Bits Bucket for May 6, 2013
Post off-topic ideas, links, and Craigslist finds here.
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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This Old Short Sale
The First Episode of This Old Short Sale Was Broadcast Locally
WGBH Boston broadcasted the first episode of This Old Short Sale on Tuesday, February 20, 2010 at 8:30pm. It featured the renovation of an upside-down serial refinanced Victorian in Boston’s historic Dorchester section, with contractor Norm Abram, host Bob Vila, and plumbing expert Ron Trethewey (his son Richard, now the show’s plumbing and heating expert, also made his debut, in a “cameo” appearance). The first 13-week This Old Short Sale series set a new ratings record for WGBH.
Morash “discovered” his crew in unlikely places. Abram had been commissioned to build a barn on the serial refinanced property. The quality of his work was so impressive (Norm had the smallest scrap pile Russ had ever seen) that the carpenter was invited to lend a hand with the eviction of the Dorchester family. In his search for a host, Morash came across a developer and builder specializing in delinquent loans in the pages of The Boston Globe. Bob Vila, who had no prior television experience.
Comment by Bill in Los Angeles
2013-05-05 08:08:32
Renting is freedom. Mortgage is slavery. Contracting is freedom. Employment is slavery. Being single is freedom. Marriage is slavery.
Slavery for us is voluntary. The bonds can be broken, but only when the psychological need for the security slavery promises to bring is rejected.
A Normal marriage is not slavery, but is a rare miracle. I rent.
Your spouse is a rental?
Yes, she is. It’s the old saying: if it floats, flies, of f@cks, rent it.
My requirement for a normal marriage has been fulfilled. It is a once in a lifetime thing, like I said a miracle. For now I make the best of a situation that will not bear fruit. You make the best of your own.
My requirement for a normal marriage has been fulfilled. It is a once in a lifetime thing, like I said a miracle.
Hmmm … if a “normal” marriage is a “miracle” then is it really “normal”?
There is the usage of the word that means “average”, and there is the usage that means ideal, as in according to design.
My wife is a gift from God. She makes me a better man.
Not sour or burn out in life.
SUGuy
What a nice testimony to a happy union. We’ve been hitched for a long time (2X’s/divorced and remarried).
We say the rocks in his head fit the holes in mine. LOL
Is it possible that the “everything is slavery” camp is comprised of rootless, lonely, and bitter individuals?
Funny how my “traditional values” of a loving family, a good partnership (no marriage for us), a beautiful home, and a job I love in a fabulous city create so much animosity from others.
What’s “funny” is how you mischaracterize reality. You don’t read too well.
How much did you pay for you city debt-dump?
Sometimes marriage is a drag…sometimes it’s not…YMMV.
if I had two lives to live one would be a family man and the other an outlaw…i chose the family man for this one.
Is it possible that the “everything is slavery” camp is comprised of rootless, lonely, and bitter individuals?
I probably use the S word more than almost anybody here. I’m not rootless or lonely, but may be a little bitter. I’m just sensitive to manipulation and lots of things reek of manipulation lately. I’m surprised that it doesn’t seem to bother other people.
No sfhomeowner, you’re obviously wrong. Comparisons of slavery to a marriage, mortgage, and having a job, religion, etc. are 100% accurate, especially in relation to actual American slavery.
See, I’m sure the guy in this picture is thinking “At least I don’t have a debt-dump in san francisco”.
http://anthonylukephotography.blogspot.com/
Now if we just had another Lincoln in modern times, I guess he would free us all by, ummm, making us rent, divorce, quit our jobs, and become atheists? Sounds like a great plan.
Traditional marriage=Slavery
What comes with it? Debt bondage to a mortgage because you have to buy a burdensome house…… right?
Not anymore. The old traditions are gone. Rent for half the monthly cost of a massively inflated payment on a rapidly depreciating house.
Rent for half the cost of a massively inflated wife (hahaha)
Can I add;
Religion is slavery.
Obedience to the institutions of man is slavery indeed, only surpassed by holding one’s self up as the highest authority in the universe.
only surpassed by holding one’s self up as the highest authority in the universe.
Hence democracy. But some see any imposition of the majority’s will on them as slavery. Bit of a catch-22 for them.
“Obedience to the institutions of man is slavery”
Are you an anarchist?
“surpassed by holding one’s self up as the highest authority in the universe.”
Nobody gets to claim that anymore I think. There were Pharaohs and a few Emperors at one time though.
No I’m not, but I observe a lot of things people just make up as they go along passed off as religious truth. Same goes for scientific truth! I try to be picky about what I accept as truth, and as I get older the list gets smaller.
Indeed it has gotten so bad we had to invent a new word:
“Truthiness”
If “truthiness” is a new word, can “truthlike” be far behind?
http://en.wikipedia.org/wiki/Batavia_(ship)
When insitutions of man are ignored it can go very bad
true story of a group of sailors who planned a mutiny then after being shipwrecked decided they could take anything they wanted.
that’s a wild story
“Can I add;
Religion is slavery.”
Please do. Thanks.
I agree somewhat with Bill. The way our society is constructed, if you “own” for your personal use, it is basically slavery (there are exceptions but they do not apply to most people). The really important things about where someone lives have nothing to do with it being a “good investment”, but rather with utility, stability, and quality. And even to the extent the average person achieves those, it is often at the price of slavery.
On the other hand, if you own enough in our society, you can escape this. But the escape velocity and self-discipline needed for this are, again, rare. Taleb has discussed a number of ways of “cheating” so that one can win without getting drawn into the rat race. One that I remember is his discussion of stoicism, i.e. a 1%er with a certain mindset can manage to neither take his/her wealth for granted and at the same time not equate wealth with self-worth. Taleb gave some examples of very rich people who worked very hard when young, put off pleasure, and then oftentimes “forgot” that they were in fact rich when they were older.
Another example is putting boundaries on one’s self, eschewing certain things even though one can easily afford them. The benefit is that you foreclose certain risky expenditures or investments and instead have a different measuring stick for yourself. Instead of competing on others’ terms, you create one static idea of “success” or your “dream life” that is reachable. And when you reach it, you value it and preserve it for your children and their children, instead of striving to move to higher plateaus that can cause the entire thing to fall apart. In this way, starting a business to create tax deductions or stuffing an IRA with S Corp stock are preferable because they are far less risky than going out and trying to play the stock market or even putting money into index funds.
I think a lot of the problems in the West (and even spreading to China and India) result from people passively accepting ideas being marketed to them. So many things that are “conventional wisdom” are either plain wrong or else lazy/sloppy.
One of the things I’m doing with my wife is coming up with an idea of what we really value, what things we want to support, what we want our life to look like, how we can spend more time doing enjoyable things while having a rock solid financial foundation. We’ve always had a budget and we’ve been saving furiously but due to inertia we’ve put off getting our ducks in a row. Some of the conversations with the parents might be “interesting” so we’re trying to have things thought out before that happens. It’s tricky being trapped in the “middle” where you will own enough to not really be a slave but yet do not own enough that you are really the master, either. You have to look like the slaves on paper but arrange your financial affairs like the masters.
Can you give us some more investment advice too?
That was goon, reposting Bill’s “wisdom” from the weekend. Right before he admitted that the only stuff he keeps in the apartment where he actually lives is an air mattress and a bar stool.
“Freedom’s just another word for,
An air mattress and bar stool…”
An air mattress and a bar stool in a studio apartment in a Phoenix ghetto.
No, I said where he actually lives. That is LA. Was Florida. He visits his furniture in a Phoenix ghetto every few weeks.
duly noted, but is the freedom the furniture in the phoenix ghetto or the studio apartment with an air mattress and bar stool in LA?
in a studio apartment in a Phoenix ghetto
…surrounded by a landfill in a 3rd world country?
How is either one freedom when you have essentially excluded all possibilities of having social interactions in your home - spending the majority of your time living in a place with only one place to sit and the rest of it in a place where you only pretend to live for tax purposes. Sounds like self-imposed servitude to me.
Look- he’s got the air mattress. That’s all he needs for his ladies of the evening, ahem I mean “social interactions.”
Slavery has its compensating amenities.
CPAC attendee defends slavery because slave owners provided ‘food and shelter’
K. Carl Smith of Frederick Douglass Republicans replied, “They call Booker T. Washington the second Frederick Douglass.”
“what about unity and diversity?” Terry asked.
“What about it?” Smith responded. “Here’s an example: When Douglass escaped from slavery, I think 10 years or 20 years after he escaped, he writes a letter to his former slave master and said, ‘I forgive you for all the things you did to me.’”
“For giving him shelter and food and all that?” Terry asked.
“No!” Smith said.
http://www.rawstory.com/rs/2013/03/15/cpac-attendee-defends-slavery-because-slave-owners-provided-food-and-shelter/
Slaves were better off than a lot of the workers in the north. This is not an endorsement of slavery, but an example of how crappy laborers were treated at that time.
Yeah, I’m sure those northern workers had their wives and children sold off, to never be seen again.
“Slaves were better off than a lot of workers in the north”
… And THAT, my friends, is exactly what compelled the United States to outlaw slavery. As long as there are slaves to be had, then free men will be unemployable. This is why we should not allow US corporations to use slave labor in foreign countries without a penalty. That is why we must reinstate the tariff.
“Research has suggested that financial strain and debt are strong risk factors for mental-health problems — and that we don’t pay enough attention to that connection. One University of Leicester study last year found that “adults in debt were three times more likely than those not in debt to have (common mental disorders).”
http://www.denverpost.com/smart/ci_23177329/debt-and-mental-health-issues-go-hand-hand
Most people aren’t going postal because they can afford month long vacations and a place to live that isn’t the ‘hood.
There’s a big correlation versus causation issue here. People with mental health issues are much more likely to self medicate by doing things that result in more debt.
“Canadians who end up having to declare bankruptcy are increasingly older and deeper in debt, says a new study.
