Bits Bucket for February 25, 2012
Post off-topic ideas, links, and Craigslist finds here.
The Housing Bubble
Examining the home price boom and its effect on owners, lenders, regulators, realtors and the economy as a whole.
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Name:Ben Jones
Location:Northern Arizona, United States
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Stockton, California, may take the first steps toward becoming the most populous U.S. city to file for bankruptcy next week because of burdensome employee costs, excessive debt and bookkeeping errors that misrepresented accounts, city officials said yesterday.
The Stockton City Council will meet Feb. 28 to consider a type of mediation that allows creditors to participate, the first move toward a Chapter 9 bankruptcy filing under a new state law. The council will also weigh suspending some payments on long-term debt of about $702 million, according to a 2010 financial statement.
“Somebody has to suffer and in this case the city manager has decided it should be the bondholders who suffer,” Marc Levinson of the Sacramento-based law firm Orrick, Herrington & Sutcliffe LLP, which represents the city, said at a news briefing at City Hall yesterday.
Stockton, a farming center about 80 miles (130 kilometers) east of San Francisco, has fought to avert bankruptcy by shrinking its payroll, including a quarter of the roughly 425- member police force. At 292,000, the city has more than twice as many residents as Vallejo, California, which became a national symbol for distressed municipal finance in 2008 when it sought protection from creditors.
BWAHAHAHAHHAHAHHAHAHAHAHHAHAHHHHHHHHHHHHHHHHH!!!!!!
“Somebody has to suffer and in this case the city manager has decided it should be the bondholders who suffer,”
I suspect the Greek haircut model of financial crisis management is about to catch on in a big way among political entities which lack their own reserve currency printing press technology.
Personally, I’m waiting for the slick Irish politician.
There will be one. You can set your Swiss watch by it!
O’bama?
The re-election peole are selling an O’bama t-shirt for St. Patrick’s day. It is wonderfully cheesy with a giant shamrock in the center.
From the UK Guardian: Why the super-rich love the UK
“London is full of the 1%, the people at the top of the income distribution, whose circumstances are at the moment so much on the agenda for the other 99%. But the thing is that while the 1% are rich by everyone else’s standards, they are not rich by the standards that rich people use themselves. To be in the 1%, in income terms, you have to earn – or, as the Socialist Worker has it, “earn” – £150,000 a year. That’s a lot, to most people’s way of thinking – but not to the way of thinking of the rich. I’ve asked quite a few people in the world of money, the kind of people who know properly seriously rich people, what counts are being properly, seriously rich. The consensus figure is that you need $100m. At that level, even the seriously rich agree that you are rich. Anyone with that amount of money is obviously way, way past the point where they will never have to think about any of their material needs, ever again.
There are more of these people in the UK than there used to be, and they have more money, too. In 1990, to come in the top 200 of the Sunday Times’s annual rich list, you needed £50m. Now you need £430m. Income levels for most social groups have stagnated in the last few decades, but the super-rich have continued to get sharply richer, and to own an ever increasing share of the economic cake. This reverses the trend of the preceding few decades – and by the way, the fact that the process has continued in that direction, even as the economy contracts and average household incomes decline, refutes the whole rationale for the laissez-faire attitude to high incomes. The argument for allowing the rich to grow richer is that it starts a process where everyone else grows richer, too – but this simply hasn’t happened. In fact, they’re growing richer while everyone else grows poorer.
As for what this has got to do with London, the answer is, perhaps too much. The capital of the UK has one of the world’s largest concentrations of the super-rich, and the reason for that is that we have chosen to have them here, as a matter of deliberate government policy. The relevant policy is the notorious provision in relation to “domicile”, as a definition of an individual’s tax status. Every other civilised country in the world taxes its inhabitants on their income and capital: the basic rule is that if you live in a place, you pay its taxes. But it’s different in the UK. Here, if you come from overseas, and can prove strong links with overseas, and can prove that you are going to return to overseas, and can therefore establish a “domicile” overseas that is different from your “residency” in the UK – well, in that case, you are treated entirely differently for tax purposes. You pay tax on your income in the UK, like the rest of us; and you can remit capital to the UK; but your overseas income, as long as you keep it overseas, is out of the reach of the Inland Revenue.”
Expect that to change in the future.
As they say, past performance is no guarantee.
The UK rule is the majority rule, most countries tax on the basis of geography. The US is an exception, taxing on the basis of citizenship / residency.
“Anyone with that amount of money is obviously way, way past the point where they will never have to think about any of their material needs, ever again.”
Not necessarily so. Ask the 1% of the southern confederacy, or the elites of tzarist Russia, or the Jewish industrialists who sold their factories for pennies, or those who fled Cuba before Castro. Many other examples. The Madoff victims, etc….
Great wealth attract a lot of attention. Not all of it good.
Here’s an interesting post:
‘Today, I just got a ‘guideline update’ from a lender:
‘Effective immediately for new locks, condominiums are now unacceptable properties except for high rise condominiums located in Chicago, Honolulu, San Francisco and Seattle. Existing locks will be honored and allowed lock extensions.’
‘Generally, when one bank comes down with an action, other banks react with similar knee-jerks. This does not bode well for the recovery of the housing market…So, my advice to you if you’ve been looking at purchasing, selling or refinancing a condo, do it now before you can’t.’
Note to condo investors:
This is where the baseball bat meets the patella!
The exceptions are interesting - Chicago, Honolulu, San Francisco and Seattle.
This will change in due order. This is a total repeat of 1990-1994. At first, the big towns were different.
They eventually took a rusted tire iron to the Manhattan condo market, and it was a bloodbath.
IMO the biggest issue in the housing market today is financing. I was talking to a UHS recently and it was pointed out that almost everybody is using a govt backed loan. This is unsustainable, and there is no visible plan in DC for getting out of this situation.
