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Posted By: Ben Jones @ 12:47 am
To me, it seems like in many places, the bubble has merely deflated slightly and has never really “popped” at all. Furthermore, it’s still happening globally.
So, I want to ask everyone here:
How long do you think this can last? What specific policies or other variables could enable the can kicking for a decade? Several decades?
1) “How long do you think this can last?” To Infinity and Beyond!
2) “What specific policies or other variables could enable the can kicking for a decade?” bailouts are coming
3) “Several decades?” To Infinity and Beyond!
Like all bubbles, it will last until its over. Remember one thing though: This time its not different.
Quantitatively it is rather different.
The policy response (”extend-and-pretend”) is different.
No it isn’t.
Extend and pretend is what Boomers have done their entire lives. Why expect anything different now that they set governmental policy?
Didn’t you get the memo? Boomers are the opposition. Policy is decided by others.
I meant “extend-and-pretend” is different as a policy response to a housing bust. I believe the policy of Uncle Sam and his agents (e.g. the Fed) to deliberately support housing prices in order to stave off a bust is different than what has occurred in previous housing busts. Thus it may take this bust longer than previous ones to play out.
The Fed’s easy money policies are pushing speculators into housing. Perhaps they will be the ultimate bagholders when the floor drops out of this sham.
For most of the Boomers I know, “extend and pretend” meant extending our bi-weekly insults as long as we could before resorting to ramen, and “pretend” meant pretending we could ever afford to buy a house. None of my circle of friends owned a home until they were into their forties, and not a few still don’t in their sixties.
The aftermath of the Vietnam War (another “pretend” event we were drafted to fake) was years of massive inflation, followed by years of massive corruption that saw our taxes go to support Ronald Reagan’s cronyism. The last decade, where twenty and thirty-year-olds got mortgages, was a cyclic anomaly. WW2 got the GI Bill, Boomers got the tab. 1890’s saw the homesteaders, their kids got the Great Depression. And onandon.
Why do you suppose this dynamic will be any different for you or your children?
I get that it’s not different in terms of prices will not keep going up forever.
However, isn’t it true that the reaction of the government is different from other times? I know there have been other bubbles, and historically, they might be very similar. Was the government foaming at the mouth at the prospect of propping up past bubbles? Were there huge bailouts? Wouldn’t that render comparing this bubble to others not as accurate?
It used to be policy makers did not know what to do. Now policy makers do know what to do.
These policy makers who “managed” the economy and got us where we are today are largely the same policy makers who are going to manage the economy and to lead us to where we need to go tomorrow.
Which way does the wind blow today? Let’s watch to see if Obama steps into the CIA power vacuum and appoints a Washington or an ex-military guy/gal. If the next director is military/CIA/FBI then the CIA masters are still in control and the CIA’s ‘War Of Terror’ will continue to interfere in the affairs of sovereign nations. If he goes outside the CIA/DOD bubble we might be seeing a change for the better. Seeing that Hilliary Clinton will be out of the picture soon there could be a historic shift in US foreign policy in the works. Again, watch to see if Obama goes to a military/CIA/FBI person or someone he can control that came from outside the military industrial complex.
“Seeing that Hilliary Clinton will be out of the picture soon…”
Is there any significance to Petraeus getting taken down for the same reason her husband was nearly taken down?
Funny that the DOD’s #1 supplier just lost their CEO to the same thing?? And hey they now have a woman heading the world leading supplier death on demand. Wonder if she has ethics left after a life in the defense business…
BTW, the non-defense part of Lockheed is one of the leading suppliers of computer/electronic services to most state welfare departments. Where do think all those plastic food stamp cards come from anyway?
*It is harder to commit fraud with the new system. Beer and cigs ain’t food.
Eunuchs, need to appoint eunuchs.
“Is there any significance to Petraeus getting taken down for the same reason her husband was nearly taken down?”
This story isn’t over yet. I’m certain that Mrs. (Ms?) Broadwell is every married woman’s fear — intense, intelligent and attractive there’s likely few men capable of resisting her siren song; however, she’s also a commissioned officer. That said, Petraeus was charged with establishing Israel’s security in the region during a volatile period of numerous civil wars and regime change. This sideshow also comes at a time of severe financial crisis and impending demographic depression in the U.S. adding to the burden of commitment.
The UCMJ will likely deal the Broadwell-Petraeus affair a harsh blow setting an example.
Well the French went to fiat money (1st. European nation to do so) in a failed effort to stop the collapse of the Mississippi Co.. Just look at the paper money your wallet, we are still living with the aftermath of the first great RE bubble.
Look up Finance Accounting Standards Board rule 157. It establishes what’s called Mark-to-Market valuations of real & synthetic financial instruments like CDOs and MBS. It was suspended in early 2009 just as Hank Paulson was handing over the keys to the treasury to Timothy Geithner. It marked the bottom of the stock market declines almost to the day. In effect it let’s holders of synthetic debt hold it on the books at it at face value. Truth is the debt is worth pennies on the dollar.
“Look up Finance Accounting Standards Board rule 157.”
A stroke of a pen and - presto! - all problems are solved.
Next: Change to value of pi to something more reasonable, such as maybe 3.2. Or, better yet, make it an even 3.
(Time)x(Inflation)= Debt “refurbished”.
…throw in a little “inflation accelerator” catalyst manufactured by the factory that is the FED, and you have a grasp of the current plan.
Only if the inflation makes its way into wages.
How many times does this have to be said to sink in?
I don’t know, but you better keep saying it because I am scared.
It seems like the way around the need for higher wages is to qualify people to take out mortgages they may later prove unable to repay.
Isn’t this generally the purpose of low-downpayment, low-interest mortgage lending?
The other part of the “housing reflation” plan seems to be for the Fed to snap up $40 bn worth of (presumably bad) MBS every month. I’m guessing there might be a connection to all those low-downpayment, low-interest loans that ended up in default?
Why not run out and buy a house or seven? Take on all the debt-pawnership that you possibly can.
It’s not like we are stopping you.
Only if the inflation makes its way into wages.”
It is but not in the USA, probably not in Europe either
in the global market this will show up no matter what Bernake says.
Will the US outlaw exporting farm products like Argentina ?
Will the US outlaw selling costal RE to Chinese investors ?
no and no unless it gets really bad and then we will have a real depression
Sometimes it helps to look at proxy indicators. So what if energy consumption per capita = average standard of living. As long as the world depends on non-renewable energy supplies and our current per capita energy consumption is so out of whack with the rest of the world then there exists a natural pressure for something to equalize the inequality. Rural wages have been increasing in China lately. Fun fact: China is the world’s #1 energy producer.
Suspension of “mark to market” occurred March 30, 2009.
In effect it let’s holders of synthetic debt hold it on the books at it at face value ??
There is your answer right there….Spot on….It does raise a question though…What would have happened “if” rule #157 was not suspended…??
What would happen if we followed the law?
It seems too terrible to imagine.
What would happen if we followed the law?
It seems too terrible to imagine.”
Yeah, we”d end up like Iceland, which had a extremely deep and intense recession that was over by 2010 and has been growing ever since, unemployment dropping to better than you’ll see in the US, and net inward migration. Basically they’re the first post-bubble economy. Good for them.
Overall I prefer that to a couple decades of Japan style extend and pretend. Get this greater depression over with, so we can start to rebuild instead of waiting around as it gets worse and worse.
I think its hilarious that Iceland’s politicians STILL want to join the EU. Looking at their relative economic health, that would be like the USA wanting to join up with Haiti.
“Yeah, we”d end up like Iceland, which had a extremely deep and intense recession that was over by 2010 and has been growing ever since”
I think it is a mistake to think that the US will have the same results as Iceland. Iceland’s recovery happened in an environment of government stimulus by most of the major economies. They are small and isolated. Most of them live close enough to the land that they can survive if they have to.
A deep and intense US recession would take the major economies of the world down with it. Less than 20% of our population lives in rural areas where they are able to live off the land. Another 10% live in small towns and cities (population between 2500 and 50K).
I expect the recession would be longer, deeper, and more painful than those who wish to let it fall would expect. And I think none of us would escape its effects.
Extend and pretend is like the tree that fell on our house after a windstorm. It took 24 hours to do it and by the time it came to rest, it damaged only a few shingles. If it had fallen during the storm, all at once, it would have taken out two thirds of the house and possibly a few family members. We would have been instantly homeless and have lost most of our stuff.
It could be argued that rebuilding would have given us a newer, better house. That could have been done less painfully with time to plan.
Iceland’s rural population lives off the government, not the land, which is too barren to provide anything but banking and obscenely expensive tourist $ervices. They do, however, have an ocean, which provides herring. And puffins. (Yummmmm, herring and puffin….)
The main reason the economy of those 350,000 souls is “bouncing back” is because Iceland is sheltering British plutocrats’ money, and providing NASA a “research” base. The Caymans are doing okay, too, btw.
“They do, however, have an ocean, which provides herring.”
October 9, 2012, 3:08 p.m. ET
Fishing for Trouble in Iceland
Reykjavik is on a collision course with the country’s most important industry.
By BRIAN M. CARNEY
Four years ago, this remote country on the edge of the Arctic Circle became the most spectacular casualty of the 2008 global financial crisis.
Practically overnight, Iceland’s banking system collapsed, taking the currency and much of the rest of the economy with it. The krona plunged by some 75% in a matter of days before it essentially stopped trading altogether. The country’s three large banks, which had between them borrowed the equivalent of many times Iceland’s annual economic output, imploded as money rushed out of Iceland even faster than it had poured in during the boom years.
By the middle of 2009, it no longer felt like hyperbole to suggest that Iceland, economically at least, could sink beneath the waves altogether. The krona was on a fast track to worthlessness. International creditors, including the governments of Britain and Holland, were demanding huge sums that Iceland patently did not have in recompense for losses suffered when the banking system fell apart.
But in the past couple of years, Iceland has staged a recovery of a sort. Unemployment is down to nearly 5%, although work-force participation isn’t what it was in the boom years, and there’s been some emigration from the population of 320,000. After shrinking 6.6% in 2009 and 4% in 2010, Iceland’s economy grew 2.6% last year and could hit 3% this year.
The rebound is in no small part thanks to the business that has been the island’s mainstay for a millennium—fishing. Fish account for more than 40% of Iceland’s total exports.
What’s more, fishing in Iceland is profitable. It wasn’t always so. In the 1970s, Iceland’s fish stocks were collapsing, and the industry in trouble. But starting in the late ’70s and ’80s, the government in Reykjavik introduced a kind of property right into its fisheries, called an individual transferable quota, or ITQ.
The quotas represent the right to take a percentage of the total allowable catch set by the government. And these quotas can be bought, sold and borrowed against. ITQs have become a valuable asset in their own right, and have allowed the owners of these fishing rights to rationalize their operations, increasing productivity and profits in a business long plagued by overcapitalization and poor returns.
In fact, Iceland’s fishing-rights system has been so successful that, in its own way, it helped contribute to the country’s financial boom: The strength of its fishing industry helped the country earn the triple-A credit rating that in turn allowed its banks to set off on the unprecedented global expansion that ultimately ended in the 2008 bust. The fishermen themselves also poured their money into (bad) investments in the boom years, helping to stoke the Icelandic bubble.
Those banks are now shadows of their former selves, but the fishermen are still here. This is where the saga takes a dark turn, however. In the wake of the financial crisis, the government of the time was swept aside in favor of a left-wing coalition that has made it its mission to undermine the property-rights system that has served the country so well—and has helped it recover from the crash. It has put forward legislation to restrict the buying and selling of quotas, and to allocate more of the catch rights politically.
Oh no…Iceland…and you were doing so well…
Iceland had plenty of lush soil right up until the Norsemen chopped down all the trees and all the soil blew away.
Bailout, bailout, bailout, …
Banks would have been recapitalized by massive amounts of money that was printed by the Fed. TARP would have gone from loans to equity.
Through this investment, massive amounts of bad debt would have been implicitly acquired and essentially guaranteed by the US Government.
The world had already experienced the failure of Lehman because of mark-to-market accounting…the US would have made all efforts to blunt the pain.
BTW, mark-to-market works really well when there is a functioning market…not so well when the market does not function. IMHO, there was rationale to suspend FASB 157 during the time of greatest disruption in the markets post Lehman collapse. I see NO rationale for the continued suspension today.
BTW, mark-to-market works really well when there is a functioning market…not so well when the market does not function.
So what’s the best way to get back to a functioning market? It seems to me that the suspension of 157 has meant that we still aren’t functioning, although we’ve created a facade that we are which wouldn’t be possible with 157 in effect. My prediction is that if we reinstated 157 today, by the end of the year we’d be right back in a situation where you would consider it necessary to suspend it again.
“IMHO, there was rationale to suspend FASB 157 during the time of greatest disruption in the markets post Lehman collapse. I see NO rationale for the continued suspension today.”
Once opened, Pandora’s box is hard to shut.
“My prediction is that if we reinstated 157 today, by the end of the year we’d be right back in a situation where you would consider it necessary to suspend it again.”
Thx for the explicit version of my Pandora’s box explanation.
Maybe. However, I would say that to test it out, you could phase it in…where banks need to reinstate MTM accounting for a certain percentage of their assets each quarter (at their choice)…say, 5% per quarter. This would give banks plenty of time to clean things up, and lots of forward planning to sell bad debts, raise capital, etc. At 5% per quarter, after 5 years, no more MTM accounting suspension.
Once opened, Pandora’s box is hard to shut
So, let me see if I understand this correctly. (Also, feel free to add or correct me).
The suspension of rule 157 allowed banks to pretend they were solvent. They never had to reduce the assets to what the actual value was, and instead got to keep their inflated prices on the books. If they were actually reduced to what they would sell for, it would have been in line with incomes, and not at inflated prices.
So, because of this, banks are allowed to live in fantasy land? Is this “extend and pretend”?
Also, is this what people mean on here when they say people who think banks have higher profits than ever don’t really have a clue? Because if they were allowed to adjust, it sounds like they would have broken up. However, because mortgages were backed with tax payer money, allowing banks to fail would have more dire consequences to the economy.
How on earth is delaying the inevitable helping?
“How on earth is delaying the inevitable helping.”
Here’s my opinion:
Among other things banks serve as clearing house for transactions. When a physical transaction occurs a matching financial transation also needs to occur. People, businesses, etc need to be paid for what they produce and what they transport. If it is questionable whether or not they will get paid for what they do then they will have no incentive to do it.
Banks serve as clearing houses for these transactions. If it is questionable whether a bank can honor its commitment to clear these transactions then these transactions will not occur, which means close to nothing gets produced or transported.
So the banks need to be seen as being solvent, as being viable enough to clear transactions. Example: To make good on any checks written on its behalf.
Because of this, even though banks may not be truly solvent it is vital to the economy to pretend that they are.
