The Housing Bubble

Realtors Are Liars

From yesterday’s UK Guardian (and linked from Drudge):

“Let me put an alternative hypothesis. America in 2011 is Rome in 200AD or Britain on the eve of the first world war: an empire at the zenith of its power but with cracks beginning to show.

The experience of both Rome and Britain suggests that it is hard to stop the rot once it has set in, so here are the a few of the warning signs of trouble ahead: military overstretch, a widening gulf between rich and poor, a hollowed-out economy, citizens using debt to live beyond their means, and once-effective policies no longer working. The high levels of violent crime, epidemic of obesity, addiction to pornography and excessive use of energy may be telling us something: the US is in an advanced state of cultural decadence.”

http://www.guardian.co.uk/business/2011/jun/06/us-economy-decline-recovery-challenges

Another post-auction price-fixing scam:

http://www.orlandosentinel.com/news/os-foreclosure-sale-problems-20110414,0,2605501.story

Well, that and “hope and change” means that once they graduate they go home to live in the parent’s basement with $50,000 of debt and no job…

———————-

Obama Losing The Youth Vote ‘Because White Students Don’t Think He’s Cool Anymore’
Daily Mail (UK) | June 06, 2011 | PAUL BENTLEY

President Barack Obama famously won the 2008 election on a wave of support from America’s youth. But any hopes the 49-year-old had of keeping down with the kids appear to have faded - his support from young people is rapidly waning, a poll has found. And for a man known for his ‘jacket off’ casual style the reason for this slump may be particularly hurtful - students are abandoning the President because they do not think he is cool anymore, it has been claimed.

Back then: In 2008, students voted for Obama because they ‘thought he was cool’ According to the National Journal’s Ronald Brownstein report, President Obama has dramatically lost support from young people - and particularly young white people - in America since 2008. His approval rating among those aged 18 to 29 is currently at 56 per cent - a huge fall of ten points since the 2008 exit polls.

And this comes in stark contrast to Obama’s general approval rating levels, which are pretty consistent with those of 2008. The reason for this sudden drop is because students, who rushed behind the Obama campaign in 2008, no longer think he is cool, according to those at Oberlin College, which is known for its hipster left-wing activism.

We are recently returned from a week of vacation on Oahu. We previously had gone in ‘07. We stayed in a rented house on north shore both times.

The contrast was striking, the number of beachfront see through houses is astonishing. There are 7 rentals on the stretch of beach where we stayed just south of Laie and ours was the only one rented the week we were there. It was great for us but that can’t be very good for the owners.

I also noted that the Polynesian Cultural Center was running far under capacity, with many empty seats at both the luau and the night show, both of which were as good as ever. It was reminiscent of Disneyland on a rainy day in February.

We were in Honolulu on Saturday, which also mirrored our ‘07 experience and the reduced crowds were very noticeable. I filled my rental for $3.85/gallon, only one cent more than I pay at Sam’s in P’dale. My mini-van rental was only $45/day as well, about half what I paid in ‘07.

Despite all this the run down shacks on the beach are still listed at asking prices of nearly $1 million. It makes me wonder at what point the investors who own these will be overcome by carrying costs.

Anyway, that’s my report, FWIW.

Cash-strapped states look to roll back tax credits
By John Wisely, USA TODAY

Tough budget times are forcing state governments to rethink the tax breaks they grant.

Montana Gov. Brian Schweitzer overruled a vote to repeal several clean energy tax credits last May.

Michigan last week eliminated several tax credits, including those for small donations made to universities, food banks, museums and public television. The state also capped at $25 million a year the tax incentives it gives the film industry, which has been lured to the state since 2008 by some of the more generous incentives in the nation. The changes were part of a tax overhaul that Republican Gov. Rick Snyder says will spur job growth.

The Oklahoma Legislature has set up a special committee to review tax incentives there. A report from the Oklahoma Tax Commission in October 2010 listed the cost of hundreds of credits and incentives.

“It’s like a big Christmas tree,” says Larkin Warner, emeritus professor of economics at Oklahoma State University, who serves on the committee. “The legislators ought to take a hard look.”

Economists generally favor more uniform taxation but acknowledge that incentives can advance policy goals such as capital investment, cleaner energy use or job creation, says Dana Johnson, recently retired chief economist at Comerica Bank.

“Taxes can be used, just like direct subsidies, to (encourage) certain behavior,” Johnson says. “The question you always have to ask is: Is it worth the revenue?”

Fed Exit Should Start ‘Long Before’ Jobs Recovery Is Assured, Plosser Says (Bloomberg)

Federal Reserve Bank of Philadelphia President Charles Plosser said an exit from stimulus measures should start “long before” a recovery in the U.S. jobs market is assured.

“Somewhat tighter monetary policy is possible by the end of the year,” he said today at a press conference, after speaking at an event organized by the Bank of Finland in Helsinki. “We will have to begin exiting from our policies long before the unemployment rate is down to what people would like to have. That’s going to be a difficult decision.”

Chairman Ben S. Bernanke and the Federal Open Market Committee, which includes Plosser, are considering the tools they would use to pull back stimulus, according to the minutes of their April meeting. One possible sequence is to end the policy of reinvesting proceeds from maturing securities and later raise interest rates and sell assets, though such moves “would not necessarily begin soon,” according to the minutes.

