The Housing Bubble

I didn’t get a chance to read the blog this weekend so I’m not sure if this was posted already:

http://www.washingtonpost.com/investigations/in-dc-loan-program-mortgage-defaults-abound/2011/11/29/gIQAPt4Z1P_story.html?hpid=z1

D.C. housing officials have routinely subsidized home purchases that low-income buyers could not afford, paving the way for foreclosures, liens and financial hardships.

“I was a first-time home buyer thinking that everything was on the up and up,” said McDonald, 48, who declared bankruptcy in 2009. “At any minute, we could be out on the street. It’s heartbreaking. It’s scary. I don’t know what could happen, especially with my kids.”

It just gets worse and worse.. this thing.

Protests Over Austerity Measures Turn Violent in Romania
By THE ASSOCIATED PRESS
Published: January 15, 2012

BUCHAREST, Romania (AP) — Romania’s government called an emergency meeting late Sunday to discuss violent protests that showed no sign of abating, after demonstrators angry about austerity measures hurled stones and firebombs at the police here in the capital. At least 13 people were injured.

More than 1,000 protesters clashed with police officers, who used tear gas and flares to repel demonstrators who blocked a main road in Bucharest. One man was briefly set on fire during the chaos.

The interior minister, Traian Igas, called an emergency meeting to deal with the crisis.

The protests, in their fourth day, were the most serious since President Traian Basescu came to power in 2004. They are the result of frustration over public-sector wage cuts, reduced benefits, higher taxes, cronyism in state institutions and widespread corruption.

Demonstrators yelled, “The Mafioso government stole everything we had!” and “Get out, you miserable dog!” — a popular expression of contempt used to refer to Mr. Basescu. Protesters roamed through the center of the capital, and Mayor Sorin Oprescu called on them to refrain from acts of violence.

Antena 3 TV reported that shops in the vicinity of the protest had been vandalized.

“We are here to protest, we cannot face it any more, we have no money to survive, our pensions are so small, the expenses are more than we can afford,” said a demonstrator who would identify himself only as Sorin. “It’s no way to live.”
…

Proposed “Man of the year” candidate: The credit rating agencies

16 January 2012 Last updated at 04:31 ET
Article written by Gavin Hewitt Europe editor
European austerity: More pain than gain?

There is no disguising that in certain European quarters the ratings agencies are feared and resented.

The EU’s Economics Commissioner, Olli Rehn, was probably speaking for many when he said he found the decision to downgrade nine eurozone countries “inconsistent”.

He felt that Standard and Poor’s had not taken into account all the steps the EU had made to tackle the crisis, like increased discipline over budgets.

The French Prime Minister, Francois Fillon, said the downgrade was “badly timed”. A French presidential adviser said the decision was “worse than pyromaniac firemen, it’s seriously perverse”.

As the crisis deepens in Europe the temptation to shoot the messenger grows. There are those who advocate that Europe needs its own - perhaps tamer - ratings agencies.

Perhaps the most interesting reason for the downgrade was Standard and Poor’s judgement that austerity alone might be self-defeating.

Some European countries and officials might retort that they were muscled into making spending cuts and raising taxes to bring down deficits by the agencies and the bond markets.

Now they are being warned of the dangers of austerity.

Shackled with debts

The “cult of austerity” has always been controversial. The doubts are increasing. There are those who say that Greece is now trapped in a spiral of decline. The Washington Post last week asked whether austerity was “killing the Greek economy”.

The assessment given to debts and borrowers by a ratings agency according to their safety from an investment standpoint - based on their creditworthiness, or the ability of the company or government that is borrowing to repay. Ratings range from AAA, the safest, down to D, a company that has already defaulted. Ratings of BBB- or higher are considered “investment grade”. Below that level, they are considered “speculative grade” or more colloquially as junk.

The fear extends to Italy, Portugal and Spain. Austerity is squeezing demand just as countries are heading into recession. Unemployment is already rising, leading to greater spending on benefits and a decline in revenue from taxation. That forces the countries to borrow more, so forcing up accumulated debt.
…

“A” is for “austerity”…”B” is for “bailout”…

BTW, since when have “assets” provided any “income” to their owners?

13 October 2011 Last updated at 04:15 ET

Financial glossary

Traders at the Chicago Board Options Exchange What’s the difference between a bull and a bear?

The current financial crisis has thrown terminology from the business pages onto the front pages of newspapers, with jargon now abounding everywhere from the coffee bar to the back of a taxi.

Here is a guide to many of the business terms currently cropping up regularly, as well as some of the more exotic words coined to describe some of the social effects of the financial crisis.

AAA-rating The best credit rating that can be given to a borrower’s debts, indicating that the risk of a borrower defaulting is minuscule.

Administration A rescue mechanism for UK companies in severe trouble. It allows them to continue as a going concern, under supervision, giving them the opportunity to try to work their way out of difficulty. A firm in administration cannot be wound up without permission from a court.

AGM An annual general meeting, which companies hold each year for shareholders to vote on important issues such as dividend payments and appointments to the company’s board of directors. If an emergency decision is needed - for example in the case of a takeover - a company may also call an exceptional general meeting of shareholders or EGM.

