Bits Bucket For September 1, 2010
Post off-topic ideas, links and Craigslist finds here
The Housing Bubble
Examining the home price boom and its effect on owners, lenders, regulators, realtors and the economy as a whole.
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Name:Ben Jones
Location:Northern Arizona, United States
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Mortgages Lose Ground in Best Month for Bonds Since 2008: Credit Markets
Government-backed U.S. mortgage bonds underperformed Treasuries in August by the most since November 2008 amid concern federal intervention will spark a refinancing wave that reduces the value of the securities.
Fannie Mae, Freddie Mac and Ginnie Mae bonds tied to home loans returned 34 basis points, or 0.34 percentage point, less than U.S. debt last month, Barclays Capital indexes show. Fannie Mae’s 6.5 percent bonds maturing in about 24 years fell 0.75 cent last month to 108.9 cents on the dollar as 4.5 percent Treasury bonds maturing in 2036 gained 8.9 cents to 118.34 cents, according to data compiled by Bloomberg.
President Barack Obama’s administration responded to July’s record decline in U.S. home sales by highlighting the Federal Housing Administration’s refinancing program. Homeowners swapping into new loans, with the lowest mortgage rates in 39 years, would punish bond investors who bought securities pegged to loans with higher interest rates.
You can’t refi Treasurys…
Not each individual one, but as a whole they are refi’ed constantly by their turnover.
Average interest rate paid:
2000: 6.6%
2005: 4.7%
2010: 3.1%
Good thing interest rates are so low, huh?
My point was that if you are the owner of MBS and the underlying mortgages get refinanced at lower rates (something that happened a lot last month), you lose a chunk of the income stream. By contrast, if you own a 30-year Treasury Bond, the only risk to your income stream is inflation, as the nominal semi-annual payments are frozen in stone.
Yep.
Just imagine if you were one of those lucky souls that bought and held a 30-year from the early 80’s. You would still be accumulating at 12-15% per year.
Mortgage and other debt backed securities always are at risk to pay less than expected because the debts originally assigned to the pool are paid off. The offering documents will say ad nauseum that this is possible and probably even specify that it is particularly likely if rates go down.
Caveat emptor.
Home Prices Probably Cooled, U.S. Consumer Sentiment Languished
Purchases of new homes plunged in July to a record low, and the median price was the lowest level since 2003, Commerce Department data showed this month. The National Association of Realtors reported a record 27 percent drop in July sales of existing houses.
The rebound in U.S. home prices probably slowed, while consumer confidence languished near a five-month low, indicating threats to the economic recovery are mounting, economists said before reports today.
Property values in 20 cities climbed 3.5 percent in June from the same month last year, down from a 4.6 percent gain in the 12 months to May, according to the median forecast of 21 economists surveyed by Bloomberg News. Another report may show sentiment stagnated in August.
Record foreclosures, unemployment near a 26-year high and a plunge in sales following the end of a government tax credit will probably pressure home values in coming months. Further erosion in home equity may undermine Americans’ confidence and limit consumer spending, which accounts for about 70 percent of the economy.
“The housing market is in the midst of a double dip, with sales declining and prices likely to,” said Guy LeBas, chief fixed-income strategist at Janney Montgomery Scott LLC in Philadelphia.
Purchases of new homes plunged in July to a record low, and the median price was the lowest level since 2003, Commerce Department data showed this month.
——————–
And still…nobody mentions the fact that the bubble was well under way in 2003. We are still seeing bubble prices in San Diego.
Well arguably 2003 was the inflection between a relatively normal sized interest rate driven bubble in home prices and the once in a lifetime ginormous crazy-insane bad underwriting driven bubble that followed.
That is a very eloquent way of putting it. Thanks, Jim. And I appreciate being able to describe “ginormous” as eloquent.
There was actually a slowdown in home sales in 2003. Had things been left to their own devices there would have probably been a correction much less “painful” than the one we’re experiencing now. It probably would’ve caused a minor recession if one at all. Yet in 2003 in order to prop up and increase sales lenders introduced all those exotic loan products that allowed the bubble to survive a few years longer.
You’re right, but we had a slowdown in 2001 (which is when things *should* have slowed down, but I think the credit bubble really got going at that point). Imagine if they had allowed things to fall from there; we would have been much better off today.
California real estate always goes up!
San Diego home prices increase
By Jennifer Davies, UNION-TRIBUNE
Tuesday, August 31, 2010 at 12:15 p.m.
[A home on Margerum Avenue in Princess Gardens awaits a buyer Tuesday morning.]
San Diego home prices increased 11.2 percent in June from a year ago and it was the only metro area in the country with 14 months of consecutive increases in home prices, says the latest Standard & Poor’s Case-Shiller Home Price Index released Tuesday.
Once again, San Diego had the second highest annual price increase of the 20 metro areas surveyed. San Francisco took the top spot with an 18.3 percent increase.
…
On a nationwide level, prices in the 20 metro areas Case-Shiller tracks were up 4.2 percent from June 2009 and up 1 percent on a monthly basis.
…
Case-Shiller’s annual price increase for June:
* Atlanta 2.0 %
* Boston 3.4%
* Charlotte -2.7%
* Chicago -0.1%
* Cleveland 0.8%
* Dallas 1.2%
* Denver 1.8%
* Detroit 0.8%
* Las Vegas -5.2%
* Los Angeles 9.2%
* Miami 1.1%
* Minneapolis 10.7%
* New York 0.2%
* Phoenix 6.0%
* Portland, Ore. 0.2%
* San Diego 11.2%
* San Francisco 14.3%
* Seattle -1.8%
* Tampa, Fla. -1.6%
* Washington 7.3%
SOURCE: Standard & Poor’s Case-Shiller Home Price Index
Even though I live in the Bay Area in the East Bay San Francisco is its own brand of wacky. The prices really never came down much to make a difference. A crap-shack is still $800,000 easy. That’s fine with me. If people like paying that kind of money so they trip over the bums, have no parking, endure the year-round miserably wet, cold weather, then that’s a-ok with me.
Have you looked around in Richmond? We sold there for $289/sq ft in late 2004. A quick glance on Redfin suggests prices dipped to $120/sq ft as of 7/09, then rose back to $150/sq ft last month on the back of the federal and CA first-time home buyer tax credits. Now that the tax credits have expired, it looks like the next dip is already underway.
Richmond might not be a bad place to invest at prices below $100/sq ft (what we paid for our place in the mid-1990s…).
Not really interested in buying anything in the Bay Area. Even in Richmond, we’re still talking maybe $250,000 for something. For that kind of money you can get a pretty nice house in a safer, walkable neighborhood in Austin, Raleigh, Atlanta, Nashville, Dallas, or many other cities. That versus a house that ‘might’ be in an ok part of Richmond. The only reason I’m in the Bay Area is to save up enough cash to move away and buy something for cash elsewhere and grease my retirement savings. IMHO, Richmond, West Oakland, and the outlying areas like Manteca, etc will never be good investments.
I don’t know PB, Richmond sounds pretty bad to me. My mom was born there in 1920, but it’s gone downhill since then. The WWII shipbuilding boom brought in a bunch of tough two-fisted blue-collar workers who never left.
Remember though that if you move to one of those lower home price/lower tax states (speaking specfically about moving from CA to TX) - remember that it is likely you will get less services. They may not be services you would ever utilize so it’s a moot point, but they are generally less.
An example would be that CA’s maternity time off benefits are much more generous, and there is none (beyond using your own vacation time + FMLA) in TX. I believe college/university costs are also more heavily subsidized in CA than they are in TX.
I’m sure there are others.
I grew up in NC. Compared to there the quality of life and cost of living in CA is awful. I plan on buying for cash when we move out. Thus we’ll have no debt. Whatever services California might offer don’t really outweigh the negatives of staying.
Note the three highest appreciation cities on the list are all in California — where the state put in place a first-time home buyer tax credit to continue propping up demand after the April 30, 2010 expiration of the federal first-time home buyer tax credit.
It should get very interesting from here, now that the CA state home buyer tax credit has also expired.
Great footnote PB. Those of us outside the fence really appreciate the extra (and oh so damning) info.
Yes, but in the SF Bay Area, the high end FELL month on month at about a 7.5% rate…medium priced homes were flat, and low priced homes increased in price at a 10% annual rate.
SD is similar. HIgh end falling at 6% annual pace, low and medium priced homes both up at approximately 10% annual pace.
LA a bit different. High end up at about 3% annual pace, medium about flat, low end up at about 12% annual pace.
At least speaking for CA, it seems like the low end has hit bottom…high end is much softer.