“The challenge of when to begin to reverse course, the challenge to pick the timing and the pace of that correctly, is the challenge that we’re going to face,” Plosser said. “We will have to figure out a way to do it at the right time, because if we wait too late, we fall into traps.”

Plosser, 62, voted to complete the central bank’s $600 billion of bond purchases and backed its decision to keep interest rates “exceptionally low” for an “extended period.” In 2008, he dissented twice in favor of less monetary stimulus.

The Once and Future Dips of the US Economy
Bill Bonner Reckoning from Farmington, Pennsylvania…

Last week, it looked as though a tide might have turned. The Dow fell another 97 points on Friday. And the 10-year US Treasury note rose to yield less than 3%.

What will happen next? We don’t know. But it wouldn’t be a bad thing if investors took a beating. At least, the rest of the country would probably like to watch.

Yes, dear reader, pity the proletariat!

While investors have recovered most of their ‘08-’09 losses, the poor working stiff is still getting it in the chops. He doesn’t own stocks. He owns a house. And housing just keeps going down.

His earnings have been going down too.

He’d better get used to it. If we’re right, he won’t have to worry about just a ‘double-dip’ but about a triple-dip…a quadruple dip…and maybe even a quintuple-dip. Forget recovery. What we’re talking about is an on-again, off-again slump that will last for a decade or more. Heck, it’s already in its fifth year!

Why so?

Everything that has happened over the last 4 years confirms that our “Great Correction” hypothesis was right. This economy is going through major adaptations, adjustments and rehabilitation. And by the look of things, it’s going to be in an out of rehab for a long time.

The latest reports show:
1) No real growth
2) No real recovery
3) No end to the unemployment problem
4) No bottom in the real estate crisis
5) No benefit from QE2

The numbers that came out on Friday were just more bullets shot into a corpse. We knew the recovery was dead. But the non-farm payroll numbers killed it again anyway.

USA Today:

Squeezed on both sides by stagnant wages and rising prices, consumers believe the chances of bringing home more money one year from now are at their lowest in 25 years, according to analysis of survey data by Goldman Sachs.

Goldman’s economist Jan Hatzius looked at the University of Michigan and Thomson Reuters poll, which asks consumers whether they believe their family income will rise more than inflation in the next 12 months. Hatzius applied a six-month moving average to smooth out the data and found that wage pessimism is at its lowest in more than two decades.

“Households are already very pessimistic about future real income growth,” wrote Goldman’s economist to clients. “A slowdown in job growth would presumably translate into a further deterioration in (expected and actual) real income growth. This would heighten the downside risks to our current forecast that real consumer spending will grow 2.5 percent to 3 percent over the next year and might call for another downward revision to our forecast for US GDP growth in 2011 and 2012.”

Real hourly wages have dropped 2.1 percent on an annualized basis over the past six months, a rate of decline not seen in 20 years, according to Goldman. This analysis is backed up by the other most-watched consumer survey from the Conference Board, which indicated earlier this week that the proportion of consumers expecting their incomes to increase was below 15 percent in May.

“The crawl out of this economic ditch is going to be long and slow,” said Patty Edwards, chief investment officer at Trutina. “Even if they’re employed, many consumers aren’t earning what they were two years ago, either because they’re in lower-paying jobs or not getting as many hours.”

Hey gang! We have a winner here in Minneapolis-St. Paul. A columnist who writes for the Minneapolis Star-Tribune who actually “gets it” regarding the housing market. Here is his article which was published Sunday June 5th. Hope you enjoy it!

Housing rebound? Let’s find the bottom first
Article by: ERIC WIEFFERING , Star Tribune Updated: June 4, 2011 - 3:12 PM

As soon as home prices began tumbling five years ago, real estate agents, anxious homeowners, would-be buyers and panic-stricken lenders began looking for “The Bottom.”

While it’s so far proven to be as elusive as the Grail, unicorns and other totems of mythology, I’m confident that someday we will find the bottom in the housing market.

But let’s not confuse a bottom with a bounce back. They are not the same thing, and the first does not assure the second.

By now it’s obvious to all that housing, like tulips and dot-com stocks, was a classic speculative bubble. But the thing most people don’t appreciate about speculative manias is that it can be decades, if ever, before asset values or prices revisit the lofty levels seen during the peak of the mania.

For all the gold fever of late, prices when adjusted for inflation remain more than 40 percent below the all-time peak in 1980. Or, consider the tech stock-dominated Nasdaq index, which is 46 percent below its 2000 peak. Tulips, meanwhile, found a bottom 475 years ago.

Yet many homeowners and real estate boosters seem afflicted with the assumption that, once a bottom is reached, homes will begin to recover most, if not all, of the value lost during the past five years.

“There’s no reason to expect that,” said Dean Baker, co-director of the Center for Economic and Policy Research in Washington, D.C. “It’d be like buying into Nasdaq and assuming it’s going to bounce back to 5,000.”

Baker was among the first to warn that the run-up in home prices was a speculative mania that would end badly. His 2002 paper was met with scorn far and wide. The Joint Center for Housing Studies of Harvard University responded with its own study that declared there was little basis for concern about a housing bubble.

Few were as dismissive of Baker’s research as David Lereah, then the chief economist for the National Association of Realtors. Lereah’s 2006 book, “Why the Real Estate Boom Will Not Bust — And How You Can Profit From It,” occupies a special shelf in the business canon, alongside James Glassman’s late 1999 tome, “Dow 36,000.”