Assets Things that provide income or some other value to their owner.

* Fixed assets (also known as long-term assets) are things that have a useful life of more than one year, for example buildings and machinery; there are also intangible fixed assets, like the good reputation of a company or brand.

* Current assets are the things that can easily be turned into cash and are expected to be sold or used up in the near future.

Austerity Economic policy aimed at reducing a government’s deficit (or borrowing). Austerity can be achieved through increases in government revenues - primarily via tax rises - and/or a reduction in government spending or future spending commitments.

Bailout The financial rescue of a struggling borrower. A bailout can be achieved in various ways:

* providing loans to a borrower that markets will no longer lend to
* guaranteeing a borrower’s debts
* guaranteeing the value of a borrower’s risky assets
* providing help to absorb potential losses, such as in a bank recapitalisation
…

Fed’s housing ideas won’t fix market
EDITORIAL | EDWARD L. GLAESER
January 13, 2012|By Edward L. Glaeser

WE SHOULDN’T count on the housing market to carry America back into economic uplands.

Last week, Federal Reserve Chairman Ben Bernanke sent a white paper to Congress outlining possible reforms to current housing policies. The paper proposes converting bank-owned properties into rental units and reducing borrowing costs for owners who are at risk of default. Some experimentation along these lines makes sense, but attempts to rejigger the market only go so far — and the barriers to success are high.
…
The Fed paper’s second primary proposal is to modify loans for owners who owe more on their mortgages than their homes are worth. Other programs have tried this already, with limited success, but the Fed suggests further steps to help homeowners, such as eliminating the refinancing fees that the government-controlled Fannie Mae and Freddie Mac charge in certain riskier situations. Freddie and Fannie might also refinance underwater loans made by private lenders.

While the Fed should want to help distressed borrowers, we should be wary of imposing more financial risks on Fannie and Freddie. Taxpayers are already out hundreds of billions of dollars because of past risky mortgages. I favor a simple cash payment of under $10,000 to ease the pain for foreclosed families; that form of aid provides humanitarian relief without keeping people in homes that they can’t afford.

Even if Fannie and Freddie modify many distressed loans, that won’t rekindle the housing market. Real housing prices did not rise between 1991 and 1998, when our economy roared after the last housing bust. We don’t need another new housing boom to bring America back.

Dead cat bounces are easily confused with recoveries in markets that move as slowly as housing.

Foreclosure Auctions Show Raw Form of Capitalism
Joshua Lott for The New York Times

Hundreds of foreclosed properties are auctioned each week in front of the Maricopa County courthouse in Phoenix.
By KEN BELSON
Published: January 14, 2012

PHOENIX — To the unknowing, the few dozen people milling around the picnic tables in front of the Maricopa County courthouse here every day could be jurors on break or scofflaws finally coming to pay a ticket. They tug on cigarettes, sip from big cups of coffee and fidget with their cellphones, often speaking in whispers.

Most of the bidders and auctioneers are men in their 20s and 30s.

But instead of waiting to meet a judge, they are preparing to bid on the hundreds of foreclosed properties auctioned each week in one of the country’s more colorful public clearinghouses. During the housing boom, when mortgages were being given out with no money down and prices soared, the auctions were a sleepy sideshow. But in the years since, the auctions have grown into a scruffy economic circus where bargain hunters from around the world have scooped up houses often sold for less than half of the value of the mortgage.

The auctions look more like a low-end poker game than the floor of the New York Stock Exchange. The bidders and auctioneers, most of them men in their 20s and 30s, are on a clubby first-name basis, and their banter can border on sophomoric. But their trading serves a critical if somewhat heartless function: to find new buyers for houses so they can be fixed up and sold to more stable owners.

“This is capitalism at its rawest,” said Brad Grannis, a bidder from AZ Property Advisors. “There’s an asset, and people assign a value to it.”

In recent months, the auctions have become more competitive because of an influx of outsiders who are eager for cut-rate houses that they can resell or rent out and because of a decrease in the number of houses available. There were 2,296 trustee sales in Maricopa County last month, 44 percent fewer than in December two years ago during the depths of the market crash, according to The Cromford Report, a real estate newsletter.

Many economists say that the housing market has a long way to go before it returns to health and that the decline in foreclosures is partly because lenders, often under political pressure, are trying to work with distressed borrowers.

But optimists in Phoenix point to the decline as a harbinger of an upturn, albeit a tentative one.

“We went lower than anywhere except Las Vegas, and we got through the foreclosure crisis faster,” said Mike Orr, a researcher at the W. P. Carey School of Business at Arizona State University and the editor of The Cromford Report. “I don’t know if this will be a significant recovery, but even going up a few points is still a recovery.”
…

(from Polly’s response yerterday)

(you wondered why you can’t swing a cat in a bank without hitting a VP?)

