Housing Bubble Predictions For 2011
What’s your housing bubble prediction for the new year? Some from last summer. “The hardest part is filtering the country’s situation through the neighborhood particulars we’re dealing with. There is increased inventory but it’s in all the 3500+ niches because basically that’s all that’s been built here in the last 20 years. I wouldn’t be interested in anything that size anyway. I’ll gingerly venture forth with the prediction that the 3500+ niche will see a price collapse by next spring due to burgeoning inventory. But these sellers have been pretty stubborn and I haven’t seen as much price reduction as one might imagine by properties sitting up to a year. Many just take them off the market thinking they’ll try later when the market improves.”
One from California said. “Here in SoCal (Orange county) there is *way* too much shadow inventory. How long can the banks hang on? If just one bank (probably one of the smaller ones) breaks
rank and starts dumping, then all bets are off. It will be a tsunami of epic proportions.”
Another said. “For the rest of 2010, I see a continuation of the current trends: declines in home sales, stocks, and even oil, but no crash. The economy cannot improve until the old order (unsustainable government debt, artificially low interest rates, misallocation of resources to zombie corporations, worship at the idol of homeownership) is swept away. But the people who have a vested interest in the old order are so powerful, they can keep it going awhile longer.”
And one looks further, “The private sector economy has stopped getting worse in the aggregate, but will not get much better. Housing prices and wages will continue to drift down in real dollars, and will only stabilize or improve in nominal dollars if we get inflation, which will probably not occur until 2012. Aggregate employment gains will occur, but they will be small compared with the prior losses.”
“The next big crisis hits in mid-2011, and it will concern the public sector this time. With the economy stalled, the federal government tapped out, and state and local governments in crisis, there won’t be much way to avoid some serious pain. I don’t expect serious economic improvement on the private side until 2012, and that assumes we aren’t Japaning or Greecing. On the public side, that improvement may take decades — until the last boomer dies.”
A poster from Baltimore, “I predict a major riot/civil unrest in a city before the end of this year. You know the drill; police kill unarmed blk male, crowd forms, name calling, bottles thrown, shots fired, fires set, looting…Oh wait a minute? the president is black right?”
“Strike that; Obama will start a “real war” with Iran or N Korea that scares the ___ out of everybody and forces the masses to rally around the flag; those who challenge it will be neutralized by being called racists for not supporting the blk president. Pretty slick eh?”
One posted, “With respect to the second half of 2010, I don’t think most people have factored in the impact from the Gulf Oil disaster, or the real ongoing deterioration of the economy. The Gulf oil disaster will create a Gulf area economic disaster and plunge many businesses, families, banks, and states into insolvency. Many properties are now becoming less than worthless, where last year they were potentially income producing.”
“The government and MSM have already used such ludicrous Psy-Ops memes about “recovery” and “green shoots” as to have destroyed any credibility they once had, IMHO. California State workers facing minimum wage should tell you things are getting worse, not better. Second half 2010 = more pain, higher unemployment, more bankruptcies, more foreclosures, lower standard of living for most Americans. The collapse of the bubble continues.”
One from DC, “So hot here in D.C. ! Anyway, prices have not bottomed out, imho. Remember the run-up was crazy (100 - 200% in some areas). Prices have a loooong way to go before people can afford them with rational loans. Plus, the job market has stalled and shows no signs of improving…..Freddie, Fannie have not stabilized and frankly, need to be broken up. Plus, Pluto has just begun its transit through Capricorn (don’t laugh) which means the return to more practical lending has just begun.”
And this, “Conspiracy time: It’s possible we’ll discover that a lot of the “shadow inventory” was sold off in bulk, possibly to creditor nations (like China) in exchange for our Treasury debt. US Gov announces shift in immigration policy: Foreign nationals that own property in US are now eligible to apply for green card.”
One said, “A few less people in denial. A few more businesses closed. A few more houses with reduced prices. A few more natural disasters. A little less hope, a little less denial, a little more pain, a little more anger. Less belief in the China miracle.”
“What is happening in Germany is perhaps a fuse for the US. Those people know what big inflation is and they want it less than the rest of us, so they might be ahead of the curve. Asia won’t drag us into the next decade, they are the delayed extrapolation of what happens in the US and Europe. Austerity is a new word in politics. I expect we will hear it a lot towards November.”
A macro-economic look, “The bad news is the Gov is running out of money. The good news is the Gov is running out of money. These states such as Illinois and California have to stop spending when they can’t borrow anymore. The fact that their situation is so bad is really good as it shows their is not way out for them. If they do raise taxes, we will welcome their manufacturing and other employment to move to South Carolina. Same goes for Greece. They now have to pay for things and can’t afford them and so they have a crisis. The crisis is a good thing.”
“Housing will continue to crash and will go down another 50% in the states that had the worst of the bubble. It just makes the country a bit more livable for the young folks. A good thing.”
“Even the failure of the stimulus is a good thing. If they had never tried it, they would have said it would have worked. They tried it and it did nothing except break the bank. Done with that and so we can move on to fiscal responsibility. Another good thing. I am optimistic today. Let it all crash. Most of us know that the future is on the other side of the crash.”
And finally, “Uncle Sam seems to have decided to temporarily pursue a treatment of housing market bloodletting, in the wake of throwing in the towel on failing stabilization efforts. ‘Worse than expected’ 2nd-half price declines and sales are the likely result. Slow sales and lower prices are the result of a drop in demand coupled with stubborn sellers who don’t get the picture.”
“This scenario will persist in fits and starts until local home prices have declined to a level in line with local incomes and rents. Never forget: All real estate is local.”
I’ll forward this thread through the weekend. Happy New Year everybody!
Happy/Healthy New Year to All….
Everyone. A very happy and prosperous New Year
to you all. Grant us the wisdom and strength to not look at any properties that are for sale.
I predict we will all be smarter and wealthier next year.
I have no predictions.
That said, I think the March-May timeframe will cause lots of heartburn natinwide as the question of raising the debt ceiling (yet again) comes to a head. The ceiling will be raised - but with strings attached. Hopefully, that string is Pay-Go.
That aside, California is overdue for a massive earthquake.
I just completed my escape from earthquake country today. Emptied my apartment, cleaned it, and turned in my keys. I experienced two earthquakes in the two years of renting that apartment. Now my fears are switching to hurricanes and tornados!
Caveat emptor. A great deal of what was built in Tampa over the last decade has glue as its primary building material. And it’s still going on — to my great disappointment, McMansion construction in my neighborhood is be picking up again, with 3/2 houses being torn down for large, ugly rectangles with particleboard for a second story.
pressboard boxes, I know.
My life has been divided between time in hurricane country, Tornado Alley and earthquake country. I prefer earthquake risk hands down. Now admittedly, I am quite certain my views could be clouded by a more direct confrontation with any of these three major types of natural disaster, but fortunately I have not had such an experience yet.
This story is a case-in-point for why I find twisters to be so terrifying:
Tornadoes slam St. Louis metro area
Saturday, January 1, 2011 12:05 am
DeAndre Thomas glanced out of the windshield and spotted a roof hurtling toward his Acura.
He had tried crouching under the steering column but couldn’t fit, and now he was simply at the mercy of the wind.
For about 20 seconds Friday, Thomas felt his car — which he had parked beneath a bank overhang in Sunset Hills — shake and begin to leave the ground.
“I felt like I was in the ‘Wizard of Oz,’” said Thomas.
At Massage Envy off Lindbergh Boulevard, also in Sunset Hills, Amy Kalma was enjoying a massage one minute and in the next, hiding beneath the massage table with her therapist.
“I got off the table and got underneath and started praying with her,” Kalma said.
In Fenton, the Rev. Mike Dieckmann got about two-thirds of the way down the basement stairs of the St. Paul Catholic Church rectory. Then he heard a loud bang, felt his ears pop and saw clouds of dust. Part of the rectory’s roof was blown away; another part collapsed.
“All hell broke loose,” he said.
A series of tornadoes stirred by a powerful, fast-moving storm flattened homes across the metro area and left thousands without power.
The storm left three dead in Missouri — two in Dent County and one in Phelps County — before continuing northeast through St. Louis and into Southern Illinois. There were no reports of major damage in the Metro East area.
…
“I prefer earthquake risk hands down.”
Don’t forget your tsunami risk. (Watch for animals heading for high ground.)
“Don’t forget your tsunami risk.”
Roughly 0, unless I happen to be frolicking on the beach or near a harbor when one rolls our way. Even then the Southern California Byte provides San Diego with a natural shelter from tsunamis originating in the Pacific North West or Alaska, while sea mounts to our west would absorb much of the energy from a tsunami that originated to our west. And most of San Diego is too high above sea level to be much at risk; for instance, the UCSD campus, which is within a mile of the Pacific Ocean, is at an elevation of maybe 400 ft above sea level — higher than any tsunami in modern history.
I’ve always liked the map at this site. It shows the range of exposure to natural disasters throughout the US.
http://www.inscenter.com/info-center/disaster-planning/risk-profile
Basically you are safest in eastern MT and WY, the Dakotas, CO, and parts of several other states. Where the Mississippi passes TN there’s a horrible place with extreme danger of earthquakes AND tornados. Moving to Memphis sounds like a poor choice.
Most of Arizona looks pretty safe on that map.
However, the map does not take 115 degree temps into account either.
Seems like most every place to live has certain advantages and certain disadvantages to it.
HPNY to all!
Basically you are safest in eastern MT and WY
Ha, depends on who your duck hunting “pardner” is in WY.
In the immortal words of Ann Coulter….
In 2005, Vice President Cheney gave 77 percent of his income to charity. He also shot a lawyer in the face, which I think should count for something.
http://news.yahoo.com/s/ucac/20101231/cm_ucac/liberalsgivetilithurtsyou
Cheney gave 77 percent of his “No-Bid” income to charity
Cobalt, Over half of Arizona is forest-covered. Phoenix is technically in Southern Arizona. Well at least the south Phoenix area where my apartment is (south of South Mtn.
Flagstaff, at 7,000 feet does not get those triple digit temperatures. However those cold places mentioned (including Flagstaff) get black ice.
I’ll take 115 one hundred days in a row over 7.0 (and higher) earthquakes), tornados, hurricanes, ice rain, and black ice.
In the 14 years I was a resident of Arizona, I never heard of a blackout. That would be lethal to many people in August in Phoenix and Tucson and the smaller towns below the 3,000 foot level. Arizona has the Palos Verdes Nuclear plants, and other various energy sources. It does not seem to have the problems that California has in its energy.
This morning driving to LA Fitness in Phoenix my temperature gauge showed 32 degrees. Now it’s sunny, crisp, and the sky is wonderful. I have to fly to Tampa tomorrow
- but it’s Florida at least, not the midwest!
“CO”
Like real estate, all natural disasters are local.
Cool map, Dennis.
“A.M. Best, the independent insurance rating service, recently announced it will lower the financial ratings of at least 14 major insurers if they do not reduce their exposure to natural disasters.”
This is something I never understood; why can’t reinsurers diversify the tail risk of local geographic risk represented in that map, or similar ones for the entire planet?
Interesting map - it seems they completely ignored the possibility of a Yellowstone eruption.
The map shows the Yellowstone caldera as a high-risk earthquake problem. If instead Yellowstone erupts, almost everyone in the US will simply die. Hence insurance companies won’t have to pay out.
What the map ignores is flooding damage. The risk of flooding is in the flattest areas of the country: the midwest and great plains. Where the land is flat, a river finds it just as easy to flow sideways as it does downstream, causing flooding.
“The risk of flooding is in the flattest areas of the country: the midwest and great plains”
I bet the risk of death by flooding is greater in more mountainous/hilly areas. It’s flash floods that get you, not a slow-rising Mississippi.
“flash floods” = desert = Phoenix. Don’t go camping in a dry wash.
“I’ll take 115 one hundred days in a row over 7.0 (and higher) earthquakes), tornados, hurricanes, ice rain, and black ice.”
FWIW, during my 15 years in Colorado I’ve never had the pleasure of experiencing black ice.
And while I would prefer a 115F day over an under 32F day, the truth is we get at most 30 days of really cold weather here and we get plenty of days with highs in the 50’s during the winter.
What I couldn’t handle is 6+ months of furnace like weather. I also couldn’t handle a humid, bug infested place like Florida. The bugs would drive me out before the hurricaneswould.
I never felt an earthquake while living in California and I lived maybe 1/2 mile from the San Andreas fault.
Just felt a little one here in Indiana on Thursday morning.
I was in Cali for the ‘71 quake. It was my first and it shook me up mentally, but they’re really inconsequential when you’re in a one-story ranch on a flat valley floor, and not really close to the epicenter.
Yeah, the one story houses / bungalows should not be fearsome. However LA is densely populated in the good places and that means three floors or higher. I remember the Northridge quake where one three story apartment building pancaked. The worst off were the people in the lower floor levels.
The safest place in the coastal areas would be in a canvas tent or cardboard box.
I felt a 4.5 in the Santa Barbara Channel. That was enough for me, sounded like a big explosion and then 30 seconds of shaking. From time to time you would have the little ones where you would just see the closet doors sway and slightly lose you balance.
Earthquakes were the least og my worries when I lived in SoCal.
No new stimulus or bailouts from a gridlocked congress for 2011.
Housing prices will continue to fall.
Massive cuts to city/county and state public workers. Massive cuts to state budgets (this is very deflationary).
Interest rates creep up (about another 1%).
We will overshoot 2.5X median wage in many areas for housing prices.
More foreclosures. More people walking away.
But still no where near bottom.
Newsweek and Time will NOT have a cover that housing in the worst investment ever.
Canada will pop. Expect no help from Canadians buying cheap American properties.
Newsweek and Time will NOT have a cover that housing is the worst investment ever.
I was thinking about that earlier today: Will 2011 finally be the year housing is identified as the worst investment ever, or will it take until 2015 for the MSM to figure that one out?
Housing has been a GREAT investment. You just have to remember to sell in 2006.
I agree that if you are very patient and a very good market timer, then housing can be a great investment. Sadly, those who believe real estate always goes up, and hence are most prone to investing in real estate with abandon, don’t tend to fit either qualification.
Stimulus package will come close to breakeven after all parties who can pay back do so. I was against it at first, and the banksters benefited most, but in the long run it may turn out to be a reasonable choice.
[I wouldn’t be interested in anything that size anyway. I’ll gingerly venture forth with the prediction that the 3500+ niche will see a price collapse by next spring due to burgeoning inventory. But these sellers have been pretty stubborn and I haven’t seen as much price reduction as one might imagine by properties sitting up to a year. Many just take them off the market thinking they’ll try later when the market improves.”]
I miss NHZ so much. He told the tale of how this could happen in Dutch society. He told us about how houses would stay on the market for more than 5 years, etc. And how the gov’t would use many schemes to prop up the housing market. I see that now in my neighborhood. The people around the corner have been trying to sell their house for almost SIX years now! He was so Right ON on so many points! Happy New Year NHZ! Come back if you are alive! And Happy New Year to all Housing Bubble Enthusiasts! Lots of love to you and yours, each and every one.
I miss NHZ so much.
—————–
Me, too. It was great to have his perspective here.
Yes, we are seeing very much the same stuff NHZ was warning us about. It makes me think the PTB reads here, and whenever they see a really bad idea (for the bears, at least), they move on it.
Happy New Year, Gang! No predictions here, but one local observation: The McMansion on the lake right beside my rental was a spec build and went on the market about 2.5 years ago. This obscenity was originally offered at $2.6 million and just last month closed for $1.2 million. And we have NOT seen the bottom in Orlando.
Canada’s housing bubble will finally pop. Really loudly.
Not everywhere Rosie. Much of Alberta’s housing market is fueled by the energy industry. As long as oil prices continue to rise, oil and gas activity will continue to grow and housing will, at the very least, remain stable.
“Nearly 12,000 oil and gas wells have been drilled in Western Canada in 2010, the second-weakest number of the past decade, but still representing a 30 per cent rebound over 2009.
Oil and gas activity is expected to continue to grow this year, observers say, a bellwether of better economic times especially for rural Alberta, where many of the thousands of oilpatch workers reside and where dozens of oilfield services companies buy meals and rent hotel rooms.
“We’re starting to see a lot more optimism in the community not only from 2010 but going forward into 2011,” said Mayor Moe Hamdon of Drayton Valley, a centre of unconventional oil development this year.
“And 2012 is projected to be the largest year ever as far as activity in the oilfield in the Drayton Valley area.”
Read more: http://www.calgaryherald.com/technology/Optimism+Alberta+oilpatch+2010+ends+strong+seen+three+years/4044448/story.html#ixzz19iaoscVj
Right Lola, it’s different here.
I have a friend in that industry. One of their tax returns topped $500k. So, yeah, I believe if you have a heavy density of those incomes in one area housing will stay higher than where you don’t find a lot of those incomes. And these people do not fear losing their jobs from a bad economy. Energy will always be needed.
Would you pay $500000 for a mobile home in Ft.McMurray or $700000 for single. Check out resource rich Saskatoon. $400000 to live in that hot spot. Resources be damned, the prices in Canada are nuts.
I’m not saying they’re not. However, employment is high and wages are high in Alberta. As long as that continues, people will continue to buy homes regardless of what they cost. And regardless of how stupid that may be.
I was looking forward to a decline in rural real estate values. We’ve been looking for awhile now for a small acreage, a couple of acres or so, so hubby could have some space and a shop to pursue his car restoration hobby. But at over 100K an acre, even out in the middle of BFnowhere, it just hasn’t been remotely realistic.
Wait awhile, say mid year, and see what’s up. Rules are changing as we speak and property values are way overvalued.
It’s pretty simple; if you’ve got a bubble, it will pop. From what I know, Canada’s more over valued than most of the US. About the resources; we had a bunch of oil in Texas in the 80’s, and IMO it made the boom/bust even worse because it fed speculation.
