Bits Bucket for September 16, 2012
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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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That a poll came out that shows Romney has a 0% share of the African- American vote to help him ,bothers my thinking a bit. It seems it cannot be quite that bad, (Somewhere under the 1% mark counts as 0).
I personally am in contact and work around a good number of African-Americans ,and have not been made aware of any that even remotely support Romney .
What happens if he does go on and win it , will an entire American ethnic group be out in the Cold ?
“What happens if he does go on and win it , will an entire American ethnic group be out in the Cold ?”
They’re already out in the cold. Any polarized group gets nothing from either side. The only people who ever get anything are major financial donors (aka legal bribes) and the “fence sitter” “swing voters”.
Step away from the race lightning rod and think about it WRT a boring demographic group… what do school teachers get? The R’s know they’ll never get a vote from a teacher so they ignore them. The D’s know they’ll get all the votes so they ignore them too other than a couple speeches. You don’t win by inflaming the extremists… you win by making the swing voters happy.
Which leads to the obvious corollary that for most people, voting is a waste of time.
Why there are endless R v/s D debates here is just mind-boggling to me!
It distracts the lemmings. And it works….
Check it out.
http://imageshack.us/a/img688/2484/40973600.jpg
I like the graphic. I particularly like the “sfrenter” one because of technical reasons. (I couldn’t care less about D in Phoenix for reasons to be explained below.)
sfrenter (can you say sufferenter?) is a school teacher. Ponder that. A job that most college graduates can do.
Now, I understand seniority and unions and all that stuff but it has no economic moat.
Introduce technology.
One would assume that the sufferenter would know something about that because she lives so close to Silicon Valley but apparently not.
Teaching is going online. Whether anyone likes it or not, that’s the future. All teachers (including college professors) are gonna taken out behind the woodshed and shot like rabid dogs.
However, the debt shall live on.
Ponder that.
OMG — that is awesome.
Were those captions part of the original cartoon?
Schools are not about teaching, not now anyway. You forgot the daycare aspect of schools. As society gets poorer and poorer, parents will struggle with multiple jobs with long commutes requiring more babysitting. This is where schools come in with meals and etc.
“(I couldn’t care less about D in Phoenix for reasons to be explained below.)”
Please explain (waits with baited breath).
Please explain
A meal that costs $100 should be evaluated with more care than than one that costs $10?!?
Just look at the relative numbers (including ability to pay.)
If you’re borrowing money from the local city government with a “promise” that it will be forgiven, where does that leave you when that “promise” shall inevitably be reneged upon?
I see dark times for sufferenter. Alpo-laden dark times (after an inevitable foray into bankruptcy court.)
Incidentally, for all you Horatio-Alger-types, W00-H00-happy-clappy types, stating the blunt truth doesn’t make you a “negative” person (whatever the heck that means.)
“Teaching is going online. Whether anyone likes it or not, that’s the future. All teachers (including college professors) are gonna taken out behind the woodshed and shot like rabid dogs.”
Probably one-third of today’s kids go to school to get their three nutritious meals, and give the teachers a chance to look for bruises or other signs of a dis-functional home. How is an iPad app going to replace this necessary service?
Probably one-third of today’s kids go to school to get their three nutritious meals, and give the teachers a chance to look for bruises or other signs of a dis-functional home. How is an iPad app going to replace this necessary service?
Ability to pay.
Also known as “property taxes”.
Also known as shrinking numbers (in real-terms) in a globalized world.
My grandson started K5 last week. His homework is an online teaching game. At five, he needs a ipad to learn his numbers. The advantage of the classroom is still evident in that he has brought home his first cold to share with all of us, and told his first off color joke.
Now that’s wrong Blue…not using a pencil and paper to figure these things out leads to pathetic employees who can’t add or subtract when the cash register or software goes down….
“employees who can’t add or subtract when the cash register or software goes down….”
Nothing new about that. I recall as a kid being in a Woolworth’s (remember those?) with my father. The teenaged clerk rang up $4.53 so my father gave her a five and three pennies. She was completely stumped. And this was in the mid sixties, when our educational system was supposedly so much better. Math is hard.
” The teenaged clerk rang up $4.53 so my father gave her a five and three pennies. She was completely stumped.”
Nation shocked to discover that half of all people have below median IQ. President demands more education for math and science education to lift everyone to above median IQ.
You can easily have 90% of an population do arithmetic. You don’t need to be “above-average” IQ for this.
This is typical of Darrell’s “thinking”.
I’d bet on the Chindians over this burger-flipper’s “thought processes.”
sfrenter (can you say sufferenter?) is a school teacher. Ponder that.
And is paying a mortgage/taxes less than renting, with almost nothing down in a no -recourse state.
Ponder that.
“And is paying a mortgage/taxes less than renting, with almost nothing down in a no -recourse state.”
You know that isn’t true so why say it?
exactly. There are many black people who do not support Obama’s policies and considered him a hoax from day one. But I think having a black president and being disapointed is a phase black people needed to go through and the way to getting where they are supposed to be.
Can you tell us which policies that “many black people” wanted but Obama didn’t support?
http://www.youtube.com/watch?v=Bg98BvqUvCc
“Can you tell us which policies that “many black people” wanted but Obama didn’t support?”
You got it backwards Oxide. Bammy pushes policies that work against black people because he knows black people will support him because he is the 1st black president.
“Gay marriage” is an example. Black people don’t want that.
I went to a black church 2 months ago and during the serman, the black preacher began a diatribe about all the pathology affecting the “black community”; HIV, dropouts, drugs, unemployment, single moms, bastard children…
And at the end he say, something to the effect of “thats why we gotta vote for Obama…
(((shakin my head)))
Afterwards, I asked one of the members how they could support a president and a party that is 180 out from everything the church stands for?
The old man had no answer, he didn’t even try to defend it.
Sometimes I get sick of black people and think we deserve whats coming to us. Government is not your family. Government is not your daddy. Government does not give a F—! about you.
We are like drug addicts who need larger and larger injections of “government programs” that provide less and less of a return; other than to produce more “drug addicts”.
But as I said before, maybe this is a phase black people need to go through in order to get to where they need to be.
Spook post this and your people go bonkers…
Every American who isn’t blinded by political correctness knows that a very large percentage of the black community is uneducated, violent, feral, and de-evolving before our very eyes.
Even Mr. Bill Cosby acknowledged this when he stated: “Black on black crime, drug and alcohol abuse, and a stubborn proclivity towards embracing the most ignorant and juvenile, criminal and self defeating culture and mentality, has done more to to hurt black people than anything ole Whitey ever did.”
These facts are not “racist”, they are reality:
► Fifty percent of all of the homicides in America are committed by young black males, who make up just four percent of the total population.
► Almost seventy-five percent of black babies are born out of wedlock. That means the taxpayers are stuck paying for all of the associated health care costs.
► Millions of young Mexican men travel thousands of miles from their homes in Mexico to get jobs in America, yet young black men can’t seem to find jobs….why?
Honorable black men and women struggled for years to obtain their civil rights, so why do today’s blacks ignore their civil responsibilities that are associated with those rights?
This kinda logic is basically the same as saying that rich gay people should basically abuse black folk.
Wait! that’s exactly what’s happening. Rich homos in NYC no longer support a lot of efforts, for example, the Pride Parade.
Ditto for teachers. They have no kids so why do they care about teachers and unions?
The public opinion has already turned and nobody cares about the poor Southerners (black or white) anyway.
The tides are changing but the wealthy gay community (simple equation: two incomes, no dependents!) has far far more in common with classical R tropes. The D party gets a D because they are really behind the curve here.
It’s coming slowly but surely. You heard it here first from FPSS!
Thats why Faster i never understood why Repubs are so against gay marriage and the JOBS it would create……gay people will spend spend spend on parties
Only government could create a scenario such as this:
http://www.youtube.com/watch?v=bavou_SEj1E&feature=related
Black people could/would NEVER create such Frankenstiens on their own. This is what happens when you remove the men and replace them with government.
You white people better do something because you are next!
The gay couple who live door to my brother and his family have three kids. So do my uncle and his husband. On average are gay couples less likely to have kids? Yes, of course. For one thing, they have to go looking for the other gamete rather than having it close by. For men, they have to rent a uterus either directly or by adopting kids who already exist. But the situation isn’t that simple.
But the situation isn’t that simple.
Correct, but we’re talking odds about likely political developments here not permanent truths.
There is a massive divide between the gays that have kids and those that don’t either just in case your uncle didn’t mention it to you or elided over it.
Simply put, one set is unwilling to either pay for or make compromises for the other.
And this doesn’t seem to be a gay issue either. Google for “take back the island” to see how it plays out (quite brutally) in the straight world, for example.
I heard an interview on NPR with a woman from a middle/upper middle class part of Los Angeles that was mainly African American. She was at a Barak Obama fundraiser. The quote from her was something like “I’m not voting for him because he’s…well, of course I’m voting for him because he’s black!”
That appeared to be the deciding factor (or at least a BIG factor) in her decision. I’m not saying that she hasn’t voted Democrat her whole life, but I’m willing to bet that a non-trivial number of Republican-leaning African Americans in the US are voting for Obama this election for reasons other than policy.
Are such black people racist?
There were probably a noteworthy number of Republican Catholics who abandoned their party to vote for JFK in 1960. There are probably also Democratic Mormons who will do the same to vote for Romney this year. It’s not really a particularly interesting phenomenon.
Bill:
The whole trayvon incident was about releasing all the black racists out in the public..( they used to stay in the closet). It was shocking to see so many many many of them…
Are such black people racist?
the wealthy gay community (simple equation: two incomes, no dependents!) has far far more in common with classical R tropes.
Bull.
In the years I have been reading the HBB, this is the most ridiculous, idiocy-laden discussion I have ever seen. You can always find some idiot from any group you want to name to stick a microphone in front of them, and get stupidity. I assumed those on the HBB were smart enough to realize such tricks of the MSM. Instead, I learn many of you actually seem to use such tricks yourself. Total idiocy.
How many dirt-poor Appalachian whites vote Republican? You think they do so because they think Republicans are consistent with their economic interests? Or, might it have something to do with poor whites’ concern that Democrats might actually support blacks receiving rights in America? (NOTE: I did NOT say democrats do this, I said Appalachian voters seem to THINK democrats do this, which makes many of them vote Republican).
In fact, since when have voters needed a “good” reason to vote for anyone? Two hundred years of white presidents, and only NOW is it the case that racism might matter in deciding how people vote? You mean we’ve had 200+ years of presidents, and there’s NEVER been a black, woman, Jew, Asian, Latino/a, or any other category of person more qualified than the old white stiff some party tosses up for people to support? And all those selections of white males, usually tall, over all those other qualified potential leaders never ever EVER had anything to do with racism, sexism, or antisemitism?
You people really kill me. I personally am not planning on voting for Obama, by the way, because of his attack on civil liberties. But, to suggest that blacks are somehow racist for supporting Obama (especially given the alternative in this election), and then to act as if racism has never been a part of politics, to salivate uncontrollably and judgmentally at the prospect that blacks might vote for a candidate without listening to whites’ claims about him — as if whites ALWAYS listen to black’s claims about white candidates — is just to prove that racism is alive and well in America. It proves it because, once again, a double standard is applied — whites voting for white candidates so much that in 200+ years only 1 non-white candidate has ever received a major party nomination is NOT racism, but blacks supporting that ONE candidate, after voting for over 100 years for white candidates, IS racist. Totally stupid.
IAT
IAT,
Rant of the month. Right there. Well done!
voting is a waste of time.
Why there are endless R v/s D debates here is just mind-boggling to me!
Look at the Citizens United SCOTUS decision and other recent 5-4 rulings. Look at their implications. Look who nominated the 5. Your mind should become far less boggled.
I think FPSS’s point was that the share of the U.S. electorate that actually has a marginal effect on the election outcome is extremely small. If you are not in a swing state, you could individually stay home on election day and have no effect on the outcome. For instance, whether I, as a citizen of the People’s Republic of California, vote for Romney or for Obama will have no effect whatever on the outcome, as California is going to Obama, no matter how I vote.
If you are not in a swing state, you could individually stay home on election day and have no effect on the outcome.
