Holiday Weekend Topic Suggestions
Please post topic ideas 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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Name:Ben Jones
Location:Northern Arizona, United States
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Auditors scour foreclosure cases for flaws
By Kimberly Miller Palm Beach Post Staff Writer
Posted: 9:20 p.m. Tuesday, Nov. 22, 2011
About 1.3 million homeowners nationwide have received notification since Nov. 1 that they are eligible for a free review of their foreclosure cases as federally approved auditors comb through files for flaws.
Another 3 million homeowners are expected to get letters by the end of the year in an effort to comply with a federal order that could compensate borrowers who were financially harmed by defects in their foreclosures.
Auditors are looking for such problems as robo-signing, inaccurate fee charges and foreclosures that occurred while a homeowner was working on a loan modification. If a flaw is identified, it has to have caused a financial hardship for the homeowner for the owner to be eligible for compensation.
http://www.palmbeachpost.com/money/foreclosures/auditors-scour-foreclosure-cases-for-flaws-1989099.html
This is a little bit silly, but how about a culinary themed thread on the top ten recipes for leftover turkey.
Gobble-gobble-gobble.
Turkey corn and black bean chili
First time ever, we bought the smallest turkey we could find, just to avoid left-overs. Next year we’ll decide if we like having, or prefer not having, left over turkey for days.
we bought the smallest turkey we could find,
I’ve never had much luck with very small turkeys. Maybe I cooked them wrong but they were tough compared to the bigger ones. All the turkeys in Brazil are small but they don’t have Thanksgiving either.
Turkey ’shepherd’s’ pie
(super-easy, tastes great- sometimes better than the original meal)
Put a layer of turkey on the bottom of a deep casserole dish, add some gravy. Then add a layer of stuffing, and add some gravy. Cap this completely with mashed potatoes. You can freeze it at this point.
Heat in oven at 350 until the top is golden-brown and it’s heated through.
(Leftover turkey also goes great with mole sauce and blue corn tortillas.)
Awesome!
Here’s a local favorite, Kentucky’s contribution to the open-faced sandwich world. Good if you have both leftover turkey and ham. (Twain once defined ‘eternity’ as ‘two people and a ham’):
The Hot Brown
Put a piece of white toast on an oven-safe plate (but wait- there’s more!)
Put a thin slice of ham on it (country ham is, of course, better)
Put a layer of turkey on next.
Cover it completely with white sauce (traditionally), or a cheddar cheese sauce (any type of cheese soup works well, too, I sometimes just heat milk or cream and shredded cheddar and a few dashes of hot sauce in the microwave and mix it up as it melts)
Put a few tomato slices on top of the sauce-covered sammich.
Sprinkle with parmesan cheese.
Put it under a broiler until it’s Hot, bubbly, and Brown.
Put two strips of crisp cooked bacon crossways on top and serve.
Cook it til it’s lightly browned, not completely brown, I should add. And be careful, amigo, the plate is hot!
Gllaaaaaaaggghhhhaaa…saaaaaaammmmmiiiiich.
How about something for Thanksgiving besides turkey? Blech.
No turkey here. I’m going to an Indian restaurant with a friend.
No turkey here. I’m going to an Indian restaurant with a friend.
That’s totally fitting as the Indians helped the Pilgrims with the first Thanksgiving!
It’s actually an Asian Indian restaurant, not an American Indian restaurant.
I suspect he knew that :-).
“It’s actually an Asian Indian restaurant, not an American Indian restaurant.”
Gonna be a long drive.
The Smithsonian Museum of the American Indian does have actual Native American fare, from all the Americas. Hope you like squash and beans.
This week I’m having stew made with beef braised in a red-wine and vegetable sauce, red cabbage PA style, and green beans. No turkey. Maybe I’ll get some turkey breast next week.
Goose stuffed with black walnuts and brandied figs here. Potato wedges roasted in the goose fat. Pungent greens with pomegranate seeds and my last two tomatoes. Pumpkin pecan pie for dessert. All ingredients home grown. (Yay.)
Leftover carcass goes into the stock pot for flageolets with hot Italian sausage, wilted greens, and confit of the goose leg meat. (Yum.)
ahansen, that description is heavenly! Enjoy!
Happy Thanksgiving, all!
We have a new tradition of ordering a smoked turkey from a local barbecue joint. They run 10-12 lbs, so not too big. While I do miss the cooked-in-the-bird stuffing, the smoked meat is to die for. All the leftovers get eaten without any fussing over casseroles etc.
Fried turkey is good too, but I’ve gotta have the cooked-in-the-bird stuffing for it to seem like a real thanksgiving. It’s my favorite part of the meal.
I got a commercial pressure smoker that I’ll be using on the bird this year. Very fast and delicious!
Happy thanksgiving HBB. My favorite holiday.
I = I’ve
“…commercial pressure smoker…”
Given near panic over the twin debt crises in the U.S. and the eurozone, that seems like the metaphorically perfect choice of cooking instrument for this year’s Thanksgiving dinner.
http://finance.yahoo.com/news/china-november-factory-activity-slumps-025241325.html
‘China’s factory sector shrank the most in 32 months in November on signs of domestic economic weakness, a preliminary PMI survey showed. Vice Premier Wang Qishan is convinced the world is heading into a major downturn, saying at the weekend that a “chronic” global recession was “certain”, the most dire reading from a senior Chinese policymaker to date.’
