Bits Bucket For June 21, 2010
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The Housing Bubble
Examining the home price boom and its effect on owners, lenders, regulators, realtors and the economy as a whole.
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OK - this week alone I have heard no less than 3 people claim that the bottom has come and gone in San Francisco.
Suggesting otherwise is met with dismissive you-don’t-know-what-you’re-talking-about glares.
Meanwhile, the vacant storefronts are piling up.
But nothing even close to capitulation when it comes to property values.
Capitulation is the result of a trend that overwhelms those who oppose it.
Still in phase One of recovery over grief - Denial.
There is no denying that the lies are real.
I will give this to the sheeple: The denial is not in the face of overwhelming evidence. I’ve watched several masters holding college kids working for peanuts at my place of employment finally get “real jobs”. Although Lockheed Martin has been laying off in other locales our local guys have gotten a pretty healthy list of new contracts. Several local colleges have received some pretty healthy gifts from former patrons’ wills. The profs are breathing easier. There is still plenty of small time commercial expansion going on here while the drop out rate has slowed significantly. TARP did get money moving again.
Talking w/a student starting a new advanced degree, she just got her notification 2 weeks before the program started that she was in. She had no problem getting all the money she needed from the US gov who now is controlling all student loans. She is carrying debt for her undergraduate degree.
It’s like the toilet bowl. Bottom comes, sh*t happens, bottom goes. But it doesn’t mean sh*t won’t happen tomorrow.
Thank you for that visual.
IMO we are years away from capitulation.
Yeah — I am guessing it will be at least 2015 if it does happen, and the Fed, Treasury Dept, etc will do everything within their power to attempt to prevent capitulation from ever happening.
I’ve been noticing that although homes have mostly sold for $79- $100/sq ft for the past year, recent prices are coming on at $130 - $150/sq foot. I’d say those sellers believe the worst is behind us. To exacerbate that price difference those cheaper homes were in much better shape than the higher priced ones coming on now. People are not preparing their homes for sale but instead are putting them on the market with sometimes pretty serious issues.
The delusion runs deep for certain.
I about fell out of my chair yesterday when CNN reported that a crisis is brewing because “building starts are at an all time low and there isn’t enough inventory to keep pace with demand”.
I kid you not.
The size of the shadow inventory can only be described as staggering.
I have been noticing quite a few newly abandoned homes mostly outside the villages. The village location is more highly favored. There are a few that are just listed that you can tell are bank owned because the furniture is way too nice for the house. They are priced at ridiculous levels for the shape the houses are in. I”m not sure what the banks think they are doing by pricing them that way except there sure are a lot of people I’m meeting that just moved here. Out of staters are almost always the ones that overpay when you see a sale like that go down. So I guess it’s the equity locusts that are still arriving that the local banks plan on saving them.
From my observation, there is a lot of new inventory coming on the market this spring. I do a lot of running through the streets of Spokane Valley, and everywhere I go for-sale signs are cropping up. Two on my block alone. I always pull the “poop sheet” and iot seems to me that the listing prices are still pretty high. In fact one of them on my street prompted me to say to Mrs. Spokaneman, “If that house sells at that price, Casa Spokaneman is going on the market”. She didn’t agree, so it ain’t happening.
There is some selling going on, a REO that had been on the market for almost a year just had a “sold” sign go up. It had gotten pretty shabby looking, so I am glad it sold.
The amount of pain in store for Spokane and northern Idaho is almost unimaginable. Some of the prices over there were absolutely mind blowing given the lack of well-paying jobs. It seems that almost every new house built was for a millionaire, especially in the Sandpoint area. Not too long ago, a guy could buy 20 acres in eastern WA or northern Idaho for less than $20k. There’s a reason land was so cheap- there’s nothing around there.
I’m beginning to think there will be no capitulation. Only that one-by-one, city-by-city, house-by-house things will change. But none of it will be announced. We’ll have to be on the lookout because the deals will be out there, but mostly kept secret so the illusion can continue.
Yesterday my gf and I were at a coastal Oregon town. Three years ago she couldn’t care less about my ramblings on things real estate and economy, except for her efforts to change the subject. But she was the one yesterday who guided me over to the RE office to look at the postings, priced between about $650k - 1.8M and the first to say, “Who the eff is buying this crap?” At least I’ve trained her well. We might as well have been in Laguna. Never mind that a few miles in either direction and you’re back in meth land.
Maybe there is some capitulation…by me. I’m so disgusted, I’m beginning to not care.
I’d say there is some capitulation…by me. I’m so disgusted by what realtors, sellers, and buyers still maintain as fair market value, I’ve about given up. We still have outta staters coming who keep throwing money at the problem, instead of being realists.
My gf and I were looking at house prices at the coast this weekend. Houses I *might* touch at $200-$400k were listed at $750k-$1.8M. These are houses that sold in 2000 for…$200-400k.
I really don’t think there will ever be strict capitulation. I think there are deals but they must be arranged between buyer and seller on contract. This is how I think I’ll end up buying, if I do. The rest, to me, is madness.
/rant off
“OK - this week alone I have heard no less than 3 people claim that the bottom has come and gone in San Francisco.”
On what evidence? Let me guess: The stimulus-driven debt cat bounce has fooled them into thinking that real estate has started always going up again?
I suggest you compare notes with these people this fall, after the expiration of the $8K federal home buyer tax credit, the $10K CA state home buyer tax credit, the end of the Fed’s MBS purchase program and another summer’s worth of prime- and alt-A ARM resets have taken their toll on the SF housing market.
Agreed IBT.
San Francisco and the Bay Area housing market in general has not nearly taken the beating it deserves.
There are lots of reasons for this - the relative strength of the tech. job market, the constant B1-Visa imports who (for some crazy reason) see these insane home prices as ‘normal’, all the stock options money floating around the valley, limited space to build on and strict regulations around the bay that discourage a lot people from bothering. You also have technology industry employees with a little money who think that because a house sold 2 years for 1.1 million, it must be a steal at 750K. Classic value traps for classic dummies.
All that won’t matter soon enough. The simple truth in SF (and surrounding counties) is that homes prices average 8 to 10X the average income. Plus, major area employers - HP, Oracle, ect. are laying people off in masses. I like to ride my bike around San Mateo (17 miles south of SF). More for sale signs are up than a duck has feathers.
Just wait. The jig is up for SF this year, next year at the latest.
The Savings & Loan disaster took 4 years to bottom out.
This is WAY bigger than that.
US manufacturing crown slips
June 20 2010 ~ FT
The US remained the world’s biggest manufacturing nation by output last year, but is poised to relinquish this slot in 2011 to China – thus ending a 110-year run as the number one country in factory production.
The figures are revealed in a league table being published on Monday by IHS Global Insight, a US-based economics consultancy.
Hoping the new change in the yuan will reverse that trend - but doubt it.
China manufactures complete crap.
They are the largest manufacturer in the World.
Eat crap, World.
Don’t know if you were around at the time, but I recall a period a few decades back (1960’s-1970’s) when “Made in Japan” was a label that was synonymous with “cheap manufactured crap.”
It wasn’t until the 1980s when they noticeably began to substitute quality for quantity in their manufactures.
I expect a similar long-term growth path in China’s development as a manufacturing power.
Couldn’t agree more.
Also look at Korean brands. They were crap in 80’s and early 90’s and they are top of the line now. Made in china will be one of the top qualities in next few years.
China Backs Obama With Debt Holdings to $900 Billion.
