The Housing Bubble

September 7th….a date which will live in infamy…..oh, wait a minute.

New credit law’s rules don’t apply to business cards

If you’re joining the ranks of the self-employed, you’ll need to take certain steps to show you’re serious about your business. A designated home office is a good idea. So is a professional-looking website. You may also want to invest in a comfortable pair of sweatpants, because you’ll probably be working into the wee hours.

Many nascent entrepreneurs believe they also need a business credit card. But while a corporate credit card may impress the folks at the local office-supply store, it’s important to understand the risks.

Business credit cards are exempt from the Credit Card Accountability, Responsibility and Disclosure (CARD) Act that was signed into law last year, says Bill Hardekopf, chief executive of LowCards.com. That means business card issuers can do a lot of things prohibited by the CARD Act. They can increase the interest rate on your existing balance, jack up your rate after just one late payment and apply payments to the balance with the lowest rate first.

CHARGES: Penalty rates, fees on credit cards not always clear

Last week, Sen. Charles Schumer, D-N.Y., charged credit card issuers with marketing business cards to consumers in an effort to evade the new restrictions on consumer cards.

“Credit card companies are purposely hawking corporate cards to consumers who don’t own a business and may even be retired,” Schumer said in a statement. “This is more than deceptive marketing. It is a dirty trick meant to get around the new credit card law.”

Used car prices skyrocketing, Edmunds says
Atlanta Business Chronicle

Automobile hunters looking to buy used cars, trucks or SUVs might want to hurry. Prices are going up.

The average price for a used car in the U.S. has jumped 10.3 percent in the past year, according to auto industry analyst Edmunds.com. The average price for some SUVs has skyrocketed 30 percent, the company reported.

Officials for the California-based company say these nationwide increases mirror average price hikes for used automobiles in metro Atlanta.

“I would concur with that,” said Jimmy Ellis, vice president of the Jim Ellis Automobile Dealership Group in Atlanta. “This year has been good one for pre-owned vehicle sales. Our volume is up.”

The average price for a used Cadillac Escalade, Chevrolet Suburban, Dodge Grand Caravan and BMW X5 led the pack with jumps of 33 percent or higher between July 2009 and July 2010, according to Edmunds.com.

“What’s going on is there’s been a lot of pent-up demand [for cars], said Jessica Caldwell, an Edmunds.com senior analyst. “Many people are at the point where they think new cars might be too expensive and they’re turning to used cars.”

“The whole market has been affected,” Caldwell said. “I think this trend is likely to continue.”

Between July 2009 and July 2010, the average price for a used car jumped from $17,448 to $19,248, according to Edmunds.com. The main reason, company officials said, is a continuing lack of consumer confidence in a fledgling economy.

Unemployment in U.S. May Rise Toward 10% on `Feeble’ Growth

Unemployment, which reached a 26-year high of 10.1 percent in October, will average more than 9 percent through 2011. Photographer: Jonathan Alcorn/Bloomberg

The jobless rate in the U.S. is likely to approach 10 percent in coming months as the economy fails to grow quickly enough to employ people rejoining the labor force, according to economists at BofA Merrill Lynch Global Research and Morgan Stanley.

Private payrolls climbed 67,000 in August, after a gain of 107,000 the previous month, and the unemployment rate rose to 9.6 percent, Labor Department figures showed Sept. 3. The economy expanded at a 1.6 percent annual rate in the second quarter, down from 3.7 percent in January through March.

Employers including government agencies have added 723,000 workers to payrolls so far in 2010, showing it’ll take years to recoup the 8.4 million jobs lost during the recession, the biggest employment slump in the post-World War II era. Still, the August employment report eased concerns the economy will falter and may postpone action by Federal Reserve policy makers aimed at bolstering the recovery.

Senior Lenders Moving to Foreclose on NYC’s Stuyvesant Town

The battle over Manhattan’s giant Peter Cooper Village and Stuyvesant Town apartment complex intensified as the banks overseeing the $3 billion first-mortgage debt on the property moved to foreclose.

The banks, including Bank of America Corp. and U.S. Bancorp, have set a public auction for the 56-building complex for Oct. 4. The move comes after the banks sued in New York State Supreme Court last month to block a group led by activist investor William Ackman from foreclosing on the property.

Mr. Ackman’s firm, Pershing Square Capital Management, made a move for control of the complex earlier last month by teaming up with Winthrop Realty Trust. Together they snapped up $300 million of the complex’s junior debt and launched a foreclosure proceeding.

Justice Richard B. Lowe III said he would make a decision before Sept. 30.

Fed should not set limit on economy aid: Kohn

(Reuters) - The Federal Reserve should not announce a limit on its actions if it resumes purchases of Treasury securities to stimulate the U.S. economy, the former vice chairman of the central bank said.

Donald Kohn, who retired as vice chairman on September 1, told the New York Times in an interview published Monday the economy was in “a slow slog out of a very deep hole,” and that the Fed should take additional measures if a recovery continued to be slow.

Actions could include purchase of more government securities to keep interest rates low, he said. The Fed has pumped $1.7 trillion into the economy through steps such as purchase of longer-term securities.

“To have a substantial effect, people would have to anticipate substantial purchases,” the newspaper quoted Kohn as saying.

“Does the Federal Reserve need to announce it’s buying $1 trillion? Not necessarily. If the Fed said, ‘We’re buying a smaller amount now but we’ll continue to watch the situation and if it warrants we’ll buy more,’ that sort of would give the public and the markets a sense that somebody was out there, ready to buy if the economic situation weakened further or didn’t improve.”