‘China’s export growth hit an eight-month low in October as industrial output grew at its weakest in a year. Up to a third of Hong Kong’s 50,000 or so factories in China could downsize of shut by the end of this year, the Federation of Hong Kong Industries said this month.’
‘The exuberant Chinese property market is also coming off the boil, a factor HSBC said had weighed on the PMI. Average home prices ticked lower in October for the first time this year and property sales fell.’
“Worse is yet to come,” Conita Hung, head of equity research of Delta Asia Financial Group, said after the data. “Companies involved in shipping, exports and even banking and finance will be affected.”
I’m reminded of how economists and others talked about California when house prices first started to fall. They would say, “public spending will keep us out of recession.” What a bunch of baloney that was.
There’s a tendency to understate the problems with bubbles, because so much of the media and govt don’t see anything wrong in the first place. Of course, China’s gonna get their head handed to them. But read the articles; “soft landing”, “fine tuning”. Yeah, tell that to the Californians.
“China’s gonna get their head handed to them”.
Only after they start some regional/world conflict, to get rid of that excess population.
China’s factory sector shrank the most in 32 months in November on signs of domestic economic weakness
So much for Chinese workers picking up the slack for the lack of demand in the West.
Chinese workers have not really been allowed the fruits of their labor, have they? And this is why Chinese workers cannot and will not pick up the slack for lack of demand in the West. This is the fundamental flaw with China as a “powerhouse”. It is and has been a global delusion. Now, had the Chinese government actually rewarded its people during China’s so-called “rise”, the scenario would be very different right now.
You have only to look at Chinese products, Chinese rip-offs, etc. to know what the end result of the nation will be. I do not blame the Chinese people themselves for that, btw.
“he provides disturbing evidence and financial charts forecasting 50% unemployment, a 90% stock market collapse, and 100% annual inflation.”
http://www.moneynews.com/StreetTalk/Aftershock-survival-summit-unthinkable/2011/10/06/id/413486
I’m not sure if that article is sound advice or a late-night infomercial for a seminar. The repeated references to Newsmax don’t exactly lend credibility either.
This is exactly why pushing inflation is not going to solve the debt problem for the world.
The working class doesn’t have much extra so causing inflation will just push spending ever more from wants (ie manufactured goods) to needs (food and fuel). Down down we go.
The PTB have a choice: pay someone more or sell them less. They’ve bankrupted ordinary people and their governments all over the world, and piled up a bunch of pieces of paper that say ordinary people and their governments will have to live even poorer to pay them back. And then ordered the governments to do whatever was required to keep the value of those pieces of paper up.
‘pay someone more’
I’ve been thinking about this within the inflation/deflation concepts. It’s often said that the central banks can inflate at will by increasing the money supply. This theory isn’t holding up as we’ve seen lots of money created and wages are not rising. Commodities maybe, but not wages and therefore no real inflation. And the rising commodity prices only make things worse for the consumer.
Why is this? There must be a disconnect with the newly created money and peoples paycheck. Let’s follow the trail; central bank hands out low interest loans to investment banks and the govt. But there the path to wage inflation stops. With the exception of a few thousand higher paying jobs in DC, the govt can’t put pressure on a typical wage in Kansas. Investment banks probably use these funds to gamble on commodities or stocks. No real wage pressure there.
This has been a phenomenon for a while. Remember the stagflation episode? The 90’s saw a bunch of money created by central banks all over the world. Yet wages fell or were flat. Actually wages in the US haven’t keep up with the official rates of inflation since the 70’s. And considering that inflation has been counted at low single digits for a years, that is pretty weak wage growth.
The big name economists don’t address this much. We’ve come full circle to where Keynsians are back is style. But IMO it’s clear that the power of central banks to create wage inflation at will no longer exists.
“Investment banks probably use these funds to gamble on commodities or stocks. No real wage pressure there.”
The commodities (e.g. “volatile food and energy”) inflation the Fed likes to ignore has exactly the opposite effect on nominal household disposable income from that of wage inflation, as the rest of a household’s budget shrinks once they have paid for groceries and gasoline.
Is printing $500 billion (arbitrary number) and putting it in storage really inflation? Unless it dilutes the currency in circulation, it’s not inflation.
Just my dumb construction guy opinion.
It’s potential future inflation, not current inflation.
A good analogy is a flood reservoir, filled to capacity: Once the floodgates are opened, downstream areas will be inundated, but so long as the water reminds behind the dam, no flooding occurs.
Of course the analogy has its limitations, as there are no physical constraints on the amount of virtual electronic printing press money that can be created from thin air.
The problem with a water analogy is that cash runs uphill.
“Is printing $500 billion (arbitrary number) and putting it in storage really inflation? Unless it dilutes the currency in circulation, it’s not inflation. ”
But if they hadn’t “stored it” (by shoring up banks) all of those bunk assets would have been liquidated, so you’re (we’re) still priced out. Like Kunstler says (re: deflation v. inflation), the end result is the same: you’re broke.
“it’s clear that the power of central banks to create wage inflation at will no longer exists.”
Flooding the finance system with cash is a Friedman/monetarist response to a crash. Keynes recognized the need to get the money directly into the hands of joe6pack, where it creates wage inflation.
Several simple answers Ben:
1. No wage inflation because the wages went overseas where the cost of living, labor, and energy are very low in dollar terms.
