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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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I’ve always taken a shine to widening spreads.
Bond spreads widen on bank credit risk worries
By Aline van Duyn in New York
Published: May 31 2010 20:13 | Last updated: May 31 2010 22:24
Fears about the creditworthiness of US and European banks have pushed sharply higher the interest rate premium on bank bonds over government debt, hitting other corporate bond markets and raising borrowing costs for many companies.
In the past month, the spreads over government debt for bank bonds in euros and dollars tracked by the Barclays Capital corporate bond index have widened by more than 70 basis points.
There have also been sharp moves in non-financial corporate bonds, even though many industrial companies face few specific credit pressures as cash balances have improved.
Debt sold by financial institutions accounts for a large proportion of all outstanding bonds. In Europe, it is more than 50 per cent of the total and in the US it is about 35 per cent.
Investors said concerns weighing on the outlook for the banking system included possible losses from banks’ exposure to the eurozone sovereign debt crisis.
In the US, a regulatory crackdown could lead to lower credit ratings for banks because lawmakers wanted bondholders to absorb more losses should a bank fail.
Another worry was the potential costs and reputational damage for big banks following the civil fraud charges filed by the Securities and Exchange Commission against Goldman Sachs.
“Much of the volatility in the corporate bond markets is driven by the spread moves in financials,” said Curtis Arledge, chief investment officer for fixed income at BlackRock.
“This uncertainty around the financial sector could persist for some time causing the entire investment grade corporate bond sector to be more volatile.”
…
“I’ve always taken a shine to widening spreads.”
Really? Not me. The more that spread widens in the Gulf, the more pissed off I get. Anyone see that nasty little Brit Tony Hayward on teevee yesterday? Oh, tickety-boo-hoo, he wants it over, too, because he “wants to get back to his life”. Seriously. Now there’s a sound bite. Clearly, this guy is completely incapable and needs a jail cell coated with oil, not a position of authority. Anyway, I get a bit sick of smarmy Brits lecturing the US, whether it’s on American Idol or in the Gulf. Right there’s a good case for sending ‘em back across the pond.
I believe that our Cantakerous Intellectual was throwing a double-entrendre bomb.
I knew that. He just gave me an opening to bloviate about Public Enemy #1, Tony Hayward.
I wasn’t really trying to give you an opening.
Look out. He has itellectual WMDs held in reserve and he’s not afraid to throw them.
Well, you would be a bit testy yourself if you had to fire up your G-V and fly all the way to the colonies, well not even the colonies, the deep south for God’s sake and pretend to give a S— about the little fishes and what-not. A gross indignity for a man of that stature.
Probably what he is truely testy about is that he knows its just about his last trip on the G-V, although I suspect the golden parachute will have continuing usage privledges.
Oh bugger — turns out China has a bigger, badder real estate bubble than the U.S. has. Who’d ‘ave thunk?
China property risk is worse than in US
By Geoff Dyer in Beijing
Published: May 31 2010 20:08 | Last updated: May 31 2010 20:08
The problems in China’s housing market are more severe than those in the US before the financial crisis because they combine a potential bubble with the risk of social discontent, according to an adviser to the Chinese central bank.
Li Daokui, a professor at Tsinghua University and a member of the Chinese central bank’s monetary policy committee, said recent government measures to cool the property market needed to be part of a long-term push to bring high housing prices under control.
He added that there were still signs that the economy was overheating and recommended modest increases in interest rates and the level of the currency.
“The housing market problem in China is actually much, much more fundamental, much bigger than the housing market problem in the US and UK before your financial crisis,” he said in an interview. “It is more than [just] a bubble problem.”
…
Apparently there was a sell off in shipping stocks last night as their manufacturing numbers were down.
We all better get over to Wal-Mart and buy some stuff. Gotta keep those Chinese guys in their homes…
If only WalMart was really the only place Chinese made stuff landed.
Made in China? You’re soaking in it.
Same can be said for Canada, Australia, New Zealand, the UK, etc.
Round Two of the Global Housing Bubble popping is coming up…
Cause it is different here.
And just like Round 1 lots of people will make lots of money while others will sit around and complain about it. The more things change, the more they stay the same.
“Round Two of the Global Housing Bubble popping is coming up …”
You bet it is, and it will destroy a lot of money in the process.
So rev up those printing presses, ’cause we have to replace all that missing money with new dollars before any body misses it. At least that SEEMS to be the plan.
“At least that SEEMS to be the plan.”
Plan? Do you mean there’s a plan?
Lol.
“Plan? Do you mean there’s a plan?”
Of COURSE we have a plan. We would NEVER make it up as we go along.
Indeed.
Roidy
There has never been a better time to be a fat lazy american.
“He added that there were still signs that the economy was overheating…”
It’s interesting how every pundit mistakes speculative activity for economic activity.
Well, well, it appears that even the Chinese are starting to believe like we do: that the stock market and bubble casinos are the real economy.
http://www.businessinsider.com/shanghai-property-bubble-2010-5#ixzz0pPw5Sb6S
Huge price cuts rumored from Chinese RE developers - an odd sense of deja vous has just enveloped Sammy.
China = “TrueBambooLie™”
Kendra Todd says “Chinese bubbles are for cheap plastic bathtubs”.
an interesting take on why commodities (including gold) are putting in a major top in price.
——————–
I can’t believe that commodities, and gold, will be substantially dropping. How can oil decline? I can give a hundred reasons why it can’t, and almost none why it can. The one why it can is world wide slowdown in what may be termed feverish economic activity for decades in spite of the media reports over the years of “hard times”.
Of course, feverish relative to what? Relative to similar periods like ‘50 - ‘70. Why did that period end? High interest rates. Well, we have high interest now, even though they’re around zero! Unbelievable.
They’re effectively high because lending standards make them the equivalent of late ’70’s 20%. Since the rate isn’t overt its effect is slow but insidious, and forms the force behind the great deflationary downtrend. Also, adding to that force is the force of technology which undermines the ability to inflate by increasing supply of all those things lacking added value, like commodities. Literally, feverish activity has over extended the ability of identifiable money to cover it. So activity must slow so that money, cash, can be accumulated until there’s enough of it to relax lending standards, and bring down effective interest rates. Labor cash has to catch up with money cash. Transaction cash has to catch up to invested cash. We’re all cashless. We own inflated real property of many forms. The last property to inflate is gold.
This process has relegated FED’s position, indeed, the positions of all CBs world wide, to impotent. You can lead a horse away from water but you can’t make it vomit up the water it has swallowed. When CBs can’t create money then cash has a chance to build. No money authority to encourage it to be invested or thrown away. When I use the term “cash” what am I talking about?
I’m talking about labor. When cash is thin, fully invested, few are doing labor. The money shuffle game dominates. Value is abstract and has to reified by 2008s. When 2008s occur many are forced out of the shuffle back to the labor of digging ditches. Anyone who has already been digging suddenly becomes way ahead in effective value of those who have been involved in the shuffle either directly or indirectly. The economic principle at work is conservation of total action, or, you can’t get something for nothing.
This economic principle must always work because the only value we esteem is the value that comes from effort. In contrast, at the other extreme of the value spectrum, we have the result of labor, constructs. We don’t esteem buildings. They’re just rotting structures. A cold depreciating loss. Bye bye RE. We do esteem the action and effort to build buildings. Welcome back, RE. This value cycle as represented by one of its contributors, RE, has lasted 50 years, and that’s long for that end of the spectrum.
To monitor the cycle I have put together the notion of world cash. Can it be quantified? How can I from time to time report that it’s rising or falling? Is it correlated with other time series data like stock market prices, or GDPs? Not really.
The world cash position is rising. One piece of evidence of that is seen in the dollar. The dollar rises in spite of being heavily sold! It’s hard to understand. You can see this phenomenon in ET (every trade) flow of relative dollar conversion rates. How does that work? Inelasticity with respect to marginal demand and elasticity relative to marginal supply. A little bit of buying is sensitive to the upside while a little selling meets a strong bid underneath. Well, the players are merely prejudiced by events in Europe which, as soon as they evaporate, will reverse, is the usual rationalization. However, they can’t evaporate until world cash has been sufficiently restored, until the swing in the value spectrum has completed.
One could look at this process from the excess debt angle, although I caution about that approach because debt always solves itself without causing mass upheaval. Excess debt adds to the force slowing feverish activity to allow labor to accumulate its valuable cash to catch up with the cash others, the speculator class, has declared must exist in the value represented by depreciating real property. Thus, debt has started to correct its excesses, savings build, and savings can be validly represented by productive investment.
How does gold fit into this value cycle? For the last 10 years gold has been rising to correct its previous 20 years bear market that reduced the ability to supply while demand remained constant. Gold has not risen for any other reason. The adjudication of gold supply and demand by price has proceeded without interruption because interest rates have been low, and this allows mining companies to build supply. Why don’t effective rates, lending standards, slam gold companies? Headline risks.
Supply is finally catching up with demand but you can’t see this so much in reported figures. You see it in ET flow. You see it in mining company’s execs mysteriously doing insider selling. You see it in the long term price charts of gold companies. I saw the same thing in 1979. There’s only incidental connection between world cash and gold price, or gold supply/demand. Gold is a minor player in the scheme of things, and its role in the world economy will decline indefinitely. Eventually, it will lose all of its money association and become just another hard to find metal.
