Bits Bucket For June 15, 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.
June 14, 2010
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I really wish I could make the DC meetup. Instead I’ll just have to content myself with surfing, snorkeling, hiking, and drinking frozen drinks. But I’ll be thinking about you guys the whole time, I swear.
Something weird in the air lately. Many of my close friends have suffered from horrible accidents or odd health issues that either left them dead, paralyzed, or worse. (Don’t ask me my opinion of the health care issue anytime soon, that’s for sure)
The net effect of these disasters has not been to make me want to run out and buy a house. It’s the exact opposite. I’d rather spend my money on traveling or other enjoyable pursuits. I’ll be finishing up my private pilot’s license this fall, hopefully. Then I expect to use it to hop around as much as the money will allow. Maybe I’m just wired differently from most Americans? Nah, that can’t be it. I’m nothing special. Who the hell would want to drop hundreds of thousands of dollars on a life anchor when there’s so much else out there to see?
“…life anchor…”
I thunk that was what dogs were fur…
Hah! Don’t tell me that. We’re thinking about getting a mid-size dog soon. At least they’ve eased up on the quarantine rules for bringing dogs into Hawaii. They let you pre-register them at a vet and have them vouch for the vaccines now, so I hear. Besides, gutter punks seem to do OK with their dogs. I’ll just have to travel by train car like a hobo from now on.
BInk–Do they have trains in Hawaii?
They have underwater trains that travel between the islands. The fare is paid in shellfish and you have to use a special underwater cell phone if you want to talk to people on the mainland. But the coffee is terrible, I’d avoid it.
bink,
Let me guess.., SpongeBob collects the shells?
The longer I rent, the less I feel compelled to buy again.
Which reminds me, Captain Credit, how did that triathlon go?
The less I rent, the less I feel compelled to buy again.
Now I’m down to renting a little sliver of ground from the state to give me a place to tie up. I’m not contributing much to keeping the machinery of the state operating. I hope they don’t notice me too soon.
Hey CarrieAnn,
I placed #2 in my age group (there were 15). It was my first race ever and I am very happy with the result. 37/220 overall, so about 15th percentile whichever way you slice it. Worst part was getting clubbed like a baby seal on the swim from all the arms and legs wailing. Best part was passing 60 people on the bike and run.
Thanks for asking =).
CCC
Wow! Captain, that is fantastic. Sounds like you might be signing up for a second sometime soon.
The mass swim does intimidate me. (There are 1000 entrants in this race) Sounds like you recovered nicely though. Good for you.
Is it Irongirl by any chance? They post photos via Facebook.
I’m a guy, and don’t happen to know much about Irongirl. Best wishes with your race! Usually they can send out the swimmers in waves since the anklet catches the true start time anyway. There’s no need for this madness of a dash and clubbing!
Where are you racing and what distance?
Bink,
Bad news about your friends. What could possibly be worse than being dead or paralyzed?
I try to enjoy each and every day and I think you do as well.
(not trying be snotty but your comment just made me think of this from “Kung Fu”)
Young Caine: You cannot see.
Master Po: You think I cannot see?
Young Caine: Of all things, to live in darkness must be worst.
Master Po: Fear is the only darkness.
Young Caine: Of all things, to live in darkness must be worst.
Being found naked in a closet in Thailand with a rope around your Johnson can’t rank very high on the list. Just saying.
I think the rope goes around your neck- that’s the problem.
Yes, I meant to mention I’m sorry to hear of the trouble you’re friends have had to face, Bink.
IMHO severe brain damage is worse than death or paralysis. Personal preference, I suppose.
‘I’m nothing special. Who the hell would want to drop hundreds of thousands of dollars on a life anchor when there’s so much else out there to see?’
I had a dream not that long ago where I was riding my bike by my tombstone. The tombstone stated that I suffered the fate of never having the pride of ownership of a house -ie- I was a renter all my life. Who is getting disappointed? The net message we get with houses is that they are a way to buffer your wealth. I’ll leave it at that.
“I’ll be finishing up my private pilot’s license this fall, hopefully.”
Congrats, bink! Very cool!
A few tips: I also recommend spending a few hours reading as many NTSB accident reports (available online) as you can to see whast mistakes other pilots make that lead to injury or death. It’s sobering, but incredibly valuable awareness.
I recommend taking at least one extra lesson in spin recovery. A surprising number of pilots still die due to stall/spin in the pattern. The private pilot’s training used to mandate spin training, but they watered it down so that you only have to experience an “incipient” (near) spin. It’s not the same, and one really doesn’t prepare you well to deal with one if it occurs.
But the spin training is actually fun, and not scary at all—it’s a 1G manuever (e.g. feels like sitting on the couch) if done correctly.
Stay safe up there! Blue skies…
Good luck and enjoy blink.
Prime_Is_Contained,
Yes sir! I’m an absolute believer in reading all the mishap data you can get your hands on. Read it month… after month… Make a part of who you are.
Even the guys in maint. Be aware of issues that could lead to or contribute to pilot error. Just b/c you don’t actually fly means you’re excused from being -very- familiar w/ that stuff!
In truth, I do the same thing for the NASD. When you read how ‘others’ have f’d up it can provide some very valuable guidance. Most of life is what ‘not’ to do.
The spin recovery mnemonic is PARE - Power (off), Ailerons (neutral), Rudder (full opposite to the spin), Elevator (neutral). Then, when the spin stops, neutralize the rudder and use elevators to pull out of the dive. Reapply power to prevent a secondary stall and you’re good to go.
Provided, of course, you had enough altitude when the spin happened….
“Then, when the spin stops, neutralize the rudder and use elevators to pull out of the dive.”
You missed one step: when the spin rotation stops, you are frequently still in a stall. First, neutralize elevator (or if necessary, even pitch the nose down slightly) to break the stall, then recover from the dive (and add power as indicated).
A spin is a relatively high-drag configuration, so you lose less altitude than you might think. But yeah, you want to do them with lots of altitude, and not anywhere near the ground—and definitely not in the pattern!
Thanks for the advice! I’m a pretty avid viewer of the airline disaster documentaries but I haven’t yet gotten around to reading NTSB reports. I’ve done a lot of work for the FAA (computer stuff) and gotten to meet many interesting pilots, especially up in Alaska. The stories they tell never get old.
bink,
Not long back X-GSfixr mentioned that most tech’s our age had real life heros for mentors, again we just assumed everyone else had as well?
One of the things my old D.O ( Division Officer ) told me was; “As a helo-pilot the idea is to become an ‘old helo-pilot’ ( and you don’t get to do that by overlooking details! )
Good idea re: reviewing ntsb reports on mistakes pilots make out of hubris.
And they don’t call those small planes “doctorkillers” for nuthin.
Be careful and have fun, but be more careful.
200 hour pilots are the worst. Just enough time to think they know it all, not enough time to get
them out of trouble….
From an old scud runner
My buddy in college had a roommate who was studying to be a pilot. One day, he took us for a ride and did a couple of stalls. The drop was more thrilling than the highest roller coaster. I can’t imagine controlling an airplane under those conditions. Of course I was in the back seat, and had only the seatbelt holding me down. I had nothing to grab onto, which may have made it more thrilling.
You got it all right Bink! A house is a life anchor. It’s a totally different lifestyle in a quiet neighborhood with families than in a high density place like apartments.
OTOH, the house on the other side of the hill from my Phoenix apartment is in a race to the price bottom with its next door house. Same footprint, both have backyard pools next to vacant open mountain. They periodically get de-listed. The first one dropped 5,000 from the price and then two weeks later the next one is up for sale at $5,000 less than the first one.
This is fun to watch. But I’m not anchored for awhile. My rent will probably go down in the Fall again. My municipal bond fund is diversified mostly into AAA and AA bonds in Arizona and partly in other states, about 14% in Puerto Rico municipalities - not entirely sure if that helps me.
“You got it all right Bink! A house is a life anchor.”
Raising a family is the life anchor; the house is just an accessory. No family, no house required.
You figured it out! If I had no kids, hopefully I would live foot loose and fancy free as Bill in LA.
Having kids, my wife and I realize that it is raising a vibrant, healthy family anchors our lives; it is unnecessary to own an alligator-funded residential real estate money pit.
Isn’t Maxine Waters that FB Congress critter from Cali? Now I guess she will institute gender discrimination in Fed hiring? And racial discrimination in lending? Hmmmmm…
I note that so far in the housing bubble and bust, special lending to minorities has been an unmitigated disaster (including Ms. Waters’ own housing market folly). But perhaps with Ms. Waters in charge, it will be different?
* REVIEW & OUTLOOK
* JUNE 14, 2010
Politicizing the Fed
Congress seeks more control over the 12 regional banks.
For 97 years the 12 regional banks of the Federal Reserve system have operated relatively free of political interference from Washington. The looming financial reform bill threatens that independence, not least through an effort to impose new presidential appointees at the regional banks.
The biggest underreported threat comes from Subtitle I, Section 1801 of the House financial reform bill titled “Inclusion of Minorities and Women; Diversity in Agency Workforce.” Sponsored by California Democrat Maxine Waters, the provision requires each federal financial agency, the Fed Board of Governors and the 12 regional Fed banks to “establish an Office of Minority and Women Inclusion.”
So what else is new, you say? Don’t the feds already dictate racial and gender hiring? Yes, they do, through the Equal Employment Opportunity Commission and assorted other federal laws. As a matter of racial and gender diversity, the Waters provision is at best redundant.
But Ms. Waters and the House are hunting bigger game—to wit, the political allocation of credit. They want to put a network of operatives at the highest level of government who are responsible for making sure that regulators put the hiring of, and lending to, minorities at the top of their priority list. The House provision makes that very clear by making each diversity officer a Presidential appointee who must be confirmed by the Senate. The post, says the bill, will be “comparable to that of other senior level staff.”
…
HOPE - check
CHANGE - check
20% unemployment rate - getting there
Isn’t this basically the argument against auditing the Fed? That suddenly Congress will be able to play all its political games with it?
Yeah — I guess Maxine is against the Fed audit idea. Otherwise, why would she be playing her hand to suggest the Fed’s allegations of a potential compromise to their political independence are warranted?
Or is it that she simply hasn’t a clue?
“Or is it that she simply hasn’t a clue”?
Her IQ is perhaps one or two points higher than the most ignorant fellow in the cesspool. Jim Clyburn (D) South Carolina. Another one of my home states continual embarrassments.
“diversity officer” WTH?
I say let Maxine take over everything that’s what she wants, and watch the system come to a grinding halt.
“diversity officer”
I have zero tolerance for politically correct language. Why don’t they call it what it is:
‘Racial discrimination officer’?
Your slot at the Re-education Camps is now guaranteed.
I notice black racism against whites is quite politically acceptable nowadays; the other direction, not so much.
“black racism against whites is quite politically acceptable”
This is not a universal truth. There are always those who seek domination over equality, in any kind of skin. Those offering equality to their fellows will always be under atack by a few who won’t be satisfied.
Racism, sexism and ageism are alive and well in all forms, but your summation is essentially correct Blue Sky.
Well said.
I guess Maxine is against the Fed audit idea.
Or, perhaps, the -Wall Street- Journal is against the Fed audit, and knows how to play its audience.
I believe we’re seeing the long term effects of social engineering manifest itself. We have people who really have no business being in their current situations, the messiah being probably the greatest example. This nations founding principles have been litigated to what we are seeing now. My belief is this,
“Equality at birth, not of result”.
It’s not a racist statement so don’t even go there. You reach your own station in life primarily based on your own merits.
Hardly. Picking the right parents is the greatest predictor of economic success in life. Certainly with bad choices it is always possible to end your life drunk in a gutter no matter what your origins, but the converse is not true. It is VERY difficult to truly start with nothing and acheive great success. Most “rags-to-riches” stories are really “K-mart to Saks stories,” where people progress from working class or lower-middle-class origins to the ranks of the well off. Hard work, intelligence, smart choices and sacrifice certainly pay off for most people, but the return is much better the more advantages you start off with.
Clarence Thomas made it the US Supreme Court, and when he was a kid he didn’t have indoor plumbling until he was 7 years old.
There are ALWAYS exceptions. But by and large, most people simply coast through and end up approximately where there parents were. Again, the ROI for hard work is MUCH greater for those from privileged backgrounds than for the middle class and for the middle class than the underclass.
The University of Florida released a study in March of this year that showed researchers could predict with uncanny accuracy how a child performed on a standardized test based solely on their address. So despite examples like Clarence Thomas, unfortunately for the vast majority of children born into poverty, they will not have the same opportunities.
“Clarence Thomas made it to the Supreme Court”
Clarence Thomas (or any other justice, for that matter) making it to the Supreme Court has more to do with political calculation than it does with any merits that the candidate may have.
I agree that starting on a level of middle class or above definitely helps. It’s probably because your parents may have been smart enough to get there. As for being born into the elite strata I wasn’t trying to include them as I assume none of us here are part of that group. I surely don’t consider myself part of that crowd.
My main point was being against social engineering of any kind. Promote your best and brightest regardless of their wrapper.
About the greatest benefit that comes from a middle class upbringing is growing up speaking a close approximation “standard written English.” It doesn’t necessarily make you smarter, but others certainly perceive you as being smarter. Learning it is school is much more difficult, and command of SWE is critical in educational success. I simply don’t know enough about the how the rich behave to know what the equivalent advantage is for the rich. Is it networking with other rich people? Is it access to better educational opportunities?
Nope, just plain money and lots of it and being able to hang on to it.