A review of about 7,000 personal insolvency filings from 2011 and 2012 indicates that the typical insolvent person is a 43-year-old male with more than $61,000 in unsecured debt, according to Hoyes, Michalos & Associates Inc., an Ontario consumer proposal and trustee in bankruptcy firm.
What is remarkable about the findings is that the highest debt levels occur in the 50-to-59 age group, where unsecured debt is more than $84,000.
That’s usually considered a stage in life where an individual should be reducing debt and preparing for retirement.”
http://www.theglobeandmail.com/globe-investor/personal-finance/household-finances/face-of-bankruptcy-older-and-deeper-in-debt-study-finds/article11730419/
Renting is freedom. Mortgage is slavery. Contracting is freedom. Employment is slavery. Being single is freedom. Marriage is slavery.
The ability to differentiate nuances is freedom.
Rigid, unimaginative thinking is slavery.
Just getting back here after enjoying a gorgeous day pertying up my rental greenery. Thanks SUGuy and others for all your comments on NYS taxation.
In that general area friends just got an $8000 increase on their assessment value. The shadow inventory game doing its part to help town/state coffers.
“The shadow inventory game doing its part to help town/state coffers.”
+1 Ditto for Joe Sixpack’s retirement plan.
Some very pertinent numbers here:
——————
Housing Crash Fades as Defaults Decline to 2007 Levels
By John Gittelsohn - May 6, 2013 12:00 AM ET (bloomibergi)
“…First-time delinquent home loans fell to 0.84 percent of the 50.2 million mortgages in March, the first month below 1 percent since 2007, before a wave of defaults led to the financial crisis, according to a report today by Lender Processing Services Inc.
…“Mortgage quality is improving rapidly,” Mark Zandi, chief economist for Moody’s Analytics Inc. said in a telephone interview from his office in West Chester, Pennsylvania. “Once we’re able to work through this last bulge of foreclosed property, which I think we’ll be able to do over the next 18 to 24 months, mortgage credit quality is going to look absolutely beautiful.”
…” In the third quarter of 2012, the most recent available, 97 percent of FHA borrowers had credit scores above 620 of a possible 850. In the last quarter of 2006, only 53 percent had a score above 620.
Florida had the highest rate of non-current mortgages with 18.2 percent of loans either delinquent or having received a foreclosure notice, followed by New Jersey, Mississippi, Nevada and New York. While Florida’s problem loans declined over the last year, the number increased 5.8 percent in New Jersey and 6.1 percent in New York. All three are judicial states, where homes languish in foreclosure more than 1,000 days while waiting to be repossessed.
…“The new problems coming into the system have alleviated,” Blecher said in a telephone interview. “It’s really about addressing what’s still in the pipeline.”
————–
I guess there’s some truth to this article. The apex of the second peak on that famous Credit Suisse graph was in Fall of 2011; 18 months ago. I guess anything that was going to go sour has already done so. And all of Blackstone’s cash-buying and the banks’ tightening of inventory (whether colluded or not) have served only to drive up virtual values enough to bring underwater owners above the surface long enough to refi to a lower payment.
In the past month I received two offers to refi; gracious I’ve only been in the house a year.
Mark Zandi: “Mortgage quality is improving rapidly,”
That was his statement on WBBR this morning. The response by his interviewers?
Laughter. Why? Because everyone knows it’s not true. But we’ve come to expect that from you and Zandi.
Now;
What did you pay for your debt dump? Be honest.
“Mortgage quality is improving rapidly,”
I’m sure.
Lenders Again Dealing Credit to Risky Clients
Dave Sanders for The New York Times
By JESSICA SILVER-GREENBERG and TARA SIEGEL BERNARD
Published: April 10, 2012 203 Comments
Annette Alejandro just emerged from bankruptcy and doesn’t have a job, and her car was repossessed last year. Still, after spending her days job hunting, she returns to her apartment in Brooklyn where, in disbelief, she sorts through the piles of credit card and auto loan offers that have come in the mail.
Shauna Ames of St. Paul said she received a credit card offer from Capital One, which had recently won a suit against her.
“Even I wouldn’t make a loan to me at this point,” Ms. Alejandro said.
In the depths of the financial crisis, borrowers with tarnished credit like Ms. Alejandro were almost entirely shut out by traditional lenders. It was hard enough for people with stellar credit to get loans.
But as financial institutions recover from the losses on loans made to troubled borrowers, some of the largest lenders to the less than creditworthy, including Capital One and GM Financial, are trying to woo them back, while HSBC and JPMorgan Chase are among those tiptoeing again into subprime lending.
Credit card lenders gave out 1.1 million new cards to borrowers with damaged credit in December, up 12.3 percent from the same month a year earlier, according to Equifax’s credit trends report released in March. These borrowers accounted for 23 percent of new auto loans in the fourth quarter of 2011, up from 17 percent in the same period of 2009, Experian, a credit scoring firm, said.
Consumer advocates and lawyers worry that the financial institutions are again preying on the most vulnerable and least financially sophisticated borrowers, who are often willing to take out credit at any cost.
“These people are addicted to credit, and banks are pushing it,” said Charles Juntikka, a bankruptcy lawyer in Manhattan.
The banks, for their part, are looking to make up the billions in fee income wiped out by regulations enacted after the financial crisis by focusing on two parts of their business — the high and the low ends — industry consultants say. Subprime borrowers typically pay high interest rates, up to 29 percent, and often rack up fees for late payments.
Some former banking regulators said they worried that this kind of lending, even in its early stages, signaled a potentially dangerous return to the same risky lending that helped fuel the credit crisis.
“It’s clear that we are returning to business as usual,” said Mark T. Williams, a former Federal Reserve bank examiner.
The lenders argue that they have learned their lesson and are distinguishing between chronic deadbeats and what some in the industry call “fallen angels,” those who had good payment histories before falling behind as the economy foundered.
…
Collective amnesia!
In a serial bottom caller’s world, there is no Federal Reserve pumping in $40 bn a month in quasi-temporary QE3 MBS purchases.
What else is either poorly understood, or perhaps just never explained to the greater fools, is how weakening or eliminating downpayments increases the risks of paying more for a home than it is worth, and of taking on a mortgage debt burden which will prove excessively burdensome at best, or ultimately unrepayable at worst.
This is the essence of subprime lending.
Low-Downpayment And Zero-Downpayment Mortgage Products Available For 2013
Mortgage rates and markets change constantly. Stay 100% current by taking The Mortgage Reports by email each day. Click here to get free email alerts, or subscribe to the RSS feed in your browser.
Low- And No-Downpayment Mortgage Options For Home Buyers
As mortgage rates fall to absurd-like levels, the cost of home ownership drops, too. Mortgage payments are 18% less expensive today as compared to one year ago.
For today’s home buyers, though, “making mortgage payments” may not be a concern — it may be making a downpayment. Thankfully, a bevy of low- and no-downpayment mortgage options remain available to buyers in all U.S. markets.
You Don’t Need To Make A 20% Downpayment
The most difficult part of an economic recovery can be identifying its bottom; even the experts can’t tell a “blip” from a “bounce”.
Several months — or several years — of data are required to properly identify a market bottom. This is bad news for bargain hunters, of course, because by the time a market bottom can be fingered, it’s too late to take advantage; prices have already started rising.
Today, we can call the housing market bottom with some modicum of confidence. The housing market bottomed in October 2011.
Since October 2011, housing market data has been steadfastly stronger . Gains have been modest and incremental. Some months have shown retreat but the overall trend has been toward growth and gradual expansion.
On average, national home prices have moved higher, U.S. buyer demand has grown larger, and confidence in the housing market overall is at its highest point since before last decade’s downturn.
Furthermore, in many U.S. markets, on account of low mortgage rates, home affordability has reached record-high levels.
Unfortunately, home affordability is rising faster than buyers’ abilities to make a downpayment. Few first-time buyers have large savings on-hand, and many of today’s “move-up” buyers are netting little or no home equity from their respective home sales.
For buyers such as these, FHA mortgages, VA loans and USDA mortgages offer paths to homeownership.
…
Since you asked, H.A…………
I paid $385,000 in Nov. 2010. It just appraised for $525,000 and the same model is under contract down the road for $575,000. I feel like an equity slave. How will I ever live with myself if I sell and obtain $150,000 return on my $14,000 FHA down payment investment? Hmmm, it will be three years in Nov. 2013. Net ROI could be 1,071%, or over 300%/year.
I know many of you will say not to count my chickens before they are hatched, and I won’t. I just want to point out that there are fantastic benefits to owning real estate. We are very happy in our “debt-dump” and have received multiple benefits from living in our new home, including $460/month of our house payment going toward principal reduction.
It is a great way to live.
And there isn’t a buyer in sight for half of what you paid.
Anyone with a frontal lobe knows that Zandi is just a shill who is talking his book.
for oxide:
http://www.oftwominds.com/blog.html
“To a considerable extent what follows is an essay in stating what I take to be obvious. It is obvious that the social world situation is endangering the future of all life on this planet. To state the obvious is to share with you what (in your view) my misconceptions might be. The obvious can be dangerous. The deluded man frequently finds his delusions so obvious that he can hardly credit the good faith of those who do not share them.” - Dr. R.D. Laing.
‘I guess anything that was going to go sour has already done so’
‘the revamped program has helped borrowers such as Arthur and Dickey Anne Cook, who remain underwater, owing about $270,000 on a Corona, Calif., house that they figure would sell for only $230,000.’
‘By getting rid of the previous home loan, which they obtained five years ago through a mortgage broker, they have now lowered their interest rate to 3.99 percent from 5.75 percent through HARP.’
“We hadn’t missed any payments yet. But in another six months, I probably would have,” said Art Cook, 69, a former phone company manager and Army reservist whose wife taught school. “Things keep getting more expensive, and we’re on a fixed income.”
‘The Cooks might have had a hard time if they had tried to tap HARP when it first started.’
‘The program started slowly in 2009 because it allowed lenders to refinance loans only for up to 105 percent of the property value. Crashing home prices left millions of people too underwater to benefit, and the loan-to-value ratio was quickly lifted to 125 percent, but few banks were willing to refinance the deeply underwater loans.’