It should be pointed out that when the last commodity to inflate, gold, undergoes its inflation, the metal can soar. Suddenly the world mistakenly identifies gold as the true cash, and scrambles into it, all the while the value is rapidly running out. This happened in 1979.
The gold spike up occurred during the early days in the development of ET flow theory. I couldn’t understand how gold price could be rising while ET flow was declining then. Nonetheless, I believed in the principle behind ET flow, a principle that says, once you take price out of the market and see the material forces that aren’t clouded by emotion, you can divine what must befall price. Is this hard to do? Extremely. Going against the prejudices of the crowd is extremely hard. So in January I shorted the hell out of gold and made a killing. I couldn’t make a dime on the way up, just like in the late ’90s I couldn’t make a dime on the upside in stocks, because it was irrational public driven lunacy. I can’t be involved where value is declining.
Accordingly, I only say that gold is putting in a major top. That top may be the Matterhorn, Everest, or Observatory Hill at Rutgers. I don’t know the amplitude, I only know the phase.
That’s an awful lot of words for… “Many people have figured out the financial markets are rigged and in trouble.”
The part of the Chinese growth story that is frequently under-reported is that a major part of their economy is the construction of capital goods (roads, bridges, buildings, etc.). I remember hearing somewhere (BBC? NPR? Elsewhere?) that construction boom is driving up GDP, but in many cases, the capital goods are not needed (empty office buildings), and the maintenance of such capital goods has not been included in the potential capital needs of the country going forward.
For perspective, China’s Industry/Construction component of GDP is 50%. In the US, that category is closer to 20%. Granted, a fair bit of that is manufacturing, but a lot of it is constructing buildings and infrastructure (not always needed…since it is managed output, not necessarily demand based).
Some are predicting outright collapse of the Chinese economy. I don’t think I’m quite there in my thinking, but I don’t know a whole lot about the problem. From what I’ve heard, it seems as though the Chinese economy may be a bit weaker/more vulnerable than perception.
I think they see all those gleaming (if unoccupied) buildings as a status symbol, much like our wannabes drove luxury cars during the bubble.
Any links perhaps? Sounds interesting.
Ideal economy is indeed demand-based - however they key is it has to be true demand, not manufactured demand (pun intended), e.g. as the housing bubble was.
I looked last night, but couldn’t find it. it was an NPR story that I was looking for, but was unsuccessful. I did find a couple of places that noted Chinese Industrial/Construction component of GDP, including the growth rate for that segment of their economy. It is a major driver of growth. Sorry for no links…no time to re-search this morning.
If the economy of China collapses outright, then who will buy US debt? I guess we could go into global Chapter 7 as everyone sells assets and pays off what they can, and the country with the least debt left over wins.
How much is Half-Dome worth? The Eiffel Tower? The Great Wall?
Of the $1.6 Trillion in new debt since last year China actually only bought $128 Billion - less than 10%. The Fed bought $300 Billion. We’ll get by. (The US$ won’t be worth squat after a while, but we’ll get by.)
You can also think of this as the US will eventually be a good place to manufacture goods and capital outflows will decrease.
The currency debasement along with other deflation is a symptom of that.
Again, how much are you and I going to miss the excess consumption by the consumer class? Not one bit.
Relax, place your bets, have a drink and some popcorn.
Wonder what Neil is up to these days?
“…then who will buy US debt?”
The Fed (quantitative easing).
“Some are predicting outright collapse of the Chinese economy.”
Somebody, somewhere is predicting the outright collapse of something or another that will lead to The End Of The World.
And yet, I Feel Fine!
http://money.cnn.com/2010/05/28/real_estate/homebuying_after_foreclosure/index.htm?source=cnn_bin&hpt=Sbin
After foreclosure: How long until you can buy again?
While homeowners who default due to economic hardship, such as a job loss or divorce, normally must wait two to five years before buying a home again, walkaways may face double that time.
“It could be well over seven or eight years before [walkaways] are able to obtain a mortgage to buy a home again,” said Jay Brinkmann, chief economist for the Mortgage Bankers
Why do I have a feeling that this won’t be the case. My gut tells me that walkaways will be quickly forgiven. Anything to get houses moving again.
Yep. They’ll probably end up cutting that time in half.
I’ll believe when I see it. There is such a huge shadow inventory that before long they’ll be lending again to the FB’s. Besides, TARP is taking care of the banks so what do they have to worry about.
I was talking to some friends yesterday and they were gladly carrying a $2800 mortgage on a McMansion. Then their ARM reset to $6000 per month.
Lip
$2800 mortgage on a McMansion. Then their ARM reset to $6000 per month.
“$2800 mortgage on a McMansion. Then their ARM reset to $6000 per month.”
“:shock: I hoe this is a non-recourse state.”:
In Arizona, I think that we should starting emphasizing the generous non-recourse protection for mortgage debt as a new state motto. This thing is bigger than the Grand Canyon.
Arizona: Bring Your Birth Certificate, Burn Your Mortgage Payment Coupons
This is certainly as it should be. Walkaways are legally gaming the system, and deserve the credit hit they get, including not being able to buy a home again for a long time.
However as Lip says - I’ll believe it when I see it. People who really want to buy a home will find ways around this, e.g. by using a straw buyer.
As a side point - just the sheer volume of walkaways itself is going to hinder the housing market demand for the next 5-10 years, since probably 3-5 million people who normally would own a house won’t be eligible.
One of the unintended consequences?
The housing market recovery will depend on selling houses to people who resisted the price runups during the bubble?
Or, as I suspect, will all the FBs be “rehabilitated”, and magically turned into buyers again (albeit with higher down payments)?
No, it will have to be low down, EZ qualify to get the houses moving again.
Not a chance.
This was the case when walkaways were relatively rare. However, there are so many people who have done this that there is going to be a huge market for lenders who are willing to take the risk.
1. Make the people who were foreclosed upon/walkaway to put 20-30% down;
2. Charge them 8-9%;
They won’t get the best rates, but there will be money for them, especially once it becomes more apparent that home prices have bottomed.
Don’t worry, you will magically be in position to buy again just before the top of the next bubble.
7-8 years? Perfect. It will take at least that long for prices to stabilize and buyer to save up the down payment.
Canada supposed to raise rates today.
(Reported on Worldwide Exchange, the less shillistic CNBC early am show)
Owners Stop Paying Mortgage … and Stop Fretting About It [650,000 Households - go eat steaks and visit casinos instead]
NYTimes | May 31, 2010 | DAVID STREITFELD
ST. PETERSBURG, Fla. — For Alex Pemberton and Susan Reboyras, foreclosure is becoming a way of life — something they did not want but are in no hurry to get out of. Your Money Guides
Alex Pemberton and Susan Reboyras stopped paying the mortgage on their house in St. Petersburg, Fla., last summer. Foreclosure has allowed them to stabilize the family business. Go to Outback occasionally for a steak. Take their gas-guzzling airboat out for the weekend. Visit the Hard Rock Casino.
“Instead of the house dragging us down, it’s become a life raft,” said Mr. Pemberton, who stopped paying the mortgage on their house here last summer. “It’s really been a blessing.”
A growing number of the people whose homes are in foreclosure are refusing to slink away in shame. They are fashioning a sort of homemade mortgage modification, one that brings their payments all the way down to zero. They use the money they save to get back on their feet or just get by.
This type of modification does not beg for a lender’s permission but is delivered as an ultimatum: Force me out if you can. Any moral qualms are overshadowed by a conviction that the banks created the crisis by snookering homeowners with loans that got them in over their heads.
“I tried to explain my situation to the lender, but they wouldn’t help,” said Mr. Pemberton’s mother, Wendy Pemberton, herself in foreclosure on a small house a few blocks away from her son’s. She stopped paying her mortgage two years ago after a bout with lung cancer. “They’re all crooks.”
…
“Any moral qualms are overshadowed by a conviction that the banks created the crisis by snookering homeowners with loans that got them in over their heads.”
These are the same dickheads who, along with millions like them, blew up the bubble, raising prices way above what prudent folks could or would pay.
I really despise these type of folks. It’s not the bankers or the politicians or whatever boogey-man people want to blame. It’s everyday dickheads.
One man’s guilt doesn’t prove another’s innocence.
+1
Wait, you despise Americans?
Meh, you got those bankers playing that evil little game of telling people “you deserve it” and “don’t let that other guy outbid you on your dream”.
Then selling off the debt.
Would have liked for someone to break the chain though. Guess in a large part it was us out in the blog-o-sphere…
Yes, certainly don’t think these guys should be rewarded. Also think the banks should be forced to address their solvency and reserve issues with a large scale liquidation.
Is it going to happen? Unlikely. People hate getting what they are owed.
This article finally did what so many here want the MSM to do, acknowledge that the people underwater may have done it to themselves by taking out the equity:
One reason the house is worth so much less than the debt is because of the real estate crash. But the couple also refinanced at the height of the market, taking out cash to buy a truck they used as a contest prize for their hired animal trappers.
