The Housing Bubble

Most municipalities leaning toward raising tax rates

By Jennifer Sorentrue Palm Beach Post Staff Writer
Posted: 4:22 p.m. Sunday, Aug. 22, 2010

Most Palm Beach County cities and towns have tentatively approved tax-rate hikes to recoup some of the revenue they have lost as a result of falling property values.

The tentative rates will be listed on preliminary property tax notices mailed out Monday to all 655,181 property owners in Palm Beach County. The rates are used by local governments to calculate how much property owners will pay in taxes this year.

The rate increases could result in higher tax bills for some property owners, especially those who have lived in the homes for many years and were shielded from soaring taxes during the boom years by the state’s Save our Homes assessment cap. Others will see their tax bills fall with the value of their property.

http://www.palmbeachpost.com/news/most-municipalities-leaning-toward-raising-tax-rates-

Even high-end properties can’t escape foreclosure wave in Palm Beach County

By Alexandra Clough Palm Beach Post Staff Writer
Posted: 1:49 p.m. Sunday, Aug. 22, 2010

Three prominent Palm Beach County properties have fallen into foreclosure. Their future is uncertain, caught up in the morass of complex bank litigation.

They are the former 1515 condominium on Flagler Drive in West Palm Beach, the Omphoy Ocean Resort in Palm Beach and the Gulfstream Hotel in Lake Worth.

The 30-story, 1515 condo was demolished in a 10-second spectacle in February. In its place, the property’s developer, Trinity Development, planned The Modern, a 24-story, $150 million condo.

But on Aug. 10, Trinity 1515, the entity that owns the property, was sued for foreclosure by First Commonwealth Bank of Pennsylvania. The Palm Beach County Circuit Court lawsuit alleges that Trinity 1515 has failed to repay a $36 million loan. The lawsuit seeks repayment of the loan and foreclosure.

Edmund Abramson, a Trinity official, said Trinity has no plans to let the land go.

“The intention is to go forward,” Abramson said. He said Trinity and the bank are trying to work things out.

http://www.palmbeachpost.com/money/real-estate/even-high-end-properties-cant-escape-foreclosure-wave-872758.html

While America’s super-rich congratulate themselves on donating billions to charity, the rest of the country is worse off than ever. Long-term unemployment is rising and millions of Americans are struggling to survive. The gap between rich and poor is wider than ever and the middle class is disappearing.

Ventura is a small city on the Pacific coast, about an hour’s drive north of Los Angeles. Luxury homes with a view of the ocean dot the hillsides, and the beaches are popular with surfers. Ventura is storybook California. “It’s a well-off place,” says Captain William Finley. “But about 20 percent of the city is what we call at risk of homelessness.” Finley heads the local branch of the Salvation Army.

Last summer Ventura launched a pilot program, managed by Finley, that allows people to sleep in their cars within city limits. This is normally illegal, both in Ventura and in the rest of the country, where local officials and residents are worried about seeing run-down vans full of Mexican migrant workers parked on residential streets.

But sometime at the beginning of last year, people in Ventura realized that the cars parked in front of their driveways at night weren’t old wrecks, but well-tended station wagons and hatchbacks. And the people sleeping in them weren’t fruit pickers or the homeless, but their former neighbors.

Finley also noticed a change. Suddenly twice as many people were taking advantage of his social service organization’s free meals program, and some were even driving up in BMWs — apparently reluctant to give up the expensive cars that reminded them of better times.

Finley calls them “the new poor.” “That is a different category of people that I think we’re seeing,” he says. “They are people who never in their wildest imaginations thought they would be homeless.” They’re people who had enough money — a lot of money, in some cases — until recently.

“The image of what is a poor person in today’s day and age doesn’t fly. When I was growing up a poor person, and we grew up fairly poor, you drove a 10-year-old car that probably had some dents in it. You know, there was one car for the family and you lived out of the food bank,” says Finley. “In the past, you got yourself out of poverty and were on your way up.”

In its current annual report, the US Department of Agriculture notes that “food insecurity” is on the rise, and that 50 million Americans couldn’t afford to buy enough food to stay healthy at some point last year. One in eight American adults and one in four children now survive on government food stamps. These are unbelievable numbers for the world’s richest nation.

(From Spiegel online)

I thought Kalifornia was having money troubles…Guess not.

LA unveils $578M school, costliest in the nation

LOS ANGELES(AP) – Next month’s opening of the Robert F. Kennedy Community Schools will be auspicious for a reason other than its both storied and infamous history as the former Ambassador Hotel, where the Democratic presidential contender was assassinated in 1968.

With an eye-popping price tag of $578 million, it will mark the inauguration of the nation’s most expensive public school ever.

The K-12 complex to house 4,200 students has raised eyebrows across the country as the creme de la creme of “Taj Mahal” schools, $100 million-plus campuses boasting both architectural panache and deluxe amenities.

“There’s no more of the old, windowless cinderblock schools of the ’70s where kids felt, ‘Oh, back to jail,’” said Joe Agron, editor-in-chief of American School & University, a school construction journal. “Districts want a showpiece for the community, a really impressive environment for learning.”

Not everyone is similarly enthusiastic.

“New buildings are nice, but when they’re run by the same people who’ve given us a 50 percent dropout rate, they’re a big waste of taxpayer money,” said Ben Austin, executive director of Parent Revolution who sits on the California Board of Education. “Parents aren’t fooled.”

At RFK, the features include fine art murals and a marble memorial depicting the complex’s namesake, a manicured public park, a state-of-the-art swimming pool and preservation of pieces of the original hotel.

Partly by circumstance and partly by design, the Los Angeles Unified School District has emerged as the mogul of Taj Mahals.

The RFK complex follows on the heels of two other LA schools among the nation’s costliest — the $377 million Edward R. Roybal Learning Center, which opened in 2008, and the $232 million Visual and Performing Arts High School that debuted in 2009.

Housing Slide in U.S. Threatens to Drag Economy Into Recession

One in seven mortgages were delinquent or in foreclosure during the first quarter, the highest in records dating to 1979.

Housing led the U.S. out of seven of the last eight recessions. This time, it may kill the recovery.

Home sales collapsed after a federal tax credit for buyers expired in April. Since then, the manufacturing-led expansion, which began in the second half of 2009, has been waning, with jobless claims rising and factory orders falling.

“If foreclosures continue to mount and depress home prices, that could send the economy back into a recession,” said Celia Chen, an economist who tracks the industry for Moody’s Analytics Inc. “The housing market and the broader economy are closely intertwined.”

Spending on home construction and items such as furniture and stoves accounted for about 15 percent of gross domestic product in the second quarter, according to West Chester, Pennsylvania-based Moody’s Analytics. Real estate also can influence consumer spending indirectly. When values soared in the mid-2000s, people used the boost in equity to pay for cars and vacations. After prices fell, homeowners lost that cushion and curbed spending.

A report tomorrow by the Chicago-based National Association of Realtors will show July sales of existing homes plummeted 12.9 percent from June, the biggest monthly loss of 2010, according to the median estimate of economists surveyed by Bloomberg.

Realtors are corrupt.

Why does the New York Times have such stupid titles for their stories? Insipid, inane, trivial, pompous and pseudo-intellectual.

When do the banksters get sentenced?

Homeless Man Sentenced 25 Years to Life for Stealing Food Released From Prison Today

Gregory Taylor has served 13 years of his 25-to-life sentence for “trying to break in to a church kitchen to find something to eat,” and today he is a free man, according to an AP report published on the Huffington Post.

Taylor became a prime example of California’s three-strikes law perhaps at its least effective; though the now 47-year-old was at the time homeless and struggling with addiction, his prior convictions were from the prior decade, one for “stealing a purse containing $10 and another time for trying to rob a man on the street. He didn’t use a weapon in either case, and no one was injured.” He was arrested in 1997 for trying to break into a L.A. church kitchen to get food.

While incarcerated, Taylor completed his GED, and has plans to live in Pomona and work with his younger brother who runs a food pantry there. His release is the result of an appeal filed earlier this year through Stanford Law School’s Three-Strikes Project, which seeks the early release of those convicted of non-violent crimes.

Atlanta Homeless Shelter Foreclosed On

You’re listening to ALL THINGS CONSIDERED from NPR News.

The homeless problem in Atlanta may soon get worse. The city’s largest homeless shelter has been foreclosed on because the group running it is deep in debt.

Some say the foreclosure is a conspiracy to rid downtown Atlanta of homeless men, while others claim the shelter is a steady source of crime and civic frustration.

From Georgia Public Broadcasting, Susanna Capelouto reports.