My opinion? If you are looking for luxury homes in CA, keep looking. If you are looking for affordable homes in CA, now is about as good a time as any.
In California low end means what? $500,000 or so?
“$500,000 or so?”
That was it in 2006.
Now the low end is $300,000 or so.
I wouldn’t live Richmond, except for in the hills. You’re talking about neighborhoods with chain link fences, gangs, and regular shootings.
A lot of the central east bay is sort of land locked if you look at an aerial view. It’s surrounded by massive park lands, so that most single family lots were built out decades ago. I think this is keeping prices stickier, but they haven’t fully corrected yet.
If you look at the most ghetto areas in the central east bay like Richmond or parts of Oakland or middle class areas farther out east bay like Concord, that would be less sticky on the way down, meaning supply coming to the market a little more quickly.
There are still people who could never afford their homes that are stretching out their foreclosures for more than a year. That is keeping the prices up longer. I know someone in the east bay that bought a home for 650k in 2006. They are still in their home after over a year of playing around with modifying their loan. I’m pretty sure they will be out in the next 6 months. There are thousands more like them that are keeping inventory tighter than it should be and we won’t see the effect of those foreclosures for months.
Yes very good news prices are up all is well???
Gemany to the world 1930’s, “we won’t invade anybody we just want to improve our ecomony and quailty of life?”
Be very carefully about stats and reports they are meant many times to appear one way and really mean something else. Just look at your general area where you live, does it seem all is returning to a normal business and buying enviroment.
All one had to do was look at the build up of the German military, it had nothing to do with quailty of life for it’s citizens.
SMOKE and MIRRORS ALIVE and WELL
Exactly swguy- I’ve noticed the local flavor of NAR here is touting price increases, but it is easy to see that the swelling inventory (again) has higher and higher initial asking prices which is skewing the median asking price.
We are generally seeing the same thing here: ultra high end has adjusted (yet not selling) and the ultra low end (under $100k) which are not fit for transient squatters.
That leaves the sweetspot for your average gainfully employed house seeker painfully taut. I’ve sen REOs that could not close come back on the market at a higer price than lised before (and they sit all summer rotting)! A few of them just adusted down to asking price at the begining of the season.
Anyone else see rental companies acting as landlords on the banks’ behalf? There is one company here that is listing a ton of rentals at market rate (whatever that is- they are not renting them) and just sitting on them FOREVER. No incentives, no reductions, nothing…
I’m sick of the govt using my tax dollars against me through bank bailouts. Take the pain already. Just like I say to my cohorts at work, “Do you want 2 years or 20 years of SUCK” Looks like I’m gearing up for the 2 decade version of SUCK.
After many months of emailing an article here and there to my wife, showing her the drops in the high end, and asking her just where the people are coming from that are going to pay these crazy prices, she is firmly onboard the waiting bus. YAY!!!! In fact she is now telling me that we need to save everything for 3 years and put a big(ger)down payment on a home- I told here we are going to be getting to a place soon where interest rates are going to rise and it may cause prices to fall, but the rate of fall may be slower than the rise in interest negating our savings. We’ll see.
I’m sick of the govt using my tax dollars against me through bank bailouts. Take the pain already. Just like I say to my cohorts at work, “Do you want 2 years or 20 years of SUCK” Looks like I’m gearing up for the 2 decade version of SUCK.
———————-
Some people just won’t get what you’re saying (I know this, because I’m saying the same thing). It’s frustrating, and all we have to show for it is a sub-1% interest rate on savings.
And going much lower!
Gee this was all sold as “prices are going back up!!1″ on the network news last night.
I’m really confused. Sales where down but again, prices rose?
While the connection is obvious to me (lower your damn prices) why isn’t it to the sellers? (rhetorical question)
Gold Rallying to $1,500 as Soros’s Bubble Inflates
Gold may rise as high as $1,500 next year according to the median in a Bloomberg survey of 29 analysts, traders and investors.
Investors are accumulating enough bullion to fill Switzerland’s vaults twice over as gold’s most- accurate forecasters say the longest rally in at least nine decades has further to go no matter what the economy holds.
Analysts raised their 2011 forecasts more than for any other precious metal the past two months, predicting a 10th annual advance, data compiled by Bloomberg show. The most widely held option on gold futures traded in New York is for $1,500 an ounce by December, or 18 percent more than the record $1,266.50 reached June 21. Holdings through bullion-backed exchange-traded products are already at more than 2,075 metric tons, within 0.1 percent of the all-time high.
“Either a swift economic recovery or further dismal economic performance should bring new buyers into the market,” said Eugen Weinberg, an analyst at Commerzbank AG in Frankfurt.
Sun storm to hit with ‘force of 100m bombs’
http://www.news.com.au
AFTER 10 years of comparative slumber, the sun is waking up - and it’s got astronomers on full alert.
This week several US media outlets reported that NASA was warning the massive flare that caused spectacular light shows on Earth earlier this month was just a precursor to a massive solar storm building that had the potential to wipe out the entire planet’s power grid.
NASA has since rebutted those reports, saying it could come “100 years away or just 100 days”, but an Australian astronomer says the space community is betting on the sooner scenario rather than the latter.
Despite its rebuttal, NASA’s been watching out for this storm since 2006 and reports from the US this week claim the storms could hit on that most Hollywood of disaster dates - 2012.
Similar storms back in 1859 and 1921 caused worldwide chaos, wiping out telegraph wires on a massive scale.
The 2012 storm has the potential to be even more disruptive.
“The general consensus among general astronomers (and certainly solar astronomers) is that this coming Solar maximum (2012 but possibly later into 2013) will be the most violent in 100 years,” astronomy lecturer and columnist Dave Reneke said.
I have to admit, at first I dismissed this as hyperbole, but out of curiosity I went to Solarstorms dot org, there’s a NASA site too, and was flummoxed by the number and severity of the accounts.
As for 1921, if a solar flare did indeed knock out the low tech, but heavy wiring of railway signal and communications systems - well then our iPads and ATMs are toast.
Still another selling point for fiber optics. No wires means no induced currents.
But then there’s the issue of the nation’s power grid. Maybe breaking up huge power grids into smaller interlocked grids connected to each each other via circuit breakers would be a fix.
Maybe it’ll throw a monkey wrench into high frequency program trading.
I’d love to see that.
If regulators were serious about cracking down on HFT, they might consider forcing orders to get filled by first come, first served (if you cancel your order you go to the back of the line), instead of by size (largest filled first). Of course that wouldn’t be nearly as profitable for Wall Street, but it might make for an interesting experiment.
How about a new capital gains category: “super short term” where the buy and sell are less than 1 week apart? Tax them 50% for super short term cap gains.
Are you telling us to pick some some VZ?
“Still another selling point for fiber optics. No wires means no induced currents.”
Combo, That is how the regional grid operators are set up. Some regional grids need to import more power than others which have enough power to be self reliant. Once the regional grids with surplus capacity are back up and running they can start exporting. Hmm its going to suck to live in California during this storm.
It wouldn`t be that bad.
http://www.wired.com/thisdayintech/2010/07/0713massive-blackout-hits-new-york/ - 78k -
And of course satellites are above the atmosphere where the action is. Shielding is part of their design, but I don’t know how well they’re designed for super high levels of solar flares.
It would be ironic if the space station were to be completed just in time for (1) no shuttle flights anymore and (2) get wiped out by solar storms.
They plan on de-orbiting it anyway in 2016.
This solar max is actually on course to be one of the weakest in a very long time. Another case of the MSM trying to coax us into hyperventilating over a non-event.
Another case of the MSM trying to coax us into hyperventilating over a non-event.
And, of course, in the blogosphere, we never hyperventilate.
Faraday Cage = the new bomb shelter.
“Similar storms back in 1859 and 1921 caused worldwide chaos, wiping out telegraph wires on a massive scale”
I just just checked and our Wisconsin AT & T rep said give us a little more time to fix the problem , we’re working on it…we’re still working on it.
“we’re still working on it.”
AT+T? Yep, that sounds about right.
I recently read “The Sun Kings” which addresses this in the later chapters. Solar flares can be very serious, but they have to be aimed right at the earth. A huge solar flare could occur and if it’s pointed, as it were, “just a little low” - there’s much less, if any, effect.
Ya’ll got some last words?
Black helicopters.
Batteries are king.
Still got my 8-tracks - they should be good…
Looks like Brock Peters and I will have the beach to ourselves (go long suntan lotion)
The issue of solar flares is not ultra-violet light, the issue is charged particles streaming from the sun that arrive at the earth and induce large voltages in the earth’s magnetic field.
