March 23, 2012

Weekend Topic Suggestions

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Comment by Cantankerous Intellectual Bomb Thrower©
2012-03-23 05:36:03

How strong is the movement to break up the too-big-to-fail banks into non-systemically risky ones?

Comment by CarrieAnn
2012-03-23 05:39:15

Does anyone think this is just an attempt to lure cautious retail investors sitting on the sidelines back in? Is there purposely more bark here than bite?

Comment by Cantankerous Intellectual Bomb Thrower©
2012-03-23 05:46:02

In my next life, I want to be Simon Johnson.

Break Up the Banks
It makes no sense to keep bailing out bankers while demanding austerity for everyone else.
By Simon Johnson|Posted Friday, Dec. 23, 2011, at 1:26 PM ET
Former Washington Mutual CEO Kerry Killinger
Photograph by Mark Wilson/Getty Images.

Santa Claus came early this year for four former executives of Washington Mutual, which failed in 2008. The executives reached a settlement with the FDIC, which sued them for taking huge financial risks while “knowing that the real estate market was in a ‘bubble.’ ” The FDIC had sought to recover $900 million, but the executives have just settled for $64 million, almost all of which will be paid by their insurers; their out-of-pockets costs are estimated at just $400,000.

To be sure, the executives lost their jobs and now must drop claims for additional compensation. But, according to the FDIC, the four still earned more than $95 million from January 2005 through September 2008. This is what happens when financial executives are compensated for “return on equity” unadjusted for risk. The executives get the upside when things go well; when the downside risks materialize, they lose nothing (or close to it).

At the same time, their actions and similar actions by other bankers are directly responsible for both the run-up in housing prices and the damaging collapse that followed. That collapse has impacted nonbankers negatively in many ways, including the loss of more than 8 million jobs.

It is also leading to austerity: Taxes are increasing and government spending is falling at the local and state level around the country. A difficult fiscal conversation still lies ahead at the federal level, but cuts and contractions of various types seem likely.

Some people argue that Americans need to tighten their belts. That’s an interesting discussion, particularly at a time with unemployment is still above 8 percent (with recent declines largely the result of many jobless workers’ decision to stop looking). Precipitate austerity is hardly likely to help the economy find its way back to higher employment levels.

But what about government support for the big banks? Is this contracting in the light of our current fiscal pressures? Unfortunately, it is not. Much government support remains, implicitly through allowing banks to be “too big to fail” and explicitly through various kinds of backing provided by the Federal Reserve.

The rationale behind supporting big banks is that they are needed for the economy to recover. But this position looks increasingly doubtful when the banks are sitting on piles of cash while creditworthy consumers and businesses are reluctant to borrow.

The same situation exists in Europe today, where the reality is even starker. Banks are receiving ever-larger bailouts, while countries that borrowed are cutting social programs and face rising social tensions and political instability as a result. Countries like Greece, Italy, and arguably Portugal overborrowed and now their citizens face severe consequences. But the bankers face no consequences whatsoever for overlending.

To be sure, some major European financial institutions may now face difficulties, and perhaps some of their executives will end up being fired. But does anyone think that the people who ran European banks into the ground will leave their positions with anything less than considerable wealth? There is no real austerity—now or possibly in the future—for leading bank executives.

The protesters of “Occupy Albany” issued a powerful consensus statement recently, which reads in part:

The interests of those who purchase influence are rewarded at the expense of the People, from whom the government’s just power is derived. We believe that this failure in our system is at the core of many interconnected issues we face as a society, and its resolution is key to a just future. We therefore demand true democracy, decoupled from the corrosive influence of concentrated economic power, and we call all who share in this common goal to stand with us and take action toward this end.

Big banks represent the ultimate in concentrated economic power in today’s economies. They are able to resist all meaningful reform that could really change their compensation schemes. Their executives want to get all the upside while facing none of the true downside.

Comment by Realtors Are Liars®
2012-03-23 05:36:16

Realtors Are Liars®

Comment by Professor Bear
2012-03-23 06:04:30

How does the Goldman Sachs call for all muppets to buy stocks look in light of breaking news of twin recessions in the Eurozone and in China?

“Come on in, muppets, the water is fine!

Comment by Professor Bear
2012-03-23 06:17:51

GLOBAL ECONOMY-China factories falter, euro zone business wilts
Analysis & Opinion
Thu Mar 22, 2012 1:18pm EDT

* China manufacturing slumps for fifth month in a row

* Euro zone PMIs suggest worsening economy

* German, French factory PMIs worse than all forecasts

* Investors take fright at data

By Andy Bruce and Nick Edwards

LONDON/BEIJING, March 22 (Reuters) - Chinese manufacturing activity shrank for a fifth straight month in March and the euro zone economy is showing new signs of wilting, according to surveys on Thursday that pointed to weakening global demand.