Ha, still smilin’ …

Dura lex sid lex:

“The law is hard but it is the law”

Currently, in America, such orientation/punishment$ are applied equivocally to the following:

1.Toothless citizen’s who steal x1 six pack of beer.
2. Well dressed executive$ of MegaAnyCorpInc. with expen$ive writing implement$

(Perhaps a database exists that references current citizen prisoners & their pre-incarceration zip codes?)

How do these myriad “settlements,” all on the order of amounts below $1 bn, compare to the financial costs of the subprime mortgage crisis, which I don’t believe actually was contained to less than $200 bn?

Editorial
On the Trail of Mortgage Fraud
Published: January 15, 2012

Queens has been harder hit by foreclosures than any other New York borough, and the Federal Bureau of Investigation believes it has found a culprit. Last July, the F.B.I. accused Edul Ahmad, a local broker, of a $50 million mortgage fraud, saying he lured fellow immigrants into subprime mortgages, inflated the values of their properties and concealed his involvement in deals that were ruinous for scores, if not hundreds, of borrowers. Mr. Ahmad pleaded not guilty, and posted $2.5 million bail. Now, according to court papers, as reported in The Times, he is plea-bargaining with federal prosecutors.

Whatever Mr. Ahmad did or did not do, one thing is sure: he did not act alone. The attention Mr. Ahmad has drawn highlights the relative lack of scrutiny of the big banks and their senior executives. Big banks created demand and provided credit for dubious mortgage loans, which they bundled into securities and sold to investors. If not for reckless lending and heedless securitizing, there would have been no mortgage bubble and no mortgage bust — and, in all probability, no Edul Ahmad.

There have been some prominent civil suits with settlements and fines, including the $550 million deal between Goldman Sachs and the Securities and Exchange Commission over the misleading of investors in a mortgage-backed investment. Bank of America, which bought Countrywide Financial in 2008, recently agreed to pay $335 million to settle a lawsuit by the Justice Department over Countrywide’s practice of steering black and Hispanic borrowers to subprime loans while similarly qualified white borrowers got better terms. But such cases have been narrowly focused and rarely name top executives.

What is needed is leadership by President Obama on this issue. He should form an interagency task force to investigate and pursue potential civil and criminal wrongdoing by institutions and people whose conduct in the mortgage chain had the greatest economic impact.

That would mean focusing on the large banks and their top echelons. The investigators would need to include the departments of Justice and Housing and Urban Development, the S.E.C. and the Internal Revenue Service, as well as bank regulators, with the formal co-operation of the most aggressive state attorneys general. The task force would need a leader with the impulses of a crusading prosecutor.

The investigations to date have not had this character. The Goldman Sachs settlement, for instance, was over one security and put the blame on a midlevel banker. When executives have been personally penalized, the fines have been a fraction of the wealth they amassed during the bubble. From 2000 to 2008, Angelo Mozilo, the chief executive of Countrywide, received total compensation estimated at $521.5 million; in 2010, without admitting or denying any wrongdoing, he paid $67.5 million to settle civil fraud charges brought by the S.E.C. The Justice Department, for its part, decided not to pursue a possible criminal case against Mr. Mozilo.
…

Euro Leaders Race to Salvage Rescue Plans
By Patrick Donahue and Simon Kennedy - Jan 16, 2012 2:27 AM PT

Angela Merkel, Germany’s chancellor, right, speaks as Nicolas Sarkozy, France’s president, second right, listens during a joint news conference following a meeting at the Federal Chancellery in Berlin, Germany. Photographer: Michele Tantussi/Bloomberg

European leaders will this week try to rescue under-fire efforts to deliver new fiscal rules and cut Greece’s debt burden as investors ignore Standard & Poor’s euro- region downgrades.

Greek officials will reconvene with creditors on Jan. 18 after discussions stalled last week and governments elsewhere are preparing for a Jan. 30 summit as the European Central Bank warns against “watering down” a revamp of budget laws. With France’s 10-year bond yield little changed today, investors will now focus on its sale of as much as 8.7 billion euros ($11 billion) at 3 p.m. in Paris.

The talks on Greece and budgets may serve as tougher tests of the tentative recovery in investor sentiment than S&P’s decision to cut the ratings of nine euro-region nations, including France. History suggests fallout from the downgrades may be limited. JPMorgan Chase & Co research shows that 10-year yields for the nine sovereigns that lost their AAA status between 1998 and last year’s U.S. downgrade rose an average of two basis points the next week.

Efforts to toughen budget laws and make Greek debt more sustainable “deserve far more attention than these rating changes, which as usual are lagging fundamental developments,” Joachim Fels, chief global economist at Morgan Stanley in London, said in a note to clients yesterday.
…

Can glaciers have waterfalls?

Experts: Beware a slow cascade of additional foreclosures in 2012
January 15, 2012|By Alan J. Heavens, Inquirer Real Estate Writer

Economist Joel L. Naroff of Bucks says a growing foreclosure rate is likely to keep housing prices down.

If the numbers were the only barometer, it would appear that the U.S. foreclosure crisis had eased considerably in 2011. But taken alone, those statistics don’t tell the whole story of the pressures on homeowners and how they are affecting the nation’s housing market.