So, forget the suntan oil; just make sure you don’t have too much iron in your blood.
“So, forget the suntan oil; just make sure you don’t have too much iron in your blood.”
Yeah right; They fed me that same line when I got sent to Vietnam
(((shakin my head)))
In Vietnam one should have avoided lead, not iron.
Also falling vegetation.
I had this really strange problem of artillery shells always chasing me and I had the freakin’ radio !?!
I only regret that I have but one cell phone to give for my country.
I need more guns and another large dog.
Interesting article that ties together Goldman, Montsanto, and Correxit and two of the biggest man-made disasters of all time:
http://americapsycho.wordpress.com/2010/06/23/monsanto-evp-and-nalco-corexit-director-are-the-same-person/
Thanks, pressboard. I posted an article below about Gulf seafood and contaminants.
In my dreams, those involved in the Corexit tragedy are invited to a banquet and forcibly led into a contaminating room, where they are drenched with Agent Orange, dressed in sleazy polyester robes and then led to a dining hall where they are stuffed with Gulf seafood, with gen-mod veggies on the side, and given water to drink from the Raytheon plume in St. Peterburg, Florida.
A few years back, Christopher Hitchens went to Vietnam and witnessed the effects of Agent Orange on the next generations. Thalidomide babies are, by comparison, athletic super models.
But we don’t need no steekin’ regulations messin’ up our profits!
If only we could get our regulators to quit surfing porn and dining with the regulated.
A pretty good chart at this website showing the impact of the War in Iraq on the overall deficit.
———————-
CBO: Eight Years of Iraq War Cost Less Than (Obama’s) Stimulus Act
As President Obama prepares to tie a bow on U.S. combat operations in Iraq, Congressional Budget Office numbers show that the total cost of the eight-year war was less than the stimulus bill passed by the Democratic-led Congress in 2009.
According to CBO numbers in its Budget and Economic Outlook published this month, the cost of Operation Iraqi Freedom was $709 billion for military and related activities, including training of Iraqi forces and diplomatic operations.
The projected cost of the stimulus, which passed in February 2009, and is expected to have a shelf life of two years, was $862 billion.
www dot wlsam.com/goout.asp?u=http://www.foxnews.com/politics/2010/08/30/cbo-years-iraq-war-cost-stimulus-act/
Not so fast.
What about the deaths and destruction of the war? I am sure it’s not figured in it. I wish the families of Iraqis who were killed could sue the US for wrongful deaths…..
Nope they were not wrongful deaths because they were dumb enough to volunteer….
Now if they were drafted against their will… that’s different
I think butters was talking about civilian casualties.
We’d sue them right back for our own wrongful deaths. There’d never be any money exchanged..
What? Did Iraq invade the USA and murder civilians in the process? IIRC, the 9/11 crowd were all Saudis.
We’d sue them right back for our own wrongful deaths. There’d never be any money exchanged..
Riiight. Like how we got all that money back from Japan…
What about all of the murder-suicides you read about lately due to how f-ed up everything has become?
The politically convenient but untrue: the deficits have been caused by the war, or the poor, minorities, immigrants and those living in older central cities.
The politically inconvenient but true: the deficits have been caused by cuts in the federal income tax, which is way down as a share of GDP over 30+ years, and increases in government health care and custodial care spending on seniors, which is way up as a share of GDP.
That’s it — the whole ballgame. At the height of the wars in 2007, spending on the military was lower than under Carter as a share of GDP, and the poor never got much to begin with.
I rally abhor gross oversimplifications. These calculations ignore not only the opportunity costs (if the actions weren’t taken) and the long-term effects.
Whats the cost when that psycho vet shows up at work and guns everyone down including himself?
Just sayin
“CBO: Eight Years of Iraq War Cost Less Than (Obama’s) Stimulus Act”
This should say (Larry Summer’s) Stimulus Act.
I’m certain that Faux News could provide a chart that would indicate every time we fritter away money to support Israel’s security our national debt goes down. Ignorant rural America, where the husband gets two votes by using the obedient wife’s mail-in voter ballot, wouldn’t know any better.
I somehow fail to see how that could possibly be true. If you look at any pie chart you’ll see that roughly 75% of the total annual expenses for the US is from Medicare, Social Security and Defense. The TARP fund cost 4% of the total. “discretionary” spending was at 12%. So if you tally things up you’re looking at around 84% of the total pie being spent on things other than pre-existing programs and departments.
I’m sure numbers can be mish-mashed in order to make a story, but the numbers tell a different story.
True, but at least until recently SS and Medicare were funded separately and ran surpluses. Take those two out of the equation and military spending as a percentage of the budget becomes huges.
I can see though why they (GOP) want to get rid of SS and Medicare. The payroll tax of course would not go away, instead it could be used to fund future wars.
But that was largely because of demographic reasons. We have an ageing population which means more retired persons consuming more healthcare supported by a proportionately smaller number of workers.
17,000 people attend loan-modification marathon in West Palm Beach
By Kimberly Miller Palm Beach Post Staff Writer
Updated: 7:35 p.m. Tuesday, Aug. 31, 2010
Posted: 6:09 p.m. Tuesday, Aug. 31, 2010
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WEST PALM BEACH — The Neighborhood Assistance Corp. of America is finishing up its five-day mortgage modification event tonight with about 31 percent of homeowners walking out with a new lower monthly loan payment.
NACA spokesman Darren Duarte said at 5 p.m. - three hours before the non-profit group closed its doors - that about 17,000 people, representing 11,149 households had attended the program at the Palm Beach County Convention Center.
Of those households, 3,544 received loan modifications, which typically include an interest rate reduction, a cut to the principal balance, or a combination of them both. NACA said it will continue to work with homeowners who did not get a modification during the event.
Marks said a permanent office could be open in Miami within the next two months.
“Their business model is broken,” Marks said about the banks and servicers trying to modify loans through the federal program.
Boynton Beach resident Jackie Hurst, 47, got a loan modification on her home last year, but the new monthly payment of about $1,900 was still too expensive for her reduced income as a patient advocate for drug and alcohol abusers.
She spent 17 hours at the NACA event beginning Monday. By this afternoon, her payment was reduced to $1,179-a-month.
Brenda Nixon, 45, of Miami, also spent about 17 hours working with NACA. She had attended the Miami Beach event in April, but didn’t get a successful modification then.
Today, the 45-year-old nurse’s assistant, who lost one of her two jobs, had her monthly payment lowered to $1,085 from $1,850.
“The burden has been lifted,” Nixon said.
“The burden has been lifted,” Nixon said.
To the backs of the taxpayers…
Bingo. Not lifted at all - just transferred.
Quiet down and get to work paying her mortgage!
Lifted? No, lady they just added it on to the end of your loan. Congratulations, you now have a 60-year note that you will die trying to pay off.
Great. 2 / 17000.
How about some real numbers?
I swear these things are just some cahoots racket between the copy-hungry MSM and the profit-hungry concession stands at the convention center.
“I swear these things are just some cahoots racket between the copy-hungry MSM and the profit-hungry concession stands at the convention center.”
Exactly. I went through the “modification” process with the bank. All they did was end up with a balloon payment at the end…lose your house now or lose your house later. Bottom line is you’re going to lose your house.
Thanks for inside info BA.
Seven lean years: No recovery till 2016
Commentary: 10 reasons Jeremy Grantham’s betting $100 billion on historic game-changer
By Paul B. Farrell, MarketWatch
ARROYO GRANDE, Calif. (MarketWatch) — Summer of recovery? Dead. How dead? Remember Genesis? The Seven Lean Years? Add seven years to the handoff from Bush to Obama in early 2009 and you get no recovery till 2016. Get it? No recovery till the end of Obama’s second term, assuming he’s reelected — a big if.
“The idea behind ’seven lean years’ is that it is unrealistic to expect to overcome the several problems facing most developed countries, including the U.S., in fewer than several years.” That’s Jeremy Grantham talking; he’s responsible for investing $100 billion in the next seven lean years. And like the biblical Joseph, whose life was on the line while interpreting dreams for the Egyptian pharaoh, Grantham can’t afford mistakes.
Fed sees limited policy options
In his recent newsletter, “Seven Lean Years Revisited,” Grantham tells us why expecting a summer of recovery was unrealistic, why America must prepare for a long recovery. Grantham details 10 reasons: “The negatives that are likely to hamper the global developed economy.” Sorry, but this recovery will take till 2016.
…Warning: You’d be a fool to trust your money with Wall Street during the seven lean years till 2016. Another 20% will vanish…
http://www.marketwatch.com/story/seven-lean-years-no-recovery-till-2016-2010-08-31
He’s wrong. It’s only going to be six lean years. Or maybe eight.