Upward mobility for the poor and lower middle class depend on education, connections, opportunity (luck), and the ability to keep the gains made. Hard work alone is no longer enough.
Of course there are always exceptions, but that’s just what they are.
Good looking people get better jobs.
Fewer good looking people in prison.
Google “good looking people” ad nauseum!
How about picking the right country of birth?
http://www.universityworldnews.com/article.php?story=20100219125450124
“I believe we’re seeing the long term effects of social engineering manifest itself. We have people who really have no business being in their current situations, the messiah being probably the greatest example “”
As I recall he won an election. How exactly is that social engineering?
” You reach your own station in life primarily based on your own merits. ”
This is less and less true every year in America. Did GW earn his presidency by being a stand out in school or the military?? Does everyone who get’s good grades get into Harvard and Yale??
Not that I disagree entirely with the statement
“Equality at birth, not of result”
I’d be all for equal funding of schools across the nation and college acceptance based on results.
Well even if we instituted an inheritance tax of 100%, we wouldn’t achieve “equality at birth.” Now don’t think that I’m advocating such a crazy policy, just pointing out that “equality at birth” is, economicy speaking, a silly fiction. We’ve never had it and we never will. Of course those who are reasonably well off are pre-disposed see our society as a meritocracy, and those who languish in the underclass to regard success as a matter of luck. Just like most false dicotomies the truth is some of each. I am as tired as the next guy of people characterizing bad choices as bad luck.
The rich, the poor and everyone in between make bad choices all the time and I too, hate one being confused for the other.
But in this country, they are both treated equally the same: too bad for you.
And only the wealthy and well connected have any real chance of recovering from a really catastrophic event, whether self inflicted of accidental.
I think people who perceive that they have little control over their lives are more likely to think that luck makes one successful. People who perceive that they have a lot of control are more likely to think that hard work makes one successful.
I think poor people are more likely to be employed in jobs in which they have little control and rich people are more likely to be employed where they have lots of control or to be the boss. They pass their perceptions on to their children.
I think that both luck and hard work are involved. There is a certain amount of luck involved in being free of injury and disease. There is a certain amount of luck in being an early employee of Microsoft. There is a certain amount of luck in making it to the NBA. In all of the above cases, there is also a lot of hard work and preparation and doing the right things to take care of yourself.
The key is to work hard so that you are prepared when luck comes your way.
Every military unit, factory and farm (and bank) in the communist Soviet Union had a political “advisor” who had more power than any general, factory manager or farm owner.
One bad report from that person meant loss of job, loss of the state apartment, the gulag or even death.
It is amazing to see who today in America likes that model.
And it is even more amazing to see the arrogance of the democrats who never think that these laws and regulations may one day be used against them.
See what happens when the Fed loses its independence?
They already voluntarily gave it away to the WH…didn’t you notice the Fed/Gollum alum in the Treasury Secretary post?
You mean, what happens when the Fed starts being held accountable under the law? And has its dirty dealings with the banksters exposed to the light of day? Not that I’m expecting that anytime soon.
Catch-22:
- The opacity of the Fed’s operation calls its political independence into question.
- Auditing the Fed in order to supplant opacity with transparency would compromise its political independence.
That’s exactly the catch-22. And the people with the least faith in our government are calling for more government control over the Fed. Strange days have found us…
A one time audit of the FED does not undermine their independance.
You get “independence” in this country, until you have repeatedly demonstrated that you cannot handle, or abuse your independence.
Then the government steps in, with this thing called “regulation”.
I find it hard to believe that anyone still thinks the FED is this ‘benevolent’ organization with your best interests in mind.
They should be audited first, then jailed after a fair trial.
The world has indeed turned upside down. Russia’s RT news carries some first-rate news and analysis these days, while our own MSM slavishly fulfills the Ministry of Truth propaganda function their corporate cartel masters dictate to them, while consigning inconvenient stories that deviate from the party line to the memory hole.
Oooh oooh look, sheeple! Lindsey Lohan is tongue-kissing some drunken skank again! Pay no heed to Bernanke’s broken Fed wellhead spewing fiat currency into the TBTF banks.
“Pay no heed to Bernanke’s broken Fed wellhead spewing fiat currency into the TBTF banks”.
that’s because that’s all part of the “plan”.
“I just did what I do best. I took your little plan and I turned it on itself. Look what I did to this city with a few drums of gas and a couple of bullets. Hmmm? You know… You know what I’ve noticed? Nobody panics when things go “according to plan.” Even if the plan is horrifying! If, tomorrow, I tell the press that, like, a gang banger will get shot, or a truckload of soldiers will be blown up, nobody panics, because it’s all “part of the plan.” But when I say that one little old mayor will die, well then everyone loses their minds!” - the Joker - “the Dark Knight”
a great example of the joker’s point would be the Fed QE policy versus the gulf oil spill. the oil spill was simply not part of the “plan”…and the public is outraged. the Fed’s QE policies are much more horrifying IMHO.
michael,
Right, and now w/ “real time feedback” they can custom tailor ‘the plan’ and tweak as they go. Anticipating the public’s reaction is as old as politics itself. But w/ today’s technology pols can formulate responses on the fly.
The Plan as it were only lasts about as long as the news cycle. It’s why I’ve basically given up on trying to even guess what their next move might be?
They’ll get what they deserve. Many already are.
“Pay no heed to Bernanke’s broken Fed wellhead spewing fiat currency into the TBTF banks.”
Nice metaphor! Will the Fed eventually attempt a ‘top kill’ procedure to stem the spreading flood of toxic assets?
America’s demographic shifts combined with Democrat votes-for-entitlements schemes means the day is coming when every Federal agency will have its own Diversity Commissariat imposing “diversity” and political correctness [i.e. Democrat Party activist] over merit and ability when it comes to hiring, promotions, and firing. Then they will use their permanent lock on power to pass ever more onerous laws forcing similar practices on private businesses under penalty of draconian punishments, while passing the tab to the middle class.
And that is when my plan to have landmines on the border backfires horribly.
Already happened in the pvt sector. Every fortune 1000 company has a vp of diversity. If you are white and male, in 20 yeras you will be unemployable in the USA.
The Repubs entitlements are right up there as well.
My guess is that Max’s constituency is unhappy with their ability to pull more equity and she wants to help them out. Stupid.
Further it’s creating some high paying jobs for some cronies.
We had a corporate diversity person. Poor dude went from a productive recruiter to this bizarre position of looking over requisitions. We already have a good record with minority hires but not a lot of black engineers. Anyhow, after about 1 year the guy was really happy to return to his original business manager job.
Basically you have hundreds of job openings and thousands of resumes. While I might screen for really bad English, I don’t care a whit about race or gender. He ended up with the same conclusion after a short period and was trying to figure out what the hell he was doing there.
Anyhow, we were happy to have him back as our business rep.
“We already have a good record with minority hires but not a lot of black engineers.”
That’s when things get kind of silly. What share of engineering students are black — about 1 in 1000 or less? If you have to hire a black engineer in order to comply with diversity guidelines, then good luck to you…
We need to lend money based on the color of a person’s skin, and not their ability to pay back the loan!
What color would you say most of the TARP recipients were?
I was 100% opposed to both the bank bailout AND the homedebtor bailouts.
And I’m not against trying to correct injustices. But I think this would better be served with, say, assistance for people in certain areas starting up a business (legal, bookkeeping, tax, training, etc) than mandating that banks provide services based on anything other than ability to repay.
I agree.
W finally apologized for doing Bailout, via his face book page.
F*k dubya! He’s a neo-con shill, delusional rapture evangelical, and worst president ever. Pimped the U.S. to gawd’s children.
White Anglo-Saxon Protestant males, perhaps?
Helicopter drops of fiatsco bailouts are great for driving the price of art skyward. So much for the “art bust”…
…
A limestone bust of a woman with an upswept hairdo by Amedeo Modigliani sold for $52.6 million at Christie’s in Paris on Monday, making it the priciest artwork ever sold at auction in France.
…
To each their own, but that looks like something you’d see at any “art” store for $200-$300 bucks.
Sorry, but no. Still, 52 Million, that’s a lot of money being washed.
I wouldnt even keep it in my apartment, and I am a sculptress and painter (for hobby only). I’m only into thought provoking and/or mood altering pieces. This piece offers me nothing. I am odd in this respect, but when private collectors pay more than a few million dollars I can only think about what a horrible and miserable person the buyer must be to spend so much money on something so frivolous in the face of so much poverty. Don’t get me wrong, I have no problems with rich people and could care less if they give it to charity. Ego purchases, however, are really no different to me than the purchase of underground snuff films.
“I wouldnt even keep it in my apartment, and I am a sculptress and painter” (for hobby only)
Everyone has their own opinion what is art and what is appealing. That sculpture might make a good door stop. I saw one similar to it at Pier One a few years ago.
Some people like Picasso’s stuff. I think it is as bad as it gets, the painting’s done by elephants are more appealing IMO.
Gee, I finally encounter another person who admits to not liking picasso. I think most of his paintings were dreck ( although some of his very early stuff wasn’t so bad ).
if i was to buy one of your sculptures for $ 52.6 million…it is not like i just pissed that money away. i just transferred any “charitable” responsibility to you (if there ever was one).
and based on your comment…buying that ‘art’ from you would have been the best for ‘charity’ since you seem so apt to giving it away.
Send me your email address and I’ll send you a link to my portfolio and wire instructions.
Yah, but this wasn’t buying art from an artist. This was one rich SOB buying art from another rich SOB’s estate making his rich SOB children even richer.
The only art I’ve ever purchased has been from living artists, and from the artist. (Or from the gallery selling stuff on behalf of the artist.)
SFBB,
I’ve come to that same approach where vintage guitars are concerned. Why would I buy a “collectible” Strat from some trenchcoat wearing ‘dealer’ when I can support someone trying to further the art?
Right now, I’d say about HALF of the stuff you see on Ebay, CL etc. are forgeries! The neck and body were never in the same factory at the same time ( yet the seller ‘insists’ it’s “100% All Original!” )
It’s gotten so bad we’ve set up like a “Yun Watch” just to expose the frauds! Yes, we have an online panel of experts that specialize in certain brands/mfrs. that verify ‘authenticity’ that potential buyers can access. Funny thing is, the original author only set it up to ‘comment’ on rare and collectible guitars. It just sort of morphed into a slam site.
Not that it matters but it may not be possible to end poverty by rich people donating money.
I think it is all about technological change AND psychological change.
Most of the chronically poor people are either in third world countries OR in the US of A make really “bad” choices.
Not talking about people that got crushed by terrible circumstance either (illness/death).
There are just lots of poor people that don’t value education, have large families with out a father, don’t save exc.
I put “bad” in quotations because you have a segment of the population that wants to live in BFE, far from most sources of income and have lots of kids. Not that you can’t be prosperous but this isn’t a recipe for it. Nor is it necessarily a bad choice except from a monetary and economic point of view. You can live nomadic lifestyle in the USA too. Again, no wealth generation but you have other options.
I’d guess another large segment is just plain old bad sh&t crazy.
I don’t disagree. I just know ppl that have paid large amounts of money for trinkets and they all are a bit pyscho. It really is the mindset of the buyer, not that lack of charity, that has me most disturbed. If you have that kind of money you can travel all over the world and visit museums. I find the need to own such things creepy. I have actually stopped dating ppl once I found out they had a car worth more than 80k or a watch worth more than 5k. It’s not like I am miss charity. I am a saver and invest. I live in a 1k a month apt and drive a 1998 Honda Accord, although my net worth including my 401k is over a million.
Maybe your net worth is over a million BECAUSE you drive a twelve year old Honda and live in a 1k apartment. Way to go, Nats.
Is there an art bubble going on? I thought there was one and it popped already, but maybe this is a dead cat bounce…be funny if the buyer is planning to flip it to someone even wealthier and more frivolous.
The air in those circles is too rarified for me…like Nat I’ll never understand it either.
Natalie,
so what is the point? Serious question. You have $1m and live like a pauper. Do you ever plan on spending the money? Or is the plan to die and be one of those stories in the local paper with the headline Local Woman Dies Penniless, Has 10 Million In Secret Bank Account.
I want to be able to work only because I want to, not because I have to, and travel all over the world. At my job right now I can only get one week off per year. I do not think I would be any happier in a bigger place, with a fancier car, or with more expensive jewelry. I would be happier focusing on travel, family, my dogs, exercise (I love to mountain bike, run marathons and dive), my art (sculpture, photography, painting), and my investments (I love trying to outsmart the market and politicians). If I did have unlimited funds, I might live in a multi-million dollar place, but it would all be in land value. I wouldn’t mind a private retreat on the coast or a nice lake. Less than 2k sq feet would be optimal.
Natalie, I salute your clarity. IMHO, very few people are able to see this truth.
I feel very similarly, and my goal is the same.
Prime,
Eddie may not be aware, but I believe Natalie is a NY’er and a mil. is no particular big deal in that town? Maybe in N. GA you can pretend like that’s money but it won’t take you far in NYC.
Not… in any way to diminish her accomplishments in the slightest!
I agree, this is a great approach.
I’m in Philly, but have to go to the NYC headquarters regularly and grew up there. I probably will not stay in the area after I feel I no longer need to work.
Natalie,
My misunderstanding! I stand corrected, be that as it may, it’s entirely possible too that some folks may not fully comprehend this whole concept of 401k’s to begin with?
I’ve learned over the years that a ‘good’ many REIC’sters will nod along w/ you when discussing them but then they’ll say the most oblivious things!