In a popular vote, would your vote matter more? Only if the election were decided by one vote. What are the odds of that?
And aren’t there other races to vote on at the same time as a presidential race? Like the POPULAR vote for your local congressman?
“In a popular vote, would your vote matter more?”
Yes, in a probabilistic sense, in exactly this case:
“Only if the election were decided by one vote.”
“What are the odds of that?”
Higher than you apparently believe. Most elections split the vote quite evenly, based on the principles of the Hotelling location model.
Higher than you apparently believe.
Can you name a single presidential election in US history in which one candidate received only one popular vote more than his opponent? No? Never?
Then it must not happen that often.
Interestingly, though, it wouldn’t surprise me if, as various ethnic groups in the country grow, this might finally lead to actual third, maybe fourth parties, along ethnic lines.
And instead of being a country of melted together immigrants, we will devolve into a rival tribal society. No thanks. I prefer the Dumb and Dumber system.
Will devolve?
further
It can’t happen. For that, you’d need a parliamentary system.
There’s a classic game-theoretic paper which explains why this is the case.
It’s by Maurice Duverger first published in 1972. I’d read that before making any bets.
Parliamentary systems finalize their coalitions after the election. We (sort of) finalize our coalitions within the major parties before the election. If your party/candidate doesn’t care much about having influence on policy, it/he/she doesn’t have to participate.
You could have instantaneous run offs (where you vote for your preferred party and then choose a back up in case your preference didn’t get into the top two) where a lot of people would choose their preferred small party as a first choice and their preferred “mainstream” party as a back up. That would at least force the big ones to acknowledge who is in their coalition with real information. It might become an entirely different system over time. It also isn’t going to happen. You have to have direct election of the president by popular vote to start with and that isn’t happening either.
Either way, absent change of system, Duverger’s model rules the roost.
Which explains the two-party system.
Why are people here so anti-intellectual? Shouldn’t everyone actually go read these references?
The only Fair way Faster is to publicly finance elections and give all parties the same amount of money….
Yes even the commies, right to life, the libertarians, the greens all get the same amount to spend as long as you are on all 50 states ballots….
Everyone starts with say $20 million, then whoever runs out of money firsts and asks for another $10 million triggers everyone getting that $10 million…..and so on
Money management would be extremely important…do you want you opponent getting more money???
No more wasting time on fundraisers or lobbyists….no personal or corporate giving of money to candidates…nothing….they actually could spend time listening and helping the rest of America which really is their job…
Give everyone the same amount of money…
There isn’t just money spent, but “in-kind” contributions like favorable media coverage (please don’t tell say they aren’t slanted) and time/money spent by groups on the candidates behalf.
In my view, candidates should be able to raise everything and spend everything they can. At least that will be out in the open.
but “in-kind” contributions
Sort of like the radio ads that start off “The Obama Administration is putting pressure on lenders to help keep homeowners in their homes…”
Before that it was Internt ads “Obama wants moms to go back to school!”
Did any of that have to get reported?
So everyone here spent an insane amount of time talking complete dogsh1t garbage.
Did anyone go read Maurice Duverger’s paper? (Hint: It’s free and online.)
If it were legal, you would be top on my priority for varmint-elimination!
Good reference FPSS.
Something that is also found in most group dynamics.
“Maurice Duverger’s paper”
This one?
Maurice Duverger, “Factors in a Two-Party and Multiparty System,”
in Party Politics and Pressure Groups
(New York: Thomas Y. Crowell, 1972), pp. 23-32.
Why are people here so anti-intellectual? Shouldn’t everyone actually go read these references?
IDK. Maybe many tune you out. Maybe many believe your boorishness is boring.
“The R’s know they’ll never get a vote from a teacher so they ignore them.”
It’s much worse than that. Since they belong to public sector unions, teachers belong to one of the Republicans’ demonized groups.
How ironic that the Repubs are taking the same position on this issue as FDR.
From Politico - Obama ‘fear’ driving social conservatives:
“Fear of President Barack Obama — not enthusiasm for Mitt Romney — is driving religious conservatives to pull the lever for the GOP nominee this November.
Romney — a former Massachusetts governor who came late to the anti-abortion rights cause — was never a favorite of evangelical voters during the Republican primaries, and their love for him hasn’t grown much now that he has officially become their party’s standard bearer, as judged by interviews with two dozen conservatives at the Values Voter Summit in Washington this weekend.
“It’s not excitement, it is fear — fear of the other guy,” said Dolores Taylor, 69, of West Harrison, N.Y., explaining why she will vote for Romney over Obama in November. “Excited doesn’t seem to be the right word — I’d say energized, because I’m so angry about what’s going on.”
Jackie Lewis, a woman from Ashburn, Va., echoed those sentiments, calling the motivating factor behind her decision to back Romney “total fear”of the incumbent.
“We can’t take four more years of this,” she said.
Fear of a second Obama administration was a centerpiece at this two-day confab of social conservatives a little less than two months before the election. Romney did not attend the conference — and perhaps demonstrating their mixed feelings about the GOP standard bearer, the speakers didn’t mention him until halfway through the first day — but Ryan, a fiercely anti-abortion rights Wisconsin lawmaker who is Catholic, did.
Conservatives attending the conference said they worried about a range of things during a possible Obama II, from implementation of the president’s health care law, and a move to what they saw as more “socialist” policies to the end of the very values — including the protection of life and traditional marriage — that they came to the summit to support.”
So…. we have to vote for Romney, because otherwise Obama will be forcing people to have abortions and forcing people to marry people of the same gender?
Oh…. fear he’ll allow people to have abortions and allow people of the same gender to marry….
Yeah, we can’t have any of that personal freedom.
No we have to vote for Romney because Obama will push the country to bankruptcy / default / Greece happiness much more quickly than the Republicans.
Oh! There you have it. I like to keep my own money and not support freeloaders so I must be a “fearful” racist, bigot, homophobe who with others “vote against their own interest.”
And yet, total debt (public and private) increased at the fastest rate under Reagan than it is under Obama. Pretty much doesn’t matter what you use as the denominator…. total debt outstanding, population x median household income, GDP…
Real (inflation/householdXincome/GDP/debt outstanding adjusted) total debt increased WAY, WAY faster under Reagan than it has under Obama.
Darrell the two major party candidate are Obama and Romeny not Obama and Reagan.
Obama = more Reagan
Romney = more, more, more Reagan
No we have to vote for Romney because Obama will push the country to bankruptcy much more slowly than the Repubs.
“We can’t take four more years of this,” she said.
My advice: Start drinking heavily.
Have a glass of wine just to my right, and it is only 2:21 p.m. PST.
Arizona Slim’s Radio Update: Be sure to tune in for my “Soul for Your Sundown” show this afternoon on my beloved community radio station, KXCI-FM 91.3.
Not here in Tucson? Well, that doesn’t let you off the hook. You can listen to the live web stream!
I might add that KXCI is in its fall membership drive, so you’ll hear me and the station’s community engagement director asking for money.
Don’t worry. It will be painless. And you know you don’t want to miss hearing Arizona Slim asking you to share some of that monetary love.
Yes, not only Slim this afternoon, but Sister Shirley this morning.
Slim, thanks for the reminder and tell SS I love her show.
One of the more interesting things about QE3 (QE∞?) is that it acts as a price-support mechanism for certain kinds of bonds.
As in go ahead and speculate, you have a stop-loss.
Everyone’s too busy discussing the day of reckoning but that can be very very far off. Look at Japan.
Discuss.
The Japanese had an advantage or two. One has been that al their export customers were in expansion mode for most of their “crisis”. Just a thought.
The US has an advantage too. It’s population is vastly more productive at a relatively lower debt-level than most of the debt-laden world.
You’d be seriously shocked to see numbers from the BRIC countries. Take a look.
I have. I do not think the US will get the worst end of it.
Japan was also different in the compliance of it’s population. Makes the suffering go on and on and on.
LA and NYC (in that order) have the largest Japanese-speaking populations outside of Tokyo.
Just like the Irish classically, the best of the lot have escaped to build better lives. They know they have no future in Japan.
I should know. They are my friends. (I speak Japanese.)
Incidentally, if we are going to talk about economics at a micro-scale, it’s very good news. In the last 4-5 years, there have been more innovative Japanese restaurants opened in NYC than ever before. Not fancy ones, dirt-cheap ones. Overnight, all the so-called fancier ones have been forced at gunpoint to up their game or go bankrupt. The new generation knows a few things and adaptability seems to be the name of the game.
Capitalism is still thriving.
Does deflation really inflict suffering to Mrs Watanabe*, who is sitting on a horde of cash that appreciates in real value?
* That’s an example of a metonym, in case you missed my meaning.
I had a classical education.
I know my metonym’s from my anacoluthion’s.
F you very much! (and that F is not terribly classical.)
FPSS, if you thought that clarification was aimed at you, then you underestimate my estimate of your education.
Fair enough.
We need more laughs in this place. Or more tomatoes.
Did your classical education also teach you the proper use of the apostrophe, or is that simply another of your charming affectations?
Affectation plus laziness.
Lady, you slay me!
Kiss kiss, pussyboy, (and throw me some-a them ripe tomaters).
Was going to say “another of your charming anacoluthions”, but figured that would sound too affected….
Forgot to all about metonyms, the creation of which seem to be accelerating.
“and throw me some-a them ripe tomaters”
And send some of that carmalized tomato paste my way, puhleaze. Or do you insist that I get off my keister and make my own?
I think I will copy your recipe and try my hand at it. I have a shamefully high opinion of my cooking skills, given that I am largely self taught.
“anocoluthon”
Here is a fine political example. Sadly, it was quite obviously unintentional.
I suppose there is a fine line between clever anocoluthon and moronic clusterfork.
LA and NYC (in that order) have the largest Japanese-speaking populations outside of Tokyo.
Maybe not.
Brazil is home to the largest Japanese population outside of Japan.[6] According to the IBGE, as of 2000 there were between 1.4 and 1.5 million people of Japanese descent in Brazil.[2][7]
The largest concentrations of Japanese people in Brazil are found in the states of São Paulo and Paraná. wiki
“…it acts as a price-support mechanism for certain kinds of bonds.
As in go ahead and speculate, you have a stop-loss.”
Isn’t this just a description for yet another version of the Greenspan-Bernanke put?
I believe it also is a stepping stone on a long path that started way back when Hank Paulson was trying to figure out how to set up a SIV to help banks offload their sh!tty mortgage assets. The purpose seems to be to provide yet another flavor of “free” federal guarantee to low-quality assets whose market value would otherwise be far lower without the guarantee, thanks to shoddy underlying fundamentals.
Why the Fed is in the business of picking winners and losers in the asset market is a bit beyond my grasp.
Aah yes, and meanwhile the gold-degenerates were busy telling us what terrors await us.
The smart crowd collected not only the appreciation but all the coupons.
Both buy tons of more gold than it used to.
And they’re still playing with the same terrors! There’s a big bad wolf in town. It’s name starts with D not I, and the “budget constraint” will make that certain.
“It’s name starts with D not I, and the “budget constraint” will make that certain.”
My question for you is whether you see QE3 as a game-changer for the ongoing housing bust. My impression is the Fed has assumed responsibility for reflating the housing market; is there any reason they won’t succeed? For instance, does the Fed’s unlimited commitment to buy MBS for as long as necessary to bring about recovery effectively engineer a housing bottom RIGHT NOW?
I know all about the “budget constraint.” But isn’t a primary purpose of guaranteeing MBS to assure a steady flow of mortgages to marginally-qualified buyers, who wouldn’t be able to borrow anywhere near as much money on the same terms if it were up to the private market to decide who qualifies for a mortgage?
“But isn’t a primary purpose of guaranteeing MBS to assure a steady flow of mortgages to marginally-qualified buyers, who wouldn’t be able to borrow anywhere near as much money on the same terms if it were up to the private market to decide who qualifies for a mortgage?”
To clarify, I view a primary purpose of the Fed’s MBS market intervention to relax the housing market budget constraint at the household level.
Will it work as intended? If not, why?
It’s going to reflate the housing market for sure.
The question is whether that’s even sustainable, and the answer is no.
