Bits Bucket For May 29, 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
Location:Northern Arizona, United States
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Three American cities on the brink of broke.
FORTUNE — Several downtrodden cities are on the verge of defaulting on their debt, putting financially encumbered states and taxpayers on the hook to pick up the tab. The National League of Cities says municipal governments will probably come up $56 billion to $83 billion short between now and 2012. That’s the tab for decades of binge spending; municipal defaults could be our collective hangover.
Municipal bonds, issued to fund public projects such as roads and public buildings, have historically been seen as one of the safest places to invest, which is why 80% of municipal bond holders are individual households and mutual fund investors, explains Jeffrey Cleveland, municipal bond analyst at Payden & Rygel Investment Management.
The average five-year cumulative default rate for investment-grade municipal bonds is less than half a percent, according to Moody’s data. That’s about one-third the amount of corporate debt defaults.
But municipal defaults are on the rise, and the trend is expected to continue. Last year 183 borrowers — mostly “risky” municipal issuers, such as suburban developers in Florida — were unable to make $6.4 billion of payments. That’s way up from 31 defaults on $348 million just two years earlier, according to Distressed Debt Securities.
Jefferson County, Ala.
Harrisburg, Penn.
Detroit
So many more to add to this list (near term).
Miami
Los Angeles
Dozens of other cities in CA
Cleveland
Baltimore
etc.
When the Fed bailouts end (perhaps Jan 2011 with a new congress) expect the list to grow and grow. Nearly all of the Fed bailout went to cities for “shovel ready jobs” which in reality went to shoring up current budget accounts and paying public union salaries/benefits and pensions.
I’m sure a bunch in IL could be added to that list.
According to Crain’s, Our lawmakers walked out for their summer break, leaving a $13B hole in the budget.
Can’t (won’t) the TBTF cities be given a federal guarantee, whether implicit or explicit?
Can’t (won’t) the TBTF cities be given a federal guarantee, whether implicit or explicit?
Considering most of these TBTF cities are:
1. Bankrupt eight ways from Tuesday
2. Are heavily unionized
3. Vote significantly democrat
I would say the answer may be no if Republicans get control of either the house or the senate or both.
if Republicans get control of either the house or the senate or both
You mean like 2000-2006 ?? That worked out well….The Neocons have high jacked the Republican party…They are just a shell (Tea Party) of the republican party that I once new…
Does your answer have anything to do with the question “Can’t (won’t) the TBTF cities be given a federal guarantee, whether implicit or explicit?”
or are you just a knee-jerk liberal who flames on at the mention of any other party besides the democrats or of anything in a negative of 0bama?
are you just a knee-jerk liberal ??
You mean me ?? The Registered republican from 1969 to 2000 ??
The Neocons have high jacked the Republican party
Amen to that. Rank and file Republicans, with few exceptions, seem oblivious or unaware that the Grand Old Party of their memories is now the zombie host taken over by neo-cons, Wall Street, and the military-industrial complex. The RNC leadership is sleazy to the core. The fact that either party has partisan defenders after their craven betrayal of the middle and working classes in this country speaks to how brain-dead most of the sheeple have become.
“The fact that either party has partisan defenders after their craven betrayal of the middle and working classes in this country speaks to how brain-dead most of the sheeple have become.”
Truer words have never been spoken.
“The Registered republican from 1969 to 2000 ??”
Touche’!!!
So you’re a Rockefeller Republican?
This tread caught my eye. I was a Republican, and the party left me a long time ago. Now I am a Political Atheist. Both parties are the same coin, just different heads.
thread- sorry, fast hands, not a brain fart.
Bernokio will bail them out, one way or the other.
Remember this old saying?
In for a penny, in for a pound…
When you’re up to your eyeballs in illegal bailout activity that totals up into the trillion$, what’s another few hundred billion among friends?
The Republican Party before 1980 in my eyes was the party of Barry Goldwater, not the party of Rockefeller. I joined the Libertarian Party because the morality cops were allowed to take over the RP. And I certainly did not like the Jackass party either.
I would like the Republican Party to take over at least one part of the Legislative Branch, because gridlock is good. The worst governmental excesses seem to happen when one group has the House, the Senate, AND the Presidency.
HUH? I have never seen so many potholes and rough roads not being filed in or paved quickly in my life.
Nearly all of the Fed bailout went to cities for “shovel ready jobs”
Just returned yesterday from a trip to Michigan. Lots of road and street repair projects in Detroit and Grand Rapids, with signage advertising that they were done with federal funds.
Also, some podunk ones - Antioch, CA, etc.
The big ones are Miami and LA. I’m not convinced that LA will default but Miami is certainly on the short list.
Don’t forget Vallejo, CA.
Vallejo is already in Chapter 9.
Faster:
My GF is having one of her paintings at the Met Museum of art in the Tisch galleries June 9- 22
Its part of the employees art show…
Take off the Rose Glasses. LA Pensions as the city is paying is taking up to much of the budget! This is not Possible to keep paying these high pension costs when the income is not there even with tax increases if they were to be put into place. The unions and city elected officials “promised” more then they can ever delivery. LA is only one of many that is in this situation.
Because no one will come to the plate with a direct answer in solving this issue, hope it goes away somehow, reality will deal with it soon. Then and only then bankruptcy will go into effect as the Federal Government with many states in trouble will come to to the conclusion. I wish it could be differant but the , marketplace, reality will step in and say enough is enough.
“Several downtrodden cities are on the verge of defaulting on their debt, putting financially encumbered states and taxpayers on the hook to pick up the tab. ”
Is there really precedent for states picking up the tab for muni defaults? That’s surprising—why would they?
“But municipal defaults are on the rise, and the trend is expected to continue. Last year 183 borrowers — mostly “risky” municipal issuers, such as suburban developers in Florida — were unable to make $6.4 billion of payments.”
So we are comparing risky municpal issuers Florida suburban developers to GOB municipals for water, sewer, schools with propensity to default?
A good to remind you all of government CAFRs. Comprehensive Annual Financial Reports.
Google it and be sure to be sitting down.
Mr. Market Beats the Bailouts
Why there’s no fixing this financial fight ~ Bill Bonner
Reckoning from Paris, France…
Well, the fans are getting their money’s worth. After staggering through the last four or five rounds, the Dow suddenly came back to life yesterday.
It got up off the mat. Straightened its shorts. Did a little dance. And then wham… By the time the bell sounded, it was up 284 points.
Gold ended the session almost unchanged.
So what do you think? Who’s gonna win this match? Mr. Market? Or the fixers?
We’ll tell you: Mr. Market.
We don’t know how. We don’t know when. But we know two important things:
First, the fixers don’t know what they’re doing.
Second, what MUST happen WILL happen.
Bernanke and Geithner tried to fix this fight. But the fix wouldn’t stay fixed. Each time they proclaimed victory, along came new evidence that Mr. Market wasn’t giving up. And for the last couple of weeks, Mr. Market seemed to have the fixers on the ropes.
The fixers tried all the usual tricks - cheap money, bailouts, and boondoggles. In fact, they used more tricks and fancy footwork than anyone ever had before. Still, the economy barely responded.
And now, the latest figures show that the ‘recovery’ isn’t developing as it was supposed to. Trillions of dollars’ worth of stimulus and there are still 11 million unemployed and 40 million people on food stamps.
An IMF economist says he thinks real estate prices are headed lower. Inventories of unsold houses remain extremely high. Foreclosure rates are at record levels.
The job picture is disappointing too. With the government spending so much money, you’d think we would see a big improvement. But, by and large, people who lost their jobs in the crisis of ‘07-’09 are still out of work. Many of their jobs were not merely put on hold - they were eliminated forever. And the economy is not creating many new ones.
Economists believed that a falling dollar would help US exports…increasing employment in the US. But when Europe got into trouble, the dollar went up! Americans felt the warm glow of schadenfreude. But the falling euro is great for Europe and a disaster for the US. Germany was already one of the top exporters in the world. Now, Germany is exporting even more. And US employment is still sinking.
Consumers are ready to spend. They’re willing. But they don’t have any money. We reported yesterday that people are earning less of their money from the private sector than ever before. The rest of their spending money comes from the government. They’re called ‘transfer payments’ - money that is transferred from one person to another. You see the trouble right there. If you have to transfer the money from one citizen to another, there is no net gain.