I discussed this with Swerve magazine in 2007. You may be able to read the PDF here:
http://thehousingbubbleblog.com/pdf/swerve_financial.pdf
I’ve been to Ft. McMurray, and if that’s what houses are going for, you should hold onto your hats.
But then again, you may want to take into account that Canada is like a big neighbor where life is generally better than here, if you can deal with the cold.
“…life is generally better than here, if you can deal with the cold.”
It’s different in Canada, because everyone wants to live there.
Exactly. Denial runs deep.
Canada has oil shale and trees.
My prediction: Traders and hedgies tire of commodities speculation by April, move on to something else (again), oil prices drop (again) and oil patch housing bubbles pop (again).
Canada has a shortage of potatoes with which to make poutine. Expect Canada to invade Idaho to grab the potato crop, and for them to be repelled by Idaho’s armed millitia groups.
If prices are outrageously high because just because of high demand (not bubble psychology), then additional supply will be built to ease the under supply. Supply and demand will be more in line and prices will come down. Unless you think that there are overwhleming building contraints around Alberta like lack of available land? There may be some issues with a shortish building season because of weather, but if the only issue with the housing market is a lot of economically justified demand, then you can bet there will soon be enough supply to bring prices down.
“Supply and demand will be more in line and prices will come down. Unless you think that there are overwhleming building contraints around Alberta like lack of available land?”
Something tells me Alberta is not going to run out of land any time soon, unless artificial constraints (e.g. government agencies hoarding it) come into play.
I believe Canada will pop BIG time, being many FB purchased homes using low interest rates. This is a recipe for disaster, being the 30 year rates are only locked in for FIVE years. After that time, a new loan is reissued using current rates.
If rates go back to “normal” numbers (IE 8-10%), many Canucks will find themselves unable to carry the loan. This law was imposed to protect the 5 or so “national” banks.
If my cousin in the bustling metropolis of Melfort, Saskatchewan cannot find a contractor to do repairs on her house, then there is a teensy weensy housing bubble in Canada. Who on earth would live in Saskatchewan. My side of the family left in 1919 for sunny Pasadena and never looked back.
Canada is a nice country , safe and all that ,also the highest depression and suicide rates one can imagine . It’s the numbing 8 months of cold and the short short days . I know , i lived up there as a landed immigrant before migrating to the sunny SC as in South Carolina . there is a good reason all the Canadians who can afford to go south every fall with the geese
On that note. When my friend the company IT ops manager was in the Air Force, one of her duty stations was in Alaska. She bought a share of a fishing boat there. She tells me that I would simply thrive in Homer. It is, according to ‘Anna’, an artsy community with lots of lower 48 expats posessed of critical reasoning capability.
I keep intending to go check it out. Our senses of humor run on the same quirky track, my predictive rule for whether or not people ‘get’ one another’s core beliefs. If she sez I’d be in tune, I prolly would. I like quirky towns that have disaffected souls with whom to have a decent cup of tea and a chat.
Getting there is a tortuous process. And it ain’t cheap TO get there. She sez it doesn’t FEEL cold, because it’s a dry cold. On that claim, I’m a tad skeptical, no offense meant to ‘Anna’s’ judgment or veracity. Theoretically, I would like to go check it out.
Anybody up for a ‘what the heck’ trip to Homer, Alaska? I am NOT daft enough to propose it for our next HBB get together, mind you. Just can’t seem to get over the hump of planning, paying, packing and slogging through four flights and probably 20 hours en route to get all the way over there only to freeze my patootie off, and no audience for my awesome repertoire of brimstone breathing curses.
“Canada is a nice country , safe and all that ,also the highest depression and suicide rates one can imagine”
US 11.0 suicides per 100,000
Canada 11.6
Not a huge discrepancy.
I read books by Farley Mowat when I was a child. His descriptions of Saskatchewan left me cold.
I read a little Jack London and his descriptions left me sacred to death. Man vs. Nature; Nature wins.
Oh, yeah, all that stuff about your spit freezing and cracking before it hits the ground at 40 below zero? I’ve always remembered that image. Very scary.
Man vs. Nature; Nature wins.
(Hwy checks “8-minute tossed sunlight” meter…slight variation, no worries yet.)
“Hey, cut with the negative waves Kelly! It’s gonna be a mother beautiful implosion!”
Nix, nix, nix…Canada does not have a Chinese immigration quota, Chinese know how to deal with extreme…
Gov’tweather. How close is Canada to relativesspyingworking in USofA?I am a frequent lurker, and infrequent poster. With that said, here are my predictions for 2011. It will be a year of continued financial turmoil, combined with more of the same extend and pretend issues. The big predictable financial crisis will be Spain, and the EU will decide to print their way out of this ever spreading mess just like the US. Smaller banks will continue to fail at the same rate. We will see QE3 - 4, gas prices will continue to climb as will Comodities, metals and silver. The disparity between wealth and poverty will not diminish. Home prices where I am, coastal socal, will continue to drop at a rate too slow for my liking. I expect a 5-10% drop at most in 2011. Unless something crazy happens, there will be no major collapse, no additional US wars, and our government will continue to kick the can down the road. Amazingly, it will be more of the same.
I’m with surfitall:
My prediction is muni and state budget default drum beats will thump increasingly louder in the MSM until the Fed gov steps up and hands out some more bail outs for unemployment, job creation (which once more will not be spent on programs meant to help us long term) medicare/medicaid, and other mandated programs. Of course this option will only be available through QEIII and although everyone will accept it with deep foreboding, they will accept it because why face hardship today when you can put it all off till tomorrow.
The HBB will watch the slow lurch toward the inevitable, proven mostly correct but nonethless in pain w/the feeling of losing time when not enough advanced clues of how to proceed safely are given up. (Or is that just me w/an almost perpetual stomach ache?) Meanwhile general public denial of where we are will continue unless major job lay-offs begin to once again gear up.
Hi Upstater. I’m a Long Islander. Happy New Year! And thanks for your comments over the years!
Happy New Year Lender! Happy to hear someone gets something out of them.
My prediction is muni and state budget default drum beats will thump increasingly louder in the MSM until the Fed gov steps up and hands out some more bail outs for unemployment, job creation (which once more will not be spent on programs meant to help us long term) medicare/medicaid, and other mandated programs
Boy that will make the Tea Baggers mad.
Almost as mad as those who voted for Obama to see a health care policy written by insurance companies, tax breaks for the elite, and no prosecution or sig regulation of Wall Street.
I used to vote. It never worked.
Agree with Surfitall and CarrieAnn.
Basically, not too many changes, but a continuation of what we’ve already seen and heard over the past couple of years.
In 2011, I do think home sales will continue to slow, and we’ll see YOY sales declines. Prices will **slowly** drop in the high-mid and higher-end areas where they’ve been proppped up with all the intervention. The lower end was allowed to fall, for the most part, before the Fed/govt got involved, so they will fall some more, but much less than the higher-end stuff.
More of the drumbeats against workers/unions, and more distracting the masses from those who really caused the crisis — the banking/financial industry.
We are not seeing a bottom in RE yet, but things do seem to be picking up otherwise. Fewer commercial vacancies, lower unemployment will be good news in 2011.
Germany pulls out of the euro.
Longtime poster and reader. I did not believe the GLD bugs, and they kicked my ass this year! However, my very small holdings of physical silver was up an even-more-impressive 84%. Sadly, no platinum except on the wife’s finger.
Major interest for me is the price of oil rising to the point of making solar, wind power, ethanol, and other alternatives more and more viable. Oil prices could be subject to reduction by the competition.
Leaf, anyone?
The un-federal reserve will pull way back on printing and raise interest rates. People will enjoy their new found austerity. Home mortgages will be between 8 &10 % with a 20% down payment requirement. All wars will cease and there will be peace the world over!
NOT!
San Diego will avoid bankruptcy by a “great increase of money” to its pension funds. Taxpayers will agree to higher taxes to see all pensions are solvent!
Now believe in the tooth fairy for 2012.
“Taxpayers will agree to higher taxes to see all pensions are solvent!”
The risk of some version of that happening seems like a good reason not to buy in San Diego.
“…seems like a good reason not to buy in San Diego”
Reason #2:
Taxpayers will agree to higher taxes to see all…earthquake damaged homes are repaired.
But it’s true! They will buy silver and gold!
By the way, has anyone noticed that aladinsane was right? At least thus far? Even a teensie weeinsie bit? 
Happy New year my best friends from 2005. You saved me THOUSANDS of dollars. Still renting. Thank you, and thank you. Best to all.
Hundreds of thousands! Muchas Gracias.
I have.,..and I’ve said so. Thank you Aladinsane wherever you are.I’ll be presumptive and make some predictions for him: $50.00 silver, $2000.00 gold (both of which, I believe , are on the low side). Save your middle class standing, if you have it. Go all in.
All wars will cease and there will be peace the world over!
NOT!
Maybe soon American’s will have to fight a foreign War that includes “civilian sacrifices” to distract ‘em from the value of their personal real estate. (Unseen foreign starvation/resource acquisition-by-force probably will not enter into the equation)
“Diz ALL the “Gubemint’s fault!”
Aircraft production - WWII
Check out these figures:
Aerospace:
Aerospace provides one crucial example. American heavy bombers, like the B-29 Superfortress, were highly sophisticated weapons which could not have existed, much less contributed to the air war on Germany and Japan, without innovations such as bombsights, radar, and high-performance engines or advances in aeronautical engineering, metallurgy, and even factory organization. Encompassing hundreds of thousands of workers, four major factories, and $3 billion in government spending, the B-29 project required almost unprecedented organizational capabilities by the U.S. Army Air Forces, several major private contractors, and labor unions (Vander Meulen, 7). Overall, American aircraft production was the single largest sector of the war economy, costing $45 billion (almost a quarter of the $183 billion spent on war production), employing a staggering two million workers, and, most importantly, producing over 125,000 aircraft, which Table 6 describe in more detail.
Table 6: Production of Selected U.S. Military Aircraft (1941-1945)
Bombers 49,123
Fighters 63,933
Cargo 14,710
Total 127,766
Source: Air Force History Support Office
Compare those figures with the ones in this Wiki chart for Germany, and remember that, in addition to the US, Britain and the USSR also need to be figured into the Allied total production. The dicrepancy is eye-opening.
The American Economy during World War II | Economic History Services
The US also launched a new aircraft carrier every week for the last two years of the war. That’s 100 aircraft carriers. Most were smaller “escort” carriers, but compare that to today when it takes years to build one and an act of Congress to fund it.
The need for this production meant that for the first time in US history women and blacks could take well-paid production jobs. This started an avalanche of social changes that are still with us today.
“The need for this production meant that for the first time in US history women and blacks could take well-paid production jobs.”
I heard a fascinating story on NPR this past Friday about the lady on one of the Rosie the Riveter posters.
Now we would need to get illegal Mexicans to build ‘em. Everybody wants a desk job.
I know a lot of white guys who aren’t afraid of getting their hands dirty.
My prediction is that the shadow inventory will remain offline — I say this only for my own psychological comfort so that I can truly be surprised if any of it hits the market.
I am predicting one thing for real: there will be a standout whistle blower this year. If you’re lurking, and thinking about, do it. Strike now, strike hard, let it fly.
Happy New Year!!
“My prediction is that the shadow inventory will remain offline …”
And I predict it may not be worth much if it continues to remain offline for much longer, especially in places like Florida where natural forces quickly lead to physical depreciation of poorly-maintained residential properties.
Well, they’re not going to give it away!
They may be willing to give it away if the structures are rotting into the surrounding swamp land. At some point, the cost of either restoring or razing a structure can potentially exceed the market value of the plot of ground on which it sits.
But without mark to market perhaps it can remain on the books at a high value forever?
“”shadow inventory” is to MegaBank Inc….what the LA Clippers are to Donald Sterling.” Hwy50
Unfortunately, there is no one person who has access to enough information to make an effective whistle blower. We basically know what happened. If Wikileaks really has a few 100,000’s of e-mails from a big bank that shows exactly how aware the execs were of what they were doing, that might fulfill your prediction. I suppose there is the vaguest chance that Ron Paul might dig up something very eye opening, but I’m afraid I doubt it. Again, we basically know what happened at the Fed and why. I’m afraid I just don’t see a lot of whistle blower potential out there for this year.
Realtors will continue to be liars
I know I said this at least 6 months ago….well the fed did buy mortages
“Conspiracy time: It’s possible we’ll discover that a lot of the “shadow inventory” was sold off in bulk, possibly to creditor nations (like China) in exchange for our Treasury debt.
The Chindians are coming! The Chindians are coming!
The Chinidians can’t be nearly as messed up as the typical J6P-red state-head in the sand types we have around here.
For starters, they grew up recognizing that what the government/mass media spews out is mainly propaganda/talking points.
I expect we will soon be reading about how U.S. housing price declines currently underway were “larger than expected” by MSM-favored “experts.”
Why do I suspect this? Here are thirteen reasons that I can suggest off the top of my head:
1. The Case-Shiller Index, which is backward looking and hence already out of date when published, shows several consecutive recent months of trailing home price declines in a broad cross section of major U.S. urban housing markets.
2. The labor market recovery has played out much slower than expected, with high rates of unemployment anticipated for years to come.
3. Mortgage rates are rising, in bond vigilante defiance of the Fed’s intended use of QE.2 to keep a lid on interest rates.
4. The slowdown in the rate of foreclosures due to the robo-signing scandal will result in higher rate of new foreclosures to correct the resulting buildup of mortgage defaults with no foreclosure to follow.
5. Prime and Alt-A ARM resets are scheduled to remain at high levels through 2013.
6. The economic recovery is showing increasingly visible signs of green shoots, disproving the claim that more housing market stimulus is needed for the rest of the economy to ever recover.
7. Ron Paul’s ascendancy to head the Senate Banking Committee may increase the difficulty for the Fed to conduct stealth housing market stimulus.
8. It is beginning to dawn on many top U.S. policymakers that high levels of housing subsidization greatly contributed to the bubble, and that bubbles are detrimental to the proper functioning of the American financial system.
9. The few eager young buyers who might currently be looking for housing were already knocked off the fence by the $8K first-time buyer tax credit, and with such a slow labor market and so many U.S. home owners underwater on their mortgages, potential sources of future demand are dead in the water.
10. There is already a huge shadow inventory of homes for sale, with more likely to be added in the next several years. This has dragged on so long by now that physical depreciation of long-vacant housing structures must in many cases be outweighing the value of waiting for the buyers to return.
11. We are at the leading edge of wave after wave of baby boomer retirements, which in many cases will involve selling empty-nest single-family housing into the lingering bust.
12. It is likely to soon dawn on policy makers that
(a) home prices are still too high compared to historic norms– i.e., they never fully corrected from the bubble peak;
(b) lower housing prices could potentially spark the greatest economic boom in U.S. history, as frozen housing market liquidity would give way to labor market mobility, bringing qualified American workers to where their skill sets would most help the economic recovery;
(c) by increasing labor market mobility, lower housing prices would enable market forces to provide economic stimulus without the need for tax increases.
13. Nobody wants to catch themselves a falling knife, and the considerable risk of doing so by currently purchasing a home is obvious to anyone who is paying attention.
Happy New Year! May all of you savor the increasingly likely future prospect of affordable U.S. housing prices!!
Mortgage Rates for 30-Year U.S. Loans Advance to Seven-Month High of 4.86%
By Prashant Gopal - Dec 30, 2010 7:09 AM PT
Mortgage rates for U.S. loans climbed to a seven-month high, increasing borrowing costs for homebuyers in a sluggish real estate market.
The average rate for a 30-year fixed loan rose to 4.86 percent in the week ended today from 4.81 percent, Freddie Mac said in a statement. The average 15-year rate advanced to 4.2 percent from 4.17 percent, the mortgage-finance company said.
Rising home loan rates may limit homebuyer demand as housing remains a weak link for the economy. Home prices in October fell 0.8 percent from a year earlier, the largest year- over-year decline since December 2009, the S&P/Case-Shiller index of property values showed this week.
“Optimism is fading from the housing market,” Robert Shiller, an economics professor at Yale University and co- creator of the index, said on Bloomberg Television on Dec. 28.
Sales of new and existing homes rose less than economists estimated in November even as mortgage rates sank to the lowest levels on record, reports from the Commerce Department and the National Association of Realtors showed last week.
…
“Optimism is fading from the housing market,”
My optimism has never been higher that affordable housing prices are in the foreseeable future.
It’s amazing to me that big-name economists like Shiller are so quick to embrace the normative presumption that higher housing prices are good and lower housing prices are bad. This kind of bubble-era thinking is one of the key reasons we boil in the pot of stew in which we swim. In Professor Bear’s normative opinion, America’s homes should be viewed as places to live, not as investments which make our society collectively better off when their prices rise.
Amen, PB!
I’m feeling rather optimistic about the housing market as well.
Why do they never consider the perspective of prospective buyers? Lower housing prices are a GOOD thing!
1. The Case-Shiller Index, which is backward looking and hence already out of date when published, shows several consecutive recent months of trailing home price declines in a broad cross section of major U.S. urban housing markets.
Here is a great graph showing the effect of Fed-funded housing price stabilization on propping up the housing price-to-rent ratio at about 20% above the level reached in the wake of previous recessions over the past thirty years. It shows this ratio peaked during the late 1980s housing boom at 1.16 (16 percent above a normalized ratio of 1.0) at some time in 1989, then tailed off at a decelerating rate of decline until reaching a trough a little below 1.0 around January 1997, eight years after the previous peak, at the apparent onset of the housing bubble by this metric.
During the bubble inflation years (1997-2006), the ratio increased to 1.88 or so, as measured by the Case-Shiller/S&P Index of home prices (red curve), or 88 percent above the baseline level of 1.0, before dropping back to a mere 1.2 (20% above baseline) by the time it was hit with a flood of QE.1 liquidity in early 2009.