I’d be long both housing and bonds right now. There’s a new “greater fools” game in town. Fed-supported. Doesn’t get better than that.
Mr. and Mrs. Boomer are gonna get more and more panicky about yields and move more of their assets into bonds. Why do you think I asked the question?
“There’s a new “greater fools” game in town. Fed-supported. Doesn’t get better than that.”
Good to see that some people actually understand.
What I need to learn is how to take advantage on the way up and the way down. My natural inclination is toward that which actually does exist versus all else, which is not necessarily productive here.
What time frame do you see as most likely tipping point between greater fools/Fed ? Magnitude also a question.
Tech and housing busts were easy for me to grasp. This will be considerably harder.
Anyone that thinks that “certain bonds” are going to fall anytime for a very very long time is deluded.
Does gold yield coupons? Is an uncertain capital gain in a dubious asset worth more than a Fed-guaranteed coupon with no loss?
One struggles to navigate these treacherous waters.
Yeah..I hear ya.
Noted that you bring up “opportunity cost” elsewhere. So obvious, so simple, so ignored. Best of all, we get to set our own parameters. Yet people still do not do.
Perhaps right before the rinse/repeat cycle begins anew, we’ll have a 10-window where something so simple reigns supreme accross the economy.
Most people here will be dead before the rinse-repeat cycle begins anew.
I am blessed (cursed?) that I am doomed to see it one more time.
Time for a beer!
Tomato salad and a martini!
“Most people here will be dead before the rinse-repeat cycle begins anew.”
I thought this as well after the Savings & Loan disaster and the dot com bomb.
There ARE new opportunities on the rise even as we speak. No, I’m not sharing them but I have mentioned them here before and they are major game changers that will also allow people stay away from the Wall St. casino.
A glass of cheap Trader Joe’s wine and some tiny chunks of English coastal cheddar — I’m a happy man!
(anacoluthon warning!)
P.S. Guacamole chilling in the frig…life is all about anticipation!
Guacamole chilling in the frig
3 ingredient, 2 minute guacamole:
1 avocado
1 or 2 spoonfuls of good salsa
juice of 1/2 a lime
combine by mashing with fork, salt and pepper to taste
you’re done
(Why chill? It’s better warm.)
“1 or 2 spoonfuls of good salsa”
I’m never in that much of a hurry when I make guacomole. This approach compared to making it from scratch is like the difference between listening to Gil Shaham on a CD versus in live performance.
Does gold yield coupons? Is an uncertain capital gain in a dubious asset worth more than a Fed-guaranteed coupon with no loss?”
Just remember to sell before the FED stops buying Mortgage bonds. Or whatever bonds it’s buying.
2015 ? I seem to recall that date? Did they even give a date ? haha I can’t remember.
I did buy a house so at least I got something right
And yes I’ll sell if I can get out before rates start up when ever that may be ? Outside of a World war I can’t imagine the central banks tighting ?
American consumers rarely have been such a bad bet. With unemployment up and salaries down, credit worthiness has plummeted.
Nearly half of American households have credit ratings that are high risk, according to Credit Karma, and the average credit score has dropped more than 20 points in the past three years.
Banks don’t care.
With the government keeping lending rates at historic lows, banks are desperate to lend out cash — and are willing to ignore warning signs to do it.
The same “subprime” mentality that drove lending before the 2008 financial crisis has not gone away, analysts say.
Read more: http://www.nypost.com/p/news/business/credit_isn_due_YYPVa0axkfgffu02vJ9WHO#ixzz26dJvVLj6
Of course they don’t care. Why would they when their losses are fully covered by the FED?
“American consumers rarely have been such a bad bet.”
Really? In what way, exactly? Are they not consuming enough government/government-entity debt?
The audacity of the leeches living off the backs of consumers…
I have not personally seen this “desperation”. I have fair credit and have had trouble getting even small loans.
Here’s a monster post, sorry if the wall of text hurts your eyes, but I think its worth it.
How much of a capital loss will I take when mortgage rates return to normal?
So I was talking to a typical soccer mom at (duh) soccer yesterday, and she noted with surprise that some houses in her neighborhood were not selling despite mortgage rates being so low. This has a history of getting me all wound up in the past (not to mention this post) I tried to explain why I’d never want to buy a locked in capital loss, but obviously it flew right over her head, she was just repeating NAR talking points, didn’t know the numbers even had a meaning other than meaningless small talk.
Anyway class is in session here to calculate your capital loss using a computer spreadsheet program, because I can. I will try to make this simple so anyone can figure it out, and I’ll fail gloriously. Then again, its free so deal with it. It took me less time to “do this” than it’ll take you to read it, but writing it all down took about ten times a long so we’ll call us even.
First you define the given data. I googled for mortgage rates and 3.5-something is roughly current for 30 year fixed. If I include a link to freddie mac it’ll take “a long time” for this post to be approved because its got a URL in it… suffice it to say google for “freddiemac.com 30-Year Fixed-Rate Mortgages Since 1971″ and you’ll get a nice table. For example one year ago mortgages were around 4.5%, when I graduated high school (neither boom nor recession, but in the NAFTA-ish era decline of civilization) they were around 9%. When my dad bought the house I grew up in, during the late Carter / early Reagan recession years, he paid about 14%. I think you can argue a “normal” mortgage rate historically was around 8% to 9% ish. I paid an eighth of a million dollars for my house in the VERY early years of the bubble (lets just say the original WTC towers were still standing, in fact 9/11 didn’t happen for a couple years). The price doesn’t matter if all you want is a percent decline anyway. When I was first getting started in computers in 1981 GIGO garbage in garbage out was a popular phrase… so think carefully about your inputs… and who benefits by lying or telling the truth…
Whatever lets get computin’. Light up Excel or whatever you’re using thats Excel-like. In cell A1 put todays mortgage rate of 3.5 as in 3.5 percent. In A2 put in “=A1+0.1″ as in a tenth of a point more. Now click on A2 and notice the big square in the lower right corner of the cell. click-drag that square down to row 100 or so, which will give you a column of interest rates from today’s 3.5 percent to roughly my father’s 14 percent (hardly the historical peak, but for the sake of argument it’ll do as a “high end”). So you’ve got a spectrum from “very low, in fact historial multigenerational lows” to “very high, like once per generation, but not record breaking by any means”.
Now lets figure out the P+I of the mortgage. In my case the T+I parts of P+I+T+I adds nearly another 50%, but whatever. In column B1 type in something very much like: =-PMT(A1/100/12, 30*12, 125000) and optimistically A1 will fill itself with a P+I mortgage payment of 561.31. The PMT is the magic mortgage function, the inputs of which are monthly interest rates as a decimal instead of a percent, which explains the /100 and /12. The 30*12 is obviously the number of monthly payments in a 30 yr mortgage, and the 125000 for a eigth of a million dollar house is … obvious where that came from. Now I pay somewhat in excess of $300/month of prop tax, and insurance is maybe $50 ?. and the T+I factors only increase, never decrease, over time, therefore there is a permanent increase in total cost therefore a permanent downward push to home prices on the “supply side” as opposed to the “demand” side always decreasing because for generations median income for housing costs has been decreasing due to less income and inflation in everything else, especially sick care and higher training / higher education. None the less, this is eactly how much P+I cost. Remember the click-drag in column A? Ditto in col B. So at an interest rate of 13.4% which is high but not historical or record breaking by any means, IF the cost of my house were constant (obviously not) then my P+I payment would be 1421.94. Now obviously if the interest rate were 13.4% my monthly payment would still only be about $570 for P+I… meaning the price would crater until the price supported a “harry howmuchamonth of $570″. In fact because Americans only get poorer over time and taxes only increase, harry howmucha can only afford say $500/month meaning an even bigger decline.. But I promised to only calculate interest rate related declines, so….
But how much would the price crater? Back to Excel. In cell C2, type in =100*(1-561.31/B2) and optimistically you’ll see an interest rate increase of 0.1% to 3.6% means a capital loss to house value of about one and a quarter percent. Remember click-drag from columns A and B… ditto… WHEN (not if) mortgage rates return to the level of my Dad’s first house, then a house bought today will lose about 60% of its sales price.
Some analysis of results… a house bought today with a 30-yr fixed, when interest rates return to “normal” can expect take around a 40% capital loss as in 40% price declines from current prices are baked into the cake curtesy of today’s low interest rates… A total overall price decline of 60% from current levels is fairly realistic, what do you think gas is going back to 75 cents a gallon, or college costs and sickcare costs are going to drop, or do you think taxes are going to drop, or … so obviously 60% price declines from current levels are reasonable. Mortgage rates merely returning to LAST YEARS RATES means a 10% loss (amazing). Worst case scenario, if I “had to sell” during a high rate era like when my father purchased our family home back when Star Wars was just released and we still thought bell bottoms weren’t dorky and disco was cool, the owner would have to eat a 60% capital loss just due to interest rates.
Now the picture gets cloudy, as in the you can tell any lie with numbers “cloudy”. For example, if you own a million dollar house and “lose” $600K, you don’t really need to earn $600K and give it away, you only need to earn a couple thousand to declare bankruptcy. Or I blew an eighth of a million on a house more than a dozen years ago, now if it went to zero (LOL its still worth “something” even as firewood and roughly an acre of suburban farmland, in fact until 1950-something it was a farm…) then thats only a loss of 125000 / 12 / 12 = $870 per month, which really isn’t all that expensive, I mean I’m paying $300/month to the city to rent the dirt aka prop tax, and $50 to insure it, and $300/mo to heat and cool it, and somewhat less than $500/mo to rent money from the bank, etc etc so the capital loss is an expense, and in fact a big expense, but I can quite easily afford it.
I do not understand why it is accepted as established fact that housing prices will necessarily decline as interest rates climb. Yes, that is the established precedent. But are we not living in exceptional times?
The banks need housing prices to stay high. All manner of financial instruments and their legions of investors need housing prices to stay high. Housing prices have in fact ballooned during an era in which salaries have declined. Is it not possible that as yet unfathomed financial machinations will evolve to support the new normal?
It’s called the “budget constraint”.
As long, as you look at peoples’ incomes in real dollars (= inflation-adjusted), I fail to see what great qualities Americans have that they can outperform a globalized workforce.
Ergo, prices must and will drop.
“budget constraint”
It never ceases to amaze me how even the really big name macros guys seem to have missed this simple concept. They don’t even include budget constraints in their graduate textbooks.
They haven’t missed it at all.
The big-names seldom bloviate in the press. One guy operates out of something that resembles a strip mall in New Jersey. He’s a multi-billionaire.
There’s big money that talks and there’s another that goes home and plays with the kids/grandkids/pets/lovers.
If you believe that interest rates are the constraint on value, then the simple math is the interest rate move divided by the current rate.
So, if rates are 4%, then a 1% move is a 25% decrease in value to match the same interest cost. I haven’t included taxes or principal payments, or assumed down payments, etc.
The other stuff (taxes, etc.) are generally rounding errors.
However, I think the premise (that rates are the constraint) is a pretty faulty one.
If so, then the move down in rates over the past year should have had the opposite effect (prices moving up dramatically). That didn’t happen.
Also, in the early 80’s, when prime rate was in the high teens/20%, prices should have been absolutely crushed…they weren’t–people found a way to make the payments if they WANTED to buy a house.
The “budget constraint” is a nice theory, but it isn’t true for most home buyers/owners. There are very few potential home buyers who can’t find extra money in their budget if they WANT to buy. The problem for the past several years is that they didn’t WANT to buy, since doing so would have put their hard-earned down payment at risk.
Once that psychology turns, I think we’ll all find that the budget constraint won’t come into play until rates have moved pretty far.
Flame on. I’m assuming there will be some nice calls of “liar” coming.
Once that psychology turns, I think we’ll all find that the budget constraint won’t come into play until rates have moved pretty far.
Oh, how cute! What happens to the rest of the “consumer economy” then, sugary-sweetcakes? Where does that budget come from? Also, all those student loans that are being handed out like radioactive debt-candy?
Wow, just wow!
These dingleberries just keep getting better and better.
‘The “budget constraint” is a nice theory, but it isn’t true for most home buyers/owners. There are very few potential home buyers who can’t find extra money in their budget if they WANT to buy.’