Followed, of course, by this winner of a quote from the borrower:
It was a stupid move by their lender, according to Mr. Pemberton. “They went outside their own guidelines on debt to income,” he said. “And when they did, they put themselves in jeopardy.”
This is the sort of article that causes high level meetings in executive conference rooms. Seriously folks, the banks are going to be talking about this one.
Now, I wonder if there is some bold economists who can try to estimate how much this sort of behavior boosts the easily measured economy. Because I’m thinking that it might not be trivial.
“Seriously folks, the banks are going to be talking about this one.”
I believe you. What will they say? That we’ve got to stick to our guidelines, etc.?
Personally, it looks like to me that mortgages are going to become harder and harder to get.
No, they are going to be talking about lost revenue from the trend. They will try to figure out how they can move to forclosure proceedings faster, strategies for recovering funds from people who built up assets while not paying (maybe push for a claw back for IRA contributions made while in strategic default), etc. Hard accouning questions. This is “their” money, and reading that a whole bunch of people out there are just deciding not to pay and using the cash to go out for steak dinners is not going to sit well.
“…They will try to figure out how they can move to forclosure proceedings faster”
Well, at least THAT won’t involve an English accent from India, then again, it might… as they track’em down via their cell phone GPS…
I don’t know how far it has gone, but I have heard stories about certain legal due diligence being moved to India. All that is required is a US attorney to “supervise” the work.
It wouldn’t even take all that much for a company to get an Indian attorney admitted to the bar in the US - the LLM that qualifies you for to take the bar is only a year for attorneys from countries on a common law system. And with universities opening up international campuses, they might not even have to come here to do it.
Being a transactional lawyer is no guarantee against outsourcing.
Lots of document review being outsourced to India already. That used to be what new grads did while looking for lawyer jobs.
What’s the old saying?
“When they offshored J6p’s jobs, the professionals weren’t worried and didn’t care, but if they had offshored their jobs, you would have seen blood in the streets.”
About time the professionals got a dose of their own apathy.
Amen, eco.
If one took equity out of the house, then doesn’t the loan automatically go recourse?
I have sympathy only for primary residences who didn’t re-fi. Specuvestors and equity liberators — recourse, right? — can fry. I hope the banks chases the FB’s for all their assets, including the airboats.
I believe that all mortgages in Florida are recourse, whether 1st, refinance, home equity, etc.
But in a BK, you can keep your house…correct?
In CA, I think the 1st loan is non-recourse, then if you refi they generally become recourse.
They can’t make you sell your house to pay off your other debts. But BK doesn’t let you keep a house you haven’t paid for.
“Seriously folks, the banks are going to be talking about this one.”
I doubt it. Most of the risk was laid off to someone else, hedged away onto some poor sap’s pension fund, savings account, or government entity.
What’s more, it’s not going to change. The PTB resisted 5 pct down-payments.
Only a fool or a politician will create conditions to perpetuate housing ponzi units then pretend to save them after the units expire.
Big Finance has turned into a perpetual bubbling ponzi machine.
“perpetual bubbling ponzi machine”
( Well if the shoe fits! ) That’s my take as well. Near as I can figure, they’ll just keep rolling out new “programs”, acronyms and deriv’s until they can dampen out the oscillations.
The name of the game is to kick the can until we’re all dead and gone and let it become some future generation’s problem.
It was a stupid move by their lender,
The Banks hired the wrong people and I’m supposed to pay for that screw-up???? according to Mr. Pemberton.
Now, I wonder if there is some bold economists who can try to estimate how much this sort of behavior boosts the easily measured economy. Because I’m thinking that it might not be trivial.
I posted a response with some links about two hours ago - hopefully they’ll show up at some point.
One bit of info are the T2 Partners reports, which state that MEW during the boom was on the order of about $480B per year. That’s a pretty good chunk of our economy.
Trying again with link - MEW contribution to GDP
wow, you’d think there would have been more MEW during the 2000-2001 recession.
Keep in mind the MEW is the delta between the blue and red lines.
Thus 2001 MEW was indeed more than 2000, and 2002 was more than 2001.
(and my post to the original seekingalpha article never showed up for some reason. Will try again…)
Trying again to link to the original article …
link
Non trivial indeed.
“This is “their” money, and reading that a whole bunch of people out there are just deciding not to pay and using the cash to go out for steak dinners is not going to sit well.”
Even if I was doing things similar to the Florida couple, I would never brag about it to a news reporter.
Even if I was doing things similar to the Florida couple, I would never brag about it to a news reporter.
I don’t think they see it as bragging. I think they see it as before they were getting screwed, now they’re getting even and living the life that God intended for them to live. Why would anyone have a problem with that?
Sheesh, I paid Casa Spokaneman off in 2002, but haven’t been to the Outback in at least five years.
“She stopped paying her mortgage two years ago after a bout with lung cancer” ( as she put out another Pall Mall…? )
I don’t mean to judge here and I wouldn’t wish that on anyone. It’s also ‘possible’…. she never smoked in here life? But isn’t it amazing virtually -all- of these people have some sort of “health issue” in their package?
If you want to make a statement or stage a protest, then that’s fine, this is still America and you can do what you want as long as your willing to accept the consequences. Just leave the ‘kicker’ out when justifying your choices.
What’s amazing about it? Illness is one of the top 5 reasons for bankruptcy in this country. Just because it’s not happened to you doesn’t mean it can’t.
Fun fact: Radon, an odorless, colorless, RADIOACTIVE gas commonly found in ALL buildings, is the second leading cause of lung cancer.
If it makes sense to walk away then just do it.
Playing the victim card is weak.
I did the same thing in 1977, haven’t made a mortgage payment since, am still living in the house. ( I paid off my mortgage in full. )
Dang, thirty + years without a mortgage payment? That is un’merican. I paid my last mortgage off in 2002 and have felt slightly unpatriotic ever sense.
Early 1900’s mortgage debt / GDP: 10-15%
1945: 9%
1955: 20%
1960-1980: ~30%
1990: 40%
2000: 50%
2010: 75%
Apparently we’ve gotten a lot more “patriotic” through the years, especially after WW2.
packman,
Nice find. That is exactly the relationship I was trying to point out. We’ve been on a ramp since the Big One. This… didn’t somehow seem troubling to anyone, the PTB? Consumers? Nobody!?
Where did we think it would all end up? You can only grow your GDP so much. This is why of late I’ve become a lot less concerned about how this will affect Goldman and a hell of a lot concerned over how it will affect ‘me’ personally!
Everything we do, spend ( or not! ) or think should be guided by this going forward.
Here’s the chart.
In my comment above I did leave off the 1920’s run-up, and the subsequent GD spike, caused GDP going down rather than mortgage going up. They are noteworthy.
packman,
Very interesting ( and very telling! ) That really makes a mockery of all the bubble-deniers claiming it was “imperceptable” blah, blah.
If you could read nothing ELSE that chart alone should have told policy makers it’s an unsustainable curve! ( Please to note the sudden spike in the last leg up.., -right- around 1997? )
The “New Rules” for DTI and mortgages eating an ever larger part of your income should have been a bit of a sign too.
Another interesting thing is the parallels with the front side of the early 1900’s spike. The big question is - is “now” the equivalent of 1930 (another big spike caused by a plummeting GDP), or is it 1933 (we’ve hit the peak, and will be heading down due to high default rate). I’m pretty sure the latter - however this time though there’s a lot more Keynesian effort being put directly into housing, so I’m quite sure the future of the chart will not end up showing a drop back down to pre-1997 levels. Which is a good thing from a short-term economic perspective - bad for long-term.
Exactly DinOR.
As I’ve said, the lying SOBs KNEW.
I for one blame the mortgage deduction, and the oft quoted “rent is throwing your money away”. I’ve had lots of people tell me that you should always have a mortgage for the deduction.
This is plain stupid.
If you are sophisticated, and have gobs of money invested in interesting ventures that return (on average) better than your mortgage rate, then yes, you should keep a mortgage. If you don’t have access to those kind of investments, and keep the cash in the bank earning 0%, deduction be damned, you should simply pay off the mortgage and save the interest.
“Owners Stop Paying Mortgage … and Stop Fretting About It”
How I Learned to Stop Worrying and Love the Debt Bomb
“Everything you ever wanted to know about MBS, but were afraid to ask GoldenmanSucks!”
The clear mistake in this article is in the title line…
Owners Stop Paying Mortgage … and Stop Fretting About It [650,000 Households - go eat steaks and visit casinos instead]
NYTimes | May 31, 2010 | DAVID STREITFELD
These people own jack and Sh&t.
Good catch!
If you look at the sales history of this house, it shows two sales on the same day:
1. A recorded sale in the **MLS** for $423K on April 30, 2010 .
2. A recorded sale picked from public records for $363K on April 30, 2010.
—————————
It is currently listed, but the banner at the top of the listing on Redfin states:
This is an off-market listing. This home is currently listed on CARETS as #F1844514.
I have no idea what an “off-market” listing on CARETS is (the new MLS service that is trying to unify all the disparate MLS systems in California…and beyond?).
—————————–
I’ve noticed a few of these (maybe 2-3) lately, and wonder if it’s a new trend, and what it could possibly mean.
