Bits Bucket for August 26, 2011
Post off-topic ideas, links, and Craigslist finds here.
The Housing Bubble
Examining the home price boom and its effect on owners, lenders, regulators, realtors and the economy as a whole.
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Clipped from The 5Min. Forecast…
Who says it’s not 2008 all over again? Warren Buffett’s Berkshire Hathaway is once again plowing $5 billion into a bank that, before the announcement, claimed it didn’t need any new capital to keep the lights on.
Then, it was Goldman Sachs. Today, it’s Bank of America.
“Berkshire will get cumulative perpetual preferred stock paying a 6% dividend,” Bloomberg reports.
“Berkshire also gets warrants to buy 700 million shares at $7.14 each.”
We assure you those are terms that you cannot secure — unless you have a spare $5 billion lying around. They guarantee Buffett will make money even if BAC’s share price goes down.
That’s how it worked with the Goldman deal. Ditto for Berkshire’s $3 billion investment in General Electric. Both companies trade at prices lower now than they did when he cut those deals.
It’s good to be the Oracle…
With this acquisition, Buffett now owns a significant piece of two of the Big Four retail banks… Bank of America and Wells Fargo. His stake in the two now totals $18.5 billion.
Buffett says he got the idea while in the bathtub yesterday morning. For all we know, the story is true — in the sense that he “got the idea” when he picked up the phone while in the tub and a panicked voice from the Treasury Department was on the other end of the line.
Let’s assess where matters stood at the time of Mr. Buffett’s date with the rubber ducky yesterday…
BAC’s share price had cratered by 36% since Aug. 1. It hadn’t been this low since March 2009
Credit default swaps on Bank of America traded at spreads even higher than during the 2008-09 panic
Another bad batch of data from the housing market (i.e., new home sales at their worst in five years) made traders twitchy about BAC’s massive exposure to the housing market
The bank remains likewise exposed to European government debt
Henry Blodget, Internet analyst turned blogger, said Tuesday that write-downs on mortgages and European bonds would force BAC to raise $200 billion in new capital
BAC had become the subject of increasingly alarming headlines worldwide, with the U.K.
Guardian writing openly about it “fueling fears of a second banking crisis.”
And that laundry list doesn’t even include the threat of lawsuits. Unique among the banking sector, BAC has a habit of turning up in the headlines again and again for stunts like repossessing a house that turns out to be the wrong address… or repossessing a house that was paid for in cash.
This week, a new wrinkle: Two stories about BAC foreclosing on people who renegotiated their mortgages under the government’s Home Affordable Modification Program and dutifully kept up their payments:
A Florida couple sent in its payment a week early and got a notice saying, “If you are not able to make each payment in the month in which [it] is due, you will not be eligible for a modification.” BAC has since apologized
A New Jersey man applied for a modification, never got word back and continued to send in his full payment every month. Evidently, he was approved… because he got a notice saying he was in arrears on his (reduced) payments to the new account. So far in this case, the company admits no wrongdoing.
Those are micro illustrations of a macro picture. BAC faces massive litigation on two fronts resulting from securitized mortgages. First, there’s the massively tangled chain of title on potentially millions of properties: Title was never properly transferred, prompting many recipients of foreclosure notices to go to court demanding, “Who holds the note?”
That’s a problem for many banks, but BAC is alone in facing this one: the hangover from the Countrywide acquisition. BAC is contending with a host of lawsuits by investors who bought mortgage securities from Countrywide… and who believe Countrywide lied through its teeth about the quality of the underlying mortgages.
And yet the PTB somehow expect J6P to pull himself up by his bootstraps when all the EZ money goes to the super rich.
I’m all for it. That’s $5B of taxpayer money that doesn’t need to be spent on some stealth bailout/QEIII/AIG whatever. Let the private sector fat cats who own shares of BRK — at $103K a pop — put up the money for once.
“Let the private sector fat cats who own shares of BRK — at $103K a pop — put up the money for once”.
Right and Buffet profited more than anyone from TARP. So calling Buffet “private” is a hard call, he attached to the gubmints hip. He loves taxpayer bailouts, pushes for them.
Exactly, if Berk’s deal turns into a loss we know that the taxpayers will bail it out.
Private has always been attached to gubmints hip, while slapping the gubmints face at every opoortunity.
In polite society this is known as a “quasi-private entity” or a “public-private partnership.”
Funny how you government lovers like rich people only if they are intertwined in government-corporate fascism. This was written about secedes ago by Leonard Peikoff in “The Ominous Parallels.”
“A Florida couple sent in its payment a week early and got a notice saying, “If you are not able to make each payment in the month in which [it] is due, you will not be eligible for a modification.” BAC has since apologized”
I have kept my 30-yr conforming mortgage paid ahead by six months in order to smooth the cash-flow problems due to winter when incomes slow and expenses rise. It worked out great for us, and I slept better too; the rough economic ride during the seventies and early eighties left me with mental scar tissue.
“Buffett says he got the idea while in the bathtub yesterday morning.”
it amuses me…the number of people that buy into his “i’m just a little old-fashioned man” routine.
I bet he’s got a super secret, high-tech bunker underneath that little A-frame he lives in. I just wonder if it’s hidden behind the grandfather clock like in Batman or if a bookcase hides the elevator or if the whole inside of his home transforms with the push of a button.
With the 10-year tail on those warrants, there’s the real money…if you assume BAC survives without wiping out all equity (which I do).
Unique among the banking sector, BAC has a habit of turning up in the headlines again and again for stunts like repossessing a house that turns out to be the wrong address… or repossessing a house that was paid for in cash.
This can’t bode well for the long-term health of BAC.
One wonders what sort of “talent” this place really has. Sounds like they have more “stupid” than anything else.
Stat of the Day: The Lost Decade of Home Ownership
Latest Census Figures Paint Sobering Picture of Slow, Uneven Recovery
By: Matt Carmichael Published: August 25, 2011
After six seasons of “Lost” on ABC, we learned that maybe no one survived the plane crash after all and instead had existed in a sort of purgatory. Or not. That will forever be debated. That’s not the kind of “lost decade” economists tend to talk about, but it’s easy to look back at what the Census Bureau today shows us about the last 10 years and draw some parallels. For much of the decade we thought, as a nation, that we were moving forward, but most of us wound up treading water and at the very least few found themselves where they expected to be once 2010 rolled around.
Since spring, we have been seeing piecemeal Census 2010 data hinting at some sobering figures. Population growth in the last decade was low. Household formation, a key driver of spending, was at its lowest growth rate on record. We added 27.3 million people, but only 11.2 million households. Birth rates, especially among younger moms, have fallen. The iconic American family — married couples with kids — are now just one in five households.
With today’s release of what the Census calls the Summary File 1 for all states, we can get a more detailed picture of what happened to housing and households in the U.S. between 2000 and 2010.
It’s not a pretty picture. In a typical decade almost all of these numbers would have shown growth. Seeing shrinkage shows just how the economy has laid the nation out in the tail end of the decade. It all points to a slow, uneven recovery.
…
Consider also the lost generation of many of the college graduates of 2009, 2010, 2011, and beyond who are saddled with tens of thousands of student loans and whose lifetime earning potential will be a third or half less than those who graduated into a growing economy.
Not much household formation going to be happening with them for a long when they’re stringing together 2 or 3 retail jobs earning less than $500/week.
The feedback posted to stories on this painful subject suggest that most people are ultimately more concerned with their own over-indulgence.
Shadow Households…the people are there, just not yet living on their own. They come out of the shadows if/when job creation restarts in earnest.
We added 27.3 million people, but only 11.2 million households.
What does this even mean? Given that they say the “iconic American family” is only 1 in 5 households, what difference does it make if the number of households formed is less than half of the number of people born. I feel like they want me to be concerned, but I’m not.
300 million people and 100 million households. The average is 3 per household. So, 27 million people and 11 million households is a lot of smaller than average households….
Thanks. That makes MORE sense, but is it household formation that is the problem (causing or correlated to a reduction in spending), or household formation by families that is the problem? Just seems to be a strangely worded/supported article…
The problem is that household formation isn’t keeping up with the population. You are still getting some household formation of perfect nuclear families, but that is more than offset by household contractions such as 2-3 income-producing roomies shacking up, communes of illegals, grandma moving in, son in the basement eating cheetos, etc. The result is a lot less spending, especially on big-ticket items like cars or furniture or appliances, not to mention houses themselves. Not good in an economy that is 70% consumer spending.
I guess I was only counting births as population growth, since they didn’t really define it…
…I didn’t consider the impact of population growth due to immigration of people of household forming ability.
Tiffany is doing just fine, thank you!
Darrell, I’ve never heard of the household size being that large. The number I’ve seen is 2.6 people per household, so for 27 million people you would expect 10.4 million households, doesn’t seem like the households formed are that much smaller than expected.
I guess I was rounding a bit too much.
http://quickfacts.census.gov/qfd/states/00000.html
Looks like 2005-2009 is the latest info available on households and it says 2.6 per.
Sooooo…. yeah. 27 million people averaging 2.6 per household should be about… 10.5 million households. 11.2 is an extra 700K households?
Are they saying that is good or bad?
Or are they just saying that the illeglas are packing up their big families and leaving?
Household formation, a key driver of spending, was at its lowest growth rate on record. We added 27.3 million people, but only 11.2 million households. Birth rates, especially among younger moms, have fallen. The iconic American family — married couples with kids — are now just one in five households.
Sounds like the MSM is getting ever closer to the key drivers of home sales. And, guess what, they’re not super-easy financing and ultra-low interest rates from here to kingdom come.
Do you mean the total lack of job security for most workers in the 21st century?
Except, of course, for the union ‘goons’. Man, those goons sure got it good.
Wait… now I’m totally confused by this “slowest household formation rate on record” BS.
The US population growth as a whole from 2000-2010 was 9.7%. That is the slowest rate of population increase in the 20th century… with the exception, of course, of the GD. From 1930-1940 USA population only increased 7.3%. I have a hard time believing that household formation was slower 2000-2010 than 1930-1940.
Of course, population growth 1980-1990 was only .1% better than 2000-2010 at 9.8%. Imagine how low the population increase would have been since then had we NOT turned a blind eye to immigration? I still say the 1986 amnesty was far more about casuing a new wave of illegal immigration to fight the baby bust.
GenX, the tiny generation trapped between the boomers and the generation of children of illegals.
It was indeed a lost decade for the majority of people who did what “they were expected to do:” drop anchor, produce babies, get in debt and decades-long obligations that shrink their opportunities. Very sad for our country, but the signs of today were in big loud letters on the wall during the late nineties.
For the most part, the wrong people are having babies. You HBBers are excepted.
Anti-baby boom: Why U.S. birth rate keeps falling
By Jessica Dickler August 16, 2011: 3:12 PM ET
NEW YORK (CNNMoney) — Right before the recession hit, the U.S. was undergoing a mini baby boom. Now, birth rates are declining fast.
The number of children born in the U.S. peaked with a record 4.3 million births in 2007, but has since fallen, dropping to 4 million births last year, according to estimates by the National Center for Health Statistics. The birth rate — a measure of births per 1,000 people — has dropped 10%.
Historically, declines in birth rates have gone hand in hand with economic downturns. During the financial slumps of the early 1990’s and 1970’s, the birth rates fell 15% and 18%, respectively. In the midst of the Great Depression, the birth rate was down by 17%.
Meanwhile, the cost of raising a child has risen steadily since the U.S. Department of Agriculture began tracking the data in 1960. From buying car seats and strollers to paying for childcare and schooling, a middle-income family could spend an average of $226,920 to raise a child born in 2010 to age 18 (and that doesn’t include overwhelming cost of college), according to the USDA.
The escalating cost, coupled with the most recent economic downturn, has caused many women to postpone or even forgo their plans to have children, said Steven Martin, a senior research associate for the Institute of Human Development and Social Change at New York University. “Certainly economic calamity does cause a significant decline in fertility,” he said.
In fact, nearly half, or 43%, of women said they would wait to start or expand their family until they felt financially stable, according to a recent survey by BabyCenter.com, an online parenting resource.
Most Americans can’t afford a $1,000 emergency
…
“a middle-income family could spend an average of $226,920 to raise a child born in 2010 to age 18 (and that doesn’t include overwhelming cost of college), according to the USDA.”