I’ll use the person I know as an example; bought a foreclosure in Flagstaff using a VA loan in 2010; put zero down after everything is figured in. A very low interest rate. Paid less than all the for sale houses on the street. “Lost” about $40k in value since and is slightly underwater. He fully expects it to go down $100k more.
Multiply that by hundreds of thousands. How many that bought a houses supposedly after the bubble “burst”, using a govt backed loan, will walk away? How will the govt losses be viewed when even Social Security and Medicare are on the cutting block?
In Texas, after the prices started to fall, no one propped up banks; they all failed. They were forced to sell assets, or were liquidated by the feds. You could still get financing but rates were double digits and the down payments were 30-40%.
And you know what? At the time, we all knew why that was so; prices were falling. Who would take on that risk without a cushion and lots of return?
“…it was pointed out that almost everybody is using a govt backed loan. This is unsustainable, and there is no visible plan in DC for getting out of this situation.”
Does it matter to the future outlook for government mortgage finance whether the federally guaranteed loans are ever repaid?
FT dot com
February 14, 2012 12:19 am
White House warns of FHA bail-out need
By Shahien Nasiripour in Washington
The White House has forecast a $688m bail-out of a federal housing agency dedicated to helping first-time homeowners and borrowers with poor credit.
A taxpayer-funded bail-out of the Federal Housing Administration would be a first and comes as increasing defaults on its nearly $1.1tn book of home loans exhaust its dwindling reserves.
But Shaun Donovan, US housing secretary, said that the White House’s forecast was outdated. He pointed to a settlement reached last week with five leading US banks to resolve fraud allegations that secured at least $900m for the housing agency, obviating the need for any sort of bail-out.
…
Now that’s interesting….
“Who would take on that risk without a cushion and lots of return?”
The only possibility that comes to mind is someone in the business of insuring too-big-to-fail financial entities. Perhaps despite its size Texas didn’t qualify as too-big-to-fail?
How many people living in Manhattan can fork out $200K as a down payment?
I know people have the illusion that is an island where the average person sh1ts gold coins but the median wages for just Manhattan are about $55K which is higher than the national median but not that high.
Also, the overwhelming people I know are what I would call “job poor”, as in, they need that job to make the payments for house, school, etc. They may be “very affluent” but they literally p1ss away every cent they make. It’s quite astonishing, and borderline shocking.
All the glamour and the marketing of Madison Ave. are quite different from the reality on the ground.
Puttin’ On the Ritz
Don’t you have a sizable rich folks from obverses and other parts of US wanting to have their own “pad” in Manhattan?
They are a rounding error in the larger scheme of the population. How many can there be, and how many apartments can they buy?
And they concentrate in certain highly desirable areas, leaving vast swaths of perfectly nice areas completely alone.
Bingo, polly! Extremely narrow areas actually.
Fifth Ave. if they can get the co-op approval. If not, Park Ave.
And very narrow stretches of both of those as well. North of 59th (preferably 65th) and south of 86th (preferably 79th.)
That’s about it.
Oh, and for the “rebels”, there is Gramercy Park. However, only if you can get the keys to the park. One building away and you’re so declassé.
There’s a caste system. You have to understand it.
‘Don’t you have a sizable rich folks from obverses and other parts of US wanting to have their own “pad” in Manhattan?
Comment by Faster Pussycat, Sell Sell
2012-02-25 08:18:54
They are a rounding error in the larger scheme of the population.’
This reminds me of a similar issue with respect to coastal California housing: The number of $1m+ properties for sale is a material portion of the current supply, while the number of potential buyers of $1m+ homes still around after the end of the crazy loan era is a rounding error.
For instance, a quick check on Redfin dot com shows a total of 13,760 homes of all types on the San Diego County MLS inventory, of which 1,344, almost 1 out of 10, are listed for a price over $1m. I can assure you that by contrast, the share of the San Diego County population who can afford a $1m home is vanishingly small.
“Fifth Ave. if they can get the co-op approval. If not, Park Ave.
And very narrow stretches of both of those as well. North of 59th (preferably 65th) and south of 86th (preferably 79th.)
That’s about it.
Oh, and for the “rebels”, there is Gramercy Park. However, only if you can get the keys to the park. One building away and you’re so declassé.
There’s a caste system. You have to understand it.”
Further proof we are not that far evolved from wild animals. In my humble opinion the obsession with caste, eg college attended, is a predominantly and uniquely northeastern trait, and perhaps present to a lesser extent in New Yorker enclaves like LA or Florida. Peacocks, unite.
Don’t delude yourself.
There is as much of a caste system in the Midwest and the South as there is in the Northeast.
If you don’t live in Johnston County, KS, you can’t really rise to top of your profession.
Haven’t heard of it? Google it.
If you live in Dallas, and you’re rich but brown, get prepared to kowtow to the blonde debutantes of the South who’ve been there for a few generations.
You are merely spouting ignorance. Edith Wharton is alive and well all over the country not just the Northeast.
In my humble opinion the obsession with caste, eg college attended, is a predominantly and uniquely northeastern trait, and perhaps present to a lesser extent in New Yorker enclaves like LA or Florida.
Your humble opinion is worthless.
I’ve seen Midwestern ladies try to do the “one over each other” at a church picnic over their entire craptacular “jello salads”. I don’t think either of them had traveled more than a 100 miles from their birthplace and they had all the preening pride of a Fifth Ave. “lady”.
This kinda behavior is entirely human. It’s how humans works in every society all over the world. I don’t know of any exceptions.
I’m not defending this behavior. It’s entirely despicable.
However, it’s understandable.
“Your humble opinion is worthless.”
“You are merely spouting ignorance.”
…Wish you’d stop bein’ so good to me, cap’n.
It’s for his own good!
Read the logic. Argue the logic.
The smacking around was necessary for the “Oh! it’s so wonderful in the Midwest and South - Thank heavens we’re not Manhattan and DC” types.
Do you even know how the system works there?