‘Then last year the Federal Housing Authority, which oversees Fannie and Freddie, approved more drastic changes. The 125 percent limit was abolished, appraisals streamlined and paperwork slashed. What’s more, lenders using HARP in its latest version nearly eliminated any threat of Fannie or Freddie demanding that they buy back flawed loans - a major thorn in the side of banks these last few years.’
‘Initially, the program was underutilized by banks that were worried that Fannie and Freddie might force them to repurchase any new, refinanced loans that went bad. The Obama administration revamped and extended the program in 2011, and it took off last year as banks found that making those new loans was actually quite profitable.
http://www.bradenton.com/2013/05/02/4508584/refinance-program-for-underwater.html#storylink=cpy
So he’s 69 years old, retired and has $270k to pay off. I guess if it was going to go sour it would have already done so.
ben…”don’t they teach you nuhsing?”
when something happens and one or both have to go into a retirement home they are just gong the sale the house for a huge profit and use it to finance their care.
housing always goes up…especially now!
Some stuff got left out of Ben’s cut and paste. New quotes in bold print:
————-
…HARP waives the requirement for extensive new underwriting on loans that are already backed by Fannie Mae and Freddie Mac.
…The program does not cover homeowners that are in privately held securities. It also allows borrowers to use the program only once.
The revamped program has helped borrowers such as Arthur and Dickey Anne Cook, who remain underwater, owing about $270,000 on a Corona, Calif., house that they figure would sell for only $230,000.
The retirees used HARP to get a new loan that knocked nearly two percentage points off their interest rate and slashed their monthly payment by $480. By getting rid of the previous home loan, which they obtained five years ago through a mortgage broker, they have now lowered their interest rate to 3.99 percent from 5.75 percent through HARP.’
“We hadn’t missed any payments yet. But in another six month, I probably would have” said Art Cook, 69, a former phone company manager and Army reservist whose wife taught school. “Things keep getting more expensive, and we’re on a fixed income.”
The way the program works now, refinances are permitted on loans sold to Fannie and Freddie before June 2009. Fannie and Freddie, which back about 60 percent of all mortgages, already are on the hook if loans go bad, so their risk lessens if the payments are lowered.
Borrowers must owe more than 80% of the home value. They can’t have missed a payment for the past six months and are allowed only one late payment in the last year. And they must have a job or other income to pay the loan, althought a full review of employments and tax documents is not required.
The Cooks might have had a hard time if they had tried to tap HARP when it first started….”
————–
“So he’s 69 years old, retired and has $270k to pay off.”
+1 This is how the foolish boomers plan on checking-out.
That says something about the future housing supply as well.
My father used to work with a guy whose goal was to be deeply in debt when he died. I always that it sounded like a loser’s attitude - the PTB were screwing him over, so he thought of a way to get them back. On the other hand, maybe what made him different is that most folks don’t realize how much they’ve been abused by the PTB.
MightyMike
As a couple allergic to debt, as these serial bubbles affect our lives (and reward irresponsibility), I understand the die broke concept. It’s the living broke part that gives me hives.
Technically doesn’t he only have something like $60K to pay off? $230K house + $40K to pay balance + ~$20K for transaction/realtor.
That math looks roughly correct, assuming they could find a buyer that would pay at least $230k for that house. Then all they have to do is cough up another $60k cash (which they haven’t got, which is why they were getting into HAMP)to bring to the signing table and they will be broke, $60k+ in debt and have no roof over their head. Tell me again how their house decision was such a great deal and buying real estate is so smart? Better yet, go tell them.
They don’t think they’re ever going to die.
The big problem will be when one of the checks out first. The remaining spouse will be in a pickle.
FHA First Time Buyer $0 Down:
FHA Loans Direct is pleased to announce that we offer $0 down for homebuyers! This is a fantastic program that you can take advantage of. A lot of people really like this option when compared with the USDA because the USDA is limited to rural areas only. With the FHA you can buy a home in urban or rural areas so there are a lot more options available when looking for a home. Through the Bond 79 Program you can get Down Payment Assistnace (SIC) up to 5% towards your home.
Here are the requirements:
640 or better credit score
Can be in urban or rural area
Closing costs can be rolled into the loan or paid by the seller.
Here are the Benefits:
You will save thousands of dollars. No Down Payment!
Can buy home in urban or rural area
Can buy new home, existing, or have one built brand new
…but the DTI requirement is 48%…it’s a great time for taxpayers to lend money!
This is absolutely despicable.
Are you interested in buying a million dollar home, but having trouble saving up for a downpayment? Here is a great suggestion: TAKE OUT A MILLION DOLLAR ZERO-DOWNPAYMENT LOAN TO FUND THE PURCHASE!
What I am missing in this article: Where does the federal subsidy enter the story? My guess: The loans are federally guaranteed against default, including on the downpayment that wasn’t made and 100% of the bloated purchase price that was enabled by the absence of a downpayment requirement. But that is just a guess.
Is a down payment essential for a solid mortgage? Two credit unions suggest no.
By Kenneth R. Harney, Published: May 2 | Updated: Friday, May 3, 6:50 AM
Rick McCleary - Navy Federal Credit Union, the largest credit union in the country with 4 million members, offers a zero-down option for qualified home purchasers coast to coast with no mortgage insurance.
Who says lenders need to charge you a down payment when you take out a mortgage in this era of hyper-strict underwriting?
Just about everybody:
…
But hold on. Two prominent federally chartered credit unions beg to differ with this consensus opinion. They have quietly been running what they consider to be successful, carefully administered zero-down-payment programs for much of the past two years, and they are seeing almost no defaults or foreclosures.
Navy Federal Credit Union, the largest credit union in the country with 4 million members, offers a zero-down option for qualified home purchasers coast to coast with no mortgage insurance. On top of that, it allows “seller concessions” — contributions by sellers of homes to defray buyers’ closing costs — as high as 6 percent of the home price.
The maximum loan amount is $1 million, but typical loans are in the $200,000 range. The program is targeted especially at first-time purchasers because they often are short on down-payment cash but may otherwise be creditworthy. Navy Federal says it has closed $740 million of these zero-down mortgages in the past 12 months alone. The credit union retains all loans in its investment portfolio and services them on its own.
…
So there might be some other thing to “qualify” you other than FICO or down payment?
Oh my…you don’t say…what ever could that be.
“…what ever could that be.”
A willingness to play the greater fool.
Let’s review:
The credit union retains all loans in its investment portfolio and services them on its own.
So which greater fool are they selling these loans to, again?
And with almost no defaults or foreclosures, I’d be hesitant to call label them fool of any stripe.
‘No defaults and foreclosures’?
LMAO
“And with almost no defaults or foreclosures, I’d be hesitant to call label them fool of any stripe.”
The same comment would have pertained to Countrywide, Ameriquest, New Century Mortgage, Washington Mutual, etc etc etc CIRCA 2006.
That’s because those 2006 loans were ARM, nega-am, I/o, or other loans with a grace period . The defaults happened after the grace period ended and monthly payment went up. Are these Navy loans that type, or is the payment fixed?
Oh wait, I’m not allowed to ask that.
‘I’m not allowed to ask that’
You can ask all you want. But since you seem so interested in this question, why not spend a few hours on the internet researching it (or make phone calls) and let us know?
I live in a Navy area. There is more recourse with Navy borrowers, so a lot of lenders love them. There are even stores full of overpriced junk with easy credit that are only open to Military/Government employees. USA Discounters and Freedom Home and Electronics are two.
Meanwhile, all the apartment prices are jacked way up to take advantage of their housing allowances. We’ve got so many new apartment projects starting it’s nuts.
$1800/mo for a 2 bedroom generally.
Behold the handwriting on the subprime stuccoed wall:
Politics
Housing nominee Mel Watt helped create the subprime crisis
10:03 PM 05/05/2013
Mel Watt, President Obama’s nominee for director of the Federal Housing Finance Agency, pushed government programs to help welfare recipients buy homes during the creation of the subprime mortgage bubble.
Watt, a 20-year Member of Congress from North Carolina’s 12th district, also had a hand in programs allowing borrowers with poor credit to buy homes with no down payment. The American financial system was subsequently destroyed when millions of bad borrowers defaulted on their loans, setting off a market crash that wiped out nearly 40 percent of the net worth of Americans.
In 2002, Watt teamed up with Freddie Mac and Fannie Mae, Bank of America, BB&T, and UJAMMA Inc., to announce Pathways to Homeownership, a pilot initiative designed to give home loans to welfare recipients.
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Republicans want comprehensive housing plan along with new FHFA chief
By Vicki Needham and Peter Schroeder - 05/05/13 01:32 PM ET
President Obama’s nominee to take over the regulator overseeing Fannie Mae and Freddie Mac has led to Republican calls for a White House path forward on housing reform.
On Wednesday, Obama tapped Rep. Mel Watt (D-N.C.) to lead the Federal Housing Finance Agency (FHFA), which is charged with overseeing the mortgage giants that are still stuck on a government lifeline.
But while members of both parties are huddling and discussing comprehensive legislation to overhaul the housing market, the nomination is opening fresh calls for the White House to step forward.
Republicans argue that if the president wants to pick a new head to oversee the biggest presence in the housing market, it is up to him to present a comprehensive plan.
“Obviously if you’re going to replace an interim person with somebody permanently, it is incumbent upon the administration to lay out how they plan to transition away from Fannie and Freddie,” Sen. Bob Corker (R-Tenn.), who is working on a housing reform bill, told The Hill.
Sen. Mike Crapo (R-Idaho), the ranking member of the Senate Banking Committee, which will vet Watt’s nomination, agrees.
In a statement, he said the Obama administration “must provide a long-term plan on how to end the conservatorships and responsibly transition to a more stable housing finance system.”
“As the nominee, Congressman Mel Watt has the task of demonstrating that he possesses the necessary political independence, expertise and commitment to structural change required to achieve the necessary reforms at this critical juncture,” Crapo added.