Only the United States is showing signs of vigor among the world’s top economies, underlined by data showing jobless claims last week fell to a fresh four-year low.

Related News
Yen bolstered as risk currencies take a drubbing
Thu, Mar 22 2012
Crude ends lower on global economic worries
Thu, Mar 22 2012
Growth worries weigh on oil, stocks; dollar up
Thu, Mar 22 2012
UPDATE 8-Oil down on weak Chinese, euro zone data
Thu, Mar 22 2012
Gold hits two-month low on slowdown fears
Thu, Mar 22 2012

Comment by Professor Bear
2012-03-23 06:19:11

Eurozone crisis live: Ireland falls back into recession, as Portugal strikes - 22 March 2012

• Surprise fall in Irish GDP and GNP
• Portugal’s largest union calls general strike
• Transport disrupted
• Weak data shows eurozone in recession

Comment by Professor Bear
2012-03-23 06:22:13

March 21, 2012, 4:42 PM

Calling All Muppets: Goldman Says Buy Stocks

By Steven Russolillo and Matt Jarzemsky

Goldman Sachs on Wednesday offered a ringing endorsement for U.S. stocks, calling the current environment a once-in-a-lifetime opportunity for long-term investors to switch out of bonds and into stocks.

In a detailed 40-page report, Goldman laid out several reasons why the prospect for future returns from stocks relative to bonds are as good as they have been in a generation.

“We think it’s time to say a ‘long good bye’ to bonds, and embrace the `long good buy’ for equities,” wrote Peter Oppenheimer and Matthieu Walterspiler, London-based strategists at Goldman Sachs.

Goldman’s argument is largely based on valuation. The bursting technology bubble in the early 2000s and the worst financial crisis since the Great Depression have contributed to the erosion of investor confidence in stocks, Goldman says.

While Goldman acknowledged slowing profit growth in corporate America is a concern, the trend may not be as bad as the market currently expects. And risks of tighter credit and investment spending as well as an aging population on equities valuations are “overstated.”

“Our global projections show that the next decade is likely to be a peak period for global growth,” Goldman says. “If future economic growth is, indeed, stronger, then again the lower expectations currently priced into equity markets is likely to prove too pessimistic.”

A Goldman spokesperson said Mr. Oppenheimer was not available for an interview and preferred to let his research stand for itself.

Comment by Professor Bear
2012-03-23 06:23:55

Did Goldman Sachs inadvertently call the top?

Updated March 22, 2012, 6:46 p.m. ET

Blue Chips Slide for a Third Session

New signs of a slowing global economy rattled investors on Thursday and put stocks on pace for their worst week this year.

The Dow Jones Industrial Average fell 78.48 points to 13046.14, bringing its three-day decline to 193 points. Commodity prices also fell.

The Dow fell for a third straight day following weak economic signals from the euro zone and fresh concerns from China about slowing global growth, Paul Vigna reports on the News Hub. Photo: Bloomberg News.

Investors were focused on weak manufacturing reports from Europe and China; in the latter, a reading showed a fifth month in a row of contraction.

Many investors believed a pullback was overdue after stocks’ seemingly relentless surge this year. The Dow is up 6.8% and was recently trading at its highest levels since 2007. The Standard & Poor’s 500-stock index is up almost 11%.

“Most of the gains this year have already been made,” said Michael Yoshikami, chief executive of Destination Wealth Management, which manages $1.2 billion in assets. “Investors jumping in now need to be careful about coming in at the tail end of the rally, rather than the beginning.” He said stocks can still push higher, but that returns would likely be “more muted.”

Comment by Professor Bear
2012-03-23 06:11:12

February 24, 2012

Are Real Estate Agents Dinosaurs?


I got a surprising e-mail from a real estate broker this week. The topic: How real estate agents have become “dinosaurs,” done in by technology and a growing do-it-yourself ethos.

It isn’t often that I hear from a stranger heralding her own profession as obsolete, so I called her.

At 53, Sissy Lappin runs a one-woman brokerage in Houston. Over the course of a 28-year career, she says she’s sold more than a half-billion dollars worth of property, from $90,000 bungalows to $9 million mansions. Though her business has been doing well—she sold all 13 of her listings last year—her outlook on her profession as a whole isn’t optimistic.