LOL
Consider yourself invited to my family Thanksgiving this year. I need 3 suicides. If I get 4 I’ll give you a case of Coors Light.
I’m soooooooooooooooo there!
Your response confirms some other stereotypes. I am in a unique position to meet wealthy or want-to’s from all over the country and beyond. I am qualified to make this general observation. Don’t get bent out of shape over it.
“…almost everybody is using a govt backed loan. This is unsustainable, and there is no visible plan in DC for getting out of this situation.”
Getting out? That’s the last thing on the minds of the control freaks in D.C. Yes, it’s unsustainable, unless your salary depends on your not understanding that fact.
Financing was an issue everywhere, not just in the oil patch. The S&L failures were simply blamed on borrowing short, lending long and getting caught in rising interest rates. Double digit interest rate and deposit, my introduction to home “ownership” in NE Pennsylvania.
The S&L failures were simply blamed on borrowing short, lending long and getting caught in rising interest rates. Double digit interest rate and deposit,
I didn’t think rates were that high in the early nineties; I remember buying in ‘93 with a 7% rate…
The Federal Government is the housing market.
Not totally. So far, they have not instituted any laws to coerce unwilling households to buy homes. So there is at least a small amount of personal economic freedom left to either strap yourself with an unaffordable mortgage, or not.
He fully expects it to go down $100k more.
Nothing like clarity of the situation. Oedipus could “see” with similar clarity only when blind.
I could have purchased the Brooklyn studio co-op I rented from ‘92 to ‘96 for about $35K. The owner had paid $80K.
It was a doorman building so I expect the common charges were pretty high.
Common charges are like property taxes. It’s the dirty phrase that nobody need utter.
I know people whose “common charges” are a large fraction of my rent. At that point, what exactly are they “owning”?
(In all fairness, there are others too where this is not the case. They are the wiser bunch.)
With property taxes and common charges, you will have to pay closer to the normal rent each month even after you “own” the place. What’s the point of owning?
Pride of pawnership?
Pawnership Society membership?
JINX!!!
I got there first.
Mere pride of pawnership doesn’t entail all the government-sponsored financial lifelines that come with Pawnership Society member status.
Whatevs, budy, whatevs!
You’re just jealous that I got there first.
Also strange they didn’t mention DC — where there is no shortage of condo complexes begging for buyers.
Every lobbyist needs a condo.
They are building like crazy in the general vicinity of my new office. I should stop off for a peek someday during lunch, but I find I lack the needed curiosity. I feel like I can tell what the interiors are going to look like since I looked at the condos in Rockville town center when they switched them over to rentals: slick lines and surfaces, but with essentially no space for books or any other indication of an interesting life. Also needing at least $10K of custom window treatments if you ever hope to sleep past 6 in the morning in the summer. Yawn. Also less than two blocks from where the gentlemen meet with their parole officers and what is puported to be a very high end strip club.
I remember working for a few years in that part of Rockville. You describe it well, Polly.
There’s truly no there there.
Let me clarify. The parole office and strip club are near my current office. The redevelopment of downtown Rockville is as successful as any of those “lets build a downtown” projects could ever be the last time I was there, but that was a while ago. They put in enough parking so people do go there to eat out. And there already was a renovated library and big movie theater, so they weren’t starting completely from scratch.
But the condos/rentals/rent to own stuff was as horribly overpriced for what you got as I have ever seen. Lots of glass walls and they evidently expected you to live your life outside in the town center as there wasn’t enough room in the apartments to do more than sleep and store clothes. But there is a lot of suburban “welcome to the strip mall” area” around it so there are a lot of people to draw from who might want someplace to hang out that isn’t just a place to shop. I don’t see it completely falling apart unless a really unsavory element moves into the residential stuff - not impossible but not guaranteed either.
If they can sell it as a place for grandma and grandpa to move when they can’t take care of the big house in Potomac anymore, they might be able to pull off the transition. They wanted it to be for hip, young, cool 20 and 30 somethings. I think a few parents may have even bought a few to get the little darlings out of their childhood/post college bedrooms and as an “investment” (oops). But those kids are going to want to be in either DC, Bethesda or perhaps even downtown Silver Spring which is getting a little better than it was and will improve a bit more if they can ever finish that transportation center. Why would they want to go another 5 long metro stops out to Rockville?
That place as a future as a “naturally” occuring retirement community for people who don’t need nursing home care and have families in the area who will be delighted to visit them and let the kids jump around in the rock garden and visit the toy store and eat out and go to the library story hour. But I have no idea if the transition will get derailed along the way. It could. And of course, now they are going to try to replicate it in White Flint. Does it never occur to any of these people that just because one worked out sort of OK, doesn’t mean the area can support another one four miles down the road? Especially one which does NOT have a library and a movie theater and a daytime population of office workers to help sustain it?
Polly;
We have the same problem….you just need 3 layers Black blinds black pull down shades, and an oversized room darking curtins so you can cover the whole window in the corners ..not very expensive….but it works quite well
Then when you get up and have all that warm beautiful sunlight on your bed….your cat(s) will love you as they suntan every morning…
Also needing at least $10K of custom window treatments if you ever hope to sleep past 6 in the morning in the summer
A few black out curtains aren’t going to do it when you have an arched wall of windows covering 15 feet, floor to ceiling. It is the most undesirable lving space lay out I have ever seen. It didn’t even have a good location to put a 42 inch flat screen TV, that is how poorly laid out the place was. You could put the TV somewhere, but it would have used up a lot more floor square footage than a flat screen should.
Polly, I know the exact place you’re talking about. It’s the same thing that we see everywhere, the hip young 20-30 somethings are going to save them? They are going to come into the area with a stable job, buy up all the condos, paint the walls and go clubbing at night. Wasn’t there some master plan to pack thousands of 20-somethings into condos all the way from King Farm to the future lifestyle center at White Flint Mall?
