Bits Bucket for August 21, 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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Posted: 3:00 a.m. Tuesday, Aug. 21, 2012
Commentary: Forget Medicare. Romney-Ryan ticket should focus on breaking up the banks.
By Simon Johnson
Fighting November’s presidential election on Paul Ryan’s Medicare plan is unlikely to go well.
The ideas don’t please the right. Former Reagan budget director David Stockman and others are displeased because Rep. Paul Ryan, R-Wis., would keep Medicare in part and largely postpone the effects of any change. Yet the left can credibly claim that Rep. Ryan would partially dismantle Medicare. Rep. Ryan’s plan won’t even satisfy the center, when independents apply any reasonable scrutiny. The Congressional Budget Office scores his proposals as likely to increase health-care costs as a percent of gross domestic product.
The big opportunity for Mitt Romney and for conservatives more broadly is to pivot against big banks. Rep. Ryan is plugged into the tea party wing of the Republican Party, which has opposed megabanks and the subsidies they attract through being too big to fail. Rep. Ryan can draw on intellectual support of senior Republicans such as former Utah governor Jon Huntsman, with his approach to breaking up the megabanks. Two weeks ago, Sen. David Vitter, R-La., co-wrote a brilliant letter to Federal Reserve Chairman Ben Bernanke on the problems the banks pose.
In addition to politicians, the emerging consensus among heavyweight Republican intellectuals is that capital requirements should be significantly higher for any financial firm whose failure could cause broad damage. A Romney-Ryan ticket could tap the Republican populist tradition (think Teddy Roosevelt). The megabanks — Bank of America, JPMorgan Chase, Citigroup — have become today’s government-sponsored enterprises. They receive large, opaque and dangerous subsidies, encouraging them to engage in excessive risk taking. The question is how best to remove those subsidies.
After a summer of scandals — JPMorgan’s $6 billion loss and Barclays’s Libor debacle — there’s growing recognition that these banks are too big to manage. HSBC Holdings and Standard Chartered have acknowledged violating U.S. laws on financial transactions with Iran and other rogue states, their defense being that executives didn’t know what was going on in their own sprawling empires.
One hundred years ago, the industrial and railroad “trusts” that Teddy Roosevelt took on were relatively well-run paragons of efficiency. The original J.P. Morgan, which TR confronted in his first big Sherman antitrust case, didn’t blow up his bank, damage the American economy, and need to be rescued at enormous expense to the taxpayer. The titans of Wall Street and industry were held accountable by Roosevelt for price fixing and gouging customers through monopolistic behavior. That policy was sensible economics and a great vote-getter.
The objections to taking this approach are that it would fly in the face of Rep. Ryan’s convictions, his voting record and his donors. All of these can be overcome.
Rep. Ryan wants to abolish the resolution powers created by the Dodd-Frank financial law, but this is a weak position from which he can walk back. Even most of the industry is not opposed to this authority; the strong think they can use it to take over the weak. Rep. Ryan voted for the 2008 bank bailout, but it was in a time of crisis, and a Republican president asked him to do it.
The most serious obstacle is that Rep. Ryan’s (and Mr. Romney’s) big donors include major players from the financial sector who have generally been supportive of the tea party due to convergent views on taxes. But the megabanks have burned too many bridges with the Democrats.
As Mr. Huntsman put it, we need to re-establish a free market in financial services. There is currently no market — just subsidies and crony capitalism. True conservatives should all want the megabanks to become small enough and simple enough that they can fail without any kind of government or central-bank bailout.
…
which has opposed megabanks
http://mobile.bloomberg.com/news/2012-04-30/tea-party-congressmen-accept-cash-from-bailed-out-bankers.html
I wonder how the christmas bonuses are shaping up?
Looks like we’re going to squeeze out another year. At least for the top 1% of the top 1%. But a lot could happen in a next few months…
“The big opportunity for Mitt Romney and for conservatives more broadly is to pivot against big banks. Rep. Ryan is plugged into the tea party wing of the Republican Party, which has opposed megabanks and the subsidies they attract through being too big to fail.”
not sure if remember how to do this but here goes…
BWAHAHAHAAHAHAHAHA!!!!!!!!!
LOL. Any anti-big-bank animus the Tea Party may once have had was quickly neutralized and diverted to hatin’ on the welfare queens and opposing gubmint regulation. The GOP knows how to control its ground troops.
Tea Party got herded like a bunch of sheep.
The free sh*t army “platform” of Occupy Wall Street and the visual repulsiveness of the Occupy encampments and their inhabitants were a convenient foil to bring the Tea Party back on the plantation of the big banks.
They really would have hated the appearance of a Hooverville. Not to mention those people in the migrant camps and the bread lines. They weren’t the fashionistas of the Depression years.
How many bankers has obama put in jail?
Oh yeah - NONE.
Is that Bush’s fault or the fault of Romney?
Who cares? As long as we can spin in favor of the democrats…
the only thing that is certain about this election is that the status quo will prevail.
“Is that Bush’s fault or the fault of Romney?”
BOTH!!
Terribly sorry but this discussion is effectively over. The Citigroup chief recently added his voice to opposing breakup of the TBTFs. If the CEOs of the TBTFs are against it, it will be pretty easy to understand where the Fed, Treasury and a bulk of the politicians will stand on the issue.
Citi Chief Rejects Calls for Bank Splits
Published: Monday, 20 Aug 2012 | 11:12 PM ET
FT via CNBC
Citigroup’s chief executive has knocked back the idea of big banks being split up after calls from people such as his predecessor Sandy Weill.
“What’s left here is essentially the old Citicorp,” he told the Financial Times. “That’s a tried and proven strategy. Why did it work? Because it was a strategy based upon operating the business and serving clients and not a strategy based on dealmaking. That’s the fundamental difference.”
I’m truly impressed with the things some people can say with a straight face.
http://www.cnbc.com//id/48733132
They put those big investment firms together with big Commerical Banks to begin with so they could pull off the Bail Outs in the trillions . In truth, they were operating as if they were connected
anyway . They just made it official after the fact to make it less questionable to bail out Investment Firms ,Hedge funds and Insurance Companies . This was the drawback of getting rid of
Glass-Stegall . Now they are so big that they they are even more so
to big to fall .
But if you look at it from the standpoint that they made them bigger for Bail Out purpose ,it all makes sense .The investment bank sector had it own bail out provision or insurance or Government recovery funds ,but it wasn’t going to be enough for
what they needed . Like I have always said ,its been obstruction of justice from day one and how to transfer the pain/loss to the taxpayers .
The most offensive feature in that article is the attempt to compare Mitt Romney to Teddy Roosevelt.
Don’t worry, Mitt’s skin isn’t that thin.
Aug. 21, 2012, 12:00 a.m. EDT
How the tea party beat Occupy Wall Street
Commentary: Antifinance movement never sent a clear message
By David Weidner, MarketWatch
SAN FRANCISCO (MarketWatch) — About a year ago I called Occupy Wall Street a “tea party with brains.”
Today, I’m the one who needs his head examined.
Occupy Wall Street, the movement critical of banks, the super-rich and their influence in our politics and daily lives, has failed to live up to its promise as an important social and political force.
Though its core message — that big finance and greed undermine society and corrupt our political system — is fundamentally correct, Occupy hasn’t lived up to the standard set by the tea party in its ability to turn grievance into a political force capable of disrupting the establishment.
The Occupy protests started on Sept. 17 of last year near Wall Street. They triggered a wave of Occupys across the United States, including major actions in Boston, Los Angeles and Oakland, Calif. Media attention followed. Polls showed 43% of Americans agreed with OWS beliefs. See poll on OWS from October .
Then the crackdowns began. Protesters at Zuccotti Park were uprooted in a midnight sweep. The confrontations with police went on for weeks, then months. Support waned. The tactics turned people off.
As Occupy camps across the country fell, so did the movement’s visibility. Occupy Wall Street disappeared from the nightly news, the New York Times, the Huffington Post and the blogs. OWS promised a big summer revival, but the actions of the last three months haven’t received much in the way of mainstream coverage, even in an election year.
Contrast OWS with the tea party. We’ve already heard about how that antitax movement has disrupted the moderate Republican establishment.
Whatever your opinion of either movement, there’s no denying that the tea party is more focused and influential. You don’t see but a handful of candidates such as Elizabeth Warren in Massachusetts and Bernie Sanders in Vermont pandering to Occupy Wall Street.
By contrast, every Republican running for anything worried about gaining tea-party support. And for good reason .
…
The tea party has been turned into sock puppets for the 1%. They’ll get plenty of ink.
How did EddieTard get to be such a ‘tard?
It’s like watching CNBC hearing all the rah rah happy horsesh*t Buy Stocks Now! and Buy Houses Now!
Incur a mortgage now. Open a margin account now. Make a debt financed war with another country now.
Its all about growing the debt to some banker isn’t it?
Cramer gave three tips for stocks that were dead on last night if youre willing to wait 4-10 months for the bottom to really occur in the economy. After the election, there will be a lot of reason for the eCONomy to really tank. All the encumbents will get what they paid for, the fiscal cliff will arrive, and whoever wins is going to have to tell the truth about city bankruptcies, true taxes, and true velocity of money. McDonalds will come down, Walmart will come down, 3M will come down, WIN will come down, and all will be good buys when they’ve lost 33 per cent of current value. Another great stock is Seadrill after it gets off its dizzying highs. I currently own PBR and am a little worried about its obvious direction. Many possible plays in China after the truth is told about their true growth. Maybe it’s only really 5 percent and the leaders are lying through their teeth.
Additionally, I have purchased about 200 shares of Banco Santander which is really a small position, but I’m ready to up my exposure if any really bad news comes out of Spain. It is a 40 billion dollar stock trading amazingly low, but it could be troubled like B of A.
His Dow 12,000 message was ironically an understatement.
I didn’t think Eddie still posted here but I guess he is, under a new pseudonym. Otherwise, why the continued venom, Thrower-tard?
Don’t be such a ‘tard, Bill — Eddie = Mr. Smithers.
Bear, we refrain from the personal attacks. The “Eddietard” is the embodiment of the Eddie ideology, the rah rah buy-now-or-be-priced-out-forever mythology. Eddietard is not a person or a singular poster on HBB, just a representation of an aloof tard who has done everything right in their personal and professional lives, and has never missed a meal or been on food stamps in their lifetime, and thinks that anyone who has ever struggled or been hungry or unemployed is a looser…
Smithers character=party hack. Nothing original to say, intentionally confrontational and insulting, learns nothing from our thoughtful responses, refuses to acknowledge facts when refuted. Eddie at least reassessed and responded with something other than partisan cliche occasionally.
Although both characters are/were classic trolls, Eddie and Smithers have different writing styles, different back stories, and most tellingly, different reactions to our responses. Although Smithers has never denied the association, I’m not convinced they’re the same person. And if they are, Smithers has regressed in not only his dialectic sophistication, but in his cultural sophistication as well.
“Smithers character=party hack”
Thank you so much! Pointing out trolls on the HBB gets so tiring after a while. It’s great to occasionally have someone else step up to assume this onerous duty.
Markets stutter as Fed stimulus hopes fade
Associated Press
By By PAN PYLAS | Associated Press – Wed, Aug 15, 2012 12:28 PM EDT
LONDON (AP) — Fading hopes that the U.S. is in line for monetary stimulus kept trading in check in thin markets Wednesday.
Stocks have enjoyed a bumper few weeks on hopes that the world’s leading central banks will do more to shore up economic growth, but a round of upbeat U.S. economic figures have reined in expectations of the Federal Reserve doing something in September.
However, investors may not get a clearer insight into Fed policy until chairman Ben Bernanke’s speech on Aug. 31 at an annual economic conference in Jackson Hole, Wyoming. Until then, markets may drift in the traditional summer lull in Europe and the U.S.
Figures earlier this week showing a surprisingly big 0.8 percent increase in U.S. retail sales in July has been followed by news Wednesday that industrial production rose an above-forecast 0.6 percent during the month.
“It would be unwise in these volume-light times to ascribe much meaning to today’s dip, but it seems that the current rally is going through a temporary pause, in the wake of economic data that perhaps lessens expectations of Fed action in September,” said Chris Beauchamp, market analyst at IG Index.
…
This is one hell of a “summer lull” we’re “drifting in.”
Market lull is not accurate at all. The market is screaming upward without any legs to stand on. This is getting interesting.
Housing is now touted as a boon to the economy which needs some real analysis to see if that has any veracity. These are very interesting times and all of us want to fight the last war when we invest or analyze.
I haven’t seen the market “stuttering” at all. I’ve seen it rocketing to the moon in the face of economic hardship the world around. And, commodities are on a massive tear, with crude at nearly $100 per barrel. All is completely unsustainable.
Yes ,yes, hence my confusion in how to play the markets. That’s why I’m 2 thirds in cash.
Sadly, by the time most folks currently 2/3 cash are ready to leave their safe positions and once more brave the stock market, they will be priced out forever…
Yea, if Europe or the US or China don’t do some stimulus right away,we could see a truly falling market real in early September when people return from vacation. If you make money on investments you’re a genius, if you lose you’re a stooge.
Ethanol outrage: Corny mandate
A disastrous drought that has sent corn prices skyrocketing also brings into sharp focus the man-made disaster that is Washington’s ethanol mandate.
Nevertheless, the federal Renewable Fuel Standard remains unchanged, mandating that 13.2 billion gallons of corn ethanol be produced in 2012 regardless of the corn harvest.
This year, as livestock farmers face higher prices for corn-based feed, the ethanol mandate will consume almost half of the corn yield, Professor Hill writes.
President Obama’s solution is for the government to buy millions of dollars of meat, which livestock farmers say is of little help this year or next. (Why Does This Help? Anyone?)
The crop-wasting ethanol mandate should be waived — permanently.
(I agree, stop the nonsense now!!!)
http://triblive.com/opinion/2425680-74/corn-ethanol-mandate-buy-crop-drought-fuel-hill-disaster-farmers
This program is just an example of the solutions our government forces on us. We have an energy shortage/mandate ethanol because we want to develop non-petrol sources/then stick to it NO MATTER WHAT. UGH.
How is taking meat off the market a solution to the price of food being too high?
It doesn’t take meat off the market. It just means that US government cafeterias around the world will be serving more steak.
What it does is put a floor under the price of cattle, because…
…farmers will be forced to sell their cattle due to the high cost of raising/feeding them. The buying market will not catch up until later, leaving a gap until then that will force the farmers to sell, which will eventually create the shortage and raise the price of beef. Maybe.
I say maybe because it’s all a matter of overall timing and market gaming. The farmer are up against time and the buyers/commodity traders are trying to game the market.