SUSANNA CAPELOUTO: About a hundred homeless men and their advocates gathered in front of the Peachtree-Pine Shelter on the edge of downtown Atlanta a few weeks ago to protest its foreclosure.

Unidentified Group: Being poor is not a crime. Keep your hands off Peachtree-Pine.

CAPELOUTO: The scene evoked memories of Atlanta’s civil rights past as the Reverend Timothy McDonald vowed to fight for the shelter.

Reverend TIMOTHY McDONALD (Senior Pastor, First Iconium Baptist Church): And we will not allow you to take away their home. We will stand to the very last drop.

CAPELOUTO: The shelter does not turn anyone away. It holds about 400 people a night in the summer and 600 during the winter, but it’s not easy living. The place has no hot water, no air-conditioning and no paid staff. The kitchen is inoperable, and food only comes when church members bring it in. The walls are cracked and in desperate need of a paint job.

Amir Hussein(ph) has been here three weeks and is trying to leave.

Mr. AMIR HUSSEIN: Well, I got my clothes stolen in here and lost my money, and so I’m kind of stuck.

Ms. PEGGY DENBY (Head of Security, Midtown Neighborhood Association): It contributes heavily to our crime rate.

CAPELOUTO: Peggy Denby heads security for the nearby Midtown Neighborhood Association. She blames the shelter for petty crimes.

Ms. DENBY: These men walk the streets all day every day. Everything we have is at risk of being stolen or broken. They break into a huge number of cars.

CAPELOUTO: Records show Atlanta police respond to the shelter almost daily for things like disorderly conduct or liquor law violations. The shelter’s owner, the Task Force for the Homeless, has lost major donors over the years.

Anita Beaty has led the task force for almost three decades. She says city and business leaders are conspiring against her. She’s filed lawsuits charging they teamed up to cut off funding to the shelter, and that she says has forced her to run up a $900,000 debt.

Ms. ANITA BEATY (Executive Director, Metro Atlanta Task Force for the Homeless): For the last 15 years, the city worked day and night along with the business community to eliminate the presence of African-American men who are homeless from the streets of downtown.

CAPELOUTO: City and business leaders would not comment for this story, citing the lawsuits, but they issued a statement saying they are concerned for the men at Peachtree-Pine.

The U.S. Housing Fetish Hurts the American Dream

http://www.realclearmarkets.com/articles/2010/08/23/the_us_housing_fetish_hurt_the_american_dream_98635.html

“Government subsidizes homeownership in two ways: through tax and spending policies and through credit markets.”

Taking away the tax benefits “would” destroy what is left of the housing market and is probably impossible [politically speaking]. I know some on this blog want to take away this tax break but once you finally find that house of your dreams, you will appreciate it.

“There is no iron law that real estate must appreciate”

http://www.msnbc.msn.com/id/38811725/ns/business-the_new_york_times

Quantitative easing

The term quantitative easing (QE) describes a monetary policy used by central banks to increase the supply of money in an economy when the bank interest rate, discount rate and/or interbank interest rate are either at, or close to, zero.[citation needed] A central bank does this by first crediting its own account with money it has created ex nihilo (”out of nothing”).[1] It then purchases financial assets, including government bonds, mortgage-backed securities and corporate bonds, from banks and other financial institutions in a process referred to as open market operations. The purchases, by way of account deposits, give banks the excess reserves required for them to create new money, and thus a hopeful stimulation of the economy, by the process of deposit multiplication from increased lending in the fractional reserve banking system. Risks include the policy being more effective than intended, spurring hyperinflation, or the risk of not being effective enough, if banks opt simply to pocket the additional cash in order to increase their capital reserves in a climate of increasing defaults in their present loan portfolio.[1]

“Quantitative” refers to the fact that a specific quantity of money is being created; “easing” refers to reducing the pressure on banks.[2] However, another explanation is that the name comes from the Japanese-language expression for “stimulatory monetary policy”, which uses the term “easing”.[3] Quantitative easing is sometimes colloquially described as “printing money” although in reality the money is simply created by electronically adding a number to an account. Examples of economies where this policy has been used include Japan during the early 2000s, and the United States and United Kingdom during the global financial crisis of 2008–2009.

The Financial Times
GM is just a hedge fund in disguise
By Tony Jackson
Published: August 22 2010 16:11 | Last updated: August 22 2010 16:11

The US’s purblind attitude to the pensions crisis seems curiously hard to shake. The latest instance is the impending initial public offering of General Motors.

Emerging like a butterfly from the chrysalis of bankruptcy, GM is being excitedly touted as worth $60bn-plus. But closer inspection of its gigantic pension fund suggests that in the long run, the business may be worth nothing at all.

As I pointed out last summer, the essential flaw in the GM rescue was that the fund – the largest private sector pension plan in the world, with $100bn-odd of liabilities – was being transferred untouched to the new entity.

GM is making no contributions to the fund for now. But drawing on work by John Ralfe, the UK pensions consultant, I suggested it might have to put in $1bn-$2bn a year in future.

It seems we were wrong about that. GM now says it may have to put in $4.3bn in 2014 and $5.7bn in 2015, with possibly more to follow.

That should be set alongside results from the new GM released last week. Second-quarter earnings were the highest since 2004. Even so, first-half operating income was only $2.9bn. Double that for an annual figure and those prospective payments would only just be covered.

It might be argued that a stated pensions deficit of only $27bn worldwide is not really a problem. GM could borrow the difference, as it did for an $18.5bn payment into the fund in 2003. But the benefit of that supposedly one-off contribution – the reason for GM’s present pension holiday – is running out. And in the interim, remember, GM went bust.

Meanwhile, GM’s perennial hopeless optimism is on full display. The assets in its US fund are still officially expected to return 8.5 per cent a year.

How exactly that is to be achieved is not clear. But it stands in curious contrast to the conventional prudent assumption, which is that pension assets should give a risk-adjusted return equal to the yield on Treasury bonds. And the US 10-year Treasury yield is now just 2.6 per cent.

To put that from another angle, GM’s annual payments to its US pensioners are running at $9.3bn. On US fund assets of $85bn, that ostensibly requires a return of 10.9 per cent.
…

Thank you Ben, for injecting some variety in the blog ads!

Topic:
Great Recession
Monday, Aug 23, 2010 08:30 ET
War Room
The creeping threat of backdoor privatization
By Alyssa Battistoni

It has come to this: Parents are now being asked to send their children to school with their own toilet paper. And not just toilet paper, but all sorts of basic items that schools themselves used to provide for kids. It’s all part of a disturbing trend, highlighted by the New York Times last week, of cash-strapped public schools — their budgets eviscerated by state cutbacks — shifting more and more financial responsibility onto parents.

Privatization meant transferring responsibility for entire programs or functions to the private sector. But with the drastic budget cuts that states have been forced to make, responsibility for public services and programs is literally being forced into private hands one roll of toilet paper at a time. We’ve entered the era of backdoor privatization.

On the surface, these stop-gap measures don’t seem unreasonable. After all, it’s hardly new for parents in well-off school districts to chip in for supplies, music classes and even teacher’s salaries in an effort to minimize the effect of school budget cuts on their children. What is new, though, is the extent to which families are being asked to contribute basic items. This may be too much to ask of parents who are struggling to pay their own bills — especially since they’ve already paid taxes that are supposed to support the public school system.

Nor is backdoor privatization a phenomenon limited to local schools.

Public university systems are increasingly emulating private universities by turning to wealthy alumni for donations — even as tuition rises because some legislators see hiking it as a way to raise money for their fungible state budget items.

Missouri, Georgia, and Arizona have been forced to slash their transit budgets and services, leaving hundreds of thousands without a way to get to their jobs, or to a doctor, or school. This has forced thousands of people to revert to private modes of transportation.

Many states have also cut funding for fire and police departments, resulting in slower emergency response times and diminished crime investigation. Fire department cuts have exacerbated the trend in wildfire-prone areas (among those who can afford it) of hiring private firefighting companies to protect homes, heralding a return to the 19th-century practice in which private firefighting companies raced each other to put out blazes and collect their reward.

Some towns have even started to shut off street lights to save money on electricity bills.

This backdoor privatization diminishes the quantity and quality of the services available to the general public while nurturing the growth of a parallel profit-making infrastructure for those who can afford supplementary services.
…

The missing element in Mittonomics appears to be affordable housing; not the version promoted by DC propagandists, where various subsidies offered on a discriminatory basis to select U.S. subpopulations end up driving housing prices out of reach for virtually everyone, but the type of affordability which results when subsidies are eliminated and the invisible hand of the free market is allowed to find a fundamental equilibrium between housing prices and local households’ ability to pay for a home yet leave money in the family budget for other expenditures.

