The Housing Bubble

Yowza, first to post.

Hey, anyone else in an area where the bubble has not popped? WTF?

Still sitting and waiting here in San Francisco.

FT dot com
December 20, 2011 6:59 pm
Eurozone crisis hits US mortgage securities
By Henny Sender in Hong Kong and Dan McCrum in New York

Asset sales by banks under pressure in Europe have hit prices for securitised mortgages in the US, indicating that the effects of the eurozone crisis are widening.

Rather than selling distressed assets in their home markets, there are increasing signs that European banks are selling assets outside the region, hitting prices for asset-backed paper.

“The commercial mortgage-backed securities market is down anywhere from 10 per cent to 50 per cent since April,” says Marc Rosenthal, who manages a portfolio of such securities for MatlinPatterson, a New York private equity group. “Yet the fundamental credit performance hasn’t changed.”

The ABX, an index of prices for securities backed by 2006 vintage subprime mortgages, has fallen 29 per cent since the start of the year, to trade at levels not seen since late 2009.

So while many analysts and traders say the bottom is near for commercial and residential mortgage-backed securities, investors remain cautious due to expectations for future sales.

European banks alone hold about $100bn in US mortgage-backed securities that are not backed by Fannie Mae and Freddie Mac, according to data from Deutsche Bank.
…

Got burst Brussels brown sprouts?

FT dot com
December 19, 2011 5:04 pm
Crisis shows signs of bursting Brussels bubble
By Joshua Chaffin and Alex Barker in Brussels
Euro coins and bills manufacturing

When dozens of civil servants last week braved the drizzle outside the European Commission headquarters in Brussels to protest against looming staff cuts, it marked a rare sighting of austerity, now extensive in the likes of Athens and Dublin, at the very centre of the European Union.

Yet the angry scene outside the building, known as the Berlaymont, only hinted at the growing disillusion and anxiety within its walls, where staffers have struggled for nearly two years with a crisis that José Manuel Barroso, the Commission president, has deemed the continent’s worst since the second world war.

“People are more gloomy than I’ve ever seen,” one official said.

“The crisis dominates the talk in the corridors, at the watercooler and down on Place Lux,” a colleague agreed, referring to the stretch of bars where staffers unwind.

Inside the building that is arguably the beating heart of the European project, workers are now beginning to entertain once-unthinkable worries about the security of their jobs. Like other anxious Europeans, they are also debating into which mattress they should be stuffing their savings. The Netherlands’ Rabobank – the only triple A-rated bank in the world – appears to be the favourite.

So dire is the situation, one staffer observed, that a co-worker recently cancelled the sale of an apartment because “you want bricks and mortar right now – you do not want to end up with 400,000 in euros”.

The Berlaymont has seen dark times before – most notably when the entire college of commissioners was forced to resign in disgrace in 1999 amid allegations of rampant corruption.

But the euro crisis presents a particular variety of misery. From their perch in Brussels, its staffers arguably have the best view into the continent-wide conflagration. Yet they also recognise that the decisive steps needed to halt the crisis must be taken elsewhere.

“They can see this train-wreck happening, but they can’t do anything about it. They’re the Commission, and it’s all in the hands of Merkel and Sarkozy,” said one Brussels lobbyist, who has regular dealings in the Commission.

A European official described the mood as “stunned embarrassment”, adding: “Everyone wants to provide the answer but there isn’t one they can give.”
…

dtto Culver City. OTOH, My across-the-street realtor nabe has made 0 sales since last Feb.

Op-Ed Columnist
Will China Break?
By PAUL KRUGMAN
Published: December 18, 2011

Consider the following picture: Recent growth has relied on a huge construction boom fueled by surging real estate prices, and exhibiting all the classic signs of a bubble. There was rapid growth in credit — with much of that growth taking place not through traditional banking but rather through unregulated “shadow banking” neither subject to government supervision nor backed by government guarantees. Now the bubble is bursting — and there are real reasons to fear financial and economic crisis.

Am I describing Japan at the end of the 1980s? Or am I describing America in 2007? I could be. But right now I’m talking about China, which is emerging as another danger spot in a world economy that really, really doesn’t need this right now.

I’ve been reluctant to weigh in on the Chinese situation, in part because it’s so hard to know what’s really happening. All economic statistics are best seen as a peculiarly boring form of science fiction, but China’s numbers are more fictional than most. I’d turn to real China experts for guidance, but no two experts seem to be telling the same story.

