March 22, 2013

Weekend Topic Suggestions

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Comment by alpha-sloth
2013-03-22 04:14:46

When was housing cheap in America?

Comment by Cantankerous Intellectual Bomb Thrower™
2013-03-22 08:39:27

An 84-year-old in my professional circle told me he bought a house in San Diego circa 1960. He claimed that houses were very affordable at the time. I doubt the Fed had an asset price support program in effect at the time.

Comment by Bluestar
2013-03-22 09:14:40

I wonder if the guy was a vet? I think the WWII G.I. veterans got a discount/benefit from the early 1950s and on. They are still getting billions even today.

Comment by Cantankerous Intellectual Bomb Thrower©
2013-03-22 14:11:44

“I wonder if the guy was a vet?”


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Comment by Jingle Male
2013-03-23 03:27:04

The VA loan program is completely self supporting. They have never needed a bail out or help from taxpayers.

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Comment by scdave
2013-03-22 09:30:15

When was housing cheap in America ??

My grandfather worked in a piping plant working on the assembly line…Worked there 30 years…My Grandmother worked in a fruit packing plant while also giving birth to 4 children…I think it would be a reach to call either of their jobs middle class…Probably lower middle class…

They bought their first house the year they were married…I want to say around 23 years old…They bought the house next door many years later…Then they bought the duplex on the other side of then sometime later…Years after that they purchased the house next to the duplex…Finally, they purchase the duplex that was next to the last house purchase….Does this answer your question ??

By the way, other than paint, carpets roof etc., their was nothing ever added to the original house…They both passed away in that same little house that they moved into after their marriage some 70 years later…Does this also offer some answers as compared to what we have witnessed over the past twenty years…

Comment by Marco
2013-03-22 10:17:44

well, if you wait out the next 3 - 7 years, and allow the USA gov debt bubble to burst, you will see a buyer’s market for residential real estate in the USA at 1-time-only shockingly historic lows, as USA gov debt bubble burst = extreme plummet in residential real estate values = the cheapest we will ever see residential real estate values & prices …that said, with the extremely high interest rates (and inflation) that will accompany the USA gov debt bubble burst, it will be very hard to get a loan or any credit to actually purchase a house at that time, so in order to set yourself up for the buying windfall to come: pay off “all” credit & debt, maintain a uber-fantastic credit score (high 700s, low 800s) and make sure you have money saved for 50% or more down payment to minimize the monthly payment hit you will have to endure when taking a home loan with an interest rate between 10 to 15 % …….yes, they will be that high …..

Comment by oxide
2013-03-22 13:51:10

you will see a buyer’s market for residential real estate

And that real estate will be snapped up by hegies and private capital like Blackstone and Colony. They won’t care about 10% interest if they pay cash. They will fix it up and rent it out. They will always be able to outbid J6P. And I suspect banks disallow families to pitch in to buy house in groups, claiming that a family fight will jeopardize the mortgage. We are going back to the days of the robber barons.

Everyone is still working off this notion that J6P has a god-given right to have a chance in the market, a chance to buy his own house. He does not. He only has the right to compete with Big Money. And he will lose, repeatedly.

And anytime the gov tries to give J6P a chance, with low-cost loans or outlawing redlining, there are screams of government intervention and out of control spending.

Comment by Carl Morris
2013-03-22 14:38:50

Everyone is still working off this notion that J6P has a god-given right to have a chance in the market, a chance to buy his own house. He does not. He only has the right to compete with Big Money. And he will lose, repeatedly.

That’s a valid point. But building more is easy in most places. J6P doesn’t HAVE to let Big Money control him.

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Comment by oxide
2013-03-22 15:09:37

Building more where? Depends on the jobs and commute, of course. And lucky ducky jobs can’t telework. The only affordable options are condos.

Comment by Carl Morris
2013-03-22 15:30:38

Most lucky duckies live out away from the expensive places where only condos are affordable. Big Money tries to control everything out there too, but they can’t buy up all the houses and land in the whole country.

Comment by Pimp Watch
2013-03-22 17:22:22

“They will fix it up and rent it out.”

To who? To who?

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Comment by ecofeco
2013-03-22 20:14:15

“We are going back to the days of the robber barons.”

Going back? We’re way past that.

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Comment by snowgirl
2013-03-22 10:39:41

My father bought a house in 1974 for 1/3 his yearly income. It was a 15 min drive to the shore. We had two vehicles one totally decked out because my Dad used it for business, and my Mom drove a newish Chevy station wagon w/a big ole V8 engine. Then came the boat. He put 4 kids through school and never said no to a myriad of instruments, sports, camps, summer programs, outdoor adventures and other experiences that pinged his bottom line. He had a HS education although he was self employed and worked like no one I have seen since.