2. Banks including the Fed create money out of thin air and move it around at the speed of electrons. They created it in loans, and then on CDS on the loans. Laborers only get hold of that money when they do actual labor and the banks grudgingly give them some money in return. Of course, a bank can create money much faster than a laborer can, and the lightspeed movement has only increased that delta. Hence the accelerated gap between working and banking classes.
3. The banks aren’t creating money in order to spend it, not even on laborers. The money was ALREADY spent in the last 10 years, on loans and CDS. Europe spent it on loans in Spain, or on social programs for the senior citizens in Greece. The money they are creating now is just filling a hole. So now the laborers have to compete with cheap labor AND a bunch of dug-up holes.
” Vice Premier Wang Qishan is convinced the world is heading into a major downturn, saying at the weekend that a “chronic” global recession was “certain”,
chron·ic adj \ˈkrä-nik\
Definition of CHRONIC
1a : marked by long duration or frequent recurrence :
Now what does certain mean again?
Is this the ugly you were talking about?
This could be a good thing, signalling the end to globalization, replaced by ethno-nationalism (something China actually supports, for its own people)
“This could be a good thing …”
Or not. Think wars.
“Think wars.”
Localized, maybe. I fully expect the US to break up. Secessionist ideas are on the rise. It is perfectly natural for people of different ethnic and cultural backgrounds to want their own spaces and to live under the same basic agreements. Freedom of association is a basic human right violated by the Soviet Union, which eventually broke up for just that reason. And the US will break up for the same reason.
Ultimately, of course, that’s the solution to the debt, too. Which is why the secession will be fought. But, who will fight it?
And just think, no more American Idle, lol.
“But, who will fight it?”
The army?
“The army?”
What army? You mean the one deployed everywhere else on the planet, except our southern border, where they’re really needed? You mean the army made up of people who are constantly getting screwed and left to rot after their service is over? You mean the army whose members are forced to be sitting ducks for freaks like Nidal Hasan, in the name of diversity? You mean the army which is feebly honored by little yellow ribbons so they’ll keep going out and protecting the interests of global corporations? That army?
You mean the army which is feebly honored by little yellow ribbons so they’ll keep going out and protecting the interests of global corporations? That army?
Isn’t it interesting how reality more and more resembles those dystopian movies of past decades? I’m expecting someone to start making replicants any day now.
I fully expect the US to break up
I would argue these pressures are due to a stronger and more centralized federal government.
The way the country was initially set up, states were relatively independent, with a core set of ideals/rights they were all based on (the constitution). However, states could govern themselves differently based on their population and the way of life demanded by the geography.
As folks have sought to impose their will across the entire country’s population, they have unwittingly weakened our country and pushed it closer to dissolution.
It’s a shame, really.
“The way the country was initially set up, states were relatively independent, with a core set of ideals/rights they were all based on (the constitution).”
Actually, they were originally set up much as you say, but under the failed Articles of Confederation, which the more-centralizing Constitution replaced.
“That army?”
Yup.
If the Amerikwa does break up, can we have a new country with real separation of church and state, i.e. eliminate Christian fundamentalism from foreign policy and the cessation of all diplomatic ties with Israel?
When did that phrase “protecting Americans and American interests” creep into our lexicon? I think it was pretty recent, within my lifetime.
US breakup? Hmm, lemme see. My guess would be Southwest goes back to Mexico, the West Coast states from San Francisco to Seattle will form an Ecotopia (there was a book about this). Rocky Moutain states will join up with Canada. Utah will be its own country. Texas will try to be its own country but will eventually join with the Southern states to form a new Confederacy. The Plains states will be a battleground for the Ogalalla Acquifier, fracky stuff in ND, and the new oil pipeline. East coast states from Maine south the Fredericksburg VA, plus parts of Ohio and West Va will become the new Northeast. Virginia will split in half… Alaska will be abandoned except for the oil fields, Hawaii will be abandoned altogether… hey this is fun.
The Western States Sheriffs Association is starting to push back against the Federal Beast.
http://www.newswithviews.com/NWV-News/news287.htm
Jim Chanos talking about China this morning…Yes China owns a lot of T-Bills but that is offset by the massive amount of bad debt that’s on the books of their Banks…
China is in worse shape than we are. We’ve all read about brand new cities sitting empty. Bullet trains with a handful of people on them. People borrowing to buy a condo at 50 times annual income. It’s all borrowed money, with corruption everywhere.
The other day I heard a guy on NPR say “if we could only be China for a day” about the super committee failure. He was talking to a east coast economist who lauded the euro approach of installing “technocrats”. Jeebus, is this what we’ve come to? A couple of guys on a publically funded radio network, wishing we could be a totalitarian state or destroying our electoral process so we can pay off some bonds?
“Bullet trains with a handful of people on them.”
Puhlease, NPR — let’s not go there! Unless this society can overcome its totalitarian tendencies, it is doomed to continue existence as a place its citizens wish to leave.
22 November 2011 Last updated at 02:17 ET
Mystery over China’s Wenzhou bullet-train crash inquiry
File picture of wreckage of two high-speed trains in Shuangyu, taken on July 24, 2011 No official explanation of what went wrong with the bullet-trains has yet been given
A Chinese safety investigator has sparked confusion after making contradictory comments about the cause of a bullet-train crash in July.