Not one has been charged with crime. David Drumm lives comfortably in a Chatham Massachusetts mansion . Thankfully Obama tracked down and held responsible similar stateside looters…

“Ireland’s Finance Minister Brian Lenihan said the government wasn’t “in a position” to forecast property loan losses faced by the country’s banks on the night it introduced a guarantee of their liabilities two years ago.
“We were very suspicious about the property based lending which had taken place in the banks, but we weren’t in a position to form a judgment on that, that evening,” Lenihan is quoted as saying in an e-mailed transcript of a documentary, ‘Freefall,’ to be broadcast on Dublin-based RTE television tomorrow.
The state injected almost 33 billion euros ($42.5 billion) into banks and building societies, with two-thirds going to nationalized Anglo Irish Bank Corp., since the guarantee was introduced in September 2008. It paid a further 13 billion euros for real-estate loans that were once worth 27.2 billion euros, the agency responsible for the debt said on Aug. 23.
Lenihan said a financial “nuclear winter” could have followed the collapse of U.S. bank Lehman Brothers Holdings Inc. two years ago. “Our banks were very dependent on obtaining funding from other countries and once that began to dry up, we knew that would create very serious problems for the Irish banking system,” Lenihan said, according to the transcripts. “

“On 4 April 2010, the Times described the lending practises at Anglo Irish Bank and how these led to the nationalisation of the bank.[14] The article quotes the new CEO, Mike Aynsley: “hubris played a very, very big part.” In may deals, Anglo Irish Bank would lend to wealthy individuals to further their equity participation. According to the CEO of Ireland’s toxic bank, the National Asset Management Agency (NAMA), loan-to-value on deals was as high as 100%. As a result the bank was totally exposed to any decline in value. In many cases, Anglo took personal guarantees as security. However, NAMA attaches no value to these personal guarantees.
“Chairman Sean FitzPatrick, CEO David Drumm, and board member Lars Bradshaw resigned in December 2008, following the revelation of a loan scandal. FitzPatrick and Bradshaw had taken out loans in order to purchase Anglo Irish shares. From 2000–2008, FitzPatrick transferred the loans to another bank prior to year-end audits, thereby causing “Loans to Directors” to be understated. In 2008, the loan to FitzPatrick and Bradshaw amounted to €87 million; the transfer resulted in the accounts showing only about €40 million outstanding to directors, instead of €150 million. The Financial Regulator revealed that he became aware of problems surrounding loans from Anglo Irish Bank to FitzPatrick, following an inspection earlier in 2008. The regulator said, “While it does not appear that anything illegal took place in relation to these loans, the Financial Regulator was of the view that the practices surrounding these loans were not appropriate. As a result, we continued to monitor and investigate this and as part of this process we advised Anglo-Irish Bank to ensure that these loans are reported in the annual accounts for 2008.”[16] The Financial Regulator resigned in January 2009 under pressure to do so.[17] “

Reading the HBB yesterday I was struck by this comment: “How do constant pessimists even get out of bed in the morning? “. IMO even the most ardent pessimists on this board are missing the true scope of the trouble that lies ahead.

The U.S and the world at large has experienced an unprecedented theft by the corporatists and monied elite . A simple turn of the business cycle cannot make up for these losses. What continues to amaze me is the Laissez-faire attitude of the masses, it’s as they see it as none of their concern. Unless we hold the true culprits responsible we are encouraging the scapegoating of the innocent, who becomes the modern day Juden?. What does it say about our nations mind set when Glenn Beck draws a crowd, imagine who or what emerges when you multiple the despair…..

Not sure which is the better choice:

“The history of the Weimar German inflation was quite different. During World War I, Germany ran moderate inflation, which accelerated in the last year of war and the first years of peace. By 1921, prices in Germany were already 15 times those of 1914.
But it was over the next two years - 1921 to 1923 - that true “Weimar inflation” occurred. By the time it ended in November 1923, the German mark was worth only one-trillionth of what it had been worth back in 1914. The middle classes lost all their savings, but one rich industrialist, Hugo Stinnes , was able though repeated borrowing in rapidly depleting marks to amass an industrial empire that controlled 20% of Germany’s industry.
The German hyperinflation was finally quelled by Chancellor Gustav Stresemann and Reichsbank director Hjalmar Schacht , who in October 1923 announced the replacement of the paper mark by a “ Rentenmark ” (security mark) worth 1 trillion paper marks and backed by a nominal mortgage over German land assets worth 3.2 billion Rentenmarks.
The mortgage was fictitious, but it created confidence in the Rentenmark and prevented the creation of extra Rentenmarks, so inflation rapidly ceased, while the budget was balanced through so-called “windfall-gains taxes” on debtors whose debts had been extinguished by the previous hyperinflation. Normal business was resumed by Germany, which was able to return to a new gold Reichsmark in July 1924.
You can debate which was worse, the U.S. Great Depression or the Weimar hyperinflation; there are arguments for both sides. The Great Depression lasted much longer, from 1929 until the United States entered World War II in 1941. On the other hand, the Weimar hyperinflation wiped out the entire savings of the German middle class.
The lack of confidence in the economy, and the overall misery that this produced, meant that the German reaction to the Great Depression that arrived six years later was much more extreme than in the United States - leading to the election in 1933 of Adolf Hitler . “

The U.S. appears to not be the only country with banking regulatory issues.