June 21 (Bloomberg) — A year after criticizing U.S. fiscal policy as “irresponsible,” China’s leaders are showing increasing confidence in President Barack Obama’s leadership of the American economy.
China boosted holdings of Treasury notes and bonds by 2.6 percent to $900.2 billion in March and April, after reducing its stake by 6.5 percent from November through February, the longest consecutive monthly declines in a decade, U.S. data released June 15 showed. The People’s Bank of China said June 19 that it will relax its 23-month lock on the yuan.
“As world leaders gather in Toronto for meetings, enthusiasm about China’s shift to a more flexible currency may be dampened by Beijing’s public caution that any changes in the value will be slow and modest”.
“Senator Charles E. Schumer, a Democrat from New York, said Saturday that if China did not take specific steps to push up the renminbi “in the next few days,” he would push forward with legislation that could impose restrictions on Chinese exports”.
~ News Service
“China boosted holdings of Treasury notes and bonds by 2.6 percent …”
Where else in the world is there for China to put all the money that flows to them?
“China Backs Obama With Debt Holdings To $900 Billion.”
Now there’s a leap for you: China buys U.S. debt thus China is backing Obama.
It is indeed quite a leap.
Not too long ago our very own Packman mapped out the seasonal trends in Treasury holdings - the point being our debt holders are always shuffling their decks and the their holdings flucuate as a matter of course. So yeah, that’s a whopper of an inference there.
“China boosted holdings of Treasury notes and bonds by 2.6 percent …”
Where else in the world is there for China to put all the money that flows to them?
“China Backs Obama With Debt Holdings To $900 Billion.”
Now there’s a leap for you: China buys U.S. debt thus China is backing Obama.
Here’s a bigger leap, how is their purchase of treasuries going to increase the value of the yuan and decrease the value of the dollar?
Is China backing Obama or merely saying the U.S. isn’t as f$%^& up as Europe?
Have we made an arrangement to provide the cannon fodder for their exploitation of Afghanistan’s mineral wealth? It seems we already have we relation to that ginormous copper mine.
“in relation to”
Pre-markets are very green, with all the good news coming out from our friends in China the DOW may jump a couple of hundred points today. The storm has passed nothing but clear blue skies ahead.
Red China greenback move make blue sky.
Pink skyes at night,
bad monkeys take to flight.
Your power-chair will be paid in full!
DOW about to go negative after being up almost 150 points.
Even though Ram is a leftist a-hole he is not stupid, he wants to separate himself ASAP from Barry and his crew of brain dead losers.
Rahm Emanuel expected to quit White House.
Rahm Emanuel, the White House chief of staff, is expected to leave his job later this year after growing tired of the “idealism” of Barack Obama’s inner circle. Washington ~ FT
Washington insiders say he will quit within six to eight months in frustration at their unwillingness to “bang heads together” to get policy pushed through.
Mr Emanuel, 50, enjoys a good working relationship with Mr Obama but they are understood to have reached an understanding that differences over style mean he will serve only half the full four-year term.
“Washington insiders say he will quit with six to eight months …”
This is screwey. This makes him a lame duck. Al his power is wisped away with this announcement. You’d think he’d be replaced ASAP.
Possibly, combo. Or maybe it’s a gambit by Ram Emanuel to force the president’s hand to shake up the White House staff.
We live in interesting times.
“…is expected to leave his job later this year…”
How can one separate rumor from fact on a vague statement like that one?
Barry better hurry and sign-up Fidel Castro as a replacement before he dies.
Nah, Hugo Chavez is the ideal replacement.
“Washington insiders say he will quit within six to eight months in frustration at their unwillingness to “bang heads together” to get policy pushed through.”
I’m calling horsesh!t on this. If it said “within the next few days” then I might buy into it. Who the hell knows what they’re going to be doing 8 months from now? What a joke.
I think they’re exaggerating the timeline to allow Rahm plenty of time to solicit and consider whatever lucrative offers from the private sector that will probably come his way.
Rahm must of walked in on Obama on his prayer rug facing Mecca and been appalled since he’s (Obama) Muslim and everything, or so the right keeps telling me.
no way. O is the Messiah remember?
Does that make Sarah Palin the modern incarnation of the Blessed Virgin?
Let me just mention that I think America’s founding fathers were on the right path when they tried to separate church and state. At some point along the way, their wise plan was derailed.
Banks Have Billions at Stake as Rulemaking Heads to Agencies.
(Bloomberg) — While Congress puts finishing touches on its financial-regulatory overhaul, Wall Street lobbyists are preparing for a new battle out of the public spotlight and inside almost a dozen federal agencies.
If the bill passes in roughly the form being negotiated by House and Senate lawmakers, regulators will be directed to write hundreds of new rules, conduct dozens of studies, combine two banking agencies and bring industries such as mortgage brokers under federal oversight for the first time.
The process will take place in an arena where technical knowledge and relationships with regulators take precedence over old-fashioned legislative arm-twisting. The lobbying will be intense because a slight change in the wording of a rule or in the definition of terms such as “major swaps participant” could curtail a firm’s business — or allow it to flourish.
“We ain’t seen nothing yet,” said David Hirschmann, president of the U.S. Chamber of Commerce’s Center for Capital Markets Competitiveness.
The Chamber, reviewing a recent version of the text, counted 399 rulemakings and 47 studies that would be mandated by the bill. “This is going to be a huge implementation challenge and we are already getting ready for it,” Hirschmann said.
When a guy who has never had a real job says the administration is too idealistic, we’re in trouble.
rainbows and unicorns in D.C. these days.
And oil rainbows in Gulf waters. White House idealists are doing a wonderful job there.
With no end in sight.
Louisiana (Reuters) - BP Plc estimates that a worst-case scenario rate for the Gulf of Mexico oil spill could be about 100,000 barrels of oil per day, according to an internal company document released Sunday by a senior U.S. congressional Democrat.
Its estimate of up to 100,000 barrels (4.2 million gallons/15.9 million liters) of oil per day is far higher than the current U.S. government estimate of up to 60,000 barrels (2.5 million gallons/9.5 million liters) gushing daily from the ruptured offshore well into the sea.
BP to Obama admininstration: We’ve upped our estimate. Now up yours.
“We’ve upped our estimate. Now up yours.”
ROTFLMAO!!!!!!!!! Cleaning coffee off the computer screen. That just made my day.
Up your royal pipeline America!
Pathetic.
Bill - that was awesome!
Are you in the Middle Class? Are you paying your fair share of federal taxes?
“Middle-class households that earned between $34,300 and $141,900 paid 50.5 percent of all federal tax revenues in 2007 (the most recent year analyzed), according to a new CBO study, and households that earned between $34,300 and $352,900 paid 66.7 percent of all federal taxes”.
do folks making $34k really pay ANY federal income taxes, after all credits and deductions?
No, they pay payroll taxes.
No, they pay payroll taxes.
Point taken. I skimmed over “federal tax revenues” and assumed income tax, rather than considering payroll taxes.
I was thinking $34k should not be included in the middle class category. I wouldn’t go below $50k. My reasoning is that once you pay the minimal on food, insurance, housing, clothing, a way to work, and your taxes what’s left shouldn’t qualify as a middle class lifestyle.
I’m not so sure $352k belongs there either. See above only reasoning works in reverse. Maybe it feels like middle class if your co-op overlooks Central Park.
For most of America, 34K is entry level middle class. You have to be frugal but you can live rather comfortably.
I wonder what share of income those same households earn, or put a different way what share of the population earners within those brackets are? If 60% of the population earns 55% of the money and pays 50% of the taxes they’re getting a relatively good deal, if 40% of the population earns 30% of the money and pays 50% of the taxes not so much a deal.