The ability of American households to fund those other, non-housing expenditures are what’s needed to solve Mitt’s “wet noodle problem.”

Wednesday, Aug 18, 2010 15:35 ET
Mitt Romney’s wet noodle economics
He tries to make a case for simultaneous tax cuts and budget balancing, but it’s impossible
By Robert Reich
…
In today’s (Wednesday’s) Boston Globe op-ed Romney attacks Obama’s economic policies for being ineffective and calls for what he calls a “growth and jobs” agenda. Here are the main points:

– match U.S. corporate taxes with those of other developed economies,

– preserve the Bush tax cuts for everyone, “especially small business,”

– allow businesses to write off capital investments made in 2010 and 2011 rather than over time,

– eliminate taxes on investment dividends,

– eliminate taxes on capital gains and interest for households earning less than $250,000 a year, and

– balance the federal budget.

Apart from the impossibility of simultaneously cutting taxes and balancing the budget without taking a meat cleaver to Social Security, Medicare, and defense spending (Romney delicately sidesteps this conundrum by urging we “reshape government programs” and “restructure entitlements”), his policies raise a more fundamental problem.

Call it the wet-noodle problem.

For Romney, the key to America’s recovery is to cut taxes on businesses and on people who invest in them. These steps, he says, are the “conditions that enable businesses of all sizes to grow and thrive.” In other words, if businesse get more capital at less cost, they’ll create jobs.

But anyone looking closely at the American economy today would see this is nonsense. American corporations have an unprecedented $1.8 trillion of cash. The Fed, meanwhile, has slashed interest rates to essentially zero – a record low – and is still holding over $2 trillion in securities that it said last week it will keep from shrinking. And a Federal Reserve survey released earlier this week showed that banks have been making it easier for businesses of all sizes to get loans. Credit standards for small firms have been loosened for the first time since late 2006.

In other words, businesses have all the capital they need. They’re sitting on it or can borrow it more cheaply than ever. But they aren’t using it to create jobs.

Why not? Because there’s not enough demand for their products or services. Consumers aren’t buying.

Retail sales continue to slide. Wal-Mart, Home Depot, and Target report disappointing sales for July. Same with popular back-to-school retailers like Aeropostale, American Eagle Outfitters, and TJX. Housing sales are down. Appliances are down. (Cars sales are up a bit but that’s mainly because they fell to record lows in 2008 and 2009, and by now some people who have held back need another.)

Romney’s supply-side economics won’t create jobs. It’s pushing on a wet noodle. Businesses create jobs only if consumers are pulling the noodle from the other end.
…

The proposed 2010 property values came out this morning for Palm Beach County, Fl. The house I am renting lost an additional 12% in value from 2009. In 2009 it lost 13%. From 2007 to 2010, the value has dropped almost 200k or about 45% (500k to 300k)

What is scary is a house just sold down the street for about 100k more than the property appraiser’s value. Either I am nuts for not buying now, or they are nuts for buying now. If you go by the appraiser’s value,we are back to 2000-2001 prices.

I still believe the other shoe is going to drop and we have another 15-20% to go on the downside.

Thoughts?

We have a whacked out buyer here in town. In the last two weeks, someone bought over $9 million dollars worth of commercial properties, several that
are new and never occupied. Two on main street
sold for almost double their actual worth. Two of
my friends were the happy beneficiaries of this
glutton for punishment. No one can figure it out.

Filed Under: “This could not ever happen in America…or…The US tax code is 20,000+ pages?…Mama Mia!”

Tax Cheats as Sailboat Owners Become $13 Billion Italy Dragnet:
By Sonia Sirletti and Jeffrey Donovan / Aug. 23 (Bloomberg)

“The higher the tax burden, the higher the incentive to evade,” Carlo Alberto Carnevale-Maffe, a professor of business strategy at Milan’s Bocconi University, said in an interview. “So far, the risk of being caught has been negligible compared with the benefit for evaders.”

The raid was part of a summer crackdown at beaches, yacht clubs and discos from Venice to Sicily in a campaign to recoup 10 billion euros ($13 billion) in unpaid taxes this year. Prime Minister Silvio Berlusconi’s government is hunting black economy revenue to tame its budget deficit and pare Europe’s biggest debt burden of 116 percent of gross domestic product.

Evasion is rampant in Italy…

“People are pretty upset here,” said Calabrese, a 58- year-old builder. “I’m not so concerned, as my accounts are in order, but it’s wrong to target yacht owners. If I buy a boat, I help the workers who made it, and help keep the economy going.”

The summer sting does have supporters. “It’s the right move,” said Pino Affer, owner of a so-called beach club in land-locked Milan’s Idroscalo, a recreational area with an artificial lake known as the Sea of Milan.

“Here at the poor people’s beach, there are no yachts, just little pedal boats and rowboats, so I don’t know if there will be any checks,”

I dunno palmetto. I went through the sales in this development over the last year. Every one sold for 30-40%% higher than what the property appraiser says they are worth. Another house down the street sold a few months ago for 40% more than the property appraiser has it worth.

I don’t get it. I must be stupid to rent for about 60% the cost of owning? I still feel we are overvalued, because everyone keeps saying we have hit or are near the “bottom.”

Is anyone in the market for a zoo or a municipal airport? How about a parking meter operation? Now might offer the buying opportunity of a lifetime.

* POLITICS
* AUGUST 23, 2010

Facing Budget Gaps, Cities Sell Parking, Airports, Zoo
By IANTHE JEANNE DUGAN

Cities and states across the nation are selling and leasing everything from airports to zoos—a fire sale that could help plug budget holes now but worsen their financial woes over the long run.

California is looking to shed state office buildings. Milwaukee has proposed selling its water supply; in Chicago and New Haven, Conn., it’s parking meters. In Louisiana and Georgia, airports are up for grabs.

About 35 deals now are in the pipeline in the U.S., according to research by Royal Bank of Scotland’s RBS Global Banking & Markets. Those assets have a market value of about $45 billion—more than ten times the $4 billion or so two years ago, estimates Dana Levenson, head of infrastructure banking at RBS. Hundreds more deals are being considered, analysts say.

The deals illustrate the increasingly tight financial squeeze gripping communities. Many are using asset sales to balance budgets ravaged by declines in tax revenues and unfunded pensions. In recent congressional testimony, billionaire investor Warren Buffett said he worried about how municipalities will pay for public workers’ retirement and health benefits and suggested that the federal government may ultimately be compelled to bail out states.

“Privatization”—selling government-owned property to private corporations and other entities—has been popular for years in Europe, Canada and Australia, where government once owned big chunks of the economy.
…

Philly requiring bloggers to pay $300 for a business license
~ Washington Examiner

It looks like cash hungry local governments are getting awfully rapacious these days:

Between her blog and infrequent contributions to ehow.com, over the last few years she says she’s made about $50. To [Marilyn] Bess, her website is a hobby. To the city of Philadelphia, it’s a potential moneymaker, and the city wants its cut.

In May, the city sent Bess a letter demanding that she pay $300, the price of a business privilege license.

“The real kick in the pants is that I don’t even have a full-time job, so for the city to tell me to pony up $300 for a business privilege license, pay wage tax, business privilege tax, net profits tax on a handful of money is outrageous,” Bess says.

It would be one thing if Bess’ website were, well, an actual business, or if the amount of money the city wanted didn’t outpace her earnings six-fold. Sure, the city has its rules; and yes, cash-strapped cities can’t very well ignore potential sources of income. But at the same time, there must be some room for discretion and common sense.

When Bess pressed her case to officials with the city’s now-closed tax amnesty program, she says, “I was told to hire an accountant.”

She’s not alone. After dutifully reporting even the smallest profits on their tax filings this year, a number — though no one knows exactly what that number is — of Philadelphia bloggers were dispatched letters informing them that they owe $300 for a privilege license, plus taxes on any profits they made.

Even if, as with Sean Barry, that profit is $11 over two years.

To say that these kinds of draconian measures are detrimental to the public discourse would be an understatement.

One of the phenomena of the last several decades years has been the rise of the individual investor Corporations using US Government tax dollars for salvation.

In Striking Shift, Small Investors Flee Stocks:

“One of the phenomena of the last several decades has been the rise of the individual investor.

Small investors are “losing their appetite for risk,” a Credit Suisse analyst, Doug Cliggott, said in a report to investors on Friday.”

NYT / On Monday August 23, 2010

My argument for why this is a terrible time to buy RE goes a few steps beyond that of the typical MSM financial journalist’s analysis:

1) Anyone who is paying attention right now knows that the U.S. residential RE market is on govt life support, and that the discussion in DC has shifted from how to reflate the housing market to how to (eventually) withdraw the massive level of federal government interference in the free market for housing which is primarily responsible for inflating the real estate bubble.