Liberals hailed the Watt nomination, as they had long been frustrated by the stewardship of the FHFA’s acting director, Edward DeMarco, who has resisted efforts to allow Fannie and Freddie to participate in programs aimed at helping struggling homeowners.
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It seems to me that any serious observer of the housing bubble realizes that it was a) debauched lending and b) the ability of lenders to totally shed repayment risk, that allowed house prices to skyrocket. People were able to borrow more and more to put down on a house.
IF lenders are forced to keep skin in the game, it will suppress house prices as they will naturally create loans more likely to be repaid. As they will lose money if they do not, as they did before securitization.
However, the policy makers have virtually unlimited amounts of OPM - other people’s money. And they want high house prices back, as it benefits their friends (ask yourself, what sector have the current policies unfailingly benefitted?), and the most powerful policy maker (central bank/Bernanke) loves having people in deep debt.
Thus, like one trick ponies, they’re going to try and re-debauch lending standards. Yes, it sets up another boom bust cycle, but it seems anything more than the immediate term is not a concern for economic policymakers. Keynes said, “In the long run, we are all dead.” They take that as a commandment to engage in as much immediate gratification as possible.
“…they’re going to try and re-debauch lending standards.”
As though it hasn’t already happened…
‘Whitney reports that the banks are sitting on over 7 million homes. He observes: Five Star Institute economist Mark Lieberman has done considerable research on the homeownership rate by combing through the US Census Bureau report. He found that: “The number of housing units held off the market in the first quarter though was 7,609,000 up from 7,299,000 in the fourth quarter and but down from 7,633,000 a year ago.” (Homeownership Rate Drops to 18-Year Low, DS News)’
‘Can you believe it? So the banks are keeping more than 7 million homes off the market to reduce listings, create the illusion of “scarcity,” and push up prices. And just look at the numbers. They haven’t budged in the last year, which means that things aren’t really getting better at all. It’s a complete hoax, in fact, it might be the biggest charade of all time.’
‘But things could change thanks to Barack Obama, who has found a way to ingratiate his bankster campaign “investors” even more. There’s a new program which gives people with homes at risk of foreclosure no-doc, government guaranteed loans.’
‘Sound good? It should– for the banks. They’re sitting on a mortgage that is probably under water, maybe worth nothing or a lot less than the paper they’re holding, and Obama comes to the rescue, offering a guarantee on the loan the owners take to save their house. if they skip out after the loan, the government has guaranteed to pay the full amount.’
‘This is why housing prices are going up, because corrupt, carpetbagging public officials and their price-fixing allies at the Fed have moved heaven and earth to do the banks’ bidding and to make sure they don’t lose one red cent on their garbage stockpile of distressed homes.’
‘It’s certainly not surprising that Obama is cutting deals that screw the nation and protect bankers. He has a deep history of appointing bankers to key economic positions. They’re going to put banks first, and see the banks safety and health as most important for the economy.’
http://www.opednews.com/articles/The-Banks-Voluntary-Housi-by-Rob-Kall-130505-988.html
And just look at the numbers. They haven’t budged in the last year, which means that things aren’t really getting better at all. It’s a complete hoax, in fact, it might be the biggest charade of all time.’
Hoax, Ruse, Charade.
And the numbers aren’t going to get “better”. Here’s what we know;
-Housing Demand is at 16 year lows, and falling
-Housing prices are massively inflated at 2004 level prices
-25 MILLION excess, defaulted or empty houses still need to be deposed.
-An additional 35 MILLION houses will be vacated over the next 15 years. This process has already begun.
-An estimated 60 MILLION borrowers paid massively inflated prices for housing from 2000-current. They will never recover the lost money.
-One failed presidency after another compounds the problem.
WrongWayBarack has institutionalized the problem into what will be the deepest, broadest and most violent housing price correction in history.
Thanks Obama!
“Whitney reports that the banks are sitting on over 7 million homes.”
Is there any cost to them to just sitting on those homes until they crumble into desuetude?
If so, what is the cost? Because I’m missing it…
Not as long as they are adequately capitalized.
http://www.census.gov/housing/hvs/data/histtab8.xls
How about some critical thinking here? Vacant and held off the market does not mean owned by the bank and held off the market. That 7.6 million homes represents 41% of all vacant homes, and 5.7% of all homes).
In Q1 2004 (when there was very little REO), there were 5.955 million vacant homes held off the market (37.8% of all vacant homes, and 4.9% of all homes).
In Q1 2000 (internet bubble booming), there were 5.408 million vacant homes held off the market (39% of all vacant homes, and 4.5% of all homes).
Things are out of whack, but we’re talking 5.7% of all homes vs. 4.5% to 5% as not unusual.
That blogger has it wrong. The homes listed by the Census are not all held by banks. I’ve posted a link (yet to show up) from the Census that has the data going back to 1965.
Long story short, many millions of homes fit this Census category even when bank REO was at record lows.
Do you know someone with a second home that they use from time to time? This is a vacant home used occasionally, and is part of the 7.6 million.
Another category is vacant, but “URE”, meaning “usual residence elsewhere”.
These two categories make up about 3.6 million of the vacant homes.
The category that matters is Vacant “Other”, which includes people NOT selling their home on purpose…waiting for a different time to sell.
This category is about a million and a half higher than it “should be” based on what that category was in 2001-2004.
Within that million and a half is REO, but also the 300k zombie foreclosures that are not yet REO, but mired in a foreclosure process. Also in that category are flippers (fixing the home before sale), and individual owners who don’t want to sell right now (for whatever reason).
The best estimate that I’ve seen for REO is about 500k. Foreclosure Radar has CA at about 50k.
Less than 10% of what the blogger claims.
Yeah he’s wrong and so are you. He’s 18 MILLION houses short of the actual excess housing inventory.
warren buffet says stocks will go higher after he got his banks got bailed out.
Can anyone real see any value in stocks at these levels?
The only thing I can think of is if Europe and the US went on a jobs program and put a large % of their populations back to work. This might get inflation going and in a way that could pump up profits at companies. The austerty supporters are having a harder and harder time of it.
You’re a month late for April Fool’s day.
I’ve been long treasuries ever since GS called for the great rotation. So obviously I don’t think this is most likely. All I can say is if interest rates go higher you do not want to be in the stock market. It will get crushed. Buffett is just part of the machine trying to draw people into the market. His image is cultivated.
Despite this I have cut my holdings significantly.
I wish the market would just up and crash already! I am shorting it. Everyone please send crashing vibes out for me.
Thanks.
I’ve got a different crash hedge strategy in play now, because I lost lots of dough on shorting the home builders too early and too deeply for the big crash to pay off.
Ask me whether it worked after the next 10%+ leg down in stocks and I will promise to honestly report…
I bought a fund called SH. I am not directly shorting. I let SH short for me. I can make less money this way, but have less risk. I think it’s fun, but only if the S&P actually gets around to crashing before I die. Why is it so slow?
Dude, there will be plenty of time to buy SH if and when the market turns.
You’re fighting a losing battle at this time. Just stay in cash.
Just as a data point, the 3/2 where my wife and I rent in Orlando was sold on 02/21/2007 for $280,000. It currently has a 2013 estimated value on the county website of $132,857. This is an increase of $1,500 (+1.1%)from its 2012 estimated market value. This is AFTER all the re-inflation price hype of Bubble 2.0. Good times…
It took Trillions of dollars to buy that bounce. The next leg down should be spectacular.
The paltry size of the housing bubble reflation bounce created by $40 bn a month in Fed-funded QE3-MBS purchases does indeed suggest a spectacular collapse may lie in store.
No matter what sort of white noise is thrown at us IMHO it always comes down to that.
It took Trillions of dollars to buy that bounce. The next leg down should be spectacular.
“There are horrible price distortions in all areas of the bubble economy.”
http://www.bloomberg.com/news/2013-05-02/near-record-nyse-margin-debt-leads-to-caution-chart-of-the-day.html
“Near-Record NYSE Margin Debt Leads to Caution: Chart of the Day”
Is there any way to create a standardized comparison of today’s level of margin debt to, say, the level as of the Great Crash in 1929?
“Buying a house at current massively inflated prices is a weapon of financial self-destruction.”
It takes leverage to produce real financial destruction.
You’re right. Writing a check for a house that is priced 3x over long term trend merely results in personal financial self destruction.
Sac..Housing talk…
http://cl.exct.net/?ju=fe631c70756007797317&ls=fe1b1d777d6c017e741275&m=fefc1172766306&l=fed1157376640678&s=fe35157277640d7d711074&jb=ffcf14&t=
Sacramento actually looks promising for the public. Demand and sales are crumbling as they should considering prices are grossly inflated.
The market is working.
http://www.zillow.com/local-info/CA-Sacramento-home-value/r_20288/#metric=mt%3D30%26dt%3D1%26tp%3D4%26rt%3D8%26r%3D20288%26el%3D0
Sacramento?!
Sacrebleu!!
The real shadow inventory are the underwater owners who would sell if they weren’t underwater. Prices haven’t risen enough, so those people sit on the sidelines.
What is interesting in my nabe is that prices are still above 1999 levels (about ~30% higher) but few are put on the market. The few houses that are put on the market sell quickly. It’s still early May so that could change.
What is also interesting is that locally there is no building frenzy. Unlike in 2005, new houses are NOT popping up like mushrooms on an over fertilized lawn.
Prices have only fallen to late 2003 early 2004 levels. And of course by that time, prices had doubled and then some. The bottom is still a long way down.
I see the same debtor’s pergatory in my neighborhood, and no new construction. Just the first step in a flight of stairs.
underwater owners = my 60-something coworkers who can’t afford to retire
So what if they don’t have a mortgage in their 60’s?
If you bought a house 1998 to current, your balance sheet reflects a gross misallocation of capital, even without the mortgage payment.
These are huge losses. Massive. That doesn’t meet the definition of retirement.
