The Housing Bubble

Your questions (expurgated, please) for Obama’s online convo with Zillow CEO, Spenser Rascoff, tomorrow?

HBB ought to represent on this one — if only by symbolically submitting them for consideration.

Is housing really the only string you have available to pull in our current economy?

Lawyers and attorneys trolling top financial blogs and websites…… ask yourselves why…. just ask yourselves why.

DHS ‘Constitution Free’ Zones Inside US Ignored By Media

Anthony Gucciardi
Infowars.com
August 6, 2013

In what should be front page news blasted out nationwide as a breaking news alert, the DHS has openly established extensive ‘Constitution free zones’ in which your Fourth Amendment does not exist.

It’s not ‘conspiracy’ and it’s not fraud, the DHS has literally created an imaginary ‘border’ within the United States that engulfs 100 miles from every single end of the nation. Within this fabricated ‘border’, the DHS can search your electronic belongings for no reason. We’re talking about no suspicion, no reasonable cause, nothing. No reason whatsoever is required under their own regulations. The DHS is now above the Constitution under their own rules, and even Wired magazine authors were amazed at the level of pure tyranny going on here.

This ‘border’ even includes where the US land meets oceans in addition to legitimate borders with Mexico and Canada. As a result, you have over 197 million citizens suffocated in these 100 mile ‘border zones’ that include major cities like New York City, Houston, Los Angeles, and Philadelphia. Checkout the graphic below for a visual representation, with the orange area representing the Constitution free zone as designated by the DHS:

What’s even more amazing, is that this has been going on since 2008. That’s about 5 years of absolute unconstitutional abuse of power by the Department of Homeland Security that the media fails to even document. That’s 197 million citizens living without a Constitution as far as the DHS is concerned, and apparently the Department of Justice (DOJ) must be pretty content too. Amazingly, no one has challenged this besides the ACLU, which was contacted following the case of a man who was actually detained within the 100 mile ‘border’ area.

Not only was this man’s laptop searched for no reason, as is ‘allowed’ under DHS code now, but they ended up finding pictures designated to be linked up with ‘terrorist’ groups. In response, the man was thrown in a cell while DHS agents went through every piece of data on his entire laptop. The ACLU is now suing over this event, but there’s no telling how the case will go with such limited media exposure. The DHS is literally gutting the Constitution and declaring itself higher than the law of the land by doing this, and it spells out major trouble for the entire Bill of Rights at large.

DHS DISMISSES CONSTITUTION, BILL OF RIGHTS

Because if the DHS can simply ‘overrule’ the Fourth Amendment for 197 million citizens, it can also ‘overrule’ the First and Second Amendments as well. What’s stopping them? It’s highly illegal under the Constitution, but it appears they truly don’t care. And to demonstrate just how little they truly care, they have even gone and ‘reviewed’ themselves for their own actions following outcry from some legal experts.

To break it down: back in 2008 there was outrage from those who actually value the Constitution and understand how the bloated DHS entity works, so the DHS promised to prove within 120 days that what they were doing was constitutional and legal. Years later, the report came out to reveal that the DHS actually reviewed itself and determined that it was acting 100% properly. It also founds that everything it was doing was ‘constitutional’ because it was not actually removing the Constitution from United States soil, only the ‘border’.

The ‘border’ that expands 100 miles and includes 197 million people.

This news should be on the front page of every single news organization in the world, but the sad reality is that it’s not. It’s up to the alternative news, the real news, to report on this. It’s up to me to make videos about this, it’s up to the alternative news to syndicate it out, and it’s up to you to share this. It’s time to reclaim our Constitution and tell the DHS we won’t live in Constitution free zones any longer.

http://www.infowars.com/category/featured-stories/ - 71k -

Obama proposes shuttering Fannie and Freddy. Hmmm…Surprising. What would be the implications of this?

http://www.dailyfinance.com/2013/08/06/obama-shuttdown-freddie-mac-fannie-mae-mortgages/

Is there anyone foolish enough to remain in bond funds at this point, given how obvious it is that the stock market always goes up?

We bombed Yemen four times in the last 10 days?

And the nobel peace prize president told me killed Osama and saved Detroit.

But now Americans are on the run….

—————————-

Drone strikes kill militants in Yemen; Americans urged to leave
CNN.com ^ | 8/6/2013 | Elise Labott and Mohammed Tawfeeq

A pair of suspected U.S. drone strikes killed four al Qaeda militants in Yemen as the United States maintained a heightened security alert in the country and urged all Americans to leave immediately.