My grandfather’s house was 1/2 a mile from the beach. He built it during the Depression. It was paid off way before his early death. He paid his mortgage as a milkman w/an 8th grade education. I know he quietly paid for other people’s milk out of his own pocket so apparently there was at least some extra money. In his teen years, he’d been forced to drop out of school by his Catholic father to work to feed his 12 other siblings. If most people could see where that house was they’d know he’d lived a charmed life. Today those same circumstances would have him in the slums.

When was housing cheap in America?

Comment by ahansen
2013-03-22 11:54:07

Right after WW2.

Comment by Pimp Watch
2013-03-22 17:24:00

1994. 1.3x our annual income.

Comment by alpha-sloth
2013-03-22 18:33:50

My father bought a house in 1974 for 1/3 his yearly income.

1994. 1.3x our annual income.

Those are both relative though. Was housing truly cheap for everyone? Why did we have ghettos and slums then?

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Comment by Pimp Watch
2013-03-22 19:38:36

Relative to local salaries. And yes it was cheap for everyone.

Comment by bink
2013-03-22 18:45:56

Yes, that’s the time frame I was thinking of too. I remember a house in my old neighborhood that sold for $1 million. We were all in awe. It was, almost literally, a castle. 4 car garage, swimming pool with giant rock waterfall, long meandering circular driveway. It had a freakin wooden carriage hanging from an interior stairwell.

In the DC area now you’d pay that much for a badly built townhouse in a crappy neighborhood.

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Comment by Rental Watch
2013-03-23 01:55:15

My great aunt bought a house just after WWII in Palo Alto (the old part of town). The price was something like $26k, and according to her at that time, it was ridiculously expensive…she lived in that house until her passing a few years ago. I’m willing to wager that it’s more ridiculously expensive (relatively) now.

Comment by Blue Skye
2013-03-23 03:07:33

“When was housing cheap in America?”

When the music stopped and there were 20 million extra chairs.

Comment by Pimp Watch
2013-03-23 05:26:35

LOVE that metaphor Blue… Thank you!

Comment by Ben Jones
2013-03-22 06:40:58

A reader sent this in:

‘my wife and I, along with a handful of smart economists & others, feel the coming burst of the USA gov debt bubble will wreak havoc on not only interest rates and inflation, and USA and world finances, and on the middle class thru-out the USA & world, but also on residential & commercial real estate values …….we are positioning ourselves to sell our home, a home where we stand to make a $100K+ profit if we sell in the summer of 2013 …….what was the average % loss of value of residential real estate values in the 2008 bubble burst ?? and what do you anticipate the average % of loss of value of residential real estate values when the next bubble bursts ??’

‘I feel if we can settle out mortgage obligations, become 100% debt free and walk with $100K+ in 2013, we should, then start renting … over the long term, we will never recoup the money spent on payments & interest should we decide to stay put in our home until the 30-year fixed (we re-fi’d at 3.9%) is free & clear when we are 79 (we are 50 now) …….is it safe to assume that real estate values, post the next big crash, will never recover to allow most home owners reap what they sowed in payments & interest over the course of a 30-yr fixed mortgage ?? ……’

Comment by rms
2013-03-22 07:33:15

One fixation hasn’t died yet, quick profits. Everyone hates capitalists unless there’s a chance for personal gain. That lure of easy money keeps the suckers coming back to Wall street despite the thorough shagging last time round. Losers!

Comment by scdave
2013-03-22 08:00:04

Ben….I just listened to Rick Santelli on CNBC…The segment is called “The Santelli Exchange”….He discussed the Governments involvement in housing finance five years post the bust…I swear, if I closed my eyes and just listened to the segment, it would be you yourself making the argument that he did…You are way ahead of the curve Ben…You saw consequences of all this long ago…

Try somehow to see the segment on CNBC or you tube…I think you will be nodding your head in agreement…

Comment by scdave
2013-03-22 08:17:04

By the way Ben…The segment was on @ 7:51 AM Pacific Time…I have it recorded…If I could post it on the board I would…Its spot on what we have all been discussing here for years…

Comment by Tarara Boomdea
2013-03-22 09:12:25

Santelli: Three’s a Crowd

Couldn’t link.

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Comment by cactus
2013-03-22 09:29:30

Resistance Level
In technical analysis, a price that a security does not, or only rarely, rise above. Technical analysts identify a resistance level by looking at past performance. When the security approaches the resistance level, it is seen as an indication to sell the security, which will increase the supply, causing the security’s price to fall back below the resistance level. If there are too many buyers, however, the security rises above the resistance level. When this occurs, the price of the security will likely continue to rise until it finds another resistance level. It is also called the overhead resistance level. See also: Price ceiling, Support (Support level).”

When alot of people buy at a peak that sets the resistance level, Because when they get even after many years they tend to sell.

After that IF the price goes up we get new peaks very fast

what will RE do ? As will approach the resistance level set in 2006 it should get interesting.