Report: Iran Paying Taliban to Kill U.S. Troops
Published September 05, 2010 | Sunday Times

Taliban fighters ride on motorbikes in an undisclosed location in Afghanistan, July 14, 2009. (Reuters)

KABUL — At least five Iranian companies in Afghanistan’s capital are using their offices covertly to finance Taliban militants in provinces near Kabul, according to an investigation by London’s Sunday Times.

Afghan intelligence and Taliban sources have told the newspaper that the firms, set up in the past six months, provide cash for a network of district Taliban treasurers to pay battlefield expenses and bonuses for killing the enemy and destroying their vehicles.

The Iranian companies win contracts to supply materials and logistics to Afghans involved in reconstruction. The money often comes in the form of aid from foreign donors.

Profits are transferred through poorly regulated Afghan banks — including Kabul Bank, which is partly owned by President Hamid Karzai’s brother Mahmood — to Tehran and Dubai.
…

Thanks to everyone for your comments yesterday on my possibly buying the apartment building where I spend much of my summers.
Esp appreciate the suggestion that I change my screen name to az_slumlord, but we know Ben doesn’t like screen name changes.

Last time I bought a real property (SFH), I asked for the most expensive inspector and the cheapest lawyer. Was very satisfied w/ that inspection, so I would use the same outfit again to inspect the apt. building. This is my answer to those who emphasized the importance of a thorough inspection.

The neighbors who are interested in providing partial management services (filling vacancies; field repair requests for the six units) would not say how much of a rent reduction they wanted. They just kept expressing lots of relief at the idea that the bldg might not be bought by a condoizer. They live in the best apt both sizewise and view-wise, and have been paying only 20% more than the cheapest. So when they wouldn’t name a price, I suggested a 30% rent reduction in exchange for their services. Their reaction was unreadable, but I would describe it as acquiescent.

Several of you raised macroeconomic concerns, which I share. The main reason I believe housing prices will fall further is that they are not in reasonable proportion to rents. For this building, where the current owner is asking 100x gross monthly rent-sum, I don’t have THAT concern. However, in my three years of part-time living here, I estimate the vacancy rate has been about 10% for the five residential units (the commercial unit has a long-term lease). I don’t think it’s easy to find “good” tenants, and one of the res units is about to be vacated for reasons unrelated to local economy.

Several of you asked why I would want this headache, and the answer is, I don’t. The landlady has been 99% perfect from my point of view, and also from the point of view of the above-mentioned neighbors. We want things to stay the way they are, but we think the LL’s main motivation to sell is to get out of the work. If another buyer came along and condo-ized the bldg, we’d collectively pay much more and we’d STILL be stuck with The Work.

Crony capitalism certainly doesn’t end at the U.S. border.

Afghan govt poised to help troubled Kabul Bank, but institution still running on its own

By Deb Riechmann (CP) – 15 hours ago

KABUL — Afghanistan’s largest bank is operating with its own money with no infusion of cash from the government despite a nearly weeklong run on the troubled institution that is being closely monitored by international banking experts, the nation’s top banking official said Monday.

The governor of the Afghan Central Bank, which is standing by to help if Kabul Bank collapses, assured customers that their deposits were safe and would be guaranteed by the government. At the same time, Abdul Qadir Fitrat said that, as a safeguard, the central bank had moved to ban the sale of properties that some of the bank’s shareholders own in the capital.
…
The central bank said Sherkhan Farnood, former chairman of Kabul Bank, and Khalilullah Ferozi, former chief executive officer, resigned because, under new reforms, only banking professionals can hold the top operating positions at banks. Farnood, a world class poker player who raised money for Karzai’s re-election campaign, and Ferozi each own 28 per cent of the bank’s shares.

Mahmood Karzai said the bank’s former chairman has said that $155 million was invested in two business properties and 18 villas in Dubai.

He said he had been living in one of the villas, but planned to move out this week.

Like many foreigners, the Afghan buyers were enticed by Dubai’s booming real-estate market in the heady years before the global economic downturn. At least some of the homes were bought as the market — once so hot that properties bought on speculation could be resold almost instantly — raced toward its peak.

Prices have since plunged, and many brand-new luxury Dubai properties sit empty. Real estate consultancy Colliers International estimates prices have fallen by nearly half since their high in the second part of 2008.

The Palm Jumeirah, where many of the villas are located, is one of several man-made islands built off Dubai’s Persian Gulf coast.

It is built in the shape of a palm tree, with gated communities of high-end villas —each with a private beach — lining its branches. Development of the island is only partially complete, with a hotel being partly built by Donald Trump among several projects stalled in the economic slump.

If problems at the bank are not resolved, it could have wide-ranging political repercussions. It handles the pay for government workers, soldiers and police in Afghanistan, which is beset by a Taliban insurgency and is awash in drug money and billions in international aid. Kabul Bank’s woes further underscore entrenched problems with cronyism and corruption, with millions of dollars allegedly loaned to relatives and friends of the ruling elite.
…

Whoever writes The Economist Magazine blog doesn’t seem to understand the notion of market equilibrium very well. Household budgets constrain the equilibrium price of an asset; long-run trend has nothing to do with it, as in the long run, we’re all dead. Perhaps The Economist writers prefer macroeconomics, which to my recollection, has no notion of a budget constraint. But I fail to see the applicability of macro to the problem of a household purchasing a home to live in.

