Examining the home price boom and its effect on owners, lenders, regulators, realtors and the economy as a whole.
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Posted By: Ben Jones @ 3:16 am
With the Fed all-in and Q4 2012 GDP coming in negative against the backdrop of the U.S. stock market approaching an all-time high, is the Wall Street bull getting a bit long in the teeth?
“Markets Can Stay Irrational Longer Than Investors Can Stay Solvent”
John Maynard Keynes
But I’m going to argue that if GDP comes in negative for another quarter, this time will be different.
Recall that Keynes was a very successful investor. It made him a wealthy man.
Also recall that he presumably was actively investing during the Great Depression. Not everyone was unable to see it coming.
He wasn’t very successful at the start though
Keynes was wiped out. Whereas in April he had been sitting on net profits of £14,000, by the end of May these had reversed into losses of £13,125. His brokers asked Keynes for £7,000 to keep his account open. A well known, but anonymous, financier provided him with a loan of £5,000. Sales of Keynes’s recently published book The Economic Consequences of Peace had turned out to be healthy and a letter to his publisher asking for an advance elicited a cheque for £1,500.
Keynes was thus able to scrape together the money he needed to continue trading. He had learned a valuable but painful lesson - markets can act perversely in the short-term. Of this, he later famously commented:
“The market can stay irrational longer than you can stay solvent.”
Determined to achieve financial independence, Keynes began trading again. He traded more prudently than in his dramatic early months, using shorter-term trading indicators and, by December, he was able to pay back the £5,000 loan to his benefactor.
In the following four years, Keynes continued to trade using high margin.
In 1921 he expanded his trading activities to include commodities - first cotton and then metals, rubber, jute, sugar and wheat - and stocks.
By the end of 1924 he had amassed net assets of £57,797.
Kinda helps illustrate how upper class kids can take risks that lower class kids can’t.
Frankie, thanks so much for sharing the fantastic tale!
is the Wall Street bull getting a bit long in the teeth?”
lots of cash on the sidelines that could drive stock prices up
on the other hand …
“…lots of cash on the sidelines that could drive stock prices up…”
I think the goal is for the Wall Street insiders to rotate in Main Street Homer’s sideline crash just before the next major market correction strikes…unless it’s different this time.
cash (damn Freudian typos!)
Is the Eurozone debt crisis pretty much resolved at this point?
Bagholder identification process continues…
January 31, 2013, 11:00 p.m. ET
Lingering Bad Debts Stifle Europe Recovery
By GABRIELE STEINHAUSER in Dublin and MATTHEW DALTON in Capelle aan den IJssel, Netherlands
The moving boxes were in Emer O’Grady’s bedroom, waiting to be packed with the contents of a home she can no longer afford. But selling her three-bedroom brick house in the north of Dublin hasn’t ended her financial bind: The 34-year-old psychotherapist and her former partner still owe some $340,000 on their mortgage.
Ms. O’Grady is a member of Europe’s Generation Negative Equity, homeowners in their 30s, 40s, and 50s who bought houses during a property bubble that burst after the global financial crisis struck in 2008. They live in Ireland and Spain—two of Europe’s hardest-hit economies—but also in places like the Netherlands and Denmark that have so far weathered the continent’s financial troubles relatively well.
Like their brethren in the U.S., they borrowed big during boom times when credit was easy and home prices were rising. Now their efforts to repay mortgage debt could stunt growth for years to come in a region already hurting from government-debt crises in Greece, Portugal and elsewhere.
In the U.S., borrowers who can’t meet their mortgage payments can often shed that debt by turning over the house keys to their banks, without resorting to bankruptcy and with little chance they will be held accountable for any unpaid balance, although their credit reports get tarnished. In much of Europe, that isn’t the case, and tough national bankruptcy laws make it far more difficult to escape creditors by seeking court protection.
As a result, many Europeans are on the hook for unpaid mortgage balances even after losing their homes. And millions struggle to pay for apartments and houses that are worth far less than they paid.
Data released by Eurostat on Thursday showed average euro-zone house prices declined further in the third quarter, dropping 0.7% from the previous quarter. Prices in the Netherlands fell 3.9%, the biggest drop in the euro zone, and prices fell 3.7% in Spain. Eight nations posted gains, including Ireland, where prices edged up 1.6%.
American banks have taken their lumps on housing loans and written down billions of dollars worth. Although some states allow banks to go after unpaid balances on foreclosed homes, that doesn’t happen often because of the legal expenses involved and the difficulty of collecting on such judgments if borrowers seek bankruptcy protection.
“There is a case for allowing overindebted borrowers to default,” as the U.S. has done, says Charles Roxburgh, a director at consulting firm McKinsey & Co. in London. “You get short-term pain, but you move through the problem faster. But someone has got to pick up the tab on it at some point.”