I don’t think there are enough 20-somethings to fill all those master plans. There sure as heck aren’t enough jobs. My section of the guv is hiring 1 person for every 5 that retire. Maybe you’re right — they’re going to fill those condos with retirees who do nothing but shop? Somehow I can’t see that. Even if the retirees were smart enough to not heloc the heck out of the house, they probably want to get the heck out of DC.
And btw Polly, custom window treatements may block out the light, but they are NOT going to block out noise of the Rockville Metro station, which has not only the Metro, but also the commuter train, the freight train, and a major bus stop which serves a clientele whose main talents are speaking Spanish and spitting on the sidewalks.
And if that’s not enough, the Rockville Fire department blares out of their station and up Rockville Pike every 10 minutes. For supposedly being a quiet town, Rockville sure has a lot of emergencies which seem to need multiple fire trucks and ambulances.
There are a lot of retirees that have kids who have settled in the area - afterall, there are jobs here. So I really can see a future for this sort of thing for people who don’t want to deal with the yard/gutters but aren’t ready for assisted living yet but do want to stay in the area. Then again, if those folks were two job families, they have had hired people to do outdoor maintenance for a long time. Maybe they will just go right from the house to the nursing home or their final resting place. I know my building has quite a few elderly people who tell me they are here because their middle aged kids wanted them close by when they couldn’t keep up the house by themselves. I presume their middle aged children live in Bethesda and Chevy Chase, maybe a few in Glen Echo. Rockville could handle a little of that too, though there are a few buildings that are already trying to fill that niche with shuttle busses to the grocery store a few times a week and maybe a bingo game or two. The town center will have to fight for them.
The noise in Rockville Town Center (the very core part of it, anyway) isn’t the metro/rail noise unless you are a really light sleeper. You have to cross the pike to get to the metro station. But they have concerts and fairs and stuff in the central areas. A lot of those condos have no privacy during those weekends. And a lot of them are - wait for it - located right above restaurants. Bug city. Also the grocery stores are not walkable for a frail person.
I think White Flint is going to be an epic fail. There are already a bunch of condos that had to go rental in that area (the big tower over the Harris Teeter, for one). They seem to think that the Whole Paycheck is going to be enough to magically turn it into a desirable place to live without a car. What are they smoking?
And I don’t get people who think they only have to build for extroverts who would rather be in public all the time. It doesn’t make any sense at all.
Oh, you mean the big glass half-circle over the Whole Paycheck? I suppose it’s great that you can buy your healthy food without going outdoors, but you can afford either the apartment or the Whole Paycheck, but not both. Upwards of $2000 for a 2-bed flat made out of glass. You can rent a three-bed townhouse for that, or just buy a house for that kind of scratch.
And those trains are noisy quite a distance, as are the sirens.
“This does not bode well for the recovery of the housing market…So, my advice to you if you’ve been looking at purchasing, selling or refinancing a condo, do it now before you can’t.”
Nonsequitur much?
I was almost certainly expecting that last line would advise waiting until after at least 2015 to even think about purchasing any real estate whatsoever, and especially condos.
That said, I do vaguely recall my amazement at some point last year upon checking the value of condos around where we used to live that they had dropped by about 2/3 from their housing bubble peaks. Perhaps this time, there really never has been a better time to buy!
But there will be an even better time to buy in the future?
Yes, unless, of course, it’s different this time.
Never catch a falling knife. When it settles, you will have near infinite time to actually hit the “buy” button.
Last time, there were seven solid years. I’ll bet on history and the fact that this was an insanely larger boom that it will be much longer.
Let’s put it this way - who can outrun whom? The debt pawners or the people who are sitting comfy?
And before anyone screams hyperinflation, let me point out that it’ll never happen. It would destroy the wealth of the 1%.
As if.
Condos down the street from me have falling form a truely insane $150K, to an equally insane downside of $25K. 80% drop?
“…equally insane downside of $25K. 80% drop?”
What is it about the downside that seems so insane? Is it that everyone wants to own investment condos in Phoenix?
Please explain, as I am deeply curious…
Everyone wants to live in Downtown Phoenix!
** snigger **
That’s the trouble with things insane; there is no logical explanation.
“everyone has reasons…even crazy people…they just have crazy reasons”.-can’t remember where i heard that
“That’s the trouble with things insane; there is no logical explanation.”
Another trouble, if the value of your real estate investment depends on insanity: So far over the course of financial history, every previous mania has come to a bad end.
I know this time is different and all…
‘an equally insane downside’
It’s an apartment. I don’t want to buy one apartment in a complex for any price. A lot of these are conversions. It could be a wore out 40 year old complex that isn’t eligible for financing or the condo association is broke. That 150k price could have been the result of a drive by appraisal or even fraud. Who cares what it sold for back in the day?
I know a custom home builder in Sedona who finished a house near the peak. He went out of town that weekend and these people from California couldn’t get inside, so they offered him $950k just from looking through the windows. This builder made $250k on the deal. I’m sure it is a nice house, but what’s it “worth”? Not $950k.
A repeat of my Jon Stewart quote from farther down this thread seems appropos:
+1 Ben. Just because condos drop by 70% doesn’t mean that SFH will drop by 70%. Just because new homes in the stick drop by 50% does not mean that established neighborhoods will drop by 50% too. If anything, crashing condos and crashing new builds is evidence that the buyers (what few there are) are competing with each other for the quality SFH.
Just because condos drop by 70% doesn’t mean that SFH will drop by 70%.
+1. Condos tend to boom bigger and bust bigger.
Condos down the street from me have falling form a truely insane $150K, to an equally insane downside of $25K. 80% drop?
Could actually be a good deal, if you can buy the whole building and re-partment it, and it’s in a good enough location to rent well.
If not, it’s not a good deal unless you really want to live there. Many condo assoc have restrictions on renting, so it’s not a reasonable investment for investment sake.
What’s the status for NY and Washington, DC. They seem like they would be stronger markets?