You covered it completely. It’s things like this that makes you understand how behavioral economics can trump classic economic theory. I bet the French wish they could have done this with the first true economic bubble: The “Mississippi Company” (of 1684). This corporation, which held a business monopoly in French colonies in North America and the West Indies, became one of the earliest examples of an economic bubble.
“…How is delaying the inevitable helping…?”
You’re getting it. When you ask how it’s helping you have to look at who it’s helping. It’s not helping us as a nation, at least in the long run, but it is helping certain people a lot.
Certain very wealthy, well-connected people.
Wasn’t insolvent banks pretending to be solvent cited by top U.S. economists as a primary problem with Japan’s policy response to their collapsed bubble in the mid-1990s?
What was different about Japan then compared to US now?
“… cited by top economists …”
Oh, please, try a source other than the opinion of “top economists”. Where were these “top economists” when the problem was brewing?
What did that top economist Galbraith say about economists? Something about an economist will answer a question not because he knows the answer but because he was asked the question?
Many economists disliked Galbraith for his frankness.
‘Where were these “top economists” when the problem was brewing?’
Busily lecturing Japan.
October 12, 2010, 9:06 p.m. ET
Fed Chief Gets Set to Apply Lessons of Japan’s History
By JON HILSENRATH
As a Princeton professor in the 1990s, Ben Bernanke lectured Japanese officials for mishandling their economy.
Today, Tokyo’s economic problems are more than academic for the Federal Reserve chairman. They are a window into his own situation as he stares at what could be a long period of slow growth, high unemployment and declining inflation in the U.S.
Behold the handwriting on the wall:
ft dot com
Last updated: November 12, 2012 12:01 pm
Japan nears fifth recession in 15 years
By Ben McLannahan in Tokyo
The Japanese economy has shrunk at its fastest pace since the earthquake-hit first quarter of 2011, piling pressure on the government to try to avert recession.
Yoshihiko Noda, prime minister, described the 3.5 per cent annualised decline in the July-September period as “severe”. Seiji Maehara, economy minister, said Japan had possibly entered a “recessionary phase”.
Many of Japan’s economic indicators have deteriorated since September, leading economists to predict that the nation has entered its fifth technical recession – two consecutive quarters of contraction – of the past 15 years.
“The question is how long and deep this downturn will be and how policy makers will react,” said Masamichi Adachi, an economist at JPMorgan.
The economy posted relatively strong growth in the first half of the year, as output was boosted by reconstruction in areas of northeastern Japan devastated by the March 2011 earthquake and tsunami. But it took a turn for the worse in the third quarter, as demand ebbed in China while Europe remained sluggish.
In July-September, Japanese exports fell 5 per cent, while household consumption and business investment also slipped. Excluding early 2011, the data released on Monday marked Japan’s biggest quarterly contraction since the fourth quarter of 2008 during the Lehman crisis.
Japan’s post-Lehman growth has been among the world’s most patchy. The economy was one of the best-performing among developed nations in 2010, as it snapped back from a 5.5 per cent fall in real GDP in 2009 to record growth almost double the G10 average of 2.6 per cent. Last year, though, output was knocked by 0.8 per cent as the nation struggled to overcome the various effects of the earthquake and tsunami and severe flooding of production facilities in Thailand.
The economy is expected to suffer again in the fourth quarter of this year, as the country remains locked in a territorial dispute with China, its largest trading partner over contested islands in the East China Sea. The spat over the Senkaku islands – which China calls the Diaoyu – has sparked unofficial boycotts of Japanese goods.
Japan nears fifth recession in 15 years
That’s such an odd coincidence. Some people just have the worst luck.
Some banks were as high as 50 leverage; US banks are buying time to get down to 30; whereas most industrialized countries are targetting 18.
Would anyone allow you to borrow $1.8 or $3.0 million based on your average $100,000 equity?
Both are ridiculous, but not when you consider the percentage coverage (F&F) is plus 90%! However, the 18 types are generally less than 30%.
If the banks cannot achieve a much lower average before the rug gets pulled then today’s Federal debt will look like a playground.
And most US banks would be out of business. Your pensions, savings, etc will be gone and repaid dollar for dollar (assuming you are not over the insured limit) with freshly printed US currency - five years later and worth only a fraction in NPV of what you lost.
The real problem is the interest spread is not allowing a fast enough leverage reduction, and most foreign money is already in North America that is coming.
We are on a fast boat in very rough waters. One bad move and we are up the creek without a paddle.
A blog like this being critical of the bankers is extremely important because it is helping to keep their feet to the firestorm.
Once they are out of the woods we should see an improved economy.
I am not a bankster and feel that BB’s E&P policy was the wrong way to go - using 80 year old tactics instead of a solid strategy is mind numbing.
The strategy that should have been followed would be a selective leverage target being met on a predetermined schedule - just like the auto industry’s mileage standards.
Any bank that couldnt meet it should have gone under.
I remember at the time that everyone was predicting that the banks would be screwed and tattooed, because of the carved in granite Rule 157…….with that rule, the tide would go out, and everyone would know who was wearing swim trunks.
Sans 157?…..most of us will be pushing up daisies before there is any accounting.
Is GAAP the standard for regulatory solvency?
shhh shhh shhh do you hear that?
That is the sound of Bernanke purchasing $40 billion in MBS per month until further notice.
bailouts are coming
Is he buying all the MBS that consists of countrywide liar loans?
My understanding is that they are buying newer/not defaulted MBS, but I could be wrong. Anyone have granular data on this?
My understanding is that they are buying newer/not defaulted MBS, but I could be wrong.
Doesn’t matter; they can bury an unbounded amount of losses in their QE “profits”.
CeeCee-the-Amazing asked: “How long do you think this can last?”
Decades. Governments painted themselves into corners. They can’t let the markets adjust on their own, but by the same token, since there’s no real money driving the speculation on properties, the markets must adjust downward. This will be a long and painful process.
I’ve already advised people to NOT just sit this one out. It’s too likely you’ll die a renter while waiting. I pulled the trigger myself in 2008, because I got a cost per sf that was so low it was criminal. Let’s just say it was less than $30/sf and leave it at that. Could I have obtained a slightly cheaper place? Sure. Would my capital have run out by then? Also sure. So I jumped and have benefited greatly since then. I’m in Oil City and I’ve weathered quite a bit since then.
So during this long, long downward plateau, if you want to stop being a renter, you have to keep doing your homework. Bursts of downward prices will appear. Those are your AIDA points. So will bursts of prices rising; those are times you must wait. The overall trend will still be down, and it will take decades for that to resolve. Hopefully you can get into the game in less than a decade. (I really pity the guys in the big coastal urban areas where prices are just too active.)
Although people like to claim we’re not following the Japanese model since “we’re not Japan” for a variety of reasons, we ARE following the J-model since that’s what the emergent facts say. Prices continue to fall, slowly. Bad loans were hidden inside government actions. And we’re apparently hiding a lot of empty housing as well. So from all this hiding, this becomes a very long term event. The Japanese call their event the “Lost Decade”, and yet are on the 21st or 22nd year of it. Honesty about the matter had long been squelched. What remains is for people like us to function as that cultural honesty. Keep researching. Keep posting. And keep talking to the people around you.
I’ve already advised people to NOT just sit this one out. It’s too likely you’ll die a renter while waiting.
Worse things could happen than dieing a renter.
The overall trend will still be down, and it will take decades for that to resolve. Hopefully you can get into the game in less than a decade. (I really pity the guys in the big coastal urban areas where prices are just too active.)
What’s to stop the guys in the big coastal urban areas to keep renting forever if purchase prices are relatively too high? With so many investors planning to buy homes to rent them out, I’m thinking cheap rentals in high priced coastal areas might be available for decades.
Where is the downside to renting forever?
The only downside relates to less income in retirement. If you don’t overpay relative to your income, and are disciplined about it, you can end up with a free-and-clear residence at a time when renters are still paying rent.
Yes, you still have maintenance and property taxes, but those will be less than the rent 20-30 years from now for a comparable property.
That’s it…the only downside, but you need to make sure you don’t overpay today relative to rents in the area you want/need to live, and your income, or the benefit of owning a free-and-clear residence will be an illusion, or eaten up by the excess costs of ownership.
Not so sure about that. Through the bubble, I was paying less in rent than I would have paid in property tax had I bought the place. Then there’s alk these bankrupt states, hungry for new revenue…
Different math for different places. CA has Prop 13, which makes property taxes VERY definable. I can imagine the difficulty in states with a very high rate of P. Taxes, as well as a propensity to increase them at the first sign of trouble.
“Not so sure about that. Through the bubble, I was paying less in rent than I would have paid in property tax had I bought the place.”
Landlord’s purchase price = $560K
San Diego property tax rate = 1.11153%
Annual property tax paid by our landlord:
1.11153% X $560K = $6225 — a lot less than we pay in rent!
Of course, there are also other components of PITI (principle, interest, insurance), plus HOA, yard care and structural maintenance. And a capital loss of maybe $150K on the investment…
What’s $150k when you can paint your walls purple?
Prop 13 is easily circumvented on the county and municipal levels. And the State periodically assess “special fees” and “penalties”.
And the 2% per year “inflation factor” has added up over the course of the last 35 years. And….
The point being, property taxes on the lucky-ducky crowd approach 4-5%, not 1-2%. For example: A $50K (assessed) property with an $830 tax bill.
CIBT, you pay about $500 per month in rent for a $560k house? The $6,225 is an ANNUAL property tax rate…
That seems pretty low to me for a $560k house.
I said the tax was a lot LESS than we pay in rent…
No CITB. I caught it, too. Re-read your post. Some of us occasionally proofread our posts before hitting “enter”.
I admit I do it too -
Robin — Perhaps my writing style is confusing you, but I put quotation marks around quotes of what others said, such as:
That was a reference to what someone else posted earlier, not to our situation.
Sorry, I read it backwards…
No matter…glad somebody read it.
Made perfect sent to me. I guess I read Academic Ursus quite well.
Where is the downside to renting forever?”
Nothing unless you get high inflation which translates into rent increases
That would mean wage inflation which is doudtful. And unless you are in certain areas ( maybe San Diego ) where the 1% want to live you could probably rent forever and come out no worse than owning ? Carmel valley off the ted willaims highway looks pretty 1% to me or at least very high tech and medical intensive. That money will drive prices. Plus foriegn money as they diversify out of China or Mexico or wherever.
The future of the US looks like pockets of extreme wealth and vast areas of deflation and proverty.
“Carmel valley off the ted willaims highway looks pretty 1% to me or at least very high tech and medical intensive. That money will drive prices.”
Already been driven.
I just did a Redfin search on Carmel Valley (92130 zip code). They are no longer showing long-term price data, making it hard to tell how far prices have dropped since the bubble popped.
Have you tried Zillow?
It shows peak at about $875k, with today’s value at about $750k. (this is the median “zestimate”)
I tend to distrust Zestimates™ as inflated to the high side. That said, what I find more interesting is that Zillow shows 379 homes on the market in the 92130 zip code going into the ice-cold holiday sales season. Are there really 379 buyers out there to match up against that many overpriced homes in just one zip code?
Call me skeptical, if you want, but I sincerely doubt it.
Here is another great example of why I distrust Zillow. Check out the huge divergence between recently realized sale prices in La Jolla and current Zestimates:
92037 Home Prices and Home Values
Median sale price ($)
Zillow Home Value Index Y-o-Y
92037 $969,500 2.9%
You know the answer as well as any of us: insurance against future higher rental costs associated with future inflation. For those that continue to harp on the “inflation has to go into wages for this to be a factor”, you’re missing the point. Inflation is going into wages, rather, their going into the top 10% of wage earners wages.
We’re seeing the bifurcation of our society, from wages and employment to housing. Those within the top 10% continue to see higher wages while those areas of housing in demand by the top 10% continue to increase in value. Those housing areas not in demand by this group are in decline to better match supply/demand and affordability by those lower classes.
I see it very clearly here in MA. Those in the hi-tech and software industry here are doing quite well, along with the professional class of usual suspects. Those communities that cater to the wealthy and wanna-be wealthy crowds are seeing prices and demand increase YoY. Those middle-class and lower class communities are seeing continued housing declines as their typical buyer continues to lose in the affordability war.
“Inflation is going into wages, rather, their going into the top 10% of wage earners wages.”
Do you have anything to back this up? Because my guess is that your ‘top 10%’ is an overestimate of the share of the U.S. workforce seeing wage increases, unless you are excluding discouraged workers, would-be workers fraudulently receiving disability, etc.
Only anecdotal evidence. Everyone I know in the “six-figure compensation” camp is seeing higher comp in terms of bonuses, salary, etc. Same goes for those taking new jobs. Those I know in the “profesional” class, like lawyers and dentists are seeing more business than last year, translating into higher compensation. These types are spending as well. A dentist associate recently bought an Audi R8… $100k car.
Everyone I know in the “under six-figure comp” group is holding steady or losing ground because of reduced benefits and a lack of raises. Case-in-point: my parents and my in-laws. All well under $100k household income. They are losing their benefits next year as their employers have decided it is cheaper to pay the $2000 fine per employee instead of continuing to offer health benefits. This will translate to loss of income as they have to purchase insurance through an exchange or via the open market or pay a fine. Same goes for the teachers and city workers I know. No raises this year for them.
The only reason I chose “top 10%” was because generally that’s the beginning of the $100k household income group… it could just as easily be the “top 5%” group, though I don’t belong to that group and I’m seeing strong wage growth personally. Again, all anecdotal.
Rented a studio, then a 1Br. apartment in Costa Mesa, CA. Next door to Newport Beach. Every six months the rent rose by $50 without fail. Because they could get it.
That was a major incentive for me to buy and the main reason you’ll get screwed and have to move every few years if you choose to be a renter forever, especially in desirable coastal areas.
BTW, I did have to move further inland to get an equivalent payment for a 2Br./den 1Ba. house with a fixed 30-year payment.
Best choice I ever made.
Hoping for reasonable rents in a coastal area crawling with wannabes is a fool’s game.
How long can it last?
Let’s just say…hug the nearest member of the MIC you find…I think our military might is a major player in the USDs status as the world’s reserve currency.
Our sphere of influence is already dwindling…see the middle east…as it dwindles so will our call to arms.
good idea in theory but it didn’t work out where I live (Calif. wine country) I tried to buy for a year and made several offers but all were ignored because a flipper or speculator offered cash, finally gave up several months ago. Fortunately I’m reasonably happy with the place I’m renting….
Over the last several months my wife and I have been looking at over 55 SF condo developments here in the Va Beach, Va area. One of the financing incentives is a $5000 credit for closing costs from the bldrs prefered morgage lender. No big deal.
What I did find interesting was the RE agents recommendation that we consider using a Reverse Morgage for financing. Unrelated Agents at the 2 developments stated that about 1/3 or new buyers were using this method to eliminate future morgage payments after purchase.