Over the last 12 months, the foreclosure rate and the number of filings nationwide reached their lowest point since the current spiral intensified in 2007, RealtyTrac Inc. reported last week.

As 2011 began, RealtyTrac, of Irvine, Calif., which tracks foreclosure activity, was predicting there would be a 20 percent increase over 2010 in the number of houses repossessed by lenders after foreclosure. Instead, that number declined, to 804,423 last year from 1.2 million. Figures for 2011 also show a 34 percent decline from 2010 in the number of properties at some point in the foreclosure process.

The numbers are deceiving, however. Brandon Moore, RealtyTrac’s chief executive officer, attributed the hefty decline primarily to the effects of the 2010 controversy over “robo-signing,” in which a number of loan servicers were accused of signing thousands of foreclosure documents without reading them.

Delays due to state action and self-imposed moratoriums by lenders created a backlog in processing that did not begin easing until the second half of 2011.

The result, Moore said, is that “we are continuing to see a highly dysfunctional foreclosure process that is inefficiently dealing with delinquent mortgages - particularly in states with a judicial foreclosure process,” such as New Jersey, Pennsylvania, and Florida, where robo-signing was equated with fraud by some officials.

What the legal wrangling and the millions of filings since the housing bubble burst have combined to accomplish is a lengthening of the timeline for processing foreclosures in most states, RealtyTrac reported.

Most states’ foreclosure-processing systems were not equipped to handle the volume seen in the last five years.

RealtyTrac calculated that in a typical year - it chose 2005 - paperwork for 500,000 foreclosures would be filed nationally. In 2010, there were 2.9 million foreclosures. An additional 1.9 million households received filings in 2011 - fewer, but still almost four times more than what had been considered normal.
…

Developments
Real estate news and analysis from The Wall Street Journal

January 10, 2012, 2:38 PM

Fed Pushes Refinancing, But Obstacles Abound
By Alan Zibel

Does the Federal Reserve have good ideas for the housing market? That’s been the question since the Fed published its paper on housing last week.

Critics see the Fed’s foray into housing policy as an irresponsible deviation from the central bank’s mission of managing interest-rate policy. Supporters of more aggressive action to stabilize the housing market argue that the Fed is playing a valuable role in pushing the Obama administration and regulators to do more.

All of this debate ignores something that’s become increasingly clear: Due to practical and political limitations, changes to the government’s response to the foreclosure crisis are likely to involve tweaks on the margins rather than a massive revamp.
…

Why is “The Fed” buying assets?

Why are they paying inflated prices for assets?

Who authorized them?

Playing catch up …

From Cantankerous:
“It’s a great time to have acce$$ to $carce ca$h borrowed at di$criminatory (below market) intere$t rate$ only available to $elect too-big-to-fail institution$, in order to participate in a$$et market fire $ales at the end of a brutal rece$$ion.”

As Foghorn likes to say: “Say boy, eyes thinks you on to $omething …”

Miss Prissy: “Yessssss, those $cotu$ Inc. rooster$ do look fine in their fancy suit$”

Has the euro zone financial crisis ended yet?

Financial Times
Global Market Overview
Last updated: January 16, 2012 11:14 am
Eurozone ratings cuts reverberate
By Jamie Chisholm, Global Markets Commentator

Monday 10:30 GMT. The downgrade of nine European nations continues to reverberate across global markets. Traders are wary of adding to racier bets as fears return that the eurozone debt crisis could sap sentiment, hobble the banking system and thus denude economic growth worldwide.

Bearing the brunt of the caution is, unsurprisingly, the euro. The single currency has fallen below Y97 for the first time in 11 years and is trading at $1.2666 – near a 17-month low – compared with last week’s close of $1.2677.

Europe’s bourses opened in suitably downbeat mood, but declines are restricted by Wall Street’s ability to more than halve its losses in the previous session. The FTSE Eurofirst 300 is flat as demand for defensives, such as tobacco and pharma counteract falls in financials. Tension in the European banking sector is illustrated by a new record level of overnight deposits, €493bn, being parked with the European Central Bank on Friday.
…

ft dot com
January 15, 2012 4:44 pm
Bank results threaten to dash US hopes
By Tom Braithwaite in New York

Faltering performance from Goldman Sachs, Morgan Stanley, Citigroup and Bank of America, all of which report fourth-quarter earnings this week, could dent optimism over the pace of corporate recovery in the US.

JPMorgan Chase revealed a 23 per cent decline in net profit last week, slightly below analysts’ estimates.

“It’s indicative of an industry under revenue pressure due to slower economic growth, lower margins, unsettled capital markets and increased regulatory pressure,” said Mike Mayo, analyst at CLSA.
…

From the Globe and Mail - In Canada, unlike the U.S., the American dream lives on:

“Canada is a world leader in economic mobility, right up there with Denmark, Norway and other Scandinavian countries.

A recent front-page story in The New York Times highlighted new research that “turns conventional wisdom on its head” – namely, that Americans enjoy less economic mobility than their peers in, gasp, Canada.