Condos in Greenbelt, PG county are selling for 20-25K which used be 220K at the peak. Condos even in Silver Spring are 1/3 rd the peak price. Townhouses are almost 1/2 the peak price in PG county. As reagrds to Reston, Herndon, Fairfax and parts of MC like Bethesda, Ch. Ch, ROckville etc., the decline is not more than 20-25% yet. But the fall is coming to these areas this year and the years to come as Federal spending slows and tons of contractors feeding off of Govt. cheese are laid off.
Those $25K conversions in PG county are probably 1970’s repartments in drive-by ‘hoods. At that price they will likely be snapped up by slumlords as tenements for illegals. No thanks.
I’ve said it before and I’ll say it again: condos are for suckers.
I guess Jack Welch and Immelt won’t be getting their pensions.
GE’s unfunded pension liability spikes in 2011
General Electric Co. said in a 10-K filed Friday that its principal pension plans had an unfunded liability of $18.4 billion as of Dec. 31, more than double the $7.1 billion reported a year earlier.
http://www.pionline.com/article/20120224/REG/120229908/ges-unfunded-pension-liability-spikes-in-2011
oh wait..
Cutting benefits boosted earnings. New accounting rules “turned retiree benefits plans into cookie jars of potential earnings enhancements and provided employers with the means to convert the trillion dollars in pensions and retiree benefits into immediate dollar-for-dollar benefit for the company.”
Since accounting rules rewarded employers for cutting benefits, retiree benefits plans soon morphed into profit centers. Retiree plans became handy earnings-management centers at the expense of the retirees. Yet as workers’ retirement benefits were cut, “supplemental executive pensions” ballooned along with escalating deferred compensation. “Today,” reports Schultz, “it’s common for a large company to owe its executives several billion dollars in pensions and deferred compensation.”
It’s these growing “executive legacy liabilities” that account for much of the “growing pension costs”. Executive liabilities are often large, growing, underfunded or unfunded, and hidden, buried within the figures for regular pensions.
http://www.forbes.com/sites/stevedenning/2011/10/19/retirement-heist-how-firms-plunder-workers-nest-eggs/
Got 8% return?
That assumption allowed funding contributions to be cut drastically, since the 80s. Has anything changed?
Update for Manhattan.
I saw two massive “For Sale” signs on my street on the UWS. They were definitely not there last week.
I saw them last night while having dinner with a friend. One of them was for a brownstone. The owner had all the lights on so you could easily look inside - a sort of cheap form of advertisement without having to pay the Realturd™.
I’ve never seen ads on my street EVER, and now there are two!
Very bad things are coming down the pipeline.
Meanwhile the restaurant space at the corner (massive) which has been lying fallow for the last five years (!!!) because the owner got too greedy has a new tenant. I’m not so sure about this one. It could go either way. It could actually work out. We’ll see.
I was walking from my office to the Folger last night and saw a few for sale signs on row houses just across the street from the back side of the Supreme Court. Might have been two signs for just one building, but I don’t think so.
Those are some incredibly beautiful houses. I’m sure I’ve seen the street you’re talking about.
Being on the Congress side, it’s nowhere near as trafficked either.
They are very nice from the outside. And they are not all used for residences, as they are so convinient to the House and Senate office buildings. One on another street was headquarters for one of the re-election committees (Senate Democrats, I think).
When I left, I walked right down East Capitol Street toward the main building with a crescent moon and two planets directly above the dome. Beautiful.
Many years ago, in the dark ages of mass housing bubble awareness, I used to yearn on this blog for the day when Jon Stewart would figure out what hilarious material financial manias can offer. We’ve come a long way, baby!
My daughter happened to bring along her copy of Stewart’s book “Earth: A Guide to the Human Race” on our PNW trip. Here is an excerpt, in which the narrator explains asset bubbles to a future generation of alien anthropologists who stumble upon the vestiges of our lost civilization:
My company stock is in a mania, although once priced near $25, it dropped to under $2 in 2009 and now is back around $14. Interesting to see more volume and more market pulse entries on Yahoo. Maniacs are finally discovering my company’s stock. My average cost is under $5 and its book value per share is around $7 so I’m okay with this micro mania for now…
Mania. You mean like this?
http://finance.yahoo.com/echarts?s=JNPR+Interactive#chart1:symbol=jnpr;range=my;indicator=volume;charttype=line;crosshair=on;ohlcvalues=0;logscale=off;source=undefined
this ones better:
http://finance.yahoo.com/echarts?s=mstr#chart1:symbol=mstr;range=my;indicator=split+volume;charttype=line;crosshair=on;ohlcvalues=0;logscale=off;source=undefined
Individual stocks don’t go into manias, even though their prices often behave like those of beanie babies or Miami condos. I call strawman…
Ummm, Facebook!
Hello?!?!?
Point taken.
Does BIPLAT work for Facebook!?
Can’t be. Facebook hasn’t gone IPO yet.
They’re predicting a $100 B valuation.
I don’t know how you would depict a whole body roll as “merely” an eye roll but that’s what I would insert here.
Faster i dont get the $100B valuation since i never see any ads on the site….
They don’t need to put ads on their site. They’re smarter than Google.
They’ve already sold you behind the scenes to the advertisers. Their cookies are set. The advertisers already know your preferences behind the scene.
For example, if you traverse some random website, the “partner websites” will target the ads based on the settings that facebook has already targeted you for.
It’s pure genius at some level. Smarter than Google definitely.
Subversive. You don’t even know that you’re being sold.
Incidentally, you’re not the “client”. The advertisers are the client. You, the facebook user, are the product. You’ve been whored out completely and for free! Can’t get smarter than that.
‘I don’t know how you would depict a whole body roll as “merely” an eye roll but that’s what I would insert here.’
You might rightly suspect I don’t give a flying fork about the Facebook IPO?
“It’s pure genius at some level.
…
Subversive.”