According to the agents, buyers were purchasing 30 year morgages with 25%+ down payments and appling for Reverse Morgages at the same time. Using their evample, a $125 morgage down payment in automatic equity that can be withdrawn immediately for lifestyle costs and eliminating further monthly payments until the property is sold. Both agents stated that this was becoming a popular option for Baby Boomers.
While I am not interested, I can see where this new and improved hussle would be popular with boomers who have limited assets. Liquidate, borrow, beg and steal as much as possible to get a large down payment, close escrow and borrow back the “equity” without having a morgage payment until something ugly happens with your health and you move on.
Looks like another marketing ploy that will stimulate housing, provide morgage opportunities for embattled financial institutions benefit a deserving demographic group while further preserving the integrety of MBS’s and the tax payers.
What could go wrong? What am I missing?
By the way, I would prefer not to deal with the rantings of some of the more vocal members of the board who no doubt will wish me financial ruin and eternal dahmnation for considering the purchasing a falling asset. I can afford to loose 100 %
I can afford to loose 100 %
Thanks for using the correct spelling.
A friend reverse mortgaged her house in 2006. She was not of sound mind to be signing such paperwork, but Wells Fargo was only too eager to “serve” her.
She proceeded with one of the most baffling spending sprees I’ve ever seen. We’re talking things like a subscription to a coffee bean of the month club. And she wasn’t a coffee drinker.
On Christmas Eve 2007, she fell and broke her leg. After a 5-week stay in a post-surgical rehab, it was decided that she could no longer live alone.
So, she moved out of the house and out of Tucson. Last I heard, she was up in northern AZ with one of her sons.
The family had some cosmetic work done on the house and they listed it for sale in mid-2008. Price was too high. It didn’t sell.
Wells Fargo foreclosed on it in 2009 and it finally sold in 2010. I suspect that the new owner is one of those first-time homebuyer tax credit people.
ISTR that Wells Fargo reverse mortgaged the place for something like $283,000. No way was it ever worth that much. Not even in the peak years of Tucson’s housing bubble.
The 2010 sale price was around $83,000. That’s more like it.
I’ve also heard that Wells Fargo recently left the reverse mortgage business. I can’t imagine why.
zeke said: “I can afford to lose 100 %”
Yes, that’s my viewpoint. I live in a sticky-rent area. I know a guy who’s paying $350/mo to rent a house that’s assessed at a little over $12000. No, I didn’t miss a zero there: Twelve Thousand Dollars. That’s an extreme point, but that’s our Big Problem around here. Landlords are sitting on their empty properties for years, adding to the problem of the bankers sitting on the shadow inventory. Our property taxes are so low (I pay a little over $100/mo, yes that’s One Hundred Dollars) that they can afford to hoard properties.
So in my area, losing 100% of the purchase price is more than an acceptable outcome. I’d in fact prefer that, since an assessment of $0.00 for my property would make my tax bill also $0.00.
I don’t know exactly what to tell the coasters about their situation, where it’s flipped: Purchase prices are sticky, whereas rents are not. So they might well be faced with the fate of renting pretty much their entire lives. Heck, faced with that fate and being younger, I’d strongly consider learning another language from Europe, and then moving there. If you’re going to be renting for life, then rent in beautiful, socialistic and enlightened locations like Paris or Berlin. Don’t hang around out %@#$hole cities like LA or NYC and endure Black crime and Liberal-crony taxes like some chump. Taxes in Europe tend to actually benefit the common population; here, taxes tend to flow to rightwing contractors and leftwing thugs (which includes union guys).
It will end when the federal reserve [private bankers] stop printing money. They will print tell the money becomes worthless. Of course since few know or read history today, this outcome remains a big mystery! Sad.
“Eastman Kodak won court approval Monday to quit providing health and welfare benefits to 56,000 U.S. retirees and dependents.”
Ah, the cogs of the Obama Corporate Death Panel begin to turn.
What a great idea!
Get my legacy commitments to go poof.
And done how, and with what? A mere stroke of a pen?
Lots of people don’t understand that unless you had a contract, your former employer has zero obligation to keep providing these retiree benefits. My parents are losing their drug coverage this year, though the company that bought the company that bough my father’s former employer will fill in the doughnut hole. The training they have from the volunteer Medicare counseling they do for other seniors means they knew it was possible. It can take hours to convince a lot of the people they counsel that the company, in fact, can cut them off.
“Lots of people don’t understand that unless you had a contract, your former employer has zero obligation to keep providing these retiree benefits.”
Does ‘contract’ exclude verbal commitments which are on the (written) record?
I’m not just thinking about health insurance here; remember how those ‘non-contractual’ federal guarantees of F&F debt turned out to be as good as a contract, when viewed through the lens of the rear-view mirror?
What does the government deciding to add an explicit guarantee to debt that was previously not guaranteed have to do with a company deciding not to continue to voluntarily provide retirement benefits to former employees who didn’t have an employment contract?
Companies provided these benefits to retirees because it made current employees believe that they too would get those benefits when they retired. It was a recruiting tool. The executives might also have considered it an ethical thing to do because they knew that people made plans with the expectation that the benefits would be there.
Once the executives give up the idea that they have an ethical obligation to someone other than current shareholders and decide that showing loyalty to former employees isn’t a cost effective way of recruiting/retaining current employees (if you are doing most of your hiring in China, this is very likely to be the case), then what reason do they have to keep paying out the money that the program costs.
If you want a benefit after you work for a company, get a contract.
“…with a company deciding not to continue to voluntarily provide retirement benefits to former employees who didn’t have an employment contract?”
A contract is an agreement entered into voluntarily by two parties or more with the intention of creating a legal obligation, which may have elements in writing,…
It seems likely that there is disagreement between the beneficiaries and the former employer whether there was a contractual obligation to provide the benefits said former employer is trying to rescind. Whether this was stated explicitly in writing is tangential or the executives believe they have an ethical obligation to someone other than current shareholders is tangential to the point…
Similar issues often arise when a wealthy philanderer carries on an extramarital affair with a sweet young thing, believing that he is not liable for her future living expenses because of the lack of a marital contract, only to later discover there was a contract, even though not in writing.
What contract is there with the philanderer and his mistress? You are making things up. If they end up in a common law marriage, there is an obligation created by state law, not a contract. If he wants her to keep her mouth shut, he has to pay for that future restriction on her behavior. If he gets her pregnant, then there is an obligation to pay child support, but that money, while paid to the mother, is the right of the child, not the mother.
So why can’t it be mandated the employer must offer a cash out lump sum when you retire or quit to put in your own IRA tax free?
“You are making stuff up.”
No I am not.
This seems to have come up a lot in cases where an implicit contract was used because a written contract was not legal (e.g. gay marriage).
From Wikipedia, the free encyclopedia
Palimony is the division of financial assets and real property on the termination of a personal live-in relationship wherein the parties are not legally married. The term “palimony” is not a legal or historical term, but rather a colloquial portmanteau of the words pal and alimony coined by celebrity divorce attorney Marvin Mitchelson coined in 1977 when his client Michelle Triola Marvin filed an unsuccessful suit against the actor Lee Marvin.
* In 1982, pianist Liberace was sued for US$113 million in palimony by his partner Scott Thorson. Though most of Thorson’s claim was dismissed, he received a US$95,000 settlement.
* Judy Nelson filed a palimony suit against women’s tennis star Martina Navratilova after their breakup in 1991.
* In 1996, Van Cliburn was sued by former partner Thomas Zaremba for a share of his income and assets following a 17-year relationship ending in 1994. Zaremba’s palimony case was dismissed for lack of written agreement, along with claims for emotional distress and that Cliburn subjected him to the fear of AIDS through Cliburn’s alleged unprotected liaisons with third parties.
* Canadian figure skater Brian Orser was sued by a former lover in 1998, outing Orser in the process.
* In 2004, comedian Bill Maher was sued for US$9 million by his ex-girlfriend, Nancy Johnson a.k.a. “Coco Johnsen”. On May 2, 2005, a California Superior Court judge dismissed the case.
* In 2010, in the Indian case of D. Velusamy vs D. Patchaiammal, Markandey Katju, a judge of the Indian Supreme Court, referred to the concept of palimony while delivering judgment. This case is also notable for the heavy use of ‘Wikipedia’ and ‘Google’ by the learned Justice in the judgment, which was later criticised in some quarters, notably by the Additional Solicitor General of India, Indira Jaising.
Palimony is an obligation CREATED BY STATE LAW. If you live in a palimony state, then the obligation is created if you live in the circumstances that create them. Living with another person in those circumstances is exactly the same as marrying in states that recognize the concept.
If there isn’t a law and there isn’t a contract there is no obligation.
The government didn’t have to back the Fannie/Freddie debt. They decided they wanted to in order to keep people buying the debt. They didn’t want mortgages to be dependent on private market standards. How is this hard to understand?
I know you claim that nobody should take anything you say seriously, but you just look stupid when you pretend that people who do stuff for non-legal reasons are the same as people who do stuff for legal reasons. There is a difference. The former can’t be enforced. You can do it if you want, but you don’t have to. The other stuff can be forced because you took on a legal obligation either by making yourself subject to a law or by entering into a contract. This isn’t physics. It is a human construct like a drawing. Seeing the ball fall doesn’t mean that there is gravity. Seeing the ball fall might mean that the cartoonist decided to make it fall.
I’m not just thinking about health insurance here; remember how those ‘non-contractual’ federal guarantees of F&F debt turned out to be as good as a contract, when viewed through the lens of the rear-view mirror?”
China was on the other side of this one IIRC
“…you just look stupid when you pretend that people who do stuff for non-legal reasons are the same as people who do stuff for legal reasons.”
Playing the ’stupid’ card is a poor substitute for reasoned arguments. But I realize you are an attorney, so I understand the impulse to try to scorn your opponent.
“China was on the other side of this one IIRC
That’s right. Uncle Sam had an implicit contract to make good on the debt sold to China.
I realize this implicit stuff is a little hard for st00pid attorneys to grasp…
Martina Navratilova’s former lover won a suite in Fort Worth.
She had a video tape of the verbal contract.
What floor was the suite on? -
What’s really nifty is having the union contract renewed and redone every three years.
Promises made today are among those many things that can be laughed at tomorrow.
A verbal contract isn’t worth the paper it is written on.
Contractual obligations based on mere rumor (too-big-to-fail bailout commitments) proved in Fall 2008 to be worth much more than your typical (insurance) contract in writing.
You are confusing people deciding to do something for reasons other than a legal obligation to people doing something in order to fulfill a contract. The final result may be the same, but the process by which you got there is entirely different.
Imagine someone who is obliged to do something if the sun rises tomorrow and another person who is obliged to do it if they role snake eyes on a pair of dice. Could they both end up with an obligation do it? Yes. Can you know whether that will be the result ahead of time? No.
“…another person who is obliged to do it if they role snake eyes on a pair of dice.”
This legal arrangement has a name: insurance contract. And it’s a lot more similar to the situation described above (employers who customarily provide post-retirement health and welfare benefits) than your strawman ’sun rises every day’ example.
“Companies provided these benefits to retirees because it made current employees believe that they too would get those benefits when they retired.”
That’s exactly where the contractual obligation arose.
No. That isn’t a contract. That is people assuming that a company will continue to behave as it has in the past. Assumptions on the part of employees and former employees are not a contract.
“You are confusing people deciding to do something for reasons other than a legal obligation to people doing something in order to fulfill a contract.”
You are confusing unwritten contractual obligations with discretion.
Stop lying about the law. You don’t know what you are talking about. You never have. You never will if you don’t educate yourself.
Law isn’t fair. Contract law isn’t about doing the nice thing. You don’t create contractual obligations by being nice to people in the past. People don’t have the right to go to court and force you to do something that you don’t want to do just because they thought you would do it.
There is a rule in the interpretation of written contracts that you assume that anything that isn’t written down is not intended by the parties to be there. Makes sense, doesn’t it? The parties actually sat down and wrote a contract. Why would you assume that they meant something to be there and just decided not to write it down?
And employees who don’t have contracts are exactly that - employees without contracts. They don’t have one. While employed they have to be treated according to the employment laws of the applicable governments. Once they are gone, money that is held in trust for them (like their 401(k) accounts) has to be treated according to the rules for those accounts. Anything else? It is basically a gift. Why do you think that companies have a legal obligation to give their former employees a gift?
I get my brother and his family a family membership to the American Museum of Natural History every year. I have done this for a while. They probably expect it. They have no way to make me do it. None. Why does your former employer have any more obligation to provide a gift to you?
“I get my brother and his family a family membership to the American Museum of Natural History every year. I have done this for a while. They probably expect it.”
This analogy is way out of bounds from the discussion.
But I don’t feel like arguing any more with someone who relies on vitriol and an appeal to academic credentials rather than reason to win — it’s truly a joyless exercise.
“Why do you think that companies have a legal obligation to give their former employees a gift?”
I doubt the FASB would have wasted time and energy drafting these accounting standards if they assumed there was no liability.
Summary of Statement No. 106
Employers’ Accounting for Postretirement Benefits Other Than Pensions (Issued 12/90)
This Statement establishes accounting standards for employers’ accounting for postretirement benefits other than pensions (hereinafter referred to as postretirement benefits). Although it applies to all forms of postretirement benefits, this Statement focuses principally on postretirement health care benefits. It will significantly change the prevalent current practice of accounting for postretirement benefits on a pay-as-you-go (cash) basis by requiring accrual, during the years that the employee renders the necessary service, of the expected cost of providing those benefits to an employee and the employee’s beneficiaries and covered dependents.
P.S. Deferred compensation arrangements, such as post-retirement medical benefits, are clearly not provided by employers as “a gift,” but rather as part of the contractual terms of employment.
The fact that FASB (it is a private group, by the way) has a method for including amounts paid for retiree benefits in financial statements doesn’t mean that companies HAVE to provide them. Some companies do provide them. Those companies have to have a way to include the expense in their financial statement. If they decide to stop providing them, they won’t need to use that FASB standard, will they?
Some companies have to provide those benefits to some former employees. Those are the employees who had a CONTRACT that gave them the right to collect those benefits forever. Even they can lose the benefit if the company ceases to exist. It doesn’t even have to go bankrupt. All that has to happen is for the company to be sold in an asset acquisition followed by a dissolution. Poof. None of the contracts exist any more.
Now do you think that because some employees have those rights all of them do? Some employees get stock options. Do all of them have to? Some employees get 4 weeks of vacation a year. Do all of them have to? Some employees get paid a million dollars a year. Do all of them have to?
“At will” employees have NO CONTRACT.