This number is so mind boggling (and oft quoted), that I almost can’t believe it. I know kids are expensive, and I put them out of reach at my income level (even though most people would consider it “high”), but I know I could afford it (although I’d have to greatly downsize my life).
However, 225K? Almost 1/4 of a million dollars? Or a little over 1K a month over 18 years? And then another 100K or so for college at the end of it?
I mean.. Wow.. That’s just a staggering amount of money. That’s like buying a Ferrari and financing it for 18 years? Or buying another 200K of house.
It’s just staggering that so many people can afford it, and even more shocking that so many people make the sacrifice to afford it.
However, birth rates going down is not a bad thing. All the “greenies” out there who want to talk about driving a Prius and buying carbon credits don’t want to talk about the real solution. The real solution is less people; we’ve overpopulated this planet and we’ve got to stop encouraging people to have more children. I certainly wouldn’t advocate a “1 child” policy like China (we’re not at that point yet), but we could slowly start to remove the subsidies encouraging more child rearing and provide a good first step. The idea that we need “more people” is just a holdover from the farming days (before machines) when we really did need more hands to man the plows and milk the cows. Now we need more people with high levels of education, but, in aggregate, far fewer people to do the same work than we used to need. Education of the populace is the key to prosperity, not “out breeding” the competition.
“That’s like buying a Ferrari and financing it for 18 years? Or buying another 200K of house.”
Small wonder we don’t own an overpriced money trap…
As an econ prof in grad school explained, the opportunity cost of poor parents having a 2nd, 3rd, 4th child is so low that it makes little difference for them to have less children.
From what I have seen in poor families opportunity costs have little to do with “decisions” about family sizes. The decisions and opportunities that decide family sizes among the poor are the opportunities that provide sex.
Family planning is something which people who plan do. People who plan family sizes are the same people who plan other aspects of their lives. People who plan usually do not end up poor. Sometimes they do, but usually they don’t.
Poor people end up poor usually because they fail to plan out their lives. Not always, but usually. Life “happens” to those who fail to plan out their lives, and large families are part of this “happening”.
Know a conservative Catholic couple in their mid-30 with 5 kids and a 6th on the way. The only family planning they do is how soon to have the next kid after the last one comes. The only reason they don’t have more is because the husband is a Major in the Army and has spend about 1/3 of his 10 year marriage deployed overseas.
Now being a Major, they make pretty good money, even with that many kids. They still own a home they bought near the wife’s parents in another state for when he deploys, but housing is pretty much moot to these people as all that is paid for on top of the $80 or so grand he makes in base pay, even though the rent a place near his current base. They are not hurting in the least even with two kids at private school and spending much of the summer traveling around the U.S.
Well, I paid $969 a month child support until my kids turned 18.
But, in exchage for that almost $12K a year, I did save about $2000 a year on taxes.
In that $1000 a month, they are assuming people live in a larger house becuase of kids. Those larger houses then have higher heating and cooling bills, higher maintenance costs, higher interest rates, larger tax bills, etc.
Sure, I wouldn’t need my 1800sqft 3-bedroom if it weren’t for the step-kids that live with us. But, honestly, how many DINCs live in 1000 sqft places? Well, outside NYC.
How many people really downsize to a smaller place when the kids are gone? My dad is still in a 1800 sqft 3 bedroom and he is 72 and hasn’t had a kid living with him for 25 years. My in-laws are 64-65 and live in a 2300 sqft 4-bedroom. Haven’t had a kid living with them since moving into that house.
Did I mention both my fater and in-laws drive giant SUVs though they rarely have more than 1 or 2 people in their vehicle?
So, yeah, the number isn’t really “real”. It makes a lot of false assumptions about WHY people have larger houses, larger cars, and such.
I’ve seen graphs that show the average size of newly-built houses has been growing steadily for the last 30 years. Years ago, it may have seemed strange for single retired man to live alone in and 1800 sq. ft. 3/2. These days, many consider a house of that size to be on the small side. Everybody thinks they need one bedroom to use as an office, in other words a room for their PC. If another bedroom is a guest room, then three bedrooms seem reasonable for one person.
You described my situation. Master bedroom, guest bedroom, and home office. The place is too big.
One bedroom here. Just over 1000 square feet. Large living room so the desk/computer don’t need their own room. People who visit me get the sofa, an aerobed on the floor or a hotel room.
It is just about right. I’d like about another 200 square feet so the dining area and kitchen weren’t so puny and little more space in the living room. In a perfect world I can see wanting the guest room, but I would almost never use it.
1000 sq ft for a one bedroom is BIG. Most of my neighborhood lived in 3/1 that were 1000 sq ft. They usually put in a finished basement.
My rules of thumb:
1/1 bare minimum: 500 sq ft (mainly to fit in all the appliances)
2/1: about 750 sq ft.
3/1.5: fits easily in 1100 sq ft.
4/2.5: 2000sq ft.
4/2.5 with formal living and dining and informal family room: 2200 sq ft.
Add up to 300-400 sq ft for extra space like pantry, mudroom, closet, small office, breakfast nook. Does not include unfinished basement.
I question the wisdom of anything over 2500 sq ft. At that point, you already have every type of room residential room in existance. What the heck else do you NEED?
I know that the 1000 square feet is a large one bedroom. I’ve had much smaller ones and this one is great. But the kitchen is very small and narrow with cabinets and counterspace on only one side. I’d like to have the other side. And the dining room is made very much smaller since it is lined with bookcases. I’d love that to be a bit bigger.
This is all if I were designing my own apartment. Don’t know. Maybe I’d like a loft. Anyway, not moving anytime soon.
I had about 400 square feet in a studio in Brooklyn when I first got out of law school. That was tight. I was working so much that all I really did was sleep and eat breakfast there. Even with that little space, I managed three house guests on two different occasions.
I’d be interested in knowing if past house sizes included that ‘unfinished basement’, because I grew up in a 1100 sq ft house — no basement — and it was small and crowded.
Watching HGTV, they always show 1200 sq ft houses that have 1000 sq ft basements. That’s 2200 sq liveable sq ft, at least for laundry and storage which makes a small house seem large.
It’s mind boggling because if you look at the things that make up the total, rent the kid should be paying for 18 years makes up the majority of it. That should be considered I guess, but the way they calculate it is by assuming that sans kids, the parents would live in a one or two bedroom place, and then calculate the difference in purchase price between 1 and 3 bedrooms and that number is the rent.
That doesn’t strike me as a particularly accurate way to calculate the additional costs of a child as I don’t consider an extra bedroom as being a marginal cost of raising a kid. People buy homes with extra bedrooms for many reasons - an office, a guestroom, etc.
So if you take out the rent calculation, the number is much lower.
Maybe buy a little farm and work the kids.
“a middle-income family could spend an average of $226,920 to raise a child born in 2010 to age 18 (and that doesn’t include overwhelming cost of college), according to the USDA.”
I have 2 kids 8 and 11, I never used to beleive that number, but I do now. I’d be pretty wealthy if I didn’t have kids and could live in a small apartment , company would pay all of my health insurance, no more 1200 dollar a month Costco bills, etc.
As a matter of fact my single co-workers drive 40K BMW’s and have 1 million dollars net worth, I drive a 20K Subaru and rent a duplex.
The reason I got the car at all is I sold overpriced RE in 2006.
And no Costco is not all food. My kids eat alot but not that much.
gosh catcus, if I should see an overflowing cart, with two youngins 8 & 11 at the Westlake Village Coscto, I’l introduce myself.
$1,200/mo, wow, I think I want to live at your house.
wait 10 and 12 , that’s what I get for typing and working at the same time
I think at least 150 is gasoline, and it will be at the Simi Costco.
often more than 1200 BTW I gave up getting pissed about it years ago.
illegals leaving? They were always having babies at a rate much higher than citizens and legal immigrants.
I’m the baby bust generation, trapped between the boomers ahead of me and a generation of children of illegals behind me.
I bought into the ’60s and ’70s paranoia about nuclear weapons. Plus, “two will do, adopt a few”. Yes, I was a Hippie. Married at 47; too late for kids. Did I unintentionally buy another flavor of KOOL-AID?
the greens are all about zero population growth, and the US is barely reproducing at replcement rate now. But why should we extinguish ourselves while sending aid overseas to support expanding 3rd world populations?
We native-born citizens are reproducing well below the ZPG rate. If it were not for immigartion, legal and illegal, we’d already be seeing a shrinking population, and that is pre-Baby-Boomer die off.
You need 2.1 children per woman to account for childhood fatality. Native-born people in the USA are about 1.9. Legal immigrants are at 2.6 and illegals are about 3.1.
As I stated, I suspect this baby bust has a lot more to do with a lower illegal immigrant population than the cost of raising a child.
As I stated, I suspect this baby bust has a lot more to do with a lower illegal immigrant population than the cost of raising a child.
I suspect you might be right. My sis is a bilingual teacher and she tells me that the # of illegals enrolled in her district has taken a sharp decline.
The enrollment in the Tucson Unified School District, southern Arizona’s largest, has been dropping like a rock.
True, this district is rife with incompetence, infighting, corruption, you name it.
But that’s not its only problem. The other one is that there are fewer children in Tucson.
And the trend is not TUSD’s friend. Further drops in the under-20 population are expected.
The birthrate measure that I pay most attention to is the Total Fertility Rate, which takes out the impact of having more and more older folks in the population, when looking at birth rates.
This is a more pure way to see how the overall economy is impacting American’s desire/willingness to start/grow their families over time. Here is a link to the last 10-years in the US.
http://www.indexmundi.com/g/g.aspx?c=us&v=31
You know what I learned from that site.
The more backward the country, the more children born. Some of those countries (Cambodia, IIRC) had 5-1 ratio (5 children per woman).
Anyone think that these things might be related? Overpopulation being the cause that these many of the 3rd world countries are still 3rd world?
Organizations that work overseas have known that educating women is the single best way to reduce family sizes for decades. And it is self-perpetuating because women who can read and do basic math teach their kids so the next generation of girls (and boys) are also more educated.
Women with a basic level of education are much more likely to want their kids to go to school and since that costs in most poor countries, they have fewer children so that they can get the better outcome (school) for all of them. Also their kids are less likely to die so they don’t need to have a lot of them to guarantee a few living to adulthood.
Conversation with a Dublin cab driver:
“You Americans are lucky, sure you are. You can just walk away from a house. If I could do that, I’d be out tomorrow. But here, if you owe money on a mortgage the bank can come after you. You can never get away.
“I got married about 4 years ago. My wife and I both worked. We had good jobs. We were earning good money. And we believed all that BS about how property would just go up and up forever.
“So we bought an apartment for 360,000 euros. It was only supposed to be temporary, because we wanted to have a family and we figured we’d get a house after we started having children.
“Well, we’ve got 2 kids already and another on the way. And we’re still in the apartment. And we can’t move. Because the place is now only worth about 160,000 euros — would you believe it? It’s come down that much. And I can’t make the mortgage payments.
“My wife lost her job when the trouble began. And now, with all those children she can’t go back to work anyway. And driving a cab isn’t what it used to be. Every time someone loses his job in Dublin, he starts driving a cab. There are empty cabs all over the place. So, I don’t make nearly as much money as I used to. And with my wife not working, I can’t pay the mortgage.
“So I went to the bank. You know they are all broke. All the banks in Ireland. You’d think they’d like to see an honest homeowner trying to do the right thing.
“I told them I couldn’t keep up with the payments. I asked them if we could work something out, since the apartment is only worth less than half the mortgage amount. But they wouldn’t even talk to me. I guess they have someone breathing down their neck too.
“So I just send them half the money I’m supposed to. It’s all I can do. And I figure they won’t kick me out. Not in Ireland. Ireland has a long history with evictions. It used to be that English property owners would evict their poor Irish tenants. So, now eviction is a bad word in Ireland, almost as bad as slavery in America, I guess. The banks — which have all been bailed out by the taxpayers — don’t want to be seen on TV evicting their tenants now. So I guess I’ll just keep sending them half the mortgage payment. I’ll probably be there for a long time.
“But sooner or later they’ll have to do something. There are 70,000 people in Dublin who aren’t paying their mortgages. And there’s no way they can pay them. The banks are going to have recognize, sooner or later, that they made a mistake lending all that money to us.”