Don’t forget the company started out as a web site for guys to collect data from chicks attending elite East Coast universities in order to rank their hotness…
Not even as entertainment?
WOW!
It’s hard to find the time with so much ongoing housing market entertainment to attend to, plus a day job and a family…
web site for guys to collect data from chicks attending elite East Coast universities
Not all guys. Just the geeks. Geeks found a passive aggressive way to release their sexual frustrations. Too bad, nowadays the whole country’s idea of sex is that of a geek because of the facebook.
What’s going on with the housing market? Nothing at all.
There’s no entertainment at all.
Whatchoo talkin’ about, Willis?
“Whatchoo talkin’ about, Willis?”
Some of us extreme geeks find it quite fascinating to watch lipstick gradually dry on a pig’s lips until they crack and bleed.
And then there are the geologically inclined among us, who are fascinated by how tsunamis, especially the financial variety, can pass beneath large ships at sea barely noticed, only to crash into the shore with devastating effect.
You just have to use your imagination a bit more to really enjoy this!
My imagination has far better things to do.
Like take pictures in India, for example.
and may i say those India picture are stunning.
Can’t be. Facebook hasn’t gone IPO yet.
They’re predicting a $100 B valuation.
And ISTR reading that each year, Facebook makes a whopping $4.39 per user. Which means that they’d better keep having a lot of users or they’re toast.
Here is Stewart’s recipe for creating an asset price bubble:
I laughed so loudly when I read that at 1am last night, I thought we would get kicked out of our hotel.
And he came up with this insightful analysis during or after the bubble?
The point isn’t that he came up with any insightful analysis — I’m quite sure Stewart would not even suggest it. Rather he did such a spectacular job of putting mass insanity into a humorous light.
Give the man a little credit for comic genius!
“banana-shit crazy”
Nothing like a mixed metaphore to confuse the future student.
The mixed-up metaphor fits perfectly into the larger context of the book. For instance, the front cover shows Stewart and a chimpanzee gazing thoughtfully into the camera; the back page shows Stewart guarding a half-eaten banana which the chip eyes covetously.
if this is a “new” book…it is soooo 6 or 7 years ago.
guess it’s nice to see some popular mainstream “shouty person on televison” finally get it.
Most of the victims caught in any bubble are the lower net worth types. They bet their youngest virgin daughter on the bubble making them wealthy and “poof!” investment gone, daughter gone.
I found an article on the web that said the higher the net worth, the less one should put into real estate (the subject was how much of your net worth should be in real estate). The article placed a ceiling of 15%. My own ceiling is 1/6 of my net worth, but 15% is a good number.
I have no real estate, only a time share, which I enjoy and use. But the older I get the grumpier I get about kids making noise, but I don’t want to live among blue hairs. A minimum 5 acre lot somewhere decent with no cRAP “music.”
How does this guideline work when your net worth is negative?
Then it means more than 100% of your money is in real estate?
Hey Prof,
What brings you up here? Enjoying our liquid sunshine?
Daughter had to visit a college in person to decide she doesn’t want to go there…the rain helped.
But a visit to Silver Falls yesterday made it worth all the trouble.
Looks more like Silver Creek Falls. If only I had known you were in the vicinity…
Local names vary…we have a similarly beautiful waterfall within an hour’s drive of home which goes by the names “Devil’s Punchbowl” and “Cedar Creek Falls.”
And sorry. Next time!
SILVER FALLS STATE PARK
Current conditions and forecast
Feb. 2, 2012 Trail Update: Closed: Canyon Trail from North Falls to Maple Ridge (4 miles) and Winter Falls Trail Head. ALL back country trails closed. See Map
The south half of the Perimeter Trail is closed between the Rackett Ridge/Perimeter Trail intersection and the Buck Mountain Loop/Perimeter Trail intersection because of unsafe trail conditions. No estimate for reopening. The trail that goes behind Middle North Falls is closed until further notice.
Nestled in the lower elevation of Oregon’s Cascade Mountains lies a temperate rain forest. It is here that the Trail of Ten Falls/Canyon Trail (770k) (Acrobat required to view map) can be found. The Canyon Trail and the falls descend to a forest floor covered with ferns, mosses, and wildflowers. You will also find stands of Douglas fir, hemlock, and cedar. While thousands visit the park every year, it is large enough for you to find quiet places to sit and watch for birds (download a bird list as a text file.)
The Canyon Trail is a nationally recognized trail system that leads hikers along the banks of the north and south forks of Silver Creek. It takes you to 10 majestic waterfalls, ranging from the grand South Falls (177 feet), to the delicate Drake Falls (27 feet). Four of these falls have an amphitheater-like surrounding where you can walk behind the falls and feel the misty, crisp spray.
…
Yeah. Same difference. “Silver Creek Falls” is more the moniker that wraps up all of them into one general descriptive name (as in, the falls of Silver Creek), but isn’t the name of the park, nor the name of any of the individual falls.
I was going to guess that but thought your kids were much younger. I guess 5 years brings much more change to that age group than it does to ours…Time flies.
The odds are usually against the S. Californian up here.
Glad to see you got some use out of the trails though!
Realtors Are Liars®
Could you vary it up a bit since you’re preaching to the choir?
A little funky chicken dance, a video on Youtube involving you in a bikini, a rubber tire and some fresh whipped cream?
Anything really.
Thanks!
One day you compliment RAL for the reassuring predictability of his posts, and the next day you decry it.
You, sir, are a hard one to please!
And before you jump on that last line, I knew it would get a rise out of you, so go ahead and have at it…
I’m encouraging creativity in the name of truth!
The same ol’, same ol’ gets boring after a while. Ask your wife!
“Float like a butterfly, sting like a bee.”
ReaItors Are Liars®
That’s not what your wife said last night. She wants to date one.
That wasn’t attractive…..
Lesson number one of interacting with anyone who lives anywhere near Wall Street: Never, ever give them an opening.