Your reader reminds me of this as does “Mike in Bend”

Comment by Ben Jones
2013-03-22 12:06:23

‘is it safe to assume’

That’s the hard part, isn’t it? It’s probably not safe to assume anything, but doing nothing is a decision too. I want to bring up a few things:

‘The actual liabilities of the federal government—including Social Security, Medicare, and federal employees’ future retirement benefits—already exceed $86.8 trillion, or 550% of GDP. For the year ending Dec. 31, 2011, the annual accrued expense of Medicare and Social Security was $7 trillion. Nothing like that figure is used in calculating the deficit. In reality, the reported budget deficit is less than one-fifth of the more accurate figure.’

‘When the accrued expenses of the government’s entitlement programs are counted, it becomes clear that to collect enough tax revenue just to avoid going deeper into debt would require over $8 trillion in tax collections annually. That is the total of the average annual accrued liabilities of just the two largest entitlement programs, plus the annual cash deficit.’

‘According to the most recent tax data, all individuals filing tax returns in America and earning more than $66,193 per year have a total adjusted gross income of $5.1 trillion. In 2006, when corporate taxable income peaked before the recession, all corporations in the U.S. had total income for tax purposes of $1.6 trillion. That comes to $6.7 trillion available to tax from these individuals and corporations under existing tax laws.’

‘In short, if the government confiscated the entire adjusted gross income of these American taxpayers, plus all of the corporate taxable income in the year before the recession, it wouldn’t be nearly enough to fund the over $8 trillion per year in the growth of U.S. liabilities.’

This doesn’t include things like future defense spending, or what HUD and the GSE’s will end up costing. Maybe these guys are right:

‘Michael Lind, policy director at the liberal New America Foundation’s economic growth program, says there is no near-term crisis for federal retirement programs and that economic growth will make these programs more affordable. “The false claim that Social Security and Medicare are about to bankrupt the United States has been repeated for decades by conservatives and libertarians who pretend that their ideological opposition to these successful and cost-effective programs is based on worries about the deficit,” he says.’

Here’s what I find troubling. People in this country don’t even want to give up Saturday delivery of the mail. We are easily turned against each other constantly, you can see it on this blog all the time. Left and right, rich and poor, etc. And while we are at each others throats, the politicians are freed to continue what has become routine; kicking the can down the road.

You question on the future of real estate is interesting, because you have a decision to make. I hope posters here will consider your options and let us know what they think.

Comment by Cantankerous Intellectual Bomb Thrower©
2013-03-22 14:40:50

‘The actual liabilities of the federal government—including Social Security, Medicare, and federal employees’ future retirement benefits—already exceed $86.8 trillion, or 550% of GDP.”

Sequester cuts = $85 billion = $0.085 trillion.

Sequester cuts as a share of $86.8 trillion =

(0.085/86.8)*100% = 0.001%.

Comment by Cantankerous Intellectual Bomb Thrower©
2013-03-22 15:14:17

Sorry — I lost my factor of 100 somehow. The figure is actually much larger: 0.1%…

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Comment by Cantankerous Intellectual Bomb Thrower©
2013-03-22 15:15:52

Or about 1/1000 of the actual liabilities…

Comment by Blue Skye
2013-03-23 05:15:23

“it becomes clear…”

Maybe not so clear. Not that I dispute the number these learned men toss out there, but where is the math?

$80 trillion is 40 grand a year for 100 million people over 20 years. Is that in the ballpark? Maybe it is 20 grand per year for 50 million people at a time over the next 80 years? To say that expenses are accrued doesn’t help me much unless the approach is shown. Is a lifetime of benefits accrued for a person at the time of birth? Are 15 years of benefits accrued for each person as they pass the gate at 65? It would make a huge difference in the numbers and the implications.

If the budget were to be balanced right now under current revenues and demographics, can oldsters expect 50% of what is being promised? 20%? No hint, no clue.

Comment by Blue Skye
2013-03-23 04:06:55

“is it safe to assume…”

From a boater’s perspective: Relative safety is greater when reliance on assumptions is reduced.

It sounds like you have set out on a cruise in a tippy boat with plenty of leaks and sense a storm front is headed your way. On a boat, a low center of gravity is desired in case of weather, because it gives stability. A 30 year mortgage at age 50 has a pretty high center of gravity which is a lot of instability. Having 300% of your assets in a house during the worst weather of your life is like putting all the heavy cargo up on deck. Most people I know in their 70s have had many major assumptions about their lives altered and the long term debt is a bet against this process.

None of us know really what is going to happen to the housing market in the near future, the past decade has surprised us “alot”. As far as safety advice goes: Get out of debt. You can’t captain the ship if you are 24/7 at the bilge pump.

Comment by oxide
2013-03-22 07:49:30

Google is stalking me. I used Tide Pods laundry detergent as an example in several of my posts, and yesterday’s banner ad was for Tide Pods. Dang.

