lost on you, let me restate it in terms of the percentage of the loan balance that comes back into the loan-owners’ pockets as a tax reduction:
Couple A: 100*495/220,000 = 0.225%
Couple B: 100*8,984.50/729,750 = 1.23%
Do you see how the mortgage interest deduction distorts the market by encouraging households to purchase more home than they need, in order to capture the tax benefit?
“Since the point of my numeric example was apparently lost on you . . . Do you see how the mortgage interest deduction distorts the market by encouraging households to purchase more home than they need, in order to capture the tax benefit?”
As I stated above, there is a disparate impact. I, however, would not characterize a law that encourages certain voluntary behavior of the type in question prior to the occurrence of such behavior to be discriminatory in any worrisome sense. As for a phase-out based on income levels or repeal, since that punishes reliance on existing law after-the-fact with no voluntary component, I would find it discriminatory in a worrisome sense. Please don’t confuse my disagreement with lack of understanding.
A still more obvious way to illustrate the regressive (reverse Robin Hood) nature of the mortgage interest rate deduction in favor of wealthy homeowners over poor ones is to compare my hypothetical loan owner households in terms of the effective interest rate they pay on their loans, after reflecting the respective tax advantages of the mortgage interest deduction:
Couple A: 5% - 0.225% = 4.775% effective interest rate
Couple B: 5% - 1.23% = 3.77% effective interest rate
Conclusion: The mortgage interest rate offers more than 100 basis point relative advantage in the effective interest rate paid by a heavily indebted (and presumably wealthier) loan owner over that enjoyed by a less indebted (and presumptively poorer) one. As already shown above, the difference in absolute dollar terms is even more stunning.
Cantankerous - one fundamental economic principle that you seem to be overlooking is that over time the market eats away at disparate financial impacts by readjusting price. It’s not as if we are considering whether to put such a deduction in place, in which case your points would be well taken. The issue is whether we phase-it out or repeal it after price adjustment has already occurred.
A phase-out would give all those careful planners time to adjust their plans. The mortgage interest deduction is a tax write-off for the wealthy. For those in the lower income classes; it is a ruse to keep sheeple in debt.
It’s also discriminatory against renters. With almost zero down payment, why should one person’s cost of shelter be subsidized over another, especially when the subsidized person gets 100% of the benefit of the appreciation in the asset (no tax on the first $500k of gain)?
I know, public policy to encourage homeownership…too bad when you borrow 99% you are not a homeowner, but a $ renter.
You are absolutely correct Cantankerous. I was explaining this to my wife and my parents the other day…If We purchase an affordable house, our tax savings will be virtually non existent. I had to break it down for them the way you did above…amazing how the media mantra programs otherwise intelligent people.
I said it would get people buying. Whether you like it or not is a diiferent issue. I think making the full mortgage tax deductible would be better than the hodge podge of credits, bailout schemes out there.
The govt will subsidize housing.
I think making the full mortgage tax deductible would be better than the hodge podge of credits, bailout schemes out there.
The problem is the government doesn’t understand “either/or”. They only know “and”. Thus any such program wouldn’t be instead of the hodge podge, it would be in addition to it.
True. But they will never stop adding. And if the choice is add more cumbersome programs vs. A bigger deduction, wouldnt be more efficient to do the latter?
wouldnt (sic) be more efficient to do the latter?
Yes.
But it’s not a question of efficiency. It’s a question of where to drive the money (given the stretched assumption that it must be driven somewhere). Being that we still have home prices that are higher than historical norms, and we have still have record levels of empty inventory - do we really want to drive money directly towards housing right now? Do we really want to try and reinflate a bubble that was proven disastrous the first time it popped?
That seems kind of… stupid.
“The government will subsidize housing”
Oh, you’re right Ki. The government is in complete control, has already decided what IT wants to do, and now it’s our job to somehow fall in line, whether we like it or not. Forgetaboutit.
Y’all, pls go and sign Ben’s petition.
Thx.
The reverse, and then some. The govt needs to get the tax code the heck out of my life. That includes substantially all social engineering deductions and credits, including, but not limited to, child tax credit, college tuition credits, charitable contribution deductions, home mortgage interest deduction, and the list goes on. If I want to have kids, send them to college, support my favorite charity, own a house etc, etc, it should not be subsidized by the tax code. Reagan tried to get there byt the NAR beat him down on the MID.
Yes people want to be homeowners.
But government subsidies just transfer money from the government to sellers, who would otherwise have to cut their price to attract buyers.
The sellers tend to be older than the buyers. The buyers will end up paying back that government debt in higher taxes or diminished health and retirement benefits when they themselves are old.
That said, I would gladly make the first time homebuyer credit permanent in exchange for phasing out the mortgage interest deduction.
I agree WT, the homebuyer credit puts people into houses the mortgage interest deduction keeps them indebted for life.
No, it doesn’t “put them into houses”. It helps convince them to buy a house, at a price approximately $8,000 higher than what they otherwise would have paid. If someone wants to be “put into a house”, then they can rent one.
“…at a price approximately $8,000 higher than what they otherwise would have paid.”
Big V —
It’s much worse than that, thanks to leverage. Consider a budget-constrained first-time buyer using FHA financing with a 3% down payment requirement. If the $8,000 represents an increase to the effectively available downpayment*, then after leverage, the home buyer’s budget limit is stretched by the amount of $8,000/3% = $266,667! I expect the ‘greater than expected’ impact of eliminating the $8K credit on purchase budgets and market values to come to the light of the MSM over the next few months, and for many real estate ‘experts’ to be quoted saying, ‘No one could have seen it coming.’
* There is a nice financing opportunity for anyone who is into this sort of thing in case they reinstate the $8K credit going forward: Offer first-time buyers some amount $X of ‘down payment assistance’ less than $8K at closing in exchange for a contractual claim on the full $8K when Uncle Sam later coughs up the money. The buyer gets ready access to downpayment funds, and the guy on the lending side of the deal gets $8K-$X in interest payments. You could even potentially set up a hedge fund to finance this kind of deal.
But government subsidies just transfer money from the government to sellers
Let’s not forget where the government gets this money…
phasing out the mortgage interest deduction ??
Please expand…How would you “Phase out” ??
Currently 100% of the mortgage interest counts as a tax deduction. To “phase it out”, government might allow only 80% of interest paid to be deductable for the next two years. Then 60% for the two years after that, then 40% and so on. In ten years it would be phased out and no amount of mortgage interest would be tax deductable.
Whether government would apply that to the mortgage interest that businesses pay as well would remain to be seen. That would be a catch-22, damned if they do, damned if they don’t.
In ten years it would be phased out and no amount of mortgage interest would be tax deductible ??
What about interest on apartment buildings ??
What about interest on Commercial buildings ?
What about interest on bare land ??
Personally IMO nothing should be tax-deductible. It’s really quite simple.
Tax deductions promote malinvestment. And that includes kids.
(Not that most people view kids as an “investment” - however some people do, believe it or not, when it comes to receiving welfare at least. At the very least it’s at least a small factor in most people’s decision on how many kids to have.)
“view kids as an “investment”
I was thinking more like overhead.
It isn’t a “deduction” when you are talking about a business. It is how you calculate business profits which is what businesses are taxed on.
People are taxed on income. Businesses are taxed on profits.
Most of the complexity of the tax code has to do with calculating business profits and determining amounts of income. Getting rid of deductions would make life less complicated for people who earn their money as employees, but would not shorten the tax code by all that many pages and would not put many tax lawyers out of business.
“Tax deductions promote malinvestment. And that includes kids.”
Tell that to a retired Japanese citizen who wonders who will take care of him in his old age, given their baby bust.
Just like housing - I never said kids were a bad investment.
But perhaps say a 10th kid, as encouraged by the additional tax deduction (or welfare income) thereof, is overkill in terms of old-age support?
You really believe people have kids to get a tax deductions? That is ridiculous.
“You really believe people have kids to get a tax deductions?”
It’s not that simple. People have kids for many reasons, and the tax advantages are presumably sufficient to push a certain number of fence sitters off the fence and into the delivery room — kinda like the way the first-time buyer tax credit pushes some people into purchasing homes who otherwise would not.
Honey wanna have a kid?
No.
You know there is a tax deduction?
Hmm ok let’s have 5.
Give me a break.
Yeah, I think I have to agree. People who have children for financial gain don’t have jobs. People that work understand that having children more importantly represents a drain on their income, not a tax deduction.
WT Economist,
Hear Hear! Yeah we need to grow up. Enough. Commence Operation MID Phase Out in 3.., 2..,
Is it just possible that while the rest of the world was raising children ( that now vastly out number the US ) we were “Raising McMansion”?
Oh and btw the “Frankendodd” comment yesterday was just over the top! Whoever posted that should be ashamed of themselves! ( tee-he )
KikiDee… err….. EddieTard… is that you?
Out of the closet!
It should be a private transaction and the Government should not be involved in it at all.
“The takeaway here is people will buy if they perceive a good deal. Whether $8K or ridiculously low interest rates or whatever the new giveaway for buying is. I think a way to get more people to buy is make the whole mortgage tax deductible not just the interest, but I digress.”
Isn’t it true that only about 23% of the most expensive homedebtors and wealthy taxpayers itemize their taxes to utilize this deduction whereas there is no or minimumal financial return benefit to most homeowner and wage earners and that they just use the “standard” deductions ?
Sounds like the wail of somebody bought more house than they can afford or that the wealthist in CA, Florida and a few other select places want even more RE taxpayer associated bailouts to support the lifestyle that they are accustomed to.
I have an incentive. How about a low price?
My take on this is that the MLS is flooded with “short sales”, which can take a long time to process and in my area account for 95% of the market.
Therefore there is a lot competition on the remaining 5% of the homes. In this market the home builders can get a premium to build something on time. I would estimate that they’re about 25% higher than the asking prices (per sq ft).
you nailed it, exactly the case.
That isn’t the case around here yet. Sellers - even underwater ones - are hanging on to wishing prices hoping for more GFs to come along. In the meantime, I am seeing a lot more middle and higher end forclosures and short sales come to market. Two years ago every foreclosure I saw was trashed to the best of the FB’s ability. Recently I have been seeing foreclosures that show a lot of signs of deferred maintenance, but are not necesarily stripped to the bones. The banks seem to have gotten smarter about using cash for keys programs, and the FBs seem to have gotten the message about how condition and resale value have a direct effect on deficiency judgements and tax consequences.
Probably also accounts for the spike in “new home” sales. The FB wanna be gets the home lust looking at short sales, gets disenchaned with the purchase process and transfers that lust to new construction.
Builders around here are beginning their race to the bottom with a slew of new housing starts, ironically next door to two houses foreclosed upon two years ago, only one of which has been recently sold. Where are they getting the money? This particular builder is broke, unemployed for the last 6 mos., living with his family at the MIL’s. Says he got a building loan, from a bank. I may have been born at night, but it wasn’t last night…
Keep us posted. I too would like to know how someone who is so broke can get a loan to build houses in this market while thousands are losing their jobs.
How do you get your economy back in gear? Tax the snot out of the most productive citizens of course.
“MYFOXNY.COM - New York Assembly Speaker Sheldon Silver is reportedly pitching a plan for an increased “millionaire’s tax” aimed at 75-85 thousand New Yorkers making $1 million or more a year.
Political columnist Fred Dicker , who appeared on Wednesday’s Good Day New York, says Silver secretly proposed a $1 billion tax hike on the highest income earners to Gov. Paterson.
The plan would jack up a current millionaires tax another 11-percent. The current “millionaire’s tax” actually starts affecting people who have incomes over $200,000. High income tax earners would pay more than 13-percent of their salary in local taxes.”
Why stop at 13? Just imagine how much money they could get if they taxed at 100%. And why only above $200k? From now on a millionaire should be anyone with an income of $10 or more. There you go, budget problems solved.
Smart millionaires only report losses on their NY returns. This law is targeting the 4 or 5 remaining who can’t firgure out how to move their incomes to offshore accounts.
By and large, most of the money that the rich make is capital gains, and not subject to income taxes.
New York doesn’t tax capital gains?
Well the quote from the article talked about “income” and “salaries” so it wasn’t clear at all whether capital gains were included in this proposed special tax.
I’d be shocked if NY doesn’t tax capital gains just like CA (which is at the same rate as ordinary income).
Why do any taxes anywhere need to be raised?
Your quote from up the line:
“I am however saying that the idea of the whole world being broke and unable to buy is incorrect.”
You are partly right. The people, in and of themselves, are not broke because they have their labor and the labor of their progeny to barter. OTOH, separating the people from their governments and enterprises isn’t really possible - and many of those governments and enterprises are indeed flat broke and then some.
Knowing this, people ought to ask themselves to what extent they are willing to allow their gov’t and business proxies to become further indebted and how much they themselves want to involved in the mess by buying further into it (a house).
Well a lesson of the bubble is that MANY people (possibly a majority of ‘em) are willing to borrow until people stop lending to them. Not surprisingly, they elect politicians that are like-minded.
one the old CFOs of my company told my boss during the height of the bubble that if the bank is willing to loan you the money…take it.
Yes, but why would a lender want to follow suit?
My question is, if you did say, tax all income over $1,000,000 at %100, would that be enough?
“My question is, if you did say, tax all income over $1,000,000 at %100, would that be enough?”
Of course not. Big government will always find a new way to overspend any additional incomes that come in.
None of this will end until both individuals and the government learn to live within their budgets. And I suspect the individuals will learn their lesson long before the politicians.
Nope, because the instant you did that, there would be very little income over $1MM. People who are getting paid such ridiculous sums would start to negotiate lower salaries and bonuses in exchange for more vacations/bigger offices, etc.
They are wealthy, not stupid.
Some people would even simply stop working altogether. In the UK in the 70’s, before Thatcher, they had a very high marginal rate on some types of income. People just picked up their families and left the country. Some call it the “brain drain”.