The real shadow inventory are the underwater owners who would sell if they weren’t underwater. Prices haven’t risen enough, so those people sit on the sidelines.”
with stocks that is known as “overhead resistance” and has to be broken through to confirm a trend to the upside.
we are not there yet with housing. If we do get there it is somthing to watch. peak 2006 prices are the overhead resistance.
I’ve been told in parts of LA it has blown through old highs , the million dollar homes. I don’t know I don’t follow that.
Pacific Palasades, Calabasas, places like that. A Engineer I work with’s other half is a flipper, tear down and rebuild.
Limited supply story as the cities don’t allow new building except under strict control and heavy fees.
I should ask what it costs to rebuild per square foot
You already know that.
Add in your demo, transportation and disposal costs.
Ryan Home developments have started up again in this area. Also some condo unit developments that stopped expanding are at it again. I gotta get out and check my favorite custom builder neighborhoods.
Current inflated housing prices are 200%+ over Long term trend, even though the cost to replace that house is nearly have the asking price of resale housing.
You believe wages are going to double to meet grossly inflated resale housing prices?
Do you believe in the the tooth fairy too?
My favorite of all time:
http://www.halfhill.com/inflation.html
Look in your paycheck if you want to understand what inflation is.
Too depressing.
Look at what percent of your paycheck goes to paying for housing, college tuition, transportation and food over time if you want to understand what inflation is.
“Fed tapering talk may be premature”
Ya think!?
Fed tapering talk may be premature
May 6, 2013, 11:21 AM
After the stronger-than-expected April nonfarm payroll report, talk of the Federal Reserve tapering asset purchases picked up speed again over the weekend. But is it premature?
Tom Porcelli, chief U.S. economist at RBC Capital Markets, thinks so. He just wasn’t so thrilled with the latest reading of the health of the labor market.
“We recognize at first blush it was better than feared,” Porcelli wrote in his weekend note.
The economy added 165,000 jobs in April and the unemployment rate fell to 7.5% and revisions to the prior two months were strong.
But that is where the “feel good numbers end,” Porcelli said.
The private payroll diffusion index, which measures how many industries are adding workers, slipped in April for the fourth straight month to a fresh 8-month low of just 53.9%, he noted. “In other words, the payroll gains were very narrow,” he said.
And the income data was worse, he said. The drop in hours worked in April means that aggregate wages shrunk 0.2% as we kicked off the second quarter.
Wages are the ammunition for spending. So “the very disappointing start to the quarter comports with our view that real consumption will slip to just 1% from north of 3% last quarter,” Porcelli said.
“This uneven backdrop means the Fed will remain accommodative and talk of tapering purchases, at least anytime soon, is premature,” he said.
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I read this and saw… er, a dirty word.
There are no dirty words…only dirty actions.
ABREAST OF THE MARKET
Updated May 5, 2013, 4:53 p.m. ET
U.S. Treasurys Still Defy Bearish Calls
By CHRISTIAN BERTHELSEN and MIN ZENG
Bond-market bears are taking their lumps—again.
A run of uneven economic data this spring has wrong-footed scores of investors—including some of the bond world’s boldface names—who entered the year betting that an accelerating U.S. expansion would send Treasury prices tumbling, ending a three-decade-long fixed-income bull market.
Among those who have rolled back bearish calls are Bill Gross, founder and co-chief investment officer of Pacific Investment Management Co., and manager of the world’s biggest bond fund, and Rick Rieder of BlackRock Inc., BLK +1.11% who oversees fixed income for the giant investment firm with $3.96 trillion in assets under management as of the end of March. Even so, the diversified bond funds run by both investors are beating their market benchmarks this year.
Pimco founder Bill Gross began the year betting against 10-year Treasurys. But the feared declines in the market haven’t come to pass.
Messrs. Gross and Rieder are among dozens of investors and pundits who have warned after the financial crisis of the risks of holding U.S. government debt with interest rates near record lows. The feared declines in the Treasury market haven’t come to pass, however, amid tepid economic growth and the Federal Reserve’s easy-money policies that bolster bond prices.
Since the end of 2009, Treasury debt has returned a total of 19%, including price appreciation and interest, according to Barclays. Even with government-bond prices sliding after Friday’s report of stronger-than-expected U.S. job growth, the 10-year Treasury yield, at 1.740%, is roughly flat with the end of 2012, and less than half of the April 2010 postcrisis peak of 4.01%. Bond yields fall when prices rise.
Investors say the reversals for bond bears highlight the perils of investing in a slow-growth, low-interest-rate world and underscore the need to approach the $11.4 trillion U.S. Treasury market opportunistically.
“It’s not timely to be betting on higher interest rates,” said Jeffrey Gundlach, chief executive and chief investment officer of DoubleLine, a Los Angeles firm with $59 billion under management. He said economic growth remains too soft to allow the Fed to consider cutting back its $85 billion-a-month bond-purchase program known as “quantitative easing,” a shift he views as a necessary precursor to any increase in interest rates.
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Buffett: “You could lose alot of money.”
Buffett: Stocks are great right now, but bonds are bad news
May 6, 2013, 8:24 AM
If you didn’t collect enough of Warren Buffett’s wisdom from Berkshire Hathaway’s annual meeting, the news channel CNBC followed up Monday with a Buffett lovefest, interviewing the Oracle of Omaha for several hours about his views on everything from Jamie Dimon and J.C. Penney to bonds and his individual businesses.
Bonds, he said, are “a terrible investment right now,” and stocks “aren’t ridiculously high.” This after the Dow Jones Industrial Average and the S&P 500 hit records Friday and with some big investors having at least temporarily backed off bearish bond calls. (Remember Bill Gross in April?)
While there are some conditions under which he’d buy bonds, those don’t exist today, Buffett said. With the Federal Reserve buying $85 billion a month in bonds, government debt is priced “artificially” right now, in his view. “When that changes, people could lose a lot of money.”
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“Buffett labels stocks a buy but calls bonds bad news”
Buffett makes a major stock buy call, and the market’s response: NADA…
So much Eurozone gloom, so little stock price correction…what gives?
Europe Markets Archives
May 6, 2013, 12:05 p.m. EDT
Europe stocks drift lower after downbeat data
By Barbara Kollmeyer, MarketWatch
MADRID (MarketWatch) — A pan-European stock index finished marginally lower on Monday following gloomy euro-zone economic data.
The Stoxx Europe 600 index fell 0.02% to end at 300.97.
Europe’s biggest airline Air France-KLM Group fell 4.3%, making it the top decliner in the Stoxx 600. The group said Friday that its net loss widened sharply in the first quarter as it battled a tough economic climate.
Investors digested on Monday economic reports including one showing the volume of retail trade fell 0.1% in March in the 17-member euro area.
Separately, a Markit euro-zone composite managers’ output index was revised up to 46.9 in April, remaining below the key 50 level that separates expansion and contraction. Economists at Goldman Sachs said in a note that the upward revision doesn’t necessarily mean anything. “It is too early to say with any confidence whether today’s numbers mark the beginning of another upswing in euro-area confidence in the coming months, similar to the one seen from November to February,” they said in a note.
After the Federal Reserve and the European Central Bank shifted their monetary positions this week, the market will be looking to see if the Bank of England does the same. But with the U.K. economy showing signs of a bounce, this appears less likely.
The Stoxx 600 reached a new 52-week high on Friday and gained more than 1% in that session, the biggest one-day gain since April 23. Last week, the index rose 1.7%.
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RealtWhores and MortgageDebtPimps are doing their best to keep their charade going in the media. They need a steady stream of suckers to feast on.
Don’t be one of them.
Was anyone surprised to see the wealth (200+ Million) Gore has amassed in just 12 years?
And honestly he didn’t put a signle day’s hard work…….
Wow just wow.
Maybe he always made a lot (alot?) and Tipper just spent it all?
allot
He went on the lecture circuit. But also did a bunch of investing - got in the ground floor on a couple of things. Not my favorite pol, but good for him. He did sell a bunch of stock last year when tax rates were lower. Lile a lot of limo liberals he believes in high taxes - for others of course.
How exactly does a relatively paltry trickle-down $26 bn mortgage settlement compare to the Fed’s $40 bn monthly in QE3 MBS purchases for helping to “halt the housing market’s downward slide”?
Investment Banking | Legal/Regulatory
May 6, 2013, 9:31 am
New York to Sue Wells Fargo and Bank of America Over Settlement Violations
By JESSICA SILVER-GREENBERG
Eric Schneiderman, New York’s attorney general. Reuters
11:03 a.m. | Updated
New York’s top prosecutor plans to sue Bank of America and Wells Fargo over claims that they violated terms of a $26 billion mortgage settlement, his office said on Monday.
Eric T. Schneiderman, New York’s attorney general, paved the way for a lawsuit against both banks over what he said was “repeatedly violating” the terms of the National Mortgage Settlement, a sweeping pact brokered last year between five of the nation’s biggest banks and 49 state attorneys general over foreclosure abuses.
The move by Mr. Schneiderman is the first time that an attorney general has readied a lawsuit against one of the five participating banks for running afoul of the settlement. More attorneys general could follow Mr. Schneiderman’s lead.
Under the terms of the settlement, which was aimed at halting the housing market’s downward slide and providing relief to languishing homeowners, the banks had to improve their servicing standards. The guidelines outline more than 300 servicing standards that each bank must follow when working with struggling homeowners. Those terms include notifying borrowers within five days that the banks have received necessary documents to complete a loan modification.
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The home equity ATM machine ain’t all that no more.
Bulletin » Google shares top $850 level for first time
The Markets News and Analysis Blog
Housing wealth not boosting economy as much as it used to: report
May 6, 2013, 10:00 AM
The recovery in house prices may mean fewer Americans are underwater and that Fannie Mae, Freddie Mac and a host of banks are seeing profits climb. But, for the broader economy, it’s not generating the bang for the buck it used to.
A Bloomberg article cites Amir Sufi, a professor of finance at the University of Chicago Booth School of Business, as saying that each dollar increase in housing wealth may yield as little as an extra cent in spending, compared with a 3- to 5-cent estimate among economists prior to the recession.