If the “official” prices used for reporting are being pulled from the MLS are different from those pulled from public records (the “real” price?), what does it mean.
Anyone with access to the SoCal MLS able to get any information on this particular property/listing?
The link:
http://www.redfin.com/CA/Woodland-Hills/22600-Miranda-St-91367/home/3225177/socalmls-F1825816
Sorry for the multiple posts. The other link is for the previous listing which sold on April 30th, which was listed as a short sale, BTW.
This is the link to the current listing:
http://www.redfin.com/CA/Woodland-Hills/22600-Miranda-St-91367/home/3225177
CA Renter
You must be in my area. I’m looking in Woodland Hills too, among other areas. Did you see the “termite house” /vertical lot home on Keokuk? What a waste. A 19K sq ft lot, that is almost all vertical.
Awaiting,
We’re originally from the SFV (me: Woodland Hills; DH: Sherman Oaks), but now live in the San Diego area.
I’ve always wanted to move back (can’t because of DH’s job), and have always kept an eye on the RE market in the Valley.
Hmm….smells like fraud from here.
CARETS is now comprised of 30 REALTOR® Associations serving 106,000+ real estate professionals in Southern California.
http://www.ca-rets.com/displayarticle.php?entry=1
“…CARETS is now comprised of 30 REALTOR® Associations serving 106,000+ real estate professionals in Southern California.”
Drop in a N = CA Rents
Sounds promising…
Redfin will pull FSBO listings (from various sites) as well as MLS listings. Could it be one of those?
Greece urged to give up euro. UK
THE Greek government has been advised by British economists to leave the euro and default on its €300 billion (£255 billion) debt to save its economy.
The Centre for Economics and Business Research (CEBR), a London-based consultancy, has warned Greek ministers they will be unable to escape their debt trap without devaluing their own currency to boost exports. The only way this can happen is if Greece returns to its own currency.
Maybe those British economists should be focusing on the UK’s own massive deficit and overspending.
The UK can take care of its problem by letting the pound deflate. They are just recommending that Greece put themselves in a position to do the same. Sounds like they are giving Greece the same advice they would give their own government.
PPT will have to stay hot on the key board for sometime to come. Got to keep the illusion alive, and the people confident.
Looks like the PPT got into work all bright-eyed and bushy-tailed this morning. We went from -100 to +30 lickety-split!
Looks like a huge helicopter-delivered liquidity bomb landed on Wall Street today! A fair amount of the liquidity flowed into gold investors’ hands, too.
Gonna need a bigger ‘bailout’ and the hits keep right on coming…
ECB Warns of $239 Billion in Further Bank Loan Losses
Tuesday, 1 Jun 2010
The European Central Bank warned on Monday that euro zone banks face up to 195 billion euros in a “second wave” of potential loan losses over the next 18 months due to the financial crisis, and disclosed it had increased purchases of euro zone government bonds.
As the euro recouped losses but remained on the back foot after a cut in Spain’s credit rating and China warned that the global economy remained vulnerable to sovereign debt risks, Spain assured investors it would reform its rigid labor market even if employers and trade unions cannot agree.
“… Spain assured investors it would reform its rigid labor market even if employers and trade unions cannot agree.”
We’ll see …
Got popcorn?
Nothing pleases the Bankstas more than a gov’t willing to put its own citizens in the crosshairs.
Nicely put
Bankers are all about transferring wealth from workers to a small # of hands at the top. Raid the pensions, devalue the currency, ZIRP, dumping bad paper on gov which then cuts jobs salaries services and regulators become weaker, politicians become easier to purchase.
You have problem with Corporate Communist Capitalism©®™, comrade?
http://www.dailymail.co.uk/news/worldnews/article-1282926/Pedestrian-sues-Google-shes-knocked-walking-highway.html
Proof, as if more were needed, that dependence on technology is making stupid people even more so. IDIOCRACY has arrived.
That she even has the money to sue it what’s even more amazing!
Asian factory data, euro zone fears sink stock futures
June 1, 2010 7:56 AM ET
All Thomson Reuters news NEW YORK (Reuters) - Stock index futures indicated a drop of more than 1 percent at the open on Tuesday as a slowdown in Asian manufacturing added to doubts about the pace of an economic recovery.
Investors also fretted about the euro zone sovereign debt crisis after Spain’s credit rating was downgraded by Fitch last week. Adding to concerns, the European Central Bank said banks in the region face another $239 billion in potential writedowns.
PPT will rise to the challenge. Market will close UP at least 200 points today.
Dow -112.61 -1.11%
I will say that every day if that is what it takes for that bogus market to go down.
Keep up the good work, PPB.
http://www.bloomberg.com/apps/news?pid=20601087&sid=axCxg6pV5d2g&pos=4
HP cutting another 3,000 jobs. Let’s see how CNBC spins this.
They’ll all unleash their untapped potential by starting their own businesses and employing more people? Green shoots all around.
You ever see the movie “Up in the air”?
“I regret to inform you that your position here is no longer available.”
HP’s productivy numbers will rise, demonstrating that the recovery is well underway.
The company said it expects to cut 9,000 jobs and replace about 6,000 of those positions.
Replace, as in India and China?
HP just arm wrestled a bit if corporate welfare (property tax credits) from cash strapped Ft. Collins, CO with the understanding that they would “create” 100 new jobs. Something tells me those 100 positions will be more than cancelled out by layoffs, if they ever even hire those 100 throretical people.
Pretty soon the only US based employees HP will have will be sales people and executives. I guess the record profits from last quarter were just not good enough.
World’s largest computer company. $110+ BILLION per year gross.
That’s $110,000,000,000. Since their takeover of Compaq, and including the takeover of other companies in the last 6 years, both Carli “We won’t lay anybody off” and Mark “Oh hell yea you’re fired” have laid off over 60,000 people.
Now THAT’S change you can believe in.
New York Times says it is 9,000. Where did the 3,000 come from? Is that perhaps a local number? Just US?
What gives? Not but a week ago they were saying tech spending was up.
It’s a good thing there is such a deluge of information nowadays, otherwise all the blatant contradictions might reveal themselves.
The article (just a paragraph really) said it was because of efficiencies from automation. Looked like it was just a statement from the company. Didn’t seem to be any follow up from a reporter to confirm.
Ok, yeah I saw that too. Well, the take away is that here is another employer that sees advantage in employing fewer people, so I suppose the rationale doesn’t matter as the damage is done regardless.
“…efficiencies from automation….”
Yeah… in CHINA.
9.000 more people in no hurry to buy a house
No. 9000 more who qualify for unemployed-mortgage-payment-assistance program by the federal government. The lenderz always get theirs.
What bothers me is that they consider “all jobs as equal”, at least the way they track it statistically.
9000 engineers/tech workers get laid off.
While at the same time, McDonalds, Wal-Mart, and the phone call centers hire 9000 people at minimum wage.
To the government, it’s a wash.
No. 9000 more who qualify for unemployed-mortgage-payment-assistance program by the federal government.
Do you really think they’ll get a dime? When I was laid off from HP last year I called my mortgage company to see what they could do for me. The answer: nothing. Fortunately I found a new job 6 weeks after I was laid off.
We all know that these programs are just window dressing. There is no way Uncle Sam can pay the unemployed mortgages. Heck, he doesn’t even want to send them their $300 per week UE check so they can buy groceries and pay the electric bill.
Interesting how the past couple of months gold has become decoupled from stocks. Sovereign debt issues seem to have a way of doing that.
Gold +12
DJI futures -103
So much for stocks as an inflation hedge, apparently.
So much for stocks as an inflation hedge, apparently.
Depends on which kind of stocks.
Stocks that pay a good dividend, have a good balance sheet and sell things people need in good/bad times and bad are an inflation hedge.
When we get inflation, they will raise their prices and raise their dividends.
I wouldn’t be too sure about that.
Though I agree in principle/theory that should be true. It has the tide principle going against it though (”a rising tide floats all boats” and vice versa).
Stocks that pay a good dividend
Do you find those in the aisle with unicorns and leprechauns?
Who’s paying a good dividend these days?
What is this “dividend” of which you speak?
Well, under normal circumstances “non growth” stocks pay dividends. HP pays dividends. I don’t know that I would qualify it as “good” especially considering their highly overpriced stock these days.
Dividends….Because at the end of the day, all else in stock pricing is speculation.
BP $37.78 div. $3.36 (7.80%)…..
Yup get your British Petroleum right here today while its cheap
I expect to be drummed out of the room for this…but Commercial REITs pay a dividend, and are a hedge against inflation…
We need to separate in our minds fundamental needs for real estate, and the method in which the real estate is financed. If you are buying a portfolio of real estate that is 90%+ leased, and the space is not overrented (rents in the portfolio higher than market), and the portfolio is conservatively leveraged (50% or less), then you have a good setup for an inflation hedge. This describes a fair number of REITs. The big problems in commercial real estate are when people bought assets at low cap rates and high leverage. Generally, you can buy REITs today at medium cap rates (I’d like to say high, but those opportunities are behind us) and relatively low leverage.