“Tax the snot out of the most productive citizens of course.”
I live in NY. Most of those “productive” people earning more than $1 millon here couldn’t predict the housing and consumer debt bubble would in tears, something hundreds of people who have posted here over the past five years could see. And they misallocated $trillions in capital.
That said, I would rather than the kleptocrats taxed at the federal level, so it would be harder for them to flee the added taxes.
The poor wealthy elite bankers!
I think, if you understood the remark, he was saying tax at the federal level so the crooks just don’t relocate to Connecticut, NJ exc.
While I do not support confiscatory tax rates its a stretch to say that NY high earners are the most productive citizens. A high percentage of them are Wall Streeters who earn vast sums of money fleecing the other 99% of the economy.
Exactly. The very people who created this mess.
The highest-paid people are not necessarily the most productive. And I don’t understand why you think it would be fair for the rest of us to subsidize their mortgages, Ki.
Blasting Bank’s Lawyer, Judge Wipes Out Homeowner’s $207,000 Mortgage
Paola Iuspa-Abbott
Daily Business Review
May 27, 2010
All Orlando Eslava wanted from his lender was a loan modification to make his payments affordable. Instead, he got his $207,000 mortgage wiped out — and a crash course in the confusing way foreclosures are unfolding in a court system chock-a-blocked with cases.
The teacher was Miami-Dade Circuit Court Judge Jennifer Bailey, who cancelled Eslava’s debt after lender HSBC Bank USA ignored her previous order to post a $414,000 bond.
Bailey said the actions of William Huffman, HSBC’s lawyer from Tampa-based Florida Default Law Group, were “contemptuous,” according to a court hearing transcript.
HSBC’s run-in with Bailey began in December 2009 when she granted the lender’s motion for the foreclosure sale of Eslava’s one-bedroom unit at El Dorado Tower in Aventura. But HSBC lost the note on Eslava’s property. So the judge ordered the lender to post a $414,000 bond to indemnify Eslava in case another lender filed a claim against the unit.
According to court records, HSBC and Florida Default did not post the bond and proceeded with an April 9 foreclosure sale that gave the lender title to the condo.
Eslava and his lawyer, Sheleen Khan, sought to overturn the sale, claiming the lender violated Bailey’s court order. At a May 6 hearing, Bailey dismissed the foreclosure case with prejudice, which prevents the lender from suing Eslava again. The judge also canceled the mortgage and ordered HSBC to return title of the condo to Eslava.
“None of us is above the law,” Khan said. “This is a landmark ruling.”
In addition to canceling the mortgage, Bailey chastised Huffman, according to a transcript of the hearing obtained by The Daily Business Review.
“When the order is simply ignored … at the end of the day, you’re the lawyer, you’re responsible,” she said.
Bailey did not sanction Huffman but said he should consider her order a “wake-up call.”
“Some day, this foreclosure crisis is going to be over, and you need to decide what kind of lawyer you are going to be,” Bailey told him. “Because at the end of the day, you are responsible for your client’s compliance with court orders.”
Huffman apologized. He said his client failed to post bond because he had misunderstood the order, according to the transcript.
“I don’t want apologies,” Bailey replied. “I want performance. I want responsible attorneys who meet the basic standards of knowing what … is going on in their files.”
Huffman did not return a telephone call or e-mail seeking comment.
Bailey’s frustration with the lender and Florida Default weren’t limited to Eslava’s case. She complained about the general “chaos and disorganization” of lenders and their lawyers.
Suzanne Hill, who represented Huffman and his firm at the hearing, said Florida Default was weighing its options, which include appealing Judge Bailey’s ruling or seeking a rehearing.
Hill, who is with the law firm of Rumberger Kirk & Caldwell in Tampa, declined further comment.
This warms my heart.
Oooooh, that’s gonna leave a mark!
SOB is lucky he didn’t go to jail for contempt.
Ah, Memorial Day weekend in DC fast approaches. As many of the local residents as can bug out are planning to bug out despite the fact that the drive out of town will be twice as bad as it is on a normal summer weekend. The Rolling Thunder motorcycle rally folks are starting to arrive and are, as always, very welcome.
Me? I got a great deal on a ticket to the current show at The Shakespeare Theater. The Museum of the American Indian is having a 3 day Hawaii festival. A new exhibit of bronzes from Cambodia just opened at the Sackler. And “The President’s Own” Marine Corps Band is giving a free concert at Wolf Trap followed by spectacular fireworks. I think I’ll find something to do….
U.S. 50 eastbound and I-95 southbound will be long, narrow parking lots much of today and tomorrow. You’ve got the right idea, Polly.
DC may be the best “staycation” city in the country. And that from a woman who happily lived for over a decade in and around NYC and is originally from the Boston area. The weather is a little dire, but there sure is plenty to do.
Polly-
Can you come up with a Top 5 or Top 10 things to see in the DC area? Thanks.
I’m flying into DC this weekend to go to a cousin’s wedding in Richmond. I hope I-95 settles down before we hit the road (Sat. night or Sun. morning).
” I think I’ll find something to do….”
We used to pack the camping gear, kayaks and booze, grab any available single RN’s and head for a cool hill overlooking Seneca WV or even hide out in Harper’s Ferry area. Some of our hospital staff would rent a small house from a friend at Rehoboth Beach, Delaware for the summer which was nice but that was long ago when prices were affordable. Nothing like busting out of a muggy DC at 2 am after nightshift with a fast Norton and a warm nurse heading for Delaware in the dark.
DC and a holiday meant “Get OUT of Dodge,” and fast, as the hospital would be busy as the tourists had amassed and the city had become a pain with summer trafic, noise and pollution.
All of the Friday night car wrecks, stabbings and shootings could wait…for the next shift …trapped and left behind.
“a fast Norton and a warm nurse” at 2 AM.
Lovely concept assuming you have made the right sacrifices at the altars of Lucas and Amal beforehand.
- Doghouse Riley, owner of a ‘65 Atlas
“Lovely concept assuming you have made the right sacrifices at the altars of Lucas and Amal beforehand”
Just run both until they seize or freeze.
I say that if I had the time and money, I would spend two weeks a year in DC for the rest of my life. I’ve been there 8 times I believe, (took both of my kids for a week a couple of times), and do not think I have even scratched the surface. Last time I was there they were just finishing the WWII memorial. I was out jogging early in the morning and was peeking at the memorial through the fence. A workman just arriving allowed me to walk through the construction site. What a thrill that was. As it is, I hope to get there once more in this lifetime, and I will need to make it count.
Quick heads up: Ben has posted his DC/Florida itinerary for the June East Coast meetup in the Meetup thread, and needs suggestions. Go on over and help him out.
Sadly, I’ll be in Wisconsin, but have a good time guys and gals.
We need Mo money…
100,000 teachers nationwide face layoffs
May 27, 2010 - (Washington)
Senior congressional Democrats and the Obama administration scrambled Wednesday to line up support for $23 billion in federal aid to avert an estimated 100,000 or more school layoffs in a brutal year for education budgets coast to coast.
As early as Thursday, the House Appropriations Committee expects to take up a bill that couples the school funding with spending for the Afghanistan war — a measure that has bipartisan support. But a parallel push in the Senate stalled this week after a leading proponent concluded that he couldn’t muster enough votes to surmount Republican opposition.
“We desperately need Congress to act — to recognize the emergency for what it is,” Education Secretary Arne Duncan said Wednesday on Capitol Hill. “We have to keep hundreds of thousands of teachers teaching.”
How about paycuts like the rest of the world?
and 100k sounds a bit too dramatic.. I doubt 100k teachers would ever be laid off
and btw, where was Obama helping my company when they laid off 13% of the force year? why didn’t we get a bailout to stay up float?
No teachers need to be laid off. Just get them all to take pay cuts.
Spend an entire school day with 20-30 kids and then come back and tell me that teachers are overpaid.
$23 Billion to save 100,000 jobs? That’s $230,000 per job! But I bet that simple math exercise won’t be in any of the MSM articles.
“That’s $230,000 per job!”
I wish it took $230,000 to save my job.
Well someone has to pay HR’s salary.
I wouldn’t doubt 100k for a minute. I remember teachers being laid off before in the late 1970s and few even in the 1990s.
Contrary to popular belief, civil servants are just as vulnerable to layoffs as anyone else.
Yeah, unless they’ve been on the job more than three years. Then it takes an act of Congress for them to lose their jobs in many places.
Yeah, unless they’ve been on the job more than three years. Then it takes an act of Congress for them to lose their jobs in many places.
Yeah, my gf is dealing with such an issue. Even though a coworker is routinely late without giving notice, out on days without calling in, and hasn’t showed up at work for the past 4 days(nor called), it’s not simple to dismiss the person. In fact, it’s a huge challenge.
If I were to behave that way in the private sector, I’ve have been let go LONG ago.
Isn’t there a formula you have to multiply a person’s salary by to determine the actual cost of employing them? I think it’s one and one half and it covers health, worker’s comp and liability insurance along with equipment, supplies and so forth. That would make it… $150K?? But, what that also does, and they did it here in my city, is it allows them to close schools, which saves even more money, so that would account for some of the 23 billion as well.
U.S. Spending on Food Stamps at All-Time High, Sparking Debate Over Welfare ~ FOXNews
The U.S. is now spending more on food assistance than at any time in its history, sparking a debate over whether the roughly 40 million people now receiving the latest version of food stamps at a cost of $73 billion a year are a symptom of a weak economy or are part of a long-term expansion in welfare and related programs.
Critics say this and other welfare programs were growing long before the recession and that food stamp usage has exploded over the last decade.
“The number of food stamp recipients has more than doubled since 2000, and the cost of the program has more than tripled,” said Chris Edwards, an expert on federal and state tax issues at the libertarian Cato Institute.
I noticed Shwans trucks in the Inland Empire have “we now take EBT cards” 3 billion is a lot of money to be floating around. I do not mind feeding people but the should really give nutrition classes and cooking classes to a majority of food stamp recipients.
People can not cook these days.
So the shwan man takes food stamps now, great.These lazy @sses cant even go to the grocery store?
“Welfare?” Most food stamp recipients work.
I assumed this would happen — an attempt to blame our fiscal problems on the working poor. Works for both the corporate kleptocrats and the public employee unions.
Exactly. I see a lot of folks around here who work low wage jobs, like convenience store and grocery store clerks, using food stamps. As far as I am concerned, they’re definitely entitled. They have a job. They just can’t live on the wage.
“They just can’t live on the wage.”
If it were kept to people or families that needed the help that would be a big plus. But I constantly see people, some legal and some not using the food stamp credit card while they are talking on their fancy cell phone before walking out to their late model and sometimes brand new car or truck. Ask not… Ah hell with it.
Build it and they shall come. In droves.
You might see my brother doing that.
All was well and good till he got laid off early this year. Now, he is doing contract work, thank God.
He had a 1990s vintage Toyota Corolla with 320,000 miles on it. Engine finally blew when my no account nephew drove it to school 50 miles away and decided to ignore the oil light. Bought a used Prius as a replacement. Anyhow, struggled to find work. Mom and I helped pay his car payments. Unemployment and food stamps for him.
Had a bunch of challenges the last ten years. Works in manufacturing/engineering. Been a rough go since NAFTA/China free trade sucked up most of the jobs. Still, been steadily employed since 1992 till now.
Now that he is getting into his 40s, worried a good bit more about retirement. Has a little 401k/toyota pension…
He lives very frugally, see car with 300k on it, but has a wife who isn’t a team player. Three kids including a 21 yr old who isn’t doing squat.
I was in a $tarBucks this past weekend (usually avoid them, but needed a fix while travelling), and saw a big sticker that said “Use your WIC card here!” on the card-reading machine.
I’m all for kids getting good nutrition regardless of their parents’ education, intelligence, or employment status.
But I don’t see how that extends to mommy getting $4 and $5 coffee beverages.
I was in a $tarBucks this past weekend (usually avoid them, but needed a fix while travelling), and saw a big sticker that said “Use your WIC card here!” on the card-reading machine.
Our welfare systems are increasingly used for wealth-distribution purposes rather than giving-the-poor-a-hand-up purposes. That’s why I hate government welfare. It’s too easy to game.
Our church has a needy-assistance program, but if anyone comes and just asks for money we don’t give it to them - instead we give them basic food or else go grocery shopping with them.
At some grocery stores now you can buy gift certificates that can only be used for food staples. I have friends that often encounter homeless people asking for handouts, and they carry a handful of these with them to give to them, rather than just giving them money. Some of homeless accept them - some though just refuse them, because they only want money for alcohol or drugs.
WIC is awfully stict on what can be purchased. I wonder what items in a Starbucks would qualify of WIC purchase.
I was in the grocery biz a couple of careers ago, and I recall that keeping the register system current on what is WIC qualified was a real challenge for the IT guy.
What can you do at $BUX with a WIC card? When I worked at Safeway, a wic voucher had the purchasable food itemized (e.g. bread, 2 cans Similac, etc.). Btw I think they should specify a list of purchasable items for food stamps like the Oregon Trail card too.
“Welfare?” Most food stamp recipients work.
whether or not something is welfare is not dependent on whether the receiver works or not.
It’s a handout, paid for by those of us who work hard, pay our taxes, and don’t have large mortgages or kids.
paid for by those of us who work hard, pay our taxes, and don’t have large mortgages or kids ??
Meaning that if you have kids and a mortgage you “don’t” work hard OR pay taxes ??
Meaning that if you have kids and a mortgage you “don’t” work hard OR pay taxes ??
No, that’s not what I’m implying.
However, what I AM saying is that those without kids subsidize those that do. Property taxes for schools, the tax credits and deductions that parents get, etc.
You can either do that or have those kids form roving gangs who WILL come and steal everything you own and then kill you.
You think it’s bad now?