Still, even the official data are troubling — and recent news is sufficiently dramatic to ring alarm bells.

The most striking thing about the Chinese economy over the past decade was the way household consumption, although rising, lagged behind overall growth. At this point consumer spending is only about 35 percent of G.D.P., about half the level in the United States.

So who’s buying the goods and services China produces? Part of the answer is, well, we are: as the consumer share of the economy declined, China increasingly relied on trade surpluses to keep manufacturing afloat. But the bigger story from China’s point of view is investment spending, which has soared to almost half of G.D.P.

The obvious question is, with consumer demand relatively weak, what motivated all that investment? And the answer, to an important extent, is that it depended on an ever-inflating real estate bubble. Real estate investment has roughly doubled as a share of G.D.P. since 2000, accounting directly for more than half of the overall rise in investment. And surely much of the rest of the increase was from firms expanding to sell to the burgeoning construction industry.

Do we actually know that real estate was a bubble? It exhibited all the signs: not just rising prices, but also the kind of speculative fever all too familiar from our own experiences just a few years back — think coastal Florida.
…

TARP bailout takes on a whole new dimension. Worth a couple of minutes of your time if you’re feeling cranky.

http://tinyurl.com/bsqdba5

Is China’s bubble bursting?
As bankruptcy-driven disappearances and suicides haunt Wenzhou, we check in with leading China debt expert Victor Shih.
David Case
October 30, 2011 21:49
China real estate bubble debt collapse

A 19-floor commercial building is demolished by controled explosions on November 17, 2004 in Shanghai, China’s financial hub, to make way for new development. (China Photos/Getty Images)

Editor’s note: this article is part of our “Cracks in the Wall” series about the challenges facing China’s economy.

BOSTON — China’s economic miracle is showing signs of faltering. Growth has slowed to 9.1 percent — still a ferocious pace for any normal country, but a relative slump for China. Meanwhile, the government has begun putting the brakes on lending, in an effort to tame inflation and avoid a serious bubble.

But now there’s evidence of real economic pain in China. In cities like Wenzhou, entrepreneurs have found themselves mired in debt — so hopelessly that some have gone into hiding or committed suicide.

To put the matter in perspective, we interviewed Dr. Victor Shih. An expert in Chinese politics and economy, Shih has been following the debt situation closely, and was among the first to warn of potential trouble ahead. An associate professor of political science at Northwestern University, Shih holds a Ph.D. in government from Harvard. (The interview has been condensed and edited by GlobalPost.)
…

China Business
Nov 23, 2011
China bubble a global concern
By James Nolt

China’s economy has been growing at a phenomenal pace in recent decades, averaging around 10% a year. Few people seemed to worry, therefore, when the Chinese government announced recently that gross domestic product (GDP) growth in the third quarter of 2011 slowed to “only” 9.1% . Almost any country would envy such growth. Yet beneath the continued robust appearances, there are signs that China is heading toward a crash reminiscent of the one that brought down the United States economy during 2007-2008.

China too is facing a real estate bubble financed by an unregulated shadow banking system that is just lately starting to get squeezed between tightening government regulation of credit and sharply falling export sales. If real estate prices finally start to tumble, the shock to bullish Chinese investors could collapse the shadow banking system, drive many smaller businesses under, and create severe unemployment problems.

Although the US Congress is still fixated on the supposed problem of an undervalued currency, a serious slowdown of the Chinese economy could have worse implications for the world economy than the much touted exchange rate issue.

Americans must start to think more broadly about the role of the Chinese economy in an increasingly troubled world economy and not consider only the bilateral US-China economic relationship in isolation from the rest of the world. Since 2007 the world economy has been rattled by a series of structural failures worse than any since the 1930s. This is a dangerous time.

The Great Depression was not a single crisis but a snowballing series of interlinked crises that each pulled the world deeper into depression. The links among various crises in the world today are even tighter than then because of the much greater integration and interdependence of the global financial system and its greater role in real economies everywhere.
…

There is no shortage of journalists trembling in fear over the prospect of a China bubble collapse without any real evidence it will even occur.

