Bits Bucket for March 10, 2013
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The Housing Bubble
Examining the home price boom and its effect on owners, lenders, regulators, realtors and the economy as a whole.
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Name:Ben Jones
Location:Northern Arizona, United States
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JUMBO JUNGLE
March 7, 2013, 10:35 p.m. ET
Foreclosures, Forestalled
Owners of luxury properties who fall into arrears typically have more time and options to keep their homes before they’re repossessed
By ANNAMARIA ANDRIOTIS
Luxe Listing: This five-bedroom, four-bathroom home in Paradise Valley, Ariz., is in foreclosure and is on the market for $1.398 million.
When the owners of high-end homes fall way behind on their mortgage payments, foreclosure is not a foregone conclusion.
Lenders can be more willing to craft a new payment plan to make high-dollar homes more affordable. Paperwork and procedures are also often delayed, keeping homeowners in some states in their homes for two or more years after they’ve stopped making mortgage payments. And in some cases, lenders are offering homeowners tens of thousands of dollars in cash in exchange for their agreeing to a short sale, in which a home is sold for less than the borrower owes on the mortgage.
Repossession rates show the difference. Last year, roughly 85% of homes worth up to $1 million that received default notices were eventually repossessed, according to RealtyTrac, which tracks real-estate data. For homes worth more than $1 million, about 28%, or around 1,400 homes, were repossessed.
For lenders, it’s worth the extra effort to avert foreclosure on luxury properties. They incur substantial expenses holding these homes, including paying property taxes, maintenance costs and, often, homeowners’ fees. The homes are also more difficult to sell, since fewer buyers can afford to purchase them. And when lenders eventually unload them, it’s often at a loss. “Lenders have more of an incentive to work out payment plans for these borrowers than with the ones [whose homes] may move quickly,” says Jon Maddux, co-founder of YouWalkAway.com, which helps borrowers, including luxury homeowners, in default or foreclosure.
Alternative payment options will vary by lender but can include getting a lower interest rate or extending the mortgage repayment period to lower the monthly payments.
Luxury homeowners often have more tools to delay foreclosure, says Daren Blomquist, vice president at RealtyTrac. These borrowers are more likely to hire lawyers who will point out problems with how the loan was originally structured, such as an inflated appraisal that resulted in a larger mortgage, and other technicalities. “It’s all about buying time,” says Richard Vetstein, a real-estate attorney in Framingham, Mass.
…
Banks are also much more likely to own a jumbo loan than one the was below the Fannie/Freddie maximum. They are trying to preserve value for themselves, not just do what they have to do for the bond holders under a servicing agreement.
are rich people less likely to trash a house?
First of all, just how rich are you if you can’t pay a mortgage? But generally, expensive houses get trashed less than the rest. What does happen is fancy appliances get ripped out and taken, causing some damage. But in million dollar houses, I haven’t seen the “baseball bat to every wall” thing I see sometimes.
Here’s another thing about million plus foreclosed houses I’ve dealt with in N AZ; not one was a primary residence.
rich people are pretty sneaky. I guess they are rich for a reason. They know how to work the system.
what percent of these million plus foreclosed homes do you think are strategic defaults by the rich folk?
I don’t work on that end of it, so I don’t really know. I’d guess the majority are strategic defaults. Here’s a funny story; back in 2008/2009, a lot of effort was put into protecting these houses. When a property was in default, we’d run around checking to see if it had been abandoned. And the day we could determine that, orders would go out to secure the houses, winterize them, whatever. So often that involved contacting the UHS, because the FB’s were trying to unload them. These agents pretty much hated people like me, because they wanted a commission and we would change the locks when it wasn’t being “maintained”. (Now some of these same agents “specialize” in foreclosures and do the same thing).
So one day I call an agent about a house; it wasn’t a million buck place, probably more like 400k at the time. She was dumbfounded. “Not Mr So-and-So! I assure you he is very well off and could pay the balance owed on that house many times over.” She insisted I had the wrong house or something, and should go back to the lender and get my facts straight. Later that afternoon, she called me and sounding depressed, informed me that Mr So-and-So is walking away from the house and the utilities were being cut off soon.
“Here’s another thing about million plus foreclosed houses I’ve dealt with in N AZ; not one was a primary residence.”
It wouldn’t surprise me one bit if a higher than usual percentage of these were walk-aways. People with money generally know how to cut their losses (which is why they have money).
First of all, just how rich are you if you can’t pay a mortgage?
Who said they _couldn’t_ pay?
I would guess that there may be more strategic defaults in the higher-net-worth segment, at least in no-recourse states.
so you guys would change the locks just on the basis of it looking abandoned? Did any of the owners of the homes ever come back and challenge that? Seems like they still own and control that home until it is sold at a trustees sale.
+1, azdude. I always thought that changing the locks on the property just because it isn’t obviously and visibly being inhabited was way over the line.