You may be too young to remember the civil rights riots. I do. It was damn scary times. It wasn’t just about civil rights, but about crushing poverty as well.
When people have nothing to lose, they WILL do anything to survive. Offshoring jobs and decimating entire industries that provided entry level jobs doesn’t help.
Modern day version of the soup kitchens without
the stigma.
Exactly.
That what your parents think?
That what your parents think?
How are my parents relevant here…?
Are you saying your parents are irrelevant?
Are you saying your parents are irrelevant?
Nice. I was asking how my parents are relevant to a discussion on welfare and tax burden?
Inflation will just make this problem worse. It will tax the poor and middle class to bail out the elite.
Monty Python - Dennis Moore
http://www.youtube.com/watch?v=qLkhx0eqK5w - 99k -
When I lived in CA I went into a convenience store once. I was the only one in there and the clerk - someone of apparently Asian / middle-eastern descent (think Apu from The Simpsons) started chatting with me. He asked me “Very often people come in with food stamps - they’re not allowed to buy beer with it, so what they’ll do is buy a pack of gum with one stamp to get the change, then go out and come back and in and buy another pack of gum with another food stamp and get the change, then use the combined change to buy a beer, and just throw out the gum. I don’t think that’s right - do you?”
I had to agree with him.
That is one of the many reasons they switched to debit cards for the program. No change, so you can’t game the system that way anymore.
Why was he selling gum to people for food stamps? I thought gum wasn’t eligible for the program either.
When my uncle was a foster parent, the foster kids (now adopted) got WIC. Local cheese, milk, fresh eggs, etc. were dropped off in a styrofoam cooler once a week or so along with less perishable groceries in a box. But Vermont is a small state.
Were those styrofoam containers reused or recycled?
Why was he selling gum to people for food stamps? I thought gum wasn’t eligible for the program either.
I don’t remember if it was specifically gum - it was some small food item that was eligible, but was less than a dollar.
“When my uncle was a foster parent, the foster kids (now adopted) got WIC.”
The worst situation in any grocery store is to get stuck behind someone with WIC coupons. It takes forever, even longer than the person with 50 discount coupons paying with a check.
But that was the thing. They didn’t use WIC coupons in VT. Just sent along the food. I think maybe he had coupons for diapers and formula when the boys were very little.
I don’t know about food stamps, but I once received a debit card for unemployment benefits. I definitely used it to buy beer. And Cheetos.
Sidenote: some small bank in Springfield (the IL state capital) has or had the contract for all unemployment-issued debit cards in Illinois.
Sidenote: some small bank in Springfield (the IL state capital) has or had the contract for all unemployment-issued debit cards in Illinois.
Chase had it in Texas….bugged me that they were skimming a % of the money I got in UI
You are correct. They still do and still do.
Un-freaking believable.
That is one of the many reasons they switched to debit cards for the program. No change, so you can’t game the system that way anymore.
In NYS the food stamps system is gamed very easily. You can stand in front of a Nojaims or a price chopper ( the local low end grocery stores) and find the food stamp recipients who are usually approaching people to buy groceries at 50 cents on the dollar with their food stamp card.
I did restrict my statement to saying you can’t game it “that way.” There are obviously any number of ways to game a debit card that doesn’t require biometric data to work. Even then you could pay for someone else’s groceries and have them pay you cash once you got outside the store.
Kinda sound maybe like Wall Street banks, for instance? You can put all kinds of restrictions/regulations on how they receive or use their welfare (TARP, HAMP, etc. etc.), but they always find a way to game the system.
I wonder how many of these people have cellphones and cable TV
Cell phones? We need as many cheap, reliable cell phones as we can get in as many peoples hands as we can get. This makes us much more efficient than we would be if we didn’t have them.
We also need as many computers in as many homes as possible. If not computers then iPads or Blackberry’s or what ever. The very worst thing we can do is to do without these items. They are central to our economy. Heck, we would be better off if we made computers and cellphones free and let WS fend for themselves.
Note: I have a pay-as-you-go-phone. I don’t need unlimited minutes these days and so my phone costs me about $100 per year. I see my students paying out $60 to $100 per month for the higher end when they should be doing the very basic in cell phones. I never advise them to do without their cell phones. Just do smarter with their cell phones.
As far as I can see, computers and the internet are not toys or expendable items. They are central to our very survival.
I want FREE high end computers and FREE highspeed internet for everyone.
No kidding.
Roidy
Free? Paid for by whom?
Ideally I’d like the Wall Street “Geniuses” who were a primary instrument that got us into this mess start and maintain a recurring fund for this. Oh, it won’t happen. It should.
Roidy
Bill, you might be too young to remember that ALL TV was free once and that it still is if you don’t mind a limited selection.
And you are also apparently ignoring the fact that websites don’t use the subscription model because it doesn’t work, yet “somehow” they are supporting themselves.
It used to be a cell phone was a luxury, now it’s a necessity. Much like cars. In some parts of the country you don’t need one, but for most of the nation, you HAVE to have one to survive. Same with a PC. Without computer skills, you are going to be asking if they want fries with that for the rest of your life.
I haven’t had a land line for seven years.
The problem is that in areas with limited reception, the signal can and does disappear frequently instead of just being grainy but highly viewable.
I don’t know the details of the analog to digital conversion, but one effect was a boon to cable / satellite providers.
The only way you get “free” computers (or free healthcare, or free anything) for everyone is if the government manages to recruit a magic dwarf who can spin straw into gold.
NB - this strategy works only until gold has been sufficiently devalued.
I got a free cam-phone the last time I signed my cell contract.
Tiffany’s 1Q profit more than doubles; issues upbeat profit forecast.
May 27, 2010
NEW YORK (AP) — Tiffany & Co. reported Thursdsay that its net income more than doubled in the first quarter as the jewelry chain enjoyed stronger-than-expected revenue in the U.S. and soaring sales in Asia.
Tiffany also raised its annual profit outlook above Wall Street expectations.
The jeweler said it earned $64.4 million, or 50 cents per share, in the three months ended April 30. That compares with $24.3 million, or 20 cents per share in last year’s first quarter.
It’s GOOD to be the Banksta!
PPT can cool their jets today and go play a little golf. Pre-markets are way up, DOW up nearly 200. Nothing but good news and blue skies ahead!
Is there any way to gauge how much liquidity the Fed has dumped into the markets this week?
Not to my knowledge, but if there is I would not trust any number ‘they’ would put out.
Wonder if John Williams at shadow stats delves into stuff like that, or is the water so muddy no way to figure it out.
The beat goes on. Those panicked into selling a few days ago sold at a discount to some very deep-pocketed pros. Now it’s time for those pros to cover.
It does seem as though some kind of massive volatility-driven shake down of the weak hands by deep-pocketed strong hands is underway. Works for me — I ain’t rich, but I is solvent.
There is nothing new here. When it is announced that the world is about to come to an end and sellers rush en-mass to dump their holding the question needs to be asked: ” Who is foolish enough to be buying?”
The answer a lot of people here have is it is the PPT. Another answer (a more accurate one IMO) is it’s the market pros, those who understand very well market psychology.
The same question should be asked when there is a huge opening on the up-side, a buying panic. If everyone is buying, who is it that is doing the selling?
“…the market pros…”
And exactly how do a bunch of individuals playing ‘every-man-for-himself’ come up with enough fire power to create their own financial weather when the chips are down?
It seems like it’s AI’s (artificial intelligences) trading against other AI’s.
Market volitility, up and down, is a very sure sign of an impending correction or bear market beginning. 200 point up days are surely followed by 250 point down days with continuing lower lows.
The consensus of what I read says there is more downside left. That’s my bet anyway,.
The market was over-sold. We were below 12 year averages not even taking into account inflation adjustment. I think anyone buying smartly today will be happy in 5 years with their decision.
5 years? Most people are worried about tommorow.
Exactly why those with cash can put it to work. Many of us have been prepared for this party for years.
This would sound like right thinking in a permagrowth scenario. Did anyone notice that the largest expansion of credit in history has stopped?
Not only has it stopped, it has reversed itself.
Sounds to me then like the beginning of the biggest contraction in history. Anyone selling anything now should be happy in five years.
“Sounds to me then like the beginning of the biggest contraction in history. Anyone selling anything now should be happy in five years.”
This is my belief also.
Time will tell.
I would say a 30% drop in prices is recognition of the obvious.
Knifecatcher.
My investments in the last three years have caused my house money reserve, which is sufficient to buy a decent home for all cash, to rise 50% while at the same time home prices in my area have fallen 20%. Say what you want, but the results are what they are.
for all cash, to rise 50% ??
home prices in my area have fallen 20% ??
Your “cash” has not risen “squat”….It has only “risen” when you sell and the percentage is the “after tax” gain I might add…Until you sell, it means “nothing”…Just ink on paper…
As far as home prices, its the same analogy…They have not fallen 20% unless you are a buyer,,,Until then your 20% number is irrelevant…
Sorry…I re-read your post…You are talking about your “cash” rising 50% so it appears you have already sold…I thought you were talking about “stock gains”…I stand corrected…
scdave - my house reserve is actually 65% equities and 35% cash equivalents (CDs, Treasuries, Money Markets, etc.). Yes, my gains/losses are not recognized yet, but I was responding to the acusation that I was a fool with my money. Perhaps if I wasn’t Jewish I would have let it go. Yes, I have been buying stocks on major corrections despite the beliefs of many of ppl on here, but I would put my ROR up against theirs any day of the week. Unlike houses, I can dump my equities in 3 seconds if my research shows it is prudent to do so.
I fear that the next 5 years will not be reflective of the last 3 years.
“Perhaps if I wasn’t Jewish I would have let it go.”
What does religion have to do with it?
Apparently you don’t know many Jewish people. Education and preservation of wealth is highly regarded in our culture. Try to meet different types of people. Despite the politically correct movement, various cultures and religions do in fact place different values on various traits. Ignoring or failing to see such differences does not make you a better person, it just makes you close-minded or less aware. For me personally, I love to learn travel and experience cultures, and embrace the differences rather than ignore them.
I hope you have stop limit orders on your equities, Natalie. There might be another dip (like the one in March, 2009) when the banks reveal their balance sheets, sans shady mortgages, if not sooner.
BTW, your remark about Jewish people is a little like a black person calling another black person the “n” word. It’s okay for a Jew to comment on Jews being frugal, but when a non-Jew does it, it’s generally not appreciated. You might want to keep that in mind when making generalizations about your peeps in mixed company.
The market was over-sold. We were below 12 year averages not even taking into account inflation adjustment.
You’re assuming that 12 years ago the market wasn’t overbought. It was - by a lot.
some perspective
(though the chart’s about 2 months old)
Just looking at that chart wouldn’t it make sense that we’d go under ten at least once before this was over? Or are we operating on a whole new paradigm now?
Properly - we probably should go under 10 for a while, given the massive malinvestment (my catch-term du jour) during the housing bubble.
Alas though - the bulk of people view the current condition as being depressed (home prices, stock prices, M3 money supply, etc. etc. etc.), not realizing that’s it’s not a depressed state at all, but merely a not-so-inflated-as-we-used-to-be state.
The chart would indicate that, except for a few exceptions, this is the best time to buy stocks since about 1990. In addition, since the time the chart was prepared, we shaved off another 5%. I did not see a footnote as to how P/E ratios were computed and adjusted to decide if they accurately accounted for bubble bursts and pops, and used realistic forward looking projection modeling if applicable. Given where we are in the cycle and our unique circumstances, various adjustments would have to be made.
I disagree. Looking at the chart - right now looks an awful lot like 1971. If one had invested then you wouldn’t get any returns until about 15-20 years later.
P.S. -
this is the best time to buy stocks since about 1990
This may well be true, but keep in mind that the stock market has been in a bubble since 1990. Based on fundamentals 1990 wasn’t a good time to buy - it was quite lukewarm.
So if one knew that another huge bubble was coming - then yes it’d be a great time to buy.
Personally I think the long-term fundamentals are far, far weaker than in 1990 - with the exception of one thing - inflation. That’s the big wildcard. Unless one things we’re in for some very high inflation ahead - I’d stay the heck away from the stock market.
BTW - that P/E ratio - (currently 21 per Q1 earnings data) is despite earnings being up 787% year-over-year! Earnings have gone from 6.86 to 60.9! That’s by far the fastest jump in earnings ever. I’ll have to post a very interesting chart tomorrow perhaps.
That’s fueled by one thing - all the incredible new stimulus that’s been enacted since late 2008 - about $3-4 Trillion worth.
But guess what? The stimulus is going away - rapidly. Now we’re talking $200 Billion stimulus packages instead of $800 Billion packages. The Fed has no plans to insert another $Trillion+ into the economy, at least that I’ve heard of.
I always respect your opinions Packman. You seem pretty sharp. I was not implying it was a “great” opportunity to buy, but given the alternatives (2% or less for cash equivalents), and believing we will experience major inflation in the next few years, it does not seem like a bad place to put some of my stashed money. I am not anticipating 20% plus gains, but I think 6% plus a chance at 10% or more is a reasonable expectation and surpasses other options. Again, I would not just dump money in whenever. I only buy on major corrections, and at these levels am not buying much, although I did last last week and last year. Please keep up the good posts.
OK - sorry, not trying to be argumentative. If you believe as you do that we’ll have major inflation in the next few years - indeed viewing the current as a good buying opportunity is valid (perhaps).
FWIW - I’m very torn, which is why I’m out. If it weren’t for inflation expectations from Fed pumping I’d short the market like there’s no tomorrow; but that’s an “if” that just can’t be ignored.