Since then, the index has remained on a quasi-permanently high plateau of 1.2 or so. We are taking our chances and continuing to throw away our money on rent in 2011. Note that the housing bubble was far more gargantuan in its price impact than the relatively tame late-1980s boom, and if the die off phase nonetheless happens on the a similar schedule as the last one (eight years from peak to trough), it would take until at least 2014 for the price-to-rent ratio to reach a bottom.
[(b) lower housing prices could potentially spark the greatest economic boom in U.S. history, as frozen housing market liquidity would give way to labor market mobility, bringing qualified American workers to where their skill sets would most help the economic recovery]
This is where I disagree with you. If we lose the banks, all is lost, sorry to say. There IS a need for a lender of last resort, to keep the financial system from totally crashing. It’s THAT bad, as you know.
“This is where I disagree with you. If we lose the banks, all is lost, sorry to say.”
It gets down to the question of whether we want to keep supporting the doctrine of too-big-to-fail, allowing the world’s largest and most powerful banks to continually hold a gun to the heads of all non-bank financial entities on the planet, and summarily bailing out TBTF banks that throw away money on bad projects, or if we want to reinstate competition to the financial system, breaking up the largest, most systemically risky firms if necessary to accomplish this.
Perhaps you missed the story of how the Icelanders let banks that threw away good money after bad collapse, but yet some how their economy survived. We apparently disagree on the importance of preserving the too-big-to-fail system of bank bailouts.
Well I think it comes down to this: what do end consumers use banks for? Checking accounts for direct deposit and direct bill pay, home(?) and car loans, and perhaps a laddered CD or two. I don’t see Jimmy off the street going to the teller and buying credit default swaps.
And say the banks guess right and makes lots of money off the credit default swaps. Does Jimmy get a dividend or a better rate? Nope, it mostly goes into paychecks of the traders. In other words, why bother with a investment bank?
[insert exhortation for Public Option Bank. Hey, why not? If private sector won't allow competition, then the government could make some competition for them.]
A grass roots movement could put Megabank, Inc. out of business. The services they offer are easily found at smaller institutions. But, Americans are lazy and ultimately don’t care about the bank bailouts or the influence of the TBTF’s on the government and their own lives. If they did, they would vote with their feet and move to the local bank down the street. I’ve had this conversation with my own family members, but they continue to patronize these behemoths.
“A grass roots movement could put Megabank, Inc. out of business. The services they offer are easily found at smaller institutions. But, Americans are lazy and ultimately don’t care about the bank bailouts or the influence of the TBTF’s on the government and their own lives. If they did, they would vote with their feet and move to the local bank down the street. I’ve had this conversation with my own family members, but they continue to patronize these behemoths.”
A grass roots movement would have no effect at all. Megabank Inc. gets almost none of it’s money from depositors.
“A grass roots movement would have no effect at all.”
Your opinion is not going to stop the effort.
Would Ron Paul Really Try To End The Fed?
by NPR Staff
December 19, 2010
Texas congressman Ron Paul has long been a fierce critic of the Federal Reserve. In fact, last year he published a book called End the Fed, calling for an end to the central bank and a return to the gold standard.
Now, Paul has been appointed head of the House subcommittee on domestic monetary policy, which, among other things, oversees the Federal Reserve.
So, does Paul see this as his chance to try to end the Fed? “In a partial sense, but not directly,” he tells NPR’s Guy Raz. “What I’m really asking for is competition, to get rid of the monopoly power of the Fed, because they don’t have legitimate power to do what they do.”
…
“A grass roots movement would have no effect at all. Megabank Inc. gets almost none of it’s money from depositors.”
I call BS on your statement. And, nowhere did I mention just depositors.
If Megabank gets none of its money from depositors, then Main Street isn’t really affect by Megabank, except for a bit of 401K loss, which can be overcome.
So why the F*$#&% didn’t they let Megabank fail???
So why the F*$#&% didn’t they let Megabank fail???
==========
Oh, oh, oh, I know! [jumping up and down with hand waving in the air]
It’s because Megabank, Inc. controls the puppets in government, right?
Long-term prediction:
Crony-socialist countries, where too-big-to-fail systemic risk insurance is systematically provided to the largest and most powerful banks, will lose the wealth-of-nations game to capitalist countries which force banks to assume the risk of reaping the rewards or paying the costs of their investment decisions without enabling them to privatize profits but socialize losses.
Guess to which group of nations the U.S.A. currently belongs?
Who belongs to the ‘capitalist’ group? Iceland? And….?
“Who belongs to the ‘capitalist’ group?”
The United States of America (1776-1912)
“It’s THAT bad, as you know.”
It really was a great year for Wall Street, after a great 2009, wasn’t it?
Stocks Set To End 2010 On An Upbeat Note
December 31, 2010
Morning Edition
Renee Montagne looks back at the performance of the stock market and the economy in 2010 with Wall Street Journal editor David Wessel.
This is MORNING EDITION from NPR News. I’m Renee Montagne.
Despite some ups and downs, the stock market had a good year in 2010. To find out why and what it portends for the economy, we turn to Dave Wessel now. He’s economics editor of The Wall Street Journal.
Good morning.
Mr. DAVID WESSEL (Economics Editor, The Wall Street Journal): Good morning, Renee.
MONTAGNE: David, how good was this year for stocks?
Mr. WESSEL: Well, it was pretty good. The Dow Jones Industrial Average was up nearly 11 percent in 2010, on top of a 15 percent rise in 2009. It’s basically put the stock market, more than two years after the disaster of Lehman Brothers in the fall of 2008, its back to where it was before we had that calamity.
…
There is more than enough cash floating around to finance a bunch of new banks. They could provide their own regulatory capital and hire the old employees in place for a while until they figured out who was useful and who wasn’t. That is for commercial banks.
As for investment banks? They are mostly useless given the changes in technology. The lawyers do nearly all the work in offering documents. Businesses have their own corporate finance departments, so they generally know the terms they want in a bond or stock offering. The internet could let those stocks and bonds be sold by dutch auction instead of the investment banks sales guys. The only stuff that can’t be done without the investment banks is the really complex, untraded derivatives work. And we can live without those, thank you very much.
[applause]
2. The labor market recovery has played out much slower than expected, with high rates of unemployment anticipated for years to come.
Economic Scene
In the Rearview, a Year That Fizzled
By DAVID LEONHARDT
Published: December 28, 2010
It was the year that the economy started to recover and then slid back into a slump — only to offer reason for renewed hope in the final weeks.
When 2010 began, hiring and consumer spending were finally picking up. But then something changed in the spring — a combination of the debt troubles in Europe, the fading of stimulus spending and the usual caution by businesses and consumers after a financial crisis. By the summer, the unemployment rate was rising again, and Americans’ attitudes about the future were again souring.
…
3. Mortgage rates are rising, in bond vigilante defiance of the Fed’s intended use of QE.2 to keep a lid on interest rates.
Kiss 4% mortgage rates goodbye
By Les Christie, staff writer
December 30, 2010: 3:24 PM ET
NEW YORK (CNNMoney.com) — The era of near 4% mortgage rates has ended after a quick rate rise since early November. But some industry experts think that may be a good thing for the flagging housing market.
The average 30-year fixed mortgage rate has risen to 4.86% from 4.17%, according to Freddie Mac’s weekly mortgage market survey. In the Bankrate.com weekly survey, the rate has risen to 5.02% — crossing the 5% mark for the second time in three weeks — after being as low as 4.42% as recently as early November.
Rates haven’t been this high since May and forecasters now predict them to remain between 5% and 6% for all of 2011.
“You can kiss those record lows goodbye,” said Greg McBride, chief economist for Bankrate.com.
Keith Gumbinger of HSH Associates, a provider of mortgage information said that the market reached a new plateau.
“I don’t think we’re going back to a 50-year low anytime soon without an economic collapse,” he said. “Rates will probably never revisit those levels.”
…
The Fed’s war on savers ostensibly is to keep mortgage interest rates low so FB’s can re-fi.
Oh dear, that is a whole chain of non sequiturs IMHO. The Fed funds rate is only loosely coupled with mortgage interest rates, which I believe are generally tied to LIBOR, not the Fed funds rate. IIUC LIBOR is controlled by bankers in the UK. And even if mortgage interest rates are low, FB’s can’t take advantage of them if they are underwater, as most of them are.
Mortgage lenders know going forward that a mortgage is no longer a safe investment protected by a good security interest. Now that housing prices have gone down they have found that they can lose principle on these loans, especially in the so-called non-recourse states. Perhaps there will be a spread between mortgage interest rates between the “recourse” and “non-recourse” states going forware.
‘The Fed funds rate is only loosely coupled with mortgage interest rates, which I believe are generally tied to LIBOR, not the Fed funds rate…And even if mortgage interest rates are low, FB’s can’t take advantage of them if they are underwater, as most of them are.’
You are spoiling the little violin music!
Dennis, that was a GREAT post. +1.
The cynic in me thinks the most likely reason for the low Fed funds rate is this.
Banks get money at 0% and lend it at 10+%.
Banks save up their profits over several years.
When enough profits are saved up, THEN the banks can mark to market their RE holdings without collapse.
The cynic in me thinks similarly; in particular, I assume the Fed’s 0% lending to Megabank, Inc gives them infinite staying power over Main Street end-user home buyer households in the shadow inventory waiting game. The Fed appears to have executed a massive, stealth reallocation of America’s housing wealth in favor of banks which is somehow completely overlooked by the MSM. The social cost of this policy is considerable, given that the value side of a large standing stock of residential real estate is essentially zero when it is vacant, while the cost side is substantially higher than if owner occupied due to a suboptimally high rate of physical depreciation when nobody is living in homes and properly maintaining them.
But since, as Lenderoflastresort suggests, the most important priority is saving banks, I guess the costs to society overall don’t figure in the unelected Federal Reserve’s allocation decision.
Interesting thread/set of posts here.
Here’s a related question I’ve never seen asked here (and it may be a dumb one, but here goes…):
To what extent can banks operate as lenders overseas?
The reason I ask is that we here tend to focus on domestic activities conducted by U.S. banks. Above, Dennis notes that banks may be increasingly okay with losing principle on loans now that housing prices have gone down.
I think there’s perhaps more to this - if U.S. banks can increasingly generate profit overseas, would there not be even less incentive for them to dump inventory on the market? Yeah.
Are we here at the HBB making the correct assumption that someday banks will have to dump properties on the market?
Perhaps that will never happen. Maybe banks will create artificial “semi-scarcity” (through availability or pain-in-the-ass lending procedures) until the properties themselves become uninhabitable.
It’s not as if our government will force them to by edict.
A declining dollar doesn’t hurt, either.
“Are we here at the HBB making the correct assumption that someday banks will have to dump properties on the market?”
Speak for yourself; I don’t assume this at all, which you would already know by now if you read what I wrote on this thread:
‘…I assume the Fed’s 0% lending to Megabank, Inc gives them infinite staying power over Main Street end-user home buyer households in the shadow inventory waiting game.‘
“The Fed funds rate is only loosely coupled with mortgage interest rates, which I believe are generally tied to LIBOR, not the Fed funds rate”
LIBOR is used to set variable-rate mortgages. The rate on 10 and 30 year Treasuries is, indeed, what is used to set fixed-rate, long-term mortgages.
4. The slowdown in the rate of foreclosures due to the robo-signing scandal will result in higher rate of new foreclosures to correct the resulting buildup of mortgage defaults with no foreclosure to follow.
Brace yourself for the 2011 foreclosure tidal wave
Posted by Scott Van Voorhis
December 16, 2010 07:06 AM
No, I haven’t lost it - I’ve read the news this morning about the huge drop in foreclosures.
Sorry if I’m not celebrating as I sip my morning coffee.
Sure, for some struggling homeowners, the temporary halt - foreclosure activity is off by a third since September as banks have taken a step back amid the robo-signing mess - is a badly needed reprieve.
But we are looking at some serious trouble for the real estate market as a whole just a few months down the line.
In fact, RealtyTrac is already predicting another fall in foreclosure activity when the December numbers come out, followed by a spike during the first quarter. Just in time for the start of the spring market.
In fact, foreclosures will surge to new highs in 2011, beating even the 1.2 million home seizures expected for 2010 and the 900,000 recorded in 2009, RealtyTrac’s Rick Sharga has been telling reporters.
If the big decline we are now seeing in foreclosure activity is any indication, we should be in for one heck of a spike come February and March.
…
5. Prime and Alt-A ARM resets are scheduled to remain at high levels through 2013.
I cast about for a recent article on this subject but didn’t see any. But here is a Daily Reckoning blog post from about a year ago which shows a version of the reset chart. The key feature of interest to me is that non-subprime option ARMs don’t peak until late 2011. I don’t foresee any recovery in more desirable areas until this pig-in-the-python is fully digested and forced out the other end, which presumably will take another several years after the peak ARM reset wave finally washes over the U.S. housing market.
P.S. I have seen other graphs of ARM resets that continue at high levels beyond year-end 2011, but posted this one to err on the side of conservative sensationalism.
do we have any info what fraction of these future arm resets have already taken advantage of the very low mortgage interest rate this past few months? thanks.
Don’t know, but my understanding is that
(1) the percentage of U.S. mortgages that are underwater is approaching 50%;
(2) the areas were option ARMs were most prevalent have the highest percentage of underwater loans (i.e. far higher than 50%);
(3) underwater loans don’t qualify for low-interest (or any other) refinancing.
That’s my qualitative answer to your question. Not sure about what fraction of future ARM resets have taken advantage of low rates, but in light of points (1)-(3), I can’t imagine it could be very high in markets formerly described as a bit frothy.
6. The economic recovery is showing increasingly visible signs of green shoots, disproving the claim that more housing market stimulus is needed for the rest of the economy to ever recover.
Stocks post another year of gains, belying investor doubts
By Tom Petruno
Market Beat
January 2, 2011
The U.S. stock market in 2010 racked up a second straight year of double-digit returns, as the economic recovery rolled on and Wall Street bet there’s more to come.
But equity investors may rightly wonder if their gains last year — the average stock mutual fund was up about 17% — were adequate compensation for the mental stress they endured. Europe’s debt crisis, the U.S. market’s May “flash crash” and a summer economic slowdown all made for a torturous ride in stocks.
And with the Federal Reserve’s renewed efforts to bolster the recovery by pumping more money into the financial system, the nagging fear is that share prices might not be up at all without continued help from Washington.
One sign of investors’ deep anxiety about the future: The price of gold soared for a 10th straight year, rising nearly 30% in 2010 to end Friday at $1,421.10 an ounce, a record before adjusting for inflation.
Many Americans simply steered clear of the stock market for most of last year, as they did in 2009. While some people snapped up gold and silver coins instead, huge sums were funneled into bonds and into bank accounts that paid virtually no interest.
…
While some people snapped up gold and silver coins instead, huge sums were funneled into bonds and into bank accounts that paid virtually no interest.
—————
One might wonder if this isn’t the “smart money” waiting for the coming deflation.
The fact that banks are sitting on a lot of money is often brought up in arguments that favor inflation. IMHO, one could just as easily believe this “sidelined money” is an indication of coming deflation, as the holders of this money don’t see fit to lend it to unqualified borrowers, and don’t believe the collateral is properly valued at this time. This money is more likley sitting there because it is waiting for the deflation. OTOH, it could cause a rather quick rocket-ride up if we do get deflation, because there does seem to be a lot of this money sitting around, waiting for a bottom.
7. Ron Paul’s ascendancy to head the Senate Banking Committee may increase the difficulty for the Fed to conduct stealth housing market stimulus.
December 28, 2010 4:00 A.M.
Who Is Ron Paul?
Ask ten different people, and you’ll get ten different answers.
Ron Paul speaks softly and carries Mises. The eccentric, famous, and infamous Texas congressman has a frail frame and a frailer voice. “I am not powerful, but my ideas are powerful,” he says.
Everybody knows his name. Everybody talks about him. But nobody can agree as to who he is.
…
Paul, however, says his political philosophy is quite simple: “I’m a constitutionalist.” And he takes it as a sign of the times that his faithfulness to an originalist reading of the Constitution — which he claims forbids the existence of the Federal Reserve, among other government creatures — engenders such confusion, so many accusations of both radicalism and reaction.
Two things about Ron Paul are for certain. The first is that he’s quixotic — unquestionably a little weird, and probably unelectable to higher office — but a necessary gadfly reminding us of our lost constitutional liberty. The second is that Paul, the author of End the Fed, among other books, has been selected as the new chairman of the Subcommittee on Domestic Monetary Policy. The man who wants to end the Fed will now be overseeing it (as far as Congress can oversee the Fed). NRO’s Matthew Shaffer talked to Paul about that oversight, his economics, the presidency, and more.
…
8. It is beginning to dawn on many top U.S. policymakers that high levels of housing subsidization greatly contributed to the bubble, and that bubbles are detrimental to the proper functioning of the American financial system.
Sweden Shows Central Bankers How to Fight Next Asset Bubble
By Kati Pohjanpalo - Dec 28, 2010 3:01 PM PT
Riksbank Governor Stefan Ingves, seen here, has raised the repo rate four times since July even as inflation remains below the bank’s 2 percent target. Photographer: Phil Weymouth/Bloomberg
Nordics Face Housing Market Losses May Trigger Double Dip
House prices in Sweden jumped an annual 7 percent in the three months through July, the 15th consecutive period of increases. Photographer: Linus Hook/Bloomberg
Sweden’s central bank may set the direction for other policy makers as it looks beyond conventional inflation targets to asset-price growth in an effort to prevent the next bubble.
