Bits Bucket for August 2, 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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What is the “Best” way to read this blog. I can hardly get through half it a night, yet it looks like some have a running commentary during the day that must require them to be reading it rapidly. Just a neophyte [a S.A.T. word from High School] but would like a techie method of viewing this besides my repeating PgDn key plucking. thankie
Don’t read everything. For instance, I tune out any technical discussions of the Fed, stock market, foreign markets or detailed RE listings not near my home. None of those affect my daily life in any significant or tangible way.
“…I tune out any technical discussions of the Fed, stock market, foreign markets…”
You must miss most of my posts. Luckily your local housing market is decoupled from the rest of the globalized economy.
Not really, I’ve just found in life that too much minutiae only obscures, not enlightens.
I tune out the politics, most the time. When it comes to that, the knowledge level here isn’t any better than anywhere else.
Also, ignore any electionchat. While important it’s mostly partisan rhetoric of the sort available elsewhere on the internet, and not completely relevant to housing.
not completely relevant to housing.
It is called the “Bits Bucket” for a reason.
Also, there are quite a few here who would say Politics is the primary reason the housing bubble occurred in the first place. The problem starts and ends with government intervention in a market to further some pro-Wall St./Equal Opportunity Liberal Agenda…
It is called the “Bits Bucket” for a reason ??
Yes it is….Long, Long time ago Ben created it so the board could have open forum in discussion…While, we all get of subject once in awhile when we have specific topics Ben posts, the Bits gives us wide latitude…
I admit to being somewhat of a chaos muppet. The chaotic volatility of Bits Bucket topical trajectories suits me well.
The (housing bubble) problem starts and ends with
government intervention in a marketthe deregulation of the finance industry; specifically, the repeal of Glass–Steagall (through the Gramm–Leach–Bliley Act of 1999) and then the Commodity Futures Modernization Act of 2000 which allowed for unregulated mortgage Securitization.It was the easing and lack of government regulations that most led to the finance/housing bubbles.
Exactly Rio…
*Fed easing in the wake of 9:11 and the Tech stock bubble were directly attributed to increases in real estate asset prices.
*Federal government tax incentives such as the MID and the Capital Gains exclusion provided incentive to purchase real estate.
*Fannie, Freddie, and the FHA all provided government-subsidized real estate loans.
You can’t take one issue like Glass-Steagall and say financial deregulation caused the boom. While it played it’s part, along with collateralization (which pre-dated the repeal of Glass-Steagall) it wasn’t the sole or even primary cause.
*Fed easing in the wake of 9:11 and the Tech stock bubble were directly attributed to increases in real estate asset prices.
The Fed easing was a form of deregulation and not regulation. Why? Because higher rates helped to REGULATE the housing market. Your above sentence acknowledges that lowering rates led to higher (than should have been) prices. Therefore the market was regulated by higher interest rates before those rates were lowered.
Even pop culture cliches acknowledge the FED’s interest rate regulatory effect when we hear “The Fed’s job is to take away the punch-bowl before the party gets too crazy”. Someone “taking away the punch-bowl” at a party is most definitely “regulating” the party. Higher interest rates regulate behavior.
Capital Gains exclusion provided incentive to purchase real estate.
Ditto. The Capital Gains exclusion eliminated a taxation regulatory effect on the market.
*Fannie, Freddie, and the FHA all provided government-subsidized real estate loans.
“Check the mortgage origination data: The vast majority of subprime mortgages — the loans at the heart of the global crisis — were underwritten by unregulated private firms. These were lenders who sold the bulk of their mortgages to Wall Street, not to Fannie or Freddie. Indeed, these firms had no deposits, so they were not under the jurisdiction of the Federal Deposit Insurance Corp or the Office of Thrift Supervision. The relative market share of Fannie Mae and Freddie Mac dropped from a high of 57 percent of all new mortgage originations in 2003, down to 37 percent as the bubble was developing in 2005-06.” ritholtz dot com
You can’t take one issue like Glass-Steagall and say financial deregulation caused the boom. While it played it’s part, along with collateralization (which pre-dated the repeal of Glass-Steagall) it wasn’t the sole or even primary cause.
I’ve listed more than one instance of deregulation. Deregulation was a primary causes of real estate bubble.
“Private lenders not subject to congressional regulations collapsed lending standards. Taking up that extra share were nonbanks selling mortgages elsewhere, not to the GSEs. Conforming mortgages had rules that were less profitable than the newfangled loans. Private securitizers — competitors of Fannie and Freddie — grew from 10 percent of the market in 2002 to nearly 40 percent in 2006. As a percentage of all mortgage-backed securities, private securitization grew from 23 percent in 2003 to 56 percent in 2006″
http://www.ritholtz.com/blog/2011/11/examining-the-big-lie-how-the-facts-of-the-economic-crisis-stack-up/
Sorry, but deregulation is the government getting out of the way of business operations. The repeal of Glass-Steagall was deregulation. The rest of the items I noted is not deregulation, but government policy, i.e. government intervention in the markets.
what caused the dot.com stock bubble?
what caused the dot.com stock bubble?
Over-exuberance and greed-driven investment in a new technology called the internet…
You do know you just proved Rio point, right?
Not following on that one Turkey. Care to elaborate?
The tech boom was driven by capital investment by companies in new technology and investors in companies driving that new tech… I don’t see how any of that proves Rio’s point about taxation and interest-rate policy being a type of “deregulation”. Especially in the case of Alan Greenspan raising interest rates to cap that irrational exuberance (i.e. tighter monetary policy being more government regulation according to Rio’s arguement).
Definition of deregulation by Merriam-Webster:
* the act or process of removing restrictions and regulations
Definition of regulation by Merriam-Webster:
* an authoritative rule dealing with details or procedure
* a rule or order issued by an executive authority or regulatory agency of a government and having the force of law
So, regulation is generally accepted to be rules or laws, often dealing with details or procedures. The cost of money (Fed Funds Rate for instance) is not regulation, it is monetary policy. It doesn’t prevent an entity from doing a certain thing, though it may make it so it isn’t profitable to do so. Taxation is the same as above… Regulation is about telling business what they can and can’t do and how to do it. Monetary policy and tax policy is about incentivizing certain behaviors over others. They are similar, but not the same.
Words have power. It helps if we use them correctly.
Of course you’re not following. We already knew that.
You will never accept facts or understand the scientific method, therefore you will never be able to follow.
You have mistaken rationalization for reason and there has never been a way to fix that except for the harsh mistress.
Sorry, but deregulation is the government getting out of the way of business operations.
Sorry, but housing is a “needs” industry. Wherever there is a product that people have to buy in some form or another, businesses will fleece the captive customers who don’t have much choice. That’s why we need regulatory bodies.
You will never understand facts or understand scientific method
What facts? The “facts” posted by Rio, which were studies done by liberal think tanks to further a liberal political agenda, and which I provided another “fact” based counterpoint to? And how does this translate into not understanding scientific method? I guess that’s why they call it a “strawman” argument.
That’s why we need regulatory bodies.
No where in any of my posts did I state that we should not have regulatory bodies. I simply stated a difference in the definition of regulation vs. monetary and tax policy.
Definition of regulation by Merriam-Webster:
Yours was only PART of the definition of regulate/regulation.
Let’s go to the big red book I have. Websters New Word Dictionary, 3rd College Edition
Regulate definition: Definition #4. to make uniform, methodical, orderly, etc.
Interest rates are the Fed’s tool to regulate as per the definition of the word regulate.
The cost of money (Fed Funds Rate for instance) is not regulation, it is monetary policy.
That is wrong by definition. As you see by the definition #4 of “regulate” above, the cost of money (monetary policy) is used as a tool of the FED to regulate (to make uniform, methodical, orderly etc.) financial markets by “taking away the punchbowl”.
Let’s see what the FED says from their website:
FED’s mission: …conducting the nation’s monetary policy by influencing the monetary and credit conditions in the economy in pursuit of maximum employment, stable prices, and moderate long-term interest rates…..
This IS to regulate by monetary policy as per definition #4 of regulate: to make uniform, methodical, orderly, etc.
Words have power. It helps if we use them correctly.
As I have just clearly proved. It also helps to use words correctly and understand all of their meanings in spite of one’s political bent.
i’m confused…when the fed raises rates they are regulating…and when they lower rates they are de-regulating?
What facts? The “facts” posted by Rio, which were studies done by liberal think tanks
Totally wrong again. They were 5 Academic studies and NOT thinktank studies and they showed that raising the minimum wage did not destroy jobs and actually created jobs because of higher demand.
http://www.americanprogressaction.org/issues/2012/06/minimum_wage.html
In our analysis we reference five academic studies of the minimum wage that include periods of high unemployment, cover different geographical areas and different time periods, and use a range of methodologies—from small case studies to large econometric analysis—lending great credibility to their findings. The most recent studies are considered significant improvements over all previous studies because of the methodology employed.
One recent study, for example, used the same methodology as earlier studies finding a small disemployment effect on teenagers, but the newer study controlled for the condition of the regional economy, something previous studies had failed to do. Additionally, other recent studies have examined U. S. counties that border one another but had different minimum wages (because they are in different states). All the studies came to the same conclusion—that raising the minimum wage had no effect on employment. Moreover, all of the studies included cases where the minimum wage was raised during a period of high unemployment. These studies should go a long way in assuaging policymakers’ fears and boost their willingness to raise the minimum wage.
i’m confused…when the fed raises rates they are regulating…and when they lower rates they are de-regulating?
Not always and historically not most of the time.
Regulate definition: Definition #4. to make uniform, methodical, orderly, etc. Websters NewWorld Dictionary
1. When the Fed raises rates to promote an orderly market/inflation level they are regulating.
2. When the Fed lowers rates to promote an orderly market/inflation level they are regulating.
When the Fed lowers or raises rates to the point of causing a disorderly market or out of control inflation they are deregulating the market or inflation rate.
Definition #4. to make uniform, methodical, orderly, etc
based on this i would argue that in most instances the free market is better at “making uniform, methodical, orderly, etc. than some central governing “smart” man (bernanke).
in other words…in most instances the “free market’ is a better regulator than the Fed.
seems that most of the time though, you may not know if the Fed is regualting or de-regulating…till after the fact.
there are exceptions…healthcare for example and oxide suggested housing (not sure if i agree with that one).
And here is Rio’s “American Progress Action Fund” that isn’t a liberal Think-tank which funded the study…
Taken right from their website:
The Center for American Progress Action Fund is an independent nonpartisan education and advocacy organization dedicated to improving the lives of Americans through ideas and action. We are creating a long-term, progressive vision for America—a vision that policymakers, thought-leaders, and activists can use to shape the national debate and pass laws that make a difference.
Our mission is to transform progressive ideas into policy through rapid response communications, legislative action, grassroots organizing and advocacy, and partnerships with other progressive leaders throughout the country and the world.
Non-partisan and independant… indeed.
And here is Rio’s “American Progress Action Fund” that isn’t a liberal Think-tank which funded the study…studies done by liberal think tanks
Do you even read??
The think tanks did not do the studies. The think tanks did not fund the studies. They were academic studies that the think tank referenced.
You are just discounting facts because you don’t like the source. It’s common of those dogmatic. If Obama told you 2+2=4 would you discount the facts because you saw him as liberal? Well that’s what you’re doing here and now.
“In our analysis we reference five academic studies of the minimum wage that include periods of high unemployment, cover different geographical areas and different time periods,”
based on this i would argue that in most instances the free market is better at “making uniform, methodical, orderly, etc. than some central governing “smart” man (bernanke).
I would not disagree with that. I would just add that regulation is needed to keep markets more free than the “free-market” America now has.
Public Policy drives housing, not “politics” or duopoly electioneering bull$hit that you guys seem obsessed with.
Public Policy drives housing, not “politics”
Politics affect public policy. Public policy is politics in the end. Right now, people of both parties want housing prices to rise. This is public policy affected through the politics of both parties. imo
What I think you’re looking for is the Joshua Tree extension for the Firefox browser. That’s what makes it easy to check back periodically during the day if so inclined and see the new posts and skip past the ones you already read. It’s what enables the running commentary that you refer to.