Whoever wrote this also seems ignorant of the alleged top-down coordinated withholding of inventory from the market, which would tend to temporarily prevent the market from reaching equilibrium.

Let the market crash?
Sep 6th 2010, 17:50 by R.A. | WASHINGTON

THE New York Times has a weird piece today on housing market policy. It reads:

The unexpectedly deep plunge in home sales this summer is likely to force the Obama administration to choose between future homeowners and current ones, a predicament officials had been eager to avoid.

Over the last 18 months, the administration has rolled out just about every program it could think of to prop up the ailing housing market, using tax credits, mortgage modification programs, low interest rates, government-backed loans and other assistance intended to keep values up and delinquent borrowers out of foreclosure. The goal was to stabilize the market until a resurgent economy created new households that demanded places to live…

As the economy again sputters and potential buyers flee — July housing sales sank 26 percent from July 2009 — there is a growing sense of exhaustion with government intervention. Some economists and analysts are now urging a dose of shock therapy that would greatly shift the benefits to future homeowners: Let the housing market crash.

When prices are lower, these experts argue, buyers will pour in, creating the elusive stability the government has spent billions upon billions trying to achieve…

The further the market descends, however, the more miserable one group — important both politically and economically — will be: the tens of millions of homeowners who have already seen their home values drop an average of 30 percent.

There are several strange things about this. One is the implication that housing prices nationally need to “crash” to approach equilibrium values. Prices nationally have nearly returned to their long-run trend in terms of price-to-rent and price-to-income ratios. Some segments of some markets may still be overpriced, and I expect prices nationally to edge downward in the months to come, but another plunge seems both unlikely to occur and unlikely to generate a wave of buying—at this point a crash would probably be indicative of a new wave of crisis that wouldn’t be associated with easy credit and willing buyers.
…

Holy Cow! Are we passing out of the denial phase???

Housing Woes Bring a New Cry: Let the Market Fall
By DAVID STREITFELD
Published: September 5, 2010

Over the last 18 months, the administration has rolled out just about every program it could think of to prop up the ailing housing market, using tax credits, mortgage modification programs, low interest rates, government-backed loans and other assistance intended to keep values up and delinquent borrowers out of foreclosure. The goal was to stabilize the market until a resurgent economy created new households that demanded places to live.

As the economy again sputters and potential buyers flee — July housing sales sank 26 percent from July 2009 — there is a growing sense of exhaustion with government intervention. Some economists and analysts are now urging a dose of shock therapy that would greatly shift the benefits to future homeowners: Let the housing market crash.

When prices are lower, these experts argue, buyers will pour in, creating the elusive stability the government has spent billions upon billions trying to achieve.

…

Michael L. Moskowitz, president of Equity Now, a direct mortgage lender that operates in New York and seven other states, also advocates letting the market fall. “Prices are still artificially high,” he said. “The government is discriminating against the renters who are able to buy at $200,000 but can’t at $250,000.”

…

The government is on the hook for many of these mortgages, another reason policy makers have been aggressively seeking stability. What helped support the market last year could now cause it to crumble.

…

Some members of the National Association of Home Builders say a new credit of $25,000 would raise demand but their chances of getting this through Congress are nonexistent.

“Our members are saying that if we can’t get a very large tax credit — one that really brings people off the bench — why use our political capital at all?” said David Crowe, the chief economist for the home builders.

If the US is going to end up like Japan, welcome to your future: 2-3 jobs per person to pay the bills.

Young Japanese Seek Second, and Third, Jobs
By GEAROID REIDY
Published: September 6, 2010

OSAKA, Japan — From 9 to 5, Hiroko Yokogawa toils at a small architectural design firm, doing clerical work and managing accounts. But even when her shift is over, her day’s work is nowhere near done.

She might go home and promote products and stores on her blog. Or in another role, as a work-life coach, she might meet a client for a consultation. Ms. Yokogawa, 32, makes about one-third of her income from her side jobs, which take up an average of three hours a day on weekdays and as many as five hours a day on weekends.

“It’s not that I hate my main job, but I want to have a stable income without being completely dependent on the company,” Ms. Yokogawa said. “I initially started doing extra work to have more wiggle room in my income — cash to spend on fashion, going out or for savings. But now I try to do work that will be useful to me in the future.”

For decades, the standard career path in Japan was to graduate from college, join a company and to stay there until retirement — one job for life. But with salaries down more than 12 percent over the last decade amid an uncertain labor market, young, mostly single Japanese are increasingly making ends meet by working second or even third jobs.

Some deliver leaflets or work in convenience stores. Some trade foreign currencies online. Others sell items on Internet auction sites. A survey in January by the Internet market research company Ishare found that almost 17 percent of workers ages 20 to 50 had a side job.

Despite long working hours — the eighth-longest in the world, according to one recent measure, though with overtime often going unreported and unpaid — almost half of the workers questioned last year in a survey by the government-affiliated Japan Institute for Labor Policy and Training expressed interest in side jobs. Nearly 90 percent said the main reason was a desire to have extra spending money.

Repeat post from late last night:

The question was asked “Is it possible we are coming to the end of the government’s attempts at price supports for the housing market?”.

I think this would indicate a definite no.

Government to Deploy Broader Mortgage Aid

…

While it’s not technically a new allocation of money - certainly the money could have been used for other things besides housing.

(pssst… maybe deficit reduction!)