In many cases it’s like they can’t make the distinction between a Qualified Account ( and a ‘checking’ account? ) I’m being totally serious here.
“but when private collectors pay more than a few million dollars I can only think about what a horrible and miserable person the buyer must be to spend so much money on something so frivolous in the face of so much poverty.”
Funny, Natalie—I feel the same way, but across a broader variety of ego purchases: cars, houses, etc, and at a significantly lower price-point!
Natalie,
I knew you were intelligent and down to earth, but now I can add practical and parsimonious to your virtues. Way to go, girl.
Thank you. I’m not sure I’m deserving, but I will take it.
“Eddie may not be aware, but I believe Natalie is a NY’er and a mil. is no particular big deal in that town? Maybe in N. GA you can pretend like that’s money but it won’t take you far in NYC.”
Well if $1M is chump change in NYC, then the median price for a condo at $1M+ sounds just about right.
As for N. GA, depends where. In Dahlonega, $1M is chump change. As it is on Paces Ferry.
Or maybe $1M is a lot of money to 90% of NYers and 90% of Georgians and 90% of pretty much anyone in the country. Nah, that can’t be.
Natalie,
You’re no doubt younger than I am, but you’re a good role model for us “over the hill, and off the pill”, gals.
“Ego purchases, however, are really no different to me than the purchase of underground snuff films.”
+1000
When you think about it, a Christie’s art auction is none other than a variety of Keynesian beauty contest. It matters not in the least whether a piece has aesthetic value, but rather that the super-rich bidder knows that there are other super-rich bidders who know that the piece is valuable.
As much as I disdain Keynesian economics, and believe it is unsustainable as a general macroeconomic theory, I have to concede the man who invented it had some brilliant insights.
http://en.wikipedia.org/wiki/Keynesian_beauty_contest
Why don’t you go to any “art” store, find a sculpture that looks to you like it might fetch $52.6 million at a Christie’s auction, then go try to sell it? You could make yourself a fortune!
Looks like someone else beat me to it! I’m sure no copies or counterfeits ever slip past the experts.
Hah! You bring to mind a famous document forgery case, chronicled in the book A Gathering of Saints. Highly recommended! (Yes, that is the profile of the Salt Lake City LDS Temple on the cover…)
I’ve always been amused by the stor of Han van Meeger…
http://en.wikipedia.org/wiki/Han_van_Meegeren
These guys did something very similar with fine wine, and it worked! At least for a while:
http://www.slate.com/id/2256775/
For more info see: The Billionaire’s Vinegar.
Speaking of art criticism…
http://news.cincinnati.com/article/20100615/NEWS01/306150004/Jesus-destroyed-by-act-of-God
Wow, what a tough critic!
They plan to rebuild it. Seems like the church can’t take a hint! Either that or they know “acts of God” are just happenstance, and that they’re selling empty words to the masses so they can line their pockets.
They plan to rebuild it. Seems like the church can’t take a hint!
Once again, I’m glad my teacup is a-slumbering on its coaster. Otherwise, I’d be hitting you up for a new keyboard and monitor.
The Devil burned down ‘touchdown Jesus’. That was no act of god.
Someone just sent me this:
http://imgur.com/vS5p2
That is simply delightful!
I always thought that statues were a no-no for evang churches.
Touchdown Jesus was so awesome he transcended dogma. But in general I think you’re right. No idolatry of the visual arts in their churches (but often $50,000 sound systems to ‘worship’ through music- somehow that’s different.)
Maybe if we collectively think of another crash of the DJIA to 6500, it will happen again!
Seems like the Wall Street Journal is sure serving up a lot of bear food these days — delicious!
* JUNE 14, 2010
How to Think Smarter About Risk
Too many investors may be taking big chances with their money because they aren’t considering the most important asset of all: themselves
By MOSHE A. MILEVSKY
Sit back for a moment and ponder something unpleasant: How would a large, sustained drop in the stock market affect your personal finances? More specifically, imagine the Dow Jones Industrial Average hitting 6500—its March 2009 level—and staying there.
I suspect that most of you are thinking about the wretched blow this would deal to your retirement savings and stock portfolio. And it no doubt would. But here’s my advice: Think more broadly. Most important, think about how such a drop would affect your paycheck and your career.
It will depend on the person, of course. Earnings in some professions are tightly linked to the stock market—an investment banker, say, or portfolio manager or financial adviser—while others, such as hospital nurses or tenured professors, are relatively immune to these zigs and zags. Most people will fall somewhere in between.
…
For what it’s worth (maybe nothing at all!), my impression is that the Fed will monetize the stock market as needed to keep the nominal level of the DJIA well above 6500 from here on out, on the assumption that money illusion will suffice to full the vast majority of clueless sheeple that Happy Days are Here Again.
Perhaps someone could compose a similar song to the one that reached lasting propagandistic popularity during the 1930s?
fullfool (pre-coffee typing effort!)A new book “Crisis By Design”, and his website “Behind The Wizard’s Curtain”.com
http://www.canadafreepress.com/index.php/article/9454
This is the next level up from “The Creature Of Jekyll Island”. (BIS and IMF)
“Crisis By Design” -The author is a Professor.
And don’t forget “Shock Doctrine” by Naomi Klein.
They probably own enough shares already via their shills, that they can buy and sell their own shares at any price they please, with little additional monitization.
Even astrologers are predicting it. I came across this while reading my own horoscope:
One last comment: I expect a dramatic, precipitous drop in the stock market between June 26 and August 13, a seven-week period. During this time, Pluto, Mercury, Jupiter, Uranus, and the Sun will continue squabbling. The effect of the eclipse, although earlier, will still be strong.
http://astrologyzone.com/forecasts/monthly/sagittarius_full.php
Better protect Uranus!
Me so mature.
They’re good at predicting things that that already happened in the recent past.
The problem of course is that the ongoing war on savers has forced a huge class of low beta savers to become unwitting high beta investors because they just cannot live on .75% interest from “safe” investments. I have a theory that in the bowels of the treasury department and the Fed, this was by design as a way to prop up the stock market with granny’s life savings and, it will not end well. Put your money out there for wall street to take, and they will take it. Guaranteed.
It was and is.
Remember, Bush wanted to put the SS fund into the stock market!
Economy in U.S. Slows as States Lose Federal Stimulus Funds.
(Bloomberg) — Spending cuts by state and local governments from New York to California may act as a drag on the economy into 2011, only the second time in more than a half century that such reductions have restricted growth for three consecutive years.
States face a cumulative budget gap of $127.4 billion as 46 prepare for the start of their fiscal year on July 1, according to a report this month by the National Governors Association and the National Association of State Budget Officers. They will have to fill that hole largely on their own, as aid from the federal government under programs including President Barack Obama’s $787 billion stimulus package starts to wind down.
State and local cutbacks may trim growth by about a quarter percentage point in 2010 and 2011 after shaving it by 0.02 point in 2010, said Mark Zandi, chief economist at Moody’s Analytics Inc. He also sees the governments lopping payrolls by 200,000 during the next year after reducing them by 190,000 in the 12 months through May.
“Only the second time in more than a half century that such reductions have restricted growth for three consecutive years.”
If measured by spending on anything other than interest on debts run up by Generation Greed, and payments for public employee pensions and retiree health care, expect that to go on for several more years.
More evidence that us doomsayers predicting an inevitable double dip recession (or the even more gloomy ongoing depression) are wrong. ATT Wireless’ Upgrade Site is overwhelmed by orders for the Iphone 4 this morning.
Either consumers still have plenty of spending power or they are spending money that used to go to pay mortgages….
So a trendy toy is selling briskly. The real question is how are AT&T, Verizon and TMobile doing overall?
It could likely be the latter. I saw it with a friend
Nokia N900 here. On a lonely island.
Meanwhile, auto sales languish in the 8million unit range, ya can’t give a house away, and consumer spending for capital goods is at an all time low. I think an Iphone is just a relatively inexpensive diversion.
My Nokia flip is just fine, thanks.
$20k for a car or $300 for a new phone?
No brainer.
No employment benefits for some Idahoans
Boise, Idaho - More than 4,000 Idahoans without work are also without unemployment benefits this week.
Multimedia
Unemployment benefits, which were extended by congress a number of times, have now run their course. Those people won’t qualify for new phases of extended benefits, or see their unemployment checks restored, unless congress again votes to extend the programs.
Around 19,000 jobless Idahoans will still continue to receive their regular state unemployment checks.
So 99 weeks wasn’t enough for them? I know. Let’s get rid of UI all together and just make it a permanent welfare program instead. You get laid off once in your life, and you never have to work again. Uncle Barry and Aunt Nancy will take care of you forever.
Yes, you can live high on the hog with $260 a week, Eddie. Our new pampered class.
I know so many people who struggled for months to find a decent job that maybe paid as much as 70% of what the old job paid. And when they finally found one they were exhuberant, to say the least.
Meanwhile, they were living it up on the weekly UE check, NOT!
Anyway, I thought Eddie was complaining in another post the UE was on the rise.
1. That is $13,520 a year
2. I know many working under the table and collecting UI and will do so as long as the free money keeps coming
3. Plus ALL the other benefits
4. 99 weeks is more than enough to collect UI
2banana,
#2 more or less describes Oregon, even in the best of times. It’s a way of life. My own brother had become a master of balancing that.
The most ‘I’ was ever able to collect was about 13 weeks IIRC? The first thing all of those folks should have done was to contact their lenders -immediately-! But they didn’t.
Eddietard….
Seeing as you think the unemployed have it so great, you’d gladly trade places with them.
Say it. Step up. We want you to say it.
I would tend to at least be openminded enough to read Eddie’s comments if he didn’t resort to disrespectful, childish name calling. That would be President Obama and Speaker Pelosi. It’s easy to say screw the unemployed & poor, but it ignores the bigger picture. Having huge numbers of poor people is of no benefit to the society at large. Having an uneducated and unhealthy underclass is no good. Diseases spread regardless of class and emergency and serious health issue services are much more expensive than preventive care. Desperate people do desperate things and that never works out well.
I would think that working out of the back of a van would suffice for Madam Moonbat.
Pelosi’s New District Office Costs $18,736 a Month
San Francisco is a high-rent city. Just ask Nancy Pelosi.
The House Speaker’s district office in the new federal building in San Francisco costs a whopping $18,736 a month — the highest rental paid by any member of the House — or, more precisely, the highest rental paid by taxpayers on behalf of a member of the House. The rental price was reported by Roll Call on Monday.
The cost of rent is for the little people…
Well, the republicans always get caught for their lack of morals on the family values campaign trail.
The democrats always get caught with frivolous spending when saying there isn’t enough money for social programs.
Our two party system. Love it or hate it. We just don’t have enough nukes to stamp it out.
Given the choices, I opt for hate it.
Unless we can find enough of Saddam’s hidden WMDs to nuke the gov from orbit.
I sure am glad they did a study, who would have thought that people need jobs to pay for their houses. Thank heaven for Harvard.
U.S. Housing Recovery Dependent on Jobs, Harvard Report Says.
(Bloomberg) — Job growth will be the key factor in whether the U.S. real estate market can extend a recovery after the end of the federal homebuyer tax credit, according to a Harvard University study.
High unemployment is fueling the foreclosure crisis and discouraging the household formation that drives property demand, according to the State of the Nation’s Housing report issued today by Harvard’s Joint Center for Housing Studies. The weak labor market resulted in people “doubling up,” or sharing residences, rather than buying their own home, the report said.
“What happens with jobs will matter the most to the strength of the housing rebound,” said Eric Belsky, executive director for the center in Cambridge, Massachusetts. “If employment growth surprises on the upside or downside, housing numbers could too.”
Sounds like years of housing market gloom lie ahead. It is hard to understand why self-styled “investors” don’t just throw in the towel on their folly. Are they sticking to their John Frum cargo cult faith that bailouts are on the way soon to make their stoopid real estate investments look smart?
Harvard’s Joint Center for Housing Studies 2010 report on the state of the American housing market
Judging from the title of this article, perhaps at least one writer at the Wall Street Journal lasted long enough in an undergraduate economics class to discover that income has something to do with demand (and prices)?
I take it back — looks like the writer was merely parroting Nicolas Retsinas…
* JUNE 14, 2010, 1:12 P.M. ET
UPDATE: US Households’ Lower Income Could Hurt Housing Demand
(Update with more details, comments from Housing Center’s Retsinas.)
By Jessica Holzer
Of DOW JONES NEWSWIRES
WASHINGTON (Dow Jones)–Falling U.S. household incomes will force people to buy smaller, more modest houses or to stretch more to own a home, as rebounding home prices begin to eat into affordability, a new report from Harvard University said.
Real median household incomes are almost certain to end the decade lower than where they started, reversing the trend of upward momentum of the previous 30 years, the report noted. Therefore, an increase in mortgage rates or a rise in home prices will crimp affordability.
“If their incomes do not bounce back quickly, Americans will have to choose whether to cut back on the size and features of their homes or allocate larger shares of their incomes to housing,” the report concluded.
The report, released Monday by Harvard’s Joint Center for Housing Studies, also found that U.S. homeowner equity has plunged to its lowest level since 1985 as home values fell and mortgage debt rose sharply over the last decade. Home equity fell from a peak of $14.5 trillion in 2005 to $6.3 trillion in 2009.
The plunge in housing wealth has pushed mortgage debt to its highest levels ever, relative to home equity. Mortgage debt soared to 163% of home equity in 2009, up from 65% in 2000.
The sharp fall in housing wealth has implications for the broader economy, said the Harvard center’s director, Nicolas Retsinas. Middle-class families have relied on their home equity to pay for their kids’ college tuition, to secure small-business loans and to fund their retirement.