With the recent droughts this past decade, I’m surprised the price of beef hasn’t dropped.
Less beef is better for humans anyway.
Less corn-fed beef, yes. Less grass-fed beef, no.
The irony of a post like “less beef is better for humans anyway” coming from a poster tagged “Grizzlybear” does not escape me…
Eat less beef == Eat mor chik’n.
Agreed Oxide. Grain fed meat is the problem. Grass fed is good source of omega 3s, as is wild salmon. However, I have my doubts about farm raised salmon since they are fed grain.
Farm raised salmon are fed a combination of ground up other salmon, a mash of hormones and antibiotics mixed in with some actual nutrients, and salmon poop. Oh, and they’re artificially colored. Yum.
If you’re going to eat meat, try to use it as a flavoring rather than a main ingredient most days, and buy it from artisanal sources or catch or grow it yourself. Industrial flesh is an abomination on our species. That said, I had a lovely wood-grilled bison flank steak for dinner last night (along with kale and mashed Yukon gold potatoes and garlic from my garden), and it was delicious.
Farm raised salmon are fed a combination of ground up other salmon
Mad salmon disease, anyone?
Great link: http://www.purezing.com/living/food_articles/living_articles_7salmon.htm
Everything ahansen said and what I said goes into them. I will not be eating any farm fed salmon if I can help it.
Because of drought and the wide-spread building-over of former grazing lands, the price of a bale of hay went from $9 two years ago to $22 today. After a brief drop in prices as ranchers and dairymen culled their herds, the price of grade beef went up by 35%+ over the last year.
The problem as they further cull their herds is reaching critical mass; I.E.; so few cattle that the herd cannot be easily replenished when rains come and/or economy picks up. After all, it takes time (and money) to grow a new cow (plant an orchard), and keep the ranch/farm from falling into disrepair. With no new source of income coming in, what’s to keep the producer from pulling up stakes and moving on? Not that many folks clamoring to become ranchers and farmers these days….
The subsidies to are more to keep the resource sustainable than to “lower the price of” beef, crops, etc.
“Not that many folks clamoring to become ranchers and farmers these days….”
It’s not from a lack of desire. It’s the entry fee. Land prices are stupid high.
Grazing lands are still available for lease from the BLM, and the cost is fairly insignificant– unless you have to supplement feed and water….
As of pre-drought 2007, the Federal lease rate was $1.35 per AUM (AUM = animal unit month = area (or amount of forage) used by one cow or 5 sheep or 1 cow+calf or one horse for a month). This works out to about 5 cents per day/animal unit.
The formula for calculating lease rates takes into account beef cattle prices, current private grazing land lease rates (about $12-14/AUM), and the cost of livestock production in the area. Rates may be lower when beef prices are lower.
State lease rates are around $5-7/AUM, but private lease rates with irrigation can go to $24-27/AUM. (Again these are 2007 rates and can vary according to productivity of the land.)
Yep. Epic “cattle cycle” ahead…
The problem with stories like this is no journalists are engineers, or can do basic math. So 13 billion gallons of ethanol vs millions of pounds of meat… that’s like thirteen thousand gallons of ethanol (equivalent) per pound of meat, which sounds like what I saw when I visited Ireland, or maybe similar to state street in madison wi during Halloween and spring break. Thats not a terribly useful metric. I’d much rather hear about how many pounds of corn it takes to make a pound of “meat” (looking at walmart shoppers I’m thinking it approaches 1:1) then convert the “govt meat pounds” into “saved corn pounds” using that ratio then compare that last metric to the unreported anticipated number pounds of corn missing in this years harvest, to get an idea of if millions of pounds of meat saves enough corn to be inadequate for PR only, just right, or yet another socialized farming handout / ripoff.
The problem with “developing non-petrol sources” by turning corn into ethanol is it takes a lot of petrol to make edible corn then ferment and distill it. The overall process turns the equivalent of 2 barrels of crude oil into 1 crude barrel equivalent of ethanol. Its an energy industry jobs program / subsidy to waste more energy, not a green enviro mandate as often reported. A well managed centrally controlled economy like ours (optimistic?) should try to minimize price swings, when oil price is low, ethanol production should be expanded so as to waste crude oil raising the oil price, and when oil price is high, it should be cut back to reduce wasted energy and lower the oil price, so big brother can create a stabilizing effect on crude prices for us. Assuming big brother wants a stable economy, instead of using manufactured economic “crisis” to gain political power.
Google and ye shall receive:
“Therefore, edible meat cuts and ground beef may be 600 pounds. So, with the example above of 50 bushels of corn fed to a finished animal, now 4.67 pounds of corn were required for each 1 pound of beef.”
http://www.extension.org/pages/35850/on-average-how-many-pounds-of-corn-make-one-pound-of-beef-assuming-an-all-grain-diet-from-backgroundi
Ethanol is a more consistent metric:
“We know that it takes 26.1 pounds of corn to make 1 gallon of ethanol.”
I’ll let someone else calculation from there.
Which ever way you slice it, it is managed prices at a higher level. How is it ever good for the consumer for the government to waste fuel?
BTW, that barrel of ethanol is not equal in energy content to a barrel of fuel oil (FOEB). Refiners in the US used to spend a lot of money and effort doing something called volume expansion. Rearranging the molecules so that they took up more space, not delivered more energy in the burn. We buy fuel by the gallon.
Blue they do the same for Ice Cream
Cheaper brands have a lot of air in them
The only reason we use corn in our ethanol is because of the power of the red/farm state senators. Corn is a ridiculous source of ethanol. It’s like putting giant coal-powered fans in front of our wind turbines to increase their energy output.
We should be using switchgrass, or hemp. Something with a lot of biomass that doesn’t require tons of oil-based fertilizers and water, like corn does.
Corn is a ridiculous source of ethanol. It’s like putting giant coal-powered fans in front of our wind turbines to increase their energy output.
Nice visual :-). And yes, in defense of ethanol (if there is any defense) I think the whole wasteful corn thing we’ve been doing was to get the infrastructure in place so that when switchgrass or whatever else came online the country would be ready to use it. That makes sense to me, except I haven’t seen any movement toward using anything but corn…
Having said all that my 50/50 testing is about done and I’m working on running the BMW on 100% E85 starting yesterday. Seems OK so far.
Carl doesn’t E85 corrode the engine parts?
It is a bit more corrosive the regular gasoline. But the parts have already been made to handle at least 10% ethanol for a long time. Most of the FUD that gets spread around in regard to ethanol is only applicable to old (70s and older) cars and is confused with methanol, which is highly corrosive.
But yes, I am running the risk of needing to change fuel filters more often and perhaps even having a fuel pump fail more often than it otherwise would have. That’s a risk I’m willing to take because for me the benefits are huge. Using E85 I can make as much power as the turbos can support, which is significantly more power than the car makes from the factory. From my testing it appears that I get 95+% of the benefit from a 50/50 mix, so in the end I may mix long-term instead of running straight E85. It’s just nice to only have to pull up to one pump and swipe the card once.
Just as an FYI I think that in Brazil they run something like 25% ethanol all the time, the same way we run 10% all the time. They sell the exact same European cars there with no issues. I ran my old car on a 30% mix for years with no issues other than having to change the fuel filter fairly soon after first starting to use it, but never again after that.
Older engines. Engines designed to run on E85 are specially made to counteract any corrosion.
Shhhhh! Geez, not too loud. People in DC read this stuff. Don’t give them any ideas. Lobbyists with sackfuls of cash, politicians with a mighty desire to lead combined with limited intellectual capacity, and we’ll get your coal powered ‘Power Grid Augmentation Units’.
Texas has the go ahead to swap corn for sorghum.
“The only reason we use corn in our ethanol is because of the power of the red/farm state senators. ”
Yeah like that leading ethanol subsidy senator Tom Harkin (DEMOCRAT) from Iowa (state that voted for Kerry and Obama).
Please, tell me more…
Edible corn is not used to make ethanol.
http://www.ft.com/cms/s/0/f761ed90-e6ea-11e1-8a74-00144feab49a.html
(FT is a VERY reliable and accurate organization and verify everything that is not op-ed. I know, they personally called me once before they published a rebuttal I had written to ask me my source.)
The federal government already has a VERY large hand in minimizing extreme prices swings in every commodity we produce, using either subsidies or rules and regulations.
I’m not sure it matters if ethanol corn is not edible. It still displaces production of edible corn.
Thanks for the link, I’ll try to read it later.
Sorry — I posted my question below before noticing yours (which essentially makes the same point)…
While some farmers have switched to fuel corn, most production came from new (to corn) fields and existing non-edible corn that was being used as raw materiel for other industries.
Non-edible requires slightly less effort, so the margins are better.
Disclaimer: I have not had time to verify the numbers on this. I really do have a job.
Quick link: http://www.wisegeek.com/what-is-dent-corn.htm
Feed and ethanol corns are indeed edible, but they’re not terribly nutritious and they take a lot of processing in order to be useful (tortillas, for example). They resemble the tough old style heritage corns that tribal people grew here, and must be soaked in lye, pounded, or otherwise processed to render them digestible.
Feed corns can be ground into meal (and actually taste like corn instead of candy), but they may also contain husks, rodent parts, and other difficult-to-identify detritus. Still, at $12/50# sack, they’re a good survival food to stick away in a metal trash can “just in case”.
With 5 grades of 6 different corn (IIRC), I didn’t want to get too technical.
Is it possible to grow edible corn on the land that is wasted on ethanol corn production?
Probably, bear. Is there a huge difference in growing conditions like water, fertilizer, flat land, machinery etc? My guess says no.
Well the vast majority of corn is not used for human consunmption. That does require better growing conditions, resource inputs, etc. Upwards of 85% of corn you see while driving over hill and dale in the US is for animal feed.
And yes, the anyone, even those in the industry, realize the horrible ineeficiencies of using corn as a feedstock. Problem is, there is such an overabundance of it produced in the US that a viable solution to continue supporting agribusdiness is through federally mandated use of corn.
Other technologies are being developed, it’s unfortunately not in the US. We will continue to lag in biofuels, solar, geothermal, etc.
“Problem is, there is such an overabundance of it produced in the US that a viable solution to continue supporting agribusiness is through federally mandated use of corn.”
Fawking ag subsidies. ..
I heard a farmer interviewed on NPR this morning. Said he was against so many government handouts. But when the interviewer pressed him about whether he participated in subsidized ag programs, turns out said farmer’s snout is in the trough along with all the other folks taking government handouts.
But what really chafes me is the notion of farmers using mechanized agriculture, hydrocarbon-based fertilizer and pesticide, and fossil-fuel powered delivery systems, to produce and deliver corn that will get recycled into fuel production. Got Rube Goldberg production processes?
Edible for humans or livestock?
Another feature of “ethanol” in gas that most people fail to factor in…..EthaNOL has less BTU’s per gallon than gas. YOU LOSE MILEAGE with ethanol.
I was recently thinking of trading my 500cc Silverwing in for a 1200 cc Goldwing. The main reason is that the posted mileage of the Goldwing is 52 mpg. That’s about what i currently get on the Silverwing. So why not upgrade.
I did a blog search of Goldwing riders and found mileages in the 40 to 45mpg range.
With mileage like that, I might as well drive a car.
These are all older vehicles and have even worse economy with ethanol than some newer ones.
The government will tell you a 7% loss in efficiency.
Some vehicles are 10 to 20% less efficient.
So what ‘benefit’ is there to this STUPID renewable concept when it wastes money all around. Farmland is not really renewable when you leach out all the nutrients to burn up as ‘biofuel’.
For me, it’s the 105 octane and the greater heat of vaporization. Plus if we can come up with something better to make it from to where we actually were reducing our dependence on foreign oil that would be a good thing.
I used to run ethanol in my old Wankel engine (’80 Mazda RX7) and it boosted the mileage on my weekly Malibu to Palm Springs run from about 27 mpg to nearly 50. I LOVED that stuff, but could only find it out in San Bernardino County (CA). Haven’t seen it anywhere in CA since then, though.
That’s weird, I wouldn’t have expected your mileage to increase.
Rotary engine could probably have run on cheap red wine if necessary. I mixed it with unleaded gasoline, IIRC, but the bump in mileage was always remarkable– especially for a traveling sales rep who was reimbursed by the mile.
“you don’t shit where you eat…and more importantly…you don’t shit where i eat”-Tony Soprano
i know the saying is much older than that but it sounds much better coming from “the man from jersey”. he told one of his underlings this after the underling ran a credit card scheme on “vesuvio’s” (i think that was the name of italian restaurant Tony frequented).
a New Romney-Ryan Distortion on Medicare
Can Mitt Romney, Paul Ryan, and their supporters go more than one day without thinking up a new way to distort the debate over Medicare? I’m starting to wonder.
http://www.tnr.com/blog/plank/106299/medicare-cut-ryan-obamacare-hospital-15-percent-unprofitable-foster
This is hilarious. Joe Conason is upset now that the Reps get to demagog on Medicare. LMFAO
I don’t see how the cost of health care today is justified . Health care is simply a price fixing monopoly in which they are trying to figure out how they can fund this price fixing monopoly in which the normal leeches get their gravy trains ,at the expense of the real health of actual people and the financial well being of the Nation .
I am getting sick of these various industries trying to keep the gravy train going while a increasingly absurd portion of the monthly nut of the sheeple goes to their “not enough value for the dollar ”
crap systems. The medical system went haywire the last 20 years in terms of costs because it was a insurance system . The auto industry would like to charge 100 thousand for a 10 thousand dollar car also ,but it doesn’t compute that the real economy would support costs like that .With health care it comes out of the hide
of the people at the enrichment of that industry .
They are not going to be able to fund health care for 80 million baby boomer and 30 million more not covered now at current costs and likely to rise costs .Rationing will be necessary or cuts
imposed along the way .
The only plus side to all this is a bunch of those Pharma drugs are crap anyway ,so it might benefit a person to be denied bogus drugs anyway . I hope that people aren’t denied emergency care at least because that is one aspect of medicine that is good ,IMHO .
The baby boomers and others would be smart to take health into their own hands and eat good food and exercise and change life
styles that increase the chance of disease .
By the way ,it just came out in a bunch of news sites lately that chemo causes cancer and we know that one has been a big money maker for the Pharma industry . I always get a little supicious when they approve chemo drugs that cost 100 thousand a year that
only extend the life for 4 months . Why would something like that be approved to begin with which appears to benefit industries rather than the people health ? I content that the corruption in the
Pharma business has been massive and those clowns are in charge of research and fund research .
“…Why would something like that be approved to begin with…?”
