Bits Bucket for April 1, 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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A coworker retired Friday, she is 59 but not quite 59 and 1/2, therefore she cannot tap into her rolled-over-into-an-IRA-cashed-out-pension until she does turn 59 & 1/2 without tax consequences so somehow, she tells me, she is going to have to find a way to get by unitil she does turn 59 & 1/2.
IMHO she is doomed. If her finances are that tight then she is living too close to the edge.
But she apparantly does not see it that way because her financial advisor (who benifits from convincing her to retire and take the pension buy-out and handing all her cashed-out pension money over to him) assured her everything will be just fine. And it probably will be fine for a while, but the returns on her invested cashed-out pension money (received after paying her advisor some hefty fees) are just not there and probably won’t be there thus she will have to continually dig into the principal to get by. And Social security is still a few years away and - assuming she starts drawing SS at age 62 - she will end up getting a discounted SS payout. Thus all the money she now has is sure to be gone in just a few years.
As I said, she is doomed.
“…and handing all her cashed-out pension money over to him…”
I presume he will begin extracting management fees the day the money gets handed over?
Most likely. The standard fee (I believe) for advisors is 1.1 annual percent paid out monthly, but the real money is made in churning the account in that advisors can make some big bucks moving money into and out of some load funds (i.e. American Funds) that kick back to the advisor up to 5.5 percent of the money that is churned.
IOW churn ‘em and burn ‘em.
Who would be so stupid as to allow that?
It appears you need to get out and about a bit more often.
GrizzlyBear, this is routine.
You vastly overestimate how smart people are about money.
I’ve met doctors who make millions who used to routinely allow this. I have thank-you notes from them when I told them how to prevent it. Alas, the wine baskets with the notes are long gone.
Not really. I know there are innumerable idiots out there, but I was under the (perhaps false) impression you actually worked for a respectable employer who paid good money and hired highly educated people.
This is not my profession.
These are people I met in a social context. Their eyes just happened to pop when I said something really basic like what combo said.
I have no skin in the game. I don’t care!
I’m entirely happy to educate if there’s a willing counterparty but I’m not going to get bent out of shape trying to accomodate fools.
Some learn, most don’t, a fraction are actively hostile, and life goes on.
My “not really” reply was in response to combotechie telling me I needed to get out more. When I typed it, your post wasn’t even there.
GrizzlyBear said: “Who would be so stupid as to allow that?”
Well, you have to understand about cultural pressure. I’m immune to it, but what happens is that these financial ‘advisors’ and your co-workers and your mate and your boss and nearly everyone else will treat you like a moron if you ever, EVER question these sort of bad financial moves. The aim is to force you to comply. So it’s not entirely stupidity. People do it to AVOID being seen as stupid, which sadly is the common definition of being normally intelligent.
A growing number of people are retiring now out of fear of anticipated negative changes to their retirement plan. Odds are slim that retirement changes will be grandfathered.
***
Well…off to work. Glad to have a job!
There it is. A selling point many advisors are using is associated with urgency, as in do it now before interest rates goes up and before the GATT rate is reset whick will whack the pension buyout.
“Glad to have a job!”
Ditto. In these times a job is a terrible thing to waste.
Also, at least in my case, as the number of experienced employees retire the value of us remaining experienced employees increases.
There is a power shift now going on where I work between management and craft; Management has the responsibility of getting things done but it is craft that has the capability of getting things done. This has the making of an interesting dynamic as the number of us experienced craft folks dwindle.
“Ditto. In these times a job is a terrible thing to waste.”
You bring to mind a young colleague who quit her job and left the country a couple of months back. I hope to hear down the road how this worked out for her. She is young and bright, at a stage in her life where starting over somewhere else might offer a better future than she faced here in America.
Other than interesting me on a personal level, her decision makes me wonder whether lots of other young Americans might currently be making similar choices, to settle abroad when prospects at home look historically bleak (albeit improving).
Should the US Encourage the Unemployed to Emigrate?
March 15, 2012
By KennethO
Today’s initial claims numbers were very encouraging for people bullish on the economy. The number of claims came in at a four year low. Economists are increasingly optimistic about the job market recovering and economy. Last month’s job creating numbers came in at an impressive 227,000 jobs created.
However things are not so rosy. According to a study from the Brookings Institute from 2010, the employment situation is almost impossible to solve. Although the study is old, the facts remain very relevant today. Below is a quote and a chart:
…
A guy I worked with was from the Phillipines and last week was his last week; Last week he retired and is now heading back to the Phillipines so as to live like a king.