Actually the true wildcard isn’t so much inflation directly as it is the federal debt. If it wasn’t for the federal debt I’d say that we’re - like Japan for the past 15 years - in for a very, very long bout of price stagnation; and as a result I think the stock market would be way overpriced (note that the Nikkei is still 75% off its 1990 highs!). However we simply can’t afford to be Japan for 15 years - we’ll simply just default on our debt and all hell will break loose. We have to inflate to get our debt level to manageable levels. The big question is when - and to that I do not have the answer. It may be 2 years or it may be 10. It’ll be less than 15 though I’m pretty sure, and definitely less than 20.
No. While I grant you 1998 was techbubblicous, but I was referring to the 12 year average. We have had two major corrections since 1998.
To clarify, I was looking at the daily average during such period.
One day my link will show.
Though we’ve had two corrections since 1998 - the chart shows that even after these corrections the long-term P/E still remained well above historical average, aside from just a very brief dip last spring. We’re currently out of what would be considered “bubble” territory - but stock prices are still high; especially (IMO) given the weak fundamentals underlying the still-inflated earnings.
Thank you for the information. I will review this evening.
According to David Rosenberg of Goldman Schiff, who I think writes one of the best (free) economic and investing newsletters, the market is currently pricing in about a 3.5% annual GDP growth. Prior to the start of the correction it was pricing in approximately a 5% GDP growth. Problem is, it beginning to look like second half 2010 and first half 2011 GPD growth is going to be in the 1.5% annualized range. If that is the case, its pretty easy to see that S&P 500 in the 900to 950 range is about right, with a possible overshoot to the downside of 850 or so.
That seems about right to me.
Looking at market over the past year.
All the rallies are somewhat low volume periods.
Signs of an inflated market. Sales are low (volume) and prices are drifting up. Similar to the housing bubble. You had prices drift up in 2005 but volume had dropped off.
Mmmm. Remembering looking for the waves of EPDs back in 06-07 as subprime blew up and much of the fraud was exposed. Course it’s still going on but on the back of the GSE zombies and being ported to the taxpayers.
Crude up $8 per barrel in two days. Given the report that supplies were “unexpectedly” high a few days ago, this looks like nothing more than pigmen playing games.
You would be correct.
I often have a hard time explaining to people that oil prices from raw to finished do not reflect supply and demand, but instead, trading and speculation.
The two aren’t mutually exclusive. E.g. in 2008 when prices hit $140 for crude - it was speculation, but it was speculation based on supplies that were at the time near record lows, and below the very wide “average range” maintained by the EIA.
That being said - the current $74 price seems to me to be very speculative, because supplies are currently way above the EIA’s average range. Only thing I can figure is that a lot of people are anticipating trouble in the middle east, combined probably with (long term) the new moratoriums on drilling due to the BP accident.
That is true. They aren’t mutually exclusive. But because of the trading and speculating, it makes supply/demand moot when trying to fix prices.
I frankly don’t know what to make of this kind of article. For instance, since the Fed stopped publishing M3 back in 2006 or so, where does Evans-Pritchard even come up with the data to support his claim about the rate of M3 contraction?
At any rate, the U.S. economy is clearly in recovery mode, so I am not sure whether or why one should bother worrying about this veil of money.
US money supply plunges at 1930s pace as Obama eyes fresh stimulus
The M3 money supply in the United States is contracting at an accelerating rate that now matches the average decline seen from 1929 to 1933, despite near zero interest rates and the biggest fiscal blitz in history.
By Ambrose Evans-Pritchard
Published: 9:40PM BST 26 May 2010
There are a bunch of private research groups that are gathering M3 data. Lots of renewed interest in those numbers after the latest dance.
Anyhow, people don’t want more debt and banks don’t really see a reason to lend. When they do it’s to sell the debt to the GSE aka Uncle Sam.
Rates going down down down. Now, it’s possible the govt sitting on those loans will not make much money or will lose some money but it will be a better result than continual bailouts to the banks.
That is my solace in the beatings that are occurring.
Again, hope we can look at our tax structure and stimulus spending and see how to invest it to make the US job situation better. Can see the trade situation has improved but lots of work to do on oil. Don’t think we will ever be as cheap as China.
I saw that boob Obama basically surrendering the US position as a world leader to China and India today.
President Barack Obama’s strategy called for expanding partnerships beyond traditional U.S. allies to encompass rising powers like China and India in order to share the international burden, according to portions of the document obtained by Reuters.
He still has that Jimmy Carter like opinion… an enabler of madmen and crazy factions around the world. Plus a wonderful tolerance for the European vision “of talking about potentially doing something drastic in the future if the current plant of talking about something drastic, possibly negative doesn’t come to fruition in some sort of period out in the future”. Or in simple speak. Doing nothing.
Even Bill Clinton, whom I detested, got sick of Europe mollycoddling the Serb’s and bomb the snot out of the bastards. It will take a long time, if it ever happens, for Obama to get there.
It’s kind of disgusting. This country has amazing resources of people, education, infrastructure, military… you name it. And a Bozo like Obama is acting like we are some kind of weakling.
Are you familiar with the concept of “rope a dope?”
The North Korean problem isn’t going to be “fixed”, without the Chinese getting on board.
The Iran problem isn’t going to be “fixed”, if everybody selling them stuff to build a-bombs aren’t on board.
My solution for North Korea? Declare victory, and GTFOO Dodge.
Why is North Korea our problem? Tell the Chinese, Japanese, and South Koreans that they are wearing the big boypants now, and delegate the problem to them.
We wouldn’t even be in Afghanistan, if the Shrub-in-Chief had sent an Airborne Division or two into Tora-Bora when we had Bin Laden cornered. But, nooooooo…..there’s no reason to do that. Not when you can come up with lame excuses to fix daddy’s unfinished business in Iraq.
We’re in EA & SEA because those three hate each other. It’s every bit as volatile as the ME, only they HAVE nukes and high tech weapons. It’s also the tech manufacturing center of the world.
It is a VERY strategic region for just about every nation on this planet.
I found the article a little inscrutable myself, maybe Ambrose phoned it in from the pub. Ambrose is a big deflation hawk, and I think his point is that even the Friedmanites are calling for stimulus, just in a different way from the Keynesians- by quantitative easing. He also says the euros still pay attention to the US M3, so I guess the data is available somewhere, despite the Fed choosing to ignore it.
The Fed still publishes all components of the old M3, you just have to roll them up. M3=M2 + Institutional Money Funds + Partial Large Time Deposits
The economy is in recovery mode? I wonder if those 240,000 people who were laid off last month heard that news? Or those 20some MILLION folks who are still getting UE?
Someone should let them know!
Feds Issue Terror Watch for the Texas/Mexico Border
May 26, 2010 ~ FOXNews
The Department of Homeland Security is alerting Texas authorities to be on the lookout for a suspected member of the Somalia-based Al Shabaab terrorist group who might be attempting to travel to the U.S. through Mexico, a security expert who has seen the memo tells FOXNews.com.
The warning follows an indictment unsealed this month in Texas federal court that accuses a Somali man in Texas of running a “large-scale smuggling enterprise” responsible for bringing hundreds of Somalis from Brazil through South America and eventually across the Mexican border. Many of the illegal immigrants, who court records say were given fake IDs, are alleged to have ties to other now-defunct Somalian terror organizations that have merged with active organizations like Al Shabaab, al-Barakat and Al-Ittihad Al-Islami.
Hmmm.
I head down to the Al Shabaab and get a falafel sandwhich and see if any of the Somali dish washers have gone a glimmer.
http://www.eyeofdubai.com/v1/restaurants/restaurant_view.asp?resto_id=3585
Pretty sure we had one in NJ as well… maybe down in Long Beach CA too. I’m guessing there are a bunch in Dearborn too.
I think the baba was better in NJ than out here in California. Better egg plant’s I guess. Short growing season.
Finally got a good Arabic place, Open Sesame, to go with my good pizza place, Valentino’s.
Sorry, this reminds me of Hot Shot’s with the Iraqi pilots. Baba Gannoosh and Koo’s Koos.
Not sure what Somali food is like though. Go over to West Africa around Ivory Coast and there is supposed to be some spicy stuff. Haven’t tried it yet.
Somali food :
pasta with grilled onions, ground meat, and white beans
balls of mashed potatoes breaded and fried
sambosas with ground beef
Somali food par excellence :
spicy, fresh slaughtered roasted goat or lamb
goat or lamb liver fried or grilled with onions and hot peppers
Somali qat is very strong - assuming that it’s what you find in the Somali tribal area of Kenya
Oh you are gonna LOVE this:
Damn SOBS
HPD Chief McClelland airs concerns about Arizona law
Houston Chronicle
WASHINGTON — Immigration legislation being considered in several states and similar to the crackdown in Arizona would have a chilling impact on local law enforcement, Houston Police Chief Charles McClelland said Wednesday.
McClelland was one of nine police chiefs from major U.S. cities who met with Attorney General Eric Holder to voice concern about local police enforcement of immigration laws.
…Texas Gov. Rick Perry, a Republican, has said the Arizona law would not be “the right direction for Texas.” But some state lawmakers said they are considering measures to get tough on illegal immigration.
Poor Rick ‘I’m the next Reagan’ Perry. This is a tough one to straddle, even for a ‘cowboy’. He’s on the long-horns of a dilemma.
There are a lot of nervous Nellies out there worrying about M3 money supply. Focus on the global economic recovery, and don’t worry about money so much, and you will feel much better.
Bloomberg
Saudi M3 Money Supply Growth Slows to Seven-Year Low (Update2)
May 23, 2010, 12:52 PM EDT
(Adds bank lending in second paragraph.)
By Glen Carey
May 23 (Bloomberg) — Saudi Arabian M3 money supply growth, an indicator of future inflation, slowed to a seven-year low in April.
M3 money supply growth, which includes demand deposits and currency outside banks, eased to 2.6 percent last month, the slowest pace since February 2003, from 4.7 percent in March, the central bank said on its website today. April bank claims on the private sector advanced an annual 3.2 percent compared with 2.4 percent in March, according to the central bank data.
“The lower money supply is a result of lower lending,” said John Sfakianakis, chief economist at Banque Saudi Fransi. “There is a lag effect. Eventually, when there is more lending, as we are seeing in April, you will see that money supply will be impacted.”
Banks in the Arab world’s largest economy have curbed lending after the Saad Group, the business owned by Saudi billionaire Maan al-Sanea, and Ahmad Hamad Al-Gosaibi & Brothers Co. defaulted on loans last year. Saudi banks have been reluctant to resume lending even after the central bank cut interest rates.
…
Try not to catch yourself a falling knife real estate asset.
Up and Down Wall Street
TUESDAY, MAY 25, 2010
Cheap Mortgages: No Boost to Housing
By RANDALL W. FORSYTH
It is different this time. The drop in interest rates reflects deflation, not an opportunity.
…
In 1998, Fannie and Freddie revved up their mortgage-making machines. The GSEs sharply boosted their then-coveted debt securities borrowings. That provided them with the wherewithal to step up their purchases of mortgages.
Meantime, Fannie and Freddie also ramped up their issuance of mortgage-backed securities, which, like their direct debt obligations, were sought after for their triple-A credit quality stemming from their implicit federal backing. And, in an ironic twist, Fannie and Freddie also became active purchasers of those same mortgage-backed securities. That’s because the yield spread between Fannie and Freddie directly issued debt and their MBS widened as a result of the volatility in the debt market. Fannie and Freddie took advantage to expand their balance sheet and boost their earnings.
In the process, the rate on the 30-year fixed rate mortgage fell to a then-record low of 6.56% in September 1998. “The strong economy, combined with a low-interest-rate environment, helped to push MBS issuance to a new high, as both mortgage originations and refinancings reached record levels,” the Bond Market Association commented at the time. Indeed, MBS volume doubled in 1998 to over $700 billion.
In other words, mortgage money was plentiful and cheap in no small part because of Fannie and Freddie. All of which spurred home buying and building as well as consumer spending. The American consumer thus was the direct beneficiary of the flight of capital from the risky emerging debt markets to the safety of the U.S. mortgage market. And the party would play on for nearly another decade.
Much has changed since. While capital is coming to America again — witness the strength of the dollar and the Treasury market — U.S. homebuyers do not seem willing or able to take advantage of it.
According to the Mortgage Bankers Association, mortgage applications to buy new homes fell 27% in the latest week to the lowest level since the trade group began keeping in track in 1997 — even with an average 30-year fixed-rate mortgage at just 4.83%, the lowest since last November. Refinancing volume did perk up by 14.5% as opportunistic borrowers sought to take advantage of the low rates — perhaps to splurge but more likely to pay off other, higher-cost debt.
The sharp drop-off in purchase applications is almost certainly the result of the end of the tax credit of up to $8,000 for first-time and certain other home buyers on April 30. The largesse from Uncle Sam gave a 7.6% boost to existing-home sales last month and will likely to be felt in the May and June data. (Under the rules for the tax credit, buyers had to sign contracts by April 30 and close by June 30 to qualify. Home resales are counted at closings.)
The tax credits most likely only affected the timing, not the total, of home purchases, accelerating them to meet the deadline. And with the lapse of the subsidy, there already are signs that housing sales and prices are dropping (”Housing Begins to Fade Without a Spur”)
One unintended consequence of the improved home resale market resulting from the tax credit and lower mortgage rates has been a surge in the number of houses for sale. Inventories of unsold homes jumped 11.4% in April, to over 4 million units, almost all single-family homes. That strongly suggests that prospective sellers, who had held back while the market was weak, are returning now that market conditions apparently have improved.
It’s unlikely that near-record-low mortgage rates can overcome this supply coming onto the market, which will be augmented by record foreclosures as lenders try to catch up with their backlog of bad loans.
Ultimately, the disparate responses to lower mortgage rates demonstrate how it really is different this time.
In 1998, during an asset inflation, borrowers leapt at the offer of cheaper financing. Rising asset prices plus cheaper costs of liabilities equaled rising wealth.