Why? Two reasons: One, some homeowners just don’t have the credit to refinance. But, second, some eligible homeowners are opting not to use their homes as ATMs and instead are paying off their mortgages quicker. The report cites Freddie Mac data in showing that borrowers who refinanced last year took $29 billion of equity out of their properties, down from a peak of $321 billion in 2006.
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Opting not to use their homes as ATM’s? How dare they! That’s un-American, anti-capitalist, and just plain commie. It is the moral duty of every American consumer to transfer all of their moneys to banks by paying mortgage and HELOC interest.
apparently they are not “sophisticated” investors.
Apparently “heads we win, tails you lose” is a corporate business model whose reach extends far beyond Wall Street.
Business columnists
With nuke near death, consumers staring at $3B tab
By Dan McSwain 05:00p.m. May 4, 2013
The San Onofre Nuclear Generating Station has been closed for 14 months after tube vibrations caused a leak of radioactive water. [U-T file]
If utility executives pull the plug permanently on the San Onofre nuclear plant, the list of losers is long: consumers face nearly $3 billion in costs, the risk of blackouts will rise, and air quality will suffer.
Yet Southern California Edison, the giant utility that botched the nuke’s retrofit and caused its shutdown, seems remarkably confident that its investors will emerge relatively unscathed. Welcome to the great coin toss of regulated monopolies, where utility shareholders typically win on heads, and consumers lose on tails.
Given that Edison led the project that essentially installed faulty radiators in its nuclear reactors — after deciding to use an untested new design from a contractor — the odds for consumers may be better this time, in what’s shaping up as the biggest regulatory struggle in a decade.
The referee is the California Public Utilities Commission, which has an almost unblemished record of siding with utilities – and against consumers – in disputes about who pays for investments in generating electricity. But Gov. Jerry Brown appointed four of five commissioners. He may be susceptible to public pressure.
Meanwhile, the clear winners include the independent generators and Wall Street trading firms raking in surprise profits in Southern California’s generally depressed power market, as utilities spent $516 million last year just to buy the electricity to replace San Onofre’s lost output. SDG&E, which owns 20 percent of the plant, spent $72 million of that total.
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Apparently “heads we win, tails you lose” is a corporate business model whose reach extends far beyond Wall Street.
Welcome to the last 30 years.
Don’t forget they now have more rights than you and I as well.
Also have more freedom of $peech…
I’ll bet those that bought solar panels will be happy when they jack up the price of power to pay for this theft.
I bet they pass the cost onto people that don’t even use electricity.
Operating a nuclear reactor is like driving a 18 wheeler with a brick on the gas pedal and trying to control it with just the brakes. The thermal efficiency of most existing nuclear plants range from 30% to 60% with the bulk of the excess heat dumped into cooling ponds or rivers. This is why thermal electrical power could be vulnerable to shut downs during extreme droughts.
Wednesday, May 01, 2013
Mel Watt may make Franklin Raines look like a chump
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when it is all said and done…….and it isn’t over by a long shot…….the carnage to the American taxpayer will continue……….and like Jim Rogers always asked, “why Franklin Raines isn’t in jail” is anyone’s guess.
Mr. Watt’s lobbying dollars coming almost exclusively from Wall Street, Lawyers/Law Firms, and Labor Unions, the $7+ trillion in US mortgages, and sole source of mortgage creation in the US, is in “very good”, if just a little conflicted and quite socialist, hands. Mortgage forgiveness-demanding, crony capitalist comrades of the world, unite! (while charging $1000/hour)
Mel Watt’s biggest career contributors by industry:
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Not only is ol’ Franky not in jail, but he demanded, and GOT, several extra million severance.
Just what the hell does he know?
Detroit seeks to relax house demolition rules
Detroit seeks a quicker fix to blight problems
Leaving basements would cut costs, allowing Mayor Bing to raze more in quest to demolish 10,000 abandoned houses
The city is considering relaxing demolition rules to expedite its uphill blight battle against nearly 30,000 dangerous buildings.
State officials and the son of a firefighter killed in a fire in a vacant home are lobbying Detroit to change ordinances to allow crews to leave most basement walls and floors during demolitions. That and other proposed changes could shave up to $2,500 off the $8,500 per home demolition cost.
Detroit and most other cities have required contractors to remove basements since the late 1990s to prevent drainage problems and lower redevelopment costs. Some say the discussion illustrates just how desperate the city is to make headway in its blight fight. Bing has demolished nearly 7,200 homes in three years, but the city has 31,000 structures on its dangerous buildings list.
“It’s unfortunate that these have to be our options because of the overwhelming blight,” said the Rev. Jerome Warfield, of the Mt. Vernon Missionary Baptist Church in Brightmoor, a neighborhood with some of the highest concentration of the city’s dilapidated homes. “We’ve allowed things to deteriorate so much that … it is one of the choices we have to consider. There’s no clear winner.”
The idea is being floated separately by Michigan Department of Human Services Director Maura Corrigan and the newly formed Detroit Blight Authority, a private demolition campaign led by developer Bill Pulte and the Kresge Foundation. Hill-Harris serves on the group’s board.
Most cities nationwide, however, require demolition crews to remove basements, said Alan Mallach, a senior fellow at the Center for Community Progress, a nonprofit focused on vacant and abandoned properties. Experts warn changing the policy would drive up redevelopment costs and lead to other problems.
“Simply put, don’t do it,” said Cheryl Stephens, director of acquisition, disposition and development for the Cuyahoga County Land Reutilization Corp. in Cleveland. “Just do it right the first time. People are looking for a quick fix but there’s no quick fix in urban development.”
Her office has overseen more than 1,600 demolitions in Cleveland area over the last three years.
“It may be cheaper today, however, the savings of 10 percent or less is not worth it,” Stephens said. “All of the standard costs for demolition have been incurred by the time the basement is reached and most of the debris hauled away.”
Among the proposed changes being pushed by state officials, crews would only have to remove the first 2 feet of the basement walls below the ground. The rest can be left as long as it is broken up to ensure water drainage. And contractors could use inorganic sand-like material, including pulverized brick and concrete material, to fill the majority of the basement hole, under the state’s proposal.
The changes would save money through reduced landfill fees, gas and labor and clean fill dirt.
Housing developer Cynthia Solaka said she understands the need to demolish more homes but said shifting the removal cost to developers, especially those pitching affordable housing, could be a problem.
“We would prefer basements and all debris be removed,” said Solaka, a co-developer of the Penrose Village II project in construction near Seven Mile and Woodward. “It kind of slows things down. We’d have to build in that cost.”
Others say it makes sense.
Make them easy to tear down, but hard to build. That will help house prices to remain more unaffordable.
If you remove a basement don’t you still have a hole in the ground?
If they really want to save money, they should bulldoze the remains of the house into the hole. Then throw a bunch of tree seeds on it.
That’s what they do to old strip mines. They claim the trees actually grow better on the rubble than on graded ground.
Hello, everyone. I have been working like crazy, but I have a day off today. Anyways, I have noticed housing prices getting really, really expensive again. I’m not sure if some areas are near the peak, because I have not had access to much information besides the news lately. Rent also seems to be rising, especially in the Long Beach area. It makes me insane knowing people think this is “normal”.
My husband recently was able to get a part time job, which is good, but of course it’s minimum wage. His friends/family are pimping a college degree to him and get angry when I insist there is high unemployment. Apparently, taking out tens of thousands in loans is still considered a great financial move right now.
He has recently expressed an interest in an electrician apprenticeship, and I was wondering if anyone has any advice for us. From my understanding, he should probably avoid trade schools, as you will learn all of that in an apprenticeship. I’m not sure how hard it’s going to be to get one in SoCal, but frankly, we are willing to move back to Pennsylvania if necessary. The only reason I stayed here is because I’ll get more financial aid for college,essentially getting a degree with little or no debt, but I’m even second guessing that. I have thought about several majors, but I get scared when I think about unemployment. I am fairly intelligent, especially in math and science, but I think there might be a severe oversupply of STEM majors. I know I’ve came here for advice before, some housing related and some not. I hope I am not annoying anyone, but this seems to be the only blog where I am on the same economic page with people.
Also, how many of you have lived in the SoCal area and moved? Are you happier? People here seem to live to work, and not the other way around. It’s a weird idea to me.
I hope all of you are doing good, and I miss reading the discussions here!
Eh… I dunno. I kind of like this quote;
“Somebody posted here recently that many on this blog had no patience. I’d add no nose for bull sh#t either.”
Well, I take everything with a grain of salt. I like that quote, too. I’m extremely skeptical of any advice, but I figured a lot of people here have more experience than me. Then again, my generation most likely has a higher unemployment rate, and the advice might apply differently to me. Thanks for the response, though.
When I was in college, I worked as a dispatcher for a plumbing company. I graduated 11 years ago, and I’m pretty sure I’m not making more than the plumbers did when they were my age. The owner of the plumbing company (a GC) was definitely making more. At the time, people with my degree were making waaaayyyy more than they do now. An apprenticeship might not be the worst idea.
Aside from comparing the salaries of college degree holder vs apprentice, our goal is to have as little debt as possible, so it seems like a win/win.
Here in Tucson, you can take your apprenticeship intro classes at the community college. Then you go into the actual apprenticeship program.
Thanks for that bit of information, Slim! I swore I saw something a few weeks ago about that going on in Long Beach, but it confused me because I only heard of traditional apprenticeships.
Good luck with the career choices. Try to find employment that you will enjoy rather than just going for the money. People are unemployed in PA too, but at a lower cost of living mostly.
The economy is very unstable, and it is not going to heal in a year or two. Avoid long term debt in this situation. Being free of debt will give you more options.
Yeah, every time I think about moving back, I think, “Well, at least I don’t need a car here.” Over where I lived, the bus system was horrid. When factoring in food and transportation, living here is somewhat comparable. The issue is competition here. I feel like being so young, having little family here, no connections, and lack of experience put me at a disadvantage. In PA, I could make the same salary working less hours (CNA). However, when factoring in my enjoyment, I feel like making connections here and getting a degree would be the best option for me, especially since my tuition and living expenses would be covered with grants and my husband working.