For the same reasons that hand-held calculators cost $399.95 when they first appeared in the late 1960’s. Or cell phones cost $2,000. The first users get to subsidize the development of the introductory drug or device until it can be refined and scaled for mass production.
No one requires you to use an uber-expensive new product or protocol — unless you want to live.
So the Democrats are reduced to wishing a hurricane on Tampa later on this month ? It is no secret that that area of the Gulf has never been much affected by one in our memories.
The hurricane they will get in Tampa is our lovely SC governor,who is slated to address the GOP convention the first night . She is a quick one on her feet , and has survived the nastiest stuff that SC politics can throw , which is pretty bad stuff.
We are so glad she is not the VP pick , at least this time , as the State of SC needs her just now.
“So the Democrats are reduced to wishing a hurricane on Tampa later on this month ? ”
Uhhhhhhhh?
link? quote? commentary? Did you just make this up, or did some person tweet that they are hoping for a hurricane? You seem to be asking a question, but I can’t figure out what the question is. How many democrats are you “speaking for” in your question?
I guess we can all do that:
So the republicans are reduced to removing voting rights as the only way to suppress the popular vote - thus using brute, unamerican force to elect their candidate?
. . . except that my statement is horrifyingly true and too real, as opposed to someone “wishing” for a hurricane - unless you believe in “The Secret”.
An FL HBBer was wishing a hurrican on Tampa a few weeks ago.
Speaking of FL HBBers, I was in the Hallmark store yesterday evening and saw — I kid you not — Beanie Ballz. They’re like beanie babies but they don’t have separate arms and legs. They’re just ball-shaped with flat appendages sewn on. Well, they say that women like babies because they’re all roundy and cute. They skipped the realism and went directly for the hormones…
http://www.plushfriends.com/beanieballz.html
(I admit that the Spiderman is pretty funny and the baby harp seal is dangerously cute).
“An FL HBBer was wishing a hurrican on Tampa a few weeks ago.”
(Sheepishly) Uh, that wuz me, a registered Republican. And I wuz only half serious. I don’t really wish hurricanes on this state. I’ve been through a number of them and they’re nothing to joke about.
I just wish they weren’t having the Republican convention here, is all. I’m so sick of political theater.
Looks like we may get a real one about the time the convention gets here, too.
There’s a tropical storm coming off the African coast that is heading our way.
They expect this one to develop and become a hurricane. The current track is through the leeward islands and then turning north into the Gulf. It’s too early to tell what will happen, but in about 36-48 hours, we should have a better idea about where this storm is going.
currently moving west at 20mph.
Especially the political theater that turns this:
“An FL HBBer was wishing a hurricane on Tampa a few weeks ago.”
Into this:
“So the Democrats are reduced to wishing a hurricane on Tampa later on this month?”
Strawmen suck. (haha kinda made a funny, there)
Strawmen suck.
Maybe he thinks:
“If it’s legitimate
rapestrawman, thefemale bodyhuman brain has ways to try to shut that whole thing down,”Six Sigma is making me rich while it drives the bosses crazy.
Some say Six Sigma won’t work; I think it is working just fine.
Six Sigma dictates its own reality, but Real World reality eventually asserts itself and upends the Great Thoughts - and the policies derived by these Great Thoughts - generated by Six Sigma thinking (thinking?) and creates endless OPPORTUNITIES for we lower-level peons to cash in and EXPLOIT the insanity.
I love Six Sigma: As long as Six Sigma rules I will always have a job.
Represent for that Six Sigma, bro!
There are two place I like to go to get a good laugh. One place is this blog, the other place is work.
My buddies at my former employer are under the despotic reign of Six Sigma.
Best story was about the sudden “resignation/retirement” of a company VP.
Why? Because he started choking the life out of some Six Sigma rep from the mother ship in his office.
Who says working can’t be fun? Glad you are able to find good laughs in the workplace, Combo. It beats crying’, for sure.
<iand creates endless OPPORTUNITIES for we lower-level peons to cash in and EXPLOIT the insanity
At some places of employment the only opportunity it creates is for unpaid overtime.
Viva the unions. Viva state laws. Viva hourly wages.
It USED TO BE, once upon a time, that most problems at work were to be SOLVED; Now most problems are to be COPED WITH.
Solving a problem makes the problem go away. Coping with the problem enables the problem to live on. And on, and on.
Problems pop up, time and money are thrown at it in an effort to get it solved, then another porblem pops up and the first problem gets put on the back burner to simmer a bit. And there, on the back burner sits the unsolvables, stacking up and simmering away.
Coping with the problem gives way to managing the problem. That’s where the big bucks are.
It USED TO BE, once upon a time, that most problems at work were to be SOLVED; Now most problems are to be COPED WITH.
Sounds like the last FT job I had. And I walked outta that place almost 18 years ago.
Does anyone know if the Chinese implement Six Sigma in their manufacturing processes?
Because from what I’ve seen, looks more like Sick Sigma to me.
“It USED TO BE, once upon a time, that most problems at work were to be SOLVED; Now most problems are to be COPED WITH.”
Wasn’t it Marshall McLuhan who said “the medium is the message?”
These days, it seems like the process is the product.
If you solve the problem, you get your funding cut.
If you cure the disease, nobody buys your medicine.
“If you solve the problem, you get your funding cut.
If you cure the disease, nobody buys your medicine.”
And there we have the crux of the matter.
Michael Korda wrote an interesting little tome called “POWER: How to get it, how to keep it”, back in the 1970s, if memory serves. It was a beautiful illustration of corporate heirarchy back in the day.
There’s lots of money to be made in perpetuating problems. Consultants, processes, new programs, supplies, etc.
On a macro level, we see this with the global financial system.
On a micro level, I was talking to a lady yesterday who works with a guy who used to own a beauty school. It went well for a while because of government based student loans. Then, the funding got cut off because his was a private school no longer eligible for government based student loans. So he went to self-funding his students. Didn’t work out, too much default. Now he works for someone else, selling home improvements.
That got me thinking about credit and how it has caused the costs of products and services to skyrocket over time, and I wondered how many businesses are actually dependent on government guarantees for their income, because people can’t afford to pay outright.
Solve a problem, put a problem-solver out of a job.
On a micro level, I was talking to a lady yesterday who works with a guy who used to own a beauty school. It went well for a while because of government based student loans. Then, the funding got cut off because his was a private school no longer eligible for government based student loans. So he went to self-funding his students. Didn’t work out, too much default. Now he works for someone else, selling home improvements.
I’ve been looking at getting my motor-mouth some training. Y’know, of the voice acting variety.
There’s a school about a mile away from here, and guess what they offer? Acting classes. Including voice acting.
Tuition per class is, oh, a few hundred bucks. Not a debt-inducing amount of money.
Yours Truly’s heading down to that school in a few weeks.
In the aviation business, we are being subjected to the latest thing in “Safety”, the Safety Management System. All kinds of “Safety Experts” are pushing a mandate to implement this.
What is supposed to happen is that you develop another manual for SMS. Basically spelling out how you identify and address hazards.
So now, on top of all of the other BS we have to contend with, now we need to develop an SMS manual. But who has time for this?
So, the consultants get called in, to develop the manual. Guess who these guys are? Yep, the same guys that lobbied for the mandate in the first place.
Viva the unions. Viva state laws. Viva hourly wages.
You aren’t one of those “union goons” are you ?
You know, the kind who expect to get paid for each hour they work?
Yes, and expect to get paid well for each hour I work.
I’ve worked union and I’ve worked non-union. Union is better.
The top execs get to set policy, the lower level salaried are responsible for execution of these policies, and the wage pukes get to carry out these policies.
That’s if they can. If they can’t then - ooops - up one level goes the policy SNAFU.
Wage earners get paid in terms of hours, salaried get paid in terms of results. If the results are not possible to obtain guess who doesn’t get to sleep much at night?
Combo….. Please don’t tell me you work for Just Call Me Jack….
Six Sigma is a horrible, horrible bastardization of Deming’s Total Quality system.
For those of you who do not know who Edwards Deming is, it well worth the research. A very interesting story of an American who helped win a war, became disillusioned with American capitalism and showed some now very famous Japanese manufacturers how to kick our butts.
My kind of guy.
Yeah, now we’re more or less based on JIT, which does not bode well in the event of any sort of disruptive event.
“in the event of any sort of disruptive event.”
Sigh. Department of redundancy department.
Anyway, I remember when, back in the day, a factory that we represented went from TQ to JIT. Disaster hit in the form of more orders than they could handle. (LOL, people NEVER prepare for success, do they?). What a mess. One thing a factory rep dreads hearing is: “Don’t take any more orders, please”.
I’ve been long out of the game, and I’m not sure I know what I’m talking about here, but it looks like to me as if we’ve got some crazy hybrid of Sick Sigma and JIT.
One thing a factory rep dreads hearing is: “Don’t take any more orders, please”.
LOL. Yep, I hear that one about every 1.5 months or so on one product or another of ours. And it always, ALWAYS, coincides with a stream of orders for that very product.
And before anyone thinks Deming was a traitor of sorts, he tried selling his ideas to American companies but they knew better. So he went to Japan, and the rest is history.
And before anyone thinks Deming was a traitor of sorts, he tried selling his ideas to American companies but they knew better. So he went to Japan, and the rest is history.
Indeed. And I highly recommend the books he wrote about manufacturing process.
Deming grew up in the same little place I did. Where there’s a statue of Buffalo Bill on every corner and nobody has ever heard of Deming.
Crazy. The man who made Toyota number one, and they’ve never heard of him.
What a world, huh?
In Wyoming making Toyota number 1 and 50 cents will get you a cup of coffee. I don’t recall even hearing about him in state history classes at UW. It wasn’t until I started on my MBA that I ever heard of him. And when I heard he was from my hometown I was mystified…
That’s what, about a 75% discount on your coffee?
He was infamous for telling US car manufacturers that quality was 85% management. That got him laughed out GM & Chrysler.
I wonder how many billions fannie and freddie have lost so far? could it reach a trillion dollars? Taxpayers are pretty gullible people.
Taxpayers are only gullible because we keep voting for the same turds who screw us every time.
Taxpayers are gullible because they think that they are voting ideas, logic, or improvements in their life style while in reality all they are voting for is a person who can do what he/she wants! The person elected gets the whim to do as he/she wishes. We (public in general) spend more time criticising the candidate’s speech, dress, religion,etc than we spend in the arena of ideas. The MSM has done its job we’ll.
“Taxpayers are pretty gullible people.”
There are few options available in a peaceful democratic system that has a history of overturning voter’s wishes. Eventually a revolution ensues when the little people have had their fill of “boiled frog” policies.
Fannie and Freddie Get a Huge Christmas Gift from Uncle Sam
Lita Epstein - 12/28/09
So much for the U.S. Treasury Department announcing its much-anticipated exit program for government support of Fannie Mae (FNM) and Freddie Mac (FRE). Instead, on Christmas Eve, Treasury said the federal government (obama) would provide both with unlimited support for three to five more years.
Also, Fannie’s and Freddie’s CEOs will get pay packages of $5 million to $6 million dollars.
http://www.dailyfinance.com/2009/12/28/fannie-and-freddie-get-a-huge-christmas-gift-from-uncle-sam/
dude that article appears to be almost 4 years old.
Here some simple math for you.
5 years - 4 years = 1 more year still to go for unlimited obama bailouts for Freddie and Fannie…
It’s less than 3 years old, but who’s counting.
Taxpayers are pretty gullible people.
We live in a representative republic. We elect representatives to Congress, who then do whatever it is they do. I certainly don’t recall being asked to vote on the merits of a bailout of Fannie, Freddie, GM, Chrysler, AIG, etc. I’m pretty sure that was POTUS, Congress, and the Treasury Department.
I think I saw a number in the $280 Billion range so far…can anyone confirm?
http://news.yahoo.com/obama-campaign-taps-cash-reserves-adds-debt-july-231048102–abc-news-politics.html
The Wallstreet interests are backing Romney this year just like they backed Obama in 2008. Don’t think it is primarily policy driven, they received the easy money they wanted. No, they are very practical they back the person they believe will win so they are at the table.
I saw some headline on google’s news aggregator page the other day that said Obama was spending more than his campaign had taken in. Gave me a laugh.
Obama Outraises Romney $9 Million as Conventions Approach
By Julie Bykowicz and Jonathan D. Salant on August 20, 2012
Bloomberg News
http://www.businessweek.com/news/2012-08-20/romney-raised-40-million-last-month-for-presidential-run
President Barack Obama raised almost $9 million more last month than presumptive Republican presidential nominee Mitt Romney, and entered the final month of the pre-convention campaign with almost triple the cash in the bank.
In the final measurement of the race for campaign cash before the national party conventions, Obama brought in $49.2 million to $40.3 million for Romney, according to Federal Election Commission disclosure reports filed today.
Obama entered August with $87.7 million in his campaign bank account while Romney reported $30.2 million. He has raised about twice as much as Romney in total, $356.5 million to $197 million.
But don’t worry, Romney has unlimited money in his anonymous/foreign funded PACs. The foreign oligarchs will treat one of their buddies well.
A lot of these “X outraises Y” or “Y outraises X” are just enticements to contributors to pony up.
I just saw an article which said that Romney had 62 million more than Obama:
http://nymag.com/daily/intel/2012/08/romney-now-has-62-million-advantage-over-obama.html
I heard a Freakonomics Blog a while back where the subject was whether increased spending gets you any votes. The answer was that increasing spending by 50% only increases the number of votes by 1% (or something ridiculously small).
In a game of inches, they are paying a LOT for those inches.
Obama is sucking up all the money depriving the congressional campaigns of support.
From Bloomberg:
In the last tally of campaign cash before the national party conventions, Obama brought in $49.2 million to $40.3 million for Romney in July. The Republican National Committee overcame that deficit by itself, raising $37.9 million, while its Democratic counterpart reported $10 million in receipts.
Cash Advantage
Likewise, the Republican committee’s cash-on-hand advantage of $88.8 million to $15.4 million for the Democratic National Committee more than overcame Obama’s edge over Romney. The Obama campaign committee reported $87.7 million in its bank account entering August compared with $30.2 million for Romney.
“Obama is sucking up all the money depriving the congressional campaigns of support.”
Because it’s all about Obama, all the time. ME, ME, ME!
Yes, cost the democrats the house already and a number of senate seats. If the Dems hang on the senate it will only because of a candidate that does not understand rape. That bozo needs to spend a night in a Mexican jail and come out singing a Shania Twain song: “man, I feel like a women”.
If it’s legitimate rape he won’t get pregnant.