Of course, “securing” the property is reasonable; by that, I mean that if the doors are open or kicked in, the locks don’t work, windows are broken, etc, then it is fine to address those issues.
But a house that is already locked up and “secured”??? Not so much.
‘on the basis of it looking abandoned’
When is a house abandoned? When you stop taking care of it? If you leave the doors open or turn off the heat in the winter? You do realize that the water may still be on and if a pipe freezes, here comes Niagara Falls.
Anyway, if it is pre-foreclosure usually it will sit there for a year or more and nothing is done. Weeds grow, food rots, kids break in and drink or do drugs, crap a few dozen times, punch a few holes, spray paint. If the lender wants access to check on it, it will only be a secondary door, leaving the owner with access too.
‘Did any of the owners of the homes ever come back and challenge that?’
One time in a very expensive house, the locks were changed. I was asked to go by and check on it every three weeks, even though there was 24 hour security at the gates. I notice on one trip, there was fresh fruit in the wine cooler. (The power/heat was on to protect the plumbing). Then the next time there was a bed and clothes in one of the many bedrooms. Then the next time there was a Jeep in the garage. Turned out the FB was a lawyer, and had decided to come up from Phoenix for the weekends and play golf. I told the client I wasn’t going back until they evicted him, and that was the last I heard about it.
You know what I never have seen an “owner” come back and do? Pay the mortgage.
If the lender wants access to check on it, it will only be a secondary door, leaving the owner with access too.
Ah, ok—that’s different then, Ben. I assumed changing the locks meant ALL the locks, in which case the owner would be denied access. Sounds like I was mistaken; sorry.
You can’t legally lock somebody out until it’s foreclosed. You can only check on it so much by looking through the windows. Anyway, as I said, those were the old days. Now almost nothing is done until it’s foreclosed. Almost every house I see locally has freeze damage. And when they do winterize it, most of the time they send some yahoo up from Phoenix that doesn’t even bother to pour anti-freeze in the toilets. Don’t worry out there. Very little is being done to preserve the value of these foreclosures while no one is paying the HOA, or property taxes, and the “owners” are free to not use a house they walked away from in 2010.
Now almost nothing is done until it’s foreclosed. Almost every house I see locally has freeze damage. [...] Don’t worry out there. Very little is being done to preserve the value of these foreclosures
That’s really a shame, Ben, and I hate to hear it. The waste of perfectly-good resources is always a bad thing, regardless of who will bear the cost of that waste—and in this case, I know it is all of us, the taxpayers.
This bums me out just like the ridiculously-stupid Cash for Clunkers.
Stupidity. Broken window economics. What a shame.
ok ben I thought you meant change every lock too and lock out the owner totally.
I guess you walk a fine line by wanting to protect the property from damage. Looking in the windows is one thing but entering the house is another.I guess the FB could really cause a lot of problems in that area due to freezing pipes etc.If it was my house I would want to make sure it was secure and avoid damage.
If it was my house I would want to make sure it was secure and avoid damage.
And if someone elses’ house were my collateral, I would also want to make sure that it was secure and not being damaged by either vandals or the elements.
In that case, I would make sure that the terms of our arrangement allowed me to act to preserve the value of the collateral asset.
Strangely enough, I’ve signed several mortgages in my life, and I don’t ever recall reading terms to that effect in the closing docs. And I do read every word… Could be a failure of my memory, though.
‘I don’t ever recall reading terms to that effect’
It’s probably a state by state thing. If you borrow to buy a car, they probably don’t say anything about how a repo man is going to tow it in the middle of the night if you stop paying.
‘terms of our arrangement allowed me to act to preserve the value of the collateral asset’
With a house, it’s even more complicated. The originators or servicers of the loans don’t want to spend a dime if they don’t have to. But they have an obligation to the guarantors like HUD or the GSE’s to do certain things.
Rich people don’t get a mortgage.
Rich people don’t get a mortgage.
BS. Rich people don’t _need_ to get a mortgage, but they do anyway so that they can milk the MID.
Most of the benefit of the MID goes to rich people. How is that possible if none of them take out mortgages?
http://www.csmonitor.com/Business/2012/0717/Zuckerberg-s-1-percent-mortgage-Why-does-a-billionaire-need-a-loan
I know of one guy who didn’t have a loan before 30-year rates fell below 4% (ie. the MID wasn’t a deciding factor). After rates fell below 4%, he went to borrow $1MM (up to the MID limit), figuring it was the cheapest 30-year loan he would ever get.
MID isn’t the ONLY factor, but it is A factor.
BS. Rich people don’t _need_ to get a mortgage, but they do anyway so that they can milk the MID.
Which makes no sense to me at all. Why pay $100 in mortgage interest to get $28 back in tax refund? You’re better off paying outright and not pay the $100 mortgage interest in the first place. Unless the whole house cost is somehow deducted as a business expense or rental, and not just for MID.
Depends on what you use the cash for. Even in today’s environment I believe there are very safe investments that will pay you more than 1% back. So if you play those games it’s free money.