In fact, there is a net loss. Anytime you take money away from people who’ve earned it…and give it to people who didn’t…you are asking for trouble. Don’t believe it? Try it in your neighborhood. Let us know how it works out.
Of course, the fixers have no idea what they are doing. All they have is a crackpot theory about the way an economy works. They stick with it despite the fact that it makes no sense in theory…and has never actually worked in practice.
In the real world, Mr. Market always wins. He always wins because he IS the real world.
You can’t fix fights in the real world of economics. You’re wasting your time trying.
Either Mr. Market wins or the whole system crashes.
Either way the fixers lose.
The fixers buy time and face. The longer they fight, the more cred they build in the eyes of those who believe financial crises are acts of God, not man-made.
+1
Nice post wmbz…Leave it to Bonner to just tell it like it is….
Well stated wmbz. Reality will prevail.
Gravity wins every time.
I saw no mention of Goldman Sachs in there. Nor their top secret software. Nor any any of the other Wall St. “fixers.”
And while I agree with the article in general, without mentioning and placing in context the above, it is incomplete.
There is no “Mr. Market” nor “invisible hand.” It’s a fairy tale for children.
Oh yes there is an invisible hand! These days it is referred to as the law of unintended consequences. It is the effect of government meddling where it should not. But we know you love big government eco.
“Please consider signing the Shadow Inventory petition”.
Signed up, Ben. Thanks
I suggest everyone do so, the denizens in D.C. only fear one thing, and that is not getting re-elected. We have to keep putting pressure on them constantly. Until there is a sincere change in the direction we are heading, expect not just more of the same, count on even more bold actions in the wrong direction.
Which is to say, more closed door deals, more unconstitutional actions, more covering up bad bank loans etc, etc…
Enough is enough, it is past time to turn on the lights and scatter the cockroaches.
I’m shocked at how few of you have signed!
Get off the couch and sign!
http://ShadowInv.epetitions.net/
Editorial suggestion to petition language:
Signatures for
EliminateEliminating the Shadow Housing Inventory“I’m shocked at how few of you have signed!”
I was shocked too, until I went ahead and signed it, clicked the link in the validation email, and saw that my name was not added to the list.
Anyone know what the lag is like before new signatures show up on the page?
“Anyone know what the lag is like before new signatures show up on the page?”
Judging from my similar experience, at least two days.
Half a day lag for me.
Yeah, there’s a time lag. I also found out that you can’t use any capital letters in your e-mail address.
Email addresses should not have, nor do they require, capital letters.
I’m surprised by the number of new listings appearing, this late in the spring selling season. Over the last couple years, I’ve seen prices come down in the lower end and higher end of the market. The middle market has been more stubborn. These are houses that based on their size and location I would consider them to be middle - upper middle class houses. Yet, asking prices are $500,000 - $900,000. Often purchased between 2004 - 2006. One comment I’m hearing now is that the owner “needs” to get out. Which is usually a euphemism for someone who is getting crushed by their mortgage and trying to unload before default. Now that some lending standards are being applied, it’s apparent that the typical buyers for these houses really can’t afford the prices being asked. My general impression is that pressure is building in this part of the market. I think that a 20% correction is due, over the next couple years, in this part of the market. This is in Long Island, N.Y..
‘the owner “needs” to get out. Which is usually a euphemism for someone who is getting crushed by their mortgage and trying to unload before default’
‘I think that a 20% correction is due’
Why am I reminded of that William Shatner commercial about bargaining?
Nambi panzi!
‘the owner “needs” to get out. Which is usually a euphemism for someone who is getting crushed by their mortgage and trying to unload before default’
I’m seeing a lot of this in my neck of the woods in Northern CA. When a house in my neighborhood hits the market with what seems like a ridiculous wishing price, I check what the current “owners” paid. Sure enough, the list price reflects the FB’s hope to avoid a complete financial slaughter given remodeling & several years of big mortgage payments. These houses are mostly sitting and list prices aren’t being reduced, sellers just hoping for someone to make them whole.
92646 in the OC is still full of knife catchers! This one is right around the corner and has back-up offers:
http://www.trulia.com/property/photos/3009535476-20721-Aquatic-Ln-Huntington-Beach-CA-92646
and this one is 4 doors down and just closed escrow:
http://www.trulia.com/homes/California/Huntington_Beach/sold/5254321-10121-Edye-Dr-Huntington-Beach-CA-92646
Clearly banks are still doing exotic loans because if the buyers actually had 20% to put down on these shacks, they could afford way nicer neighborhoods than Bakersfield by the sea.
“I need this property to be worth a lot of money. It’s all I’ve got.”
LOL! I suspect that mindset is prevalent in the pretentious beach cities of the South Bay. Retirement plans are mainly in there bungalows But no earthquake insurance! Doh!
I have been thinking that NW Phoenix could also expect a 20 reduction in the average prices. In practical terms, what does that mean?
$300k - 60k = 240k @ 4.75% = $1251 monthly payment + PITI
$240k - 48k = 192k @ 4.75% = $1001 monthly payment + PITI
I used 4.75% because that’s what I was quoted on Thursday, no points. As you raise the amount mortgaged, the spread starts to widen significantly. But at my price points I can expect to save “about” $250 per month as the market crashes.
At $400k - $500k that spread is about $520 per month.
So the question remains, if any of us can find that diamond in the rough should we jump on it? I think it depends upon your price points, your financial goals and your partner. Lets face it, making the fetching Mrs Lip happy is one of my goals. Not always possible, but a goal never the less.
“So the question remains, if any of us can find that diamond in the rough should we jump on it?”
My main concern is that even if I was to find something that I thought reflected where I think prices are headed, I think the economy is going to continue to be rough for the net couple years, with a very rough patch during that time. So staying employed with no more commitment than my apartment lease and cash in the bank, adds a level of security.
It has ALWAYS added a level of security. The fact was just masked during the absurd bubble.
For most people, house buying was nothing more than a “forced savings” program. If you don’t need this “forcing” then you don’t need a mortgage either.
Do you have any clever insights to the likely effects of the Fat Finger May stock market swoon on
1) housing prices going forward;
2) impetus for substantive financial reform?
agreed about renting. I am in Phoenix for the weekend. my balconey and master bedroom face a quiet green park. In an apartment complex. I pay $900 Monthly for my spot. Across on the other side of the wide green Savannah, houses go for the high $200s. I am waiting patiently and am confident those prices will fall. Then instead of a southwest park view I may get a northeast park view. until then, I have my piece of paradise.
Long Island is going to get hammered.
No more middle class jobs. Small and dinky houses for $600,000 with a $20,000/year tax bill. Insane public unions.
The young move away to places like NC where they can afford to start a life.
The perfect storm is coming…
“The perfect storm is coming”…
Tis true, but the confidence guys are hard on the job, the street and the gubmint collude 24/7, and the dumb masses are easily fooled over and over again.
Nailed it, wmbz.
Sad but true wmbz.
Also, as I’ve said, the smart people started leaving New York in 1980s and continue to do so. Beautiful country, but without enough jobs, people have to leave.
Long Island does have beautiful beaches and close proximity to New York City.
Housing costs (both rents and prices) in the metro New York area have always been very high.
I grew up on Long Island and moved away in large part because of the ridiculous housing costs.
I grew up in Great Neck NY and I also moved away from the crazy ness of NYC area. It’s a jungle of immigrants that changes very few years. Loud, fast, expensive, dirty, noisy, people are packed into long Island like a can of Sardines. Long Island has endless retail and nothing much else. People who live around NYC do not know what is decent living is all about.
But they THINK they do!
“Long Island is going to get hammered.”
“The young move away to places like NC where they can afford to start a life.”
A broker, last week, related a story about a local doctor. This doctor is in a practice of 11 doctors. He plans to leave the practice and move to North Carolina, as “you” can’t make it on Long Island. Given as a doctor his idea about “making it” is probably more grandiose than the average middle class slob, it’s still a telling statement about the cost of living around here.
See what kind of house you can get for $250-300k on Long Island. Now look at what kind of house you can get for the same money in the major metro areas of NC. The property taxes will be much lower in NC as well.