Wang Menshu was quoted as saying bad management had caused the crash in Wenzhou, which sparked a public outcry.
But later Mr Wang, the deputy director of the investigation, withdrew his comments and played down his own role in the investigation team.
The team’s report has not been made available to the public.
Forty people died in the Wenzhou crash, which cast doubt on the feasibility of China’s vast high-speed rail building projects.
And many web users became convinced that the government was trying to cover up the details of the crash to save its bullet-train project.
Initial comments made by safety officials in July suggested the crash had been caused by a signal failure.
But in a report by the Beijing Times on Monday, Mr Wang was quoted as saying human error was to blame.
“The local railway authority didn’t use the equipment correctly, leading to a malfunction,” he told the paper.
“After the equipment broke down, staff operated it improperly, causing one train to rear-end a stalled one, leaving 40 dead and around 200 injured.”
…
When people are forced to do work, they will not complete it properly if they believe they will not be personally held accountable.
They also don’t complete it properly when they believe they won’t be rewarded for a good job.
When people are forced to do work, they will not complete it properly if they believe they will not be personally held accountable.
This was often done by prison labor in Nazi Germany. The prisoners were very creative when it came to finding ways to sabotage the job.
Most people only see a very small part of the picture. Lots more information is available, but they don’t find it interesting.
“wishing we could be a totalitarian state or destroying our electoral process so we can pay off some bonds?”
Yes, totalitarian state, the dream of elitist slackers and bloviators. They ought to read a little history of totalitarian states, they don’t call commies red for nothing. Stalin, Mao and company slaughtered something like 100 million people (average estimate, the low is 50 million, the high 150 million).
The Star Wars prequels all sucked, but there was a good line in one of them, when Palpatine is proclaimed Emperor by the Senate. IIRC Amidala says something like: “And that’s how freedom dies, to sound of thunderous applause”
China is in worse shape than we are.
Eyes feel for their peoples, it’ll be “epic” in it’s dimension’$ :-/
Looks like the “left” isn’t what it used to be, eh?
I haven’t heard anybody say “let the defaults occur and Wall Street and the corporations go under, wiping out the top one percent.”
I was invited to a Republican candidate’s fund raiser dinner (the dinner was free and the attendees were my neighbors so I went). I challenged the candidate with exactly that same default scenario, specifically: why not default on Fannie & Freddie as they should not have been bailed out in the first place. She responded: “Then we would end up like Greece!” I didn’t bother pointing out the difference between sovereign debt and that vile stew of toxic mbs and related fraud that was shoved up the arse of the American taxpayer. After my question, the candidate decided not to take any more questions from the assembled electorate…
“…the dinner was free and the attendees were my neighbors so I went…”
I’m pretty sure that wasn’t Mitt, as I have heard his dinners are only affordable to 1%ers.
How come we believe these ‘bad’ numbers when there is so much ridicule and distrust of the China economic numbers when they post year after year of 7%-9% annual GDP growth? Fact is we have no direct evidence of the state of their economy except for remote monitoring. They are still buying US debt according to our treasury dept. Also we can clearly see a huge growth in energy consumption by monitoring their CO2 emissions and satellite surveillance. I’ll believe they are going into recession when the levels of industrial waste by-products start to decline.
Back when I was a young pup studying economics at the University of Michigan, one of my professors was a world-renowned expert on post-1949 China.
One of the great challenges to him and his fellow economists was teasing out the truth from the data provided by the Chinese government. And this guy was fluent in Chinese, so he didn’t have to deal with a language problem.
I’ve read too (maybe here) that 70% of China’s GDP was real estate investment, etc. Compare this to Japan and US at their heighth(30% and 25%, respectively) and these numbers are staggering.
I thought I was just joking with my statute-of-limitations remark aimed at Polly yesterday, but now I have my doubts: Is Megabank, Inc hoping to run out the clock on actions related to shoddy mortgage origination practices?
BUSINESS
NOVEMBER 23, 2011
Foreclosure Talks Push Ahead Absent California
…
California has more than two million underwater borrowers, more than any other state, according to CoreLogic.
The refinancing plan will remain in the deal even if California doesn’t because it is attractive to other states that have seen large home-price declines, the people said.
Ms. Harris has come under pressure from labor and progressive groups seeking to extract greater penalties from banks for alleged mortgage-related wrongdoing.
Last week, her office issued subpoenas to Fannie Mae and Freddie Mac, the government-controlled mortgage companies, according to people familiar with the matter.
The subpoenas asked the firms to provide responses to about 50 different inquiries, according to these people, including demographic information about borrowers who have missed payments and who have received loan modifications, among other items.
The state also requested information on foreclosed properties owned by the firms, including any evidence of unpaid taxes or drug abuse on vacant properties.
Representatives of Fannie, Freddie, and the Federal Housing Finance Agency, which regulates the firms, declined to comment.
Ms. Harris has a limited ability to bring legal claims related to originations and servicing practices if she decides not to agree to the foreclosure deal, people familiar with the negotiations said.
The statute for filing cases related to loan originations is four years in California, meaning any legal action could cover mortgages originated only in 2007 and after. California allows foreclosures to proceed through a nonjudicial process, limiting the state’s ability to argue that banks lied to the courts, these people said.
…
The statute of limitations is sort of irrelevant. There aren’t enough lawyers in the entire country to prosecute and defend everyone who participated in a bad loan orignination. There are millions of them.