“Not countering asset-price increases has been the conventional wisdom among central banks, but what has it actually resulted in?” said Tina Mortensen, an economist at Citigroup Inc. in London. “Surely the current crisis has made central bankers rethink policy; Sweden is actually facing this problem” because “asset prices and monetary policy are a hot topic,” she said.
…
9. The few eager young buyers who might currently be looking for housing were already knocked off the fence by the $8K first-time buyer tax credit, and with such a slow labor market and so many U.S. home owners underwater on their mortgages, potential sources of future demand are dead in the water.
Roubini: ‘Housing Prices Can Only Move Down’
Published: Tuesday, 28 Dec 2010 | 12:27 PM ET
By: Ash Bennington
According to economist Nouriel Roubini, the housing market is in a double dip.
And negative Case-Shiller Home Price numbers out today only confirm that unpleasant truth.
“It’s pretty clear the housing market has already double dipped,” says Roubini. “And the rate of decline is stronger than in previous months,” he said of the new housing data.
Aside from below trend economic growth, there are two factors specific to the housing market that are putting downward pressure on home prices.
The first factor is the expiration of federal home buyer tax credits for first time home buyers.
“If you look at the data, Case Shiller has been falling every month since the tax credit expired in May. Everyone who wanted to buy a home did so by April,” Roubini said.
“That tax credit stole demand from the future and its expiration led to another 30% fall in home sales, pushing Case & Shiller lower for the last few months,” Roubini wrote in a text message earlier this morning.
…
11. We are at the leading edge of wave after wave of baby boomer retirements, which in many cases will involve selling empty-nest single-family housing into the lingering bust.
December 31, 2010
Will the boomers be able to retire?
Posted: 07:09 AM ET
Adam Noboa
Starting tomorrow, more than 10,000 baby boomers a day will turn 65 or retirement age and since boomers are defined as those born between 1946 and 1964, this is a trend that will last for the next 19 years. But in tough economic times boomers are struggling to say afloat let alone think about retirement. Boomers now find themselves pulled between aging parents and adult children still living at home.
…
http://seattletimes.nwsource.com/html/businesstechnology/2013825070_burns09.html
“Q: I turned 63 earlier recently. I was laid off through a reduction in force effective Oct. 1, 2010, and received a severance package.
Due to previous layoffs and extended job searches, we have virtually depleted our retirement savings. I am in good health and have no interest in early retirement. Our cars are paid for. We have no credit-card debt. Our COBRA benefits cost $1,400 a month. The cost of homeowners insurance, car insurance and property taxes is $900 a month. Our monthly mortgage and second mortgage payments are another $1,200. We owe a total of $49,000 on the house.
We have about $110,000 in a 401(k) and about $85,000 in other investments, plus $10,000 cash on hand. Starting in 2011, we will start living off the cash on hand and then our investments (until I find a new job). During this time I will also be making the mortgage payments from our investments. With the uncertainty of the job market, wouldn’t it be a good idea to pay my home off now?”
Another non-retiring boomer. It is no wonder that recent grads are having trouble finding work.
12. It is likely to soon dawn on policy makers that
(a) home prices are still too high compared to historic norms– i.e., they never fully corrected from the bubble peak;
(b) lower housing prices could potentially spark the greatest economic boom in U.S. history, as frozen housing market liquidity would give way to labor market mobility, bringing qualified American workers to where their skill sets would most help the economic recovery;
(c) by increasing labor market mobility, lower housing prices would enable market forces to provide economic stimulus without the need for tax increases.
Perhaps since these are my own ideas which I would like to see enter the national housing policy debate, I can’t find any supporting articles. Please post any you come across.
13. Nobody wants to catch themselves a falling knife, and the considerable risk of doing so by currently purchasing a home is obvious to anyone who is paying attention.
Home Demand Finally Stabilizing in Wake of Tax Incentive Expiration
Posted by BEREL News Team on Friday, December 31st 2010
The National Association of Realtors (NAR) reported this week that levels of demand for previously-owned homes are finally stabilizing after being thrown into limbo last July with the expiration of the $8,000 tax incentives on home purchases[1]. NAR, a traditionally optimistic group, had forecast low numbers for November sales, but the number of contracts to buy last month actually rose more than expected, increasing by 3.5 percent after a “record 10 percent in October.” These gains were third and fourth in a series of (according to NAR) strong indications that “home demand is stabilizing.”
Thanks to jobless rates around 10 percent in most areas of the country, the housing recovery will likely continue to be “uneven” in 2011, said New York based economist Yelena Shulyateva in an email to clients following the release of the numbers. She added that “housing oversupply should keep pushing housing prices down.” NAR’s chief economist, Lawrence Yun, forecast that in 2011 another 4.5 million distressed properties could reach the market. Hopefully predictions for an “accelerating economy” in 2011 will prove accurate and help investors clear this surplus inventory quickly.
Are you buying up properties right now?
…
“Are you buying up properties right now?”
You can tell the Fed’s bubble reflation effort has been at least a partial success, by the fact that buying homes as investments instead of as places to live in still seems like a good idea to some.
Last year was good for investors
What can they expect in 2011?
By Eileen Ambrose, The Baltimore Sun
January 1, 2011
Vow to exercise more. Check. Pledge to volunteer for worthy causes. Done. Swear to get organized. Yep.
Another New Year’s resolution to keep: Examine your investment portfolio and consider what moves you might want to make in the months ahead.
You could start by reflecting on your investment returns from 2010. In fact, if you have a diversified portfolio of stocks and bonds, you should be in for a pleasant surprise when year-end statements come in.
“It was a good year, better than otherwise expected,” says Joseph Battipaglia, a market strategist with Stifel Nicolaus in Pennsylvania. “Just about all investment categories performed well — bonds, stocks, commodities and even gold. The only lagging asset once again was personally held real estate. The housing market had a difficult year, at best.”
…
Cash was also lagging in 2010.
Why does no one care about the savers who’ve been mercilessly punished throughout the past decade?
“Slow sales and lower prices are the result of a drop in demand coupled with stubborn sellers who don’t get the picture.”
We are already there. The interesting question is where things go next. I personally expect the following three developments over the next several years:
1) The labor market recovery turns out better than expected, at least compared to Bernanke’s gloomy prediction (which I suspect is mainly intended to set up a wave of optimism when things finally start turning out “better than expected”).
2) Sellers who have been patiently delaying the marketing of their homes until buyers return will be forced to compete on price to attract buyers, driving down the comps.
3) The dynamic to restore affordability to the U.S. housing market will consist of steadily increasing sales on steadily declining prices, until a bottom is finally reached by 2015 or so.
4) Once the bottom is in, it will be here to stay for a while, at least in real terms.
5) The Fed will use its printing press to use inflation to stabilize nominal housing prices, even as their real value continues to decline (and this is already underway!).
How will these prices compare with ounces of gold and silver. I really wonder. How about you? Check out some charts, or am I totally off base?
I predict I will continue renting for all of 2011.
Try not to become “bitter” about your x12 month “predicament” ;-/
I agree with surfitall’s “more of the same” past overall, but with a couple standout events:
1. At least one local state or municipality will float a trail balloon to play with pension money. They will either means test it, or institute a residency requirement.* Unions will be up in arms but cities will stand firm. If it works, the Republicans will look to the same ideas for Social Security.
2. Health care will come to a head, probably late in the year when health premiums go up again and a few more court cases come back. Not sure which direction this is going to go.
3. Congress will compromise on some token social legislation, but stay in gridlock over any legislation with significant economic impact. Example: Don’t Ask Don’t Tell was token legislation — socially important, but does little for unemployment. Tax reform of any kind? Nothing doing. Immigration reform will stay on the back burner as the bad economy and stepped up border measures keep the question from flaring up too badly.
4. Outsourcing will continue apace, clawing ever further up the professional food chain. Next stop: bean counters in India will decide that American bean counters — the ones that started all the outsourcing — are no longer needed. And watch out for Telemedicine.
5. 2011-2012: Sarah Palin will announce that she is running for President. She will make a splash, but all that fakey teleprompter-reading won’t fool the good folks of Iowa and New Hampshire. She will subsequently sell her mailing and donor list to Mike Huckabee (her intent all along).
————–
*I like the idea of residency requirement. e.g. LAPD officers are highly paid for living in expensive LA, and their pension is based on that salary. Why should they be allowed to take the high pension to low-tax low-cost Texas? They would never have earned that type of pension in Texas.
I’m sympathetic to the “residency requirement” concept. Much of a locality’s “deal” for local government pensions is that most employees will stay local and SPEND local, thus having those pension dollars returned back into the local economy.
Stupid question time: does CA tax the income of LAPD guys who retire out of state? I’d sure hope so.
If so, could they tax at a higher rate those pensions paid out-of-state? Max CA income tax rate is 9% - could they tax out-of-state pensions at 20%? Call it a “service fee” or whatever they like.
The Pension Carry Trade is familiar to everyone out here in Flyover…..California retirees bring their bubble generated pensions and home sale profits out here, and outbidding the locals for all of the prime real estate.
$200k could easily be generated by Californians by flipping a single house. Good luck with working for a living out here in Flyover, and actually being able to save that much money.
Why are Bubble area public pay/pensions so high? Because the “cost of housing” in bubble areas artificially distorted upwards the “cost of living”. To me, there should be plenty of room in public pensions for some “shared sacrifice”.
If the public unions were smart, and were the beneficiaries of bubble-induced pay and benefit increases, they should read the writing on the wall, and start being proactive about negotiating some contract revisions. Fat chance that will happen.
Following the lead of our national and business leadership, they will kill the host, knowing that $50 in hand now is worth more than promise of $100, ten years from now.
They used to be taxed.
“Effective 1/1/96, California law conforms to federal
law and provides that nonresidents of California are
no longer taxed on California source pension and
retirement income.” From the CA Franchised Tax Board.
Had some friends that retired from Ca and moved to AZ, very happy when the law was changed.
Agree that Californians with more “generous” pensions should abide by a “residency” requirement.
She will subsequently sell herself & her family intrigue for $$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$
mailing and donor list to Mike Huckabee(her intent all along)Good ones, oxide. Agree very much with what you’ve said.
1. Higher prices for all commodities and things we all use and need with the government still saying there is little or no inflation.
2. Here in North Florida, I believe unemployment will go up, not down as so much of our economy was based on building, selling and financing real estate (which still have many years of suffering to go)and the military which I think will see big reductions due to the deficits. Ditto for many other Sunbelt cities.
3. I think we’ll see major riots in at least one U.S. big city as continued unemployment leads young people to revolt against the government run by boomers and seniors who are leaving all their mistakes and debts for the younger generation to clean up. The young people are truly screwed beyond all belief.
In regards your #3….
Detroit, New Orleans, and Los Angeles would be my guess.
kid rock will buy detroit and get keys to the city?
I am seeing a lot of generational bitterness on other websites. It bothers me because I don’t think anything is so black and white as the stereotype. There are frugal boomers who wouldn’t have made the same choices their power structure representatives did. There are group X and Y types that are as materialistic and self-serving as the best of them.
+1
Just to be clear, Carrie Ann, I am much closer to being a Boomer than being called a young person. I do believe the people who have been adults and out of college for 20+ years (which includes me) and have been effectively minding the store have screwed it up for the generations to come. I include myself in that, not because I have direct control over the government or am part of the PTB, but because I like many sat back and watched things go to heck because it wasn’t hurting me and at times was helping me.
We let our country’s finances go down the toilet over the last 25 years and just watched it happen, for the most part pretty silently. Our offspring will suffer the most.
I guess this is a reflection as the New Year turns on past mistakes, not meant to be pitting one generation against another. Just a commentary on how badly we’ve messed things up. Maybe someone with some guts and brains will come along and figure out how to get jobs created again in America. We’ve failed so far, and that includes regular citizens, businessmen and polticians, individually and as a collective.
I think my crystal ball is somewhat cloudy…and I admit it has been so for a long time. Here I thought in 2006 that the housing crash would be mostly limited to the big 5 bubble states.
I predict that Estonia will rue their adoption of the Euro, scheduled for midnight tonight.
I predict that China will demand an increase in US bond interest rates - or they won’t buy any more.
The conflagration in the PIIGS is the new “Reichstag fire”, and will be used by Germany to extort concessions in the EU. There will be a constant threat to withdraw from the Euro, but these will remain a threat for about 2 years. I predict Ein Neues Deutschmark to come in 2013.
I predict that Her Majesty’s Government will tell the EU to “get stuffed” when the EU presses the demands for the UK to adopt the Euro.
I predict that housing prices will trend down softly in most markets.
“I predict that Her Majesty’s Government will tell the EU to “get stuffed” when the EU presses the demands for the UK to adopt the Euro.”
I don’t see that one at all. I don’t see Euro expansion on the table at all. The bigger challenge will be not losing any current Euro countries.
I predict Swiss bankers will remain calm & very quite…(and not experimenting with any foul smelling foreign derived “cologne”).
Here’s a graphic of how some Estonians view their country’s adoption of the Euro today.
http://www.iseseisvus.ee/images/TITANICINGLIS1.jpg
1) A stain in the likeness of Jesus will be found on the carpet of a foreclosed house in Phoenix Arizona.
2) A man in Miami who sold his food stamps for 30 cents on the dollar will win the lottery and buy a condo on the beach.
3) Angelo Mozilo will die from skin cancer.
4) The government will announce the new CAMP program.(can`t make your payment, don`t worry about it nobody can)
5) The FHA will come out with their new (Don`t ask don`t tell) loan application for their new 120% LTV mortgage program.
“1) A stain in the likeness of Jesus will be found on the carpet of a foreclosed house in Phoenix Arizona.”
6) A statue of St Joseph will later be buried in the yard in a futile attempt to sell it for a 2006 price.
+10 Jeff -
#1. The wave of foreclosures will begin….The final act of letting the market clear itself has arrived…..Hope you have dry powder to finally get a shot at a affordable house…
#2. As I have mentioned before, Hilary and Biden will swap seats and there is a 50/50 chance that Obama will not seek a 2nd term….Hilary wins easily in 2012….
lewinski comes out of retirement to service the mortgagees?
Clubber Lang: My prediction?
Interviewer: Yes, your prediction.
[Clubber looks into camera]
Clubber Lang: Pain!
But mere gradual, grinding pain. More people in trouble financially but no riots or anything like that. In 2005, I was so sure that we’d be all mad maxing it already. I’m glad that we aren’t and no longer see it happening. I thought that the EU would have imploded by now. Now it seems that even if/when Spain goes tango uniform, it won’t matter. It’s a race to the bottom and the bottom is still a long way away.
There will be some good and some not so good next year. I’ll try to stay focussed on the former. Baby boy on the way, heart stent still open, silver bars, ammo, blood thinners and food tucked away just in case, a great and beautiful partner, my bicycle, a job, my worm bin and small garden, a ton of good friends and my brother only an hour away.
Happy New Year!
MrBubble
Congratulations on your baby (and all the other things, as well), MrBubble!
Happy New Year!
Gotta go with surfitall as well as oxide.
Same song, different verse.
Precious metals and necessary commodities will continue to rise until debt/gdp ratio, real unemployment, and “QE” (Fed balance sheet expansion / money printing) start declining.
Well, the prediction was some time ago that commercial real estate would be the next shoe, not just here on the HBB but also on Wall Street, where $billions were raised to pick up assets at fire sale prices. Instead, you got a virtual elimination of commercial real estate sales due to “extend and pretend.”
Now, the obvious prediction is a meltdown in state and local government, with everyone paying more and getting less, the wages and benefits cut for future public employees (but not the early retired), massive social conflict (there are allegations that the failed blizzard cleanup in New York last weekend was due to a wildcat slowdown), etc. Can it be avoided? Only by extending and pretending — going deeper into debt, not making absolutely necessary pension contributions, etc.
The lesson I have learned is that things can go on for YEARS longer than they should have, years longer than I would have thought they could have. Such is the power of vested interests managing mass delusion. It was true of the housing bubble, and it has been true in NYC, where the retrenchment is way behind many parts of the country.
The lesson I have learned is that things can go on for YEARS longer than they should have, years longer than I would have thought they could have.
Me too. Therefore my only prediction is that we’re likely to see more of the same despite that being unsustainable.
The fact that so many of us “die-hard bears” have finally capitulated regarding the timing of things makes me think that 2011 might be more “colorful” than we’re thinking.
Every year, since Ben started this blog, we though the next year would be the one when the SHTF. Other than a brief downturn in 2H 2008 and 1H 2009, everything has been much more calm than any of us had thought possible.
Now, for our 2011 predictions, we’re seeing more predictions for “basically nothing” (including mine, above, concurring with oxide and CarrieAnn). It’s almost as though we’ve all capitulated. IMHO, the S will HTF when nobody is expecting it. Nobody seems to be expecting it now. Let’s see what happens…
Amen to that. I have now been bubble-sitting for seven years. There is no end in sight. I did not forsee that we would give everything we had as a people and a nation to prop up housing prices.
My 2011 predictions are that this country becomes even more consumed by its increasingly violent, mindless, and tawdry entertainments; that Ireland defaults; that we see some test case municipal bankruptcies with attempts to shed labor contracts and pension obligations; that advertising intrudes into previously non-commercial areas of our lives; and that no significant financial fraud or torture prosecutions are initiated, because that’s how we roll now.
Happy New Year to all. I haven’t posted much since the blog went on semi-hiatus, but this is my sixth year.
My predictions…
Whereas Somebody Stole The America that I thought I used to know, and it sure WASN’T me, I therefore haven’t a clue what’s gonna happen tomorrow…which is not usual.
I am going to go against the grain.
Economy wise… I think we will see more good signs. Port activity, namely exports, have increased in LA and Long Beach. In coming cargo is up too, and I understand the ports are nearing/past their previous highs for tonnage. This is a good sign for consumers and jobs in the manufacturing sector.