Security sources told CNN about the strikes but didn’t offer additional details. A Yemeni official said four drone strikes have been carried out in the past 10 days.

David Paul
President, Fiscal Strategies Group
President Obama Should Nominate Larry Summers Just for the Spectacle of It All
Posted: 08/06/2013 2:53 am

I would like President Obama to nominate Larry Summers to be the new head of the Federal Reserve Bank.

I do not know anything about Janet Yellen. And truth be told, I really do not know who would be the best candidate for the job.

I can already hear the howls of protest. I know Larry’s history, the warts and all. I have read the diatribes of those outraged by the prospect of his selection, and the fawning commentaries of those lobbying for him. And I have marveled at the fact that this is about the position of Chairman (sic) of the Board of Governors of the Federal Reserve Bank. This is not a position that generally garners much commentary outside of Wall Street and the financial community. And if Larry Summers were not a prospective nominee, no doubt the topic would once again recede to the back pages of the New York Times, if not the front pages of the Journal.

My motivation is different. I just want to watch the confirmation hearings.

It is now a half a decade since the 2008 financial crisis shook the world economy, and a half a decade since the head of the U.S. Federal Reserve Bank effectively became the central banker for the world. Perhaps that is why more people should care about who is appointed to lead the Fed this time around. In a world where D.C. politics have ground to a dysfunctional halt, where the Euro continues to struggle on the precipice of failure, and where the growth rate of China is grinding downward, the head of the Fed has become a figure of global importance. Perhaps in some respects eclipsing that of the President.

And surely no person views himself as more prepared to step out onto that stage, and lead the world through a precarious financial future than Larry Summers.
…

“Surfin Usa”

Since everybody is a suspect
Across the U.S.A.
That’s why they gotta be watchin’
Just what you think and say

We’ll all be gone by the summer
We’re on safari to stay
Tell your friends you got busted
By the NSA

They caught ‘em surfin’ at Del Mar
Ventura County Line
Santa Cruz and Tressels
Australia’s Narabine

All over Manhattan
And down in Tampa Bay
Everybody caught surfin’
By the NSA

We’ll all be planning out a route
We’re gonna take real soon
They’re readin’ all your e-mail

They couldn’t wait for June

We’ll all be gone by the summer
We’re on safari to stay
Tell your family you’re busted
By the NSA

At Haggerty’s and Swami’s
Pacific Palisade
Everybody caught surfin’
By the NSA

Everybody caught surfin’
By the NSA

Everybody caught surfin’
By the NSA

Everybody’s gone

Is there any end in sight to the housing market rally?

Aug. 6, 2013, 8:01 a.m. EDT
Home-price growth near seven-year high
Nevada tops annual gains with rise of 27%; Mississippi, Delaware prices slip
By Ruth Mantell, MarketWatch

WASHINGTON (MarketWatch) — Annual home-price growth in June was close to the fastest pace in seven years, as inventories of existing and new homes remained low, according to data released Tuesday.

Home prices, including distressed sales, rose 1.9% in June, and were up 11.88% from a year earlier, according to CoreLogic (CLGX -0.56%), an Irvine, Calif.-based analysis firm. In May, prices were up 11.93% from the prior year, the fastest annual growth since February 2006.

Excluding short sales and other distressed properties, prices rose 1.8% in June, and were up 10.97% from the year-earlier period, reaching the fastest annual pace since February 2006.

“The U.S. housing market experienced robust price appreciation during the first half of 2013 and our forecast calls for double-digit growth through July,” said Anand Nallathambi, CoreLogic’s chief executive. “Despite their rebound of late, home prices remain reasonable in a historical context, with most states near peak affordability levels.”
…

I smell Robo renters.

I don’t have to pay my rent because they can’t prove who my Landlord is.

And that’s gonna lead to RAP A $20 billion (Rent Affordable Program)

Blackstone, Deutsche Bank in Talks to Sell Bond Backed by Home Rentals

By JEANNETTE NEUMANN

July 30, 2013, 3:41 p.m. ET

Two major Wall Street firms are in detailed discussions to create and sell the world’s first bond backed by home-rental payments, people familiar with the matter say.