“In some ways, home equity has undergirded our moderate-income families,” Retsinas said.
…
“If their incomes do not bounce back quickly”
Whudda they gonna do? Hold their breath until they get their way?
In that NY state 90 day pre foreclosure list that I provided the link to several days ago, the largest group of homes in trouble had only $100k or less to go till payoff. I enterpretted these troubled mortgages as due to a change/interruption in income. So I’d say in NY the troubled mortgages are primarily linked to job loss.
I’m picturing workers in the manufacturing sector in their 40s, 50s who were recently being laid off being the primary profile of these homes in trouble. Now most of the mortgages were originated in the 2005-2008 spike but it’s hard to tell if they were new purchases or refi’s on existing homes. Wish there was more info.
Carrie…. that factoid jumped off the page at me too and I’m still trying to understand it. Given the majority of paper originated in 2005-2008, (to me) it implies that it is the bottom end/entry level buyers (outside of NYC/LI)who are delinquent and defaulting.
Basically, all the run-down, post industrial towns where we saw housing prices up 300% as measured in price/square foot is where the defaults are going to show up.
Carrie… I should clarify.
The data could be interpreted that the bottom end buyer who *established the bottom margin in years 2005-2008* is the profile of the defaulting debtor.
I’ve discussed this type many times here on the blog. More specifically, I’ve discussed what these people are buying and at what price. These houses averaged less than $20/square foot before the Great Housing Fraud began. The data can be seen on propertyshark*com and they were paying 80-100/sq ft during the bubble years. If you don’t know the geography it means nothing but if you know the history, it’s sickening.
What further complicates that issue is that a good many of the folks now in their 50’s and 60’s are finding it’s just about impossible to downsize!
According the the article in the Journal this morning, this is another tried and true method that’s been completely gutted. Pre-retirees are finding unless you can find ( and live ) in a home/condo that’s at least half of what you’re currently paying, it’s a wash.
Transaction costs ( on the buy AND the sell ) along w/ still too high taxes and HOA’s mean you better start liking that 3,500 s/f house you empty nesters!
“Retirement” is over played and overmarketed. When I hear 30 and 40 something chronically underemployed morons say “I’m semi-retired” while believing they’re sitting on a million dollar lottery ticket called a house, I know there is something very wrong.
“chronically underemployed morons” LOL
What’s key there is that often that underemployment is actually by choice. I have nothing but empathy for those actively attempting to better themselves but were forced to take lesser paying positions in the interim.
But among the pony tail/jeans/no pee test crowd, I’m just fresh out! And you’re absoultely right, in fact I don’t believe there’s any aspect of American life more continuously over-hyped than retirement.
I know we all recall the peak years articles on “MEW-dads”.
Keep in mind I understand WHY chronic unemployment is such an epidemic but don’t piss on my leg and tell me it’s raining by saying you’re semi-retired when the truth is that you’re chronically underemployed.
Chronic underemployment is on the menu for every single one of us. I sympathize with those who have to endure it but lets be real and call it what it is.
exeter,
I mentioned on the Portland blog ( and the conserv’s here have NO idea what liberal posters are all about!? ) that once we get on the other side of this thing.., you won’t even -recognize- yourself!
You won’t be the person you were or thought you were just a few years prior! Now in many ways some of our regulars there openly talk about inviting anarchy etc. ( but when I introduced the possibility you just may be looking at stringing together any number of ‘gigs’ just to maintain the status quo, you could have heard a pin drop! )
Entire career fields will have evaporated completely. Likely we won’t even be able to support our newly established min. wage ( or inflation will make it look like min. circa 1970? ) For a good many people, getting a ‘real’ job is just one good resume away ( if they so desired? )
But once just about everything looks like ( and pays like ) min. wage, what’s to become of us ‘then’? Well, my suggestion was it’s never too early to start planning for that eventuality?
My neighborhood is turning over to younger families with children, which is what it was when we moved in 22 years ago. Probably 50% of those that bought when we did, or thereabouts moved on to bigger better things, the rest of us finished raising our kids and stayed put, at least as long as we can manage the maintenance.
Interestingly though, the houses that do sell tend to attract the younger families, and the houses don’t seem to sit on the market for excessive periods. The neighborhood is priced at about 150% to 175% of the Spokane median. I think there will always be a demand for modestly priced, well maintained owner occupied housing. People with young families, generally, prefer to buy rather than rent. The demand will not be as strong as it once was, but its not going to go to zero, either. I fully expect that in five years or so when its time to sell Casa S. I will be able to sell. Whether the sale price is todays price +10% or - 10%is largely irrevelant as it was a place to stay, not an investment.
I might have missed the link. Sorry. For my area, a number of the defaults under $100K are second mortgages. Its possible people are making payments on their primary mortgage, but not on the second, knowing that the second leinholder (if different from the first) won’t initiate foreclose proceedings because the house isn’t even worth enough to pay off the primary mortgage.
Kim,
Unfortunately I think that’s exactly what is going on! Loanowners have figured out that the lender in the second position has little in terms of upside if you quit paying to -ever- recover those losses.
( Of course if they move to FC their odds just dropped to… about zero? ) Isn’t that wonderful? Maybe Debt DOES = Wealth?
Here it is Kim:
http://www.banking.state.ny.us/pff100610.pdf
Note pdf!
Agreed. Just looked at the study and most of what is in it has been reported on this blog; and Professors Ben and Bear don’t even make six-figure tenured salaries with subsidized healthcare, pension, and research grants.
Fig. 2: “Strong Employment Growth, More than Falling Interest Rates, Has Been Critical to Sustained Housing Recoveries” Wow, you mean people who don’t earn any money at all are more likely to figure that an impediment to buying a house than a couple of interest points.
It talks about the shadow inventory; calls it “Held off the market.” (Fig. 7)
“…don’t even make six-figure tenured salaries with subsidized healthcare, pension, and research grants.”
Not willing to compromise my integrity to pay for that lifestyle. It is far better to blog for free than to become an academic prostitute.
Hey Prof Bear, when did you become The Bomber and why are you moving between Bear and Bomber?
He forgot to take off his sock puppet.
It would seem that there are multiple layers of sock puppets :-).
Who knew you needed an Ivy League degree figure out that a consumer driven economy needs consumers who have jobs? And not just jobs, but jobs that pay more than subsistence wages.
Now if we could just get the Master(bator)s of the Universe to get an Ivy League degree…
Colorado, mountain West ‘still struggling,’ says Brookings economic study
Denver Business Journal
The Denver area has made “discernible progress” in recovering from the recession, with two straight quarters of economic growth, “but that growth has yet to be translated into jobs,” says Mark Muro, co-author of the latest quarterly “Mountain Monitor” report on the Intermountain West’s economy from the Brookings Institution and the University of Nevada at Las Vegas.
Denver was the only metro area in the region where the unemployment rate at the end of the year’s first quarter wasn’t higher than a year earlier, the report notes.
But overall, the study says the cities of Colorado and neighboring mountain states are “at once recovering and still struggling.”
“For the first time in three decades, the region finds itself unable to lead the nation out of a recession and [is] forced into a period of serious questioning about the sources of future growth with further federal stimulus unlikely,” the study says. “In these new, uncharted territories, certain corners of the Mountain West face the prospect of being left behind the rest of the country and virtually all of the region’s metropolitan areas have to re-evaluate the basics of the Western growth model.”
There’s been a huge and highly visible proliferation of sign wavers at practically every intersection in most Colorado towns. I suppose these new hires are showing up as “new jobs” on employment statistics, but given the abject misery on their faces, I’m guessing these latest inductees into the Obama Recovery take a bleak view of the region’s economic prospects - and their own.
Good point, Sammy. I’m seeing more sign wavers here in Tucson.
Since my stomping grounds are in the central city, I’m not seeing wavers touting newly built housing developments. Those would be outside the Tucson city limits. Instead, they’re touting things like going out of business sales at furniture stores.
How do you recover without jobs?
Oh never mind…
You look in the mirror every morning and say, “I’m good enough, I’m smart enough, and doggone it, the economy’s recovering!”
See? That simple.
+1
Easy, lend money to people that can’t pay it back.
It doesn’t matter if they can pay it back, so long as federal guarantees are in place to make sure the banks that made the post-bubble-collapse subprime loans are made whole when the FB goes into default and walks away.
“…but that growth has yet to be translated into jobs,”
Hmm, where have I heard this before? Was in the recession of the 1970s? Maybe the recessions of the 1980s? Or maybe the recession of the early 1990? I know! It was the recession of the early 2000s!
But I’m not really sure. They all seemed the same!
UPDATE 2-UK’s Bellway says economic worries hit house sales
Tue Jun 15, 2010
4:39am EDT
* 100 sales per week, in line with last year
* Sales levels have shown dip since election
* Says selling price up 10 pct year-on-year
* Targets 200 sites next year - CEO
* Shares down 0.8 pct (Adds CEO, analyst comment, background)
By Lorraine Turner
LONDON, June 15 (Reuters) - Fears of government spending cuts has dented momentum in the UK housing market housebuilder Bellway (BWY.L) said on Tuesday, while proposed reform to the planning system could be a further obstacle to recovery.
The Newcastle-based company said it made 100 sales per week in the 18 weeks to June 15, with a slight dip in visitor levels and weekly sales rates since the general election due to fears of spending cuts and fiscal policy review.
“The uncertainties are really around the macro picture. What is the new government going to bring to a) an average consumer spending and b) the planning system,” CEO John Watson told Reuters.
The recovery in British house prices has lost its steam in recent months, with prices falling according to mortgage lender Halifax.
…
Business
Property market weak, prices fall 1.4pc in May
11:15 AM Tuesday Jun 15, 2010
House prices fell 1.4 per cent across New Zealand in May, according to the latest REINZ Monthly Housing Price Index, released this morning.
In the three months to May, house prices rose by 0.7 per cent. Compared to 12 months earlier, the index was up by 2.3 per cent.
This latest research shows that house prices are now 5.1 per cent below their peak in November 2007.
…
Coffee is for closers!
Real estate agents come to blows
* Source: Global Times
* [10:16 June 13 2010]
Staff members of a real estate agency shoot the breeze with each other Saturday. Photo: Wang Zi
By Li Yang
Falling property sales and drops in housing prices last month have put pressure on real estate agents in Beijing, and even led to several physical conflicts recently.
Over 30 men broke into an outlet of 5i5j real estate agency in Chaoyang district Friday morning, beating five 5i5j agents and smashing up the shop, the Beijing Times reported. The men were allegedly property agents from another agency. It is the fourth reported case of agents from different companies engaging in fights since May 20.
“The recent fights may have been caused by the current downturn in the property market and intensified competition,” Zhou Zongchun, vice-president of the Beijing Real Estate Agency Association, told the Beijing News.
Dong Liming, general manager of Centraline Real Estate, wrote in his microblog that the difficult business environment was putting stress on property agents, making them irritable. He asked rival companies to maintain restraint.
Beijing reportedly has over 100,000 property agents, and many were drawn to join the industry by last year’s fiery property market, at a time when agencies chose to expand their outlets in an attempt to seize market share.
The central government has successively released credit-tightening policies starting in April that analysts called “hard punches” to cool the overheated property market. These moves have obtained quick results: the average transaction price of a second-hand house in May in Beijing dropped 2,577 yuan ($377) per square meter from April’s price of 15,238 yuan ($2,229), the Beijing Municipal Bureau of Statistics released Friday.
…
For reference, $377 per square meter is equal to $377/(3.2808399)^2 = $35 per square foot. This may not sound like much, but note that is the average drop in home prices for May 2010 — similar to what would happen if San Diego prices collectively fell from $200/square foot to $165/square foot in one month’s time.
Say what you want about China’s government, but they have convincingly demonstrated that it is possible to make home prices affordable if the government is determined to do so. Perhaps Fannie Mae and Freddie Mac could steal a page from Beijing’s play book, and at long last achieve their mission to provide “affordable housing”?
I wonder if there are clandestine little Maoist cells forming among China’s disenfranchised workers and peasants. The Little Red Book wasn’t real big on crony capitalism. From Mao’s Third Strata:
“Those who are going downhill with every passing year, their debts mounting and their lives becoming more and more miserable, in great mental distress because there is such a contrast between their past and present, who feel the constant pinch of poverty and dread of unemployment, are highly receptive to revolutionary agitation and propaganda.”
So will the U.S. go communist?
“So will the U.S. go communist?”
No, the US might finish it’s journey into Fascism. A US version of Social Democrat (Nazi) is possible, but IMO not likely. Think Oligarchy on steroids. It all depends upon how Wall Street will capture the Congress. If the FinReg “fails” in that there is another crisis and the banks are bailed out, more “bonuses”, bigger JPMorgan, Goldman, then this may ignite a more obvious general takeover of the Gov’t. The reason is very simple: If there is no Gov’t takeover, then WS will get another FinReg that they cannot ignore or subvert.
Still, if our Gov’t & Economic Systems continue in that direction, it shouldn’t be as virulent as Germany’s was in the 1930’s and 40’s.
Note that I said virulent. This political/economic system and it’s governance could very well be as pervasive as that bygone era was. Still, Concentration camps, Gestapo, etc. will not happen. Those were inefficient and did not lead to greater profits.
Our version of this would be economic. We would be required to hold more debt than we currently are. Of course, we are required to hold debt now, and we certainly have no choice in the matter.
Never did.
Roidy
Those were inefficient and did not lead to greater profits.