Government… Because folks are not buying homes in great numbers, and when they do, that they are at lower prices and lower morgage commitments… and household income is not changed significantly (relative to the lower morgage rates), I think lots of people are increasing their disposable income… and as such, sales tax revenue for cities and counties will be better than past indicators.. perhaps enough to fully mitigate the drop in property tax revenue. California is on my mind.
Jobs… unemployment rates will improve. Retail and manufacturing will do best. But, this time next year, the general perception will be that things still need improving. Unemployment in the 8.0%-9.0% range.
House prices… more and more folks are sitting on the sidelines.. convinced that prices will remain flat and quite possibly drop. This will perpetuate that trend, regardless if there is progress concerning jobs and the economy. The double dip occurs and continues through the year. Prices in many markets, such as Los Angeles and San Diego will decrease 5% to 10% range. And, the downward trend will continue this time next year… some flatness to trend in Summer, but continued downward trend in the Fall. San Francisco will be flat, burbs in eastern Contra Costa, Alameda, etc, will also fall in the 5%-10% range.
Myself… I am lucky to have a wife on the same page as me… no urgency to buy in this market due to a high risk in loosing more money in a sinking home market vs. throwing money away for rent. We’re looking at homes that are currently in the $500-$650k range but if prices drop 10%… we would be looking at possibly loosing up $50k-$65k in value in a years time. Our annual rent is $30k ($2.5k/mo), so, it really pays to rent right now!
No doubt lower prices helps the disposable income of buyers. This will, however, be offset by the public sector problems. Higher taxes. Private schools, and personal bodyguards required etc.
Big affordable housing may be the one problem we don’t have. Unfortunately, in NYC we have an affordable housing problem.
As for jobs, if banks go back to doing actual banking they’ll have to hire a lot of people. And if the dollar collapses and imported energy comes available, they’ll be a lot of demand for pedicab and peditruck drivers making minimum wage.
OK. I’ll bite although most posters are late to the game and have no skin in the game. In Cal. there are NO JOBS!!!! Gov. Jerry Brown (anyone with a memory should shudder at that pronouncement) has said “OOPS”!!! our deficit is actually 28 billion dollars for 2011. Please tell me how activity in San Pedro shipping crates creates jobs and what manufacturing jobs are coming back. Brown said he would bring green auto manufacturing jobs back to California (were they ever here???). California is factually bankrupt.
The feds will have to implement a receivership/bankruptcy alternative for states. None exists now. Chapter 9 is for municipalities/not states. ALL major banks that are involved with mortgages WILL be taken over by the Govt. as the “robo signors” fraud exposes them to bond holders who hold worthless securities. Once the lawyers sober up you will see class action lawsuits that sink these institutions.
Gas prices are the highest they have been EVER at this time of year. This will cause the price of all goods to go up as we work towards the Memorial Day Happy-Day top forr gas prices.
I could write for 1000 pages but housing should be the least of your worries. Food, guns, employment and Govt. are your biggest concerns. . .
“California is factually bankrupt.”
You are making me wish that I had voted for Meg Whitman, as we really need a Republican governor to fix this mess.
Oops…
“You are making me wish that I had voted for Meg Whitman, as we really need a Republican governor to fix this mess.”
PB, we all know that it doesn’t really matter who is driving the state bus. The sharp hairpin is right ahead and we lost brake pressure around 2008.
As California goes, so goes the nation (unfortunately).
Still, I am happy she did not make it into the governor’s office, as the thought of her working behind the scenes to permanently attach Wall Street’s great vampire squid’s beak to California would have bothered me.
I felt the same way about Meg. Good riddance.
I ended up voting 3rd party across the board knowing full well it wouldn’t make a difference.
“Once the lawyers sober up you will see class action lawsuits that sink these institutions.”
From your mouth to God’s ear…
-$4/gallon gas in May, 20% increases in taxes and healthcare expenditures will kill off the so-called “recovery”, at least on Main Street.
-This news will get us to Dow: 15,000.
-Washington will hang “Mission Accomplished” banners all over Wall Street and the Beltway.
-A new video game called “Grand Theft Auto: Wall Street” will be released…….the player will be challenged to gather up guns, pitchforks, torches, Ryder trucks, ammonium nitrate and diesel fuel, and drive to NYC and the Connecticut Gold Coast, before the banks can kill all his purchasing power, and ends up in a cardboard box under a bridge.
-The wretched refuse will start searching for an alternative currency, something that is easily transportable, inherently useful, cannot be duplicated/copied cheaply (by either the Chinese or the government), accepted widely, and does not deteriorate/spoil over time.
My recommendations:
Twinkies, SPAM, 1970-85 Full size pickup trucks, .45, 7.62, 9mm and 5.56mm ammunition, 1970-96 full size GM cars, 1970-76 Chrysler “A” bodies (Dodge Dart/Plymouth Duster) “Fox”-body Mustangs.
“the player will be challenged to gather up guns, etc, before the banks can kill all his purchasing power, and ends up in a cardboard box under a bridge.”
Now THAT would be cool.
Computer and video games, btw, are an excellent use of money. I bought a $50 computer game back in 2000 and I’m STILL playing it.
I’d guess that we might see $4 per gallon gas, too. It is inching towards $3.50 in certain areas right now, and when demand is low. It is obviously due to speculation, and a weak dollar, but I don’t see anything to curb either in the short term.
We currently pay $1.04/litre which is about $3.94/gallon. And this, in an oil producing province. 24.2 cents of that $1.04 is tax, which is the second lowest tax rate in Canada, after the Yukon.
Highest-paid UC execs demand millions in benefits
Nanette Asimov, Chronicle Staff Writer
Read more: http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2010/12/28/MNDC1GUSCT.DTL&ao=all#ixzz19jvf10ux
(12-29) 11:23 PST — Three dozen of the University of California’s highest-paid executives are threatening to sue unless UC agrees to spend tens of millions of dollars to dramatically increase retirement benefits for employees earning more than $245,000.
“We believe it is the University’s legal, moral and ethical obligation” to increase the benefits, the executives wrote the Board of Regents in a Dec. 9 letter and position paper obtained by The Chronicle.
“Failure to do so will likely result in a costly and unsuccessful legal confrontation,” they wrote, using capital letters to emphasize that they were writing “URGENTLY.”
Their demand comes as UC is trying to eliminate a vast, $21.6 billion unfunded pension obligation by reducing benefits for future employees, raising the retirement age, requiring employees to pay more into UC’s pension fund and boosting tuition.
The fatter executive retirement benefits the employees are seeking would add $5.5 million a year to the pension liability, UC has estimated, plus $51 million more to make the changes retroactive to 2007, as the executives are demanding.
The executives fashioned their demand as a direct challenge to UC President Mark Yudof, who opposes the increase.
“Forcing resolution in the courts will put 200 of the University’s most senior, most visible current and former executives and faculty leaders in public contention with the President and the Board,” they wrote.
Three dozen sign on
Without naming Yudof, the executives claim that denying their benefit increase would breach UC’s code of ethics, place Yudof in a conflict of interest and jeopardize the system’s ability to recruit top employees.
The 36 executives who signed the letter include Mark Laret, chief executive officer of UCSF Medical Center; Christopher Edley Jr., dean of the UC Berkeley law school; and Marie Berggren, chief investment officer for the UC system.
They want UC to calculate retirement benefits as a percentage of their entire salaries, instead of the federally instituted limit of $245,000. The difference would be significant for the more than 200 UC employees who currently earn more than $245,000.
Under UC’s formula, which calculates retirement benefits on only the first $245,000 of pay, an employee earning $400,000 a year who retires after 30 years would get a $183,750 annual pension.
Lift the cap, and the pension rises to $300,000.
1999 promise cited
The executives say the higher pensions are overdue because the regents agreed in 1999 to grant them once the Internal Revenue Service allowed them to lift the $245,000 cap, a courtesy often granted to tax-exempt institutions like UC. The IRS approved the waiver in 2007.
Yudof wants the regents to rescind their original approval of the higher pensions, but withdrew his recommendation after receiving the letter.
He did so to allow “time for further review by the regents,” his spokesman said.
The executives either did not respond to requests for comment or declined to be interviewed.
However, their letter leaves little doubt about their views.
“Employees made career decisions in good faith, based on the expectation that the regents’ policy would be implemented,” they wrote.
The letter claims that failing to implement the pension policy already approved by the regents not only violates UC’s code of ethics, which calls it “unacceptable” for employees to disregard policies they don’t agree with, but also presents a conflict of interest: Yudof, as a beneficiary of the retirement plan, should not influence retirement policy.
Financial irregularities
The roots of the pension dispute go back to 1999, five years after the IRS limited how much compensation could be included in retirement package calculations. But even after the IRS granted UC’s waiver in 2007, nothing changed.
University executives were having troubles of their own that year.
President Robert Dynes resigned in 2007 after it was discovered that UC was awarding secret bonuses, perks and extra pay to executives. State auditors also found that UC’s compensation practices were riddled with errors and policy violations.
UC officials also had become aware of another big problem: UC’s pension obligations were about to outstrip its ability to pay retirees. Neither UC nor its employees had paid into the fund since 1990.
It took until this year for UC to act. In September, a retirement task force offered Yudof several options for closing the $21.6 billion gap - and one to widen it: increasing executive pensions.
Dissenting members of the task force said it would be “unseemly” to expand executive pensions. Tuition had just been increased by 32 percent this fall, and the regents were poised to raise it another 8 percent for fall 2011. They also voted to shift more money into the retirement fund from employees’ pockets, as low-wage workers worried about retiring into poverty.
“I think it’s pretty outrageous that this group of highly compensated administrators of a public university are challenging the president and the chair of the Board of Regents,” said Daniel Simmons, chairman of UC’s Academic Senate and a law professor at UC Davis.
“What outrages me the most is that these 36 people are blind to the fact that this is a public entity in dire straits,” said Simmons, who also served on the retirement task force and opposed the higher pensions.
If UC promised people a higher pension in writing, they should show the contract, Simmons said. “They may have a legitimate claim.”
Angry reaction
Anger was a common reaction to the letter.
“This is outrageous, while all other UC employees have been forced to take a cut in their total compensation packages,” said Bob Meister, a social science professor at UC Santa Cruz who studies UC compensation issues.
Todd Oppenheimer, 1981 graduate from UC Berkeley, said that if UC agreed to the higher pensions, it should give them.
“It’s excessive and sounds greedy to me,” he said. “But, unfortunately, a deal is a deal.”
Which is why the executives say they are prepared to question Yudof, former UC presidents Dynes and Richard Atkinson, and others under oath as part of the threatened lawsuit.
Or UC could give in and grant the higher pensions. Any other decision would be “demoralizing” for executives, they wrote.
Three dozen who signed the letter
These are the 36 highly compensated UC executives threatening a lawsuit unless the cash-strapped University of California increases their retirement benefits:
UC system’s central offices
Satish Ananthaswamy, CFA senior portfolio manager, Office of the Chief Information Officer
Marie Berggren, chief investment officer
William Coaker Jr., senior managing director of equity investments, Office of the Treasurer
Lynda Choi, managing director, absolute return, regents’ Office of the Treasurer
Linda Fried, senior portfolio manager
Gloria Gil, managing director of real assets, Office of the Treasurer
Jesse Phillips, senior managing director, investment risk management, regents’ Office of the Treasurer
Tim Recker, CFA managing director of private equity, regents’ Office of the Treasurer
Dr. Jack Stobo, senior vice president, health services and affairs
Randolph Wedding, senior managing director, fixed income, Office of the Treasurer
UCSF
Dr. Sam Hawgood, vice chancellor and dean, School of Medicine
Ken Jones, chief operating officer, medical center
Mark Laret, CEO, medical center
Larry Lotenero chief information officer, medical center
John Plotts, senior vice chancellor
UC Berkeley
Christopher Edley Jr., dean, School of Law
Richard Lyons, dean, Haas School of Business
UC Davis
Steven Currall, dean, Graduate School of Management
William McGowan, CFO, health system
Dr. Claire Pomeroy, CEO health system, vice chancellor/dean, School of Medicine
Ann Madden Rice, CEO Medical Center
UCLA
Roger Farmer, chair, Department of Economics
Dr. David Feinberg, CEO of the hospital system; associate vice chancellor
Franklin Gilliam Jr. dean, school of Public Affairs
Dr. Gerald Levey, dean emeritus
Virginia McFerran, chief information officer of the health system
Judy Olian, dean and John E. Anderson chair, Anderson School of Management
Amir Dan Rubin, chief operating officer of the hospital system
Dr. J. Thomas Rosenthal, chief medical officer of the hospital system; associate vice chancellor
Paul Staton, chief financial officer of the hospital system
UC San Diego
Dr. David Brenner, vice chancellor for health sciences; dean of the School of Medicine
Tom Jackiewicz, CEO, associate vice chancellor of the health system
Gary Matthews, vice chancellor, resource management & planning
Dr. Thomas McAfee, dean for clinical affairs
Robert Sullivan, dean, Rady School of Management
UC Irvine
Terry Belmont, CEO, Medical Center
Read more: http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2010/12/28/MNDC1GUSCT.DTL&ao=all#ixzz19jvWkX8y
“Failure to do so will likely result in a costly and unsuccessful legal confrontation,”
Is it fairly typical for top public university officials to use a threat of legal action to squeeze blood out of a dying pension system?
(Sorry for the triple post, but this one seemed worth repeating a few times.)
Is it odd that so many of these “valuable” employees are involved in finance (the other group being in medicine)? It’s like a mirror image of the rest of our U.S. economy — where the financial “wizards” and healthcare execs threaten everyone below them so they can “get more of what they deserve.”
I wish every single one of these human skidmarks could be fired and replaced by someone appreciative of the opportunity they’ve been given, bereft of the greed and entitlement mentality so pervasive in the current crop.
Highest-paid UC execs demand millions in benefits
Nanette Asimov, Chronicle Staff Writer
12-29) 11:23 PST — Three dozen of the University of California’s highest-paid executives are threatening to sue unless UC agrees to spend tens of millions of dollars to dramatically increase retirement benefits for employees earning more than $245,000.
“We believe it is the University’s legal, moral and ethical obligation” to increase the benefits, the executives wrote the Board of Regents in a Dec. 9 letter and position paper obtained by The Chronicle.
“Failure to do so will likely result in a costly and unsuccessful legal confrontation,” they wrote, using capital letters to emphasize that they were writing “URGENTLY.”
Their demand comes as UC is trying to eliminate a vast, $21.6 billion unfunded pension obligation by reducing benefits for future employees, raising the retirement age, requiring employees to pay more into UC’s pension fund and boosting tuition.
The fatter executive retirement benefits the employees are seeking would add $5.5 million a year to the pension liability, UC has estimated, plus $51 million more to make the changes retroactive to 2007, as the executives are demanding.
The executives fashioned their demand as a direct challenge to UC President Mark Yudof, who opposes the increase.
“Forcing resolution in the courts will put 200 of the University’s most senior, most visible current and former executives and faculty leaders in public contention with the President and the Board,” they wrote.
Three dozen sign on
Without naming Yudof, the executives claim that denying their benefit increase would breach UC’s code of ethics, place Yudof in a conflict of interest and jeopardize the system’s ability to recruit top employees.
The 36 executives who signed the letter include Mark Laret, chief executive officer of UCSF Medical Center; Christopher Edley Jr., dean of the UC Berkeley law school; and Marie Berggren, chief investment officer for the UC system.
They want UC to calculate retirement benefits as a percentage of their entire salaries, instead of the federally instituted limit of $245,000. The difference would be significant for the more than 200 UC employees who currently earn more than $245,000.
Under UC’s formula, which calculates retirement benefits on only the first $245,000 of pay, an employee earning $400,000 a year who retires after 30 years would get a $183,750 annual pension.
Lift the cap, and the pension rises to $300,000.
1999 promise cited
The executives say the higher pensions are overdue because the regents agreed in 1999 to grant them once the Internal Revenue Service allowed them to lift the $245,000 cap, a courtesy often granted to tax-exempt institutions like UC. The IRS approved the waiver in 2007.
Yudof wants the regents to rescind their original approval of the higher pensions, but withdrew his recommendation after receiving the letter.
He did so to allow “time for further review by the regents,” his spokesman said.
The executives either did not respond to requests for comment or declined to be interviewed.
However, their letter leaves little doubt about their views.
“Employees made career decisions in good faith, based on the expectation that the regents’ policy would be implemented,” they wrote.
The letter claims that failing to implement the pension policy already approved by the regents not only violates UC’s code of ethics, which calls it “unacceptable” for employees to disregard policies they don’t agree with, but also presents a conflict of interest: Yudof, as a beneficiary of the retirement plan, should not influence retirement policy.
Financial irregularities
The roots of the pension dispute go back to 1999, five years after the IRS limited how much compensation could be included in retirement package calculations. But even after the IRS granted UC’s waiver in 2007, nothing changed.
University executives were having troubles of their own that year.
President Robert Dynes resigned in 2007 after it was discovered that UC was awarding secret bonuses, perks and extra pay to executives. State auditors also found that UC’s compensation practices were riddled with errors and policy violations.
UC officials also had become aware of another big problem: UC’s pension obligations were about to outstrip its ability to pay retirees. Neither UC nor its employees had paid into the fund since 1990.
It took until this year for UC to act. In September, a retirement task force offered Yudof several options for closing the $21.6 billion gap - and one to widen it: increasing executive pensions.
Dissenting members of the task force said it would be “unseemly” to expand executive pensions. Tuition had just been increased by 32 percent this fall, and the regents were poised to raise it another 8 percent for fall 2011. They also voted to shift more money into the retirement fund from employees’ pockets, as low-wage workers worried about retiring into poverty.
“I think it’s pretty outrageous that this group of highly compensated administrators of a public university are challenging the president and the chair of the Board of Regents,” said Daniel Simmons, chairman of UC’s Academic Senate and a law professor at UC Davis.