Yes, the U.S. is richer, but it’s also significantly more unequal, and a lot less mobile.

Canadians are up to three times more economically mobile than Americans, and it’s almost entirely due to the conditions faced by those living at the very top and bottom of society

The American dream that anyone can rise from humble beginnings to vast wealth has become a myth. And as the gap between rich and poor widens, the middle class is shrinking.

For now, at least, the dream of upward mobility in Canada is still alive. Canadians can thank a legacy of sound public policy and a more progressive tax system.

Even the poorest of Canadian children have access to good schools, quality health care and decent homes

Compare that to the United States, where schools are financed primarily by wildly variable local property taxes rather than state income taxes. Neighbourhoods with low home values and marginal businesses have underfunded and failing schools, which become magnets for perpetual failure.

But it’s a country of extremes, and life is good if you’re at the top in the United States. A child’s chance of staying at the wealth pinnacle is much greater than in Canada.

The divergence of opportunity in the U.S. grows even more pronounced with higher education. Tuition fees, which can easily run into the tens of thousands of dollars per year, essentially put the best schools out of reach for many Americans. Wealthy Americans, on the other hand, can literally buy opportunity for their children, paying their way through the best colleges, hiring tutors and providing access to family connections.”

Expiring mortgage aid destabilizes owners

By Kimberly Miller Palm Beach Post Staff Writer
Posted: 9:01 p.m. Sunday, Jan. 15, 2012

JUPITER — The tenuous financial grip Sheryl Stuart holds on her Jupiter home is slipping.

She is one of about 3,400 home­owners statewide who have received help paying their mortgages from the federal Hardest Hit program, which gave Florida $1 billion to keep unemployed and underemployed residents out of foreclosure.

But the monthly mortgage supplements expire after six months.

Stuart, 61, a former business owner who closed up shop when the economy hit the skids, received her first installment in September. February will end her mortgage reprieve, and although she has found a job, her salary isn’t enough to make her payment.

“In this economy, to think you can turn your life around in six months is totally ludicrous,” Stuart said. “The working class is quickly slipping into a black hole.”

In the nine months since Florida opened its Hardest Hit program statewide, about 23,320 people have completed applications and $77.3 million has been either reserved or spent on those approved for money.

http://www.palmbeachpost.com/money/foreclosures/expiring-mortgage-aid-destabilizes-owners-2104222.html - 77k -

Yesterday I said no one was building 3x income homes in our locality. But then I found this one in Dewitt for $224k. It’s probably a Ryan home. I told you what our inspector friend said about one of those. The number and type of shortcuts they took were attrocious. But here’s why I’m bringing this up.

This is about 20% less than the cheapest Ryan home used to be offered for in 2007.

So now we’ve got at least one of the major builders showing us they get the idea that they’ve got to come down in price. It’s a start.

http://cnyhomes.com/Listing/Search/info.cgi?mlnum=S265416

“America has defaulted on this promissory note…but we refuse to believe that the Bank of Justice is bankrupt”

http://www.youtube.com/watch?v=smEqnnklfYs

Happy Martin Luther King day. One of the greatest Americans in history.

From Nouriel Roubini’s latest missive:

Given the bearish outlook for US economic growth, the Fed can be expected to engage in another round of quantitative easing. But the Fed also faces political constraints, and will do too little, and move too late, to help the economy significantly. Moreover, a vocal minority on the Fed’s rate-setting Federal Open Market Committee is against further easing. In any case, monetary policy can address only liquidity problems – and banks are flush with excess reserves.

Most importantly, the US – and many other advanced economies – remains in the early stages of a deleveraging cycle. A recession caused by too much debt and leverage (first in the private sector, and then on public balance sheets) will require a long period of spending less and saving more. This year will be no different, as public-sector deleveraging has barely started.

http://www.project-syndicate.org/commentary/roubini46/English

DeWitt is a suburb of Syracuse, and its median income might be $75K if you exclude renters.

The question is, why are people still buying those dopey McMansions. Rather than a fuel-efficient row house, in a place where you can walk to things so you only need one car, and you aren’t stranded when 30 inches of snow falls?

They are building in a big heating bill.

Bank foreclosing on O.J. Simpson’s Florida house

MIAMI (AP) — A bank is foreclosing on the Florida home of O.J. Simpson, who is serving time in a Nevada prison for kidnapping, armed robbery and other charges.

Miami-Dade Circuit Court records show that JPMorgan Chase filed for foreclosure in September. Simpson’s attorneys have since filed a motion to dismiss the case.

Simpson bought the four-bedroom, four-bath house south of downtown Miami in 2000 for $575,000. Its current assessed value is $478,401.

The 64-year-old former football star and actor is serving a nine-to-33-year prison sentence in a 2007 armed confrontation with sports memorabilia dealers in a Las Vegas casino hotel room.

Simpson was acquitted in 1995 in the Los Angeles slayings of his ex-wife, Nicole Brown Simpson, and her friend, Ronald Goldman.