Aha found the study. That group (income precentiles 40-95% are obviously 55% of the population (95-40). They earn 56% of the national income, and pay 50.5% of the taxes. The top 5% earn 32.3% of the income and pay 44.3% of the taxes, the bottom 40% earn 11.7% of the income and pay 5.2% of the taxes.
If you take the percentiles 10%-5% out of that 50% middle class group, it does shift the tax burden down quite a bit. Now 50% of the people (percentiles 90-40) earn 46.3% of the income, but pay 39.6% of the federal taxes. That means that group was earning 10% of the national income, and paying 11% of the taxes. The middle class cut off for 40-90th percentiles would be $34,100 to $102,000.
Put in graphical form:
http://i47.tinypic.com/vo5phc.jpg
Interestingly not only is the overall federal tax system progressive, but excise and social security are each progressive taxes (which isn’t something I had seen anywhere before this study).
I’ll bet if you diced that a little smaller, you would find $80K+ paid almost all of that 50%
There is an exact itemization on the IRS website.
That’s not what Pastor Creflo Dollar says.
Double-dip fears raise worries the Fed is out of bullets.
cnnmoney ~ June 21, 2010
Economists are more nervous about the chances of another recession. And one of biggest fears is that the Federal Reserve may have run out of bullets to fight another downturn.
“They do have some ammunition left, but it’s not going to pack a lot of punch,” said Mark Zandi, chief economist with Moody’s Economy.com.
Most economists aren’t yet predicting that a double dip recession is imminent. But financial problems in Europe led to a sell-off in U.S. stocks in the past six weeks. Weaker-than-expected readings on job growth and retail sales have added to concerns that the recovery is stalling out.
“Whenever the next recession comes, it is very important that policymakers have had the opportunity to reload their gun to fight the downturn,” said Lakshman Achuthan, managing director of Economic Cycle Research Institute. “Today it’s not clear that there’s a lot more policymakers can do.”
Double dip? For Main St., the only recovery they’ve seen has been for Wall St.
Reload the gun… Bernie’s 22LR pistol is empty and that polar bear is plenty pissed off and coming our way… It stopped to swat at the superficial stinging wounds it suffered but now realizes that he ain’t bleeding anymore and is coming up on us fast. I suppose Bernie will throw the gun at the bear - yep that will save him from being eaten…
‘World News’ Political Insights — Sticker Shock Jeopardizes President Obama’s Agenda
Congressional Democrats Put Brakes on New Spending, Despite Press to Focus on Jobs.
President Obama has had two major messages for Congress in recent months: Keep the focus on jobs and the economy, and get serious about runaway spending.
As national debt rises, new push to put focus on jobs and unemployment.
His problem now is that they’re starting to listen to him on the second point — at the expense of the first.
In a major shift in congressional politics, Democrats have developed a severe case of sticker shock, just as many of their colleagues press to prime the pump of the economy in time for the mid-term congressional elections.
Now, even popular initiatives with widespread support — notably an extension in unemployment benefits for those who have been out of work for more than a year, plus $50 billion the White House is asking for to help avert state layoffs of teachers and law enforcement officials – are stalled inside Congress.
There is always quantitive easing. Fed may be out of bullets but still has nukes to used if needed.
Quantitative easing will only work if Congress will spend, just like rescueing the banks will only work if people will borrow and lend.
Historically this has not been a problem.
How many billions were and are still being awarded in no-bid contracts?
Payback Time. In Budget Crisis, States Take Aim at Pension Costs.
Associated Press
Gov. Pat Quinn said an overhaul would save Illinois’s pension system $300 million in its first year. But the fund is weakened.
Illinois raised its retirement age to 67, the highest of any state, and capped public pensions at $106,800 a year. Arizona, New York, Missouri and Mississippi will make people work more years to earn pensions. Virginia is requiring employees to pay into the state pension fund for the first time. New Jersey will not give anyone pension credit unless they work at least 32 hours a week.
“We can’t afford to deny reality or delay action any longer,” said Gov. Pat Quinn of Illinois, adding that his state’s pension cuts, enacted in March, will save some $300 million in the first year alone.
But there is a catch: Nearly all of the cuts so far apply only to workers not yet hired.
And people still deny how much of this was caused by all the non-smoking campaigns.l
Live longer, work longer and in your final years be healthy enough so you can get a lot of OT….instead of wheezing and coughing and barely putting in 35 hours, and retiring to an early grave.
Too funny! Shag ‘em up, workers of the world! Smoke, smoke, smoke that cigarette!
I was out on my Saturday 3 hour training run, which unfortunately gives me a lot of time to think. I used to think happy thoughts, like ever increasing 401-K balances, mega home value appreciation (by Spokane standards). Now, not so much.
I was mulling the notion that my generation, say people 50 to 70 (I am 61), may be the last generation which will ever be able to retire in the classic sense, or at least how we have come to view retirement in the last 50 years.
With SS retirement age being pushed to 70 and beyond, mortality rates increasing due to a reduction in health care benefits due to resulting from lower rates of quality employment and cuts in medicaid and medicare and the inability of people to build retirement nest eggs due to high debt levels, the logical extension is that at some point in the not too distant future, most folks will die at their desks long before they can afford to retire.
Old dream retirement: See the country in the Winnebago, with the Harley on the trailer in back.
New dream retirement: Coronary or stroke on your last day of work…..preferably as your are wheeling your tools/contents of your desk out the lobby.
Yours is certainly the dream of the Treasury Dept.. Die before you collect a dollar of SS and while still covered by the company health plan.
Bureaucratic nirvana.
Not just the Treasury. The FIRE sector would also love to keep your life savings.
Squatters take over homes, causing different housing crisis
By SALLY KESTIN
The Associated Press
Posted: 12:15 a.m. Monday, June 21, 2010
FORT LAUDERDALE, Fla. — Imagine going to a house or condo you own and finding a stranger living there who claims the property no longer belongs to you.
It’s happening across Florida and other parts of the country through what authorities say is abuse of a centuries-old concept known as adverse possession.
Dating back to Renaissance England, adverse possession allowed people to take over abandoned cottages and farmland, provided they were willing to live there and pay the taxes. These days, officials say, the legal doctrine is being misused by squatters, trespassers and swindlers to claim ownership of vacant or foreclosed homes.
In Broward and Palm Beach counties alone, adverse possession claims have been filed on some 200 homes in recent months. Three of the four people behind the claims have been arrested, and police are investigating the fourth man, who along with his father, a convicted mobster, tried to take over properties in Hollywood.
“We look at this as another con job, another get-rich-quick scheme,” said Don TenBrook, a Broward state prosecutor of economic crimes. “You’re starting to see them pop up all over the place. It’s been spawned by the real estate crisis.”
“It’s been spawned by the real estate crisis.”
I’m sure it was, expect I don’t see it as I “crisis”.
“In Broward and Palm Beach counties alone, adverse possession claims have been filed on some 200 homes in recent months. Three of the four people behind the claims have been arrested…”
Is there any ‘legal’ way to squat? It seems to me that simply stepping foot on private property against the owners wishes is illegal, let alone moving in. I can’t imagine moving into somebody else’ house, pretending I had a right to live there. That takes a lot of nerve, and it seems only logical that one would be arrested.
Better make sure they are not home before you squat.