And that is millions of borrowers (some multiple times) and at least tens of thousands of workers. What the heck are you going to do with all them? Fine them? Put them in jail? Put ankle monitors on them? Seriously, what? They all have the right to jury trial. Where are you going to find the courtrooms? Please remember that the no-doc loans aren’t fraud - you can’t lie if you don’t say anything. And if the originator wasn’t relying on the statement of income in order to make a decision, it wasn’t fraud either. Not on the application. It might have been fraud further along the chain (if the investment bank said it was an underwritten loan when it wasn’t).
The people who need to be prosecuted are the people who set up the system. There is securities fraud in there. It isn’t the easiest thing to find, but it is there. You can’t get them for just “setting up a system where the fraud was inevitably going to happen.” That isn’t illegal. But you can get the illegal stuff they did do. That requires lots and lots of work. I don’t know if there are enough people out there to even pursue the securities fraud, but there could be.
Please remember that the no-doc loans aren’t fraud - you can’t lie if you don’t say anything.
Were not no-doc loans “stated-income” loans and if so, is that not “saying something”?
I watched a special on the Holocaust on public TV the other night, and one of the guys they were interviewing had been a very young prosecutor at the Nuremberg Trials (his first case ever was a capital case). He said one of the first problems facing the investigators and prosecutors was that a large swath of the population was guilty of involvement in war crimes- far too many to prosecute, if Germany were to get its factories and farms producing again, and avoid a total breakdown in the economy and society.
He said if they did try to prosecute them all, they’d still be having trials today.
It was a question of destroying the country in order to properly punish it, or letting many guilty people go free. Needless to say, we pursued the latter option. Most of the worst of the worst were tried and executed or imprisoned, but the vast majority returned to society. We were even easier on the Japanese.
I wonder if we’re not facing a similar situation now? (Though obviously less horrific.)
Will the eurozone debt crisis trigger a global recession?
Eurozone recession signals mounting
By Pan Pylas
Associated Press / November 23, 2011
LONDON—Any hopes that the 17-country eurozone will avoid sliding back into recession in the wake of a debt crisis that’s shown alarming signs of spreading to the bigger economies appeared to have been dashed Wednesday.
A couple of indicators show that the eurozone economy is in deep trouble and that the debt crisis is denting confidence so badly that a recession looks almost inevitable. Figures last week showed that the eurozone only narrowly avoided contracting in the third quarter, growing by only 0.2 percent during the period.
The sense of an impending recession was evident in the findings of a closely watched survey from financial information company Markit. Its monthly survey showed that the eurozone contracted for the third month running in November and that the deteriorating economic picture is not just confined to debt-stressed countries such as Greece.
Though its monthly composite purchasing managers index — a broad gauge of business activity — rose to 47.2 in November from 46.5, it remains below the 50 mark, the threshold between expansion and contraction.
Markit said Wednesday’s survey suggests that the eurozone is contracting at a quarterly rate of 0.6 percent in the fourth quarter and that the problems are increasingly spreading to Europe’s two biggest economies, Germany and France.
“As feared earlier in the year, malaise has spread from the periphery to the core,” said Chris Williamson, Markit’s chief economist. “Even Germany is stagnating and France contracting by around 0.5 percent.”
…
Bloomberg
U.S. Stocks Decline as European Bond Risk Increases to Record
November 23, 2011, 3:12 PM EST
By Rita Nazareth
Nov. 23 (Bloomberg) — U.S. stocks slumped, sending the Standard & Poor’s 500 Index down for a sixth straight day, as the cost of insuring European government debt against default rose to a record on concern the region’s crisis is worsening.
About nine stocks fell for each that rose on U.S. exchanges. Alcoa Inc. and Halliburton Co. tumbled at least 3.8 percent amid concern that a contraction in Chinese manufacturing may crimp demand for commodities. Bank of America Corp. and Citigroup Inc. declined more than 3.5 percent. Groupon Inc., the largest Internet daily-deal site, plunged 15 percent to below its initial public offering price.
The S&P 500 slid 1.9 percent to 1,165.56 at 2:45 p.m. New York time, the lowest intraday since Oct. 10. It lost 7.3 percent in six days, the biggest drop since Aug. 10 on a closing basis. The Dow Jones Industrial Average fell 198.55 points, or 1.7 percent, to 11,295.17. The Russell 2000 Index sank 2.9 percent. The U.S. stock market will close tomorrow for Thanksgiving and trading will end at 1 p.m. Nov. 25.
“It’s unknown in capital letters,” David Sowerby, a Bloomfield Hills, Michigan-based portfolio manager at Loomis Sayles & Co., which oversees $150 billion, said in a telephone interview. “It’s about Europe’s likely recession, the unknown of what’s the contagion, slower China. That’s winning a tug-of- war against U.S. stock valuations.”
About $850 billion was erased from U.S. market value from Nov. 15 through yesterday amid concern that Europe’s debt crisis will hamper the global economy. The S&P 500 is trading for 12.3 times reported earnings, compared with its average since 1954 of 16.4 times, according to data compiled by Bloomberg.
…
So how much did Megabank of America gamble on eurozone debt? Seems like those bets are coming home to roost about now:
The Financial Times
Last updated: November 23, 2011 10:35 pm
US bank credit default swaps jump
By Nicole Bullock, Michael Mackenzie and Ajay Makan in New York
Investors paid record amounts to protect themselves against the risk of default by Bank of America on Wednesday, as fears grow over US banks’ exposure to the eurozone debt crisis.