So I was looking for something under the kitchen sink yesterday and noticed some water that had no business being there. I cleared out the cleaning supplies down there, ran the water for a few seconds and looked back under the sink. Sure enough water was flowing down some conduits with a source a little further back. I reported it to the guy on the desk downstairs. The maintenance guy was stuck in traffic (seems I reported my problem right at the change in shifts) but would be with me in about 40 minutes. Less than an hour later, he was under my sink cutting out a section of pipe in the wall that had a hole in it. He replaced the pipe, snaked the pipes (water was draining slowly) and cleaned out some onion skins from the garbage disposal for good measure. Took a good solid 2 hours as the broken pipe was right next to a wall stud and fitting in the new section was a little difficult.

Total cost to me for emergency plumbing visit on a Monday holiday? Zero dollars. Seriously, I tried to pass along a tip, but he got another calll as he was cleaning up the floor and left so quickly I didn’t have a chance to shake hands and give it to him. A carpenter will come to fix the hole in the back of the cabinet later in the week. I have been warned that it might not look quite as perfectly matched as it was before. I assured him that I was not overly bothered by the idea that the back of the cabinet under the sink might not perfectly match the sides of said cabinet. I’m sure that my Lemon Fresh Joy and the extra sponge/scrubbies will survive the aesthetic assault.

Gotta love renting.

Oh no, its happening in Eddie’s neighborhood too!

http://www.ajc.com/business/boom-goes-bust-in-607959.html

Might this trend not pose “systemic-risk” to the financial system?

SEC Sees Surge in Fraud.

http://finance.yahoo.com/news/SEC-sees-surge-in-fraud-rb-450663533.html?x=0&sec=topStories&pos=4&asset=&ccode=

“Fraud is good”.

This past weekend, I spent a good chunk of time with my nose in various books. One of them was Alyssa Katz’s Our Lot: How Real Estate Came to Own Us.

Good book, BTW.

And guess who was featured on pp. 118-119? Our very own Paladin, that’s who!

According to the book, Paladin has been reporting the big investors who’d been buying properties in his neighborhood, Lincoln Crossing in Lincoln, CA.

Apparently, these properties have been purchased for well above the assessed value. (Smells like mortgage fraud, doesn’t it?) Who’s Paladin reporting these creeps to? The IRS and various mortgage funds.

Which probably explains why he hasn’t been posting ’round these parts.

NFW! A voice of REASON?

Grim Housing Choice: Help Today’s Owners or Future Ones

http://finance.yahoo.com/news/Grim-Housing-Choice-Help-nytimes-2501800868.html?x=0&sec=topStories&pos=4&asset=&ccode=

“PVC Farms”

http://www.ajc.com/business/boom-goes-bust-in-607959.html

“weedy lots surround the occasional home in the Heritage Point subdivision. “PVC farms,” where only water and sewer pipes sprout from the ground, abound farther along Ga. 124.”

Posted by my realtor friend on facebook….fire away:

Thought of the day from Mark at Cornerstone Mortgage. For each 1% mortgage rates increase, your buying power decreases 10%. So if you qualify for a $200,000 mortgage at 6%, you’ll only qualify for a $180,000 mortgage if rates go up to 7%. The moral of the story being “Buy now if you can!” And call me if you need a Realtor

“What bothers the public, plain and simple, is that the steps that were taken to mitigate the recession—which involved greater government involvement, including ownership of the largest auto and insurance companies, and vastly more federal spending—have not worked.”
~Wall St. Journal

< Yet President Obama, prodded - apparently - by the frantic advice of economist Paul Krugman, yesterday announced yet another government stimulus plan to boost the U.S. economy.

The cost: $50 billion.

A proposed 28th Amendment to the United States Constitution:

“Congress shall make no law that applies to the citizens of the United States that does not apply equally to the Senators and/or Representatives; and, Congress shall make no law that applies to the Senators and/or Representatives that does not apply equally to the citizens of the United States.”

The Ten American Industries Which Will Never Recover

It has become clear that jobs in some industries may never come back or if they do it will take years or decades for a recovery. 24/7 Wall St. examined the Bureau of Labor Statistics’ “Employment Situation Summary” and a number of sources that show layoffs by company and sector. The weakness in these sectors will make it harder for the private industry, even aided by the government, to bring down total unemployment from 9.6% and replace the 8.3 million jobs lost during the recession. The losses in these industries have to be offset by growth in others before there can be any net increase in American employment.

Some of the industries are obvious. Detroit will never employ the number of people it did five years ago. Domestic car sales hit 16 million in 2005 and 2006. That number will be closer to 11.5 million in 2010. More cars and light vehicles are made overseas now, in places like Mexico, to keep labor costs down.

Home construction is another industry that will almost certainly not recover. Home inventories are still extremely high and home prices have fallen to the levels where they were in 2004. Prices in some markets, which include Las Vegas, Florida and parts of California have dropped 60% to 70%. New construction in those markets will not begin again in the foreseeable future.

Here is the list of the ten jobs categories that will not recover based on 24/7 Wall St. research:

Read more: The Ten American Industries Which Will Never Recover - 24/7 Wall St. http://247wallst.com/2010/09/07/the-ten-american-industries-which-will-never-recover/#ixzz0ysLArs2R

Los Angeles school named after Al Gore
He’s the first vice president to have an L.A. school named after him, sharing the honor with author Rachel Carson. Fittingly, the campus will be devoted to environmental themes. But there’s a catch.