Because you know what Wall Street folks do at the moment they notice somebody gave them an opening: Think bonobo monkeys!
Nor is his wife!
But she’s better than a Realtor™.
And she’s not a liar.
That’s all you got? Really? REALLY?
That’s what your wife said too!
Darn.
good one.
LOL
I’m just ribbin’ you!
Hah! Whipped cream and latex. As IF….
From the NY Times: U.S. Agencies See No Move by Iran to Build a Bomb
“WASHINGTON — Even as the United Nations’ nuclear watchdog said in a new report Friday that Iran had accelerated its uranium enrichment program, American intelligence analysts continue to believe that there is no hard evidence that Iran has decided to build a nuclear bomb.
Recent assessments by American spy agencies are broadly consistent with a 2007 intelligence finding that concluded that Iran had abandoned its nuclear weapons program years earlier, according to current and former American officials. The officials said that assessment was largely reaffirmed in a 2010 National Intelligence Estimate, and that it remains the consensus view of America’s 16 intelligence agencies.”
What Ron Paul has been saying too.
Not sure about RomneyBama, but Santorum is very dangerous and wants to sacrifice American lives by putting America into war against Iran.
And because we can’t get to $5 gas soon enough: ‘Iran ready to wipe Israel off the map’
http://www.ynetnews.com/articles/0,7340,L-4194444,00.html
Anybody who listens to such tripe is a fool. It’d be no different than trusting the words of Baghdad Bob. Iran surely knows that any sort of action would result in the complete and total destruction of their government.
…American intelligence analysts continue to believe that there is no hard evidence that Iran has decided to build a nuclear bomb.
Didn’t they miss the Soviet Empire’s collapse?
The government is telling the media and the defense contractors in the quiet rooms to quit drumming up war.
Here’s an excerpt of an email that I got from a very close friend in Toronto:
There are new or half-built condos on every other block. There is a new Four Seasons hotel/condo building less than four blocks away from the other Four Seasons hotel.
Nowhere else are so many, so proud, to be so far behind the curve!
I definitely have to go to Stratfird this year.
http://online.wsj.com/article/SB10001424052970203918304577241623995642182.html?mod=WSJ_Opinion_LEADTop
Wall Street Journal blasts Obama’s “Forrest Gump analysis” of rising gas prices; highlights Ben Bernanke’s easy monetary policies as driving commodity inflation [due to Wall Street specualtion with free Fed trillions].
“It’s true enough that oil prices can’t be commanded from the Oval Office, so in that sense Mr. Obama’s disavowal of blame is a rare show of humility in the face of market forces. Would that he showed similar modesty in trying to command the tides of home prices, car sales (”cash for clunkers”), or the production of electric batteries.”
one of the better points.
Thanks to natural gas prices close to 10 year lows the regional monopoly Atmos Energy has concluded they need to raise residential customer bills by 13.6%. It’s a very clever ploy, they tack on a huge fixed monthly infrastructure fee while lowering the per cubic feet cost. Of course the price of the natural gas is no longer a variable and will always be priced at $2.50 mcf*.
* I would point out that all the Nat. Gas drillers have already cut back on production to force the price back to $5.
http://www.statesman.com/news/local/central-texas-cities-move-to-delay-natural-gas-2188903.html
Weak prices drive US natgas drilling rigs to 29-mth low.
http://www.reuters.com/article/2012/02/24/energy-natgas-rigs-idUSL2E8DO8JH20120224
Most business plans of the past decade have assumed everything goes up in a straight line to infinity. That and the debt based model means you grow or die. These guys probably took on a bunch of debt to exapnd their holdings in recent years.
Deflation does not always mean lower prices, not right away.
Allena, I agree with your comment about “specialized schools” being sad. You’re not the first I’ve heard that from, and my school wasn’t all that, but it wasn’t NOT all that.
It gives me some comfort that I am bringing this back to several schools, but no comfort in the fact it wasn’t there, or it was, and went away for a while.
The power was out in all of Bay Pines (an area of St. Pete) today. I went into Target, to get shoes for my littlegal, and they were running on backup power and still open, but it was emergency lights only.
It was creepy.
I think if the just-in-time economy skips a few paces and starts to falter, this will be a very, very, bad place to be.
You don’t say?
Buffett says he was ‘dead wrong’ on housing market
OMAHA, Neb. (AP) - Billionaire investor Warren Buffett said Saturday that he was “dead wrong” with a prediction that the U.S. housing market would begin to recover by now, but he remains optimistic about the nation’s economy.
In his annual letter to Berkshire Hathaway shareholders, Buffett said he is sure housing will recover eventually and help bring down the nation’s unemployment rate. But he did not predict when that will happen.
Buffet says he was dead wrong about gold - Yr 2015
Buffet is “dead” wrong about everything - Yr 2017
I don’t think he’s wrong about gold (in general) but he might be wrong about the fact that stock multiples are likely to get compressed a lot. A lot of smart people including some Graham disciples - Buffett’s friends - believe this.
If so, there’s going to be a lot of pain, and there’s not much the Berskanke (or Buffett) can do about it.
Invest in a couple of good mattress and stuff my cash, is that the only option?
Not really.
I don’t give financial advice because it stinks to explain to people in an absolute sense.
However, if you take the Berskanke on his word (I don’t), you could theoretically safely invest in bonds of that duration.
There’s a lot of wink, wink, nudge, nudge in that statement and wise people will read a lot more into it than I’ve said.
Yeah that’s what I have; bonds, some cash and some gold. Part of me thinks that the Bernank will be forced to raise IR well before the said period.
Thanks for nothing, FPSS.
You’re mad at me (for no good reason) so let me explain.
A lot of investing is a game of odds. There are bets with 80% chance, 40% chance, etc.
There are no 100% odds. If you know any, let me know!
Wildly, your estimate of those odds may be totally wrong. In which case you will have to unwind.
Even worse, your odds may be fine but the bet could go against you.