Comment by goon squad
2013-03-22 08:50:43

No amount of detergent will remove the stain and the stench of the incalculable losses.

Comment by alpha-sloth
2013-03-22 18:35:35

No amount of detergent will remove the stain and the stench of the incalculable losses.

You’ll find another girl, goon.

Comment by Cantankerous Intellectual Bomb Thrower™
2013-03-22 08:18:06

How is the move to break up the too-big-to-fail Megabanks coming along?

Comment by Cantankerous Intellectual Bomb Thrower™
2013-03-22 08:26:58

I smelled some Megabank, Inc propaganda in this article, which I accidentally struck out when my wrist slipped.

Will Congress actually break up ‘too big to fail’ banks?
Washington can’t agree on much these days. Which makes this new bipartisan push all the more surprising…
By Peter Weber | 9:49am EST

Too Big To Fail is not solved and gone.
— Federal Reserve Chairman Bernanke

Cutting the big Wall Street banks down to size has been a liberal fantasy since at least 2008, when the financial system teetered on the brink of its own recklessness and hubris, dragging the rest of the economy down with it. Democrats managed to pass a big financial reform package, Dodd-Frank (or Wall Street Reform and Consumer Protection Act), in 2010. But even if Republicans hadn’t taken over the House in elections later that year, the general consensus has been that there’s no more will to take on Wall Street (and its deep pockets).

In February, Federal Reserve Chairman Ben Bernanke appeared to say that Dodd-Frank has solved the problem of giant banks being so big they threaten the global economy — in a disagreement with Sen. Elizabeth Warren (D-Mass.), who argued that “too big to fail” is too big a problem to ignore. On Wednesday, Bernanke officially switched sides. “I agree with Elizabeth Warren 100 percent that it’s a real problem,” he said at a press conference. “Too Big To Fail is not solved and gone…. Too Big To Fail was a major source of the crisis, and we will not have successfully responded to the crisis if we do not address that successfully.”

Bernanke was a registered Republican when George W. Bush tapped him to be Fed chairman, says Jason Sattler at The National Memo, and he isn’t the only prominent Republican to agree with Warren about the danger of giant banks.

In fact, it’s surprising “just how bipartisan the support for breaking up the big banks has become,” says David Dayen at The American Prospect. “Over the last few years, conservative intellectuals — from economists and central bankers to think-tankers and high-profile pundits — have come to the conclusion that the largest institutions remain Too Big to Fail,” and together with populist conservative anger from grassroots Tea Partiers, “these forces have penetrated the Beltway.”

The new surge of interest in ending Too Big to Fail on the right has converged with an existing effort on the left, and it’s translating into legislative action. Sherrod Brown, the populist progressive senator who just won re-election in Ohio, has been discussing solutions to the mega-bank problem with up to ten Republican senators. Against all expectations, his main partner is David Vitter, a Republican and fellow member of the Senate Banking Committee….

At the end of February, Brown and Vitter announced they would work on legislation to incorporate much of the thinking about how to deal with runaway banks. Brown tried this once with an amendment to Dodd-Frank with Senator Ted Kaufman that would have capped mega-bank assets to a percentage of GDP. It received 33 votes in 2010, with only 3 Republicans supporting. Brown’s discussions with colleagues leave him thinking Brown-Kaufman could get at least 50 votes today, and the bipartisan nature of the Brown-Vitter effort could mean that whatever results will have an even better chance at broad support. [American Prospect]

Here’s the problem, says Matthew Yglesias at Slate. Even if everybody agrees on the need to cap the size of big banks, there’s no agreement about what that’s supposed to accomplish. Would smaller banks have less political clout? Probably not. Was the size of banks really the problem? It’s not clear. And “I get really suspicious” about conservatives’ motives: Does breaking up the banks just give “Republicans something to talk about while in practice they work to subvert the regulatory framework”?

Comment by Arizona Slim
2013-03-22 10:06:26

Reminds me of the push to end Don’t Ask Don’t Tell. Sooner or later, the tidal wave becomes so big that you have to hop on board.

Comment by Cantankerous Intellectual Bomb Thrower™
2013-03-22 08:28:44

Sorry Jamie Boy…your number is up.

Fed’s Bernanke agrees “100%” with Elizabeth Warren, too-big-to-fail banks are a problem
3/21/2013 3:20pm by Chris in Paris

There continues to be a groundswell of support among the political class that too-big-to-fail (TBTF) banks are in fact a problem.

Elizabeth Warren has been talking about it a lot lately, including her comment in February that “too big to fail has become too big for trial.”

Two weeks later, Warren asked why the banks were receiving $83 billion each year in subsidies. (We now know that that the subsidy might be ten times that amount.) At the time, Fed chair Ben Bernanke agreed with Warren that the subsidies were a problem and should be ended.

