The Housing Bubble

For those who missed my post over the weekend:

The Joshua Tree Extension has been updated to support Firefox 5. Click the link in my name.

http://contrarianedge.com/2011/07/05/the-chinese-black-swan/

Party rulers in China are trapped in a position that chess players deeply fear — zugzwang — where any move made puts you at disadvantage. In China, the potential cost of both action and inaction is economic collapse.

China is slowly starting to face the consequences of its actions — loans grew over 30% a year over the last few years — and inflation is rising fast. Inflation in developed countries is unpleasant, but it is tolerable. For a developing country — and China, despite its size, is still a developing country — it can be catastrophic. In developed countries, we spend two or three times less on food as a percentage of our income as do people in developing countries. Therefore, though food inflation is unpleasant, we have a much greater tolerance (margin of safety) for it. While food inflation the US can mean fewer trips to restaurants or no summer vacation, food inflation in China leads to hunger.

The Chinese government is desperately trying to put the brakes on the economy. It is shutting off lending to land developers and has raised bank reserve requirements five times this year. However, its success on the inflation front will likely lead to a slowdown of the economy and high unemployment. Ironically, those were the issues party planners tried to cure when they stimulated the hell out of the economy over the last few years.

China bulls are arguing that the almighty Chinese government will be able to soft-land the economy. Unlikely, I’d say. Forced lending was at the core of Chinese economic growth. Simply put, there is too much debt to go bad. According to Ernst and Young, one-third of the $700 billion in loans taken out by local governments may face repayment problems. The People’s Bank of China estimates that Chinese banks’ exposure to local government loans is 14 trillion yuan ($2.2 trillion), according to the June 17 South China Morning Post. Once lending is cut off, property prices will stop appreciating (and likely collapse — that is what usually happens in a Ponzi scheme). Also, the overcapacity in the industrial sector and commercial real estate will come to the surface. And suddenly everyone will discover that the venerable emperor has no clothes.

Houses that get medieval on your patootie:

http://theweek.com/article/index/216802/homes-with-medieval-flair-a-slideshow

They cost millions, but at least you feel like the people who built it were real craftman and not the help du jour from the Sherwin Williams parking lot.

Casey Anthony trial over, thank goodness. The media must be p-o’d at the not guilty verdict, because now there’s no appeal or sentencing to cover. They’ll have to go back to reporting news.

May I suggest a little jalapeno for the chafe….

Banks chafe at pay clawbacks in liquidation plan

WASHINGTON (Reuters) - Banks and other large financial companies that could be seized and liquidated by the government are balking at a proposed plan they argue gives regulators too much power to snatch back executives’ pay if their institutions fail.

“Vague and arguably unfair provisions would create powerful incentives for senior executives and directors with the best options to head for the exits at the first sign of trouble, lest a substantial portion of their compensation be at risk,” top banking groups including the American Bankers Association, The Clearing House and the Financial Services Roundtable wrote regulators in May.

http://finance.yahoo.com/news/Banks-chafe-at-pay-clawbacks-rb-4224701934.html?x=0&sec=topStories&pos=9&asset=&ccode=

“I’m a very responsible woman and I don’t think it’s fair to be treated this way by the bank,” she said. “If we signed an agreement, how can I be going through all this?”

If we signed an agreement? Pay no attention to the first agreement I signed, that one doesn’t count.

Why doesn’t it count?

Because “I’m a very responsible woman and I don’t think it’s fair to be treated this way by the bank,”

Borrowers sue over apparent loan mod mishaps

By JACOB ADELMAN
Associated Press
Tuesday, July 5, 2011 at 5:03 AM

LOS ANGELES —
It seemed Maria Campusano’s financial problems were behind her when the mortgage on her Victorian home in a Massachusetts mill town was chopped by hundreds of dollars a month.

Campusano’s problems began when she sought to modify a loan she refinanced years earlier to finish repairs to her Victorian-style home in Lawrence, Mass.

The 44-year-old single mother said she wanted to reduce her housing expenses because she was about to begin repaying a graduate school loan and had recently taken in a niece and nephew after the death of her sister.

“How can they take away what I have worked so hard for?” Campusano said.

Julie Lewis, a 53-year-old mother of four, modified her contract with CitiMortgage Inc. for her Staten Island, N.Y. home after getting a divorce and suffering injuries in a car wreck that kept her from working.

“I’m a very responsible woman and I don’t think it’s fair to be treated this way by the bank,” she said. “If we signed an agreement, how can I be going through all this?”

http://seattletimes.nwsource.com/html/businesstechnology/2015511646_apusloanmodlawsuits.html?syndication=rss - -

Best way to pave the path for a future financial crisis, where Wall Street pirates get to screw the rest of US:

CONVINCE EVERYONE IT IS INEVITABLE, AND THERE IS NOTHING YOU CAN DO TO STOP IT FROM HAPPENING!

Brett Arends’ ROI Archives
July 6, 2011, 12:01 a.m. EDT
The next, worse financial crisis
Commentary: Ten reasons why we are doomed to repeat 2008
By Brett Arends, MarketWatch

BOSTON (MarketWatch) — The last financial crisis isn’t over, but we might as well start getting ready for the next one.

Sorry to be gloomy, but there it is.

Why? Here are 10 reasons.

1. We are learning the wrong lessons from the last one. Was the housing bubble really caused by Fannie Mae, Freddie Mac, the Community Reinvestment Act, Barney Frank, Bill Clinton, “liberals” and so on? That’s what a growing army of people now claim. There’s just one problem. If so, then how come there was a gigantic housing bubble in Spain as well? Did Barney Frank cause that too (and while in the minority in Congress, no less!)? If so, how? And what about the giant housing bubbles in Ireland, the U.K., and Australia? All Barney Frank? And the ones across Eastern Europe, and elsewhere? I’d laugh, but tens of millions are being suckered into this piece of spin, which is being pushed in order to provide cover so the real culprits can get away. And it’s working.