Baker worried in 2002 that housing prices nationally could fall as much as 22 percent, wiping out $2.6 trillion in household wealth. The plunge proved even deeper because the bubble kept inflating for four years longer. Nationally, average home prices are 34 percent below their 2006 peak, according to the S&P/Case-Shiller Index.

In Minnesota’s 13 most populous counties, the median price fell 26 percent between 2006 and 2010, according to sales data compiled by the Minneapolis Area Association of Realtors. Of the 103 sales markets tracked by the group, 101 have experienced a decline in median home prices since 2006. Meanwhile, the average price of homes sold in 2010 is roughly the same as it was in 2001.

Lost decade, anyone?

Just for fun, I tried to reach a few people who were brave enough to call a bottom in the housing market over the years. One who was sporting enough to take my call, Mary Bujold, is president of the Minneapolis-based real estate consulting firm Maxfield Research. I could almost hear her cringe when I reminded her of her March 2009 prediction, which she offered up to a Star Tribune reporter.

“Please, you don’t have to read it back to me,” Bujold said.

For Bujold, the biggest surprise was how deeply distorted the market turned out to be, and how much the entire economy had come to rely on consumer confidence tied so closely to a falsely inflated home value.

“When the whole tower started to tumble, I think there was a shock as to how far-reaching those effects were,” she said.

That’s the thing about bubbles: The bottom always seems to be six to nine months away, and it’s always a lot further down than anyone
ever led you to believe.
ericw@startribune.com • 612-673-1736

Yesterday, with regard to QE3 Carl Morris wrote:

“I’m assuming that will happen. I wonder if they will find a way to do it under the table this time, though.”

My son-in-law who just finished his internship at the Treasury is firmly convinced that QE3 will be disguised and unannounced, it will simply consist of rolling all assets previously acquired by the Fed into T-bonds as they mature.

I see this as plausible but I don’t think the numbers add up unless QE3 will back off the level of pump underway with QE2.

FWIW.

Over a half million $$$$ per household . That is what the federal government’s obligations are at this time .. That will never be repaid . But the big question is , when will it all come down ???

Roseland developer files for bankruptcy protection
TIMES-DISPATCH By Carol Hazard June 07, 2011

The developer of the huge Roseland residential and commercial project in northwestern Chesterfield County is fighting a second legal battle to get the development off the ground.

G.B.S. Holding Ltd, managing owner of about 900 acres in the 1,300-acre, mixed-used development, filed for Chapter 11 reorganization with the U.S. Bankruptcy Court in Richmond.

G.B.S. also guaranteed loans secured by Roseland Village, managing owner of a 342-acre high-density piece of the project, which filed for bankruptcy protection in late January to stop foreclosure proceedings.

“Those same banks [that went after Roseland Village] have turned on the grantor,” Bruce E. Arkema with DurretteCrump, the lawyer for G.B.S., said Monday.

With the first avenue blocked, the lenders went after G.B.S., forcing the bankruptcy filing on Friday of that entity, Arkema said.

Arkema said he plans to ask the bankruptcy judge to consolidate the two cases, so the borrower can more easily reorganize and proceed with the project.

“There are a lot of irons in the fire,” he said. “There are good prospects to get the development going.”

No homes have been built yet in Roseland, but a lot of pre-development activity is taking place, including road and master planning design. Houses have been built in the adjacent Hallsley subdivision.

George B. “Casey” Sowers III, manager of the family business developing Roseland and building houses in Hallsley, said the lending landscape hasn’t changed in the last couple of years, making financing difficult, but tools are available to get Roseland moving again.

“One is to pay off the loans, which we can’t right now,” Sowers said. “Or we can give the land back to the bank and allow for a fire sale. Or if you have enough equity, you can let the court protect it [the project] and let the development proceed.”

G.B.S. has bank loans of $23.3 million and assets of $57.9 million, so the hope is to proceed with the development and make the banks and everyone involved in the project whole again, Sowers said.

Essex Bank in Tappahannock, Central Virginia Bank in Powhatan County, Franklin Federal Savings Bank in Henrico County and Paragon Commercial Bank in Raleigh, N.C., are listed as creditors in court records.

Banks are under pressure from regulators to call or not renew development loans, even those made to developers with large equity positions such as G.B.S., Arkema said.

“Raw land loans are way out of favor,” he said. “Banks got their stimulus from the government through TARP [Troubled Asset Relief Program], but they won’t help out the poor developer.”

Fewer jobs for unemployed workers
CNNMoney June 7, 2011

There are fewer jobs listed at one New Jersey career center. The unemployed feel the economic slowdown first-hand.

HACKENSACK, N.J. (CNNMoney) — No one has to tell the folks at the One-Stop Career Center in northern New Jersey that the economy is getting softer.

They feel it first-hand.

“The last month or two, it’s gotten very slow,” said Susan DeGroat, who lost her job as a billing manager two years ago. “I go online and the same jobs are still posted.”

DeGroat, who was using the computers to search for jobs at the One-Stop center in Hackensack, N.J., on Monday morning, has not been on an interview in more than a month. The 55-year-old applied for several positions lately, but has not heard back from the firms.