Regards,
Bill Bonner
for The Daily Reckoning
“But here, if you owe money on a mortgage the bank can come after you. You can never get away.”
Emigration?
160K Euro still seems like heck-a-lot.
I don’t feel bad for people that bought at a price that was double rent.
But, I also don’t feel too bad for the people that loaned the idiots the money and now can’t get paid back.
1. Why send in ANYTHING if they can’t evict you?
2.
My wife lost her job when the trouble began
The “troubles” in N. Ireland has a completely different meaning…
“The banks are going to have recognize, sooner or later, that they made a mistake lending all that money to us.”
Not if the central bankers have anything to say about it!
“And now, with all those children…”
Interesting. Were “all those children” dropped at their doorstep and they felt an obligation to care for them? If so, kudos.
Quit blaming the kids.
If the banksters were innocent of very big crimes, why would they be so very interested in blanket immunity as part of the robo-signing settlement? I smell a rat — lots of them, in fact.
Schneiderman Removed From Mortgage Abuse Panel
All Things Considered
August 25, 2011
…
ROBERT SIEGEL, host: Eric Schneiderman was fired this week. Not from his day job, he’s still the Attorney General of New York State, but he’s no longer on the executive committee of state attorneys general who are negotiating a settlement with banks over fraudulent mortgage foreclosure practices. According to news reports, the consensus position among the state AGs is to get a narrow settlement, mostly on robo-signings, and to get it done. Attorney General Schneiderman, who is a first term Democrat, said this in a statement.
“Our ongoing investigation into the housing crisis cannot be shut down to accommodate efforts to settle and give banks and others broad immunity from further legal actions.” Immunity seems to be what this dispute is about. Wall Street Journal reporter Ruth Simon has been covering the story and joins us now from her office in New York City. Welcome to the program.
RUTH SIMON: Thank you.
SIEGEL: Tom Miller, the attorney general of Iowa, who I guess chairs this whole project of the state attorneys general, says that Mr. Schneiderman, the New York attorney general, has been undermining the 50 states in their attempts to negotiate a settlement. What’s going on here? What’s the dispute?
SIMON: Yeah, I think often these multi-state negotiations are difficult. And what’s unusual here is that the disagreements are coming to the fore and that they’ve been made very public even before we’ve got a deal. In this case, Mr. Schneiderman wants to take a broader approach, to look at both consumer and investor claims. He’s apparently asked administration officials to give him more time to look at matters related to securitization and the folks negotiating the deal want to focus this part of their effort on robo-signing and the problems in how troubled mortgages were handled.
SIEGEL: By securitization, you mean, the New York State attorney general wants to look into mortgage-backed securities and how..
SIMON: Right.
SIEGEL: …in his - in the words of his statement, the misconduct that lead to the collapse of America’s housing market.
SIMON: And what he has that a lot of other states don’t is a powerful tool called the Barton Act to look at alleged misconduct by Wall Street.
SIEGEL: So, Schneiderman, the New York State attorney general, says one thing he doesn’t want to do is to give the banks broad immunity to other state lawsuits that might be brought against them. And the other attorney generals, where do they stand on that, do you know?
SIMON: What we know is the banks have asked for broad immunity, but I’ve been told that they’re not going to get it, that what’s happened is the government has come back with a narrower legal release that the officials who were negotiating that have said would allow Mr. Schneiderman or other parties to pursue things like mortgage securitization or fair lending claims. Of course, the devils are in the details and there is no final agreement. And Mr. Schneiderman, of course, if he doesn’t sign the agreement, isn’t bound by it, either.
SIEGEL: And so far as you know, what the banks want is if they’re gonna pay 25 billion, they want to know that’s the end of litigation over mortgages?
SIMON: The banks would like to put it all behind them, clearly. I think it’s painful to have to keep dealing with this. I think you also have to keep in mind that in any kind of negotiation, the party that’s under investigation always is seeking the broadest legal protection possible. And the folks on the other side of the table want to preserve their ability to bring any kind of additional cases or ongoing cases for other types of wrongdoing. What normally happens, you don’t know about the back and forth of these negotiations until they’re all done.
…
‘the New York State attorney general wants to look into mortgage-backed securities and how..…in his - in the words of his statement, the misconduct that lead to the collapse of America’s housing market.’
Yeah, there were no greedy refinancing homeowners or people buying 5 or 10 houses. It was all the securitization of mortgages that caused everything. No appraisers were involved, no corporate builders bidding up raw land. There weren’t people camping out to buy condos that were never built, only to flip them in a week for big profits.
None of this happened; there was no housing bubble. It was all securitization; and the media re-writing of history continues.
Yeah, there were no greedy refinancing homeowners or people buying 5 or 10 houses. It was all the securitization of mortgages that caused everything.
Was that really all that common outside the speculative, high appreciation regions?
Well it was here in central S.C. on a much smaller scale of course, but we had Heavy speculation going on. The flipper stories were everywhere around here.
Same here. A couple of years ago a foreclosure notice in our community caught my attention so I looked up the FB’s name in the online county property records. He owned another failed flip here plus two others in a nearby lakeside community. Lost ‘em all, I’m sure. The question is, did the banks go after him since the houses were obviously “investments.”
I had a coworker who bought 20 (20!) section 8 quality houses in a bundle. And about as far from speculative fast appreciation areas as you can get.
Speaking of speculators, here’s one who’s a blast from my past:
Housing auction this weekend
The Fred mentioned in this article was the guy representing the sellers of the Arizona Slim Ranch. Which was a fix-and-flip special.
Yes, I bought one. And, ahem, it’s been quite a learning experience. I’ve learned quite a bit about doing my own repairs, maintenance, and upgrades, and working with others on these projects.
As for Fred, here’s a fun quote from the above link:
If he gets the house, he plans to put in granite kitchen counters, better appliances and upgraded lighting. Then he will put it back on market. He said, “If we’re lucky we might make something like 15 to 20 {thousand dollars}”.
To which I say:
Fred, do you now know how to do the paperwork? Because my agent had to walk you through the paperwork on this place back in ‘04.
“If we’re lucky we might make something like 15 to 20 {thousand dollars}”
Wow. If he’s thinking he’ll be “lucky” with those earnings, he’s already in trouble. Guys I’m talking to are pricing their ARV at 10% LOWER than the most recent comps (which in many cases aren’t very recent - 6+ months ago), and looking to make $30k+, independent of property type. That gives some good buffer.
$15-20k can get eaten up VERY quickly in this environment!
“If we’re lucky we might make something like 15 to 20 {thousand dollars}”
Wow. If he’s thinking he’ll be “lucky” with those earnings, he’s already in trouble. Guys I’m talking to are pricing their ARV at 10% LOWER than the most recent comps (which in many cases aren’t very recent - 6+ months ago), and looking to make $30k+, independent of property type. That gives some good buffer.
$15-20k can get eaten up VERY quickly in this environment!
Having had personal experience with this guy, I can tell you that he’s not the sharpest tool in the shed.
When you first meet him, you’ll note that he’s quite personable. But you’ll quickly realize that while the lights are on, nobody’s home.
Yeah, the people that point at the banksters are in many cases, the same people that fudged numbers on thier Alt-A loans and were doing cash-back-at-closing deals.
If we locked up everyone that committed fraud, there wouldn’t be enough people left to be the prison guards.
Ben, it kinda WAS all securitization. If those banks couldn’t sell 100%* of each and every mortage on the secondary market, then there would be no loans made. FIRST the bank that draws up the easy-money mortgage. Only THEN can the FB sign it. Without that easy loan money, there would be no condo farces, no reason to hit an appraisal number, no demand for land, no camping out, no Casey you-know-whos, and the rest of it.
Now, yes, the FB’s helped to the cycle going, but it was securitization that started the bubble cycle. I give the FB’s 1/3 blame, at most.
——————-
*100% of each and every mortgage. Those hundreds of comments to the proposed Credit Risk Retention rule were crystal clear: “if we have to hold 5% of all mortgages except QRM, that will kill the entire industry.” Banks — accustomed to living off the fat fees of clean sale within 30 days — do NOT want to hold even 5% of the risk.
‘it was securitization that started the bubble cycle’
Look at the time lines of when prices started going up and when securitization began in earnest. Why are there bubbles in so many countries that didn’t have wall street MBS? Some of these bubbles are worse that ours.
What I’ve noticed is groups that try to find one single cause of the housing mania usually have a political angle that is then tied to that one cause. IMO, it was a confluence of factors. But I’m not that interested in this matter. It won’t be you or me that writes the final book on the housing bubble. History will decide, after all the political axes have been ground away.
History will decide
Human “Habitats” & the mechanism’$ for it’s distribution & acquisition, in every way, shape & form.
HomeHouse: It’s a reflection of the person.Going after the banks is mostly about being ABLE to do a prosecution at all. They are big. They have money. They are required to follow a lot of rules when carrying on their business. And they have lots and lots of records.
How are you going to go after 10’s of thousands of appraisers? Or millions of borrowers? Criminal fraud is notoriously hard to prove and you also have to prove that the defrauded person relied on the information. Who relied on anything that was written on an application with no documentation? They didn’t. The only “persons” that can be caught by legal means are the banks. Or rather the originators of the loans, but the non-bank originators are pretty much defunct now, aren’t they?
Look at the time lines of when prices started going up and when securitization began in earnest. Why are there bubbles in so many countries that didn’t have wall street MBS? Some of these bubbles are worse that ours.
Sorry I still see securitization. Rather than a rising tide lifting all boats I see a MASSIVE financial bubble pumping cash into all sorts of places around the globe. It increased manufacturing around the globe as hoards of people feeling flush took vacations and purchased stuff made round the globe, and invested in things that offered higher returns.
If they were not all linked then why have all the bubbles popped at the same time. Without FED easy money the entire globe would be popping at this point.
“Look at the time lines of when prices started going up and when securitization began in earnest. ”
I don’t have those exact timelines, but I have two examples:
1. John R. Talbot’s book The coming crash in the Housing Market: April 2003. The book was ALL about securitization and LBO’s. When I read the book in 2006, I didn’t quite get it, but i do now.
2. The Zestimates for the houses near where I live. The first skyrocket in price happened in the 2002 timeframe, right about when Talbot was writing his book.
I vote for securitization as a primary factor.
John R. Talbot’s book The coming crash in the Housing Market: April 2003. The book was ALL about securitization and LBO’s. When I read the book in 2006, I didn’t quite get it, but i do now.
I can recall reading that book in the Borders in Ann Arbor, MI, a few years ago. I think it was a few months after I joined the HBB back in the spring of ‘06.
My father, noting how ardently I was reading, asked if he could buy the book for me. I turned him down and told him that I was already quite familiar with what was in it.
There was a full on bubble in Austin Texas in 1998. Every aspect of a mania was occurring. I’m sure that wasn’t the only place, and the US wasn’t the only country even then.
We’ve had countless threads on this. Are you asking who was to blame? What organizations were to blame? What caused the housing bubble? If it’s what caused it, you have to say that if this factor wasn’t in place the bubble would not have occurred. There’s not much that you could point to as a single “cause” given that this happened all over the world in a lot of different circumstances.
Even with securitization. Had it not existed, who’s to say some other form of finance wouldn’t have occurred?
The ability to separate a lender from repayment risk, was IMHO, the most important factor to create a debt bubble, and its physical manifestation, the housing bubble.
If lenders had to actually worry about being paid back, they would have made safe, likely-to-be-repaid loans. And none of the bubble could have possibly taken place.
The bubble in Texas depended on oil jobs and the high-flying Internet economy right? It wasn’t quite a bubble, since the prices seemed to have some income to back it up. And it was local.
“How are you going to go after 10’s of thousands of appraisers?”
I’m surprised to hear this from you Polly. I always expect sound discussion from you but you drove off the cliff on this one.
How about going after the *leadership* of these organizations? Instead of going after the local realt-liar x200,000, how about one or two decision makers at the top? Regarding appraiser, there is a national organization. Same with media. They don’t even have to go to jail. The hell that is the court system is punishment enough and establishes a deterrent against further corruption.
There as long been a leadership vacuum in government and the business community… now more than ever we need leadership on these issues.
Immunity seems to be what this dispute is about.