Comment by Cantankerous Intellectual Bomb Thrower™
2013-03-22 21:53:05

Wall Street
Justice Department Probing Whether JPMorgan Traders Tried to Hide ‘Whale’ Losses
Published: Friday, 22 Mar 2013 | 6:00 PM ET
By: Kate Kelly

The Department of Justice is probing whether former JPM traders mismarked positions, reports CNBC’s Kate Kelly.

The U.S. Department of Justice is in the advanced stages of an investigation into whether former traders in JPMorgan Chase’s chief investment office in London engaged in criminal misconduct in the marking of credit positions last year, according to someone familiar with the matter.

The Justice Department probe centers on whether a handful of individual traders deliberately mismarked certain complex credit positions in an effort to mask the growing losses in a key CIO portfolio during the spring of 2012, according to this person. That portfolio, whose positions in complex corporate-credit securities eventually went badly awry, costing the bank more than $6 billion, eventually took on the nickname “London Whale” because of its geographic origin and size.

Comment by Rental Watch
2013-03-23 03:07:13

Oh, our friends Mr. Dodd, and Mr. Frank stopped the breakup of Megabanks by making it harder to be a small bank, and codifying what it meant to be TBTF.

Comment by Cantankerous Intellectual Bomb Thrower™
2013-03-22 08:19:38

Is the Fed likely to exit its bloated QE balance sheet positions any time soon?

Comment by Cantankerous Intellectual Bomb Thrower™
2013-03-22 08:31:30

Whether you agree with Ben Bernanke’s policies, it’s difficult to not admire somebody this unflappable.

The US economy needs a third term of Ben Bernanke
By Miles Kimball — 5 hours ago

Miles Kimball is an economics professor at the University of Michigan. He blogs about economics, politics and religion.
In the event of another shock to the financial system, there’s really only one person we want to be running the show. AP Photo/Richard Drew

Ben Bernanke’s second term as chairman of the US Federal Reserve ends at the end of January 2014. Speculation has begun about whether President Obama leans toward reappointing him and whether Ben Bernanke would accept reappointment. At his March 20 press conference, Bernanke said he had spoken to Obama “a bit” about his own future without directly addressing the question of whether he would be willing to serve a third term if asked. But he emphasized that he did not see himself as indispensable, saying “I don’t think that I’m the only person in the world who can manage the exit [strategy]” from the stimulus the Fed has been providing to the economy. Given Bernanke’s reticence, the Wall Street Journal provides an important tea leaf when it reports that “Many of [Bernanke’s] friends and associates believe he will want to leave after his current term expires.”

Though the stresses Ben Bernanke has faced during his time as chairman of the Fed—and the princely speaker fees and book advances available to former Fed chiefs—would make a desire to retire at the end of his current term understandable, I hope that Obama will ask him to serve a third term and that Ben Bernanke will accept—and that the Senate will confirm him by a wider margin than it did for his second term. Of these decision-makers, the hardest to persuade might be Ben Bernanke himself.

As Bernanke said, if all goes well, and the economy is firmly on the road to full recovery, many possible Fed chiefs could manage a reasonably graceful exit from quantitative easing and interest rates hovering around zero. But I do not think the economy will be out of the woods by January 2014. Many dangers will remain, particularly dangers to the US economy from troubles in the rest of the world and from the difficulties of reining in the US national debt without bringing the US economy to a halt.

Comment by Carl Morris
2013-03-22 09:25:59

Whether you agree with Ben Bernanke’s policies, it’s difficult to not admire somebody this unflappable.

Xanax? Valium? That’s what I always think of when someone who should be in the fetal position sobbing in the corner doesn’t seem worried at all.

Comment by Cantankerous Intellectual Bomb Thrower™
2013-03-22 08:21:09

Castle flipping, anyone?

Comment by Cantankerous Intellectual Bomb Thrower™
2013-03-22 08:22:42

Bless my wife for sharing this story with me…

Nicolas Cage’s most outrageous purchases
Hope he kept the receipts…
Wed, Mar 20, 2013 16:19 GMT

A medieval castle

Did you know Nicolas Cage is from German ancestry? That was reason enough for him to buy (and later sell) the medieval castle of Schloss Neidstein in the Oberpfalz region in Germany. He also bought (and later sold) Midford Castle in Somerset, where he enjoyed “a Dickensian Christmas”.

Comment by Cantankerous Intellectual Bomb Thrower™
2013-03-22 08:34:27

Is it time for the bears to admit they were all wrong, throw in the towel, and go long into stocks?

Comment by Cantankerous Intellectual Bomb Thrower™
2013-03-22 08:37:21

March 22, 2013, 8:46 a.m. EDT
When do the bears admit they are wrong?
By Bill Gunderson

On March 6, 2009, the Dow Jones Industrial Average closed at 6,626. Today the average is near 14,500. That is a gain of almost 8,000 points. Percentage-wise, that translates to a 118% gain. Yet the bears continue to advise me not to get in, it is all smoke and mirrors created by the Fed.