The new Carson-Gore Academy of Environmental Sciences, scheduled to open Sept. 13. The campus was built atop contaminated land.

Al Gore has had some tough breaks — like losing the presidency after getting more votes than the other guy — but the noted environmentalist achieved a singular honor last week, becoming the first vice president to have a Los Angeles school named after him.

And, fittingly, the school will be devoted to environmental themes.

But as in the 2000 election, there’s a catch. Critics say the campus’ location poses a long-term health risk to students and staff.

School district officials insist that the Arlington Heights property is clean and safe. And they’ve pledged to check vapor monitors and groundwater wells to make sure.

The $75.5-million Carson-Gore Academy of Environmental Sciences will open Sept. 13 for about 675 students. As he was with Bill Clinton (who has an L.A. middle school named after him), Gore is second on the ticket to Rachel Carson, the late author credited with helping launch the modern environmental movement.

Economist Christina Romer serves up dismal news at her farewell luncheon Washington Post

Lunch at the National Press Club on Wednesday caused some serious indigestion.

It wasn’t the food; it was the entertainment. Christina Romer, chairman of President Obama’s Council of Economic Advisers, was giving what was billed as her “valedictory” before she returns to teach at Berkeley, and she used the swan song to establish four points, each more unnerving than the last:

She had no idea how bad the economic collapse would be. She still doesn’t understand exactly why it was so bad. The response to the collapse was inadequate. And she doesn’t have much of an idea about how to fix things.

What she did have was a binder full of scary descriptions and warnings, offered with a perma-smile and singsong delivery: “Terrible recession. . . . Incredibly searing. . . . Dramatically below trend. . . . Suffering terribly. . . . Risk of making high unemployment permanent. . . . Economic nightmare.”

“They” just won’t stop until they screw the entire system into the ground. Go Team Barry!

Gov’t launches plan to help “underwater” borrowers
Government plan seeks to aid homeowners who owe more on properties than homes are worth

WASHINGTON (AP) — The Obama administration is trying to jump-start its sputtering attempts to tackle the foreclosure crisis with an effort to assist homeowners who owe more on their properties than their homes are worth.

Starting Tuesday, the Federal Housing Administration will permit lenders to give these borrowers refinanced loans backed by the government. The lenders will be required to forgive at least 10 percent of the original mortgage amount. Investors who have control over the mortgages as part of their large portfolios will select which borrowers are invited to participate.

The plan was first announced in March. Its rollout represents the latest of numerous efforts by the administration to address the housing bust. So far, the government has only nibbled around the edges of the crisis, as its programs have run into numerous problems.

The lending industry was ill-prepared for a crush of distressed homeowners, the economy worsened and millions of homeowners had taken on so much debt that their financial woes have been nearly impossible to resolve.

Nearly half of the 1.3 million homeowners who have enrolled in the Obama administration’s main mortgage-relief program — overseen by the Treasury Department — have already fallen out over the past year.

“So many economists…. If you could take all the world’s economists and lay them end-to-end, you should do it. The world would be a better place with out them”.

“And take Paul Krugman…please! He’s in The New York Times this morning with an analysis worthy of a Ph.D. economist/Nobel Prize winner…but unworthy of a first year philosophy student, cab driver or hairdresser. At least he is efficient. In the space of just a few well-chosen paragraphs he is able to misunderstand the entire economic world”.

~ Bill Bonner

The new young investor: Shunning stocks
cnnmoney

When 18-year-old Robert White decided to jumpstart his retirement plan, he invested his life savings of $25,000 into an aggressive mutual fund.

Little did he know that just five years later, he would make a complete 180 and join the ranks of a new group of young investors who have become so risk averse by the wild market swings that they’d rather park their money in safety zones, like CDs or Treasurys.

Today, only 22% of investors under the age of 35 say they’re willing to take on a substantial level of risk, according to the Investment Company Institute. Compare that with 2001, when that same group outpaced every other age bracket.

“We’re coming off a series of financial crises that hit this young generation at points in their lives where external events shape strong opinions,” said Christopher Geczy, adjunct associate professor of finance at University of Pennsylvania’s Wharton School.

When White’s fund began to slip with the broader market in 2008, he yanked his savings, now at $35,0000, and put the money into a short-term certificate of deposit with an annual return rate of 4%.

“It’s almost embarrassing to talk to anyone about my portfolio because I know how stupid it is to normally keep my portfolio in cash,” said White, now a 23-year-old graduate of Northern Arizona University.

While most investors have become more cautious during the decade, the biggest change has come from White’s generation.

German Factory Orders Unexpectedly Declined in July on Exports

German factory orders unexpectedly fell in July as demand in the euro region weakened, indicating the recovery in Europe’s largest economy is losing momentum.

Orders, adjusted for seasonal swings and inflation, declined 2.2 percent from June, when they surged a revised 3.6 percent, the Economy Ministry in Berlin said today. That’s the biggest drop since February 2009. Economists forecast a 0.5 percent gain, according to the median of 40 estimates in a Bloomberg News survey. From a year earlier, orders climbed 18 percent, when adjusted for working days.

Evidence of slowing growth comes after the German economy expanded at the fastest pace in two decades in the second quarter, boosted by exports. An index of manufacturing fell in August and investor confidence dropped to a 16-month low. Still, Daimler AG, the world’s second-biggest manufacturer of luxury cars, said yesterday that sales jumped in August.