It’s about goal$ that bring about a better tomorrow:
Job #1: Indemnify (covered against lo$$)
Job #2: Immunity (covered against toilet paper pillow)
Job #1 benefit$ MegaInc’$ better than Peon$
Job #2 benefit$ MegaInc’$ expensive suits better than Peon$ t-shirts
This is “too big” to explore at length in this response. So, I’ll be brief.
Everyone in the game was to blame. You know this better than most.
Blind sheeple greed was necessary, but that psychology is visceral and native to humanity and will occur/has occurred with every bubble. The lemming portion of population that is caught in the phenomenon though must be… enabled… to run with that psychology. It largely cannot play if not for the credit-bubble element. Most of the “buy five houses for investment on $40k annual income” could not have happened if not for the securitization, the suicide loans and so forth.
Plenty blame to go around.
I favor no bailouts of any sort. No one listens to me, of course. But, if all the banks are to bailed, it is odd still to vilify the average shlep caught up on the process. Yeah, I save. I have doctor’s salary, one even way above average for my specialty. Yeah, I’ve rented the last 8 years at $850 a month for 3/2 1400ft-2 with all utilities included. I still drive my 8 year old (loaded) Honda Accorde EX-6 couple, taking more pride in having it run like the day I bought it at 115k miles, than I would take pride in springing for new wheels.
I am not “psyched” to see morons who borrowed 10x their income (or heloced it after buying house once upon a time reasonably) living large then whining about losing it, but, really, is not that what the banksters have done too.
I have no answers. Bailouts are evil. I get moral hazard. I continue to be frugal while I would indulge more if I did not believe the housing market will continue to crash another ten years. But, worse than moral hazard in general is “corporate moral hazard” in which the facilitators of the bubble are bailed, while we continue to mock the dumb-@ss greedy “little guys” for their role.
My rant now is done.
Where do you live (roughly)? In my area, that kind of property rents for three times as much.
Syracuse, NY. Clean suburban basic apartment, 1970’s. The tile in the BR is avocado. It’s ok
I travel. I have hobbies. I love Medicine. I earn well in this evolving Great Depression. And, I spend a lot of time out of town, minimizing my “need” (desire) for fancy homestead. I could buy nice houses up here in cash, but with NY taxes, my taxes would be close to my current rent, never mind upkeep and utilities (free with the apartment). I’ve been a mortgage holder in the past. Sometimes that is ok. But for now, incredible freedom to travel, low cost for “the place I sleep” serves good purposes.
But, even your mentality of making lots of money and spending little, is to blame as well.
For every seller there must be a buyer. The only wany one person can sell more than they buy is if another is buying more than they sell.
Someone borrows some money into existance. This allows them to buy from you, even though you are not buying an amount in return. You get the money and they get the debt.
And, that is all that money is. Someone elses debt.
Since you continue to live frugally, the next person that comes to see you must borrow some more money into existance. Again, they are left with debt and you are left with money.
At some point, unless this imbalance reverses and you begin spending more than you earn, the people that owe you can’t pay back the debt. The debt collapses, is written off as uncollectable, and the money you have worked and saved so hard for, disappears back into the thin air from which it was borrowed into exisitance.
It is fundamentally impossible for EVERYONE to be spending less than they earn. Really learn and understand that and the very nature of what money is, and you will have taken a large step into a larger universe.
Once again darrel, you miss the basic tenet of wealth. I can sell you a house with land for $20,000. Without me ever spending another dollar, you could mine that land for gold and pay me $20,000 in gold to settle your debt. Wealth is created through production, not through debt. Get over it.
—It is fundamentally impossible for EVERYONE to be spending less than they earn. Really learn and understand that and the very nature of what money is, and you will have taken a large step into a larger universe.—-
Perhaps it is impossible for everyone to spend less than he earns. I’ve not heard that thesis advanced before. It literally means that ALL cannot save ANY money. Not everyone can have ANY savings account whatsover. I’d need to see greater expansion on that claim to see if I buy it.
However, even if this is true, it stems from notion that societies all have a significant non-saving usually low-income population. That low income group can have variably poor quality existences, depending on the country. But, even if this is true, too, the “bigger step into the Universe” seems simply to be recognizing that in a non-win-win system you postulate, one must struggle then to be in the relative winning (saving) group. Clearly those who spend less than they earn have greater security and comfort (barring asteroids, cannibalism-inducing zombie viruses and such) than those who spend all/more than they earn. It seems, then, I am living the lessons put forth even in your larger universe
Comment by mathguy
2011-08-26 13:01:54
Once again darrel, you miss the basic tenet of wealth.
No mathguy, you miss the basic tenant that money is not wealth. Wealth is what you buy, and money is what you buy it with.
” I can sell you a house with land for $20,000. Without me ever spending another dollar, you could mine that land for gold and pay me $20,000 in gold to settle your debt.”
But I can’t walk into the bank and hand them gold. They only take dollars. You know.. that stuff they print “This note is legal tender for all debts public and private” on.
Money is borrowed into existance, and is ALWAYS equally offset with debt. I can’t destroy the debt by paying it back, unless I have dollars to equally destroy.
SOMEONE has to buy the gold from me so that I can get dollars to pay back my debt… PERIOD!!!!
Doesn’t matter if I’m mining gold, farming wheat or making widgets, if the people with the money aren’t willing to buy more from me than they sell to me so that I can get some money, the debt can’t be repaid.
I’m not saying that people with money have to end up with less WEALTH so that the people with debt can pay back their loans. I’m saying they have to end up with less MONEY! They have to spend thier money on wealth so that the people with debt can get the money they need to repay debts.
If they refuse to spend the money, then there will be 2 choices 1) tax it away from them or 2) let the debt default and be written off as unpayable, then the money just poofs back into the non-existance from which it was borrowed.
And a lovely rant it was, evil. Thank you for sharing.
Just curious, though. With expenses that low, are you planning to retire early?
Yeah, there were no greedy refinancing homeowners or people buying 5 or 10 houses. It was all the securitization of mortgages that caused everything. No appraisers w. There weren’t people camping out to buy condos that were never built, only to flip them in a week for big profits
Without securitization this would not have happened. Banks would have taken a close look at borrowers. Those that overleveraged to buy 5-10 hourses would have been denied credit by banks afraid of loosing money. Bad appraisers would have been rooted out by banks afraid of loosing money. Flippers would have been denied credit if they didn’t put 20% down on the house. Strawberry pickers would have been denied credit.
This entire mess is due to securitization and off loading of risk combined with short sighted compensation plans for banking and WS CEO’s. I’ll agree that small bubbles can form even without securitization but there is absolutely no way a super bubble like we’ve seen happens if banks can’t off load risk and CEO’s compensation is tied to the long term performance of the loans made.
’small bubbles can form even without securitization’
Like China? Their bubble dwarfs ours in the US.
Their bubble is the result of our bubble.
Seriously how would their economy look if we hadn’t allowed the real estate bubble to form. When US jobs were shipped to China unemployment would have immediately increased here. This would have cut into demand and likely affected our trade policies.
The ONLY reason their bubble hasn’t popped simultaneously with ours is MASSIVE injections of cheap credit and spending from their gov and ours.
Also didn’t they provide a lot of the cheap credit to the US forcing people to choose riskier investments like MBS that were as we now know as good and as safe as treasuries?
“The banks would like to put it all behind them, clearly.”
Doesn’t any criminal?
There is a concerted effort on Huffington Post to attribute anything housing related to “securitization”. Never about those things we discuss here…. only securitization.
This is no mistake or coincidence. I’m no apologist for the corporate banking thugs but ALL of it appears to be piled up on the bank steps while those at the helm of the organizations that leveraged securitization walk scot-free.
Yes… I’m talking about NAR…. and MBA, NAHB, The Appraisal Institute on the private side and the obvious perpetrators in public service. Securitization makes for a great proxy for these thugs…. yeah…. it was the SecuritizationMonster that took over all these organizations and created this disaster. Securitization was the the loaded rifle but someone took aim and fired.
‘a concerted effort’
I noticed it a while back here. As I said, it comes from the notion to lay blame where one wants to, not anything to do with reality. Suddenly we then find every FB is a victim of the evil bankers and wall street. It’s wasn’t a mania where every participant wanted something for nothing, but a world where all these people just wanted a little house with a picket fence and they were duped, defrauded, lied to, and now they are being cheated out of the house they deserve.
Give me a break. I was onto the MBS scam years before Ariana Huffington decided to get rich off of search engine optimization. I was poring through Fitch, Moody and S&P PDFs when the rest of the media though the bubble was a conspiracy theory. Back to the NPR reference; when I was on there in June 2007, I mentioned “record foreclosures.” Conan O’Brien said, “RECORD foreclosures?” and acted like I had farted. Jeebus, they had been at record levels for a year and half at least. But now, these clowns are gonna tell us all what “caused” the housing bubble?
Accuse me of tin foil hats but I believe laying the blame entirely on the banks is intentional and the Housing Crime Syndicate is funding that effort.
Yep, ole Buffet tries to talk people into feeling safe about BOA by throwing a small line of credit BOA’s way. Come on people start buying that stock from the big boys so they can jump ship. I haven’t checked, but what are the numbers of shorts?
Anyway we all know from government figures and the MSM that the recession is over but someone forgot to tell that to the management at Costco. I went in yesterday and the garden section was cleared out and replaced with Xmas lights, wrapping and toys for Xmas. While, get that money from the poor while they still have it. Since they only have it for the 1st week of the month that is only 4 shopping weeks until Xmas.
Aug. 26, 2011, 8:30 a.m. EDT
U.S. second-quarter growth revised down to 1.0%
By Jeffry Bartash
WASHINGTON (MarketWatch) - The U.S. economy grew 1.0% in the second quarter, down from an original estimate of 1.3%, the Commerce Department said Friday. The decline stemmed mainly from slower export growth and less restocking of inventories.
…
Aug. 25, 2011, 4:53 p.m. EDT
U.S. stock indexes fall ahead of Bernanke
Equities analyst says Buffett’s B. of A. purchase cause for concern
By Kate Gibson, MarketWatch
NEW YORK (MarketWatch) —- U.S. stocks skidded Thursday to break a three-day winning run as Wall Street braced for Federal Reserve Chairman Ben Bernanke’s speech the next morning.
“It’s not going to be an annual event, to drop a big bombshell at Jackson Hole,” Mike Dueker, chief economist at Russell Investments, of any expectations that Bernanke would repeat last year’s scenario — which had Bernanke hinting that the Fed might undertake a second round of asset purchases, otherwise known as quantitative easing.
…
Economy Grew at Slower 1 Percent Rate this spring - AP
The U.S. economy grew at a meager 1 percent pace this spring, a slower rate than previously estimated. The downward revision will likely increase fears that the economy is at risk of another recession.
Funny this Obama recovery feels like a Bush recession.
Spain puts constitutional limit on deficits. Not quite a balanced budget amendment, but close enough for “government work”.
http://finance.yahoo.com/news/Troubled-Spain-amends-apf-1537994339.html?x=0
Easy to pass an ammendment. Let’s see them make the cuts needed to get there.
That’s because it IS a Bush recession. Yes Clinton started the process of outsourcing, but a lot of the actual jobs moved during the 2000’s, generally following the advances in technology. Not to mention the tax cuts.
I notice that guys love to blame ex-wives for running up the credit card. But in an analogous situation, it’s all Obama’s fault.
Yes but to continue your analogy if the man continued to blame the ex-wife for running up credit card when he was running up his debt at a faster and faster rate, I would not find him very credible. I do not blame Obama for Bush’s debt but I do blame him for pursuing policies in fields such as health care, carbon policies etc and now immigration which have only made the situation worse. We should have had a Reagan type recovery since his stimulus is ten times Reagan’s. Had he done something about reforming entitlements, the economy would be doing much better. Just like Nixon could go to China, he was in a better position to cut the budget than any Republican president but he did not and he created uncertainty with his policies and drove up energy policies just at the wrong time.
No, the stimulus has helped growth and redeuced unemployment. The health care law is projected to get more people insured while also reducing the deficit over time. Reforming entitlements, specifically reducing the growth of health care spending per capita, will help over the long term, but wouldn’t have much affect on the main problem that the economy is experiencing currently, which is slow growth and high unemployment.
“Yes Clinton started the process of outsourcing…”
I can remember Nixon establishing trade agreements with China. The off-shoring process has been underway for some time, IMHO.