Credit default swaps on BofA, a form of protection against default, rose as high as 495 basis points – or $495,000 a year to insure $10m of BofA debt over five years, according to Markit, the data provider. That compares with the previous high of 456bp on October 4 and a recent low of 300bp in late October.
…
Boy is this reminiscent of the September 2008 — March 2009 episode!
US stocks dive on German bond flop
(AFP) – 13 hours ago
NEW YORK — US equity markets tanked Wednesday as a poor German government debt auction fueled fears over Europe’s fiscal crisis and weak growth in the eurozone, a major US trading partner.
Markets spent the day stuck in negative territory after Germany was able to sell only part of an issue of German 10-year bonds, considered the gold standard of eurozone debt.
“The European debt crisis escalated after a failed German government-bond auction indicated that investors are now demanding higher risk compensation even at the heart of the currency bloc’s debt market,” said Robert Brusca, chief economist at FAO Economics.
The Dow Jones Industrial Average tumbled 236.17 points (2.05 percent) to finish at 11,257.55.
The broader S&P 500-stock index dropped 26.25 points (2.21 percent) to 1,161.79, while the tech-rich Nasdaq slid 61.20 points (2.43 percent) to 2,460.08.
US stocks were under solid pressure “as the ongoing eurozone debt crisis is conspiring with resurfacing global economic concerns, courtesy of disappointing manufacturing data out of China and Europe,” Charles Schwab analysts said.
…
I have FDIC limit amount in most TBTF banks. I am thinking about pulling my money out of Bank Of America and depositing it in a few local banks or credit unions. Does anybody have any links to checking out the financial conditions of banks? Any additional suggestions are quite welcome.
Happy Thanks Giving to all
“With the exception of a few thousand higher paying jobs in DC, the govt can’t put pressure on a typical wage in Kansas.”
Got agricultural subsidies?
“Got agricultural subsidies?”
And how! Not just direct subsidies, either. Taxpayer subsidies of housing, food, health care and education for foreign farmworkers and their children.
Ahh yes, the attempt at central control of our economy.
What exactly is it that gives folks the ideas that *THEY* know best, how things should work, and can fix it?
Ivy League Education
Reporter - How’d you change the world?
Keith Richards - Change it? I would probably fook it up even more.
Too bad Ivy League doesn’t teach common sense anymore.
Upward pressure on German government debt yields may lead to a change in perceptions in that country on how to deal with the Euro area sovereign debt crisis, according to Standard and Poor’s.
Germany failed to get bids for 35 per cent of the 10-year bonds offered for sale today, sending its borrowing costs higher and the euro lower on concern that Europe’s debt crisis is driving investors away from the region.
“This auction is nothing short of a disaster for Germany,” Mark Grant, a managing director at Southwest Securities in Florida, said. “If the strongest nation in Europe has this kind of difficulty raising capital one shudders concerning the upcoming auctions in other European nations.”
http://www.irishtimes.com/newspaper/breaking/2011/1123/breaking29.html
Must admit this came as a bit of a shock to me. Any of the other countries but not Germany; obviously worse than I thought.
The Eurozone experiment is done. Over and out! Long live the individual nations of Europe!
Could you not extend this to the “strong central government” of the states of the U.S.A.? Are we not seeing that experiment nearing its end as well?
If the USA breaks up I am getting the F outta Florida and moving straight to Vermont.
Pressure Piles Up on German Chancellor Merkel
Nov. 23, 2011
German Chancellor Angela Merkel faces growing calls to soften her resistance to euro-zone bonds, Stephen Fidler reports on Markets Hub. Photo: Getty Images.
How will the I.M.F. eurozone rescue (and the underlying debt crisis which inspired the rescue effort) affect economic life on this side of the pond?
IMF Rescue Fund and Bailout of Eurozone
Posted: November 23, 2011 at 5:58 am
The IMF says it has created a new facility for “responsible” countries to use for short-term capital needs. That probably means Greece will not qualify, but maybe Italy will. Or, maybe not.
The IMF will enhance its emergency lending and liquidity windows. The pool will be similar to the Federal Reserve window that lent American banks $9 trillion over the course of the 2008 credit crisis. The Fed window may have saved the nation’s financial system, and the IMF system may do the same for the eurozone. That means the International Monetary fund will do what eurozone nations and the ECB have not been able to do. It will be long remembered that the eurozone could not fix its own problems. That bodes poorly for its future.
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IMF Managing Director Christine Lagarde realizes something that eurozone officials, particularly those in Germany, and the board of the ECB do not, or are not willing to acknowledge. The trouble in Europe is happening now, not later this year or early next. The European Stability Mechanism (ESM) is not supposed to be completely in place until 2013. The European Financial Stability Facility (EFSF) is in place now, but the decisions to deploy its capital have been slow and politically charged.
The Federal Reserve rescued America banks. The IMF is about to do the same of eurozone nations. Each acted without the weight of politics. That is the reason each move makes sense.
“IMF Managing Director Christine Lagarde realizes something that eurozone officials, particularly those in Germany, and the board of the ECB do not, or are not willing to acknowledge. The trouble in Europe is happening now, not later this year or early next.”