“That bozo needs to spend a night in a Mexican jail and come out singing a Shania Twain song: “man, I feel like a women”.
Best laugh I’ve had all day.
So, he raises more and spends even more than that. Awesome!
Taking this totally out of the political realm, the most fundamental law of economics is: Income greater than outgo.
But when it’s OPM, who cares? Plenty more where that came from, right?
I seem to recall that last time they backed both candidates. You know, that hedging strategy thingie.
True, but the candidate that they think will win gets more.
Or is it the candidate they think will best support their interests, whom they aim to help win?
It probably depends on the poll numbers. When do they switch from spending money to help a candidate win, to spending money to bribe the guy they know is going to win?
That would be an interesting trend to track. Graph both campaign contributions and poll numbers as a function of time. Alignment between the two should improve the closer we get to the election.
“When do they switch from spending money to help a candidate win, to spending money to bribe the guy they know is going to win?”
Guess it depends on lots of factors:
1) Who is likely to win, and how predictable the outcome is at each point leading up to election day.
2) How much Megabank, Inc’s “free speech” contributions can influence the election outcome.
3) How much the “free speech” can influence the winner’s post-election fealty to Megabank, inc.
For instance, a close race where both sides have dropped hints they might favor more banking regulation (e.g. TBTF breakup) should result in more Megabank, Inc “free speech” showered on both sides than an uncontested election where the likely winner will clearly be pro-FIRE sector.
but the candidate that they think will win gets more
Casino odds holding steady with Obama 4 to 11, Romney 2 to 1.
You’d think those smart Wall Streeters would be doubling their money by betting Romney to win.
Rasmussen which had Obama up by two on Sunday before you allocated the undecided now has him behind. Ohio is 45-45 which means Romney wins with undecided and he had 45-43 lead in Florida , ditto. I trust Rasmussen based on experience. I remember the Walker election and the the polling. Yes, by the end the betting site had the winner correctly determined but by then the argument was only over the margin.
True Fundies do not gamble but they do vote.
“True Fundies do not gamble but they do vote.”
They also ‘invest’ in the Wall Street casino market.
“Independent Voter”, right?
True Fundies do not gamble but they do vote.
As if that would matter. Does everyone who bets on a football game also play in the game?
RealClearPolitics poll of polls Obama +2.5
No but emotion plays a role in the betting. If the people voting does not actually reflect a fair sample of america then the odds will be impacted by more of the people placing the bet actually wanting Obama to win. I think on some issues such whether war is likely in the mideast etc. that site can be very useful but not when it does not represent a cross section of america.
As far as RCP it just averages polls including very poor polls that are being conducted by MSM. I trust someone that has to live by the accuracy of his polls and has a clear record of being much more accurate than the MSM
Then you should thank me for showing you how to double your money. I’d do it myself, but I remain unconvinced. As, apparently, does the gambling public.
“The Wallstreet interests are backing Romney this year just like they backed Obama in 2008.”
Looks like it:
http://www.opensecrets.org/pres12/index.php
No, they are very practical they back the person they believe will win so they are at the table.
I agree with this. It’s kind of a b!tch to navigate since there’s so much info, but I love this site:
2008: http://www.opensecrets.org/pres08/sectorallc.php?cycle=2008
2004: http://www.opensecrets.org/pres08/sectorallc.php?cycle=2004
I’d like to thank everyone who tried to explain the recent decline in stock exchange trading volume situation yesterday.
In summary it seems similar to the decline and fall of the Roman Empire in that lots of hand waving is possible (I’ve read Gibbon) but it appears to simplify to no one really wants it anymore and its taking its sweet time going away slowly, because hangers on figure they can squeeze a little more blood from that turnip if they extend and pretend.
In a central government controlled economy, post industrial, post middle class, oligarchical wealth distribution, declining empire scenario, it boils down to “we” don’t think “we” need public equity markets anymore. Or rephrased, if the 1% are going to own all the nations wealth you can’t raise money in public, all on shore capital intensive companies have been shut down and sent off shore so you don’t need to raise the money, perma-declining economic conditions mean you don’t need to raise money to expand whatever’s left, the government picks all the winners and losers so there is no free market anymore making investment too dangerous for the unconnected and the connected have easier ways to siphon money out of the system, so there is just no point in a public stock market anymore.
Its not all that different than the long term housing / real estate outlook, just looking at buying chunks of companies instead of chunks of dirt. Even the mental outlook is the same; pretending the system isn’t rigged against you; maybe the good old days will come back if I wish hard enough; eyes wide shut or whatever.
Does not appear to be a simple “opposing forces” analysis like I originally suspected like the classic supply and demand curve, etc.
What was “That 70s phrase”, economic malaise or economic mayonnaise or something? I like the economic mayonnaise analogy where corrupt govt and corrupt corps normally don’t mix into an economic mayonnaise unless you add the emulsifier of an egg of citizen apathy and whip it into an economic froth. Strange times when the best hope for a long term economic recovery can only begin with someone else starting the riots and revolution, to quote an old HBB poster I look forward to watchin’ that play out on TV while I eat popcorn or something like that.
I didn’t respond yesterday because there was just too much speculation by people who didn’t really know much about the stock market.
The MARKET is not driven by individual investors, so all the comments about rich people and poor people, blah, blah don’t mean a thing. BIG Funds drive the market.
When you have Billions of dollars and want to “buy” a company or position that has millions of shares outstanding, you don’t go out and buy 1 million shares today. You buy 50,000 per week over many weeks so you don’t drive the price up.
When prices are trading at high volumes, is shows support of the current market price by BIG institutions.
When the volume falls off it shows a lack of interest in buying at the new higher prices. Big investors are staying away. It is usually indicative of a change in trend. First, interest in buying the new highs falls off, then you may get some run-ups into new highs (manipulation), but if the volume stays low, the trend is likely to reverse.
Buyers will become sellers.
Most individual investors will “chase” the rising trend, just in time to catch the falling crest of the wave. Wallstreet’s primary goal is to relieve you of your money.
So the best strategy for the small investor might be to buy rising volume and sell falling volume.
We don’t need no stinking stock market .
is anyone watching cnbc anymore? what a joke the outfit has become. It is amazing they still have cramer on there lying to people constantly.
I have a feeling now that all bernakes friends have made a ton of money and they are about to take it to the sheep again.
Naked Capitalism’s Michael Olenick, one of my main men, strips the hype off the much-ballyhooed housing recovery:
Still Looking for a Housing Bottom
From the article:
trying to gain credible insight into housing and foreclosure information is difficult because the industry, including and especially Fannie Mae and Freddie Mac, continue to hoard housing data. We can’t measure what we can’t see, and thanks to murky and inconsistent housing data all we really know is that there is a lot we don’t really know.
What is certain is this;
- Housing inventory is massive
-Housing demand is at 15 year lows and falling
-Housing prices are grossly inflated
-Housing prices are falling
-construction costs + margin is 40% LOWER than resale price measured in $/sq foot
The risk of loss is massive, the magnitude of the loss is massive.
“- Housing inventory is massive”
True. There are somewhere between 5 and 9 million too many housing units. If we need 1.2 million houses a year and are building .7 million a year, then it will take another 10-20 years to work off the excess. Except that by then the Boomers will be dieing off and our need will probably less than the current .7 million a year.
The result is that the current level of construction, which is 30% that of the peak, is still too high.
Construction is not coming back, and neither are the jobs the construction provided.
“-Housing demand is at 15 year lows and falling”
I am not sure how you define demand. The number of transactions in 2012 is running 5% above 2011 and 13% above 2010. http://ycharts.com/indicators/existing_home_sales
Household formation is also up. Good reliable yoy data is hard to find, but they agree we’re coming back up from 2008 lows toward the more demographically sustainable 1 million new households a year.
http://www.calculatedriskblog.com/2012/08/another-measure-of-household-formation.html
So, exactly what definition of “demand” are you using and what data indicates we are at 15 year low… and falling?
“-Housing prices are grossly inflated”
Nationally, I agree. However, in some markets you are clearly not correct.
“-Housing prices are falling”
Again, nationally, probably yes. And even in some segments of markets, yes. There are some segments of some markets where prices are well below fundamental level and no longer falling.
You are making generalities that are not true for all markets.
“-construction costs + margin is 40% LOWER than resale price measured in $/sq foot”
Hmmm. I’m buying a place for $50 a sqft. So, you are saying a townhouse can be built for $30 a sqft? Or, are you again making generalities that are not true for all markets?
I’ve been hearing about this supposed shadow inventory of 5, 10, 20 million houses for years now. Where is it already?
If you aren’t too lazy, you might find at least some of the information you are looking for here:
Quarterly Vacancy and Homeownership Rates by State and MSA
Table 1. Rental Vacancy Rates by State: 2005-present [xls - 95k]
Table 2. Homeowner Vacancy Rates by State: 2005-present [xls - 92k]
Table 3. Homeownership Rates by State: 2005-present [xls - 97k]
Table 4. Rental Vacancy Rates for the 75 Largest Metropolitan Statistical Areas: 2005-present [xls - 147k]
Table 5. Homeowner Vacancy Rates for the 75 Largest Metropolitan Statistical Areas: 2005-present [xls - 161k]
Table 6. Homeownership Rates for the 75 Largest Metropolitan Statistical Areas: 2005-present [xls - 154k]
You’re lying again Darryl.
And you’re invoking the marketing lie “real estate is local” without saying it.
Why are you lying Darryl?
Are we in the 1st grade here… Darrell youdn’t even grace you with a response…
Oh how sweet… Another fawning housing parasite rushes in.
Recent buyers are non truth tellers and statistical cherry pickers.
“So, you are saying a townhouse can be built for $30 a sqft?”
Not sure, but back when we could actually get him to talk details every once in a while, I think he said he doesn’t include the cost of the lot.
He also ignores permit costs, as he even said that some small builders don’t get permits. Boy, I sure do want to buy one of those homes…unpermitted by a small builder.
What I’ve heard in terms of hard construction costs for a basic single family home is in the range of high $30’s per foot (I think the lowest number I’ve heard is $38 psf), with more typical being in the low-mid $40’s per square foot, let’s say $45.
This is consistent with RAL’s view, but he has said that he doesn’t care about land values because for whatever reason, he says land is virtually free.
FWIW, I spoke to a guy recently who manages large sums of money in the housing market, and asked him point blank what it costs to create a finished lot of average size, if your starting point is raw and flat land, in California. His answer was $70-$80k, if the land were free. Half of this is for permit costs, and half for land development (curbs, gutters, utilities, etc.). This was consistent with my general view.
If you ignore land, plus this $70-80k, of course you would think you can build homes for less than today’s market prices. If you include land and permit costs though, the replacement cost roughly doubles from RAL’s view.
The real number for a standard home in terms of reasonable replacement cost is ~$80-$100 per square foot, all-in, assuming pretty cheap land.
There we go, we haven’t had enough calling of me a liar today…I’ve been busy. Now I can be called a liar, misrepresenting the truth, etc.
What is “consistent with your view” is repeated and insidious misrepresentations and lies…. Yes lies.
You lied about your construction background and you’re lying about construction prices.
I’ve got a bulletin for you bud…. I’m not going away.. ever. And I will continue to expose your lies everytime you post them.
I’ve never said I’m in construction. We invest in real estate, where construction is a part of the cost of a project.
What are construction costs per square foot then? I’ve said $38-$45 psf…are you higher or lower?
We are going to get luuuuucky in New York State as I can bet that our politicians are going to help crater house prices much faster than any other state. The scumbags in Albany aka capital districts (ore’s) have started raising property taxes.
When we look at properties in the town of Manlius, Dewitt, Cazenovia the asking price of houses in the 400K – 450K range are usually selling for around 385K. But the towns are raising the assessed values by as much as 100K to 150K. This means that the average property taxes for a house selling around 400K will increase by at least 4K. Most of the 400K asking price properties already have a tax bill of about 17K. The realtor I was speaking to last night said that the people do not like confrontations and usually pay the higher tax and he would help fight the new tax assessment if we bought the property.
What to do? Complain and rent.
What to do? Complain and rent.
Now playing at your local HBB!
Or rent and not complain.
Renting is better. After two months of 90+ degree weather almost every day, just got our highest electric bill of the summer for a whole $63!
But renting is throwing money away. Life really sucks throwing away 13% of monthly gross on rent and having electric as the only utility bill to pay.
Not just that put it the spiraling property taxes in NYS simple serves to drive more people out of the state. Crush demand, increase inventory.
What a way to go.
What to do? Complain and rent.
spiraling property taxes in NYS simple serves to drive more people out of the state.
Move to a state with lower taxes. That’s my advice. I posted a while ago on family members who moved from RI to MA last year. They sold a property in RI and bought a property in MA, essentially a wash in terms of the value of the real estate [approx. same appraised value]. Taxes went from $17k annually to $7k annually. They also managed to lower their state income tax and sales tax in the process… distance of move: 20 miles
There are basically 4 types of houses you can get in the nice suburbs.
200K or less property tax 8K mostly junk about 2000 sq.ft
300K or less property taxes 13K about 2500 sq,ft most need updating
400K and above property taxes are 16K to 22K.
550K and above taxes are 25K to 35K
These are the prices to put your foot into a house in a decent neighborhood.
I own a 13,000 sq.ft building in the town of Dewitt and my taxes are 8K. The political powers are not raising commercial property taxes. So they are not too dumb about driving the host away. They are parasitic on the well to do worker bees with kids in school.
As far as moving to a lower cost state our manufacturing/franchising business is well established in NYS that such a move will be counterproductive.
My complain is tying yourself to a 20K + plus property taxes for ever as this will be our toe tag home.
I pay $2K on a house assessed at 350K.
17k in tax on a 400k house?
Insanity. This puts the property taxes in my little burb in a whole different perspective.
Here is the link to the property we are interested in buying
http://www.cnyhomes.com/Listing/Search/info.cgi?mlnum=S267845
“I pay $2K on a house assessed at 350K.”
How about $2,200 on a house assessed at $179k? But no income tax here in Washington state…fingers crossed.
Looks nice, but I’d have to be a millionaire to even consider it.
Looks nice, but I’d have to be a millionaire to even consider it.
Hear Hear
Isn’t it sad to buy a 400K property you would need to be a effin millionaire in America. WTF
“Here is the link to the property we are interested in buying…”
Wow, 3360-sqft and $420k as we muddle along through a depression for the next 10-yrs?
I make decent money right now, but that could end without much fanfare. A fellow I’ve known for 8-yrs at an office I frequent just lost his security clearance and with that his job too. I don’t know why, but it still sent a shiver up my spine, and I’m debt free and have decent savings. It must be PTSD from the 70’s recessions.