Thank you, thank you … thank you.
“What is the “Best” way to read this blog.”
While you’re getting paid, i.e., with a gubmit job.
Do as I do and read it late at night as a soporific. When I get to the end, I’m usually past my insomnia and ready for a good night’s sleep. (Which is no reflection on the quality of the commentary.) Nice to see you again, RoyG, btw.
Up way too darn early. Got a performance tonight. Me? Nervous? Uh-uh. Not at all.
Best of luck. Break a leg.
Good luck Slim on performing…. um, what are you perfoming? More DJ-ing?
I’m one of six invited storytellers at this performance. Which just got quite the writeup in the Tucson Weekly.
Break a leg, Slim. Entirely in the theater sense of the phrase, of course.
Thank you to everyone! I’ll carry you with me tonight.
Your support means a lot. Really, it does.
Todays odds on the number of times alpha-sloth shows his bizarre crush crush for .GOV
Over 4.5 -150
Under +205
Whether you’re a John Galt, Grover Norquist fetishist or an Obammie commie, one thing’s for certain: the invisible army of government contractors will NEVER stop growing.
* posted outside of government contractor business hours
It’s GOOD to be L3!
his bizarre crush crush for .GOV
Looks like I’m developing a fan base. (He’s probably angry about .GOV freeing the slaves from the states rights people.)
Today’s casino odds on US presidential race:
Obama 4/9
Romney 7/4
Paul 50/1 (Up from 100/1, where he’d been for several weeks!)
Which Paul? Ron or Rand?
Ron
Unless the people setting the odds know something that I don’t about what is going to happen at the Republican Convention, 100 to 1 is way too high. If he isn’t at the top of the R ticket, he has no chance at all.
100 to 1 is way too high. If he isn’t at the top of the R ticket, he has no chance at all.
I suspect they SWAG an unlikely bet like one on Ron Paul. They probably went with 100/1 because it sounded good, and then had enough people bet on him (whether through belief he’ll win or for a souvenir ticket) that they lowered the odds to reflect that.
I assume you meant 100/1 is too low.
.GOV freeing the slaves from the states rights people
The Civil War was not about slavery-not at all. It was all about the evil north wanting to transition from cotton to polyester shirts and the “states rights” folks didn’t think it was “right”.
That was after the Poly-Cotton Blend Compromise of 1850 broke down. Sure, the shirts were wrinkle-free, but they were still too hot for a Southern summer, dammit!
Poly-Cotton Blend Compromise of 1850
LOL!
Me again. The housing bulls are stomping all over the place in Tucson. Latest data point from our leading local fishwrap:
Guest Column: Housing recovery is real; figures bear it out
And, my fellow HBB bears, it’s time to stomp all over this guest’s reasoning. Have at it!
I think it is a good thing. The more the shills say that prices are moving up, the more likely people with control over large amounts of REO housing are to start the process of liquidating. It is only a portion of the market, but anything is better than nothing.
From the Northern Virginia Housing Bubble Fallout blog, posted back in June.
“Northern Virginia’s May 2012 housing sales were up 22% YOY, and median prices were up 6.6% to $399,000. The average days on the market decreased 23% to 43 days.”
That certainly isn’t happening around here, so Rome continues to prosper while the rest of the empire disintegrates or at best stagnates. Let’s hear it for big government.
Since when is having higher housing prices a good thing?
Since when is having higher housing prices a good thing?
I guess that would depend on whether you’re an FB who is underwater on a loan, a boomer looking to profit from the sale of a house and downsize in retirement, a home builder, a Realtor, a local government looking to boost tax revenue, or the Federal government responsible for loans on real estate collateral or repossessed homes.
I’m pretty sure the only people who are hoping house prices continue to decline are renters who want to buy eventually and investors looking to leverage up in real estate…
Bingo. There’s a ton of people who want higher house prices.
Or pretty much the next generation of first time buyers.
But they’re so levered up with student and credit card debt already that they’ll be limited in their ability to take on new debt.
Also, people who bought before the housing bubble finally matured in the 2000s, are of mixed feelings. Higher prices for their asset didn’t allow them to take a profit and move, if they wanted to stay in the same geographic area; all other house prices had moved up. Higher house prices also mean higher taxes. But if they expect to downsize when they retire, they might make a profit. Yet again pay higher prices for the housing they wish to move into. So, there goes that plan.
Actually… house price inflation doesn’t help current homeowners very much, if at all. They would need an Oil City plan where they cash out and move to BFE in order to realize their profits. And not many oldsters wish to move away from infrastructure and hospitals in their dotage.
However, after they die, selling the house and distributing the proceeds certainly could help their children.
As long as prices are rising and EZ loans exist buyers don’t seem to mind high prices, as we can still see in Canada and Oz
LOL! I wasn’t suggesting that higher housing prices was a good thing. It’s just supply and demand. There are enough highly paid individuals in government service and in the large and ever-growing ranks of government contractors who drive up prices in NoVA until demand and supply become re-balanced.
While the rest of the country sees wages stagnate or even drop, and house prices follow.
Wage inflation, quite rampant and accross the board, is being openly discussed. How far away does hyperinflation seem now?
http://finance.yahoo.com/blogs/daily-ticker/minimum-wage-raise-10-hour-says-dean-baker-141406868.html
I’ll let you know when I get a 15% raise.
Lol. Raise the minimum wage to $10? You’ll have massive layoffs and businesses closing who depend on cheap, minimum wage labor.
Raising the minimum pay standard doesn’t allow businesses to pass that expense on to it’s customers. Who eats that increased expense? The business… only someone who has never run a business would even argue for that.
Raise the minimum wage to $10? You’ll have massive layoffs and businesses closing who depend on cheap, minimum wage labor.
Says who?
Studies: Increasing The Minimum Wage During Times Of High Unemployment Doesn’t Hurt Job Growth
http://thinkprogress.org/economy/2012/06/20/503112/studies-increasing-the-minimum-wage-during-times-of-high-unemployment-doesnt-hurt-job-growth/
“A significant body of academic research has found that raising the minimum wage does not result in job losses even during hard economic times. There are at least five different academic studies focusing on increases to the minimum wage—including increases ranging from 7 percent to 12.3 percent made during periods of high unemployment—that find an increase in the minimum wage has no significant effect on employment levels. The results are likely because the boost in demand and reduction in turnover provided by a minimum wage counteracts the higher wage costs.
Similarly, a simple analysis of increases to the minimum wage on the state level, even during periods of state unemployment rates above 8 percent, shows that the minimum wage does not kill jobs. Indeed the states in our simple analysis had job growth slightly above the national average. [...]”
All the studies came to the same conclusion—that raising the minimum wage had no effect on employment.
…..Raising the minimum wage would be good for our economy. A higher minimum wage not only boosts workers’ incomes—something that is sorely needed to boost demand and get the economy going—but it also reduces turnover and shifts businesses toward a high-road, high-human-capital model.
http://www.americanprogressaction.org/issues/2012/06/minimum_wage.html
only someone who has never run a business would even argue for that.
Says you?
Lol. What a bunch of liberal hogwash. Ask any small-business owner what their reaction would be if they were forced to pay higher wages in the form of a higher minimum wage, guess what you would get? Layoffs, lowered hiring, and reduced expenses such as retirement benefits. How do I know? Because I talk to small and mid-size business owners regularly at SBA meetings.
And here’s a link with a report that counters yours:
Rising minimum wage hurts unemployed workers
Keep thinking that the all-powerful government can wave their magic wand and candy-crapping unicorns will make everyone prosperous… meanwhile, I’ll continue to live in the real world. You know, the one where there are consequences to every action, and most government actions benefit someone at someone else’s expense.
What a bunch of liberal hogwash. Ask any small-business owner what their reaction would be if they were forced to pay higher wages in the form of a higher minimum wage, guess what you would get? Layoffs, lowered hiring
Nonsense. As a former corporate owner, I’ve lived it. I paid some of my lower-paid workers $14 an hour with health insurance when I could have gotten by paying $10 and hour with no health insurance. The result? Much lower turnover, more motivated workers and a very productive workplace.
How do I know? Because I talk to small and mid-size business owners.
Fine. You talked it. I walked it.
Lower turnover? LOL. If you’re unskilled enough to only qualify for a minimum wage job, you’re not going to magically make more money by going somewhere else with your low-skilled labor…
And yes, you can pay your employees more than minimum wage. I know plenty of businesses who do: employees who started out at minimum and over time, with longevity, received pay increases. What happens when you move the starting point from minimum wage with the employees making marginally more than that? They want increases as well. What happens to the business’s bottom line? It gets destroyed by higher compensation costs across the board. But I’m sure you knew this because you “walked the walk”.
Action > Reaction
All the liberal dimwits think these things happen in a vacuum. “All my employees will be happy when I start paying everyone more”… indeed, and then for the business to pay for it all, the health insurance match is decreased and the 401K match goes away or the ESOP get’s cancelled. And then there are the product price increases, which lead to decreased sales if the product isn’t a budgetary staple.
Keep digging that liberal hole… I’m sure you can pay someone $10/hr to fill it…
All the liberal dimwits….
Liberal dimwits? As usual, you’re spouting biased dogma, calling names and ignoring facts. Who does that? Smart people? Do smart people do that? So which Political Party has more dimwits?
Congress officially declared ‘dumber’ than years prior because politicians are speaking down to constituents
http://www.dailymail.co.uk/news/article-2160881/Congress-officially-declared-dumber-years-prior-politicians-speaking-constituents.html
Of the 530 politicians evaluated, members with the ten lowest scores were all Republicans.
Most Scientists Politically Liberal (Reality Must Have a Liberal Bias)
Only 6% of scientists in a recent Pew study identified as Republican.
http://www.alternet.org/story/141264/most_scientists_politically_liberal_%28reality_must_have_a_liberal_bias%29/
this because you “walked the walk”.
I sure as sh!t did. And I’m a “producer” too.
What is it G.B. Shaw said about wrestling with a pig?
Something about you both get filthy and the pig likes it…
Don’t feel bad , North. Marie Antoinette didn’t get it either.
The money has to come from somewhere Turkey. You give more to those wage earners you have to take it from somewhere else… in this case either the customer, through higher end-prices, or the business, through higher labor costs and reduced profit (or reduced employee benefits as I outlined prior).
Raising the minimum wage is also inflationary (in the more money chasing fewer goods sense). Any wage gains made by those receiving an increase will end up being offset by increased costs of everything they buy. In the end, they will receive no “real” benefit, though those cost increases would take time to make their way through the system…
Why don’t you understand that the government isn’t the prosperity fairy and they can’t magically make everyone well-off? I thought we were joking about Candy Crapping Unicorns on this blog, but it turns out that some people really believe in them…
You do NOT “have to take from someone else”.
Study after study has proven in the real world that increasing wages increases the economy in general.
Only an insecure, control freak would think “you have to take from someone else”.
I’m all for taking the costs out of profit. I’m still convinced that goods and services are only structured to bring in a 6% return anyway. And if we didn’t have this damn greedy sprial where businesses rased prices to what the market will bear, then 6% would be enough.
The money has to come from somewhere Turkey.
A lot of those Lucky Duckies work for Corporate America (over a million of them work for WalMart alone). Corporate America is both sitting on a mountain of cash and is making money hand over fist. It’s not unusual these days for a big biz to have a net profit that is larger than it’s payroll. Many companies generate 100K+ profit per employee (OK WalMart doesn’t, but they’re retail). Yet money is too tight to mention.
I will admit that mom-n-pop biz would be more affected. Of course, in many cases, they don’t have employees to begin with.
Thanks to the race to the bottom we now have a huge underclass of people who a couple of generations ago would have been at least lower middle class.
It’s funny how say UPS can pay union wages and still turn a profit. I don’t buy the “we need a large underclass to make things work” argument.
Again, words have a particular meaning Turkey. And again, I find that meaning to be wrought with peril in your posts.
Study after study has proven in the real world that increasing wages increases the economy in general.