What If the China Bubble Bursts?
By Ken Miller Monday, Oct. 17, 2011
Ghost town Empty streets in Kangbashi, Inner Mongolia
Michael Christopher Brown / Corbis

What’s the most important economic question in the world today? One contender would certainly be whether the euro will collapse. Another might be whether the U.S. will plunge into a double-dip recession. But a third, and possibly the most important over the long term, is whether China can find its way out of the biggest housing bubble ever created.

It may seem strange to Westerners, who hear so much about the rise of Asia and growing Chinese competitiveness. But like U.S. Republicans who try to “starve the beast” by cutting government spending, the Chinese Communist Party has been attempting to put a damper on the debt-fueled real estate boom that is at the heart of the nation’s economic miracle. This is part of a deliberate attempt that is meant to rejigger the Chinese economy into one that relies more on a domestic service sector and less on manufacturing and exports. If, however, the party’s efforts result in a precipitous drop in real estate values, multinational corporations whose revenue and earnings growth are tied to China could be hard hit. And the U.S. could be thrown back into recession. (See pictures of China’s 90 years of communism.)

The world has to care about Chinese growth, since it is an important driver of the global economy. China contributed 19% of the world’s economic growth in 2010, and that’s expected to increase to 24% this year. China’s growing strength is essential to both the U.S. and European recoveries.

While Washington has sweated through its partisan debates on budget balancing and economists have bickered over solutions to our low-growth and high-unemployment problems, the Chinese boom of the past several decades has blasted ahead without a glitch. Much of that boom is wrapped up in real estate. In the first six months of this year, Chinese investment in real estate was up 32.9% compared with the same period in 2010, and China’s economy is expected to grow more than 9% this year, about equal to its average during the post — Deng Xiaoping era of “communism with Chinese characteristics.”

The popular narrative is that China’s rise from nowhere in 1978 to its position today as the world’s second largest economy has been fueled by cheap labor. While this is one factor, cheap capital and land have been as important. Most Chinese, who are huge savers, have little choice but to put their money in bank accounts that pay interest lower than the rate of inflation; these funds are then channeled into state-owned enterprises whose capital expenditures create the factories and buildings on which the Chinese miracle has been built.
…

http://www.telegraph.co.uk/finance/economics/houseprices/8968616/Americans-ditch-home-ownership.html

The development of multi-family units - a category made up of flats and townhouses - jumped 25.3pc last month to an annual rate of 238,000, the Commerce Department said on Tuesday. That helped drive overall construction on new homes up 9.3pc to an annual pace of 685,000, the strongest since the spring of 2010.

The better-than-expected figures were enough to cheer investors who have become accustomed to a flow of depressing news from the housing market since the bubble first burst in 2006. They also showed the degree to which the downturn is unwinding American homeownership, an objective of successive US governments since World War Two.

Ownership dropped to 66.9pc last year from a high of 70pc in 2005, and some are forecasting it will drop as low as 62pc as the hurdles to owning a home increase.

“We expect the shift from owning to renting to persist for the next few years,” said Michelle Meyer, an economist at Bank of America. She points to the prospect of further repossessions next year and the tougher criteria banks are now imposing on potential borrowers.

Colleges pay presidents millions while raising tuition

CNNMoney
5:59 a.m. CST, December 20, 2011

Vanderbilt University paid its chancellor, Nicholas Zeppos, $1.9 million in 2009, according to the school’s most recent tax filings — enough for up to 43 students to attend Vanderbilt at current prices. His total pay includes a base salary of $673,002, as well as bonus and other compensation.

That same year, Vanderbilt’s tuition jumped 4.3 percent. Since then, the college has hiked tuition more than 3 percent annually, and now totals $41,332, according to the university.

As student loan debt continues to grow and students storm campuses across the country to protest the surging cost of tuition, college presidents’ big paychecks are adding fuel to the fire, said Sara Hebel, a senior editor at the Chronicle of Higher Education, which recently published its annual survey of CEO compensation among private colleges.

“At a time when the national conversation is focused on widening income gaps between the wealthiest individuals and everyone else, it is not a surprise that college presidents who earn some of the highest salaries have been targeted by students who face rising tuition,” said Hebel.

http://www.chicagotribune.com/business/breaking/chi-colleges-pay-presidents-millions-while-raising-tuition-20111220,0,3120591.story -

The producers:

Weak regulation, poor oversight led to Morgan Keegan investors’ heavy losses

Jim Kelsoe had a pet name around Morgan Keegan’s skyscraper in Memphis.They called him “the genius.”