Nope, but it’s swept under the rug for the time being…I think Japan will come to the forefront next.
FRANKFURT: Banks will pay back another 3.5 billion euros next week of the emergency 3-year loans they took from the European Central Bank a year ago, further deflating the ECB’s balance sheet after they paid back a whopping 137 billion euros this week.
The repayments, which the ECB said would be made by 27 banks, compared to a prediction of 20 billion euros from a Reuters poll of traders, although forecasts had varied widely from zero to 150 billion euros.
The early return of some of the 3-year funds the ECB pumped into the system in late 2011 and early 2012 to avert a credit crunch marks the beginning of an unwinding of the ECB’s crisis measures - the opposite of action being taken by other central banks.
This is seen by the media as a good thing; I beg to differ, why would you repay cheap money which you can lend out at a profit, unless of course you can’t find anyone to lend it to (at least anyone who is likely to pay it back)
Do you notice how there is always a ready-made official excuse when economic numbers come in “worse than expected”?
Jobless rate up in January, but 2012’s data look better
The U.S. creates a modest 157,000 jobs in January and the unemployment rate ticks up to 7.9%, but updates show the economy adds one-third of a million more jobs in 2012 than previously estimated.
Rich Chinese love Taxifornia but they are probably not paying much taxes. They have their wealth in Hong Kong. Their businesses too. Flat 15% tax. They at e buying real estate in California and paying 1% property tax rate. Many movie stars and sports stars are based in lower tax states and shelter their wealth and capital gains in lower tax areas. The illusion is that California wealthy people are happy to put their necks under the choppi g block to pay for the libturd socialist programs. Most wealthy people don’t.
Is the 2016 presidential campaign already underway? I still haven’t nearly recovered from the last one.
Hillary ‘is running for President in 2016 and turned down Bloomberg’s suggestion that she run for Mayor of New York City’
Mayor Bloomberg suggested Clinton follow him when he leaves next year
By Meghan Keneally
PUBLISHED: 22:09 EST, 3 December 2012 | UPDATED: 10:19 EST, 4 December 2012
The editor of The New Yorker magazine has predicted that Hillary Clinton will be running for President in 2016, making him one of the boldest names to do so.
With sky-high approval numbers and an empty schedule as soon as she steps down from her position as Secretary of State, the guessing game about Clinton’s next move is anything but new.
New Yorker editor David Remnick wrote a piece for the magazine’s website explaining that he became certain of her future run after attending a conference about the constantly-evolving political landscape of Israel.
Watching she and Obama on 60 minutes it certainly looked like an attempt to pass the torch early and decisively.
I may be wrong, but I don’t believe she is electable, as roughly 50% of the American electorate might object to the idea of having Bill Clinton’s better half in the WH.
I may be wrong about this, but I was dead on about both Meg Whitman and Mitt Romney.
How about a blog topic called “Take My Money!” wherein we tell stories about the crazy behavior we’ve seen at open houses?
How about the widespread misrepresentation of housing demand? Demand is at 16 year lows while the excess empty inventory is still… well… empty. And there are millions upon millions of them.
Does anyone else (besides me) have documentary evidence that high-end home prices are falling in your area?
Here is an example of a high-end La Jolla home that Zillow claims dropped in value by over $1,000,000 over the last month.
Check out the price history at the bottom of this post. There is something mighty strange about the way La Jolla properties are priced!
311 Dunemere Dr, La Jolla, CA 92037
Not for Sale
Rent Zestimate: $21,233/mo
Single Family:3,009 sq ft
Lot:18,290 sq ft
Last Sold:May 2008 for $12,000,000
Value Range 30-day change $/sqft Last updated
$10,320,043 $5.37M – $13.4M -$1,100,147 $3,429 01/31/2013
$21,233/mo $8.5K – $42K/mo -$69 $7.06 01/21/2013
Date Description Price Change $/sqft Source
07/12/2008 Listing removed $14,000,876 – $4,652 Number1Expert
06/15/2008 Listed for sale $14,000,876 16.7% $4,652 Number1Expert
05/30/2008 Sold $12,000,000 -14.3% $3,988 Public Record
05/28/2008 Listing removed $14,000,876 – $4,652 Number1Expert
03/09/2008 Listed for sale $14,000,876 -2.1% $4,652 Number1Expert
03/08/2008 Listing removed $14,300,000 – $4,752 –
10/08/2007 Price change $14,300,000 -9.5% $4,752 –
08/12/2007 Listed for sale $15,800,000 459% $5,250 Agent
08/31/1989 Sold $2,825,000 – $938 Public Record
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