During a debt deflation, however, asset prices fall while the value of the associated liability remains fixed, resulting in reduced wealth. Expectations of lower asset prices elicit more sales, which puts more downward pressure on prices. Lower borrowing costs can’t offset that squeeze.
So, one cheer for the drop in mortgage rates. They are the result of the deflation that is deepening.
Nice post Pbear and I agree….
One good thing is people that got in before the bubble happened are able to refinance at insane low rates.
That hit’s the bankers again.
That hit’s the bankers again.
How so? How much of the money being lent out is sourced by the bankers?
They make their spread no matter what. Either they borrow from the fed at low rates and lend out at a higher %, or they lend out the money depositors give them, which they pay an incredibly low rate of return on.
It’s the savers that lose due to low rates, not the bankers.
While it is true they make money on the churn in the longer run it is deflationary.
Friedmanites arguing that the Keynesians are pushing on a string. The Friedmanites are calling for quantitative easing! Something Ayn’t right…
http://www.telegraph.co.uk/finance/economics/7769126/US-money-supply-plunges-at-1930s-pace-as-Obama-eyes-fresh-stimulus.html
Funny, being the financial neophyte that I are, I had to look up quantitative easing to get it.
What are they thinking?
They’re thinking ‘this sucker could go down!’.
Yes, I don’t think there’s enough money to keep it all afloat. I bet the US could save money if we just gave everyone a $200,000 check.
Here’s a plan: Give everybody $200,000, have them pay their share of the nation’s debt with that money and then spend the rest buying American made products. Everybody’s a winner and the US is debt free. I don’t see what can go wrong with this idea.
I think we should outsource our money printing to China, and just tell them to print off a little extra for themselves whenever they need any from us.
Send ‘em a debit card hooked up to our electronic blip machine- save the trees!
Bloomberg
China’s Stock Market Has Become a Poor Man’s Casino: Andy Xie
May 23, 2010, 3:22 PM EDT
Commentary by Andy Xie
May 24 (Bloomberg) — A bartender at my neighborhood pub recently asked me how the Shanghai stock market was performing. I said it was at about 2,600 points. He jumped and said, “No! The Communist Party wouldn’t let that happen.”
He spent the next 10 minutes trying to convince me that the Communist Party would make the market rise to 8,000 in the next three to five years.
“Look, the Hong Kong market is at 20,000,” he said. “Shanghai at 8,000 would be very reasonable.”
China’s stock market involves more investors than any other market in the world. There are 124 million brokerage accounts. From what I can gather, the collective enthusiasm of the investing community is still quite strong. The market capitalization is small at 53 percent of gross domestic product and 31 percent of money supply. Prices are at a historical low of 2.5 times book value. Why is the market still going down?
When the central government introduced tightening measures for the real-estate market, many were hopeful the money would flow out of property into the stock market. A popular yo-yo theory says money travels only between property and the stock market, never anywhere else. The property market hasn’t dropped much, while the stock market is down 20 percent.
…
They learn well from amarica dont they?
Wait till that real estate bubble implodes over there.Lots of people will have to go back to work making nikes for people on food stamps pimping the schwan man over here.
What happened to Barrycare?
Health insurance rate hikes hitting California small businesses could hurt state’s economic recovery
Small firms say they are curtailing plans for hiring and expansion amid rising insurance bills. ~ Los Angeles Times ~ May 26, 2010
Small businesses in California are being hit this year with double-digit hikes in health insurance costs that could hurt the state’s economic recovery as companies curtail plans for hiring and expansion to pay their insurance bills.
Five major insurers in California’s small-business market are raising rates 12% to 23% for firms with fewer than 50 employees, according to a survey by The Times.
Similar increases are being felt by many small businesses across the nation, including those in Texas, Ohio and Florida — mainly the result of escalating costs for medical care and pharmaceuticals, insurers say.
In California, some small businesses say they are stunned by their latest insurance bills. Longtime customers of Blue Shield of California, for instance, are facing rate hikes as high as 76% after the insurer lost money on a handful of plans.
“We don’t have that money,” said Ann Terranova, a San Francisco financial planner who is dropping Blue Shield for herself and two employees after learning that their annual premium would jump to more than $19,000 a year from $11,000.
Barrycare is to heathcare as Iraq war is to terrorism.
could hurt state’s economic recovery ??
Kind of funny….What recovery ?? All the happy talk, thats a recovery ?? Take a stroll through 75% of California and show me recovery…
Which 25 percent of the state is having a recovery?
San Francisco Bay Area is in a better mood…
First-quarter growth revised down to 3.0 percent
May 27, 2010 8:35 AM ET
All Thomson Reuters newsWASHINGTON (Reuters) - The economy grew at a slower pace than previously estimated in the first quarter as businesses investment slackened, while hard-hit state and local governments curbed spending at the steepest rate since 1981, a government report showed on Thursday.
“while hard-hit state and local governments curbed spending at the steepest rate since 1981″
Without Federal stimulus measures that directly benefited states, how much sharper would have been that contraction?
My state said that April 10 revenues were up about a hundred M over last April. But they went on to say that if Federal assistance was removed the April revenue was about 1.3 B less than April 09.
The states have been hanging on a DC thread.
* US Money Supply Plunges ~ Clipped from Max Kaiser
“Yikes. Deflation. Depression. And, you know what comes next. “The stock of money in the US fell from $14.2 trillion to $13.9 trillion in the three months to April, amounting to an annual rate of contraction of 9.6pc” *
*Source ~ St.Louis Fed.
Yep. Lot’s of poofiness going on. The job the investor needs to be concerned with is making sure his dollars are not mingled with the pile of those destined to be poofed.
In German, the term poof refers to what a prostitue provides. Quite appropriate.
Poof is slang for a male homosexual in the English-speaking world, so be careful when you ask a prostitute for a ‘poof’. (Unless you’re into that sort of thing;)
The M3 figures - which include broad range of bank accounts and are tracked by British and European monetarists for warning signals about the direction of the US economy a year or so in advance - began shrinking last summer. The pace has since quickened.
The stock of money fell from $14.2 trillion to $13.9 trillion in the three months to April, amounting to an annual rate of contraction of 9.6pc. The assets of insitutional money market funds fell at a 37pc rate, the sharpest drop ever.
“It’s frightening,” said Professor Tim Congdon from International Monetary Research. “The plunge in M3 has no precedent since the Great Depression. The dominant reason for this is that regulators across the world are pressing banks to raise capital asset ratios and to shrink their risk assets. This is why the US is not recovering properly,” he said.
Kind of funny how everyone seems to ignore the 17% annual growth rate happening recently.
In that light, 9.6% annual rate of shrinkage doesn’t sound so bad.
See, I told you we had deflation. Told ya.
If foreclosures are scheduled to peak in 2011, wouldn’t it be too early to buy in 2010?
Inside Real Estate
Default Rate Slides, But Foreclosures May Peak In 2011
By DONNA HOWELL, INVESTOR’S BUSINESS DAILY Posted 05/20/2010 06:02 PM ET
The mortgage default rate is beginning to slow, giving analysts hope that housing troubles are nearing a turning point. But they warn that a backlog of foreclosures persists, and that some improvement in defaults is due to bank tactics.
Standard & Poor’s this week launched S&P/Experian credit indexes that include mortgage payment lateness. They show “lower proportions of default each month,” said David Blitzer, chairman of S&P’s index committee. “It’s telling me we’re really squeezing out some of the worst that’s been going on.”
The index tracked an average default rate of 3.7% on first mortgages in April, down 6% vs. March and 31% vs. a year ago. The second-mortgage default rate, 2.5%, fell more.
Improvement in defaults “is the first positive sign” in a long while, said Rick Sharga, senior vice president at foreclosure watcher RealtyTrac, on a Thursday conference call.
“We’re seeing loans stay in delinquency longer and longer before the first notice of default,” he said.
The foreclosure backlog amounts to about 55 months of inventory, Sharga says, and 2011 is apt to be the peak year for foreclosure activity. He adds that lenders appear to be slowing foreclosures while they try to sell off homes they’ve repossessed.
“Then they will replenish that supply, if you will, by bringing new loans into the foreclosure process and proceeding with them,” Sharga said.
Congress has only a little more than one trillion left on the federal “credit card.” Knowing how little Congress knows about handling money it will surely blow this next trillion very fast.
By the governments own projections, it is possible that our debt will hit $14 trillion by labor day this year. What next? Simply throw another trillion into the black hole?
This is kind of funny. Apparently Beacon Economics analysts don’t realize the Case-Shiller index is adjusted for housing quality — i.e., it is a repeat sales index that reflects pure price change, rather than changes to the mix of homes that are selling. What a bunch of hacks!
County’s home values rise, but caution advised
By Roger Showley, UNION-TRIBUNE STAFF WRITER
Tuesday, May 25, 2010 at 9:30 p.m.
Online: The full S&P/Case-Shiller report is available online at http://www.homeprice.standardandpoors.com
With 11 consecutive months of growth, San Diego County is leading the nation’s largest metro areas in home-price appreciation, the widely watched Standard & Poor’s/Case-Shiller Home Price Index showed Tuesday. In March, the index of San Diego prices was up 10.8 percent from the previous year, the biggest increase since the heady days of mid-2005.
By contrast, prices in the 20 metro areas that comprise the index declined by 0.5 percent from February to March, the sixth straight decline. They were up 2.4 percent year over year.
Robert Shiller, co-creator of the index, said the national trend suggests the worst may be ahead. “I’m worried still about the risk of a double-dip,” he said.
Analysts warned that San Diego’s increase may only reflect a change in market mix, not an increase in value, and that it will likely to slow down and possibly reverse as additional foreclosed homes hit the market.
“We shouldn’t be looking to get to a high, unrealistic, completely overinflated price,” said Brad Kemp, director of regional analysis at Beacon Economics of San Rafael. “We can’t get caught up in the idea that a rising price (out of step with income growth) is good.”
…
Isn’t the index up due the now-expired tax credit?
Looks like NY is going to run some more folks out of their state. Desperate times, create desperate measures.
N.Y. Assembly Looks at Millionaire’s Tax
MYFOXNY.COM - New York Assembly Speaker Sheldon Silver is reportedly pitching a plan for an increased “millionaire’s tax” aimed at 75-85 thousand New Yorkers making $1 million or more a year.
Political columnist Fred Dicker , who appeared on Wednesday’s Good Day New York, says Silver secretly proposed a $1 billion tax hike on the highest income earners to Gov. Paterson.
The plan would jack up a current millionaires tax another 11-percent. The current “millionaire’s tax” actually starts affecting people who have incomes over $200,000. High income tax earners would pay more than 13-percent of their salary in local taxes.
The highest one percent of income earners account for about 36 percent of all state taxes.
The state is trying to close a $9.2 billion deficit.
“run some more folks out of their state”
except for unlike their lower income counterparts the high income NYers more than likely will just chose a new home in another state to declare as their primary residence and spend the same amount of time here that they always did.
Smart people have been leaving New York since the 1980s. No jobs. No future. Overpriced and over taxed.
I don’t feel sorry for the rich. “Noblesse oblige” seems to be a dirty word and now they are going to pay the price one way or the other.
Jobless claims drop slightly to 460,000 last week but level still suggests a weak labor market.
WASHINGTON (AP) — The number of newly laid off workers filing claims for unemployment benefits dropped last week but the level still remained higher than expected, indicating only modest improvements in the job market.
Applications for unemployment benefits fell by 14,000 to 460,000 last week, the Labor Department reported Thursday. Economists had expected the level would fall further to 455,000. The decline came after claims had risen by a revised 28,000 in the previous week, the largest gain in three months.
The latest level of claims is slightly higher than it was at the start of the year, underscoring that the nation’s workers are still facing tough times even though the overall economy is growing again after enduring the worst recession since the 1930s.
Note: it is now prime hiring season for summer jobs, right now, right this minute. For lots of Americans summer starts tomorrow afternoon. Resorts, waterparks, tourist traps, they should all be staffed up by now to get in on this first big summer weekend. Then we settle into the summer pattern, with no big annual shifts until back to school season.
My wife spotted a wedding announcement in the paper last weekend. The groom is a 2008 engineering graduate of a nearby university who is employed as an estimator (salesman) for a local window and siding replacement company.
I wonder if “staycations” are going to be big again this year? (it will for me)
Some needs to tell those people the economy is recovering! That’ll cheer ‘em right up!
There are 140 cottages for sale around the shore of our little Keuka Lake here in backwater NY. We must be a suburb of Toronto.
A shiny new steam valve for the Digital Economic Engine!
FASB Issues Proposal Requiring Banks to Book Loans’ Fair Value:
By Michael J. Moore
May 27 (Bloomberg) — The Financial Accounting Standards Board is seeking public comment on a proposal that would require banks to report the fair value of loans on their books and accelerate recognition of credit losses.
“FASB’s proposal for mark-to-market accounting presents significant problems, not only for banks, but also the general economy,” Edward Yingling, chief executive officer of the American Bankers Association, said in a statement.
PBC property values drop an average of 11.8 percent; Lake Worth takes 24.9 percent hit
By Jennifer Sorentrue Palm Beach Post Staff Writer
Posted: 8:44 a.m. Thursday, May 27, 2010
Taxable values throughout Palm Beach County have fallen another 11.8 percent over the past year on average, according to estimates released by Property Appraiser Gary Nikolits this morning.
More than half of the county’s 38 municipalities fared worse than the countywide average. None saw its values increase.
The plunge means cities and towns will have to choose between cuts in services for residents or property tax increases.
Lake Worth saw the sharpest decline. Its tax base plummeted by 24.9 percent over the last year.
Greenacres and Boynton Beach saw drops of more than 18 percent.
The estimates are based on the values of homes as of Jan. 1. They are used by cities and towns to set their property tax rates for the budget year that begins Oct. 1.
From Zero Hedge:
The Hard Truth About Residential Real Estate
Anyone who believes that housing is on the rebound, and that now is the time to buy, should take a very hard look at the numbers I dredged up for my spring lecture and luncheon tour.