2) There is also an open acknowledgment that the housing market currently remains too weak for govt feeding tubes to be disconnected.

3) As the housing market eventually regains the strength to stand on its own two feet, the case for withdrawing govt life support will strengthen.

4) Eventual green shoots of residential REcovery will also encourage many would-be sellers who are currently holding homes off the market to finally try to sell.

5) The withdrawal of govt life support coupled with marketing of pent-up supply will put downward pressure on housing prices for “longer than expected.”

6) The current cohort of real estate flippers are likely to discover that they, too, caught themselves falling knives, which will lead to yet another rush for the exits right at the point when the housing market is supposed to be recovering along with the rest of the economy.

Many will eventually come to agree that, “Real estate is the worst investment.” We’re not there yet!

Housing Fades as a Means to Build Wealth, Analysts Say
nytimes August 23, 2010

Housing will eventually recover from its great swoon. But many real estate experts now believe that home ownership will never again yield rewards like those enjoyed in the second half of the 20th century, when houses not only provided shelter but also a plump nest egg.

The wealth generated by housing in those decades, particularly on the coasts, did more than assure the owners a comfortable retirement. It powered the economy, paying for the education of children and grandchildren, keeping the cruise ships and golf courses full and the restaurants humming.

More than likely, that era is gone for good.

“There is no iron law that real estate must appreciate,” said Stan Humphries, chief economist for the real estate site Zillow. “All those theories advanced during the boom about why housing is special — that more people are choosing to spend more on housing, that more people are moving to the coasts, that we were running out of usable land — didn’t hold up.”

Gold! Gold! Gold!
Wheat! Wheat! Wheat!
Bonds! Bonds! Bonds!
Coffee! Coffee! Coffee!
Buy! Buy! Buy!
Flee! Flee! Flee!

(Hwy notes: “These f@!king Guys!,” Jon Stewart. …are still walking around private Islands with sand between their toes, thinking ’bout what this Dec will bring…)

Tropical “Fruit-cake” Storms:

“Coffee surged as tropical storm Frank was moving off the southern coast of Mexico and may become a hurricane today, the U.S. National Hurricane Center in Miami said yesterday. A tropical storm formed over the South China Sea was on a path toward Vietnam, according to the U.S. Navy Joint Typhoon Warning Center. Mexico will tie with India as fifth-largest coffee producer in the season starting Oct. 1, and Vietnam will be the largest after Brazil, according to the U.S. Department of Agriculture.”

By Stephen Kirkland and Nikolaj Gammeltoft / Aug. 23 (Bloomberg)

Has the U.S. housing market bottomed out yet? I think not.

Why?

1) No sign of market capitulation;

2) No stories of flippers getting badly burned;

3) No common agreement yet that “Real estate is the worst investment”;

4) No evidence yet that anyone who admits they are planning to buy a home is generally considered to be a fool;

5) No sign in sight that government life support will soon be withdrawn from the housing market, despite growing signs that the folly of federal housing subsidies is gaining recognition;

6) No hint yet that interest rates will some day increase back towards historically typical levels;

7) No recovery yet in home sales;

8 ) No recovery in the labor market;

9) No recovery in new home construction;

10) No suggestion that seller expectations and buyer willingness-and-ability to pay are in agreement;

11) Whisper word in the MSM that between 6-8 million American mortgages are in default, with no clear indication how the situation will be resolved;

12) No hint yet about how the extraordinarily high number of vacant U.S. housing units will be absorbed by people who just need a place to live.

Besides these factors, and perhaps a few other ones that don’t come as readily to mind, it seems like the U.S. housing market recovery is in the bag.

* AHEAD OF THE TAPE
* AUGUST 23, 2010

The Housing-Market Diagnosis: Still Weak
By DAVID REILLY

Talk of mortgage-market overhaul has started percolating in Washington. But housing numbers this week are likely to reinforce the notion that the market still is far too weak for radical surgery.

Existing-home sales for July, due Tuesday, are expected to come in at a seasonally adjusted annual rate of 4.63 million, which would mark a nearly 10% decline compared with a year earlier and the first time since June 2009 that the rate has fallen back below 5 million units.

Credit Suisse economists believe the figures could reach their lowest level since at least 1999. New-home sales figures due Wednesday, meanwhile, are expected to stay flat with the previous month, at a near-record low of about 330,000 units.

Such downbeat numbers would show that the housing market is still struggling to shake off the hangover that followed April’s expiration of the government’s home-buyers tax credit.

In fact, the existing-home-sales figures still may be benefiting from it, as sales agreed to by April have until September to close to qualify.

The fragility of housing markets is especially notable given that prices in many areas have plunged, bringing affordability rates to their best levels in at least 20 years. At the same time, Freddie Mac said Thursday that average rates for a 30-year, fixed-rate mortgage fell to 4.42%, the ninth consecutive week of declines and the lowest rate since it began keeping a tally in 1971.

For all that, buyers still are thin on the ground. Mortgage-purchase applications have declined sharply since the end of April. The steady stream of foreclosures is keeping inventory elevated. And with economic growth weakening, doubts about private-sector employment growth intensifying and consumer confidence declining, prospects for the housing market during the autumn selling season aren’t great.
…

There has truly never been a better time for diversification!

The Wall Street Journal
* HEARD ON THE STREET
* AUGUST 22, 2010, 8:44 P.M. ET

Government Clouds Value of Investments

From Ecclesiastes to Bernanke

By PETER EAVIS

What is anything worth?

That might sound like an utterance from the book of Ecclesiastes or the title of a freshman philosophy paper. But it is a valid question for any investor right now. Gauging the true worth of stocks, bonds and real estate is extremely difficult at a time when their prices are so heavily influenced by the actions, or perceived inaction, of governments and central banks.

The dilemma crops up everywhere. Last week, Sears Holdings shares plunged on disappointing second-quarter earnings. “Appliance stimulus,” or state rebate programs aimed at spurring sales of energy-conserving fridges and washing machines, didn’t provide the expected boost to Sears’s sales, according to some analysts.

On a far bigger scale, take the 10-year Treasury note, a cornerstone for pricing so many other securities. While the Fed’s monetary-policy stance has always had an impact on government bonds, its moves have much more sway when the economy’s future hinges on monetary stimulus. Just over a month ago, Fed Chairman Ben Bernanke said the economic outlook was “unusually uncertain.” Since then, the 10-year note has rallied. The drumbeat is growing louder for the Fed to balloon its balance sheet further by purchasing more assets. But that would only increase its presence in important asset markets, further distorting them.

Of course, there is supposed to be a happy ending. The fiscal and monetary stimulus is meant to bring the private economy to the point where it is self-sustaining. But it is just as likely that the government remains entrenched. Government entities will likely back some 90% of new mortgages for the foreseeable future. And if, miraculously, that backing returned to precrisis levels, it would still be huge. From 1990 to 2006, 54% of all new mortgages had effective taxpayer guarantees, according to data from Inside Mortgage Finance.

Some will take comfort from the fact that it would have been a good bet to buy shares in 2002, when there was huge doubt about the economy and loud calls for the Fed to do more. The S&P 500 rose 67% from the end of 2002 to the end of 2007.

The problem is, anyone unlucky enough to buy the S&P 500 at the end of 2003 would be down today. That underlines the fact that timing is everything. And even more so in markets beholden to aggressive government action. Today’s winners will arguably be those who correctly guess the Fed’s appetite for shock and awe.

To paraphrase Oscar Wilde: Right now, investors know the price of everything but the value of nothing.

Interesting divergence last week between treasuries and mortgage. Both had been plummeting (yields) in tandem over the last few weeks. However after bottoming at 4.44%, the 30-year mortgage rate bounds back up some and settled last week at about 4.52%, whereas treasuries continued plummeting into Friday.

http://kpbj.com/business_weekly/2010-08-23/homeowner_confidence_in_real_estate_market_dips

More Kool-Aid anyone?

“Homeowners are more pessimistic about the short-term future of home values in their local market than they have been in the past three quarters, according to the Zillow second quarter Homeowner Confidence Survey. One-third (33 percent) believe home values in their local housing market have not yet reached a bottom, while 38 percent believe they have already reached a bottom.”

And what happens IF we see the market turn up? A WAVE of sellers.

“Despite the increasing pessimism, a large number of homeowners anxiously await the opportunity to sell. Five percent of U.S. homeowners say they are very likely to put their home on the market in the next six months if they see signs of a real estate market turnaround. This translates into 3.8 million homes with the potential to come into the market. By comparison, 5.2 million existing homes were sold in all of 2009.”