Clinton in no way started outsourcing. See Nixon. Clinton did however accelerate it w NAFTA. Technology also gets some of the blame.
At double the unemployment and triple the deficit…
Because it is all just a slow motion Reagan solvancy depression.
Trade imbalances do not exist long-term becuase they lead to excess debt. The debt multiplies the trade imbalance as the person with the deficit has to pay interest to the person with the surplus. The same imbalance that created the debt, then grew with interest, prevents the debt from being repaid.
If the trade imbalance does not reverse, then the debt will collapse, the money will poof into non-existance, people will lose faith in money, and a long and ugly depresion will follow.
Reagan delivered the GDP growth so more debt was possible. If we had 7% nominal growth in the economy we could afford to add almost a trillion in new debt a year and not impact the debt to GDP ration. Reagan inherited stagflation which is worse than Obama inherited because he had only a recession to fight. Obama has created stagflation which means the person that takes over from him has very limited options to improve the economy. Had Obama just done nothing, allowed the recession to play out we would have been better off. Oil prices would have stayed lower longer providing a stimulus that did not add to the debt and the economy would have rebalanced at a lower level. This is now happening anyway but we have killed our credit rating. I have to go for the day but will read the comments later.
Had Obama just done nothing… Ha!
If
would have rebalanced
would have stayed lower
would have been better off
The world according to
Garp… Albuquerquedanwe have killed our credit rating.
America [AA+] Day 21!
“Reagan delivered the GDP growth so more debt was possible. If we had 7% nominal growth in the economy we could afford to add almost a trillion in new debt a year and not impact the debt to GDP ratio”
If the GDP growth been something sustainable, like mining, manufacturing, ag, etc. then perhaps. However, his GDP growth was a combination of generating, servicing and trading debt, selling people cheap imports, and bubbles.
What he did was hand the nation a credit card, then count the rate the debt was increasing as income.
What we got was household debt increase at 3.5x inflation while wages were increasing more slowly that inflation. Sorry, but I don’t care how much you are increasing GDP, if that GDP is based households with falling real wages going further into detb at 3.5x the sustainable, reate, it is doomed.
” worse than Obama inherited because he had only a recession to fight”
Sorry, but we lost 750K jobs the month before Obama took office. Banking was in total collapse mode. Stocks were off 50% from their peak.
Obama didn’t get elected during a recession. He got elected in the middle of the inevitable debt crash that was the result of 30 years of debt increaseing at 3x the sustainable rate.
Obama, congress, the Fed and other government agencies (mainly suspending FASB157 so companies could flat out lie) managed to delay that crash. But, it is a delay only. We have not reversed the trade imbalances that caused the excess debt. We just made the government the borrower of last resurt. When the government has to cut back on its insane spending and low taxes, we’ll be right back in full collapse mode.
“Had Obama just done nothing, allowed the recession to play out we would have been better off”
We’d be in 1931. 25% unemployment, 50% underemployment, banking shut down, global trade at a standstill, tent cities, bread lines….
“the economy would have rebalanced at a lower level.”
At what level? $4 an hour average wage to compete with imports?
Trade imbalances do not persist long-term. They result in excess debt on the deficit side of the imbalances. The imbalances widens when the interest is added to the imbalance. The imbalance that created the debt, prevents the debt from being paid back. Debt that can’t be paid back, defaults, is wrtten off as uncollectable, casing money to poof into non-existance, causing people to lose faith in money, casuing a depression.
We are at that point where people are unable to pay back the debt and the debt and money are poofing into non-existance. That is where we were in 2008 when Obama won. In the process of falling into depression. With massive government action, we have maanged to delay the crash, but it is still right there… just waiting for government to shrink deficits, or for interest rates to react to our inability to trim deficits….
So Dan
If I use the credit card to buy and burn $1,000,000 worth of candles from my wifes candle store and she uses 800,000 of that to buy new candles from down the street, is the improved earnings at my house real? What do you think the future holds for my house?
If Warren Buffett buys a blizzard at Dairy Queen (or Steve Jobs buys an ipod) on a credit card, is that ‘real’?
Funny this
Obamalil’ Opie ICU drip-line recovery feels like aBushShrub Shadow ER Cardiac by-pass recession.“Hit ‘em Dr. Bernanke!”
“CLEAR!”
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“Hit ‘em again Dr. Bernanke!”
“CLEAR!”
zzzzzzzzzzzzzzaaaaaaaaaaaaaaaaaaaaappppppppppppppppp!!!!!!!!!!
“Nurse, how many times can I hit ‘em with this device”?
“Hey, you’re the Doctor, you decide!”
“oh, well in that case…”
“CLEAR!”
zzzzzzzzzzzzzzaaaaaaaaaaaaaaaaaaaaappppppppppppppppp!!!!!!!!!!
“CLEAR!”
zzzzzzzzzzzzzzaaaaaaaaaaaaaaaaaaaaappppppppppppppppp!!!!!!!!!!
“CLEAR!”
zzzzzzzzzzzzzzaaaaaaaaaaaaaaaaaaaaappppppppppppppppp!!!!!!!!!!
Man, I’d hate to be that patient when the hospital bill comes.
Guitar Frets: Environmental Enforcement Leaves Musicians in Fear
The Commercial Appeal/Zuma Press
Federal agents swooped in on Gibson Guitar Wednesday, raiding factories and offices in Memphis and Nashville, seizing several pallets of wood, electronic files and guitars. The Feds are keeping mum, but in a statement yesterday Gibson’s chairman and CEO, Henry Juszkiewicz, defended his company’s manufacturing policies, accusing the Justice Department of bullying the company. “The wood the government seized Wednesday is from a Forest Stewardship Council certified supplier,” he said, suggesting the Feds are using the aggressive enforcement of overly broad laws to make the company cry uncle.
It isn’t the first time that agents of the Fish and Wildlife Service have come knocking at the storied maker of such iconic instruments as the Les Paul electric guitar, the J-160E acoustic-electric John Lennon played, and essential jazz-boxes such as Charlie Christian’s ES-150. In 2009 the Feds seized several guitars and pallets of wood from a Gibson factory, and both sides have been wrangling over the goods in a case with the delightful name “United States of America v. Ebony Wood in Various Forms.”
The question in the first raid seemed to be whether Gibson had been buying illegally harvested hardwoods from protected forests, such as the Madagascar ebony that makes for such lovely fretboards. And if Gibson did knowingly import illegally harvested ebony from Madagascar, that wouldn’t be a negligible offense. Peter Lowry, ebony and rosewood expert at the Missouri Botanical Garden, calls the Madagascar wood trade the “equivalent of Africa’s blood diamonds.” But with the new raid, the government seems to be questioning whether some wood sourced from India met every regulatory jot and tittle.
It isn’t just Gibson that is sweating. Musicians who play vintage guitars and other instruments made of environmentally protected materials are worried the authorities may be coming for them next.
If you are the lucky owner of a 1920s Martin guitar, it may well be made, in part, of Brazilian rosewood. Cross an international border with an instrument made of that now-restricted wood, and you better have correct and complete documentation proving the age of the instrument. Otherwise, you could lose it to a zealous customs agent—not to mention face fines and prosecution.
John Thomas, a law professor at Quinnipiac University and a blues and ragtime guitarist, says “there’s a lot of anxiety, and it’s well justified.” Once upon a time, he would have taken one of his vintage guitars on his travels. Now, “I don’t go out of the country with a wooden guitar.”
Cool! I will have to hang on to my vintage mahogany Gibson guitar a bit longer, I guess…
Hope and change everyone!
File under “Why companies don’t want to make anything in America anymore.”
How soon will Gibson be offshoring their production? My guess is by the end of next year. Yeah, they may keep a symbolic manufacturing facility running here but the vast majority of product will be made elsewhere.
But will they be able to import the guitars made out of the exotic “forbidden” materials?
“ebony wood”?
The effect of speaker wire upon the signal it carries has been a much-debated topic in the audiophile and high fidelity worlds. The accuracy of many advertising claims on these points has also been a matter of much debate.
Friend, [audio engineer], old and still active beer argument with Hwy:
Hwy: “So, you saying Iffin’ eyes remove x1 stand of x19 from this 6′ foot cable you can tell the difference when listening to George Thorogood sing: “House Rent Boogie/One Bourbon, One Scotch, One Beer”
Friend: “Yep”
“How bout’s Tom Petty’s: “Into the Great Wide Open” ?
Friend: “Yep”
Hwy: “Not me” “…and I’m not going with the “Gold” connectors either”
Even with poor-quality wire, an audible degradation of sound may not exist. Many supposedly audible differences in speaker wire can be attributed to listener bias or the placebo effect.
Listener bias is enhanced in no small part by the popular manufacturers’ practice of making claims about their products either with no valid engineering or scientific basis, or of no real-world significance. Many manufacturers catering to audiophiles (as well as those supplying less expensive retail markets) also make unmeasurable, if poetic, claims about their wire sounding open, dynamic, or smooth. To justify these claims, many cite electrical properties such as skin effect, characteristic impedance of the cable, or resonance, which are generally little understood by consumers. None of these has any measurable effect at audio frequencies, though each matters at radio frequencies.
[Proud owner of a vintage hand-made 12 string Takamine guitar w/ Brazilian rosewood] (love the www site that let’s you imput your serial number to get the guitar’s mfg. history)
I can see a business opportunity here. It would similar to Fair Trade coffee. Call it Sustainable Music or something like that.
Methinks that more than a few musicians would get behind this in a big way. As in, Joe Bassist says that he plays a Sustainable Instrument. And he gets a big writeup in Guitar Player for it.
Reminds me of the 100% solar-powered music festival that we already have here in Tucson. Solar Rock’s been around for about five years, and it’s been quite successful.
Don’t invite the band Manowar. They would bust every solar panel and probably take out Palo Verde too.
(Manowar holds the records for the loudest concert and longest concert.)
The bands that play at this event are all local. And our local ear-buster is Juarez, which is a little too heavy-metal for Solar Rock.
The band is from Auburn NY and I was friends with the band in the late 80’s, They were trying to make in the US.
Goldman Launches Probe For To Find Out Who’s Behind The @GSElevator Twitter Account
Julia La Roche | Aug. 26, 2011
Goldman Sachs is launching an internal investigation into the culprit behind the @GSElevator Twitter account, the New York Post reported citing an unnamed source.
From the Post:
A source told us that following “a failed attempt to force Twitter to freeze the account, they are investigating who is behind it.
The Twitter account, which describes itself as “Things heard in the Goldman Sachs elevators do not stay in the Goldman Sachs elevators,” launched a few weeks ago.
So far it’s garnered more than 5,000 followers. Goldman wants it to stop.
It’s unclear if the user is actually an employee at the bank.
However, Goldman thinks the user is an intern or a young employee. Goldman believes there are enough facts on the Twitter feed for the bank to suspect it’s someone from within, the Post reported.
“Things heard in the Goldman Sachs elevators do not stay in the Goldman Sachs elevators,”
Ha! (anxiously awaiting):
“Things
heardseen in the Goldenman$uckselevatorspayroll/bonu$ dept. do not stay in the Goldenman$uckselevatorspayroll/bonu$ dept.,”Truth, like a beacon of light…
“culprit” would seem to imply guilt.
Perhaps they should be inquiring into the “hero”.
If it is an employee, he/she is violating the confidentiality agreement big time.
Fair point, with caveats.
Are mail room clrks and ‘terns sworn to confidence about things outside their arena? If so, then they are violating confidentiality, though one wonders about whistle-blower element (though that might require going to proper authorities, not blogs and twits).
Still, it is interesting that GS believes Twitter has obligation to facilitate GS’s policies, especially if company policy (which no doubt can give termination from job) rather than law is at issue.
I bet everyone signs the same one and it is as iron clad as any you ever read about anything learned at work or even in public. If I had to guess Goldman employees aren’t even allowed to talk to a reporter about a quote some politician said about Goldman. I didn’t have to sign anything to get in their building, but I was bound by attorney-client privacy responsibilities.
I find it interesting GS would expect Twitter to have hand enforcing its internal policies
The Bernake is getting ready to open his blow-hole at 10:00 a.m. Many on the street are hoping they’ll hear that QE-3 is set on the gangway. Not this time I think. Not to say it won’t happen at a latter date, but this go round BB is getting some push back.