Indeed, increasing general wages would “increase” the economy. Generally, those wages are “increased” in a free-market where workers are allowed to shop their labor to the highest bidder, otherwise known as competition. Increases in compensation come about because businesses can profit from the additional labor provided, and so are willing to pay more. However, that is not what you’re calling for…
You are calling for increasing wages for the least skilled labor group, and you are calling for it by redistributing money from the business or forcing the business to pass that cost onto consumers. There is no increased profit from forced labor input costs. So again, where will the money come from to pay those increased costs? You cleverly didn’t answer that part.
Only an insecure, control freak would think “you have to take from someone else”.
Ah, so we went from strawman attack to generalization of a very specific problem to personal attacks. Your frustration and desperation is showing…
“…increasing wages increases the economy in general.”
Of course it does. Rents go up. House prices go up. Utilities go up. The price of groceries goes up. I lived through the high inflation of the late 1970’s and early 1980’s, and got big raises that were meant to compensate for (or maybe they caused) the inflation. Did I come out ahead?
No.
Thankfully the tax brackets were indexed to more or less reflect the inflationary times.
Did you actually say that taking money from the boss (lower profits) and payng it to the employees (higher wages) is inflationary? Really?
Depends on who you think will spend it faster.
“You are calling for
increasing wagesemancipation for the least skilled labor group, and you are calling for it byredistributing moneytaking slaves from the business (and) forcing the business to pass that cost onto consumers.” Jefferson Davis, 1861What wage inflation? The only wage inflation I see is for the 1%.
10%… the wage inflation is happening with the top 10% of wage earners.
But I get your point, the top 1% are seeing considerably higher increases in compensation than the bottom 99%.
And here’s a link with a report that counters yours:
Rising minimum wage hurts unemployed workers
You gave me a link to a think-thank editorial referencing NO studies. None, just opinion based on no economic or academic studies - simply unsupported dogma.
I gave you a link to a think tank editorial referencing 5 academic/economic studies proving raising the min wage does not destroy jobs.
Your link:
http://www.washingtonpolicy.org/blog/post/rising-minimum-wage-hurts-unemployed-workers
My link:
http://www.americanprogressaction.org/issues/2012/06/minimum_wage.html
Britain’s moribund economy was yesterday rocked by an ‘absolutely dreadful’ slump in factory output as the Olympics and the crisis in the eurozone hit business.
Manufacturers suffered their worst month for more than three years in July as the deepening recession showed no sign of easing, according to a closely-watched survey.
The bleak report dented hopes that the country will recover from the longest double-dip for more than a half a century this summer.
Read more: http://www.dailymail.co.uk/news/article-2182329/Eurozone-crisis-Economy-rocked-absolutely-dreadful-slump-output-British-factories-Olympics.html#ixzz22Nxk6iie
House prices are dropping at their fastest pace for three years and economists warn the double-dip recession will push them down even further.
Nationwide, the biggest building society, published figures yesterday showing the average value of a home has dropped by 2.6 per cent since July last year.
This is the biggest annual fall recorded since August 2009 and follows a drop in values every month since December, except for February. Last month the average property lost 0.7 per cent of its value.
Read more: http://www.dailymail.co.uk/news/article-2182394/House-prices-falling-fastest-rate-years–And-double-dip-push-further.html#ixzz22Nxzp0V1
The Olympics are working out so well for us Brits; not!
Luckily the U.S. economy has decoupled from the Eurozone, the UK and everywhere else. The only direction from here is up.
…and turtles all the way down!
Luckily for U.S. real estate investors, the real estate recovery here is also fully decoupled from the ongoing crash that is playing out in the rest of the global economy.
I love it when the real-time number directly contradicts the MW headline.
Aug. 2, 2012, 8:25 a.m. EDT
Europe stocks stay higher after ECB rate decision
Veolia Environnement tumbles after earnings miss view
By Sara Sjolin, MarketWatch
LONDON (MarketWatch) — European stock markets held on to gains in afternoon trade on Thursday, after the European Central Bank kept its key lending rate unchanged, with investors awaiting to ECB President Mario Draghi’s news conference and hoping for action to curb the region’s debt crisis.
The Stoxx Europe 600 index (XX:SXXP -0.82%) rose 0.5% to 263.96, adding to a 0.5% gain from Wednesday.
…
Got correlation?
Aug. 2, 2012, 4:48 a.m. EDT
Most Asia markets end down amid ECB skepticism
Tokyo stocks held up by yen’s weakness, auto sales and earnings
By Virginia Harrison and V. Phani Kumar, MarketWatch
HONG KONG (MarketWatch) — Most Asian markets fell Thursday as skepticism the European Central Bank will announce bold measures to ease the region’s debt troubles turned investors cautious a day after the Federal Reserve also refrained from further monetary stimulus.
Chinese stocks retreated on a sharp decline in property developers, with investors also shrugging off a regulator’s repeated appeal for companies to buy back their own shares. Japanese stocks ended marginally higher as some automobile majors advanced on upbeat U.S. sales and a few strong earnings reports.
China’s Shanghai Composite Index (CN:000001 -0.57%) and South Korea’s Kospi (KR:SEU -0.56%) shed 0.6% each, while Hong Kong’s Hang Seng Index (HK:HSI -0.66%) dropped 0.7%.
…
Global manufacturing slows as euro crisis dents demand
Manufacturing contracted in China and Europe and slowed in the United States and Canada in July as the eurozone debt crisis dented global and domestic demand.
Chris Williamson, chief economist at Markit, said US order books barely grew in July as export orders fell for a second month, signalling “a real risk of manufacturing production falling in the third quarter unless demand picks up soon”.
http://www.telegraph.co.uk/finance/financialcrisis/9444328/Global-manufacturing-slows-as-euro-crisis-dents-demand.html
Yep looks fully decoupled to me
“Yep looks fully decoupled to me”
EPIC FAIL!
ft dot com
June 11, 2009 8:15 pm
Decoupling gains new group of cheerleaders
By David Oakley
The theory of decoupling – the idea that emerging markets can grow in spite of a downturn in the developed world – has been revived after their dramatic resurgence this year.
Decoupling was completely dismissed by most analysts following the collapse in markets everywhere after the bankruptcy of Lehman Brothers in September.
The decoupling debateClick to enlarge
Yet decoupling – which was so popular as an idea at the end of 2007 and early 2008, as many of the emerging markets continued to rally in spite of the credit crisis – is gaining traction once again.
The main cheerleader is Jim O’Neill, chief economist of Goldman Sachs and the inventor of the Bric acronymn for the world’s four biggest emerging markets of Brazil, Russia, India and China in 2001.
Mr O’Neill says there is “considerable decoupling going on” as investors switch to emerging market assets as they reckon many of these economies can grow more strongly than the developed world.
…
I think the phrase Jim’s looking for isn’t decoupling, it’s headless chickenism as people desperately run round looking for return on assets that are just not there.
Stocks tumble as European hopes are dashed
The Dow is off more than 130 points after the European Central Bank doesn’t offer big moves to save the euro. Commodities drop. Knight Capital may need to raise new capital. Some retailers had a strong July.
By Charley Blaine 25 minutes ago
What Mario Draghi giveth — or what traders thought he gave — he can also taketh away. And that’s what the president of the European Central Bank did today. He disappointed, and stocks are lower as a result.
The European Central Bank didn’t cut its key interest rate. More important, the ECB didn’t announce a big plan to save the euro, although Draghi promised that one is coming.
…
Decoupling gains new group of cheerleaders
I have to say that during the 2008 crisis and up until now, Brazil was “decoupled” more than most countries. It had one quarter of (barely) negative growth in 08 and Brazil has pretty much chugged along since then.
I attribute this partially to Brazil’s relatively selfish protectionism in its economic and national policies.
Brazil protects its national sovereignty instead of just its corporations.
National sovereignty? Isn’t that just another way of saying “dang socialist/commie”?
Asia grinds lower on ECB
Asian markets tumble, joining a global chorus disappointed with the European Central Bank, with Japan also hurt by Sharp and Sony results.
Quantitative Easing Explained
Uploaded by malekanoms on Nov 11, 2010
What the Federal Reserve is up to, and how we got here.
“Asian markets tumble, joining a global chorus disappointed with the European Central Bank, with Japan also hurt by Sharp and Sony results.”
I applaud the Fed’s and ECB’s QE head fakes. At what point did it become central bankers’ jobs to pay off the Wall Street investing cargo cult?
I turn on CNBC in the morning, to listen to what the shills are saying. The message was “hurry up and buy stocks, or you’ll miss the rally.” Nevermind the global economic meltdown…
I turn on CNBC in the morning ??
We discussed a few days ago the “Boomers” not being in the market…Risk Off….How would you have liked to turn on CNBC this morning and see how your investment in Knight Trading was doing….
There’s not an ounce of difference between realtors and stock pushers, stock brokers and money mangers. It’s always a good time to buy.
“…or you’ll miss the rally.”
Got cognitive dissonance?
Like P.T. Barnum said, “There’s a sucker born every minute.”
August 2, 2012, 4:37 p.m. ET
U.S. Stocks Slide for Fourth Straight Day as ECB’s Draghi
-U.S. stocks decline as European Central Bank’s measures disappoint investors
-U.S. retail sales mixed; teen-clothing sellers lag, miss views
-Weekly U.S. jobless claims rise less than expected
By Matt Jarzemsky
NEW YORK–Disappointment with the European Central Bank’s latest response to the region’s debt crisis sparked a slide in stocks, commodities and the euro.
The Dow Jones Industrial Average fell 92.18 points, or 0.7%, to 12878.88, its fourth-straight decline. The Standard & Poor’s 500-stock index lost 10.14 points, or 0.7%, to 1365.00. Energy shares led declines in nine of the index’s 10 sectors, as crude-oil prices slid 2% to settle at $87.13 a barrel.
The Nasdaq Composite Index retreated 10.44 points, or 0.4%, to 2909.77.
ECB President Mario Draghi pledged to draw up a set of unconventional measures to preserve the euro, but his comments disappointed investors looking for more concrete plans. The central bank left key interest rates unchanged, as expected.
Gold futures dropped 1% to finish at $1,587.40 a troy ounce. The euro tumbled from near a one-month high to a one-week low after the ECB disappointed.
“The ECB has been the only game in town, and Draghi made a minor mistake in overpromising and under-delivering,” said Jim McDonald, chief investment strategist for Northern Trust, which oversees $704.3 billion in assets. “There was an expectation that there might be some specific plans announced on bond purchases, and there was no specificity.”
European markets sold off more sharply than the U.S., with Spain’s IBEX 35 sliding 5.2%, and Italy’s FTSE MIB losing 4.6%. Overall, the Stoxx Europe 600 dropped 1.3%.
“This action by the ECB today highlights the fact that they don’t have the ability to just, with the signing of the pen, fix their financial problems,” Mr. McDonald said. “In light of that, the U.S. is a relative safe haven.”
Also in focus was Knight Capital Group, whose shares plunged 63% after the brokerage said it is pursuing ways to “strengthen its capital base” after glitches in its electronic-trading system caused price swings in about 150 stocks, a misstep the company said will likely cost it $440 million.
The decline added to a 33% slide in Knight’s stock Wednesday, the day the problems occurred. Selling in the two sessions erased three-fourths of the company’s market capitalization.
Concerns about Europe overshadowed mixed U.S. economic data. The number of workers filing applications for jobless benefits rose to 365,000 last week, a smaller increase than economists had expected, according to a Dow Jones Newswires poll. The prior week’s figure was revised higher.
Factory orders unexpectedly fell in June, the latest sign the slowing economy is sapping demand. The 0.5% decrease compared with economists’ expectation for an increase by the same percentage.
…
(Great Britain) House prices are dropping at their fastest pace for three years and economists warn the double-dip recession will push them down even further.
Great Britain had a dead cat bounce in their housing prices before this current decline. Many markets have dead-cat bounces in the middle of their declines. Look at the NASDAQ in the autumn of 2000.
If you buy a house now, you’re going to lose money. ALOT of money.
people are making money in some markets. High risk = high reward
Dumb risk = big loss.
people are making money in some markets. High risk = high reward ?