There are 140 million personal residences in the US. Today, there are 26 million homes either directly or indirectly for sale. According to a survey by Zillow.com, a real estate appraisal website, 20 million homeowners plan to sell on any improvement in prices. Add to that 4 million existing homes now on the market, 1 million new homes flogged by companies like Lennar (LEN) and Pulte Homes (PHM), and 1 million bank owned properties. Another 8 million mortgage owners are late on their payments and are on the verge of foreclosure, bringing the total overhang to 34 million homes.
Now, let’s look at the buy side. There are 35 million who are underwater on their mortgages and aren’t buying homes anytime soon, nor are the 35 million unemployed and underemployed. That knocks out 50% of the potential buyers.
Here is where it gets really interesting. There are 80 million baby boomers retiring at the rate of 10,000 a day. Assuming that they downsize over time from an average 2,500 sq ft. home to a 1,000 sq. ft. condo, and eventually to a 100 sq. ft. assisted living facility, the total shrinkage in demand is 4.3 billion sq.ft. per year, or 1.7 million average sized homes. That amounts to a shrinkage of aggregate demand for a city the size of San Francisco, every year. You can argue that the following Gen-Xer’s are going to take up the slack, but there are only 65 million of them with a much lower standard of living than their parents.
Throw in the disappearance of state and federal first time buyer tax credit. You can count on a jump in long term capital gains taxes and state and local property taxes, further diminishing property’s appeal. If you are looking for a final stick to break the camel’s back, how about eliminating, or substantially reducing the home mortgage interest deduction?
Add it all up, and there is a massive structural imbalance in residential real estate that will take at least a decade or more to unwind. We could be looking at a replay of the same 26 year period from 1929 to 1955 when prices remained flat, and we are only 3 years into it! A second down leg in the real estate market seems a no brainer to me, as is the secondary banking crisis that follows. Perhaps that’s why hedge funds have been big sellers of the homebuilder’s ETF (XHB).
What’s a poor homeowner to do? Don’t ask me. I sold everything in 2005 when my research threw up these numbers, and have been happily renting ever since. And if the toilet blocks up, I just call the landlord.
Stop discouraging prospective home buyers with all that statistical gobbledygook. There has never been a better time to buy!
“The Phase of Reckoning”: Sovereign Debt Crisis Far From Over, Park Says ~ May 27, 2010 Investing, Recession, Banking, Politics. Tech~Ticker
Three years ago, few Americans were worried about — or had even heard of — CDOs, CDSs and other acronyms that contributed to the global economic conflagration of 2008-early 2009. But Daniel Park, president of Venable Park Investment Council, was worried about a looming debt crisis in her 2007 book Juggling Dynamite.
So what should we worry about now?
The global debt crisis indeed remains front and center, says Park. “It’s not over. It’s ongoing.”
“Seismic Shift”
There’s no quick fixes for the deleveraging cycle, which Park says will take years. She is concerned about coming write-downs, higher taxes and cuts in entitlement programs. “The reality will hit and this will be the seismic shift. The behavioral change will come,” Park says.
To date, bondholders have largely remained unscathed from the financial crisis, despite bad investments in risky assets. “Bondholders by and large didn’t do their due diligence,” Park says. “They relied on ratings agencies that were on the dole, they passed the buck and now they want to be made whole.
The “Reckoning”
But as public outcry over our state of bailout nation percolates, Park is concerned about growing civil tensions in North America, not Greece. “Now we’re into the phase of reckoning, where it’s like ‘actually we need cash’,” she says, fearing there’s “not enough zeros” to pay back all the I.O.U.s circulating around the globe.
Park is concerned about growing civil tensions in North America, not Greece. “Now we’re into the phase of reckoning, where it’s like ‘actually we need cash’
This will come with one of the following
1. Massive unemployment with no unemployment benefits.
or
2. Massive inflation.
or
a combination of the two.
Mortgage rates sink to lowest this year
Freddie Mac says average rates for 30-year mortgages fall to 4.78 percent, shy of record low.
WASHINGTON (AP) — Mortgage rates have fallen to the lowest level of the year as investors poured money into the safe haven of U.S. government securities.
The average rate on a 30-year fixed rate mortgage dipped to 4.78 percent this week from 4.84 percent a week earlier, mortgage company Freddie Mac said Thursday. It was the lowest level since early December, when rates fell to a record low of 4.71 percent.
Yep and they’re saying “Y’all better buy before the rates go up”
Actually talked to a mortgage broker today and he was talking about how his companies are cranking up the requirements to get a mortgage loan.
In other words, without a good credit score and money in the bank, the banks don’t want to take a chance on making new loans. Wanna bet that they can see the perfect storm that’s brewing over their heads?
Spooking markets is a good way for restoring affordability to asset prices (note how well it worked when BB, HP and GWB all did it on national teevee back in Fall 2008!).
And breaking up Megabank, Inc into smaller, non-systemically-risky parts would be a good way to restore competition in the lending sector and to take taxpayers off the hook for future Megabank bailout liability. I don’t see any mention of trust busting in the TTT policy recommendations.
* MAY 27, 2010, 9:22 A.M. ET
2nd UPDATE:Geithner:Supports Germany On Cooperative Approach To Reform
By Ian Talley and Patrick McGroarty Of DOW JONES NEWSWIRES
BERLIN (Dow Jones)–U.S. Treasury Secretary Timothy Geithner, meeting with German Finance Minister Wolfgang Schaeuble Thursday, said there is a shared interest in creating a global approach to financial system restructuring, but warned against drafting policies that are counterproductive and could push activities outside of market oversight.
The Berlin meeting was held at the end of a two-day whirlwind trip through London, Frankfurt and Berlin for Geithner as he encouraged officials here to push forward on a “balanced” restructuring of the financial system and to encourage growth while cutting deficits through fiscal reform.
“We all understand that part of recovery, part of growth, is to make sure that we make clear and credible commitments to restore gravity to our fiscal positions over time,” Geithner told a press conference. “But we’re also working to make sure our economies are growing. We’re creating incentives for private investment and job creation and we are trying to get that balance right. The balance will be different from one country to another.
“I have enormous respect for Germany and enormous confidence” in its leadership of European financial restructuring, he said. “We share a common interest in making sure we’re working closely together to reinforce this global recovery and to work together to put in place a strong framework for global reform.”
Geithner said the U.S. and Europe are in broad agreement on “putting in place more conservative constraints on risk-taking, more conservative capital requirements and bringing transparency to derivatives markets,” but he acknowledged that “we’re going to have slightly different approaches.”
The U.S. Treasury Secretary warned that reform should be “designed carefully in a way that makes the system more stable in the future but doesn’t create financial headwinds to recovery.”
“You don’t want risk just to move outside the scope of regulation,” he added.
Reference to such headwinds could be seen as another oblique rebuke to Germany for its calls to extend its proposed ban on some financial transactions. There is concern in Washington, D.C., that such measures are damaging to market confidence, spooking investors and showing that finance ministers don’t understand how markets function.
…
There is concern in Washington, D.C., that such measures are damaging to market confidence, spooking investors and showing that finance ministers don’t understand how markets function.
I think everyone understands how the wealth stripping market functions. When someone notices that the emperor has no clothes and says something, it’s off with their head.
I’m feeling a little more DEflationista these days
http://www.telegraph.co.uk/finance/economics/7769126/US-money-supply-plunges-at-1930s-pace-as-Obama-eyes-fresh-stimulus.html
Thanks for the post…Good info…Many of us here have felt this way for some time…
“A nation never fails but by suicide.” ~Ralph Waldo Emerson
And we have plenty of Jack Kevorkians running the show in D.C. assisting.
And Wall St.
Mortgage Lenders Seek Relief From Forced Bad Debt Repurchases.
May 27 (Bloomberg) — Mortgage lenders are seeking relief from Fannie Mae and Freddie Mac as the government-supported companies force them to buy back more soured debt, said John Courson, president of the industry’s largest trade group.
While his members “certainly understand” their contracts require repurchases of defaulted loans when items such as faulty appraisals, inflated borrower incomes or missing documentation are discovered, the Mortgage Bankers Association has started to “aggressively” push the two companies and their regulator to ease up, he said.
Fannie Mae and Freddie Mac, propped up by unlimited taxpayer capital, should acknowledge lenders are unfairly absorbing too many losses, with unemployment that reached a 27- year high among the causes of defaults unrelated to loan quality, Courson said yesterday in an interview at Bloomberg News headquarters in New York.
“We’re trying to see if we can’t reach some type of a system that says there is a bright line out there, if this loan has been making payments and defaulted for a reason that is neither fraud nor related to the underwriting of the loan, it shouldn’t be subject to a repurchase,” he said.
Total debt payments at 64.3 percent of incomes??? Sounds like a recipe for government-sponsored household bankrutpcy.
Cancellations rise in mortgage rescue program
David Lawder
WASHINGTON
Mon May 17, 2010 6:03pm EDT
…
The Treasury report showed that while housing expenses were cut to 31.0 percent of borrowers’ income for those in permanent modifications, total debt payments still took 64.3 percent of their income.
The April total of borrowers with permanent modifications represented about 9 percent of delinquent loans that met the program’s guidelines, compared with about 6.7 percent in March.
But those borrowers represented only half of the loans that would have been eligible for participation in the program because investor properties, abandoned homes and those with too low debt-to-income ratios were filtered out.
Treasury officials said that among options for those who were dropped from the modification program are short sales — in which the lender closes out the loan from sale proceeds less than the principal amount — transfers of deeds to the lender without foreclosure, or “self-cure” — cases in which an owner finds a job and can resume paying the mortgage.
(Reporting by David Lawder; Editing by Padraic Cassidy and Dan Grebler)
‘Top kill’ stops gulf oil leak for now, official says.
Officials are cautionary but say drilling fluid has blocked oil and gas temporarily. Engineers plan to begin pumping in cement and then will seal the well.~ Los Angeles Times ~May 27, 2010
Reporting from Houma, La. —
Engineers have at least temporarily stopped the flow of oil and gas into the Gulf of Mexico from a gushing BP well, the federal government’s top oil-spill commander, U.S. Coast Guard Adm. Thad Allen, said Thursday morning.
The “top kill” effort, launched Wednesday afternoon by industry and government engineers, had pumped enough drilling fluid to block oil and gas spewing from the well, Allen said. The pressure from the well was very low, he said, but persisting. The top kill effort is not complete, officials caution.
Once engineers had reduced the well pressure to zero, they were to begin pumping cement into the hole to entomb the well. To help in that effort, he said, engineers also were pumping some debris into the blowout preventer at the top of the well.
Great. Mission accomplished. Next crisis?
“Next crisis”?
Not sure, but perhaps Kim Jong Mentally-ill will lob a few ding-dong missiles at his neighbors to the south.
If not, hurricane season starts soon and we may get lucky and get slammed several times this year.
Don’t go counting your shut off oil wells until they are cemented in . . . http://www.nytimes.com/2010/05/28/us/28spill.html
Don’t go counting your shut off oil wells until they are cemented in . . .
Do they really wear vests with patches identifying their job titles? Is this so that if one goes down, someone else can just put the vest on and assume the title?
Latest news is that the top kill is still a work in progress and has experienced a setback.
But it is “contained,” right?
Stall in Applications for Federal Mortgage Program
By DAVID STREITFELD
Published: May 17, 2010
A major effort by the Obama administration to keep homeowners out of foreclosure may be reaching its limits long before the crisis abates.
The government’s loan modification program has helped about 300,000 defaulting households get permanent new loans, according to federal data released on Monday. But that is only a small fraction of the estimated four million households in danger of foreclosure and of the 1.7 million households that the governments thinks would qualify for the program.
Begun only a year ago, the Making Home Affordable Program already seems to be running low on applicants. The number of borrowers that enrolled in the trial phrase in April was only about a third of the number that signed up in September.
…
From the article:
“There are several possible reasons for the scarcity in applicants. Some borrowers may feel it is more financially advantageous to default, pay nothing for many months and then walk away from the house. Others may have committed fraud when getting their mortgage and are reluctant to come forward. And many may simply be unaware of the program.”
Unaware of the program? I doubt that’s the problem.
Plan A: Get a modification NOW.
Plan B: Enjoy free housing then walk away. Blame the banks for all of it.
Skidding and accelerating at the same time can result in a severe crash.
Shasta County home sales accelerate as prices skid
* By David Benda
* Posted May 25, 2010 at 7:26 p.m.
The $8,000 federal tax credit and record low mortgage rates helped fuel Shasta County’s housing market in April as sales increased for the third straight month.
But the median price paid in Shasta County in April fell to a seven-year low of $165,000. It has dropped every month for six months.
The 156 escrows that close in April were just three more than the March total, but were up from 131 in April 2009, MDA DataQuick reported.
About half the homes sold in Shasta County this year have been foreclosures or short sales.
Such transactions continue to be popular with buyers, and to push down prices.
Foreclosures and short sales dominate the closed escrows, despite being only about a quarter of the available homes for sale in Shasta County.
“I think it’s a combination of they (buyers) see them as bargains and also this instinct that maybe they are benefitting off somebody else’s loss,” Redding real estate agent Brad Garbutt said of foreclosures.
…
The point when prices stop heading towards Detroit levels should offer a great time to invest in Shasta County real estate!
Shasta has no economy except assholes that want to climb up big snow covered mountains.
Approximate value is zero. Well above the negative value associated with Detroit.
Course you could grow refer there in the summer months.
How’s all that “free” stuff working out for you, Britain?
Work or lose your benefits: Iain Duncan Smith heralds biggest shake-up of welfare state since the war. UK Times ~ 27th May 2010
Britain’s welfare system is ‘bust’ and faces its most radical overhaul for 60 years to undo Labour’s legacy of benefit dependency, Work and Pensions Secretary Iain Duncan Smith declared today.