Blackstone Group LP BX -0.14%is in negotiations to bundle monthly rental payments on about 1,500 to 1,700 of its homes. The private-equity giant is among the firms that have spent billions buying homes out of foreclosure, an investment strategy that has helped to bolster demand and strengthen the U.S. housing market.

The bond comprised of the Blackstone homes would be structured and marketed to investors by Deutsche Bank AG, DBK.XE -1.07%the people say.

The creation of a new type of security shows that Wall Street’s financial engineering, blamed for deepening the financial crisis, is revving back up.

Some investors and analysts have said they are wary of a bond backed by rental payments, citing the dearth of long-term data on how often tenants living in previously foreclosed homes pay their rent on time

Also, some investors and analysts have raised concerns about how quickly firms have purchased thousands of homes, and whether they have the management track record and expertise to oversee the maintenance of properties scattered across the country.

But investors still are hungry for the high returns that are likely to accompany a first-of-its-kind deal, which would be viewed as more risky than well-known securities.

http://online.wsj.com/article/SB10001424127887324170004578638093802889384.html - 231k

bailouts are coming, the free sh1t army demands it

wall street journal - many can’t pay student loans:

‘just four in 10 borrowers with direct federal student loans are paying them back, according to a report released monday that offers the first comprehensive snapshot of the program since the government created it in 2010 … excluding borrowers who don’t yet have to make payments because they are still in school or within the grace period, more than a fifth — 22 percent — are in default or forbearance.’

http://online.wsj.com/article/SB10001424127887323420604578650420166447266.html

“Hold on to your cash because you’re going to need it.”

San Francisco Bay Area Rental Rates Crumble 5%

http://picpaste.com/pics/b76a04ee68b7e38be42c6f0fc7251b81.1375716266.png

“A ‘housing recovery’ is falling housing prices to dramatically lower and more affordable levels by definition.”

Considering housing prices were never allowed to correct to the long term price trend, it appears housing hasn’t recovered. Nor will it recover…… until prices fall to dramatically lower and more affordable levels.

“Housing Prices Crater 11% In Exclusive Los Angeles Neighborhoods”

http://picpaste.com/pics/15b0288c9a4ed6710dfd98adbfae729c.1372250662.png

Ms Yellen vs. Mr Summers.
Whac posted a great find yesterday.
Thank you, Whac.

Do You Live In The Constitution-Free Zone Of The US?

Earlier this week, we wrote about the latest defense by Homeland Security of their laptop search policies that (they claim) give them broad coverage to search laptops within 100 miles of the border. The latest bit of news was that an internal review found that there was minimal benefits to one’s civil liberties in not searching their laptops, so it was okay (think about that sentence for a bit).

The 100 mile “buffer zone” part of that story gets most of the attention, but it isn’t a new thing. They’ve been claiming that for a while. It’s just that this is yet another attempt by them to give themselves additional support for those kinds of searches. In our comments, someone pointed us to a useful (and horrifying) map that the ACLU put together highlighting just how much of our country is within 100 miles of border/coastline, creating the Constitution-Free Zone Map — which happens to cover about 2/3 of all American citizens.

http://www.techdirt.com/articles/20130212/02045321947/do-you-live-constitution-free-zone-us.shtml - 367k

That is one cool house.

———————–

Eco-couple told to pull down their ‘hobbit home’ made entirely out of natural materials
dailymail | 1 August 2013 | By Stuart Woledge

Eco-couple told to pull down their ‘hobbit home’ made entirely out of natural materials . . . but without planning permission

Family of three is made homeless by planning inspector’s decision They built their home from scratch, but have been ordered to tear it down The couple admit they built it without first getting planning permission Their labour of love was branded ‘harmful’ to the countryside

A young couple have been left heartbroken after planners ordered their unique ‘hobbit home’ to be bulldozed, effectively leaving them homeless.

Charlie Hague and Megan Williams, both 25, built the roundhouse from scratch with their own hands, using only natural materials.

But the couple lost their appeal today against a planning enforcement notice telling them to tear their pride and joy home down.

Charlie and Megan, who have a one-year-old son Eli, built the house on private land in Glandwr, North Pembrokeshire, last summer.

Locals nicknamed it the hobbit home, although most people did not even know it was there because it is so secluded.