After seeing her on 60 Minutes, I’m not so sure she realizes much of anything. Logan asked her what would happen if the Eurozone didn’t make it. And she answered along the lines of mass unemployment, social unrest, etc. As if these things weren’t happening already.
Talking of civil unset and the IMF
Egypt’s economic outlook is bleak as protests against the country’s ruling military council intensify
http://blogs.ft.com/beyond-brics/2011/11/23/egypt-and-the-imf-needs-must/#ixzz1eXtrd3ZR
You don’t get anyone’s deep thoughts on a 60 minutes interview. It is all talking points vetted about a billion times.
How about housing bubble discussions at the holiday table?
I won’t touch that with a 50 ft. turkey leg. My in-laws are children of a developer, and I am still the crazy, family idiot.
Looking forward to a couple of days with a finance professor — should be great fun!
How about a conversation on what to do with your money? I have a fairly significant amount of cash at a couple of different banks. I have worked hard my entire life and I have been extremely conservative with my money. I am one of those folks who only owns one television and that was given to me by parents back in 2001. Couch- Parents gave to me…..you get the idea. When I open my wallet people joke that George Washington has to rub his eyes. I left a bubble in New York city in 2004 only to find the same bubble in Florida! Anyway, I am terrified that my cash is ultimately going to be worthless and all my hard work and frugality will be all for naught. I guess my larger concern is that a major bank will go under and the FDIC wont have enough cash to insure the funds. I have actually given some thought to taking like $100k out and buying a safe and keeping it in my rented townhouse. Is that insanity? I dont want to buy a house. Half the people in the “upscale” hood that I live in havent made a mortgage payment in a year.. Gold? Think there is a bubble there. Stock market? Legalized gambling. I am not even worried about getting a return. I am just talking preservation…if the SHTF….I want to be prepared. Any thoughts?
“I guess my larger concern is that a major bank will go under and the FDIC wont have enough cash to insure the funds.”
My advice:
1) Forget about your ‘larger concern.’ The FDIC is not going to go under, at least in a way that will wipe out your federally-insured bank accounts, at least up to the amount of the guarantee. In case you have amounts in excess of the guarantee in any one federally-insured account, you will have to open another account to make sure all your savings are protected.
In a worst-case scenario, whose importance is diminishing as the FDIC ‘problem bank list’ shrinks, the Fed/Treasury would provide whatever support was necessary to make good on guarantees. I know this for a couple of reasons:
a) Did you notice how the GSEs supposedly collapsed in Fall 2008? Yet they continue to operate, funding a large share of new mortgage originations. They seem to be miraculously immortal, don’t they?
b) I had a CD in an FSLIC-guaranteed Savings & Loan institution in the late 1980s, which went out of business before my CD matured. The ‘failed’ FSLIC somehow made good on not only the principle on my CD, but full interest through the scheduled maturity date, which was paid to me well after the S&L went broke.
c) The Bernanke Fed has shown a willingness to withstand the political flack that came their way as a result of funding bailouts with a balance sheet expansion. There is no reason to not expect them to do this again on a discretionary basis, and a collapse of the FDIC would certainly qualify.
2) Inflation risk is a larger concern, given the appearance of unrepayable debt at so many levels, from households to governments to international obligations. You should consider possible ways to shield your savings against collateral damage which may eventually be inflicted on cash savings by the dilution of the currency base to enable repayment of otherwise-insurmountable debt burdens.
I have worked hard my entire life and I have been extremely conservative with my money……..I am terrified that my cash is ultimately going to be worthless and all my hard work and frugality will be all for naught. I am just talking preservation…if the SHTF….I want to be prepared. Any thoughts?
I’d take 10% of my money and blow it on stuff I liked and stuff I wanted to do. Take some great vacations. See places. Buy an nice TV and a really nice couch. Eat like a king. You’ve been frugal your whole life and yes, your money and/or health could disappear in the blink of an eye.
Los Angeles a sancturay city will no longer impound undocumented drivers vehicle,for 30 days if they are involved in a accident or for DRUNK DRIVING.They can now get there car back in 24 hours.
Wouldn’t you know it? Anthony Villagrosa Mayor of LA wants to be reelected just like his buddy Obama. Let’s protect illegals no matter what. No longer are they kept in jail….free tuition to college…santuary cities giving them freedoms americans don’t get…reduced deportation…special teachers to learn english…free health care…food stamps…and I can go on forever. We the tax payers are getting ripped off daily and I for one can’t understand why california/liberals keep voting for the democrats. Please folks when you vote…try to be smart this time. Don’t complain that your taxes are going up. Don’t complain your kids are being used as pawns. Don’t complain our politicos have bankrupted our state. I’m frustrated and need your help to get the changes we deserve
It’s time to retreat and regroup.
This one’s lost.
Any input on 55+ communities? My wife and I are considering a move.
Thanks and Happy Thanksgiving!
Do you have any kids? If something happens to you kid and/or their kids, 55+ can be a bad scene…
From what I hear these places are filled with a bunch of old people.
Not trying to be a smart ass but one should hang with a bunch of old people for a while before making the leap into living amongst them.
On the plus side, the demand for 55+ community housing can only grow over the next several decades, as the tsunami tide of Baby Boomer retirements swells demand.
Is another U.S. credit rating downgrade on the way, thanks to the failure of the Supercommittee to come to terms on how to shave $1.2t off the deficit?