The former Tory leader vowed to end the scandal that means welfare claimants are no better off – and sometimes poorer – if they come off the dole to take jobs paying up to £15,000 a year.
He also signalled that benefit payments to the middle classes were likely to be pared back in favour of income tax cuts – and the state pension age might have to rise more quickly than planned.
“He also signalled that benefit payments to the middle classes were likely to be pared back in favour of income tax cuts – and the state pension age might have to rise more quickly than planned.”
Help the wealthy at the expense of the middle class. That’s worked out so well in the U.S.
Help the wealthy at the expense of the middle class.
By wealthy you mean help everyone that pays income tax, right?
At least in the US, the truly wealthy don’t pay income tax - they pay cap gains, no? It’s the middle class folks who are getting beat down by taxes on income.
I’d be okay with exchanging welfare benefits for some community service. My town has at least two failing elementary schools. The school district had to hire an outside company to bring in tutors for all the kids. No reason some of the folks collecting welfare couldn’t do that for four or five hours a week (presuming a background check is cheaper than paying the outside company). We’re talking first and second grade math and reading here, not calculus.
We’ve got public parks, trails and such that aren’t getting mowed/tended to nearly as often as in the past. I’m sure there has to be a few folks who could fill in for those tasks.
Every town has these kinds of problems right now. I happen to think “welfare for work” can be part of the solution.
I believe the terms you propose are aligned with a communist ideology.
Britain’s problem is the same as ours and has been for the last 30 years… JOBS!
The best way to get people off of welfare is to get them jobs! Jobs that pay the bills. If there are no jobs available than the system has failed and that is what needs to be “reformed.” Period.
The news that the oil spill tops the Exxon Valdez is great for BP’s share price! THIS COMPANY SHOULD BE SHUT OUT OF THE US OIL PRODUCTION MARKET!!!
market pulse
May 27, 2010, 11:52 a.m. EDT
New spill estimate beats Valdez as worst
By Steve Gelsi
NEW YORK (MarketWatch) — A new estimate of the BP Plc (BP 45.36, +2.95, +6.95%) oil spill in the Gulf of Mexico by a team of scientists puts the size of the disaster well ahead of the Exxon Valdez oil spill of 1989, formerly the worst in U.S. history. United State Geological Survey Director Marcia McNutt said Thursday that a team of scientists and government officials reviewing video footage of the BP oil spill put the flow rate at a minimum of about 500,000 gallons a day. That means that 19 million gallons have leaked since the Deepwater Horizon rig exploded on April 20. In the Exxon Valdez spill, 11 million gallons leaked out of a super tanker. Under the higher estimate, the BP leak totals 39 million gallons.
The pain in Spain…
More Pain on the Way for Spanish Banks
Thursday, 27 May 2010 ~ CNBC
The Bank of Spain says it intends to toughen up rules on the provisions the banks have to make against the real estate on their balance sheets.
For months investors have been questioning whether much of the Spanish banking industry has come clean on the scale of real estate losses they are sitting on.
Analysts at UBS welcomed the move, saying the “proposed changes are a step in the right direction. We would welcome more efforts to improve disclosure on substandard loans.”
UBS said unfinished developments and land prices are showing contractions of between 40 and 50 percent and that new rules could hit profits at Spanish banks by as much as 10 percent.
“Given our cautious outlook for the Spanish banks earnings and premium valuations in the geographically diversified banks we maintain our negative view on this sector,” UBS said in a note to clients.
A player on team Barry quits, wonder if Jackboot Salazar will throw in the towel next.
Obama to Cancel Drilling Off Virginia as MMS Chief Steps Down
May 27 (Bloomberg) — President Barack Obama will cancel a plan to drill for oil off Virginia’s coast and extend for six months a moratorium on new deepwater drilling permits, as the head of agency responsible for issuing the permits stepped down.
In addition, planned drilling by Royal Dutch Shell Plc of exploratory wells in the Arctic off Alaska will be delayed while a presidential commission studies the Gulf of Mexico oil spill in an effort to determine how to prevent any future disasters, according an administration aide, who spoke on condition of anonymity in advance of the official announcement.
In the wake of criticism of the government’s oversight of energy exploration on public lands, the head of the Minerals Management Service, Elizabeth Birnbaum, has submitted her resignation from the post she’s held since 2009, Interior Secretary Ken Salazar said.
DENG ZHUANG , China — Peng Gonglin wasn’t an important man. He lived in a bare concrete house in a small village where women stoop beside ponds to scrub clothes in buckets and the men often harvest crops by hand.
When his rice fields came up empty last October, Peng had no influence and little cash. The 43-year-old farmer had spent almost all of his family’s savings and borrowed more .
County experts in the central province of Henan tested the seeds he’d planted and determined that he’d been sold inferior goods. Peng begged for financial or legal help from the local agricultural bureau and its county seed station.
He took what remained of his family’s money and tried to bribe two local officials to intervene. They accepted the meals, massages and prostitutes, but they did nothing in return, according to a letter he later wrote.
Finally, on March 29 he returned to the county seed station to plead once more. Men there beat Peng about the head until he went home, humiliated.
Facing financial ruin, he carried out one last act of protest. Early the next morning, Peng Gonglin’s body was found hanging at the seed station.
A senior researcher from the seed company, Zhao Xinming, acknowledged in a phone interview that his bosses hadn’t submitted the seeds to government inspectors and had sold them under false packaging. He said that the seeds weren’t the problem, blaming bad weather and worse farming practices.
Zhao said that his company and its owners had no ties to the government.
Local officials, though, act as if they have something to hide.
On a small country lane in Deng Zhuang last week, a silver minivan pulled up and four plainclothes policemen got out and asked a McClatchy reporter for his identification. A few minutes later, a black Hyundai showed up with five government representatives in it.
There would be no more interviewing locals about Peng. With the black Hyundai leading the way and the police van following, the authorities insisted that the reporter join them at a nearby hotel for lunch.
A crystal chandelier dangled from a gold ceiling in a private dining room. The officials ordered one course after the other — Beijing duck, a delicate mushroom soup, vegetables plucked from the mountains, ox tripe and sea plants, a large fish, spices and sweets — costing more than most villagers make in a month.
A man who was introduced as Tian Zhong of the Chinese Communist Party propaganda department said that one shouldn’t listen to what the farmers said, that they didn’t know anything. In fact, Peng’s own wife probably didn’t even know what her husband’s gender was, Tian said to guffaws at the table as the officials gorged themselves on more than a dozen dishes brought to the table by a pretty young waitress.
“He’s just a farmer,” Tian said of Peng, as he picked food from his teeth. “He doesn’t know what he was talking about.”
After the conversation ended, a county official confided that Tian’s real first name was Dong, not Zhong. He didn’t work for the propaganda department; he was the deputy director of the county’s agricultural bureau.
The reporter then was escorted back to the Zhumadian city limits.
Why do I picture similar seens with FED and banking officials picking pieces of duck from their teeth as they belittle average Americans.
Because they are? (and not just them, but the entire Fortune 500 as well)
And never forget just how many crooks want this type of life - that of the doomed farmer - for us all.
Regarding today’s stock market: To the moon, Alice!
Oh yea! Next stop 12,000!
If you think this sucker is going down, it’s probably a great day to go short.
No one wants to be short going into a long holiday weekend, but why be long either?
+1
Many people on HBB, moi included, have been pretty much out of the stock market for a long time now - long or short. Rightly so, since it’s very much blown by the winds of Congress now and not actual fundamentals. As such it’s very risky either direction - who knows WTF it’s going to do.
The stock market hasn’t paid attention to fundamentals since the 1980s, junk bond, corporate raider, offshoring, deregulation decade.
…and I thought this cat was done wiggling, but apparently it still has some life left. Might be some profit taking tomorrow for the holiday.
I threw up my hands (and threw up in general) a long time ago w/regards to the stock market. Who the heck knows.
Those who are gaming the system, that’s who knows.
Cats are cute when they wiggle.
gotta like the wigglers
Treasury vows fight for strong financial reforms.
May 27, 2010
BALTIMORE (Reuters) - The Treasury’s number two official vowed on Thursday to fight efforts to weaken the U.S. financial reform bill and said it should include the so-called “Volcker rule” which would separate banking from proprietary trading.
Deputy Treasury Secretary Neal Wolin also said U.S. Senate and House of Representatives conferees working to reconcile their versions of the bill should also oppose efforts to weaken a new consumer financial protection agency with more lenient lending rules for car dealers.
“As conferees begin the process of reconciling the remaining differences in the two bills, we will continue to fight for the strongest financial reform bill possible,” Wolin said in a speech to the Financial Industry Regulatory Authority’s annual conference here.
“And we will oppose any attempts by particular interests to use the conference process as an opportunity to weaken the final bill,” he added.
… says the man who co-authored the Glass Steagall repeal.
(just noting that fact, with the implication that anything this man says w/regards to tightening restrictions should be taken with a very big grain of salt.)
Got that right.
Maybe he’s learned his lesson. Financial deregulation=disaster.
Anyone here remember this one, it took 9 months to stop it…
In Mexico, Gulf oil spill draws parallels to worst case ever ~ USA TODAY
COATZACOALCOS, Mexico — Here on Mexico’s Gulf Coast, the Deepwater Horizon disaster has revived memories of the world’s worst accidental oil spill, a 1979 blowout that spewed oil for nine months, devastated marine life and covered the Texas and Mexican coasts with gobs of crude.
Now, people here are worried they may be in for a repeat of that disaster as ocean currents begin to catch oil from the Deepwater Horizon well and the Atlantic hurricane season gets underway June 1.
There are strong parallels between the two spills. Like the Deepwater Horizon spill, the Ixtoc 1 spill on June 3, 1979, involved the failure of a blowout preventer device, a kind of emergency shutoff valve. In both cases, metal domes put over the well failed to stop the leaks.
That 1979 spill was so bad, so horrible that I never heard of it before the recent spill.
I thought I remembered something like happening before as I was living in Texas at the time, but I couldn’t remember what it was.
Good find.
“NEW YORK (CNNMoney.com) — Employees on the Deepwater Horizon oil rig that exploded April 20 all had the ability to stop the drilling process at any time but ignored red flags, BP and Transocean executives told lawmakers Thursday.
“Any employee, anywhere at any level, if they have any concern of safety, has the ability and responsibility to raise their hand and try to get an operation stopped,” Lamar McKay, chairman and president of BP America, told the House Natural Resources Committee.”
Ooooh. I can’t wait for the fallout on this one. “…had the ability…” is what HE said. What SHE is going to say is that warnings were issued, and were shot down by managers/executives.
These guys are running out of fingers to point.
First of all, there were probably a half dozen guys max. on that rig who had the training/expertise to make that kind of call.
And I’m betting that most of the guys in the drilling business are good old Southern Baptist, Conservative, nobody-is-telling-me-how-to-do-my-job types, who think environmental and safety regs are for pu$$ies. Which means that they will do whatever they think they can get away with. Regs/company policies don’t mean squat, if the culture allows people to ignore them. Sorta like Wall Street and the SEC, circa 2001-2008.
Was there a QC/Safety staff onboard, and did they have anyone on the crew that knew what they were doing, or were all the jobs filled by recent college grads with geology degrees?
In the business we call these recent graduates as “Nintendo Geologist”. They are the ones that overlap colored charts and graphs on each image on the computer screens and say this and that will happen. No real world experience.
Yep. Blame the dead guys. Always a winning strategy.
Get rid of the heat AND deny death payments to the families.
WIN!
‘They could have stopped it but instead they chose to blow themselves up’.
This is just like the Massey coal mining CEO telling his underlings to ignore anybody telling them to do anything other than dig coal. I’m sure ‘officially’ the miners were allowed to call a work stoppage if conditions were dangerous. It’s just that they’d lose their jobs if they did.
The last time I worked factory production, I could stop the line for any reason. And so I did for many QC issues. Including having maintenance fix the line itself.
You know who I got the hardest time from? My stupid coworkers.
But yes, for the most part, you will lose your job if you stop production too many times for even legitimate reasons.
Based upon my experiences, if you bring up legitimate and even obvious problems, you are considered a “troublemaker” who “doesn’t work well with others” when the optimists are sailing along, claiming “all is well!”
If the doomed souls on that rig had spoke up, they probably would have gotten the same treatment.
Short-Term Bottom In, But Rally Won’t Be “Satisfying or Long-lasting,” Roque Says. ~ Tech Ticker ~ May 27, 2010
The market see-saw tilted back toward the upside Thursday. After taking a fall below 10,000 on Wednesday, the DOW was up more than 200 points in afternoon trading.
In the near term, this bounce could have legs, says John Roque, managing director and market technician with WJB Capital Group. “But we think the corrective phase is incomplete.”
Roque believes the rally could take the S&P 500 as high as 1120 or 1130 in the near-term. However, “the rally’s not going to be particularly satisfying, long-lasting (or) encouraging,” he predicts.
For clues on the broader market’s path, Roque closely follows Goldman Sachs, Morgan Stanley, Monsanto, Mosaic, Freeport-McMoran and copper prices; this group has tended to lead in and out of rallies over the last couple years. The signs coming from these so-called bellwethers, “suggests to us the S&P doesn’t hold this 1050 level on this next retest,” he says, predicting the S&P will fall until it finds support around 990.
One technical reason Roque is so down on any rally effort is the percent of NYSE stocks trading above their 200-day moving average. Through Wednesday 45% of Big Board stocks traded above their 200-day MA. “That number needs to decline below the 35% threshold,” a level that has been a strong indicator of oversold conditions for the last 30 years. “It can get much lower, but at least at 35%, you’d say to yourself most of the damage has been done.”