We would be required to hold more debt than we currently are. Of course, we are required to hold debt now, and we certainly have no choice in the matter.
Which is why the PTB are making sure that credit scores affect more than just one’s ability to borrow money.
“Will the US go communist?”
We already are. Wall St. style.
An Ultimate Fighter match between ReMax and Coldwell Banker agents would make for a very entertaining HBB outing, no?
Yep. I suggest locking a bevy of unemployed UHS into a cage and letting them duke it out…
Good thing my teacup’s sitting on its coaster or you guys would owe me a new monitor and keyboard.
“Changying researched this !!!!!”
“Coffee is for closers!”
Nice. Brings back memories.
Never mind them Chinese real estate agent gangs declaring war on one another, or the ongoing housing price declines in most Western nations; China’s housing market will not crash, because the Chinese economy is different:
China is decoupled from the rest of the world.
P.S. Hopefully it is within a U.S. citizen’s First Amendment rights to suggest that both the Federal Reserve Chairman and the former central banker who now serves as Secretary of the Treasury are either liars or stooges.
Bloomberg
China May Avoid U.S.-Style Home Crash, Grantham Says (Update1)
June 15, 2010, 2:20 AM EDT
(Updates with comments from Grantham from 12th paragraph.)
By Sarah McDonald
June 15 (Bloomberg) — Jeremy Grantham, who correctly predicted U.S. stocks would lose money in the past decade, said China’s “experimental” approach to reining in asset bubbles may help it avoid a U.S.-style housing market crash.
China’s lawmakers have raised down payment requirements and mortgage rates and restricted loans for multiple-home buyers as they seek to dampen record property price gains. U.S. Federal Reserve Chairman Ben S. Bernanke said in January the central bank’s low interest rates didn’t cause the past decade’s housing bubble and that better regulation would have been more effective in limiting the boom.
“Bernanke for example has not admitted that asset class bubbles matter at all, but the Chinese know they do,” Grantham, chief investment strategist at Grantham Mayo Van Otterloo & Co, said at a media briefing in Sydney today. China is “adventurous in trying new things, and they’re really quite aware of potential dangers.”
…
My take: Grantham is missing the explosive effect of taking a pin to the side of a bubble. I guess he never tried this with a balloon when he was a kid?
I personally expect the Chinese housing bubble collapse to be the most spectacular of all, thanks to no-nonsense bubble-popping measures from the Chinese communist party dictatorship, but this is simply my own gut-level subjective hunch, not a data-based better-than-expected prediction like the Wall Street forecasting brigade regularly spews out.
“I personally expect the Chinese housing bubble collapse to be the most spectacular of all, thanks to no-nonsense bubble-popping measures from the Chinese communist party dictatorship, but this is simply my own gut-level subjective hunch, not a data-based better-than-expected prediction like the Wall Street forecasting brigade regularly spews out.”
I’ll take your guts over Wall Street any day. I too expect the CHB collapse to be pretty impressive.
Now Roach is a China housing bull! You never know what is coming next in the course of a credit collapse.
Bloomberg
China Property Bubble to Burst ‘Quickly,’ Nomura Says (Update1)
June 15, 2010, 10:59 PM EDT
More From Businessweek
(Adds China’s May property prices in fourth paragraph.)
By Shiyin Chen and Rishaad Salamat
June 16 (Bloomberg) — The “bubble” in China’s property market is going to burst very quickly, with prices set to fall as much as 20 percent in the next 12 to 18 months, according to Nomura Holdings Inc.
National real-estate prices may drop between 10 percent and 20 percent on average, compared with an increase of about 22 percent last year, Sun Mingchun, a Hong Kong-based economist at Nomura, said in a Bloomberg Television interview.
“If you look at housing prices to disposable income in Beijing and Shanghai, they are 13, 14 times,” said Sun, whose team was ranked third in Institutional Investor’s 2010 Asian poll for China research. “There’s no way you can say there’s no bubble.”
Real-estate prices jumped 12.4 percent across 70 cities in May, adding to the 12.8 percent surge in April that was the most since the data series began in 2005. The gains suggest that measures ranging from a ban on loans for third-home purchases to higher mortgage rates and downpayment requirements for second- home purchases have yet to cool the real-estate market.
Stephen Roach, chairman of Morgan Stanley Asia Ltd., said the government’s measures are working “by all accounts.” China’s property boom isn’t a bubble because it’s supported by “solid” demand for residential housing, he said. While portions of the real-estate market such as high-end apartments are overheating, demand for homes will remain robust as rural Chinese migrate to bigger cities, he said in a radio interview from Hong Kong with Tom Keene on Bloomberg Surveillance.
Sliver of Boom
“This is just a sliver of the property boom,” Roach said, citing that each year since 2000, between 15 and 20 million people migrate to Beijing, Shanghai, and second- and third-tier cities in mainland China. That’s 2 1/2 New York Cities created annually, he said. “This underpins a huge demand for residential property. This property has not overheated and the demand for this property is very, very solid.”
…
Cocaine Kudlow sez…
Take Some Profits, Before the Tax Man Takes ‘Em
Larry Kudlow ~ CNBC
Stocks are up strong across-the-board with renewed hopes of global growth fueling a roughly 1 percent gain in all three indices.
Of course, today’s move to the upside follows last week’s strong equity performance.
So here’s what I think, folks: This is as good a time as any for investors to think long and hard about taking some profits off the table.
Why, you ask?
As my old friend Art Laffer continually reminds us, the Tax Man is coming to town on January 1, 2011. Taxes are going up across-the-board. So investors should seriously consider selling into any stock market strength ahead of the tax deadline. Doing this will enable investors to lock in a lower capital-gains tax this year and beat next year’s higher rates.
It’s a lesson investors literally cannot afford to forget: If after-tax investment returns decline, because the key capital-gains tax rate and other investment taxes go up, the future value of stocks is damaged.
Some interesting bond downgrades in the last 24 hours…
BP from AA to BBB (Fitch)
Illinois from A+ to A (Fitch)
Greece from A3 to Ba1 (Junk) (Moody’s)
And usually the rating agencies are WELL behind the power curve.
All is well.
Bear in mind, these same rating agencies gave AAA ratings to the toxic mortgage-backed securities being foisted on unsuspecting “investors” (marks) by our TBTF banks. Now it wouldn’t surprise me if they’re working in collusion with certain trading desks of our independent Wall Street-based 4th Branch of Government with short positions on the euro and Eurozone to hasten their collapse.
I’d go with that analysis.
ITEM: “President Obama will direct British Petroleum to set up an escrow account from which damage claims by individuals and businesses along the Gulf Coast will be paid. If BP refuses, Mr. Obama is prepared to argue that he has the legal authority to force BP’s hand. The move comes as BP considers whether to pay dividends to its shareholders. Members of Congress including House Speaker Nancy Pelosi have demanded that BP refrain from paying dividends to shareholders”.
Expect our friends in Britain to bristle IF President Obama claims legal authority over funds owned by a British corporation. A messy situation is about to get messier.
Paying out a dividend would be only slightly less inflammatory right now than BP CEO Tony Howard singing “Rule Britannia” while pouring oil down a pelican’s throat.
That’s funny.
Lol.
British PM to Obama: “FU. We are pulling out ALL British troops from Afghanistan starting today. You will need to mobilize at least another 10,000 American troops immediately to replace them. Have a nice mid-term election.”
Obama: Ummm - wait a sec…
The new PM has stated that they will not be sending any more troops. Withdrawals will follow.
If they just left Amoco in their name they could have avoided a lot of this.
Giveaway apts. now tax duds.
City Hall Bureau ~ http://www.nypost.com
Hundreds of buildings seized by the city for unpaid taxes and turned over to low-income tenants and nonprofit groups decades ago are now in default, leaving taxpayers on the hook for $100 million, according to city officials.
“It’s just a huge ongoing problem,” Mark Page, the city’s budget director, conceded at a City Council hearing last week.
He said the city is in a bind because it doesn’t want the buildings back and hasn’t had much luck collecting from poor tenants with limited assets.
“In theory, we could take the building because they haven’t paid their taxes. But then what does that do for us?” he said. “It’s full of tenants and then what do you do?”
There’s a reason most “low income” people are in that income bracket - and no, contrary to Democrat dogma and MSM propaganda it’s not because they’re all “victims.” Many or most are outright lowlifes who never bothered taking responsibility for themselves or anyone else. Wherever you put them, they’ll manage to turn it into a ghetto.
“Wherever you put them, they’ll manage to turn it into a ghetto”.
True and I have watched it happen several times in my life. Our city tore down a ghetto a few years ago to build a new one, very nice looking place. Problem, the old buildings were built of brick. The new ones are Styrofoam stucco. They’ll have it torn up in no time, under no penalty of course.
I hate to say it, but Habitat for Humanity neighborhoods do not fare particularly well either. I’ve volunteered a few times, and inevitably when I go back to a build site, the place is very unkempt. For better or worse, maintaining a house is a fairly expensive proposition, lawn chemicals, equipment, water etc., and is labor intensive. The thing I always notice is the amount of junk that collects in the yards, but then dump fees are expensive.
I’ve only been involved in building one Habitat neighborhood here in Tucson, so take what I say in the spirit that it’s offered. (”Sample size of one” statistical bias here, folks!)
I haven’t been over there lately, but the houses seem to be holding up pretty well. Same for the exteriors.
In this particular community, there’s a lot of what would best be described as peer pressure to keep things looking nice. I’m personally acquainted with two of the ladies who’ve chaired the homeowners’ association, and they’re pretty adamant about the peer pressure part.
As much as I stand up for J6P and the less fortunate, yes there are plenty of useless lowlifes in this world.
Betcha nearly 100% of these “poor tenants” have some/all of top-of-the-line cell phones, smoke, drink, get nails done regularly, have lots of designer clothing and have plasma TVs on the wall.
It is amazing how people will come up with money for the things they want or can’t get any other way.
They have uncle sugar daddy for the rent so why pay
You, sir, are heartless. Your local DNC diversity commissar will be around to visit later on. Please be prepared to surrender your computer for inspection.
2banana,
And not for nothing but those are amenities a good many posters here do without! Oh AND pay for their own health insurance?
Betcha nearly 100% of these “poor tenants” have some/all of top-of-the-line cell phones, smoke, drink, get nails done regularly, have lots of designer clothing and have plasma TVs on the wall.
I can assure y’all that I have none of the above.
I have some nice shirts I picked up at 50% off or better to wear to my job. (Business casual).
I have some nice wine that I will partake of a few times a month.
I have a iPhone.
I have a flat screen TV.
I trim my fingernails several times a month.
Thank goodness I don’t smoke or I’d be ghetto!
Despite warnings from its own engineers, “BP chose the more risky casing option, apparently because the liner option would have cost $7 to $10 million more and taken longer,” Waxman and Stupak said.
In the brief e-mail, Morel said the company is likely to make last-minute changes in the well.
“We could be running it in 2-3 days, so need a relative quick response. Sorry for the late notice, this has been nightmare well which has everyone all over the place,” Morel wrote.
BP apparently rejected advice of a subcontractor, Halliburton Inc., in preparing for a cementing job to close up the well. BP rejected Halliburton’s recommendation to use 21 “centralizers” to make sure the casing ran down the center of the well bore. Instead, BP used six centralizers.
In an e-mail on April 16, a BP official involved in the decision explained: “It will take 10 hours to install them. I do not like this.” Later that day, another official recognized the risks of proceeding with insufficient centralizers but commented: “who cares, it’s done, end of story, will probably be fine.”
A spokesman for BP could not immediately reached for comment.
“…will probably be fine.”
Yesterday some wag dubbed that the “quote of the decade”.
I agree, think about it all it applies to: the wars, the bubbles, the bailouts, the oil spill.
One of the fixes I’ve wondered about is using one of those collapsible type “play tunnels”. Well obviously it would need to be made out of kevlar?
It needn’t even fit snugly around the breach. Just anchored to the ocean floor. The metal hoops would need to be very closely staggered toward the bottom but could be spaced further apart as you rise closer to the surface and pressure begins to equalize.
Once on the surface they could use peri-jet eductors and perhaps even salvage a good bit of it?
Wonder if Stupak will drop this investigation if BP offers him a job…
Wait a minute… Wait a minute… I thought this was all Dick Cheney’s and Haliburton’s fault?
Meh, typical disagreement over engineering data on a higly unlikely event (we are talking about TWO in several decades). Not a lot of great engineering data on about what is needed. Highly specialized stuff here.
Not a clear peice of fabrication like the global warming scandal either.
BP apparently rejected advice of a subcontractor, Halliburton Inc., in preparing for a cementing job to close up the well. BP rejected Halliburton’s recommendation to use 21 “centralizers” to make sure the casing ran down the center of the well bore. Instead, BP used six centralizers.
As mentioned previously, Haliburton bought out the remnants of Red Adair’s companies only a few months ago, so they do possess much of the engineering talent for snuffing out runaway oil wells.
Looks like we have more Space Shuttle Challenger market action in store again today.
But perhaps if the Fed and other fiat-money sources run their electronic printing presses just a little faster, a nominal stock market price crash can be precluded?
Ker Plunk! Time for an “emergency” bailout to respike the home builders’ punch bowl?
market pulse
June 15, 2010, 10:00 a.m. EDT
U.S. June home builders index falls 5 points to 17
By Rex Nutting
WASHINGTON (MarketWatch) - Sentiment among U.S. home builders retreated in June after a tax break for home buyers expired, according to a monthly survey released Tuesday by the National Association of Home Builders. The housing market index dived to 17 in June from 22 in May, the NAHB reported. All three components of the index fell in June, and home builders were more discouraged in all four regions of the country. The index was lower than the 21 that was expected by economists surveyed by MarketWatch, and was the lowest since it hit 15 in March.