A very close friend’s parents are planning the same thing.
They are very financially conservative in a good way, and have invested their savings quite wisely (both here and over there.)
They are going to do just fine.
“A guy I worked with was from the Phillipines and last week was his last week; Last week he retired and is now heading back to the Phillipines so as to live like a king.”
That’s like somebody from the US working abroad for millions per year, then retiring back to the US to live like a king. Unfortunately, there is no opportunity for such a thing.
But this is a false dichotomy.
People from poorer countries routinely work abroad to save up money for what they want to do home.
The entirety of the Middle-East construction trade, nannies, etc. is built up of Chinese, Indian, Filipino people who send money back home.
I was in India two years ago in Kerala. You could clearly tell even as an outsider which families had someone abroad sending money back home. The houses were more lavish, better painted, in perfect shape. (The tropical climate makes even houses made of concrete deteriorate really really quickly.)
Also, the entirety of the “merchant navy” trade is built up of such immigrants!
You suffer the curse of the “lottery of birth” by being born in the right country. What’s your point?
My point is that, as “birth lottery” winners, we are not able to work abroad for more money in order to retire back home to a life free of cat food dinners and $100,000 hospital bills.
Right, as “birth lottery” winners, you should’ve saved your bennies ’cause the rest of the world sure finds the wages quite excellent!
Alternately if you didn’t, as I observe more and more, you’re looking to be an expat.
And incidentally, I consider going to Florida as also being pretty much the equivalent of an expat. Sure the legal system is the same but culturally it’s a different world from most places that the people who get there.
Basically, the circumstances are quite clear. Your response to them is what matters.
That’s like somebody from the US working abroad for millions per year, then retiring back to the US to live like a king. Unfortunately, there is no opportunity for such a thing.
The closest thing I can think of is Blackwater. Crappy work, good pay. I don’t know if it was tax free or not. But I do know there were (are?) plenty of young guys making well into six figures who would have had a hard time finding anything that paid 50k at home, making hay while the sun shines.
I (vaguely) know a couple from Louisiana working in DC trying to make enough to make the transition back home.
Now that I think about it, I used to know this other couple that did the same in Boston to finance a house back in South Carolina.
If you’re planning on leaving:
1) Be sure you have a way of legally becoming a resident wherever you plan on going. Being a citizen of the target nation works best as there no visas to apply for and get denied.
2) Don’t plan on coming back. You probably won’t recognize the USA by that time anyway.
“Kerala”
Is that home for you?
“Odds are slim that retirement changes will be grandfathered.”
Please elaborate on this or give an example. Because every ‘retirement change’ with which I am familiar had some kind of grandfathering provision; the problem is that the kind of grandfathering matters.
For instance, my dad has been retired for almost two decades. A few years before he retired, at the height of the 401(K) revolution, the pension where he worked was converted from traditional defined benefit to defined contribution (401(K)). At first they were going to transfer his accrued defined benefit into a new 401(K) account (one form of grandfathering) but as it turned out, they let him keep his final-average-salary defined benefit plan in place until he retired maybe five years later (a second form of grandfathering). Which of these forms of grandfathering do you think was more attractive, and why?
And do you think ERISA legally allows employers to take away pension benefits?
According to a study from the Brookings Institute from 2010, the employment situation is almost impossible to solve.
Perhaps some immigrants, both legal and especially the illegal ones, might decode to go home, especially once the free cheese starts to run out.
“A growing number of people are retiring now out of fear of anticipated negative changes to their retirement plan.”
Only since no one has said it yet (surprisingly), I will.
“Retire now or be priced out forever!”
“Retire now or be priced out forever!”
Combo are you sure the “investment” adviser is not her boy toy?
I’m wondering how much money in retirement this woman has. And, at 59, how much is enough to retire at that age? Is there a magic number?
With the War on Savers still in full swing, that nest egg needs to be really big if you want to live off of interest alone. One might have to buy a Subway franchise or two and continue working until it isn’t possible anymore.
Since I do a lot of charity work for Breast Cancer (one on one, helping them out) I see people changing lifestyles from career heavy hitters to more relaxed and play. Sometimes knowing you might not have much time changes perspectives and plans.
I figure I’ll out live my money, like most of us.
Would be interesting to know if she has any debt like a mortgage, etc. Also wondering if there’s a significant other with a pension, 401K , etc.