Until rents rise, very little will be developed, since construction costs have not fallen substantially. As various markets tighten, REITs will be able to raise their rents as leases roll. Not to mention that REITs are required by law in those circumstances to raise their dividends.
This is a much longer-term investment strategy. Gold seems to move on short term perceptions, not necessarily reality. If it moved on reality, it should be far higher, since gold was north of $700 per ounce in the 1970’s. In the meantime, commercial real estate rents have moved up far more than gold prices.
Hey folks, we completed the move into an apartment. For the first time since 1982 I don’t own a home. What a relief.
I would like to add that it’s incredible how much crap a family can accumulate. Its a good thing my apartment complex has large dumpsters because I’m going to be dumping a ton of stuff I don’t need.
Where is this dumpster I am going to be diving in?
Congratulations on the downsizing!
Welcome back from the Memorial Day Weekend all!
( Must say everyone got down to biz quickly ) In our 500+ mile round trip I can honestly say I’ve never seen such an economic disaster! No matter where we stopped and talked w/ ppl the assessment was that “I’ts been slow before, and granted the weather is awful ( but it’s never been ‘this’ bad before!”
We took I-5 out of Salem, OR and went all the way down by Yreka, CA ( just to see if we couldn’t find the sun? ) The level of traffic would be light for a normal day, let alone a 3-day weekend. We practically had the road to ourselves. No lines anywhere. Spent the night in Hornbrook, CA at the R-Ranch ( fantastic place btw ) and then up 5 over to 66 out of Ashland, breakfast in K’ Falls and then up 97 to Sisters where the kids were camping.
On the way home Monday morning stopped for gas in Detroit Lake, OR and… it was abandoned! The gal that owned the station there said it was more or less a death blow. They count on families spending during the summer and she said if ‘this’ is any sign how the summer is going to go ( she might as well go ahead and throw in the towel NOW! ) What were others seeing as they went about over the weekend? Just curious.
DinOR,
Interesting tidbits. Thank you. We stayed home Sat and Sun, but ventured out Monday to run errands. We went to the Sony and Apple stores at the regional Westfield “Shoppingtown” in our So Ca area. It was full of the youngins with packages, mostly. The older crowd was there to cool off, and didn’t register more than a 2-3 (out of 10) on the *package index.
(*Like the pain index chart at the Dr.’s office)
Your report edited for “the Recovery”:
The roads were obviously empty because everyone was closer to town house-shopping and gorging on fresh-baked cookies at open houses.
The small businesses you encountered were dead because everybody was joining the spending frenzy at the big malls (the ones with an Apple store) trying to find a parking space.
You were out in BFE hardly spending a dime and you call yourself an American!
Fixed.
pressboardbox,
( I know, we felt so ashamed! ) Normally every hwy. in OR that goes over the mountains is a steady line of campers, RV’s and every rec. gear imaginable!
Sister, OR was crowded on the sidewalks ( but nobody appeared to be spending any money! ) Just hanging around? Driving up 97 coming into LaPine, OR we noticed a huge off. bldg. on the south end of town that was painted Edward Jones green. It was closed and for sale, complete w/ Price Reduced! sign. ( My wife said “Epic Fail X 2! )
Geez DinOR even you are embarrassed to admit you drove through Bend OR! I don’t think you can drive from LaPine to Sisters without going through Bend. Does that place have a bad name or what?
DennisN,
LOL! ( Did I… ‘overlook’ Bend? ) I’m sure it was just a coincidence. Yeah, you couldn’t even tell it was a holiday there traffic was just that light.
Each of the stoplights on 97 thru town had like 4 or 5 cars at the intersection. The kids stayed on Fed. land by Suttle lake and for the most part it didn’t rain. Monday heading back on Hwy 20 was as dreary as it gets. Rained the whole way home to Salem.
Gas prices DROPPED 20 cents/gallon locally, vs. two weeks ago.
It’s usually the other way around on holiday weekends. Can’t remember the last time gas prices dropped prior to a holiday weekend.
X-GS,
Right, imagine what the place would have looked like had we seen the usual “because we can” spike in gas prices? Typically we stay home as others here have noted but if we ‘are’ going to travel on a holiday, we like to get where we want to be as early as possible, so my view may be a little skewed.
Regardless, a long way from the Boom Times anyway you want to slice it.
IIRC, last summer in the PNW was unusually hot - and here in the Midwest it was unusually cool. So far, and it is only early June, the pattern looks reversed for summer 2010.
edgewaterjohn,
Looks like the PNW is in for yet another “Juneuary”. The wife and I have HAD IT and that’s why were down looking in NorCal over the weekend.
It’s possible this volcano up in Iceland has turned our usual cr@ppy weather even cr@ppier ( if that’s possible? ) We actually went to R-Ranch where they have memberships for like 5k and they offered to put us for the weekend.
Since 5k is about all the more I’d be willing to shell out for RE at this point it seemed reasonable. I think they’re sort of re-testing the waters post-implosion. I’d like to see a history of what those fees have run over the years?
In the inland NW, I learned not to expect summer until July 15. July 4th. 45 degrees and raining is more the norm. But, we have nice fall weather. Living in Texas half my life convinced me, I will take cool dry summers over hot and humid any time.
Last year, here in Cincinnati, it was almost an ice-age.
During the entire month of July, we had zero days that reached the normal high. The closest we got was 3 degrees below normal. By the end of July, we shattered the record for coldest July ever. Much of June and the first half of August was bacically record-cold as well.
This year, things are better as it was 90 degrees over the week-end.
In other news, Al and Tipper Gore are getting a divorce.
I heard that Tipper was giving Al a hard time over his Ozzy CD’s. He finally snapped.
Here in Cincinnati, went furniture shopping on Sunday, then down to the “Taste of …” event.
Good crowds at the various furniture stores, big crowds at the “Taste of..” event.
There are signs of an economic slowdown starting to appear (we tend to lag the national economy by a bit), but no signs of a collapse or anything dire.
The “unintended consequence” of Oregon’s “can’t pump your own gas” law has been that marginal service stations have been forced out of business. To stay open in OR you need TWO employees on hand: one to watch over the till and the other to pump the gas. Banning self-serve prevented marginal stations going to fully automated operations that you may see in extremely isolated areas.
Driving up US 95 from NV to ID requires filling up before you transit that corner of southeast OR. Stations in one-horse towns like Burns Junction or Rome have drastically reduced hours (e.g. Noon-4PM weekdays only).
Yes, but just think how much safer the citizens of Oregon are now!! Especially the children!
Even with that, OR’s unemployment rate is pretty high, isn’t it?
I suppose you can’t legislate to full employment…..
I once by-passed the station in Biggs because it looked like a real kluge at the pumps figuring I could get gas further south towards Bend. Almost a huge mistake. Up a very long hill, I was really sweating the fuel situation. Fortunately some guys were playing cards at the “closed” station in Grass Valley, and agreed to let me pump 10 gallons for cash. Otherwise it would have been a very long coast back to Biggs.
Mrs. Spokaneman tried to warn me.
Everything about this bust is bigger than previous busts. Why even the teardowns might be bigger. In the 1980 they bulldozed houses in TX? Pfffft, today it’s a half-built skyscraper that might go down.
http://cbs2chicago.com/local/waterview.tower.future.2.1725890.html
darn
Copyright? 2004.
Time just keeps ticking away.
darn
Its 10:30 on the east coast and I can tell you certainty with there is a shadow inventory of comments that have not yet been released to be posted on the blog.
HP plans to cut 9,000 jobs, take $1 billion in charges as it creates automated data hubs. The Associated Press(AP)
Hewlett-Packard Co. said Tuesday it will cut about 9,000 jobs and take $1 billion in charges over three years as it creates fully automated commercial data centers.
The Palo Alto, Calif. technology company said it will invest $1 billion in its enterprise services unit, over a multiyear period. The company said the job cuts will be the result of productivity gains and automation. The company said it will replace about 6,000 of the jobs to boost its global sales and delivery staff.
5,000 words just to say “We offshored your job.”
Say goodbye to full-time jobs with benefits ~ June 1, 2010
NEW YORK (CNNMoney.com) — Jobs may be coming back, but they aren’t the same ones workers were used to.
Many of the jobs employers are adding are temporary or contract positions, rather than traditional full-time jobs with benefits. With unemployment remaining near 10%, employers have their pick of workers willing to accept less secure positions.
In 2005, the government estimated that 31% of U.S. workers were already so-called contingent workers. Experts say that number could increase to 40% or more in the next 10 years.
Apparently we’re now insourcing our outsourcing.
Except, of course, if you are a city/state/fed public union worker.
They expect and demand ever increasing salaries/benefits/pensions. Just raise taxes to pay for it…
I think what you say is true of Federal employees but not so much for state and local govt employees. I think that those jobs are very unstable and ultimately, many retirees will see benefits reduced. The federal government can continue to print money forever, the states cannot.
Plenty of furlows and firings at the state gov level.
Also at the local level.
——————–
Anytime I hear the private sector workers complaining about the union benefits…I wonder if they ever grasp the fact that private sector workers bought into the myth that “unions are bad.”
Perhaps if they weren’t so apathetic and anti-worker, they would also have more secure jobs with better pay and benefits?