But Pembrokeshire County Council ordered the couple to demolish their home because it was built without planning permission.

http://www.dailymail.co.uk/news/article-2382684/Charlie-Hague-Megan-Williams-told-pull-hobbit-home-entirely-natural-materials.html?ICO=most_read_module

California Housing Demand Crumbles 9%

http://picpaste.com/pics/f5f67e704002ded36be2bd3fdab429f0.1375800953.png

Watch out below for falling BRICs.

Aug. 6, 2013, 10:47 a.m. EDT
HSBC: Emerging market output shifts to contraction
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Gold loses grip on $1,300 in sixth straight drop
Hong Kong stocks fall as HSBC drops sharply
U.S. stocks begin lower amid Fed ‘taper’ talk
By Barbara Kollmeyer

MADRID (MarketWatch) — Manufacturing output for the major emerging market countries, Brazil, Russia, India and China, showed contraction for the first time since April 2009, according to the HSBC Emerging Markets Index released Tuesday. The index fell to 49.4 in July from a prior 50.6, the first time it has dropped below 50 in over four years, indicating an “overall contraction of output in global emerging economies,” said HSBC. July data also signalled a decline in new business for the first time in over four years. “Emerging markets are not yet feeling a lift from stabilizing demand in the United States, Europe, and Japan,” said Frederic Neumann, co-head of Asian economic research. “There are signs that domestic headwinds are stiffening as well.” He said the main risk for emerging markets is that the cyclical downturn in manufacturing and softer service-sector activity will lead to a weak job market, which could weigh on household spending.

Buy now, or get priced out forever!

First-time home buyers face difficulties
Justin Sullivan/Getty Images
New homes are seen at the Pulte Homes Fireside at Norterra-Skyline housing development on March 5, 2013 in Phoenix, Arizona.
by Andrea Gardner
Marketplace Morning Report for Tuesday, August 6, 2013

President Obama will speak in Phoenix today, talking up homeownership for the middle class. But there is tension between Obama’s message and the reality for many first time home buyers in the area who are facing low inventory, rising prices, and competition from investors.

In the month of June, 24 percent of homes in Phoenix’s Maricopa County were bought by investors, who often use cash to flip the properties or rent them. According to real estate researcher Michael Orr from Arizona State University, investors are interested in mostly inexpensive properties, buying 42 percent of the homes that sold for less than $150,000 in June.

“If you want to make a certain cash-on-cash return, the most favorable areas are the cheapest, where you can buy very inexpensive homes, but you still get quite a decent rent out of them,” Orr said, explaining why inexpensive property appeals to investors who intend to become landlords.

For this reason, first time home buyers often find themselves competing with investors for homes in the lower-price ranges. And with small down payments and the baggage of an FHA loan, these first time buyers are often struggle to have their offers considered by sellers or are outbid, said Phoenix realtor Renee Slagter.

“There’s a lot of frustration because they know that if they wait too long they will no longer be able to afford a home in this market,” she said.

Slagter and Orr say higher inventory would stabilize prices, and construction is picking up in Phoenix, however most new homes being built are aimed at higher-priced buyers.

Beware the FB sell signal!

Aug. 6, 2013, 6:00 a.m. EDT
The Facebook indicator says sell
Commentary: Social network’s stock gauges an overheated market
By David Weidner, MarketWatch

SAN FRANCISCO (MarketWatch) — Do you use Facebook to keep tabs on your friends, family and the latest entertainment and news?

Well, there’s more. Facebook Inc.’s (FB -2.60%) stock is also useful. Not only can it tell you whether the social media site is overvalued, it hints at the same over-exuberance in the broader stock market.

And guess what? What it’s saying now ain’t pretty.
…

“Home Affordability: Prices Are Still 40% Higher Than ‘Normal’”

http://www.dailyfinance.com/2010/02/14/home-prices-must-drop-40-more-to-reach-normal-affordability-lev/

Just think how massively inflated current asking prices of resale housing is in light of the fact they were 40% overpriced in 2010.

“If you pay current asking prices for resale housing, you’re going to lose alot of money. ALOT of money.

Considering construction costs (material, labor, profit) is $55/sq ft, If you’re paying more than 35-$40/sq ft for a used house, you’re getting ripped off.

More Hope and Change in Hopeychangeyville:

http://mobile.nytimes.com/2013/08/06/us/chicago-sees-pension-crisis-drawing-near.html?from=homepage

“Mortgage delinquencies take a sharp turn up”
http://www.cnbc.com/id/100914292

And they’ll continue rising for as long as transactions occur at massively inflated prices.