I can’t believe anyone is ignorant enough to believe this. I don’t even want to get into the details; I will leave that to FPSS if he has the will and the energy.
From your posts I can tell you are not ignorant. So why are you pimping and lying here? Do you have investment properties you are trying to unload on the unsuspecting?
Do you have investment properties you are trying to unload on the unsuspecting?
Even if he did, why is he here in the first place?
If you had a load of Catholic doo-dads to unload, would you open up a stall outside an Atheist Convention?
Delusional, simply delusional is all.
“Delusional, simply delusional is all.”
How do you distinguish between delusional and merely ignorant? It’s a challenge in my book.
You conflate the categories and let them come to you not worry about their feelings.
That’s my solution.
Well…. after all… Rental Watch is an establish debt and housing pimp.
Had enough?
We had the same thought about globalizing wages, FPSS.
The only quality I can see that Americans have is innovation. After one of your trips to India, I asked you if Indians have the type of innovation and drive where they could support themselves well without money flowing in, in the form of outsourced American jobs, and you said “no,” without elaborating. Do you remember that? Does it still hold?
Also, are the Chinese inventing their own stuff nowadays, or is it still all American design done by Chinese labor, or reverse engineering of American products?
Maybe the environmental aspects are going to bite those countries in the butt. Witness the creaky Indian power grid and the Chinese rivers full of dye.
If we ever had a honest conversation face-to-face, you’d probably first throw a skillet in my face and then agree with me.
I get the fact that you have a technical degree but your position depends on Washington. Additionally, you are a LOT older than me.
Will you come out of this mess fine? You’ll muddle through OK but not great - that’s my guess.
However, by nature, I am inclined to look at “opportunity costs”. You are forgoing almost all of them. In short, you are paying a very very steep premium for “security”. Hope that it’s worth it to you.
For a pile of stuff that depreciates continuously.
Good luck! As they say in poker, you’re “all in”.
“… you’d probably first throw a skillet in my face and then agree with me.”
Now that is funny. At the risk of sounding like a sexist (which I probably am, anyway), this reminds me of any number of conversations I have had over the years with my lovely wife.
“all in”
Luckily for the Oxides and the Darrells out there, the Bernanke Fed is “all in,” too.
The next few years will provide some telling evidence on what happens when the Fed goes “all in” on housing market reflation.
At the risk of sounding like a sexist
I’m not a sexist. I’m an OCD-perfectionist.
I’d probably criticize her skillet-smacking skills. Analyze in detail and give her a few pointers. That might be more scary than housing!
Are you going to actually answer the questions I asked you?
I must’ve missed the question.
Or I didn’t “get it”. Either way, clarify or rephrase, please.
After one of your trips to India, I asked you if Indians have the type of innovation and drive where they could support themselves well without money flowing in, in the form of outsourced American jobs, and you said “no,” without elaborating. Do you remember that? Does it still hold?
Also, are the Chinese inventing their own stuff nowadays, or is it still all American design done by Chinese labor, or reverse engineering of American products?
It’s worse than you think. There is no innovation. There is only copying.
There is plenty of drive but the government stifles it and wants its cut.
The ludicrousness of it all. As if Walmart and Amazon don’t know how to bribe government officials. You don’t need to be Indian or Chinese for that!
Quelle imbeciles!
“I asked you if Indians have the type of innovation and drive where they could support themselves well without money flowing in…”
This reminds me of the time I complimented a friend on his “Indian cooking” skills, which precipitated a lecture on how there is no such thing as “Indian cooking” as a single category.
Similarly, I don’t think your question about whether “Indians have the type of innovation and drive” can be meaningfully applied to a heterogeneous country with 1bn or so citizens.
While your response is logical, I reformulated her question to a more logical one:
Is their system set up to help entrepreneurs to thrive?
The answer is that it’s not. If I were a Chindian entrepreneur, I’d move to Silicon Valley.
The Chindian entrepreneurs in Chindia are aping well-established models. They are also better armed in the fine art of Chindian bribery.
“If I were a Chindian entrepreneur, I’d move to Silicon Valley.”
Apparently lots of Chindian entrepreneurs agree with your thinking.
“The Chindian entrepreneurs in Chindia are aping well-established models. They are also better armed in the fine art of Chindian bribery.”
Endogenous selection is not just an ag sector phenomenon.
Thank you Faster. I had wondered about that. But it doesn’t make much sense. the R’s would have us believe there is too much uncertainty and too many regulations such that small businesses can’t make payroll. And yet India and China don’t foster innovation? Why not? Sounds like you can set up shop with little trouble and innovate your way to riches. Why is the US so special? IP laws? Judicial enforcement? Evil regulations? Educated workforce? Stable power supplies?
You can set up shop in NYC, Chicago, SF or Boston in a day. If you make a mistake, you get to put up a sheet of paper, and fill out a form, and pay some modest fine.
They don’t shut down your business. You don’t need to bribe them. You don’t need to spend six months in the legal system to defend your nascent business against the malicious government official who brings fake charges against you because he wants a bribe.
You’d have to be borderline insane to open a high-tech business in Chindia. (Or have a stomach of cast-iron.)
FPSS writes:
“It’s called the “budget constraint”.
As long, as you look at peoples’ incomes in real dollars (= inflation-adjusted), I fail to see what great qualities Americans have that they can outperform a globalized workforce.”
I’d agree with you FPSS with the correction that all that matters is the fraction of my budget going toward P+I can’t increase unless I implode other sectors of my budget. Maybe if medical sickcare insurance costs “disappeared”. Or energy costs. Or food costs. Shopping/consuming other than that isn’t a very large part of my monthly budget so that doesn’t matter.
So aside from making the pie bigger, the real estate slice of the pie can expand or contract (mostly the latter) depending on numerous other expenses. Every other slice is currently expanding relative to the size of the pie, therefore the only one that can shrink is real estate and automotive purchases.
I’ll let you tell me where the “magical” part of the free-pie will come from.
Perhaps, you can repeal the laws of physics somehow.
If wages don’t climb, perhaps 100-year mortgages will make up the difference. Backstopped by the fed, of course.
“Ergo, prices must and will drop.”
Prices per person must drop as average income per person drops. At least in the short term, single family, single generation households can be merged to decrease price per person.
Prices will not decrease uniformly. Well located neighborhoods are likely to hold value better than less convenient places.
So the p1mping has come to this?
“Well-established” properties will live and the rest will collapse.
You’re arguing that there’s no substitutional value. Harlem will die while the Upper West Side will live on in eternal glory where the 2-million properties will live on forever.
Why because people can’t take the extra 9 minutes on the subway?
They are substitutes. Prices fall outwards towards the core. Park Avenue and Pacific Heights will collapse last but most assuredly they will. It will be rapid, ruthless and epic just like 1994.
Quelles imbeciles!
There used to be an Italian designer clothing store along my walk to the subway. Lots of other similar high end stores on that little swath of Wisconsin Avenue. It closed. It will be replaced (after about a year of being empty) with a “high end” tex-mex restaurant. I wonder if Dior expected their customers to have to smell the fry oil when they rented that spot? What is going to go in on the other side? Barney’s just closed and the space is for rent.
“You’re arguing that there’s no substitutional value.”
Realtwhores™ make this mistake all the time: ‘It’s different here. All real estate is local.’ Etc etc etc.
“You’re arguing that there’s no substitutional value. Harlem will die while the Upper West Side will live on in eternal glory where the 2-million properties will live on forever.”
Au contraire. I am arguing that substitutional value will be generations or multiple families living together in larger houses in more convenient places over smaller houses in less convenient places.
I rent in a close in suburb of Seattle. 3-4 BR houses on small lots. I expect these neighborhoods will fall more slowly than those further out. The housing and infrastructure lend themselves to greater density.
You are very NYC centric. 9 minutes on a subway is nothing. A few miles from where I live, bus service is non-existent. You may need to walk a couple of miles to the closest bus.
In NYC, I would expect Harlem and other lower rent areas in the city to hold value better than suburban areas in Connecticut and New Jersey where transportation is more challenging.
“The banks need housing prices to stay high.”
Banks or Pension funds?
May 11, 2012
Court Rules that Victims of Fraudulent Sales of Derivative Securities Must File Separate Claims - No Class Action Allowed
The U.S. Court of Appeals for the Second Circuit has affirmed a lower court’s decision to not grant the petition of two pension funds asking to certify a class action of investors that allegedly suffered financial losses in mortgage-backed securities. The Second Circuit said that the Lower Court did not abuse its discretion by denying the motion for class certification.
The institutional investment fraud cases were argued together at both the district court and appeals court levels but have never been officially consolidated. In both mortgage-backed securities lawsuits, the lead plaintiffs—both pension funds—are accusing their respective defendants of making misleading and false statements in the different MBS prospectuses. They are seeking to recover their losses.
Although the MBS that the plaintiffs had purchased were given AAA credit ratings for the majority of the tranches, the delinquency and default rates in the underlying mortgages would go on to dramatically go up. The ratings agencies then went on to downgrade most of these tranches.
The plaintiffs are claiming that the defaults are an indicator that the subcontractors and issuers failed to follow underwriting guidelines. If this is true, then there were false statements in the registration statements at the time the MBS were bought.
While the plaintiffs had made their claims under the 1933 Securities Act’s Sections 11, 12, and 15, the appeals court said that only claims under Section 11 needed to be discussed, as the claims under the other two sections were derivatives of the Section 11 claims. Under Section 11, a prima facie case has to have proof that a registration statement included material misstatements or omissions. However, since it isn’t a fraud provision, a culpable mental state on the issuer’s part is not required.
Section 11 claims are subject to an affirmative defense in that the issuer can show that when the acquisition took place the buyer had knowledge about a specific omission or untruth. The district court held that to determine whether each buyer had knowledge of specific untruths or omissions at the time of purchase, individual inquiries overriding the common issues would be needed. This holding was affirmed by the appeals court. The second circuit also said that the district court only looked at the facts “on the limited record available on this case.” It noted that district court judge, Harold Baer Jr. has since this decision not to certify the plaintiffs in these two cases granted class certification in similar litigation. (Public Employees’ Retirement System of Mississippi v. Goldman Sachs Group)
The appeals court said that its review was limited to the class definition rejected by the lower court judge and to the record the way it was when the motion to certify was made. It said the appeals determination was “without prejudice to further motion practice in the district court on the matter.”
New Jersey Carpenters Health Fund v. RALI Series 2006-QO1 (PDF)
Boilermaker Blacksmith National Pension Trust v. Harborview Mortgage Loan Trust 2006-4 (PDF)
More Blog Posts:
Morgan Stanley Sued by MetLife for Securities Fraud Over $757 Million in Residential Mortgage-Backed Securities, Institutional Investor Securities Blog, April 28, 2012
H & R Block Subsidiary Option One Mortgage Corporation to Pay $28.2M to Residential Mortgage-Backed Securities Investors, Institutional Investor Securities Blog, April 25, 2012
FDIC Objects to Bank of America’s Proposed $8.5B Settlement Over Mortgage-Backed Securities, Stockbroker Fraud Blog, August 30, 2011
$63 Million Mortgage-Backed Securities Lawsuit Against Bank of America is Second One Filed by Western and Southern Life Insurance Co. Against the Financial Firm, Institutional Investor Securities Blog, August 29, 2011
Not just pension funds, but many local governments are invested heavily in Wall St.
CAFRs.
Vince, if you want us to read all of the wall of text, it would help if you put some of the summary statements in bold print so it’s easy to see. For example:
How much of a capital loss will I take when mortgage rates return to normal?
Some analysis of results… a house bought today with a 30-yr fixed, when interest rates return to “normal” can expect take around a 40% capital loss as in 40% price declines..
Mortgage rates merely returning to LAST YEARS RATES means a 10% loss (amazing).
Two questions:
Are you accounting for inflation? At some point, wages will HAVE to go up,* which raises the PITI that someone is willing to pay. So rising affordable PITI will place a floor under prices.
Did you mother work growing up? I mean a career job, not just at the grocery store for a little extra cash. House prices were low due not only to high interest rates, but because households were one income. Now, housing prices are predicated now on two average incomes.** So I could expect prices to fall to one-income levels.