A LOT was written and said on this very subject in the early 1990s. I remember it well as I was caught up in that recession pretty badly and it profoundly shaped my personal outlook.
Then, by the late 1990s things changed. People stopped talking about losing benefits and lack of career stability. By 1999 the old timers were comparing 401k statements in the lunchroom each night. When 2001 came there were “externalities” to blame and this talk didn’t come back as strongly as in the early 90s. Of course by 2005 everyone was talking about their house appreciation.
So what happens this time? Will something again come along to keep the American worker from fully facing something that’s been building for decades? Or, is this it? Time will tell.
My pet theory is that the period from about 1991 to 2007 was a historical abberation brought on by a very misguided Fed, Congress and Administration, causing the economy to move from bubble to bubble. Without the tech bubble,the housing bubble employment, and a couple of wars, todays unemployment and economic stagnation would have manifested itself much sooner.
Like Bob Newhart waking up from the dream, we are now in the new/old reality and what we are experiencing today (much like we did in the 70’s and early 80’s) will be with up for the forseeable future.
My pet theory is that the period from about 1991 to 2007 was a historical abberation brought on by a very misguided Fed, Congress and Administration, causing the economy to move from bubble to bubble. Without the tech bubble,the housing bubble employment, and a couple of wars, todays unemployment and economic stagnation would have manifested itself much sooner.
————————-
That’s my theory as well. IMHO, we’ve been in a recession/depression for over ten years. The bubbles have masked that reality for those who aren’t really paying attention (which is most Americans).
meh, ive been an indie for almost 10 years and would never give it up for “real job”. People need to realize it is 2010 not 1950.
Can’t argue with that, except shouldn’t that also apply to their attitudes towards housing and debt? The willingness to spend 2.5~3x income on houses betrays a belief by many that career-long employment is still an expectation.
Same thing with going six figures into debt to pay for college. If you aren’t sure of an income, coming out of school with substantial debt is a killer.
Bingo, EWJ.
This is exactly why we should be paying **LESS** for housing, not more.
And yet we could not do away with the employment based health care system. That one will come back to bite us.
So how is a 75% consumer driven economy going work with almost 100% employment UNcertainty?
I’m just a recently terminated “Entry-level Cost-Benefit Analyst” …might have to add “Risk Management Director” as well…
When is a “$500,000″ ounce of Prevention”…worth… 95 Billion + $$$$$$$$$$$$ “Pound of Cure”?
Billions more wiped from BP’s value as shares plunge on oil spill failures
The Deepwater Horizon disaster has ‘the real smell of death’ and ‘could break BP’, one oil analyst claims:
By: Elena Moya guardian uk
Dougie Youngson, oil analyst at Arbuthnot, said: “This situation has now gone far beyond concerns of BP’s chief executive Tony Hayward being fired, or shareholder dividend payouts being cut – it’s got the real smell of death. This could break BP.
“I’m just a recently terminated “Entry-level Cost-Benefit Analyst” …might have to add “Risk Management Director” as well…”
When is a “$500,000″ ounce of Prevention”…worth… 95 Billion + $$$$$$$$$$$$ “Pound of Cure”?
We need to take a lesson from the Federal Financial Disaster Handbook and apply it the manmade undersea oil volcano:
“It’s all contained (in the ocean). Now, everyone go back to spending more than you earn.”
BP will surely need a trillion dollar bailout after this so let’s start raising taxes now to pay for it.
Oh, and, the Fed printed the extra trillion five days ago on a hunch so a new trillion is probably what we need to tide us over. Responsible gubmint and all that…
A whole host of new taxes are beginning in WA state today in a effort to plug the 200 million budget gap.
The taxes demonstrate the length lawmakers will go to pander to their consitituency.
There is a sales tax being implemented on Candy (previously exempt as a food item), but only on candy that is not made with “grain flour”. So a Mars bar is not taxed, but a Three Muskateers is. (Not making this up), Washington state is of course a big grain growing state.
“Mass Market” beer has a new on it, but Micro brews do not. I believe Mass Market is defined by 1% of the market or more. So how do you keep track of that? (Lots of Micro Breweries in WA)
I have a friend that works as the IT guy in a regional grocery chain, and he said the admin costs of tracking this stuff is going to be terrrible.
“There is a sales tax being implemented on Candy (previously exempt as a food item), but only on candy that is not made with “grain flour”. So a Mars bar is not taxed, but a Three Muskateers is. (Not making this up), Washington state is of course a big grain growing state.”
Cook County, IL has been dealing with those goofy taxes for a while now, much to the delight of surrounding counties, I am sure.
Why? Just set a binary field on the product table. Yes - tax it. No- dont tax it. Not that hard.
There are 10,000 ever changing SKU’s. I’ll accept from the IT guy that it is an admin nightmare.
He’s right. It will be.
But maybe grocery stores should cut down on the churn.
I know, crazy idea.
Clipped from Neal Boortz…
Dozens of workers from the Pei Wei (Pee Wee?) restaurant in Phoenix decided that they weren’t going to show up for work because they wanted to attend the immigration rally. So what happened? The restaurant fired every single one of their sorry butts. Good for them. The restaurant will be better off for it. One employee, Elizabeth Serefin, says “I can understand it because that’s their business and we were supposed to work, but come on, they have to understand us too.”
Now … we need to make sure that these people … every single one of them … is not allowed to collect unemployment. They were fired for cause. Let them learn to live with the consequences of their actions.
Hmmm… could that restaurant have been looking for an excuse to rid itself of illegal labor before they got busted by the new laws?
Look like some idiots just got a lesson of real life.
Former Vice President Al Gore to separate from wife Tipper after 40 years of marriage
ERIK SCHELZIG Associated Press Writer
11:15 AM CDT, June 1, 2010
NASHVILLE, Tenn. (AP) —
According to an e-mailed statement obtained by The Associated Press on Tuesday, the Gores said it was “a mutual and mutually supportive decision that we have made together following a process of long and careful consideration.”
Gore spokeswoman Kalee Kreider confirmed the statement came from the Gores, but declined to comment further.
Al Gore lost the 2000 presidential election to Republican George W. Bush. He has since campaigned worldwide to draw attention to climate change, which in 2007 led to a Nobel Peace Prize and an Oscar for the documentary “An Inconvenient Truth.”
Tipper Gore is known for her advocacy on mental health issues. She became interested partly because her mother suffered from depression.
The Gores have four adult children.
I’m sure Tipsy will get some nice parting gifts.
As Eddie Murphy says “HALF!”
About Tipper…
So, my former Mother in law worked at a US embassy and had the pleasure of taking Tipper on a tour of the local capital. So, she got to spend a lot of quality time with Tipper.
Tipper must have liked her as she offered to buy lots of stuff for her. Tipper said “It’s free, it’s tax payer money.”. The mother in law was horrified by the amount of money she wasted.
Also said she had dinner with Reagan. Said Nancy’s face looked like it was stretched to breaking. Her English wasn’t good enough to understand all of Ron’s jokes.
Even as rich as these people are, they still found one more way to fu&k us, blowing money on bull in the casbah.
Won’t that be bad for the environment? You know, two households and all.
Hershey May Cut Up to 600 Jobs at Historic Factory.
June 1 (Bloomberg) — Hershey Co. may cut 500 to 600 jobs from its historic 19 E. Chocolate Avenue plant, the home of the chocolate Kiss, in a plan to modernize its manufacturing.
The company is proposing to convert the complex to office space and shift another 600 workers to a second factory near headquarters in Hershey, Pennsylvania, spokesman Kirk Saville said today by telephone. That second site would be renovated under a program the directors will consider this month, he said.
The job cuts, representing as much as 5 percent of Hershey’s workforce, are part of a manufacturing and supply operations makeover aimed at decreasing costs. The 116-year-old maker of Kisses has closed seven plants in recent years and in 2008 opened a facility in Monterrey, Mexico.
So…how does moving your production to drug-war battle zone pencil out in the long run?
Top Chinese Central Banker: Our Property Crisis Is Worse Than The US And UK Bubbles ~ Jun. 1, 2010 Business Insider
The FT snagged an interview (via Yvees Smith) with Chinese professor and PBOC monetary committee member Li Daokui on the much talked about subject of the Chinese property situation.
“The housing market problem in China is actually much, much more fundamental, much bigger than the housing market problem in the US and UK before your financial crisis,” he said in an interview. “It is more than [just] a bubble problem.”
What does that mean? Basically that high prices cause their own societal problems.
Mr Li said the high cost of housing could hamper future growth by slowing urbanisation. Rising prices were also a potential political flashpoint, especially among younger people who felt locked out of the property market.
“When prices go up, many people, especially young people, become very anxious,” he said. “It is a social problem.”
Meanwhile, Chinese premier Wen Jaibao is urging the world to maintain a “sense of crisis” in regards to the economy and that the global economy is too fragile to start withdrawing stimulus.
Meanwhile, Chinese premier Wen Jaibao is urging the world to maintain a “sense of crisis” in regards to the economy and that the global economy is too fragile to start withdrawing stimulus.
Just as I said above, they have plenty of foreign $$ and a printing press to stimulate demand. I don’t expect China to allow it’’s currency to rise much, and they will likely continue to purchase treasuries. At least until 90% of US is still unable to afford their cheap stuff.