Kelsoe pulled down buy-the-whole-vineyard pay — $10 million, even $20 million in good years, according to estimates by finance experts.

He was the genius.

Then an estimated $1 billion put in his grasp by Memphis families and businesses drained away and simply vanished in America’s 2007 meltdown.

Tangled roots

■ Banks — In New York, Sandy Weill invited John Reed to the Park Hyatt. They talked merger. In 1998, Reed’s Citigroup bank wed Weill’s Traveler’s insurance, owner of big bond trader Salomon Smith Barney.

Weeks after the $70 billion merger, Weill urged repeal of Glass-Steagall, the 1933 federal law barring banks from owning investment firms. (Salomon-Travelers had secured a temporary waiver). Led by Weill, commercial and investment bankers donated more than $150 million to key lawmakers’ election campaigns.

In November 1999, Congress ended the Depression-era law.

Within days, former Goldman Sachs co-chairman Robert Rubin resigned as U.S. Treasury secretary and joined Weill as his right-hand man.

Within two years, Regions bought Morgan Keegan. The big bank would begin steering clients to the Memphis-based investment house

http://www.commercialappeal.com/news/2011/dec/18/morgan-keegan-what-went-wrong-genius-at-work/

Two stories from Politico:

Poll: No love for the 2012 field

“In a figure that’s dramatically higher than four years ago, almost half of Americans are not satisfied with the field of 2012 White House candidates, saying they don’t think any of the hopefuls would make a good president, a new poll Wednesday shows.

Asked if there is any candidate who they think would make a good president, 46 percent said there wasn’t, while 48 percent said there was, according to a Gallup/USA Today poll.

This year’s level of dissatisfaction is significantly higher than it was in 2008, when just 11 percent signaled they weren’t happy with the choice of presidential candidates, and in 2000, when 16 percent said there was no one in the field that would make a good president.”

And this: Gary Johnson to drop out of GOP primary to run as Libertarian

“Gary Johnson will quit the Republican primaries and seek the Libertarian Party nomination instead, POLITICO has learned.

The former two-term New Mexico governor, whose campaign for the GOP nomination never caught fire, will make the announcement at a press conference in Santa Fe on Dec. 28. Johnson state directors will be informed of his plans on a campaign conference call Tuesday night, a Johnson campaign source told POLITICO.

The move has been expected for weeks — Johnson had run a New Hampshire-centric effort that never got him past a blip in the polls. He appeared at only two nationally televised debates, and only one in which other major candidates took part.

Johnson expressed deep disillusionment with the process as his libertarian message failed to catch fire and he received almost no attention for his bid. He soon began flirting with the Libertarians when it became clear that he was gaining no traction in GOP primaries.”

Politicians Are Feces®

Congress Are Whores®

Retired police and firefighters from Central Falls, R.I., have agreed to sharp pension cuts, a step thought to be unprecedented in municipal bankruptcy and one that could prompt similar attempts by other distressed governments.

“This is the first time there’s been an agreement of the police and firefighters of any city or town to take the cut,” he said, referring to those already retired, who are typically spared when union contracts change. “I’ve told these guys they’re like the canary in the coal mine. I know that there are other places watching this.”

Nice to see the fraudsters get their due. Now move up the food chain….

The police and firefighters have known for months that drastic cuts were looming. Last month, the unions representing active workers negotiated new contracts, which called for workers to complete at least 25 years to receive pensions, instead of 20. Workers will also have to meet much more rigorous standards to qualify for disability pensions.

Until now, 60 percent of Central Falls police officers and firefighters have retired on full disability pensions, drawing the inflation-protected and tax-free payments even when they embarked on new careers. One of them, at 43, has become a prominent personal-injury lawyer and can be seen in television ads shooting baskets and pretending to fall down a manhole. That retiree, Robert Levine, a former police officer, said his disability was the result of an on-duty car crash where he was not at fault, and that his pension had been granted lawfully after his condition was certified by three different doctors.

http://www.nytimes.com/2011/12/20/business/pension-deal-in-rhode-island-could-set-a-trend.html?src=mv&ref=business

Realtors Are Liars®

Brenda Lee - Rockin’ Around the Christmas Tree Lyrics,

Rockin’ around the Christmas tree
At the Deadbeat party hop,
Everyone heres been livin free,
Since their mortgage payments stopped,
Rockin’ around the Christmas tree,
It`s a Deadbeat kinda thing,
Later we’ll take our house payment,
And we’ll do some more shopping.