Well, I can’t say that they are making money because I just don’t have those facts but I can say this; They are sure taking “High Risk”…The money that is poring into Real Estate in my valley right now is about as big as I have ever seen….Billions & Billions of dollars…
Shiller pointed out Phoenix and SF/SV as new bubble places. Interesting times are ahead for these places. Good Luck.
Shiller pointed out Phoenix and SF/SV as new bubble places ??
Tell it to the Irvine Company….
And while your at it tell it to Prudential Ins. Cos. also…
I am butters and I approve this message.
Housing Is A Loss
With little inventory and lots of refi’s on homes up for auction, I don’t see house prices falling in our area of So Ca anytime soon. I use to be a bear, but my crystal ball has been cloudy. There may be some buyers, but with little inventory the illusion looks like a seller’s market, and that’s been our experience with multiple offers up against us. And with so many FHA buyers with little meat in the game, us cash buyers are being squeezed out of the retail side. FHA buyers get in and default, so they don’t pay attention to price. It’s free living to them. We are now looking at wholesale as well. Flippers and hoarders (LLs) are our competition now.
A short sale we bid on and dropped out of, is back on the market due to the buyer backing out. Wish we knew if it was the home’s condition, lack of funding, or personal issues. As they say in
R E: “Time is of the essence, and inspections aren’t cheap.
You used the correct word…. Illusion. The reality is California housing market is fraught with massive fraud, inventory and obfuscation. You’d be best to avoid it as the risk associated with buying any housing in California is obscured by the Housing Crime Syndicate. They’re doing everything in their power to detract from it.
Housing Is A Loss
Great insight in your last post. I agree 100%, but we’re in a place of need right now, not want. I wish we could wait, but we can’t. The best we can do in our area, is just find a suitable home, close, and fix it up as cash flow permits.
This engineered market is criminal. And seeing what I see on my subscriper foreclosure website is mind blowing. A $400K market value home, with $1,200,000 of debt against it. WTH was that all about? The banks lent out money like cotton candy. The more I dig, the wider eyed I get. The underwater values look like typos. Some of these people have owned for over 25+ years. The house should be close to being paid off or should be paid off. Who borrows that kind of dough?
This engineered market is criminal.
Agreed. Housing and stock market.
“Need” can mean rent, move, live with relatives, etc.
“You’d be best to avoid it as the risk associated with buying any housing in California is obscured by the Housing Crime Syndicate. They’re doing everything in their power to detract from it.”
I am, totally avoiding it like the plague!
6 months ago these were less than 400K. A year ago they were 440K. Did we just pass the bottom ?
Listing #12006386
$439,900 (LP)
$432,000 (SP)
Price/SqFt: 266.34
SP % LP: 98.20 6867 Pecan Ave, Moorpark, CA 93021 * Sold
Beds: 3* Baths: 3 (2 0 1 0) (FTHQ) Sq Ft: 1622* Lot Sz: 5087sqft*
Area: NMP Yr: 1989*
The path to the bottom is never perfectly straight. Look at a chart of the oil bust a few years back. There are always rallies, then new lows. I see new lows in housing on the horizon, especially given the absolutely DREADFUL employment and wage picture in this country.
DCB…though it will last for an eternity, as the real estate market adjustment process is glacially slow compared to the stock market…
While some folks have been lucky, housing is almost always in the expense category if you’re looking at it honestly and include taxes, maintenance, transaction costs, interest, and insurance. In the unlikely event of a profit after all that, the usefulness of that profit will be reduced by inflation.
Whether you choose to buy a place or rent it, losing money is generally a given. That having shelter is an expense should not be a surprise to anyone. The better question is, how do I minimize that expense?
The answer isn’t always renting these days.
The better question is, how do I minimize that expense ??
A Tent ??
If you can get a good job, move to flyover country.
“The answer isn’t always renting these days”
When you can rent for less than 1/7 gross income and less than 1/5 net income with heat included and highest summer electric bill of $60 in a secure building with elevator on the top floor with no shared neighbor walls and reserved off street parking, yes, the answer is renting.
BINGO
“…less than 1/7 gross income…”
We are at slightly less than 1/4 gross. But it works for me, compared to forking out over 30% (3/10 > 2.5/10 = 1/4) on purchasing a falling price money pit.
Gov’t to create 4 million jobs
By RICKY RICARDO,
5 hours ago
The Associated Pess
WASHINGTON — The Obama administration unveiled a plan that would create 4 million new jobs. The plan would build new highways that would run directly through 1,614 Chick-fil-A restaurants in 39 states and the District of Columbia.
Really, that sounds like a better use of money than high-speed rail. Although, I think that upgrading the grid is an even better use of money.
Speaking of grid, all the power was restored in India as of yesterday. It appears to be a case of people sucking more power than the grid can handle, so I guess it’s wasn’t too hard to ramp the grid back up.
I wonder if they could handle a derecho.
Gov’t to create 4 million jobs
Now here’s a good example of public money invested in infrastructure drawing in private money later. (You know, like the USA used to do.) Here you have a part of Rio where public money is improving upon before the Olympics. This public improvement is making the area attractive to private investors who would have had no interest this land before the public-money improvement. (Too bad it’s Trump though. lol) Public money invested in infrastructure draws in private investment later. It works.
Trump Mulls Real Estate Project in Rio de Janeiro, Brazil
http://online.wsj.com/article/BT-CO-20120725-713449.html
Begun in 2009, the Porto Maravilha initiative seeks to invest BRL3.5 billion of public funds in overhauling the port district’s infrastructure, also hoping to facilitate private development efforts such as Rio Towers.
…Rio Towers would form part of a broader initiative led by the Rio de Janeiro municipal government to revitalize the city’s port district. The initiative, called Porto Maravilha, or Wonderful Port, was inspired by similar projects in Buenos Aires, Hong Kong, London, and Barcelona.
American real estate mogul Donald Trump is considering a new project in Rio de Janeiro that would aim to capitalize on the city’s revitalization as it prepares to host the 2016 Olympic games.
A consortium led by Bulgarian real estate developer MRP International, and including the Trump Organization, is planning to develop six new waterfront office buildings in the city’s central port district, according to a proposal submitted to the Brazilian government earlier this year and to which Dow Jones Newswires had access.
The consortium’s proposal envisions six 50-story towers with a total of 322,400 square meters of office space, having a final value as high as 5 billion reais ($2.5 billion).
Olympic bust follows the Olympic boom.
Olympic bust follows the Olympic boom.
I think not so much in Rio. The visuals coming out of London are fantastic but the visuals coming out of Rio will be epic. There is no city in the world with the natural beauty of Rio. You have jungle covered mountains dropping down to miles of white sand tropical beaches. London is modern and “on the map” already. For much of the world, Rio is not yet modern or “on the map”. It will be after the Olympics and much safer, cleaner too.
If that’s not enough, Rio also just discovered one of the world’s largest offshore oil fields. The city is flooded with oil people.
That will do it every time.
Of course not, I forgot that the city of Rio is immune from speculative bubbles and laws of demand and supply.
And resource rich countries like Nigeria always do well.
From: riogringa.typepad.com Can’t see why the housing boom would ever end:
Debt among the middle class is on the rise, recent numbers indicate. In May, debt defaults from businesses and consumers hit record levels. Overall consumer defaults hit a 30-month high. Credit card defaults rose to nearly 30 percent, amounting to an estimated $10.8 billion in unpaid charges. Car defaults hit 6.1 percent. Business debt defaults rose 17.5 percent from January to May over the same period last year. Though interest rates are at record lows, they’re still significant–at 32.9 percent in May. Some credit cards even charge interest rates of up to 200 percent a year. It’s not clear if consumption trends will continue. Some economists say in spite of slower growth, consumption will remain strong. Other economists point to slowing car sales as evidence of slowing consumption. Credit debt should slow, others say.
2/3rd of Nepal is spectacularly beautiful although no beaches.
Still dirt poor.
(Brazil)Debt among the middle class is on the rise, recent numbers indicate. In May, debt defaults from businesses and consumers hit record levels.
We were talking about an Olympic bust in Rio. 2016 Olympics. I do expect a serious Rio/Brazil slowdown before the Olympics but I don’t see much of a bust in Rio just because the Olympics will be over. And remember I’m looking at it from the perspective of an American living in Rio. Brazil will in invest billions of federal tax money directly into Rio. The Olympics might be a loss for Brazil on the whole but I think it will be great for the one city of Rio de Janeiro. (especially the nice parts)
Nigeria (oil but poor)/Nepal (beautiful but poor)
Rio and Brazil are not Lagos nor Nepal by almost any measure and the Girl from Ipanema is not the Girl from Nepal.
I forgot that the city of Rio is immune from speculative bubbles and laws of demand and supply.
Forgot? Who told you that straw-man.
Some Chick-Fil-A news from my little burg
http://www.reporterherald.com/news/loveland-local-news/ci_21211661/supporters-mob-chick-fil-loveland
I’ve never eaten there. And, in memory of my two gay relatives, I support equal rights for all people, regardless of who they love.
My daughter went with her lesbie-friend* to Chick-Fil-A to tell people to peacefully eat there w/o protesting.
*Full disclosure: Said daughter has a boyfriend.
Teenager kills 8, wounds 5 in China knife attack
Wow. Was he shooting knives?
Ban automatic knives or high capacity knife holders now!!!
Yes. I fully support the banning of all knives and more regulation against the dangers knives pose to children, the elderly, minorities… basically anyone who isn’t white and middle-aged.
Someone should jump on this and start a liberal, progressive, anti-knife think tank so the media will have someone to talk to about all the dangers posed and we can lobby for more government regulation…
Stabby the Clown strikes again.
snort
With the Fed on the sidelines, I guess it is up to Draghi to satisfy QE cargo cult investors.
FED DECLINES NEW ACTION TO BOLSTER U.S. ECONOMY
Policymakers note growth has slowed and pledge to offer stimulus ‘as needed’
By MARTIN CRUTSINGER
ASSOCIATED PRESS
12:01 a.m., Aug. 2, 2012
Updated 8:53 p.m. , Aug. 1, 2012
WASHINGTON — The Federal Reserve said Wednesday that the U.S. economy is losing strength and repeated a pledge to try to boost growth if hiring remains weak.
The Fed took no new action after a two-day policy meeting. But it appeared to signal in a statement released after the meeting a growing inclination to take further steps to lift the economy out of its funk. The Fed noted that growth had slowed over the first half of the year, with job creation slackening and consumer spending tapering off.
The Fed reiterated its plan to hold its benchmark short-term interest rate at a record low near zero until at least late 2014.
Market reaction to the Fed’s announcement was muted. Stocks fluctuated slightly after the statement was released and ended the day lower.
The Dow Jones industrial average fell 33 points to 12,976, and broader indexes also closed down. The yield on the 10-year Treasury note increased from 1.50 percent to 1.52 percent.
The statement was slightly different from the one issued after the Fed’s last meeting, June 19 and 20.
In addition to noting that the economy had “decelerated,” the Fed’s policymaking committee said it would “closely monitor incoming information” and “will provide additional accommodation as needed” to stimulate the economy and job creation.
In the June statement, the central bank said “the economy has been expanding moderately” and that it “is prepared to take further action as appropriate.”
…
Ruh-roh…Draghi comments are not encouraging…
TODAY’S MARKETS
Updated August 2, 2012, 8:52 a.m. ET
Stock Futures Drop on Draghi Comments
By TOMI KILGORE And MATT JARZEMSKY
NEW YORK—U.S. stock futures erased earlier gains as a European Central Bank press conference disappointed investors, although U.S. employment data topped expectations.
Less than an hour before the opening bell, Dow Jones Industrial Average futures declined 41 points, or 0.3%, to 12882. Standard & Poor’s 500-stock index futures lost 6 points, or 0.5%, to 1364 and Nasdaq 100 futures retreated 12 points, or 0.4%, to 2614.
Changes in stock futures don’t always accurately predict stock moves after the opening bell.
…
Look ma — no QE!
I guess it is up to the PPT now to rescue Wall Street from a crushing selloff?