Looking over the OTS answers to Ben a while back. Seems the banks are required to write down the asset at the time of 180 days delinquint per GAAP.
Now, I’m wondering what they have squeezed into the GAAP for what that value would be? It is possible that they write it down to the note value and the loss isn’t realized until it sell on the market for less?
So, seems like there is cover from a regulatory sense but what does it mean? My guess is they write the value down to full value of the note for collateral. Then Bernake’s comments about no reserve status makes more sense. They have all those losses to realize and are insolvent by current rules. Figure massive undershoot in liquidation would occur. Currently hiding behind the GAAP loopholes.
Looked at some GAAP stuff. Mostly greek to me. Valuation of inventory would be by a couple of menthods based on market value. So, the banks have an interest in the market value.
Enjoy digging through this… CFA Level 1 Asset impairment…
Course a lot of this stuff is held by hedge funds, off balance sheet vehicles exc as Level Three Assets or still in the mark to model vs having a typical market value. Or very esoteric kind of model with some kind of risk premium built in. This means the banks are also pinned with interest rates. They need low interest rates to have attractive premiums on their assets or take major writedowns if rates go up. That is relative to treasury debt, these assets have to yeild higher value. Course this goes in with questionable collateral aka houses. So, they are allowing themselves a lower risk premium because they are holding collateral that is appreciating in value. At least in their models.
Don’t get me started on level 2 assets.
It’s not quite as straight forward as we originally thought but the banks have every reason to sit on this inventory and keep prices high. Protects them from insolvency if they have to realize the values all at once.
Now, you could get a big squeeze on a bank and they might have to dump inventory. Course they’d probably dump in bulk to investors and call it an off market transaction that doesn’t effect their marketable assets.
So, considerable danger to us homebuyer type people. Maybe the best thing to do is get inside with an investor group and pick out a property that way.
Again, with the huge and growing size of the foreclosure inventory and lack of reserves, could see another credit crisis later this year just due to slow bleed in the market.
As far as I can see, they’re writing off the loans at 180 days and then putting the properties on their books in Level 3 for the same value as the loan balance. As you say, its a slow bleed from there.
Of course that’s a relatively straight up scenario that assumes the lender owns the whole note.
Well this is the long term deflation scenario that played out in Japan.
Everytime they raise rates, the banks go insolvent.
Everytime something looks halfway productive, it gets bought with funny money and another business is sucked into the vortex and ruined.
Everytime the market shows some sign of life a bunch of bad assets bubble forward.
Not sure we are totally trapped in an ever increasing debt spiral, like Japan is. Must be getting close though.
Ben is heading to DC and wanted to put my two cents in on this. Have to get the right question ready.
Deeply in Debt, Fayetteville, N.C. Museum of Art Forced to Close.
Jun 01, 2010
While it seems like, in financial news, we’ve been on a slow but upward trajectory, things are still on shaky ground within the museum industry. Following a very rough ‘08 and ‘09, and this past March’s news that the Smithsonian-affiliated Fresno Metropolitan Museum had run out of money and was closing, the Fayetteville Museum of Art in North Carolina is the latest casualty of the economic collapse.
After 38 years of operation, have closed their doors. Just three years ago, reports the local Fayetteville Observer, the museum was flying high, even planning a $15 million project to construct a new building for itself. But then that planning got too pricey and a large chunk of their government funding evaporated, both of which damaged the museum’s apparently already troubled method in which it was handling its finances.
I know how those “planning sessions” go. It’s usually a political favor/BIL job to the tune of a few million, with nothing accomplished except some pretty drawings and a fancy PowerPoint presentation/study.
Euro to Go Under $1.20 ‘Almost Certainly’. CNBC ~ June 1, 2010
The euro will drop even further against the dollar because Europe’s problems will not be easy to solve, Dennis Gartman, author of “the Gartman Letter,” told CNBC Tuesday.
The single European currency (Currency Exchange: EUR=X) hit a 4-year low versus the greenback after the European Central Bank warned that more bad loans were ahead for the continent’s banks.
Growth concerns were also high on investors agendas, after data showed manufacturing in the euro zone expanded in May at a considerably slower pace than in April, when it reached a 46-month high.
Austerity will not be embraced “affectionately” by Portuguese, Greeks, Italians so the euro zone’s problems will increase, Gartman said.
The euro “is having a rough month, it’s having a rough year… it’s probably going to continue to have rough times ahead. Are we going under $1.20? Almost certainly,” he added.
Which Western fiat currency is least bad?
FOREX-Euro falls to fresh four-year low vs dollar
* Contagion fears to banking system still weigh on euro
* U.S. ISM for May, construction spending for April rise
* Bank of Canada raises benchmark interest rates
* RBA keeps benchmark interest rate steady
NEW YORK, June 1 (Reuters) - The euro fell to a fresh
four-year low against the dollar on Tuesday on signs the euro
zone’s debt crisis is spreading to its banking system.
The European Central Bank warned on Monday that euro zone
banks face up to 195 billion euros in a “second wave” of
potential loan losses over the next 18 months due to the
financial crisis. The ECB said it had increased purchases of
euro zone government bonds. For details, see [ID:nLAG006303]
Stronger-than-expected U.S. manufacturing and construction
spending data boosted stocks and encouraged some investors to
leave the perceived safety of the U.S. dollar and yen, allowing
the euro to come off lows as the global session wound down.
“The ECB warning on Monday set the stage for euro selling,”
said Matthew Strauss, senior currency strategist at RBC Capital
Markets in Toronto. “Markets remain jittery and overall risk
sentiment is bearish,” he said.
…
Whirpool to cut 216 jobs, close Michigan plant
Associated Press, 06.01.10
BENTON HARBOR, Mich. — Whirpool says it will close a machining facility in Benton Harbor, Mich. and eliminating 216 jobs as a result.
The appliance maker said Tuesday that it is discontinuing the production of components made at the Michigan plant and making its latest laundry products at a location in Clyde, Ohio. The Michigan plant is expected to close at the end of 2010 or early in 2011.
I thought it was ‘different’ there? Now, where’s my ‘free’ stuff.
Soaring costs force Canada to reassess health model.
TORONTO (Reuters) – Pressured by an aging population and the need to rein in budget deficits, Canada’s provinces are taking tough measures to curb healthcare costs, a trend that could erode the principles of the popular state-funded system.
Ontario, Canada’s most populous province, kicked off a fierce battle with drug companies and pharmacies when it said earlier this year it would halve generic drug prices and eliminate “incentive fees” to generic drug manufacturers.
British Columbia is replacing block grants to hospitals with fee-for-procedure payments and Quebec has a new flat health tax and a proposal for payments on each medical visit — an idea that critics say is an illegal user fee.
And a few provinces are also experimenting with private funding for procedures such as hip, knee and cataract surgery.
It’s likely just a start as the provinces, responsible for delivering healthcare, cope with the demands of a retiring baby-boom generation. Official figures show that senior citizens will make up 25 percent of the population by 2036.
I thought it was ‘different’ there? Now, where’s my ‘free’ stuff.
It is different they pay 50% less per capita than we do and enjoy similar health outcomes. If we paid that amount each American would have an extra 3-4000 dollars a year to spend on other stuff.
“Pressured by an aging population and the need to rein in budget deficits, Canada’s provinces are taking tough measures to curb healthcare costs, a trend that could erode the principles of the popular state-funded system. ”
In case you hadn’t noticed insurnace companies in the US have been ramping up rates 20-40% in some cases.
Ontario, Canada’s most populous province, kicked off a fierce battle with drug companies and pharmacies when it said earlier this year it would halve generic drug prices and eliminate “incentive fees” to generic drug manufacturers.
vs US that mandated medicare provide prescription coverage and mandated that they couldn’t negotiate lower prices or create pref drug formularies.
Back in April 2008, the Alberta government decided that “the time has come for Albertans to reap added benefits from the province’s prosperity” so they promised to eliminate health care premiums on January 1, 2009.
And so they did.
Boggles the mind.
http://www.cbc.ca/canada/calgary/story/2008/04/22/budget-alta.html
Plunge protection seem decreasingly adequate to offset Fat Finger Boy’s influence.
Ouch.
DJI from flat to down 112 in 20 minutes.
3 of the last 4 trading days have been almost identical - flat all day and then big drops right before the closing bell.
Veddy intelesting….
Crashing the equity markets makes Gubmint Treasury sales oh so easy.
Yes.
Eventually the stock market equity - like the home equity market before it - becomes a dry well.
And then we turn to…????
The Japanese at least had a booming U.S. economy to sustain them in the 2000’s. We however don’t have the luxury of a larger non-U.S. consumer-based economy to pull us along through our debt doldrums.
It’s interesting to me that when there is a huge rally in the last hour of trading, the explanation is that it was the PPT propping up the markets. Now when there is a huge dump before the bell, it’s also the PPT?
My gut is that these patterns justtend to be self-reinforcing, when people notice that they work and try to play them as trades—which tends to exaggerate the pattern that was observed initially. But eventually the tide changes, and they don’t work anymore.
Maybe I’m wrong, though.