Shrinking equity has caused consumers to take a hard look at ways to cut transaction costs, particularly the typical 5% or 6% real estate commission, she says. And they’ve discovered that they can now find all the information they need to list, market, stage, negotiate and close a home sale on the Internet.

Like bank tellers, travel agents and other middlemen, real estate agents are no longer critical to a transaction, Ms. Lappin says—though many of her peers will undoubtedly disagree. And as technology has made their role less essential, their ranks have plummeted. According to the National Association of Realtors, the number of real estate agents fell to roughly 1 million members last year from about 1.4 million members in 2006. Ms. Lappin expects the decline will continue as more technological tools are developed to help sellers and buyers deal with each other directly. “The real estate game has changed forever,” she says.

Comment by polly
2012-03-23 08:08:11

“And as technology has made their role less essential, their ranks have plummeted.”

So either their ranks were plummeting in 2004 or there was no internet in 2004? Welcome to the spin zone,

Comment by scdave
2012-03-23 08:09:04

expects the decline will continue as more technological tools are developed to help sellers and buyers deal with each other directly. “The real estate game has changed forever ??

The real death blow to NAR will be ruiness competition…If it happens, it will likely come through the big banks or a company like Wal-Mart…Just look at what impact “Legal-Zoom” has had on the lawyer industry…

Comment by Neuromance
2012-03-23 21:29:19

I think the buyer’s agent, with its inherent conflict of interest, might be fading. The seller’s agent makes sense. Someone dedicated to getting the house marketed and sold. But, with the listings available on the internets, if I find a house and want to execute the transaction, why do I need a buyer’s agent? Basically a buyer’s agent is just another salesperson who’s prodding me to buy, instead of just the one salesperson.

Now, for someone who wants to be prodded to buy, a buyer’s agent might be the right option. But for someone who doesn’t want that, it’s just an added hassle. Plus without an extra agent, the deal gets sweetened for the seller.

If I as a layman approach the seller’s agent, why do I need yet another middleman? It’s like buying a car. There’s a bunch of paperwork but we both want the same thing - me buying that house. I’d think the seller’s agent should be more than capable of handling the transaction.

But what about all that paperwork? One needs the inspection. And the title search. The lender will do a title search before loaning me money. Escrow officer? Still gotta find out about that. I don’t wanna hand the deposit/earnest money over to the realtor’s cousin Bernice. But, it’s like a car sale in many regards. No need for another agent in the mix it seems to me.

Comment by Cantankerous Intellectual Bomb Thrower©
2012-03-23 06:36:18

Is the “housing market recovery in 2012″ mantra still on track?

March 23, 2012, 9:12 a.m. EDT
U.S. stock futures flat ahead of housing data
By Kate Gibson and William L. Watts, MarketWatch

NEW YORK (MarketWatch)—U.S. stock futures hovered near unchanged Friday as investors awaited a further set of housing data.

Investors will be awaiting new-home-sales data for February, set for release at 10 a.m. Eastern time. Economists surveyed by MarketWatch expect sales to rise to an annualized pace of 330,000 from 321,000 in January.

Data earlier this week showed sales of existing homes dipped in February. Housing starts also declined, but building permits rose.

Comment by Cantankerous Intellectual Bomb Thrower©
2012-03-23 06:42:38

Seems like Mr Market, who is itching for a selloff, is in a tug of war with the Plunge Protection Team this morning. We’ll see who wins once those housing numbers are released.

Comment by Carl Morris
2012-03-23 18:50:20

I’m starting to forget there was ever time when this wasn’t true…

Comment by Professor Bear
2012-03-23 15:23:45

Snowballs roll downhill — until they turn into avalanches.

KB Home cools down red-hot homebuilders
Commentary: A bad report offers a good excuse to lock in profits
By MarketWatch

SAN FRANCISCO (MarketWatch) — It was a double-whammy Friday for homebuilders. It was also overdue.

First up, KB Home (KBH -0.49%). The company released its fiscal first-quarter report before the opening bell, setting the stage for the subsequent sell-off. At first glance, the company seemed to be on the mend. It narrowed its loss to 59 cents a share from $1.49 a year ago, but was still wide of the 24-cent per-share loss analysts expected.

Closer inspection showed other problems. KB Home’s margins shrank. Net orders fell. Perhaps most surprising was a rise in cancellations to 36% from 29%. Read about KB Home’s latest quarter.

KB Home still on roll

Not surprisingly, the stock got pounded, plunging double-digits in pre-market trade.