Those builders are staring into the abyss of no tax credit hell.
Look at it from their point of view. Tax credit ended and demand fell off a cliff into said abyss. Mortgage rates are as low as possible and have been for some time. The economy is ‘as good as it gets’ for some time. And yet… no one wants to buy their houses.
Those that didn’t go under on the first drop will on the second if they bought ANY of the hype and ramped up production.
They fell down the stairs and landed leaning against a wall. Taking a breath, they realized they were bruised, not broken. Now suddenly the wall is ‘moving’ and they realized they are leaning against an elevator shaft and the doors have started to give.
Now all they have left to wonder is how far down is the ground floor.
Let me take the opportunity to point out here that this was completely predictable and we already told the world that the bottom would fall out from under home purchase demand with the expiration of the $8K first-time home buyer tax credit.
This will not stop idiots from saying, “no one could have seen it coming.”
* ECONOMY
* JUNE 15, 2010, 10:04 A.M. ET
Home-Builder Confidence Tumbles
By JEFF BATER And MEENA THIRUVENGADAM
Shorn of government subsidy for home buyers, builder confidence plunged in June, raising concerns about the housing sector recovery.
Separately, U.S. import prices posted the biggest decline in almost a year in May as energy prices fell sharply, in the latest sign that inflation remains tame.
The National Association of Home Builders’ monthly gauge of confidence in new-home sales dropped to 17 from an unrevised 22 recorded for May, the trade group said Tuesday.
Economists surveyed by Dow Jones Newswires expected a reading of 22 in June.
The retreat in the index followed two consecutive increases. A tax credit for first-time home buyers ended April 30. Recent government data showed home-building permits in April fell sharply, suggesting the market would fall without the incentive, which had initially been scheduled to end last November but was extended.
“The home-buyer tax credit did its job in stoking spring sales and we expected a temporary pullback in the builders’ outlook after the credit expired at the end of April,” NAHB Chairman Bob Jones said. “However, the reduction in consumer activity may have been more dramatic than some builders had anticipated, which resulted in their lower confidence levels.”
…
Sounds like the latest wave of greater fool infestors with boxes of stupid and buckets of money have snapped up anything that is decent at the low end of the San Diego market. I have to assume this is Wall Street bailout money trickling down into residential RE, as there is essentially no end-user demand. I am expecting these lastest, greatest fools to get wiped out when the debt cat bounce gives way to the realization that San Diego home prices have not yet bottomed out.
Bottoms up!
County home prices at highest since August 2008
Median price at $340,000, up 15.3 percent from a year ago
By Roger Showley, UNION-TRIBUNE STAFF WRITER
Originally published June 14, 2010 at 11:30 a.m., updated June 15, 2010 at 12:15 a.m.
This home on Capricorn Way in Mira Mesa is on the market for $375,000.
Sean M. Haffey / Union-Tribune
San Diego County home prices, which were falling at double-digit rates a year ago, are now rising rapidly as investors grab the last remaining bargains and upper-end buyers find deals to their liking.
MDA DataQuick reported Monday that the May median price stood at $340,000, up 4.5 percent from April and up 15.3 percent from a year ago. It was the eighth straight month of year-over-year increases.
“Across the board, it looks like almost everything is off the bottom,” said DataQuick analyst Andrew LePage. “A lot of places are up a little from a year ago.”
But LePage said it isn’t that individual homes are appreciating rapidly — it’s just that there’s a broader mix of homes being sold.
For example, he said, North County coastal neighborhoods, excluding low-priced Oceanside, accounted for 10.1 percent of the county’s single-family resales in May, up from 8.1 percent a year earlier and even above the decade average of 9.6 percent. The number of sales in that area rose 41.3 percent from May 2009, far higher than any other submarket in the county.
“The growing shares of sales and relatively large increase in the high-end coast over the last year helps explain your 15.3 percent increase in the median,” LePage said.
…
In bubble runup and collapse, median price becomes un-usable as the mix of properties selling shifts so radically. It’s interesting to see somebody involved in the REIC actually point that out in the face of ‘rising median prices’ that are nothing more than a change in the mix of properties being sold.
“In bubble runup and collapse, median price becomes un-usable as the mix of properties selling shifts so radically.”
You might be able to salvage the median as an estimate of post-bubble collapse, provided you properly weighted your data to reflect the fact that almost nothing is selling at the high end, while lots is selling in the low end. It would take a little thought, though — something which seems to be in short supply at outfits like DataQuack.
Regarding the San Diego article I just posted, note that the California government some how found an extra bit of money in its -$20 bn black hole budget to continue the home buyer tax credit beyond the expiration date of the now-expired federal home buyer tax credit (April 30, 2010). Once California either ends its home buyer tax credit, goes into default, or both, I expect San Diego home prices to tank along with the rest of the state, playing catch up to the rest of the U.S.A.
It is going to take a long time. Remember how long the delay was after sales tanked last time.
Keep an eye on volume. First thing to go.
The CA home buyer tax credit is really a sham.
No money back in your pocket. You may be able offset some CA taxes with it. For one year. Maybe.
It’s going to hurt at the tail end when the greater fools who took the CA tax credit as an incentive to buy realize they have to repay it…
Guys,
Remember if we are far enough down the supply/demand curve, with enough over supply, the effect on prices will be minimal and this kind of credit does help.
Don’t totally neglect elasticity in your analysis.
I suspect we will see a substantial drain on house prices but will be a slow bleed for a while. Followed by some nasty inflation.
What I’m thinking… The credits might be done but we are still in the much larger low rate subsidized market with securitization. Meanwhile employment stinks to high heaven. Will probably be a deflationary enviroment for a long while as we work off the debt.
However, out in the middle of the USA, things are cheap.
You can buy a adequate shelter on less than 40k income with normal metrics. My guess is that in the background a lot of companies are looking at new production facilities in the ole US of A. Suspect Barry O and govt to do some work to lure some stuff in. That part of America can be had on the cheap.
How does that effect us clownifornians? I suspect a lot of people will make a slow migration back east. Follow the jobs. We will probably lose most of the Mexicans as well. All should turn into a long term deflation.
I suspect we will suprised at the election result. A lot of people are going to vote for the entitlement party. That means a lot of money will be wasted trying to stretch things out.
My primary fear in all of this… my new small company job will try to move to Arizona.
A very large manufacturer of pocket knives moved to North Idaho (thats how we say it) from SD about five years ago. I talked to the Ownership family when they were setting up shop. They told me that they figured they would save about $1 million/year on workmans comp insurance alone by moving from SD to NI. They went through a whole litany of what they figured they would save in lower taxes, fees, utilities, insurance and other costs not least of which was the notion that they could secure a large workforce for $6.25/hour in NI vs. well over $15.00 in SD. Interestingly, they did find out that it cost more like $8.00/hour to get quality labor in NI, but that is still about half of the SD cost.
Yeah. Probably end up paying a bit more for to attract engineers and skilled labor.
My thought as a professional is that i want some additional money up front so I don’t get trapped in some backwater. Companies seem to be willing to cough it up for talent, as much as I’ve been able to talk them into thinking I’m talented.
People think California can’t go back to being a low cost area OR get into a long term deflation like Michigan.
Oh, it has a certain inevitable quality to it.
Plus there’s a little-known law in Idaho that makes switchblades legal so long as they were manufactured within the state.
Nightmare vision for Europe as EU chief warns ‘democracy could disappear’ in Greece, Spain and Portugal. ~ 15th June 2010
Democracy could ‘collapse’ in Greece, Spain and Portugal unless urgent action is taken to tackle the debt crisis, the head of the European Commission has warned.
In an extraordinary briefing to trade union chiefs last week, Commission President Jose Manuel Barroso set out an ‘apocalyptic’ vision in which crisis-hit countries in southern Europe could fall victim to military coups or popular uprisings as interest rates soar and public services collapse because their governments run out of money.
In this case -
Democracy = insane public unions and a massive welfare state.
Yes, isn’t a popular uprising the very definition of democracy?
Unfortunately, the uprising would be FROM the public unions demanding the insanity be reinstated. The austerity measures are an attempt to reign in the kleptocracy of public unions.
Wait minute, I thought TARP went to Wall St.?
How do you say ‘pitchfork’ in Greek? (Or do they use tridents?)
He’s right
Democracy could disappear here too.
You just need a critical mass of people with a rapidly declining standard of living and sense of security. Add a spark and bam
You get a Chavez, a Hitler or some other clown.
Uprising does not equal democracy?
A loud well armed minority and propaganda can sway things far from center.
Democracy, well, representative republicanism, disappeared in 1862 when the Supreme Court ruled that corporations were persons.
You do realize we are a constitutional republic? Or maybe no.
I thought we were a federal republic.
Damn. How many chiefs does the EU have?
Banks which are run by managers who don’t prudentially handle money should be shut down, not bailed out. This goes double-plus for Megabank, Inc’s too-big-to-fail gambling scam operation.
US Banks Under Fire: Citigroup, Bank Of America, JPMorgan Chase, Goldman Sachs, American International, Wells Fargo, Morgan Stanley
Written by Michael Vlaicu Featured, US Markets
Jun 15, 2010
…
Even though we don’t yet have full information to evaluate May, here’s what we do know:
Employment
Unemployment technically declined in May. But a deeper look at the numbers showed that was mostly due to temporary census hiring. The private sector only hired a measly 41,000 new workers. If you subtract all government jobs, then hiring was the worst we’d seen since January.
Housing
Mortgage applications for new purchases have indicated an incredible fall in home sales following the April expiration of the buyer credit. They’re down 42%. Foreclosures also continued to occur at a very high rate, so housing market inventory almost certainly increased in May.
…
Re: Too Big To Fail - Dallas Fed President Richard Fisher just made the same point.
Fisher sounds like my kind of banker.
“Most of you are bankers—many, graduates or future graduates of this fine school. My message to you tonight is to remember where we have been. We have collectively been to hell and back. Let’s not go there again. Let’s remember that bankers should never succumb to what is trendy or fashionable or convenient but should instead focus on what is sustainable and in the interest of providing for the long-term good of their customers.
You gather tonight on the eve of a conference of key members of the House of Representatives and the Senate of the United States seeking to agree upon legislation to foster financial reform. This evening, I am going to discuss this reform initiative. I do so, as always, speaking my own mind, making clear that I speak for nobody else at the Fed (something that is usually patently clear). I do so as one of only a few members of the Federal Open Market Committee who have been practicing commercial bankers. And I do so in the belief that it is always best to speak the truth to political convention.”
He spoke at the University of Arizona’s business school back in March. I was blown away by the content of his speech — IMHO, he was previewing his recent (very public) stance on ending TBTF.
Afterward, there was a reception. I had a few friends to catch up with first, and then I went over and talked with Fisher about the varying rates of recovery in the American economy. Same soapbox as I’ve stomped on here — project-based work moving away from the “jobs” paradigm and toward the “freelance” paradigm, and how the “freelance” arena is recovering faster than the “jobs” arena.
In short, we had a nice chat.
Slim,
One of the MANY things I hated about TARP, Obama’s stimulis and the bailouts…
We would have been better served using the money to form new banks with out the liability and letting the big banks collapse.
Additionally they should have made most of the money available as grants for starting new businesses or other kind of investment.
Not that I have a great plan but would have been better than a lot of what we did.
I’m encouraged by the dissenting views of regional Fed bank presidents like Fisher and Hoenig. Perhaps they will mutiny against BB+TTT.
What I like about Fisher is that he came from a commercial banking background. As in, real life experience, rather than ping-ponging back and forth between academia and government.
Kinda funny you know.
Gotta lot of people yelling at the banks for doing what we told them to do.
Can’t be pissed about foreclosures and insolvency after you pushed the banks to make those loans.
A lot of banks are doing what you should do in a deflationary spiral. Trying to hoard cash. It’s the same advice we dole out on here every week. it’s good advice for the banks as well as everyone else.
“Gotta lot of people yelling at the banks for doing what we told them to do.”
Really I don’t think many called the banks and politicians to request rolling back regulation and allowing CDS and securitization to run wild. Before the collapse I’d guess the average American didn’t even know what these things were.
“Can’t be pissed about foreclosures and insolvency after you pushed the banks to make those loans.”
Give it a rest James
Most of the subprime was not forced on banks. Banks did it themselves as soon as they realized they could sell the risk to pensions, conservative investors, and the US gov via securitization, and make money hand over fist in the process.
Subprime Primer
“A lot of banks are doing what you should do in a deflationary spiral. Trying to hoard cash.”
The only problem is that Uncle Sam (e.g. FHA, GSEs) is guaranteeing loans that private bankers do not consider prudential. If the banks did consider these loans prudential, there would be no need for the govt guarantee, as banking is a self-regulating system if banks are allowed to underwrite loans and charge interest rates that include a risk premium to cover their risk of losing both loan and customer. But with super-low-rate, govt guaranteed loans, private banks which do not get their loans summarily guaranteed cannot compete. Thus they are left on the sideline with money parked under the mattress but not much new lending at a rate which pays the bills. I guess that’s where future bailouts come in — to guarantee that bankers will continue getting paid well even if they do little business.
Wrong. The question of prudent or not is moot when you can package the bad loans in with the good ones as a tradeable security, have it rated AAA and sell it off to other suckers.