None. Nothing. They work. They get paid. They can be fired at any time for any reason or no reason (the small exception being that they can’t be fired for illegal reasons like race or national origin). There are some minimal legal protections that mean that they can’t be put in really dangerous situation and have to be paid for the work they do. That is it. No employment contract. No requirement to be treated nicely.
Companies that used to offer really great health insurance coverage now often offer nothing but a high deductible plan. Do you think that the people who got hired when the health insurance was better now have the right to get the same coverage because that is what they expected when they got hired? Why do you think that former employees get more rights than current workers?
“Why do you think that former employees get more rights than current workers?”
That depends on the contractual agreement that was established when the workers in question were hired.
They don’t have a contract. You deciding that there should be a contract doesn’t create one. Your utopian fantasies are not contracts.
“Your utopian fantasies are not contracts.”
Your diatribes do not define what the definition of ‘is’ is.
Methinks the lady doth protest too much.
Why do you care so much about whether or not employers have contractual obligations to pay post-retirement medical benefits?
More generally, why are you so obsessed about browbeating everyone who reads here into agreement with your legal opinions?
As usual, a promise means nothing when made by a corporation.
Alabado la revolución y la coronación de nuestro líder supremo. Muerte a todos los capitalistas y de la muerte a la Constitución de Estados Unidos.
On housing, the phoenix market is still light on inventory, the spring will be very interesting.
I think all the big money investors that screwed people in the first place are scooping up distressed properties and then renting to the same people they hosed.
Only trouble is, there are only so many tenants in any given market. Which means that there will be a lot of “for rent” signs creaking in the breeze.
BTW, I’m already seeing this in the Tucson market. Which means a lot of disappointed in-VEST-or landlords.
Is the Section 8 rate, whatever it is, the floor ? If you can guarantee cash flow or a profit even at that rental rate, are you all good?
What does a Canadian landlord care about the neighborhood.
Anyone know how much Section 8 pays a landlord for a 3 bedroom house in Tucson or Phoenix ?
Simple math doesn’t work for the rental market. Florida lost residents for the first time in recorded history once rental and home prices got too high. Arizona will be the same if prices keep rising. The investors (who have since been bailed out), believed rent was inelastic. Who knew?
I have a daily alert for when homes in the Scottsdale area come up for rent. The alert only hits when something changes or a property was listed as available.
In October, I got about 20 for the whole month.
This month, I’ve received 20 in the past week.
Inventory is changing rapidly in Phoenix, could it be all these investors are trying to get their cash flow?
Most amusing one - monthly “ask” went from $1450 to $1399, so I got an alert. Its been empty since Sept 1. Some speculator hoping for a late arriving snowbird doesn’t realize they have lost at least $4200 instead of losing $2400 by lowering the price to $1200 where it should rent in one day.
I’m noticing quite a few empty rentals around the University of Arizona campus.
And, guess what! Even more are being built! It’s luxury student housing rising to the sky!
“lowering the price to $1200 where it should rent in one day.”
Yeah, $1200 seems to be the sweet spot for <=1500sf homes in decent metro phoenix neighborhoods. They can go very quickly depending on condition.
“Buyers snap up homes, bumping up Tampa Bay prices
Hundreds more homes sold across Tampa Bay last month than the year before, as tight supplies sent prices rising and helped the market build in strength.”
Hundreds of more homes sold because tight supplies sent prices rising.
Take a close look at this statement and see if you can find any logic there.
This special offer is limited to one per household.
Be the first on your block to get one.
When I want to move merchandise I lower the price. This works because my customers have a feel for value and hence a feel for what is considered a good value for the lowered price.
When the RE folks want to move houses they raise the price. This works because RE buyers do not have a feel for value, they only have a feel for price. Raise the price and you raise the value.
This price equals value concept is reinforced by the comps. People look at the comps to discover what the going price is, and because price equal value they discover, by looking at the comps, what the value is. If the price of the comps is going up then the value must be going up and hence their emotions kick in and they buy, and their buying - combined with others who are buying - puts upward pressure on prices, and because price equals value their buying ends up putting upward pressure on value, and this upward pressure on value is expressed in an upward pressure on the value of the comps and this upward pressure on the value of the comps draws in more buyers and the cycle repeats itself.
You are saying that people are logical when buying a pair of panties, but not at all when spending several times their yeraly earnings on a shack.
It must be a woman thing. I am completely opposite. When the gf is interested in some underwear, I lose all sense of appropriate price. It’s value is always beyond the asking price for me.
When it comes to houses, it is all about the numbers, like it was a capital project at work.
I never said anything about logic. What I said is if I want to move merchandise I lower the price.
If I lower the price on panties then I sell a lot of panties. The people who buy these panties may not acutally need them but nevertheless they buy them.
Logic? My business is not about logic. If it were I would probably starve.
It’s not logic, it’s history. The perception is that we are effectively back in 2002, and prices are just starting to scream up, so they betterbuy before they get priced out forever.
Should be interesting to see if prices actually do scream up. I think we’re in for a decade-long bounce along the bottom.
I think we’re in for a decade-long bounce along the bottom.
I agree…once we get to the bottom.
We’re a long way from the bottom folks. Prices are still at the grossly inflated levels of 2004….. and slipping.
“Hundreds of more homes sold because tight supplies sent prices rising. Take a close look at this statement and see if you can find any logic there.”
I think he meant that the tight inventory and resulting higher prices sent many scrambling to buy out of fear that they’ll miss the bottom.
“… fear that they would miss the bottom.”
Fear. A market driven by fear.
Fear on the way up, fear on the way down.
And what would generate so much fear? Knowing you can no longer survive the old fashioned way and therefore MUST succeed at the gambling table?
“And what would generate so much fear? Knowing you can no longer survive the old fashioned way and therefore MUST succeed at the gambling table?”
Maybe a rational fear of missing an opportunity, a fear that everyone in “the market” should probably have. Whether or not that fear is well-placed isn’t necessarily relevant. A good friend of mine has been a real estate agent for 20 years and she says that she sees huge blips like these whenever it looks like interest rates are going to rise. Same type of fear, I think.
Anyone know if Christie has signed this bill into law yet? With a quick search, it looks like it passed state Senate and Assembly with only 2 “no” votes (over 100 “yes” votes).
It could be a game changer with respect to moving foreclosures onto the market. This should bring lots of inventory to market, further depressing prices.
bailouts are for closers
Informative article from Asia Times Online chock full of statistics:
Barack Obama and America’s decline
Some excerpts, with extended discussion of four facets in article:
“America is in incipient decline, and this week’s presidential election might be the last chance to reverse it. We are becoming a different sort of country, with a different people and different beliefs. Another four years of Barack Obama well might take us past the point of no return, although no-one, to be sure, knows quite where that lies. There is still time to change course. There might not be time by 2016.
Nearly a third of Americans now depend on food stamps, welfare, disability payments, or some other form of government support, compared with one out of five when George W Bush left office. This enormous shift has occurred before the detonation of a demographic time bomb that will explode towards the end of the present decade, and which will push America towards even greater dependency. This time bomb has four facets:
The baby boomers will retire, and the percentage of Americans over 60 will jump from a sixth to a quarter of the total population in little more than a decade;
The population that replaces the baby boomers will come to an increasing extent from families with the lowest level of educational attainment;
A new underclass is in formation due to the jump in the rate of births out of wedlock, which comprised two-fifths of total births in 2011;
Dependency on government support will rise sharply just as the federal government’s capacity to finance the dependent population will fall.”
www DOT atimes.com/atimes/Front_Page/NK06Aa02.html
“America is in incipient decline”……with extended discussion of four facets in article:
The article is bunk. 99% of it is describing the problem’s symptoms and not the root causes. America’s greatest problems are gross wealth and income inequality and the trickle-down, supply-side, “corporations are people” public policies that have gutted the middle-class to further enrich the rich.
America abandoned it’s mission to “Promote the General Welfare” and to “Establish Justice”.
In fact, “Promoting the General Welfare” and “Forming a More Perfect Union” is now falsely propagandized as “Socialism”.
“gross wealth and income inequality”
Those are symptoms of some things going on at a deeper level.
“America’s greatest problems are gross wealth and income inequality”
and we just re-elected a president that has been exacerbating that problem for the past 4 years.
he also thinks the fix is to just tax them more…that will not “fix” the disparity…he needs to support policies that do not create the inequality in the first place.
So far all that is obvious is the the solution is to “say” that you will tax them more, while taking bribes from them, letting them write laws and set monetary policy.
We’ll see who actually gets taxed more shortly.
great blog by charles hugh smith today that touches on the point.
“and we just re-elected a president that has been exacerbating that problem for the past 4 years.”
Michael I believe you must be very young? That’s OK, just sayin from an “old timer” that the problem goes back a wee bit further than when you were in middle school in ‘08 or whatever the exact case may be. Or if not, in a youth centered culture, no one gets insulted by being seen as young, so don’t sweat it. Anyway, the point is that “problem” has been one of the primary goals of our “one-party-two-PR-team” system since… Well certainly at least since 1980, but probably earlier? 60s? 30s? More than a century? I think the early 20s is probably going back at least far enough (and no I’m not THAT old… If there are centenarians here they’ll certainly let us know… I really want to meet a centurion but that’s probably asking too much).
You know your country is in trouble when your only hope for political / economic guidance is via seances.
“…and we just re-elected a president that has been exacerbating that problem for the past 4 years.”
WHERE is the wealth in the U.S. located, geographically speaking?
HOW do people tend to vote geographically speaking?
Do natural resources count as wealth?
99% of it is describing the problem’s symptoms and not the root causes ??
Symptoms maybe but those were some of the most sobering statistics that I have read in some time…I come away feeling it is beyond manageable…
See ‘Idiocracy’: Its a really stupid movie that the current administration is determined to turn into a documentary. The four “facets” have never been better addressed.
I see you are a fan of uber Zionist ‘Spengler’. I have watched him slander progressives and liberals every since the glory days of Bush the lesser. I’m not disputing his demographics but he has veered into crazy land a few time during the Iraq war calling for a new Christian crusade to wipe out all Muslims. I do encourage everyone to read the rest of the stories on Asia Times though. They have lost a lot of good talent due to the deaths of their founding editors and reporters in recent years.
wow….was i right or what…..we need to target the mosques…
‘Destroy the idols,’ Egyptian jihadist calls for removal of Sphinx, Pyramids
Two wrongs don’t make a right. I want to see a real war on religion, all of them. But I also don’t want to see one drop of blood spilled because of it. Brainwash them, drug them and maybe imprison the violent ones till they repent. I want to see a world full of rational capitalist not theocratic rulers.
Blue good idea and cut off their access to the world.. they will still have cellphones in jail unless you jam the signals.
imprison the violent ones till they repent
History is full of failed attempts to suppress religion.
The athiests who want to re-educate the religious alternately amuse and concern me. I assume they know the history of the 20th century…
As Soviet Russia’s failed social experiment amply demonstrated, an official attempt to suppress free-market religion is likely to be followed by offerings of state-sponsored cults of personality as an inferior substitute.
I see you are a fan of uber Zionist ‘Spengler’
Not a “fan” any more than Gary Johnson is our “hero”, as was posted on HBB last week.
Our biggest takeaway from the article was the stats on Hispanic Educational Attainment, less than 9th grade 21.2% and 9th to 12th grade (no diploma) 15.9% which is, of course, Racist® to discuss.
Spengler is a depressing sort of guy, in the 6 years I have followed him I don’t think he has written a upbeat or positive story once. His POV is western civilization is spiraling down the drain and it’s his lot in life to document it.
Well, at least that takes some of the load off of us.
We find his writing to be rather uplifting, thank you.
“I have watched him slander progressives and liberals every since the glory days of Bush the lesser.”
Slander is tame, progressives need to be completely defeated.
Going by the dictionary definition, it’s hard to see what Nick finds so threatening about progressives.
Definition of PROGRESSIVE
1a : one that is progressive
b : one believing in moderate political change and especially social improvement by governmental action
2 capitalized : a member of any of various United States political parties: as
a : a member of a predominantly agrarian minor party that around 1912 split off from the Republicans; specifically : bull moose
b : a follower of Robert M. La Follette in the presidential campaign of 1924
c : a follower of Henry A. Wallace in the presidential campaign of 1948
our sloth in Florida
How are your family members that were staying with you and driving you crazy doing anyway? Was it a Robo cousin? Perhaps a Victim-in-law that your sister married? They already got their bailout and they still had to move in? Man (or woman) that`s a real Mitch. Not to worry, more….
Counterpunch article - The Reality of the “Lesser Evil”
Is This Child Dead Enough for You?
“To all those now hailing the re-election of Barack Obama as a triumph of decent, humane, liberal values over the oozing-postule perfidy of the Republicans, a simple question:
Is this child dead enough for you?
As we all know, these drone missiles are, like the president who wields them, super-smart, a triumph of technology and technocratic expertise. We know, for the president and his aides have repeatedly told us, that these weapons — launched only after careful consultation of the just-war strictures of St. Augustine and St. Thomas Aquinas — strike nothing but their intended targets and kill no one but “bad guys.” Indeed, the president’s top aides have testified under oath that not a single innocent person has been among the thousands of Pakistani civilians — that is, civilians of a sovereign nation that is not at war with the United States — who have been killed by the drone missile campaign of the Nobel Peace Prize Laureate.
Yet somehow, by some miracle, the missile that roared into the residential area where Naeemullah lived did not confine itself neatly to the house it struck. Somehow, inexplicably, the hunk of metal and wire and computer processors failed — in this one instance — to look into the souls of all the people in the village and ascertain, by magic, which ones were “bad guys” and then kill only them. Somehow — perhaps the missile had been infected with Romney cooties?”
Is he dead enough for you?
Dead enough not to disturb your victory dance in any way? Dead enough not to trouble the inauguration parties yet to come? Dead enough not to diminish, even a little bit, your exultant glee at the fact that this great man, a figure of integrity, decency, honor and compassion, will be able to continue his noble leadership of the best nation in the history of the world?
Do you have children? Do they sit your house playing happily? Do they sleep sweetly scrunched up in their warm beds at night? Do they chatter and prattle like funny little birds as you eat with them at the family table? Do you love them? Do you treasure them? Do you consider them fully-fledged human beings, beloved souls of infinite worth?
How would you feel if you saw them ripped to shreds by flying shrapnel, in your own house? How would you feel as you rushed them to the hospital, praying every step of the way that another missile won’t hurl down on you from the sky? Your child was innocent, you had done nothing, were simply living your life in your own house — and someone thousands of miles away, in a country you had never seen, had no dealings with, had never harmed in any way, pushed a button and sent chunks of burning metal into your child’s body. How would you feel as you watched him die, watched all your hopes and dreams for him, all the hours and days and years you would have to love him, fade away into oblivion, lost forever?
What would you think about the one who did this to your child? Would you say: “What a noble man of integrity and decency! I’m sure he is acting for the best.”