DeGroat is not imagining things. Fewer businesses are hiring these days and more people are coming in to discuss their unemployment insurance claims, said Salvatore Mastroeni, who directs the center.

The uptick in job openings he saw earlier in the year has waned amid concerns of regulatory uncertainty in Washington D.C. and fallout from the natural disasters hitting Japan and elsewhere in the U.S.

“Many of the employers that we talk with are hunkering down,” said Mastroeni, who first noticed the shift in April. “They are not willing, with the unknown before them, to expand and to rehire people at this particular point in time.”

Obama’s Commerce Nominee: Cap and Trade Good for ‘Hiding’ Carbon Taxes.

(CNSNews.com) – John Bryson, President Obama’s nominee to head the Commerce Department, told a University of California Berkeley audience in 2010 that a cap and trade system was a good way to hide a carbon tax from the public.

Bryson, formerly the CEO of Edison International, said that a carbon tax was the new “third rail” of politics because politicians wouldn’t want to tax energy directly.

“I think it’s still unlikely there’ll be a carbon tax bill because I think in the end a very high percentage of the members of Congress think it’s kind of the third rail to support a tax, even if it’s a carbon tax,” Bryson said.

“Greenhouse gas legislation, either with a tax or with cap and trade – which is a more complicated way of getting at it but it has the advantage of politically sort of hiding the fact that you have a tax – but that’s what you’re trying to do,” he added.

Bryson said that carbon taxes – whether open or hidden in a cap and trade regime – were still not the best way to reduce energy consumption and greenhouse gasses. The best way, he said, was a robust system of regulations that penalized energy producers for producing more energy than the government deemed necessary.

“In the great debate between economists and others about whether we ought to be proceeding primarily with market signals or regulatory steps, I believe we ought to do both,” He said. “But the regulatory steps act right now [with] immediate requirements.”

Mexican drug gangs building own tanks as war intensifies
http://www.mcclatchydc.com

MEXICO CITY — Mexico’s rival crime gangs are in an arms race, and the latest sign of that are the homemade “Mad Max” type heavily armored vehicles they deploy to withstand fierce clashes with each other.

The army found two more “narco tanks” over the weekend in Ciudad Camargo in Tamaulipas state along the border with Texas.

In earlier discoveries in April and May, armored vehicles found by authorities contained swiveling turrets, snipers’ peepholes and gadgets to dump oil and scatter tire-puncturing nails on roadways.

The latest discovery showed that the gangs are upping their game. The two armored vehicles were cloaked in inch-thick steel plating. Built on a three-axle truck bed with a heavily armored cabin, the latest “narco tanks” are far larger than previous versions.

“You can easily fit 20 armed people in here,” an unidentified army officer told El Porvenir TV as he showed the inside of one of the vehicles.

The officer said the vehicles could withstand fire from 50-caliber mounted weapons and grenade blasts, and contained a vicious pointed steel battering ram.

An army patrol found the tanks after soldiers spotted two armed men along a road on the highway from Nuevo Laredo to Reynosa, just outside Camargo, authorities said. The men ran into a warehouse. Inside, soldiers found the two armored trucks and a workshop to fabricate more. Two more trucks were in the process of being fitted with steel armor.

Each of the armored trucks had special synthetic insulation to deaden the sound of incoming rounds and air conditioning for the compartment.

East St. Louis, IL (KSDK) - East St. Louis no longer has a hospital - Kenneth Hall Regional Hospital closes its doors at 7 a.m. Tuesday.

The hospital has a history in East St. Louis that goes back more than 100 years but come Tuesday morning that history will come to a close and would be patients will have to find other options for emergency care.

Kenneth Hall is a nonprofit hospital run by the Southern Illinois Healthcare Foundation. The foundation says since 2000, the hospital host has lost $5 million a year, every year.

The hospital was already down to an emergency room and 39 mental health beds. Those services will now be moved to Touchette Regional Hospital in nearby Centreville, which is operated by the same organization. And while that’s not far it’s not good for East St Louis say city leaders - a sentiment shared by one of the last people to visit the hospital Monday night in need of a doctor.

“There’s going to be a lot of people getting hurt around here and Centerville is too far to be trying to rush somebody to the hospital if they get shot or killed or whatever,” said Farina Larkin. “I don’t think that’s a good idea for them to be closing down this hospital. And our police need it too in case one of them gets shot.”

Who was it again who broke the Weiner story? I heard from an unreputable source that since he was not resigning; that he was “pumped up” regarding his re-election bid and would be appreciative of continued constituent support.

GM chief pushing for higher gas taxes. ~ The Detroit News

Detroit — General Motors Co. CEO Dan Akerson wants the federal gas tax boosted as much as $1 a gallon to nudge consumers toward more fuel-efficient cars, and he’s confident the government will soon shed its remaining 26 percent stake in the once-bankrupt automaker.

“I actually think the government will be out this year — within the next 12 months, hopefully within the next six months,” Akerson said in a two-hour interview with The Detroit News last week.

He is grateful for the government’s rescue of GM — “I have nothing but good things to say about them” — but Akerson said the time for that relationship to end is coming because it’s wearing on GM.

“It’s kind of like your in-laws: It was a nice long weekend. We didn’t say a week,” Akerson said with a laugh.

And while he is eager to say goodbye to the government as a part owner of GM, Akerson would like to see it step up to the challenge of setting a higher gas tax, as part of a comprehensive energy policy.