2. No one has been punished. Executives like Dick Fuld at Lehman Brothers and Angelo Mozilo at Countrywide , along with many others, cashed out hundreds of millions of dollars before the ship crashed into the rocks. Predatory lenders and crooked mortgage lenders walked away with millions in ill-gotten gains. But they aren’t in jail. They aren’t even under criminal prosecution. They got away, scot free. As a general rule, the worse you behaved from 2000 to 2008, the better you’ve been treated. And so the next crowd will do it again. Guaranteed.

3. The incentives remain crooked. People outside finance — from respected political pundits like George Will to normal people on Main Street — still don’t fully get this. Wall Street rules aren’t like Main Street rules. The guy running a Wall Street bank isn’t in the same “risk/reward” situation as a guy running, say, a dry-cleaning shop. Take all our mental images of traditional American free-market enterprise and put them to one side. This is totally different. For the people on Wall Street, it’s a case of heads they win, tails they get to flip again. Thanks to restricted stock, options, the bonus game, securitization, 2-and-20 fee structures, insider stock sales, “too big to fail,” and limited liability, they are paid to take reckless risks, and they lose little — or nothing — if things go wrong.
…

U.S. Farmland Boom May Peak After 5-Year Surge (Bloomibergi)

By Jeff Wilson - Jul 6, 2011 12:00 AM ET inShare0More

A five-year bull market in U.S. farmland values may peak this year as interest rates increase and crop prices decline, Rabobank International said.

Land costs may fall by as much as 15 percent in the next seven years, Sterling Liddell and Vernon Crowder, vice presidents at the bank, said in an interview. Gains in the past five years ranging from as much as from 70 percent in Nebraska to 20 percent in California were spurred by record grain and livestock prices and the lowest borrowing costs ever, Rabobank said in a report released today…

…Farmland values in parts of 12 central U.S. states were as much as 23 percent higher than a year earlier by the end of March, according to data from the Federal Reserve in Chicago and Kansas City. That may not be the peak, Rabobank said.

“We are in a period of continued price volatility, and we may see additional price spikes,” Liddell, a vice president for food and agribusiness research at Rabo AgriFinance in St. Louis, said in the interview. This year, farmers were hit with flooding in some areas and drought in others, and until the crop is harvested, there may be swings in agricultural prices,” he said.

The gains in the value of farmland outpaced the expansion in debt, driving debt-to-asset ratios near record lows. The trend in the debt-to-value ratio suggests lenders have been “conservative” and the highest-ever farm income means there should be enough money to service the debt, Liddell of Rabobank said.

————-

Floods in some areas and drought in others… it rather surprises me that there there isn’t the infrastructure to pipe fresh water from state to state. They do it with natural gas.

That underwater skeleton face in the mortgage mod ad gives me the heebie-jeebies.

http://www.nypost.com/p/news/business/bless_this_mess_eGj0dX3bBhzS3NTUwRAlRO

America’s biggest mortgage servicers are closing in on a deal with federal and state officials to settle some of the thorniest foreclosure fiasco problems — including the robo-signing issue, The Post has learned.

The proposed settlement with the Department of Justice and 50 state attorneys general, once thought to be in the neighborhood of $20 billion, could range as high as $60 billion and include a provision for principal reduction, sources close to the discussions said.

The settlement, as it is now structured, would form two types of funds, one national and state funds for each of the states, and would settle most state and federal civil foreclosure claims against Bank of America, JPMorgan Chase, Wells Fargo, Citigroup and Ally Financial.

U.S. Housing Recovery Stymied by Government

By Kathleen M. Howley - Jul 5, 2011 9:00 PM PT
Bloomberg

Fannie Mae and Freddie Mac, seized by the U.S. during the closing months of the Bush administration in 2008, have tightened more than a dozen mortgage qualifications since then, including those for down payments and credit scores. The restrictions come after the government handed out $16.2 billion in homebuyer tax credits to pump up demand and the Federal Reserve bought more than $1 trillion of mortgage bonds to lower borrowing costs.

The Fed on June 22 lowered its estimate for 2011 economic growth to a range of 2.7 percent to 2.9 percent from the 3.1 percent to 3.3 percent it projected in April, citing the residential real estate market as a factor. Housing is “a big reason that the current recovery is less vigorous than we would like,” Chairman Ben S. Bernanke said in a speech last month.

“The government is working at cross-purposes,” said Doug Bandow, a senior fellow at the Cato Institute, a libertarian policy-research center in Washington. “There’s been a desperate attempt to reinflate housing by throwing money at the problem. The worst time to tighten lending is after doing that.”

Ben has talked about the housing bubble in terms of being a classical mania. I think there’s probably truth to this. But with a twist.

So - you’ve had tulip bulbs (1637), the South Sea Company (1720), stocks (2000), and the real estate bubble (2000-2010).

What is different about these items? Real estate is something significant - a real object. All of these other manias are in “virtual products”. Products that are independently of little or no value or use, that gain massive popularity and demand. High liquidity virtual products.

But with real estate, I’m thinking that the same thing happened, and that real estate was just a side effect of the underlying mania. And that mania was in debt.

Small numbers of stocks are basically worthless except that someone else will pay more than you did for them. If a company’s stock goes too low, it will be bought. That puts a floor under stock prices (side note: the encouragement of mergers and acquisitions, which got big in the 80s, probably significantly boosted the price of stocks).