“The question of prudent or not is moot when you can package the bad loans in with the good ones as a tradeable security, have it rated AAA and sell it off to other suckers.”
Your comment is so 2007. Private securitization is so dead that I cannot even find a recent article to post on the topic (one of the first times ever that I could not find an article on a topic I was researching!).
The GSEs would also be dead, were it not for Uncle Sam’s choice to force the U.S. taxpayer to keep them on life support. Securitization was a bubble which took seventy years to inflate, from its origin in the First Great Contraction of the 1930s to its collapse in the Second Great Contraction of the 2000s. The PTB are in denial that the idea was a bad one and has failed spectacularly. They’ll eventually get over it:
Mortgage securitization, R.I.P.
Misery continues at Fannie and Freddie
June 16, 2010
The mortgage giants may need billions in US loans, write Lorraine Woellert and John Gittelsohn.
The cost of fixing Fannie Mae and Freddie Mac, the two mortgage companies that last year bought or guaranteed three-quarters of all US home loans, will be $US160 billion ($187 billion) and could grow to as much as $1 trillion after the biggest bailout in US history.
Fannie and Freddie, now 80 per cent owned by US taxpayers, have already drawn $US145 billion from an unlimited line of government credit granted to ensure home buyers can get loans while the private housing-finance industry is moribund.
…
Fannie and Freddie are deeply wired into the US and global financial systems. Figuring out how to stem the losses and turn them into sustainable businesses is the biggest piece of unfinished business as Congress negotiates a Wall Street overhaul that could reach President Barack Obama’s desk by next month.
Neither of the two main political parties wanted to risk damaging the mortgage market, said Douglas Holtz-Eakin, a former director of the Congressional Budget Office and White House economic adviser. ”Republicans and Democrats love putting Americans in houses, and there’s no getting around that.”
With no solution in sight, the companies may need billions of dollars from the Treasury Department each quarter.
The alternative - cutting the federal lifeline and letting the companies default on their debts - would produce global economic tremors akin to the US decision to go off the gold standard in the 1930s, said Robert Shiller, a professor of economics at Yale University, who helped create the S&P/Case-Shiller indexes of property values.
…
”People all over the world think, ‘Where is the safest place I could possibly put my money?’ and that’s the US,” Professor Shiller said.
”We can’t let Fannie and Freddie go. We have to stand up for them.”
…
Fannie and Freddie also raised billions of dollars by selling their own corporate debt to investors around the world. The bonds are seen as safe because of an implicit government guarantee against default. Foreign governments, including China’s and Japan’s, hold $US908 billion of such bonds. Karen Petrou, managing partner of Federal Financial Analytics, a US research firm, said: ”Do we really want to go to the central bank of China and say, ‘Tough luck, boys’? That’s part of the problem.”
…
Fannie and Freddie has benefited by selling $US1.4 trillion in mortgage-backed securities to the Federal Reserve and the Treasury since September 2008, bonds that otherwise would have weighed on their balance sheets. While the government bought only the lowest-risk securities, it could incur additional losses.
One idea weighed by the Obama administration involves reconstituting Fannie and Freddie into a ”good bank” with performing loans and a ”bad bank” to absorb the rest.
That could cost $US290 billion because of all the bad loans.
Whatever the fix, the money spent would not be recovered, said Alex Pollock, who is now a fellow at the Washington-based American Enterprise Institute.
”It doesn’t matter what you do or don’t do. Fannie and Freddie will cost a lot of money. The money is already lost. There’s an attempt to try to avert your eyes.”
“We” did not tell the banks to make NINJA loans.
Subprime makes up only 6% of the bad loans made.
Until this myth and blaming of the poor is finally laid to rest, there will NEVER be any real recovery for anyone but the perpetrators… Wall St.
All of the GSE loans are subprime loans. All of them.
That has been 80% of the market for about three years now.
Previously it was a good 35% of the market.
Should have gone to nothing but instead was used to feed the socialist housing agenda.
“Should have gone to nothing but instead was used to feed the socialist housing agenda.”
Won’t that kind of backfire if housing has another leg down from here, as is widely predicted? Or has the Fed finally figured out how to make sure that real estate always goes up again?
“That has been 80% of the market for about three years now.”
What market? If you mean the entire residential RE market, you’re wrong.
If you mean GSEs alone are almost all subprime, well that was its purpose.
But subprime is only ~15% of the total residential RE market and delinquencies are only ~7%. (these numbers seem to be hazy at best)
The biggest problem that you don’t hear about is CRE delinquencies. So everybody needs stop stop blaming the subprime. It was neither the cause nor the instigator of this mess.
IT all depends on what your definition of subprime is.
What James is trying to insinuate is that the current crisis is due to CRA loans.
This is clearly not the case.
businessweek.com/investing/insights/blog/archives/2008/09/community_reinvestment_act_had_nothing_to_do_with_subprime_crisis.html
The Community Reinvestment Act, passed in 1977, requires banks to lend in the low-income neighborhoods where they take deposits. Just the idea that a lending crisis created from 2004 to 2007 was caused by a 1977 law is silly. But it’s even more ridiculous when you consider that most subprime loans were made by firms that aren’t subject to the CRA. University of Michigan law professor Michael Barr testified back in February before the House Committee on Financial Services that 50% of subprime loans were made by mortgage service companies not subject comprehensive federal supervision and another 30% were made by affiliates of banks or thrifts which are not subject to routine supervision or examinations
China’s US govt debt holdings hit 2010 high: Treasury
China has raised its US government debt holdings to the highest level this year, according to US Treasury data published Tuesday.
The Chinese government raised its US Treasury bond holdings to 900.2 billion dollars in April, its highest level since November 2009, the Treasury Department said in a monthly report on international capital flows.
China remained far ahead as the top foreign debt holder, followed by Japan, which held 795.5 billion dollars in April, and third-placed Britain at 239.3 billion dollars, according to the figures.
There has been an influx of investments into US Treasury bonds — a channel used by the government to borrow from the public to finance its burgeoning deficit — amid the mounting European debt crisis.
The latest Treasury data also showed that net foreign purchases of US securities rose in April but at a slower pace than the record set in March.
Net long-term foreign purchases fell to 83 billion dollars from a record 140.5 billion dollars in March.
I think China got burned in the last 12 months when they left the USD and invested in the Euro.
Good for these guys, screw BP and our slack ass federal gubmint, do what needs to be done.
Okaloosa defies Unified Command over East Pass plans.
DESTIN — Okaloosa County isn’t taking oil spill orders any more.
County commissioners voted unanimously to give their emergency management team the power to take whatever action it deems necessary to prevent oil from the Deepwater Horizon spill from entering Choctawhatchee Bay through the East Pass.
That means the team, led by Public Safety Director Dino Villani, can take whatever action it sees fit to protect the pass without having its plans approved by state or federal authorities.
Commission chairman Wayne Harris said he and his fellow commissioners made their unanimous decision knowing full well they could be prosecuted for it.
“We made the decision legislatively to break the laws if necessary. We will do whatever it takes to protect our county’s waterways and we’re prepared to go to jail to do it,” he said.
Good for them.
It appears the DOW is ready to bust out a quick 1000+ move to the upside after its recent lows.
PS- Note “its”, Professor “Bomb-thrower” Bear.
It’s “its,”.
(Sorry, I just can’t help myself…)
Sigh
PS- I DO understand my commas and periods are to always be inside of quotation marks. I’d need a good editor if I was a writer. Thank God I’m not.
Just funnin’ ya… what else is a fellow bear to do on a day when the stock market rockets upwards with no rhyme or reason?
PS- I DO understand my commas and periods are to always be inside of quotation marks. I’d need a good editor if I was a writer. Thank God I’m not.
I’ve just completed a website design for a Canadian client. He’s on the faculty of a U.S. university, but he still writes like a Canadian.
Apparently, the Canadian style is to have the commas outside of the quotes. And, truth be told, I got tired of Americanizing things and just left his copy as is.
It doesn’t matter really, but you have to be consistent, (one way!) (or another)!
Bank profits rise, but so do bad loans.
Investigative Reporting Workshop, American University.
The nation’s banks keep looking for signs that they’ve turned the proverbial corner toward prosperity, and there may have been a few faint indicators in the first quarter that the worst days are behind them.
But after more than two years of stress, it’s probably still too early for many to relax, according to quarterly financial reports compiled by the Federal Deposit Insurance Corp. and analyzed by the Investigative Reporting Workshop at American University in Washington.
Even though profits increased sharply, troubled assets continued to grow. According to the Workshop’s analysis, 411 banks have a “troubled asset ratio” of more than 100, up from 389 banks at the end of December. In other words, they had more problem loans and foreclosed properties on their books than capital and loan loss reserves.
Breaking News!
AlGore had an affair with Laurie David, Star mag. reports.
Who?
Larry David’s alter-ego.
Is his name David Larry?
Also, Paris Hilton was spotted wearing panties just last week!
AlGore’s split from wife Tipper after 40 years of marriage was a shock to everyone who thought theirs was the ideal marriage. Now Star can exclusively reveal that the former Vice President was having an affair with Larry David’s ex-wife — for the past two years!
In the June 28 issue of Star, on sale Wednesday, we report that Al and Tipper’s breakup didn’t come as much of a surprise to one Hollywood player — Laurie David. Star has learned that Al has been having an affair with Laurie, who divorced Seinfeld creator and Curb Your Enthusiasm star Larry David in 2007 amidst reports she was cheating with the caretaker of their Martha’s Vineyard summer home.
“Al and Laurie went from friends to lovers,” an insider tells Star. “It couldn’t be avoided.”
wmbz,
Thanks for the laughs! ( Like how hard could it be to be a ‘caretaker’ to begin with? ) Isn’t that what Jack Nicolson’s character was in The Shining?
So on top of that, it’s out in that sleazy ‘dump’ called Martha’s Vineyard! But NO… that’s STILL not good enough skating out of the BS and stress the rest of us face on a daily basis? You have to have an affair w/ your bosses WIFE!
First Time Home Buyer Tax Credit Closing Extension Appears Likely to Pass Senate. ~ June 15, 2010 ~ Mortgage News
There was a tremendous response to a blog that I posted last week regarding the possible extension of the first time home buyer tax credit. We received over 50 comments, most of them from potential home buyers who have a deal in place but are having difficulty closing on their home prior to June 30th.
Almost without exception, these commenters are dealing with servicers, underwriters, processors, and lenders who are severely backlogged because of the huge spike in mortgage volume that occurred prior to the April 30th expiration of the tax credit. According to a video on MSNBC today, as many as 20 percent of those who signed contracts prior to April 30th may not be able to close by June 30 in order to claim the tax credit.
As a result, Sen. Harry Reid (D-NV), proposed an amendment to the American Jobs and Tax Loophole Closing Act of 2010 that would extend the closing date to claim the tax credit three months to September 30th.
Sounds like (so far) there is no proposal to reopen the credit to new takers, but rather just to allow time for those who took it to clear their transactions.
Damn there’s a pill for everything now days…
Spanish clinic probed for offering to ‘cure’ gays. Jun 15
The government in Spain’s Catalonia region said Tuesday it was investigating a clinic in Barcelona that is allegedly offering treatments to “cure” homosexuality.
The Policlinica Tibidabo in the Catalan capital is offering pills and psychiatric treatment to “convert” homosexuals, Spain’s leading daily El Pais reported.
Many of those coming for treatment are followers of a particular religion who believe homosexuality is incompatible with their beliefs, it said.
“An investigation has been opened into this clinic,” a spokeswoman for the regional government’s health department told AFP.
“We do not consider homosexuality as an illness, far from it.”
Medical science has come a long way from the days when the proposed cure was to have gays view heterosexual pornography.
That worked for me!
Of course, I wasn’t gay in the first place.
But thank goodness for good old fashioned American heterosexual porn for keeping me that way! Who knows how fast I might have turned gay otherwise!
SFBB,
And hey, while you’re at it you’d be perfectly qualified to work at the SEC!? No, seriously, there are regular ads in local Portland weekly papers that offer counseling.
They usually read something like; “Gay ( but miserable? ) Stop in for a free consultation!” But as you go on to read their 1/8th page ad, they do rattle off a whole list of reasons it’s only temp. for a good number.
They don’t get preachy or anything of the sort. I think they’ve just had enough experience w/ younger males that move to “the big city” ( yeah Portland, right! ) where it seems like “anything goes!” They get drawn into it and by all accounts aren’t happy in the slightest. I’ve worked w/ a lot of young males downtown over the years and nearly all of them that were ‘formerly gay’ I never heard any of them refer to those days fondly. IMHO.
Ya can’t be too careful about that sort of thing around SanFran…
Yep we need to roll back regulation on medicine and let the free market of idiocy take over. Snake oil for everyone.
Well, unless electro-shock ‘therapy’ is part of the cure to get you straight? LOL! Yeah, the ads I’ve seen said “counseling”. It’s truly a sight to behold though. You get young guys flocking here after grad. and within 6 weeks of living in PDX suddenly decide they’re gay!
I’ve had a lot of them pateintly explain to me that they’re bi-sexual too. As I’m older they put extra emphasis on the bi… part as they’re sure I’ve never ‘heard’ of it?
BP’s Downside Is Worse Than You Thought
thestreet
The military uses the phrase “It is never as good as last reported.” Nobody really knows how bad it is going to be for the Gulf region. Every report seems worse than the previous one. Until all the facts are available, it would be foolish to pronounce BP safe from bankruptcy.
One thing seems clear: There is little upside for BP, at least in the short term. This is a multiple-Exxon-Valdez event in a highly populated and economically productive region. The real damage has yet to be seen, and it is looking grim.