If we go back to 14% interest, nobody could afford a house. More likely, houses would be bought by cash investors who don’t need to care about interest rates, and rented out like in the tenement days, or the Gilded Age.
—————-
*unless we globalize everything, be it in the form of 1) illegal labor, 2) outsourcing to India (or H1b) for every computer job, or 3) citizens willing to accept wages which slide from organized benefitted permanent employees down to no-benefit temp freelancers at Foxconn levels. Currently we are experiencing all three.
** I could only afford my house because I have one well-paying heavily degreed income. Everyone else is either taking in roomies or stretching too far.
“grocery store a little cash”. Brought back some memories on costs. Dad sold his house in the LA basin in 1955 for $12.5K and moved the family to the desert where he bought a house for $4K. When I got out of the Army in 1965 I bought a one owner 1959 chev belaire 348 cu.in. with 48K miles on it for $600. I made $600 a month during the summer working produce at the local grocery.
One of my grandfathers worked his whole career as a produce buyer for supermarkets. And it was a career. He started at lower level jobs and worked his way up. Then he switched to bigger and bigger chains until he landed someplace he liked and stayed there until he retired. Got up at 2 in the morning his whole adult life. This was after he did a few years in the Army as an occupier instead of having to invade Japan.
Was there a union at that grocery store?
Yes oxide your TLDR summary is pretty good, WRT to you and Blue Skye I’m really pushing for the “scientific experiment” of actually googling for data and running real numbers in a spreadsheet. Sort of like just making a unsupported claim is no good without the numbers to prove. Detailed numerical research and calculations count as a better explanation of “40% decrease predicted” than “I’m an authority on the internet, and you’ll like this answer, so trust me”. Opinions are cheap, facts about numbers are real.
No not accounting for either made up govt inflation or real inflation numbers. No… unfortunately wages do not have to go up at all. Why do they? Is there a shortage of labor I’m not aware of, or a place with a higher standard of living we can take the jobs from? Societal trend toward unionization? Societal trend toward lowering wage discrepancy? Nope, rich are going to get richer and poor are going to get poorer unless/until at least 60’s style revolution happens. And most houses and jobs aren’t held by the 1% or even the 10%, so all that matters is the median, and they’re going downhill. Also we don’t need income, we need P+I housing budget. Doesn’t “help” house prices if I get a $100 pay raise (dreaming it) at the same time food prices go up $200/month (living it)
I don’t even have a career job, I work in what amounts to IT. Just waiting for ageism and outsourcing to eliminate me, I guess, then I’ll have to find something else to do until I retire. SSDI? Contract? I don’t think many people have the luxury of a “career” complete with advancement and a upwardly mobile path and stuff like that. Oh it happens, just to other people.
“If we go back to 14% interest, nobody could afford a house.” Why? They did in the past. My father had no problem paying 14%. Prices will be lower of course to keep the “howmuchamonth” constant to dropping. In fact I predict precisely 60% lower than present in my spreadsheet, not 65% and not 55%. Reality will be different of course, but the “primary” impact will be a 60% decrease. Maybe your labor argument about going back to 1-earner families will drop it to 80% lower, who knows. But the biggest effect seems to be the interest rate manipulation.
I’m open to seeing a better spreadsheet design. Maybe a spreadsheet of how P+I budget changes as T+I and gas and food increase by 5% to 10% every year as wages are stagnant to falling.
“I predict precisely 60% lower than present in my spreadsheet, not 65% and not 55%…”
You need to meet my old frined Propagation of Error.
“If we go back to 14% interest, nobody could afford a house.”
Because no houses were bought and sold when rates were 14% plus?
Your logic is twisted beyond recognition.
Vince,
The reasoning is really very simple. Pages of equations do not help a simple concept.
Re:vinceinwaukesha
You deserve credit for trying to turn this blog around into discussing issues of importance instead of focusing on the political smokescreen. It will be what it will be! There are only two things one needs to know in this world to make decisions effective to their financial being: who has the power and follow the money. What side is elected will bode the direction of your financial future.
I would agree that 7% to 8% is probably the historical norm of my life time (after age of 18) for a mortgage. Numbers are nice but they have to be applied to specific groups to understand their limitations. I’ll agree that I think people buying now in general will find over time a loss in their purchase price. However, there is a segment on this blog that choose to buy long term based on their desire to stabilize their costs, live in a stable neighborhood, be part of a community, not having to move because a LL defaults on payments, not having to move again until medical issues move them into a home with care, a desire to make a house into a home.
Some people pay big bucks to drive a car, for me when we talk car pricing above $15K I state to have the big one as per Redd Fox comedy. Some people will go into hock for tours or trips abroad or floating cruises of which I have no desire; activities in the outback yes.
Salinasron:
“buy long term based on their desire to stabilize their costs, live in a stable neighborhood, be part of a community, not having to move because a LL defaults on payments, not having to move again until medical issues move them into a home with care, a desire to make a house into a home.”
Yes well, those rationalizations about a financial decision of course all wrong, often the reverse, but virtually unprovable other than “he said she said”. Regardless of the rationalization, we agree based on the historical facts the mortgage rates seem to hover around 8% in normal times, and my numerical analysis indicates that regardless of any rationalizations the loss in house price will, based on interest rate changes, eventually be around 40% lower than 2012 prices. Personally my house is cheap enough and I bought long enough ago that I can easily eat a 40% loss. Others, maybe not. Ethics or morals, good or bad, I donno, I can’t help there other than outputing my own biases and experiences. But at least a good start is to acknowledge the numbers, plugged into a formula on a easily reproducible spreadsheet, show approximately a 40% loss coming up.
I think its valuable. As a gut level non-numerical guess all I had going into the experiment was “changes in low interest rates don’t modify payment much” so maybe 10% loss vs “dogs and cats living together so buy beans -n- ammo” so maybe 90% loss. Surprising to calculate its 40%, which is high enough to offend the real estate agents who are still pushing a return to bubble pricing for the 5th straight year, yet low enough to offend the doomers who expect to buy skyscrapers with a single one oz gold coin. Who wouldda guessed?
I made a goof. I should have said that we couldn’t expect to go back to the house prices of a one-income household.
Ron, I tried to lay out the numbers months ago, and got lambasted.
Vince’s calcuations need to figure in inflation, the job situation in my area, and the rising of rental rates. Also figure in that this 40% fall in house prices isn’t even going to start until 2015, which is the new time frame for rising interest rates.
Then you’ll have to explain why prices are falling at this very moment.
“Also figure in that this 40% fall in house prices isn’t even going to start until 2015, which is the new time frame for rising interest rates.”
That’s not how the price formation operates under rational expectations. Rather, if everyone knows interest rates will rise after 2015 and everyone knows higher interest rates will result in lower housing prices, they will factor this information into their current offer prices, in order to avoid selling at a loss after 2015.
Explain something to me…..
I just bought a townhouse for less than it would have sold for in the mid-to-late 1990s, when interest rates were almost double what they are now. And that is in nominal money, ignoring the 40% increase in income since then.
How is that possible in your concept that P+I will always be the same, and as I goes up price will go down by the exact inverse rate?
Or….. Has the P+I being constant already broken?
Have prices actually doubled and interest rates fell by half?
Nationally, C-S is up…. what is it? 40% over the last 12 years? Incomes are up like 20% since then (nominal, not real).
So, a 50% drop in rates is accounting for… maybe…. 20% increase in prices nationally, and that is mostly coming from a few select markets like NYC, Miami, Boston and D.C. area. That is significantly less than the almost 100% that your logic would predict.
Most cities in the C-S are at or below inflation adjusted level they were at when rates were twice what they are today…….
What’s up with that?
Darrell, just a simple question: mid to late 1990’s what did town house sell for? What was the average income of the borrower at that time? What was the age of the buyer? What was the youngest age of a buyer at that time and what was the income for that buyer? How many of those buyers now have the income or even a job to support buying? You say that you are buying because your kids can’t, how long before they can even with your help? If inflation hits and the property goes up will your kids be able to buy or will lagging wages keep them locked out?
You make my point… thanks.
Vince’s argument seems to be predicated on the idea that house prices will come down as interest rates go up. However, he leads with, and totally fails to support the prerequisite cause of this, that house prices have gone up because interest rates have gone down.
My point is that supply and demand have largely overridden changes in interest rates. Sure, lower interest rates is having an effect on demand, but it is nominal at best, and certainly not sufficient to overcome the supply issues.
What if rates do not go up, until we’ve addressed the other flaws in the fundamental supply/demand imbalance, that are largely decoupling house prices from interest rates at this time?
Darrell:
“Vince’s argument seems to be predicated on the idea that house prices will come down as interest rates go up.”
Uh yes if you boot up Excel and google for certain number to type into certain questions… that being kind of the whole point of the exercise / experiment.
“However, he leads with, and totally fails to support the prerequisite cause of this, that house prices have gone up because interest rates have gone down.
Hmm close… A delta in interest rates will result in a delta in house prices of X due to interest rates, as read off a line of the spreadsheet. A more accurate statement of my mistake is thinking the primary determinant of house prices is interest rates.
“My point is that supply and demand have largely overridden changes in interest rates”
Hmm to keep this in the world of numbers and out of the world of politics, you have a much harder spreadsheet job that I do. Maybe a graph or tabular analysis of historical correlation coeff of interest rates vs recorded sales prices? The trick is to make a dimensionless number by using $/sqfoot? Then figure out the same correlation coeff using supply/demand data like house sales vs offers made or something?
I’ll bow to the numbers, even if they prove me wrong. But I have a gut level guess that supply and demand are not usually in the drivers seat nor are they there today. Superficially, you’d like to think houses are permanent and take forever to build or destroy resulting in extremely stiff supply constraints … but…
Then figure out the same correlation coeff
Oh spare me your bogus correlation coefficients. As if those were stable anyway.
You expect the same coeff during a credit up-cycle as during a deleveraging?
Surely you jest!
The ship is going down (in real-terms) and no amount of statistical sleight-of-hand is needed to state the obvios.
But I have a gut level guess that supply and demand are not usually in the drivers seat nor are they there today.
So a 2000 sq ft beach house in Hawaii should cost the same as a 2000 sq ft house in rural Kansas?
Materials and labor? Absolutely.
Materials and labor? Absolutely.
Exactly, materials and labor will be quite similar. But the actual price will be much higher on the beach house. Why?
Supply and demand.
“, and she noted with surprise that some houses in her neighborhood were not selling despite mortgage rates being so low.”
See, right here.
You say that elevated house prices are not being supported by falling interest rates…..
Maybe my opinion is skewed by being in a non-judicial state that say a massive wave of foreclosures push house prices to below the level of the mid-late ’90s in nominal terms.
Sorry, but house prices here are being primarily ruled by supply and demand, not interest rates. Yes, interest rates are a secondary factor influencing demand, but we have not see aggregate price even keeping up with inflation, let alone being elevated by falling interest rates.
Yes, in a fundamentally sound market with balanced supply and demand, then falling interest rates should cause falling prices, and the inverse.
My counter-argument is that we’re not in a fundamentally sound market with balanced supply and demand, and that house prices are not being elevated by the falling interest rates. If rates remain low until supply and demand return to balance(more than a decade, maybe two), then there would be no reason the rising interest rates need cause falling prices.
“Sorry, but house prices here are being primarily ruled by supply and demand, ”
Look you ducking and weaving liar….. housing DEMAND is at 15 year lows and falling.
Actually, house prices are determined by how much the typical buyer can borrow. See the case of the strawberry pickers getting the close-to-a-million dollar loan. See NINJA loans and option-ARMS.
As long as lenders don’t care about being repaid, they have every incentive to create as large a loan as possible for as many clients as possible.
Regarding interest rates, they determine the monthly payment. Thus, they will influence the price of the house, as the monthly payment is paramount for renters as well as mortgage-payers.
What amazes me about the Bernank and his MBS buying activities is the fact that the housing bubble was driven by debauched lending. Which is why prices were got so high - any mirror-fogger was able to get larger and larger loans. And now he seeks to maintain that level.