People don’t understand this probabilistic mindset. It’s hard even after you’ve done it for a while.
Start talking about Bayesian updates of your priors and they’ll start rolling their eyes.
At that point, the safest bet is to NOT give any advice at all. You’re on your own!
No I am not mad. And I wasn’t expecting investment advice either What you said, I mostly agreed with and thanks for that.
I was being ironic. I thought the smiley face was a giveaway.
Yeah, the smiley face was a giveaway but I thought I’d explain anyway.
Bayesian updates of your priors
Nice, alpha, real nice!
LOL. My priors have been expunged, thankyouverymuch.
That restaurant space on your corner- it’s calling your name…
I love this board!
It’s funny and informative and rational.
May all your evenings be like that!
“Start talking about Bayesian updates of your priors and they’ll start rolling their eyes.”
Are you saying that Bayesians do it with prior information? Or is it that they do it with less frequency? Or both (in my case, anyway…).
Here’s the link:
Clicky
You think he’ll make it to 2017? The guy apparently eats a lot of cheeseburgers.
I don’t buy his “folksy” image. It’s all an act.
It was ALWAYS an act.
+ 5,000,000
Seriously, everyone. The top people are 90% PR mouthpieces. That is what they do. Not a word is unplanned.
Think about what someone like Buffet, or KKR or Bain Capital does:
1) Say a company is worth about 2 million dollars, net worth.
2) It’s got a million shares of stock.
3) Each share is worth two dollars.
These folks will take a company like that, strip its long term growth potential by killing R&D, killing anything that does not pull in cash right now. That usually involves laying off a good chunk of people too. Now, the share price should go up, with the company’s net worth increasing. They sell off the company and pocket the change.
It’s not something that socially conscious people do.
Bain and KKR took over Toys R Us a few years ago. They’re closing 40-plus year old stores, doing consolidation, exactly what I described above. Plenty of people are losing jobs. They’ll sell and net a healthy profit. Seeing stores I frequented as a child destroyed and jobs lost in order to pad some amoral paper-shuffler’s pocket doesn’t sit well with me.
This society currently is geared towards more debt, destroying its own competitiveness, shipping jobs overseas and rewarding the high finance guys for it all. The people will wake up eventually, but I’m not sure when.
Toys R Us isn’t a great example. That’s a business that was dying a slow death for years. Those moves were going to be made regardless.
Really? Seems like it was doing pretty well for a long time. No store closings or anything like that till just now. What’s your evidence?
Toys R Us had so much insane debt that it was reduced to betting on the hot toy each Christmas just to survive.
Once the Internet came around they got the tire iron treatment.
Do you know anything at all about how a balance sheet works?
FPSS: Thanks for the evidence.
Berkshire is more of a buy-and-hold company, than a buy-and-strip one, like Bain.
The death trap estate: Aerial picture reveals in shocking detail the dangers of a ghost town where a two-year-old boy died… and there are hundreds more like it
http://www.dailymail.co.uk/news/article-2106282/The-death-trap-estate-Aerial-picture-reveals-shocking-dangers-ghost-town-year-old-boy-died–hundreds-like-it.html
The unintended consequences of building too many houses.
Comment by Pete
2012-02-24 17:15:32
“+1 for “refi suction.” ”
That was a nice touch.
(Comments wont nest below this level)
We have a spin-off
Grand Funk Railroad - The Locomotion Lyrics
Anywhere USA 2005-2007
Everybody’s doin’ a brand new dance now
(C’mon baby do the refi-suction)
I know you’ll get to like it
If you give it a chance now
(C’mon baby do the refi-suction)
All my fuqin`neighbors say they do it with ease
It’s easier than learning your a b c’s
So come on, come on,
Do the refi-suction with me
You get to board cruise ships now
Come on baby, pump up, your shack
Oh well I think you got the knack
Now that you can do it
So let’s board a plane now
(C’mon baby do the refi-suction)
Last year we went to Jersey but we`re going to Spain now
(C’mon baby do the refi-suction)
Do it nice and easy now don’t lose control
Just those 50 yard line tickets to the Super Bowl
So come on, come on,
Do the refi-suction with me
Well you can board cruise ships now
Come on, come on,
Do the refi-suction with me
Yeah
Chug chug (sampling)
Go and buy a car with your new refi-suction
(C’mon baby do the refi-suction)
Tell youself your fine cause` it`s a new tax deduction
(C’mon baby do the refi-suction)
There’s never been a scam that’s so easy to do
You`re glad you bought your house back in 2002
So come on, come on
Do the refi-suction with me
Come on, come on,
Do the refi-suction with me
Yeah
Come on, come on,
Do the refi-suction with me
You gotta flap your lips now
END:
(repeat & fade
US Secretary of State Hillary Rodham Clinton
“It is just despicable and I ask whose side are they on?”
I wish Barney Frank was US Secretary of State because I would have loved to hear him say……It is just despicable and I ask whose side are they on?
Is it a “good” time to BUY? Well…Heck ya it is!
http://www.jaysre.com/ (realtor, slo)
It’s always a good time to buy AND sell.
My car insurance only went up $60 for the year. That’s a relief. $2,120 for 2 cars.
Does anyone here live in Arkansas?
I pay less for 3 cars and 3 drivers (one is a 20 year old).
I pay much less for three trucks, a motorhome, a motorcycle and a 25 year old. Of course all the vehicles are old ones.
three trucks
Three trucks?? I thought you traveled light, BlueSkye!
That’s a relief. $2,120 for 2 cars.
Sounds like the lender still holds the title(s)?
Little wonder that the government decided to support the ailing auto industry because there’s lots of suits in office buildings living off of our love affair with cars.
WHAAAAAAAAAAAAAA?
2100 for 2 buggies???? Are you a menace on the road?
$920 a year here. Just went down a bit, for some reason (probably because I’m getting old.) For one car, but that’s not really a major factor, is it? You can only drive one at a time. Full coverage.