“So if you play those games it’s free money.”
This is especially the case if you are not playing anywhere close to a danger zone (ie. worth $25MM+ conservatively).
Does the supposed 39% discount on foreclosures accurately reflect the likely trashed condition of the home you are buying “at a great price”?
And to what extent are these “39% discounts” reflected in the official real estate price stats (e.g. Case-Shiller/S&P Index) which “prove” that real estate is going up again?
Best places to buy foreclosures
By Les Christie @CNNMoney
March 8, 2013: 2:34 PM ET
The average discount on homes sold in a foreclosure was 39% below conventional sale prices during the fourth quarter, according to RealtyTrac.
NEW YORK (CNNMoney)
Shoppers willing to buy homes sold in foreclosures or short sales are nabbing them at deep discounts, especially if they know where to look.
Nationwide, the average discount on homes sold in a foreclosure was 39% below conventional sale prices during the fourth quarter, while prices on homes sold in a short sale averaged 23% below market, according to RealtyTrac, the online marketer of foreclosed properties.
But in some markets, the discounts were much steeper.
Cleveland was the hottest market among those looking to buy foreclosed homes during the last three months of 2012, with sales of bank-owned homes soaring 141% year-over-year. The average foreclosed home there sold for $57,782, a 56% discount to non-distressed properties in the area.
Sales of bank-owned properties in Dayton, Ohio, jumped 121% during the fourth quarter, selling for an average of just $50,579 — 57% below regular market prices. Other popular markets for foreclosed homes included Charlotte, N.C., Columbus, Ohio, and Palm Bay, Fla.
Buying from the bank is currently one of the best options for homebuyers, “because of increasing inventory, deeper discounts and shorter times to close,” said Daren Blomquist, vice president at RealtyTrac.
Yet, these transactions come with risks. Defaulting mortgage borrowers often lack the money for basic maintenance. Plumbing, heating and electricity can fall into disrepair and roofs, walls and ceilings can deteriorate. Some homeowners, angry at losing their homes, may even deliberately damage the property before they move out. And many foreclosed homes stand vacant for months, leading to disrepair and, in some cases, inviting vandalism.
For more cautious buyers, short sales may offer a combination of affordability and quality. These are deals in which homes are sold by borrowers who owe more on their mortgages than the homes are worth and the lenders agree to forgive the difference.
Former owners tend to remain in the homes until the closing of the sale and therefore keep the homes in better condition.
Short sales have also become a more popular alternative to foreclosure, especially in hard-hit places like California.
In fact, Santa Barbara, Calif., was the hottest market in the country for short sales, with sales of these homes more than doubling year-over-year. The median price of short sales sold there was less than $284,000 during the last three months of 2012, nearly 38% below the amount sellers owed on the mortgage.
Visalia, Fresno and Vallejo, all in California, also saw big spikes in short sales, as did Grand Rapids, Mich. The median sales prices in those markets ranged from about $91,000 to $192,000, with homes selling at discounts of $71,000 to $178,000 of the mortgage balance owed.
…
Best foreclosure markets
City Median foreclosure price Discount
Cleveland $57,592 56%
Dayton, Ohio $50,679 57%
Charlotte, N.C. $111,260 43%
Columbus, Ohio $87,994 48%
Palm Bay, Fla. $87,018 39%
Winton-Salem, N.C. $72,356 49%
Daytona Beach, Fla. $88,012 33%
Canton, Ohio $57,339 48%
Greensboro, N.C. $85,333 40%
Pensacola, Fla $100,825 33%
Source: RealtyTrac
Price and discount data are for the last three months of 2012.
I’m unclear as to what the 39% reflects…average discount to the estimated market value of each home? Or that the average sale price of foreclosures are 39% below the average sale price of a conventional sale. It seems VERY high to be the former–I understand foreclosure prices have narrowed considerably with all the money flowing into the market (perhaps a 0%-20% discount off of traditionally marketed sale value).
In any event, I’m not sure the foreclosure sale is included in the Case-Shiller index…HOWEVER, the next sale IS included.
So, if you bought a home that was worth $100k for $80k at the foreclosure sale, and turned around and “flipped” it for $95k (quick sale, no problems with appraisals, get your return on investment–time matters, etc.), Case-Shiller would say that the value of that home fell by 5%.
If there is enough of this kind of activity relative to “normal” sales, it is what drives the value in a market lower and lower, even when you exclude the actual foreclosure sale from the data sets.
This is why, the increase in foreclosures in NJ (abandoned and vacant homes can be foreclosed quickly there now–just started March 1st), and coming and IL (I think this starts in May), and perhaps in FL, will likely trigger data readings that show market values declining in those states. Likewise, in states where there was lots of this foreclose/flip activity, and it stops, it can show a boost in the market, even when there effectively wasn’t such a boost. However, that perceived boost in the market can change sentiment enough to make the short term illusion of a boost become a real increase in prices…NV is an example of this…the question still there is whether the recent increases in foreclosures in NV will be enough to stop the positive momentum.