Tulip bulbs are good for little but decorative purposes. They quickly degrade, are easily damaged.

Debt is also a virtual product - it is merely a promise to pay. “You want promises to pay, I’ll give you promises to pay,” said the market to investors.

And the way to have individuals generate the most debt is to entice them to buy the largest purchase of their lives, a house. Demand for real estate itself I think is pretty static. It ebbs and flows depending on the economic climate of an area. Case-Schiller said it tracked inflation for the 1900s. But what can cause a worldwide mania is not the real estate itself but the mania in the underlying debt. Sharing an important facet with historical manias.

And it seems to me that the best way to stop the debt mania is to stop all government guarantees of debt, and to create a financial system that can’t hold the economy hostage when it engages in shenanigans. Highly rated junk debt by ratings agencies, plus government guarantees boosted the prices of debt. Then the government made itself the “bad bank”, by assuming the junk debt. And now, it’s not just this generation that will pay, but it will be many future generations that will pay.

Faux News / WSJizz / New$ Corp.’$ Inc.’$ … et.al.= MUrDoch’s “True Chupacabra™”

Families of 7/7 victims ‘targeted in phone-hacking’:
By Alice Ritchie | AFP

The row over phone-hacking at the News of the World erupted into a national scandal on Wednesday, amid allegations that relatives of murdered children and victims of the London 2005 bombings were targeted.

After the claims sparked widespread outrage, an emergency parliamentary debate was to be held to discuss the activities at the top-selling Sunday newspaper, owned by Rupert Murdoch’s News International.

Graham Foulkes said he believed his phone may have been hacked during the week he waited for confirmation that his son David was one of 52 people killed when suicide bombers attacked the London transport system.

“My wife and I were kind of all over the place, we were chatting to friends on the phone, in a very personal and deeply emotional context — and the thought that somebody may have been listening to that just looking for a cheap headline is just horrendous,” he told the BBC.

It has also emerged that the parents of Holly Wells and Jessica Chapman, two 10-year-olds who went missing in Soham, eastern England, in 2002 and were found murdered several weeks later, may have been targeted.

The news followed allegations on Tuesday that the News of the World hacked into the voicemail of teenager Milly Dowler in the days after she went missing in 2002. Her remains were found six months later.

When her voicemail box became full, they even deleted messages to make room for new ones — an action that hampered the investigation because her loved ones and police mistakenly took it as proof that Dowler was still alive, reports said.

In a statement issued late Tuesday, the private investigator jailed in 2007, Glenn Mulcaire, apologised for his actions but said there was “relentless pressure” at the News of the World, and a “constant demand for results”.

http://news.yahoo.com/iranians-gold-amid-inflation-currency-fears-124851328.html

Iranians snapping up gold as a hedge against inflation and central bank money-printing. Now that the sheeple here aren’t riveted to the Casey Anthony trial, they might want to think about doing the same thing before QE III is announced and Zimbabwe Ben’s digital printing press cranks the money supply to infinity and beyond.

This is kind of an important comment, so please read it. I will also re-post this comment at least a few more times this month.

Ben Jones has posted several articles about the pending regulation for the Qualified Residential Mortgage Program. Sloppier news articles imply that the regulation would “require” 20% down for any mortgage. This is not true. The pending regulation says that if a buyer qualifies for QRM, then the bank can securitize ALL of the loan. If the buyer does not qualify, the bank may only securitize 95% of the loand. That is, the bank could accept 0% down if they wanted, they just need to hold 5% of their loan.

Here is a better summary of the pending regulation:

———-
“The intent of the risk retention requirement written in Dodd-Frank was to make it more difficult to originate and securitize the types of loans that caused the worst problems during the downturn. The QRM (Qualified Residential Mortgage) definition should, and does, explicitly target these riskier attributes. There is no reason to further cut off credit to borrowers by layering on other more onerous restrictions that were not implicated in the downturn. The current QRM proposal is contrary to the explicit intent of Congress. To qualify for a QRM under the proposal, the borrower must make a 20 percent down payment and have a maximum loan-to-value (LTV) ratio of 80 percent for purchase loans and a 75 percent combined LTV for refinance transactions, reduced to 70 percent for cash-out refinances. In addition to a 20 percent down payment, the borrower must have cash to pay closing costs. Additionally, a borrower’s debt load must not exceed front-end and back-end debt-to-income (DTI) ratios of 28 percent and 36 percent, respectively. ”
———–

This summary was written by Chris Mozilo, a realtor in Arizona and nephew of Angelo. It is part of his full public comment on this pending regulation. To read his full comment please go here:

http://www.regulations.gov/#!documentDetail;D=OCC-2011-0002-0012

and click on the little “doc” box to the right. It will open in Word or pdf.

To see all 121 public comments, go here:

http://www.regulations.gov/#!docketDetail;dct=FR+PR+N+O+SR+PS;rpp=100;po=100;D=OCC-2011-0002

And click on the names you want to see. Names with little paper clips means that the comment was attached.

Here’s a quick tip: we like to complain that we can’t make a difference. But unlike a call to your congresscritter, public comments for pending regulations (on all topics) DO make a difference:

1. In this case, Congress already voted to write a regulation, when they passed the Dodd-Frank financial reform, so Congress can’t do anything any more here.
2. Public comments have to be read and answered by the regulators. Your comment will be read by those workers who make the actual decisions.
3. So far, there are ONLY 121 public comments. Contrast that to the thousands of calls a Congressman gets on dozens of topics. Instead of being one among thousands, your comment will be one among about 200 total (i’m guessing). It’s about the best “access” you will get.