Before the election, we heard a lot of talk about this notion of the “lesser evil.” From prominent dissidents and opponents of empire like Daniel Ellsberg and Noam Chomsky and Robert Parry to innumerable progressive blogs to personal conversations, one heard this basic argument: “Yes, the drone wars, the gutting of civil liberties, the White House death squads and all the rest are bad; but Romney would be worse. Therefore, with great reluctance, holding our noses and shaking our heads sadly, we must choose the lesser evil of Obama and vote accordingly.”
I understand that argument, I really do. I don’t agree with it, as I made plain here many times before the election. I think the argument is wrong, I think our system is so far gone that even a “lesser evil” is too evil to support in any way, that such support only perpetuates the system’s unconscionable evils.
www DOT counterpunch.org/2012/11/09/is-this-child-dead-enough-for-you/
Is he dead enough for you ??
Hell…We advertise & promote it…A Global Force For Good…Kill-em over there so they don’t kill us over here..Out-of-Sight….Out-of-Mind…
US Navy - Feel The Rush
by jakepetersen91 • 2 years ago • 57,771 views
The next commercial in the Navy’s series of “A Global Force for Good” ad campaign. United States Navy - Feel The Rush! www …
If you’re trying to say the the Military-Industrial complex is out of control in this country, it would be hard to disagree.
launched only after careful consultation of the just-war strictures of St. Augustine and St. Thomas Aquinas
Somehow, I doubt anyone in our government has ever read any of their writings.
Here’s a question for Veterans’ Day (observed):
Are remote control “pilots” of drones really considered “veterans”?
Not the ones employed by the CIA.
No. They’re considered “heroes”.
Who is more evil? Those who kill children in a combat theater or those who use them as shields?
Evil people force good people to make very unpalatable responses… so they can blame them.
The lesson: don’t hang around evil people and don’t put your children in harms way.
If you buy housing at current inflated asking prices, your losses will be tremendous.
…has a somewhat desperate tone not unlike: Buy now or be priced-out forever.
It is what it is. I’m indifferent.
All the evidence seems to be that everyone’s waving the flags of how “this is the bottom” and “prices will never be so low”.
I call BS on that.
Well it could be true.
If commodities were at an all time low.
If taxes were only going to go down.
If interest rates were at an all time high.
If a labor shortage was about to set off an epic upward spiral of wages and benefits.
Do you have any updates on your guess about how many more years from now the housing market will bottom out?
In particular, at what point will policies designed to keep housing propped up on a permanently high plateau either be abandoned or otherwise fail?
“In particular, at what point will policies designed to keep housing propped up on a permanently high plateau either be abandoned or otherwise fail?”
Until further notice.
“Bernanke purchasing $40 billion in MBS per month until further notice.”
housing is the economy.
Housing = Government
Government = Housing
When the Government Bubble bursts, housing will bottom out.
Since they presently are one and the same, housing will remain artifically inflated until government isn’t.
Government will do everything it can to keep itself aloft, prospects for the masses be damned.
Pretty obvious stuff, really.
Housing - Government
And the minions wonder why the housing market is inefficient and doesn’t clear.
Houses back mortgages.
Mortgages back bank capital.
Save the houses and you save the banks.
“housing is the economy.”
It is?? Explain yourself.
For things so obvious, the key ingredient seems to be missing from your equation.
I was thinking along the lines of the banks owning the government.
The best government money can buy.
We’ve got 5 more years of the Bernanke (through this term that ends in 2014, plus another 4 year term assuming Obama taps him again).
So my answer is at least 5 years.
“So my answer is at least 5 years.”
That answer seems predicated on the assumption that the Fed controls the movements of the sun, the planets, the moon and the stars.
On what evidence do you assume this?
You yourself note that the policies that are propping up housing need to either be a) abandoned or b) fail.
What do you think will bring about failure of these policies?
And I don’t think they will be abandoned as long as Bernanke is at the helm and politicians get brownie points for handing out nearly free money for mortgages. Since money printing is one way out of the debt mess we are in, I’m not sure the next guy is going to stop the printing either.
“What do you think will bring about failure of these policies?”
That’s the question I keep asking…but perhaps the answer is nothing. The Fed is an all-powerful governing force which can dictate policy outcomes to the global economy.
Isn’t that what you are suggesting?
For a more serious answer, note how the Greenspan Fed’s action to prop up the stock market after the 1987 crash immediately preceded one of the largest speculative stock market manias (aka bubbles) in history during the 1990s, just before it popped in the early 2000s.
Isn’t it reasonable to expect the current overt effort to prop up housing prices will lead to the same kind of speculative price bubble and collapse that we have seen over and over again during the Greenspan-Bernanke era? We see many posts here documenting a housing market overrun by historically unprecedented levels of speculative buyers, which you conveniently ignore.
You phrased my own questions better. That’s what I was wondering. However long this keeps up would most likely (at least I think) be directly affected by either those policies failing or being abandoned. I assumed they might eventually fail before the government stops intervening, so it’s more about at what point would everything just fall apart due to forces our government CAN’T control. I have no idea what would cause everything to finally break, though.
However, I think the fact that a lot of countries are in trouble might cause an issue of some countries (trying to) not allow others to fail, because it will directly impact their own in a bad way. For example, if country a buys a lot of exports from country b, and those exports account for a large part of country b’s economy, there might be incentive from country b to try and intervene. Although, I have no idea how something like that would play out.
“I have no idea what would cause everything to finally break, though.”
An excess of speculative euphoria over the available means to prop up markets?
“For example, if country a buys a lot of exports from country b, and those exports account for a large part of country b’s economy, there might be incentive from country b to try and intervene.”
Similar principle: If investors from China and Canada have been liberating equity from their domestic housing bubbles to make all-cash speculative investments in U.S. real estate, it seems as though this component of U.S. real estate demand could dry up when the China and Canada real estate bubbles pop.
My best answer to what is “propping up” the housing market?
1. Low interest rates;
2. NOT rampant building in places where the markets are tightest;
3. The eeking of distress out to the market.
Let’s hit what stops this in reverse order:
3. Changing of judicial foreclosure laws in judicial states, and/or ending the suspension of MTM accounting. Based on the progress non-judicial states are making as compared to judicial states, I’m going to make the controversial statement that more important of these two is the foreclosure laws. If the reflation of the bubble occurs, MTM accounting will become less relevant. What incentives do state officials have in changing foreclosure laws to kick MORE people out of their homes faster? Very few, unfortunately.
2. NIMBYism unfortunately is alive and well…this will only change market by market, city by city, and not all at once.
1. Fed controls this, and the US Government is propping up the housing finance market. What incentives for the US Government to change? Very few (hurting the housing market so obviously hurts politicians). What incentive does the Fed have to change? None until inflation becomes more obvious…and since the BLS has been cooking the CPI books for more than 20 years, I suspect reported inflation will be tame for a while…
The fundamental answer to your question as to what breaks the policies?
Courageous politicians who, at either the state, local, or federal level, in large enough numbers, vote such changes into existence, because they care more about the long-term health of their constituents than their next election.
Call me when you find a critical mass of those politicians…I won’t wait up.
To the REIC, 2005 was the price, and they will beg borrow and steal to get us back there again.
You see, it’s kind of like the election, they know santa clause will ultimately win the day.
Santa Claus…that is.
Oh my God!
Do most low-to-middle class homeowners realize the tax benefit of the MID is zero unless they itemize?
Who Really Benefits From Interest Deductions
The New York Times
By LISA PREVOST
Published: October 25, 2012
REAL estate and building industry groups have loudly condemned proposals by both presidential campaigns to shrink the mortgage interest deduction. Central to their arguments is the long-hallowed deduction’s value to the middle class. But a closer look at who benefits suggests that this perception, though prevalent, is not accurate.
To begin with, most taxpayers do not benefit from the deduction at all. This is because they do not itemize deductions on their federal income tax returns. According to Joseph Rosenberg, a research associate at the Urban-Brookings Tax Policy Center, only about 30 percent of taxpayers itemize, rather than take the standard deduction. And the majority of these itemizers are upper-middle and upper-income households.
Within that privileged category, the people who tend to derive the greatest dollar benefit from the mortgage interest deduction are households earning $100,000 to $500,000 a year.
“About two-thirds of the total benefit go to that group in the 80th through the 99th income percentiles,” Mr. Rosenberg said.
For those households, by the center’s calculations, the tax benefit of the deduction amounts to about 1.5 percent of after-tax income. By way of comparison, the value to households earning $40,000 to $50,000 is closer to 0.3 percent of after-tax income; for households earning $50,000 and $75,000, it is 0.7 percent.
Why is this so? One reason is simply that people who have more money are more likely to have expensive homes and bigger mortgages. They may also have second homes, and under the current rules, mortgage interest may be deducted on those as well, up to a cap of $1 million in debt.
The other factor is that the value of the subsidy increases along with your tax bracket.
For households in the 15 percent bracket, the tax benefit for every $1,000 of mortgage interest deducted is $150. That benefit rises to $350 for households in the 35 percent tax bracket.
This is also because almost 1/2 of this country has no federal tax burden to offset, thereby immediately ensuring that this type of benefit is of little use the the majority of the country. 1/2 the country pays no FIT, and, of the 1/2 that does, not all own homes, and not all of those that own homes have enough debt to get over the STD deduction threshold.
Don’t get me wrong, I think that the MID is terribly destructive and is used, more often than not to get people to spend too much money.
If you owe less than $150k on your house, the tax benefits are neglible at low interest rates.
Off the fiscal cliff and into the great abyss
By Peter Morici
Published November 12, 2012
Negotiations to avert the Fiscal Cliff offer great political drama, but they won’t solve Washington’s budget woes and may cast the nation into another recession or worse.
The Budget Act of 2011 requires the president and Congress to agree on a nine-year $1.2 trillion deficit reduction program, or cuts in annual defense and non-entitlement outlays each equal to 54.7 billion trigger on January 1. Simultaneously, the Bush Tax cuts, the 2 percentage point payroll tax holiday, and other assorted programs expire.
Altogether, $136 billion in annual spending reductions and $532 billion in additional taxes could trigger cataclysmic consequences for the economy. Unemployment would rocket past 15 percent, state government finances would collapse, homeowners would default on mortgages, and hundreds of banks would fail.
To avoid calamity, President Obama and House Republicans will likely agree to raise taxes on high income Americans by $100 to $150 billion and curb spending by an equal amount. However, those efforts will prove too little, and yet, the economy may still skid into recession—depriving the federal government of tax revenues and further pushing up the budget gap.
The federal deficit exceeds $1 trillion dollars—up from $161 billion in 2007, the last year before the financial collapse. Spending is up some $1 trillion, as outlays for Social Security, Medicare, Medicaid and other entitlements have increased by an amount equal to the entire 2013 defense budget.
By the end of the decade, runaway entitlement spending will require shutting down the military or crippling many other domestic spending programs to head off ballooning deficits.
Enginnering of consent. It will be bad today if we raise taxes and cut spending. But what will it be like for younger generations if Generation Greed keeps running up deficits.
Ryan let the cat out of the bag. Generation Greed gets everything it has promised itself, while poorer younger generations suffer deprivation, ill health and early death in old age.
Fiscal cliff? Bring it on. Take the medicine now.
I agree to take the pain sooner rather than later. Those who get a free ride on the backs of our debt need to be cut off. By this I do not mean my unfortunate neighbors, I mean those who profit from the interest on our debts.
BTW, what is dying early in old age? Is that the lost weeks on life support?
When I questioned reducing the unnecessary and outrageous military spending, my friend said “but think of how many people would lose their jobs!”
I thought the primary objective of the miitary was to keep us safe, not to keep people employed. And if that was the case (and was discussed many times here), the multiplier effect of investment in military lags far behind things like infrastructure, heathcare, education, etc.
Why do we still pay for hundreds of military bases overseas? If they are not vital to our security, then let the country reimburse us for the costs..
If we put 100,000 troops on our southern border their paychecks will be spent in America stimulating OUR economy, not Senegal’s.
Agreed. And I heard this morning on the CBC that the US is interested in furnishing weapons to the opposing government forces in Syria. The enemy of the enemy is our ally. Well until it backfires on us. But at least there’s money to be made now.
“The enemy of the enemy is our ally.”
How’d that work out with Saddam Hussein or Osama bin Laden?
“Well until it backfires on us.”
I hope it doesn’t because the U.S. is on the hook!
“The act Obama signed Friday reaffirms “unwavering commitment to the security of the State of Israel as a Jewish state” and calls for providing Israel with “the military capabilities necessary to deter and defend itself against any threat or possible combination of threats.”
It also pledges a U.S. veto of “any one-sided anti-Israel resolutions at the United Nations Security Council” and outlines U.S. support for an expanded Israeli role in NATO, increased intelligence cooperation and increased training for Israel’s air force.”
Our primary export is military intervention.
It’s our core competency. My MBA classes said to stick with that.
According to the Marketwatch people, the standoff in Washington may already be resolved.
The debt resolvers sure work a lot faster these days in DC than they do over in Athens!
U.S. stocks rebound after worst week in five months
Modest gains at Monday open in part reflect thinking that standoff in Washington may be resolved.
Nov. 12, 2012, 9:39 a.m. EST
U.S. stocks rebound from worst week in five months
NEW YORK (MarketWatch) — U.S. stocks opened with modest gains Monday on thinking the standoff in Washington over automatic spending cuts and tax hikes could be resolved.
A few more years of promised can kicking and Mr. Stock Market stops wring his hands.
Maybe Dick Cheney was right, maybe deficits don’t matter after all. The certainly don’t seem to upset the stock market. Threaten to begin a painful process to get the house in order and Mr. Market has conniptions.
“The National Association of Realtors strongly opposes eliminating the mortgage interest deduction, claiming, “Housing is the engine that drives the economy, and to even mention reducing the tax benefits of homeownership could endanger property values. Home prices, particularly in high cost areas, could decline 15 percent if recommendations to convert the mortgage interest deduction to a tax credit are implemented.”The Tax Foundation, a conservative think tank, claims that economists are basically united in their opposition to the deduction.”
So the goddamn corrupt lying realtors publicly admit inflated housing costs could fall in areas that most need lower prices if the MID were to go away. And they’re still against the elimination of the MID?
You scumbag realtors are so irrational and hideously corrupt, it’s shocking.
Are you implying that Realtors lie?
Implying? We’ve been saying that Realtors lie, oh, since Ben started this blog back in 2004.
I’m not impressed. You can tell the opposition to the MID is not serious because if they were, they would two-parter it.