Plenty of Kool-Aid drinkers left. We have a ways to go before any bottom is made.

“Looking further into the future, the majority of homeowners believe their own homes’ values will either increase (27 percent) or stay the same (35 percent) in the next 12 months, while 12 percent expect a decrease and 26 percent don’t know.”

Anyone else catch the fact that Greek 2-year bonds are creeping back up, with a new recent high? Currently at 11.09% - highest level since before the ECB bailout.

chart

This is the shoeshine boy moment for the long-term bond bubble. Don’t tell me later I didn’t warn you!

* THE WALL STREET JOURNAL
* CREDIT MARKETS
* AUGUST 23, 2010

Bankers Pitch 100-Year Bonds
By KATY BURNE

THE CENTURY CLUB: Norfolk Southern, Motorloa and FedEx have all issued 100-year debt in the past.

Bond investors are buying almost anything the market throws at them. Now some bankers want to put those appetites to a full test. They have begun sounding out investors about 100-year bonds.

Such long-term bonds are considered some of the most exotic available because they are issued only by the strongest companies—those that are expected to be around a century from now.

Hundred-year bonds were in vogue in the mid 1990s and early 2000s, when a few dozen companies issued them. Most were bought in 1993, 1996 and 1997.

But they remained relatively rare because companies have to pay a premium over 30-year bonds, typically the longest-dated asset.

With interest rates now at some of their lowest levels in history, some companies are tempted to press for longer-dated paper, knowing that demand for corporate bonds is outstripping supply.

Such bonds won’t pay off their principal until 2110, a date so far that the people doing today’s buying and selling will all be dead.

The risk is that over the next century, interest rates will rise to a level that diminishes the value of the century bond. Given the vagaries of any market over 100 years, that is a near certainty.

That is why some are skeptical there will be sufficient appetite to get a new century deal done.

“I think it would be a challenge,” said Mark Oline, head of U.S. corporate finance at Fitch Ratings. “Given the volatility in world markets, the credit risk of a 100-year bond combined with the expectation that at some point interest rates will rise will probably make buyers shy away from a 100-year security,” he said.

Still, that isn’t stopping some bankers from pressing their case.
…

I’m enjoying a few good days between chemotherapy treatments. Last night I really enjoyed reading the 8/22 bits thread. Lots of interesting stuff: aspects of the Treasuries bubble, Eddie’s idea that going to any but a top 50 college is a waste of time, and Mikey’s big to buy a big short sale house for 55/sq ft in Wisconsin. It was a good day on the HBB, other than the angry young person from CO who gets depressed by too much good weather and hates boomers (I’m just being sensitive, I guess .)

I’m having fewer good days as the treatment progresses. I can’t see patients because I’m immune suppressed, and I tried to do some surgeries, but I’m too weak now. So keep up the excellent blogging, HBBers!

Union members are thugs.

Home sales collapse in the Triangle Area in North Carolina.

After several months of being buoyed by government tax credits, the Triangle housing market slumped badly in July as many buyers appeared to stop looking.

There were 1,366 homes sold during July in Durham, Johnston, Orange and Wake counties, down 33 percent from the same month a year ago, Triangle Multiple Listing Services data show.

Pending sales slumped 32 percent, and showings were down 23 percent. The market also saw a rise in the number of existing homes on the market. Listings in July were 20 percent higher than the same period last year and are now at their highest level in four years.
Quantcast

One of the few bright spots was the average sales price in July, which was $252,174, or 6 percent higher than last year.

Although most real estate professionals expected the July numbers to be down, they were still sobering.

“It’s what we were hoping we wouldn’t see after those tax credits expired,” said Ross Rhudy, general manager of Real Living Pittman Properties in Raleigh. “I think we’ll go up from here, but it’s going to be a very, very slow recovery.”

Global Deficits Will Create $4.5 Trillion in New Debt: Hedge Fund Manager. ~ CNBC

How much additional soverign debt does the world have to issue this year, just to make up the massive, growing budget deficits?

“You have to think about the world and its totality. There is a finite amount of capital, so just to plug fiscal deficits the world has to issue $4.5 trillion worth of new debt—that assumes the existing debt stock rolls,” Kyle Bass, managing partner of Hayman Capital, told CNBC’s The Strategy Session on Tuesday, adding, “but where does this $4.5 trillion worth of new debt come from?”

“U.S. banks’ securities portfolios have increased 26 percent year over year, all they are doing is buying Treasury Bonds. The Fed doesn’t want that to happen—they want the yield curve to flatten and the banks to go lend,” Bass said.

Refinancing boom no blast for Mass. banks
Boston Business Journal

Homeowners are on a refi high.

But don’t expect bankers and investors in mortgage-backed bonds to join the euphoria over record-low interest rates.

Believe it or not, there is a gloomy dimension to seeing the interest rate on a 30-year fixed-rate mortgage fall below 4.5 percent.

For one, banks aren’t happy about seeing mortgages already at rock-bottom rates being paid off early and then refinanced at even lower rates.

“Refinance is a terrible thing for banks,” said Gerald Mulligan, chief executive of North Andover-based River Bank. “It’s giving us cash to reinvest and we don’t want that because there’s no place to put it.”

Of course, there’s a place to put the money from a mortgage payoff, but banks are not thrilled about the options. For Mulligan, he would ideally reinvest the money in a commercial loan, but demand is weak in the current economy. Another route to consider is investing the money in mortgage-backed bonds, but the yield on those securities continues to fall because of, you guessed it, falling mortgage rates. To make matters worse, bank customers, especially ones with large sums in money market accounts, are hunting for better rates, forcing banks to pay more on those deposits.

“Everybody is looking for a little extra,” Mulligan said.

ahansen,

Thank you for the kind words. Glad to see you posting.

Renewed economic uncertainty is testing Americans’ generation-long love affair with the stock market.

Investors withdrew a staggering $33.12 billion from domestic stock market mutual funds in the first seven months of this year, according to the Investment Company Institute, the mutual fund industry trade group. Now many are choosing investments they deem safer, like bonds.

If that pace continues, more money will be pulled out of these mutual funds in 2010 than in any year since the 1980s, with the exception of 2008, when the global financial crisis peaked.

Small investors are “losing their appetite for risk,” a Credit Suisse analyst, Doug Cliggott, said in a report to investors on Friday.

Or maybe the small investor sees what’s really happening on the street. Or understands that stocks do not move on fundamentals but on the whims of the banking cartel and large computers.

cougar91 and awaiting wipeout,

Thank you for your kind words posted yesterday.

SFBayGal,

My condolences for the loss of your mom. I am glad for you that she was able to be in hospice and to be with you and family. We all die and she was able to do it surrounded by the people she loved - that sounds like a good way to go.

I am happy to see you back again while so sorry for your loss.

Boarded-up complex excels now in a sorry way - decay

Soaring Teen Unemployment Could Have Lifetime Effects
LiveScience.com ~ Aug 22

The summer job used to be a staple of teenage life. Paper routes and ice cream parlors provided work experience, paychecks, and a psychological boost in the form of independence and self-esteem.

The worst recession since the Great Depression has changed all that.

Today, teenage unemployment is at an all-time high, hitting 26.1 percent in July. According to economists at Northeastern University, 4 million fewer teens are working today than would have if employment was at 2000 levels. Meanwhile, family financial stress hits teens, too. It’s a combination that could have long-term effects on both their earning power and their mental health.

“Whenever there is fear and uncertainty and doubt, you’re going to get a fair amount of anxiety about oneself, one’s future and one’s options for the future,” said Laura Kastner, a professor of psychiatry at the University of Washington in Seattle and author of several books on parenting teens and young adults. “Anything that disempowers you in your expectations and attitudes about the future is not necessarily going to put you on the best path.”

No bubble here…

Bond Funds Attracting Cash Like Stocks During Dot-Com Boom: Credit Markets
By John Glover and John Detrixhe - Aug 23, 2010 9:17 AM PT

The amount of money flowing into bond funds is poised to exceed the cash that went into stock funds during the Internet bubble, stoking concern fixed-income markets are headed for a fall.

Investors poured $480.2 billion into mutual funds that focus on debt in the two years ending June, compared with the $496.9 billion received by equity funds from 1999 to 2000, according to data compiled by Bloomberg and the Washington-based Investment Company Institute.

Concern the global economic recovery is faltering, with the U.S. growing at a slower-than-forecast 2.4 percent pace in the second quarter, is prompting investors to pile into fixed-income securities of all types even with some yields at record lows. The new cash has helped fuel a rally and drove yields on investment-grade U.S. corporate debt down to a record 3.79 percent last week, while two-year U.S. Treasury yields fell to an all-time low of less than 0.5 percent.