On that same day in March of 2009, the S&P 500 touched the Biblical number of “666.” The S&P now stands at just of 1500. That translates into a gain of 132%.

Yet I hear on a daily basis not to trust this bull. It is the most hated bull of all time.

Yeah right, I have really hated being invested for the last four years.

The Dow recently hit a new all-time high, yet I am told that I should be loading up on gold, guns, ammo, and dried food.

Don’t get me wrong, I don’t think that America is on a sustainable course either, but to stand by stubbornly on the sidelines and chide those who are in the market, seems a little short-sighted to me.

After all, a 401(k) that was worth $100k in 2009, could be worth about $233k today if invested only in an index fund. Now who is laughing at whom?

Comment by Carl Morris
2013-03-22 09:29:04

Like I said before, I would only want to trade this “bull” if I had insider knowledge of Fed actions yet to come. Do these people who are laughing understand that they are making money only because someone else is choosing to allow them to because it suits their purpose at this moment?

Comment by Robin
2013-03-22 16:23:16

Since the Big R, the half in stocks remained invested. The CDs that dropped from 5% to .1% stayed mostly in cash, but about 35% put into the market in the last year.

It’s all good!

Comment by ecofeco
2013-03-22 20:23:05

The best time to buy in to the current stock market is 3 years ago.

Comment by Cantankerous Intellectual Bomb Thrower™
2013-03-22 08:55:58

Is the Cyprus crisis fully contained at this point?

Cyprus: The Nightmare Scenario and How to Avoid It in America
By Larry Kotlikoff

Customers queue to withdraw cash from an automated teller machine (ATM) outside a Cyprus Popular Bank Pcl, also known as Laiki Bank on Thursday, March 21. The European Central Bank said it may cut Cypriot banks off from emergency funds after March 25 as the island nation’s president, Nicos Anastasiades, scrambled to forge agreement on a plan to stave off financial collapse. Photo by Simon Dawson/Bloomberg via Getty Images.

Comment by Cantankerous Intellectual Bomb Thrower©
2013-03-22 10:30:08

The scary politics of the euro zone
Posted by Ezra Klein on March 22, 2013 at 10:40 am

Confused by all the talk of Cyprus? Don’t be. Here’s the situation in three sentences: The country’s banks were using Russian deposits to buy Greek bonds. The Greek bonds went bad, and the Cypriot banks lost a bundle. They now need a bailout from their euro zone partners, but it’s tough to convince German taxpayers to pony up if they think the money is really going to Russian oligarchs.

But here’s the bigger question: Why are we talking about Cyprus at all?

Cyprus is tiny. It has fewer people than Philadelphia. It has a smaller economy than Vermont. It has no nukes. It is not a country that typically commands global headlines.

But in 2008, exhibiting epically bad timing, Cyprus joined the euro zone. So now its problems are the euro zone’s problems. And as we’ve discovered in recent years, the euro zone’s problems are the world’s problems.

In 2011 and 2012, markets seemed in almost constant turmoil over the very survival of the currency union — and their turmoil, in turn, actually threatened the survival of the currency union, as the market became unwilling to lend Italy, Greece, Portugal and Ireland the money needed to fund their governments. Investors have since calmed down. But the relative financial calm masks a very dangerous political and human situation.

Comment by ecofeco
2013-03-22 20:24:27

There ya go.

Comment by Cantankerous Intellectual Bomb Thrower©
2013-03-22 15:36:59

ft dot com
March 22, 2013 7:33 pm
Cyprus: A poor diagnosis, a bitter pill
By Peter Spiegel, Kerin Hope and Quentin Peel

Protesters in Nicosia voice their anger at the bailout terms after the Cypriot parliament rejected a levy on bank deposits

After days of anger and worry about the safety of their savings, hundreds of Cypriot protesters gathered outside the parliament in Nicosia on Tuesday. They waved Russian flags and shouted “out with the troika” – a reference to the European Commission, International Monetary Fund and European Central Bank, the reviled threesome responsible for negotiating eurozone bailouts.

The EU leaders who had spent all night in talks to produce Cyprus’s ill-fated bailout plan – a plan that would have been paid for in part by a levy on ordinary citizens’ bank deposits – had seen much worse. In Athens, there had been riots and tear gas.

Yet despite three years of battling one crisis after another, the officials had still managed to misread the situation. They were wrong about Cyprus and its brand of politics.

They thought the island had elected another Antonis Samaras, the centre-right prime minister of Greece who became a champion of his country’s tough austerity-laden bailout when he was elected last June. But this was no Greece.

Instead, they were dealing with Nicos Anastasiades, a lawyer and career politician who had assumed the country’s presidency just two weeks earlier. Like many in Cyprus, he has ties to Russian interests – his family law practice has two Russian billionaires on its books. And other members of the Cypriot governing class felt pressure to protect the country’s banking sector, which counts Russians among its most important customers.