First they’d get rid of the standard deduction option. If itemizing using MID would increase your tax, like it does for about 70% of the population, then you can just use the standard deduction. If they were serious, first they’d eliminate the std deduction for loanowners. “Its simpler and fairer to make everyone do their taxes the same way”
Second, after the screaming about the first part builds up to a fever pitch, then, and only then, would they “save us all” by eliminating the MID and returning to std ded only for everyone. Just get rid of schedule A (or is it B?) “Its simpler and saves most of us money”
Why even have a standard deduction? Just build the deduction into the rate structure by adjusting the rate down to yield the same final tax bill. Why have a any of these on a personal tax form?
Deduction for 1/2 of SS + Medicare
Foreign Tax Credit
State Tax Deduction
Just get rid of them all and build the deduction into a lower rate structure that yield the same final tax bill. That would also eliminate most of the reason for the AMT and probably save billion a year to U.S. citizens in tax compliance costs.
And why even bother to pretend SS + Medicare is not just another tax. Just roll them into the rate structure too so you get one progressive rate structure.
You tax preparation would be simplified to:
I made $X last year = look it up on a tax table and I pay Y. Done!
For 95% of the population.
Why have any deductions?
My goodness, taxes are so complicated, the IRS can’t even keep up. Complicated incentive structures via tax code breed the ability for people to take advantage of the complicated system.
Take out all deductions, stop with the social engineering through tax incentives, lower rates across the board, increase compliance/collection (because it will be easier for people to comply, and easier for the government to track).
Imagine all the accountants, CPAs and IRS agents we could fire?
Oh the humanity!
I would say that the bulk of the complexity of our tax system lies at the corporate level. It’s how GE can make billions in profits and pay no income tax.
Wouldn’t your proposed tax code simplification (which I agree with) put an army of tax consultants out on the street?
(Posted before I read your similar comment…)
Do you think they are too dumb to realize that inflated home prices reduce sales?
“Do you think they are too dumb to realize that inflated home prices reduce sales?”
Well…. partially in a distorted kind of way. They want to put a price floor under their own depreciating house without impacting all other houses. Yet deep down, they know(or should know) that sales volume evaporates as prices move up.
They’re dumb greedy conniving pukes.
Anybody see the 60 Minutes report on the labor shortage in manufacturing?
It seems that after 30 years of falling wages, benefit cuts, downsizing, and unemployment, manufacturers find not enough people have engaged in expensive and difficult training for skilled manual work careers. And now many of the workers they hadn’t gotten around to laying off are approacing retirement.
They ask why isn’t the government, which is the problem and not the solution to the problem, doing something like this? Well, why aren’t companies raising wages? Because their customers are broke and they can’t raise prices.
This is the future I had expected, (like the bursting of the housing bubble) has taken longer to arrive that I would ever expected. Plenty of jobs, but at wages that provide a lower standard of living. That’s what will happen is our ability to import stuff from China and not pay for it goes down.
“And now many of the workers they hadn’t gotten around to laying off are approaching retirement.”
Those who choose to retire will increase the value of those who choose to stay.
A good job is a terrible thing to waste. Spend an entire career gaining valuable experience and then walk away because of - because of what? - because you had a birthday and turned sixty-five?
At least you will probably have a good pension waiting for you that should finance your needs for the rest of your life. (Be sure you get pension promises in writing. The company has to make good on promises that are written down.)
Was talking with a guy last week……he was telling me about an aviation maintenance bachelor’s degree program his son is in.
The problem? They don’t teach anyone “aviation maintenance”. They teach them how to “manage” aviation maintenance.
The new “fast track” in aircraft maintenance……get partial training in the armed forces, then get an A&P from one of the many diploma mills out there, then go to work as a six figure/year overseas contractor maintaining/overhauling the same aircraft you worked on in the armed forces.
Contrast this to our friends in China, where training to turn wrenches is a four year degree program.
Like many other things in this country, aircraft/airline maintenance is becoming a giant baling wire and bubble gum fastened Tower of Crap, on the verge of collapse.
I’ve mentioned it before……after thirty years of training and experience in multiple corporate jet (Citations, Falcons, G200) and ten years as a Director/manager for various Part 91 and 135 operators, I’m making the same money (salary inflation corrected) as I did as a newbie at a non-union shop in 1979……..essentially, the market says my experience/training is worth ZERO.
Everybody sees where the money goes in this country…….the sales guys/bull$hit artists, and the financial types who can manufacture 8% returns on paper. Why do anything useful like build or fix things, when you can make twice as much money pushing paper, with half the risk? Or better yet, buy a few Congressmen/government regulators. The ROI on that is a lot higher than actually doing something useful.
The real parasites aren’t the 47%ers……..
Let me take a wild guess that the “solution” is an educational-industrial complex degree program that now does with $100K+ of govt guaranteed student loan debt what used to be done with paid apprenticeships or $1000/semester community colleges / voc tech schools?
No it’s better than that……..you are not giving our swindler class enough credit for creativity:
-Recruit all of the wretchedest refuse/English as a second language types with all of the typical “high demand/good paying jobs” BS.
-Have them apply for student loans covering all of the tuition and living expenses. Buy some crappy apartment complex in the ‘hood, and call it a “dormitory”.
-Have them sign a contract where tuition and rent are paid “up front”.
-School starts……tow or three months in, they find out that they are ineligible to get an A&P due to some previous drug/DUI conviction.
-They go home……the school keeps the cash. Uncle Sam gets to try to recover the money.
Multiply this times just about every kind of tech training out there.
Don’t the students also have to know maths and stuff?
Since you brought up the aviation industry, that reminds me of a news item this morning about airlines facing a shortage of pilots. Quelle surprise! New pilots get paid squat and older pilots are having their pay & benefits reduced. Can’t imagine why being an airline pilot is not an attractive career any more.
I understand that our local airline, Frontier, starts it’s jet airliner copilots at around $40K per year.
Many airlines won’t hire a pilot if he cannot make captain.
For the past 20 years, this ment no one over 30.
WT. Industry size today is a shadow of it’s workforce 20 years ago because of robotics (and offshoring) and it is significantly a much higher skill set - and yet we are producing more.
I agree that uncomfortable skilled labour shortages pop up and are not as easy to fill - but the numbers required are much less than semi skilled before.
Guys like Fixer are hard to find. Thats why we have proactive human resources today rather than reactive form filers of yesterday.
In Canada, I find the government largesse greater today than yesterday for hiring and improving employees.
One bloody thing - it sure costs more today to find one of these guys - although they don’t make much more than former semi skilled employees.
I don’t think many people have noticed the intense use of capital vs labour being employed today compared to just a few years ago. Today’s capital equipment doesn’t break as much, and generally tells you what is wrong with it.
Hey patrick here is another interesting idea extending your remarks. If 30 years ago your $100K CNC lathe broke, you’re in a big rush to fix it to make your 15% business loan payment. But if your loan terms are 1% with govt grant for substantial downpayment and zeroed out prop tax for 10 years to get community jobs and your $200K CNC lathe breaks, you don’t have to hurry quite so much to make the loan payment.
Scenario #1 means fixr gets massive overtime to get it fixed yesterday, Scenario #2 means fixr might not get the repair job at all, after all, they’re in no rush and if burning some time saves 5% on the cost, well…
Lots of modern day “capitalists” are really welfare queens in disguise.
In the long run, someday, interest rates are going to do back up, and this is just another culture shock that’ll happen along the way.
30 years ago a simple six up cost $250,000. Today you can get a 60 plus up for much less than that.
The old machines your staff fix. The new ones often fix themselves.
Today you cannot let your “battery” down for anytime what ever as it shuts down your whole line. Yesterday, one CNC down meant putting more on another one, then worrying about your repair costs when you could afford them.
But when that line goes down for shutdown, or is forced down, you cannot afford millions of dollars worth of integrated equipment to be down for one second longer.
But your staff cannot fix everything that goes wrong with today’s equipment. That is where the labour shortage is - on and off site repair staff.
“Proactive Human Resources”
I haven’t got a job YET by applying thru human resources. In fact, I haven’t even been called for an interview. It’s all been somebody asking someone that I know, who knew I was looking.
The problem with this is if you live/work in a location with minimal job opportunities. We have a “network” of local guys who know who’s looking, and know what jobs are opening. It’s hard to get into another network/relocate if you don’t know anybody in it.
As near as I can tell, the HR guys have the computers set up so they screen out everybody but the 32-33 year old guys, with 20 years of experience. (if such a candidate can be found)
All other things being equal, the HR pukes will take the minimally qualified 32 year old over the highly trained/experience 45-50 year old EVERY TIME.
Although you may not know it, proactive HR does get out into the field, attends drinking sessions in pubs where known talent “resides”, develops networks etc.
Your right - most good “fixers” are scouted. They do not get their offers from a staid HR office.
We now scout employees almost as much as marketing/sales do customers.
But you are wrong about the age. We prefer really good experience, a known track record. University / college is nice, but often not available within the older crowd.
I would rather have it fixed right the first time - it’s a lot cheaper in the long run - and only those talented with experience seem to be able to consistently accomplish that.
So many repairs today literally require “researching” a solution as the repair progresses. I cannot imagine a junior being able to do that. And then have the insurance company agree.
That’s what will happen is our ability to import stuff from China and not pay for it goes down.
It seems that the whole world is dependent on the first worlders (who are a small minority) to be their customers. As the amount of wealth to transfer to the sweatshop countries shrinks, so will their exports.
Perhaps “capitalism” will collapse under the weight of unrepayable debts and plummeting consumer demand. What will replace it is anyone’s guess. What I do know is that there are hundreds of millions of unemployed around the globe and the situation will probably get worse as the first world continues to tighten its belt.
“Plenty of jobs, but at wages that provide a lower standard of living.”
This suggests the effort to artificially inflate housing prices will ultimately fail.
Look to Mexico/Hillbilly country for the future of the former middle class.
-Two families/3-4 generations in one house. The old “never been more than 10 miles from the place he/she was born” meme will return.
-Everyone working 2-3 part time jobs, plus the side jobs……farming if they have land, fixing stuff for cash, swap meet entrepeneur, meth lab, corn liquor, marijuana rancher.
-”Company Stores” will return.
-The only ways “out” for most of them will be the military, or athletic scholarships.
- The kids will/are growing up on a steady diet of religious fundamentalism, Rush Limbaugh, and Fox News……where “progressive” will be a brand of soup, and Noah had dinosaurs on the Ark.
So I grew up about halfway hillbilly. Sounds about right.
So did I. Nothing particularly wrong with that. But it’s not an existence that leads the majority of kids to Doctorate’s or Nobel Prizes.
Thank God I’m a Country Boy
Well, why aren’t companies raising wages? Because their customers are broke and they can’t raise prices.”
then they will stop manufacturing these things and we will all be poorer
Or how Deflation eventually causes prices to go up.
Well, I rolled over another year this past weekend. Looks like I’m now old enough to qualify for senior discount day at the grocery store. First Wednesday of the month, and I’m stocking up on…
Happy birthday Slim…Go out a take a bike ride…
“Well, I rolled over another year this past weekend.”
Congrats! My daughter just rolled over her childhood into adulthood today…
You can tell how many women are in the house, by knowing the toilet paper consumption
1 male = 1-2 rolls/month
1 Female = 3-4 rolls a week
Happy Birthday, Slim! Don’t go overboard on the celebrating.
“I made the argument that I believed that by the end of the fall, stocks would close at new all time highs led by emerging markets…
After last week’s drop in worldwide risk assets and collapse in Treasury yields…”
Is this guy simply trying to tell his readers that he totally blew his market call? If so, why did he waste so many words in doing so?
Nov. 12, 2012, 1:06 p.m. EST
Bonds return as sky falls
By Michael A. Gayed
After last week’s drop in worldwide risk assets and collapse in Treasury yields once again, it’s worth addressing where we are now and the likelihood of what happens next.
Following the Summer Surprise and “end to the end-of-the-world trade,” I made the argument that I believed that by the end of the fall, stocks would close at new all time highs led by emerging markets, but that before that were to happen, we were likely entering a period of “corrective hesitation” (Sept. 26: “ Corrective Hesitation and the ‘Fall Catalyst ‘”). As intermarket trends suggested further deterioration was occurring, I became more adamant that a corrective period was underway…
This related at all to the new Bond movie “Skyfall”?
I’m sure you’re all read about people with unsellable houses torching them for the insurance money? Like how all those houses in NYC that got flooded and have no flood insurance but do have fire insurance and oddly enough they sure burn well for no apparent reason after being flooded?
OK now that you’re in the correct mindset, look at the wash post article about the giant house explosion in Indianapolis. “Indiana real estate records show Shirley’s house had been for sale for a year until it was taken off the market in March.” Now add in that according to the explosion was so immense that it killed at least one neighbor, but the owner, ex-wife, and daughter all survived (although no comment on the ex-wife boyfriend… let me guess, he lived too?). The daughter was merely freaked out enough to text her father, seems kind of unemotional. Everyone living there must have luckily been out of the unsellable house, what a lucky coincidence. Utility workers haven’t found any obvious reason for a gas leak. If the arson investigators and lawyers and insurance investigators aren’t all over this yet, they certainly should be. At least once innocent bystander is dead, however all this turns out.
This is disturbing to me, because I always thought the worst case scenario of my deadbeat neighbors was a fire (but house separation, climate, construction, and extremely close FD means that is not much realistic danger to me) or the typical cowards way out murder suicide, again unless the guy has ridiculously bad aim with his gun, my family and I should be perfectly OK. But this massive explosion killed at least one neighbor. As a neighbor of deadbeats, I don’t particularly like this idea.
That explosion was more like a 50# bag of ammonia nitrate and a few gallons of diesel. Wow, I mean there nothing left, it’s flat as a pancake.
The lack of arson fires during this housing bubble collapse surprised me. I would have thought it would have been bad in the worst hit areas but that’s not been the case.
I’m not going to burn it down if I can live there for free.
Spanish Economy Minister Luis de Guindos promised on Monday that no needy family will go homeless over mortgage arrears, responding to public fury at a homeowner’s suicide as she was being evicted.
Facing accusations that politicians and banks are complicit in de facto “murder”, Spain’s banking association said its members would suspend eviction orders for two years for those borrowers worst hit by economic crisis and record unemployment.
Athens needs €15bn to cover 2013-2014 and will need another €17.6bn for 2015-2016, according to the report seen by AFP as eurozone finance ministers began a meeting to discuss the Greek bailout.
Under its current bailout, the creditors - the European Union, International Monetary Fund and European Central Bank - had expected that Greece would need some €8bn in additional funding.
Finance ministers are relying on the long-delayed report, drawn up by officials from the EU-IMF-ECB troika, to assess Athens’ efforts to meet its targets and decide whether to release a next aid tranche of some €31bn.
<i<Athens needs €15bn to cover 2013-2014
That’s about 1500 Euros for every man, woman and child in Greece
Men women and children are not getting any of that money.
Damn wrong place. Oh well Happy Birthday Slim.
Would this situation fit the definition of a “Keynesian ugly contest”?