Brazen home-invasion robberies stir Jupiter Farms residents to action
By Andrew Marra Palm Beach Post Staff Writer
Posted: 7:23 p.m. Friday, June 11, 2010
JUPITER FARMS — A trio of would-be robbers who shuffled up a front yard on Alexander Run with a pump-action shotgun last week had the misfortune of confronting an armed homeowner in the driveway. He stared them down until they ran off.
But if they had tried one of the neighbors instead in the rural Jupiter Farms enclave, they might not have had much better luck. In the house next door lives a Vietnam veteran with heavy firepower in his bedroom. At the two houses across the street, the homeowners were packing heat too.
It’s no secret that much of an unincorporated swath of pine tree-studded acre lots, elegant mini-mansions, rugged ranch homes and rural individualism - is heavily armed. And after two brazen home-invasion robberies and one attempt earlier this month, some residents are buying new bullets and brushing up on Florida’s self-defense laws.
“If they get inside my house they’ll die,” vowed Joe Melchiosse, a Vietnam vet and air-conditioning repair worker who lives next-door to the site of the attempted robbery. “At least they’ll get hurt.”
At a Jupiter Farms homeowners association meeting Thursday night, more than 400 packed in to listen to Palm Beach County Sheriff’s officials describe their investigation into the robberies, in which masked gunmen stormed into occupied, unlocked homes and in one case stole several weapons.
Deputies advised residents to lock their doors, trim oversized shrubs and be vigilant. Many residents grilled deputies about the state’s Castle Doctrine law, which declares people’s right to use lethal force to defend themselves on their property.
Deputies told attendees that if someone comes into their house unwelcomed, it is presumed they mean them harm. But they warned that the decision to shoot and potentially kill someone is not an easy one.
“It is a life changing moment that will affect the rest of your life,” one sheriff’s official told the crowd.
But it was clear many were in no mood to negotiate with trespassers. The crowd burst into applause and cheers when a Jupiter Farms resident stood and advised the other residents to gun down intruders.
“We all have guns in our house,” the man said. “If you have an armed intruder in your house, shoot him.”
Budget Crisis Leaves Los Angeles’ $74 Million Jail Empty
Gross overcrowding in one jail and no money to staff the other one (AP)
The brand new, state-of-the-art Metropolitan Detention Center remains empty because the cash-strapped Los Angeles Police Department lacks the funds to staff it.
The $70 million, 172,000-square-foot, five-floor structure jail is one of the largest of its kind, but because of the city’s budget problems, the LAPD can’t hire enough jailers to operate it, according to the Los Angeles Times.
The LAPD has 10 jails, although seven are just a few cells inside police stations. The others are larger regional facilities in the San Fernando Valley, South Los Angeles and downtown. About 120,000 people are arrested and jailed each year in Los Angeles.
Kick the illegals out of the prison system and send them back home, wouldn’t need so many prisons.
Yeah, and give ‘em each a gun to take home.
Sorry - guns are illegal for the average citizen to own in Mexico.
That is why it is such a crime-free country…
Hardee har har!!!
Good one 2banana. Got that right.
But we need old ‘double dipping’ government workers to put out fires, fight crime, teach our children in our failing schools and to send out notices of property tax increases to cover their six-figure salaries and fat pensions . Maybe they had better Unionize. Oh, they did.
Florida ends ‘double dipping’ by teachers, other government workers on July 1
By Josh Hafenbrack
Sun Sentinel
Posted: 8:38 a.m. Tuesday, June 15, 2010
TALLAHASSEE — In 2007, Jon Wilson retired after 38 years teaching history at Hollywood Hills High School. His retirement: One month.
After that brief break, Wilson returned to the classroom — using a state law that allows government employees to retire, take a month off, and come back collecting a paycheck and a pension. Now 67, he’s still teaching lessons on subjects such as the Civil War and the Kennedy political dynasty.
Starting July 1, however, veteran teachers and government workers will be blocked from retiring and returning quickly to the job — or becoming so-called double dippers, as Wilson did.
Lawmakers in 2009 passed a law to stop double dipping, citing high-ranking local administrators, politicians and judges who earn six-figure salaries and fat pensions well into their golden years. After July 1, workers will have to wait six months to return to the government payroll after retiring, a waiting period supporters say should prove impractical enough to end the practice.
Sen. Mike Fasano, R-New Port Richey, said it will nudge high-paid government officials off the payroll and make way for new blood.
“Every person in any job today — from a politician to any other public servant — is replaceable,” said Fasano.
Critics and government workers, however, worry the state is snubbing workers with valuable expertise that will be missed at schools, police and fire stations, state office buildings and city and county halls.
Many top educators double dip the system
Growing number retiring only to get rehired at same job or another district, collecting pension as well as a paycheck
An analysis by Ohio’s eight largest newspapers found:
• One in four public school leaders in Ohio’s 614 districts brings home the bacon twice and one in two educational service center superintendents is doing the same.
• Allowing superintendents to retire early halts their contributions into the fund and pulls millions of dollars out at a time when the fund’s long-term viability is at risk.
• Superintendents point out that the practice is legal and that it would be foolhardy not to take advantage of a pension system that permits them to retire and return to work.
• While many superintendents claim that this practice is justified because of a shortage of qualified candidates, the Ohio Department of Education says there are thousands of licensed individuals who meet state standards to run school districts.
• And this is part of a larger state issue. About 32,000 state and local employees collected more than $1 billion in pension payouts last year on top of their paychecks. Three-fourths of those dollars went to STRS members.
http://www.ohio.com/news/96744849.html
• Superintendents point out that the practice is legal and that it would be foolhardy not to take advantage of a pension system that permits them to retire and return to work.
If all they care about is themselves, then sure. But one could argue that there’s a bigger picture at hand, and they should consider what’s “right” rather than just what’s legal.
Very few people care about the big picture when their personal little picture is affected. This problem will only be resolved by changes in the legislation or state or local default.
I read an interesting blog this weekend exploring the notion of resolving the California Public Employee Pension problem through the legislative initiative process. That should strike fear in hearts of the Public Employee pensioners.
“Critics and government workers, however, worry the state is snubbing workers with valuable expertise that will be missed at schools, police and fire stations, state office buildings and city and county halls.”
If they have such valuable expertise, why aren’t they encouraged not to retire in the first place? Perhaps these ‘critics’ need to be reminded that these workers are strategically gaming the system.
“…valuable expertise…”
I could write something here, but I’d get flamed to a crisp. Some of you out there know the real story in the public sector, and that will just have to do for today.
This problem is not unique to government.
I know (or know of) several guys who were offered an “early retirement” package (including their pensions) when tehri production line shut down, only to be called back as “consultants” when the line restarted.
Including “Mr Radome Fitter”……was “the guy” at the factory that fit and installed all the radomes on one of the jet lines. When he retired, man hours and scrapped radomes increased about five-fold. So heeeee’s baaaaaaack……….
“Critics” = Community Organizers
Critics and government workers, however, worry the state is snubbing workers with valuable expertise that will be missed at schools, police and fire stations, state office buildings and city and county halls.
well then why let them retire?
How hard would it be to pass a law to say that if you come back in the employment of the state your pension is put on hold? Voila, no double-dipping. I suppose you’d still have the issue of them “earning” a second pension….seems you can look at things such that they have one employment “account”. If they want to tack on extra years, sure…but they only get one pension per employment account..of which they only have one.
Early Social Security beneficiaries are penalized $1.00 for every $2.00 earned above a fairly low threshold.
At about $60K of income SS is eliminated entirely. That would be reasonable for public employee pensions as well.