The good news for savers and those living on a fixed-income is the dollar does continue to look good against other currencies, according to Roque. “The dollar is benefiting from being the tallest midget,” he jokes, predicting the euro will eventually fall to parity with the greenback.
Bill Bonner commented the other day about the much-discussed gaffe by Dr. Rand Paul, the would-be U.S. Senator from Kentucky. I agree with Bonner’s conclusion.
“We don’t know Rand Paul; we only know his father. Pere Paul is the kind of politician the country needs but won’t accept. He offers real ‘change.’ That is to say, if he had the power to do so, he would unwind the welfare/warfare state. He would more-or-less, let people alone to get on with their own lives again.
“That is not what voters want. What the man on the street seems to want is cheaper gasoline, free health care, food stamps, Social Security, wars and boondoggles. At least, that’s what the evidence suggests. He wants protection from everything and a free lunch too.” ~ B.Bonner
Exactly! And he/she will go to the polls to make damned sure politicians are sent to Washington who will dish out the freebies. Ron Paul is not the ideal of Joe and Jane Twelvepack. It remains to be seen whether Kentuckians will send his son, Rand, to Congress.
Did you guys notice the petition link Ben put up? We really should sign it. And we should give him a donation too, since he’s bothering to travel all the way to DC!
Just did…Have a good time in DC Ben…
Britain to scrap unpopular ID card program
Thu May 27 (AP)
LONDON – Britain’s home secretary said Thursday an unpopular national identity card program for U.K. citizens will be scrapped within 100 days — but many foreign nationals will still require one of the credit-card sized documents carrying biometric data.
Both members of the country’s new coalition government pledged during this month’s national election to ditch the unpopular 5.1-billion-pound ($7.3 billion) plan, which Britain’s previous administration said would help combat terrorism and identity fraud.
The ID cards were designed to carry biographical details and biometric data, including fingerprints and a facial image. Information was stored on a national identity database — which will also be dismantled.
Home Secretary Theresa May said the plan to ditch the cards and database will be the first piece of legislation tabled by the new government. She said 15,000 cards already issued to British citizens will be invalidated.
“With swift parliamentary approval, we aim to consign identity cards and the intrusive ID card scheme to history within 100 days,” May said.
Tennessee To Send Out 853 Layoff Notices This Week
NASHVILLE, Tenn. - Governor Phil Bredesen said Tennessee will mail out over 800 layoff notices to state employees this week. Another 300 hundred notices will go out in the next several months.
The Democratic governor said Wednesday that the layoffs are being made for “business reasons” amid bleak budget conditions.
“I think what we all get paid for in government is to run the ship here, and the waters are very rough right now, but that’s when you need to step up and do what it takes. That’s what I’m trying to do,” said Bredesen.
UT President Says Worse Economic Times Coming.
CHATTANOOGA, Tenn. (AP) – University of Tennessee Interim President Jan Simek said the UT system will lose $112 million when federal stimulus funds run out in 2011.
Simek said at a meeting of the university board at UT-Chattanooga on Monday the amount is equal to one-fifth of the total amount of state money the university receives.
The Chattanooga Times Free Press reported Simek said UT might have to increase tuition for academic majors including nursing, pre-law, pre-medicine and accounting. Those majors cost more for the university to operate.
Simek said tuition increases are one of the methods to be considered as the university faces another budget cut next year.
These sick, twisted SOB’s really just need to be put down.
Feds Bust Child Porn ‘Social Networking’ Site
May 27, 2010 ~ Associated Press
INDIANAPOLIS — U.S. federal prosecutors say they are working with police in several countries to investigate suspects in a child pornography “social networking site” that at one point had more than 1,000 members trading explicit images.
U.S. authorities announced Wednesday that they had broken up the international online child porn site, saying more than 50 people had been arrested in more than 50 states since the 2008 start of the investigation.
They said they are also seeking the extradition of several suspects from overseas, including the alleged ringleader, Delwyn Savigar, who is serving a 14-year prison term in England for sexually assaulting three underage girls.
Hey Brennan, why don’t we just call them a bunch of murdering Pieces Of Sh!t? Does that work for you? Works for me, problem solved no ‘religious’ harm done. Next!
Counterterror Adviser Defends Jihad as ‘Legitimate Tenet of Islam’
May 27, 2010 ~ FOXNews.com
The president’s top counterterrorism adviser on Wednesday called jihad a “legitimate tenet of Islam,” arguing that the term “jihadists” should not be used to describe America’s enemies.
During a speech at the Center for Strategic and International Studies, John Brennan described violent extremists as victims of “political, economic and social forces,” but said that those plotting attacks on the United States should not be described in “religious terms.”
He repeated the administration argument that the enemy is not “terrorism,” because terrorism is a “tactic,” and not terror, because terror is a “state of mind” — though Brennan’s title, deputy national security adviser for counterterrorism and homeland security, includes the word “terrorism” in it. But then Brennan said that the word “jihad” should not be applied either.
This country has completely lost its mind.
I can easily out-crazy wmbz’s example; don’t know if the HBB censors will let my example through, though:
THE CIA considered making a fake video of Saddam Hussein having gay sex with a young man in order to destabilise the tyrant ahead of the Iraq war, reports say.
The video would have shown the deposed leader apparently romping with a teenage lad, officials told US media.
It was just one of a number of barmy plots thought up to discredit the dictator in the build up to the US 2003 invasion of Iraq.
One unnamed source is reported as saying: “It would look like it was taken by a hidden camera, very grainy, like it was a secret videotaping of a sex session.”
…
THE CIA considered making a fake video of…
So,…that’s what happened to Gary Hart
In classical Islamic jurisprudence jihad consists of warfare with the aim of expansion and defence of Islamic territory.[10] In later centuries, especially in the course of the colonization of large parts of the Muslim world, emphasis has been put on non-militant aspects of the jihad-concept. Today, Muslim authors only recognize wars with the aim of territorial defence as well as the defence of religious freedom as legitimate.[11]
In western societies the term jihad is often translated as “holy war”.[12] Muslim authors tend to reject such an approach stressing non-militant connotations of the word.[13] In technical literature regarding the concept of jihad the term “holy war” is often used to describe it.[14] However, scholars of islamic studies often stress that both words are not synonymous.[15]
The jihad absolutely is a legitimate tenat of Islam. It does not happen to concern me, however, what is legitimate under Islam. It’s not legitimate to us.
C’mon you cowards. Sign the petition.
Where is it? I didn’t see it.
He has a link to it in the opening to this bits bucket.
Megabank, Inc’s subprime lending schemes are certainly not the only avenue by which disaster capitalists extract wealth effects from the global economy. Here is another approach:
Alarm rises as N Korea threatens attack
By Song Jung-a in Seoul
Published: May 27 2010 10:12 | Last updated: May 27 2010 18:13
North Korea threatened to scrap all military assurance agreements with South Korea on Thursday and warned of an immediate attack should Seoul intrude on the disputed maritime border, further raising tensions on the peninsula.
Pyongyang’s threat to abandon the agreements – designed to prevent accidental armed clashes and protect the safety of South Korean workers in a Northern factory enclave – came as Seoul elevated its alert level and began anti-submarine exercises off the west coast of the peninsula.
North and South Korea ThumbnailThe threats mark the most serious deterioration in relations between the neighbours, who are still officially at war, in more than a decade and have rattled international markets. They stabilised on Thursday and financial regulators in Seoul said overseas investors had overreacted to the sinking of the Cheonan, a South Korean warship, in March. The Korean won rose to Won1,224 per dollar for the first time in six sessions and the benchmark Kospi index closed up 1.6 per cent.
A joint international team last week found that North Korea was responsible for the sinking of the Cheonan.
North Korea “will completely nullify an accord which was signed by the two sides to prevent accidental clashes” in the Yellow Sea, Pyongyang’s official Korea Central News Agency said. The area is the scene of deadly clashes in the past.
…
ill wrong kimmie…is about too get an old fashioned Chinese stinging nettle spanking
Kimme don’t care. He’s shorted the Korean Kospi in anticipation and will cash out before declaring peace.
Iceland sounds like a fascinating country to visit, but unless lots more global warming happens, I wouldn’t care to live there.
Life in Iceland
Nasty, brutish and short
An Icelandic social history
May 27th 2010 | From The Economist print edition
Wasteland With Words: A Social History of Iceland. By Sigurdur Gylfi Magnusson. Reaktion Books; 288 pages; $39.95 and £25.
FILTHY, damp, cold and exhausting, living in Iceland for most of the past millennium had one redeeming feature: that the long dark winter evenings gave people the chance to read a lot and tell stories. That combination of cultural depth and material backwardness is the central message of Sigurdur Gylfi Magnusson’s social history of one of Europe’s smallest and remotest countries.
Given its 300,000 population (about the size of New Orleans), Iceland produces a lot of news. Its volcanoes and banks have blown up with dreadful consequences for locals and outsiders alike. Alone in Europe, it husbands its fish stocks properly. It used to be horribly expensive to visit. Now its hauntingly barren landscape is a bargain holiday destination. This book, drawing on Icelanders’ astonishingly detailed diaries and letters in past centuries, gives the outsider a rare glimpse into the past lives of an extraordinary people.
The story is not wholly pleasant. Even readers with strong stomachs will find them tested. The book opens with an account of a man who rips his own testicles off with a cord after a tantrum involving allegations of infidelity. The pressure-cooker of emotions induced by isolation (the road round the island was completed only in 1974) dispel any stereotypes of Nordic stolidity. The dank squalor of the turf-built hovels in which most Icelanders lived is described with disconcerting relish, along with the suppurating sores, stoically borne, that resulted. Clothes were boiled in urine occasionally, but were otherwise worn without washing.
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The dank squalor of the turf-built hovels in which most Icelanders lived is described with disconcerting relish, along with the suppurating sores, stoically borne, that resulted. Clothes were boiled in urine occasionally, but were otherwise worn without washing.
Sounds like my freshman year of college.
I think it “doubtful” that California will be able to repay all its borrowings, either, but what’s to stop the PTB from extending and pretending indefinitely, whether regarding Greece, California or any other of the plethora of financially submerged governments around the planet?
I fail to understand what precipitates SOL moments for debtor corporations or governments, though we certainly have seen it happen plenty of times in recent days to the likes of Countryside, New Century, Ameriquest, Washington Mutual, Bear Stearns, Lehman Brothers, Fannie Mae, Freddie Mac, etc etc etc. I suppose governments are, by their very nature, too-big-to-fail corporations in the eyes of the IMF, the Fed, the ECB, &c.
* MARKETS
* MAY 28, 2010
Greece May Yet Have to Restructure Its Finances
By CHARLES FORELLE And TOM LAURICELLA
Even as investors grapple with the short-term economic impact of the European debt crisis, an important longer-term issue lingers in the background—the likelihood that Greece will have to restructure its debt.
Analysts and investors don’t think this is likely soon. The financial markets are too unsettled to weather such a dramatic step and the bailout by the European Union and the International Monetary Fund gives Greece much-needed breathing room.
While a restructuring may not take place for another year or two, it’s a move that Greece may be unable to avoid, many say, despite assurances to the contrary from officials at the EU and IMF.
Restructuring is essentially a default, under which Greece would renegotiate its debt with bondholders, either lengthening its maturities or reducing the amount it owes, causing bondholders to take a loss.
“At this point, it is very clear that restructuring is the only option,” says Lena Komileva of Tullett Prebon in London.
Josef Ackermann, the chief executive of Deutsche Bank, said earlier this month he thought it “doubtful” that Greece would be able to repay all its borrowings.
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Experience WSJ professional
Editors’ Deep Dive: Sovereign Debt Watch
* DOW JONES INTERNATIONAL NEWS
Cracks Threaten EU United Front Ahead of G-20 Meeting
* Agence France Presse
Spanish Banks Strain to Borrow Abroad
* The Christian Science Monitor
France, Germany at Odds as Euro Continues to Tumble
Guess what? Holding interest rates near zero percent for an indefinite period is a great recipe for currently overvalued assets and future crashes. If you want to find the source of a system overloaded with systemic risk, look no further than the Fed.
Kind of a no-brainer, isn’t it?
* The Wall Street Journal
* OPINION
* MAY 28, 2010
The Fed and the May 6 ‘Flash Crash’
Near-zero interest rates have made investors susceptible to the same stresses at the same time.
By MARK SPITZNAGEL
Regulators have been busy searching for the cause of the May 6 “flash crash” when the market dropped by 9.3% and then recovered within minutes. I think it’s a good bet no cause will be found; there is still no consensus on what triggered the one-day 20% stock market crash of 1987. But even if there was no trigger, market conditions created by the Federal Reserve’s easy money policy definitely made the crash more likely.
The market is a critical system. To illustrate, let’s consider another fragile system: the earth’s crust. Imagine geologists scouring through the debris of a big earthquake in search of its trigger—as in, “Let’s investigate anyone jack hammering in the minutes leading up to the quake.” It is intuitively obvious that earthquakes don’t have identifiable triggers. We know that big earthquakes, which happen very rarely, are nothing more than many little earthquakes piled on top of each other due to stresses built up within intricate networks of faults. These little fissures cascade into enormous ruptures. The more correlated the fissures, the more delicate the system.
Back to markets. Think of every investor holding a risky position. Then think of all of these investors together in a big herd. Each member of the herd focuses on what the others will do next, since the only reason anyone takes a position is because others are initiating like-minded ones.
When imitative behavior starts happening in markets en masse, expect funny things to happen to liquidity. All you need to know about market dynamics—as I learned as a Chicago pit trader—is that market prices always adjust to the level where market-makers see balanced two-way order flow between buyers and sellers. All market-makers want to do is buy at the bid price, sell at the offer price, and at the end of the day go home unscathed. When there are only buy orders, for instance, expect market-makers to be unwilling to sell to those buyers until the price has adjusted to the point where they see roughly equal buyers and sellers again. To expect them to do anything else is to imagine them as charities.
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