Decoupling ain’t all that…

Asia Markets Archives
Jan. 16, 2012, 3:28 a.m. EST
Asian stocks hit hard by S&P’s Europe downgrades
By Virginia Harrison and V. Phani Kumar, MarketWatch

HONG KONG (MarketWatch) — Asian markets were beaten down Monday, with mainland Chinese stocks falling for a fourth-straight session, as a string of euro-zone downgrades from Standard & Poor’s and stalled debt talks in Greece thrust Europe’s crisis back into the spotlight.

Japan’s Nikkei Stock Average (JP:NIK -1.43%) fell 1.4% to 8,378.36, Australia’s S&P/ASX 200 index (AU:XJO -1.16%) dropped 1.2% to 4,147.20 and South Korea’s Kospi (KR:0100 -0.87%) declined 0.9% to 1,859.27.

China’s Shanghai Composite (CN:000001 -1.71%) shed 1.7% to 2,206.19, Hong Kong’s Hang Seng Index (HK:HSI -1.00%) lost 1% to 19,012.20 and Taiwan’s Taiex (XX:Y9999 -1.09%) shed 1.1% to 7,103.62, with President Ma Ying-jeou’s election victory unable to dent the Europe-inspired gloom. Read more on Taiwan election.

Ratings agency Standard & Poor’s cut France and Austria’s triple-A credit ratings by one notch Friday, in addition to also lowering the ratings of Italy, Spain, Malta, Slovenia, Slovakia, Portugal and Cyprus. Read more on S&P downgrades.

“People are looking at the repercussions of the downgrades,” said Tom Kaan, director of equity sales at Louis Capital Markets in Hong Kong.

“The pertinent issue is not the sovereign-debt cuts, it’s the ensuing downgrades for the French banks. That is creating a lot of negativity in the market,” Kaan said. “The contagion impact will be on the U.K. and the U.S. banks as well,” he added.
…

This is shaping up to be a volatile week in global stock markets.

Jan. 13, 2012, 11:52 a.m. EST
Greek debt talks break down
Some German lawmakers see Greek exit as manageable
By William L. Watts, MarketWatch

FRANKFURT (MarketWatch) — Talks between private creditors and Greece on a voluntary restructuring of government debt appeared to break down Friday, with negotiators representing the private sector citing the lack of a “constructive, consolidated response by all parties.”

A deal on a proposed 50% writedown on the value of Greek debt held by the private sector is a prerequisite for Athens to receive further rescue funds from the International Monetary Fund and the European Union secured as part of a second bailout agreement reached last October.
…

Yawn…

US Dollar Ready to Break to 12 Month Highs if Euro Collapses
By John Kicklighter, Currency Strategist
14 January 2012 05:08 GMT

Fundamental Forecast for the US Dollar: Bullish

* Rating agency Standard & Poor’s looks to spark market-wide risk trend with broad EZ downgrades
* Eight-month high in confidence, drawing a greater contrast between US and global growth outlook
* Euro under pressure and dollar finds safe haven demand into the week’s close

When you boil it down, the US dollar’s current role in the global financial market is the safe haven and liquidity provider of last resort. To drive the greenback higher, a slide in risk appetite and deterioration in normal market function would represent the ideal fundamental conditions. That being the case, we may finally see a passive appeal for the benchmark turn into a genuine trend moving in the week ahead if the Euro Zone’s fresh sovereign debt troubles infect underlying risk appetite trends.

So far this year, we have yet to see a meaningful rebound in trading activity – bullish or bearish. Between the fading outlook for economic activity, yields and financial health and the hope that policy officials will foot the bill with stimulus; the masses seem to have kept to the sidelines rather than instigate a wholesale deleverage or add to bailout-dependent positions. However, it is only a matter of time before this particularly immense fundamental clash takes a definitive bearing. And, considering the woeful lack of consistent yield to be found in the market along with the steady economic and financial troubles rolling in; fear is by far the more pressing emotion.

What we lack to start the dollar and capital markets moving is a catalyst with enough influence to convince the masses to abandon their comfortable stasis. Friday’s fireworks may provide the necessary spark to pull speculative interests down to fundamental reality. Standard & Poor’s (the rating agency that cut the United States’ top AAA rating last year) delivered a series of critical downgrades to the Euro Zone after the market close on Friday. The highest profile cuts came from France and Austria which lost their AAA-status and were left with a negative outlook (which suggests there is a 50 percent chance of further downgrade over the coming two years). However, arguably more systemic were cuts to Italy, Spain and Portugal. Portugal debt is now ‘junk’ status and Spain’s cut further exposes the lack of transparency in the region’s exposure. Yet, as Standard & Poor’s and Fitch have both stated, Italy is the most highly exposed to further market deterioration and presents the greatest threat to intensifying the world’s worst financial crisis.
…

Jan. 13, 2012, 7:13 p.m. EST
S&P hits euro zone with downgrades
France loses triple-A, Italy, Spain and Portugal cut by two notches
By William L. Watts and Christopher Noble, MarketWatch

FRANKFURT (MarketWatch) — Ratings agency Standard & Poor’s on Friday stripped France of its coveted triple-A credit rating and reduced Portugal’s debt status to junk as part of a broad reassessment of Europe’s financial soundness that highlights the severity of the euro zone’s persistent sovereign debt crisis and complicates efforts to resolve it.