The only Deflation we are going to see here in America is our Standard of living

“Consumer spending in Brazil, Russia, India and China accounted for 8.1 percent of global gross domestic product in 2010, according to IHS Global Insight. It is expected to reach 12 percent by 2015. U.S. consumption as a percentage of GDP peaked at 22 percent in 2002 and is expected to be roughly 14 percent by 2015.

That emerging middle class pushes prices higher, because there are more people vying for resources and products. Rising wages, which help create a middle class, also inflate prices because goods are more expensive to produce, Plunkett said.

“The long-term effect is going to be pretty dramatic,” he said.

Consumers are likely to notice first-and may have noticed already-with basic items such as groceries and gasoline.

“When people get a higher income, they want to eat more meat,” said Chris Christopher, an economist with IHS Global Insight. Prices for a pound of ground chuck and whole chicken are up 20 percent and 28 percent, respectively, in the past five years, according to the Bureau of Labor Statistics.

Is your housing market hot or not- it all comes down to the employment market
http://www.marketwatch.com/story/is-your-housing-market-hot-or-not-2013-08-05

If over 90% of all mortgages are insured by F&F then why don’t the banks just foreclose on the shadow inventory; get their money out -
could their liquidity be that bad that they cannot absorb a 5% loss ? Has F&F set a quota ?

Something is really amiss.

Does anyone believe the Dow will continue upwards when QE ends ? Crash ?

Deficits, Shadow Inv., bubble stocks, interest hikes, mediocre economy, huge distortions (pensions, etc), bankrupt cities, - not like the old days.

Time to make sure you have no debts and a very stable customer list.

Whats going to happen if white people don’t have a secret plan to fix the economy?

The more I understand about it, the less I want to know.

Now get to work!

Opps!
Newt says he made mistake about Afghan and iraq. Sorry bout that.

Newt%20Gingrich%20sees%20major%20Mideast%20mistakes,%20rethinks%20his%20neocon%20views%20on%20intervention%20-%20Washington%20Times.htm

Sorry new link for Newt.

http://www.washingtontimes.com/news/2013/aug/4/newt-gingrich-rethinks-neoconservative-views/?utm_source=RSS_Feed&utm_medium=RSS

Whoo boy! The Obama lovers on this blog missed a good one

http://www.azcentral.com/news/articles/20130806obama-phoenix-visit-hails-homeownership-speech.html

Am I ever so glad I’m renting. Like his predecessor, Obammy is pushing for an “ownership society.”

Doublespeak “debtor society.”

After years of wondering how the likes of Yahoo, Google, Facebook and other internet companies made money, I finally get it: They are in the spying business.

Russia seeking Snowden’s help on data security
Russia’s upper house of parliament is planning to ask former NSA contractor Edward Snowden to advise the country on improving Internet privacy and security.
By Fred Weir, Correspondent / August 6, 2013

In this video still image taken Thursday, Aug. 1, 2013 and made available Sunday Aug. 4, 2013, by Russia24 TV channel, US National Security Agency leaker Edward Snowden, third right, is shown as he leaves Sheremetyevo airport outside Moscow with his Russian lawyer Anatoly Kucherena, second right, on Thursday, Aug. 1, 2013.

The upper house of Russia’s parliament will invite ex-National Security Agency (NSA) contractor Edward Snowden to participate in a probe of how the privacy of Russian citizens is being violated by big Internet companies who, according to Mr. Snowden, allow the personal data of users of Facebook, Yahoo, Google, and other big global Internet companies to be accessed by a “third party.”

Snowden, who was granted temporary asylum in Russia last week, may soon find himself acting as “Exhibit A” in a concerted Russian effort to beef up national electronic security and assert something lawmakers are calling “digital sovereignty” in the wake of the recent revelations about NSA Internet-snooping around the world.
…

The DOD folks in my circle are suffering under the furloughs.

Romney warns against gov’t shutdown
AP 7:35 p.m. EDT August 6, 2013
In a Tues. speech, former Republican presidential candidate Mitt Romney warned of the negative consequences of government shutdown, a strategy GOP politicians angry with Obamacare have proposed.

WOLFEBORO, N.H. (AP) — Former Republican presidential nominee Mitt Romney jumped into the debate over the GOP’s future Tuesday night, warning congressional Republicans against forcing a government shutdown in their quest to stop President Barack Obama’s signature health care law.