Aug. 2, 2012, 9:44 a.m. EDT
U.S. stocks open sharply lower; Draghi disappoints
NEW YORK (MarketWatch) — U.S. stocks began Thursday in a steep decline as European Central Bank President Mario Draghi failed to deliver hoped for action to address Europe’s debt crisis. “He essentially came out last week and put his reputation on the line by promising they’ll do whatever it takes, and he failed on that,” said Robert Pavlik, chief market strategist at Banyan Partners LLC in New York. At a news conference in Frankfurt, Draghi said euro-zone members have to be ready to begin the European Fainancial Stability Facility. “The market was hoping for some type of intervention in the way of buying the debt of the countries that are in trouble,” said Pavlik. The Dow Jones Industrial Average (DJIA -0.88%) fell 86.05 points to 12,885.01. The S&P 500 index (SPX -0.57%) declined 11.02 points to 1,364.30. The Nasdaq Composite (COMP -0.24%) lost 16.24 points to 2,903.97.
Every “better than expected” jobs number reduces the strength of the Fed’s case for QE3.
Jobless Claims in U.S. Climbed Less Than Forecast Last Week
By Shobhana Chandra - Aug 2, 2012 6:04 AM PT
The number of Americans filing applications for unemployment benefits rose less than forecast last week as annual auto shutdowns continued to influence the number.
Jobless claims climbed by 8,000 to 365,000 in the week ended July 28, Labor Department figures showed today in Washington. The median forecast of 47 economists surveyed by Bloomberg News called for an increase to 370,000. Starting next week, the data should be clear of any influence from the annual auto plant retooling closures that make it difficult to adjust the data for seasonal variations, a Labor Department spokesman said as the report was released to the press.
…
You really think 5000 less new unemployed is going to keep the fed from initiating QE3 in September?
I’m sure they will jawbone it plenty; too early to say whether they will pull the trigger, or just rely on cargo cultists to keep the faith that QE3 is coming some day soon…
If you remember the predictions from ten years ago we were suppose to have an acute labor shortage, now, with all the people reaching retirement age. People were saying how lucky the young people would be to be entering the job market during this era. We have about ten thousand people retiring each day. It is a reflection on how really bad the economy is that anyone is being laid off. A corporation can cut its head count merely by not replacing its retiring workers.
No BB appointed by Bush II and reappointed by Bush III a.k.a Obama will pull the trigger.
If something doesn’t work then efforts to do more of it should be intensified.
Are you a central banker in cognito?
I think he’s Romney’s economic strategist.
…and then tax it.
Somebody better do something real fast. Facebook is down to 20.17, a staggering 47% drop from IPO price.
Looks like big chit-chat sites aren’t so valuable after all. And Branding Guy Rob Frankel is of the same mind.
That was an excellent piece, Slim. Thanks.
You’re welcome!
But you know me. I’ve been a social media skeptic for quite a few years.
This, if anything, warrants the double o spelling: Loosers!
People have looked at me like I was some kind of crazy iconoclast when I said Facebook probably won’t be around five years from now.
I LOVE the Internet!
“People have looked at me like I was some kind of crazy iconoclast when I said Facebook probably won’t be around five years from now.”
You’re probably right. But unfortunately Faceplant will be replaced by something even more inane and time-wasting.
One can hope! My fear is that before FB disappears from the internet landscape, all of my kids will waste the bulk of their youth on meaningless FB posts…
Lotsa clueless commentators miss the connection between the Fed’s ultra-low rate policy and cities who can’t honor their pension obligations. Little beknownst to non-actuaries, such as this columnist, who clearly did not bother to ask one before writing, pension costs are a direct function of interest rates: When interest rates go down, pension costs rise, as unfunded liabilities increase, while investment returns on pension funds decrease.
Guess what, Main Street America: The investment returns on your pension fund were diverted to Megabank, Inc!
July 20th, 2012
11:45 AM ET
Why U.S. cities are going bankrupt
By Fareed Zakaria
I was struck last week to hear that the city of San Bernardino, California is declaring bankruptcy. It follows similar moves in the past month by Mammoth Lakes and Stockton, also in California. Before them it was Harrisburg, Pennsylvania, Jefferson County, Alabama, Central Falls, Rhode Island – the list continues.
What in the world is going on? Companies go bankrupt all the time – but what happens when a city goes under?
In reality, the two aren’t that different. Companies file for what’s known as “Chapter 11” – a provision which enables them to renegotiate deals, to downsize, to fire people. But filing Chapter 11 also gives them the option of liquidating – or breaking up. That would be essentially impossible for a city – it also happens to be unconstitutional. So cities go for “Chapter 9,” which covers municipalities: that’s cities, but also towns, villages, taxing districts and utilities.
641 cases of municipal bankruptcy have been filed since Chapter 9 was created. Most have been smaller cases involving utilities. But when an entire city goes bankrupt, things are much more complicated. It affects public sector jobs and vital services like fire and police departments.
Now, naturally, we assume all bankruptcies are a bad thing. They’re humiliating, they impact business, they’re difficult to recover from. The situation is far from ideal. But it’s actually not without its benefits.
Take for example San Bernardino. It was running a $45 million deficit (on a $130 million budget.) But its creditors – workers and retirees – were unwilling to help out. The best the unions were able to do was to offer what they thought was a major concession: allowing newly-hired public safety workers to retire with 90 percent of their salary at the age of 55 – instead of 50, which had been the earlier deal!
That won’t work in a chapter 9 bankruptcy. An independent judge brings all parties to a table where an agreement has to be reached – no matter how painful. And, we need some of those painful decisions – not just at the federal level, but at local and state levels as well. At its heart, the bankruptcies you keep hearing about these days aren’t about taxes being too low or spending on city services being too high – they’re about pensions.
California’s pension-related costs rose 20-fold in the decade since 1999. This frightening trend is true almost everywhere in America. And it’s simply not sustainable. A recent Pew research survey found that the gap between state assets and their obligations for public sector retirement benefits is $1.38 trillion. It rose by 9 percent in 2010 alone – and it will likely keep rising until these obligations are renegotiated.
…
“Guess what, Main Street America: The investment returns on your pension fund were diverted to Megabank, Inc!”
Which is why we should never raise taxes on the rich!
bail them out; then tax them.
a win win.
How about we just force the people who made the bad bets, and entered into bad contracts, take the losses. Instead of directly and indirectly foisting the losses on the rest of us.
The people who f–ked up should be the bag holders. But the current system is geared towards protecting them and making everyone else the bagholder.
“How about we just force the people who made the bad bets, and entered into bad contracts, take the losses.”
WAY too fair and rational!
Which is why we should never raise taxes on the rich!
Romney’s plan raises middle-class taxes so it can cut the rich’s taxes because the rich “create” jobs in China.
Mitt Romney’s tax plan would offer big cuts to millionaires, raise taxes on middle class, Brookings analysts say
Mitt Romney’s tax plan would provide large tax cuts to wealthy Americans and hike taxes on middle- and low-income households, according to an analysis by The Brookings Institution .
The report published Wednesday estimated households with incomes over $1 million would receive average tax cuts of $87,117 under Romney’s plan, while those earning $200,000 or less would pay higher taxes.
Brookings analysts concluded Romney’s plan favors high earners “even when we bias our assumptions about which and whose tax expenditures are reduced to make the resulting tax system as progressive as possible.”
http://www.boston.com/politicalintelligence/2012/08/01/mitt-romney-tax-plan-would-offer-big-cuts-millionaires-raise-taxes-middle-class-brookings-analysts-say/3TBTf2GSlecutmVK97R6sK/story.html
“Mitt Romney’s tax plan would offer big cuts to millionaires, raise taxes on middle class, Brookings analysts say…”
…and that government of the
peoplesheeple, by thepeople1%, for thepeople1%, shall not perish from the earth.Something noticeably left out of every article I’ve read lately on pensions is “administration fees”.
Except for the recent mention of 401(k) fees.
So just what ARE the fees for pension administration?
A quick google of “municipal pension admin fees” shows…. uh oh…
They are layered.
There are pension managers. They are often employees of the state or town or whatever. Might only be one, but could be a whole staff. But they don’t buy things on their own. The talk to investment advisors who get paid. They put some money in mutual fuds (ever looked through the lists of funds and seen one that is labeled [name] institutional fund? That is the one the institutions like pensions invest in. Much larger minimum amounts than ones offered to the public but probably somewhat lower fees since it is easier to the admin work that is needed when you have a few thousand customers with millions of shares each than if you have a few million customers with a few thousand shares each. Mutual funds have fees. They buy derivatives from investment banks and the banks charge fees. They probably buy treasuries through some form of treasury direct, but they may pay someone to manage their mix of long. medium and short term bonds for them. Hedge funds change 2% of money being managed and 20%v of any gains for the year.
Lots and lots and lots of fees. The more layers, the more fees. If you really want to drive a pension manager crazy, ask for his total fee burden for the previous fiscal year. Specify that you mean the number that blends together all the fees he pays at all levels including the salaries for his staff. It should be in any report they provide to the governmental entity they report to, but I’d bet they leave out parts of it (their own bonus, for example) a lot of the time.
- insert union thug’s pay fault remark here -
So ONCE AGAIN, we see that it’s really the money “managers” that are creating unsustainable overhead while letting the people whom the managed funds are supposed to benefit, take the blame.
They are layered.”
How hard is it to buy a index fund ? But since many of them are sorta stupid they get tricked into buying exotic crap ( with high fees) and then go bankrupt. Like Orange County did.
A lot of pension funds own real estate directly - as in own the actual building. They have to pay for the agent that helps them buy it, the lawyers that transfer the leases to them, the property managers, etc. Fees, fees, and more fees.
They may buy some index funds, but never exclusively. And sometimes they get caught up in the whole “fund of funds” thing where you pay someone to buy a collection of funds for a fee, while each fund in the bunch is also charging its standard fee.
The money is incredible in this area.
They left out wasteful municipal boondoggles.
My town just opened up a brand new police station and announced a drive home plan for policemen.
What is a drive home plan?
Cops can take their cars home with them.
And a data point from my nabe: A friend works in emergency preparedness for one of the local Indian nations. He occasionally brings official vehicles home.
His wife reports that a lot of our less upstanding neighbors think he’s a cop. They do nothing to dispel that illusion. They’re delighted that their part of the nabe has become, as she puts it, “less ghetto.”
So the cops can’t share the same cars because when the new shift comes on the last shift has taken the cars home? That is really stupid. Didn’t the new police station include parking spaces for the cops so they could drive their own cars to work?
Out here in the boonies, all of the county sheriff’s deputies and Kansas highway Patrolman get their own cars.
Makes sense for several reasons out here. Many of them are 20 miles away from their HQ/station. No need to report to the station, then drive back to their patrol area.
Another benefit is the “ownership” factor. People tend to take care of stuff they are responsible for. When nobody owns it, the equipment tends to be abused/poorly maintained. And breaks when you need it most.
Whoa, they actually OWN their squad cars?
That’s good, cuz like most people I have never washed a rental car, or had the oil changed.
They “own” it, in that they are assigned to it until it is taken out of service, and are responsible for making sure the upkeep and maintenance is done.
None of the drivers of rental cars really “own” them, so rental car abuse is lengendary.
So many wonderful phrases in this listing: “tear down”, “starting to gentrify”, “befor it’s too late”
MLS: 2239268
Price: 245k
Area: 1346 sq ft
Great location close to downtown on a corner lot. You could further remodel, rent it as is for $1600/mo, or tear down and build the house of your dreams and be in a great location! A lot of the surrounding homes in the neighborhood have been completely remodeled or rebuilt - the neighborhood is really starting to gentrify, get this great property and be a part of it before it is too late!
The only word that stands out for me is “higher property tax”. Oh that’s right, it isn’t in the description.
Here’s a shot in the arm for stock market confidence, just when it is needed!
Investing
Wall Street’s Robot Uprising Quickly Quelled
Though some day traders referred to yesterday’s software glitch to something out of the Terminator movies, long-term investors have little to worry about.
By David Futrelle | August 2, 2012
Brendan McDermid / Reuters
Knight Capital Group Inc said that on August 1, 2012, that a “technology issue” had affected the routing of shares of around 150 stocks to the New York Stock Exchange.