Germany escaped S&P’s scrutiny unharmed. It’s triple-A credit rating was left unchanged and given a stable outlook.

S&P’s steps were certain to make it more difficult for European leaders to solve the debt crisis and could trigger a period of volatility in financial markets similar to what investors experienced in the wake of S&P’s downgrade of the United States last year, said Jeremy Hare, Managing Director of Investments at Gilford Securities. S&P’s moves would also, Hare said, shine a harsh light on the leaders’ ineffectual efforts to solve the crisis.

“It hits them right on the chin,” Hare said. “S&P is calling (German Chancellor Angela) Merkel out and saying, ‘Hey, fix the problem’.”

S&P cut France, Austria, Malta, Slovakia and Slovenia by one notch, stripping France and Austria of rare triple-A ratings that were key to their ability to support efforts to rescue struggling euro zone members. The ratings agency also downgraded by two notches Italy, Spain, Portugal and Cyprus. Portugal and Cyprus were cut to junk status.
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I’ll say it again…..

Isn’t it interesting that those who know nothing about bidding, estimating or construction management seem to know what the price of housing ought to be?

Realtors were wrong

Buyers were wrong

Banks were wrong

Govt was wrong

Yet everyone seems to apologize for one party or another, even they’re all are wrong. Why align yourself with a party who is wrong?

Isn’t truth better?

I hope she had a splendid Bat Mitzvah.

http://www.rollingstone.com/politics/blogs/taibblog/everything-you-need-to-know-about-wall-street-in-one-brief-tale-20120113

Anybody hear from Oxy lately?

Polly?

Interesting article. I especially liked the contrasting of how other countries/cultures view the idea of adult children staying/moving back home with their families:

http://www.salon.com/2012/01/16/get_used_to_living_with_mom_and_dad/singleton/#comments

Get used to living with Mom and Dad - The era of empty nests may be over unless we change our work culture and our economy.

“They are a generation that has been caught by a series of unfortunate, overlapping trends that put them at a disadvantage for becoming independent the way their parents did. They’re entering a very unfriendly labor market that is particularly punishing to young workers. With the housing implosion in the United States, they’re still entering a housing system in which owner-occupied housing is very expensive. So, they have lower wages, if they have wages at all; they have high housing cost; and, in the advanced countries, there are ever more demanding credential races to qualify for professional employment. If they’re aspiring to be middle- or upper-middle class, the length of time it takes to pile up the education you need to qualify for the jobs to make that possible is getting longer and longer and more and more expensive.”

Somethings not right here…. I’m getting “fashion and beauty” ads on the HBB today.

Slim here. And I have good news from a gray day here in Tucson.

The good news is that I won an award for the photography book I created last year. It’s some sort of Tucson Advertising Federation Addy Award. Gold? Silver? Bronze? I don’t know yet. The awards ceremony is next month.

Will keep you posted!

Ben - Here is your chance to give a big F.U. to the PTB. Join the Stop SOPA movement and shut down the HBB blog for 24 hours on Wednesday.

1/16/12 - Wikipedia will shut down for 24 hours Wednesday to protest the Stop Online Piracy Act, founder Jimmy Wales announced on Monday.
In doing so, Wikipedia joins a long list of web companies such as Reddit and Mozilla that are taking similar measures against the proposed legislation.

Use the Force Ben, use the Force!

Apparently, the U.S. is not the only nation where organized crime has made significant inroads to the banking system.

SA Time: Tuesday, January 17, 2012 1:03:29 AM
Mafia cashing in on Italy’s euro crisis
January 16 2012 at 02:52pm

TAKING STEPS TO AVOID BAD TIMES: Banners depicting the pictures of Italian magistrates Giorgio Ambrosoli, Emilio Alessandrini and Guido Galli killed more than 30 years ago, hang from the Justice Palace in Milan in this file picture. As the Italian economy slips into a recession and its banks answer regulatory pressure by curbing loans, more troubled firms could be tempted to turn to Italys mafia organisations. Picture: Reuters

Milan, Italy

When Italian construction group Perego was struggling in 2008, a white knight flush with cash rode to its rescue. Unfortunately the “knight” was a powerful mafia organisation, the ’Ndrangheta, which went on to take control of the family-owned Lombardy business and tried to steer it on an expansion path, Italian justice authorities say.

“Luckily it failed,” said Milan judge Giuseppe Gennari. The group has since collapsed and former chairman Ivano Perego is awaiting trial for opening his door to the crime syndicate.
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http://www.donegaldaily.com/2012/01/15/donegal-hauliers-vote-to-bring-dublin-to-a-standstill/

Are the 99% in Ireland starting to stir?

Reasons why it sucks to be a renter:

Your landlord may choose to not renew your lease, and move back into their house instead.

Time to start the hunt for new digs….

The Party’s Over: How The West Went Bust

A two-hour documentary.

http://topdocumentaryfilms.com/party-over-how-west-went-bust/

If bailout funds are facing downgrades, is it safe to conclude that it is no longer turtles all the way down?