“What outrages me the most is that these 36 people are blind to the fact that this is a public entity in dire straits,” said Simmons, who also served on the retirement task force and opposed the higher pensions.
If UC promised people a higher pension in writing, they should show the contract, Simmons said. “They may have a legitimate claim.”
Angry reaction
Anger was a common reaction to the letter.
“This is outrageous, while all other UC employees have been forced to take a cut in their total compensation packages,” said Bob Meister, a social science professor at UC Santa Cruz who studies UC compensation issues.
Todd Oppenheimer, 1981 graduate from UC Berkeley, said that if UC agreed to the higher pensions, it should give them.
“It’s excessive and sounds greedy to me,” he said. “But, unfortunately, a deal is a deal.”
Which is why the executives say they are prepared to question Yudof, former UC presidents Dynes and Richard Atkinson, and others under oath as part of the threatened lawsuit.
Or UC could give in and grant the higher pensions. Any other decision would be “demoralizing” for executives, they wrote.
Three dozen who signed the letter
These are the 36 highly compensated UC executives threatening a lawsuit unless the cash-strapped University of California increases their retirement benefits:
UC system’s central offices
Satish Ananthaswamy, CFA senior portfolio manager, Office of the Chief Information Officer
Marie Berggren, chief investment officer
William Coaker Jr., senior managing director of equity investments, Office of the Treasurer
Lynda Choi, managing director, absolute return, regents’ Office of the Treasurer
Linda Fried, senior portfolio manager
Gloria Gil, managing director of real assets, Office of the Treasurer
Jesse Phillips, senior managing director, investment risk management, regents’ Office of the Treasurer
Tim Recker, CFA managing director of private equity, regents’ Office of the Treasurer
Dr. Jack Stobo, senior vice president, health services and affairs
Randolph Wedding, senior managing director, fixed income, Office of the Treasurer
UCSF
Dr. Sam Hawgood, vice chancellor and dean, School of Medicine
Ken Jones, chief operating officer, medical center
Mark Laret, CEO, medical center
Larry Lotenero chief information officer, medical center
John Plotts, senior vice chancellor
UC Berkeley
Christopher Edley Jr., dean, School of Law
Richard Lyons, dean, Haas School of Business
UC Davis
Steven Currall, dean, Graduate School of Management
William McGowan, CFO, health system
Dr. Claire Pomeroy, CEO health system, vice chancellor/dean, School of Medicine
Ann Madden Rice, CEO Medical Center
UCLA
Roger Farmer, chair, Department of Economics
Dr. David Feinberg, CEO of the hospital system; associate vice chancellor
Franklin Gilliam Jr. dean, school of Public Affairs
Dr. Gerald Levey, dean emeritus
Virginia McFerran, chief information officer of the health system
Judy Olian, dean and John E. Anderson chair, Anderson School of Management
Amir Dan Rubin, chief operating officer of the hospital system
Dr. J. Thomas Rosenthal, chief medical officer of the hospital system; associate vice chancellor
Paul Staton, chief financial officer of the hospital system
UC San Diego
Dr. David Brenner, vice chancellor for health sciences; dean of the School of Medicine
Tom Jackiewicz, CEO, associate vice chancellor of the health system
Gary Matthews, vice chancellor, resource management & planning
Dr. Thomas McAfee, dean for clinical affairs
Robert Sullivan, dean, Rady School of Management
UC Irvine
Terry Belmont, CEO, Medical Center
“Failure to do so will likely result in a costly and unsuccessful legal confrontation,”
Is it fairly typical for top public university officials to use a threat of legal action to squeeze blood out of a dying pension system?
boys, we can’t do it. Free trade demands the lowest salaries be paid. I would tell those f*ckwads to take a hike and get a new job someplace else if they feel they are being underpaid. Say, I hear the military is hiring.
“We believe it is the University’s legal, moral and ethical obligation…”
These suffering folks are about to journey forth on yet another “ed-a-kay-shun” extension program… ;-/
Oops, sorry for the double post.
(Though the outrageousness is soooo outrageous one may have to read it twice to accept anyone could be that idiotic).
IAT
“Failure to do so will likely result in a costly and unsuccessful legal confrontation,”
Is it fairly typical for top public university officials to use a threat of legal action to squeeze blood out of a dying pension system?
Ok, I’ll play…
Gold will continue to increase to around $2,000 / oz and we will see Silver over $45
We have just completed the first dead cat bounce on the real estate side, and prices will continue to fall at an accelerating rate. Around the middle of the year, alarmed by the new wave of walk aways, the Federal Govt will again attempt to intervene, putting a floor on prices for the balance of the year. It is highly likely FB’s will be invited to “rent” rather than foreclose.
Unemployment will continue to increase and wages will generally fall. The business climate will continue to get progressively worse, and major credit card issuers will start to exit the credit card market, causing further erosion in Americans buying power.
We will see record personal and business bankruptcy filings, possibly on the order of 3.5 million or there abouts.
Apple will hit a snag and has most likely already peaked. Energy costs will continue to skyrocket as will medical insurance costs, probably 20% each.
Oh yeah, almost forgot…
Cheer up it could possibly be worse and
Happy new year all!!!
Happy New Year to you all!
My predictions - inflation in commodities and food will continue to creep up. Housing in NYC will remain unaffordable, or finance will crash and burn (in which case no one can buy anyway). I will probably get fed up by renting and buy something next year. Salut!
I predict the new class of Republican congressmen will try to improve on the efficacy of Dodd-Frank financial reform legislation. And I wish them all the success in the world with their efforts!
Wall Street reform that flouts the law
By C. Boyden Gray
Friday, December 31, 2010
…
The Dodd-Frank legislation passed in the summer is supposed to remedy weaknesses in the U.S. financial system - ensuring transparency and accountability, and removing risks that banks are “too big to fail.” Yet the bill created a structure of almost unlimited, unreviewable and sometimes secret bureaucratic discretion, with no constraints on concentration - a breakdown of the separation of powers, which were created to guard against the exercise of arbitrary authority.
…
They will “improve it” by repealing it, and give the Banksters a free pass to finish looting what little is left of Main Street USA.
Because, as we all know, any regulation is bad, and the free market is best at picking winners and losers.
Prediction:
The new class of Congressmen gives Bernie Sander’s Too-big-to-fail, too-big-to-exist bill another look in 2011.
If It’s Too Big to Fail, Is It Too Big to Exist?
Daniel Acker/Bloomberg News
By ERIC DASH
Published: June 20, 2009
Nearly a century ago, the jurist Louis Brandeis railed against what he called the “curse of bigness.” He warned that banks, railroads and steel companies had grown so huge that they were lording it over the nation’s economic and political life.
“Size, we are told, is not a crime,” Brandeis wrote. “But size may, at least, become noxious by reason of the means through which it is attained or the uses to which it is put.”
Today, amid the wreckage of the gravest financial crisis since the Great Depression, bigness is one of our biggest problems. Major banks, the Detroit automakers, the financial basket case that is the American International Group — the only reason these giant, sclerotic companies are still standing is that they have been deemed “too big to fail.”
Or, more precisely, too big to be allowed to fail. Policy makers fear companies like these are so enormous and so intertwined in the fabric of the economy that their collapse would be catastrophic. Hence, all those multibillion-dollar, taxpayer-financed bailouts.
In its overhaul of financial regulation last week, the Obama administration proposed several measures to try to contain the biggest of America’s big banks. But it stopped far short of calling for the dismantling of those institutions.
…
Went by my accountant the other day (who has a financial services business on the side)
Was all smiles about all the money everyone was making on Wall Street. Even mentioned the “recovery” of AIG, currently pushing $60/share.
Ron paul will fall prey to corrupt politicians.
Chris Dodd gets a job lobbying for Wall Street and/or a REIC trade organization. Larry Summers proclaims his own divinity. Levi Johnston stars in a porn film, and a corporation runs for public office.
Nice
My only correction
“Policy makers fear companies like these are so enormous and so intertwined in the fabric of the economy that their collapse would be catastrophic. Hence, all those multibillion-dollar, taxpayer-financed bailouts”
Actually this is just the excuse, the multibillion dollar taxpayer financed bailouts have everything to do with money. As the middle class weakens there is less money to support the middle class priorities, thus politicians more and more compete for the gravey from big business. They angle for campaign contributions, jobs for their relatives, a later gig as a lobbiest, inside stock information, a board seat at say Citibank you name it.
When there are a large number of small businesses and a strong middle class politics has competition and that prevents a lot of bad legislation and graft, but what we have now is a massive concentration of wealth working together via PAC’s, lobbiests, and think tanks to concentrate wealth and power.
Spot on, measton.
Housing in the US is the biggest scam ever. First they used to make real houses out of stone. These houses were built to last and didnt require insurance. Now days they build houses out of cardboard and a pretty strong wind or snowfall can render these dwellings structurally defective.
A house that should not cost more than $4000 is sold out at a boom price of over $400000 and the buyer promises to pay the lender this amount with INTEREST that is aproximately three times the principal.
So the buyer agrees to pay $700000 over a period of 30 years for a house that is not worth more than $4000 at the time of purchase and will most likely be rendered unlivable at the end of the 30 year period (hence zero value assuming the house is still standing on its feet)
Dumb, stupid and slave America will line up before dawn, before the house is even built, to buy a poor quality product at super inflated prices with full insurance coverage.
How much more dumber can you get!
You and I look through the very same lens.
Well stated.
Housing in the US is the biggest scam ever
Clue # 1:
x48 “escrow” pages that require x8 full signatures & 26 initials,…(no worries, they’ll provide you the pen.)
In Soviet Russia we didn’t even have predictions.
But my understanding (gleaned from conversations with Russian immigrants to the U.S. I have known over the years) is that reinterpreting the real information behind the news stories in Pravda was common practice. More and more, I feel the need to do the same with articles I read in the U.S. MSM.
Me too. This is why one of my goals in life it to get a general understanding of what is what, what makes what, who benifits from what, etc.
One doesn’t get this general understanding from one point of view, from one source; One has to broaden out and pluck information from many sources and then churn the info to get a glimpse of what is really going on. Even then much of the true haps will remain hidden from him.
“Over there, it was easy to figure out truthful news from lies…. here it is impossible.” -A conversation I had in last year with two russians who came here in 1990
Potemkin village news agencies. Common now
is the US.
The word “Pravda” is Russian for truth. But that’s not the whole story.
Just like the Eskimos have several names for snow, Russians have two words that roughly correspond to “truth”. One means “literal truth”. The other is pravda, which means “it darned well ought to be true”. In other words, pravda loosely translated means “what the government wishes were true”.
In Soviet Russia we didn’t even have predictions.
I understand you completely, my own experience was standing in line with a small child at Disneyland.
I was being silly.
My prediction is that there will be another quantitative easing and gold will go higher.
My wish is for gold to peak and crash. Then those who speculated will lose.
I also predict the the Obamas will go on several vacations.
I see that a lot of predictions a year ago did not come true.
So I am starting to think the prolonging of the stimulus will continue. The inevitable will be put off.
I think the S&P 500 index will gain between 4% and 12% this year. I think precious metals will continue to edge up to $1600 for gold this year. Platinum will be $2000 or break away to $3200. Silver will be $40 at some point this year.
T-bill yields will edge upward to 0.45 for 52-week bills.
The Afghan war will continue. Terror plots will continue.
House prices will continue to slide.
Well, let’s assume the economic policy makers were to succeed. What would success look like?
The debts would be made affordable through a devaluation of the dollar, rather than the insolvency of the financial system, but the dollar would not collapse.
The real value of housing would gradually over five years fall via inflation, which would be elevated (3 to 6 percent) but not get out of hand. Wages would trail, but would still rise in nominal dollars, which would make some people think they were getting richer.
Jobs, albeit jobs supporting a lower standard of living, would be created from exports and import substitution. Developing countries would keep developing without selling primarily to the U.S., making those exports possible.
Could it happen? That would really be threading the needle through a flock of Black Swans.
Wont happen because too many folks want to stick their entitlements to us. Of course in the end while they could have had at least something, all will settle for nothing at all!
I can only state a forecast based on my perspective so here it is-
1) Fundamentals supporting grossly inflated housing prices continue to deteriorate to non-existent levels. Falling prices will demonstrate this. Localized areas subject to boom related industries excluded.
2) The Housing Crime Syndicate created lie that millions of people (boomers) are loaded with cash and “almost ready to retire” will finally be demolished. The truth that the majority that fit this profile *already* retired 1995-2005 will slowly dawn on the brain-dead public.
3) A newly formed and reconfigured housing finance authority will replace Phoney and Fraudie. In addition, this new authority will take on the task of liquidation of privately and publicly held housing inventory, a’la Resolution Trust Corporation, circa 1990’s.
“The Housing Crime Syndicate created lie that millions of people (boomers) are loaded with cash and “almost ready to retire” will finally be demolished.”
The people I know who could retire (age wise) can’t because of medical problems, have no savings, and retirement pensions are $25K or less and won’t cover expenses.
Yes, many bought into the big lie. Work hard your whole life and then retire to the good life. Of course no one told them about medical costs that go up 20% annually for decades.
Many who retire are eventually wiped out due to medical expenses, and become a financial burden on family or society. An entire life’s worth of savings can be completely consumed in a matter of a few months. $10k per day hospital beds have a way of doing that.
Hospital beds are $10k a day because of insurance and Medicaid programs. Without it they would never have been able to get much over the cost of a nice hotel. Not saying they could not charge whatever the market would support, but with individuals on the hook they would have a lot of empty rooms at current rates. Eliminate insurance and costs will balance out. Same has happened with college costs because of federal loans, and the same is true in the world of house prices, where Federally backed real estate loans allowed costs to rise far above the point they would have been had the government not intervened.
It is simply a matter of having organizations with deep pockets paying the bill and distorting free market economics, and the result of the law of unintended consequences.
“Hospital beds are $10k a day because of insurance and Medicaid programs. Without it they would never have been able to get much over the cost of a nice hotel.”
That’s partially true, but today hospitals are full of expensive equipment you wouldn’t find in any hotel. The design and manufacture of this equipment is subject to heavy FDA rules and regulations, which add to costs.
Also hotels are mostly staffed by low wage, low skilled employees, and not doctors and nurses.
Anyway, I do agree that hospitals do overcharge and are run very inefficiently, with loads of non care givers feeding at the trough. But its also worth remembering that hospitals in the 50’s and 60’s were closer to a hotel room than they are today, which is one reason they cost less.
You are presuming that services cost only what the market will bear. Sadly, there is a material basis to cost. For example, if no one can afford an item whose energy of production cost $10,000, then you have only two options if you want that item available: 1)subsidize the cost of production (so providers can charge less) or 2)subsidize the cost of delivery (again so providers can charge less).
Modern medicine has a high cost of production. I’m not talking about big pharma, I’m talking about all of the research, all of the training costs of medical personnel, all of the diagnostic equipment. One could say, screw modern medicine, let’s just have affordable medicine. One could have that, but then recognize–no more kidney dialysis, no more successful heart attack treatments, no more successful treatments of stroke, forget about cancer treatment.
I totally agree that some medical costs are ridiculous. But some of those ridiculous costs reflect an effort to spread the cost of truly costly services beyond the set of people who use those services (e.g., the $1,000 hospital-administered aspirin that is subsidizing maintenance of the mammogram machine).
Economists have told is there is no such thing as a free lunch. But it was chemists that taught us there is no such thing as free energy. We would do well to remember the lesson.
IAT
Smells like an opportunity for hotel chains…
Why not build a hotel right across the street from hospital? Patient has an elective choice: stay in the hospital at $10K a night, or risk adverse effects by staying at the hotel.
Going to the hotel means the patient can’t sue the hospital or the hotel.
The hotel can hire a nurse or two.
Then the hospital would just shift the costs, such that:
Before you build your hotel
night in hospital $10,000
your procedure $10,000
to:
After you build your hotel
night in hospital $1,000
your procedure $20,000
They win either way.
But, go ahead and build.
IAT
You are missing the point about what I said about insurance. OF COURSE the hospital is a free market business and is entitled to charge ANYTHING they desire. Now that is out of the way, I suspect if people had to actually pay their own bills, some would go for the Rolls Royce treatment option, but most care providers would adjust to the reality that people can only afford what people can afford, and that is not a $1000 aspirin.
I agree without government and insurance our medical care would be a lot different, but it would also be sustainable and realistic!
My Nephew who was unemployed finally got a job but he tells me it might
only last a year at best .My 3 Nephews were driving me crazy during the Holidays . One finally got a job ,the other is doing good and always does good and the youngest is bouncing off the walls . These three kids lost both their mother and father at young ages and the youngest one keeps
using that as a excuse for not performing while the two other Nephews don’t.
I want the World that these kids face to give them opportunity .Ok ,the youngest wants everything handed to him on a silver platter in spite of him being a sweet kid
But anyway ,I just want America to become the land of opportunity again ,especially for the lower classes .In my view everything is screwed up right now and the distribution of resources and wages aren’t making sense .
The PR machine keeps saying ,”Let Industry and Corporations solve all the
problems and give them every favorable break to let the market forces work and that will create jobs.” This idea would only be true if outsourcing and Globalism wasn’t so operative as it has become .
My prediction is that the unemployment numbers will remain high and
no progress will be made in 2011 toward job creation in the USA .
Houses will continue to go down in value and interest rates will rise by a small amount .
Corporate America and Wall Street will continue to blame Unions and
pensions for their long standing attempts to un-level the playing field by
using a Global work force . Corporations will continue to gain the advantage on work forces and wage increases are out of the question in spite of inflation creeping in slow but picking up steam more in 2012.
Like a number of posters have said ,more of the same ,but more opportunity for affordable housing coming ,
I really don’t think that the Health Care Bill can function in it’s current form and changes will be made to that and I see more and more people rejecting the health care system in it’s current form because it’s a price fixing monopoly that has gone beyond affordable ,just as housing did .