Zombie foreclosures: Borrowers hit with debts that won’t die
By Les Christie @CNNMoney February 22, 2013: 1:04 PM ET
Even though Christopher Warner’s mortgage debt was extinguished upon his foreclosure, debt collectors are still seeking $120,000.
NEW YORK (CNNMoney)
Borrowers are discovering that their foreclosed homes are coming back to haunt them — long after they have moved out.
In these “zombie foreclosures,” borrowers move out after their bank schedules a foreclosure auction only to learn months or years later that the auction never took place or the bank never transferred the deed. That means the borrower still technically owns the house and is on the hook for property taxes, fees and homeowners’ association dues.
Since the housing bubble burst seven years ago, almost two million properties have started but never completed the foreclosure process, according to RealtyTrac. While no one knows the exact number, it’s estimated that tens of thousands could be zombie foreclosures.
Many of these homes are in low-income communities where foreclosures are so difficult to sell that lenders sometimes delay taking possession to save on taxes and other costs that then stay under the borrower’s name.
Those debts can then go unpaid for years because the borrower is unaware they owe them, further slamming their credit score and making life after foreclosure even harder.
“The most frustrating part is that I can’t move on,” said Rose Nathan, a 37-year-old office manager.
Nathan lost her South Bend, Ind., home in January 2009, after working out a deal with CitiMortgage to voluntarily walk away in a “deed in lieu of foreclosure.”
“On Christmas Eve, the bank called and told me a sheriff’s sale was coming and I had to move out right away,” she said. “So that’s what I did — seven days after New Year’s.”
She sold her belongings and moved to Hawaii. Nearly two years later, she received a property tax bill from the City of South Bend for $5,000. The bank had never taken possession of the house.
Citi told her attorney, Judith Fox, that the holdup was due to a lien on the home that they were never told about. Nathan said she knew of no liens at the time of the transaction. Upon doing a title search, Fox found no evidence of a lien until well after the bank agreed to the deed-in-lieu deal.
Meanwhile, the unpaid debt has crushed Nathan’s credit score. The deed-in-lieu alone lowered her score by 80 to 120 points, but the unpaid debt meant her credit kept taking a hit. Eventually her credit card companies cut her off, even though she said she was making her payments.
Her auto loan now carries a 25% rate. Her car insurance premiums have skyrocketed. She can only afford a one-bedroom apartment where she lives with her three kids. And forget about buying another home. “Nobody will give me a mortgage,” she said.
Citi declined to comment on the case. Nathan said she has since paid off the lien with the hope that Citi will take the deed on the home.
…
Her auto loan now carries a 25% rate.
OMG!
Let me translate that: “She was stupid enough to take out a car loan even though the best rate she could get was 25%.”
Did she even consider not getting a car loan?
“Did she even consider not getting a car loan?”
I thought the same thing. Why not just drive an old beater to get around? She lives in Hawaii for crying out loud—it’s not as if she’s going to be hitting the open road.
Maintaining “beaters” is guys work.
It was a long while ago, but my brother was able to get a beater in Hawaii for less than $1000. The islands are full of beater cars and plenty of people around who know how to take care of them if you can’t do it yourself. It is much too expensive to export beaters off the island.
Some beaters really aren’t worth fixing. That’s why they call them “beaters.”
Some will never even pass inspection without thousands of dollars in repairs. Repairs are not a thing a person with bad credit can get a loan for. So it’s cash or tough luck.
Have any of you priced a decent used car lately? Even a 10 yo one? Holy moly!
The days of finding anything under 2k is rarer and rarer these days.
Rust.
The days of finding anything under 2k is rarer and rarer these days.
How quickly do you think she’ll piss away that $2K at a 25% rate of interest??
Who knows and who can say. I do know that when you live somewhere without decent mass transit, you HAVE to have a car. A fairly reliable one at that. One you have to constantly repair is by definition, not reliable
My point was that this may have been her best choice. A lessor of 2 or 3 evils.
BTW, in case you haven’t been out lately, unless you have PERFECT credit, 25% is about normal these days and the average car repair starts at $200+. That’s a car payment right there.
Have you profited so far from the sequestration stock market rally?
How long do you expect stocks to keep going up from here?
These 3 Stocks Were Sequestered
By Rich Duprey
March 6, 2013
Whee! Sequestration is fun. The Dow Jones Industrial Average tacked on 126 points yesterday, causing the index to reach new record highs as traders shrugged off the supposed ill effects across-the-board cuts would engender. But not for the three stocks below, which incurred double-digit losses on the day. For them it was a day filled with as much doom and gloom as the budget warriors suggested we would feel.
…
pennys is a disaster. I browsed through there the other day and they are lost souls. i smell a bankruptcy coming soon.
Maybe craigslist will have an ipo?