So, if you want to comment on this regulation yourself, please go here:

http://www.regulations.gov/#!docketDetail;dct=FR+PR+N+O+SR;rpp=10;po=0;D=OCC-2011-0002

scroll down, and click on “comment due” in blue print. There are options to either type a comment directly, or upload a comment.

Realtors Are Liars

The EU honchos are getting mad at the credit rating agencies. The latest blow to them is that Moody’s downgraded Portugal’s debt. They have a point: the credit rating agencies are all US corporations. But if they were based in the EU they may be more likely to be compromised by government corruption there.

Europe issued a full-throated assault on credit ratings agencies on Wednesday, saying there were signs of bias against the European Union after Moody’s downgraded Portugal’s debt to “junk” status.

European Commission President Jose Manuel Barroso said Moody’s decision to lower Portugal by four notches and maintain a negative outlook was fuelling speculation in financial markets. Europe was looking at getting away from its reliance on the mainly U.S.-based ratings companies and weighing possibilities for legal redress, he added.

http://finance.yahoo.com/news/EU-attacks-credit-rating-rb-1204936540.html

Can anyone who believes it is a vital U.S. national interest to prop up the value of millionaire housing in Coastal California please explain the reason?

Because I’m missing it…

July 6, 2011, 11:18 AM ET

Rebound or Retreat After Mortgage-Cap Declines?
By Nick Timiraos

Wednesday’s Journal takes a look at the first real test of the government’s efforts to take a toe out of the mortgage market. Come October, the government will modestly reduce the maximum loan size that government entities can guarantee in certain high-cost housing markets.

In 2008, Congress raised the maximum loan amount that mortgage giants Fannie Mae and Freddie Mac and federal agencies could guarantee in certain housing markets. Home buyers in dozens of cities faced a credit squeeze when private lenders pulled back from originating loans that exceeded $417,000, the limit for government-backed loans. The higher limits are pegged to local prices and in the priciest markets rise as high as $729,750. After September, they’ll fall on a sliding scale depending on regional home prices, topping out at $625,500.

The decline illustrates the tough balancing act facing policy makers, particularly at a time when housing markets appear to be softer than many had hoped they would be at this point in the recovery. Without government-backed loans, buyers must take out jumbo mortgages that carry higher rates and tougher qualification standards.

“It’s a tough call,” says Richard Green, director of the University of Southern California’s Lusk Center for Real Estate. While he says it’s a “good natural experiment” to rollback lending support for higher-priced properties, he adds, “with the housing market as weak as it is, one reasonably wonders whether it’s good to do anything.”

The Obama administration supports letting the limits fall in a bid to carve out more room for private capital to compete with Fannie, Freddie and the Federal Housing Administration. Government-related entities stand behind more than nine in 10 new mortgages, and taxpayers have sunk $138 billion into Fannie and Freddie, underscoring lawmakers’ eagerness to dial down the government’s share.
…
In San Diego County, loan limits will decline to $546,250 from the current ceiling of $697,500. Greg Demgen and his wife are trying to sell their 5,200 square-foot home for $900,000. While he says he’s confident the home is priced to sell quickly, finding buyers who can qualify for cut-rate loans “can only help the cause,” says Mr. Demgen, 51, of Vista, Calif. “We should get it done before that $697,500 ceiling goes away.”

One in 12 home sales during the past year fell within the county’s proposed and current limit, assuming a 10% down payment, according to MDA DataQuick, a real-estate research firm.
…

Condos in Richmond, CA are selling at 60% off peak bubble prices — and at less than 100X rent, at least according to Zillow; and I believe Zillow’s market value estimates are upwardly biased, as I saw a comp on the MLS (exact same housing complex, floor plan, etc) offered at $25K less than this one. Presumably homes are selling for less than the list prices these days, too…

I hereby nominate Eddie for the HBB man of the year.

Former Boynton Beach police officer of the year indicted on drug charges

By Sonja Isger Palm Beach Post Staff Writer
Posted: 5:29 p.m. Tuesday, July 5, 2011

A Boynton Beach police officer honored only last year as an Officer of the Year and an instructor at his department’s Teen Police Academy now stands accused of selling drugs for the last two years.

The U.S. Attorney’s Office and DEA officials announced Tuesday the indictment of David Britto, 28, who they allege had and intended to sell more than 500 grams of methamphetamines between June 2009 and March 2011.

Boynton Beach Police department hired Britto in 2007. The Palm Beach County Association of Chiefs of Police and the Boynton Beach police selected him as 2010 Officer of the Year.

At the time, the department reported that Britto was an instructor at the department’s Teen Police Academy and volunteered as a mentor at the Florida Community Alliance.

http://www.palmbeachpost.com/news/crime/former-boynton-beach-police-officer-of-the-year-1583911.html - 57k

It’s just not fair howled the great American whiner!
Hey Sue, to bad, then get qualified. May take some time though and we can’t have that.

U.S. Housing Recovery Stymied by Government
Bloomberg- Jul 6, 2011

Sue Stamper, a business owner in Sacramento, California, wants to buy a home. After mortgage- financiers Fannie Mae and Freddie Mac imposed the strictest loan standards in more than a decade, she doesn’t qualify.

Pam Crawford of Lyon Real Estate is trying to sell a three- bedroom bungalow on Sacramento’s east side for $179,000, a third less than what it went for in 2004. She hasn’t found a buyer even after cutting the asking price by $10,000 two weeks ago.