A government-imposed tax hike, Akerson believes, will prompt more people to buy small cars and do more good for the environment than forcing automakers to comply with higher gas-mileage standards.

“There ought to be a discussion on the cost versus the benefits,” he said. “What we are going to do is tax production here, and that will cost us jobs.”

For the years 2017-25, federal officials are considering 3 percent to 6 percent annual fuel efficiency increases, or 47 mpg to 62 mpg. That could boost the cost of vehicles by up to $3,500.

“You know what I’d rather have them do — this will make my Republican friends puke — as gas is going to go down here now, we ought to just slap a 50-cent or a dollar tax on a gallon of gas,” Akerson said.

“People will start buying more Cruzes and they will start buying less Suburbans.”

With gas already over $4 a gallon in parts of the country, a higher gas tax is a hard sell.

Rebecca Lindland, an analyst with IHS Global Insight, said higher gas taxes in Europe did lead consumers to buy more fuel-efficient cars.

But she acknowledged that’s virtually impossible to see in the United States.

“It’s career suicide for a politician to call for raising gas taxes,” Lindland said.

I would think that people who post on this blog would understand that the economic problems we have are longstanding, and will require years of painful restructuring to get past. They are not the result of the policies of the Obama Administration, which have mostly be palliatives.

The WSJ editorial page may not know what is going on, but someone there does.

http://online.wsj.com/article/SB10001424052702304906004576369960155065484.html?mod=WSJ_hpp_sections_markets

The worst that may be said of the Obama Administration is that THEY don’t fully understanding “that the economic problems we have are longstanding, and will require years of painful restructuring to get past” either. But “we’re screwed so let’s buckle down and tough it out together” doesn’t seem to win elections in the USA.

Obama said a few things along those lines early one. He should have stuck with it. This “we’re turning the corner” nonsense is just going to make a whole lot of Americans who are less worse than they were blame him.

Job Openings Fall First Time in Three Months
Bloomberg - Jun 7, 2011

Job openings in the U.S. decreased in April for the first time in three months, showing companies started to lose confidence in the expansion’s durability even before hiring slumped in May.

The number of positions waiting to be filled fell by 151,000 to 2.97 million, the fewest since January, the Labor Department said today in a statement posted on its website. The number of people hired and the number of workers fired also decreased.

The unemployment rate rose to 9.1 percent in May while employers added the fewest workers in eight months, Labor Department data showed last week. More job gains are needed to drive consumer spending after economic growth slowed in the beginning of the year.

“We’ve got a very weak, very mild recovery, which does not create enough demand for labor,” said Henry Mo, an economist at Credit Suisse in New York. “Even if all the open positions were filled overnight, we’d still have almost 11 million workers without jobs.”

Half Moon Bay will cut staff in half under new budget
By Julia Scott julia.scott@bayareanewsgroup.com

HALF MOON BAY — And then there were 19. Or more accurately, 19.6.

That is the number of staff, or “full-time equivalent” employees, that will be left on the city payroll after the Half Moon Bay City Council votes Tuesday to outsource its police and recreation services. In so doing, it will lose more than half its employees — from 38 down to 19 and change.

The city has inked an agreement with the San Mateo County Sheriff’s Office to take over the staffing, facilities and equipment of the Half Moon Bay police, a transition that will officially take effect at midnight Saturday. The move is expected to save the city $509,723 a year, though the savings won’t take effect until fiscal year 2012-2013.

Half Moon Bay already halved its staff in 2009, after the economy robbed the city of crucial tourist dollars and the city began paying off a costly legal settlement. Those cuts saved more than $500,000, but they weren’t enough.

“We had the hardship of the lawsuit, but we were able to recoup from that, do the budget and make our cuts,” said Mayor Naomi Patridge. “The thing that really hurt us besides that was the economy.”

The city of San Carlos will take over Half Moon Bay’s recreation department. Police and recreation will join a long list of other Half Moon Bay city services that have been outsourced in recent years, including the city attorney, public works and engineering, building inspection and code enforcement services.

Ironically, the $11.1 million budget the City Council adopted last week is slightly larger than last year’s budget — owing to some $500,000 in transition costs associated with switching over to a contract with the Sheriff’s Office and some street-improvement projects the city had been deferring until now. The council had to draw down its reserves to backfill a $1.1 million deficit, but officials say the savings will start to show next year.

For all its charm and natural beauty, Half Moon Bay has become a poster child for cities on the edge. National media outlets, including The Wall Street Journal and National Public Radio, have documented its fall from grace ever since the city lost a $36.8 million court judgment in 2007.

The Markets News and Analysis June 7, 2011

Corporate insiders are selling

It may be only one straw in the wind, but it’s an ominous one: Corporate insiders last week accelerated the selling of their companies’ shares, even as the stock market was declining.

That at least according to this week’s issue of the Vickers Weekly Insider Report, published by Argus Research.

This represents an ominous shift in the insiders’ behavior.

Up until now during this bull market, the insiders have pulled back on their selling in the face of any market weakness — suggesting that they had confidence that the market would soon recover. Last week, in contrast, they apparently lost that confidence.

This doesn’t automatically doom the market, of course. And it’s always possible that the insiders will change their tune in coming weeks. But, for now, it can’t be a good sign that corporate insiders have been selling into the decline.