Romney addressed more than 200 donors on the shores of Lake Winnipesaukee at a fundraiser for the New Hampshire Republican Party, staged just four miles from the vacation home where he has spent much of the summer with his family. The event was closed to the media, but his office released his prepared remarks.

Romney, 66, warned congressional Republicans against letting emotions drive their decisions.

“I badly want Obamacare to go away, and stripping it of funds has appeal. But we need to exercise great care about any talk of shutting down government,” Romney said in the first speech of its kind since his November election loss to Obama. “What would come next when soldiers aren’t paid, when seniors fear for their Medicare and Social Security, and when the FBI is off duty?”

He continued: “I’m afraid that in the final analysis, Obamacare would get its funding, our party would suffer in the next elections, and the people of the nation would not be happy. I think there are better ways to remove Obamacare.”
…

Mortgage market must remain too-big-to-fail, post-Fannie Mae and Freddie Mac.

ft dot com
August 6, 2013 10:33 pm
Obama says private lending should be ‘backbone of housing market’
By Stephanie Kirchgaessner in Washington and Stephen Foley in New York
US President Barack Obama speaks on home ownership for the middle class at Desert Vista High School on August 6 2013 in Phoenix, Arizona

Barack Obama called for the protection of the 30-year-mortgage, a fixture of the “American dream” of home ownership since the Great Depression, whose future is uncertain amid calls for the government to minimise its role in housing finance.

“We should preserve access to safe and simple mortgage products like the 30-year, fixed-rate mortgage. That’s something families should be able to rely on when they make the most important purchase of their lives,” the US president said in a speech in Phoenix, Arizona, a city that was devastated by the mortgage crisis.

Mr Obama endorsed a bipartisan effort in the Senate to wind down Fannie Mae and Freddie Mac, the two mortgage giants that were bailed out in 2008, and called on private investors to take a bigger role in the mortgage market.

“I know that must sound confusing to the folks who call me a raging socialist every day,” he said. “But I believe that while our housing system must have a limited government role, private lending should be the backbone of the housing market.”

There is a rare political consensus among Democrats and Republicans in the Senate on the need for the US to allow the private sector to take the lead in accepting mortgage risk. But the question dividing lawmakers is the extent to which the government should serve as a backstop to provide catastrophic reinsurance on some mortgages in the event of a crisis.
…

20 Cities That May Face Bankruptcy After Detroit
Tuesday, 06 Aug 2013 09:23 PM
By Steve Moore

Think Motown is the only major U.S. city in a boatload of financial trouble? Think again.

Detroit’s bankruptcy filing sent shivers down the spine of municipal bondholders, government employees, and big-city urban residents all over the country.

That’s because many of the 61 largest U.S. cities are plagued with the same kinds of retirement legacy costs that sent Detroit into Chapter 9 bankruptcy this summer.

These cities have amassed $118 billion in unfunded healthcare liabilities. These are legal promises to pay healthcare benefits to municipal workers beyond the employee contributions to finance those funds. This is a giant fiscal sink hole — and because of defined benefit plans, the hole keeps getting deeper.

Detroit may be the largest city in American history to go bankrupt, but it is not alone. The city raced to the financial insolvency finish line before anyone else in its class.

Keep an eye on “too big to fail” cities like Chicago, Philadelphia, and New York.

According to an analysis by the Manhattan Institute, several Chicago pension funds are in worse financial shape than the worker pensions in Detroit. One is only 25 percent funded, and where the other 75 percent of the money will come from is anyone’s guess. And there are about a dozen major California cities having systemic problems paying their bills.

Here is my worry list, based on bond ratings and other data, of the top 20 cities to watch for financial troubles in the wake of the Detroit story:

1. Compton, Calif.
Compton has teetered on the brink of bankruptcy after it accrued a general-fund deficit of more than $40 million by borrowing from other funds, depleting what had been a $22 million reserve.

2. East Greenbush, N.Y.
A New York state audit concluded that years of fiscal mismanagement — including questionable employment contracts and illegal payments to town officials — left East Greenbush more than $2 million in debt.

3. Fresno, Calif.
Fresno had the ratings of its lease-revenue bonds downgraded to junk-level by Moody’s, which also downgraded its convention center and pension obligation bonds due to the city’s “exceedingly weak financial position.”