250-300k will get you 3-4000sqft in Houston. 2 story, 2-3 car garage, pool, 4bdrm, 3 bath, media room or office. VERY nice neighborhood.
“The young move away to places like NC where they can afford to start a life.”
Some move to NC but somejust go upstate. There are very deep connections between NYC & Syracuse and the Boston area and Syracuse. I think upstaters go to the cities for education or to jump start their careers and after establishing them and starting families they often return here for low crime rates and cheaper living. But also we’ve been seeing somewhat of an influx of people who’ve lived in NYC their whole lives coming here. Sometimes family members follow shortly after.
I looked at houses last year in NC. Inexpensive then, but still overpriced I thought. The fixer upper I had my eye one was a complete disaster. A once grand beautiful victorian in a prestigious part of town was $69,000. Probably cost that or more to repair it. Repair not renovate! Hear tale it’s now up for sale for $5,000. I’m getting interested.
It needs foundation work, and I’d probably need to do something about the ivy growing through the walls. Oh, and plumbing would be nice…
A once grand beautiful victorian ??
I have re-habed about a 1/2 dozen of these over the years including new foundations…Several were condemed and I brought them back to life
From what I could tell, nothing has ever been condemned in rural NC.
oh, Dave, since you are more familiar than I with these houses, are they supposed to have sloped porches? Sloped bedrooms?
Sloped Porch “yes”…Sloped bedroom hell “no”.
Sloped bedroom likely indicates a foundation problem although it also could be a problem in the floor joist…Joist problem easy fix…
Foundation problem, expensive fix unless you can do it yourself…
I should qualify; Sloped porch “yes” as long as it is slopping away from the house…
scdave - do you live in one of your repaired Victorians, or are you now renting? I wish that I had construction skills, and admire people like yourself who remake beautiful old houses.
do you live in one of your repaired Victorians ?
Hell No…
It is very rewarding to bring them back to life but honestly there is so much functional obsolescence in these old houses that I would not enjoy living in one…Add to that they are endless money pits for maintenance….One thing I never did, and what I would enjoy immensely would be to build a authentic Queen Ann with a more modern interior layout…That would be a bunch of fun but also a bundle of money…
Correction: There is so much functional obsolescence in these old houses that the cost to make them function exceed the cost of building new.
http://artsandcraftshomes.com/
scdave, wish I could get together with you over a beer sometime & talk old houses & renovations. Have always loved the old Victorian and Arts & Crafts homes - and neighborhoods, which look and feel so much more like real neighborhoods than the soulless, cookie-cutter tract housing ‘burbs ever will.
Having grown up in ranchers, I could not handle living in Victorians. I am always hopeful and look forward to the future, don’t have nostalgia for the past.
yesterday was my Birthday and I did 52 regulation pushups. one more than my age.No rest. bragged to my older sister. doh! she put me back to earth. she said she would do 100 Nonstop when she was in her early 40s.
It sounds like a teardown if plants are growing through the walls.
It sounds like a teardown if plants are growing through the walls ??
Nah….These beauties are made out of heart redwood that were Centuries old when they were milled…There is not a bug or plant that will phase them…A little round-up with a dash of cross bow and plant goes bye bye…
The realtor was not amused. When visiting these old houses I bring a marble and drop it on the floor. Realtors aren’t happy when it rolls to one end of the room.
In this house, the turret end of the second floor bedroom sloped out 2 or 3 degrees. I didn’t notice it so much below on the first floor. Windows didn’t seem to be noticeably out of true on the first floor.
The porch slope was maybe 10 degrees, and the trim was out of true. I’m guessing it was a combination of design and foundation, but I don’t have any experience with that design.
DOW 36,000 here we come…
Dow ends worst May in 70 years.
NEW YORK (CNNMoney.com) — Stocks tumbled Friday at the end of the Dow’s worst month in 70 years, after a downgrade of Spain’s debt reminded investors that Europe’s economic woes continue.
The Dow Jones industrial average (INDU) lost 122 points, or 1.2%. The S&P 500 index (SPX) fell 14 points, or 1.3%, and the Nasdaq composite (COMP) dropped 21 points, or 0.9%.
What’s funny is some folks think that the big boards are over sold. What will they think when the DOW is back at 6000?
I know, I know, “they” won’t let that happen. We’ll see.
If the are still bullish, they will probably be thinking time to place some more buy orders today, and dream of early retirement. Given the volatility and uncertainty, I am keeping at least 30% cash reserves for opportunities (I’m somewhat higher than that now). At the same time, we are close to historical PE ratios and inflation is right around the corner, and the masses have their money sitting in 401ks and must park it somewhere. I wouldn’t be sitting naked on either side right now. Time will tell which positions make the most money for me. As far as unemployment goes, I know business is booming for my firm. I have had to work every weekend this month, including every day this holiday. I normally don’t work weekends. I am in finance and law and do not have a good sense for other areas. I would like some comment from others as to whether they are seeing work pick up or still go down. Work around here is way up, and we are are track for 35% profit increase over last year.
Having said that, I am not a perma bull, and had my savings 100% in cash before the crash. I would be not be tempted to pay much higher than current levels, and still have not bought a house yet. I want the death of the tax credit to be felt, and will begin to seriously look in the Fall when ppl are desperate to get rid of the excess inventory as sales come to a halt. If I see signs of inflation right around the corner and work is still busy, I will probably give home ownership serious consideration. Also by then I will have a better feel how the Euro problems will play out to conclusion.
What county are you in Natalie ??
I have ties to Philly and NYC. The Euro problems tie into our banking central nervous system.
Close personal friend is the Philly announcer…Larry Anderson…
That is pretty cool. I like him.
The Euro problems tie into our banking central nervous system.
B…b…but Cramer said the Eurozone problems were ring-fenced from the US market. And that all that capital fleeing Europe would seek the safe haven of US equities.
CNBC has my best interests at heart. Their analysts are pillars of integrity and market knowledge. I feel so safe and secure navigating the treacherous iceberg-riddled waters ahead with such experienced and helpful guides.
Although reported earnings trended up recently, the macro and technical pictures are trending down. The stimulus is fading. Austerity is the new black.
True, but fold or all-in has never been a winning long term stategy in poker or in the markets (on average as opposed to the few that just get lucky). I agree, if you have 100k or less in cash there is no reason to take risk, but if you have in excess of a million in reserves, you need to hedge. I know you were not saying fold or all-in, but I was responding more to the general tone of the board from time to time. I always find your posts informing and intelligent.
“True, but fold or all-in has never been a winning long term stategy in poker or in the markets (on average as opposed to the few that just get lucky).”
Au contraire, Natalie. Fold and all-in are BOTH winning strategies in poker—depending on the hand that you are holding at the time.
Playing the middle-road for a hand that says “fold” or one that says “all-in” are both losing strategies.
I was not intending to refer to going all-in and folding as part of tournament stategy when blinds are high or your opponent is short stacked, in a limit game, post-flop, or if you have sufficient cash behind you but not on the table. I was thinking pre-flop in my head and expressly referred to long term strategy. Rather, I was envisioning over aggressive pre-flop strategy that some try. To me that is most akin to saying since you are worried about the market you should not be in at all, or if you think it is a good time to buy you should allocate 100% towards equities. I try to keep it brief so it posts. Are you are serious player. I am. I would love to enter into a big cash game with some HBBers and see where the chips fall.
Another way to think about it is that when going into a volatile stock market you should never put yourself at risk by not having at least 20% reserves to invest if markets fall further, I have around 36% cash equivalents right now. The reason people lose money is that they buy high and pull out when they get scared. If you buy at an ok price, pull back when they rise, and put more money in when they fall, its much harder to lose money even in a so so market. You do have to be prepared for the game, however, and set various limits, triggers and reserves in advance.
Inflation can be right around the corner for a long long time.
Ask a lot of the guys in Japan.
No natural resources and extremely xenophobic (they don’t have white skin so it is PC to say they cannot be racists).
At the same time, we are close to historical PE ratios and inflation is right around the corner
P/E are far away from historical lows and are closer to historical highs
Inflation is coming but it may take years (one hint is when housing prices start rising)
Note I said historical ratios, meaning norms, not lows. Yes, we are slightly higher but many factors are at play.