Even those who predict Congress does a deal may be selling simply because they think others will.
ABREAST OF THE MARKET
November 11, 2012, 6:15 p.m. ET
Tax Threat Prompts Selloff
Investors Dumping Winning Stocks Due to Expected Jump in Capital-Gains Rate
By JONATHAN CHENG, LIAM PLEVEN and ALEXANDRA SCAGGS
Politicians are locked in a battle that will determine which Americans pay higher taxes. But many investors aren’t waiting to find out the answer.
The prospect of higher taxes on capital gains is prompting many to unload some of their winning stocks.
Tax-induced selling is one factor some market watchers attribute to the recent declines, including stumbles in highfliers such as Apple, which has tumbled 8.1% this month. Broadly, stocks suffered their worst week of declines in five months.
The potential rise in the capital-gains tax is included in a raft of potential year-end tax increases and spending cuts, known as the fiscal cliff. Leaders in Washington are likely to spend weeks wrangling over which taxes get increased, and many investors anticipate capital gains will be one of them.
Peter Disch, a wealth adviser, has been helping his stable of 90 clients, who collectively have entrusted about $140 million to his firm, sell stocks in recent weeks.
“Tax rates are going up, and if you don’t plan to hold these stocks for a long time, now is the time to take advantage of the lower tax rates,” Mr. Disch says he has told his clients.
The wave of selling is a twist on the usual year-end rush among financial advisers, who typically help their clients sell their losing stocks to offset gains from other investments.
The Standard & Poor’s 500-stock index has climbed 9.7% this year, but stocks continue to find skeptics, who point to Europe’s debt crisis, Washington’s political gridlock and disappointing corporate earnings.
Any increase in taxes on investment gains would dig into the paper gains that investors have enjoyed as the S&P 500 doubled off its March 2009 lows.
That could be behind the recent selling, investors say. Even those who predict Congress does a deal may be selling simply because they think others will.
Isn’t the fiscal cliff an example of a closely-watched pot never boiling over? Why is everyone worrying so much about it, if it is very unlikely to occur?
If the worry is hammering small businesses, why not carve out some protection for them as part of the fiscal cliff solution?
Romney’s Legacy: A Fiscal Cliff Deal
By Deborah Solomon Nov 12, 2012 10:33 AM PT
Could Mitt Romney ultimately be the architect of a fiscal cliff deal?
Crazy as it sounds, an idea Romney floated during his failed presidential campaign could provide a blueprint for President Barack Obama and Republicans as they attempt to negotiate a deficit-reduction compromise.
Romney’s proposal to cap tax deductions like the mortgage interest tax break and tax credits at a certain amount provides a giant revenue boost to the U.S., particularly at the $17,000 limit Romney floated during one of the presidential debates.
Of course, Romney’s idea was to limit the tax breaks to help pay for his 20 percent across-the-board tax cut. With that idea off the table, the rationale for limiting the tax expenditures still makes sense and could be embraced by Republicans, who appear ready to accept new revenues as long as they don’t come from higher marginal tax rates.
Consider this: Capping tax deductions at $17,000 for everyone would boost the government’s coffers by $1.75 trillion over 10 years — far above the $1.5 trillion in new taxes Obama has called for as part of a deficit-reduction deal. That revenue jolt comes without raising marginal tax rates on the rich.
There’s a catch, of course.
Capping tax deductions for everyone would raise taxes on more than just the wealthiest Americans. The rich would take the biggest hit, since the value of the tax breaks increases along with income. But about 25 percent of the tax increase would hit those with incomes between $112,000 and $228,000, and about 20 percent of the increase would hit those below $112,000, according to Tax Policy Center estimates.
USA projected to become world’s top oil producer, and even am exporter:
A talking head on the radio just suggested the obvious: That the dire fiscal picture is primarily due to the Fall 2008 financial collapse, rather than out-of-control government spending.
Did some possibly overlook the role of economic collapse in creating the dire financial situation at hand?
Private debt caused the problems, not public.
Which debt-ridden Eurozone country’s economy is in the most dire straits?
November 12, 2012, 11:35 AM
Where Spain Is Worse Than Greece
By Matthew Dalton
By most measures, Greece’s economy is in worse shape than Spain’s. Greece has been largely shut off from financial markets for more than two years; yields on its bonds are still sky high. Gross domestic product has fallen nearly 20% over the previous three years. Spain can still borrow from private investors, and its GDP has fallen around 5% during the crisis.
But if you take forecasts from the European Commission seriously, Greece enjoys one formidable advantage over Spain: Its economy is running well below capacity, while the Spanish economy, despite an unemployment rate around 25%, is operating relatively close to full steam.
Why is that an advantage? According to the commission, it means that the Greek unemployment rate should fall sharply if the economy starts to recover again, without causing inflation. Spain faces a much more difficult situation. If the structure of its labor market doesn’t change, the commission’s analysis suggests that a nascent economic recovery in Spain could be hampered by labor shortages that would spark wage inflation.
Seems like a strange thing to believe for a country with 25% of its workforce sitting idle. How can this be?
The reason is the commission’s view of the Spanish labor market. During the previous decade, the Spanish unemployment rate dropped sharply as millions of Spaniards found work in the booming Spanish real estate sector.
But the bubble has burst, probably for good. This means, according to the commission’s analysis, that millions of Spaniards need to be retrained to do non-real-estate-bubble-related jobs. In the meantime, their labor won’t be available to do the new jobs that will drive Spanish growth in the future.
Greece faces similar problems, but they are less serious, according to the commission’s analysis. Yes, the “government-borrows-money-and funds-consumption” model of growth won’t be available to Greece anymore. But it didn’t endure the same private-sector credit bubble that hit Spain during the previous decade.
For how much longer will the Canucks enjoy whistling past the housing bubble graveyard in a state of denial, before the inexorable burial of their housing bubble?
Don’t expect Canada’s housing market to have U.S.-style meltdown
OTTAWA — The Globe and Mail
Published Sunday, Oct. 21 2012, 8:00 PM EDT
Last updated Monday, Oct. 22 2012, 7:13 AM EDT
Canada’s housing market is faltering just as the U.S. market roars back to life.
This sudden reversal of the narrative that has prevailed since the U.S. housing bust in 2006 is about to make Mark Carney’s interest rate juggling act much trickier.
The Bank of Canada’s next rate-setting announcement is Tuesday, followed by the monetary policy report Wednesday.
There won’t be a rate hike – not yet, anyway. But the betting among some Carney watchers is that the bank governor will drop his implicit projection of higher rates soon, or at least modify the bank’s now-familiar pledge of “some modest withdrawal” of rock-bottom rates and monetary stimulus.
Mr. Carney is facing an unusually uneasy global economic environment. China’s potent economy is slowing. Europe’s debt crisis continues to fester. And while U.S. prospects are looking up – most notably in housing – the uncertainty surrounding the November election and the looming fiscal cliff have economists and investors on edge.
But it is the home front that is probably keeping Mr. Carney up at night. For the first time in five years, he has a major domestic problem to fret about – housing.
The housing market is not a proxy for the whole economy. But one of the lessons of the Great Recession is that housing matters a lot – to employment, to wealth, to consumer confidence, to job creation and to the financial services industry.
Sales of existing homes plunged 15 per cent in September – the latest hint that the long and surprising boom in Canadian housing is coming to an end. More than half of major markets saw sales drop 10 per cent in the month, and prices have stalled. Overheated Toronto and Vancouver are cooling fast.
It was inevitable. When the average price of a home in Vancouver hit $1-million, it was pretty clear that prices had finally outstripped the ability of most buyers to pay.
And yet debt, particularly mortgage debt, continues to rise. Canadians are suddenly flirting with the same debt danger zone that triggered real estate crashes in the U.S. and Britain. New figures from Statistics Canada show that households are carrying a record level of debt relative to disposable income – 163.4 per cent in the second quarter, up from 161.7 per cent at the end of last year.
So does that mean Canada is headed for a U.S.-style meltdown? Unlikely.
I am surprised that RAL hasn’t said something about the booming US housing market. Not very likely - we are both weak. Weakening?
A perfect zero!
Dow Jones Industrial Average
DJI: DJIA 12,815.16
Change -0.23 -0.0018%
Nov 12, 2012, 4:03 p.m.
Previous close 12,815.39
Hey look! Could be a good deal on some choice Belize beach front property coming up. I have been to that area and loved it’s peaceful beauty. To think that McAfee was once worth over 100 million, now it’s rumored he’s got about around 4 mil. left.
That’s a shocking story!
Millionaire behind McAfee software giant on the run after ‘gunning down an American builder in Belize’
By Rachel Quigley
PUBLISHED: 14:28 EST, 12 November 2012 | UPDATED: 16:10 EST, 12 November 2012
The man who made millions by creating one of the world’s most successful internet security firms is on the run after shooting dead an American man in Belize, according to police.
John McAfee - co-founder of McAfee virus software - is the prime suspect in the murder of American expatriate Gregory Faull, a local builder who was gunned down on Saturday at his home.
Head of Belize police force’s Gang Suppression Unit Marco Vidal named the 66-year-old as the prime suspect today and revealed he was on the run.
Sounds like he succumbed to the same weakness that allegedly brings down many Realtors™.
He is also thought to have been struggling with the after-effects of mind-altering drugs like bath salts, which he often posted about on drugs-focused internet message boards.
He wrote in one: ‘I’m a huge fan of MDPV. I think it’s the finest drug ever conceived, not just for the indescribable hypersexuality, but also for the smooth euphoria and mild comedown.’
He is also thought to have been struggling with the after-effects of mind-altering drugs like bath salts, which he often posted about on drugs-focused internet message boards.
He wrote in one: ‘I’m a huge fan of MDPV. I think it’s the finest drug ever conceived, not just for the indescribable hypersexuality, but also for the smooth euphoria and mild comedown.’
Does anyone know why he was in Belize?
He didn’t want to pay his taxes.
The lawsuits were just part of the problem.
Oh, the delicious irony if this story goes viral….
BELLEAIR — Nobody seemed to know John J. Osborne.
He lived alone in a modest stucco home on a dead-end lane, where he spent hours trimming his shrubs. The most neighbors can say is that he seemed polite. Perhaps most unassuming of all, a six-sentence obituary followed his Sept. 6 death. It ended with, “There will be no funeral service.”
But in his will, the little-known 79-year-old stranger named the town of Belleair as the sole beneficiary of his estate. That included his house, his furniture, his car.
And, as the town just found out, nearly $4 million in stocks.
Statements like this made before the election could have made all the difference to the outcome.
ft dot com
Last updated: November 12, 2012 11:41 pm
Republicans shift stance on taxing wealthy
By James Politi and Stephanie Kirchgaessner in Washington and Ed Crooks in New York
The US Congress should agree to higher taxes on the wealthy to avoid the fiscal cliff, a top Republican economist has said in a sign of the rapidly shifting political climate in Washington before negotiations to avert the looming budget crisis.
Writing for the Financial Times, Glenn Hubbard, who advised Barack Obama’s rival Mitt Romney on his losing presidential bid, is the latest prominent conservative to suggest Republicans should change tack and accept the president’s structure for impending budget talks.
“The first step is to raise average (not marginal) tax rates on upper-income taxpayers,” he wrote. “Revenues should come first from these individuals.”
Mr Hubbard said that could be achieved by eliminating tax loopholes and capping popular deductions – such as those for mortgage interest, charitable giving and employer-provided health plans – rather than allowing Bush-era tax rates for the rich to expire this year, as Democrats are demanding.
Mr Hubbard’s remarks come as formal talks are set to begin on Friday between Mr Obama and congressional leaders on how to solve the fiscal cliff – a $600bn mix of spending cuts and tax rises set to take effect at the start of next year. These could plunge the US back into recession if Congress does not act to pre-empt them.
The growing debate among Republicans over how to generate more revenue highlights the change in the political mood since Mr Obama’s victory in last week’s election.
For most of the last two years, the Republican refrain was that deep cuts needed to precede any deal on higher revenues. But against a backdrop of investor concern, the budgetary battle is being waged on terrain friendlier to Democrats.
Are you saying that Romney could have won had he more fully endorsed raising revenue via the tax plan in Simpson/Bowles?
The only difference was that his party line was that reform would boost growth making increases in taxes right now unnecessary.
The rest was the same…lower rates, fewer deductions.
Those that could do the political math knew that he would ultimately need to raise revenue absent growth to make a deal on entitlements with the Democrat controlled Senate–start to the right, move left.
Obama was proposing only to raise the rates, but keep the complicated loopholes in effect.
Again, those that could do the political math knew that he would need to move toward reform (a la Simpson Bowles) to make a deal with the Republican controlled House.
“Are you saying that Romney could have won had he more fully endorsed raising revenue via the tax plan in Simpson/Bowles?”
I’m saying that at least from my perspective, his message got lost in the weeds of propaganda and reciprocal personal attacks on his opponent.
I confess my perceptions are biased, as I never, ever watch TV news, and limit my reading to only three or so dead tree newspapers plus articles that I find online. Maybe if I had watched the debates, I would have had a clearer picture of the real platforms, instead of mere disgust over the irrelevant nonsense the MSM chose to report on.
Yeah. I ignored the media and personal attacks. I watched the debates (mainly the one centering on the economy), read what I could on both candidates websites, and read Woodward’s book about how Obama dealt with the last major dust-up with the debt/deficit.
Despite all that however, the most compelling thing I heard was a second hand (but very credible) story that Romney told those close to him in the LDS that he expected to be a one-term president…why?
Because he thought the medicine the country needed to get their fiscal house in order was going to be so bitter that EVERYONE would hate him and not want him back.
I read that to mean the he was going to piss off the right (raise revenues) and the left (cut entitlements).
Too bad he could never say such things publicly without getting skewered by the other side’s propaganda machine about throwing grandma under the bus.
“Too bad he could never say such things publicly without getting skewered by the other side’s propaganda machine about throwing grandma under the bus.”
Leadership sometimes involves standing in the fire and showing the world you aren’t getting burned, or even uncomfortably warm, for that matter.
Dumb question of the day:
Is there any need for actual households to purchase homes with the mortgages that get packaged and sold to the Fed as $40 bn a month’s worth of MBS, or can banks and other non-end users (e.g. “private investors”) participate in Fed-funded home purchases?
If Fed-funded mortgages are not restricted to end user purchases, I see no reason that home prices can not be robo-funded on a permanently high plateau forever…
I think you are talking about two things…money purchase loans vs. refinance loans, and GSE backed loans vs. non-GSE backed.
My understanding is that they are buying both money purchase and refinance loans, but only GSE…I don’t think they were buying non-GSE of either kind…anyone care to chime in?
What I am actually asking about is whether straw buyers can purchase homes on mortgages which go up the MBS pipeline to the Fed’s QE3 vacuum apparatus. And by ’straw buyer,’ I mean a non-end user who is buying the home as an investment, not to live in.