You will get a sentimental feeling when you hear,
Voices singing, “Raise your glasses,
Robo signers saved our @sses”,
Rockin’ around the Christmas tree,
Have a happy holiday,
Everyone dancin’ merrily,
Thanks to rent that we don`t pay.

Interlude

You will get a sentimental feeling when you hear,
Voices singing, “Raise your glasses,
Robo signers saved our @sses”,
Rockin’ around the Christmas tree,
Have a happy holiday,
Everyone dancin’ merrily,
In a house where we don`t paaaay.

to: Rental Watch & 45 North

Tankxs for yer posts & in$ights yesterday re: CRE !

How to Be a Millionaire
Writer: WHITE, MARK ANDREW/FRY, MARTIN (ABC)

I’ve seen the future, I can’t afford it
Tell me the truth sir, someone just bought it
Say mr. whispers! Here come the click of dice
Roulette and blackjacks - gonna build us a paradise
Larger than life and twice as ugly
If we have to live there, you’ll have to drug me

Maybe these luxuries can only compensate
For all the cards you were dealt at the hands of fate
So tell me
Tell me! tell me! How to be a millionaire
Tell me! tell me! How to be a millionaire!

Millionaire! Billionaire! Trillionaire!

Hardly surprising if you might consider
Loyalties go to the highest of bidders
What’s my opinion? I’d give you ten to one
Give me a million, a franchise on fun
But there are millions who often get nowhere
And there’s just one secret I think you should share

Maybe these luxuries can only compensate
For all the cards you were dealt at the hands of fate
So tell me
Tell me! tell me! How to be a millionaire
Tell me! tell me! How to be a millionaire!

Who wants to be millionaire?
I do! - I don’t! - I do!
Who wants to be millionaire?
I do! - I don’t!

I’ve seen the future and I can’t afford it

Written in the 1980s. These guys were way ahead of their time. The cartoon video’s a hoot, too.

Hmm. Doesn’t look good for the Eurozone, doesn’t look good for China.

Globalization. Worst. Idea. Ever.

Some Lilliputians seem to think it might be good for America to tie Gulliver’s income down to the 99%er income level. J K Galbraith’s ghost nods in approval.

Felix Salmon
A slice of lime in the soda
Income distribution charts of the day, middle-class edition
Dec 21, 2011 01:24 IST

Ian Ayres has an excellent post at Freakononomics today, explaining some of the background thinking behind his inequality tax proposal:

An important goal of our op-ed was to suggest a new unit of measure, “medians” to help us think about what it means to be rich. In 1980, if you earned 3.8 medians, you were in the top 1 percent, but by 2006 even the poorest in the 1 percent club earned 6.9 medians.

What we call the “Brandeis Ratio,” the average income of the richest 1 percent (which includes the billions earned by the lucky few) has grown even more disproportionate. As shown in the chart below, in 1980, one-percenters on average made 12.5 medians, but in 2006 (the latest year in which data is available) the average income of our richest 1 percent was a whopping 36 medians.

Ayres makes a strong case that there’s a real societal interest in capping this ratio somewhere — “it would be bad for our democracy,” he writes, “if 1-percenters started making 40 or 50 times as much as the median American.” So let’s not tax income; let’s instead tax inequality, and increase taxes on the 1% if and only if inequality is going up rather than down.

But here’s the thing: 36 times median income corresponds to an annual income of $1,780,020. I think we can agree that anybody earning over a million dollars a year is rich: that’s just 20 times median income. The 1% on average hasn’t earned that little since 1995.
…

Preemptive disclaimer:

P.S. The income gap was similarly ginormous just before the onset of the Great Depression.

Income inequality in America
How the middle class became the underclass
By Annalyn Censky, staff reporter @CNNMoney February 16, 2011: 5:39 AM ET

The average American’s income has not changed much, while the richest 1% of Americans have seen their earnings surge.

NEW YORK (CNNMoney) — Are you better off than your parents?

Probably not if you’re in the middle class.

Incomes for 90% of Americans have been stuck in neutral, and it’s not just because of the Great Recession. Middle-class incomes have been stagnant for at least a generation, while the wealthiest tier has surged ahead at lighting speed.