“It is never as good as last reported.”
How about another version: “It is always worse than expected.”
It’s our Chernobyl.
If the street is saying sell, I say it’s a good time to buy.
No problem with double digit increases, everyone should be able to absorb that. My question is when do we start getting our “free” stuff? That’s why we voted for Barry!
Health care premiums likely to see double-digit increases.
Sacramento Business Journal
Employers can expect health care premiums to increase an average of 9 percent nationwide in 2011, down slightly from a 9.5 percent average rate increase in 2010, according to a new report by PricewaterhouseCoopers.
But local brokers are skeptical that local businesses will see rate increases that low. The norm appears to be anywhere from 11 percent to 14 — and some employers with expensive health benefit claims in 2010 face renewals as high as 60 percent.
“Locally, I’m seeing nothing less than low double digits,” said Sacramento broker Vinny Catalano. “The 9 percent must be a vast generalization across the board,” he added. “2011 is anyone’s guess at this point. There’s still a lot of unanswered questions about how health care reform will roll out.”
“Locally, I’m seeing nothing less than low double digits,” said Sacramento broker Vinny Catalano. “The 9 percent must be a vast generalization across the board,” he added. “2011 is anyone’s guess at this point. There’s still a lot of unanswered questions about how health care reform will roll out.”
Methinks that a lot of these increases are “’cause we can” increases rather than ones that are based on actual cost increases in health care. We’ve been discussing the notion that price resistance is finally starting to rear its ugly head in the health care arena, just like it is in education.
Oh, one more thing: Health insurance companies’ internal operations aren’t exactly renowned for their attention to costs. In a nutshell, they’re not the most cost-conscious of companies. So, rather than trim the fat in their own operations, they can just scream for a rate increase.
We became renters four years ago. Landlord is selling so will likely be moving. He did offer it to us first, but we politely declined.
Looking at Craigslist, there are usually a few way below market offers for rent. They are about 50% off the current rent, contain some nic pics, but have a 800/866 contact number instead of a local number. One of the listings actually mentioned the property was in foreclosure. Anyway, I think it is a bait and switch or some type of scam and haven’t contacted any of the too good to be true listings.
BTW, rent for a 3BR/2BA home in Irvine is down about $200 per month if four years. Not a lot, but it is a move in the right direction for a renter.
Stay away from the ‘deep discounts’ but keep your eyes open for ones at 3-10% under going rate. A lot of good landlords offer slightly below market rate to get a large number of applicants in order to screen them carefully.
A good tenant paying 90-97% of market rate is worth five times a parade of deadbeats paying 100-110% of market rate for a few months.
Those slightly discounted rentals will go fast.
“One of the listings actually mentioned the property was in foreclosure”
Wow, talk about brazen!? I went thru that very scenario myself and it was no fun. We like to pretend steering clear of this thing is such a lay-up but stories such as your own exhibit clearly it is not.
In fact, I tend to think there’s about just as much a liklihood of getting taken as a renter as a buyer. Lots of desperate LL’s, probably way more than there are desperate tenants. So… what’s your chances of coming across a real shell game/snake? I’d say about 85% of these ppl weren’t -even- LL’s before The Boom and the vast majority are ‘accidental ll’s”. Keep your head up and your eyes open!
DOW ~ 10,400 next stop 11,000, it’s all good.
until the next shoe to drop. What will that be?
Banks yesterday won an important victory over the part of the financial reform package they most feared-and almost no one noticed.
Senator Blanche Lincoln is considering a “compromise” that will neuter her proposal to ban banks from trading derivatives by including a long delay before requiring any change to the swaps business, allowing banking regulators discretion about implementing the provision, permitting special derivatives entities to operate inside of federally supported bank holding companies, and pre-authorizing federal bailouts of the derivatives entities if they blow themselves to financial smithereens.
Lincoln’s spokesperson says the derivatives proposal remains “a strong provision,” which might make you think it remains a strong provision.
Think again.
Under the proposed compromise, any spin-out of swaps desks will be phased in over a two-year period. During that time, federal banking agencies will be tasked with considering the impact of the measure on mortgage lending, small business lending, jobs, and capital formation.
Those vague and open-ended considerations will provide wiggle-room for the federal banking agencies to avoid implementing the new swaps rules.
Make no mistake about what is going on here. The swaps provision is being transformed from a mandatory ban into something over which banking regulators have discretion. And the banking regulators-from Fed chair Ben Bernanke, to FDIC chief Shelia Bair, to SEC head Mary Schapiro-oppose the ban on swaps altogether. Given wiggle room, they will wiggle right past Senator Lincoln rule.
Even if the new rule were somehow to survive the wiggle of the regulators, Lincoln’s compromise also allows the banks to continue operating swaps desks so long as they are separately capitalized. To put that in perspective: the failed Bear Stearns hedge funds and the Citigroup (NYSE: c) SIVs that collapsed at the start of the financial crisis were also separately capitalized. But that capital proved inadequate, and eventually they had to be “bailed out” by their parent companies.
And the losses at the SIVs and the hedge funds eventually became taxpayer liabilities when the government stepped in to prevent the collapse of Citi and backstop Bear’s losses.
If a new swaps entity gets into trouble, guess what will happen?
measton,
Sad, and it’s the one good thing that could’ve come as a result of all of this? Full speed astern! WTF do these banks need to be playing w/ this crud for? How many layers of deriv’s do they need?
Wish you had better news.
Oh, I think it was noticed. You don’t think the market’s jump today was a mere coincidence, do you? They’re celebrating.
You might have something there.
But I have some news for the revelers: The handwriting of impending doom remains scribbled on the wall. The fools who are promoting financial reform at the moment are predicating their action on the spurious presumption that the financial crisis is over. It is only at best half over, and the PTB who think otherwise are living in denial.
The impetus for the current premature edition of financial reform is getting swamped out by the most recent wave of financial market volatility. When the dust settles on the credit bust, lots more housecleaning will be necessary to protect the financial system against a continuation of the recent pattern of ever-larger and more frequent too-big-to-fail bailouts. The seeds of resolve for ending too-big-to-fail have been planted and have taken root, but have yet to come to fruition. We aren’t there yet. In the long run, Keynesian stimulus and free (government-provided) too-big-to-fail bailout insurance are dead.
Where America’s Money Is Moving
Jon Bruner, Forbes.com
Jun 14th, 2010
http://realestate.yahoo.com/promo/where-americas-money-is-movinghttp://realestate.yahoo.com/promo/where-americas-money-is-moving
Anywhere they don’t have to pay taxes. Hope their roads stay nice, no pot holes. No need for cops, firemen.
Once again, the locals will suffer when the equity locusts descend.
Is this the La-Z-Boy way to “go Galt”?
http://www.dailymail.co.uk/news/worldnews/article-1286480/EU-chief-warns-democracy-disappear-Greece-Spain-Portugal.html#ixzz0qwrTswX3
EU chief warns democracy could “disappear” among upheavals in southern Europe as the money runs out. Oddly enough, CNBC told me no such thing.
Interesting…it appears someone has used my credit card to pay a vet bill in Baltimore (I’m in Seattle). Who would’ve thought a credit-card fraudster would have a pet…
Glad I noticed that Discover has mis-computed my balance. Turns out there’s a pending transaction that they consider part of my balance, but hasn’t posted yet. Should be fun to call the vet tomorrow and find out what fun things my CC Is being used for.
* REVIEW & OUTLOOK
* JUNE 12, 2010
Crashing Real Estate
Is this really the time for a tax increase on commercial property?
Ronald Reagan liked to describe the sequence of actions that government typically takes toward private business: “If it moves, tax it. If it keeps moving, regulate it. If it stops moving, subsidize it.” Our government is now doing all three at the same time to America’s real-estate market, and with the brilliant results you’d expect.
It’s the taxing part that represents the most immediate threat to the commercial market. Despite price declines of more than 30% in many areas since the height of the boom, commercial real estate has not become the default moonscape observed in the residential market.
At least not yet. But a plan passed by the House and pending in the Senate would raise “carried interest” taxes on the managers of many real-estate partnerships from the current capital gains tax rate of 15% to the top income tax rate, scheduled to hit 39.6% on January 1. Carried interest is the gain these managers receive if the assets held by the partnerships rise in value.
…
But valuations are key to avoid a replay of the residential debacle in commercial property. Over the next five years, more than $1.5 trillion in commercial real-estate debt will be falling due. Without the subsidies poured into the residential market, many managers of commercial properties have aggressively responded to the downturn by raising capital, or by buying back or restructuring their debt. Now Washington arrives to impose a new burden.
Congress and the White House have tried everything under the sun to put a floor under the housing market, but for the commercial side they seem eager to knock out the foundations. Per President Reagan’s advice, could the politicians at least wait until a business is moving to start increasing taxes on it?
At least one high-level government official is catching on to how the U.S. housing market got to this terrible place. Maybe it’s because she is from Kansas (where my ancestors lived three generations ago). Through openly acknowledging the problems with trying to turn all Americans into home owners, Sheila is leading the way out of the denial phase of the housing bust.
FDIC Chairman Questions Government’s Obsession With Promoting Home Ownership
By Bill Zielinski on June 9th, 2010
June 7, 2010 - In a speech given today, FDIC Chairman Sheila Bair questioned the wisdom of government policies that over-subsidize home ownership while devoting insufficient attention to the need for affordable rental housing. The Chairman noted that expansive public and private efforts to push homeownership to a record level of 69% ultimately proved to be unsustainable, resulting in mortgage defaults and massive loan losses for the banking industry.
…
In order to provide a smooth flow of necessary private capital to the mortgage markets, the Chairman noted the need to once again allow mortgages to be securitized. “But in today’s world of global finance, securitization remains the best way to tap large volumes of capital at the lowest possible cost. Right now, private securitization of nonconforming loans remains largely shut down. Investors have lost faith in a process where the financial incentives — between lenders, underwriters, ratings agencies, and investors — are badly misaligned.”
“We need a whole new set of transparent market practices. We need higher standards for loan underwriting and documentation. Loan originators need to keep some skin in the game and not be able to walk away from the long-term consequences of their decisions.”
Chairman Bair’s final recommendation is to examine whether too much capital and subsidies are being extended to homeowners at the expense of renters. “For 25 years federal policy has been primarily focused on promoting homeownership and promoting the availability of credit to home buyers. While tax deductions for interest on most forms of consumer debt have been curtailed, the home mortgage interest deduction lives on. Local property taxes are also deductible, as are capital gains up to $250,000. In the end, these public and private efforts helped to briefly push the homeownership rate as high as 69 percent. That’s a level that ultimately proved unsustainable, and that may not be reached again for many years, if ever.”
…
DFW bubble, R.I.P.
Home > Business
Business
Fort Worth-area home prices expected to weaken
Posted Tuesday, Jun. 15, 2010
By SANDRA BAKER
sabaker@star-telegram.com
Fort Worth-area home prices are expected to weaken slightly this year as home builders also anticipate pulling back on construction in coming months, say two market reports released this week.
The National Association of Home Builders/Wells Fargo Housing Market Index dropped 5 points to 17 this month, a level not seen since February, just before the second round of the $8,000 first-time home buyer tax credit.
“The home buyer tax credit did its job in stoking spring sales, and we expected a temporary pullback in the builders’ outlook after the credit expired at the end of April,” the association’s chairman, Bob Jones, said in a statement. “However, the reduction in consumer activity may have been more dramatic than some builders had anticipated, which results in their lower confidence level.”
Read more: http://www.star-telegram.com/2010/06/15/2268124/fort-worth-area-home-prices-expected.html#ixzz0qzbcYJp8
This shadow inventory shell game can only last so long before it ends; once built, houses are very hard to hide from view.
HOUSING: Median prices up, foreclosures down
Fall in foreclosures may drive up prices, analysts say
By ERIC WOLFF - ewolff@nctimes.com | Posted: June 15, 2010 3:21 pm
Foreclosures in May fell dramatically in San Diego and Riverside counties, while median home prices increased, said two reports released by real estate analysts Tuesday.
The median home price in Riverside rose to $210,000, up 16.7 percent from the previous May, according to real estate data firm MDA DataQuick. The median price in San Diego County rose to $340,000, up 16.7 percent from the previous May.
“Southern California home sales rose last month in all but the lowest price categories as buyers took advantage of tax credits and low mortgage rates,” the DataQuick report said.
In North County, the median price rose 21.5 percent in May to $475,000, according to records from the San Diego County Assessor.
Foreclosure activity fell sharply in both counties, said a report from real estate analyst ForeclosureRadar. Lenders sent San Diego County borrowers 1,748 notices of default, which start the foreclosure process, down 46 percent from last May. Fewer homes were taken away in foreclosure in May, down 7 percent from the previous year to 1,239. As reported last week, North County defaults fell 47 percent, and foreclosures dropped 83 percent.
Riverside County borrowers received 2,292 notices of default, down 52 percent from the previous year. Lenders foreclosed on 2,101 homes in the county, down 4.2 percent from last May. Locally, Southwest Riverside defaults fell 45 percent, and foreclosures tumbled 84 percent.
The two counties matched statewide trends, in which notices of default fell 43 percent to 23,911 in all of California, and final foreclosures fell to 17,819, down 1.9 percent.
But the decline in foreclosure activity made little sense, said Sean O’Toole, founder of ForeclosureRadar.
“Given the staggering number of delinquent home loans, foreclosure activity should be rising, not falling, as we found again this month,” O’Toole said in a statement.
…