I guess the one great thing we have going for us is we don’t need a lot of money. We are both minimalists, and prefer to enjoy free activities.
If you believe high inflation is coming, it would be prudent to load up on as much long term debt as possible.
But wouldn’t you have to assume wages will inflate, too? Isn’t the fear of high inflation based on everything but wages will rise? How would you even begin to predict that? I’m sorry if you are being sarcastic and I’m a dummy for being serious about that. It’s hard for me to tell sarcasm over the computer.
If you use the debt to buy a cash-flowing asset, it could be a good strategy.
Well that DOES make sense, but it seems like a bit of a gamble. I don’t think loading up on as much long term debt as possible, as suggested by Steve J, was what you had in mind, though.
And housing is a huge gamble considering it’s negative cash flow at current inflated asking prices of resale housing.
Beware.
A common misconception. You still have to pay it back with paycheck that DID NOT adjust for inflation.
Oh wait, you were being sarcastic.
There is no severe oversupply of STEM majors, especially not ones that have very little debt. You should do what you like, but even today, actual college graduates have something like 50% higher lifetime earnings than non-graduates, and that includes people graduating with BS degrees and getting jobs at Starbucks.
As far as becoming an electrical apprentice, that’s fine if it’s something he’s interested in. It’s kind of a horrible job if he’s just doing it for the money - rushing from job to job and on the clock your entire life. Maybe he’s got the smarts to start his own company or can get in with a builder/remodeller and those are better than small time repair jobs. A job where thought & design is 50% of what you do is less soul-deadening than a job where you are doing the same thing over and over - and electrical work involves lots of repetitive work. I think they are union in CA - and they hold people out to control wages.
If he’s much over the age of 20, I’d not recommend college actually. Sorry but it’s too late - he’d lose too many prime earnings years.
he’d lose too many prime earnings years.
But he’s making minimum wage now- in SoCal, if I understand correctly.
Are you a CNA, CeeCee? You can do that anywhere. I think you guys should move. Pretty much anywhere else would be a lot cheaper. You could get your current type jobs anywhere.
I was comparing going to college (for something….) vs an electrical apprenticeship, not vs the status quo. You are right that either choice is better than continuing with minimum wage.
“You are right that either choice is better than continuing with minimum wage.”
+1 It’s still better to have an engineering degree and no job than it is to have a job and no engineering degree.
Hi, as a STEM major, I can tell you that there IS a severe oversupply of STEM majors. This results from offshoring and H1-B workers.
What I think I see is that there are plenty of the majors but a shortage of the people employers actually want. The ones who can self manage and are really into the technology and can make you a lot of money quickly. The ones that just do what they’re told and focus on life outside of work, not so much.
Carl:
Nobody wants to hire people with a BS who can think for themselves. The PhDs are threatened by those.
The people with a BS, these days, are doing work that could be done by a high school graduate. Thinking is against the rules. A BS in molecular biology living in Southern California right now will be lucky to get $15/hour after graduation. No joke.
Nobody wants to hire people with a BS who can think for themselves. The PhDs are threatened by those.
All I know is the storage side of tech. At small companies you see very few PhDs. And they don’t want people who just follow instructions. They want people who will solve the problems and make the customer happy without anybody above them needing to direct them. I came from the military and it’s been an adjustment for me.
Also, how many of you have lived in the SoCal area and moved? Are you happier?
We did. We don’t miss the bumper to bumper traffic, the high cost of living, the crime or the smog.
We do miss the snow free winters.
CeeCee, my own experience in the sciences indicates that there are jobs. My husband works for Big Pharma and they have difficulty filling positions that require bachelor’s degrees in chemistry or microbiology. These are good jobs with good benefits. Hospital based fields such as medical technology always need people.
Nope, that’s wrong. Those positions are offshored or filled by H1-B workers. Very few jobs; many applicants. If they are having a hard time filling the jobs, then they are probably offering $12/hour.
The only shortage comes from not enough pay.
There’s and old saying: There is no such as a job too dirty that an American won’t do for the right money.
such thing
Dammit I wish we had an editor.
As someone who takes full advantage of the community colleges in California (I’m taking Weight Training for Women this semester - a needed break from computer classes), you can get a very good practical education in areas that will help make you more valuable as an employee.
Here’s a link to the college in Long Beach. If your husband is really interested, he should start the admission process soon so he’s at least set up for the fall or perhaps this summer if they have classes.
http://www.lbcc.edu/electrical/
“Weight Training for Women”
Is this dieting or weight lifting?
I would like to know how all these people are somehow finding and keeping jobs in one town, such as to make it possible to own the house where they live. It seems the average job these days is good for three years. I have known a few people that stayed in a job for seven years. Perusing the pages on Linked In, I can see that many, many, many jobs are only good for one or two years.
How is it even possible to own the house where you live?
I have known many people to work under the table, at several jobs, putting in 16 hour+ days just to be able to afford it. And of course they have a spouse doing the same thing, and room mates. It does not make sense when you never actually get to enjoy where you live to buy a house you cannot afford.
If you are going to pay for the house with supposed future income, you don’t own it anyway.
I’ll be at my job 10 years in June. That’s a record for me. No plans of going anywhere in the near future (hopefully, the company has the same plan for me). Prior to this job, I held 7 others averaging about 2 years in each (one was 4). I didn’t buy a house until 3 years ago (yep, HBB, already on my 3rd anniversary of home ownership - hard to believe). Saved my arse off in all those earlier years to be able to put 25% down.
That’s how I did it.
eastcoaster-
Wow, you bought three years ago!
Time has flown.
Perusing the pages on Linked In, I can see that many, many, many jobs are only good for one or two years.
I’ve noticed the same thing.
And, speaking of noticing things, has anyone noticed an increase in the “join LinkedIn” e-mails? I’ve gotten up to 3 a week from them. Still haven’t joined.
If you give in and join, send me an invite :-).
I am on LinkedIn. But not as a paying member. I’ve never seen anything worth paying for.
I agree. Just saying…you can find me under the same name in Colorado if you want…
It’s not just changing jobs, but having your job moved that’s a possibility. Having a 10 minute commute jump to an hour would make me *need* to change jobs.
Eliminating weekday car usage has been a major factor in my increased happiness between 2012 and 2013. (When it’s rainy my wife still gives me a ride to Camden Yards in the AM.) It’s just been amazing how much less stress I have and how much more I get done. I actually used to dread going home at night and sitting in traffic. Now I love it, I practically skip out the door like a brony.
I miss walking to work, too.
I would like to know how all these people are somehow finding and keeping jobs in one town, such as to make it possible to own the house where they live.
The larger the metro area, the easier it is to find a new job. The downside is that the cost of living is much higher.
I know we’re all supposed to hate public employees (because private contractors are better,duh!) but this is one way that people know where they’ll be for a pretty long time. DC and Baltimore have a ton of federal employees, obviously.
Another way people know where they’ll be is because they own a business or have family concerns in the area. I’m scoping out a potential site a few blocks from my house for a Chicken & Waffles carry out (yes, I know that’s racis [sic]) once the road is fixed up. This way I’ll have my tax-reducing boot-strapping “small business” located very close to my wife’s job and our home. As Mittens would say, keep your friends close and your faux-S Corp even closer.
Chicken & Waffles?
Chicken and Waffles:
http://roscoeschickenandwaffles.com
I like soul food food as much as almost anyone, and am even a bit of an aficionado of the style, but I don’t understand the flavor, texture, or cultural combination of fried chicken and waffles.
I don’t believe it’s a traditional soul food dish, though some claim it is. Too many disparate menu items and cookware for a poor black cook.
Perhaps a play on the old rural southern practice of pouring molasses or sorghum on everything eaten, often including fried chicken and biscuits or johnny cakes. Maple syrup (or honey, molasses, or sorghum) does taste good with fried chicken, in a gross kind of way. Like a fried egg on a cheeseburger.
I put on 10 pounds just looking at the menu!
How is it even possible to own the house where you live?
A lot of jobs rely on local reputation and connections: doctor, lawyer, accountant, veterinarian, building contractor, repairman, RE/insurance/car sales, photographer, tattoo artist, hair stylist, etc. And then there’s gov workers, cops, firemen, teachers. Owners of local businesses. Retired people, the wealthy.
What about all the other people? How is it possible?
The other people (people whose jobs are inherently nomadic) are mostly stupid to buy houses. That doesn’t make it impossible, though.
Every nomadic worker/renter shall be punished by making tax payments which help to enrich relatively wealthier, settled homeowners.
“Valley fever” on rise in drought-stricken southwest
FRESNO, Calif. — California and federal public health officials say valley fever, a potentially lethal but often misdiagnosed disease infecting more and more people around the nation, has been on the rise as warming climates and drought have kicked up the dust that spreads it.
The fever has hit California’s agricultural heartland particularly hard in recent years, with incidence dramatically increasing in 2010 and 2011. The disease - which is prevalent in arid regions of the United States, Mexico, Central and South America - can be contracted by simply breathing in fungus-laced spores from dust disturbed by wind as well as human or animal activity.
The fungus is sensitive to environmental changes, experts say, and a hotter, drier climate has increased dust carrying the spores.
Nationwide, the number of valley fever cases rose by more than 850 percent from 1998 through 2011, according to the Centers for Disease Control and Prevention. In 2011, there were nearly 22,000 cases, with most cases reported in California and Arizona.
In California, according to the CDC, valley fever cases rose from about 700 in 1998 to more than 5,500 cases reported in 2011. The disease has seen the sharpest rise in Kern County, followed by Kings and Fresno counties.
Out of the 18,776 California cases between 2001 and 2008, 265 people died, according to the state health department.
Arizona saw an even steeper rise: The number of reported cases there went from 1,400 in 1998 to 16,400 in 2011, with the highest rates of infection occurring in Maricopa, Pima and Pinal counties.