Failing to grasp the depth of such ties would prove a fatal blind spot. “The discussion in Cyprus was not about small savers,” says a senior German official. “It was about people who fly in Lear jets.”

By the end of the week there would be 13 private jets belonging to Russian owners of Cypriot companies parked at Larnaca international airport, ready to decamp with millions held in the two main banks. Cyprus has long been a popular tax haven for Russian businessmen, legitimate and not.

Comment by Cantankerous Intellectual Bomb Thrower©
2013-03-22 17:13:16

It’s deja vu all over again!

ft dot com
March 22, 2013 9:03 pm
Cyprus runs out of bailout options
By Peter Spiegel in Brussels, Josh Chaffin and Andreas Hadjipapas in Nicosia and Kerin Hope in Athens

The chances of Cyprus finding a way out of an EU-backed plan to seize €5.8bn from Cypriot bank accounts to unlock a €10bn rescue appeared at an end on Friday as bailout lenders rejected another counteroffer from Nicosia and the country’s finance minister returned from Moscow empty-handed.

The rejection of the Cypriot plan left Nicosia with little choice but to acquiesce to a programme similar to one agreed last weekend or face collapse of its financial sector – and possible exit from the euro. If Cyprus cannot reach a deal by Monday, the European Central Bank has vowed to cut its emergency loans to Cypriot banks, starving them of their last lifeline.

“It looks as if we are coming back in circles to places we had visited before,” said one senior eurozone official involved in negotiations.

Comment by Cantankerous Intellectual Bomb Thrower©
2013-03-22 17:32:02

12 HOURs ago
Cash is King in Cyprus

Comment by Ben Jones
2013-03-22 19:26:54

Cyprus crisis similar to Iceland’s crisis

“We let the banks go bankrupt”

Comment by Cantankerous Intellectual Bomb Thrower™
2013-03-22 23:31:08

23 March 2013 Last updated at 01:05 ET
Cyprus MPs in key bailout talks

Cypriot reaction: “No-one knows what is going on”

MPs in Cyprus have voted to restructure the island’s banks - one of several measures to ease a financial crisis that has hit eurozone confidence.

They have also approved a “national solidarity fund” and capital controls to prevent a bank run.

Cyprus needs to raise 5.8bn euros (£4.9bn; $7.5bn) to qualify for a 10bn-euro bailout.

Efforts continue to reach consensus on key issues such as levies on bank deposits before Monday’s deadline.

MPs did not vote on these measures on Friday, having rejected similar proposals on Tuesday.

Parliament passed a total of nine bills, covering three main elements of the rescue plan including:

* Restructuring of the banking sector, starting with the most troubled bank of all - Laiki (Popular) Bank, the country’s second largest
* The creation of a solidarity fund: nationalising pension funds and other state assets
* The approval of capital controls to prevent large fund withdrawals out of Cyprus

The bank levy issue may come before parliament on Saturday, says the BBC’s Mark Lowen in Nicosia; a levy, possibly of around 15%, on all deposits over 100,000 euros, has been suggested.

Comment by Bluestar
2013-03-22 09:36:51

Notice to bloggers: Be careful about using cut and past stories from commercial news outlets. By including this quote am I (and by extension Ben) committing a crime?

“For years, all of us have been hearing that if it is free on the Internet, it is free for the taking. The judge in this case just rejected that argument,”

So far this only applied to a for-profit operation but if it sticks then expect big media to push for more control.

Comment by Arizona Slim
2013-03-22 10:57:15

I prefer to add an excerpt from the story. Say, a paragraph or two, and then a link along with my own snarky commentary.

Comment by Happy2bHeard
2013-03-23 08:49:23

This behavior serves to drive page views to the link. Why would the linkee object to that?

Comment by Cantankerous Intellectual Bomb Thrower©
2013-03-22 13:49:17

Is a blog post “for profit” even if you don’t get compensation?

Comment by Brett
2013-03-22 09:56:24

How about discussing what to do with cash?

Savings accounts / CDs offer nothing return

Buying a house seems like a bad idea

The stock is overinflated.

Do we just store our money in a mattess?

Comment by Cantankerous Intellectual Bomb Thrower©
2013-03-22 15:38:38

“Do we just store our money in a mattess?”

Yes. Gold coin preferred.

Comment by tresho
2013-03-22 17:13:57

And as far as earning interest on the money in the mattress, you will just have to steal it from someone else’s mattress.

Comment by Cantankerous Intellectual Bomb Thrower©
2013-03-22 13:35:18

Has the sequester so far affected your life?

Comment by Cantankerous Intellectual Bomb Thrower©
2013-03-22 13:36:19

FAA: Seven Southern California air traffic control towers to close

The contract tower at Riverside Municipal Airport is one of those that will close April 7, the FAA announced. (Mark Boster / Los Angeles Times)

By Laura J. Nelson

March 22, 2013, 1:15 p.m.