Volatile Housing Market Baffles Homeowners
September 7, 2010

Talk of the Nation
[47 min 9 sec]

Guests

Mark Zandi, Moody’s Analytics
Amy Bohutinsky, Zillow
David Streitfeld, New York Times

September 7, 2010

Tax credits for buyers, mortgage help for homeowners and new rules for lenders haven’t stopped the slide in the housing market. Some economists argue the best way to balance the market in the long term is to let it crash in the short run. Many homeowners and prospective homeowners are unsure if it’s time to buy, to rent, or to wait.

Used home for sale inventories always go up.

WSJ Blogs
Developments
Real estate news and analysis from The Wall Street Journal

* Home Buyer Tax Credit Price Tag: $22 Billion
* September 7, 2010, 3:57 PM ET

Housing Inventories Rise for Eighth Straight Month
By Nick Timiraos

See housing inventory data and price cut information for 21 metro areas.

Housing inventories rose in many U.S. cities for the eighth straight month in August in a sign of the continued headwinds facing a soft housing market.

The number of available homes for sale in 26 major metropolitan areas at the end of August increased 0.4% from one month earlier, according to figures compiled by ZipRealty Inc., a real-estate brokerage firm based in Emeryville, Calif. The figures include all single-family homes, condominiums and townhouses listed on local multiple-listing services in markets where the firm operates. (See the full data).

Inventories traditionally rise modestly in August. Zelman & Associates, a research firm, says listings have typically risen by 2% in August over the past 28 years.

The less-than-average gain in inventories is troubling, nonetheless, because demand has fallen sharply since a tax credit to spur sales expired earlier this year. At the current pace, it would take 12.5 months to clear the backlog of unsold homes, according to the National Association of Realtors. A healthy market typically a six-month supply of homes. Inventories nationally remain at their highest levels since November 2008, according to Zelman data.

The August inventory in the 26 markets tracked by ZipRealty showed a 10.6% year-over-year increase in the number of unsold homes listed for sale. A number of cities, including Houston, Philadelphia, and Orange County, Calif., remain at 18 month highs. “It’s across the country where you’re seeing really big inventory levels,” says Pat Lashinsky, chief executive of ZipRealty.

The biggest gains in inventory continue to come from overheated Western markets where bidding wars on foreclosures pushed the housing supply down to very low levels one year ago. Las Vegas saw inventory rise by 9.3% from July, while listings were up by 4.6% in Phoenix and 3.8% in San Diego.

Compared to one year ago, inventories are up by 59% in San Diego, 43% in Orange County, Calif., and 25% in Los Angeles.
…

I think some posters here have already mentioned Robert Scheer’s new book: “The Great American Stickup: How Reagan Republicans and Clinton Democrats Enriched Wall Street While Mugging Main Street”, but there is a really excellent interview with the author here where Scheer concisely summarizes and synthesizes the best of this blog… almost like he reads the HBB! His proposed solution to the problem is silly, but what do you expect? The rest of the interview is solid gold and I bet you’ll never hear a peep from him reported anywhere else:

http://www.democracynow.org/2010/9/7/robert_scheer_on__the_great

Democrat partisans on this blog beware (I assume the Republican ideologues are too cynical to care). This guy really nails it and names the names including The One.

(if this is a double posted, my sincere apologies)

Whadda ya know? While catching up on the local news this evening, I just learned that our Mayor Daley will not seek reelection this spring. He’s been mayor for 21 years - when his father’s terms are counted, father and son were mayor for 42 of the past 55 years!

A historic day for Chicago to be sure. It will be supremely interesting to see what effect, if any, this has on the housing price situation here. Daley was quite pro growth and the face of the city markedly changed during his five terms. His influence in local development schemes was not at all trivial, so if there is a power vacuum setting up and weak successor come along, one has to wonder what effect that might have on the overall situation here.

I don’t see how buying call options on land will save these permabulls. In fact, given the difficulty the Fed is having with creating real estate price inflation, coupled with ever persistent “higher than expected” unemployment, I am expecting lots of these options to expire worthless. At least with owning land (or a house), the value of your investment is highly unlikely to drop to zero and stay there forever.

* REAL ESTATE
* SEPTEMBER 8, 2010

Home Builders Sound Retreat on Land Deals
As Housing Sector Remains Weak, Some Firms Back Out of Contracts, Forfeiting Deposits; ‘Holy Cow! Our Sales Are Down’

By DAWN WOTAPKA

The weakening of the housing sector is having repercussions in the land-speculation market, which enjoyed a miniboom earlier this year when it appeared that the worst of the housing crisis was over.

With sales volume falling and home buyers retreating, home builders are re-examining land contracts, asking land sellers for lower prices or abandoning deals entirely. Land brokers said several of the nation’s builders, including D.R. Horton Inc. and M.D.C. Holdings Inc., have walked away from deals. In some cases, they forfeited the deposit: KB Home walked away from the option to purchase 90 lots, and a $500,000 deposit, in Roseville, Calif.

D.R. Horton and M.D.C. didn’t respond to requests for comment.

This summer, builder Standard Pacific Corp. signed a letter of intent to buy an option on 451 ready-to-build lots in the Inland Empire, a Southern California market where builders have ramped up construction in recent months. But in August, Standard Pacific decided to pass on the deal.

“The market is definitely doing worse now than at the beginning of the year,” said Standard Pacific Chief Executive Ken Campbell. “It’s a weaker home-sale environment than people had expected, which means land is less valuable.”