NL’s whale fountain shut off for sanitary reasons
By Kathleen Edgecomb : TheDay.com

New London — The city turned off the water at the new whale tail fountain over the weekend after someone reportedly defecated in the water.

“People are using the tail as a latrine,” Evelyn Louziotis said. “It’s an $11 million bathroom.”

“It’s sad,” City Councilor Michael Buscetto III said during Monday’s City Council meeting. “It’s two steps forward and three steps backward. There are people in the city who don’t care, and they need to be dealt with.”

Buscetto said since water started flowing in the whale fountain last month, police and fire officials have been called for people urinating, defecating and washing themselves off in the fountain water. He said some people who have cut themselves have also used the fountain to rinse off blood.

“I’m concerned with the sanitary aspect of the water,” Buscetto said, adding that there needs to be more supervision at the Parade. He said city officials know who is abusing the fountain and the Parade area.

“Let’s call them frequent flyers,” he said, referring to a group of people who routinely hang out on the benches on the Parade.

ITEM: Dennis Kucinich Calls For Congress To Take Back The Power Of The Purse, Demands The Abolition Of The Federal Reserve: “The Founders Did Not Intend For America To Be Run By Big Banks And Wall Street”

Natural Gas Entering ‘Golden Age’
~ WSJ ~ Tuesday, June 7, 2011

The increasing abundance of cheap natural gas, coupled with rising demand for the fuel from China and the fall-out from the Fukushima nuclear disaster in Japan, may have set the stage for a “golden age of gas,” the International Energy Agency said Monday.

Under a scenario set out by the IEA, global consumption of natural gas could rise by more than 50% over the next 25 years, with it accounting for more than a quarter of global energy demand by 2035, up from 21% now.

But while natural gas is more clean-burning than coal and oil, it is still a fossil fuel, and its increased use will lead to higher emissions of the greenhouse gases that cause global warming, the IEA warned. More gas will also mean less take-up for low-carbon energy sources like renewables and nuclear power. “An expansion of gas use alone is no panacea for climate change,” said Nobuo Tanaka, the IEA’s executive director.

The global natural gas market is in the midst of a revolution that has huge implications for the future of energy. In the U.S., technological advances like hydraulic fracturing, or “fracking,”—in which water laced with chemicals is injected into the ground to crack open dense, gas-bearing shale rock—have fueled a surge in production from vast new gas reserves stretching from Texas to Pennsylvania. Such techniques are now being applied in other countries with big shale-gas resources, such as China. The IEA says that over the next 25 years, 40% of the growth in total gas production will come from unconventional gas.

Price of average home has fallen £130 every week for the last year
By Becky Barrow, Business Correspondent

The average price of a home in Britain has plunged by nearly £130 every week for the last 12 months, an alarming report revealed today

Over the last year, house prices have dropped by a total of 4.2 per cent, the biggest annual fall since October 2009 during the depth of the recession.

The scale of the price plunge is massive, equal to the amount that a typical family spends on their weekly supermarket shop.

Tumbling: During May house prices fell at their fastest rate for 19 months

It is in sharp contrast to the boom years when people’s properties used to ‘earn’ more than they did every week.

But the figures, from the Halifax bank, show how thousands of people who recently bought a home have been left badly out of pocket.

In May last year, the average home cost £167,207. Today, the same property is worth £160,519, a drop of £6,688 or £128 every week.

This is likely to have tipped many people into negative equity, when the size of their mortgage is bigger than the value of their home.

On a more optimistic note, Martin Ellis, housing economist at the Halifax, said yesterday that house prices will stop falling later this year.

He expects prices will ‘stabilise’ during the second half of the year, although there may be a few more modest drops over the next few months.

Mr Ellis said: ‘We expect a moderate improvement in the economy during the remainder of 2011 which, combined with continuing low interest rates, is likely to support housing demand.

‘This should prevent a further marked fall in prices and help to stabilise property values later in the year.’

Read more: http://www.dailymail.co.uk

Sarah Palin

Talbots slumps after sales, outlook disappoint. June 7, 2011,

NEW YORK (MarketWatch) — Talbots Inc. TLB -39.14% shares slumped 31% in premarket trading on Tuesday after its fiscal first-quarter sales missed analysts’ estimates and the company pointed to a disappointing second-quarter outlook.

Second quarter-to-date sales and customer traffic continue to trend negative and the company expects second-quarter sales and gross margin will be “significantly below” last year, the women’s clothing retailer said.

“Our first quarter performance reflects an inconsistent customer response to our merchandise assortments, a challenging competitive environment and high levels of promotional activity,” said President and Chief Executive Trudy Sullivan.

What, you guys haven’t read CNN yet today? It says homeowners are getting “ruthless” and walking away. lol.

-Home OWNERS

-Ruthless

The Next Financial Crisis Will Be Hellish And It’s On Its Way
Posted by Addison Wiggin

Bernanke and Volcker: Different men, vastly different monetary policies

“There is definitely going to be another financial crisis around the corner,” says hedge fund legend Mark Mobius, “because we haven’t solved any of the things that caused the previous crisis.”

We’re raising our alert status for the next financial crisis. We already raised it last week after spreads on U.S. credit default swaps started blowing out. We raised it again after seeing the remarks of Mr. Mobius, chief of the $50 billion emerging markets desk at Templeton Asset Management.

