The Housing Bubble

Coming up next: Pirate raids on these hyper-mega-super yachts.

Two thoughts on this article:

1) A little more taxation of the rich wouldn’t hurt.

2) Maybe the arms industry should be converting over to producing this kind of stuff. If I was buying a support yacht, I’d want my F-35 commuter jet to be able to land on it.

Perhaps if you are deemed too-big-to-fail, and have borrowed enough money at zero percent interest, you don’t worry much about the risk of losing it on foolish gambles.

Are stock investors going insane?
Commentary: Investors not paying attention to the fiscal cliff
December 06, 2012|Brett Arends
AP Photo/Richard Drew

Have investors lost their moorings — or their minds?

As the economy hurtles towards the “fiscal cliff,” the stock market is going up, not down. Standard & Poor’s 500 is buoyant and is now within a few percentage points of a new, post-Lehman high. The Russell 2000 index of the smallest, riskiest stocks has risen 7% in just a few weeks.

Hello, McFly?! Is there anyone home?

I am going to say two things right now that absolutely nobody else anywhere in the media is likely to say. I could be disbarred for saying it, so don’t rat me out.

I have absolutely no idea whether we are going to go over the “fiscal cliff” of tax hikes and spending cuts at the end of this year.

Nor does anybody else.

I doubt even John Boehner and Nancy Pelosi know what’s going to happen. But what is as obvious as a kangaroo in a dinner jacket (to steal from the late, great Raymond Chandler) is that there is a significant risk of us going over.

And yet investors are acting like there’s no worry whatsoever.
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In Talks on a Budget Deal, Boehner and Obama Stand Alone
Doug Mills/The New York Times
By JONATHAN WEISMAN and PETER BAKER
Published: December 6, 2012

WASHINGTON — At House Speaker John A. Boehner’s request, Senate leaders and Representative Nancy Pelosi have been excluded from talks to avert a fiscal crisis, leaving it to Mr. Boehner and President Obama alone to find a deal, Congressional aides say.

All sides, even the parties excluded, say clearing the negotiating room improves the chance of success. It adds complexity as the two negotiators consult separately with the leaders not in the room. But it also minimizes the number of people who need to say yes to an initial agreement.

“This is now the speaker and the president working this through,” said Senator Richard J. Durbin of Illinois, the Senate’s No. 2 Democrat.

White House aides and the speaker’s staff, by mutual agreement, have largely shut down public communication about the talks to avert hundreds of billions of dollars in automatic tax increases and spending cuts set to begin in January if no deal can be reached. Both sides said on Thursday that lines of communication remained open.

For public consumption, Democrats and Republicans are engaging in an increasingly elaborate show of political theater. Mr. Obama on Thursday went to the home of a middle-income family in the Virginia suburbs of Washington to press for an extension of expiring tax cuts for the middle class — and for the expiration of Bush-era tax cuts on incomes over $250,000.

“Just to be clear, I’m not going to sign any package that somehow prevents the top rate from going up for folks at the top 2 percent,” Mr. Obama said. “But I do remain optimistic that we can get something done.”

On Capitol Hill, Senator Mitch McConnell of Kentucky, the Republican leader, moved Thursday to vote on Mr. Obama’s proposal, in his broader deficit package, to permanently diminish Congress’s control over the federal government’s statutory borrowing limit, assuming that Democrats would break ranks and embarrass the president. Instead, Democratic leaders did a count, found they had 51 solid votes, and took Mr. McConnell up on what Senator Harry Reid of Nevada, the Senate majority leader, called “a positive development.”

Mr. McConnell then filibustered his own bill, objecting to a simple-majority vote and saying a change of such magnitude requires the assent of 60 senators.

“I do believe we made history on the Senate floor today,” Mr. Durbin said.

The government is expected to hit its borrowing limit in late January or early February, and it is an added complication in the deficit talks because some House Republicans say they will demand further spending cuts before they lift the debt ceiling. Mr. Obama has said that any deal on taxes and spending must ensure that there will not be another crisis over the debt ceiling early next year.
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2 crooks are still more than enough to fook up.

For what it’s worth, the New York Times calculator I posted the other day indicated that $250,000 was the cutoff for the top three percent. By contrast, the median U.S. household income is (supposedly) around $51,000

Opinion: As fiscal cliff nears, we are better off without Bush tax cuts for top 2 percent
Times of Trenton guest opinion column
on December 06, 2012 at 8:21 AM, updated December 06, 2012 at 8:49 AM
By Joshua Henne

Mere days after the polls closed in 2004 — the election he actually won – President George W. Bush proclaimed, “I earned capital in this campaign, political capital, and now I intend to spend it.” Bush garnered 286 electoral votes and called it a mandate.