Nooz from Tucson: No mention of the city’s high vacancy rate. Not that such a thing will stop in-VEST-ors:
Housing investors busy in Tucson as distressed properties hit market
From the story comments, we learn the truth:
Investors are buying up homes in my neighborhood which has led to more rentals and in turn more crime. Most of them also do not keep up the properties they’re renting which is further contributing to the decline of propoerty values and of the neigborhood in general.
Nice info AZ. Truth.
Capital Economics Predicts Further Drops in Homeownership Rate
http://www.themreport.com/articles/capital-economics-predicts-further-drops-in-homeownership-rate-2013-05-03
With the U.S. residential sector destined to face a flood of cheap rentals for years to come, that was an easy call to make.
New LPS Mortgage Monitor out today:
http://www.lpsvcs.com/LPSCorporateInformation/CommunicationCenter/DataReports/MortgageMonitor/201303MortgageMonitor/MortgageMonitorMarch2013.pdf
Downward trend on non-current loans continues in CA. See page 20. This was 7.3% last month, down to 7.0% this month.
13 of the worst 17 states are judicial (left column);
12 of the best 17 states are non-judicial (right column).
Last week you quoted David Pinocchio Lereah….This week you’re quoting an outfit where the CEO is a convicted felon and con artist.
Why is that?
WASHINGTON (AP) — It seems like a simple proposition: give employees who work more than 40 hours a week the option of taking paid time off instead of overtime pay.
The choice already exists in the public sector. Federal and state workers can save earned time off and use it weeks or even months later to attend a parent-teacher conference, care for an elderly parent or deal with home repairs.
Republicans in Congress are pushing legislation that would extend that option to the private sector. They say that would bring more flexibility to the workplace and help workers better balance family and career.
Why do I have the feeling this would end up being like Frequent flyer miles, Time shares, and pensions. Corporations paying for things with promises that would never be paid. Of course you know that Joe 6 pack would immediately be put under pressure to accept these terms.
free market republicans wish to compel private companies to offer this benefit?
get out of town!
free market republicans wish to compel private companies to offer this benefit?
Yep.
GOP seeks alternative to overtime pay By SAM HANANEL | Associated Press
“…..But the idea Republicans promote as “pro-worker” is vigorously opposed by worker advocacy groups, labor unions and most Democrats, who claim it’s really a backdoor way for businesses to skimp on overtime pay.
“This is nothing more than an effort to turn a sow’s ear into a silk purse,” said Judith Lichtman, senior adviser to the National Partnership for Women and Families. She contends the measure would open the door for employers to pressure workers into taking compensatory time off instead of overtime pay.
…..Phil Jones, 29, an emergency medical technician in Santa Clara, Calif., said he’s wary of how the measure would be enforced.
“Any time there’s a law that will keep extra money in an employer’s bank account, they will try to push employees to make that choice,” said Jones, who regularly earns overtime pay. “I know how we get taken advantage of and I think this bill will just let employers take even more advantage of us.”"
*snerk*
No Brazilian Banks needed to be bailed out during the world’s financial crisis in 08 but I guess they are taking no chances.
BC (Brazil’s Central Bank) wants to avoid using public funds to bail out banks in crisis
http://www.jb.com.br/economia/noticias/2013/05/06/bc-quer-evitar-uso-de-recursos-publicos-para-socorrer-bancos-em-crise/
(via microsofttranslator.com)
The Central Bank (BC) or that the public money is the last resort used to maintain the stability of the financial system in cases of breach of major banks to the sector. To this end, the Central Bank is preparing a draft Bill, under discussion in the international seminar on Resolution schemes in the Brazilian Financial System today (6) and (7) tomorrow…..to then be sent to the National Congress….
…..the proposal provides that the resources for the rescue of financial institutions must come, first, of the shareholders of the banks. Cases these are resources are sufficient, the money can come from subordinated debt securities (used to strengthen banks ‘ capital) converted into shares. “The draft not vetoes the use of public resources, but will always be the last alternative,” he said.
ft dot com
May 6, 2013 8:04 pm
Banish the threat from Europe’s zombie banks
By Harald Benink and Harry Huizinga
The financial sector needs credible stress tests, say Harald Benink and Harry Huizinga
Unlike the US, Europe failed to recapitalise its biggest banks following the financial crisis of 2007-09. Instead, policy makers gambled that economic recovery would lift the profitability of financial institutions, enabling them to increase their capital buffers over time. It is now clear that this strategy has failed. The eurozone is in a new recession and the depressed share prices of many banks signal that they are in dismal health.
In recent speeches, such as one on April 16, Klaas Knot, Dutch central bank president and European Central Bank governing council member, noted that restoration of banks’ balance sheets was a crucial requirement for economic recovery. To facilitate this process, Mr Knot stated, it was essential to create transparency about losses in the banking sector and to have an orderly resolution of lossmaking assets. Without this, banks would remain restrictive in making new loans. He added that the planned European banking union offered an appropriate opportunity for speeding up the resolution process.
We agree with Mr Knot’s analysis. Unfortunately, however, an orderly resolution of lossmaking bank assets is still a long way off, despite the fact that Europe has conducted several bank stress tests in the past few years.
Until now, Europe’s banking sector has been kept afloat by implicit state guarantees of virtually all liabilities. A recent report by the CPB Netherlands Bureau for Economic Policy analysis, a research institute, finds that in 2012 these guarantees provided banks in Europe with an annual average funding advantage equivalent to 0.3 per cent of total assets (which amounts to a funding advantage of 2 per cent of total assets on a present value basis). Given total banking assets of
€33tn in the eurozone, we are talking about an implicit guarantee of about €650bn.
The plight of Europe’s banks worsened considerably when Jeroen Dijsselbloem, Dutch finance minister and president of the eurogroup of eurozone finance ministers, stated that the approach taken in Cyprus of resolving failed institutions without using taxpayer money would in future preferably apply throughout the eurozone.
Banks are already saddled with ample unrecognised losses on their assets, estimated by many observers to be at least several hundreds of billions of euros, and an additional loss of their present funding advantage will be crippling. Financial markets well understood Mr Dijsselbloem’s message, as shown by a subsequent decline in the share prices of many institutions. Very low bank valuations imply that they will find it almost impossible to recapitalise themselves by issuing equity or debt that is convertible into shares – in part because share issuance would further dilute the value of implicit state guarantees.
It is now urgent to start recognising losses on balance sheets to avoid a proliferation of Japanese-style zombie banks in Europe. To facilitate this, we advocate conducting a new and thorough stress test soon, similar to the one administered by US supervisory authorities in 2009. Of course, the financial position of most governments in Europe is much worse than that of the US in 2009. So Europe needs to take a path towards recapitalisation that in some respects differs from the earlier US approach.
…
May 7, 2013, 12:01 a.m. EDT
Flip houses to get rich, retire before next crash
Commentary: There’s a window of opportunity if you act now
By Paul B. Farrell, MarketWatch
SAN LUIS OBISPO, Calif. (MarketWatch) — Yes, flipping houses, your big new window of opportunity. Flipping commercials increasing on drive-time radio.
The Wall Street Journal reports “housing market accelerates … prices jump 9.3% in quickest rise since 2006, gains seen across country.” Over on 24/7WallSt.com you can see its coast-to-coast “10 Best Cities to Flip a House:” The New York/New Jersey/North East sector had average $118,376 profits on holdings of 118 days. On the West Coast, California’s metro San Jose saw profits averaging $61,758 on 105 days holding.
Yes, there’s a window of opportunity for house flipping. But ask yourself: When will the window slam shut? Timing, that’s the trick. You get it? Could be just a few months, like the fall 2008 crash? Or a few years, like the bull of 2004-2007.
Not sure? Timing crucial tracking cycles, picking tops, bottoms and turning points is less of a science than gambler’s coin toss. Over the years we reported on a couple dozen warnings of a bubble blowing before the 2008 crash. And yet, four months before the fall 2008 that tanked global markets and economies, we hesitated. The Lehman bankruptcy was the turning point.
Yes, flipping window will close … in 3 months or in 3 years?
One thing is certain, you will never hear the next crash coming. Wall Street will drown out the warnings with relentless happy talk. But bull or bear, bubble or bust, recovery or recession, every cycle has a natural pattern that ebbs and flows at its own pace.
Investors Business Daily’s Bill O’Neill says market cycles average 3.75 years up, nine months down. But “averages” are old data, not future facts. Happy talk won’t restart a bull. And more warnings won’t puncture an old bubble. Cycles have lives of their own, move up and down when they darn well feel like it. That’s nature.
Still, today’s warning signs like flipping commercials point to housing and mortgage problems. But investors must decide what fits their risk profile, knowing that timing’s the key. Will the flipping market collapse in a few months? Or a few years? And most of all, do you have the stomach of a flipper?
History is the best teacher of all. Take a moment here and review some of the early warnings Americans heard and ignored about a coming market collapse and recession, beginning back in 2000 until the fateful 2008 Wall Street credit meltdown:
2000 to 2005, early prediction of ‘biggest bubble in history’
Fed governor Ed Gramlich was warning Fed chairman Alan Greenspan as early as 2000 about subprime problems. Later he wrote the book, “Subprime Mortgages: America’s Latest Boom & Bust.”
Coming out of the recession in 2004 money manager Robert Rodriguez of First Pacific Advisors told the world a meltdown was coming in the red-hot mortgage market. He began moving money out of equities, into cash.
Economist Nouriel Roubini warned that housing had become a “speculative sport,” would trigger recession. Soros and others started shorting the market, made billions when it collapsed.
In mid-2005, three years before Wall Street’s meltdown, the Economist magazine ran a major cover story with this message: “The worldwide rise in house prices is the biggest bubble in history. … Rising property prices helped to prop up the world economy after the stock market bubble burst in 2000.” Values increased 75% worldwide in five short years, from $30 trillion to $70 trillion. “Never before have real house prices risen so fast, for so long, in so many countries … This is the biggest bubble in history.”
…