To hear some tell it, it was as if Wall Street were facing its very own “rise of the machines,” a strange and chaotic robot uprising that wreaked havoc amongst a wide assortment of stocks yesterday morning. “The robots are attacking Wall Street’s integrity,” the New York Post declared. “It’s like technology out of control,” one floor trader at the New York Stock Exchange told Bloomberg. “The machines have taken over,” a market consultant told the New York Times. One trader wondered if poor humans would be left to fend for themselves in “a terminator infested market ran by algos and [High Frequency Traders,] slaughtering the last of the human day traders that are left.”
…
The stock market is doing ok… they have people lined up to bet their retirement in a broken slot machine.
Caveat emptor!
‘Knight-mare’: Trading Glitches May Just Get Worse
Published: Thursday, 2 Aug 2012 | 2:00 PM ET
By: Jeff Cox
CNBC.com Senior Writer
The Knight Capital trading fiasco, bad as it is, looms even worse because similar high-speed trading problems are likely to keep on roiling the markets and fueling investor mistrust.
[A trader holds his head in his hand on the floor of the New York Stock Exchange in New York City]
Anger and gloom swept across trading floors Thursday, the day after the New York-based trading firm reported a software malfunction that caused a surge in volume at the market open Wednesday and violent price swings for nearly 150 stocks.
Few if any were cheering the misfortunes of Knight [KCG 2.8799 -4.0601 (-58.5%)], whose very survival is challenged by the scandal.
But the biggest concerns were for the retail investors who are likely to continue to flee the market.
“You can only assume that these glitches are going to continue into the future,” says Todd Schoenberger, managing director of the BlackBay Group in New York. “This is a huge, huge negative. It’s another black eye for Wall Street. This is not good for the retail investor. How are they supposed to trust what we do?”
…
Are there any MSM-based financial writers left who aren’t pimping real estate?
It sure seems like the capitulation phase is a long way off…
WRITING ON THE WALL
August 1, 2012, 11:11 p.m. ET
Finally, It Is Time to Buy a House
By DAVID WEIDNER
Warren Buffett famously once said: “Be fearful when others are greedy, be greedy when others are fearful.”
And if you’re not instinctively scared of the housing market, then global warming, saturated fat, running with scissors and the bogeyman probably aren’t keeping you awake at night, either.
The fact that everyone is scared to dabble in—much less commit to—housing makes it a close-to-perfect investment based on Mr. Buffett’s principle. But buying real estate is a good long-term investment for many more reasons, some of which have only become apparent in recent weeks.
The most striking: Housing prices rose sharply from April to May. The S&P/Case-Shiller Index rose 2.2% in 20 of the nation’s big cities. Prices shot up more than 3% in Chicago, Atlanta, San Francisco and Minneapolis. Even Detroit’s housing market scored a gain, inching up by 0.4%.
Nationally, the increase was the first in seven months. More importantly, the increase matched other data and empirical evidence this spring that foreclosures slowed and inventories were shrinking. Simple economics suggests that as the supply of distressed property slows, buyers will be forced into higher-price properties.
In addition, interest rates on 30-year fixed mortgages have tumbled below 3.5%. For those who can get credit, these aren’t just historically low rates; they are one-sided deals tilted toward borrowers.
…
one minor difference…buffet will get a bail out…you won’t.
Bingo.
news thats 6 months late By DAVID WEIDNER
San Bernardino, Calif., files for bankruptcy with over $1 billion in debts
http://bottomline.nbcnews.com/_news/2012/08/01/13077304-san-bernardino-calif-files-for-bankruptcy-with-over-1-billion-in-debts?lite
Really, $1,000,000,000???
Divided by the population (209,924 as of the 2010 census) and that’s only $4736 per person. With the average family having 4 people, that’s only about $19,054 per family.
Doesn’t sound too bad until you consider the county debt, the state debt, and the federal debt.
Divided by the population (209,924 as of the 2010 census) and that’s only $4736 per person.
Mammoth Lakes has San Bernardino beat.
Using a single obligation to demonstrate, $43,000,000 owed to Mammoth Lakes Land Acquisition / popluation 7,500 = $5,733 per person.
Then add all other obligations to that.
Doesn’t sound too bad until ??
Until some of those family’s leave…Then what happens to the numbers…
San Bernardino is a smoggy armpit of a place.
And after the BK dust settles
1) They won’t be able to borrow money at low interest rates
2) They’ll have to live within their means
Our little burg of 60,000 people has a total debt of $12,000,000; about $200 per person.
Unexpectedly low returns on pension assets can blow municipal debt through the roof in a hurry…
can blow municipal debt through the roof in a hurry ??
Yep…In a real Hurry….The compounding effect of accelerating costs with shrinking revenue…Just look at what Scranton had to do…
We agree on this. As I said a week ago, since most pension funds are counting on a return of 7% or better each year to fund their promises, a lot of pensions will not be paid. My employer does fund its pension each year and I have notice that the fringe benefits I received has gone from about 33% of my pay to about 45% over the last five years. A little of this is the health care portion but most is the pension. I cannot complain since I have both a dedicated pension and a 401k 50% match, but my pay increases have disappeared, recently.
Unexpectedly low returns on pension assets ”
I wonder if this has to do with population leveling off and getting older if yes then it should not be unexpected
I wonder if this has to do with ??
Has to do with the actuaries establishing the rate of return necessary to fund them….Were now in the worst physical condition we’ve seen in 80 years…Game now is just to hold on to what you got…Probably going to be the game going forward for a very long time….Bug meet Windshield….
Average Ontario home prices have risen 17% over the past four years, with the most significant growth seen in the province’s north, according to a report released Tuesday.
http://business.financialpost.com/2012/07/24/northern-ontarios-housing-market-is-booming/
Don’t tell anyone — it seems we’re not supposed to talk about it too loudly — but mortgage rates have come crashing down again.
Ratesupermarket.ca says the fixed rate on a five-year mortgage has dropped to 2.94%, below the 2.99% rate that caused a furor earlier this year with Finance Minister Jim Flaherty warning banks not to get too aggressive with pricing.
“The record-breaking rate, offered in Ontario, appeared July 24 and is expected to return as the precedent has been set,” says Kelvin Mangaroo, president of Ratesupermaket.ca, who says his own surveys show the push is back on for a five-year mortgage.
Even the 10-year fixed-rate mortgage is getting more enticing, with a guaranteed rate of 3.76% for the next decade.
Vince Gaetano, a principal at monstermortgage.ca, says a number of lenders have quietly dropped back to 2.99%.
“The banks are not publishing anything yet but there are a couple that in certain situations will go to 2.99% on a five-year,” Mr. Gaetano says.
mortgage rates have come crashing down again.
This was completely predictable… given the amount of central bank intervention and the increase in long dated treasury values given the uncertainty in the EU.
How do low rates protect FBs against cratering prices when rates go back up in a few years?
By “in a few years” are we talking 2014? Or 2030?
Most likely ongoing from 2014 through 2026 or so (for comparison, look at the gradual climb in U.S. rates from 1960-1982…).
The Equity Premium Puzzle will most likely become a hot topic again over that period…
Exactly, and the FB will have paid back the bank by then or run away inflation will have raised the nominal price of the house so the bank does not lose. The question is though: who is really the FB, the person who has the mortgage inflated away or the person who tries to buy the price inflated house with a pay check that has not kept up with inflation and had the money he/she put in the bank for a down payment become essentially worthless?
The trillion dollar question for the day.
Rates are never going back up under the current financial system.
When we see higher rates, it will be because the existing financial system has collapsed and something else has taken it’s place…
As FPSS has said and I’ve reiterated: This was a 1-way trip…
So you’re saying this is like “The Abyss” and we’re doomed unless Aliens save us?
Exactly, though I’m not sure who is playing the part of the crazed Navy SEAL suffering from pressure-induced neurosis, with his hand of the trigger of a multi-megaton nuclear warhead… Ben Bernanke maybe?
BTW, I think it will be the Zombie Apocalypse that saves us from this financial mess, though I’m hoping the ending isn’t like that of “Dawn of the Dead” (Ving Rhames version)…
*Spoiler Alert*
The “safe haven” island is full of the walking dead and everyone dies horribly…
How do low rates protect FBs against cratering prices when rates go back up in a few years?”
won’t higher rates crash the economy and cause rates to go lower again ?
Where do these fruitcakes learn this from….any guesses….
Ahmadinejad: World forces must strive to annihilate Israel
In Ramadan speech to ambassadors from Islamic countries, Iranian president says “horrible Zionist current” has been managing world affairs for 400 years, adds that liberating Palestine would solve all world problems.
Our allies in Iraq say the same thing.
We of course, are fighting a Global War on Terrorism. We have a nebulous enemy that is every where and can look like anyone.
Now that’s progress!
The Protocols of Zion written by the Tsar’s agents to discredit the Russians forms the basis for a lot of it.
But look, to become the President of Iran you have to have a certain world view of Islam. Democracy only applies to issues such as the correct amount for gasoline subsidies. In the United States you cannot become president, if you question the Federal Reserve and the power of bankers. Thus, I find Obama and Bush and most every president in the modern era to be chosen by the PTB.
What you are allowed to fight about are issues such as abortion and gay rights. In fact, you are encouraged to fight over those issues since the distract from the real issue of who controls America. Turkey lurkey says he does not read posts about technical issues.Thus, he must just care about the issues we are allowed to fight over. Is it an accident that Obama changed his view on gay marriage and picked a fight with the Catholic church over birth control during this election cycle? Really, do so many people work for religious organizations that they have to be covered by the mandate to supply birth control or is he just satisfying the requirement to not talk about the key issue? Democrats are blocking the audit of the Fed, and I forgot who said it, one party in America and the wing of that party who is in power must block any attempt to look behind the curtain but he or she was right.
There you go assuming again.
I don’t read the technical articles because I’ve been familiar with the actors for decades and the petty details are just distractions for the masses.
But thanks again for proving my point.
From wiikipedia, my earlier post has not posted about the Protocols of Zion:
The Protocols continue to be widely available around the world, particularly on the internet, as well as in print in Japan, the Middle East, Asia, and South America.[70]
Since World War II governments or political leaders in most parts of the world have not referred to the Protocols. The exception to this is the Middle East, where a large number of Arab and Muslim regimes and leaders have endorsed them as authentic, including endorsements from Presidents Gamal Abdel Nasser and Anwar Sadat of Egypt, one of the President Arifs of Iraq, King Faisal of Saudi Arabia, and Colonel Muammar al-Gaddafi of Libya. The 1988 charter of Hamas, a Palestinian Islamist group, states that The Protocols of the Elders of Zion embodies the plan of the Zionists.[71] Recent endorsements in the 21st century have been made by the Grand Mufti of Jerusalem, Sheikh Ekrima Sa’id Sabri, and the education ministry of Saudi Arabia.[72]
Ahmadinejad: World forces must strive to annihilate Israel
Spoken like an Iranian conservative.
B of A just stopped by the abandoned house next to me to slap another “This is a B of A house, no trespassing” sticker on the window.
Gee, now if they’d only actually foreclose on it, they could actually truly claim. How are they getting away with this nonsense?
I’m tempted to mail the owner - she should put a renter in there. WHy not? She’s still the one of the rolls with the county, not B of A.
Proofreading is for loosers.
Sentence fragments and run-on sentences are for closers.
WHAT’S MY NAME?!
Is this one of the houses currently mired in the foreclosure process in FL? How much of it is the bank slow playing the foreclosure, and how much is it the legal process?
The Naked Capitalism blog just addressed this issue. The post:
Another Way Banks Abuse Homeowners and Distort Markets: Refusing to Take Title to Foreclosed Properties
How can they foreclose if they don’t have the title in the first place?
As I’ve said, the only reason any of this is happening is because it can. It can because people are just too damn stupid to stand up for their rights. Rights they don’t even know they have.
They don’t need no stinkin’ titles
But keeping houses in limbo is a horrorshow for the old homeowner, “who unknown to them”, still owns the property (meaning they could have lived in in it and maintained it, preventing neighborhood blight) and is still on the hook for property taxes.