When it turns out that we’re both probably wrong, no one will remember that we made these predictions.
The ’seven lean years’ is a Biblical reference. Perhaps he reads here, as I made that reference in my posts no less than ten times over the past five years…
“The ’seven lean years’ is a Biblical reference.”
Right, Joseph interpteted Pharoah’s dream to foretell 7 years of plenty (fat cows) followed by 7 years of famine (skinny cows)
Really he was predicting The Far Side cartoons and diet ice-cream sandwiches. (Skinny Cow Ice Cream Sandwiches. I kid you not!)
I’m still waiting for Bernanke to show up in a coat of many colors……
’seven lean years’
Look at the bright side, it`s only one dog year. Oh, wait a second that would be forty-nine years for a dog. My dog is nine, poor Dozzer is going to be dead before we get a recovery.
You know, I was just looking at the rate sheet from my mortgage lender, Wells Fargo. My current 15 yr is at 4.875%. Right now their 5yr ARMS are 2.875%. For only a few hundred a month more than I’m paying, I could get this and then pay it off within 5 years, rather than the ~8 I’m currently looking at. I’m trying to figure out whether this makes sense.
How much and how fast can the ARM adjust?
Figure worse case.
Would you lose your house?
So you only need to keep stable income for 5 more years and you get to throw a mortgage burning party? What’s the probability there might be a wrench in that income or that a property tax spike may push you into the payment discomfort zone? If you’re all good, I’d go for it.
7.875% is the maximum. Which is pretty close to what I was paying in 1999 when I bought the place. What I can’t find from their website is the MINIMUM loan ammount that they’ll make. ‘Cause I only have 62k of principal left in the loan. Certainly during the bubble, nobody wanted to bother with sub 100k mortgages. I also can’t see anyhing about pre-payment penalties. which would immediately scotch the idea.
That might be the best use of an ARM that I have ever heard described.
Is there an early payoff penalty? I think most ARMs have that, don’t they? If so - what is it?
Early payoff penalties are certainly common on neg am and interest only loans, I’m not sure that they’re as routine on conventional ammortizing ARMS. But yeah, this could only make sense if there is NO pre-payment penalties. What I’m trying to figure out is whether this makes sense given the closing costs. I’m only cutting 2% off the interest rate of a relatively small loan ammount ~60k and doing that for a short period of time. It’s perfectly possible that this doesn’t make any sense.
Excel (or equivalent) is your friend.
I did that when I refi’ed early last year. The crossover point for interest savings vs. closing costs was 5 years out; I figured I’d probably be in the house that long, so pulled the trigger.
Just make sure you get all the costs up front, of course.
(One thing I didn’t account for is opportunity costs - e.g. the lower rate if I’d have waited until right about now. That requires predicting future rates though. Who’da thunk they’d be this low now? Insane.)
I got burned too. Pulled the trigger, and rates are down another .25 percent from what we got.
Might be possible to refinance with no closing costs.
You have to shop around to find a lender that does these types of loans. Then again, they might not do it fo a 60K refi.
For example, on a 130K refi (30 Year) they offered me 4.5% with closing costs or 4 5/8% with no closing costs.
Spoke to a mortgage broker. Here’s what he’s offering on a 130K refi. None of the loans carry a prepayment penalty.
15Yr fixed 4% ($2100 closing cost)
15Yr fixed 4.625% (no points no closing costs)
10Yr fixed 3.875% ($2100 closing cost)
10Yr fixed 4.375% (no points no closing costs)
7/1ARM 3.75% ($2100 closing costs)
Does not offer a “no closing costs” 7/1ARM loan
5/1ARM 3.5% ($2100 closing costs)
Does not offer a “no closing costs” 5/1ARM loan
Also, the Wells Fargo 5/1 (2.85%) yields an APR of 3.209% whereas the 5/1 FHA (3.25%) yields a lower APR of 3.074%.
Appears Wells Fargo might be charging folks a lot of fees and or points if they go with the 2.85%
If I were to ever sign up for another mortgage(which I probably never will) I’d be inclined to pay the additional risk premium, ie, 30 year v. 15 year and maintain a 15 year schedule. The new normal appears to be periods of unemployment and other contingencies that the delude masses never planned for as evidenced by the current debacle.
Totally agree with you on that.
I think you’re misreading those terms, Jim. A 5-year ARM means the interest is fixed for five years and adjusts annually after that. The amortization is still over a 30-year term.
But he is assuming he will make additional payments to keep it to a 5 year schedule. Otherwise the payment on the 2.9% 30 year would be much, much less than the 4.9% 15 year currently is. He says he can do it by increasing the payment by a few hundred a month. That implies lots and lots of additional payments.
That is, indeed what I was thinking. My gut feeling is that it probably isn’t worth it. And paying attention to my gut feelings is why I’m on the bubble blog.
I’ve always been told by people with far more money than me that if you can withstand significant payment shocks, over the long run, you will be far better off with adjustable rates.
If you are that secure in your payment, go for the ARM.
If there is a significant rise in interest rates, it will likely be coming with inflation, and you will be paying off your debt with cheaper dollars anyway. In the meantime, you get to save a couple of percent to put toward principal.
Prepayment is also a question of course…
I came back to read yesterday’s HBB after going off for the day. I just wanted to thank alpha and rio for the very interesting read tackling my question of where true free market price discovery would lead us and if we were truly ready for that. Those are the gems that keep us coming back for more.
What a lovely morning.
The good Republican voters of Alaska have tossed their RINO Senator out on her ear. The plutocrats of the Establishment GOP are in disarray. Despite the best efforts and payolla of the sleazy operatives of the NRSC, Tea Party backed candidate Miller has staged the political upset of the year.
Maybe there’s hope, yet.
Yes and this election cycle is going to dump a lot of incumbents out on their ears. I only wish we couldn’t done the same to McCain.
I thought that was good too. That’s probably the only good thing about tea party.
Coffee party, now it’s your turn. Show me the money!
Coffee Party was a flash in the pan, had no agenda, and died as soon as the initial meetings were over. I would like to point out that I actually predicted that this would happen on this blog. You don’t start political movements by getting a few thousand people to go to a few hundred Starbucks and trying to figure out what they think might be important.
Not to mention, the “coffee parties” were a contrived astro-turf movement built around DNC talking points and a core cadre of Obama supporters. The status quo, in other words. Goodbye and good riddance, losers.
I know that the political chattering classes like to tout stuff like this a huge deal, but I have a hard time seeing anything that Alaska does as a bellweather for the country as a whole. The population was estimated to be less than 700K in 2009. Their economy is hugely dependent on natural resource extraction, and they have a *reverse* income tax (everyone in the state who qualifies gets a check from the government just for breathing).
How is anything this small population does a sign of things to come for most of the US? It is clearly an important moment for Alaska. And it will be interesting to see how he does in the general election. But it is interesting because of what it means for Alaska, not what it means for the rest of the country.
The GOP has applied their long lauded expertise in divisiveness…. to themselves.
It doesn’t get any better than that.
The GOP has applied their long lauded expertise in divisiveness…. to themselves.
My prediction in 2004 when Bush was re-elected and the GOP had a congressional majority:
“Things are going to get a heck of a lot better, or it will be the end of the Republican party as we know it”
Yahoo!
Watching these unelectable buffoons get nominated to the GOP and their deluded memes a matter of public record makes for great entertainment.
What comes around goes around. Eat up.
Feh. I can’t believe we’ve got three Senatorial candidates here in Fla and I can’t bring myself to vote for even one of them. All three are illegal immigrant panderers. One has the Bush stench on him, one’s an elitist and the third has too many issues.
Murkowski never crossed the aisle so from a Senate voting standpoint, it doesn’t matter.
The newsmedia will enjoy the ratings from playing up the surge in the Tea Party, but secretly progressives should be rejoicing. Palin/Beck&Co are merely re-fracturing the already fragile coalition that Karl Rove cobbled together for Bush. Conservatives are dividing and conquering themselves, both in the ballot box and the contribution checks.
Yeah - thank GOD no one is fracturing the spend/borrow-our-grandchildren-into-oblivion/slavery democrats…
You seem to forget that the $5 trillion dollar man, deficits don’t matter bluster and borrow and spend boys are GOP. That’s right…… 5 trillion.
You own them.
Oxide, your post has been saved to a file on my computer and will be replayed on this blog the day after the election. We’ll see if you were right.
No need to save Eddie’s Dow 12K prediction. We will all remember that one!
Interesting…since I didn’t make any specific predictions in my post.