The Government will continue to rescue Banks ,even if its behind closed doors or by methods that it would be hard to call it a direct Bail Out .
The Politicians will continue to sell out to the highest bidder lobbyists and gas will go up about a dollar during the year of 2011 .
In my view it all about the job base of a Country coupled with decent wages and all else is derived
from that ,including the tax base.
I guess my 33 year old nephew still uses the excuse of losing his brother and his grandmother (my mom) for not working. He had severe ADHD and my sister (his mom) ignored it (”My son could never have any problem!”). So he was grade-inflated all the way through high school. Tried a community college at 18 but got straight Ds.
My nephew is essentially a beneficiary (since his mother is one of my benificiaries). So I’m thinking of spending every night at strip clubs, showering money at the beautiful young women and working until I drop.
I can see why you’ve chosen to move here.
Wiz,
As usual, I couldn’t agree more with your post regarding jobs and our youth, and how the elite keep trying to deflect blame by pointing at working people who try to stand up for workers’ rights and better wages.
It’s always sad to hear about kids who lose a parent at a young age, but to lose both parents is utterly heartbreaking. Your successful nephews are impressive, but I think the difference between them and the younger one might be due to the age difference when their parents died? Or perhaps, the youngest was more attached to his mother or father? Whichever, I wish them all the best. Glad to hear you got to spend your holidays with them, even if they did drive you nuts.
Happy New Year, Wiz!
Happy New Year Ca renter …..hope the World is treating you
gooddddddddddddd.
Those kids just tear my heart out . I try to be a father figure to them
when they feel like coming around or calling and I have shelled out a lot of doe trying to help them but I can’t afford to much more of this
because of the cut backs I got for the last 5 years . It’s the youngest one that I’m the most worried about .I might be old ,but I’m in touch with what is going on with the young people .
They are blessed to have you, Wiz.
I hope you get a reversal of those cutbacks this year. Things do seem to be picking up, at least around here, and pretty soon, they’ll run out of excuses to cut back on employees’ pay and benefits.
IMHO, things are picking up **because housing prices have fallen** in most areas, and people finally have more money to spend on things other than their housing costs. It never ceases to amaze me how people can be convinced that high housing prices are a good thing. High housing costs (high/rising asset prices, in general) are one of the most destructive forces in an economy, IMHO.
As a side note ,I think they will have to reduce Medicare benefits and
seniors will have to pay more toward these costs .In my view the Industry is already rationing the seniors depending on the Insurance Company .
One offbeat prediction ; Some people will have their health improve when they withdraw from the health care system .
Interestingly, the requirement that you have health insurance goes along with the same requirement that you work an extra 10 hours or so a week. This extra stress results in poorer health, thus increasing the cost of providing health care and insurance, resulting in the need for longer work hours …
We have been out of health insurance for over two years now, at a savings of some $30,000 to date. I suspect this money would cover quite a bit of health care, and over 10 years with even moderate interest would be worth some $400,000. With 20% annual increases in insurance costs, more like a million dollars and that is just the next 10 years! WOW!!!
You mean future seniors, don’t you?
Generation Greed isn’t giving up anything, other than its progeny.
Hmmm Half the amounts, but you get the point!
Right GH ,the financial stress of paying for health care costs that takes to much of the family budget actually causes health problems .Financial stress is a big killer . I am especially thinking of families with children that
just have so many other costs that are necessary. The food costs for a
family just keeps getting higher and higher ,especially if you want good food .
Corporations and business in general use to operated on a much smaller profit margins for many of the years that I was out there and wage increase occurred when inflation occurred .CEO salaries were actually modest verses today and I’m sorry but this greed that knows no bounds
just wasn’t operative . The Corporations seem to think that the little
people are to much entitlement demanding but the truth is the Corporations are the entities that are demanding everything and giving less and less and feel they are entitled .
After the fact Corporations don’t want to honor their pensions ,yet they
gained the value of those benefits for years . I’m not saying that some of those benefits were sustainable ,but why ? The entire financial and
Corporations structures changed in favor of Globalism and favorable tax treatments regarding outsourcing and out-manufacturing and crazy trade balances and they are trying to blame the working stiff for this change that F—– the American worker .At the same time Industry wants to charge the highest price possible for crap produced outside our borders and they can’t understand why Americans are having problems even being able to afford the pumped up housing market .
Basically ,the Powers that Be are being influenced by forces that don’t care how well the entire BEEHIVE functions ,but they only care how much of the pie can be funneled to a small % of the population by a stacked deck . This kind of shit has been going on since the dawn of man
and it’s created a lot of misery .
111th Congress Added More Debt Than First 100 Congresses Combined: $10,429 Per Person in U.S.
(CNSNews.com) - The federal government has accumulated more new debt–$3.22 trillion ($3,220,103,625,307.29)—during the tenure of the 111th Congress than it did during the first 100 Congresses combined, according to official debt figures published by the U.S. Treasury.
That equals $10,429.64 in new debt for each and every one of the 308,745,538 people counted in the United States by the 2010 Census.
The total national debt of $13,858,529,371,601.09 (or $13.859 trillion), as recorded by the U.S. Treasury at the close of business on Dec. 22, now equals $44,886.57 for every man, woman and child in the United States.
Not true. The debt existed prior to the current Congress, and indeed it is the failure of those responsible for repaying those debts which caused the debts to be transferred from one group to another. We as individuals would ACTUALLY be out the $10,000 in the form of cash losses, and indeed I know several who lost several hundreds of thousands of dollars after the crash in the form of lost value in 401k’s, so there is always a winner and a loser. In this case, the loss was spread out instead of targeting a few groups and individuals.
I believe we need to start thinking of national debt, not in terms of ONLY that owed by the Federal Govt, but in terms of the total debt held by all individuals, businesses, municipalities, States AND last and indeed least the National debt, which is about 15% of the total. Problems in Europe have demonstrated that problems in any area of debt, even individual debt have national consequences!!! By my understanding then the debt held by Americans in total is some $60 trillion, rather than $12 trillion. It is the $60 trillion number which is the really scary one IMO!
Exactly right, GH.
predictions for 2011
Highly paid bankers, CEO’s and the super rich avoid the spotlight with Class Warfare shifting to public verus private pay and pensions and away from their outrageous behavior that caused much of the housing bubble run-up. A nice diversion which the MSM will go along with.
Double Dip in homes prices
Stock market lower in 2011
Interest rates stay low because of double Dip recession
Inflation in the third world economies as investors chase yeild
My prediction for 2010 is that my bay area house purchased in 2009 with some serious lowballing will be valued at at least 10% less than I paid for it but probably not more than 20%. I think we’ll bottom out at 30% less than we paid for it in 2012-2014. My guess for being back to ‘worth what we paid for it’ would be 2025 with no hyper-inflation. I also hope to have the house paid off by then.
We paid 70.8% of the original listing price (or 30% off of peak or ‘wishing’ price). We owe 72% of the original closing price, which comes out to about 51% of peak pricing.
I say there’s only about a 10% chance we’ll be underwater by the end of 2012, and probably about a 35% chance we’ll be underwater by the end of 2012. Those chances would be higher if we didn’t over-pay the mortgage as often as possible.
end of 2011 for the 10% underwater. Doh!
I always have that problem of being a year out of date for some time after Jan 1.
BTW, I hope you get a great lifestyle advantage in exchange for the risk of buying real estate when further price declines seem likely. We would do it now myself if there were a place we could comfortably afford which offered a major lifestyle advantage. Thanks to the inventory squeeze, there are not all that many attractive choices currently on the market. Apparently, Megabank, Inc would rather watch its shadow inventory hoard crumble into dilapidation than honestly disclose real estate gambling losses on its balance sheet.
Are any of the retired execs of the TBTF Megabanks retirements or pension possibly tied to the current (alleged) performance of current assets?
I’m happy with the house in many, many ways as long as I ignore the price.
Even the ‘howmuchamonth’ bit isn’t too bad thanks to a cash-in refi close to the rates bottom. Having owned and rented multiple times before, I was never going to be sold on the ‘owning as a lifestyle’ but it sure made the wife more comfortable.
We’re Getting Out of These Places:
All of the cities on this list have experienced tens of thousands — and in some cases, hundreds of thousands — of its residents to leave the region for other jobs and other homes in the last decade. While it has been the primary focus of these cities to create new sources of employment for their residents, it may be years before people return, if they do at all.
Unfortunately, the populations of most of the cities on this list continue to decline and the situation could get worse for years. This loss of residents has caused severe drops in the social services that many of these cities can provide. Property and other taxes have fallen so much that the support that residents of other cities take for granted is at risk in the municipalities on this list. There is no longer any guarantee that they can maintain police and fire departments at reasonable levels. Some of these cities cannot continue to manage large neighborhoods that have become almost deserted as residents have left unoccupied homes behind. Home vacancy rates tell a great deal about how much a city’s population has dropped.
24/7 obtained its population data from the U.S. Census Bureau’s Population Division. Housing vacancy came from the Census Bureau’s American Community Survey. This is a list of the seven American cities that have lost the most people in the past decade:
1. New Orleans
Population: 354,850
Population Change 2000-2009: -128,813
Population Percent Change 2000-2009: -26.63%
Home Vacancy: 21.5%
New Orleans is unique in that its presence on this list is not due to industrial decline, but from natural disaster. Hurricane Katrina flooded 80% of the city, caused by some estimates more than $80 billion in damage, and displaced tens of thousands of residents. The period of widespread homelessness, severe crime, and slow recovery has left the city as a shadow of its former self. While people are trickling back into the city, many will likely never return, and the city has lost more than a quarter of its population in just 10 years.
2. Flint, Mich.
Population: 111,475
Population Change 2000-2009: -13,266
Population Percent Change 2000-2009: -10.63%
Home Vacancy: 18%
While most of the cities on this list are here as the result of a general decline in industry, Flint’s woes have come almost entirely from one sector — the auto industry. Flint became a boomtown at the turn of the century as it became a divisional headquarters to the major American auto manufacturers, including Chevrolet, Buick, and General Motors. Between 1910 and 1930, the population had more than quadrupled due to the success of the American car business. Since the American auto industry began its decline in the 1980s, Flint has consistently lost at least 10% of its population each decade. Massive layoffs and plant closings have devastated the city, and unemployment rates remain well into the double digits.
3. Cleveland
Population: 431,369
Population Change 2000-2009: -45,205
Population Percent Change 2000-2009: -9.49%
Home Vacancy: 17.5%
Cleveland, the largest city on our list, was once a thriving manufacturing center, as well as an important point of trade because of its connection to several key routes, particularly Lake Erie. The city was once home to a sizable auto industry. Most of the largest companies that were once based in Cleveland no longer exist. These include Peerless, People’s and Winton. Cleveland also served as headquarters for John D. Rockefeller’s Standard Oil Company, as well as a key import location for coal and iron shipped from the South and Midwest. The decline of industrial American has hit the city particularly hard, and poverty, a default on municipal debt in the ’70s, and pollution have earned the city the nickname “the mistake on the lake.” In 1948, the city had over 910,000 people; it now has less than half of that.
4. Buffalo, N.Y.
Population: 270,240
Population Change 2000-2009: -21,970
Population Percent Change 2000-2009: -7.52%
Home Vacancy: 17.2%
Another victim of the Erie Canal boom and bust, Buffalo was the 13th largest city in the country just before WW II. It is now the 70th. Like Rochester, the city was once a premier mill town due to its location to the canal. Massive electricity generation from Niagara Falls improved Buffalo’s industrial capacity, and the city referred to itself as the “City of Lights” for a time because of its power production. The collapse of the canal and improvements in the energy industry that made Niagara Falls less important led to the mass migration from the city which continues to this day. In the 1970s alone, Buffalo lost more than 100,000 residents, roughly a third of its current population.
5. Dayton, Ohio
Population: 153,843
Population Change 2000-2009: -11,961
Population Percent Change 2000-2009: -7.21%
Home Vacancy: 18.9%
For its size, Dayton, Ohio, was once one of the most productive and creative cities in the U.S. It produced more patents per capita at the turn of the century than any other. The city was home to several former great Fortune 500 companies, including National Cash Register, Mead Paper and Phillips Manufacturing. Through the first half of the 20th century, Dayton had one of the healthiest manufacturing industries. It had more GM autoworkers than any city outside of Michigan during World War II. In the past 50 years, Mead has merged with West Virginia Paper and moved to Richmond, and GM has closed one plant after another in the city.
6. Pittsburgh
Population: 311,647
Population Change 2000-2009: -22,056
Population Percent Change 2000-2009: -6.61%
Home Vacancy: 14.1%
Known as the “Steel City,” Pittsburgh was once the forge for the American industrial engine from the late 1800s through the late 1970s. At its peak, the city was home to more than 1,000 factories, including the mills owned by Pittsburgh-based U.S. Steel, which by itself employed over 340,000 workers during World War II. As the American steel industry collapsed in the 1980s, Pittsburgh suffered severe unemployment problems. In the past few decades, the city changed to a technology-based economy, but the population is still on the decline. Since 1950, Pittsburgh’s population has declined by more than 50%.
7. Rochester, N.Y.
Population: 207,294
Population Change 2000-2009: -12,180
Population Percent Change 2000-2009: -5.55%
Home Vacancy: 15.3%
Rochester was once a booming trade center largely due to its location at the midpoint between Albany and Buffalo on the Erie Canal. At its peak, the city was the major flour processor in the country, and was home to several key corporations including Xerox and Eastman Kodak. Rochester declined as the usefulness of the canal went out with the advent of railroads and its flagship companies began to lose their relevancy in the larger global economy. Rochester has yet to produce an important replacement industry to drive up the population, and even the success in the 1990’s of Xerox has faded. Between 1950 and 2000, Rochester lost 34% of its population.
Besides NO, what do the cities mentioned in this report have in common?
‘Flint became a boomtown’
‘Cleveland was once a thriving…’
‘Another victim of the Erie Canal boom and bust, Buffalo’
‘Dayton, Ohio, was once one of the most productive…’
‘Pittsburgh was once the forge for the American industrial engine’
‘Rochester was once a booming’
‘Some of these cities cannot continue to manage large neighborhoods that have become almost deserted as residents have left unoccupied homes behind. Home vacancy rates tell a great deal’
I could show you towns in Texas that are a shell of the former boom-era populations. Boom begets bust; it may take a while, but it almost always happens. When I was first researching the housing bubble in 2004, what alarmed me were the similarities to the Texas bubble; optimism bordering on hysteria, rampant speculation, overbuilding and of course, absurd price increases which were justified by almost everyone concerned.
I’m not saying all booms are bubbles. But the problems these cities face are a direct result of the absence of the former boom. It’s been a long debated topic; are we better off without booms? Is it more desirable in the long run to have steady, if mundane growth patterns?
Shouldn’t the people in DC and industry take note of these things, instead of constantly injecting money into the economy, hoping something takes off?
There are many ghost towns in the west. Most of them, when abandoned, become places for nostalgic explorers to find.
Idaho City was once the largest city in the Pacific Northwest: larger than Portland or Seattle. The population of metro Idaho City was 20,000 back in the gold rush days circa 1860. It’s astonishing to realize this if you drive through today. It’s a “living” ghost town with a population of around 450.
Of ironic note is the Idaho ghost town of Democrat. It’s a ghost town on the road to Whisky Mountain.
I’d been meaning to tell you about my hiking trip to Idaho this summer. We summited Borah, but God that was hard. We also drove through Stanley, which I’ve often seen named in my local paper as the cold spot for the day in the continental U.S. Passing through a few small eastern Idaho towns, though, it seemed like the only thing thriving was the local Mormon church, and I got the impression that meth is a big problem.
What was interesting from a housing bubble standpoint was Ketchum. What is with all the real estate being sold by Southeby’s? I thought that was for auctioning Van Gogh paintings.
‘all the real estate being sold by Southeby’s’
They got into the RE brokerage biz around the peak, at least here in N AZ. They did so buying out well established existing brokers.
It got down to minus 27 degrees F in Stanley the other night. Nice and warmy-cozy. Stanley got down to minus 55 degrees one night in the early 1980s. But they make up for the cold with spectacular scenery.
Ketchum’s real estate situation fascinates me. It’s way overpriced for such a place. It draws rich people from all over the country: Arnold Schwarzenegger, John Kerry, et al. A bunch of nouveau-nouveau-riche got nailed there this past decade. I drove through town a couple of times last summer. It’s shocking to see the number of RE signs along Hwy. 75 since the built-up area north of Ketchum is only a block or so wide.
http://www.sothebyshomes.com/sunvalley/areas/ketchum-id-real-estate
It would be interesting to see the “days on the market” for a lot of these houses.
Here’s one….640 DOM at Zillow. Nice little $5 million “mountain cottage”.
http://www.zillow.com/homedetails/27-Lake-Creek-Dr-Ketchum-ID-83340/2139298108_zpid/
We passed the Sawtooths, which might be the most appropriately-named mountain range in the United States. Just driving around, it felt very lonely despite the spectacular scenery — I was glad I was with friends.
Is the intention of these Ketchum Southeby’s listings to sell to entertainment moguls and hedge fund jerks who might spend thirty days a year there? And where does Ketchum’s hourly labor live? I visited Hemingway’s grave and wondered what he might say about today’s Sun Valley.
Ketchum’s hourly labor lives south in the town of Hailey. In turn the hourly labor for Hailey lives south in the cheap digs/trailer parks of Bellevue.
Hemingway was so depressed living in Ketchum that he shot himself. One of his daughters killed herself too, so depression seems to run in that family.
Ketchum, one of the founders of my company lives there
Don’t worry about him he can afford it.
In 1600, Potosi, Bolivia had a larger population than Madrid, as Spain exploited the outrageous silver deposits nearby. Now Potosi is one of the poorest cities in one of the poorest countries in the Western Hemisphere.