I don’t know…I think it depends if the Fed is buying non-GSE debt or not. To my understanding, the GSEs are not yet providing debt for investors–I had heard a rumor that they were going to provide such debt in big pieces ($25MM at a time). However, I’m not sure that has happened yet.
I think Waypoint needed to tap Citi for a big line to buy rental properties, and a group that I know is borrowing ~60-70% of cost from a bank who is supposedly keeping the debt on their books (ie. not selling it to anyone). I don’t think in either situation the Fed is buying that debt.
If what you are asking is whether people are lying to get GSE backed loans…I’m certain the answer is yes. I don’t think the big guys are able to though, it is too much volume for them to do one at a time.
Nov. 12, 2012, 8:52 p.m. EST
Hong Kong stocks drop; energy, property shares off
By V. Phani Kumar
HONG KONG (MarketWatch) — Hong Kong stocks edged lower in early trading Tuesday as concerns over the U.S. fiscal outlook remained in focus, with the energy sector pacing the decline. The Hang Seng Index gave up 0.5% to 21,323.96 and the Hang Seng China Enterprises Index gave up 1.1% to 10,332.60. Oil and coal stocks fell after crude-oil prices settled below $86 a barrel in New York overnight. PetroChina Co. lost 1.9% and China Coal Energy Co. declined 2%.
Is this practice really legal?
Nov. 9, 2012, 12:18 p.m. EST
New real-estate fad: the all-cash head fake
More wealthy home buyers are closing before financing
Pay cash for your next home or get a mortgage? Some wealthy home buyers are choosing both.
It’s called delayed financing, in which buyers pay cash for a home and then take out a mortgage soon after closing. Rarely used even two years ago, experts say it has picked up over the past 12 months.
“It was an extremely unusual phenomenon, but it’s going on quite a bit now,” says Jack McCabe, an independent housing analyst in Deerfield Beach, Fla.
The practice is growing mostly in affluent coastal housing markets, including New York and San Francisco. And it all boils down to competition. Sales of million-dollar-plus homes are on the rise nationwide, while inventory remains limited. All-cash buyers have a better chance of standing out from competing bids and getting the home at a lower price since their offer isn’t contingent on financing.
Borrowing money against unencumbered collateral is as old as banking.
We see it frequently on the commercial side–you buy the asset all-cash in order to meet the seller’s abbreviated timeframe (since banks are skittish and SLOW today), and then you seek financing after you already own the asset…happens all the time, but much more frequently since the crash.
For a while there were so few lenders for commercial assets that the only way you COULD buy an asset is if you had the cash. Over time, as banking recovered, loans were put on properties…could have been months, or years later.
Nov. 12, 2012, 10:31 p.m. EST
Asian stocks recede amid U.S., Greece fears
By V. Phani Kumar and Michael Kitchen, MarketWatch
HONG KONG (MarketWatch) — Asian markets retreated as lingering uncertainty over the U.S. fiscal outlook and the next tranche of financial aid to Greece sidelined buyers, hurting resource stocks in particular.
Australia’s S&P/ASX 200 dropped 1.1%, China’s Shanghai Composite Index skidded 1.1%, Hong Kong’s Hang Seng Index fell 0.8%, and Taiwan’s Taiex lost 1.3%.
Japan’s Nikkei Stock Average gave up early gains to retreat 0.3%, extending a string of recent losses as the country’s weak economic outlook pressured sentiment, while South Korea’s Kospi also surrendered early gains to slide 0.6%.
The drop in Shanghai and Hong Kong came even as markets awaited the once-in-a-decade leadership changes at the Communist Party Congress, currently in session.
“China is likely to remain the center of focus for the region, and any comments from there could be a big sentiment driver,” said Stan Shamu, a market strategist at IG Markets.
Investor focus also remained on the so-called fiscal cliff in the U.S. — heavy tax hikes and spending cuts that would occur in the absence of an agreement between Republicans and Democrats by year’s end.
“While our base case remains that a compromise will be reached eventually, the risk of temporarily going over the fiscal cliff in the interim will be negative for risky assets,” Barclays strategists wrote in a note to clients.
Greece was another cause for concern, with The Wall Street Journal reporting about differences between euro-zone leaders and the International Monetary Fund on how to reduce the country’s debt to more manageable levels.
The report said that while the region’s ministers were confident about finding a way to agree on releasing a long-delayed $40 billion aid tranche, IMF Managing Director Christine Lagarde made clear there were differences on how to do that.
Is it OK to do it in a FL restaurant at the table where you dine, so long as you pay the bill?
Florida couple has sex on restaurant table, man arrested for refusing to pay bill
Jeremie Calo, 32, and an unnamed companion had sex on an outdoor table in full view of other patrons, Orlando police said, though Calo was arrested for not paying his bill.
By Victoria Cavaliere / NEW YORK DAILY NEWS
Wednesday, October 17, 2012, 9:32 AM
Jeremie Calo (inset) was arrested after he and an unnamed companion had sex on an outdoor table in full view of other patrons, but was charged only for not paying for his meal.
This couple really needed to get a room.
Unsuspecting diners at an Orlando restaurant got more than they bargained for when a dinner date turned X-rated on a patio table.
Jeremie Calo, 32, and his unnamed companion “were having sex on a table in view of minor(s),” Orlando police told WKMG-TV.
Patrons tried to shield their children and went to tell the manager of the Paddy Murphy’s restaurant, Tom Murphy, about the table romp.
Murphy interrupted the couple, asking them to finish their business elsewhere.
Calo replied that his date “can’t get up at this time,” because she was on top of him, WKMG reported.
Jon Stewart Mocks Fox News’ Election Night Meltdown: ‘There Was An Avalanche On Bullsh*t Mountain’ (VIDEO)
The Huffington Post | By Katla McGlynn Posted: 11/08/2012 8:59 am EST Updated: 11/08/2012 8:59 am EST
“Last night, tragically, there was an avalanche on Bullsh*t Mountain, ladies and gentleman.”
When Jon Stewart returned to “The Daily Show” after Tuesday’s live election night coverage, the only thing left to discuss was the absolute meltdown that occurred at Fox News after President Obama was re-elected.
Even days before the election, no one at Fox seemed to think that Mitt Romney losing was a possibility, and on election night, Karl Rove proved just how in denial he was by refusing to believe that Ohio would go to Obama (after 74% of the votes were in). Later, a stunned Sarah Palin and Bill O’Reilly played a little game Jon Stewart likes to call, “White People Judo.”
Watch the clip above for Stewart’s full “avalanche” coverage, then watch part two below wherein he breaks down who Fox News thinks is really to blame. Could it be the mainstream media? Hurricane Sandy? Minorities and women exercising their right to vote? Or could it have been the “Obama smear machine” which happens to have said a lot of the same things as both Fox News and GOP supporter Sheldon Adelson in the past?
All Stewart knows is that, “This election wasn’t murder, it was auto un-erotic asphyxiation”
WATCH: Part Two
I took a quick peak at the video, and am happy to report that other than Sean Hannity, I recognize none of the faces who flashed across the Fox news screen…
…except for Karl Rove.
Tom Lawler Is A Liar
Is he a progressive?
Can you offer a hint about why everyone should be up in arms over the dreaded “progressives”?
Euro hits 2-month low with Greece deal still up in the air
The Euro currency sign is seen in front of the European Central Bank (ECB) headquarters in Frankfurt November 6, 2012. REUTERS/Lisi Niesner
By Hideyuki Sano
TOKYO | Mon Nov 12, 2012 10:33pm EST
(Reuters) - The euro dipped to a two-month low against the dollar on Tuesday after the euro zone and the International Monetary Fund failed to agree on a long-term plan to reduce Greece’s debt, preventing disbursement of immediate aid to Athens.
While market players expect Greece to manage to get by this week without the aid money it was counting on, uncertainty over its short-term financing and long-term debt reduction plan was enough to put off investors.
“Few people would think that the euro zone will desert Greece. Still, the market will be frustrated by lack of a clear picture. I expect the euro to keep falling gradually,” said Ayako Sera, senior market economist at Sumitomo Mitsui Trust Bank.
With the aid funds from international lenders blocked, Greece plans to sell treasury bills on Tuesday to refinance a 5 billion issue maturing on Friday.
But some market players are not sure if they can take successful auction for granted.
“Although the market was indeed not expecting progress this time, there remain concerns about Greece’s funding, putting pressure on the euro,” Masafumi Yamamoto, chief FX strategist at Barclays in Tokyo, wrote in a note to clients.
The euro fell to as low as $1.2676, having erased about four-fifths of its gains made after the European Central Bank unveiled a program to buy government bonds with aim to buy Spanish debt on September
It last stood at $1.2684, down 0.2 percent on the day, having constantly declining since it peaked at $1.3140 mid-October as the euphoria over the ECB’s scheme faded.
Against the yen, the common currency fell to 100.74 yen, threatening to break below one-month low of 100.43 yen hit on Friday.
Euro zone finance ministers agreed to grant Athens two more years to reach its budget goal but the IMF and the euro zone are at loggerheads over who should shoulder the cost — around 33 billion euro — as well as on a longer-term target date to shrink the country’s debt pile.
“If you extend the deadline by two years, you need more money, and countries like Germany and Finland will need to go to the parliament. The market will be concerned if all of that goes so smoothly,” said a trader at a Japanese bank.
‘The Simpsons’ Karl Rove Blackboard Gag Mocks Fox News Meltdown (PHOTO)
Posted: 11/12/2012 8:29 am EST Updated: 11/12/2012 2:20 pm EST
Nov. 12, 2012, 4:36 p.m. EST
U.S. stocks stall ahead of budget talks
By Kate Gibson, MarketWatch
NEW YORK (MarketWatch) — U.S. stocks finished nearly unchanged Monday, with the market treading water before talks to head off automatic spending cuts and tax hikes that would begin in January.
“Unlike monetary policy which seems pretty certain, fiscal policy is the great unknown. In the short term, the clock is ticking on the fiscal cliff,” said Andrew Fitzpatrick, director of investments at Hinsdale Associates.
The uncertainty of whether politicians would reach an agreement and avoid more than $600 billion in automatic tax hikes and spending cuts otherwise set to take place in January was expected to keep equities on a volatile ride until an accord is reached. Read: U.S. stocks to follow erratic ‘fiscal cliff’ path.
Once companies feel that the “fiscal cliff” has been avoided, they will likely turn to ramp up delayed projects and start hiring again.
U.S. stocks fell the most in five months last week as investors turned to newly re-elected President Barack Obama’s budget standoff with the Republican-majority House of Representatives.
“This has the capability to lead to recession as growth in the economy could stall. Early signs are encouraging as both Obama and [House Speaker John] Boehner have a least expressed some willingness to compromise,” Fitzpatrick added.
At what point should apocalyptic stopped-clock permabear warnings be heeded?
Nov. 13, 2012, 12:02 a.m. EST
New bull record in 2013 or crash over a bear cliff?
Commentary: 10-part test: rational investing in irrational markets
By Paul B. Farrell, MarketWatch
SAN LUIS OBISPO, Calif. (MarketWatch) — New record? Yes. Dow 14,165, “almost there” says Barron’s in its latest Big Money poll. Still, hedge your bets: “After three years of handsome returns for U.S. stocks,” optimism about 2013 is “waning as the list of things to worry about grows longer.”
The big worries: “Corporate earnings growth is slowing, there’s the threat of war in the Middle East and defaults in Europe, and the fiscal cliff.” USA Today adds “Big-Name Stocks Hit Bear Markets, Apple, Nike” and more.
And yet, Barron’s “Big Money bulls expect the Dow Jones Industrial Average to rise to about 14,400 in the next year.” New record? Good news? The guys over at Seeking Alpha are skeptical of Barron’s October 15 cover flashing 14,165 in big numerals with the subtitle, “almost there … stocks are healthier today based on profits and cash levels than in 2007 when this level was last seen.”
So should we cheer when we actually get there? Or is it time to play defense?
China Stocks Fall to 7-Week Low on Property Tax, Retail Concerns
By Bloomberg News on November 13, 2012
China’s stocks fell to the lowest level in seven weeks after the Xinhua News Agency reported the government may expand a property tax trial and Haitong Securities Co. said retailers may post weak sales this month.
China Vanke Co. (000002) and Poly Real Estate Group Co. led declines for developers after Xinhua cited the housing minister as saying the government is watching for signs of surging transaction volumes and home prices. Suning Appliance Co. (002024) plunged 5 percent as Haitong said November sales for traditional retailers will be hurt by a shift towards online purchases. China Petroleum & Chemical Corp. (600028) slumped to the lowest in almost a month after the Beijing Times said China may cut gas prices tomorrow.
“The economy seems to be stabilizing but there’s no solid evidence that it will pick up further,” said Wei Wei, an analyst at West China Securities Co. in Shanghai. “Some investors are taking profits ahead of the year-end. Investors should avoid the property sector amid policy uncertainty.”
The Shanghai Composite Index (SHCOMP) slid 1.5 percent to 2,048.89 as of 1:11 p.m. local time, heading for the lowest level since Sept. 26. The CSI 300 Index (SHSZ300) lost 1.7 percent to 2,213.31. The Hang Seng China Enterprises Index (HSCEI) of Chinese companies traded in Hong Kong retreated 1.8 percent. The Bloomberg China-US 55 Index (CH55BN), the measure of the most-traded U.S.-listed Chinese companies, added 0.1 percent in New York yesterday.
The Shanghai Composite rose 0.5 percent yesterday, halting a five-day decline, after export growth surpassed forecasts in October. Industrial production, fixed-asset investment and retail sales exceeded estimates last month while new lending trailed projections. The measure trades at 9.7 times estimated profit for 2012, compared with the 17.8 average multiple since Bloomberg began compiling the weekly data in 2006.
Trading volumes in the Shanghai index were 7.2 percent lower than the 30-day average, data compiled by Bloomberg show. Thirty-day volatility was at 16.1, down from this year’s average of 17.2.
A gauge of property developers in the Shanghai index slid 1.7 percent, the most since Oct. 26. The measure is still up 13 percent this year, the only one of five industry groups to advance. Vanke, the biggest listed developer, fell 2 percent to 8.39 yuan. Poly Real Estate, the second largest, lost 1.6 percent to 11.43 yuan. China Merchants Property Development Co., the third biggest, sank 2 percent to 22.12 yuan.
The ministry is on “high alert” if both transaction volume and home prices increase “substantially,” Xinhua cited Minister of Housing and Urban-Rural Development Jiang Weixin as saying. Home prices have risen about 155 percent nationwide since reforms that privatized the country’s housing market in 1998. The government imposed a property tax for the first time in Shanghai and Chongqing and raised down-payment and mortgage requirements in its more than two-year effort to curb the property market.
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