4. Gulf County, Fla.
Fitch Ratings warned that Gulf County’s predominately rural economy is “narrowly focused,” with income levels one-quarter below national averages and economic indicators for the county also comparing unfavorably to national averages.

5. Harrisburg, Pa.
Harrisburg is at least $345 million in debt, thanks largely to municipal bonds it guaranteed in order to finance upgrades to its problematic waste-to-energy trash incinerator.

6. Irvington, N.J.
Irvington has a violent crime rate six times higher than New Jersey’s average, with Moody’s citing “wealth indicators below state and national averages and tax-base and population declines due to increased tax appeals and foreclosures.”

7. Jefferson County, Ala.
Jefferson County, home to the city of Birmingham, has been dealing with the collapse of refinancing for a sewer bond. It filed for bankruptcy protection in 2011 over a $3.14 billion sewer bond debt.

8. Menasha, Wis.
Menasha defaulted on bonds in 2007 it had issued to fund a steam plant which has since closed and left the city permanently in the red and, as of 2011, had $16 million in general fund revenue, but had $43.4 million in outstanding debt.

9. Newburgh, N.Y.
Newburgh was cited by Moody’s for “tax base erosion and a weak socioeconomic profile,” with 26 percent of its population below the poverty line and its school district facing a $2 million budget gap.

10. Oakland, Calif.
Oakland is trying to get out of a Goldman Sachs-brokered interest rate swap that is costing it $4 million a year. According to a recent city audit, Oakland has lost $250 million from a 1997 pension obligation bond sale and subsequent investment strategy.

11. Philadelphia School District, Pa.
Philadelphia’s school district, the nation’s eighth-largest, faces a $304 million deficit in its $2.35 billion budget, and is seeking $133 million from labor-contract savings to prevent further cutbacks.

12. Pontiac, Mich.
Pontiac, where the emergency manager has restructured the city’s finances, was downgraded by Moody’s, reflecting the city’s history of fiscal distress and narrow liquidity.

13. Providence, R.I.
Providence, rumored to be filing for bankruptcy for more than a year, experienced consecutive deficits through fiscal 2012, has a high-debt burden and significant unfunded pension liabilities, as well as high unemployment and low income levels.

14. Riverdale, Ill.
The credit rating for Riverdale is under review by Moody’s because the city has not released an audit of interim or unaudited data for the year that ended April 30, 2012.

15. Salem, N.J.
Salem is under close fiscal supervision after it issued bonds to finance the construction of the Finlaw State Office Building, which was delayed by construction issues, and its leasing revenues are not enough to cover the debt payments and the maintenance fees.

16. Strafford County, N.H.
Strafford County regularly borrows money to cover its short-term cash needs after it spent two-fifths of its budget on a nursing home, which lost $36 million from 2004 to 2009.

17. Taylor, Mich.
Taylor has a large deficit and is vulnerable due to significant declines in the tax base, limited financial flexibility, and above-average unfunded pension obligations.

18. Vadnais Heights, Minn.
The Minneapolis suburb of Vadnais Heights had its debt rating downgraded to junk last fall by Moody’s after the city council voted to stop payments to a sports center financed by bonds.

19. Wenatchee, Wash.
Wenatchee defaulted on $42 million in debt associated with the Town Toyota Center, a multipurpose arena, and has ongoing financial issues due to the default.

20. Woonsocket, R.I.
Woonsocket faces near-term liquidity shortages necessitating an advance in state aid, a high-debt burden and unfunded pension liabilities, with Moody’s citing the city’s continuing difficulties in making spending cuts because of poor management and imprecise accounting.

The stock market rally in the first half of 2013 has helped many of these cities as they invest pension contributions and get higher returns. But another market downturn could send these teetering cities back into the red.

And the states can’t bail them out because Illinois, California, New York, and Pennsylvania face their own money challenges. Republicans in Congress have been insistent that Washington, D.C., won’t be tossing a life-preserver to troubled cities, either.

The view among conservatives in Washington is that a federal bailout would only reward cities for their own bad behavior. But that won’t stop the unions from trying.
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ft dot com
August 6, 2013 10:45 pm
Fed officials say asset buying could slow next month
By James Politi in Washington

Two Federal Reserve officials said the US central bank might start slowing asset purchases as early as next month, suggesting last week’s sluggish payrolls data were not sufficiently weak for them to take such a move off the table.