We have Jerome, AZ. The first capital of AZ, and I am told where a billion dollars of copper was extracted. Now it’s a cheesy tourist stop.
“Now it’s a cheesy tourist stop”
I’ve had some great cheeseburgers as a tourist in Jerome; I can add my firsthand experience to support Ben’s assertion.
New Orleans is America’s Venice: a city built below sea level. Not a good idea. Only the Dutch have the technology and social cohesion to make this work.
For its size, Dayton, Ohio, was once one of the most productive and creative cities in the U.S. It produced more patents per capita at the turn of the century than any other.
Those honors are now held by…..drumroll…..Boise Idaho. I should know: I’m a patent attorney and read the US PTO’s site constantly. Of course, statistics may lie. Many of the patents with assignee Micron may be divisionals and continuations. But even so….
I know a guy in Buffalo. The place is as depressed as the weather is bad. He stays put because of family ties, but I keep encouraging him to move on.
Ben ,maybe we should have big portable houses that move to the next big action place and than the people move on once the bust takes place taking their housing with them . I’m serious . If they made these houses real livable and easy to transport .
http://www.flickr.com/photos/grummantravels/4934715509/
When we first moved to our SD ‘hood before the bubble popped, there was a double-wide that used to move from parking spot to parking spot around the neighborhood from one night to the next. Don’t know if it was owned by a local resident, or served as a permanent residence, but it disappeared after the bubble popped; perhaps the owner sold it to raise cash?
I predict more of this type of price discovery in 2011:
(Reuters) - Few know better than former Treasury Secretary Henry Paulson how the struggling U.S. economy has battered home prices.
As former President George W. Bush’s top economic adviser, Paulson played a lead role battling the U.S. housing downturn and deep financial crisis it sparked.
But last week it got personal.
Paulson sold his three-bedroom home in a tony Washington neighborhood last week for close to a third less than his initial asking price and more than $1 million below what he paid for it more than four years ago.
The villa-style home near the official vice president’s mansion and the National Cathedral sold for $3.25 million on December 21. Paulson put it on the market for $4.6 million in April, later lowering the asking price to $4.15 million, according to real estate industry records. He paid $4.3 million in August 2006, according to government records.
“A jewel-like facade, reminiscent of a Provencal villa, gives way to a remarkable interior with living space on three levels and expansive common areas,” gushed the listing.
Paulson clearly got caught in the wave of price declines that has bedeviled sellers across the nation. But real estate is location specific, and Paulson fared much worse than his neighbors.
The value of Paulson’s house fell 24.4 percent during his ownership. Nationally, home prices are 29.3 percent lower over that period, according to real estate data firm CoreLogic.
“Paulson sold his three-bedroom home in a tony Washington neighborhood last week for close to a third less than his initial asking price and more than $1 million below what he paid for it more than four years ago.”
In case you are imagining the sound of the world’s tiniest violin as you read this, bear in mind that a loss of $1 million in wealth for Hank Paulson is akin to you or me dropping a penny on the ground and failing to pick it up.
One year is too small a window for my predictions.
Looking at the macro rather than the micro, I think we’re in for about another 20 years of declining living standards and petty political squabbling. I hate using generational shorthand terms like “boomers” and “gen x” or “gen y”, but it makes it easier for everybody to know what I’m talking about.
Basically, everything bad we have now will continue, with nothing improving or getting accomplished, until the “greatest generation” types, and boomers, finally die off in large enough numbers to allow some changes in this country to be politically possible.
“Boomers” is a misnomer, though, because it’s really not an age thing so much as a question of who benefits from the current systems continuing, vs. who stands to benefit from changing them. The older you are, the more you will want to maintain the status quo - older generations already got their educations without having huge student loan debt, they bought their houses, had their careers in a more stable employment environment without outsourcing and with less frequent layoffs, and have medicare and don’t have to worry as much about health care costs. It is in their best interest to keep things limping along for as long as possible. They also can’t comprehend the idea that younger generations don’t have the same advantages, and so blame them for their failures. Add to that their tendency to be conservative on social issues, the fear of change that comes with getting older, etc. and there’s no reason to expect anything in the American political or economic landscape to change anytime soon. They will remember the 80’s as being the peak of the country (and their lives) and cleave to politicians who invoke that Reagan ghost. Even the ones who have been poorly served by the current systems will be easily manipulated by those stoking the fires of social and cultural issues. They will also keep thinking that house prices always go up, or at least wishfully thinking that they do, so they can sell their houses.
Gen-Xers can be divided into two camps - those who have come out alright in the current systems and those who haven’t. The ones who have done well are going to be more likely to continue to embrace a libertarian, laissez faire approach, and take for granted that their success is the result of their own hard work, smarts, and skills, rather than luck or connections. The losers in the current economic system (the majority) will have to either believe the propaganda or their own lyin’ eyes. But their numbers will be too small to generate any political power, and they will be in the shadow of the older generation’s electoral numbers until that demographic dies off. Gen x will have been told all their lives that real estate always goes up, but will also have seen it take a huge dive, so it will be interesting if reality is able to triumph over social conditioning.
This dichotomy between the winners and losers will persist with gen y and younger, but lacking the numbers of the boomers to tip the scales, the number of economic “losers” is going to outnumber the “winners”. So, in about 20 years, they will inherit a country with the same problems as today, but the problems will have had two decades to fester with no real improvements being made. By then, a house will just be a place to live, probably that they have to share with a bunch of roommates or extended family members in order to make ends meet. These younger folks will be less likely to be divided by social issues, which is good, since I think they probably won’t have the luxury of worrying about them much anyway. They will have to basically rebuild the entire country, with far fewer resources than previous generations had at their disposal to squander.
Check back at the HBB in 30 years or so to see how my predictions will pan out!
“had their careers in a more stable employment environment without outsourcing and with less frequent layoffs”
This does not apply to most boomers. My brother retired from the government this year at age 60 (back problems forced the early exit). He was RIFed 3 or 4 times. Boomers who hired into the phone company in the 70s and expected to retired there saw its breakup in the 80s. When boomers started their working years, government and phone company jobs were stable.
Outsourcing was in full swing in the 90s - in mid-career for most boomers. They saw stagflation in the 70s, recessions in every decade, stock market busts that decimated savings.
Technological changes have made many boomers obsolete well before retirement age. I have had to re-educate myself several times. If you haven’t worked in 2 years, you can kiss your career goodbye.
And most boomers are still working - subject to the same employment environment as younger folks.
Good points, Happy2bHeard.
IMHO, this generational garbage is just that…garbage.
The reason the middle class is being decimated is because wealth has been shifted up. While the majority is seeing their personal situations decline, there is a small group at the top who have done quite well for themselves, thank you very much. This group controls the MSM and our national thought, and they like us to squabble amongst ourselves because they can get away with the looting for as long as we’re bickering about generations and public vs. private pay/benefits for the working class. If our anger ever begins to turn toward the banker class, all sorts of distractions and flashed before us, driving us to bicker amongst ourselves, yet again.
Well, like I said, I think the generational labels are garbage too, but they serve as an easy shorthand to describe what I’m talking about.
It’s not about age, it comes down to who has a stake in maintaining the current system, and who doesn’t. But generally the older you are, the more of an interest you have in kicking the can down the road and letting somebody else address the problems after you’ve got yours, rather than trying to fix things…
Interest rates remain static. House prices fall. Inflation heats up. Fed and E.U print lots of money. Things stabilize which convinces the sheeple to get into the market. Dow 13500 S&P 1500. Gold 1500. It’s all good.
My predictions”
1) UE benefits will expire for millions as they reach the 99 week limit. There will be no further extension.
2) As stim cash runs out state and muni gov’ts will have to resort to massive layoffs.
3) Those in charge will play kick the can with state and muni pension plans.
4) Spain and Portugal will be the next crisis in the Eurozone.
5) More quantitave easing.
6) Dollar continues to sink while gold and oil continue to rise. (unless the Eurozone out QE’s us)
7) $5/gallon gas by next summer. Cheap used trucks for sale (again)
Well, it’s not MY prediction, cuz I don’t know jack, other than what I read here. Anyway, I regularly drive this nice old fella to the airport who works for a bank in Newark (I’m a shuttle driver near Sacramento). This gentleman started telling me in ‘06 that the next few years were not going to be pretty. He said the words “deflationary spiral” like a normal person says, “I’m fine, how are you?” He’s big on Robert Prechter and Elliot wave theory. He told me in ‘09, and I quote, “Don’t buy a house until 2014. You’ll be able to get it for a song”. He was firm on this.
Anyway, since his early words of doom all rang true, I now make it a point to ask him what the latest forecast is. Last time (two weeks ago), he said, “actually, it looks like things will turn around by 2012″. I reminded him of his 2014 comment, and he said that it still may be the case, but that things look alot better than they did a couple of years ago, and his compadres see a slow but steady recovery starting in 2012. OK then, as for 2011, if my aged friend’s words are worth anything, I predict that 2011 will be just like 2010–painfully slow growth, stagnant or dropping housing prices, slight deflationary pressure on wages, with slight inflationary pressure on essential goods like gas and food.
I predicted a few years ago that things would get awful in 2009 and stay awful in 2010 and 2011, as improvements in some places/sectors are balanced by things getting worse in other sectors.
I thought the best chance for “morning again in America” was 2012, at the earliest.
I doubt things will get better earlier. But there is any number of things that can go wrong and makes things get worse for longer.
“I doubt things will get better earlier. But there is any number of things that can go wrong and makes things get worse for longer.”
Like a full blown banking meltdown in Portugal, Spain and Italy?
Well, a political crisis in China, a huge war set off with Iran or North Korea, the bankruptcy (de facto) of a number of U.S. states and localities, major financial institutions facing runs due to presumed commercial real estate insolvency, a flight from U.S. debt, etc.
In 2011:
- Those that took the first round of 8K credits are begining to see steep declines in equity and will increase foreclosure rates beyond current forecasts.
-The stronger hands that managed to endure last 3 years will finally begin to crumble.
-Stock market hits new highs. No place else to go with all the free money. Anybody know a good index fund?
“No place else to go with all the free money.”
Don’t forget about:
- Gold
- FOREX
- Real Estate Investment Trusts (yes, even I started tip-toeing into a Vanguard REIT fund…)
- Rare violins (my fantasy asset class)
- Swiss bank accounts (haven’t done this yet, but I have my moments when I feel tempted!)
Diversification means spreading your beans across many baskets, so if Wall Street grifters blow up yet another bubble, your wealth doesn’t get blown to smithereens by finding yourself long in the wrong asset class at the wrong time.
For $30 for three years you can get a type 3 “curio and relic” FFL.
http://www.atf.gov/forms/download/atf-f-5310-16-notice.html
Stock up on good rifles that shoot the cheap 8mm Mauser or 7.62 x 54R cartridges. Both kinds of ammo are available (although not as cheaply as 8 years ago) for a few pennies a round.
Czech or Turk Mausers, or Russian/East block Mosin-Nagants, can be picked up cheap once you have an FFL.
FOREX- good one.
My lead pipe certain prediction for 2011 and beyond.
As sure as the sun will rise tomorrow, as sure as the NAR will bloviate about how there “has never been a better time………”, as sure as the latest WH marionette promises ‘better days ahead…..’, as sure as……………………… you get the point.
The PTB will say and do anything to maintain the charade. Anything!
Go with your gut. Believe your lyin eyes.
I’m half-way through Matt Taibbi’s Griftopia now, and I can’t recommend reading it as an uplifting experience; in particular, the scale of high-level crime and corruption is unimaginable to anyone who does not live and work in the world of high finance described in this book. The humor is so vivid and dark that it is more likely to send the reader into a depression than to entertain him. Nonetheless, some valuable lessons can be gleaned from reading it.
Above all, my conviction has only grown that banking as a service industry* does not work without the elements of competition and a rule of law. Hopefully our political leaders will catch on, assuming it is not already too late for America.
*If organized crime is the intended purpose, then nothing needs to be changed.
Chinese economy sneezes, global economy catches pneumonia.
China manufacturing slows
China’s purchasing managers’ index, a measure of manufacturing activity, slowed last month, in a sign efforts to tame inflation may be working.
Stimulus has reached $1.9 billion in county
About a fourth of the money has been spent; recipients include knee researchers, peanut butter hauler
By Danielle Cervantes
Saturday, January 1, 2011 at 3:20 p.m.
San Diego County has received nearly 1,100 grants since the American Recovery and Reinvestment Act passed Congress last year, totaling $1.9 billion.
About one fourth of that has been spent, according to a year-end review by The San Diego Union-Tribune.
…
I predict far more stories like this one over the next three decades, as unprepared Baby Boomers experiencing financial difficulties at the onset of old age choose the expedience of self-immolation over a poverty-stricken denouement towards the grave.
Second body found in burned Calif. house
By The Associated Press,
Sunday, January 2, 2011 at 5:49 p.m.
SANTEE, Calif. — Investigators on Sunday found a second body, believed to be a woman in the charred remains of a San Diego County home where a man called 911 saying he was going to kill himself and his wife and set the place ablaze, authorities said.
Only the man and his wife lived in the house, and the discovery ends the search for victims of the Saturday fire that forced evacuations and sent a huge plume of black smoke over the city of Santee, Sheriff’s Lt. Jim Duffy said.
The body hasn’t been identified, but it appeared to be a woman, Duffy said.
The body of a 60-year-old man was found in the rubble on Saturday, the county Medical Examiner’s Office said in a statement. His name has not been released, pending notification of relatives.
On Saturday, the man told neighbors he was having financial troubles and that his wife had cancer.
He then called 911 and said he was going to kill his wife, burn his house down, shoot anyone who approached the house, and kill himself, sheriff’s Lt. Dennis Brugos said in a statement.
Firefighters and deputies found the house in flames and heard explosions they believed to be from ammunition.
The house was soon engulfed in flames and destroyed as firefighters shifted their focus to protecting neighbor’s homes. The house next door had minor damage from the fire.
The San Diego Union Tribune reports county records show the home was owned by 60-year-old Michael Cour and 70-year-old Janice Gervais since 1999, and that World Savings Bank foreclosed on the property Dec. 6. The couple filed for voluntary bankruptcy last summer.
Demography and the economy
Dec 29th 2010 | WASHINGTON, DC | from PRINT EDITION
FROM the moment they entered the workforce in the 1960s, baby-boomers began to shape America’s economy and politics. They will do the same as they leave. The first of the estimated 78m Americans born between 1946 and 1964 turn 65 in 2011, the normal age for retirement. As their ranks swell in coming years, the burden of financing their retirement will mount. So will their electoral importance.
Retiring boomers will squeeze the economy from two directions. The number of people enrolled in Medicare (federally funded health care, available from the age of 65) will grow from 47m in 2010 to 80m in two decades’ time. Enrolment in Social Security (federally funded pensions, available from the age of 62-67, depending on your birth year) will grow from 44m to 73m. The cost of the two programmes will grow from 8.4% of GDP in 2010 to 11.2% by 2030. Meanwhile, as boomers retire, the workforce will grow more slowly, as will the taxes to finance their benefits. The pensioner-worker imbalance and health-care inflation, which is driving up the bill for Medicare and Medicaid, the federal health benefit for the poor, will send the budget deficit into the stratosphere.
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So many books on how America screwed up, so little time…
American finance
Dec 16th 2010 | from PRINT EDITION
Inflated: How Money and Debt Built the American Dream.
By Christopher Whalen. Wiley; 393 pages; $34.95 and £23.99. Buy from Amazon.com, Amazon.co.uk
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The author has an eye for links between past and present. Bankruptcy was used to advance the robber-barons’ private agendas in the late 19th century, just as it was used to further political goals recently with General Motors and Chrysler. The Federal Reserve’s huge monetary expansion since 2008 echoed its money-printing “recklessness” in the 1930s.
For much of its almost century-long life, writes Mr Whalen, the Fed has served the White House and the big banks before serving the people—for instance, by repeatedly providing liquidity to stabilise financial markets under the guise of protecting the real economy. Under Alan Greenspan, the central bank encouraged and facilitated greater use of debt throughout the economy. Today’s anti-Fed movement is no flash in the pan: antipathy towards central banking stretches back to the civil-war era.
But the seeds of today’s troubles were sown before Mr Greenspan’s time. By the late 1970s housing had begun to replace defence as America’s engine of growth. Before long, the myth that you could never have enough of the stuff had taken hold. Over time, the push to make housing more affordable, backed by daft government policies, became a giant enterprise involving 1,500 public and private organisations. Mr Whalen is not alone in wondering how the American economy will cope without a buoyant property market.
He worries that Americans, long used to instant financial gratification, have borrowed so heavily from the future that the necessary belt-tightening will prove to be beyond them. America and Europe used to preach to fiscally profligate developing countries about the need for structural adjustment. Now the tables have turned.
The solution lies in “a 21st century Marshall Plan in reverse”: an overhaul of the global monetary system that includes a managed devaluation of the dollar to bring down America’s external deficits and stimulate its exports. Mr Whalen looks forward to the day when the greenback is no longer the world’s sole reserve currency, a status that gives America “a free ride” on fiscal discipline. He ends on a positive note, expressing confidence that Americans “have the honesty to talk about limiting our national wants and needs to our national income”. But the overall message is none too encouraging.
Better late than never…
Dow: sideways
Housing: down about 10%
Dollar: up due to Euro problems (possibly reaching parity with the Euro)
Commodities: down due to strengthening dollar, lengthening (double-dip) recession, except for…
Gold: sideways
Oil: down, unless Israel and Iran go at it, in which case up, up, up
General economy: sideways to slightly down
Black Swans: 2
Why don’t we have a National Home Foreclosure Clock adding up the totals so we can see in real time Americans becoming homeless on the continent their forefathers conquered?