These people have placed their lives in the hands of the IRS. OMG, how many don’t even know this?
Low-paying jobs are here to stay
“NEW YORK (CNNMoney) — Stuck in a job with lousy pay? Better get used to it.
Some 28% of workers are expected to hold low-wage jobs in 2020, roughly the same percentage as in 2010, according to a study by the Economic Policy Institute.
The study defines low-paying jobs as those with wages at or below what full-time workers must earn to live above the poverty level for a family of four. In 2011, this was $23,005, or $11.06 an hour.”
I thought this was an interesting comment:
“Kids can’t find work because people with degrees or professionals that lost their jobs are taking all these jobs. I worked part at Home Depot last year and stunned to fing out eveyones back ground.
There were school teachers, engineers, plumbersm home builders all working their because things got so bad”
This is what “the future belongs to Lucky Ducky” means.
I actually saw some people that did not look like illegals trying to day work outside of Home Depot, in Utah. So you are lucky ducky if you get to work inside.
No way I’d hire white boys for that kind of work. They might be desperate enough to try to work as hard as the Mexicans, but they just aren’t in the physical shape for it.
…and they might kick your butt if you short them on pay.
Damn legal status makes people all uppity.
So much for hope and change…
Can I get a chorus of “Four more years!”
Four more years! (of Obamney) because there’s no difference between them…
When in serious doubt, better the devil you know…
Four more years! (of Obamney) because there’s no difference between them…
There’s a huge difference when one considers potential Supreme Court nominations.
Also, I think more military and more taxcuts for the rich will increase the deficit more than less military, less taxcuts for the rich and social programs as they are.
23k is poverty for one!
Oh look - public unions bankrupt ANOTHER city.
Many more to come.
——————————————
San Bernardino, California, Files Chapter 9 Bankruptcy
Bloomberg - Steven Church - Aug 2, 2012
San Bernardino listed assets and debt of more than $1 billion in a filing yesterday with the U.S. Bankruptcy Court in Riverside, California. It’s the third California city to seek court protection from creditors since June 28.
City officials sped up the timing of the filing because they were concerned that some creditors may take legal action against the city, Mayor Patrick J. Morris said yesterday in a phone interview. Under Chapter 9, all court cases and other legal actions against the city will be halted until the bankruptcy case is over.
One of the main problems is the high cost of the city’s union contracts, particularly for police and fire service, City Councilman Fred Shorett said in a phone interview.
But you forgot to use the word “goon” in this post. You okay? Should we send you some non-union chicken soup?
Let him be
That news is ancient — I’ve posted on it about eighteen times already.
Besides, how do you know it wasn’t the Fed’s ZIRP policy that bankrupted the city, not the public unions. You really ought to read more of my posts; even you might learn something.
See polly’s post above regarding pension funds “management” fees.
People tend to forget that the employees have to pay into these boondoggles from every paycheck.
Red herring.
The main dynamic is ultra-low rates…see my other posts above.
Will obama bail out obamamotors and the UAW AGAIN?
—————————-
GM profits slip 41% as European struggles take their toll
The Guardian | 8/2/2012 | Dominic Rushe
America’s largest automaker made $1.5bn in the second quarter of 2012, compared with $2.5bn for the same period last year. Revenue fell to $37.6bn from $39.4bn in the second quarter of 2011. The results exceeded analysts’ estimates, but further underlined Europe’s drag on the US economy.
“Our results in North America were solid, but we clearly have more work to do to offset the headwinds we face, especially in regions like Europe and South America,” said GM chairman and CEO Dan Akerson. “Despite the challenging environment, GM has now achieved 10 consecutive quarters of profitability, which is a milestone the company has not achieved in more than a decade.”
If you believe the numbers, it looks like GM is doing a lot better, now that it’s partially owned by the UAW.
It wouldn’t surprise me. It pains me to say that Ford would have been better off taking the bailout. The bailout put GM and Chrysler on much better financial footing…
I have much respect for Ford for not doing it. However, I find my opinion on this has mellowed a bit, as I find myself looking at Chevy Camaros, and Dodge Challengers of late…
Don’t forget the BK’s. Starting over debt free definitely puts GM and Chrysler at an advantage.
“Our results in North America were solid, but we clearly have more work to do to offset the headwinds we face, especially in regions like Europe and South America,”
Sometimes it doesn’t pay to be a global firm. And you can’t blame the UAW for the problems abroad, as those cars are not built by UAW workers.
Sorry, I didn’t say it above, but I count the BK as part of the bailout, as my understanding was GM and Chrysler were given special treatment as part of their reorg…
” I find myself looking at Chevy Camaros, and Dodge Challengers of late…”
Careful there. Here’s a study that shows an inverse relationship between motor size and unit size.
http://en.wikipedia.org/wiki/Motor_unit_recruitment
Oh wait. Upon closer inspection, “there is an inverse relationship between the number of motor units and the force they generate (i.e., the number of muscle fibers per motor unit).”
Yeah, yeah, us car loving guys have small Johnsons……
I’ve found that the quality of my “whip” is inversely proportional to the number of women I’m living with.
Don’t forget the channel stuffing and easy loans from Ally.
It’s a tough road ahead.
GM’s is turning a profit, just not what Wall St. expects.
This is a non-issue.
the Hive big film shoot in lobby of building lots of lights , props, generators, etc. Film industry must be good for local economy.
hundreds of film people running around and union worker bees. this happens about 2 x a year here.
halley barry is the big star some sort of police station activity for this shoot.
anyway back to work
Looks like it wasn’t just Solyndra:
“Why China is losing the solar wars”
http://tech.fortune.cnn.com/2012/08/02/china-solar-energy/?iid=HP_LN
Sometimes the race to the bottom even hurts China.
key comment from article:
“The point being that while solar is simply not close to being cost competitive in the United States, it still can get there in China, and it if it does, the potentially massive domestic market will provide salvation for Chinese solar companies.”
Not cost competitive but billions of government funds went to these companies. Crony capitalism? Government has a role, basic reseach etc. but when it comes to backing an industry we all lose.
“The point being that while solar is simply not close to being cost competitive in the United States”
Big lie right there.
Not only is it competitive but install companies are booming.
Not true even with heavy government subsidies, they are not competitive.
Google “solar news”
also:
http://www.forbes.com/sites/toddwoody/2012/06/13/u-s-solar-industry-booming-despite-china-trade-war/
Also don’t forget the subsidies given to big oil and big coal producers. Gas would probably cost 5 - 10 bucks a gallon if all of the costs of security in teh middle east were included. We give big oil huge tax breaks to produce in this country. XOM has had years where they paid no taxes at all. Then you get into the cost of pollution which we all suffer from. Lakes with too much mercury to eat the fish. Destruction of entire mountain ranges. Pollution of air and water. These never seem to get factored into the debate??
We could pull out of the Middle East completely, and it wouldn’t change the price. Who else are they going to sell it to that they aren’t already?
We would be in the Middle East even if we did not import any oil at all. We are allowed to have the reserve currency for the world. The price for that is that we are the world’s policeman. I don’t like that bargain but it is not a subsidy to the oil industry. The oil companies would make more money if the flow from the middle east was cut off since the production they actually own would soar in price.
Oil companies pay huge amounts of taxes when they generate profits . If Exxon did not pay taxes one year, it was because it did not generate a profit that year. Oil companies profit margins are very thin compared to say an Apple. They generate huge profits in good years due to the vast scale of their operations. However, when oil drops to ten dollar a barrel as a did during the late 90’s nothing is made.
According to its SEC filings Exxon just in income taxes for the last quarter paid $8,537,000,000.00. So that is a rate of over $34 billion dollars in one year paid to the government in one year.
These alleged subsidies are primarily just income tax breaks which keep them from having to pay even more. Compare that to solar companies where the subsidies far exceed the taxes paid. That is a real subsidy.
Thanks for proving my point.
That was directed toward Turkey who likes to invent his/her own facts.
…in 5-4-3-2-…….
Those invented facts I cite?
Those invented facts?
Yes, the issue was about cost and solar is not cost competitive with other sources and that is what the discussion was about. The article posted by Colorado talked about how Germany and Spain were cutting back on solar because even with gas being five times the price in U.S. You claimed that Germany was getting 50% of its energy from solar without qualifying that we are talking about a couple hours out of the whole year. The actual number was 3 to 4% and the list goes on and on. Most people on this blog, are very reliable even if I disagree with them but your facts are just made up.
No one disputes that the large amount of subsidies by California and the U.S. have lead to more solar, although it is still a drop in the bucket of total production, only that is far from being price competitive.
Yes has nothing to do with the cost of the power a dim bulb should see that.
It is why even Google locates its servers outside of the state and relies on coal to generate 30% of the electricity and it is one of the best of the high tech companies. California’s ignoring of electricity costs are one of the reasons the state is so uncompetitive.
Don’t believe me just Google it and burn that coal.
“Is one the reasons”. The cost of tax subsidies and the cost of the electricity even after the subsidies are bankrupting the state. The article posted by Colorado mentioned that Germany and Spain are scaling back from solar because it is so uncompetitive.
“No one disputes that the large amount of subsidies by California and the U.S. have lead to more solar, although it is still a drop in the bucket of total production, only that is far from being price competitive.”
The idea is exactly that! Subsidies should lead to more solar, which will, over a long period of time lead to price-competitiveness. I understand that you disagree with this in principle (as in why are taxpayers shouldering the burden of a niche business?), and I even agree, in principle. But energy is one of those necessities that the free market, in its short-term profit mode of thinking, won’t get us where we need to be long term. We need a more balanced array of energy sources so that a supply drop in one source doesn’t leave us completely screwed. In this case, I favor subsidies for some time to come, while agreeing that it’s not yet price competitive. The efficiency and lifespan of the panels have been rising incrementally but steadily for years. Couple that with fossil fuel costs continuing to rise for the next few years. and it’s worth the public investment now, imo.
Pete, if it were close to being cost competitive ,I would agree with you. However, it is not a case where economies of scale can make solar competitive, right now. I support basic research and I think that within my life time solar will be competitive. However, for now we should be looking to create economies of scale for things like natural gas cars which have a reasonable chance to displace foreign oil. With solar we are talking about having spent billions but we still are producing about one percent of our electricity and many solar companies are going out of business so they will not be around when solar is competitive. A similar effort with NG cars would produce a viable industry. The free market is already moving to create a viable industry starting with trucks.
I disagree that the free market cannot have a longer term horizon. The simple fact is had the oil companies not have been so creative in finding new ways to produce oil, oil would be $300 a barrel and solar companies would not need government subsidies. That is the sad truth. The government backed industry has been out innovated by the private oil companies. If solar cells would have dropped in price as much as memory cells, oil for not be used for transportation at all.
“A similar effort with NG cars would produce a viable industry. The free market is already moving to create a viable industry starting with trucks.”
Absolutely. They might even be able to do it without subsidies, as the demand will be there, and the infrastucture is in place, only problem being the relatively high cost of installing pumping stations. I would support subsidies for that in a hearbeat, as it would be a short-term expense.
“The simple fact is had the oil companies not have been so creative in finding new ways to produce oil, oil would be $300 a barrel and solar companies would not need government subsidies.”
OK, they have been efficient at finding new sources, but with oil prices being what they have for the last ten years, they’ve had great short-term incentive to. I am impressed by the ability of the market to adjust to the prospect of short term profit (even medium-term if the margin is high enough). But energy supply and price are too manipulable when it comes from foreign sources. Again, I agree with your NG position, and it’s even more efficient at generating electricity than powering a car motor. Nuclear as well, if done right.
It was examining the Baltimore market that clued me in that shenanigans were afoot in the real estate market. The marketing line was that increased demand was causing the higher prices, but Baltimore had been losing population for decades, including during the bubble, yet crackhouses were selling for well into the six figures and prices were skyrocketing.
Michael Phelps DUMPS Baltimore Condo At $400,000 Loss
8/2/12
TMZ
Michael Phelps didn’t just take a beating in the 200m butterfly recently … he also got his ASS kicked by the real estate market — letting go of his swank Baltimore condo for $400,000 less than what he bought it for.