The Commerce Department dropped the second bomb. New home sales fell 1.6% in February to an annually adjusted rate of 313,000, well off the 330,000 pace analysts had expected. Read about the latest housing report.

Comment by Ben Jones
2012-03-23 08:02:29

We’ve seen some big changes come out of the housing bubble. Much of the turmoil in the EU can be attributed to the housing mania. But will it lead to the downfall of the regime in China? Consider this:

‘Damaging coup rumours ricochet across China…The reality of the past few weeks has been that China has been gripped by some of the most extraordinary political events in years, and they indicate significant political tensions beneath the surface. It began in early February with the flight of Wang Lijun, deputy mayor and police chief of Chongqing to the US consulate in Chengdu where he sought asylum.’

‘He was refused and was taken away by Chinese state security. That was extraordinary in itself, but the talk was that he had evidence of high-level corruption.’

‘In his speech at the recent National People’s Congress in Beijing, Premier Wen Jiabao revised down the GDP growth rate to 7.5 percent, the lowest for a long time. In his address to China’s 3,000 delegates, he detailed the problems facing the economy. He said: “Domestically, it has become more urgent but also more difficult to solve institutional and structural problems and alleviate the problem of unbalanced, uncoordinated, and unsustainable development.” And: “Internationally the road to global economic recovery will be tortuous, the global financial crisis is still evolving, and some countries will find it hard to ease the sovereign debt crisis any time soon.”

‘The breakneck speed of China’s economic development has not only created structural imbalances but also social dislocation. From a predominantly agricultural economy, China is now 50 percent urbanised. Nearly 300 million rural people (and rising) constitute its floating migrant population working on urban industrial and construction sites. They are not entitled to urban residency because of their rural residency registration. A whole way of life, going back thousands of years, is in search of a new sense of belonging that eludes them.’

‘No wonder, China is in the midst of widespread social unrest. According to the last official estimate, China experienced, in one year, 90,000 cases of social unrest, big and small. The government has stopped compiling and issuing statistics on this. Corruption is now endemic and getting institutionalised, affecting even the higher levels of the bureaucracy and government.’

‘The Bloomberg columnist William Pesek, quoting a report to this effect said: “The wealthiest 70 members of China’s legislature added almost $90 billion to their bank accounts last year….”

Comment by Cantankerous Intellectual Bomb Thrower©
2012-03-23 09:34:46

‘The Bloomberg columnist William Pesek, quoting a report to this effect said: “The wealthiest 70 members of China’s legislature added almost $90 billion to their bank accounts last year….’

They put America’s 0.00001% to shame!

Comment by Blue Skye
2012-03-23 09:35:11

“added almost $90 billion to their bank accounts”


Still, it’s neglible compared to the 30 odd million Mao starved to death by sending them out into the wilderness to be “farmers”. This was within the lifetime of many HBBers.

Remind yourself next time you buy “made in China”; it’s just business.

Comment by Ben Jones
2012-03-23 11:35:34

Speaking of Mao, I posted an editorial recently that asked, since the Chicoms no longer offer a socialist utopia, prosperity is their only claim to power. And if that goes away, who is gonna stop these 300 million peasants from rising up when they hear of corruption like this?

Comment by In Colorado
2012-03-23 16:45:13

Free condos? :-)

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Comment by Ol'Bubba
2012-03-23 14:51:40

“The wealthiest 70 members of China’s legislature added almost $90 billion to their bank accounts last year….”

Legislature is the operative word there.

By the way, what is 70 divided by 1.3 billion?

Comment by Cantankerous Intellectual Bomb Thrower©
2012-03-23 16:03:16

$1.3bn/70 = $18.5m — just a drop in the bucket, really…

Comment by Cantankerous Intellectual Bomb Thrower©
2012-03-23 16:09:47

Oops — I did the wrong calculation:

$90bn/70 = $1.286 bn each.

Not a drop in the bucket, after all. These seventy guys could probably purchase enough SCOTUS-defined free speech to take over the U.S. government.

The other calculation you mentioned was implicit in my post above:

70/1.3 bn = 0.00001% (rounded) = 0.00000538461538% (unrounded)

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Comment by Blue Skye
2012-03-23 18:46:07

Bubba, you answered your own question!

Comment by Ol'Bubba
2012-03-23 20:21:11

They were rhetorical questions.

It’s an obscenely large amount of money going to an obscenely small number of people legislators.