In addition, the GSEs are loosening up lending again, only requiring a mortgage stay current for three years before removing the penalty of buyback. That seems eminently easy to game.
Does confidence really cost $40 Billion a month?
Anyway, when it comes to…
“Purchases of housing debt should help the housing market, which he called “one of the missing pistons in the engine.”
This should be considered….
How much would it cost to replace my piston rod on a 97 gst eclipse?
i think thats it cause there like a knocking sound coming out from the engine but the wierd part is that you can only hear it when you like press on the gas like when you accelerated there a knocking pretty loud can anyone help me out and tell me what it is? could it be the piston rods? or the block or the motor or the trassmison?
Best Answer - Chosen by Asker
Connecting rods only make noise when they fly through the side of the block. You have rod, main bearing, or a cracked piston skirt.
If a dependable mechanic makes all repairs correctly, it will cost far more than the car is worth. That’s a fact!
Source(s):
Alignment, suspension and brake shop.
Fed Undertakes QE3 With $40 Billion Monthly MBS Purchases
By Joshua Zumbrun - Sep 13, 2012 5:33 PM ET
“By assuring the public that we will be prepared to take action if the economy falters, we’re hopeful that that will increase confidence, make people more willing to invest, hire, and spend,” Bernanke said.
Purchases of housing debt should help the housing market, which he called “one of the missing pistons in the engine.”
“Our mortgage-backed securities purchases ought to drive down mortgage rates and put downward pressure on mortgage rates and create more demand for homes and more refinancing,” he said.
http://www.bloomberg.com/news/2012-09-13/fed-plans-to-buy-40-billion-in-mortgage-securities-each-month.html - 167k -
How much would it cost to replace my piston rod on a 97 gst eclipse?
Hey, I didn’t know you had a 2g DSM. Any interest in making it *really* fast?
No more Big Gulps in NY. So sad.
loss of freedom is sad
Actually, the rules have no impact on any 7-11 or any other entity that isn’t a restaurant because they aren’t regulated by the city.
Thanks, that makes everyone feel much better about the nanny state.
The Nation: Panetta to urge China and Japan to tone down dispute over islands
Jeebus. As if the Middle East weren’t enuf, we gotta go telling Asia what to do.
Of course, that would be a sticky wicket for the US if China and Japan really got into it, eh?
What to do, what to do.
That’s interesting, though. Panetta is doing the urging. Where’s Hillary? In the doghouse, I’ll bet.
I’ll bet the back story on all of this is juicy beyond belief.
Maybe madame secretary will retire to “spend more time with her family”. Er, uh..
If Obama gets re-elected, will she still be Sec State?
Stay tuned!
I thought she had already said she did not want to continue as Secretary of State.
sticky wicket?!?!?!?
Jiminy-Cricket?
Didn’t know palmy knew anything about that particular sport.
It seems like all this negativity in the third world is just building up pressure and is going to explode after the election. The developed world i.e. E.U, America and Japan are losing their grip on power.
Yeah the third world is just a bustling den of industry and opportunity just waiting to take the reigns of world power.
Which Candidate’s Plan Solves the Deficit? by John Mauldin
I am not going to go into detail about how to balance the budget over time in this letter. There are numerous ways to get there. Simpson-Bowles (the presidential debt commission) is one path. It gets rid of many of the so-called tax expenditures and actually reduces the top rate by 24% and raises more taxes.
I would prefer to get rid of almost all tax deductions, except the earned-income tax credit, and end up with a lower top rate. The large majority of tax deductions favor those with higher income, anyway. If I really got my wish, there would be some type of consumption tax (like a VAT) and much lower income taxes across the board, and perhaps we’d even get rid of the Social Security tax as part of the deal, which would clearly help lower-income citizens. For what it’s worth, consumption taxes have less of a negative impact on the economy than income taxes.
Neither the Romney proposed budget nor the budget Obama submitted to Congress (and that did not get even one positive vote from his own party) is politically doable, and both have serious problems in dealing with the deficit.
“To get to a real budget solution is going to take a compromise”, which means some combination of spending cuts and tax increases. It must deal with entitlements and health care. In one sense, the election is about how much health care we want and how we want to pay for it. Everything else is “easy” after that.
I have talked with lots of Congressmen, Senators, and their staffers in the past few years, from both parties. They all get that something must be done, and my sense is that they will do something after this election. The consequences of doing nothing would be disastrous, especially given the “fiscal cliff.” Facing such a scenario, I think Congress will act.
The question then becomes, what is the nature of this compromise? And that, gentle reader, will be the real economic effect of this election.
From John Maudlins weekly email.
So there you have it, we’ll have to compromise with spending cuts and raising taxes. Not sure I want to go along with the VAT nor the reducting in tax deductions, but that’s his thought not mine.
So, basically, what you are saying is that you want, more, more, more of the same that created our trade imbalances and made us dependent on unsustainable debt growth to replace the money that it drains from circulation?
Under your “plan” how are we going to create the even greater than 8-9% of GDP that will leak from the economy?
Simple - print it!
Sorry Darrell, the troll in me just couldn’t be contained.
Bad troll! Bad!
Except that the private sector remains tapped out, and the same party that trumpets the “flatter, broader” tax rate to increase the rate of drain of money from circulation, ALSO trumpets slowing the rate at which the public sector is pumping new debt/money into the economy.
Drain more money and pump in less? How is that in any way a recipe for economic growth?
Oh, right….. the economy does not exist to ensure the efficient production of goods and services, and provide a mechanism for distribution based on subjective opinion of relative worth…. the economy exists to ensure the rich and powerful grow ever more rich and powerful.
My bad!
“…the economy exists to ensure the rich and powerful grow ever more rich and powerful.”
Are you a closet Republican?
“Are you a closet Republican?”
Closet? Heck no. I’m an out and proud Republican…. just not the Republican party of today. Not the Republican party of “trade deficits are good”.
Ah, the good old days - Allena, Ben, Grizzly Bear, Ollie, Get Stucco, Palmy, Jetfixer, Sleepless, Hiway, Puddytat, Alladinsane, the list goes on - I remember you all well and have missed you. I’ve been out of touch cause I’m still lost.
Still wandering around in SE Utah, though I’ve been doing some exploring in Montana and the Canadian Rockies, but I always come back to this damn desert. Nothing new here in housing prices - it’s the same as everywhere else, but things are slowing down - I recently had a guy beg me to rent his brand-new spec house that he can’t sell - dogs, cats, and all at a discounted price. I declined cause I was worried I’d get spoiled with all that fancy stuff - you know, dishwashers and all - heck, why would I need a dishwasher with one spork, pan, and a coffee cup (that says “The best way to avoid housework is to live outdoors”)?
Life gets too complicated when you have too much stuff.
Anyway, just wanted to swing by here and say hello and hope everyone’s prospering. I’ll be around for a bit - I gotta get my FJ repaired - I backed into a big rock out in the outback the other day not paying attention - well, I was paying attention, but to that BLM ranger I could see off in the distance coming my way. I need to get a new paint job - thinking about desert cammy.
Oh, if anyone’s interested, I’m looking for investors for a Maule - won’t post the link, but go to youtube and search on STOL Maule Bush Plane Off Airport. And if you’re not lucky enough to be one of the Maule investors, don’t despair, I’ll be needing gas investors after I get it, so you’ll still have your chance. I guarantee you’ll forget all about houses and stuff like that.
OK, gotta get the dogs out - we gotta keep those bunnies hoppin’ so they’re in shape and the coyotes can’t catch ‘em.
I made my insane amount of tomato paste and tomato sauce for the Winter yesterday.
I’m completely wiped out.
Good to have you back.
Your prostate must be in top condition with all these tomatoes….
What do the two have to do with each other?
Did I miss something?
“…miss something?”
Got lycopene?
Tomatoes and Prostate Cancer
March 5, 2002
(Journal of the National Cancer Institute) — Frequent consumption of tomato products may be associated with a reduced risk of prostate cancer, concludes a study in the March 6 issue of the Journal of the National Cancer Institute.
Previous research has suggested that frequent consumption of tomato products or lycopene, an antioxidant in tomato sauce, may be associated with a lower risk of prostate cancer. To confirm these findings, Edward Giovannucci, M.D., Sc.D., and colleagues from Brigham and Women’s Hospital and the Harvard School of Public Health analyzed tomato-product-consumption patterns and prostate cancer cases among roughly 47,400 men enrolled in the Health Professionals Follow-Up Study.
The researchers found that the consumption of tomato sauce was associated with a reduced risk of prostate cancer among men of Southern European descent (who typically have tomato-rich diets), and among men of Caucasian ancestry. The authors conclude that frequent consumption of tomato products is associated with a reduced risk of prostate cancer. They note, however, that it remains to be seen whether lycopene is the key compound in reducing prostate cancer risk.
…
I treat such studies as the garbage they are.
How do they know it’s the tomatoes? Not the fact that they eat less meat or eat a lot more sage?
I’m reasonably convinced that eating more vegetables than meat is the way to go (mostly because you are eating less calories but there seem to be other evidence too.)
But they ignore basic control variables. Did you know that they “saturated fat” study never controlled for the fact that the fat came from animals v/s vegetables (e.g. coconut)?
When the researchers are that culturally-biased and ignorant, it’s just best to retreat to ancient “peasant diets”. I’ll take lard over margarine any day of the week provided it’s available in the same scant amount that it used to be to a peasant which is to say rarely.
In any case, I crave veggies all the time. I seldom crave desserts, etc.
In any case, I’m craving some okra today. And three kinds of beans that I bought yesterday. And some tomatoes. I might fry the beans in duck fat.
“…okra…”
Thanks for the reminder. I have a bit of dad’s homegrown in the frig, waiting to be cooked.
Can’t believe the food Nazis let me smuggle it from the Midwest into California.
I canned pears yesterday. With the high price of produce I figure my time was worth $3/hour rather than $1.
Here’s where I’ll pimp Kiefer pear trees. Absolutely maintenance free. The pears are a bit gritty but wrap them in newspaper and they will keep for weeks.
Ahh okra - one vegetable that doesn’t slow down at the end of the summer. Very filling for a vegetable - must be the seeds. I go ahead and shake it in corn muffin mix and pop it in the freezer.
FPSS,
How do you make the paste? Just keep reducing the tomatoes? Why the paste? To save space? More concentrated flavor?
RE: Prostate.
I thought you were a Ms. not a Mr. Though for years I read E.B. White (Charlotte’s Web and other works) and thought him a lady. Was quite surprised.
Three step-process (all easy but time-consuming):
Add a little oil to a very large pot. When heated, start tossing in quartered tomatoes willy-nilly. (Yes, the oil matters for technical scientific reasons.)
Just cover when the pot is full. I had four pots going.
The tomatoes will leach water and as such they will start cooking. Let them cook. This depends on your burners. When they are soft, you need to pass all of them through a food mill. You want the water and the pulp, not the skin and seeds.
Bring them back to a pot and let reduce at low heat for a long time. At this point the oil will rise to the top like white scum. You need to keep skimming this. (Yes, this is work but you can circle back every 20 minutes.)
You are both reducing them as well as caramelizing the sugars. Add salt towards the end.
Will freeze for a year.
The flavor is absurdly concentrated. Just one tablespoon when pan-fried in February makes the whole house smell of tomatoes.
Thanks for sharing. Sounds as good as it is simple. Forgot about the wonderful effect of the carmelization.
I also freeze tomato sauce, and put a lot away at the back of my fridge at the end of summer.
As the farmer joked this weekend, “I see the terror in your eyes.”
LOL
I thought you were a Ms. not a Mr.
My bad. I thought the opposite.
“I read E.B. White (Charlotte’s Web and other works) and thought him a lady.”
Of course the use of initials instead of full name hides gender. But when my 1st grade teacher read Charlotte’s Web to our class, I had absolutely no doubt that the author was a woman.
If we ever go to the Oil City plan, I look forward to joining you in the SE Utah desert.
Hi Losty - Good to see you back!