If I were to make a prediction, I would say that the Tea Party will only serve to make red districts already redder. If a blue district switches to a red tea partier, it will be because of a disallusioned liberal base that stays home, NOT because the conservative candidate is a Tea Partier. Purple districts will swing either way, as they always do.
Yes, the Tea Party may help the conservative side in the short term. My comment about rejoicing progressives was a more long-term prediction. It may take a decade or so, but I predict that Rino republicans and Dino democrats will join to form the “new” moderate republican party, while progressives will stay Dems in a smaller tent. The Tea Party will be viable until (a) They figure out that the young folks are gravitating left, as they always do (b) Sarah Palin loses her looks, as women always do. Sorry, Bristol ain’t going to cut it.
At that point the Tea Partiers will fade away, leaving a Congress overall more liberal.
(a) They figure out that the young folks are gravitating left, as they always do
Until they earn their first paycheck…then being a socialist is not so much fun…
(b) Sarah Palin loses her looks, as women always do. Sorry, Bristol ain’t going to cut it.
You seen Raquel Welch lately - she is 70+ and still HOT
Liberal fiscally or liberal socially?
Most of America is fiscally moderate to conservative and socially moderate to liberal. A party that could reflect those views would do well. The current alignments seem almost intentionally designed to keep us at each others throats.
Unfortunately, you can’t drum up huge fund raising rallies and marches on town all by saying “We’re going to be sensible prudent and let people live their lives.”
Nope. You need to be screaming about abortion, war, and illegal aliens.
The current alignments seem almost intentionally designed to keep us at each others throats.
Incredibly insightful…
“Eddie’s Dow 12K prediction”
With just a few more Wall Street blowouts like today’s, I expect him to resume crowing.
The newsmedia will enjoy the ratings from playing up the surge in the Tea Party, but secretly progressives should be rejoicing.
And that is egg-zactly what the progressives are doing.
“progressives should be rejoicing”
Progressive = Communist = Democratic Socialist = (Insert current stealth name here)
Don’t let the names fool you.
Progressive = Communist = Democratic Socialist = (Insert current stealth name here)
Don’t let the names fool you.
Don’t let multi-millionaire, self-serving, lying, village idiot, AM talk-radio horse’s-asses fool you either.
“Don’t let multi-millionaire, self-serving, lying, village idiot, AM talk-radio horse’s-asses fool you either.”
Already did.
Honesty is the best policy. It’s fine if you are an anti-capitalist communist, tell the truth, put your ideas on the table BEFORE Election Day…let the people know that you intend to bring about the collapse of our current system. Don’t masquerade behind pleasant sounding names like progressive.
Honesty is the best policy. It’s fine if you are an anti-capitalist corporatist, tell the truth, put your ideas on the table BEFORE Election Day…let the people know that you intend to bring about the collapse of our current system. Don’t masquerade behind pleasant sounding names like conservative.
See how that works Cupcake?
let the people know that you intend to bring about the collapse of our current system. Don’t masquerade behind pleasant sounding names like progressive.
Or slow?
Like I said, eating Gulf seafood might not be the best idea. Love the line about people shrimping alongside people skimming oil. Oh, yah, you can believe the EPA, right? To be fair, I think they at first tried to do the right thing with respect to Corexit, and then backed down.
http://www.aolnews.com/gulf-oil-spill/article/new-lab-results-raise-questions-about-gulf-seafoods-safety/19616043
If Gulf seafood is safe to eat, why not make a big show of serving it on Capitol Hill and at a White House state dinner? After that, serve it in ALL government building cafeterias.
I know, I know… dream on.
My reply to pressboard’s post above hasn’t shown up yet, but when it does, read my banquet scenario dream sequence.
This is a fantastic idea. Especially if they then get sent to the ‘free clinics’ for their treatments.
Michelle plating saucy gumbo for all should do the trick.
Headline in 3 mos:
People “unexpectedly” being hospitalized in droves after eating gulf shrimp.
Carrie, I’m not sure it will be that immediate. I expect it will look more like Middle Eastern Gulf War Syndrome, and other conditions that affect troops, etc. Clusters of neurological illnesses, more people with ADHD, weird intestinal problems, organ malfunctioning, etc.
It will all be very “mysterious” and Big Pharma will go to work on it with a vengeance, developing new drugs to deal with these strange new illnesses and physical conditions. “Toxicity” will be pooh-poohed as “tin foil hat”, etc.
Gulf seafood effects: I expect it will look more like Middle Eastern Gulf War Syndrome, and other conditions that affect troops, etc. Clusters of neurological illnesses, more people with ADHD, weird intestinal problems, organ malfunctioning, etc.
That’s actually a relief because I was afraid it might make me throw up.
And then sue BP…
People “unexpectedly” being hospitalized in droves after eating gulf shrimp.
Fartin’ fire
Nothing is safe to eat. or drink.
Have you stopped eating and drinking?
“Eat, drink and be merry …
… for tomorrow you may be in Utah!”
Spotted at at T-shirt shop in Salt Lake City in the late 80’s.
That sounds like something Olygal would have liked. Or possibly made up.
Can someone anyone tell me what happened to Olygal?
Can someone anyone tell me what happened to Olygal?
She passed away back in October 2009.
“…what happened to Olygal?”
She lives on in our fondest HBB memories.
that sux sux sux. She was so young.
I didn’t know.
Ok c’mon Palmy……. Gulf shrimp sautee’d and deep fried in BP crude oil. It’s an all-American feast…. honestly…. it won’t hurt you. Tall glasses of crude oil are served everywhere outside the US.
You’re just un-American.
..and on a link from that page:
Newly Discovered Oil-Eating Microbe Flourishing in Gulf
Scientists discovered the new microbe while studying the underwater dispersion of millions of gallons of oil spilled into the Gulf following the explosion of BP’s Deepwater Horizon drilling rig.
[snip]
“Our findings show that the influx of oil profoundly altered the microbial community by significantly stimulating deep-sea” cold temperature bacteria that are closely related to known petroleum-degrading microbes, Hazen reported.
Their findings are based on more than 200 samples collected from 17 deepwater sites between May 25 and June 2. They found that the dominant microbe in the oil plume is a new species, closely related to members of Oceanospirillales.
This microbe thrives in cold water, with temperatures in the deep recorded at 5 degrees Celsius (41 Fahrenheit).
Hazen suggested that the bacteria may have adapted over time due to periodic leaks and natural seeps of oil in the Gulf.
http://www.aolnews.com/gulf-oil-spill/article/newly-discovered-oil-eating-microbe-flourishing-in-gulf/19606738
——–
I wonder if we could deliberately cultivate and harvest these microbes.. and burn them for fuel.
They’ve already spent the energy they garnered from the oil hydrocarbons metabolically. It’s not like they turn into giant (for a microscopic organism) beach balls filled with gasoline.
It would be cool if they did, though……:)
How is it that here in The Matrix, where we humans are fed nothing but soylent green, enough excess heat and electrical energy is extracted to run all those machines…?
…fed nothing but soylent green, enough excess heat and electrical energy is extracted …
What they didn’t tell you in the movie is that soylent
green is really just stacks of freshly printed $100 bills..
Joey, what’s more ridiculous is why they wouldn’t have killed all humans and used cows for their ‘bio batteries’ instead. They’d get methane as well!
WASHINGTON (Reuters) - U.S. regulators did not grant Lehman Brothers the same assistance as its competitors, knocking out the possibility of an orderly unwind of the firm and aggravating the global crisis, former Lehman Chief Executive Dick Fuld said on Wednesday.
Fuld will tell a U.S. commission investigating the causes of the financial crisis that Lehman proposed to government regulators a menu of options that could have given the investment bank relief and possibly averted its September 2008 collapse
Regulators rejected these options — including allowing Lehman to become a bank holding company — but weeks later extended the measures for other Wall Street firms, Fuld said in testimony prepared for the Financial Crisis Inquiry Commission.
Fuld focused on Sunday, September 14, 2008, when he said Lehman was mandated by government regulators to file for bankruptcy before the Asian markets opened the next day.
That same Sunday, the Fed expanded for investment banks the types of collateral that would qualify for borrowings from its discount window, Fuld said.
“Only Lehman was denied that expanded access. I submit, that had Lehman been granted that same access as its competitors, even as late as that Sunday evening, Lehman would have had time for at least an orderly wind down or for an acquisition which would have alleviated the crisis that ensued,” Fuld said
If true this goes along with my belief that many knew there would be a collapse, but only a small number knew when because they planned to prick the bubble and profit from it.
Anyone happen to remember how many other firms (besides Lehman) were leveraged 31.7 times over?