This marks a shift from earlier this year, when builders competed to boost their land supplies to have inventory ready for an improved market. Finished-lot prices in Phoenix and California’s Riverside-San Bernardino area, two of the markets hardest hit by the housing crisis, soared more than 40% above the bottom hit in the first quarter of 2009. Prices in other hard-hit markets such as Las Vegas and Tampa, Fla., rose between 21% and 40%, according to housing-research firm Zelman & Associates.

“They obviously got pretty aggressive in terms of their assumptions in the first half of the year,” said Alan Ratner, a Zelman vice president. “They were bidding up deals at prices that current home prices could not support.”

But builders are trying not to overpay for land, which got them into trouble when the market slumped and land values plunged. These days, builders buy options rather than purchasing the land outright whenever possible. Options give builders the right to buy land at a later date at a set price.
…

Polly, Reuben, et al,

Happy New Year! Shana tova!

This legislation is likely to cast a long-lasting pall over the U.S. economy. It would have been wise to at least wait for the Great Recession to end before going berserk with ill-conceived remedies. It might be a good time for those Americans with international alternatives to consider them, as the free enterprise capitalistic system which made America a great economic power is doomed if this legislation is not soon overturned.

Given the insurmountable political challenge of successfully driving a stake through the heart of heads-Wall-Street-wins, tails-Main-Street-loses too-big-to-fail bailout policy, perhaps this is the best possible financial reform.

* FEDERATION FEATURE
* AUGUST 31, 2010

The Dodd-Frank Act: Creative Destruction, Destroyed
By PETER WALLISON

From the American Enterprise Institute

The dominant theme of the 2,300-page Dodd-Frank Wall Street Reform and Consumer Protection Act is fear of instability and change, which the act suppresses by subjecting the largest financial firms to banklike regulation. The competitiveness, innovativeness, and risk taking that have always characterized U.S. financial firms will, under this new structure, inevitably be subordinated to supervisory judgments about what these firms can safely be allowed to do. But the worst element of this system is that the extraordinary power given to regulators–and particularly the Federal Reserve–is likely to change the nature of the U.S. financial system. Where financial firms once focused on beating their competitors, they will now focus on currying favor with their regulator, which will have the power to control their every move. What may ultimately emerge is a partnership between the largest financial firms and the Federal Reserve–a partnership in which the Fed protects them from failure and excessive competition and they in turn curb their competitive instincts to carry out the government’s policies and directions.
…

http://www.bbc.co.uk/news/world-us-canada-11219411

Zombies take over Baltimore University curriculum

The new course, which promises to “get you ready for a zombie apocalypse”, invites students to devour classic zombie films and comics.

… and that’s why America needs to continue to import qualified workers from other countries.

Karzai’s brother made nearly $1 million on Dubai deal funded by troubled Kabul Bank

By Andrew Higgins
Washington Post Foreign Service
Wednesday, September 8, 2010

DUBAI, UNITED ARAB EMIRATES - The brother of Afghan President Hamid Karzai made nearly $1 million on a Dubai property deal financed with money from Kabul Bank, according to a person familiar with the transaction and a property sales registry.
…

I felt like the voice of one crying in the wilderness several years ago when I used to pontificate on the HBB regarding the moral hazard problem with bailouts. Now it seems like almost everyone gits it; in due time, I expect everyone will git it, bar none.

WSJ Blogs
Deal Journal
An up-to-the-minute take on deals and deal makers.

* September 3, 2010, 11:18 AM ET

Kabul Bank: Moral Hazard Personified

Deal Journal HOME PAGE
By Michael Corkery

Ok, critics of the U.S. bank bailouts, you warned about moral hazard. Well, here it is.

In Afghanistan, investors in Kabul Bank are counting on U.S. support to stem a run on the country’s largest bank.

“America could support Kabul Bank to the last penny,’’ Mahmood Karzai, the Afghan president’s brother and largest bank investor, said in a WSJ interview. “The full faith and credit of the U.S. government behind the Kabul Bank–what more could you want?”

And why shouldn’t the Kabul Bank expect a bailout? Washington provided $700 billion to rescue U.S. financial institutions in 2008. The FDIC has estimated it could cost an additional $100 billion to cover the costs of banks that have failed since the global financial crisis.
Then, there is Europe. In May, the European Union, with help from the International Monetary Fund, plied troubled European banks with nearly a trillion dollars in aid. That came on top of the billions of dollars spent in 2008 propping up many of those same European banks. Afghanistan, which is receiving billions in humanitarian and military assistance from both the U.S. and Europe, is arguably a ward of both those states. What’s a few more billion to back up a failing Afghan bank?

Another reason bolstering Kabul Bank’s argument for a bailout: Its executives seemed to have followed the western play book for ruining their bank.

As the WSJ points out, Kabul Bank is accused of giving “clandestine” loans to themselves and Afghan government insiders.” These loans sound like the Afghan version of the special mortgage loans that Countrywide gave to “Friends of Angelo” Mozillo, the former CEO, who is now under investigation for hiding risk from investors. Mozillo’s “friends” included several members of U.S. Congress.

Still not convinced? Consider the roots of Kabul Bank’s current cash crunch. The bank’s assets are almost equal to its liabilities, but much of its asset base is illiquid and hard to value. Among Kabul’s illiquid assets: investments in Dubai real estate, which has suffered a U.S.-style bust. Clearly, Lehman Brother’s former chief Dick Fuld can relate to this predicament.
…