The whole family went a week ago…first time in a couple of years. They didn’t have what I went to get. First time that’s ever happened to me at Penneys. And I was just there to get the same stuff I always get. So yeah…I smelled the same thing. The employees just shrugged and said “sorry” and offered to help me order online.
I am saved from spending money because what I want is not available anywhere in my local stores. Things you can’t order on-line like shoes. (I never buy shoes without first trying them on)
Or the on line prices aren’t competitive or even they don’t have it.
The store within a store idea was a really bad idea.
When i go into a store to buy pants i want to stand with ALL the choices in my size right in front of me…. not go to different “stores” to check out their merchandise.
New ‘Powerful Force’ to Underpin Stock Rally
Published: Sunday, 3 Mar 2013 | 11:59 PM ET
By: Dhara Ranasinghe
Laura Fitzsimmons, VP of Futures & Options at JPMorgan Investment Bank, says while the U.S. economy still faces headwinds, real-money investors remain comfortable holding long positions on stocks.
A wave of new money coming into equity markets is a “powerful force” to reckon with and means that risks such as the U.S. budget cuts and uncertainty in Italy are unlikely to derail a stellar rally in the markets, one expert told CNBC.
While there has been much talk of a “Great Rotation,” a shift by long-term funds into equities from bonds amid improving sentiment, the real driving force behind recent gains in equities has been an inflow of new money that was previously held in cash, said Laura Fitzsimmons, vice president for futures and options at JPMorgan Investment Bank.
She said the shift suggests markets would be able to weather headwinds such as concerns about the impact of the U.S. “sequester” - $85 billion worth of spending cuts that took effect on Friday after lawmakers in Washington failed to agree to an alternative budget plan.
“There’s definitely been an underlying shift in markets,” she told CNBC’s Asia “Squawk Box.” “People talk about a ‘Great Rotation,’ but actually I think it’s just new money that’s coming into the market that had been sitting in cash and that’s a pretty powerful force to be reckoned with.”
U.S. stocks shrugged off the looming spending cuts to close higher on Friday, with the blue-chip Dow Jones Industrial Average closing at a fresh five-year high. Equity markets globally have also bounced back after inconclusive election results in Italy last week dealt risk appetite a blow, with European shares closing on Friday almost 2 percent above eight-week lows hit earlier in the week.
“I think equities look over-stretched and I’m not alone in that view. But when you talk to real money investors that went long at the start of the year, they still feel reasonably comfortable with their positions,” Fitzsimmons said.
“They feel that we have weathered the storm so far. We’ve had the Italian elections, the ’sequester’ – there are lots of issues out there - but we’re not seeing the real pullback you might have expected given trading conditions in previous years,” she added.
…
I think most people have been screwed so hard they are totally out of all the markets. This great rotation theory is rubbish and hogwash by the media.
“I think most people have been screwed so hard they are totally out of all the markets.”
If so, the 1% just got a heck of a lot richer since January 2009, thanks to the Fed’s indefatigable efforts to use quantitative easing to pump up the stock market.
I saw a graph the other day that showed historical flows into equity markets. For the past few years, it was flat…previously trending upwards. Given this, unsurprising graph for bond flows…previously trending upwards, steeper slope for prior few years.
The comment was that there was $1T LESS flows into equities, and $850B MORE into bonds than the prior trendlines would indicate (they didn’t say why there was a difference).
In any event, catching back up to the trendline is probably the driving force that is behind the “great rotation” that they reference.
“…$85 billion worth of spending cuts that took effect on Friday after lawmakers in Washington failed to agree to an alternative budget plan.”
Surely this can’t be???? Thought the sky would fall in. Good. Let’s ramp up the spending cuts.
I have been in MM since 2008 with my retirement account. Every time I think about putting some in stocks, I stop, because I think it will go down.
Every time I have made this decision, the market goes up.
The higher the price of stocks go the closer to the top they get. The closer to the top they get the risker it becomes to buy them.
The irony of this is the longer prices go up the stronger the uptrend and this stong uptrend is what draws buyers into the market.
People who didn’t buy when prices were down become buyers when prices go up. For them there seems to be no intrinstic value for what they buy, instead the value of what they buy is determined by the price. The higher the price the greater the value.
In a world driven by fundmentals the higher the price the less value one gets for his money. But in a world of Price equals Value the higher the price the more value one gets for his money.
If businesses were thriving honestly then everyone would benefit, but I’ve long held that stock market gains are simply losses for someone else such as a janitor’s retirement fund. Occasionally an inside repents and issues a statement that Wall street is a den of thieves, and I believe them.
Off to work this Sunday morning.
zero sum game?
zero sum game?
Not all markets are zero-sum game. The derivatives markets definitely are.
But equities merely represent a small fractional ownership of real businesses. This is not a zero-sum game; these businesses can represent real value creation, and they can provide real services that people want.