In 1988, the income of an average American taxpayer was $33,400, adjusted for inflation. Fast forward 20 years, and not much had changed: The average income was still just $33,000 in 2008, according to IRS data.

Meanwhile, the richest 1% of Americans — those making $380,000 or more — have seen their incomes grow 33% over the last 20 years, leaving average Americans in the dust. (How the rich became the über rich)

Experts point to some of the usual suspects — like technology and globalization — to explain the widening gap between the haves and have-nots.

But there’s more to the story.
…

Got millions of mortgages in default?

Foreclosure sales still pummeling home prices
By Les Christie @CNNMoney December 21, 2011: 5:45 AM ET
Five years after the subprime mortgage meltdown started to hit, foreclosure sales are still hurting the housing market.

Five years after the subprime mortgage meltdown started to hit, foreclosure sales are still hurting the housing market.

NEW YORK (CNNMoney) — Nearly five years into the crisis, just how badly are foreclosures still hurting the housing market?

A whopping 46% of homes sold in November were either short sales or REOs — as homes foreclosed on and repossessed by lenders are called, according to a survey by Campbell/Inside Mortgage Finance released Tuesday.

“The huge glut of distressed properties coming to market is why there will be no home price rebound this coming year and maybe into 2013,” said Guy Cecala of Inside Mortgage Finance, a publisher of mortgage information and news.

One problem: Distressed homes sell for a lot less than homes sold by conventional sellers. The average price for a short sale (when borrowers owe the bank more than their homes are worth) was $209,000 in November. For a regular sale, the average is about $259,000.

The numbers are even worse for REOs, which averaged about $190,000 for properties in move-in condition.

“Distressed properties have the lowest prices for any category of home sold,” said Cecala. “To a large extent, that’s why we’ve seen continuous home price drops over the past three years and why those drops are likely to go on.”

Foreclosures fall but outlook isn’t bright

There is no shortage of distressed properties: More than 6 million borrowers are delinquent 30 or more days, according to LPS Applied Analytics. Two million are already in the foreclosure process, and most of these homes will be repossessed or sold as short sales.

House hunters have gotten accustomed to shopping for homes in foreclosure and any stigma that may have attached to REOs or short sales in the past has diminished. But many of these properties have been damaged, making them hard to sell and depressing their prices.

Indeed, the average price for a damaged REO was just $99,000 in November — 62% less than conventional sales, the survey found.

After all, some buyers don’t want to do major repairs and others are turned off by homes in poor condition.

Plus, getting financing for REOs in poor shape can be difficult, according to Cecala. Lenders don’t like to issue mortgages for homes in need of extensive repairs. Underwriters don’t want to wind up with houses worth less than their loan balances.

And in an insidious twist, as distressed properties are sold, they can also bring down the price of homes that aren’t in trouble. That’s because mortgage appraisers assessing a regular home’s value typically compare it to short sales and REOs in the area.
…

Impressive:

Each Chevy Volt sold thus far may have as much as $250,000 in state and federal dollars in incentives behind it – a total of $3 billion altogether, according to an analysis by James Hohman, assistant director of fiscal policy at the Mackinac Center for Public Policy.

Hohman looked at total state and federal assistance offered for the development and production of the Chevy Volt, General Motors’ plug-in hybrid electric vehicle. His analysis included 18 government deals that included loans, rebates, grants and tax credits. The amount of government assistance does not include the fact that General Motors is currently 26 percent owned by the federal government.

Don’t know the whole story, but I take the impression that somebody high up the chain of command decided it was high time to tell Larry Ellison to take a hike.

Bulletin
Oracle shares plunge 13% early Wednesday, pacing tech-sector pullback as Wall St. retreats

Dec. 21, 2011, 9:41 a.m. EST
U.S. stocks open lower on ECB lending plan
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NEW YORK (MarketWatch) — U.S. stocks began with modest declines on Wednesday after the European Central Bank said it would lend a record amount to euro-area banks. The Dow Jones Industrial Average (DJIA -0.29%) fell 36 points to 12,066.87. The S&P 500 (SPX -0.44%) declined 4.41 points to 1,236.89. The Nasdaq Composite (COMP -1.30%) shed 27.31 points to 2,576.42.