Yeah, but that’s the perfect house to stop paying on. Pay the taxes, and stop paying the mortgage… Voila!
10 years of cheap living until foreclosure.
Don’t like confrontation? To fight for their own money? Bizarre. Yet they will complain about “too much government”. (reminds me of people who complain about schools, but never vote for the local board of directors, nor think about running for it themselves, nor participate in the public meetings)
The last time I went to the tax assessor’s to have my property tax adjusted, it was easy. But you have to be prepared. Photos and a written report any 6th graders could do, with facts as to why your property is overvalued by the county, are all you really need.
And a 15% reduction is all you’re going to get. 15% less of a grossly inflated tax bill results in a grossly inflated tax bill.
That’s still 15% BACK in your pocket. Why leave it on the table?
But you’re right, many place have so over-inflated the valuations that you are still getting screwed, and some places will deny your petition no matter what, but you still have to try.
What’s that old saying? “Life is hard, but even harder when you’re stupid.”
Add to that “…and don’t even try.”
“The last time I went to the tax assessor’s to have my property tax adjusted, it was easy.”
Same for me. I got an 8% reduction in the assessment upon moving in. Took an email and a phone call to get it done.
My little burg even has a website where you can create you challenge. Both times I’ve done it I had my assessment lowered.
Moreover, as property taxes go up, note the number of public employees actually working and providing services. It is going down. And public employee wages are frozen.
So where is the money going? To the early retired. They passed a bunch of retroactive pension enhancements from 1995 to the present, and claimed the cost would be zero. So they didn’t enough extra money in. But they are putting it in now.
The money is going to Florida. But it could be worse. The New York State pension system, which includes local government employees outside NYC, is one of the best funded in the country, despite many years where taxpayers kicked in nothing. The NYC pension system is one of the worst, even though its taxpayers have kicked in more than anywhere else.
Pensions are not the problem. Bad financial deals made the local govs in the form of bonds and loans are the REAL problem.
There have been several examples posted here. Financial mistakes to the tune of a billion dollars in just one example.
So who is more to blame? People who made a deal in good faith in exchange for years of their time and labor, or gov leaders who gambled away the budget and lost the house to Wall St. by making deals even a 5th grader could see was a ripoff to the taxpayer?
“Most of the 400K asking price properties already have a tax bill of about 17K. ”
OMG. 4%+ of value for property tax? That’s insane, it’s more than the mortgage interest would be for the same property today (given rates are <4%).
How on earth does someone afford that, coupled with a state income tax, NY might take the the title from Mass for being a tax he**hole.
Looking at it another way, 400K property should have someone making about 150K looking to purchase it. 150K is really about 100K take home, so 17% of a “typical” buyer’s income is going to local RE tax? And another ~30% to the feds. And another 6-8% on everything he buys? That poor typical homeowner is spending more than 1/2 his income on taxes. When will the revolution come?
Honestly, if more people had Quicken and tracked their taxes in there, it probably would have come already. For many people middle income people the biggest expense in their entire lives is taxes. Not their house. Not their cars. Not their children. Nope, the DMV and speed traps, those are your biggest expenses.
“150K is really about 100K take home, so 17% of a “typical” buyer’s income is going to local RE tax? And another ~30% to the feds. And another 6-8% on everything he buys? That poor typical homeowner is spending more than 1/2 his income on taxes.”
You counted the federal income tax twice - once in the “30% to the feds” and once in the “about 100K take home.”
You left out that in a state with high income taxes and high property taxes, an upper middle class home owner is very, very, very likely to hit the AMT.
Sorry, you’re right Polly, my mistake.
” 150K is really about 100K take home,”
Depends. 150K for a single, married renter with no kids…you’re right. 150K for a couple with kids, a mortgage and high property taxes is more like 125-130K take home. And yes I’m including FICA as well.
You be insane to BUY a house in New York State.
NYS is completely controlled by the public unions at EVERY level (city, county and state). They will make damn sure that their insane contracts will be paid in full. This means property taxes will be raised and raised and raised.
Having a $20k property tax bill for a just OK house in the middle of nowhere UPSTATE NYS is COMMON.
Now predict where this tax will be in 5 years. 10 years.
Eventually, like ALL public unions, they will kill their hosts (just look at Detroit, Chicago, Philly, Newark, etc.) because they think taxpayers are a never ending stream of money to be taken at whim.
Then they wonder how and why a Scott Walker can win in the bluest of blue states…
I get the feeling that 2banana would turn down a lap dance, if it was from a union dancer.
No, just leave a cheap tip.
Yeah - because instead of getting the prettiest and hottest dancer for your top dollar, due to union seniority rules, you would get a 50 year fat dancer that took breaks every 10 minutes and had an attitude…
I get the feeling that 2banana would turn down a lap dance, if it was from a union dancer.
LOL
If you visit a Disney theme park you’ll invariably encounter pretty young ladies dressed up as Disney “Princesses” (Snow White, Cinderella, etc.). Everyone I’ve ever seen is a looker.
They’re union.
OK, now that’s just funny, 2B! Love it!
lmao….. SCHWEEEEEEEEEEEEEEET banana.
“Eventually, like ALL public unions, they will kill their hosts (just look at Detroit, Chicago, Philly, Newark, etc.) because they think taxpayers are a never ending stream of money to be taken at whim.”
Taxpayers who remain in Detroit, Chicago, etc keep voting in Democrats who serve as union lapdogs. If these morons want to pay $20K a year in property taxes in order to fund $100K a year pensions for bus drivers who retire at 52, I say let ‘em.
The problem is - they then demand BAILOUTS. From all of us.
And the dems and obama will give it to them - because it is only fair.
If these morons want to pay $20K a year in property taxes in order to fund $100K a year pensions for bus drivers who retire at 52, I say let ‘em.
“The problem is - they then demand BAILOUTS. From all of us.
And the dems and obama will give it to them”
No, they won’t.
http://www.seiu.org/a/publicservices/fact-check-on-public-sector-pensions.php
Do Vets still get 50% discount on property taxes and are pensions still untaxed in NY?
“What to do? Complain and rent.”
Complain? It makes me giggle when I think I’m paying less in rent than I’d be paying in taxes alone if I owned.
There are damn few indicators that I’m smarter than the average clod, and I cherish each and every one.
Location location location…
Depreciation, depreciation, depreciation…..
Location *and* lifestyle. The squad has not mowed a lawn since 2005.
Spending weekends at Home Depot is for LOOSERS!
I can’t disagree with you goon. I didn’t mow a lawn from 1989 to 2012. But I hope you’re socking away the difference between rent and house payments into a housing account. You still have to live somewhere — be it rent or paid-off house — when you’re 68 and your income is near-zero.
I happen to like fixing up houses I live in. I’m good at it. I used to be professional. I know how to get projects done quick.
Anything you see on TV DYI shows, I can do.
But I hate, HATE mowing yards.
I enjoy renovating and doing some projects around my building. I have 3 people who work as maintenance staff position at large rental complexes and they work for me in the evenings and weekends. They bring their trucks, tools, and expect cash based on a very low hourly rate. I even supply the beer after the job is done. All I do is sit back read the hbb and the project is complete.
“You still have to live somewhere”
And you couldn’t lived for half the cost but you just couldn’t resist. But that’s the way OPM skews ones’ thinking.
Massive Loss, we’re not going to get involved with your personal beef with oxide’s metro DC home purchase, but we will be posting pics on Monday morning of where renters get to spend their weekend because they rent and are not loanowners, the scenery will blow your mind…
No personal beef here. Her losses are hers and hers alone.
And I’ll quote my good friend Nickpapageorgio;
“Recent buyers are non truth tellers and statistical cherry pickers.”
If they wanted to crater house prices, they should change forclosure laws…there is nothing getting through in NY.
As I was saying yesterday, those who were going make money from FBs IPO have done so, causing the drop in share price:
SAN FRANCISCO (Reuters) - Facebook Inc director Peter Thiel sold roughly $400 million worth of shares in the Internet social networking company last week, cashing out most of his stake, according to a regulatory filing.
Thiel sold his shares on Thursday and Friday at average prices ranging between $19.27 and $20.69 per share after the end of the first lockup, which barred early investors and insiders from selling shares following the initial public offering.
Take The Money And Run
Which is why there should be FEDERAL LAWS mandating that all “incentive” stock given to Key personnel at any company as a ‘bonus’ or at a huge buy-in discount, be held for AT least 2 years.
If you are getting ‘paid’ in stock to increase the value of a company, the value should increase. If it doesn’t, then the beneficiary should get screwed, along with the poor slobs who ‘bought’ all the stories you told about what a great company it was.
That’s not very “free market” now is it?
Uh, what, Diogenes? Yet another law protecting the public against their own stupidity? Since when did any such laws work in the first place? The information about Facebook was VERY public. Everyone knew (or should have known, which is the point) that the stock was hugely overpriced. Selling at a P/E of 80? Nobody should have bought for the IPO price. It’s like paying $10 an apple from some guy on the streetcorner.
Zuckerberg, Thiel and the rest have benefited from the stupidity of stock buyers. Regardless, they would always benefit. The only way you’d stop that sort of thing is by essentially outlawing stock ownership (i.e. stop stock being used like any other asset indicating ownership share). Want to take that step, chum?
Why would you restrict the freedom of the Board of Directors that way?
Generally speaking, if a corporate executive sells the majority of his financial stake in the company, he is on his way out…
Look for an announcement of Thiel leaving FB within the next few months.
Look for an announcement of Thiel leaving FB within the next few months.
I don’t think he’s an executive there, he’s on the BOD. He’s the billionaire founder of Paypal, and an early investor in FB. He got 10% of FB for $500,000, so he still made quite a profit.
And there you have it.
2012 will be known as the biggest housing Bull trap in history.
Time is your friend.
The contrary view is 3% interest rates and reasonable prices are your friends.
If you’re paying cash, time is your friend.
I suspect that opinions differ on the definition of “reasonable prices”. But as always, that probably depends on where you’re looking.
Paying cash in this market isn’t a good idea, IMHO. Take the cash, bury it under the bed, buy bonds, buy stocks, but, whatever you do, don’t lock in a 3% interest rate for the next 30 years (which is what you’re doing if you use that cash to buy a house). Also, if the value does fall 50%, you have much better options if you have cash and an underwater mortgage than if you have no cash and a home that just lost a few 100K of value.
I’m an advocate of taking the 3% mortgage as long as PITI and a reasonable repair budget are less than renting and it took me a long time to get back to this point.
“I’m an advocate of taking the 3% mortgage as long as PITI and a reasonable repair budget are less than renting and it took me a long time to get back to this point.”
As long as you don’t have to sell in the next 15 years.
Maybe even longer than that. You have to be prepared to stay.
you have much better options
I assume you mean walking away with your cash still available?
If you don’t own, you can move away before this debt has to be repaid.
P.S. RE: “…picked up by the national media.”
I guess the UT-San Diego editors don’t read the Financial Times of London.
POWAY UNIFIED RESIDENTS FUME OVER COSTLY BOND
District officials defend long-term financing plan
Written by Ashly McGlone
12:01 a.m., Aug. 21, 2012
Updated 10:39 p.m. , Aug. 20, 2012
A capacity crowd filled Monday night’s Poway Unified School District board meeting to voice concerns over a bond deal that saddles them with nearly $1 billion in long-term debt — about nine times the amount of the bond.
Their comments followed a presentation by district officials explaining their rationale in issuing the controversial and expensive bond, a move that has attracted nationwide attention.
Resident Sharon Swildens called on the five board members to resign.
“I’m appalled at your 2011 fiscal irresponsibility,” Swildens said. “You seem to be happy with it, which I can’t understand. Not one of you have apologized.”
School officials said the long-term bond was needed if the district was to continue with a school construction program in these difficult economic times.
Board member Marc Davis pointed to the taxpayer approval of the bond measure in 2008 without a tax increase.
“We had those parameters and we executed or operated within the parameters you had given us,” Davis said, adding: “There are no backroom deals. There are no shenanigans. There is no fraud.”
Last August, district officials obtained $105 million for school construction with the promise to repay investors $981 million under long-term financing known as capital appreciation bonds, or CABs. The deal prevents the district from paying anything on the bond for 20 years as interest compounds, and requires repayment in the 20 years after, reaching the maximum 40-year term permitted for bond repayment under state law.
Revelations of the bond deal in recent weeks raised the ire of some local residents who fear taxes will skyrocket to repay the debt. The bond concerns were first surfaced by a blogger in Michigan in the spring, but were picked up by the national media after a recent report by the Voice of San Diego.
…
The deal prevents the district from paying anything on the bond for 20 years as interest compounds, and requires repayment in the 20 years after, reaching the maximum 40-year term permitted for bond repayment under state law.
WTF. Are they really saying that municipal finance, in the guise of “It’s for the children” has resorted to Option ARM-like financing?
Because that worked out so well for real estate buyers…
If the voters tell you to borrow money to build schools but don’t use any current money to pay for it, what other choice did they have? Bank robbery isn’t a good financial plan for a town either.
Bank robbery isn’t a good financial plan for a town either.
It also tends to be an epic fail for the bank robbers. Just look at the story of John Dillinger if you want proof.
And, yup, there’s a Tucson connection to that story.
To quote Turkey “The voters got the government they deserved.”
I’m sure it was clearly explained to voters that if they went the Option ARM route, that interest would accumulate for 20 years and they would end up owing almost a Billion dollars, 10X what was borrowed.
I’m also sure that a clear example was used of what taxes would have to be in order to pay all that interest when the bond came due.
Or, were voters given a few simple questions and then bent over when the results came out as expected:
1. Do you want a new school? [Yes]
2. Do you want to raise taxes to build a new school? [No]
“If the voters tell you to borrow money to build schools but don’t use any current money to pay for it, what other choice did they have? Bank robbery isn’t a good financial plan for a town either.”
Does not sound like they said don’t use any current money just don’t raise taxes. That is the way that the school system put it on the ballot. They were suppose to find a way to pay for the bonds using existing revenue. Leaving debt for a future generation to be paid for by the coercive use of the tax system backed by people with guns is little different than robbery. Why is is so hard for people to say we cannot afford something?
“Bank robbery isn’t a good financial plan for a town either.”
Better to rob tomorrow’s PUSD taxpayers, who will have no way to hold today’s policy makers accountable.
in the guise of “It’s for the children” has resorted to Option ARM-like financing?
When you think about it, there is a certain fairness to it. The school is for the kids, so in 20 years when they’re adults, they can pay for it. As long as they don’t move away.
Hey, I know! The debt could follow them, like a student loan.
“The debt could follow them, like a student loan.”