I suspect self-reinforcing trends are used by the PPT as a form of market-driven jujitsu, reducing the amount of intervention needed to a mere impulse rather than full-fledged market control. Once a herd of sheep begin to stampede, there is no stopping them.
P.S. PPT intervention and market-driven moves are not at all mutually exclusive; rather they are complementary and, when necessary, close substitutes (e.g. if a market crash is underway and no bids are coming forth, that is a great time to dump liquidity to green up the system…).
PPT cut out a little early today, must be having a two for one at their favorite bar. No worries it’s all good, they’ll be back in action tomorrow.
LOL! Yea 500,000 temporary jobs should be enough to get the economy roaring back…
Strong Jobs Number on Friday Could Give the Markets a Boost- CNBC
Economists expect the US economy generated about 540,000 jobs in May-a large portion of which expected to come from Census hiring-and many analysts will be hoping that’s enough to assuage investor fears that the European debt contagion could cause a double-dip recession.
“Economists expect the US economy generated about 540,000 jobs in May-a large portion of which expected to come from Census hiring-”
Well then, let’s make sure all of the Census workers get a Census McMansion and Census mortgage to go with their Census job.
The economists will expect the Gubmint to manage the whole industry.
See, economy fixed just like economists said it would be.
Do I detect the smell of more “unexpected” next week?
As for Census jobs, they are going to be so wrong on this one it isn’t even funny. I know several people who applied and NONE of them were hired.
Almost one-third of Gulf fishing grounds closed.
Associated Press, 06.01.10
NEW ORLEANS — Almost one-third of federal waters in the Gulf of Mexico is closing to commercial and recreational fishing because of the oil spill.
The National Oceanographic and Atmospheric Administration expanded the area by 5 percent Tuesday. NOAA says as of 6 p.m. EDT Tuesday that nearly 76,000 square miles would be off-limits because of oil spreading from the Deepwater Horizon disaster. That’s more than 31 percent of federal Gulf waters.
The irregular shape ban extends from Atchafalaya Bay, La., east to a point about 200 miles west of Naples, Fla., and then bending south.
Cisco spent $620,000 to lobby government in 2Q
June 1, 2010
WASHINGTON (AP) - Cisco Systems Inc., the world’s largest maker of computer networking gear, spent $620,000 in the first quarter to lobby on patent reform, immigration reform and other issues, according to a recent disclosure form.
That’s double the $310,000 that Cisco spent in the year-ago period, and more than the $280,000 it spent in the fourth quarter of 2009.
The San Jose, Calif.-based company also lobbied the federal government on legislation relating to cybersecurity and international taxes, according to the report filed with the House clerk’s office on April 20. Cisco makes much of its money abroad and faces taxes when “repatriating” the income to the U.S.
I wonder how many people they had to layoff to pay for that?
I’m sure it was just the lazy slacker deadwood, right?
NC health insurance company tests outsourcing.
RALEIGH, N.C. — A plan by a North Carolina health insurance company to outsource some of its data management work is drawing criticism from people who say the company shouldn’t be sending jobs overseas.
The News & Observer of Raleigh reported Saturday that Blue Cross and Blue Shield of North Carolina has started a pilot project that could change the way the insurer handles electronic information and save money.
Head of the State Employees Association of North Carolina Dana Cope says Blue Cross should not be allowed to outsource jobs since taxpayer money goes to the company in the form of premiums for state worker insurance.
I am praying that Darth Cheney will be implicated somehow.
Bloomberg
Criminal Investigation Under Way in BP Gulf Spill (Update3)
June 01, 2010, 6:27 PM EDT
(Updates with Halliburton spokeswoman declining to comment in eighth paragraph. For more on the gulf oil spill, see {EXT4 }.)
By Justin Blum and Aaron Kuriloff
June 1 (Bloomberg) — The Justice Department is investigating whether any criminal or civil laws were violated in the BP Plc oil disaster in the Gulf of Mexico, the biggest U.S. spill on record, said Attorney General Eric Holder.
“We will prosecute to the fullest extent of the law, anyone who has violated the law,” Holder said. “This disaster is nothing less than a tragedy.”
Holder announced the investigation today at a news conference in New Orleans, the same day President Barack Obama called the spill “the greatest environmental disaster of its kind in our history.” The president said, “My solemn pledge is that we will bring those responsible to justice.”
The spill began after an April 20 explosion aboard the Deepwater Horizon rig, which London-based BP leased from Switzerland-based Transocean Ltd. to drill its Macondo well in the Gulf. Houston-based Halliburton Co. provided oilfield services on the well.
Holder, who said the probe “began some weeks ago,” declined to specify which companies are under investigation. He said he surveyed a portion of the damage, was briefed by Coast Guard officers and met with prosecutors for the areas affected by the spill.
…
Cheney? He lives in Dubai now and has special extradition exemptions.
So dream on.
Oh, and Halliburton is no longer based in Houston. They moved their world headquarters to Dubai 3 years ago.
Now does it make more sense?
Monday, May 3, 2010 13:30 ET
Who’s to blame for the oil spill? Dick Cheney
By Alex Pareene
AP Photo/Ron Edmonds
The Gulf of Mexico oil spill could end up being the worst American man-made environmental catastrophe of this generation. With the oil still spilling and investigations into the causes yet to come, it’s too early to neatly assign blame to any one person. But for now, let’s hold Dick Cheney personally responsible for the whole thing.
Here’s the evidence: The Wall Street Journal reports that the oil well didn’t have a remote-control shut-off switch. The reason it didn’t have a thing that it seems every single offshore drilling rig should have? According to environmental lawyer Mike Papantonio, it’s because Dick Cheney’s energy task force decided that the $500,000 switches were too expensive, and they didn’t want to make BP buy any.
Is that not enough reason to blame the former Dark Lord of the Naval Observatory? Guess what: Halliburton is involved, too! The Los Angeles Times reports that BP contracted Dick Cheney’s old company to cement the deepwater drill hole. Cementing the hole was, according to the U.S. Minerals Management Service, “the single most-important factor in 18 of 39 well blowouts in the Gulf of Mexico over a 14-year period.” And Hallburton is already under investigation for faulty cementing in an Australian well last year.
…
Damn locust plague!
The grasshoppers and the ants – elucidating the fable
By Martin Wolf
Published: June 1 2010 23:26 | Last updated: June 1 2010 23:26
Ingram Pinn illustration
Fables seek to illuminate reality. The goal of the one I told last week – concerning “the grasshoppers and the ants” – was to provide a simplified account of the world economy. Today I wish to address two questions: who benefits from the trade flows between import-surplus grasshoppers and export-surplus ants? Can the two co-exist fruitfully?
First, who benefits? My colleague, Robin Harding, raised this question in response to my advice to ants: “If you want to accumulate enduring wealth, do not lend to grasshoppers.” He asked: what about the gains for the grasshoppers?
The traditional answer is that both sides should gain from any voluntary exchange. That includes these “inter-temporal exchanges” – in which ants offer goods to grasshoppers now in return for future repayment.
Yet this assumes that the decisions are well informed, markets are flexible and contracts are enforced. None of these assumptions seems all that plausible. A reason people may not make informed decisions is, readers argue, that what some call “locusts” (financial capitalists) fool both grasshoppers and ants. At best, agency and information problems in financial markets make it hard for ants or grasshoppers to understand what is going on. At worst, locusts use their wealth and knowledge to rig the game to their advantage.
…
“Business as usual” means the Nikkei Index is sliding again?
NIKKEI 225
9,568.78
-143.05 (-1.47%)
Delayed: 2:06PM JST
INDEX NIKKEI data delayed by 20 mins
* The Wall Street Journal
* June 2, 2010, 7:02 AM JST
Hatoyama Quits, But Tokyo Stock Market Provides Its Own Certainty
By Ayai Tomisawa
Japan’s Prime Minister resigning? Business as usual for the Tokyo stock market.
Yukio Hatoyama’s reign at the head of Japan’s government is over. After a swathe of stories Tuesday that he was facing growing pressure to resign and a long slide to opinion survey approval ratings of less than 20%, it’s barely a surprise. Still, just eight months into the troubled DPJ-led administration, you might be forgiven for imagining uncertainty about where Japan goes from here could spread a wave of consternation in Tokyo’s markets.
Not a bit of it. Seasoned traders in Tokyo barely batted an eyelid as the news began emerge soon after trading began Wednesday. Point of fact, by 0145 GMT, the Nikkei Stock Average was up 0.1%, bouncing back after the market opened lower in your everyday response to a weakening overnight on Wall Street. And some observers say Mr. Hatoyama’s resignation may actually be good for the stock market in the longer run.
“It’s not like we are on the verge of losing a leader who has high support rating with superb policies,” said Norihiro Fujito, senior investment strategist at Mitsubishi UFJ Morgan Stanley Securities, speaking before Wednesday’s news broke.
…
For perspective on the Nikkei, check out this Wikipedia entry — shows how the peak around 39,000 in 1989 gave way to a permanently low, ever-volatile plateau below 10,000 through 2010. I am thinking they may reach a bottom some time between 2015-2020?
Don’t worry — it can’t happen to the Dow Jones Industrial Average, because this is ‘Merica!