The money flowing into bonds is “probably not repeatable on a consistent basis,” said Joel Levington, managing director of corporate credit in New York at Brookfield Investment Management Inc., which oversees $24 billion. “Eventually it won’t be sustainable. Whether that means five years from now or five weeks is a little difficult to tell,” he said.
…

Do it yourself? Not likely if you’re under 35. More than half are DIY dunces who can’t even rewire a plug and have to rely on parents

Daily Mail Reporter 23rd August 2010

More than half of young people lack the skills they need to maintain their homes, with many relying on their parents to carry out basic tasks, a survey suggested today.

Around 50 per cent of people aged under 35 admitted they did not know how to rewire a plug, while 54 per cent did not know how to bleed a radiator and 63 per cent said they would not attempt to put up wallpaper, according to Halifax Home Insurance.

DON’T do it yourself: Young people under 35 are more likely to call in a professional when it comes to doing jobs around the house. Over half don’t even know how to bleed a radiator

Other basic jobs, such as putting up shelves, were beyond 45 per cent of those questioned, while 36 per cent said they would not even attempt to do gardening themselves.

Instead 42 per cent would pay a professional to do the work.

Nearly two-thirds of young people admitted that their father was far better at DIY than they were.

The study also found that when the under 35s do attempt to do a job themselves and it goes wrong, it costs nearly three times as much to fix as problems caused by other age groups.

Don’t try this at home: Under 35s spend on average £2,498 to fix botched DIY jobs

Martyn Foulds, senior claims manager for Halifax Home Insurance, said: ‘This survey strongly suggests that younger people feel they don’t have the experience or knowledge necessary to tackle even the most basic of home maintenance and DIY tasks.

‘This indicates a significant number of younger householders could be storing up problems for the future, as the lack of home maintenance starts to take its toll on their homes.’

Foreclosure Study Shows Dramatic Value Drop
August 23, 2010

Nationwide, more than a half million homes fell into foreclosure in the first half of 2010.
More than 900,000 were repossessed in 2009.

Now a new study, conducted by MIT and Harvard researchers, reveals the drop in value to a foreclosed property is even more staggering than many would believe.

“Foreclosed homes sell for less, not just a little bit less, but much less than comparable homes sold in the same area at the same time but voluntarily outside the foreclosure process,” explains Harvard Professor of Economics John Campbell. “In fact, the discount on average is about 27% which is really a very large number.”

And a foreclosure is bad news for the neighborhood…

The study-which examined 1.8 million home sales in Massachusetts from 1987 to 2009 reveals nearby homes within 250 feet of a foreclosure lose 1% of value.

One reason- the condition of a foreclosed house often deteriorates and falls into disrepair.

Real Estate Agent Danny Griffin runs his own firm selling property across Massachusetts. He points out that foreclosures often sell for a discount as banks look to quickly unload unwanted property.

“It becomes a hot potato on their books and they need to get rid of it and when somebody needs to get rid of something that’s the deepest discount and not good for the neighborhood,” said Griffin. “And a foreclosure, not being lived in, can absolutely have the broken window effect.”

Worst traffic jam ever? Gridlock spans 60 miles ~ CNBC

A traffic jam stretching more than 60 miles in China has entered its ninth day with no end in sight, state media reported.

Cars and trucks have been slowed to a crawl since August 14 on the National Expressway 110, which is also known as the G110, the major route from Beijing to Zhangjiakou, Xinhua News reported.

Officials expect the congestion to continue until workers complete construction projects on September 13, the report said.

State media reported that Chinese drivers have become accustomed to the severe delays, noting a similar jam in July that slowed traffic for close to a month.

Britain’s Sky News reported that the snarls have been commonplace since May as a result of a spike in the number of trucks using the roads, with the daily peak reaching about 17,000.

“Give me all of MY money!”

Man robs congressional candidate:

http://www.miamiherald.com/2010/08/23/1787656/police-still-searching-for-gunman.html

Credit card interest rates are through the roof
August 23, 2010

NEW YORK (CNNMoney.com) — Credit card interest rates soared in the second quarter to a nine-year spike, according to the market research company Synovate.

The average interest rate on existing cards jumped to 14.7% last quarter, up from 13.1% a year earlier, Synovate said. Synovate is the market research arm of Aegis Group plc.

The jump created a dramatic spread of 11.45 percentage points between the average credit card interest rate and the prime rate — the largest margin in 22 years, according to Synovate.

The Next Bubble? Investors Flee Stocks in Droves In Favor of Bonds
Aug 23, 2010 Peter Gorenstein in Investing, Recession

Individual investors are fed up with the stock market. Burnt by 10 years of negative returns, two crashes, and a current economy mired with high unemployment and lackluster growth, many are throwing in the towel.

Investors have pulled $33.12 billion from U.S. mutual funds this year through July, according to the Investment Company Institute, the mutual fund industry trade group. With the exception of 2008 (height of the financial crisis), that’s on pace to be the worst year for stock funds since the 1980s, reports The New York Times.

What’s interesting is, this mass exodus comes at a time when stocks are holding up relatively well, as Aaron and Henry point out in this clip. The Dow Jones Industrial average has been volatile but is down less than 2% this year. Not exactly crash territory.

The next bubble?

Investors are fleeing the stock market in favor of bond funds. It’s happening at such a staggering rate, Bloomberg compares the flood of money into bonds to the stock market bubble surrounding the dot.com craze:

Hiring Spree Gets Long in the Tooth ~ WSJ

Wall Street employees about to return from the summer doldrums have something new to worry about: their jobs.

The weak economy, volatile markets, regulatory upheaval and changes in how traders and investment bankers are paid are starting to trigger job cuts that could reverse a recent rebound in overall employment levels at banks and securities firms.

While the firings so far add up to a tiny slice of all Wall Street jobs, companies and analysts say deeper cuts are looming unless business revs up soon. “When push comes to shove, Wall Street firms are erring on the side of caution

New health plans for uninsured off to slow start
Some can’t afford it, some not eligible ~ MSNBC

Ruth Titus, a 59-year-old cook from Taos, N.M., leaped at the opportunity in July to sign up for health insurance under a new federally subsidized program for uninsured people with health problems. With her history of bladder cancer, she said “it was hopeless to even look” for private coverage because she’d be turned down.

Titus is one of what some officials say has been an unexpectedly small number of people to sign up for the program, which was touted by the Obama administration as an early benefit of the new health overhaul law. It began last month in 30 states with the expectation that many thousands of uninsured people would apply for the opportunity to get comprehensive coverage regardless of their health status. But that hasn’t been the case.

About 3,600 people have applied and about 1,200 have been approved so far in state plans that started in the beginning of July, according to data from the states and federal government. Officials say the new plans, although a better deal than anything comparable on the private market, still may be unaffordable for many people. Eligibility requirements are another possible barrier. And states have had little time to publicize the plans.

It’s too soon to gauge the program’s impact. The plans won’t be up and running in all the states until September. But some officials are surprised.

“It’s early, but thus far interest in the program is lower than we expected,” said Michael Keough, executive director of the North Carolina Health Insurance Risk Pool, which started July 1. As of Tuesday, 258 people had applied and 121 had been approved.

Cover Colorado, the program’s name in that state, has received 314 applications; 158 people are enrolled.

“We’re happy not to be overrun with people,” said Suzanne Bragg-Gamble, the executive director. But it’s “a very low number given that there are hundreds of thousands of uninsured in the state.”

drumminj,
You around?

Louisiana fishermen net more cash working for BP. “Thank god for BP.”
Venice, Louisiana

In the early afternoon, when the Louisiana sun begins its slow descent, the wide and shady bow of the Soul Mama provides an excellent place to hang a hammock, as Neil Foret has discovered over the past few months.

The white shrimp season officially began this week in Louisiana, and at this time of year 46-year-old Mr Foret, a hardened Cajun shrimper from Houma in the Mississippi delta, would normally be out on the water plying the trade that has kept him and his family since he was 13.

But now that he is a BP contractor through the oil company’s Vessels of Opportunity programme, designed to employ local fishermen in the oil spill clean-up operations, he earns more consistent money, and works a lot less than he used to.

“BP is a very nice fella, and this is a guaranteed cheque,” he says, pointing to a huge yellow skin or “bladder” on his boat that is used to collect skimmed oil. “I’m sticking with this for as long as I can.”

All over Louisiana, it is the same story: fishermen involved in the programme – according to BP, there are 2,000 vessels currently on active hire in the VoO – are discovering that hauling oil boom is far less taxing than shrimping, and they are in no hurry to return to their traditional way of life.