The two women, who haven’t met, illustrate the deadlock crippling the U.S. housing market five years into the crash: While a record share of Americans want to buy homes, U.S. policies, often working at cross-purposes, are making it more difficult. Government-controlled Fannie Mae and Freddie Mac have boosted standards so high that some people previously considered prime borrowers no longer qualify. That’s limiting a real estate rebound that also has been damped by a state attorneys general probe into foreclosure practices and an Obama administration loan-modification program that has fallen short of expectations.

“It’s very important for a robust recovery that we get the right credit standards,” said Joseph Stiglitz, a Nobel-prize winning economist and professor at Columbia University in New York. “Giving out unsupportable mortgages was a disaster, and now the danger is overreacting and making the standards excessively high.”

I’m seeing a new line realtors are using on their flyers: “Priced Right for Today’s Market.”

I, of course, take them to mean, “It’s really worth a whole lot more, so YOU’RE IN LUCK because it’s so low-priced.”

Orange Co. Fl. Mayor Proposes Budget Cuts, Layoffs

Orange County Mayor Teresa Jacobs submitted her first budget as mayor and proposed a $3.2 billion budget, which is 5 percent less than this year’s budget.

The budget suggests eliminating 60 positions, which would mean as many as 27 people could be laid off. The last time Orange County laid off an employee was in 2007.

While most county office budgets are being cut, the sheriff’s office will receive a $2 million increase. The proposed budget for the sheriff’s office is $180 million.

Sheriff Jerry Demings asked for the additional funds because of rising fuel costs, expenditures associated with the Casey Anthony trial and the upcoming 2012 NBA All Star game.

“The sheriff had some legitimate concerns about their costs,” said Jacobs.

Jacobs also suggested a one-time $1,200 bonus for all county employees. She said the employees are not getting raises and they are having a hard time paying for health care. The state is requiring a 3 percent employee contribution to their pension plans.

Commissioner Ted Edwards said he disagrees with the bonus checks.

“I think if we give money for health insurance it should go into their health insurance plan, otherwise if you give them a bonus and a few days that goodwill is gone,” said Edwards.

The U.N. one of the larger wastes of time and money on the planet and a complete waste of real estate in N.Y.C. Looks like the new guy, Ban Ki-moon-bat has brought about some change.

~ U.N. Leader Ban Ki-moon Accused of Secretive Hiring Practices and Stonewalling | FoxNews.com

As Ban Ki-moon begins his second term as United Nations Secretary General, he has come under withering criticism from within the world organization over the way he hires and replaces top managers.

In a remarkably harsh report, a special U.N. investigative unit has charged that the way Ban chooses his most important managers is shrouded in excessive secrecy, that he keeps U.N. member states in the dark about top job vacancies, that he has created elaborate and arcane titles and functions, and skimps on detailed reference checks that could determine whether top officeholders are qualified to do their jobs.

Moreover, the inspectors say, the selection process has become so cumbersome that “appointments are not always made on time,” there is “almost no overlap between incumbents,” and that “ positions are vacant for long periods of time.”

They also charge that Ban’s methods are a step backward from the ways of his predecessor, Kofi Annan, who had promised to shed more daylight on the hiring process.

The two authors of the report, members of a small, elite U.N. evaluation team known as the Joint Inspection Unit, apparently had first-hand experience with Ban’s secretive habits.

They charge that Ban’s executive office stonewalled them in their mandated investigation of his hiring practices, refused them access to personnel files, proposed changes to their recommendations that would, as they put it, “simply eviscerate the entire report,” and contrary to normal practice refused to allow the authors to publish the Secretary General’s comments on their report.

“The ideological chasm in America today is a clear illustration of the old expression ‘a house divided cannot stand.’ ” ~Anon.

lil’ Opie (the non-Hawaiian),…Destroyer of America!

AP / By ERICA WERNER - Associated Press | AP – Tue, Jul 5, 2011

WASHINGTON (AP) — The White House says that families of service members who commit suicide are now getting condolence letters from the president just like families of troops who die in other ways.

The White House has been reviewing the policy since 2009, lobbied by some military families. A White House official said Tuesday that the change was made this week.

Safeguards Scant for U.S. Investors as Registered Advisers Increase by 39% - Bloomberg - Jul 6, 2011

Arnold and Cheryl Levy were a year away from retiring when Jeffrey Liskov, acting as their registered investment adviser, took a large position during July 2009 in a speculative fund with Arnold’s retirement money.

The Levys were dealing with an ill family member at the time and the trade escaped their notice until December of that year when Liskov alerted them to losses on the fund, the Levys said in a telephone interview. According to court filings they lost about $85,000 on the ProShares UltraShort MSCI Emerging Markets (EEV) exchange-traded fund, which placed bets that foreign stocks would drop.

“We were just beside ourselves,” said Cheryl, 67. She and Arnold, 69, of Stoughton, Massachusetts, felt they could trust Liskov’s judgment, she said. Actually, Liskov was sliding toward bankruptcy, and they had to absorb a 44 percent loss on the fund.

Registered investment advisers — firms that employ about 280,000 individual representatives nationwide — are billed as an alternative to traditional brokers because they are legally bound to a fiduciary duty to put their clients’ interests first, and typically charge fees instead of commissions. Brokers, who number about 632,000, are held to a suitability standard that their advice meet clients’ needs at the time a product is sold.

In practice, the lightly regulated RIA industry — where low barriers to entry helped swell membership by 39 percent in six years — may offer few protections for investors who wind up with incompetent advisers.
No Guarantee

Registering as an RIA “is just notifying regulators that you are holding yourself out as a professional investment adviser, and that doesn’t necessarily mean that you’re good, or ethical, or competent,” said Sheryl Garrett, founder of Shawnee Mission, Kansas-based Garrett Planning Network Inc., a network of fee-only financial planners.