I’m guessing more folks will be reading up on the “twist” and not the one Chubby Checker is famous for.
There will be no QE-3 as such
Bernake was hired and promoted by obama.
obama wants to get re-elected.
QE-3 will destroy that chance.
huh? obama?
rehired - February 2006 he was “hired”
Wiki: “On February 1, 2006, President Bush appointed Bernanke to a fourteen-year term as a member of the Federal Reserve Board of Governors, and to a four-year term as Chairman.”
Obama did not hire Bernanke, he just didn’t fire Bernanke. And really, it seems nobody else wants the job. It’s no fun anymore after Greenspan maxed out the credit card.
New York Times
August 24th, 2009
“The president thinks that Ben’s done a great job as Fed chairman, that he has helped the economy through one of the worst experiences since the Great Depression and that he has essentially been pulling the economy back from the brink of what would have been the second Great Depression,” the White House chief of staff, Rahm Emanuel, said Monday night.
—————
ABC News
August 25th, 2009
President Obama took a break from his vacation on Martha’s Vineyard to announce he would nominate Ben Bernanke for a second term as chairman of the Federal Reserve and credited him with guiding the economy through the worst recession since the 1930s.
“As an expert on the causes of the Great Depression, I’m sure Ben never imagined that he would be part of a team responsible for preventing another,” the president said. “But because of his background, his temperament, his courage, and his creativity, that’s exactly what he has helped to achieve.”
Obama praised Bernanke for the job he has done in guiding monetary policy through the economic crisis.
“Ben approached a financial system on the verge of collapse with calm and wisdom, with bold action and outside-the-box thinking that has helped put the brakes on our economic free fall,” he said.
Today’s homes, from the “recently sold” files. Unfortunately, once a house is sold, the only picture is the satellite shot.
House 1: http://tinyurl.com/3qfw6mr
This is a typical 1950’s-ish small house in learn-Spanish-by-immersion land. 4 beds in a 787 sq ft ==> done-over basement. “Totally renovated home, All appliances are top of the line stainless steel, granite counter tops, rear deck with part of it covered.”
Aug 1993: Sold $124K
Aug 2006: Zestimate $380K
Mar 2011: Sold $146K
Jul-Aug 2011: Listed $289K, then listing removed.
Good god. Granite is s-o-o-o 2006. Are there really idiots still trying to flip in this economy??
——————
House 2: http://tinyurl.com/42njey4
1940’s 3/1 split level on 0.2 acre. Blurry pix still on the site. Looks a little countryish, needs $30K interior cosmetic, like a bigger kitchen. I’d been following this one on Zillow.
Mar 2011: Listed $230K
Mar 2011: Zestimate $291
Apr 2011: Sold $190K.
—————-
My impression is that Zillow is where houses go to die, at least on the low end. The houses appear trashed, distressed, as is, and have high “days on Zillow” for a reason. The Zestimate does a good job of matching a list price, but the sell price is lowballed. In the $400K middle range, Zillow seems to be a better match. However, I don’t trust them. They probably have selective amnesia if something recently sells far below their Zestimate.
Warren Buffett makes $280m profit on Bank of America stake in just 24 hours.
By Helia Ebrahimi, and Harry Wilson -UK
The billionaire investor bought $5bn of preferred stock with 700m warrants that convert into 7pc of the bank’s shares, sending them up an initial 25pc to $8.80. They fell back to $7.67 in mid-afternoon trading, up almost 10pc on Wednesday’s close.
Mr Buffett’s move put some market confidence behind the bank after the hammering given to the shares in recent weeks on talk that it was short of $50bn to $200bn of capital. The bank has been hit by rumours that it may be forced to make massive writedowns on its housing debts and government bonds as well as the possibility it could haemorrhage even bigger legal bills for its mortgage liabilities.
But Mr Buffett, who made $4.5bn in profit from a similar move investing in Goldman Sachs at the height of the financial crisis, said he was impressed by Bank of America’s “profit-generating” capabilities. He added he had contacted the bank’s beleaguered chief executive Brian Moynihan on Wednesday morning proposing the deal, saying: “Bank of America is a strong, well-led company Brian… I wanted to invest in it.” The shares closed up 11pc on Wednesday.
Bernanke proposes no new steps to boost economy but hints Congress should help
On Friday August 26, 2011, 10:00 am
JACKSON HOLE, Wyo. (AP) — Chairman Ben Bernanke is proposing no new steps by the Federal Reserve to boost the economy while hinting that Congress may need to act to stimulate hiring and growth.
Bernanke says that while record-low interest rates will promote growth over time, the weak economy requires further help in the short run.
The Fed chairman is speaking at an annual economic conference in Jackson Hole, Wyo.
His speech follows news that the economy grew at an annual rate of just 1 percent this spring and 0.7 percent for the first six months of the year. Only slightly healthier expansion is foreseen for the second half.
Bernanke says he’s optimistic that the job market and the economy will return to full health in the long run.
Good, now the boyz best get out to Long Island and board up their Hamptons retreats.
Hopefully FEMA has staged some containers of sparkling water, vintage wines, and caviar.
FEMA will give them 5 star service on that you can count!
Dow down 140 on the news of no obvious QEIII. Well duh. Dow gained 400 points thinking there would be QEIII, so it should lose all 400 of those points.
And then some more.
And now up 124. Yeah, that makes sense.
I am so pleased that I don’t day trade because I would have went bankrupt 6 years ago.
They think Teh Bernank will announce QEIII in September and they’re pricing it in now. Never mind that they already priced it in.
This is my 401K they’re playing with. There’s not much else place to put money. (and no, I’m not going to buy gold at these prices. I don’t have that kind of scratch.)
From the Washington Post:
“Based on trends, half of the adults in the United States will be obese by 2030 unless the government makes changing the food environment a policy priority, according to a report released Thursday on the international obesity crisis in the British medical journal the Lancet.”
The problem is that “empty calories” (startch and fat) are cheap while while nutritious healthy food (fruits, vegetables and lean meats) are expensive.
True confession: I once had a boyfriend who was a bit of a control freak. Meaning that if he thought that anyone living with him made unhealthy food choices, into the trash can went the food.
It certainly got my attention. To the point where I made sure that my food passed muster.
One of the things he taught me to do was shop the grocery store. Yeah, big deal. Who doesn’t know how to do that?
Well, the trick is to spend a lot of time and money in the produce section. Chow down on those fresh fruits and veggies. Want something to drink? Well, hello frozen OJ! (This was Pittsburgh, after all.)
Other goodies can be found in the whole grains, dairy, and meat departments. As long as these things are of high quality.
In short, he showed me how to shop the periphery of a grocery store, rather than the middle aisles where the junk foods are.
Meaning that if he thought that anyone living with him made unhealthy food choices, into the trash can went the food.
Did he also turn all the can labels so they faced outwards?
Did he also turn all the can labels so they faced outwards?
No, but I do that. Working in a food co-op got that habit nailed into my psyche but good.
Wait, he did all his chowing and drinking IN the produce section?
And “shopping the perimeter” of the store to avoid the processed stuff in the middle has been the classic advice for years. Grocery stores have responded by putting their high value prepared deli items around the perimeter.
Fortunately, we in Colorado have the lowest percentage of land whales in the nation. One of the consequences of not living in a ‘right-to-eat’ state.
Consumer sentiment sinks in August on government despair
NEW YORK (Reuters) - U.S. consumer sentiment sank in August as consumers lost confidence in lawmakers’ ability to stave off the threat of another recession, a survey released on Friday showed.
The Thomson Reuters/University of Michigan’s consumer sentiment index edged up from its mid-August level but was still consistent with recession-era lows. The index has only been lower in three other surveys, which were taken in April and May 1980 and November 2008.
The final August reading on the overall index of consumer sentiment was at 55.7, down from 63.7 the month before. It was slightly better than August’s preliminary reading of 54.9, which had been the lowest level since May 1980.
Economists polled by Reuters had forecast a reading of 56.0.
“Consumers have shifted from being optimistic about the potential impact of monetary and fiscal policies to a sense of despair and pessimism about the role of the government,” survey director Richard Curtin said in a statement.
From Bloomberg:
Japan Spurs Solar, Wind Energy by Approving Subsidies for Renewable Power
“Japan approved a bill today to subsidize electricity from renewable sources, joining European nations in shifting away from nuclear power after the Fukushima reactor meltdowns in March.
The bill allows for incentives that guarantee above-market rates for wind, solar and geothermal energy. The so-called feed-in tariff created a race to install solar panels when implemented in Germany and Spain.
Critics of the measures included Keiranren, Japan’s largest business lobby, which counts power utilities among its members.”
Here’s some good news!
Tiffany & Co. 2nd-quarter profit jumps 30 percent on overseas growth; lifts full-year guidance
NEW YORK (AP) — Tiffany & Co.’s net income jumped 30 percent in the second quarter, propelled by strong growth across all regions as high-income shoppers continued to be drawn to its jewelry and other goods.
The New York company’s results handily beat Wall Street’s expectations, and it raised its full-year profit forecast again due to the better-than-expected performance.
Tiffany, known for its turquoise boxes, has a customer base that leans heavily toward high-income consumers. Such shoppers tend to gravitate toward luxury goods. Spending on luxury items has rebounded faster than other segments since the recession as wealthier consumers feel more confident in making purchases, boosting earnings for companies like Tiffany.
For the period ended July 31, Tiffany earned $90 million, or 69 cents per share. That’s up considerably from the $67.7 million, or 53 cents per share, it earned a year earlier.
Excluding 16 cents per share in costs tied to relocating its New York headquarters’ employees, adjusted profit totaled 86 cents per share.
This easily beat the 70 cents per share that analysts surveyed by FactSet forecast.
Irene might hit Wall Street . You couldn’t write a script like this .
But anyway be safe everybody thats in the hurricane zone .
I was just reading a worst case scenario article saying that Wall Street could possibly end up 7ft under water.
So the end of today’s NY markets it for a while if markets remain closed next week?
http://news.blogs.cnn.com/2011/08/26/hurricane-models-prepare-new-yorkers-for-worst-case-storm-scenarios/?hpt=hp_t1
There was a terrible rain storm one of the first years I was working downtown in NY. Don’t remember if it was the tail end of a hurricain or not, but very messy. By the time I got to the office, we had been kicked out of the building because the basement flooded and that messed up some of the power and the bathrooms. Couldn’t go home as by that time the subway back to Brooklyn was out and you did not want to walk across the bridge in that wind. Only trains functioning were going north, so I went to the Matisse exhibit at MOMA (bought a ticket off a scalper for pretty much all the cash I had in my wallet - about $30). Stayed for 5 or 6 hours (skipping lunch) and by that time I could get a train home. Great day. One of my NYC favorites. Co-workers largely decided to go to a bar to drink or World Trade Center to shop.
Can only dream of Richard Fuld, Lloyd Blankfein, Angelo Mozilo being forced to fend for themselves locked inside a post-Katrina Superdome.
The Day After Tomorrow
Here’s even better news: :-/
87% in US disapprove of Congress:
“…the GOP House members who refused to compromise weren’t considering the substance of the deal and instead acted on a desire to “bring the president down.“
WASHINGTON (AP) — Americans are plenty angry at Congress in the aftermath of the debt crisis and Republicans could pay the greatest price…
The poll finds the tea party has lost support, Republican House Speaker John Boehner is increasingly unpopular and people are warming to the idea of not just cutting spending but also raising taxes — anathema to the GOP — just as both parties prepare for another struggle with deficit reduction.
The results point to a chilly autumn in Washington as the divided Congress returns to the same fiscal issues that almost halted other legislative business and are certain to influence the struggle for power in the 2012 elections. They suggest that politicians, regardless of party, have little to gain by prolonging the nation’s most consequential policy debate. And they highlight the gap between the wider public’s wishes now and the tea party’s cut-it-or-shut-it philosophy that helped propel Republicans into the House majority last year.
Much about the next election hinges on independent voters, the ever-growing group fiercely wooed by campaigns for years. These respondents, the poll found, were the least forgiving toward incumbents and shifted substantially toward the need to raise taxes as part of the deficit and debt solution.
Among them, 65 percent say they want their own House representative tossed out in 2012, compared with 53 percent of respondents generally.