To say that someone who has retired from a job, and EARNED that retirement according the rules of the time, should not be allowed to work is true tyranny and nothing short hypocritical in society that claims to be pro capitalist.
Millions of people are NOT living “fat” on their retirement. And at that age, your medical expenses are literally a killer.
nothing short hypocritical in society that claims to be pro capitalist
We’re talking about gov’t pensions, right?
Where is the capitalism when it comes to the gov’t? To public school districts?
There is no capitalism in the government. As such, I’d argue that your argument is invalid.
Money exchanged for goods and service is the very definition of capitalism. HELLO?
And you don’t think the government is capitalist? Ever heard of a CAFR? Do know how much money every government, from the tiniest town to the biggest state, has invested in Wall St.? And how that surplus money is NOT claimed as part of the operating budget?
This whole thing of former civil service workers not being able to work as civil servant after retirement is a non-starter and about as smart as a circular firing squad and meant to do nothing but distract us from the real crooks.
Money exchanged for goods and service is the very definition of capitalism. HELLO?
Umm..money taken by force, and with no alternatives or competition? How does this possibly meet the definition of capitalism?
The root of capitalism is choice. When it comes to government and their services, there is no choice.
Oh, you have a choice alright. No holds barred and no recourse force by business or a least some recourse and regulation by government.
To think that businesses will act altruistically all by themselves is juvenile fantasy.
Germany Rejects Obama’s Call on Growth, Stoking G-20 Conflict.
(Bloomberg) — Chancellor Angela Merkel’s government rebuffed U.S. calls to focus on bolstering growth over debt reduction, setting a course for conflict at the Group of 20 summit in Canada this week.
“Nobody can seriously dispute that excessive public debts, not only in Europe, are one of the main causes of this crisis,” Finance Minister Wolfgang Schaeuble told reporters in Berlin today alongside Merkel. “That’s why they have to be reduced.”
Germany is holding to G-20 commitments on exit strategies from fiscal stimulus, and “not violating international requirements for a coordinated strategy for sustainable growth,” Schaeuble said. “We will face up to the international debate and I think we can do that with a great deal of self- confidence,” he said.
Is Free Checking about to go out the window?
In an attempt to make up for lost revenue from new regulatory rules on credit cards and overdraft fees, watch the banks re-think such perks as “free checking.” Most consumers haven’t paid for a checking account in years.
HSBC North America has told customers that it is converting their free checking accounts to ones that carry a monthly maintenance fee of up to $15.
Wells Fargo is eliminating free checking on July 1. Bank of America is testing new tiered checking accounts that will encourage customers to increase their activity with the bank.
My checking account isn’t exactly “Free”. If I don’t have a direct deposit set up to the account, I need at least a $75 recurring transfer from checking to savings to avoid a maintenance fee. I think that’s fair - it’s “free” to me because they can make money on the cash they know will be in my account for at least a little while…
If the bank pays 0 percent on your checking account then loans the money out at market rates and pockets the spread, it is not free –
Two words - Credit Union
Gotta watch them like a shoplifter, 2banana. I’ve been a credit union member for years, and they’ve been just as knee-deep in the housing bubble as any other part of the financial sector.
True, but I’d rather have to watch a shoplifter than a serial rapist.
California License Plates May Go Digital. Imagine ad-blaring license plates. NBC San Diego
California drivers may soon come bumper to bumper with the latest product of the digital age: ad-blaring license plates.
State lawmakers are considering a bill allowing the state to begin researching the use of electronic license plates for vehicles.
The device would mimic a standard license plate when the vehicle is moving but would switch to digital messages when it is stopped for more than four seconds in traffic or at a red light.
In emergencies, the plates could be used to broadcast Amber Alerts or traffic information.
The author of SB1453 says California would be the first state to implement such technology if it decides to adopt the plates on a large scale.
Supporters say license-plate advertising could generate much-needed revenue in a state facing a $19 billion deficit.
Revenue stollen from some other private company.
This remonds me of that old movie “Americathon”
Well I’ll be damned! Some around here HAS seen that movie!
Great. Will the driver be allowed to program their own message in the license plate area?
Absolutely not!
You have to pay for it (but will not receive any percentage of profit), and gubmint will decide what will be advertised. It’s for the greater good, and it takes a village.
Not going to happen. Law enforcement will shoot this down from the get go.
And if it does pass, law enforcement will find a way to let something bad happen to the morons who pushed it through. Accidentally, of course.
Sen. Kyl: ‘Obama Says No Border Security without Amnesty’
Connie Hair ~ 06/20/2010
“In a stunning revelation at an Arizona town hall meeting this past Friday, Republican Senator Jon Kyl told his constituents that President Obama privately insisted that he will not secure the border until amnesty for illegal aliens passes first. According to Kyl, Obama argued that Democrats would lose their bargaining chips for any type of amnesty if the government beefs up its presence on the chaotic border. “The problem is,” Obama allegedly told Kyl, “If we secure the border, then you all won’t have any reason to support comprehensive immigration reform.”
Should read
Obama argued that Democrats would lose their 20 million illegal alien votes if the government beefs up its presence on the chaotic border.
Here I come to save day, “Super Euro’s” on the way!
Germany and France are examining ways of creating a “two-tier” euro system to separate stronger northern European countries from weaker southern states. ~ Brussels
Germany and France examine ‘two-tier’ euro
A European official has told The Daily Telegraph the dramatic option was being examined at cabinet level.
Senior politicians believe their economies need to be better protected as they could not cope with another crisis on a par the one in Greece.
The creation of a “super-euro” zone would initially include France, Germany, Holland, Austria, Denmark and Finland.
The likes of Greece, Spain, Italy, Portugal and even Ireland would be left in a larger rump mostly Mediterranean grouping.
What’s next a 12 tiered Euro? Maybe the US could do this as well.
About a Euro currency for every country?
For Germany we could call it the Euro-Mark
For France we could call it the Euro-Franc
For Holland we could call it…
Euro-Gelding?
“For Holland we could call it”…
Euro-Dike
Economy Weak, Data Look Even Weaker. MarketWatch
FOMC to keep rates exceptionally low as housing subsidy fades,
No one thought this recovery would be quick or easy, and it hasn’t been. The U.S. economy has been growing, but it’s still too fragile to stand on its own.
The economic data to be released in the coming week are expected to be a mixed lot, while the Federal Reserve holds its regular meeting to assess how much progress is being made in the economy. The likely conclusion from the Federal Open Market Committee? Not enough.
The FOMC is expected to maintain its exceptionally low interest-rate policy amid persistently high unemployment and low inflation.
Gulf Oil Spill Job Losses Could Total 1 MILLION Over Next 5 Years: David Kotok ~ Huffington Post
One Wall Street analyst has a very dire projection about the economic effects of the BP oil spill. David Kotok, the co-founder and chief investment officer of Cumberland Advisors, a Sarasota, Florida-based investment advistory firm, has projected that the spill will cost 1 million permanent jobs in the next five years. (Hat tip to Politico’s Morning Money.)
The price of real estate properties around the Gulf of Mexico has been projected to fall up to 10 percent — erasing some $4.3 billion in value — Bloomberg noted recently.
According to a recent USA Today/Gallup poll, 8 in 10 Americans think that the Gulf oil spill will damage the economy and push up commodity prices.
Don’t worry - BP will pay for it all…
Every nickel, if I am not mistaken.
Aww…. poor BP!!!! Poor United Kingdom…… boo hoo hoo.
WASHINGTON (Reuters) – U.S. health insurers are raising prices by an average of 20 percent for adults age 64 and younger who buy their own policies, according to a survey released by a nonprofit healthcare group on Monday.