Please explain how, as I am missing it.
You run a tab for every year you go to the school, then when you turn 20, and the loan payments come due, you start paying your share of it back like a student loan?
2010: The state issues 25-year bonds to build the school. 10-year-olds attend the school.
2035: The 10-year-olds are now 35. They all have jobs and pay back those bonds with their property tax dollars. But it only works if they stay in the school district, as alpha says.
It’s a closed-loop paygo.
i sense some sarcasm alpha, PB.
Now multiply this by hundreds of other local govs making the same bad deals and you begin to see why pensions are getting the blame.
They didn’t have to build new schools.
Steve Martin’s “Don’t buy stuff you can’t afford” skit comes to mind…
The people of the town voted to build new schools for no present increase in taxes. That means you either violate your current contracts (wait for the courts to weigh in on that) or you finance it in a way that puts off paying for it. Did they have to do it in a way that was quite this boneheaded? Probably not. But they had to do something that was along these lines.
What percentage of new schools were built to accommodate illegals?
MARKETS
August 20, 2012, 7:26 p.m. ET
Buffett’s Move Raises a Red Flag
By SERENA NG And MICHAEL CORKERY
A decision by Warren Buffett’s Berkshire Hathaway Inc. to end a large wager on the municipal-bond market is deepening questions from some investors about the risks of buying debt issued by cities, states and other public entities.
The Omaha, Neb., company recently terminated credit-default swaps insuring $8.25 billion of municipal debt. The termination, disclosed in a quarterly filing with regulators this month, ended five years early a bullish bet that Mr. Buffett made before the financial crisis that more than a dozen U.S. states would keep paying their bills on time, according to a person familiar with the transaction.
The insurance-like contracts, which required Berkshire to pay in the event of bond defaults, were originally purchased by Lehman Brothers Holdings Inc. in 2007, more than a year before the Wall Street firm filed for bankruptcy, the person said.
Warren Buffett’s Berkshire Hathaway recently canceled credit-default swaps insuring $8.25 billion of municipal debt.
Details of the termination, with the Lehman Brothers estate, weren’t disclosed. It isn’t clear whether Berkshire’s move will leave the company with a profit or loss on the wager. Mr. Buffett, Berkshire’s 81-year-old chairman and chief executive, declined to comment.
Some investors said the decision to end the bet indicates that one of the world’s savviest investors has doubts about the state of municipal finances. If so, the move could be a warning to investors who have purchased such debt. In canceling the contracts early, Mr. Buffett probably “doesn’t want this exposure anymore and is getting out while he can,” said Jeff Matthews, a hedge-fund manager who personally owns Berkshire shares.
…
“Some investors said the decision to end the bet indicates that one of the world’s savviest investors has doubts about the state of municipal finances.”
Do you think?
“Do you think?”
If so stay out of journalism school. Could not be any clearer that he has joined the Whitney camp. Gold has been moving up due to more talk of easing. The only way they can move the stock market is easing. If they don’t move the stock market the pensions get more underfunded. However, when the do ease they drive up things like gasoline.
I have been enjoying my platinum run but am now locking in some profits. Will keep some exposure due to the potential easing but I don’t want to get too greedy.
Could not be any clearer that he has joined the Whitney camp.
Was just about to say, maybe she called it early, but this looks like confirmation of Whitney’s predictions.
It used to be munis were one of a handful of the safest investment you could ever make.
Now they are not.
That alone should tell you how big of trouble we are in.
wsj dot com
HEARD ON THE STREET
August 20, 2012, 2:40 p.m. ET
Time to End the Fiction of ‘Frannie’
By DAVID REILLY
The case for keeping Fannie Mae and Freddie Mac off the government’s books has gotten even weaker.
Last week, the Treasury Department said it would change the way the two mortgage giants operate in terms of their government lifelines. Rather than pay 10% dividends on the $188 billion they have received in government assistance, the two companies will now pay any profit they generate as a dividend—to the government not shareholders. If the companies generate losses, no payments will be made and the government will extend additional support.
It’s time to stop pretending that Fannie Mae and Freddie Mac are private companies.
The switch ends the curious arrangement in which Fannie and Freddie often had to take on more taxpayer funding, in the form of a preferred stock issued to the government, to make dividend payments on existing support. It also means, though, that the companies will never pay back the mountain of government-held preferred stock because all profit is now paid out as a dividend instead. While the two companies have been in government conservatorship since September 2008, this makes them even more permanent wards of the state and turns the government’s preferred stock into a permanent, perpetual kind of security.
That bolsters the argument that Fannie and Freddie should be included on the government’s balance sheet. Of course, that is politically unpalatable: The inclusion of their combined $5.3 trillion in liabilities would balloon the nearly $16 trillion in total federal debt outstanding and breach the debt ceiling. And, in fairness, the liabilities of Fannie and Freddie have assets against them.
Still, as debt investors have learned in Europe, any assessment of a country’s financial position needs to take into account both on- and off-the-book liabilities. It’s time to stop pretending that Fannie and Freddie are private companies or anything other than arms of the government.
Fannie and Freddie Get a Huge Christmas Gift from Uncle Sam
Lita Epstein - 12/28/09
So much for the U.S. Treasury Department announcing its much-anticipated exit program for government support of Fannie Mae (FNM) and Freddie Mac (FRE). Instead, on Christmas Eve, Treasury said the federal government (obama) would provide both with unlimited support for three to five more years.
Also, Fannie’s and Freddie’s CEOs will get pay packages of $5 million to $6 million dollars.
http://www.dailyfinance.com/2009/12/28/fannie-and-freddie-get-a-huge-christmas-gift-from-uncle-sam/
Whether or not Freddie Mac screwed its investors depends on what the definition of what “subprime” is.
Where have I heard that kind of legal argument before?
BUSINESS
August 20, 2012, 7:06 p.m. ET
Subprime Whodunit A Case of Semantics
By JULIE STEINBERG
Exactly what is a subprime mortgage?
How a U.S. judge answers that question could determine if three former Freddie Mac executives misled investors about loans backed by the mortgage giant before it sank.
At a four-hour court hearing in New York, lawyers for the former executives, including Chief Executive Richard Syron, sparred with the Securities and Exchange Commission over the definition of “subprime” and “subprime-like.”
The fight came as lawyers for the former Freddie Mac executives urged U.S. District Judge Richard Sullivan to throw out an eight-month-old fraud lawsuit by the SEC alleging they made “materially false and misleading public disclosures” about the company’s housing-market exposure in 2007 and 2008.
The civil suit and a parallel case against former Fannie Mae executives are among the highest-profile lawsuits filed by the SEC over alleged wrongdoing related to the financial crisis.
Lawyers for Mr. Syron, Patricia Cook, a former Freddie Mac executive vice president, and Donald Bisenius, a former senior vice president, asked the judge to dismiss the suit because Freddie Mac told investors it didn’t classify single-family loans using the words “prime” or “subprime.”
Instead, Freddie Mac provided investors with tables outlining the characteristics of loans, allowing investors to draw their own inferences about loan quality, the lawyers said. The lawyers cited an investor document that said the amount of loans that would have been subprime if Freddie Mac used that term was “not significant.”
Suzanne Romajas, a lawyer for the SEC, agreed that there is no universally accepted definition of “subprime,” but that doesn’t matter, she told the judge. Freddie Mac used a combination of factors to decide if a certain loan was high-risk, and the former executives should have disclosed all of the mortgages that were vulnerable to potential default, she said.
For example, including mortgages with “subprime-like” characteristics would have increased Freddie Mac’s overall high-risk loan exposure to 10% of its portfolio, not the 0.1% claimed by the company, she added.
In a court filing, the SEC said Messrs. Syron and Bisenius and Ms. Cook knew their public statements were false because Freddie Mac referred to loans as “subprime,” “otherwise subprime” or “subprime-like” in internal communications.
During the hearing, Judge Sullivan repeatedly pressed lawyers on both sides about their descriptions of “subprime” and “subprime-like.” He said language Freddie Mac used in disclosures to investors was “confusing” and “problematic,” while showing signs of exasperation that the case might boil down to what “subprime” is.
…
Don’t let the stock market’s countless headwinds keep you sidelined from joining in on this rally!
Aug. 21, 2012, 12:02 a.m. EDT
Investors hope this time it’s different
Commentary: Unlike most other Augusts, the market is rising
By Irwin Kellner, MarketWatch
PORT WASHINGTON, N.Y. (MarketWatch) — August is usually a down month for stocks, but this year the market is heading in a different direction in the eighth month — it’s actually going up.
With nine trading days left in August, stocks are clearly in the black. As of Monday’s close, the Dow Jones Industrial Average was about 4% higher than it was at the end of July.
This is a marked difference from the Dow’s change in August of each of the previous 20 years. Indeed, historically, August has marked the beginning of a seasonally tough period for stocks.
In the past, the days from the beginning of August through the end of October have brought with them more than the usual headwinds for investors to cope with. It’s tough to say why.
Maybe it’s the realization that earnings forecasts made earlier in the year were too optimistic. Or it could be self-fulfilling, based on past history. It could also be a result of annual reminders from pundits and the press.
The market’s performance last year was especially turbulent — and with good reason. There was a litany of woes for investors to wrap their arms around.
First and foremost, the U.S. economy was plodding along so slowly that fears were rife it would tumble into a double-dip recession. On top of that, there were concerns that, because of a political stalemate, the debt ceiling would not be raised, thereby curbing Washington’s borrowing, and thus its ability to roll over its debt.
This would have caused our government to default for the first time in its history. And while the ceiling was raised in time to avert such a development, the very threat of a default led to an unprecedented downgrade in the ratings of our debt.
Overseas the situation was no better. The euro zone was engulfed in one of its periodic spasms, leading to fears that one or more of its members would pull out of the currency compact, thereby jeopardizing the further existence of the euro.
But the same issues are present this year — plus a couple of more.
…
CNN has become the Grand Marshal of the Housing Pimp Parade.
What’s up with that?
Without a housing recovery Obama will not be reelected. They are trying to create one.
Well….. housing is actually recovering considering prices are falling.
You’re saying CNN is pro-Obama?
Interesting. The libs think CNN has gone wingnut. I was listening to the wingnut radio and even the host said that CNN was going more “balanced” (ie more wingnut).
CNN and all of the mainstream networks are so far up Obama’s ass it’s not funny. So yes, I’ll concur. I watched the coverage of when Romney picked Ryan. He could have picked anyone really and it would have been the same.
You can’t trust mainstream media more than you can trust MSNBC or Fox News.
When you are way Right, even centrist appears to be Left.
I don’t have a horse in this race. I’m not voting for Obama or Romney. Compare the coverage of Obama to the coverage of Romney. Obama coverage is generally positive and coverage of Romney is generally negative. The exceptions are Fox where the coverage of Romney is extremely positive and MSNBC where the coverage of Obama is extremely positive.
“Obama coverage is generally positive and coverage of Romney is generally negative. The exceptions are Fox where the coverage of Romney is extremely positive and MSNBC where the coverage of Obama is extremely positive.”
IMHO That`s about right.
PS
Sorry to hear about your horse.
It’s pretty interesting to see Megabank, Inc quietly loading up on Treasurys in the background, even as the stock market goes on a tear against a backdrop of little news to buoy it.
Guess what happens next?
Banks Use $1.77 Trillion Stockpile to Double Treasury Buying
Cordell Eddings and Daniel Kruger
Updated 8:28 a.m., Monday, August 20, 2012
(Updates Treasury yields in the 10th paragraph.)
Aug. 20 (Bloomberg) — The gap between U.S. bank deposits and loans is growing at the fastest pace in two years, providing lenders with more funds to buy bonds and temper the biggest sell-off in Treasuries since 2010.
As deposits increased 3.3 percent to $8.88 trillion in the two months ended July 31, business lending rose 0.7 percent to $7.11 trillion, Federal Reserve data show. The record gap of $1.77 trillion has expanded 15 percent since May, the biggest similar-period gain since July, 2010. Banks have already bought $136.4 billion in Treasury and government agency debt this year, more than double the $62.6 billion in all of 2011, pushing their holdings to an all-time high of $1.84 trillion.
Faced with a slowing U.S. economy, unemployment above 8 percent for more than three years and regulations forcing them to hold more and higher-quality assets, banks are lending at below pre-recession levels. The bond purchases help explain why even after rising this month, Treasury 10-year note rates are about half the 3.5 percent median forecast of 43 economists in a Bloomberg survey a year ago.
“Bank deposits continue to explode and in turn they continue to buy Treasuries as the economy loses momentum, inflation is trending down, Europe continues to hang over our heads and political uncertainty reigns” said Michael Mata, a money manager in Atlanta at ING Investment Management Americas, which oversees about $160 billion. “There is no reason for interest rates to climb in any meaningful way any time soon.”
…
Wily E. Coyote noticing that he’s off the cliff and that the fall is about to begin?
I thought Treasuries were “worthless IOUs” ?
Yeah, but as IOUs go, they’re the least worthless.
Actually, on days like today, you can make hefty capital gains on long-term Treasury holdings.
I thought Treasuries were “worthless IOUs” ?
Just those in the Social Security trust fund. Those held by the 1% are inviolable.
We have a winner.
Government sells bonds and spends the money into the economy. The money flows through the economy to the rich and Chinese, who put the money into banks. The banks use the money to buy treasuries from the government so that the government can spend again, so that the money can again flow through the economy to the rich and the Chinese, who again put the money into the banks, which again use the money to buy treasuries….
Surely, this one can last forever. That one where we were having the banks loan the money to households that couldn’t pay it back was doomed, but this one where we’re just loaning the money to the government can go on forever….
Right?
The Canadian real estate industry is in a tight spot these days.
With home-ownership rates headed for record levels and the federal government tightening lending rules to cool the market, the question now is whether we have reached the saturation point.
Bank of Nova Scotia economist Adrienne Warren says that when the latest census figures come out next month she expects us to be in the elite company — depending on your view — of countries with more than 70% of households owning their own homes. Based on the 2006 census, we were at 68.4%. “It’s similar to the U.S., U.K. and Australia when they came up with the mid-decade census,” Ms. Warren said.
And the commodities bubble is already popping…
In a country with massive amounts of empty land and cruel winters that can last up to 5 months.
The Canadian housing market is going to get crushed.
You will know when it is near bottom when American investors are flying up there to buy cheap housing.
CRUSHED
“In a country with massive amounts of empty land and cruel winters that can last up to 5 months.”
About 70% of Canadians live in metro Vancouver, Montreal or Toronto. Vancouver’s weather is like Seattle. Toronto’s is like Boston. Montreal’s is like Minneapolis. Cruel 5 month winters affect a miniscule % of Canadians.