Inappropriate investments, high fees and an inability to collect on legal awards are some of the problems investors may face with registered investment advisers, according to attorneys such as Angela Magary, a Boston-based securities lawyer, who have represented clients in arbitration or court actions against their advisers.

Orszag: Why We Care About Price of Water in China
By Peter Orszag Jul 6, 2011 Bloomberg

An American trucker barreling down Interstate 95 bemoaning the high price of diesel fuel might never imagine that one of the things driving up his bill is the way water in China is being mispriced. But the truth is, water shortages are indirectly causing increased use of diesel generators for electricity in China, and that, in turn, is helping raise diesel prices in the U.S.

Smarter pricing could help China — and the rest of the world — avoid further problems allocating water resources, and mitigate some of the side effects.

Coal plants generate most of China’s electricity. Hydropower is the second-biggest source. Water is clearly essential for hydropower, but a lot of it is needed for coal power, too — to mine the raw material, to process it and then to cool the power plants that burn it. In 2010, coal-fired electricity in China used more than 30 trillion gallons (114 trillion liters) of water, or about 20 percent of the country’s total consumption. And over the coming decade, roughly 40 percent of the nation’s increase in water demand will be associated with coal power, China’s Ministry of Water Resources says.

This development is exacerbating an already severe shortage in China. The country accounts for about 15 percent of the world’s consumption of fresh water. Yet its supplies are limited, and pollution is a significant hazard.

According to the World Bank, the amount of water per capita in China is only one-quarter of the global average. Furthermore, about 80 percent of the total supply is south of the Yangtze River, while only about half the Chinese population lives there. So the north is chronically short. The North China plain, which encompasses both Shanghai and Beijing, contains more than 40 percent of the national population, but less than 15 percent of the water. In this region, the per-capita amount is only about one-quarter the level considered the minimum for people to live on.
Pollution Hurts

Widespread pollution exacerbates the situation. About 90 percent of the aquifers underneath major cities in China are polluted. More than 300 million Chinese lack access to safe drinking water, according to the World Bank.

More property floods Dubai, Abu Dhabi rents drop 9%
Jul 5, 2011 ~ ARABNEWS

DUBAI: Oversupply continues to hurt the UAE’s property market with 18,000 new homes expected to hit Dubai’s market by year end and rents in Abu Dhabi dropping 9 percent in the second quarter, reports showed.

Some 2,000 homes were completed in Dubai in the second quarter and another 18,000 will be ready for occupancy by the fourth quarter, a report from property consultancy Jones Lang LaSalle said, adding that total current residential stock will rise to around 322,000 homes.

Office supply in Dubai is expected to grow by more than 30 percent over the next three years, it said.

Dubai house prices, already nearly 60 percent off their peak, are set to drop another 10 percent before stabilizing, Reuters poll showed.

Craig Plumb, head of research, Jones Lang LaSalle MENA, said, “Considering all real estate sectors in Dubai, performance was mixed this quarter, with some sectors - such as hospitality and retail - on the way to recovery, while others continue to decline. With GDP forecasts at 5 percent for 2011, Dubai’s economy is already recovering and general market confidence remains buoyant, which is illustrated by the over subscription of Dubai government’s new $500 million bond issue. Supported by improving investor confidence and increased liquidity, we anticipate progressive stability for most asset types.”

Hundreds of Calif. state workers earn 6 figures
~ SFGATE

Sacramento — As California’s elected leaders took drastic steps to cut spending last year, the state was paying hundreds of its workers six-figure earnings that far exceeded base salaries, according to newly released compensation data for public employees.

The data, compiled by state Controller John Chiang, show that more than 500 state employees made more than $240,000 before taxes in 2010. The controller listed last year’s pay for all 256,222 state workers on his website, but did not include their names.

At least nine state workers made more than $500,000 last year - most of them prison doctors and other medical staff. The top 10 earners, combined, collected more than $5.8 million in 2010.

When Chiang’s office first released the data Tuesday morning, they reported the top earner as a prison system psychiatrist who made $838,706 last year. But later in the day, Jacob Roper, a spokesman for the controller, said that figure was erroneous. State officials are reviewing the payroll data and will update it as soon as possible, he said. Without that psychiatrist, Chiang’s database cites the top earner as a prison surgeon who made $777,423 before taxes.

Exceeding base pay

All of the top earners’ pay far exceeded their base pay, and state officials said some were the result of payouts to retiring employees who had racked up extensive paid time off over the years. Others received bonuses, such as the chief risk officer at the State Compensation Insurance Fund, who made $288,000 in a base salary but $561,072 in total wages. And others may have received payment from lawsuit settlements, said Paul Verke, a spokesman for the prison system.

The Chronicle reported in March that the state regularly makes six-figure payouts to retiring employees because managers do not enforce caps on the amount of paid time off an employee can amass, and over the years, that paid time off adds up.
Exorbitant city salaries

The database was made public last year, at first focusing only on the compensation of city and county employees around the state, said Roper. It was created after media reports revealed exorbitant public salaries for top managers in the small Los Angeles County city of Bell - including a city manager who made $780,000 in 2009. The revelations eventually led to criminal charges against some city leaders.

“After the scandal in the city of Bell, we realized that taxpayers needed a better idea of where tax dollars are going to provide services, and we thought this was a good way of getting the information to them,” Roper said. “It adds value at the local level, so we wanted to add state payroll data as well … to match what we did for the locals.”
CSU salary data

Also Tuesday, Chiang released compensation data for the 123,406 employees of the California State University system on the same website. CSU Chancellor Charles Reed topped the list at $399,326 in 2010 pay, while the other top CSU earners were nearly all university presidents making between $288,000 and $372,400.