Such premium cost increases affected more than three-quarters of the 14 million adults who buy their own health plans and caused some to either seek a cheaper option with fewer benefits or switch insurers altogether, the Kaiser Family Foundation study showed.
Health Insurer’s new business plan:
-Throw anyone even remotely in need of health care insurance under the bus.
-Start running commercials during Saturday morning cartoons, to sell health insurance to eight year olds, then try to bump their premiums 20%/year.
Call me back, and let me know how that ends up working out…..
Yep, but health care has been reformed. I wonder how Harry, Nancy and BO sleep at night.
Health care was not reformed. If we’re lucky, it was merely stopped from further sociopathic pillaging.
– “U.S. health insurers are raising prices by an average of 20 percent”
Yes but with all the new jobs being created, home prices stabilizing (and soon to start going up), along with free D.C. health care any minute now. We really have nothing to worry about, everyone at the W.H. has said so. It’s all good!
My prediction: The public option will be back with a vengeance.
I stated the reasons for this last week, but I’ll repeat ‘em anyway:
1. People can only afford 20% increases for so long. Which means that you’ll see individuals dropping coverage. And loudly informing their elected reps as to why. And, being the “We Gotta Do Something!” types that they are, the reps will find reason to revive the public option.
2. The people who were advocating for the public option last year have NOT gone away. Far from it.
3. The Gulf oil spill is throwing all sorts of people out of work. And, in the good old US of A, job loss tends to go hand-in-hand with losing one’s insurance. Something that’s going up 20% will not find too many takers in this crowd. Not to mention the fact that more than a few of them are getting sick from spill-related things. Private health insurers won’t be interested in them.
The wheels on the bus go round &round,round &round…Until they fall off!
Borrowers exit troubled Obama mortgage program
Borrowers face foreclosure after Obama loan assistance program fails to provide help.
WASHINGTON (AP) — The Obama administration’s flagship effort to help people in danger of losing their homes is falling flat.
More than a third of the 1.24 million borrowers who have enrolled in the $75 billion mortgage modification program have dropped out. That’s more than the 27 percent who have managed to have their loan payments reduced to help them keep their homes.
Last month alone, 150,000 borrowers left the program — bringing the total to 436,000 who have exited since it began in March 2009.
Administration officials say borrowers will get help in other ways. But analysts fear the majority will still wind up in foreclosure.
As Fernando Lamas might say…..
“It is better to “look” helpful than to “be” helpful…….and I might add, you McMansion looks mahvelous……”
My wife knows a lady who went through the mortgage modification program and stopped paying four months ago. Put that together with the year and a half she didn`t pay before that and you would think she and her husband would have some money put aside. Nope, flat broke. Oh well at least my LL hasn`t made a mortgage payment in 6 months. But the P.O.S. would be screaming if my $1,700 rent was late. God Bless America.
Some people stop paying their mortgage and don’t save because they.. and this might seem novel… don’t. have. the. money.
One third is not a bad rejection rate. Those people may very well have not been qualified in the first place. But what’s missing is how many of the people where stymied and thwarted by the lending company themselves.
According to many oil industry ‘experts’, once cap&tax comes about we will be headed to $6&$7 dollar gas. I am sure if/when that happens the average house hold will be easily able to absorb the cost. No problem!
Smiles fade at the pump: Gas prices going back up
After 6-week break, gasoline prices moving higher as July 4th holiday approaches
Mark Williams, AP Energy Writer, On Monday June 21, 2010
Motorists heading out for the long July 4th weekend will find that filling up the family car is getting more costly.
Retail prices for gasoline have climbed over the past week and are headed back toward a national average of $2.80 to $2.90 per gallon with higher prices on the West Coast, said Tom Kloza of the Oil Price Information Service.
cap and trade = oil tax with revenue going to Walstreet instead of the gov. I suspect it will also mean a lot of volitility in energy prices.
Oh yeah what break. A whopping 10-20 cents. Break out the champagne.
Looks like the first private sector to shift solidly from negative job growth year-over-year to positive will be — Leisure and Hospitality, including the fast food industry.
The joke in my generation is that our economy would consist of people selling each other insurance. For the next generation, they’ll be cooking each other hamburgers. They could save by cooking their own hamburger, but without the help of a corporation they no longer know how to do it.
That’s odd because according to figures posted here last week, hotels are lading the CRE foreclosures.
Actually WT, they don’t have the time. Between having to work 2 jobs and then spending all their free time texting, there just isn’t much time left for cooking.
Rahm Traded Favors with Blago: Report Jun 21, 2010
While a congressman, Emanuel asked for trades with embattled gov.
President Barack Obama’s chief of staff, then a congressman in Illinois, apparently attempted to trade favors with embattled Illinois Gov. Rod Blagojevich while he was in office, according to newly disclosed e-mails obtained by The Associated Press.
Emanuel agreed to sign a letter to the Chicago Tribune supporting Blagojevich in the face of a scathing editorial by the newspaper that ridiculed the governor for self-promotion. Within hours, Emanuel’s own staff asked for a favor of its own: The release of a delayed $2 million grant to a school in his district.
The 2006 discussion occured with Blagojevich’s top aide, Deputy Gov. Bradley Tusk, and doesn’t appear to cross legal lines; Emanuel couldn’t speed up the distribution of the funds. But it offers a peek at ties between two high-profile Illinois politicians — one now the president’s right-hand man, the other facing years in prison if convicted of political corruption.
“’The bottom line is that all those McMansions that were bought during this housing boom are going to go the way of the 1973 Lincoln Continental,’ Merrill Lynch’s David Rosenberg writes. The housing bubble was the most over-owned, over leveraged and oversupplied real-estate market ever, he says, and its unwinding will take years. The revival of consumers saving their money for retirement - rather than expecting their homes to provide the cushion - added with ‘move down’ buyers will depress real-estate prices, he says.”
Dow Jones, December 20, 2007
I tried a few times to respond to the capitulation thread above to no avail. Rosenberg is right, but perhaps measured in decades not years. At the current level, buyers, sellers, and realtors still have out of this world expectations and acceptances of pricing. I keep doing a higher interest-rate rain dance, but all I get is more actual rain.
“I keep doing a higher interest-rate rain dance, but all I get is more actual rain.”
I suggest moving away from rainy Seattle to sunny Southern California; but come prepared to rent for the next several years until the real estate comps finally reflect the post-2006 housing bust effect on prices.
What happened? The DOW was supposed to fly today, what with all the good Chicom news.
When the news moved from the futures pit, to the real world, the China news was seen to be Much Ado about Nothing.
Kind of brings to mind the trajectory of the Challenger space shuttle launch, no? Tomorrow should be even more interesting, IMO…
Political victory notwithstanding, will the Obama financial reform have any beneficial effect?
WRAPUP 1-U.S. House agrees to put consumer watchdog in Fed
Mon Jun 21, 2010 3:23pm EDT
11:45am PDT
* House backs away from making watchdog separate agency
By Kevin Drawbaugh
WASHINGTON, June 21 (Reuters) - The Federal Reserve, which was criticized for failing to protect consumers in the run-up to the credit crisis, would be the home of a new financial consumer watchdog under an agreement announced on Monday.
U.S. House of Representatives Democrats said they have agreed to go along with a Senate proposal to put the watchdog inside the Fed, backing down from their earlier support for setting up a powerful new stand-alone agency.