What other possible ways forward are available besides a ratings downgrade?
U.S. Rating by Moody’s Imperiled Without $1.2 Trillion in Cuts
November 23, 2011, 9:13 PM EST
By John Detrixhe
Nov. 23 (Bloomberg) — Reducing the $1.2 trillion of discretionary spending cuts set to begin in 2013 may have “negative rating implications” for the U.S.’s top credit ranking, according to Moody’s Investors Service.
The deficit reductions are to take place over 10 years and were triggered by a congressional panel’s failure this week to agree on alternative cuts of the same amount. Moody’s, which didn’t change the U.S.’s Aaa rating after the committee failed to reach agreement on Nov. 20, has a “negative outlook” on the country’s debt.
“If they were to eliminate that process or reduce that amount significantly, that would definitely be a negative for our thinking about the rating,” Steven Hess, senior credit officer at Moody’s, said today in an interview. “A change in that would increase deficits and therefore the debt over time and would definitely be negative.”
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Can anyone who understands the connection between plummeting Treasury yields and failed deficit reduction talks please explain the logic? I would have expected yields to rise on evidence that any deficit reduction will be “smaller than expected.” I claim to understand nothing about what moves prices in the current international financial climate.
Treasuries Rising Most Since 2008 as Budget Paralysis Seen
November 22, 2011, 6:02 AM EST
By John Detrixhe
Nov. 21 (Bloomberg) — With Congress at an impasse on how to reduce the U.S. budget deficit, the biggest rally in government bonds since 2008 shows no signs of letting up even as yields are about the lowest on record.
Treasuries have returned 0.9 percent this month, 3.4 percent since the U.S. was downgraded to AA+ by Standard and Poor’s Aug. 5, and 8.9 percent this year, according to Bank of America Merrill Lynch index data. The cost of derivatives to protect against a U.S. default is about half that for AAA rated Germany or the U.K. as Europe’s debt crisis has spread from Greece, according to data provided by CMA.
After the downgrade, and with lawmakers said to have failed to reach agreement on cutting $1.2 trillion from the deficit ahead of a deadline, U.S. bonds have still been the best investment this year. Yields may stay low as the Federal Reserve holds down rates and political wrangling in the U.S. threatens the global recovery. Spending cuts triggered by lack of a budget plan would lop as much as 2 percentage points off growth in the first quarter of 2013, according to JPMorgan Chase & Co.
“People are more concerned with risk aversion than they are with trying to hit a home run on return,” Jeffrey Caughron, an associate partner at Baker Group LP in Oklahoma City, who advises community banks on investments of more than $38 billion, said Nov. 17 in a telephone interview. “It makes sense to stay in Treasuries and high-grade investments until we see a demonstration of responsibility on the part of our Congress and some evidence that things are going to improve with the European situation.”
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Why bother with Megabank stress tests when credit default swap prices do such a great job of indicating what the market thinks about credit default risk?
BofA Swaps Soar to Record as U.S. Company Credit Risk Increases
November 23, 2011, 7:34 PM EST
By Mary Childs
Nov. 23 (Bloomberg) — The cost to protect Bank of America Corp. debt surged to a record and a benchmark gauge of U.S. corporate credit risk climbed to a seven-week high as Europe’s sovereign fiscal crisis intensified.
The Markit CDX North America Investment Grade Index of credit default swaps, which investors use to hedge against losses on company debt or to speculate on creditworthiness, added 5.9 basis points to a mid-price of 146.4 at 4:57 p.m. in New York, the highest since Oct. 4, according to Markit Group Ltd.
Investors pushed the gauge higher on concern that Europe’s bond market turmoil, which began more than two years ago in Greece, now risks engulfing the region’s biggest economy. Germany failed to get bids for 35 percent of 10-year bonds offered for sale today, sending its borrowing costs higher and the euro lower. French and Belgian bonds fell as the cost to protect European government debt against default rose to a record.
“If ‘the least’ riskiest of the EU has a difficult time selling its debt, that’s not a particularly encouraging sign for the rest,” Joel Levington, managing director of corporate credit at Brookfield Investment Management Inc. in New York, said in an e-mail today.
The U.S. index, which typically rises as investor confidence deteriorates and falls as it improves, has increased from a two-month low of 113.4 basis points on Oct. 27 as traders have wagered that Europe’s escalating fiscal crisis will taint bank balance sheets worldwide.
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Weighing the Odds of a Euro-Zone Collapse
Nov. 23, 2011
A few months ago, predicting the breakup of the euro was the preserve of wild-eyed hyperbole addicts and cynics. But recently, some sensible people are taking the idea seriously, Katie Martin reports on Markets Hub. Photo: AFP / Getty Images.
Rupee nears record low against dollar
By Reuters
Published: November 24, 2011
The rupee ended at 87.50/55 to the dollar, weaker than Tuesday’s close of 87.35/40. It hit a record low at 87.92 to the dollar in September.
The rupee fell on Wednesday, inching closer to its record low amid higher dollar demand from importers and dealers said the local unit is likely to stay under pressure because of import payments.
The rupee ended at 87.50/55 to the dollar, weaker than Tuesday’s close of 87.35/40. It hit a record low at 87.92 to the dollar in September. “There were import payments, especially for oil, of around $100 million which pulled the rupee lower,” said a dealer at a foreign bank.
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