Please consider that you are talking about Price to Projected Earnings. We are still in the Pretending Phase.
Work is up here too. Sales, not so much. My stuff front runs the general economy by 12 months.
Stimulis: Spend two to juice one. What a thing to depend on for the future.
“Note I said historical ratios, meaning norms, not lows. Yes, we are slightly higher but many factors are at play.”
Yes, but we are in middle of the worst economic downturn in 70yrs. Should we really be above historical average P/E ration in that context?
Depends where we are in the cycle. On the backside facing inflation: yes.
“On the backside facing inflation: yes.”
Ok, that’s a fair point. You may be right.
I still am not convinced of the inflation-is-imminent thesis, though, in spite of the many years of debating here. I still see massive deflationary pressures afoot, which the Fed has been roughly balancing out by pouring in trillions of $$$s.
The key question in my mind of whether we have serious inflation is whether they remove or sterilize those $$$s as nimbly as they injected when the time comes. That remains to be seen.
My DH is in tech. His best bonus ever was 2009 but 2010 wasn’t bad. He’s as busy as he’s ever been. There were never any layoffs at this company although there was some house cleaning of “problem” people. Their positions were promptly filled. There is no inventory in my price niche in the area we are looking unless it’s a fixer. We either lighten up on the condition of the place we will accept, or I believe we’ll be sitting till next year. There is action in the mega places. (over 4000 sq ft) I’m seeing that several of them are looking abandoned if anyone wants a nice $500k - $1mil CNY property for a bargain. Shouldn’t be long until those price points start to collapse.
The revenue of my small agency is up about 160% so far this year compared to last. In general most of my customers (fashion industry) are more optimistic but weary of a “double dip” correction.
I think 30% cash is very good. It is insurance against deflation. but so are T-bills. I can redeem a good amount of savings bonds held more than five years, making them cash-equivalent. I am in information security software. Just trying to hang on. Grateful to work 40 hours per week, but my spirits would really improve if overtime returns. At the client company there is one firing every three weeks or so, rarely in software. Things in my industry are drying up still. My buddy gave up and moved to Phoenix from San Diego to sit out for awhile. It’s treacherous, hence I like T-bills.
Didn’t the Dow bottom out at about 10% of its peak during the course of GD I? Yeah, I’d say we still have a ways to go on the downside.
Unless it’s different this time, there will soon be another trough in the S&P Composite PE ratio below a level of ten. This is documented in a downloadable data file made available by Robert Shiller (click on the first link at the top of the page).
Here is a list of bear market troughs over the past 100 years, when the PE ratio on stocks remained below a level of 10 for a protracted length of time. My guess is that the next one will begin within the next decade, well-timed to coincide with a tsunami wave of late-baby-boomer retirements.
Here is a summary of the historic evidence:
Start of period / end of period / duration of PE trough / time until next trough
April 1917 / July 1925 / 8 years, 3 months / 6 years, 5 months
Dec 1931 / April 1933 / 1 year, 4 months / 8 years, 10 months
Feb 1942 / Dec 1942 / 10 months / 8 years, 2 months
Feb 1949 / Sept 1949 / 7 months / 24 years, 11 months
Aug 1974 / Feb 1975 / 6 months / 11 years, 11 months
Jan 1977 / Jan 1985 / 8 years* / 25 years, 4 months (SO FAR, SO GOOD!!!)
- The average duration of the period between bear market troughs before the end of the most recent episode was 12 years.
- From Jan 1985 to the present, the PE ratio has remained permanently aloft above a level of 10 for the longest period in modern history, and stocks have been perpetually overvalued.
- The misnamed “Great Moderation” was really “The Great Credit Bubble.”
- Anything which cannot go on forever will end. (Herbert Stein)
- Irrational exuberance cannot go on forever.
* There were a few months in that period when the PE ratio barely climbed above 10 before dropping again.
From Jan 1985 to the present, the PE ratio has remained permanently aloft above a level of 10 for the longest period in modern history, and stocks have been perpetually overvalued
You probably have to consider what returns on treasuries were during those periods to make this statement.
The correct P/E really depends on what people can earn in other investments at the same time. If you can’t earn squat in the bank or in a treasury then maybe a higher P/E is reasonable.
My concern at this point is the performance of stocks has nothing to do with fundamentals of the stock and everything to do with the perception of how much cash they are going to pump into the system, and how much manipulation of stock prices is going on on Wall Street.
I’m still in the deflationary camp, and I think the FED alone would completely fail to fix this stituation with easy credit, but if all the central bankers play the same game and their is no safe option for cash paying any return then it gets harder to predict what’s going to happen. Hyperinflation is still a long way off though. Any rapid increase in inflation will create a rapid drop in consumption at this point.
“You probably have to consider what returns on treasuries were during those periods to make this statement.”
Redact the part about ‘perpetually overvalued’ and you are left with a statement which is objectively supported by Shiller’s data.
Regarding the the ‘perpetually overvalued’ judgment, I find it curious that people would imagine they were going to do well buying stocks when a much lower PE-ratio seems likely over the next decade.
That would seem to me nearly as foolish as purchasing an overvalued house when prices seem set for another 30 percent leg down over the next half-decade. At least in California, where SFRs still often sell for north of $500K, 30 percent down is a lot of money — at least $150,000 on a home priced north of $500K. I assume most people would not willingly flush $150,000 down the toilet, assuming they even had that much on hand?
If you view the DJIA chart for the entire decade from 2000-2010, it appears the market has reached a high, permanent, if slightly volatile, plateau.
36,000 (thousand) or 3,600 (hundred) ?
“The greatest fruit of self-sufficiency is freedom.” ~ Epicurus
“The most evil lie of government haters is their lofty buzzword called freedom is completely devoid of opportunity.” ~ Exeter
“In Gold We Trust?”
Heavens, no! says Brett Arends in the Wall St. Journal in one of the strangest attacks on gold among the several that have been published lately. His fear is understandable. Fortunes are made in the financial industry’s paper games and he and the “money” establishment do not want us thinking for one second that a piece of paper is not as good as a piece of gold.
Here’s a sample:
“Gold is volatile. It’s hard to value. It generates no income.
“Yes, it’s a ‘hard asset,’ but so are lots of other things—like land, bags of rice, even bottled water.”
Anyone who considers bottled water and bags of rice to be “hard assets” is not to be taken seriously. He correctly states that gold is not necessarily a good investment. That’s true. Anyone buying gold with an idea of making money has a wrong idea of its function. It’s nothing more that a rare metal which was settled on thousands of years ago as an efficient medium of exchange and a store of value. It’s not supposed to “generate income.” It’s a medium of exchange, for Pete’s sake. A gold coin in one’s pocket is not someone else’s IOU. It is a precise measure of value…480 grains to the troy ounce…and it can be exchanged for goods and services almost anywhere in the world.
“It is a precise measure of value…480 grains to the troy ounce…”
Are these grains the kind you can eat? 480 doesn’t sound like much.
Those grains looked like a lot when they hit the Visa card last month…
“Are these grains the kind you can eat? 480 doesn’t sound like much.”
I know that comments was tongue-in-cheek GS, but to satisfy my own curiousity, I just did a quick computation of how much wheat you could buy for that 1oz gold coin.
I used $1200 for the coin, and the recent $4.57/bushel for the wheat.
It’s a lot: 15754lbs of grain.
(1 bushel = 60lbs for wheat)
$1200/$4.57 = 262.58 bushels
262.68 * 60lbs = 15,754lbs
I couldn’t find any information on an average number of grains there are per pound of wheat, but I’m guessing it is a lot.
Gold and grain prices are both cyclical, and given how overvalued stock prices are currently and how far they have yet to fall over the next decade, not to mention how much money the financial panic has driven into gold purchases, I am guessing gold prices are at the high end of their near-term range.
When the stock market correction reaches a PE trough on the S&P composite below 10, gold bugs will suddenly want to reallocate their wealth gains into the US stock market, starting another cyclical bull. (Look for my long, data-based post on this point to appear within the next hour or so.) I promise to change my HBB handle to Professor Bull when this happens.