Tard….
Because Boston and Minneapolis weather is wonderfully warm.
I’ll bet the Canadians, who make a point of saying how much better they are than Americans, are a bit peeved. I mean, eek! They’re imitating their Neighbours to the South!
The Canadian reprieve from the carnage is about over, as is their unprecedented currency parity.
America da stooopid
http://www.local10.com/sports/LeBron-sneakers-test-300-limit/-/1717082/16203796/-/basurmz/-/index.html
All I can say is, those sneaks better last as long as that pair of loafers that my mom bought me back in 1991. I think they’re Bass Weejuns, but I’m not sure.
Whatever they are, they just keep on kickin’.
Housing is a thoroughly criminalized market space.
Yes. Yes it is.
We are sold the worst possible obsolete technology for the highest possible price using the most byzantine processes and it’s… the law.
For Andy Polly and all those who are Always working at a great company with great benefits and no chances of layoffs….i present this…..
http://gawker.com/5927342/hello-from-the-underclass-unemployment-stories-vol-one?tag=hello-from-the-underclass
there are presently 6 installments….lets talk afterwards…
You seriously don’t remember that I was laid off from my last private sector job and was out of work for almost TWO YEARS?
What are you, dj? Stupid?
You go, polly! And remember, Slim has your back.
C’mon, dj, let’s go over to this corner and have a little talk. Here it is:
Even though times are tough, it doesn’t cost anything extra to be nice. We’re all family here, mmm-kay?
You seen too many episodes of SouthPark, haven’t you?
We put the ‘fun’ in ‘dysfunctional’.
By the way, I lived for those two years on 39 weeks of unemployment, the severance package I got from the employer that did the layoff (it was about 20,000 employees over the course of several years), and my own savings (never touched retirement money). During that time I also paid tuition for classes toward my masters degree, in part because I couldn’t stand to leave it half finished, in part because it afforded great opportunities to network with classmates and teachers, and in part because it kept me eligible to buy student health/dental insurance. I had paid off my law school student loans within three years of graduating which made living off savings a lot less burdensome.
Why do I get the feeling that I’m back in high school being scolded by the school librarian? I probably set the record for getting kicked out of the library.
I too was laid off from a private-sector job and was unemployed for a year.
I lost a house to foreclosure just a few years ago. I own a great company and I offer some benefits but I’ve seen incredible highs and extreme lows.
Well, the longest I’ve been out of work in the last 27 years since graduating high school is 4 weeks, April 15 - May 13th 2012. I have had good employer supplied benefits since joining the Navy 26 years ago.
I have been laid off twice.
Could I end up with a long-term unemployment? Yep. I’ve been very fortunate not to have been.
My wife, on the other hand, has never been laid off or been out of work.
It sucks to be laid off. I had it happen to me a few years ago. My boss was an ass. And he was an even bigger ass during the layoff. To the point people were looking at lawyers about a lawsuit.
Managed to get another job in a few months. With a better boss and better pay. So I can not complain.
Life sucks sometimes. Sometimes you just have to muddle through it.
It helps having no debt, some money in the bank and strong family and friends…
Excellent find, dj. This is EXACTLY what “the future belongs to Lucky Ducky” means.
And in Eddietard’s bubble universe, these people don’t exist…
That’s right, because they’re the Free Sh#t Army, and drive late model Escalades and gorge on steak and lobster while yakking on their iPhones.
The scary thing is that I know people like those in the article. Hanging by a thread, a couch away from sleeping on the street.
Except dj isn’t pointing it out to show how screwed people are. He is pointing it out because he wants us all to believe that the only reason he can’t get a job is because he doesn’t qualify to be an intern in the same places he worked for 20 years ago to get “recent experience” on his resume. And he wants us to believe that his horrendous attitude and unwillingness to commute or take an entry level position or treat HR people with respect or learn to write properly or any of his other faults could not possibly be to blame.
It’s so rare that we agree polly but in this case we do.
dj, you have to be a little more open minded and a little less bitter. A lot of us have had some really rough times. It’s how you act in those times that defines you. You don’t want your life to be defined as bitter do you?
I’m in no position to lecture or be self-righteous given how my life went for a time. I can say that if you work with an open mind toward a goal you may end up at your goal in a way that you hadn’t imagined before.
Yeah I’ve been a bad boy….rantin and ravin….I guess I’ll never get used to the dumbing down of our country….
People used to talk to each other,on the PHONE no less… you showed INITIATIVE if you applied in person for a job even if there weren’t any…..
All the things we were brought up to believe in and worked….all has been negated by the computer scanning for code words but they wont tell you what the code words are….
On one hand you have articles like this, yet when you get an interview its like talking to a wall, the person is so clueless about these things:
http://www.recruiter.com/i/the-work-ethic-of-millenials-and-how-to-recruit-them/
It’s so rare that we agree polly but in this case we do.
dj, you have to be a little more open minded and a little less bitter.
you showed INITIATIVE if you applied in person for a job even if there weren’t any…..
Lots of things used to be considered initiative and are now considered stalking.
Lots of things used to be considered initiative and are now considered stalking.
Funny. Reminds me of the time I was told that you have to make sure the interviewer knows that you want the job. The fact that you spent your time and energy going to the interview should make it obvious to them, I thought, but the opinion was that telling them showed a higher level of initiative, etc, etc.
Apparently I showed too much initiative as, after my concluding remarks, the interviewer said, “I get it. You really, REALLY want the job.”
I didn’t get the job.
So the job search skills you learned 25 years ago don’t work and you can’t learn the new ones? That is the only problem?
You live in NYC. There is more money sloshing around NYC than almost any place else in the country. You need to start your own business. Your attitude doesn’t lend itself to being hired to work for another person. I would recommend cat sitting with you promising to actually stay and play with the cats. You would have to film the play sessions and either put them on utube daily for the owner so they could know you were actually doing it or edit down to a nice montage so they could see their cat had some interaction while they were on their business trip or vacation or whatever. You seem to actually like cats and you know how to deal with cameras. You could bring in a pretty penny with insanely wealthy cat worshippers in Manhattan. Get a few clients and get bonded (against you ripping people off) and get started. You’ll have to deal with the commuting.
Oh, and the code words are easy. They are in the job description. Add a few other obvious ones (managed, accomplished, raised, efficiency, etc.)
Yup gotta learn to BS the airhead….time was you were EXPECTED to do the job near perfect…so all of this wasn’t necessary to explain in each painstaking detail…
——-managed, accomplished, raised, efficiency, etc
It isn’t an airhead, dj. It is a computer. You get past the computer to get your resume in front of the HR person who picks the best ones to send to the person who has control of the hire. And honestly, you don’t have enough experience to get through that process. You need a different way of doing it. Networking is the standard answer, but I don’t think you have the ability to work for another person at this time in your life. Even if you get an interview with a hiring manager, you aren’t going to get a job if you let them know that you are an “outside the box thinker” all the time. New hires fit in and learn the culture first. Try the business idea. Why should the dog people be the only ones who get screwed out of their money?
People used to talk to each other,on the PHONE no less
Yes, things change, but that doesn’t mean it’s getting dumber. Today I worked at home. The only time I was on the phone was to attend a coupe of meetings. When I interact with coworkers, often with more than one at a tim, and who are in multiple geographic locations, I use instant messaging. It also allows me to carry on more than one conversation at a time.
I also remember the days of picking up the phone and talking with people (I’m as old as you are). Now if I call a coworker, I’ll almost certainly get sent to voicemail, so I don’t use the phone. But if I IM them, I’ll get a response within a minute. And I use email for less urgent things.
You need to change.Things are not going to go back to the old way, it just isn’t going to happen.
you showed INITIATIVE if you applied in person for a job even if there weren’t any
Well, that’s changed too. You don’t apply in person for a job anymore. My son had a summer job at a retail chain. And he had to go online to apply for the job.
And in a way it makes sense. The store manager is too busy running the store to sift through a mountain of job applications. And the manager is especially too busy to deal with job applicants when there aren’t any openings. You might thing it shows “initiative” but to the manager you’re just an irritation. You might as well be a peddler, that’s how you’ll be seen, as someone wasting his or her time.
Yes it used to be a part of their job description….to sift through the resumes…
Its sad they way things turned out..even networking events.
——The store manager is too busy running the store to sift through a mountain of job applications.
here is one: How many will apply 10-20?
I even emailed and called the one i think it is….asking if they sold tv time….no answer…ill try another one tomorrow….simple ad….yet flat out no response….
Small TV Station Studio Operator/Engineer (Midtown)
Date: 2012-08-03, 3:15PM EDT
Looking for a studio engineer / master control operator for a small low-power television station. Practical knowledge of broadcast studio equipment, networking, PC’s needed.
Polly just gave you a GREAT concept and then spent another half hour of her valuable time explaining very concisely how to go about reorienting your expectations, and you DIDN’T EVEN BOTHER TO THANK HER!
Not only that, you completely ignored what she said then turned right around to complain and offer more pathetic excuses for yourself. And you wonder wants to hire you….
Oh i thank Polly for the advice….but i wished it worked….i would be so happy …unless you have a extremely specific resume like Bill in LA…..the new rules are SO damn Unprofessional its scary…
I was laid for 3 years the last time I was out of work. Sent out hundreds, and do mean hundreds, of resumes, Applied for everything including grocery sacker.
No dice.
Got a call from out of the blue on day and went to work for one of the biggest names in the industry. To this day I will swear somebody recommended me and isn’t telling me.
Keeps me humble (if you can believe THAT! :lol:)
I remember the days when sending out 100 resumes guaranteed you a job. Now? I sent out almost 500. Five. Hundred.
That’s 3 resumes every week. Would have been more, but there weren’t that many jobs I qualified for. I was lucky to FIND 3 a week I was even near qualified for.
“…it’s even harder if you don’t try.”
What’s really humbling is when you need to take your graduate degree off your resume, along with all of your senior/officer titles to dumb it down to compete for the job while not appearing overqualified.
turkey,
What industry/job are you in?
A friend took his BS, MS, and Ph.d off his application to work at a WalMart distribution center.
It was walking distance from his house.
Yep… The never ending tales of misery. We’ll all get there sooner or later. I figure I might have another year left at best.
So what’s going to occur first? Flat out revolution or the complete dismantling of the Ever Enlarging Credit Machine?
Sleepless: I’d rather not say. I prefer as much anonymity as possible on the Internet, which is scarce enough as it is.
Housing: I lived through the 1960s, though just a kid. Those protests and riots were NOT ALL about the war. Most were in fact about civil rights for poor people, not just minorities. I remember cities burning, not just Watts. All because of inequality. Economic inequality. I get very angry when I see people advocating for it all over again.
I remember the violence. It WILL happen again. The 1960s were not unique in American history.
No worries. After I hit ‘Add Comment’ I thought I should have included the “if it’s not intrusive” qualifier.
warning shot
“Warren Buffett’s Berkshire Hathaway ended its five-year bullish bet on the municipal bond market, disclosing in a recent quarterly filing that the Ohama, Neb., company canceled $8.25 billion worth of credit-default swaps that insured its muni-bond market wager, The Wall Street Journal reports. The Journal said it was unclear whether Buffett’s decision resulted in a profit or a loss and the 81-year-old Buffett declined to comment about the early termination of the contracts.
Does Warren Buffett’s exit from the municipal bond market portend more financial hardships for struggling U.S. states and cities?
Buffett’s move may very well signal his fear that more cash-strapped cities, states and municipalities will default on their debt, as The Daily Ticker’s Aaron Task and Henry Blodget discuss in the accompanying video. Local authorities have been making severe budget cuts (affecting both personnel and services) over the past two years to stave off bankruptcy but many are still short on funds.
Investors though have taken a positive outlook on the $3.7 trillion municipal market, pouring $964 million into municipal-bond mutual funds last week — the 18 the straight week of inflows. Investor appetite may be stronger for municipal debt than U.S. government bonds, but the tide could be changing after the Berkshire Hathaway disclosure.
I was never laid off or without a job. I always had standing offers to change employment at any time. I read about the downturns in the economy but never felt them. Lucky, right place, right time, right skills.
I had the right skills, so I was able to find new jobs within weeks of being laid off (twice in the past 12 years).
The first one was a real miracle as I was laid of days before 9/11. Talk about getting doors slammed in you face. Fortunately a friend helped me get a job. It was the crappiest job I ever had and paid 20% less than my old job. Clawing back and regaining that lost 20% was the hardest thing I’ve ever done. More often than not there were no pay increases. I was back to where I was before when HP cut every one’s pay and then fired up the layoff machine.
It’s been fun.
The last time I was “jobless” I wasn’t actually jobless. The paychecks just stopped coming in. At that point it becomes very easy to make the decision to go into business. You also learn to live a very low overhead lifestyle both personally and in your business.
marketwatch dot com
Market gains may hurt the case for QE3
August 21, 2012, 12:24 PM
One of the reasons stocks have recovered from their June lows to multi-year highs is the expectation that the Federal Reserve will do something big – like a third round of quantitative easing – to boost growth, thereby supporting equities.
But the circularity to that argument could lead to a big sell-off, said analysts at Bank of America Merrill Lynch led by U.S. economist Michael Hanson.
“With the equity market pricing in a significant chance of QE3, stock prices are no longer as useful a signal to Fed officials. Should the Fed disappoint at its September policy meeting, the risk of a stock sell-off is high,” they wrote in a note Tuesday.
“Some in the markets think that the Fed effectively targets equity prices, meaning that to predict Fed policy, one merely needs to track the US stock market. There is a curious circularity to this view, however: the Fed will not launch QE3 so long as stock prices are high, yet the stock market is high because it anticipates QE3.”
“True, the Fed wants to see financial conditions improve because this is a channel through which monetary policy has a positive impact upon the economy, including wealth effects and confidence. But Fed officials do not see targeting equity prices as even an intermediate goal of policy, let alone an end in itself.”
As for the Fed’s dual mandate – low inflation and maximum sustainable employment – inflation is a little low but would probably need to weaken to make a compelling case for QE3 next month, Hanson said. And payrolls growth is obviously still too slow.
“This mixed data outlook makes the Fed call for the September meeting especially close. There is little doubt for us that if the data resume sliding to the downside, the Fed will step in and ease further this year. Right now, however, we are in an anti-Goldilocks period in which the data are too hot for clear-cut Fed easing, but too cold to support a sustained rebound — anything but ‘just right’.”