Speaking in Tokyo, he pointed to derivatives, the financial hairball of futures, options, and swaps in which nearly all the world’s major banks are tangled up.

Estimates on the amount of derivatives out there worldwide vary. An oft-heard estimate is $600 trillion. That squares with Mobius’ guess of 10 times the world’s annual GDP. “Are the derivatives regulated?” asks Mobius. “No. Are you still getting growth in derivatives? Yes.”

http://blogs.forbes.com/greatspeculations/2011/06/01/the-next-financial-crisis-will-be-hellish-and-its-on-its-way/

Dude, and I ate a seafood queasadilla just the other day. Hope it was at least Atlantic:

http://epaper.ardemgaz.com/WebChannel/ShowStory.asp?Path=ArDemocrat/2011/04/14&ID=Ar06107

On April 1, Food Safety Net reported that the amount of radioactive iodine-131 isotopes in samples taken just off the coast of the Pacific Ocean had surged to 4,385 times above the regulatory limit …

“as a buffer against taxpayer-funded bailouts should the institutions fail”.

Fed eyes global bank surcharge: report June 7, 2011

WASHINGTON (MarketWatch) - The Federal Reserve is backing a proposal at the Basel Committee on Banking Supervision that would have the largest global systemically significant banks hold a capital surcharge of three percentage points. Bloomberg News, citing a person familiar with the discussions, said regulators meeting in Basel, Switzerland want to have more capital for the largest banks as a buffer against taxpayer-funded bailouts should the institutions fail.

Fed governor Daniel Tarullo said Friday that work among international regulators on a Basel committee charged with writing global rules for bank capital has sped up recently and that the Fed is coordinating its introduction of a U.S. proposal for a capital surcharge for big banks with a similar one under consideration by international regulators. The surcharge would be required by some big banks in addition to an already agreed-to requirement that global banks hold top-quality capital totaling 7% of their risk-bearing assets, according to the report.

Is this Poison Sumac?

http://i864.photobucket.com/albums/ab205/muggyflo/IMG_5596.jpg
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~ Clipped from the 5 Min. Forecast

The chairs and nameplates are being lined up, the caviar is being prepped, the world’s finest hookers and blow are standing by. Tomorrow, OPEC gathers for one of their occasional price-fix… er, production quota meetings in Vienna, Austria. As always, the party will ensue.

But for a bunch of people who supposedly hold the world economy by the short and curlies… we can’t help but notice the ministers are looking decidedly feeble these days. As a consequence, the bickering — in Arabic, Farsi, Spanish, Portuguese and English — is liable to be more heated than usual this time around.

For starters, some of OPEC’s member nations are supporting a military campaign against another member nation. Kuwait, Qatar and the United Arab Emirates back the rebels trying to dislodge Libya’s Col. Gaddafi from power.

True, OPEC has been through this before… with Saddam Hussein 20 years ago. But it’s a lot harder for 12 guys in a room to reach a decision when three of them have bosses who are scheming to overthrow or even kill the boss of another. Just sayin’…

OPEC’s two key movers, Saudi Arabia and Iran, are also bitter enemies. That said, they appear to be in agreement this time on one essential issue: They think it’s time to bring more oil onto the market by boosting OPEC’s production quotas.

They’ve sat unchanged since they were lowered in December 2008 — when oil prices had crashed to $32 a barrel and it looked as if nuclear winter was descending over the world economy.

“OPEC is trying to compensate part of the shortage of supply of crude and create a balance in the market,” Iran’s OPEC governor Mohammad Ali Khatibi said recently. Usually, the Iranians are in the lead pushing for higher prices.

It’s one thing for OPEC ministers to say they want to boost production. It’s another to actually pull it off. This brings us back to an issue we’ve examined before — “spare capacity.”

Spare capacity is the ability of oil producers to jump-start new production within one month and keep it going for three months. Right now, there’s not much of it…

Libya’s 1.3 million barrels a day of production are out of the picture for the duration of the war there
Production in Venezuela, under the stunning mismanagement of our favorite caudillo Hugo Chavez, has been falling for years
Oil installations in Iraq have come under attack in recent months
Kuwait and the United Arab Emirates are already pumping full-tilt.
That puts the spare capacity burden, as usual, on Saudi Arabia.

In the meantime, let’s add this next item to our “man-versus-bureaucracy” file — proof that when it comes to busybodies, no good deed goes unpunished.

The good deed in this case is Mike Haege helping folks in Minneapolis whose trees had been knocked down by a tornado May 22.

As the owner of a tree-trimming business in a town about 40 miles away, Haege figured he could help. The morning after the tornado, he drove to Minneapolis to volunteer with the Urban League. He signed a waiver and headed out with his bucket truck and a wood chipper to get started.

Then a city inspector showed up.

You know where this is going. Haege doesn’t have a license to trim trees in Minneapolis. Never mind that he was volunteering his services.

Neighbors came out to tell the inspector he, indeed, was working for free. Haege showed the waiver he signed.

Nothing doing. He had to go. So he packed up. Passersby who saw his bucket truck begged him to stop and help. He did stop once — to move a tree, an act that, presumably, does not require a permit.

At that point, plainclothes cops who had nothing better to do pulled him over.

Unbeknownst to him, they’d been following him to make sure he left town. And they called in a bunch of uniforms for backup… just to make sure this obvious menace to the community didn’t pose a threat to the officers’ safety.