Well, last month, President Barack Obama racked up a whopping 332 electoral votes in his re-election bid. Now, that’s a mandate.

At its heart, the 2012 campaign was about fairness. And there’s no better way for Obama to level the playing field than by letting the Bush tax cuts expire on the wealthiest 2 percent.

The Senate has already passed legislation S3412, providing tax relief for middle-class families. Right now, Obama would sign a bill extending tax cuts for 98 percent of Americans if it came across his desk. Yet, some stubborn House Republicans continue holding this plan hostage to keep the system rigged in favor of those at the tippy-top. Obama has drawn a line in cement that he’d veto any legislation continuing cuts for those making more than $250,000.

By any metric, America’s most affluent aren’t hurting. In fact, they’re far richer today than at any time in history — taking home a larger slice of total wealth and income than top earners have received in more than 80 years. If the Bush tax cuts were to expire for the top 2 percent, they’d still be able to keep up with the Kardashians.

Allowing the clock to run out on these cuts isn’t merely a symbolic gesture of finally shaking off the yoke of Bush’s failed legacy. There are practical, real-life implications, as well.
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Had we faked the moon landing, wouldn’t the Ruskies have called us on it?

There will be a deal. Take it to the bank.

Interim deal this month and long term deal early next yr.

Bloomberg News
Fed’s Rosengren Sees ‘Strong Case’ for More Asset Buying
By Caroline Salas Gage on December 03, 2012

Federal Reserve Bank of Boston President Eric Rosengren said he sees a “strong case” for the central bank to buy bonds at the current monthly pace of $85 billion after its Operation Twist program expires.

“Given the tepid economic recovery, high unemployment, and subdued inflation — and the uncertainty around fiscal policy — I believe an accommodative monetary policy is quite appropriate,” Rosengren said today in a speech in New York. “We want to see continued improvement in labor markets in the near term, and monetary policy should encourage faster economic growth to achieve that objective.”
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Opinion
Losing mortgage deduction would be a small sacrifice
Editorial
By TBO.COM | Staff
Published: December 06, 2012

The tax deduction for mortgage interest, designed to encourage home ownership, has done its job by encouraging some families to make wise investments. At the same time, it has enticed other buyers to go deeper into debt than they otherwise would have.

Now, with Congress seeking ways to reduce the budget deficit, a good place to look would be at reducing or even eliminating this long-standing deduction.

Today’s low interest rates make the deduction worth less than in the past. That’s no problem because with great rates available, buyers need less incentive.

Nationwide, only 26 percent of taxpayers claimed a mortgage deduction in 2010, USA Today reports. In Florida it was only 19 percent. The average deduction in Florida was $11,163.

A few years ago, some members of a deficit-reduction panel suggested that the deduction for mortgage interest be replaced with a tax credit equal to 12 percent of the interest paid on a maximum loan of $500,000, down from the current $1 million. They also wanted the tax break eliminated for vacation cabins and any second home.

The idea went nowhere. Those involved in building and selling houses fought back, fearing any change would discourage home-buying and even hurt property values.

Home ownership, without a doubt, can strengthen a community’s social fabric in a number of ways. But why must it be a permanent government obligation to help a minority of us make our interest payments to the bank?
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“At what point will politicians announce the MID is off the table?”

FWIW, I haven’t heard or read much lately about defense cuts either.

I guess those massive bailouts and record profits weren’t enough to go around?

Holiday Jeer: Big Banks Planning More Layoffs
By Charlie Gasparino, Matt Egan, Adam Samson, Sital Patel
Published December 05, 2012
FOXBusiness

The big Wall Street firms are preparing to dole out a not-so-nice holiday gift to their employees: More layoffs.

Citigroup’s (C) decision to slash 11,000 jobs today comes as a number of big banks are planning further cuts to the workforce in the coming months, the FOX Business Network has learned. People inside Morgan Stanley (MS) and Goldman Sachs (GS) say management at those banks is contemplating cutbacks, as well, something that officials there won’t deny.

Analysts say Citigroup’s cut were unusually large, around 4% of its entire workforce, reflecting the fact that Citigroup had waited too long to reduce headcount given mounting profit and regulatory pressures on all the big banks. Still, even firms that have already announced major layoffs like Goldman Sachs and Morgan Stanley are expected to announce job reductions in the coming weeks and months, according to people close to both firms.
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Central planning is un-American.

So the trick is to be the warlord’s central planner?

I agree. For a bank to get it’s charter it should be forced to allocate it’s loans sector by sector, and by location without regard to race.

Same for insurance companies.

Because nobody has ever determined if the debt limit itself is constitutional. It is very much an open question, legally.

A stopped-clock financial prediction is right twice a century.