A couple days ago in Japan, Ben Bernanke said that the benefits of low interest rate policies that politicians want “are not sustainable and soon evaporate, leaving behind inflationary pressures that worsen the economy’s long-term prospects……thus political interference in monetary policy can generate undesirable boom-bust cycles that ultimately lead to both a less stable economy and higher inflation.”
Clipped from Max Keizer
Maybe that’s why the Dow went down. Finally Mr. Bernanke is hinting at raising rates? I certainly hope so.
“I certainly hope so”.
As do I, but BB has painted himself into a corner, about all he can do now is jawbone. However at some point his hand will be forced, by Mr. Market place.
It’s more than just “Mr. Marketplace.” Society is more than the sum total of its economic activity, especially the rigged casino economy. There is a breakdown of cohesion and basic values and a rise in atomized, alienated individuals who see they have no future worth living in the Incorporated Global Plantation the elites are herding us into. The productive segment of society is rapidly losing all faith and trust in a system that is actively hostile to their interests and the future of their children. That is a much larger problem than falling markets.
You could start by mentioning the absurd amount that most people spend to send their worthless spawn to expensive colleges, end up hock in debt with a less-than-worthless degree.
The productive segment of society is rapidly losing all faith and trust in a system that is actively hostile to their interests ??
Spot On Sammy…
“The productive segment of society is rapidly losing all faith and trust in a system that is actively hostile to their interests and the future of their children. That is a much larger problem than falling markets.”
That problem is a root cause of falling markets. If you kill the goose that lays golden eggs, you get no more gold, though you do enjoy dining on fowl for one night.
FPSS just hit one of my pet peeves. I went to my nephew’s high school graduation in Michigan two days ago. He’s going to Michigan State to study engineering. Smart boy who knows how to work. We will need to come up with only $7000 per year to cover all of his expenses. The rest is covered by grants, scholarships and work study. The goal is for him to graduate without debt. I’m one proud aunt.
No need to attend overpriced schools.
That problem is a root cause of falling markets. If you kill the goose that lays golden eggs, you get no more gold, though you do enjoy dining on fowl for one night.
The US gov has been strangling the Goose for the last 20-30 years. We’ve taken a population that had a work ethic with manufacturing engineering and science skills and transformed into one skilled at paper shuffling (finance), servitude (the vuanted service industries), and welfare obtainment.
You left out “temping.”
They’re not just killing the goose. They’re violating it in unspeakable ways.
The whole economy has become addicted to the Fed’s zero interest rate policy (ZIRP), just like a heroin junkie. Houses, stocks, bonds, and the ability of governments to finance deficits with cheap money will all collapse if interest rates are raised.
Therefore, interest rates have become Bernokio’s Conundrum. If he leaves them at zero, the economy will stagnate forever, like Japan, and if he raises them he will kill the economy.
IMO as long as money is destroyed faster than it is being loaned into existence (or printed or whatever) then interest rates will remain low.
This money destruction should take down stock prices (along with bonds and other debt instruments) and even gold.
Those with the cash will rule.
One should expect a lot of subsidies to be yanked out of the System and will witness prices going up and will call these rising prices inflation while in fact the rising prices will be caused by deflation.
Health care is one example of this. Right now health care is highly subsizided: The patient doesn’t pay anything close to what he is billed for. A subsidy - from private insurance, government payments, etc - make up the difference. Yank away the subisdy and one pays more health care but gets less health care in return.
Expect more of this in the future, expect more for less. That’s because subsidies are being eliminated. The subsidies are being eliminated because there is not enough money floating around to finance them.
One should expect utility rates to go up. Why? Because the number of vacant houses is increasing and the number of businesses is decreasing.
The electric utility folks build infrastructure to supply the needs of houses and of businesses. The cost of paying for this infrastructure is spread among the receipiants of the electricity generated by this infrastructure. All is well until the number of receipiants goes into decline. That’s when the electric bill for the remaining receipiants needs to rise in order to keep up with the financing of the now overbuilt infrastructure.
This holds true for other utilities as well: Water, sewer, gas - and for roads.
Were it not for money printing and stimulus, inflation would be negative, perhaps -5.
Keynesian and monetarist are not going to stop until inflation is firmly on the positive side of the number line, +5 and beyond.
In other words, although you are not seeing a large headline CPI number, +1, there is a lot of inflation in the absolute spread, -5 to + 1 = 6 pct.
Again with no safe investment option earning any return I don’t see the bond vigilantes having as much power to push spending cuts on countries that print their own money. If all the central banks play the same game they can keep cash flowing into the economy ie medicine, roads, infrastructure, etc. I don’t see the cuts coming in the short term. Long term you are probably correct.
I keep telling the people around here that the solar heating , and electric systems, will cause the PGand E to have to raise the prices on the electric bills.
the solar energy people tell them to put in solar electricity so the buyer can sell excess to utility at high prices, and pay low prices when sun in not shining.
Raises utilities expenses and lowers their income, resulting in need for higher electric prices from utilities.
They don’t seem to understand the problems
I can’t believe some of you people have bought voodoo, er, “supply side” economics hook line and sinker.
Do you even understand what “supply side” economics really is? Forget the official definition. This is what it REALLY is.
It’s where prices are raised when times are good because of a “shortage” of goods and service and prices are raised in bad times because of shortage of income.
In other words, prices NEVER go down. (there are of course, some exceptions, but that’s all that they are; exceptions)
What does this mean? We’re scr3wed. That’s what it means.
“We’re scr3wed”
Naa…We are going to be fine. The Government has got our back.
“Finally Mr. Bernanke is hinting at raising rates?”
Get serious, man. With the euro keeling over and China not budging, there is no economic reason for BB to raise rates and strengthen the dollar. Instead, he’ll probably do more QE.
I agree…
You’re right. It was just wishful thinking.
Only 3 banks this weekend…
3 Fla. banks, 1 each in Nev., Calif. shut down
Regulators shut down 3 banks in Florida, 1 each in Nevada, California, for 78 failures in 2010
WASHINGTON (AP) — Regulators on Friday shut down three banks in Florida and one each in Nevada and California, bringing the number of U.S. bank failures this year to 78.
The Federal Deposit Insurance Corp. took over the Florida banks, all owned by holding company Bank of Florida Corp. They are Bank of Florida-Southeast, based in Fort Lauderdale, with $595.3 million in assets; Bank of Florida-Southwest, based in Naples, with $640.9 million in assets; and Bank of Florida-Tampa Bay, based in Tampa, with $245.2 million in assets.
The FDIC also seized Las Vegas-based Sun West Bank, with $360.7 million in assets, and Granite Community Bank, located in Granite Bay, Calif., with $102.9 million in assets.
Bank of Florida is really just one bank with a total FDIC cost of well over $1 billion. I guess breaking it up into three makes it easier for people to swallow.
Only 3 banks this weekend…
3 Fla. banks, 1 each in Nev., Calif. shut down
By my count that makes five. Of course I was always better at science than math.
I would add, we have over come past “fool” presidents, but the “fools” that can vote are hard to over come…Now, where’s my “free” stuff?
This quote came from the Czech Republic .
Someone over there has it figured out. We have a lot of work to do.
“The danger to America is not Barack Obama but a citizenry capable of
entrusting a man like him with the Presidency.
It will be far easier to limit and undo the follies of an Obama
presidency than to restore the necessary common sense and good judgment
to a depraved electorate willing to have such a man for their
president.”
“The problem is much deeper and far more serious than Mr. Obama, who is
a mere symptom of what ails America .
Blaming the prince of the fools should not blind anyone to the vast
confederacy of fools that made him their prince.
The Republic can survive a Barack Obama, who is, after all, merely a
fool.
It is less likely to survive a multitude of fools such as those who made
him their president.”
While I certainly have no high regard for the wisdom of the general populace (especially watching them jump from bubble to bubble - tech, to homes, to leveraging into equities, selling equities at a loss in fear during the stock market crash,and then begging for government handouts with any savings going into bonds), to be fair, we are only given two choices for President. I don’t think that anyone on here or at any other somewhat intelligent forum would think that Obama was fit for the job, or a decent human being, but McCain is slightly insane and profoundly ignorant and Sarah Palin was cloned in the darkest pits of hell. I would love to see at least one choice better than what you could find on a random sampling of the occupants of an inner city bus.
Make that a random sampling of the occupants of “the short bus”.