I have long assumed that Fuld must not have had his political ducks in order; otherwise, why would Lehman have been thrown under the bus when all the other Megabanks were granted too-big-to-fail rescues?
Or Greenspan/Bernanke corruption buried under the Lehman smoldering $hitpile.
Yes. Or both.
Or Lehman was just simply the sacrificial lamb to get TARP passed.
Ding!…….winner!.
Or maybe the thought of bailing out Dick Fuld was just too much for some people to stomach.
BINGO
Remember the sequence of events.
Bernanke/Paulson were against too big to fail. They got caught flatfooted and had to liquidate Bear Stearns, but spent the summer saying they didn’t want to do it again. And when Lehman was going under, they told the other banks they’d better arrange their own rescue, because there would be no government money.
They let Lehman go down. The result was chaos. And then they folded.
Remember, Bear Sterns was not bailed out. It was liquidated, but its creditors were protected. Lehman was an attempt to not protect the creditors.
If Merril Lynch had gone under first, Lehman would have been bailed out.
Fuld focused on Sunday, September 14, 2008, when he said Lehman was mandated by government regulators to file for bankruptcy before the Asian markets opened the next day.
That same Sunday, the Fed expanded for investment banks the types of collateral that would qualify for borrowings from its discount window, Fuld said.
“Only Lehman was denied that expanded access. I submit, that had Lehman been granted that same access as its competitors, even as late as that Sunday evening, Lehman would have had time for at least an orderly wind down or for an acquisition
Again if true this would suggest that they wanted a Pearl Harbor type event that didn’t drag down certain banks but would scare Congress into TARP.
The Financial Times
Fuld accuses Fed of worsening crisis
By Tom Braithwaite in Washington
Published: September 1 2010 14:22 | Last updated: September 1 2010 16:44
Dick Fuld, the former chief executive of Lehman Brothers, accused the Federal Reserve of worsening the financial crisis by letting his investment bank fail.
In the most vigorous defence yet of his actions at the helm of Lehman, Mr Fuld said in prepared testimony to the Financial Crisis Inquiry Commission on Wednesday that regulators pushed his group to file for bankruptcy and denied it the same access to Fed credit that other banks were allowed.
The FCIC, which was set up by Congress to examine the causes of the financial crisis, is examining the phenomenon of “too big to fail” institutions at this week’s hearing in Washington.
Mr Fuld said that the weekend before the collapse in September 2008 the Fed allowed greater access to its credit facilities: “Only Lehman was denied that expanded access.”
He added: “I submit, that had Lehman been granted that same access as its competitors, even as late as that Sunday evening, Lehman would have had time for at least an orderly wind down or for an acquisition which would have alleviated the crisis that ensued.”
The collapse of Lehman roiled markets and Mr Fuld has been castigated widely for taking on too much risk and engaging in off-balance sheet financing that gave investors a flawed impression of the company’s health.
He acknowledged that he made mistakes but insisted that “there was no capital hole” at Lehman.
Mr Fuld was one of a number of witnesses testifying in a Senate hearing room on Capitol Hill. Scott Alvarez, the Fed’s general counsel, told the commission that the Fed had had no confidence that it would have been paid back had it opened up credit to Lehman.
“I think they failed not because the government wasn’t willing to help them but because they were a victim of the circumstances and the economy and some bad decisions that they had made in the years leading up to this that they did not have time to unwind or get out of,” he said.
…
EDITOR’S CHOICE
Probe chief to issue Wall St data - Sep-01
SEC drops probe into Moody’s - Sep-01
In depth: Obama and Wall Street - Jul-22
US pay law branded ‘logistical nightmare’ - Aug-30
Video: CEO pay exposure - Aug-30
Analysis: SEC – No longer a doormat - Aug-26
It’s seems fairly obvious that after Lehman was allowed to go under the repercussions scared the pi$$ out of everyone on the planet… and the PTB did a quick 180 in their attitude about bailouts.
Obvious = no fun.
Conspiracy = lots of fun.
A small number of individuals in positions of great power made decisions about which firms to rescue and which to go under. Bear and Lehman were the losers.
Call it a conspiracy if you want, Joey — I call it market intervention on an unprecedented scale.
I call it a picking a bad day to quit amphetamines!
LOL
Is there any part of our lives in which some outside power does not interfere? Why should financial markets be so blessed when virtually nothing else is?
Anyway, if they sat on their hands and allowed systemic financial collapse (when they could have prevented it), the deliberate lack of action would certainly be considered “intervention” of the highest order.. and their withered bodies would still be hanging from lampposts.
Frame it:
Is there any part of our lives in which some outside power does not interfere? Why should financial markets be so blessed when virtually nothing else is? Comment by joeyinCalif 2010-09-01 10:12:59
Is there any part of our lives in which some outside power does not interfere? Why should financial markets be so blessed when virtually nothing else is? Comment by joeyinCalif 2010-09-01 10:12:59
Is there any part of our lives in which some outside power does not interfere? Why should financial markets be so blessed when virtually nothing else is? Comment by joeyinCalif 2010-09-01 10:12:59
Doom and gloom predicted for Vancouver house prices
A new report says Vancouver’s real estate market could drop by 30 per cent. Aug. 31, 2010. (CTV)
By: Kerry Gold, ctvbc.ca
Date: Tuesday Aug. 31, 2010 5:08 PM PT
A new doomsday report warns Vancouver’s housing market could be hit by a burst bubble — and a drop in prices by as much as 30 per cent.
The threat of a giant, synchronized real estate bubble looms over all six of Canada’s major cities, says the report released by the Canadian Centre for Policy Alternatives.
But Vancouver homeowners are poised for the biggest hit to their investments.
“Vancouver would be worst hit, in dollar value, losing almost $200,000,” says a news release issued by the CCPA, which examined house price trends in six major markets over the last 30 years in a report called “Canada’s Housing Bubble: An Accident Waiting To Happen.”
It isn’t the first time Vancouver has been the target of bubble talk.
Garth Turner, former MP turned finance author and speaker, has been predicting calamity for Vancouver’s real estate market for the last two years.
“A 15 per cent to 40 per cent crash in prices, depending on the market — with Vancouver and the Lower Mainland most at risk - is now a certainty,” Turner told ctvbc.ca. “The real question is how long prices grind lower after that phase, and how many years it will last.
“Those who thought real estate would always rise in value were blinded by the industry and by the cheapest mortgage rates ever. All booms end badly, and all bubbles burst.”
Local industry experts, however, aren’t buying into the doom and gloom.
…
Anyone with an update to the $1 million condos from the Olympic village that were “for sale”
I visit Garth’s site regularily. Google Greater Fool if you’re interested. It’s probably the closest thing Canada has to the HBB.
Local industry experts, huh? Good thing Real Estate Experts have never,ever been wrong before. Also this is a perfect excuse to post this link:
http://www.crackshackormansion.com/
How about “Lower Housing Prices Predicted for Younger and Future Vancouver Residents”?
Local industry experts are, however, terrified that the bubble collapse will savage the REIC like the bubble collapse in America did, and therefor are clamping their hands over their ears, closing their eyes and screaming “LALALALALALALA I CAN’T HEAR YOU LALALALALA!”
Close sfbb. They’re closing their eyes and screaming “IT’S DIFFERENT HERE, IT’S DIFFERENT HERE, IT’S DIFFERENT HERE.” For variety, sometimes they’ll throw in a “WE’RE NOT THE U.S.” OR “WE DON’T HAVE SUBPRIME” or “OUR BANKS ARE THE SOUNDEST IN THE WORLD.” They miss a few facts, like we did have 0 down 40 year amort mortgages and still have 5/35s. They don’t mention our banks are the soundest in the world because the Canadian govt insures the riskiest mortgages through the CMHC.
My favourite line from the eternal optimist crowd. “Sure the debt levels of Canadian households are at all time highs, but they’re debt to asset ratios are still good.” I’m sure debt to asset ratios didn’t look too bad in the U.S. right before the bubble burst either.
Yep. Massively inflated asset valuations led to massively inflated debt against said assets.
Local industry experts, however, aren’t buying into the doom and gloom.
I see a whole crop o’ unexpected bein’ planted.
Foreclosures Plague Atlanta’s Best Gated Communities:
http://www.ajc.com/business/housing-troubles-slip-into-603791.html
Maybe an opportunity for a wannabe to move up and finally escape living next to someone who is only making 25K a year. Or not.
Nothing wrong with making 25K a year.
As long as you only spend 23k a year you`re fine.
To me “gated community” means that you live in a town or city where there is a lot of income inequality and hence crime, so you have to barricade yourself in to stay safe.