This group, too, is helping fuel the shift toward raising taxes as a way to balance the budget. The poll found that among independents, 37 percent now say that increasing taxes should be the focus of the fiscal dealmakers, over cutting government services. That’s up nine points from March, the poll found.
McCain is using his vacation to do town halls here in AZ. He had a funny joke….
“87% of people disapprove of the job congress is doing. No one from the 13% has showed up at any of my town halls.”
McCain recently held a town hall a few miles north of Tucson. (He won’t come into our fair city. I guess we’re too liberal for him.)
Unfortunately for McCain, his suburban town hall didn’t go well. I heard that his Gilbert, AZ town hall wasn’t a love-fest either.
So the Bernake volleyed the hot potato back into congresses court. Saying they need to get their act together (basically) and come up with some serious plans, that “fix” not hurt the economy. The congressional clown circus is bound to come up some real head spinners. Once they fail, they can whack the potato back to the Bernake.
Loads of entertainment heading our way!
Tariffs on any money leaving the country? Wealth tax on cash and cash equivilants holdings? Abolish payroll taxes and roll SS funding into a much steeper income tax? Short-term capital gains tax to 75%? Strengthen labor laws to bring up wages? Debt forgiveness? Let the too big to fail, fail, and push funds to small and medium banks instead? .5% tax on stock trades?
Here’s even the Best news yet! Cheers!
[perhaps ol' Hwy might spot crissy cox...]
Black kilt, Scottish attitude at Morton’s
August 26th, 2011, by PAUL HODGINS, THE ORANGE COUNTY REGISTER
I’d circled the date on my calendar weeks ago in eager anticipation: a Glenfiddich tasting at Morton’s in Santa Ana. Mitch Bechard was going to host. (He has what many fans of Scotland’s most beloved export would consider the ultimate dream job: Glenfiddich Ambassador for the western U.S.)
Sporting a black kilt and a dose of Scottish attitude that would make Shrek seem like a mewling little girl, Bechard was a grand barroom entertainer full of stories and jokes — a good share of them not repeatable in polite company.
Here are a few snippets from Bechard’s talk.
Mitch on his company: The company I work for is 100 percent Scottish. We always have been and we always will be. It was created in the 1880s by a man called William Grant. Him and his seven sons took a year to build the distillery. Our current CEO is part of the family. He is William’s great-great-great grandson. In Scotland there are only a handful of distilleries that are independent. Only two are run by the families that created them: The Balvenie and Glenfiddich.
We are the most awarded single malt scotch whiskey on the planet. Not too shabby. Can I hear an “Och aye”?
Mitch on what we were drinking that night: There are three fine samples in front of you this evening. It’s amazing none of them have been touched yet. That’s quite rare.
Age isn’t always the be all and end all in a whiskey. My analogy for age is this: imagine a very old collectible car. Great to look at, very rare and expensive. But you drive in it and it’s gonna drive like a piece of (junk). Think about what flavors you like and go with that as opposed to those numbers on the bottle.
When you’re tasting, please, don’t down it in a one-er. Remember people, it’s not (stinking) tequila we’re drinking here.
Mitch on the history of his fine spirit: We believe the first whiskeys were produced over in Ireland. We don’t know this. There are no written records. I always say, “Ireland, you can have that because look who’s laughing now!”
The first record of whiskey in Scotland is around 1494. There are references about aqua vitae, the water of life. We to this day talk about scotch as very medicinal. Peter Gordon, our current CEO, his aunt is about to reach 110 years old this week. It’s because she’s been having a little nip every day.
The English made scotch world famous. Around 1880 the Phylloxera bug destroyed wine and cognac sales in France, and the English needed something to drink so scotch whiskeys got more popular. Earlier in the century the single-malt scotches were very viscous and oily and there was no consistency (to) them at all. They were all over the place. In 1836 we were legally allowed to blend our whiskey together to make it more drinkable and smoother.
Mitch on the worldwide popularity of scotch: I go anywhere in the world and I’ll see scotch whiskey in the bar. That’s pretty impressive, don’t you think? You look at the size of Scotland, it’s this tiny little patch of land that sits above England, for obvious reasons. I’m quite jealous of England, actually, because they have some amazing (darn) neighbors.
Mitch on single malt vs. blended: A blended whiskey can be from a lot of different distilleries. More than 40 distilleries go into Johnny Walker Black. Single malt is from one distillery. Remember when you come to Scotland, you can visit our distillery. But you can’t visit a (single-malt) Johnny Walker distillery. It doesn’t exist.
About 85 % of our sales are blended. Single malts are a very new category. The first time a bit of advertising was done on a single malt was by our company in 1963. Arguably we were the ones that started up the category. The industry laughed at us. They said there was no point in marketing a single-malt scotch whiskey because it was all about blends. What’s happening today? Single malts are going through the roof. Everyone’s loving them. It’s a huge growth category, up 23% in the U.S. last year. Which is brilliant, because it keeps me in a job!
Mitch on a certain Scottish trait: What’s the difference between a Scotsman and a coconut? Sooner or later you can get a drink out of a coconut.
The verdict: Oh yes, the samples. We were given a 12-year-old , the 15-year-old Solera Reserve and an 18-year-old. Mitch wanted us to choose a favorite. I couldn’t — it would be like picking the son you loved the most.
Bechard will be hosting a four-course dinner featuring Glenfiddich 30-year-old at the Bayside Restaurant in Newport Beach on Sept. 14. The cost is $45 per person.
Mitch on a certain Scottish trait: What’s the difference between a Scotsman and a coconut? Sooner or later you can get a drink out of a coconut.
Very true!
Yours Truly has Scottish blood on both sides of the house. And, yes, we are thrifty, frugal, cheap, whatever you want to call it.
You should hear us having meltdowns over the prospect of having to…
…spend money.
I’ve been informed very curtly by a Scotsman that the properly spelling is “whisky.” The spelling “whiskey” refers to the Irish product, apparently.
Schwab Sues Bank of America, Citigroup for Manipulating LIBOR Rates; IMF Notes that LIBOR Underpins $400 Trillion in Financial Derivatives
Investment News reports Schwab sues banks for manipulating Libor rates.
Charles Schwab Corp., the largest independent brokerage by client assets, sued Bank of America Corp., Citigroup Inc. and other banks claiming they manipulated the London interbank offered rate, or Libor, starting in 2007 in violation of U.S. antitrust law.
The banks conspired to depress Libor rates by understating their borrowing costs, thereby lowering their interest expenses on products tied to the rates, according to the lawsuit filed Aug. 23 in federal court in San Francisco, where Schwab is based.
The banks “reaped hundreds of millions, if not billions, of dollars in ill-gotten gains,” Schwab wrote.
In separate suits in April, three European asset-management firms and the Carpenters Pension Fund of West Virginia sued the banks claiming they manipulated Libor. U.S. and U.K. officials are cooperating in a probe of possible Libor manipulation, a person close to the investigation said in March.
The Schwab suit seeks unspecified damages, which may be tripled under antitrust law. It also includes claims for racketeering and securities fraud.
There is that Bank of American name again….
I guess we’re at the part where they start taking out each other.
Perchance, see no evil, hear no evil, speak no evil is dead.
A few days ago I mused it would be funny for BB to come out and say “I got nuthin.” I clearly underestimated him. To paraphrase BB: “I got something, but I’m not planning to use it and won’t tell you what it is.”
There’s more genius there than I ever would have guessed.
http://www.theglobeandmail.com/report-on-business/economy/bernanke-quiet-on-next-fed-moves/article2143127/
I’ve been reading about the Dudley (NY Fed), who says that what the Fed SHOULD do is target a higher rate of inflation to make up for lost ground, and telegraph the higher inflation target to the world.
If that won’t get people buying risky assets, nothing will.
Stocks Rally After Bernanke Predicts U.S. Growth- AP
Stocks are rising in midday trading after Federal Reserve Chairman Ben Bernanke said the U.S. is on track for long-term economic growth.
- What a pant load!
- Another pant load…
Merkel: Markets Won’t ‘Blackmail’ Euro Leaders
(Bloomberg)
German Chancellor Angela Merkel said investors are trying to “blackmail” governments into helping debt-strapped European countries, underscoring the need for all euro-area governments to reduce debt.
“After the states bailed out the banks, the financial markets are again trying to blackmail states and tell them, ‘You’ve made so much debt,’” Merkel said today at a rally of her Christian Democratic Union in the eastern city of Brandenburg, about 50 kilometers (30 miles) from Berlin.
The solution is to press “countries that are highly indebted to really do their homework and get their debt down,” she said. “A Europe with a common currency requires common duties.”
Merkel is underlining her stand on the euro region’s debt crisis in local election rallies in August before national lawmakers vote next month on a second aid package for Greece and an expansion of the powers of the European Union’s crisis fund.
She stood firm in rejecting euro bonds, joint debt issuance by euro countries, which is supported by Germany’s two main opposition parties, the Social Democrats and Greens.
“That’s where we have to put up a clear stop sign and say we won’t do that,” Merkel said. “Everybody has to do their homework. Responsibility has to be pointed out.”
Angela is not a pushover. She has given in a number of times already, but I do not believe that means she always will. If the push too hard, they will find her sticking point.
Further up the thread, I confessed to having Scottish blood on both sides of the house.
Well, I have German blood on my mother’s side. She uses the term “stubborn Kraut” as a term of endearment.
It gets harder and harder to believe you will stand your ground when you keep rolling over. My wife’s family is German and her extended family have lived there for generations. They are none to happy with all of “her” bailouts to say the least.
And, being of German descent, I can visualize what they’re saying and how they’re saying it.
Warning: Do not get anywhere near angry Germans. Because when they’re angry, they’re REALLY angry. We’re talking blitzkrieg levels of anger, people.
Another barometer in Phoenix besides record heat: six months ago my regular dentist was not there. Another dentist examined my teeth. Today just the hygienist was there. I jokingly asked if they are escaping the heat.
The receptionist says they lost business lately due to layoffs. This dentist office is in Chandler. Over five years since the bubble peak. Things seem to be getting worse. People give up dental care when they lose jobs, makes sense.
On the other hand I got three headhunter calls this week. One of the headhunters called me on three consecutive business days. Jobs are looking up if you care to commute thousands of miles to work.
My co-worker’s wife is a hygenist. Down from 4 full days a week to 3 half-days a week.
The receptionist says they lost business lately due to layoffs. This dentist office is in Chandler. Over five years since the bubble peak. Things seem to be getting worse. People give up dental care when they lose jobs, makes sense.
When I last went to the dentist back in early ‘09, I noticed that the practice’s longtime receptionist/administrator was gone. This lady had run the place like a clock, so I was surprised that she had left.
The hygienist who examined me was all hot to sign me up for a pricey deep cleaning treatment. Price I was quoted was around $650. “Too rich for my blood,” I said.
I paid my bill (to that hygienist), left, and never went back.
What I did was hie myself over to the community college dental studies program for a second opinion. The student hygienist and his instructor both said that I didn’t need the deep cleaning treatment.
Looking back on this incident, I’ve come to the conclusion that the receptionist/administrator either resigned (because she saw the handwriting on the wall) or she was laid off. And, since business had gotten so bad, the pressure was on the remaining employees to sell expensive procedures.
I can’t help thinking that similar pressure is also on the employees in a lot of other dental practices. Because dentistry is one of those fields where you’re paid for doing things, regardless of whether those things help the patient or not.
I had the same experience.
I hadn’t been to the dentist in 2-3 years. No history of cavities.
The hygenist and dentist came in and said I absolutely needed an sonic cleaning for 300 plus bucks. They said insurance wouldn’t pay which got me thinking. They laid on the fear pretty heavy as well.
6 months later I went to another dentist and they cleaned my teeth without saying a word. I asked about sonic cleaning and the girl said that she used in on a couple areas, ie they didn’t charge anything for it it was part of routine cleaning for them.
Needles to say dentist 1 will see no business from me orany of my family in the future.
I recently had my old mercury fillings removed and replaced with the new type plastic fillings. After three appointments and all is done, the Dentist tells me he wants me to come in and put caps on each tooth at $700 each.
Confused me but it makes sense since they did not seem that busy and I have read this blog. Anyway, my teeth are just fine and the mercury fillings are gone.
Does anyone else get flyers in the mail for new dentists? I get one every couple weeks.