Soon to be heard by panhandlers on the street corner… Hey brother can you spare a credit card.

As Plastic Reigns, the Treasury Slows Its Printing Presses
~ The New York Times

WASHINGTON — The number of dollar bills rolling off the great government presses here and in Fort Worth fell to a modern low last year. Production of $5 bills also dropped to the lowest level in 30 years. And for the first time in that period, the Treasury Department did not print any $10 bills.

The meaning seems clear. The future is here. Cash is in decline.

You can’t use it for online purchases, nor on many airplanes to buy snacks or duty-free goods. Last year, 36 percent of taxi fares in New York were paid with plastic. At Commerce, a restaurant in the West Village in Manhattan, the bar menus read, “Credit cards only. No cash please. Thank you.”

There is no definitive data on all of this. Cash transactions are notoriously hard to track, in part because people use cash when they do not want to be tracked. But a simple ratio is illuminating. In 1970, at the dawn of plastic payment, the value of United States currency in domestic circulation equaled about 5 percent of the nation’s economic activity. Last year, the value of currency in domestic circulation equaled about 2.5 percent of economic activity.

“This morning I bought a gallon of milk for $2.50 at a Mobil station, and I paid with my credit card,” said Tony Zazula, co-owner of Commerce restaurant, who spoke with a reporter while traveling in upstate New York. “I do carry a little cash, but only for gratuities.”

It is easy to look down the slope of this trend and predict the end of paper currency. Easy, but probably wrong. Most Americans prefer to use cash at least some of the time, and even those who do not, like Mr. Zazula, grudgingly concede they cannot live without it.

Currency remains the best available technology for paying baby sitters and tipping bellhops. Many small businesses — estimates range from one-third to half — won’t accept plastic. And criminals prefer cash. Whitey Bulger, the Boston gangster who lived in Santa Monica for 15 years, paid his rent in cash, and stashed thousands of dollars in his apartment walls.

Indeed, cash remains so pervasive, and the pace of change so slow, that Ron Shevlin, an analyst with the Boston research firm Aite Group, recently calculated that Americans would still be using paper currency in 200 years.

“Cash works for us,” Mr. Shevlin said. “The downward trend is clear, but change advocates always overestimate how quickly these things will happen.”

Production of paper currency is declining much more quickly than actual currency use because the bills are lasting longer. Thanks to technological advances, the average dollar bill now circulates for 40 months, up from 18 months two decades ago, according to Federal Reserve estimates.

Investigation into APS cheating finds unethical behavior across every level
By Heather Vogell ~ The Atlanta Journal-Constitution

Across Atlanta Public Schools, staff worked feverishly in secret to transform testing failures into successes.

Teachers and principals erased and corrected mistakes on students’ answer sheets.

Area superintendents silenced whistle-blowers and rewarded subordinates who met academic goals by any means possible.

Superintendent Beverly Hall and her top aides ignored, buried, destroyed or altered complaints about misconduct, claimed ignorance of wrongdoing and accused naysayers of failing to believe in poor children’s ability to learn.

For years — as long as a decade — this was how the Atlanta school district produced gains on state curriculum tests. The scores soared so dramatically they brought national acclaim to Hall and the district, according to an investigative report released Tuesday by Gov. Nathan Deal.

In the report, the governor’s special investigators describe an enterprise where unethical — and potentially illegal — behavior pierced every level of the bureaucracy, allowing district staff to reap praise and sometimes bonuses by misleading the children, parents and community they served.

The report accuses top district officials of wrongdoing that could lead to criminal charges in some cases.

The decision whether to prosecute lies with three district attorneys — in Fulton, DeKalb and Douglas counties — who will consider potential offenses in their jurisdictions.

For teachers, a culture of fear ensured the deception would continue.

“APS is run like the mob,” one teacher told investigators, saying she cheated because she feared retaliation if she didn’t.

The voluminous report names 178 educators, including 38 principals, as participants in cheating. More than 80 confessed. The investigators said they confirmed cheating in 44 of 56 schools they examined.

Even U.N. Admits That Going Green Will Cost $76 Trillion
By Dan Gainor| FoxNews July 06, 2011

Two years ago, U.N. researchers were claiming that it would cost “as much as $600 billion a year over the next decade” to go green. Now, a new U.N. report has more than tripled that number to $1.9 trillion per year for 40 years.

So let’s do the math: That works out to a grand total of $76 trillion, over 40 years — or more than five times the entire Gross Domestic Product of the United States ($14.66 trillion a year). It’s all part of a “technological overhaul” “on the scale of the first industrial revolution” called for in the annual report. Except that the U.N. will apparently control this next industrial revolution.

The new 251-page report with the benign sounding name of the “World Economic and Social Survey 2011” is rife with goodies calling for “a radically new economic strategy” and “global governance.”

Throw in possible national energy use caps and a massive redistribution of wealth and the survey is trying to remake the entire globe. The report has the imprimatur of the U.N., with the preface signed by U.N. Secretary-General Ban Ki-Moon – all part of the “goal of full decarbonization of the global energy system by 2050.”

Make no mistake, much of this has nothing to do with climate.

The press release for the report discusses the need “to achieve a decent living standard for people in developing countries, especially the 1.4 billion still living in extreme poverty, and the additional 2 billion people expected worldwide by 2050.” That sounds more like global redistribution of wealth than worrying about the earth’s thermostat.