An excerpt from an article by Jim Goad at Takimag about the Black Friday brawls. Nope, greed and deception is by no means confined to banksters and politicians. I say this because of a recent experience with a “small” business. “Small” business often deserves what it gets. It stays small, because the people involved are. Here’s why the 1% is successful: they often take care of their own. The 99% often cannibalizes their own.

“If any of these baseball-cap-wearing ass-sores clawing over one another at midnight to score a discounted toaster oven using their nearly tapped-out credit card had the slightest chance to be a despised villainous oligarch, they’d cannibalize every peasant within a hundred miles and then go out for lobster puffs with champagne. This isn’t to say that greed is inherently good, only to point out that it’s not confined to those who’ve been successful at it.”

Please share this article by using the link below. When you cut and paste an article, Taki’s Magazine misses out on traffic, and our writers don’t get paid for their work. Email editors@takimag.com to buy additional rights. http://takimag.com/article/the_black_friday_brawls/page_2#ixzz1hBDr53cw

I know the Sarkozy trade has been mentioned before but it’s been more successful than they could have hoped. Edited highlights are

Huge demand for ECB’s three-year loans

Eurozone banks have rushed to take out cheap three-year loans offered by the European Central Bank, borrowing 489bn euros ($643bn; £375bn).

The central bank had originally hoped to lend up to 450bn euros to stop another credit crunch crippling the banking system.

Over 500 banks raced to borrow from the scheme, which was far beyond market expectations.

“A cash for trash mechanism allowing banks to access cheap funds and buy up more sovereign debt - or more likely just shore up their own finances,” is how Justin Urquhart Stewart of Seven Investment Management described the scheme.

Although the ECB has ruled out lending directly to countries, banks taking the three-year loans at 1% are being encouraged to invest in sovereign debt at 6% to 7%.

Full details

http://www.bbc.co.uk/news/business-16282206

So now it’s official

http://money.cnn.com/2011/12/21/real_estate/home_sales_revised/

Realtors Are Liars®

“What’s the matter with Kansas?”…now we know!

Did the military haul a UFO through Kansas?
By Eric Pfeiffer | The Sideshow – 51 mins ago

“Clearly people are interested in what’s going through town. It’s unusual to see a shrink-wrapped ********, especially one with that shape,” McKinney said.

“We built two for the Navy, they were being tested at Edwards Air Force Base [in California] since March. One is on its way to Maryland, and the other will remain in California.”

is this who we turn america over to?

http://www.peopleofwalmart.com/50201

Comment by measton

Really so it’s the liberals that think gov should be cracking down on medical marijuana????? I think you might by typing from a pot dispensary as we speak.

No, really it is big pharma that wants it to be controlled.

THC is ok if big pharma produces it in pill form. If you can produce it readily and cheaply yourself, big pharma loses.

Follow the money.

Victor Davis Hanson

A Vandalized Valley

While the elites make excuses, citizens cope with theft and destruction.

I am starting to feel as if I am living in a Vandal state, perhaps on the frontier near Carthage around a.d. 530, or in a beleaguered Rome in 455. Here are some updates from the rural area surrounding my farm, taken from about a 30-mile radius. In this take, I am not so much interested in chronicling the flotsam and jetsam as in fathoming whether there is some ideology that drives it.

google and read you will nt be disappointed !!!!!!!

Did we already know the adjustment was going to be as bad as 14%?

An average of 14% fewer existing homes were sold annually between 2007 and 2010, according to revisions reported Wednesday by the National Association of Realtors, pointing to a housing market that was even weaker than previously believed.

http://www.marketwatch.com/story/existing-home-sales-downwardly-revised-14-2011-12-21-100210?link=MW_home_latest_news

onsumers may be cutting debt and banks may be tightening up their balance sheets, but borrowing by U.S. corporations is in full swing.

At a time when the popular narrative centers on how tight-fisted banks are getting with their lending, end-of-year data for syndicated loans tell a different story.

Corporations use syndicated loans for longer-term financing. The loans usually are provided by a group of deep-pocketed lenders who can distribute liability among them and thus decrease their risk. Big Wall Street investment banks are usually the source of such loans.

So far in 2011, syndicated loan volume has increased a whopping 56 percent compared to 2010, according to Dealogic. The total of $1.76 trillion is the highest single-year sum since the pre-financial crisis days of 2007.