Hi. Have not visited in a few weeks. Local market observation here in Arlington, MA - Boston suburb. A fall season better than any spring summer season. Tons of inventory listed. And the stuff is moving. Prices not any higher or lower than the past two years but an awful lot of people are selling and buying. I wonder could it be older people downsizing and figure they better sell while they can? Or some of the inventory coming to the market (does not seem to be any bank owned / forclosed.) But really suprised at the activity. Seems the same in neighboring suburbs - Belmont, Cambridge, Concord, Lexington, Lincoln, etc…
Thanks for the update! What’s the condition of the housing? Are the well maintained? Trashed? Just curious. Everything around here is trashed even if you spend over a million. I’ve never seen the housing stock in such disrepair.
Condition pretty much represents the spectrum. Some creampuffs, some dumps, but mostly regular condition. As I say lots and lots of activity. The high end is not moving at all or rather is ver saturated. Brookline has 80+ listing for over a million dollars. That must be years and years of activitly. There are a number of beautiful but ridicuosly price places in Lincoln that have been for sale for 2 - 3 years.But more in my hood Arlington most houses ~ $400K - $600K still much too rich for my blood.
Bouncing along the bottom…I’ve been saying this for a while..
“Bouncing along the bottom…I’ve been saying this for a while..”
Your entire world depends on that lie. What are your losses so far? How many tens of thousands?
As I said, in poker terms, she’s gone “all in”.
Wagner’s Götterdämmerung comes to mind. Those slow bass chords played out in the brass where you know everything will inevitably end badly before the “Twilight of the Gods theme” brutally rushes in and the whole orchestra joins in.
Fifteen hours of Wagner vs 30 years of mortgage payments. It’s a hard call, but I think I’ll have to go with the house.
Bayreuth Festival is enough to scar one for life….
I recall playing Götterdämmerung at 7:00am in the morning in 2008.
I bet I get a second chance.
‘Götterdämmerung comes to mind. Those slow bass chords played out in the brass where you know everything will inevitably end badly before the “Twilight of the Gods theme” brutally rushes in and the whole orchestra joins in.’
Awesome reference!
“Bayreuth Festival is enough to scar one for life….”
Have you been through it?!
The only other place I know of where you can see the complete Ring cycle is Seattle. (Did so 35 years ago!)
Sadly, if Rmoney is elected, government subsidies for fine art (like Wagner opera) will go away. What will be left is the profane free market choice of music.
Thank you, Retardicans, for your free market solutions!
I agree cibt but then again we may fully fund NASA and explore the origins of our universe…..
“…fully fund NASA and explore the origins of our universe…”
Or establish a 51st state on the Moon…
kewl…..I mean say it costs $100 billion to do this….Bernie baby is going to spend $40 billion a month buying up mortgages creating how many JOBS???
Oh, just leave the debt-slave be! She reminds me of that old joke about gay marriage.
“Haven’t those people suffered enough?”
Isn’t she suffering enough?
“Your entire world depends on that lie.”
Rightfully speaking, it’s not Oxide’s lie. She is channeling what the housing market serial bottom callers have been saying for the past five-or-so years.
This is true. But she’s exhibit A in how the Housing Group Think phenomenon penetrates the mind of people who are typically normal, intelligent and level headed.
According to the Zestimate, my house is now worth $10K more than the Zestimate when I bought it. Yes the Zestimate is biased, but is it more biased now than it was 6 months ago?
Allena, you don’t need 15 hours of Ring Cycle to be driven insane. 4 hours of Parsifal was more than enough for me. No more paying for opera — I’ll watch the simulcasts on PBS while blanching green beans, thanks.
Somebody (not me) had the best summary of Parsifal: “The show starts at 6 pm and two hours later you look at your watch and it says 6:20.”
You know it’s not true so why invoke Zillow?
Oxy, “…two hours later you look at your watch…”
Snort. Yep. Been trying to half-watch the PBS production at the MET but I just can’t do it.
Prof, a long long time ago in a universe far away, I let this guy at the table talk me into flying to Germany with him for the cycle. We never spoke again after that.
talk me into flying to Germany with him for the cycle. We never spoke again after that.
You just haven’t seen a proper production of it:
http://www.youtube.com/watch?v=C2VMqQ6XnmI&feature=relmfu
http://www.youtube.com/watch?v=LCyyiYDAU3E&feature=watch_response
In case you don’t have time to watch it here are SF Bay Area’s notes on Ray Dalio of Bridgewater Associates speech to the Counsel of Foreign Relations:
Central banks (and the fractional reserve banking system) spur current growth by expanding credit at a faster rate than the rate of growth of income (or spending i.e. GDP). This goes on until the current debt servicing burden becomes too large to be supported by current income. At that point central banks slowly lower rates to close to zero. When even that fails we cycle into a prolonged phase of deleveraging.
Deleveraging happens by:
1) Debt default / restructuring
2) Fiscal Austerity
3) Financial repression and capital controls where returns on financial assets are held below the level of inflation for a prolonged period of time.
4) Money printing by the central bank to create Inflation to offset the deflation caused by debt deleveraging.
The deleveraging cycle continues until the current debt servicing burden can be supported by current income. Then Central banks start the whole process over again. The whole process lasts for decades (after which everyone forgets the last cycle). Wash, rinse, repeat!
Banks don’t like default because the debts they hold are their assets. The population won’t elect people that propose austerity. So by default that leaves fiscal repression, capital controls and money printing. Fiscal repression, capital controls and money printing work because people are too dumb to understand what hit them.
Have a nice day!
I think they are missing a step.
Assuming a closed system where created money remains in circulation, and assuming no change to the velocity of money, then increasing debt/money should result in a proportional increase in GDP.
The issue is when the economy leaks money from circulation (trade imbalances, either domestic or international), causing the increased debt/money to result in a smaller than proportionate gain in GDP.
Put another way, trade imbalances are dependent on unsustainable debt growth.
One entity can not accumulate more money, until another entity first borrows that money into existence.
True - but are you making the claim that through fiscal repression, capital controls and money printing we can’t deleverage faster than the 8% of GDP that would be required to overcome the trade deficit in the U.S.? All we need is a printer and some dilithium crystals. Warp factor 12 Mr. Sulu!
And let’s not forget - if we go all Smoot–Hawley Tariff Act on Canada, Mexico, China and Japan it isn’t going to get you the vote from anyone in these industries: Agricultural products (soybeans, fruit, corn) 9.2%, industrial supplies (organic chemicals) 26.8%, capital goods (transistors, aircraft, motor vehicle parts, computers, telecommunications equipment) 49.0%, consumer goods (automobiles, medicines) 15.0%
Total Exports
$1.497 trillion (2011 est.)[11]
Main export partners
Canada 19%, Mexico 13.3%, China 7%, Japan 4.5% (2011)
Total votes? Not sure - but probably a lot.
I like that interview.
It’s the only one that is cold-blooded and rational.
The guy is killing it:
http://en.wikipedia.org/wiki/Bridgewater_Associates
If all these establishment types including Pimco’s El Erian and Hayman Capital’s Kyle Bass and Nassim Taleb all “get it” it just isn’t credible the Bernanke doesn’t get it. People like Dalio, El Erian and Bass control more capital than many central banks. And The world expert on the great depression claims he’s never read Minsky and has never studied Austrian Economics – yeah right. Welcome to the age of deleveraging. It’s a bitch. But no one ever got elected without making people feel good. Ron Paul should have just handed out Prozac and rose colored glasses and he might have had a chance. But no… he had to tell the truth! We can’t have that. Next!
The guy is killing it.
If all these establishment types including Pimco’s El Erian and Hayman Capital’s Kyle Bass and Nassim Taleb all “get it” it just isn’t credible the Bernanke doesn’t get it. People like Dalio, El Erian and Bass control more capital than many central banks. And The world expert on the great depression claims he’s never read Minsky and has never studied Austrian Economics – yeah right. Welcome to the age of deleveraging. It’s a bitch. But no one ever got elected without making people feel good. Ron Paul should have just handed out Prozac and rose colored glasses and he might have had a chance. But no… he had to tell the truth! We can’t have that. Next!
Anyone that is long RMB is gonna get their clock cleaned.
In a deleveraging, it’s always the lender that gets slaughtered. That’s why the US had GD1 whereas Europe and India and Russia went home clean. They all defaulted.
Cheerio, we already got your products; you get nothing.
Guess what’s happening this time?
So does China have any strategic choice or not? Buy what is left of America now or get left holding an empty paper bag?
The regime has its gorgeous villas in Vancouver, correct?
You guys pay way too much attention to macro- over micro-.
Après moi le deluge!
That’s how the world works.
And The world expert on the great depression claims he’s never read Minsky and has never studied Austrian Economics
He’ll be in a pasture before this is all done. Why be honest?
Dalio has a motive. Bernanke has none.
I think this blog is going to be around for a LONG time. The deleveraging cycle is long followed by the inevitable massive inflation one. But we’re a far ways away from that. Most here will be dead.
“I think this blog is going to be around for a LONG time. The deleveraging cycle is long…”
Five years ago I would not have guessed the deleveraging cycle would outlive me and many other posters here. Now I know how wrong I was, and I expect to be around for a while!
My micro focus is on running my business. The Macro stuff for me is more of an escape - lot’s of fun. Well and it’s also a reflection of my insecurity regarding where to put all my retirement savings I’ve accumulated until the deluge hits. In cash and hating every 1×10^-9% compounding day of it. What do you call that? A nano-cent? It’s more of a pain in the ass to record the interest you get on a few million these days than it is a delight to receive it.
Depends on your business.
Is it a marginal good or a necessity or somewhere in between?
If you make more than you earn (and I suspect you do more than that!), I’d just focus on micro-.
It always wins.
I’m long tomatoes and friends who like tomatoes in February. I’m reasonably sure I can afford that all my life.
“I think this blog is going to be around for a LONG time. The deleveraging cycle is long followed by the inevitable massive inflation one. But we’re a far ways away from that. Most here will be dead.”
So how does one buy a house in all this nonsense? Blue and Diogenes are on track… I guess pick up a foreclosure / fixer-upper dirt cheap, and get to work.
I’ve always profited far more off of my micro pursuits than off of my macro bets. I’ve always worked for my own businesses. I’m just not W-2 material I guess. So I tend to agree. I’d just like my returns on my Macro bets to not be so darn… er micro. LOL Well I should count myself lucky. Life for me has not been so exciting as for others. I sat on the sidelines during the stock bubble and the Internet bubble. At least what I’ve saved is still there and not vaporized. Time to go re-stock my deleveraging bunker…
Tomatoes - I used to grow those - how do you deal with all the bugs?
You live in the Bay Area. So does my sister.
What on earth are you talking about?
She had a buncha tomato plants on her balcony and the they just kept giving off so many tomatoes that I was like, “I confess, I confess.” We ate and ate and then just to be clear, we ate some more.
You live in a place where climate is not an issue. For cryin’ out loud, get a garden!
pain in the ass to record the interest you get on a few million
I call BS on this.
A 5-year suitably conservative muni-bond (and they exist, if you do your homework) easily yields $2K a month tax-free on $1MM.
If you can’t live on the interest on your “millions”, you’re quite ‘effed.
I call BS on this debt slave.
“…how do you deal with all the bugs…?”
Kitchen shears and a good strong stomach.
Kitchen shears and a good strong stomach.
A good wok helps too.
Mmmm …. crispy tacos!
I want some chapulines now. Now. NOW!!!!!!!
Why do you do this to me?
I want some chapulines now.
You like to eat grasshoppers?
Ew!
There’s nothing “ew” about it.
It’s no terribly different from shrimp which are pretty close in spirit to insects.
I like fries cooked in horse fat too. Also, frog legs.
“Ew” that!
Well I do pull the legs off our insects and feed them to my three third generation bearded dragons. My they tasty! Snup! Smack! Gulp! And they gone!
Seriously - CA munis? The same CA that has no less than four defaults going on concurrently and more in the pipeline? I want return of my savings not just a return on my savings. I pulled my money out of CA obligations six years ago. Well I do keep a pizly $3K in one just so I might have the bragging rights some day of being defaulted on just for kicks. I might want to frame that next to some of my dot.com stock option certificates. If you look at CA financing it’s worse than Fannie Mae in 2006!
I think I like the idea of the insects better - move over little dragons - daddy’s gotta eat! Now you talking!!!