In Venice, Louisiana, the nerve centre of BP’s operation to remove the estimated 200m gallons of oil that gushed into the Gulf of Mexico after the blowout of Deepwater Horizon on April 20, the atmosphere is like a modern-day version of the Californian gold rush.

Pick-up trucks drive up and down the puddled road leading to BP’s command centre, and contractors of dozens of different companies offering a seemingly endless array of services line up to report on work as well as to seek out the latest opportunities. Captain Michael Owen, better known as the big “O”, has been doing pretty well out of BP. For the past three months, he and his 24-foot fishing boat have been ferrying clean-up workers to parts of the Gulf affected by the oil spill.

As a BP contractor, he does not have to worry about securing charter fishing contracts for small parties of tourists visiting the Mississippi delta, the business he ran until the oil spill. Nor does he have to stress over the pressure to find fish – redfish and speckled trout – for his demanding clients.

“I’m super happy with BP,” he says. “And I’m not taking a cut [in pay].”

Of course, for those fishermen who have not been able to get on the programme, the oil spill has been a devastating blow. They have been almost closed down for the past four months because of widespread fishing bans.

More worrying, perhaps, is that the oil spill has undermined the image Gulf seafood once had in the rest of the country.

In the first week of the white shrimp season, many fishermen complain that docks and processing plants throughout Louisiana remain closed because their customers no longer want to buy.

But for those commercial and charter fishermen on the programme, there has been little in the way of grumbling since the oil spill. As Chucky Farkas, a blond shrimper with piercing blue eyes and thickset shoulders, says, “Some people complain about BP but you ain’t going to hear me complaining.”

Between the rain showers that pass over the bayous of southern Louisiana during the summer months, Bobby Dugas relaxes with a cigarette and a beer on the deck of a nearby marina.

Mr Dugas, a lean and tanned 54-year-old with a bald head and a white tuft of hair under his lip, is officially contracted until about 5pm each day. But he says that he often finishes early.

It has been that way for many of the 74 days he has been on the oil company’s payroll. And at $1,500 a day – $1,200 for his boat and $300 for his time – he is reasonably happy with how his summer has gone.

“It takes you three days to make that charter fishing,” says a charter fisherman from Port Sulphur about 30 miles up the road. “Thank god for BP.”

Time to feed Eddie, but I can’t find him. Did he get out of the back yard and get hit by a car?

Roidy

And what is there to reckon with today? ~ Bill Bonner

Slowly, the idea of “recovery” is fading. People are beginning to realize that we are in a Great Correction, not a typical post-war recession.

“The Never Ending Recession,” is one title in the financial news.

“Consumers slow to spend, businesses slow to hire,” The Washington Post sums up the situation.

“US Restaurants Starved for Business,” reports The Los Angeles Times.

The Dow fell 57 points on Friday, after a big down day on Thursday. Gold lost $6.

Are you invested in stocks, dear reader?

You are? Shame on you!

Of course, there are always one or two stocks that will buck the trend. And if you’re willing to wait, say, 20 years, you might be okay.

But in the next few years, US stocks are not likely to pay off. The stock market entered a bear phase in January 2000. Since then, stock market investors have made some money and lost some money. Some are ahead a little. Some are behind. Most have gotten nowhere.

But the bear still hasn’t fully expressed himself. The stock market still hasn’t reached its rendezvous with desperation. That’s when you will be able to buy stocks without worrying about further price erosion. That’s when the sellers have sold and the typical person wants nothing more to do with stocks.

The ideas of “stocks for the long run” and “stocks for everyone” are not permanent, universal truths. They are merely cyclical fads. People believe in stocks when stocks have been doing well. They stop believing in them when they stop doing well.

Eli Broad to Build Museum, Foundation Offices in L.A.
Bloomberg

Billionaire Eli Broad said he will build the Broad Collection, a public contemporary art museum and headquarters for his art foundation, in downtown Los Angeles near the Walt Disney Concert Hall.

Billionaire Eli Broad said he will build the Broad Collection, a public contemporary art museum and headquarters for his art foundation, in downtown Los Angeles near the Walt Disney Concert Hall.

The 120,000-square-foot museum will cost $80 million to $120 million, Eli and Edythe Broad said today in an e-mailed statement. He will also pay $7.7 million to lease the land, and they will endow the Broad Art Foundation with $200 million to cover its ongoing annual operating expenses.

The project, to be designed by New York-based architects Diller Scofidio & Renfro, received final approval today from the Grand Avenue Authority, made up of city and county officials who oversee the areas’ redevelopment, said Broad, 77. Construction is set to begin in early 2011 and be completed in late 2012.

The new museum will provide a home for some of Broad’s 2,000 pieces of art, which he’s been collecting for more than three decades. Broad made his first fortune as co-founder of Los Angeles-based KB Home, a home-building company he started in 1957 with Donald Kaufman who died last year. Broad later pocketed $3.4 billion when sold his 19 percent stake in insurer SunAmerica Inc.

The museum will rise across Grand Avenue from the Frank Gehry-designed Disney hall, near the Arata Isozaki-designed Museum of Contemporary Art and a civic park under construction. Broad said he hopes the project will help jump-start further development.

‘Iconic Piece’

“This will be an iconic piece of architecture,” Broad said in the statement. In March, Forbes magazine estimated his wealth at $5.7 billion.

Monsanto = “These f@!king Guys!,” Jon Stewart.

BWAHAHHAHAHAHHAHAHHAHHAHAHAHHHHHHHHHHHHH!!! (fpss™)

&

Ho ho, hah hah, hehehehehehe, BwaHaHaAhHAHAHAHAHAHA!!! (Cantankerous Intellectual Bomb-thrower™)

Is Your Favorite Ice Cream Made With Monsanto’s Artificial Hormones?:

John Robbins / Author of The New Good Life, Diet For A New America, and many other bestsellers Posted: August 19, 2010

“…Monsanto has been in the news this week, with a U.S. District Court Judge ruling that the USDA has to at least go through the motions of regulating the company’s genetically engineered sugar beets. Monsanto, you may know, is not likely to win any contests for the most popular company. In fact, it has been called the most hated corporation in the world, which is saying something, given the competition from the likes of BP, Halliburton and Goldman Sachs.

Was Taylor unbiased? Prior to holding that position, he was an attorney at King & Spaulding, Monsanto’s law firm, where he presided over the firm’s “food and drug law” practice. After the decision was made which gave the green light to rBGH, he left the FDA and resumed working directly for Monsanto, as vice president and chief lobbyist.

How, then, was such a dubious and tainted product ever approved for use in the U.S.? The answer provides a glimpse of how successful Monsanto’s efforts have been to exert control over our nation’s food policies.

By all accounts, the FDA’s 1993 decision to allow the use of rBGH was one of the most controversial in the agency’s history. Made amid widespread criticism from scientists, government leaders and farmers, including many researchers and officials inside the FDA, the decision was overseen by Michael R. Taylor, the FDA’s Deputy Commissioner of Policy from 1991-1994.

Congressman Bernie Sanders was specifically referring to Taylor when he said “the FDA allowed corporate influence to run rampant in its approval of BGH.” Documentaries including “The World According to Monsanto” and “The Future of Food” present Taylor’s pro-Monsanto actions at the FDA as a dramatic example of the how corporate influence has exerted massive control over the FDA. Today, Taylor again works for the FDA, now as Deputy Commissioner of Foods.

Things have taken a different turn in Canada, but not for want of effort on the part of Monsanto. During Canada’s scientific review of Monsanto’s application for approval of rBGH, Canadian health officials said Monsanto tried to bribe them, and government scientists testified that they were being pressured by higher-ups to approve rBGH against their better scientific judgment. But in 1999, after eight years of study, Canadian health authorities rejected Monsanto’s application for approval of rBGH.

In the U.S. today, Monsanto continues to wield massive influence over U.S. food policies. In spite of, or perhaps in response to, Monsanto’s toxic and tenacious grip on our nation’s food policy, a movement is afoot. Every day more and more people are refusing to buy ice cream and other dairy products made with rBGH. And every day another organization adds its name to the growing list of groups campaigning against Monsanto’s influence, and calling for the FDA decision allowing the use of rBGH to be revoked.

Does the increase in udder infections have an effect on the milk, and thus any ice cream, cheese or other product made from it? Most definitely, according to Dr. Richard Burroughs, a veterinarian deeply familiar with rBGH. “It results in an increase of white blood cells,” he says, “which means there’s pus in the milk!” The antibiotic use, he adds, “leaves residues in the milk. It’s all very serious.”