Jan. 16, 2012, 2:37 p.m. EST
S&P takes Europe’s rescue fund down a notch
By Kate Gibson

NEW YORK (MarketWatch) — Standard & Poor’s on Monday cut the rating of the European Financial Stability Facility to double-A-plus from triple-A, the rating agency said on its website. The downgrade to the euro-area’s bailout fund follows Friday’s downgrade by S&P of nine euro-region nations, including France.
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http://market-ticker.org/akcs-www?post=200636

Meet the new boss; same as the old boss (Romney & Obama).

I’m thinking it might be prudent to keep one’s cash under the mattress for the six weeks (46 days) until the Greek situation is resolved. No sense in catching yourself a falling knife…

Real Time Brussels
Insight and analysis from The Wall Street Journal and Dow Jones team in Brussels

January 16, 2012, 5:22 AM

46 Days to Avoid Greek Default
By Matina Stevis

While the market was moving on news that Standard & Poor’s had downgraded nine euro-area countries, including triple-A France, news from Athens that the debt-restructuring talks there have been suspended should really be of bigger concern to market participants and policy makers.

Greece has very little time left to complete the restructuring of its debt and avoid a “hard” default.

The latest from the Greek capital Monday was that talks would resume with a view to having a deal in place by Feb. 23, when euro-zone finance ministers will be meeting.

Here’s why it’s crucial that the deal is done as soon as possible, and why the schedule of 46 working days –including today- that Greece, the private sector, the euro zone and the International Monetary Fund have to complete it is very tight indeed.

Greece has a €14.4 billion bond maturing on March 20 that it can’t afford to pay in full, but the steps to be taken between now and then are many, technical, difficult and large.

We’ll go through those steps one by one, but before we do, it should be clear that if Greece doesn’t manage to complete the restructuring by March 20, it will go into a hard default. While the market has largely priced in this eventuality, the fulfillment of the scenario is ultimately unpredictable.

It first has to come to an agreement with its private-sector creditors. These talks have just been suspended and are said to resume next Wednesday.

If it doesn’t get high enough participation, Greece will likely force the rest of the creditors into the deal–making it an involuntary restructuring that most likely will trigger credit-default swap contracts.

In order to have the involuntary path available to it, Greece also needs to pass a law through parliament that will retrofit its bonds with collective-action clauses.

Greece must also publish a term sheet detailing the characteristics of the bonds it will offer (yield, maturity, etc.) and invite its bondholders to tender their bonds and receive the new ones.

Then the bondholders have to reflect on the deal for a while before formally accepting it–or indeed rejecting it.

In the eventuality of a forced restructuring, the country would have to physically hold a vote among creditors to ensure that a majority is on board, thus making use of the CACs to bind in the minority opposing the deal.

This is the stage where some creditors are likely to begin litigation processes against the country on various grounds.

Assuming all has gone smoothly thus far–or even that the CACs have been used and the minority bondholders have been forced in–the deal has to be consummated, i.e., bondholders must give Greece their old bonds and get new ones.

For the deal to be consummated, Greece’s not-too-happy euro-zone peers have to sign off on sending some €60 billion its way. Why? Because it will need €30 billion to recapitalize its own banks that will face collapse after they take the losses in their holdings of Greek debt and another €30 billion to give to the wounded bondholders as an upfront cash sweetener.

We are told the euro-zone countries will discuss these rather large disbursements at their Jan. 30 summit.
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GLOBAL VIEW
JANUARY 17, 2012

What Is Europe Sinking About?
The shipwreck of a cruise liner is a metaphor for a continent.
By BRET STEPHENS

The Lord works in mysterious ways, or so it is often said. But in an era when few can read His signs, those signs have a way of becoming a bit more obvious. Like 45-10. Or how about another Titanic-type event, right on the eve of the 100th anniversary of the first one, as a way of prefiguring some great European disaster?

OK, probably better to leave Him out of it. But as metaphors go, Friday night’s tragic-ridiculous shipwreck of a cruise liner off the Italian coast is an apt one for a continent in which nine countries had their credit ratings downgraded earlier that same day. Even the biggest ship can founder in calm waters if the captain is negligent. Even a rescue operation 50 feet from shore can turn into a fiasco if nobody has conducted a drill and the crew have no idea how to steer a lifeboat.

When the hors d’oeuvres are listing hard to starboard and the waiters tell you nothing’s wrong, something’s terribly wrong.

That last detail—from passenger accounts of the accident—reminded me of listening to European Council President Herman Van Rompuy in New York last fall, explaining that Greece would never default, that the euro zone’s financial position was not a serious cause for alarm, and that the main thing was to prevent further outbursts of market irrationalism. In other words, it wasn’t the ship that was sinking, in Mr. Van Rompuy’s view, it was just that the passengers had an odd way of occasionally going berserk.

This raises a vexing question: Why have European leaders consistently and almost weirdly misdiagnosed their own crisis? Probably because it was always easier to blame someone else.
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