Even in a zero-sum derivatives market, there is the potential to hedge, as well as the potential to speculate. Which side any individual participant is on depends on the OTHER risks in their portfolio, and whether their derivative position offsets their existing positions, and thus reduces their total risk (in which case they are hedging), or whether it augments their existing positions, and thus increases their total risk (in which case they are speculating).
“If businesses were thriving honestly then everyone would benefit”
janewells (janewells) on Twitter
https://twitter.com/janewells - 208k - Cached - Similar pages
Bottom line, central banks are literally papering over everything and it’s all a lie. …
Storm clouds are gathering.
she will be on fox soon.
Not hot enough.
You would be further ahead and have a lower basis if you dollar cost averaged in 2008 than if you put it all in now. You are better off if you dollar cost averaged into the stocks starting now.
you might as well just give them your money if you buy now.
Market going up is given explanation because earnings are good. OK, that’s nice. Companies are going to be on happy street. I’ll worry about improving my employment situation now. The market has given me what I needed from it for the time-being. You don’t go broke taking some money off the table.
you stay in the stock market long enough and eventually they will get your money. Where do you think all the money comes from to pay their huge bonuses and salaries?
The very thinking is why you get lost in the dust. Since 1926 the broad market outperformed every other asset class. Since 1926 we almost became a Marxist nation under Hoover and FDR and shook loose. We are almost a Marxist nation now but will shake loose of this too. We’ve fought world wars, fought a cold war, downsized militar, fought a religious war between Republican social conservatives and foreign Muslims and will downsize and shake loose from that too. The stock market, in essence, kept outperforming through several crises and yet folks such as you mock it.
keep dreamn dude. keep following the sheep.
The stock market, in essence, kept outperforming through several crises and yet folks such as you mock it.
Bill, how do you think the market would have done without the Fed making itself the SuperSIV, and pump-pump-pumping bubbliciously the past five years?
Seriously, where would the market be without the extra few TRILLION DOLLARS that they have created out of thin air and shoveled into the financial markets? All with the intent of pushing grandma into riskier assets—e.g. throw grandma in front of the train.
I, for one, don’t think it would be where it is today.
In normal times, Bill, I totally agree with your position. These times are far from normal.
The price you pay determines your rate of return. If you pay too much for stocks - meaning if you pay too much for what stocks earn - then your rate of return will suffer.
OTOH if you pay little for the earnings of stocks then your rate of return can become quite large.
Go here for Shiller’s chart of the price of earnings for the S&P 500 and pay close attention to the swings:
http://www.multpl.com/shiller-pe/
Buy low and sell high means, when it comes to stocks, buy earnings when the price of earnings is low and sell these earnings when the price of these earnings is high.
“the last five years…” too short a time frame to be concerned about. I am covered if the stock market takes a 50% hit. My basis is low. If I was not older than 45 I would be 80% into stocks. But I am 61% into stocks through mostly stock funds and a few individual stocks. Index funds rock! Gold will be the place where people flee to safety.
I would be concerned about gold if wage inflation took off. But we have years of zero interest rates until then.
“the last five years…” too short a time frame to be concerned about.
Great, then I haven’t missed anything.
I have been well diversified for the majority of my several decades of investing experience.
Just not the past 5.5yrs. I want no part of the massive manipulation that is occurring. I said in 2006 that I didn’t mind missing out on a half-decade of gains if I could also miss out on the massive troubles that were in the pipeline. So far, so good… Except that with all of the massive market manipulation, I will probably just decide to take the next half-decade off as well.
When a reasonable return on capital is available in the markets, at a reasonable level of risk, WITHOUT massive Fed intervention, then I’ll think about letting some of my capital take some risk.
My only regret is that I didn’t go all long-dated Treasuries when the coming ZIRP was so easy to see. I still can’t really explain that failing.
pay close attention to the swings:
That graph is like comparing apples to oranges. It’s missing the dimension of Fed manipulation via printing and interest rates, etc. In the very latter part of the graph it’s a ginormous amount of influence, so I don’t expect past performance to predict/compare to future performance.
When you’re looking at that graph, what do you see keeping in mind the Fed’s current Zirp for all time and money-printing goodness?
I would be concerned about gold if wage inflation took off.
Huh?? Wouldn’t real inflation be the environment in which gold would truly shine?
Past performance does not guarantee future performance.
Forget this at your own peril.
Hoover a Marxest? Really?
Have you profited so far from the sequestration stock market rally?
My only profit from this rally has been the entertainment value—and, I believe, the upcoming schadenfreude value.
How long do you expect stocks to keep going up from here?
All I can say is that I’ve been fighting the desire to get short again. The last couple of times I’ve felt this way, I haven’t acted, but would have profited nicely if I had done so.
Will it be a short-term swoon or a return to real fundamentals? I’m guessing the former, while the Fed has the desire and ability to pump unlimited amounts of liquidity into the markets.
Speaking of which, I think we need a new term for liquidity. I’m thinking of calling it “gas” instead, as that makes more clear both its incendiary potential, as well as its tendency to generate bubbles.