This has gotten me thinking about, of all things, ice cream, and of how Monsanto’s clammy paws can be found in some of the most widely selling ice cream brands in the country. These brands could break free from Monsanto’s clutches. So far they haven’t, but maybe this is about to change.

Ben & Jerry’s gets all their milk from dairies that have pledged not to inject their cows with genetically engineered bovine growth hormone (rBGH). Why, then, can’t Haagen Dazs, Breyers and Baskin-Robbins do the same?

Starbucks now guarantees that all their milk, cream and other dairy products are rBGH-free. So do Yoplait and Dannon yogurts, Tillamook cheese, Chipotle restaurants, and many others. But ice cream giants Haagen Dazs, Breyers and Baskin-Robbins continue to use milk from cows injected with rBGH, a hormone that’s been banned in Canada, New Zealand, Japan, Australia and all 27 nations of the European Union. As if to add insult to injury, Haagen Dazs and Breyers have the audacity to tell us, right on the label, that their ice cream is ” All Natural.”

We have Monsanto to thank for rBGH. Monsanto developed the artificial hormone and marketed it aggressively for years, before selling it in 2008 to Elanco, a division of the Eli Lilly drug company. Of course, Monsanto (and now Elanco) wants us to think the hormone is in every way completely satisfactory and safe. Monsanto’s party line has consistently been that there is “no significant difference” in the milk derived from cows who have been dosed with the hormone compared to those who haven’t.

There are, indeed. One of them is that injecting the genetically engineered hormone into cows increases the levels of a substance called IGF-1 in their milk. Monsanto’s own studies found that the amount of IGF-1 in milk more than doubled when cows were injected with rBGH.

How serious is the increased risk? According to an article in the May 9, 1998 issue of the medical journal The Lancet, pre-menopausal women with even moderately elevated blood levels of IGF-1 are up to seven times more likely to develop breast cancer than women with lower levels.

As if these risks to human health weren’t enough reason for nations to prohibit the use of rBGH, there are more. The artificial hormone is also notorious for causing the cows much pain and distress. It does this by increasing painful and debilitating diseases like lameness and mastitis in cows who are injected with it. And because it increases udder infections in cows, it has greatly increased the use of antibiotics in the U.S. dairy industry. If you wanted to design a system to breed antibiotic-resistant bacteria, you’d be hard pressed to do better.”

BWAHAHAHicHAHAHicHAHAHAHAHicHAHAHic* (DennisN™)

From the AP. This one’s for you NYCdj :

ATLANTA – Federal agents are seeking to hire Ebonics translators to help interpret wiretapped conversations involving targets of undercover drug investigations.

* AUGUST 23, 2010, 1:05 P.M. ET

Fed’s Hoenig: Mistake To View Housing As Investment Opportunity
DOW JONES NEWSWIRES

OVERLAND PARK, Kansas (Dow Jones)–The troubled U.S. housing market is not a place where Americans should speculate or look to invest, the chief of the Kansas City Federal Reserve said Monday.

“If the American people are looking at the housing market to be their investment opportunity, I think they are making a mistake,” said Thomas Hoenig, president of Federal Reserve Bank of Kansas City.

The housing market remains burdened by excess supply, a condition that was created by providing financing leverage at levels that were considered “nonsense,” Hoenig said during testimony at a field hearing by the U.S. House Financial Services Committee’s oversight and investigations subcommittee in Overland Park, Kan.

Future financing in the housing market, currently in the hands of Congress and the Obama Administration, will require regulatory oversight, he said.

“It’s more than just what do you do with Fannie [Mae] and Freddie [Mac], that’s hard enough, but it’s how you’re going to decide to finance housing in America in the future and what impact it will have on regional community banks,” said Hoenig.

He sees continued improvement in the U.S. economy, though there are issues that need to be addressed.

“I think the economy will continue to improve, I think we will have new opportunities and we will prosper. However, we have some things to get through,” he said.

There is a great deal of uncertainty about regulatory issues related to the U.S. health-care and financial reform laws, he said. Once those issues are resolved, it will be easier to move the economy forward.

The U.S. also must systematically deal with its burgeoning national debt “to give the American people confidence that we won’t try and solve it all in one year, but we’ll get on a path and we’ll solve it and therefore consumers and businesses can make decisions that are long term…and then we can think of very optimistic outcomes for the U.S. economy,” said Hoenig.

The Kansas City Fed chief made his remarks during the hearing titled “End of Excess,” chaired by Rep. Dennis Moore (D., Kan.).

Hoenig testified that the too-big-to-fail policies that have propped up the nation’s largest banks have given them greater leverage and consistently lower cost of capital and debt, putting smaller community banks at a disadvantage.
…

While fiat money can be created on an electronic balance sheet with a keystroke, confidence, or the word I prefer, trust, is far more easily destroyed than created.

* OPINION
* AUGUST 24, 2010

The Fed Can Create Money, Not Confidence
Inflation—or stagflation—remains the more serious danger than deflation.

By GEORGE MELLOAN

A report by the Federal Reserve Bank of New York last week showed that consumers are having difficulty climbing out of the debt hole they dug for themselves before the credit bubble began to deflate in late 2007. The report gives support to the fears of those asset managers and economists who believe the U.S. is facing deflation.

Bill Gross, manager of the $239 billion Pimco bond fund, is one. His evidence is that the Consumer Price Index (CPI), annualized over the last two years, has fallen slightly.

Since deflation, in simple monetarist terms, means too little money chasing too many goods, with a consequent fall in prices, the remedy should be easy. Can’t the Federal Reserve create as much money as it wants with just a few key strokes? Well, there are some things money can’t buy. In political circumstances like today’s, one of them is public confidence.

In fact, the Fed has been fighting deflation for nearly two years. It began pumping new money into the economy after the September 2008 stock market crash to restore liquidity in the financial system. It has kept the pumps running by maintaining a near-zero interest rate target. Its net purchases—with newly created dollars—of government and government-agency bonds have totaled some $1.4 trillion, expanding its balance sheet to $2.3 trillion. As the Fed pumped out new money, member bank reserves ballooned and now exceed $1 trillion. That means a vast amount of money is on deposit in Fed accounts, ready to be flooded into the economy if loan demand increases.

So what’s the problem? Here it is best to depart from monetarist terminology, with its heavy emphasis on the magical powers of the central bank. Those magical powers are highly overrated, as almost anyone who has ever run a central bank will likely tell you. The Fed can flood the banks with liquidity in an effort to stimulate economic growth (if it is willing to run the very serious risk of inflation). But that will not necessarily stimulate a demand for this money.
…
Mr. Melloan, a former columnist and deputy editor of the Journal editorial page, is author of “The Great Money Binge: Spending Our Way to Socialism” (Simon & Schuster, 2009).

I love the smell of capitulation in the morning!

15 Signs The U.S. Housing Market Is Headed For Complete And Total Collapse

Michael Snyder, The Economic Collapse | Aug. 20, 2010, 11:24 AM

The U.S. housing market is dying. You will only hear hints of this on the mainstream news and from the politicians in Washington D.C., but as statistic after statistic continues to roll in, the reality of what is happening is becoming very difficult to deny.

Up until the end of April, the giant tax credit that the U.S. government was bribing home buyers with helped stabilize the real estate market, but now that the tax credit has expired the decline of the U.S. housing market has resumed. Mortgage defaults continue to set new records. Foreclosures continue to set new records. Home repossessions by banks continue to set new records. The number of homes being constructed and the number of Americans applying for home loans is at stunningly low levels.

For decades, owning a home has been touted as the very heart of “the American Dream”, but today that dream is out of reach for an increasing number of Americans. Why? It is because there are not nearly enough jobs for everyone. Without a jobs recovery, there simply is not going to be a housing recovery. Unfortunately, as the U.S. economy continues to come apart like a 20 dollar suit, even more Americans are going to lose their jobs and the U.S. housing industry will continue to experience a very painful decline.

The truth is that this is not a short-term downturn in the housing market. During the past two decades, an insane amount of debt fueled an artificial housing bubble that drove home prices to ridiculous levels. Now the U.S. housing market is trying to correct itself, and no matter how many trillions of dollars the U.S. government throws at the problem the fundamentals of the marketplace are still going to have their way eventually.

The U.S. economy is in decline. The employment situation is going to go from bad to worse. Americans without jobs are Americans that cannot buy homes. Millions of Americans who are employed are finding it increasingly difficult to make it from month to month. The truth is that there is no way that Americans can afford the ridiculously inflated home prices that we have seen over the past decade any longer.

So, yes, the U.S. housing market is headed for a complete and total nightmare.