Haege hit “record” on his cell phone video camera as he was detained for the next two hours…

Finally, he was let go. In his mailbox a couple of days later was a citation from the City of Minneapolis for trimming trees without a license — a $275 offense.

~ The 5Min. Forecast

NJ plant closing, laying off 146 workers

PENNSAUKEN, N.J. — LiDestri Foods, Inc. is closing its 230,000-square-foot plant and laying off 146 workers.

The maker of Francesco Rinaldi spaghetti sauce, private-label sauces and other foods is consolidating operations at its base near Rochester, N.Y.

LiDestri will close July 22, Terry Carr, Pennsauken’s associate director of economic development, said this morning. The company will work with the state labor department’s business closing response team to help find new jobs and training opportunities for the people who will lose their jobs.

“This is a very sad day,” he said. “It is always hard when people are out of work.”

Sounds like B.B. is sniffing crack again, green crack that is…

Bernanke Sees Stronger Growth in 2nd Half of Year- AP

Federal Reserve Chairman Ben Bernanke says temporary factors, such as higher gas prices and the crisis in Japan, are the main causes of a softening economy. But he predicts growth will pick up in the second half of the year

“which ended in June 2009″ LOL! Yea riiight!

Consumers borrowed more for 7th straight month

WASHINGTON (AP) — Americans borrowed more money in April for the seventh straight month, but they cut back on using their credit cards.

Consumer borrowing rose by nearly $7.2 billion, fueled by greater demand for school and auto loans, the Federal Reserve said Tuesday. A category that measures credit card use fell for the second time in three months. It has risen only twice since August 2008, the height of the financial crisis.

The 3.1 percent overall increase pushed consumer borrowing to a seasonally adjusted annual level of $2.43 trillion, just above the nearly four-year low of $2.39 trillion hit in September.

The report includes auto loans, student loans and credit cards, but excludes mortgages and loans tied to real estate. The Fed will give a more complete picture of Americans’ debt on Thursday when it issues its quarterly report on household net worth.

Households began borrowing less and saving more to cope with the recession, which ended in June 2009. Credit card use has plummeted nearly 19 percent over the past 20 months and it has dropped 5 percent over the past year.

WSJ confirms what we’ve long suspected about HELOCs. Story:

More Homeowners With Second Mortgages Are Underwater

The lede:

“Almost 40% of homeowners who took out second mortgages—extracting cash from their residences to cover everything from vacations to medical bills—are underwater on their loans, more than twice the rate of owners who didn’t take out such loans. “

High comedy - Jamie Dimon allegedly griping to Bernanke about new too-harsh regulation. Pure political theater. If this guy can get an audience with Bernanke in public, do you think they’ve not previously spoken in private? The Jamie and Bernie Show. High comedy.

Jamie Dimon gripes to Bernanke
By Annalyn Censky
CNNMoney June 7, 2011: 6:34 PM ET

NEW YORK (CNNMoney) — JPMorgan Chase CEO Jamie Dimon is still griping about financial reform, and this time, he took his complaints straight to the top official at the Federal Reserve.

[...]

Dimon blames financial reform for stifling growth. He gave the Fed Chairman a laundry list of ways regulators have already cracked down on the banking system, after the Dodd-Frank financial reforms were passed last year.

[...]

http://money.cnn.com/2011/06/07/news/economy/jamie_dimon_bernanke_dodd_frank/?section=money_latest

Our local TV channel runs commercials constantly with Henry “the fonz” Winkler pimping reverse mortgagees from quicken loans. To listen to these folks “testimony” it’s apparent the plan all along was to live off their home once they retired. Now they can live the life they deserve!

The police officer was injured when he tried to keep a party reveler from breaking off the Mercedes-Benz logo of his patrol car.

Hamburg police have a WAAAAY better union that any in the U.S. It’s on Huffpost about the German girl who accidentally invited all of facebook to her birthday party (including her home address).

Facebook Party Gets Out Of Control After German Girl Forgets Privacy Setting - Huffington Post

Comment by GH
2011-06-07 07:01:22

“Not a popular belief, but our current economic problems are indeed the end result 25 years later of Regan policies, specifically his desire to deregulate big business.”

I was all but wiped-out as a high rise building contractor when Reagan let the trail lawyers have their “deep pockets” joint and several liability act. My insurance premiums were jacked-up so high that my clients decided to cut back my services by half; it didn’t take long before the trophy girlfriend was gone among other things. On the bright side, the event forced me to return to college for an engineering degree. I’m still bitter looking back though. The seventies and eighties were tough years.

Baby bulls are throwing a tantrum: “Where’s my next bailout?!”

The Financial Times
Markets sulk after Bernanke calls halt to QE
By Jamie Chisholm in London and Song Jung-a in Seoul
Published: June 6 2011 07:48 | Last updated: June 8 2011 08:02

Wednesday 08.00 BST. Markets are sulking after Ben Bernanke late on Tuesday appeared to signal the end of quantitative easing.

The chairman of the Federal Reserve acknowledged that “accommodative monetary policies are still needed” as the US economy struggles for traction. But he stopped short of suggesting any further quantitative easing, as some had hoped.

Wall Street promptly threw a strop, swiftly giving up gains to finish at a fresh 11-week low, and that has carried through into Wednesday’s action.
…