Saudi needs 260,000 housing units a year.
“Saudi Arabia’s developers will have to build about 260,000 residential units every year through 2017 to tackle the ever growing housing problem across the Kingdom, said a report.”
http://www.tradearabia.com/news/CONS_215141.html
The price for this building boom is about $80 billion from the Government so this would suggest the price of their oil will not be coming down soon.
Hey what’s up with this? Here is the #1 OPEC producer, Saudi Arabia, planning to generate 10% of it’s electricity with solar power by 2020. Why would they do this when they have so much oil and gas?
http://www.ynetnews.com/articles/0,7340,L-4210423,00.html
How else will they raise foreign currency reserves…. sell sand?
‘Why would they do this when they have so much oil and gas’
I’d guess it’s ROI. Maybe they are thinking it’s better than groupon stock.
Better idea.
Sell Florida to the Saudis for $80B. I hear they have a $#itload of unoccupied residential units down there.
Wouldn’t Nevada be more like Saudi Arabia?
You assume the Saudis want to live somewhere that’s like where they came from.
As I’ve gotten back into the car game a bit lately, I’m noticing that there are way more Arabs around the Denver area that are spending big money on fast cars than there were 10 years ago. Not sure if they’ve moved here recently, or if they have more money than they used to.
any surprise here with grpn?
http://blogs.barrons.com/techtraderdaily/2012/03/30/groupon-tumbles-8-revises-q4-for-higher-reserves/
Why Groupon Is Poised For Collapse.
http://seekingalpha.com/article/470311-why-groupon-is-poised-for-collapse?source=yahoo
Some day they will be kicking themselves that they didn’t take that $1B offer.
On a separate note, what was Google thinking?
I know they are smart but surely they can hire a buncha financial types to tell them that it was doomed from the get-go.
This Groupon business plan/scheme always sounded too much like a “Pets.Com” deal for my taste.
Except that they never had the shipping costs on a 50-lb bag of dog food to consider… Their coupons at least get delivered for free, cause you print them out yourself at home.
But I never understood what the barrier-to-entry was, or how large the first-mover advantage would be in their market…
A small FHA lending rule changes effective today:
Potential FHA loan borrowers who have outstanding debts sent to a collection agency are directly affected by recent changes in that old rule. The new guidance is as follows:
“If the total outstanding balance of all collection accounts is equal to or greater than $1,000 the borrower must resolve the accounts (e.g. entered into payment arrangements with minimum three months verified payments- paid as agreed) or paid in full at the time of, or prior to closing.”
In other words, old charge off debts have to be settled or repaid before a borrower can get an FHA loan.
Up front PMI also increases to 1.75%.
I think that is pretty substantial. I guess it appears to be for accounts sent to collection and not active balances on credit cards.
Frick, are you serious? Yesterday you could get an FHA loan with an unresolved account? WTF! GAH!
I need to buy a punching bag.
Let’s start an HBB boxing club.
First Rule: Don’t talk about HBB Boxing Club.
Second Rule: Don’t talk about HBB Boxing Club.
Thousands of foreclosures in limbo one year after Stern firm’s collapse
By Kimberly Miller Palm Beach Post Staff Writer
Posted: 10:25 p.m. Saturday, March 31, 2012
The so-called foreclosure king of Florida knew his reign was over four months before his law firm’s doors would officially shutter.
“There’s nothing left for you here. There’s nothing left for me here. We’re done. And that’s the end of the story,” one of David J. Stern’s chief employees remembers him telling her in November 2010, according to her deposition.
The conversation followed what Stern characterized in his own deposition as the “unexpected catastrophic event” of being fired by the two biggest clients of his massive home repossession empire.
On March 31, 2011, he closed the firm, leaving as many as 100,000 Florida foreclosures, or nearly a third of the state’s backlog, in limbo.
http://www.palmbeachpost.com/money/foreclosures/thousands-of-foreclosures-in-limbo-one-year-after-2275058.html - -
“On March 31, 2011, he closed the firm, leaving as many as 100,000 Florida foreclosures, or nearly a third of the state’s backlog, in limbo.”
100,000 or 600,000? Somebody’s pants are on fire.
“Jaffe: Right. But you have that information, that institutional knowledge of your own business far in advance of those calls and reports for that matter.”