Charles Evans, one of the more dovish officials at the Federal Reserve, said he would “clearly not” rule out the tapering of bond buying at the next meeting of US monetary policy makers on September 17-18.

The remarks by Mr Evans, the president of the Chicago Fed, are significant because he is known as a staunch defender of the US central bank’s quantitative easing programme, and this year is a voting member of the Federal Open Market Committee, which sets interest rates.

Mr Evans said the Fed was “quite likely to reduce the flow purchase rate starting later this year” though he added that “I couldn’t tell you exactly which month that will be”.

His comments show that the US central bank is not overly concerned that job creation in the US economy slowed to 162,000 positions in July, a weaker reading than predicted by economists. It indicates that a moderately strong report on the labour market for August – even if it is not stellar – could tilt the Fed towards tapering its QE programme at its next meeting, assuming other economic data are also relatively upbeat.

“We’ve seen good improvement in the labour market, there’s no question in my mind about that,” Mr Evans said. “I’m still wanting to see greater evidence that it’s a sustainable improvement,” he added.

Separately, Dennis Lockhart, president of the Federal Reserve Bank of Atlanta, who does not hold a vote on the FOMC this year, also suggested Fed tapering could begin next month, assuming some improvement in the data.

“If we see the growth pick up in the second half and if we see job gains … at a higher range, say 180-200,000 – I think with other fundamentals improving we probably are in a position to remove … the extraordinary policy programme over the medium term,” Mr Lockhart said in an interview with Market News International.

But Mr Lockhart noted that the timing of slower asset purchases would depend on the incoming economic data. “[With a] kind of ambiguous picture of mixed data that signal neither accelerating strength nor necessarily deterioration, but that kind of moping along in the middle, then I think it’s not a foregone conclusion that the asset purchase programme should be removed or be removed rapidly,” Mr Lockhart added.

The comments by both Mr Evans and Mr Lockhart signal that Fed officials are also quite confident that the increase in mortgage rates and other borrowing costs in recent months is not tightening financial conditions to the point that it is damaging the economy.
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ft dot com
Markets Insight
August 6, 2013 9:56 am
Forget ‘taper’ risk: China is a bigger threat
By George Magnus
Deflation looms as Beijing rebalances economy

Developed country equity and credit markets snapped back quickly after the Federal Reserve tapering wobble a few weeks ago. From the crow’s nest, markets have accepted that Fed policy normalisation will be gradual, become more confident about economic prospects, and put to one side earlier concerns about the risk of deflation. At the coalface, though, things look more nuanced, and suggest that Fed tapering is much less of a risk than rising concern over a ‘fin de siècle’ moment in emerging markets, especially China, which could spark new deflation fears.

Since early May, the top-performing equity markets have been the US and core Europe, putting Japan and southern Europe in the shade. Nearly all developed market indices are outgunning emerging markets, which have lost almost all the gains made from last summer to January, and the continuing slide in commodity prices is undermining countries such as Australia and Brazil.

The tapering announcement, expected after the September meeting of the Fed’s Monetary Policy Committee, has already been well discounted, with US 10-year government bond yields up by nearly 1 percentage point since June. Markets know there is a country mile between tapering and a reversal of quantitative easing, let alone a rise in policy rates. That said, some uncertainty remains about the behavioural consequences for investors, banks and borrowers as the monetary policy regime of the past four years starts to change.

Elsewhere, although the Japanese government is expected to confirm in October the planned two-stage consumption tax increase, starting next year, Europe is a bigger cause for concern. Claims that recent economic indicators portend a return to sustainable growth in southern Europe look way off the mark, and are overshadowed by the absence of aggregate demand, the unsustainability of debt levels and default risk, and the difficult politics of austerity.

Moreover, the new German coalition government, emerging after next month’s elections, is most unlikely to accede to demands for a change in Germany’s macroeconomic policies, or for the transfer mechanisms and fiscal backstops needed to build a credible banking union, and a more stable European banking system.

But the most immediate and transparent threat to markets is already evident in the funk in emerging market equity, local currency bond, and currency markets, as well as in global commodity markets. Predictably, China is centre stage.

It has already figured prominently in the economic forecasting industry’s downgrades, but there is a still a way to go. Analysts and investors have not yet embraced fully the idea that the China problem is not about a cyclical and easily countered economic detour, but about the implications of what a fundamental transformation of the country’s economic model means for China’s GDP growth and supply chains, and for global commodity markets and industries.
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