“Meanwhile, discussions with investors suggest that the equity markets have not yet priced in the fiscal cliff or resumption of risks from Europe once policy makers there return from vacation. Our equity strategists have highlighted downside risks to the equity market, now that the S&P 500 index is within striking distance of their year-end target. Another on-hold Fed meeting — or even an extension of the forward guidance when the market really wants QE3 — could be a catalyst that begets a sell-off, in our view.”
– Deborah Levine
“The top 10 States With Rising Foreclosure Rates“
http://www.realtytrac.com/images/affiliates/Foreclosure_Rates_Top_10_States_First_Half_2012.jpg
It’s the usual suspects and rounding out the top 3 are NV, AZ and GA.
We’re number two! Woo!
It appears that 1.55 percent of CA housing units received a foreclosure filing in the first half of 2012. That doesn’t sound like much, until you take into consideration how many housing units are in the largest U.S. state — 13,680,081 according to the 2010 census.
1.55 percent of 13,680,081 is 212,041 additional homes in the California foreclosure pipeline as of the first half of 2012.
That’s massive…. .massive. I would be expecting much on the sale of a house in California over the coming years.
Correction: I WOULDN’T be expecting much on the sale of a house in California over the coming years.
Just adding my $.02 to the Trader Joe’s discussion from yesterday.
“There are any Trader Joe’s in Utah either. I think it is because you can’t sell wine outside the state liquor stores. I love them for dark chocolate and Kefir.”
Actually TJ’s will open shops that cannot sell alcohol. We have three in Kansas City. The two on the MO side sell wine. The one on the KS side does not. All seem to be very packed all the time. (And I am so happy they opened them!!! Even if they are 2 hours away.)
The decision to open a store has a lot to do with their shipping process - it has to be economically feasible to open a new store and within a certain distance of an existing one in order to route the trucks there.
They are expanding, although slowly, and are making progress into other states. But if you don’t live near one, don’t hold your breath on getting one anytime soon.
I’m just hoping Joplin is close enough to KC to open one there soon!
With the exception of the “wine only” store near union square none of the Trader Joe’s in New York/New Jersey seem to have wine.
Yesterday I bought an HP cartridge on line for $25 and the staple price was $156. Yes it is a compatible cartridge and they work fine. I saved over a hundred dollars. Staples and office max are the next to go down. There are too many of these stores within a few miles of each other, mostly empty with high prices. Are you listening Sears ?
Best Buy 2Q profit drops 90 pct, misses estimates
NEW YORK (AP) — The news just keeps getting worse at Best Buy each day.
To top off an already eventful several days for the nation’s largest consumer electronics retailer, Best Buy Co. withdrew its full-year earnings guidance Tuesday after reporting a 90-percent drop in net income during the second quarter, dragged down by restructuring charges and weak sales.
http://www.google.com/hostednews/ap/article/ALeqM5gWzYEfVTfgHZd02Qb7rkje2lQYfQ?docId=b8fa16db785342ce9f4938dfac6d8fa7
Staples and office max are the next to go down. There are too many of these stores within a few miles of each other, mostly empty with high prices.
Here in Tucson, I’ve never seen any of the Max/Depot/Staples stores in anything other than a ghost town state. It’s as if I’m walking into my own personal big box store.
SEC issues first whistleblower award
NEW YORK (CNNMoney) — The Securities and Exchange Commission announced Tuesday that it had granted the first whistleblower award under a new program to a witness who helped stop a multi-million dollar fraud.
The agency did not identify the whistleblower or the case in question, but said the person will receive an award of $50,000. That equates to 30% of the total penalties collected so far by the SEC in the case, the maximum percentage allowable by law
http://money.cnn.com/2012/08/21/news/sec-first-whistleblower/index.html
How does this news play into the consumer confidence recovery mantra?
Best Buy profit plummets 91%; earnings projections suspended
Electronics retailer Best Buy’s second-quarter revenue falls 3% and its stock hits a nine-year low a day after the company named Hubert Joly as its newest CEO.
…
I’m seriously thinking about buying next June no matter what the case, and if the market goes WAY down, just balk… take my 3-5 years of no payments and bank it for the deficiency judgment and buy something else, cash.
The game is changing.
http://www.theroot.com/blogs/paul-ryan/does-paul-ryans-black-girlfriend-matter
‘Ryan said he has a black sister-in-law, but perhaps even more interesting, his “college sweetheart” was African American.’
Being a supposed libtard, this information increases the chances I will vote for R&R.
What about you, Mr. Smithers from Atlanta?
P.S. I never dated a black woman, but one of my sisters had a long-term relationship with a black man. And I had several black roommates in college, which was most interesting, as one was Nigerian and the others were American. There was a huge cultural difference between the Nigerian and the American blacks.
Ill bet the Nigerian spoke better English then the American one.
Spot on! And he also took his turn cleaning up the kitchen…
NOT AN ANTI-ROMNEY POST, BUT:
2012 US Presidential Election Winner Takes All Market
Summary of Iowa presidential election futures market indicator:
1) The gap in Obama’s favor is ever-widening.
2) All the Wall Street money and Republican propaganda in the world doesn’t seem to be able to stop it.
Nobody put a gun to Geithner’s head and made him take the job.
Tim Geithner: Washington’s Whipping Boy
Aug 6, 2012 1:00 AM EDT
The Treasury chief won praise for helping to stem the 2008 economic crisis. Has he lost his touch? Daniel Gross on the book that’s threatening to derail the finance star’s legacy—an acid-drenched rebuke from the former inspector general of TARP.
Timothy Geithner tried to talk Barack Obama out of appointing him Treasury secretary in late 2008. Along with Federal Reserve chairman Ben Bernanke and President Obama’s all-star team of advisers, Geithner was a core member of the rescue team that won the financial crisis of 2008–09. The TARP programs, market interventions, and the stimulus of 2009 stopped the panic, halted the economy’s cataclysmic fall, and created the conditions for growth. “At the New York Fed and following at Treasury, Tim’s actions have been heroic,” says Roger Altman, a former deputy Treasury secretary and the current CEO of investment bank Evercore. “I think that history is going to view the response of the U.S. to the credit market collapse of 2008 as a historic and textbook response.”
But since late 2010, the narrative surrounding the group that author Noam Scheiber dubbed “the escape artists” has been less about winning the economic crisis and more about them losing the recovery. Most of the members of the brainy, contentious Obama financial team—economists like Larry Summers, Peter Orszag, and Christina Romer—came and went rather quickly. But Geithner, whose involvement in the rescue efforts predates the Obama administration (he was president of the New York Federal Reserve when things went south in 2008), is one of the only members of the economic team to stay for the duration. His reward for sticking around? Slogging through a subpar recovery, grappling with politically imposed debt crises, and trying to cajole Europe into acting to prevent its own meltdown. Oh, and shouldering a share of the blame as the administration threatens to snatch economic defeat from the jaws of its early financial victories.
“We still have an economic expansion that is pretty broad based and looks pretty resilient given how broad those constraints are,” Geithner tells Newsweek, stopping to talk after a flight from Europe—where he had been trying, for the umpteenth time, to convince European central bankers to decisively tackle their sovereign debt and banking crises. “I don’t believe it’s fair to put responsibility for the headwinds or congressional constraints on the president.” *
Geithner continues to serve as a lightning rod for criticism aimed at President Obama. Now comes Bailout, the New York Times–bestselling memoir by Neil Barofsky, the former inspector general for the TARP program. The acid-drenched polemic pins much of the administration’s failure to fix the housing mess on Geithner. “From my experience, he was incredibly dismissive of dissenting views,” says Barofsky. “We could not have a respectful disagreement on an issue like transparency in how banks use TARP funds.”
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Neil Barofsky’s book rocks. I just finished it.
The LOL-est part was when he felt snubbed at a hearing. Someone with lower rank was put in a higher place than he was. And he got his back up. Oh, did he ever.
Then he went home, confessed to his wife that he’d gone native when he pulled rank at that hearing. Wife agreed. He also said that it was time to get the heck out of D.C. The wife heartily agreed.
Neil was back home in NYC a few months later.
BUY! BUY! BUY!!!
SELL! SELL! SELL!!!
Churn’m and burn’m…
Aug. 22, 2012, 1:14 a.m. EDT
Asia stock markets pull back after gains
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Jeffrey Sica: Look for selloff, soon
By Sarah Turner, MarketWatch
SYDNEY (MarketWatch) — Asian stock markets headed lower Wednesday, pulling back after recent gains as earnings and weak Japanese trade figures dented sentiment.
Japan’s Nikkei Stock Average traded down 0.3%, South Korea’s Kospi lost 0.7%, and Australia’s S&P/ASX 200 index declined 0.1%.
In the Chinese markets, Hong Kong’s Hang Seng Index fell 0.8%, while the Shanghai Composite index slipped 0.4%.
The drop came after U.S. shares ended with losses Tuesday, even after rising to touching distance of multi-year highs during the session.
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U.S. News
Possible Relief for Troubled Homeowners
Homeowners whose property values have fallen could have an easier time selling the home for less than the outstanding mortgage amount under changes to be announced by a federal housing regulator. Alan Zibel has details on The News Hub. Photo: Bloomberg.
8/21/2012 4:43:12 PM2:31
Lingering irrational exuberance is a great contrarian indicator — for a future stock market crash!
Aug. 22, 2012, 12:01 a.m. EDT
May-June correction was a failure
Commentary: Enthusiasm was not reduced by the correction
By Mark Hulbert, MarketWatch
CHAPEL HILL, N.C. (MarketWatch) — Surprised by the Dow’s continued inability to close above its early-May highs?
You’re not alone: Tuesday was the 11th day in a row in which the Dow was less than a percentage point away from eclipsing its May 1 closing high of 13,279. And it was the 11th day in a row in which it failed.
Contrarians, however, have not been surprised by the Dow’s difficulties. For a number of weeks now, contrarian analysis has suggested that the rally is living on borrowed time. ( Read my Aug. 8 column. )
And recent developments have only reinforced the contrarians’ concern.
Consider the average recommended stock market exposure among a subset of short-term stock market timers (as measured by the Hulbert Stock Newsletter Sentiment Index, or HSNSI). On Tuesday, when the Dow Jones Industrial Average rose above its early-May high on an intra-day basis but ended up closing well below it, this average stood at 53.1%.
On May 1, in contrast, the day on which the Dow closed at what so far has been its bull market high, the HSNSI stood at 42.1%. This 11-percentage-point difference is one measure of how much more optimism there is today than at the May market peak.
And contrarians do not consider excessive optimism to be a good sign.
An even starker picture of excessive optimism is painted by those market timers who focus on the Nasdaq market in particular (as measured by the Hulbert Nasdaq Newsletter Sentiment Index, or HNNSI). This average today stands at 58.8% — exactly double the 29.4% that prevailed on the day of the bull market high in early May.
These sentiment comparisons show that the stock market’s May-June correction failed to do what corrections are supposed to do — wring some of the optimism and enthusiasm out of the market, thereby giving it better odds of rallying to a new high after recovering from the correction.
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ft dot com
Markets Insight
August 21, 2012 2:36 pm
Beware the Faustian bargains of central banks
By Scott Minerd
In Goethe’s 1831 drama Faust, the devil persuades a bankrupt emperor to print and spend vast quantities of paper money as a short-term fix for his country’s fiscal problems. As a consequence, the empire ultimately unravels and descends into chaos. Today, governments that have relied on quantitative easing instead of undertaking necessary structural reforms have arguably entered into the grandest Faustian bargain in financial history.
As a result of multi-trillion-dollar quantitative easing programmes, central banks have compromised their ability to control the money supply, making them vulnerable to runaway inflation. When interest rates rise, the value of central bank assets could fall below the face value of their liabilities, potentially rendering them incapable of protecting the purchasing power of their currencies. To better understand the potential consequences of quantitative easing, it is useful to review the historical evolution of central banking. Early central banks were essentially clearing houses for gold. Individuals and trading companies placed their bullion on deposit and received a claim that could be redeemed upon demand. The system’s strength was largely derived from its simplicity. Today’s global monetary system, by contrast, has virtually no gold backing and depends entirely on faith that central bankers can control the supply of paper money.
When founded in 1913, the Federal Reserve’s definition of eligible reserve assets was extended beyond gold to include short-term bills and then in the 1930s, Treasury securities. The problem with using Treasury securities as a reserve asset is that, unlike gold, Treasuries have duration. This means that in a rising interest rate environment, the value of the Federal Reserve’s asset portfolio could potentially decline below the face value of its liabilities (Federal Reserve notes).
In 2008, just before the first of two rounds of quantitative easing, the Federal Reserve had $41bn in capital and roughly $872bn in liabilities, resulting in a debt to equity ratio of roughly 21-to-one. The Federal Reserve’s portfolio had $480bn in Treasury securities with an asset duration of about 2.5 years. Therefore, a 100 basis point increase in interest rates would have caused the value of its portfolio to fall by 2.5 per cent, or $12bn. A loss of that magnitude would have been severe but not devastating.
By 2011, the Fed’s portfolio consisted of more than $2.6tn in Treasury and agency securities, mortgage bonds and other fixed income assets, and its debt-to-equity ratio had dramatically increased to 51-to-one. Under Operation Twist, the Fed swapped its short-term securities holdings for longer-term ones, thereby extending the duration of its portfolio to more than eight years. Now, a 100 basis point increase in interest rates would cause the market value of the Federal Reserve’s assets to fall by about 8 per cent, or $200bn, leaving it insolvent, with a capital deficit of about $150bn. Hypothetically, a 5 per cent rise in interest rates could cause a trillion dollar decline in the value of the Federal Reserve’s assets.
As the economy continues to expand, the Federal Reserve will eventually seek to normalise monetary policy, resulting in higher interest rates. In this scenario, the central bank could find that the market value of its portfolio has declined to the point where it no longer has enough sellable assets to adequately reduce the money supply and maintain the purchasing power of the dollar. Given US dependence on foreign capital flows, if the stability of the dollar is drawn into question, the ability of the US to finance its deficits may falter. The Federal Reserve could then find itself the buyer of last resort for Treasury securities. In doing so, the government would become hostage to its printing press, and a currency crisis or runaway inflation could take hold.
To hedge against deterioration in the dollar’s purchasing power, investors have already begun migrating towards hard assets such as gold, commercial property, and artwork. Other assets likely to perform well in the immediate term because of the effects of quantitative easing are credit-related instruments including bank loans and asset-backed securities. European equities are likely to outperform US equities over coming years because of ongoing balance sheet expansion by the European Central Bank. Long-duration, fixed-rate assets such as government bonds are likely to underperform in the years ahead, indicating that now may be a better time to sell Treasury securities than buy them.
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Always seemed that the Fed was reducing their own flexibility by going longer through operation twist…interesting to see numbers put to the risk…