“Stern: When Fannie Mae comes in and sits down and says, “David, we have 600,000 shadow inventory loans,” we say “You mean, 60,000″? And they go, “No. We mean, 600,000.” And I say, “Oh, that’s nationwide”? And they go, “No 600,000 shadow inventory in the State of Florida”. Sure, I know. Yeah, it’s exciting. [Note: transcribed verbatim from the transcript.]“
100,000 or 600,000? Somebody’s pants are on fire.
I was under the impression that the 100K was the number that his firm was actively engaged on. The shadow ones that FNMA had not yet released to be processed were not included in that number.
The real question is why the author seemed to think that 100K was “one third” of the total backlog in the state… Where did the 300K number come from?
“Where did the 300K number come from?”
Where do any of the numbers come from?
Monday, January 2, 2012
Michael Olenick: Is Shadow Housing Inventory Vastly Larger Than Widely Believed?
“Let’s repeat that. In the spring or summer of 2010, before the robosigning scandal caused a massive slowdown in the number of foreclosures filed, Fannie Mae apparently had 600,000 loans they expected to foreclose upon. Not Fannie Mae, Freddie Mac, FHA, VHA, and private label mortgages, Fannie Mae alone.”
“FHFA reports that Fannie Mae’s share of total US mortgage debt, at the end of 2010, is 27.7%. If Fannie Mae really does have 600,000 homes they expect to foreclose upon we’d expect to see about 2,165,000 shadow inventory homes total .. in Florida.”
“If the number Stern relayed is accurate, that would put a theoretical backlog of filings, for that one county, at 26,000. If we extrapolate to the rest of this high foreclosure state it’s safe to say shadow inventory estimates for the US have been dramatically underestimated, in much the same way that existing home sales were overestimated, albeit to a much more severe degree.”
from the article:
“It’s impossible to believe this figure is accurate. Let’s look at some data. First, the Census Bureau reports there are just under nine million housing units in the entire state at the end of 2010, 8,989,580, to be exact….
“One thing is certain. Either a) Stern lied during his deposition, or b) Fannie Mae lied to Stern, or c) government and non-government organizations that project shadow volume have massively blown it. On Wednesday, Dec. 21st, 2011, HousingWire reports that CoreLogic projected shadow inventory to be 1.6 million homes throughout the entire United States. If Stern relayed the information correctly, and Fannie relayed it to him correctly, that figure looks more like it could be the shadow inventory of South Florida alone. Except that would mean they expect to foreclose on about half the houses in this state, which seems … impossible.”
It does seem like a dubious number- how many houses in FL have mortgages? Seems like almost every house with a mortgage would have to be in the shadow inventory.
I did relish this part of the article:
“Quoting John Maynard Keynes, the only economist who seems to know how to pull a country out of an economic depression, “If you owe your bank manager a thousand pounds, you are at his mercy,” Keynes said. “If you owe him a million pounds, he is at your mercy.”
So too-big-to-fail goes all the way back to Keynes, if not before.
Cool!
“…we’d expect to see about 2,165,000 shadow inventory homes total … in Florida.”
This discussion is starting to get interesting. If the FL shadow inventory were really that big, and CA’s were proportionally sized by population, then CA would have around
(37,691,912/19,057,542)*2,165,000 = 4,281,926.
The two largest shadow inventory states would then have a total of
2,165,000 + 4,282,000 = 6,447,000.
If the rest of the country had the same proportion of homes in shadow inventory as FL & CA, this would bring the total shadow inventory up to
6,447,000*308,745,538/(37,691,912+19,057,542) = 35,074,919.
Of course these numbers are just extrapolations, but I am still expecting the shadow inventory to turn out to be “much larger than expected.”
Thousands of foreclosures in limbo one year after Stern firm’s collapse
By Kimberly Miller Palm Beach Post Staff Writer
Posted: 10:25 p.m. Saturday, March 31, 2012
“After then-Florida Attorney General Bill McCollum announced in August 2010 that he was investigating a few so-called “foreclosure mills,” and depositions were released of former Stern employees, Fannie Mae and Freddie Mac fired Stern’s firm. The company slashed 70 percent of its workforce.”
Here’s a video of a bunch of dolphins beaching themselves and of people wading into the water so as to head them back out to sea. Two things about this video that especially interests me:
1. Why did the dolphins do this?
2. There was nobody in charge of saving the dolphins; people seemed to have made their own decisions as to what needed/should be done and then just did it - probably because they felt it was the right thing to do.
http://elcomercio.pe/player/1384898
And, 3. The dolphins seemed to sense that the people were there to help them and not hurt them. Notice how the dolphins stopped struggling altogether when the people began grabbing them by their tails and hauling them back out to sea.