My big question,
Which is worse for working people: the sequester or the affordable health care bill?
If you mean J6P, neither, really.
From late 2005 through mid 2012 I personally paid over $100k to 2 different landlords who did not pay the mortgage on the houses I was renting from them. As we know, up and util the banks takes the proerty through foreclosure, the landlord is still the owner. As we also know, in many cases (millions?) this has taken and is still taking years.
I can not find any stats (bunches of articles) on how many landlords took part in this practice or any amount of money that would have been collected in this high profit margin business model.
Would anyone here like to take a stab at the number of landlords have done this or the dollar amount collected?
How many landlords are there in the US? - Quora
http://www.quora.com/How-many-landlords-are-there-in-the-US - - Cached - Similar pages
Answer 1 of 1: This question would be impossible to answer within a meaningful degree of accuracy. This type of data is impossible to gather,
I’m sure it’s impossible to answer with precision, but not impossible to estimate. Apparently some estimate the number of homes that were acquired by investors by tracking how many homes have property tax bills sent to an address other than the home.
This of course will also pick up a lot of vacation homes, but it would at least be a starting point…how many such addresses are there?
“Vacation” ‘homes’??? LOLZ
You’re a pimp.
Rental Watcher
RAL, I disagree with your assessment of RW, but I still couldn’t help but LOL at your new handle.
“Would anyone here like to take a stab at the number of landlords have done this or the dollar amount collected?”
OK I`ll start the bidding at 650,000 DB LLs collecting $1,200 a month for 2 1/2 years w/o paying the mortgage.
Which is worse for working people: the sequester or the affordable health care bill ??
Sequester is the mouse that roared…..
Health care cost, Health care insurance is the Elephant in the room….Our county hospital is state of the art….That facility is paid for by the “working people” you describe above…We need a system where everyone helps pull the wagon instead of riding in it…
The medical industry in this country is one big scam.
Period.
Add to that social security. Most people who collect are collecting more than they paid in when adjusted for inflation. Though in a few years I forget how many the report said people will collect less than they paid in.
That’s how SS was designed to work. That is NOT a scam.
Sorry if this was already posted.
Markets |3/05/2013 @ 2:10PM |25,771 views
Peter Schiff And The Coming Housing Collapse: The Fed, Instead Of Lehman, Owns The Mortgage Market
http://www.forbes.com/sites/afontevecchia/2013/03/05/peter-schiff-and-the-coming-housing-collapse-the-fed-instead-of-lehman-owns-the-mortgage-market/ - 106k -
‘Schiff incredibly agrees with what has become a mainstream opinion: the Fed is behind this rally, both in stocks and bonds, and even in real estate markets. Yet Schiff differs in that, while most believe the Fed-induced rally has “training wheels” that can later come off, the Fed’s support “are the only wheels” keeping the market going, and removing them will spark a crash.’
‘Pointing to housing markets, Schiff notes that “we are building more homes than we can afford,” as hedge funds and speculators gobble up hundreds of thousands of properties being cranked out by the homebuilders.’
as hedge funds and speculators gobble up hundreds of thousands of properties being cranked out by the homebuilders.’
Hedge funds operating out of the back door of the Federal Reserve as Federal Reserve proxies, under Federal Reserve direction, with Federal Reserve cash.
You can’t make 30 million houses disappear.
You can’t make 30 million houses disappear.
If they are truly unmaintained for a decade or so, they can certainly be made to disappear…
Have you seen the photo-tour of Detroit homes that have been left unmaintained for that time-frame?
Mother Nature takes over in a hurry, and eventually the house is worth less than zero due to demolition costs.
But you can sell them to china and get some of our trillion dollars they hold back…the fed can’t openly sell them but hedge funds can.
You can’t make 30 million houses disappear.
‘Schiff differs in that, while most believe the Fed-induced rally has “training wheels” that can later come off, the Fed’s support “are the only wheels” keeping the market going, and removing them will spark a crash.’
Judging by the Fed’s actions, they concur with Schiff.
Hola HBB friends. I’m just back after a week in the sun (e.g. not my usual form of vacation). I was able to keep up with HBB better than usual, what with having more spare time, but the internet connection was infrequent enough that was always a couple of days behind—e.g. there wasn’t much point in posting.
Glad to be back where I can chime in again!
In this morning’s Las Vegas Review Journal:
Anyone else hear bubble inflating?
Also the discussion on “Current Update on the LV Real Estate Market - Part II”, which has gone on some 600+ pages has turned sour (properly so) drowning out the usual rah rah realtors:
Current Update on the LV Real Estate Market — Part II
The natives (renters, and anyone else not on the gravy train) on the board started getting restless about 10 pages back. Before then it was strictly buy or you’re an idiot. Interesting to see.
Hey, how’s the tiny house revolution doing? Admittedly, they remind me of a human birdhouse, but if those suckers can be paid off in no time, screw the government real estate complex.