I didn’t say “CA munis”. Reading comprehension FAIL!
You said tax free which for me would mean CA munis. Otherwise I pay taxes on them.
You pay CA taxes on other muni’s but not federal taxes.
Once more, reading comprehension and tax-law knowledge FAIL!
I read what you said and fully comprehended it:
“A 5-year suitably conservative muni-bond (and they exist, if you do your homework) easily yields $2K a month tax-free on $1MM.”
To be “tax free” it would have to be a CA bond. You failed to take into account where I live… CA.
Paying 10%+ California Income Tax on interest on a Non-California muni bond is not by any stretch of the imagination tax-free. Sorry no reading comprehension issues on my end.
In that interview, Dalio doesn’t talk about the degradation of lending standards which led to the current crisis.
Debasing of lending standards is the elephant in the room which is being studiously ignored.
This seems like more of the whole, “Oh this is part of a normal cycle, let’s just move on and get it cleaned up.” I recall Dimon pushing this angle a few years ago.
Describing this whole debacle without looking at the criminality involved - the deceit and misrepresentation of the quality of loans, then selling them to those hungry for safe, high returns typical of mortgages - seems like an effort to misdirect. To talk one’s book.
You always gotta ask yourself, “Why would lenders make loans they don’t care about having repaid?”
Answer that, and you won’t have debt growing faster than income.
This kind of massive debt crisis is not normal, a result of simple debt growing beyond the growth rate of income due to unavoidable market forces. Attempts to make it seem so merely put in place permanent measures which allow those running the system to continue to profit from it.
It baffles me to see how small the number of foreclosures is in Austin, TX (population of 820,611 according to the Census).
You can visit the Fannie Mae, Freddie Mac and HUD foreclosure databases and the breakdown is as follows:
-Fannie Mae —–> 38 active foreclosures
-Freddie Mac Homes —-> 13 active foreclosures
-HUD foreclosures —-> 7 properties
-Bank of America —-> 5 properties
Shadow inventory anyone?
Brett
1. Live Frees are a large population.
2. Many states have moratoriums on foreclosures.
3. Many REOs are or have been destin for bulk sale
to deep pockets for rentals.
4. Many states (Ca included) are passing “Leash” Bills on the banks.
We are a cash & close for a “retail” (MLS) primary, but spent many mornings at the auction in our county of So Ca. Even there, the prices are going up on the ones still left, after the postponed and cancel properties get called out. Very few trickle thru and are sold to 3rd parties. Most had such high opening bids, they went REO back to the bank.Since JuneJuly 2012 the auctions are pretty much dry.
Buying properties at auctions is nearly impossible in Texas unless you are an investor with cash in hand… When you bid in Texas, you has to pay on the spot.
“2) The property will be sold at the public auction and will be sold for cash to the highest bidder, based on oral bids. The rules covering auctions generally will apply. Purchasers must pay for their property with cash, cashier’s check, money order or credit card with a (3% fee that the credit card company charges for all credit or debit card transactions) payable to Grayson County Sheriff’s Office.”
We’re cash and have been to six auctions. The bank bid up the price beyond reason a few times, when we were the last bidder standing (bank bid against us). Screw that. With the condition of these properties, only fools over pay.
There’s massive incentive to do so.
As long as women like sufferenter and per-oxide rule the roost, the bank will hire shills to outbid them.
There’s not even a law against it!
“…the bank will hire shills to outbid them.”
Reference, please.
Awaiting,
Can you please school ‘ol SF Bay Area on the CA “Leash” Bills please sir?
Also why are the the auctions drying up? I see the same thing here, I have a realtytrac subscription but I’m not really sure why. Is the government just leaning on the banks to cut it out until after the election?
SF Bay Area
Ca Homeowners Bill Of Rights takes effect Jan 01, 2013. It is what I refer to as a “Leash Bill” on the banks, and the live frees will get more “sugar”.
1. Live Frees are a large population.
2. Ca has a string moratoriums on foreclosures.
3. Postpones and Trustee Sales cancel, due to extend & pretend.
I have a family member in reomac. Look it up online and follow their bi-monthly newsletter online. I can’t read the stuff anymore. My BP goes up. btw, I’m a gal.
Thanks for the heads up. I’m reading an overview of the new CA law now:
http://www.buchalter.com/bt/images/stories/Client_Alerts/homeowners%20bill%20of%20rights%20richards%20rubenstein.pdf
And I’ll take a look at REMAC bi-monthly’s:
http://www.reomac.org/library/publications/
I’m sure CA is doing it “for the kids.” Oh wait… no… CA claims they are doing it for…”Every foreclosure imposes on average $19,229 in costs on local governments.” OK so they are doing it for the CA Unions. Doh! Not again!
Must kick can down the road! Kick! Kick! Kick!
But you must pay our pensions! But we can’t pay your pensions! But you must pay our pensions! But we can’t pay your pensions!
Kick! Kick! Kick!
Oh Geez… this law just keeps on giving…Doesn’t this block foreclosure for everything on MERS which basically is all loans?
Recording “robodocs” is prohibited on ALL mortgagerelated
notices of default and supporting declarations
(including declarations recorded pursuant to Civil
Code §§ 2923.5 or 2923.55), notices of sale,
assignments of deed of trust, and substitutions of
trustee recorded in connection with a nonjudicial
foreclosure, as well as declarations filed in court with
respect to any foreclosure proceeding. Documents
must be accurate, complete and supported by
competent and relevant evidence. [Civil Code §
2924.17.] Until January 1, 2018, a mortgage servicer
that engages in multiple and repeated uncorrected
violations of these requirements is subject to a $7,500
civil money penalty per mortgage or deed of trust
levied by a government entity, including the mortgage
servicer’s primary California regulator, if any.
I took my family to the zoo today — it was $5 day. The place was packed.
The wonders of low prices.
Muggy
Do tell us, what were their “wow” “cool” animals?
I loved the elephants and seals as a kid. Zoos are great childhood memories. Still a kick.
They have a 2 manatee pools and 3 tank manatee hospital. We *LOVE* that. Other than the Okapi, I think all of their animals are standard zoo critters…
It’s a great kids zoo.
LOOK at the last line………………….
DEA shuts down shipments from Walgreen facility
Reuters) - The U.S. Drug Enforcement Administration (DEA) said it shut down shipments of controlled substances from Walgreen Co’s Florida distribution facility on the suspicion that highly addictive painkillers were being diverted to the black market.
The distribution center in Jupiter, Florida, “failed to conduct due diligence to ensure that the controlled substances were not diverted into other than legitimate channels,” the DEA said in a email statement.
The U.S. Drug Enforcement Administration had inspected the facility along with six of the company’s pharmacies in April.
The shutdown comes a few days after the DEA said it will revoke the controlled substance licenses of two CVS Caremark Corp drugstores in Florida as part of a government crackdown on addictive painkillers like oxycodone.
According to the DEA, the Walgreen facility has become the largest distributer of oxycodone products in Florida.
The DEA has increased its focus on drug wholesalers and pharmacies as it tries to battle what the Centers for Disease Control and Prevention call a prescription drug abuse “epidemic.”
Deaths from narcotic painkillers now top those of heroin and cocaine combined.
“All DEA Registrants have an obligation to ensure that medications are getting into the hands of legitimate patients, and when they choose to look the other way patients suffer and drug dealers prosper,” DEA Special Agent in Charge Mark Trouville said in the email.
Walgreen could not be reached for comment outside regular business hours.
(Reporting by Tej Sapru in Bangalore; Editing by Gary Hill)
Amid Discord, Romney Seeks to Sharpen Message
By JIM RUTENBERG and JEFF ZELENY
Published: September 16, 2012
With time dwindling for him to gain an edge in the presidential race and with an outbreak of finger-pointing signaling trouble in his campaign, Mitt Romney plans to begin an offensive this week, his aides said, seeking to give voters a clearer picture of where he wants to take the country.
Amid a clamor of calls from prominent Republicans for Mr. Romney to offer a major policy address to answer voters’ continued questions about his plans, his aides said he would present a series of speeches, television commercials and events promoting his five-point economic policy, even as he concentrates on his next big chance to change the race: the debates.
In an interview, Ed Gillespie, a senior adviser, said that in the coming days the campaign would be “very future oriented” about “what a vote for Romney would result in.”
But the discussion of the new tack came as Mr. Romney’s campaign was contending with a report in Politico on Sunday night that his campaign was divided over the dominant role of his chief strategist, Stuart Stevens.
In interviews on Sunday night, others close to the campaign said Mr. Stevens’s domineering style had at times rankled his colleagues. Campaign aides had also begun grumbling about Mr. Stevens’s role in debate practice sessions; they said he frequently interrupted and offered rambling monologues.
But none questioned that Mr. Stevens remains close to and trusted by Mr. Romney. And one senior adviser, who discussed the internal workings of the campaign on the condition of anonymity, dismissed the criticism of Mr. Stevens as coming from outsiders.
“In the inner circle of this campaign, the people who are on the phone calls and really making the decisions, there’s not infighting, there just isn’t,” the adviser said.
…
Check out the ever-widening gap in Obama’s favor:
2012 US Presidential Election Winner Takes All Market
-1 I’m not voting for either of these two shills.
European Squabbling on Currency Crisis Solution May Test Rally
By Patrick Donahue - Sep 16, 2012 3:01 PM PT
Squabbling among European governments over the next steps needed to overcome the region’s sovereign debt crisis raised the specter of renewed turmoil as last week’s market rally eased pressure to forge a common path.
A Sept. 14 European Union finance ministers meeting in the Cypriot capital of Nicosia deadlocked over the timetable for a more unified EU banking sector, with a German-led coalition pushing back against a more ambitious plan sought by France, Spain and Italy. The ministers also bickered over the terms of bailout requests and the role of the European Central Bank.
“Experience suggests that just as day gives way to night, improvement gives way to policy complacency, which is then followed by renewed crisis,” Joachim Fels, chief economist at Morgan Stanley in London, wrote in a note yesterday.
The euro area’s ability to overcome differences will determine whether a market revival prompted by increased ECB intervention and a German high-court ruling on bailout funding will mark a turning point in the three-year-old crisis or just the latest European bid for more time.
The euro climbed 1.1 percent Sept. 14, helped by new measures by the U.S. Federal Reserve, bringing the rally this month against the dollar to 4.4 percent. After falling from more than 6.8 percent at the beginning of September, Spanish 10-year yields climbed 1.5 basis points at the end of the week to 5.79 percent as the euro ministers failed to find agreement.
Single Supervisor
The sharpest EU disagreement in Nicosia was over a European Commission plan to establish joint banking supervision from the beginning of next year. German Finance Minister Wolfgang Schaeuble, backed by colleagues from Sweden, the Netherlands and Poland, urged the meeting to agree on a more cautious approach when assigning new duties to the ECB.
EU leaders called for a single supervisor in June as a condition of bailout assistance directly to euro-area banks. Such a mechanism would be designed to decouple government funding to prop up failing credit sectors, breaking the link between sovereign and banking debt that has been blamed for compounding the crisis.
While Schaeuble argued that such a “sizable apparatus” would require more time to take in more than 6,000 euro-area financial institutions, other finance ministers wanted to stick to the Commission’s timetable.
“We can’t waste time,” French Finance Minister Pierre Moscovici told reporters in Nicosia.
…
Baltic index dips on weaker panamax rates
Fri Sep 14, 2012 11:49am EDT
Sept 14 (Reuters) - The Baltic Exchange’s main sea freight
index, which tracks rates for ships carrying dry
commodities, slipped on Friday as panamax vessel rates continued
to tumble.
The main index, which factors in the average daily earnings
of capesize, panamax, supramax and handysize dry bulk transport
vessels, fell 1 point or 0.15 percent to 662 points.
The overall index, which gauges the cost of shipping
commodities such as iron ore, cement, grain, coal and
fertiliser, has fallen about 62 percent this year.
“The bigger vessels have gained some traction over the past
week and although rates are still at abysmal levels, the
activity level seems to have picked up,” Arctic Securities
analyst Erik Nikolai Stavseth said in a note.
…
I just got done writing a 40% offer on a short. I’ll let you all know.