The House’s retreat on the issue resolves a lingering dispute and moves historic Wall Street reform legislation closer to completion. A Senate-House panel is slated to reconvene on Tuesday to work on finalizing the bill.
The legislation will be the biggest overhaul of financial regulation since the 1930s. Enactment would give President Barack Obama and the Democrats a major policy victory to add to healthcare reform going into November’s general elections.
…
Victory?? More likely it will cement the belief that our entire gov is run by Wall street and the FED.
More likely it will be something to hide Health Care Reform behind. No-one even remotely hoping for re-election, except maybe for Queen Nancy, and her buddy Barney will even mention Health Care Reform.
Belief? You mean some still think it isn’t? Now THAT’S denial!
Saudis Hoard Twice as Much Gold as Thought.
21 Jun 2010 ~ Financial Times
Saudi Arabia, the world’s fourth-largest holder of foreign exchange reserves, is sitting on more than twice as much gold as previously thought, according to new estimates that point to the revival of bullion as part of emerging economies’ official reserves.
The changes in Riyadh’s reserves were revealed by the World Gold Council, the industry-backed body which regularly tracks official bullion holdings. According to the WGC, the Saudi Arabian Monetary Agency, the central bank, has gold reserves of 322.9 tones, more than double the 143 tones it had previously reported.
“Most Americans say they do not trust Congress, but they trust the FDIC, Medicare, Social Security, and Homeland Security.”
~Gary North
Many people also don’t trust bankers and Wall St. - but they still dutifully contribute to their 401k plans every paycheck.
Insert song: “We Only Hurt the Ones We Love”
“You can’t fix stupid. There’s not a pill you can take; there’s not a class you can go to. Stupid is forever. ”
- Ron White
Saw a bumper sticker today that said “Honk if you pay your mortgage.”
It is trickling down. Next one will be ” My elementary school kid beat up your realtor’s son. “
“Honk if you pay your mortgage.”
We are gradually progressing towards, ‘Real estate is the worst investment.’
I give it five years till we are there…
Though the impetus for central banks to financially engineer inflation to whittle away at a mountain of private, civic, provincial, sovereign, and pension debt is ever-present, at least some economists doubt the technical feasibility of doing so. I frankly don’t understand why, given a history of successful reflation efforts by central banks fighting their way out of financial crises. Perhaps it really is different this time, as deleveraging is the new black.
The Financial Times
Predictions of a bond market bubble are wrong
By David Rosenberg
Published: June 21 2010 22:36 | Last updated: June 21 2010 22:36
I find it truly amazing to see how many pundits refer to the bond market as if it is in some sort of a bubble. How can a security whose price is constantly projected to decline by the economics community be in a bubble? How can any asset class be in a bubble where the capital is guaranteed and which pays out a coupon twice a year? It makes no sense.
Of course, the retort is that retail investors have been ploughing money into bonds and bond-equivalents en masse, choosing fixed-income securities even in the face of a pronounced bear market rally in equities. What is rarely mentioned is that the median age of the 78m baby boomers is 54 and even after two bubbles bursting in less than a decade, about 30 per cent of the US household asset mix is represented by equities and real estate apiece and only six per cent is in bonds. The demographic drive towards capital preservation and income orientation and away from capital appreciation strategies looks to be a secular theme. As such that small share of the asset pie that is in bonds and equivalents is likely going to continue to expand over time.
Looking at the outlook for Treasuries, the point must be emphasised that supply alone has been an inadequate focus for predicting future prices/yields. The 30-year Treasury bond yield went from 4.7 per cent to 6.7 per cent in 1999 even though the federal budget was in surplus and new issuance non-existent, and the dramatic decline in JGB yields over the past two decades even in the face of a spectacular deficit financing binge that has left the country with a 200 per cent gross debt-to-GDP ratio. Last I saw, the 10-year JGB yield was hovering near 1.2 per cent.
The problem in trying to assess either supply or demand is that everything seems so confusing in the early stages of this new secular paradigm of a global credit collapse. There is no way to get it completely right – the contraction in household and business credit bumping the rapid expansion of public sector deficits as losses are socialised and debts from the private sector get transferred to the public sector balance sheet. The bottom line is that in all levels of society, and across most countries in the industrialised world, there is still far too much debt and debt-servicing relative to income-generating capacity. Extinguishing this debt will be deflationary even as central banks are forced into further dramatic actions to cushion the blow.
History shows that deleveraging cycles typically last as long as seven years, and we have just completed year number two – at a time when most measures of underlying inflation are less than 1 per cent.
…in mid-2007, the secular credit expansion came to a thundering halt. Deleveraging is the new secular trend. Inflation is down to 2 per cent and the core rate of inflation is 90 basis points below zero. Imagine that when the oil price was at $10 a barrel back in 1998, the core inflation rate was 2.5 per cent and today at $75 a barrel the rate is below 1 per cent. The situation now is one of debt destruction, not debt expansion, and it is only a matter of time before we see prices in aggregate start to deflate.
We are not talking about 10 or 20 per cent price declines – more like 2 to 3 per cent. But enough to jeopardise the lofty earnings estimates embedded in equity market valuations, enough to thwart the progress needed to resolve our intractable deficit and debt problems, and enough to take bond yields back to their 2008 microscopic lows.
The writer is chief economist and strategist at Gluskin Sheff & Associates
Take it from a Democratic pundit: A double-dip recession is not out of the question.
I don’t particularly agree with the recommended Keynesian hair-of-the-dog policy prescription, but at least Reich does recognize that it is different this time, as, for instance, the Fed is pushing hard on a string.
Friday, June 11, 2010
Several factors point to double-dip recession
Former Labor Secretary Robert Reich explains why there’s not enough oomph in our current economic situation to promote a recovery.
More on Commentary - Robert Reich, Robert Reich
With May’s employment picture so tepid, some fear a jobless recovery could turn into another downturn. Former Labor Secretary Robert Reich says the likelihood of a double-dip recession is now close to 50/50. “The May jobs report shows there’s not enough oomph in the economy because consumers don’t have the dough,” he says. Only 41,000 private-sector jobs last month, but according to Reich, we may need at least 100,000 just to keep up with population growth.
Reich also says the economic boosters we currently rely on are running out: 75 percent of stimulus has been spent and the Fed is worried that zero interest rates will cause more inflation down the road. Some economy-watchers were hoping U.S. exports would give recovery a boost, but with uncertainties in Europe promoting the dollar as a safe haven, exports have become more expensive.
Despite recent positive news of slow but steady economic growth from Fed Reserve Chairman Ben Bernanke and others, Reich says it’s not enough. “In a typical recovery, we would expect far better. And we’ve fallen into a far deeper hole than in a normal recession, so the recovery has to be much bigger.”
So why is this recovery so different? “Most recessions are caused by the Fed overshooting in its efforts to control inflation and raising interest rates to high,” Reich says. “So it’s pretty simple for the Fed to reverse course, cut rates and get the economy back on track. But the Great Recession was caused by the bursting of a giant housing bubble, which directly reduced the value of most people’s biggest assets. Consumers can no longer use their homes as ATMs.”
With so many factors working against a recovery, Washington is focusing on long-term deficits, which will get worse if the recovery stagnates.
…
Why can’t we just throw all the UHS and banksters into a large gladiator pit, release a few lions into their midst, and let them sort things out?
Battles in California Over Mortgages
Justin Sullivan/Getty Images
A foreclosed home in Richmond, Calif., a state where property drove wealth.
By DAVID STREITFELD
Published: June 21, 2010
As the housing market continues to sputter, the real estate industry is increasingly split on the responsibilities of overextended and foreclosed homeowners.