This came even though fourth-quarter activity saw a pretty big tail - the $354.5 billion total was the lowest in more than a year, since the $246.6 billion in the third quarter of 2010, Dealogic said.

Moreover, the U.S. was the biggest player in the space, with 47 percent of the total global loan volume, up 9 percentage points over 2010.

The bulk of the loans went to the most credit-worthy.

Investment grade volume increased to $1.03 trillion, also the highest since 2007, representing a 68 percent year-over-year gain.

Interpretation
1. Corporations are borrowing and not spending on capital equipment.
2. CEO’s want their paycheck to flow as long as possible. Having a mountain of cash is a way to accomplish that. They don’t care about the companies inabillity to pay the loan back if things get worse down the road. They are interested in their paycheck.
3. CEO’s want a mountain of cash so they can buy up the pieces of what’s left of America after the next crash.

Or as this NYTimes article suggests. Corporations are borrowing cash cheaply to drive up the price of stocks so insiders can unload.

nytimes.com/2011/11/22/business/rash-to-some-stock-buybacks-are-on-the-rise.html?_r=2

This suggests those at the top are going to cash as much as possible and leaving the bag of debt to everyone else.

When those at the top are going to cash, does this suggest they fear hyperinflation????

I was just thinking - 35-40% of people don’t aren’t real estate owners. It’s this 35-40% that the government is screwing especially hard. The government is bailing out the FIRE sector and pandering to real estate owners/debtors, but 35-40% is a very large block of people, much bigger than the traditional interest groups that politicians pander to.

gobble, gobble, …peck, peck,… gobble, gobble

Behind Boehner’s Debacle:
The Daily BeastBy Patricia Murphy | The Daily Beast – 11 hrs ago

…a group of Republicans they’ve dubbed “the kamikazes,” the GOP freshmen who arrived in January on a wave of Tea Party anger and have shown time and again that they are willing to blow up their careers and everything around them in service to their cause.

The “kamikazes’” casualty list this year is long. They blew up the debt-ceiling vote this summer, sparking a downgrade in the nation’s credit rating. They blew up the appropriations process so thoroughly that routine spending votes morphed into philosophical standoffs that nearly locked down the federal government three times and required seven temporary funding patches just to keep the lights on. And this week, they managed to blow up not just a tax cut that nearly everyone in Washington agrees is a good idea, but also their party’s hard-earned reputation for cutting taxes and, quite possibly, their chances at a long-term majority in the House and future control of the Senate.

Most Americans support cutting spending, cutting taxes, and shrinking deficits, all organizing principles of the Tea Party when the movement sent nearly 90 new members to populate the House GOP’s ranks after the 2010 elections. But their decision again and again to stop a bill instead of modifying it, to reject a proposal instead of changing it, has put House Republicans in a suicide pact with themselves, tying Boehner’s hands and then walking him and their entire caucus off a plank together.

http://www.savingsbonds.gov/NP/BPDLogin?application=np

US debt just surpassed our GNP: $15 trillion. It was $10.6 trillion when Obama took office.

Bernie Madoff was more legitimate than NAR.

High & Low Finance
A Central Bank Doing What It Should
By FLOYD NORRIS
Published: December 21, 2011

“Talk tough, and open the vaults.”

That should be the slogan of Mario Draghi, the president of the European Central Bank.

http://www.nytimes.com/2011/12/22/business/a-central-bank-doing-what-central-banks-do.html

Had lunch at the NY Fed with a buncha economists.

They still don’t get it, it’s freakin’ unreal. My friend (who works there and invited me) was smirking all the way through lunch (he gets it clearly.)

Great lobster ravioli though.

Into the valley of Debt
Rode the Three Hundred Million.

‘Forward, the Debt Brigade!’
Was there a man dismay’d ?
Not tho’ the taxpayer knew
Some one had blunder’d:
Theirs not to make reply,
Theirs not to reason why,
Theirs but to pay & die,
Into the valley of Debt
Rode the Three Hundred Million.

Bailouts to right of them,
Bailouts to left of them,
Printing ppress in front of them
Volley’d and thunder’d;
Millions of houses they would not sell,
Boldly they rode and well,
Into the jaws of Debt,
Into the mouth of Hell
Rode the Three Hundred Million .

When can their glory fade?
O the wild charge they made!
All the world wondered.
Honor the charge they made,
Honor the Debt Brigade,
Noble Three Hundred Million.