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Comment by mattsmith
2012-03-23 09:14:53

I would suggest a weekend topic on what to do for those of us who own homes that we want to live in for the long-term. Wife and I bought a house last year and took 6 months doing basic cosmetic/comfort things. However, in the past month or so I’ve met with 3 different window companies about replacing the windows and met with SolarCity about solar power. I turned all their proposals down after studying our energy bills and seeing that the cost savings aren’t all that great for us and because the pay-back period on the initial cash outlay is too long–ten to twelve years.

Comment by Blue Skye
2012-03-23 18:58:27

Take care Matt. Solarcity is an investment scheme, and you are not the investor. The investor is supposed to make big money off of your gullibility. Also it is a gimick to soak up government subsidy, which goes to them rather than you. You pay for the panels and the fee has a built in escalation. You will not own the panels. You will have a long term contract. Try selling your house in the next 15 years?

If you are trying to make your future easier, invest in conservation. Reduce your demand for utilities.

Comment by cactus
2012-03-23 12:00:47

Question if a buyer was going to walk do you think they have already done so ?

Or will it trickle out for years and years ? A slow motion wreck

Comment by Cantankerous Intellectual Bomb Thrower©
2012-03-23 15:26:02

Will the next generation learn from our mistakes and do better?

One can always hope so.

‘Hunger Games’ shoots arrows at big government, big media, hits bullseye
By James P. Pinkerton
Published March 22, 2012
FoxNews dot com

The new movie “Hunger Games” seems destined to be a big hit. Yes, “Games” is a challenging story–a dystopian future in which an oppressive government forces young people into gladiator-type battles-to-the-death–but it’s getting good buzz and good reviews. One critic described “Games” as “like ‘American Idol’ with a body count.”

So c’mon folks! Head down to the ‘plex, buy your ticket, plunk down another $10 for soda and popcorn, and watch good-looking actors and actresses exchange longing glances as they kill each other.

Yet everyone should know one thing: “Games” is not just another slasher/horror scream flick–but rather a furious critique of our political system, in which the central government grows rich from the toil of the masses, even as that same political elite finds entertainment in the contrived and manipulated death of its subjects.

“Games” is fantasy fiction, to be sure, but if it can be said that all fiction holds a mirror to the society from which it came, then the contemporary US government–as well as our popular culture, which also comes in for a drubbing–might wish to reflect on its status and standing in our society.


Because a new generation, having grown up in the midst of futile foreign wars and feckless bailouts to billionaires–even as the middle class continues to erode–might wish to make some changes in our system.

Comment by Cantankerous Intellectual Bomb Thrower©
2012-03-23 23:34:22

Saw it. Loved it.

And I just knew someone out there besides me would detect the obvious metaphorical connection to housing.

The Housing Games: The Hunger Games at Brown

by Jason Hu

May the odds ever be in your favor!The Hunger Games movie is coming out this Friday, and to say we’re excited is a bit of an understatement. We’ve listened to the soundtrack, watched the trailers (five times), and even have begun to play the game “RISD outfit or Capitol citizen?”

To celebrate our age-inappropriate excitement for the wholesale, post-apocalyptic slaughter of adolescents, BlogDH reimagines the world of District 12 here on College Hill:

It’s sometime in the indefinite future. Brown’s endowment is gone, and to make money, the Corporation has started The Housing Games—a nationally televised event where Americans can feed their schadenfreude and watch freshman Ivy Leaguers fight to the death.

But freshmen eagerly look forward to the competitions: awaiting everyone in the winner’s dorm is priority housing, early registration, and 500 flex points.

So fame, mortal danger, and a whole lot of Blue Room sandwiches lie ahead.

May the odds ever be in your favor, and let the Housing Games begin!

Comment by Robin
2012-03-23 18:38:54

When will rents begin to soften or fall?

Housing has fallen markedly, yet rents remain high and often continue to rise. More demand because of foreclosure?

The buy vs. rent equation seems quite out of balance to me, and I believe rents should someday move toward equilibrium.

Investors buying foreclosures to rent them out may eventually have to compete if/when the demand for rentals drops.

More leaving CA than coming in. How much a factor? Howmuchamonth?? - :)

Comment by aNYCdj
2012-03-23 20:30:09

Polly said yesterday:

Well, since the ( students) debts aren’t dischargeable, there is no “end.” Just decades of people spending a lot less than previous generations. You can’t foreclose on a brain.

Polly: Maybe not a brain but the degree?…..Trade in your degree or license and poof on the student debt.

How any lawyers who give up their JD in exchange for no debt? heck lots of them here work as paralegals.

The license /college degree gets cancelled…and you would have to state that on a resume…

I did get my MA but couldn’t afford to the payments, so like cash for clunkers, cash for keys, I traded my clunker college degree for freedom!

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