I don’t think that anyone on here or at any other somewhat intelligent forum would think that Obama was fit for the job, or a decent human being, but McCain is slightly insane and profoundly ignorant and Sarah Palin was cloned in the darkest pits of hell.
Well said, Natalie. I’d shudder to think of that pair at the helm. It is a testament to the intellectual and moral bankruptcy of the GOP that this ghastly duo were the best the party could offer.
While Obama’s shortcomings as a leader are all too apparent, in fairness to him, the hoi polloi are laying things to his account that no President could realistically be expected to solve.
Independents and Democrat crossovers in the early primaries gave the GOP McLame. Left the public with quite a choice…An African style Marxist and the Manchurian candidate.
The biggest problem this country faces isn’t in Washington DC or NYC. It’s a populace that’s so far down the road to IDIOCRACY that it is becoming an ungovernable rabble.
That is an awesome quote. I’d say we’ve had a depraved electorate ever since Clinton. Much of that has to do with the dumbing down of the schools, the whole infiltration of pop psychology, the predator and victim mentalities, etc.
Last night, on the local PBS political punditry show, one of the pundits had the “gall” to blame the electorate for the condition of Tallahassee. She was right, too.
But, mobs will always insist on the wrong thing and make a fetish of it. Like drilling in the Gulf.
We have two guys gunning for the Republican gubernatorial nomination here in Florida. One is a crook and the other is Attorney General. The crook is perferable to the Jeb-endorsed Attorney General.
As to those who think Mitty will be the Pubs’ choice in 2012, nope. Jeb. Mark my words.
Jeb ??
Jeb Clampett maybe…You think this country would elect another Bush ??
Of course, because it would be totally depraved.
Let’s suppose it is Mitty after all. Who do you think is behind him? Jeb. And others of course. The neocon cabal trying to rise again, makes me sick. Cheney, Guiliani, Jeb, Romney. Looks like a rogues’ gallery. For that reason I’ll vote for Charlie Crist before I’ll vote for Rubio.
I don’t think Mitty has a realistic shot either…Not sure who does….I think a woman running down the middle could have a shot…
I’m thinking Mike Pence.
I certainly never thought we would elect another one before the 2000 elections happened!
I personally would like to see an end to family dynasties, including the Bush and the Clinton versions thereof. Let’ try to keep America from slipping into Third World banana republic status if at all possible…
Quotes from Jed Clampett:
“Took to it like a cold hog to warm mud.”
“Harder than braiding a mule’s tail during fly season.”
“Like trying to poke a cat out from under a porch with a wet rope.”
“If brains was lard, Eb wouldn’t grease too big a pan.”
“We’re gonna put the big pot in the little one!”
“Ever man needs a wife; they’s a lot of things he can’t blame on the government.”
“They had a happy marriage; it was all that living together afterwards that caused the trouble.”
“Many a man’s lost his best friend by marrying her.”
“Us old foxes is trap-shy; especially when the bait comes looking for us!”
“Pears to me there’s more than one fox with feathers on his mouth.”
“When you come in my house toting a firearm, you’ve done dropped a muddy clod down my churn.”
Granny: “I was comin from the still.”
Jed: “From where?”
Granny: “The hill, the hill!”
Jed: “I heard you the first time. You probably got your nose wet too, let me smell your breath.”
Granny: “Not while you’re smokin.”
“If money was skunk oil a hound dog couldn’t smell me.”
“Your Granny’s old now, boy, and she’s had a long life of service to others. And in all that time she’s only asked for one thing out of life…her own way.”
“The greatest joy in all of livin is the joy that comes from freely givin.”
“Old folks likes old things.”
“Drive on, boy.”
Jed: “One of these days I gotta have a lo-ong talk with that boy.”
Elly Mae: “Well, how come you keep puttin it off, Paw?”
Jed: “I reckon ’cause the short ones is so distressful.”
“You have to remember, Granny, that these are city people. They growed up with newspapers and radio and TV and an education. We didn’t have none of those things. If we would’ve have, we’d been as peculiar as they are.”
Man looking for loan at the bank: “How can you tell I’m an honest man?”
Jed: “Because if you wasn’t you’d be sitting there telling me all about what all you got instead of what all you ain’t.”
“This is the most confused I’ve ever been with Jethro out of the house.”
Jed’s reply to Miss Jane’s folksinging:
“Lot a call for that, is they?”
Granny: “My Grandpappy had another saying, ‘older violins make the sweetest music, you just gotta have the right beau.’”
She laughs and Jed just stands there.
Granny: “That’s a witty sayin, Jed.”
Jed: “Not too witty.”
Granny: “Well, it sure beats, ‘Well doggies.’”
You think this country would elect another Bush ??
A country dim enough to give Shrub a second term, after the epic incompetence of his first one, could very well elect another Bush.
Since it is basically a choice between two people, it’s very dependent on who the other party puts up. When talking smack about the idiocy of the American people for electing candidate X, always take into account what their other choice was.
“That is an awesome quote. I’d say we’ve had a depraved electorate ever since Clinton. Much of that has to do with the dumbing down of the schools, the whole infiltration of pop psychology, the predator and victim mentalities, etc.”
…and I say that we now have a highly reactionary and responsive electorate, all due to the past sins, deeds and piss poor performance of the republicans that were given this nations charge and trust.
Whether it’s one of the old loyalist skeletons brought out of the GOP political closet, dusted off and image rehabbed or a newer face with moose antlers, a cross and a hunting knife, the GOP and republicans still have one major current and future problem.
Regardless of whatever new political critter and leader that the GOP attempts to come up with, create and present to Americans, this now highly reactive electorate will see this Creature as only one thing and nothing else.
Another George Bush, in disguise…or in Drag.
Bring that Critter on and see what happens.
Try “since Johnson.”
“As to those who think Mitty will be the Pubs’ choice in 2012, nope. Jeb. Mark my words.”
Oh Hell No! The tea party voters will not elect another Bush. Not sure who it will be, but there is no way it will be Jeb…Unless the voting system is completely rigged.
I hope Ron Paul gets more votes this time around, that would be encouraging.
Obama is a super genius compared to Bush II.
Bullwinkle is a super genius compared to Bush II.
Hilary is evil incarnate, but she’s highly intelligent. More so than her boss, who I have little doubt she’s scheming to run against now that his feet of clay are showing.
The world’s leading insulin-provider says it is withdrawing its medicine from Greece, because of a compulsory 25% price cut.
Oooh, price curbs. Yep, that’s always worked.
What to expect with ObamaCare in a few years…
Thank god the insurance companies weren’t raising rates and cutting services every year.
Oh wait…
ObamaCare and socialist Greek Care. How it will work.
Get even with those evil drug companies. Mandate a 25% (or whatever) price cut. You are a hero to the masses. You are doing something! Government is in control. Socialism works!
But companies and importers react…and say adios to selling their product in your economy. So, there are fifty thousand Greeks (imagine the number in America) who use this insulin from the company in question.
But these people will have to buy it….via another country and I’m guessing they will pay fifty-percent mark-up to make this work, and an import tax (which Greece is famous for) will be involved.
So guess what…black market insulin will become popular…as fishermen run up to Italy…pick up a pallet of this stuff on ice…and come back to sell off the pier.
People will now be happy to pay twice what they used to pay under the “old system” before socialized medicine ever got involved.
+1
“Who is the greater fool? The fool or the fool who follows him?”
–Obi Wan Kenobi
Is it just my imagination, or has talk of financial reform been crowded out by the news of the May stock market swoon? Did our Congress somehow mistake the eye of the financial hurricane for the end of the storm? Perhaps it was just a little too early to reform our financial system, given that the crisis is still in full force.
Looking on the bright side, apparently the past month was not as bad for stocks as some were during the 1930s.
* The Wall Street Journal
* TODAY’S MARKETS
* MAY 29, 2010
May Finishes With DJIA Falling 122.36
By PETER A. MCKAY And KRISTINA PETERSON
Stocks ended sharply lower after a downgrade of Spain’s credit rekindled investors’ fears about Europe’s economy.
The Dow Jones Industrial Average fell 122.36 points, or 1.2%, to 10136.63, down 7.9% for May, the biggest monthly drop since February 2009 and the worst percentage decline for May since 1940.