Phelps purchased the 4,080 sq. ft. home in Fells Point back in 2007 for $1.69 million — but then the housing market crashed … and so did the value of his home.
The 19-medal-winning swimmer listed the 3-bedroom pad earlier this year for $1.42 million — but even that was asking too much … because when he finally sold the place last week … he could only get $1.25 mill.
http://www.tmz.com/2012/08/02/michael-phelps-baltimore-condo-loss/
He paid how much for a condo? In Balti-morgue?
Yeesh. The guy should stick to swimming.
I’ve never heard of a 4000 sq ft condo. Did he buy an entire floor?
And only three bedrooms. It must be a loft.
Looks like Michael needs to win a few more swimming medals if he’s going to keep taking real estate losses like that…
Fells Point? $1.69 Million?!! LOLOL!
“What’s the best way to make a small fortune in real estate?”
“Start with a large fortune.”
Realtors are goddamn liars.
Volcker said that he thought that the only worthwhile financial innovation of the past 25 years was the ATM. I hear the ATM held up by various Wall Street-backed politicians as an example of the benefits of financial innovation.
But… the ATM isn’t a financial innovation. It’s a technological one. A device which can installed anywhere, connected to a network and a database system which can allow dispensing of cash and related reduction of the numbers in the linked account. That’s a physical and technological innovation.
Financial innovation involves conceiving of new logical constructs and figuring out how to price and sell them. Literal market making.
So Volcker couldn’t actually figure out any actual Financial Innovations he thought were worthwhile. The ATM is a physical thing coming out of the technology sector, not a financial innovation coming from Wall Street.
That’s pretty lame if Volcker meant it. Maybe he was just kidding.
Can you name another one? I doubt it, but trying to stay optimistic…
Goes back further, but how about the cast iron prison cell?
Not really. Wall St. products are designed to screw someone out of money. It’s a zero-sum game…
Hey….Gordon Gekko is in the house….
I was agreeing with Neu that ATM is a technological innovation not a financial innovation. I can’t think of any financial innovation that is not designed to screw us.
“financial innovation” like “free market” and “government interference in business” is all just code for “free to screw us all over without consequence.”
But sometimes you can’t blame them because there so many people who seem to WANT to be screwed over, that you just can’t fix that kind of stupid.
From Wikipedia:
The first ATM was put into use in 1959 in the Kingsdale Shopping Center in Upper Arlington, Ohio. This suburb of Columbus, Ohio created a shopping center where the Galbraith Farm used to be located that also featured the world’s first The Limited Store.[citation needed]
In simultaneous and independent efforts, engineers in Japan, Sweden, and Britain developed their own cash machines during the early 1960s. The first of these that was put into use was by Barclays Bank in Enfield Town in North London, United Kingdom,[6] on 27 June 1967. This machine was the first in the UK and was used by English comedy actor Reg Varney, at the time so as to ensure maximum publicity for the machines that were to become mainstream in the UK. This instance of the invention has been credited to John Shepherd-Barron of printing firm De La Rue,[7] who was awarded an OBE in the 2005 New Year Honours.[8] His design used paper cheques issued by a teller, marked with carbon-14 for machine readability and security, that were matched with a personal identification number.[7][9]
The Barclays-De La Rue machine (called De La Rue Automatic Cash System or DACS)[10] beat the Swedish saving banks’ and a company called Metior’s machine (a device called Bankomat) by nine days and Westminster Bank’s-Smith Industries-Chubb system (called Chubb MD2) by a month. The collaboration of a small start-up called Speytec and Midland Bank developed a third machine which was marketed after 1969 in Europe and the USA by the Burroughs Corporation. The patent for this device (GB1329964) was filed on September 1969 (and granted in 1973) by John David Edwards, Leonard Perkins, John Henry Donald, Peter Lee Chappell, Sean Benjamin Newcombe & Malcom David Roe.
Both the DACS and MD2 accepted only a single-use token or voucher which was retained by the machine while the Speytec worked with a card with a magnetic strip at the back. They used principles including Carbon-14 and low-coercivity magnetism in order to make fraud more difficult. The idea of a PIN stored on the card was developed by a British engineer working on the MD2 named James Goodfellow in 1965 (patent GB1197183 filed on 2 May 1966 with Anthony Davies).
Aug. 2, 2012, 5:07 p.m. EDT
Global economy’s cure is worse than the disease
Commentary: Take two aspirin and call Bernanke in the morning
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By Satyajit Das
Editor’s note: Satyajit Das held a live chat on Aug. 2 to discuss readers’ comments and questions. You can read a recap here.
SYDNEY (MarketWatch) — Dear Doctor: Thank you for referring Mr. Global Economy to me.
The patient’s history includes a seizure in 2007/2008 — financial losses, banking problems, a major recession. Liberal injections of taxpayer cash avoided catastrophic multiple organ failure, assisting a modest recovery.
Governments ran large budget deficits in the period after the crisis. Interest rates around the world were reduced to historic lows, zero or negative in many developed countries. Balance sheets of major central banks have increased to $18 trillion from around $6 trillion, reflecting an unprecedented 30% of global gross domestic product.
Mr. Economy is now addicted to monetary heroin. Increasing doses are necessary for the patient to function at all.
Mr. Economy has not made the changes necessary for a return to full health. He seems to have taken rock star Steven Tyler’s advice: “Fake it until you make it.”
Borrowing levels remain unsustainable. Debt levels for 11 major nations have increased to 417% of GDP in 2012 from 381% of GDP in 2007. Debt has increased in Canada, Germany, Greece, France, Ireland, Italy, Japan, Spain, Portugal, the U.K. and the U.S.
Global imbalances — major current account surpluses and deficits — remain. Little progress has been made in bringing the banking system under control.
…
Gee…….government and Wall Street devise the “Vampire Squid” economy, designed to give the benefits to the “investor” class, while transferring all of the taxes/user fees/costs to the wretched refuse.
Now, the refuse is tapped out. The “refuse” also has to deal with “globalization” of the labor economy, where even skilled workers find themselves in competition with subsidized competition from India, Mexico and China, so wages are more likely to continue to go down.
“Globalization” was also a “policy decision”.
“Helicopter drops” of Federal Reserve won’t help the refuse, because the squids blood funnels are parked right in the middle of the drop zone.
Any plan to revise of this policy is met with screams of “socialism” and “stealing from the producers, to give to the parasites”.
So here we are. A Main Street economy bouncing along the bottom like a lawn chair in a hurricane. The Wretched Refuse in bunker/delevraging mode. The investor/squid class looking for “growth investments”, of which there are none, unless you count the favored monopolies, or assets whose value is only increased by helicopter drops.
When plankton dies, whales die. See how that works?
keep printing or it all goes down the tubes.
The Fannie Mae HomePath of the righteous man is beset on all sides by the inequities of the selfish and the tyranny of evil men. Blessed is he who, in the name of charity and good will, shepherds the weak through the valley of foreclosure, for he is truly his brother’s keeper and the finder of lost equity. And I will strike down upon thee with great vengeance and furious anger those who attempt to poison and destroy my Deadbeats. And you will know my name is the SNARP when I lay my fingers upon thee.
Don’t tell me, let me guess….
Your wallet sez “BMF”…..
It appears that Fannie, Fraudie and others are gearing up for a massive increase in inventory to the public. All these websites have been reworked and are now more intuitive. More importantly, trulia is showing many more “preforeclosure” listings……. you know what I mean….. all those defaulted shacks that may or may not be occupied.
Sit tight….. hold your cash and ignore all the realtor driven lies in the media.
“It appears that Fannie, Fraudie and others are gearing up for a massive increase in inventory to the public.”
Seeing is believing.
But given that the economy has been recovered since, when was it, 2009?, it’s about time that F&F started unloading their massive REO portfolios.
Well d’oh…
Mormon vrs. mormon…
Is Mitt Romney ‘hiding something’ as Reid claims?
Presidential candidate Mitt Romney denied unsubstantiated claims made by Nevada Senator Harry Reid that Romney is ‘hiding something’ by refusing to release more of his tax returns. Returns that Romney has made public show that he paid a lower tax rate than most Americans in 2010.
By Douglass K. Daniel, Associated Press / August 2, 2012
…
Is Mitt Romney ‘hiding something’?
By definition….of course Mitt Romney is hiding something, and something important IMO.
This is really good — fascinating perspective from outside the box!
ft dot com
August 2, 2012 7:48 pm
Anthropologists join actuaries on risk
Gillian Tett By Gillian Tett
How should risk managers assess the dangers that beset a bank, insurance group or any other company? In the last few years of financial turmoil, this question has been much discussed and no shortage of ideas has been tossed about; just think of all those debates about value-at-risk (VaR) and other models.
But one interesting perspective on this issue comes not from bankers but a group of actuaries and anthropologists. Yes, you read that right – the idea of these two groups working together might seem odd. Actuaries are trained to be number crunchers. Anthropologists, by contrast, deal with slippery, non-quantitative ideas like culture.
However, in recent months The Actuarial Profession in the UK has been trying, to its credit, to widen its gaze beyond statistics, partly because a growing number of its members are moving into more senior risk management functions. So, when the Society recently held its annual conference in Leeds, it invited anthropologists, such as Michael Thompson, to discuss the cultural assumptions that shape risk modelling in pensions and insurance.
And the results were thought-provoking. One key issue that usually gets overlooked, Mr Thompson argued, is the variety of assumptions about risk found inside a society, institution or company. Most notably, he believes, are two key variables which shape risk controls: do we assume anybody is in charge, and is the power structure benign?
On the first issue, for example, it is possible to view the world in two ways. Sometimes societies assume that there is a vertical, hierarchical pattern of control (ie somebody, like a government, in charge) but sometimes there is a horizontal dynamic where crowd power rules. This second pattern is roughly how the financial markets were supposed to work before 2007, when investors and free market forces shaped our financial system instead of government diktat. However, since 2007, government intervention has repeatedly trumped the power of the crowd, in ways that feel alien to investors.
However, it also matters whether we believe that societies operate in a benign, accountable manner, or not. Hierarchical relationships can be considered beneficial; wise regulators, for example, can shape markets in sensible, accountable ways and corporate managers steer their way round risks. But sometimes power seems capricious and harmful; panic-stricken governments suddenly do unpredictable, negative things. Similarly, while crowd rule can feel benign and collaborative, markets, say, can feel like a community, it can also be anarchic and unpleasant, a jungle driven by Darwinian selfish instincts.
…
Best revenge: JUST DON’T OWN STOCKS, AND YOU WON’T GET BURNED!
Aug. 3, 2012, 12:01 a.m. EDT
Don’t get mad, get even!
Commentary: It’s possible to profit from the market’s lunacy
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By Mark Hulbert, MarketWatch
CHAPEL HILL, N.C. (MarketWatch) — Don’t get mad, get even!
I say this because everyone’s up in arms in anger over the lunacy that became even more evident this week in how Wall Street operates: Knight Capital, a firm that engages in high-frequency trading, experienced a software glitch that led to millions of shares being traded in a number of stocks in just a few minutes. ( Read full story. )
But why get mad when we can make money from the market’s madness?
Take the increased volatility to which high-frequency trading and other Wall Street developments sometimes lead. I would have thought that investors would, at a minimum, see a silver lining in it — since it makes it easier to buy good-quality stocks at bargain-basement prices, and to sell stocks they already own at rich valuations.
To be sure, very short-term traders — those whose average holding period is measured in hours, minutes, or even seconds — will rightly be alarmed by the lack of orderly markets, whether they be caused by a rogue high-frequency-trading program or by something else entirely that Wall Street is thinking up. But I would argue that 99.9% of the people reading this column shouldn’t even be trying to play that game.
Wednesday’s trading glitch is more than enough to give small investors reason to be disgusted with the stock market. Photo: Reuters.
That’s because there’s no way that we as individuals stand any chance of competing against large firms like Knight Capital that have powerful computers, sophisticated trading programs, and superfast connections to the stock exchanges that enable millions of trades to take place in a second.
After all, what are the odds we can get a trade executed at a better price than those firms? By the time we even have the information on our screens that they are reacting to, they’ve bought and sold millions of shares.
…