That’s because it is. The report goes on and says “one half of the required investments would have to be realized in developing countries.” In other words, $38 trillion would go to the developing world.

Fun statistics about Canadian Housing prices:

http://www.rbc.com/economics/market/pdf/house.pdf

A house or bungalow in Vancouver requires around 80% of pre-tax household income.

The 80% is based on:
The measures are based on a 25% down payment, a
25-year mortgage loan at a five-year fixed rate and
are estimated on a quarterly basis for each province
and for Montreal, Toronto, Ottawa, Calgary, Edmonton
and Vancouver-metropolitan areas.

25% down still requires 80% of your pre-tax income. No bubble? YEAH RIGHT!

“We do have to make sure that there are computers in a computer age inside classrooms and that they work and that there’s internets that are actually — there are Internet connections that actually function. And I think that those states that are going to do well and those countries that do well are the ones that are going to continue to be committed to making education a priority.”

~ President Obama

http://chicago.cbslocal.com/2011/07/05/thieves-in-chatham-targeting-air-conditioners/

A few years ago when I was vacationing in Belize, I noticed that in even the most upscale neighborhoods, all the houses had their air conditioners protected by theft-proof iron cages. Now that America is sinking deeper into a Third World dystopia, better make sure your new house has physical security measures appropriate to the times. Introducing hope ‘n change scrap metal dealers can believe in.

Would have been more fitting on the 4th of July, but this may resonate with the non-sheep among us.

http://www.alt-market.com/articles/164-the-essential-rules-of-liberty

There is nothing worse in this world than an enslaved man who naively believes himself free, except, perhaps, trying to explain to that same man his predicament. You can lay truth after truth before his feet. You can qualify your every position with cold hard irrefutable data. You can plead and scream and raise veritable hell, but before he will ever listen, he must first become aware of his own dire circumstances. As long as he views himself as “safe and secure”, as long as he imagines his chains to be wings, he will see no reason to question the validity of the world around him, and he will certainly never invest himself into changing his own deluded destiny.

Unfortunately, there are many such men crawling and scraping about here in what was once a land graced with a self sufficient and independently minded public majority. The great lie that has been perpetuated in this country over the past several decades is that we can defer our responsibilities of vigilance and place our well being and our futures into the hands of others for the sake of “collective efficiency”, or leisure. We have been conditioned to live in a state of constant indifference, a society which prizes compromise over principle and steadfast resolve. Those who refuse to compromise that which is honorable for the sake of ease and comfort are indicted as “extremist” or even criminal. The idea of personal revolution is treated with discomfort, and all we claim to stand for becomes muddled in a fog of inaction and cynicism. As Americans, we have forgotten what it means to earn and protect our own freedoms. We have forgotten that in liberty, there are standards that must be defended.

http://www.jsonline.com/news/milwaukee/125027704.html

More of that edgy downtown urban vibe.

I’m sure we’ve all heard of the stubborn home seller who insists that he/she won’t give it away. Well, guess what BofA is doing in Chicagoland.

http://news.yahoo.com/scandal-erupts-over-power-mexican-union-leader-211718158.html

Looks like Mexico’s teachers’ union is cut from the same cloth as the NEA.

Other things to wonder about as screws tighten down on all these public health services. Just think the about thousands of untreated AIDS patients that will soon be mingling among us.

“AIDS clinic in rural Texas to close”
http://www.wfaa.com/news/local/HIV-Clinic-Closing-125107234.html

A letter ARRT clients received in the mail “wishes them well” and “encourages them to seek” medical care elsewhere. It does not say where.

“Rochester has taken the top spot in a new national ranking of the most livable and affordable areas of the country.”

http://www.democratandchronicle.com/article/20110706/BUSINESS/110706015/Rochester-area-ranked-most-livable-bargain-market-U-S-

I’m hearing the voice of Ben.

“It’s all about jobs.”

Impressive video of the Phoenix dust storm:

http://www.youtube.com/watch?v=8W4Cx44XKZ4

Get out there and help ‘em, they’re… $uffering $o!

As recovery lags, corporations prosper–and lobby for more:
By Zachary Roth | The Lookout / 8-hours ago

Call it a tale of two economies. Across a range of measures, the current “recovery” is among the weakest since the government began keeping records. Meanwhile, American corporations, which already have been raking in massive profits, are poised to report strong second quarter profits. And despite that imbalance, one economic commentator notes that those same corporations are still lobbying for more tax breaks–concerns over the deficit be damned.

So, things are bleak–but not for American companies and shareholders. The Journal reports separately that according to an analysis by Brown Brothers Harriman, second-quarter earnings for companies in the Standard & Poor’s 500-stock index are expected to rise by 13.6 percent compared to a year ago, when they’re announced later this month.

That news comes after U.S. companies reported record profits last year. And rather than using that cash to hire workers, they sat on more of it than ever before.

Given all this, you might expect that corporations would at least be doing what they can to help solve the deficit problem that many experts say imperils the long-term stability of the economy. But as David Leonhardt of the New York Times observes today, the opposite is the case.

Leonhardt uses as an example the Business Roundtable, a trade group that’s generally seen as moderate, and talks about the deficit problem in sober, restrained tones. But lately, he writes, its actions are telling a different story:

Rhetoric aside, it consistently lobbies for a higher deficit. The roundtable defends corporate tax loopholes and even argues for new ones. It pushes for a lower corporate tax rate. It favors the permanent extension of the Bush $hrub tax cuts. It opposes a reduction in the tax subsidy for health insurance, a reduction that was part of the 2009 health reform bill. Oh, and the roundtable also favors new spending on roads, bridges and other infrastructure.