Volume was light ahead of the three-day Memorial Day weekend. Composite turnover in New York Stock Exchange-listed companies hit 5.1 billion shares, below the month’s average daily volume of nearly seven billion shares.
“One of the intermediate-term concerns the market has here is if the global market recovery is intact with the same trajectory or are there some signs it’s beginning to fray at the edges?” asked Jim McDonald, chief investment strategist at Northern Trust Global Investments.
…
Here’s an interesting perspective on the “flash crash”; the basic premise is that the Fed, by pushing investors into more-risky investments via ZIRP makes the market more prone to dislocations:
http://finance.yahoo.com/banking-budgeting/article/109679/the-fed-and-the-may-6-flash-crash
It’s not the Fed’s fault that markets are currently crash prone — it’s Fat Finger Boy’s fault!
Armchair quarterbacking is great fun for pundits, but also quite unfair. Peggy Noonan’s WSJ current Op-ed piece seems particularly mean spirited given the daunting plate full of crises left behind by GWB for Obama to clean up. One colleague of mine likened GWB as the guy riding the elephant in the parade, and Obama as the guy tasked with walking behind to shovel the elephant crap.
Obama is no oil man like GWB and Cheney, and he did not cause the BP oil spill! The roots of the crisis probably go back to deals that were cut before 2008. I don’t personally see what right wing pundits like Noonan find so reprehensible about Obama’s crisis response — at least he hasn’t made any stoopid remarks that the media could seize on (”Heckuva job, Brownie!”).
To criticize a sitting president for his actions ignores what might have gone wrong if he had failed to act. The Peggy Noonans of the world would have just as eagerly criticized Obama for not acting on health care reform and fiscal stimulus as they currently criticize him for actions taken.
The reasons that our financial system is on the brink of collapse were already firmly in place during GWB’s tenure. I was personally overjoyed when politically-motivated efforts to hide the recession that began on W’s watch back in 2007 failed spectacularly.
Two wars initiated on GWB’s watch remain Obama’s problem, along with myriad other lingering hangovers from the GWB presidency. Obama’s biggest mistake may have been to assume too much responsibility too early for problems left behind by his predecessor, underestimating how hard they would be to fix.
Bottom line:
1) The president is a human being, not master of the universe.
2) It is always far easier to criticize than to act.
* The Wall Street Journal
* OPINION: DECLARATIONS
* MAY 29, 2010
He Was Supposed to Be Competent
The spill is a disaster for the president and his political philosophy.
* By PEGGY NOONAN
I don’t see how the president’s position and popularity can survive the oil spill. This is his third political disaster in his first 18 months in office. And they were all, as they say, unforced errors, meaning they were shaped by the president’s political judgment and instincts.
There was the tearing and unnecessary war over his health-care proposal and its cost. There was his day-to-day indifference to the views and hopes of the majority of voters regarding illegal immigration. And now the past almost 40 days of dodging and dithering in the face of an environmental calamity. I don’t see how you politically survive this.
The president, in my view, continues to govern in a way that suggests he is chronically detached from the central and immediate concerns of his countrymen. This is a terrible thing to see in a political figure, and a startling thing in one who won so handily and shrewdly in 2008. But he has not, almost from the day he was inaugurated, been in sync with the center. The heart of the country is thinking each day about A, B and C, and he is thinking about X, Y and Z. They’re in one reality, he’s in another.
The American people have spent at least two years worrying that high government spending would, in the end, undo the republic. They saw the dollars gushing night and day, and worried that while everything looked the same on the surface, our position was eroding. They have worried about a border that is in some places functionally and of course illegally open, that it too is gushing night and day with problems that states, cities and towns there cannot solve.
…
“Obama is no oil man like GWB and Cheney, and he did not cause the BP oil spill!”
Of course—just as GWB did not cause Katrina, nor was he the one who decided that engineering the levees for a Cat3 storm was adequate. That was the Army Corp of Engineers.
The fact that the general populace can attribute the blame for these things to the POTUS continually astounds me. People truly are stupid.
“The fact that the general populace can attribute the blame for these things to the POTUS continually astounds me.”
Ahmen, brother! But nonetheless, I still maintain that GWB’s Katrina response was a lot more stupid than Obama’s Gulf oil spill response has been thus far.
+1, Prime.
I do not blame presidents for accidents, acts of God, etc.
However, there’s something to be said for being critical of the response to such, or for lack of preparedness.
For example, Bush the First’s response to Hurricane Andrew in South Florida was actually pretty darned good. Of course, I’m sure he wanted to ensure goodwill on behalf of his son, too.
There’s only really one way to judge the job that someone is doing, and that’s by honest statistics.
Based on that, it is only a matter of time before we have a major security problem in this country, because I’ve been reading that attacks on the US, potential and otherwise, are way up and thus far have only been prevented by dumb luck and quick thinking folks on the ground. The longer Janet Napolitano remains on her post, the more likely there will be a successful attack. Talk about a depraved, insane creature.
And as scary as Rahm is, I don’t think you want Valerie Jarrett in his place. Just sayin’.
I agree with all of that
but FEMA is definitely designed to respond to a Katrina.
We have absolutely no gov agency designed to respond to this kind of massive oil spill
I love the people who have suggested Obama take over the well and plug it. We have absolutely no resources to do that.
As a guy who voted for O, he has been a big disappointment when it comes to Wall Street. I’d spend my bashing resources there. Not much he can do regarding BP other than to fine them and make them pay for the clean up. This was a failure of regulation that was created well before he took office.
+1, Prime. People have completely unrealistic expectations of what Presidents can and can’t accomplish. For all his faults, Obama is not an Emperor and he is not a deity. Some events and circumstances are going to play out largely beyond his control.
How could you not love a third Bush-Clinton term neatly wrapped in an aura of change? All across the policy spectrum — from oil, war, deficits, and banking to healthcare — all I see is more Bush-Clinton policies. There is nothing fresh or new. It’s all a bunch of stale ideas, echos of yesteryear.
You can’t lip-sync change. BP demonstrates what happens when the music unexpectedly stops.
The president is a human being, not master of the universe.
Problem is, Mr. O has been acting as if he can solve all problems in life. When the government raises expectations to that degree, it’s bound to disappoint.
You’re starting to believe your own propaganda. The only people who think Obama acts like he can ’solve all problems in life’ are his political opponents- who are so constantly hammering on the ‘messiah’ talking point that I guess at times they come to believe it themselves.
Noticed that too, did you?
So what problems has Mr. O said are off limits for the government to try to solve?
Well, he seems to be getting out of our bedrooms, so there’s that.
Are presidents in the habit of proclaiming what problems are ‘off limits for the government to solve’? I can’t recall any such proclamations from any past presidents. Is this a new requirement?
The US Constitution seems to have a thing or two to say about it…
The point is, any problem that comes to his attention, he’s got some huge government program to try to solve it. And he’s certainly not alone in DC in that regard. I don’t have any anti-Obama “propaganda”. It’s the reigning mentality there. But if that’s your approach, you’re setting yourself up for a big fall in public esteem.
“Are presidents in the habit of proclaiming what problems are ‘off limits for the government to solve’? I can’t recall any such proclamations from any past presidents. Is this a new requirement?”
It should be. I can take care of my own private parts, stomach, mouth, lungs, heart, opinions, tv watching, radio listening, food buying, etc. Just keep our country secure and solvent.
“Mr. O has been acting as if he can solve all problems in life.”
But if he doesn’t play this game, the Peggy Noonans of the world will snipe and pick away incessantly at any shortcomings of American life the President doesn’t claim to personally be able to remedy.
I suppose Noonan would blame Obama for the failure of the ‘Top Kill’?
* The Wall Street Journal
* BUSINESS
* MAY 30, 2010, 12:42 A.M. ET
‘Top Kill’ Fails to Stop Flow of Oil From Gulf Leak
By MARK LONG
A rig and support vessels surround the site of the Deepwater Horizon oil spill in the Gulf of Mexico non Friday.
BP PLC has abandoned an attempt to plug a mile-deep oil and natural-gas gusher in the Gulf of Mexico by injecting thousands of barrels of drilling fluid and will now, after three days, try a new method.