The sad thing is that this has become the norm in many US communities, along with the ubiquitous signs that proudly proclaim that the house is wired with a security system.
Get ready for more of this.
Is there any town or city over 10,000 population in the U.S. that does NOT have a lot of income inequality?
Define inequality. Top family income of 2X greater than the bottom? 4X? 8X? 16X?
I’ve got the security system now. My house got robbed and they made off with around $30k of my wife’s jewelery. I hope they die painfully.
That’s sad.
For the record, we had a home security system when we lived in Richmond (East Bay version). Nowadays, the home security system consists of a pad lock on the gate to our yard between the hours of 11p and 5a.
Maybe an opportunity for a wannabe to move up and finally escape living next to someone who is only making 25K a year.
Pass the word along to Eddie.
Lots of news about Canada’s housing bubble in the MSM today…
http://www.calgaryherald.com/business/Report+raises+concern+city+housing+bubble/3467579/story.html
“According to the website of realtor Mike Fotiou, of First Place Realty, the average MLS sale price for a single-family home in the city, from Aug. 1 to 30, was $445,499. ”
In what is basically a prarie town where land is for all practical purposes unlimited.
Calgary is often compared to Denver, yet in Denver the median price is 275K. And that price is too high. How does Calgary justify 445K (423K USD)?
Oil Sands money.
We’ve got oil and nat gas here too. Plus it doesn’t get half as cold as Calgary does.
There’s lots of money here in Calgary thanks to low unemployment and high wages.
http://www.calgaryherald.com/business/Alberta+province+earnings/3448294/story.html
“There’s lots of money here in Calgary thanks to low unemployment and high wages.”
So did a lot of US cities before the music stopped. Keep believing your own hype or prepare for the inevitable implosion.
I thought all the oil boom-town money was up in Edmonton.
Colorado has shale oil. Just as impractical.
I’ve been a good Roidy lately. I haven’t been flexicuffed or tased. Really.
So, do I have to put up with the words and pharases “snapping up”, “snapped up”, and “unexpectedly”, anymore?
Roidy
We’ll have to hear those until we all buy houses.
We’ll have to hear those until we all buy houses.
Roidy unexpectedly snapped up a house.
Isn’t this sort of thing to be expected when electronic fiat money presses run amok in a desperation attempt to drown systemic economic problems in a tsunami tide of virtual liquidity?
* September 1, 2010, 8:59 AM EDT
* ETF Investing home page »
High correlations reveal unhealthy market: strategist
Pity the active managers.
Yesterday my intrepid colleague Sam Mamudi was out with a story making the rounds in the blogosphere about how investors are ditching active managers and piling into index funds.
Meanwhile, money continues to flow into index-tracking ETFs.
This shift is occurring as stocks are increasingly moving in tandem. The CBOE’s implied correlation indexes are near all-time highs. Who needs active management when the stock market looks like one giant herd?
Going beyond stocks, Nicholas Colas at ConvergEx each month analyzes asset-price correlations for a range of financial assets and precious metals.
The month of August “shows little break from the recent highly correlated price movements amongst these type of asset types,” he writes in a report Wednesday. “There are a few exceptions … but by and large a whole range of disparate risk assets continue to trade as one undifferentiated mass.”
In other words, different investments all look the same to the global capital market.
…
I’ve been a good Roidy lately….do I have to put up with the words and pharases “snapping up”, “snapped up”, and “unexpectedly”, anymore?
Darn, I didn’t even expect them to use that phrase in this story.
Banks to allow local groups to buy foreclosuresBy ALAN ZIBEL (AP) – 1 hour ago
http://www.google.com/hostednews/ap/article/ALeqM5jNtGDqByR93u4OmnM0T74HMLmSrgD9HV7RG80
WASHINGTON — Major banks are agreeing to give local governments and nonprofit groups the ability to buy foreclosed homes before they are sold to private investors.
The Obama administration said Wednesday local officials could benefit from acquiring these properties and renovating them or using the land for redevelopment projects. Congress has provided $7 billion to buy the homes, but these groups are struggling to spend the federal money because they are often outbid by speculators who are snapping up foreclosures.
Speculators tend to be gifted at spotting opportunities to capture federal subsidies.
…but these groups are ***struggling to spend** the federal money…
Struggling to spend? Now, that’s a phrase you don’t hear everday!
Everyone wants house prices to be high, until they are the buyer. It’s a struggle.
I was just robo-called by my credit card to lower my rate to 6.99% from 12.99%. So I hit 1 when prompted.
Of course -I- cannot take advantage of the offer, because to qualify you have to have a minimum balance of 4k, and I do not carry a balance. Rats.
oh well, back to making my payments and having a rate of 0%.
Did you press 1 and get this answer:
“No 6.99% rate for you…6 months!”
now that was funny! Credit nazi strikes again!
the credit/soup nazi strikes again.
Thanks for the laugh!
That’s a slick marketing campaign. Get a mindless computer to call you up to tell you that you are not eligible for a discount, that wouldn’t save you any money anyway.
The best part of that was, when you press 1 you actually get a live body on the other end of the phone. He said “please disregard this call - you don’t qualify”
Wonder how many times he does that day?
Not enough to make it worth programming in the pre-screening, apparently. I suspect there are a surprising number that carry that amount of credit on the particular card you’re using.
Awwww man! Now “savvy investors” are “snapping up” houses in Brazil!
• Brazilian property is continuing to be a success story, according to a new report.
“Now, savvy investors from around the world are snapping up low cost properties and filling this void.
And from the same article: (But is this true?)
Surge in demand for rental apartments in America
http://www.fly-2let.co.uk/news467.html
landlords with apartments in the US would be wise to warm to the domestic market as the country is seeing a surge in rentals.
Mounting foreclosures are reducing homeownership and an improving job market for young adults is encouraging them to find their own places to live. The number of occupied apartments increased by 215,000 in the 64 largest US markets in the first half,
That is almost double the units added in all of 2009 and the most since the firm began tracking the data in 1992.
“Demand is pretty stunningly strong in the first half,”
The economy’s recovery from the worst recession since the 1930s has revived the job market, stimulating demand for apartments.
However the growth has not been enough to prevent more home foreclosures, which lift rental demand, or to lead to a sustained rebound in home buying.
New jobs are the biggest driver of apartment occupancy. Employers began hiring again in January, adding an average of 147,000 jobs a month through June, according to the Labor Department.
The freakish Florida flippers were savvy and sophisticated when “snapping” up $hitty shacks in 2005.
Savvy to slave seemingly overnite.
Savvy to slave seemingly overnite.
I think about that.
It’s such a fine line between stupid and clever.
Andrea Coombes’ Ways and Means
Andrea Coombes
Sept. 1, 2010, 12:01 a.m. EDT
Recession slams workers’ pay
Men’s wages are falling faster than women’s, Economic Policy Institute says
By Andrea Coombes, MarketWatch
SAN FRANCISCO (MarketWatch) — Wage growth among middle- and low-income U.S. workers has been shaky, at best, for a decade, but in the last three years it collapsed, with wages growing at less than half the rate they had in the period right before the recession, and some workers’ pay decreasing, according to a new analysis by the Economic Policy Institute.
Median weekly earnings for full-time workers 25 and older grew at a rate of 0.5% in the year ending in the second quarter, down from 1.3% in 2009, 3.4% in 2008 and 4.3% in 2007, according to the EPI report, which measured year-over-year changes in growth from second quarter to second quarter. The figures are not adjusted for inflation. EPI is a Washington, D.C.-based think tank that focuses on low- and middle-income workers.
…
Factor in
higher fees
higher taxes
fewer services
lower home prices
higher payments on house if adjustable and on credit card
Less and less is available
But heh at least Wall Street Titans made big bucks.
Yahoo finance interview w Ron Paul
Schonberger: On financial reform, do you think the newly passed regulation solved “too big to fail” and reined in systemic risk? What do you make of the legislation that has passed?
Paul: I didn’t like the legislation, and I voted against it. It’s sort of a bill that plans how we will sort out the pieces the next time we have a similar crisis. They didn’t change policy. They just thought that if we had more regulations, and more protection, then we would take care of it in a different fashion. They’re trying to patch up the old system. It can’t work. It hasn’t worked this go-around.
Just pretending that we can continue with the same monetary policy, the same Federal Reserve system, and all these guarantees sort of concedes that we’re going to have another bubble. If we have regulations and plans for how we distribute these assets later on, it just says that nothing has changed. That’s another reason why there’s no confidence in the market. People realize they’re just propping up a system that has already failed.