Today I got a recorded phone call from my old doctor’s office for flu shots. i think it was a scam.
Cosmetic dentistry procedures are way down.
And that is where all the profit is…
My former dermatologist got very deep into cosmetic procedures.
Last time I visited his office was in the fall of ‘08, and the huge waiting room was almost deserted. Oh, yes, there was an elderly guy standing there, looking lost.
Well, my father gets that way too. Best thing to do is just walk over to him and say, “Good morning, sir! Can I help you find a seat? Would you like a cup of coffee while you wait?”
Not one staff person even bothered to come out and assist him.
But why would they? He wasn’t an upscale cosmetic patient. The old man was probably on Medicare.
In addition to the price I was charge for removal of a mole and testing it, their ignoring that old man so offended me that I never went back.
A year later, I got a letter from that office. Letter all but begged me to make an appointment.
The “TrueReducethe DeficitNow! Today!™” will be out in droves filled with “TrueAnger™” at lil’ Opie iffin’ he allows Federal Di$aster aid to these,.. poor folks
When will we ever learn the lessons of hurricanes?
By Orrin H. Pilkey, Special to CNN
August 26, 2011
Editor’s note: Orrin Pilkey is the James B. Duke Professor Emeritus of Earth Science at Duke University.
Recognizing the futility (and stupidity) of rebuilding in very dangerous places, the states of North Carolina and South Carolina both instituted policies of not allowing buildings in beach communities to be replaced if destroyed by storms. Property owners went to court, important people were offended, politicians got into the mix and the approach did not work in either state.
“When will we ever learn” as the song goes. Why spend federal and state money to bring back roads, water and sewer lines, bridges and beaches in locations where we know for certain that storms occurred in the past and will soon occur again in the future; storms that will destroy the communities.
How long will it take the public to learn that beachfront construction is a fool’s act and that we should not be responsible for such foolish acts. Ironically, although the affected beachfront property owners may lack common sense, they do not lack for money and influence, which of course is one reason that we repeatedly bail them out.
After Hurricane Irene the time may come to take a deep breath and in this era of tight budgets, ask why are we bailing these people out once again? Those who study global change argue that more intense storms are on the way along with a rising sea level. No better time than now to come to our senses.
The opinions expressed in this commentary are solely those of Orrin H. Pilkey.
Back in 1969, my parents and I went camping on the Outer Banks.
To say the least, the weather was downright weird. Huge storms would blow up on the Pamlico Sound, then vanish. And the surf on the Atlantic Ocean side? Downright vicious. Even my father, who loved to swim in the ocean, was wary of it.
So, we got the eff out of there.
Our next stop was Colonial Williamsburg, which was quite a lovely experience. Only downside was that we had to put the dog in the kennel because the campground we were staying in didn’t allow dogs.
After liberating Heidi the dachshund from the kennel, we headed up to Shenandoah National Park. With the help of a friendly waitress, we snuck her into a diner in Charlottesville and she sat quietly in the booth with us.
Heidi’s good behavior didn’t last long after we left the diner. She grabbed a chicken bone off the sidewalk, and my mother told me to get it away from her. Heidi chomped down on my finger, and I still have a scar.
Up into the mountains we went.
Huge thunderstorm broke out, and I still marvel at how we got up to the Blue Ridge Parkway. We were in mom’s station wagon, so it’s likely that she was driving. Lady was born to drive, let me tell you.
We pitched our tent and camped in the rain. During the night, bears came into the camp, and Mom had to keep pushing Heidi down to the bottom of her sleeping bag. Heidi wanted to go outside and fight.
Next morning, beautiful sunshine everywhere. But Mom and Dad are telling me that we were going HOME.
From northern Virginia? Great!
Are we going to stop at Deep Creek? Can we please make that stop in Maryland? Go swimming at Swallow Falls again? Please?
Mom and Dad weren’t entertaining any suggestions. We were going HOME. In one day.
We drove into Front Royal, VA, and it was still sunny. But, as we headed north into West Virginia, the skies became gray. And stayed that way.
Being good Pennsylvanians, we aimed toward the Turnpike, paid the toll, then headed east. Folks were determined to get back to West Chester, and but for human and canine bathroom breaks, they weren’t stopping.
We got home under gray skies.
A few days later, Mom shoved the local paper under my nose. “THIS is where we just went through!” she said.
Photo in the paper showed some of the flooding and devastation in West Virginia. It was the result of Hurricane Camille, which beat up coastal Mississippi, then kept right on going.
He should wear a big clown nose when he says crap like this.
Bernanke Blames Politics for Financial Upheaval
nytimes - August 26, 2011
JACKSON HOLE, Wyo._ — The Federal Reserve chairman, Ben S. Bernanke, said Friday that the political battle this summer over the federal government’s borrowing and spending had disrupted financial markets “and probably the economy as well.”
Are you suggesting that the political battles over the federal borrowing and spending did NOT disrupt the financial markets?
Ergo Monday would be a good time to dump all your stocks as quickly as humanly possible?
Does anyone remember how to do that copyright© thingee?
Paging Combo!
“…sees a deflationary spiral in the next few years when both prices and incomes drop dramatically.”
http://www.tampabay.com/news/business/markets/article1188146.ece
Hmm…I did not know Harry Dent lives in Tampa. His book, Roaring 2000s predicted America in depression in 2009 or 2010, but missed the RE bubble and 2008 financial meltdown. His followers were screwed. He did make points in his earlier book, making fun of “The Millionaire Next Door” that if you are worth several millions, it does not make sense to live frugally. I think if you do not want to be a target by the lower classes, you should not public ally flaunt your wealth. Maybe only among other wealthy people you trust!
Comment by evildocs
“Perhaps it is impossible for everyone to spend less than he earns. I’ve not heard that thesis advanced before. It literally means that ALL cannot save ANY money. Not everyone can have ANY savings account whatsover. I’d need to see greater expansion on that claim to see if I buy it.”
Wealth = goods and services
For a barter economy, wealth is exchanged for wealth. The parties negotiate an exchange rate and trade… each person is both a buyer and seller of equal amounts of wealth.
What a hastle. What if you want to sell to someone that wants to buy from you, but you don’t want to buy what they are selling? That’s fine. We invented this thing called money. The person you want to sell to goes to a bank and borrows some money into existance. The bank makes two, equal and offsetting ledger entries…. one entry is money and the other is debt. The person that withdrawls their money as notes… peices of paper that say “this note is legal tender for all debts public and private”.
Now the guy that wants to buy from you comes up to you and says, “Instead of barter, how about you accept these notes?” You say, “HECKA YEAH!!! There are tons of people with debt that will give me stuff for these things becsues they need them to repay their debts!”
Money: you owe me
Debt: i owe you.
Money and debt are offsetting products for the same loan. They always exist in equal and opposite, offsetting quantities.
Everyone can have money in the bank, but that would require there be a total amount of debt equal to that total amount of money.
Now, let’s think about the flow one money.
For every money trasnaction, there must be a buyer and a seller. The buyer receives wealth and gives up money while seller gives up wealth but gains money.
B = money given (bought stuff with)
S = money received (sold stuff for)
For each transaction:
B = S.
For the sum of all transactions:
sigma B = sigma S
We could use commutive and associatve properties of addition to sum up all the buy transactons and sell transactions by individual and call this B# where # is the number of the individual.
Let’s say there are 2 individuals in the entire economy.
B1 + B2 = S1 + S2
Total money given by person 1 + person 2 in buy side of the trasnaction must equal total money received by person 1 + person 2 on the sell side.
Let’s say that person 1 sells more than they buy. This is ONLY possible if person 2 buys more than they sell. And how do they do that? B borrowing some money into existance.
Person 2 that bought more than they sold is left with the debt, and person 1 that sold more than they bought ends up with the money.
The money has value to person 1, because at some point in the future, person 2 is going to have to sell more than he buys so that he can get teh money back so that he can repay his debt.
“However, even if this is true, it stems from notion that societies all have a significant non-saving usually low-income population. That low income group can have variably poor quality existences, depending on the country.”
Being in debt need not necessarily require a low quality existance. Quite the contrary. Even a young person with plans to become a doctor with a wage above those in his specialtiy, may choose to borrow some money into existace to say… attend medical school.
Then, later, those with the money that he borrowed into existance may choose to exchange that money for his services so that he can repay the debt (at which time both the money and the debt cease to exist).
Heck, he may even choose to continue to accept money in exchange for his services from people that grow food. At some time in the future, the doctor may want to stop providing services, and just exchange that money for food that the farmers need to repay their debt.
Debt, in and of itself, is not bad…. IF the total debt that individuals are allowed to borrow into existance is kept in close relation to their wage, making it likely they will pay it back.
However, limiting debt growth, also limits money, limiting peoples’ ability to get money. If we limit the debt side of the trade imbalance, that limits the money side of the trade imbalnce.
People decide they don’t like the limits on the money side of the trade imbalnce, so they deregulate debt so that people can borrow more money into existance… this is the only way they can find buyers for all their supply so they can get money… we call these illogical people that want to let individuals borrow way more money than can be paid back, Supply-Siders.
Don’t let demand-side hold down the econmy when simply by deregulating banking and getting debt flowing, we can lift demand to the point that the economy is supply-side limited.
Then we get debt growing at 3x the sustainable rate for 30 years, until the debt is maxxed out.
Then…
Rut Roe Shaggy….
The people with debt can’t repay that debt unless that people with all the money start spending all that money.
“But, even if this is true, too, the ‘bigger step into the Universe’ seems simply to be recognizing that in a non-win-win system you postulate, one must struggle then to be in the relative winning (saving) group. Clearly those who spend less than they earn have greater security and comfort (barring asteroids, cannibalism-inducing zombie viruses and such) than those who spend all/more than they earn. It seems, then, I am living the lessons put forth even in your larger universe”
No, debt and money can be win-win… IF at some point before the debt is written off as uncollectable, the person with the money spends it so that the person with the debt can get it to repay the debt.
If the person with the money does not spend it in time, then the person with the debt defaults, the debt is written off as uncollectable, the money borrowed into existance ceases to exist, the people that thought they were so smart and smug thinking they were so well off becuase they had all this money, suddenly find out that money no longer eixsts… people lose faith in money, start hording gold, land, other wealth… depression.
We have created mechanisms to try to protect the money poofing into non-existance when the debt is written off. Federal Reserve vs. individual bank notes, but that just gets you your paper money not you bank deposits money. So then we created FDIC to cover bank-depost money, with limits. But really, even your FDIC protected money is of value only as long as the federal government can take on the debt that is being written off. If it reached the point that the government can’t repay its debt, then all bets are off and all money is pretty much poofed into no value.
Debt-Money can be win-win, just like barter… IF we always remember that money and debt are flip sides of the same IOU. Don’t let people go further into debt than can be repaid, and don’t let money pool into too few hands having so much moeny they can’t possibly spend it all. Always remember that the trade imbalance must reverse before the debt is written off as uncollectable and we collapse into depression.
Just heard a very timely song by Nick Lowe. Title is “House for Sale.” One line says “I’m leaving like I’m getting out of jail.”
Give it a listen — it’s good.
Interesting article. Baby boomers have entered into retirement, lost a lot of their equity in stocks, and are (will be) cashing in their investments during retirement at a much greater rate than historical amounts. This extra selling should devalue the stock market.
WS says no, it won’t.
After all of the goofiness of the market over these last few years - who is going to be the new buyers? Lower birth rate (1.9), higher unemployment, the average job receives less real pay, higher real inflation, cashing out seniors for the next twenty years. Retirement savings accounts and insurance funds could take a hit. Then what?
Once bitten, twice shy.
Boomers can continue working. I know of several engineers in their seventies. Many love working. The one I talk with now is in his seventies. Gets social security. His wife spends the dough. Boomers are going to continue to rock!
Bill
I agree. I’m an accountant (69) still working; enjoying it; and working with a lot of engineers and lawyers at least my age.
I think our generation has more professionals and tradesmen than most gens. Something to consider in the economic mix.
LOL yes, old age pensions - I just started them this year as well - had forgotten about them. Guess who spends it ?
I am 62 and a nurse. Very healthy and love what I do. Not bedside nursing, so I do not have to worry about a physical injury. I have no plans to retire and do not face mandatory retirement. Keeps me sharp!
Realtors Are Liars®
This is true!
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