Wells Fargo offered free help for troubled homeowners during a workshop in Oakland, Calif.
On one side are the bankers, who say borrowers should be liable for what they owe. On the other side are real estate agents, who say those who lost their houses should not be so burdened by debt that they cannot move on.
The differences have real financial consequences: bankers want to collect on billions of dollars in outstanding loans; real estate agents want as many people as possible to return to the housing market.
For the first time, the debate is spilling into the realm of law making, with state legislators in California considering a bill that would redefine the obligations of many defaulting homeowners. The efforts to shape the bill demonstrate how much is at stake — in California and the many other states with distressed real estate markets.
The legislation introduced in the winter by the real estate lobby would have largely shielded foreclosed homeowners from debt collectors. But by the time it passed the state Senate on June 3, the banking lobby had succeeded in scaling it back. Now the bill goes to the state Assembly, where a committee will take it up next week, and bankers intend to continue lobbying.
“We’re concerned this could adversely accelerate strategic defaults,” said Rodney K. Brown, chief executive of the California Bankers Association, referring to instances in which borrowers leave their properties without settling with the lender.
…
“Why can’t we just throw all the UHS and banksters into a large gladiator pit, release a few lions into their midst, and let them sort things out?”
Cruelty to animals? That meat is poisonous afterall.
‘“We’re a little in the Wild West here,” said Paul Leonard, California office director of the Center for Responsible Lending. “People are struggling with what it means to uphold the terms of your mortgage contract and what it means to walk away. There are no tried and true rules.”’
Here’s a little rule for financially prudent prospective buyers to follow: DON’T BUY IN CALIFORNIA UNTIL THIS ISSUE ABOUT WHO EATS THE BAD MORTGAGE DEBT IS RESOLVED.
Those who chomped on the lure of $8K or $10K credit to get them off the fence are going to have to learn one of life’s hard lessons about things that seem too good to be true. Anyone who sat on their hands in the face of this enticement is advised to continue exercising patience until the market has figured out who the ultimate bagholders are as regards the underwater mortgages. The outcome has huge implications for how much further California housing prices have to drop from here on down to the basement.
I’m thinking that as foreign creditors of last resort to the U.S., the Chinese may enjoy driving the final stake into the heart of the U.S. real estate bubble. They may be timing the situation to ensure they are well-positioned to snap up collapsed U.S. real estate assets at fire sale prices.
This Chinese Yuan Move Should Be A Huge Wakeup Call To Tim Geithner
Keith McCullough, Hedgeye | Jun. 21, 2010, 10:00 AM
“They must often change who would be constant in happiness or wisdom.”
-Confucius
Changing your economic policies as the facts do is not easy; particularly if politics stand in your way. Unlike Western countries, China has positioned itself to make monetary and fiscal policy decisions when it wants to make them, not as the political wind of Fiat Fools blows.
Club Myopia in Washington will tell you that China’s decision to allow the Chinese Yuan to appreciate this morning was driven by American political pressure. That’s obviously ridiculous. Ever since they laughed at Timmy Geithner last year, the Chinese have done nothing but smile and nod.
…
Both inflation and politics are local. The best way to ensure political safety and benign inflation at home (at the same time) is to maintain a strong currency. This will sound very foreign to the Japanese, European, and American Fiat Fools. They believe in debasing the Yen, Euro, and Dollar anytime there is a whiff of stock market weakness. It’s sad.
Stock and commodity markets around the world are moving higher on this Chinese news this morning because a stronger currency for the world’s strongest sovereign balance sheet means China has more purchasing power. Gold is hitting all-time highs at the same time that prices from sugar to oil are charging convincingly above their immediate term TRADE lines of support.
After he is done attempting to smirk, Timmy Geithner should realize that the corollary to a strong Chinese Yuan is a weaker US Dollar. This is another reason why assets priced in US Dollars are charging higher this morning. Dollar down equals assets priced in dollars up, for a trade.
Unfortunately, this also means that the sovereign risk implied on America’s balance sheet goes up this morning. The US Dollar is hitting a 4-week low, and is now decidedly broken from an immediate term TRADE perspective.
…
China is America’s creditor. I’m not sure whether or not the professional politicians in Washington get that or not yet. But, as we head into the G-20 meeting next week in Toronto, the Chinese are definitely going to remind the world who is wearing the pants in this financial relationship. China holds $900.2B in US Treasuries and has plenty a reason to ask Timmy what he’s thinking about Chinese Wisdoms now.
…
A musician I know who got his fans to kick in tons of money 2 years ago to “save” his home from foreclosure is…again asking fans to save them from the foreclosure that they supposedly saved him from already:
http://ryuuaja.livejournal.com/782.html
I’m sure there are lots of HBB’ers who are just itching to start a business with him. After all, an ideal co-ownership partner would be someone who announces the intent to start a business while only 10 days from foreclosure and who has proven that he can’t even pay a mortgage reliably, right?
Casey Serin lives.
Bloomberg
Sales of Existing Homes in U.S. Probably Climbed on Tax Credit
June 22, 2010, 12:04 AM EDT
By Shobhana Chandra
June 22 (Bloomberg) — Sales of U.S. previously owned homes rose in May to the highest level in six months as buyers rushed to beat a June tax-credit deadline, economists said before a report today.
Credit-induced gyrations will make the underlying health of the market difficult to determine over the next couple of months. A slump in builder shares since early May signals investors are concerned the damage caused by the end of government stimulus, mounting foreclosures and unemployment will exceed the benefits of lower mortgage rates.
“There are still a lot of headwinds as we’re making this important transition,” Scott Brown, chief economist at Raymond James & Associates Inc. in St. Petersburg, Florida. “The real key in all this will be the labor market. You’re not going to see a sustainable housing recovery without job growth.”
The report from the National Association of Realtors is due at 10 a.m. in Washington. Economists’ estimates ranged from 5.2 million to 6.5 million after a 5.77 million rate in April.
Demand last exceeded May’s projected level in November, the month the tax break was first due to expire, when sales reached an almost three-year high 6.49 million pace. The smaller jump last month shows the incentive lost power after being extended.
Fed Outlook
Federal Reserve policy makers, who begin a two-day meeting today, are forecast to commit to keeping interest rates near zero to help wean the world’s largest economy off government stimulus. The hazard posed by the European debt crisis, joblessness and a lack of inflation add to the reasons why central bankers will focus on sustaining the U.S. rebound.
Industry reports signal residential real estate is slowing. Housing starts last month dropped by the most since March 2009, and building permits, a sign of future construction, fell to a one-year low, data from the Commerce Department showed. The National Association of Home Builders/Wells Fargo confidence index for June fell by the most since November 2008.
The number of mortgage applications filed to purchase houses dropped this month to the lowest level since 1997, according to data from the Mortgage Bankers Association.
Builder Shares
The Standard & Poor’s Supercomposite Homebuilder Index, which includes Toll Brothers Inc. and Lennar Corp., has dropped 27 percent since reaching a 19-month high on May 3. The broader S&P 500 Index is down 8.6 percent from April 23’s 19-month peak.
Hovnanian Enterprises Inc., the largest homebuilder in New Jersey, said orders fell 17 percent in the quarter ended April 30 from a year earlier, and contract signings slowed in May, indicating the tax credit helped pull some sales forward.
“The expiration of the federal homebuyer tax credit, the lack of job growth and a potential increase in foreclosures all pose risks to a housing-industry recovery,” Ara K. Hovnanian, chief executive officer, said in a June 2 statement.
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