Schonberger: Do you think anything good has come from this legislation?
Paul: The best thing that has come out of it was the fact that we ended up with 320 people in the House that supported transparency of the Fed to find out what they do in secret, and that they have to be accountable to the Congress. Even though that didn’t get passed, more and more people now understand that the Fed is the culprit and not the solution. They created the bubble, they’re responsible for the problems we have, and they will never be off the hook. I think that is just great.
Russ Feingold and Ron Paul are at opposite ends of the spectrum in terms of many things but in terms of their feelings and voting on TARP, paper tiger regulation, and auditing the FED they see eye to eye. I suspect they are among a small hand full of politicians who are not on the take.
The Financial Times
Probe chief to issue Wall St data
By Tom Braithwaite in Washington
Published: September 1 2010 00:39 | Last updated: September 1 2010 00:39
Wall Street groups face the disclosure of internal documents that could provide a treasure trove for would-be litigants and a headache for banks, regulators and their lawyers.
Phil Angelides, Financial Crisis Inquiry Commission chairman, said he planned to publish a large amount of background data when he delivered the commission’s final report in December to allow further scrutiny by academics and journalists. “It’s not just banks, I might say that there are a lot of government agencies that want to keep all their documents secret and my view is if they add to the knowledge of the crisis I lean towards disclosure,” he said.
The commission – set up by Congress to study the crisis and given sweeping legal authority – has used subpoena powers to compel Goldman Sachs to release documents and to force Warren Buffett, the chairman of Berkshire Hathaway, to testify.
But it is in a race against time to obtain additional information from Wall Street and complete its work before its deadline. “Sometimes it’s fair to say we’re getting the ‘slow walk’. They’re probably looking at December 15 and saying ‘we’ve got 100 days to go until these guys are gone’,” said Mr Angelides.
…
hey’re probably looking at December 15 and saying ‘we’ve got 100 days to go until these guys are gone’,” said Mr Angelide
I read the other day that during the last election donations from Wall Street went 60-70% in favor of Democrats now they are going 60-70% in favor of Republicans.
You can bet that these pigs want a gov off balance weak and fighting.
Divide and conquer !!
COTONOU, Benin – More than a hundred thousand people in the tiny West African nation of Benin have lost their savings in a Ponzi scheme run by a now-defunct company that appeared to be publicly endorsed by the country’s president.
The government said in a statement last month that more than 130,000 people gave their savings to Investment Consultancy and Computering Services. Together they lost more than $130 million, the statement said.
The corporation was registered as a nonprofit computer service company and was operating illegally as a banking institution. ICC was forced to close July 1, and more than a dozen of its employees were jailed.
But the reverberations have echoed to the top of Benin’s power pyramid and now threaten President Boni Yayi, who appeared on television with ICC managers.
Television news shows showed Yayi and other top government officials posing alongside the managers of the investment firm. The images were reproduced on T-shirts. While investors interpreted Yayi’s presence as an endorsement, the president did not officially speak in favor of ICC during the appearances.
In this country of 8.7 million people, the average yearly income hovers at $750. Many lost months to years of savings in the scam.
Electrician Lambert Saizonou, 40, planned to use his investment earnings to buy his first house. Now he has lost all of his savings. Jobs are scarce, and Saizonou worries it will take years to save to buy a home for his family.
“They promised me an interest rate of 200 percent,” he said. “Now I must start saving again, little by little.”
This is chump change compared to what people lost in the US ponzi scheme.
Yahoo
They promised me an interest rate of 200 percent
Ladies and gentleman, this guy’s a piker. If you’d care to send me all your money, I can assure you of at least a 1000 percent return. I have got the inside track on some special real estate and I just need more capital to make it work. Send your money now, postage handlers are standing by.
I agree. Anybody who hands over their money to someone promising 200 percent interest rate is certifiable and proves the saying “A fool and his money are soon parted.”
I agree. Anybody who hands over their money to someone promising 200 percent interest rate is certifiable and proves the saying “A fool and his money are soon parted.”
We here know that but most those poor Benin guys make $750 dollars a year. Dude, that’s my bar tab. (not)
Maybe only a third can even read, and in French.
Benin: The literacy rate increased from about 20% in the mid-1970s to about 26% in the late 1980s
Environmentalist invades Discovery Channel. Shot by police. Inspired by Algore.
http://www.foxnews.com/us/2010/09/01/maryland-police-respond-hostage-situation-man-gun-enters-building/#content
Good thing Nancy is worried about the right wing
The pols want protection from the extremism they helped create.
Whack jobs will get themselves shot…
Housing isn’t the only sector suffering from demand evaporation in the wake of a hair-of-the-dog hangover cure.
Auto sales: Worst August since 1983
By Chris Isidore, CNNMoney.com
September 1, 2010: 5:14 PM ET
NEW YORK (CNNMoney.com) — The nation’s top automakers reported disappointing sales Wednesday, resulting in the worst August for industrywide auto sales in 27 years.
According to sales tracker Autodata, U.S. new vehicle sales fell just short of 1 million vehicles, a drop of 21% from a year ago, which included Cash for Clunkers. That federal program created a sugar rush of sales by dangling an incentive of up to $4,500 in cash for buyers who traded in older gas guzzlers for more efficient models.
…
“…by dangling an incentive of up to $4,500 in cash for buyers who traded a life without car payments for a life with car payments…”
“sugar rush” - at least they’re calling it for what it was…that’s somewhat of an improvement.
Sugar is one thing, and alcohol quite another. If you are not convinced, conduct this thought experiment. First imagine yourself driving home from the local ice cream eatery after consuming a pint of ice cream. Then consider driving home from the bar after consuming a pint of whiskey. In which imagined state of reality are you more likely to arrive home alive?
So when is that GM IPO?
Governments, community groups to get first crack at foreclosed homes
By Kimberly Miller Palm Beach Post Staff Writer
Posted: 5:48 p.m. Wednesday, Sept. 1, 2010
Cash investors hunting for abandoned and foreclosed properties will take a back seat to buyers using federal housing money under an “unprecedented” agreement with the nation’s largest private lenders.
The “First Look” program, announced Wednesday, gives local governments and community groups using Neighborhood Stabilization money the first crack at buying bank-owned homes in areas hit hard by the real estate crash.
While plans to spend stabilization money differ among organizations, the general intent of the nearly $6 billion awarded nationwide is to refurbish and eventually sell or rent the homes to low- to middle-income families.
Palm Beach County has received about $77.7 million in stabilization money over two rounds of funding. The City of West Palm Beach, Boynton Beach, and Lake Worth’s Community Redevelopment Agency have also received funding.
But spending the money isn’t always easy. Competition with speculators looking to rent or flip for a profit has made finding viable homes a challenge.
The program, which a U.S. Housing and Urban Development statement called “unprecedented,” also includes a new web-based mapping tool to help groups easily identify bank-owned homes.
“The properties are few and far between right now,” said Michael McManaman, who oversees the neighborhood stabilization money for the Lake Worth CRA.
The CRA received $23.2 million in a second round of funding announced in January. Since then, it has been able to purchase 17 properties in a small area west of Dixie Highway.
But McManaman said he relies partly on code enforcement officers to tip him off when a property might be in foreclosure, as well as real estate agents and combing through bank-owned listings.
Then there’s the investors.
Assistant Palm Beach County Administrator Shannon LaRocque said officials had to work hard to meet a Sept. 4 deadline to match $12.8 million in stabilization money with homes. Part of the county’s program offers loans to eligible buyers, but the buyers have to find foreclosed houses first.
“We knew there was going to be a foreclosure wave and we started to see more properties but they would be gone immediately,” LaRocque said.
Under the “First Look” program, groups will have up to 48 hours to express interest in a property and then another 12 days to do inspections.
Participating banks include Bank of America, Chase, Citi, Deutsche Bank, GMAC, Nationstar Mortgage, Wells Fargo and the West Palm Beach-based Ocwen Financial.
“This is a way for us to assist in the larger housing crisis by providing options for state and local governments to find solutions for homeowners,” said Ocwen Senior Vice President Steven Nesmith.
Some institutions, including Bank of America and FHA, had already started programs similar to “first look,” but not always on a nationwide scale.
Another $1 billion in neighborhood stabilization money is expected to be announced soon.
The additional money will likely be welcomed as banks move swiftly this year to take back properties.
In July alone, more than 10,000 Florida homes were repossessed by banks, a 60 percent increase compared to the same time last year
Sounds like yet another govt-sponsored scam…why can’t they just leave poor Mr Market alone?
Why cant I get a free years rent..i promise not to spend my windfall on lap dances…ok?