“We have been unable to overcome the flow from the well,” BP Chief Operating Officer Doug Suttles said Saturday in a news briefing. “We now believe it is time to move on to the next of our options,” he said, adding it wasn’t clear exactly why the procedure called a top kill failed to stem the flow of oil and gas. The decision to give up on the top-kill attempt was made late Saturday afternoon after consultation with U.S. Secretary of Energy Steven Chu and Interior Secretary Ken Salazar.
The failure is a huge blow to BP, which had big hopes for the top kill, and will increase the pressure being piled on the company by the Obama administration and legislators from both parties on Capitol Hill, where a number of investigations are under way. BP started the top kill Wednesday afternoon, shooting heavy drilling fluids into the broken valve known as a blowout preventer. The mud was driven by a 30,000 horsepower pump installed on a ship at the surface. But it was clear from the start that a lot of the “kill mud” was leaking out instead of going down into the well. BP tried to get around that problem with a series of “junk shots,” in which materials like shredded rubber tires, pieces of rope and golf balls were fired in to clog the valve. In a statement, BP said that despite pumping over 30,000 barrels of mud in three attempts at rates of as much as 80 barrels a minute, the operation “did not overcome the flow from the well.”
…
I noticed recently that the foreclosure inventory in Seattle has ticked up noticably. I vaguely track this every few weeks by seeing what Redfin brings up on a query for only MLS-listed Foreclosures and “Foreclosured homes” (which I think is REO that is not listed in the MLS—not sure how they get this data).
Around a year or year-and-a-half ago, I noticed that the number of SFH matching this query had dropped dramatically and suddenly; now it seems to have ticked back up to about the previous inventory.
Is anyone else noticing a healthy uptick in inventory recently in other parts of the country?
A little bit, but probably more of a small blip…could be nothing, unfortunately.
We are still waiting to see inventory grow in a more drastic manner. So far, it’s pretty stable.
“The proposed auction of the 1.07 acres hit the Teton County sheriff’s foreclosure listings Friday and appears in the News&Guide’s public notices today. ”
“LaSalle Bank in 2007 provided Tramline a $14.1 million mortage and another for $4.7 million, according to clerk’s documents. LaSalle Bank has since been purchased by Bank of America.”
“The group has been working with the bank for a long time, he said.
“They are sort of saying they are running out of patience,” DesLauriers said.
““It wasn’t structured to be held for a long time,” DesLauriers said. “You replace that with a development loan once permits are in place. That was the normal course of business back in the day.”
They didn’t build a hotel so what did they do with the money, spend it meals…
http://www.jhnewsandguide.com/article.php?art_id=6024
What, Banks never heard of performance bonds to be provided when big loans are made?
Looks like the developer made money on his lot.
Reminds me of a time when a Bakersfield developer got 110% construction financing for a subdivision, built them, and let them go back to the bank!
Why spend money trying to sell the homes?
LOL
“Foxconn” is a great name for a corporation that fuels the Great American consumption machine’s hungry gorge.
The Financial Times
China: Showing the strain
By Kathrin Hille in Beijing
Published: May 28 2010 21:00 | Last updated: May 28 2010 21:00
Employees work on the assembly line at Hon Hai Group’s Foxconn plant in Shenzhen, Guangdong province, China. Nine of the 11 company workers who either committed suicide or attempted to had worked at the company less than a year
Terry Gou is used to having everything under control. When an earthquake struck during Hon Hai’s annual meeting a few years ago, and investors interrupted his presentation with frightened screams, the company’s founder and chairman silenced them with a stern look and a few words: “It’s just an earthquake!”
That approach runs through Hon Hai – also known by its trade name, Foxconn – the world’s largest electronics contract manufacturer, which for two decades has operated according to three principles: authority, control and discipline.
But now everything is not under control. The centre piece of Mr Gou’s manufacturing empire, a vast factory town in the southern Chinese city of Shenzhen, housing 300,000, has been shaken by a spate of suicides. Since the start of the year 12 workers have jumped from buildings; 10 have died – three in the past week.
The deaths have stoked criticism of working conditions at Foxconn and, by extension, all of southern China. In a region covered with factories, Foxconn is the “workshop of the world” writ large, an institution symbolising the best and worst of the country’s manufacturing miracle and the legions of migrant workers who have laboured to build it.
International controversy over working conditions in the south is nothing new. Western clothing brands, such as Timberland and Nike, and multinational retailers, such as WalMart, that benefit from the region’s low production costs, have all attracted foreign criticism. But the deaths at Foxconn have prompted a broader debate within China itself. While the company and local authorities say personal reasons were behind each death, critics claim that a high-pressure and isolating work environment raised the risk of suicide. Across the country academics, labour advocates and young people are comparing their nation to an inhumane industrial revolution-era world dominated by the search for progress and profits.
“When I look at Foxconn, I feel reminded of Charlie Chaplin’s Modern Times,” said an anonymous contributor to one online forum. “They show a world in which human beings are being degraded to gearwheels in a huge machine. Isn’t that exactly what’s happening here right now?” Another wrote: “This is not just Foxconn’s crisis, it is our crisis, our tragedy.”
…
EDITOR’S CHOICE
Foxconn to raise salaries 20% after suicides - May-28
Strike forces Honda to shut Chinese plants - May-27
David Pilling: The dark side of China’s enduring dream - May-26
Video: Foxconn grapples with suicides - May-23
In depth: Foxconn - May-26
Chief acts as death toll rises at Foxconn - May-25
Hmmmm Death always seems to work…….Bad intersection…run over a kid and the next week they will install all sorts of warnings ,paint the road or even install traffic lights
————————————————-
Foxconn to raise salaries 20% after suicides
Foxconn builds almost 80% of ALL consumer electronics for the entire world.
Apple, HP, Dell? Foxconn. Nokia, Samsung, LG? Foxconn. Sony, Panansonic, Vizio? Foxconn.
You name it, they make.
“When I look at Foxconn, I feel reminded of Charlie Chaplin’s Modern Times,” said an anonymous contributor to one online forum. “They show a world in which human beings are being degraded to gearwheels in a huge machine.
Corporatism taken to its logical conclusion. MODERN TIMES and METROPOLIS [the original, black & white versions] should be required viewing for high school seniors. America, meet your future.
“Since the start of the year 12 workers have jumped from buildings; 10 have died – three in the past week.”
When a worker dies from impact their vital organs cannot be harvested and sold to the western world.
Only 3 banks this weekend…
Seems the TARP deniers want to grab every last crumb before they rollover, tougher to do with the Feds pokin’ around. This fella was selling stock at a dollar a share just two months ago…
“”TARP has evolved and changed significantly since we submitted our application in late 2008,” says Michael McMullan, president and CEO of Bank of Florida. “At that time, we understood the program to be targeted at healthy institutions that were in a position to help lead the economic recovery in their respective markets, instead of what is now perceived to be a government bailout of weaker financial institutions.”
For Bank of Florida, the new conditions for firms that receive federal assistance — which include intense scrutiny of potential acquisitions, executive compensation, and other high-profile expenses — outweigh the advantages of taking the money. “With the increasing level of uncertainty associated with this government program, we feel that withdrawing our application is in the best interest of our shareholders, and better positions our company in the long term by remaining independent of any government-assisted capital,” says McMullan.
Welcome to Moral Hazard Michael McMullan.
The gov bails out the reckless. Now do the right thing and hit the blackjack tables with your depositors money.
MADRID – Spain’s Socialist government is seeing its political power erode as it struggles to chart a path out of deep financial trouble, failing so far to satisfy conflicting demands to cut its budget and stimulate job creation.
Time for another Trillion dollar bailout.
They ran out of other people’s money.
I heard some were Pooling their money in Greece to save water & taxes
It must be killing them - socialists don’t cut spending and do not shrink the size of government.
Their base must hate them and everyone else does not trust them.
socialists don’t cut spending
Not true
They cut the cost of providing medical care to each person 50% vs the US of A.
How is that working out for them now? There is no free lunch.
Is it just my imagination, or are the trillion dollar bailouts coming at an accelerating rate?
Not your imagination!
WSJ graphic showing magnitudes of recent U.S. bank failures is here. WaMu’s failure appears to be as massive as a future eruption of the Yellowstone super volcano might prove to be.