Seven air-traffic control towers in Southern California will close next month as a result of forced federal budget cuts, the Federal Aviation Administration announced Friday.

The FAA had been considering closing as many as 189 air-traffic control towers at smaller airports across the nation, including 14 in Southern California. The FAA must cut $637 million by Sept. 30 as part of $85 billion in cuts across the federal government.

Southern California will lose towers in Fullerton, Oxnard, Riverside, San Diego, Victorville, Pacoima and Lancaster.

All the towers that will shut down April 7 are contract towers, which are certified by the FAA but not run by the government. Contract towers make up nearly half of the nation’s towers and handle about 30% of the air traffic.

“These were very tough decisions,” Transportation Secretary Ray LaHood said in a statement. “Unfortunately, we are faced with a series of difficult choices that we have to make.”

This is the largest contract tower closure in history. Since the program’s start in 1982, only three towers have been closed, according to the U.S. Contract Tower Assn.

“The decision by the administration to disproportionately target the contract tower program represents a regrettable deviation from the role the FAA has always played as a guardian of aviation system safety,” said Spencer Dickerson, the association’s executive director, in a statement.

Comment by Cantankerous Intellectual Bomb Thrower©
2013-03-22 13:47:59

FAA will close 149 airport towers on heels of sequester
By Lori Aratani, Updated: Friday, March 22, 12:44 PM

The Federal Aviation Administration announced Friday that it would shutter 149 airport control towers early next month, including at least six in the Washington region.

The closures come on the heels of the mandatory spending cuts that went into effect earlier this month. The Federal Aviation Administration had planned to make the closure announcement last week but delayed the decision because it had received a of the volume of appeals. The shutdowns, which begin April 7, are part of the more than $600 million in cuts the agency must make because of sequestration.

“We heard from communities across the country about the importance of their towers, and these were very tough decisions,” said Transportation Secretary Ray LaHood. “Unfortunately, we are faced with a series of difficult choices that we have to make to reach the required cuts under sequestration.”

Comment by Cantankerous Intellectual Bomb Thrower©
2013-03-22 18:28:51

Has the Fed mastered the alchemy of changing economic outcomes merely by altering the message they use to describe the economic situation?

Comment by Resistor
2013-03-22 19:30:38

Wow, house next door auctioned: 03/14/2013 11:08 AM ET

“Renovated” in a week, and now it’s on the market.

Comment by Cantankerous Intellectual Bomb Thrower™
2013-03-22 23:26:45

Lucky Ducky is on disability.

Comment by Cantankerous Intellectual Bomb Thrower™
2013-03-22 23:38:07

“Trends With Benefits” Web Extra
Mar 22, 2013
By Chana Joffe-Walt

In the past three decades, the number of Americans who are on disability has skyrocketed. The rise has come even as medical advances have allowed many more people to remain on the job and new laws have banned workplace discrimination against the disabled. Every month, 14 million people now get a disability check from the government.

The federal government spends more money each year on cash payments for disabled former workers than it spends on food stamps and welfare combined. Yet people relying on disability payments are often overlooked in discussions of the social safety net. People on federal disability do not work. Yet, because they are not technically part of the labor force, they are not counted among the unemployed.

In other words, people on disability don’t show up in any of the places we usually look to see how the economy is doing. But the story of these programs — who goes on them, and why, and what happens after that — is, to a large extent, the story of the U.S. economy. It’s the story not only of an aging workforce, but also of a hidden, increasingly expensive safety net.

For the last six months, I’ve been reporting on the growth of federal disability programs. I’ve been trying to understand what disability means for American workers, and, more broadly, what it means for poor people in America nearly 20 years after we ended welfare as we knew it.

Comment by Rental Watch
2013-03-23 03:33:21

What about suggested podcasts that people listen to?

I’ll start…

Disciplined Investor Podcast…the podcast that got me thinking about what other podcasts I’m missing. It is put on by a money manager who is clearly enamored with technical analysis, and trading (as opposed to investing). I usually listen to it at 2x speed while doing dishes, like sifting through trash looking for the watch you dropped…HOWEVER, he sometimes has discussions with pretty interesting folks. The last one I listened to he interviewed Satyajiy Das (episode #304), who had some very interesting perspectives on global currency wars (he tongue in cheek calls them currency “skirmishes”…with a nod toward Lagarde not wanting people to think of them as wars)…I listened to that one twice.

NPR (various, marketplace, etc.)…however, I’m starting to tire a bit of the slant…I’m thinking of cutting these back;

Bill Gross’s Investment Outlook…once per month…about half of it is the legal disclaimer at the end.

Meet the Press…since there’s no way I get in front of the TV on Sunday morning.

Freakonomics…last one was on parking…cars spend 95% of their time parked, and we have anywhere from 4-8 parkings spaces per car in the US…is there a better way to utilize land? Some are OK, some are very good.

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