“Tiny” houses cannot pass building codes in most areas.
In my locality, a bathroom and kitchen must only have a 4sqft window.
4ft is almost half the size of a tiny house.
Iran and the Petrodollar Threat to U.S. Empire
by Christopher Doran
Iran poses a far more serious threat to the U.S. than its disputed nuclear aspirations. Over the last few years, Iran has unleashed a weapon of mass destruction of a very different kind, one that directly challenges a key underpinning of American hegemony: the U.S. dollar as the exclusive global currency for all oil transactions.
How the Petrodollar System Works
http://www.newleftproject.org/index.php/site/article_comments/iran_and_the_petrodollar_threat_to_u.s._empire - 36k -
Little known fact: just before we invaded Iraq, they were about to change from dollars to euros for their oil market.
“Little known fact: just before we invaded Iraq, they were about to change from dollars to euros for their oil market.”
Iran and the Petrodollar Threat to U.S. Empire
In October 2009, veteran Middle East correspondent Robert Fisk of Britain’s Independent newspaper broke the story that Gulf oil-producing countries, along with China, Russia, Japan and France, were planning a new system to replace the dollar as the de facto currency for global oil sales by 2018. The dollar would be replaced by a basket of different currencies including a yet-to-be-released new currency for the Gulf Co-operation Council countries of Saudi Arabia, Kuwait, the United Arab Emirates, Oman, Qatar and Bahrain.[15] Other currencies would include the euro, the Chinese yuan [renmimbi] and Japanese yen. Gold would also be included in the mix. That long-term allies like Saudi Arabia and the other Arab Gulf states, along with Japan, were involved suggests that U.S. leadership is being seriously questioned, if not outright challenged.
U.S. Protection of Dollar Dominance
By accepting and encouraging countries to pay for its oil in currencies other than the U.S. dollar, Iran has deliberately taken the same action that, I argue in Making the World Safe for Capitalism, led directly to the U.S. invasion of Iraq. In September 2000, Saddam Hussein announced that Iraq would no longer accept the “currency of its enemy”, the U.S. dollar, and from that time onwards any country that wanted to purchase oil from Iraq would have to do so in euros. I further argue that the motivation for the United States’ invasion of Iraq was to eliminate the threats a post-U.N. sanctions Iraq posed to the key underpinnings of American economic hegemony, and to install a pro-U.S. client state and permanent American military presence in the region. The book examines how a post-U.N. sanctions Iraq either directly threatened the ongoing success of American economic power, or provided enormous opportunities to extend it.
All the same considerations are in play with Iran, starting with Iran’s direct threat to the dollar as the dominant global reserve currency. But that is just one aspect of the much larger issue: that Iran openly defies U.S. neoliberal hegemony. Like Iraq pre-invasion, Iran is not a member of the WTO, has not had any dealings with the IMF since 1984, and does not have any debt with it or the World Bank. Like Iraq before it, and evidenced by China’s oil development contracts, the U.S. and its oil companies are cut out of any future oil development in Iran. Like a post-sanctions Iraq, Iran has the potential to be the dominant power in the region and to provide development assistance on a vastly different model to that imposed by the WTO, World Bank and IMF, against which so much of the Middle East is rebelling.
Now you know the REAL reason we want to invade.
“Now you know the REAL reason we want to invade.”
Same reason they want 30 round mags, to keep the POWER in TPTB. The people would throw their @ss in jail.
This. Same goes for Homeland Security acquiring 1+ billion rounds of ammo…
Brown Bear® 7.62×39 123 - grain FMJ AmmoBuyer’s Club
$270.74
Non-Member $284.99
(5.0) on reviews
Backordered - Expected Availability: Sep 9, 2013
Critique my oil city find:
http://www.realtor.com/realestateandhomes-detail/642-Spruce-St_Marion_VA_24354_M52161-91171
About 50K of rehab and it ought to livable.
I was thinking of it as a winter home. For $15K, I’ll eat the squirrels.
If you are looking for a winter home and won’t be going year round in the near future - look further south. Upstate SC if you like mountains, or closer to the coast in SC or GA otherwise.
That’s a pretty big house for $15K. I’d be afraid the back sits too close to the ground. You may need to remove the addition. Has it been your dream to restore a Victorian house? You’d have to look on this as a hobbby - maybe cheaper than a sailboat or golfing every day.
There are some beautiful, beautiful mountains southeast of Marion. There is culture in Abington and jobs in Wytheville. But unless fixing up a house (in the winter no less) is your idea af fun, look for someplace smaller.
(in my very best Brian Regan dumb person voice)
Whoo! Hoo! The analyst on CBS Sunday news just told me housing is a silver bullet and that meant people that thought they had fallen out of the labor market should take heart. Things are gonig to be looking up again. Housing is going to solve everything. Halleluiah! Then she blinked her cute little eyes and sighed. I feel so much better.
Another Brian Regan fan. Yes. He has kept a career going for 20+ years doing clean comedy.
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