Your post reminded me of this:
http://www.youtube.com/watch?v=VyfOp_keW0A
“There was nobody in charge of saving the dolphins; people seemed to have made their own decisions as to what needed/should be done and then just did it”
Very thoughtcrime, double plus ungood to think about people doing stuff without endless intermediaries and dictatorial levels of leadership and control. What if those dolphins were terrorist dolphins here to attack us because they hate our freedom? What if a dolphin gave birth while on land making its dolphin child a citizen? Those dolphins are only beaching themselves on beaches we are not willing to beach ourselves on (although I’ve seen some peopleofwalmart.com pix of landwhales that make me wonder) Who gave the safety training? Did TSA agents feel all over the pregnant female dolphins and child dolphins to determine they were not threats? What they should have done was open a market trading futures and options on each dolphin’s survival, and sold each other trillions of dollars of CDS (with a healthy commission charged on each trade, of course). They could probably get the govt to backstop any losses if one of the dolphin contracts croaked. Maybe they should have formed a company to save dolphins, and IPOed… can’t be any less sustainable than groupon or facebook. Really the main problem is someone has probably made a business methods patent on “saving dolphins” which makes all those people IP pirates, unless they’re paying licensing fees.
There was nobody in charge of saving the dolphins; people seemed to have made their own decisions as to what needed/should be done and then just did it
It was in Brazil I think. They don’t worry about getting sued.
They don’t worry about getting sued.…..or fined or jailed.
No, just the taxes they worry about.
I bet they were being pursued by a predator, possibly orcas.
Early one while they are beaching themselves, the camera pans right, and I saw something further out from shore blow spray; it sure looked a lot larger than a dolphin could produce…
And a thumbs up for the person filming it, as they always catch crap for not putting down the camera. Glad the moment was captured.
But this stretch of 21st Street, pocked by homes with boarded-up windows and dead-ending at railroad tracks, is unlikely to make it to a tourism poster. Verna turns the car around in case he needs to make a quick exit and tucks a Smith & Wesson pistol into his jeans.
I’m curious, Ben: have you ever felt the need to go armed into a foreclosure?
http://www.washingtonpost.com/business/markets/who-knows-where-the-foreclosure-crisis-ends-searching-shadows-for-the-answer/2012/03/31/gIQA5AaBnS_story_2.html
Realtors Are Liars®
Is there something “magical” about Global DOW = 2000? Because the index keeps gravitating there, as though guided by an invisible hand.
Global Dow Realtime USD
DJI: GDOW 2,000.57
Change +14.99 +0.76%
Volume 699.23m
Apr 2, 2012 2:13 a.m.
Previous close 1,985.58
Day low 1,999
Day high 2,003
Open: 1,999.05
52 week low 1,665
52 week high 2,270
Is this supposed to be an April Fool’s joke?
Bond Traders Say Worst Over for Treasuries as QE3 Comes
Susanne Walker and Daniel Kruger
Sunday, April 1, 2012
(Updates bond yields in 6th paragraph, currency conversion in 26th paragraph.)
April 2 (Bloomberg) — The worst is over for the $10 trillion U.S. Treasury market following the biggest quarterly rout since 2010, say Wall Street’s largest bond trading firms.
After rising to as high as 2.4 percent last month from 1.88 percent at the end of 2011, the yield on the benchmark 10-year note will finish 2012 at 2.48 percent, according to the average estimate in a Bloomberg News survey of the 21 primary dealers that trade with the Federal Reserve. That’s the same as a January poll, suggesting the market isn’t ready to declare a bear market in bonds after a 30-year bull run.
Signs of strength in the economy, which caused a 5.56 percent loss in bonds maturing in 10 years or more last quarter, may fade in the second half of 2012, the dealers say. Tax cuts are expiring, $1 trillion of mandatory federal budget cuts are due to kick in and $100-a-barrel oil is eating into consumer spending. With inflation in check, Fed Chairman Ben S. Bernanke said last week that the central bank will consider further stimulus, even after upgrading its economic outlook March 13.
“The back-up that we’ve seen over the past three or four weeks was not fully justified by what we’re seeing in the data,” said Aneta Markowska, a senior U.S. economist at primary dealer Societe Generale SA in New York. The 10-year yield will end the year at 2.25 percent, she said in an interview March 27.
…
Can Bernanke somehow force the FOMC to endorse QE3?
How so?