Bits Bucket for December 21, 2014
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.
About Me
Name:Ben Jones
Location:Northern Arizona, United States
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President Barack Obama,
Is a revolutionary marxist ideologue and is completely unqualified to lead this once great republic.
#FundamentalTransformationOfAmerica.
Revolutionary Marxist ideologue would have been an improvement to what he is. He is a republicrat who only exists to serve his banking and corporate masters.
One of our most effective employees.
I’m sure that his employers have a large bonus in store for him after he leaves office…
Obamacare has been a windfall for health insurers. I’m sure they will show their gratitude by paying for endless speeches by Obama and the Wookie at $300K a pop. Legalized bribery, some would call it, but it’s worked out pretty well for the Clintons.
wookie?
hope and change
http://nypost.com/2014/12/20/2-nypd-cops-shot-execution-style-in-brooklyn/
is it ‘go time’ yet?
the only Muslim who can be blamed for all the world’s problems.
Is just another thug of a group of thugs calling themselves “government.”
Is currently laughing in Hawaii.
rj - an open ended letter? I’ll take a shot at it.
“Dear Prez: Thanks for making my country the laughingstock of the world, and the bulls’ eye for every grifter on the planet. Thanks for the role model you present, with your lying, thieving and arrogance (same goes for the wifie). Since sauce for the goosed is sauce for the gander, stands to reason that the anarchy you foster will eventually find its way back to you. I’ll be in the peanut gallery, smiling as I watch your oxen being gored.
Sincerely, jane6pack”
The idiots who elected Obama (or the even bigger idiots who voted for McCain or Romney) made America the laughingstock of the world while highlighting our descent into IDIOCRACY. The same ‘tards will do the same with their “lesser of two evils” votes for Jeb or Hillary.
The “lesser of two evils” is still evil, and I’m not voting for it.
jane6pack ?
Are we related ? maybe relatives from the homonym family
oops, didn’t mean to steal your moniker, lol! I do like it. Has a nice ring to it. As a practical matter, what else are we wimmin s’posed to call ourselves if we ain’t one of the .01%?
You did not steal my moniker. You are kin. And I liked your post.
When deciding on a moniker, (years ago, i actaully posted back in the anonymous days) it was a very close call between joesixpack and usefullidiot. I asked my wife what she thought and she told me that I was not usefull, so the rest is futurey.
Me Tarzan SixPack
On another note - yesterday’s Bits discussed the Baltic Dry. We used to have a poster who - during the last crash - commented frequently about traffic going in and out of Long Beach. How incoming shipments AND outgoing shipments piled up.
My question: can you really tell what is incoming vs. outgoing in a container port, if the containers are all piled up in the yard (or whatever)? All containers look alike.
I’d like to be able to eyeball and make hypotheses about the differential pilings-up of incoming vs. outgoing. If incoming piles up, does that mean the end point customers don’t have the liquidity to take delivery? I thought that was all settled before the cargo shipped, via letters of credit.
Same with outgoing. What kind of phenomenon causes outgoing freight to pile up? The containers would not have been sent to the port if the shippers (US companies) did not have cash in hand.
Can anybody explain how to tell inbound from outbound on the basis of containers lying around? And, what does it mean when inbound>outbound and vice versa?
Thanks to anybody who can shed light.
You could read the reports that publish import/export indexes.
“We used to have a poster who - during the last crash - commented frequently about traffic going in and out of Long Beach. How incoming shipments AND outgoing shipments piled up.”
I don’t know if I am the poster you are referring to but I used to comment on the number of SHIPS (not containers, but ships) that used to “pile up” or, more accurately, be anchored off of Long Beach and Seal Beach.
All of them were floating high in the water, as in empty.
Every ship has to be somewhere and if these ships have no reason to go anywhere then they might as well be anchored off of Long Beach as much as anywhere else.
Singapore is a favorite place to sit idle.
“Wherever you go, there you are.”
If it costs a lot to go to some place that you don’t need to go to then you might as well stay where you are.
All of them were floating high in the water, as in empty ??
Yep…Which indicates we are not sending anything back maybe because everyone else cannot afford to buy it….
“Yep…Which indicates we are not sending anything back maybe because everyone else cannot afford to buy it….”
Not trying to be picky … but I was referring to what I saw “during the last crash” (as jane put it), not necessarily what is going on now.
It MAY be going on now but I haven’t been frequenting Seal Beach as much as I used to so I don’t know what the current status is.
Yep…Which indicates we are not sending anything back maybe because everyone else cannot afford to buy it….
Or they are “protectionist” and make their own stuff, even when ours might be better and/or cheaper.
I haven’t been frequenting Seal Beach as much ??
Why Not !! : >)
Or they are “protectionist” ??
Yep…We are seeing more of it…
“Wherever you go, there you are.”
Clint Black I believe. Not his best work.
Gilda Radner was the original owner of that remark, in her legendary sketches as Roseanne Roseannadanna on SNL. Must be 80s vintage. I really liked that woman.
Combo, thanks for the clarification! And JM, thanks - I’ll take a gander at the import/xport indices.
Man, you always learn something here at the HBB!
Cra-?
Cray?
Crayt-?
I have a noticed a trend in the markets lately. It really seems like the tendency is for the stock market to crater. It seems the markets go down a little and then the momentum starts to build to the downside. Then there is this magical force that comes in and starts buying like a madman and thus forcing shorts to cover their positions and we get violent moves to the upside. Anyone else see this pattern?
Been like this last couple of years at least.
Like since 1987?
Since 1929.
1913?
Been like this last couple of years at least ??
Yep and likely to get more volatile….
CRAAAAAAAAAAAAAAAAAAATERRRRRRRRRRRRR!
Crayon
And how are your losses stacking up?
San Diego, CA Sale Prices Plunge 10% YoY
http://www.zillow.com/san-diego-ca-92130/home-values/
mer?
fish?
-mdown?
I vote for this ^ as the best answer.
They’re coming.
Cray-cray.
Warmist Warming Sunday
“According to researchers working on the Polaris Project in the Arctic, which aims to study climate change at the poles, arctic ground squirrels and beavers both contribute to carbon emissions by burrowing into the frozen soil to make their homes, churning up the soil. Faeces and urine from the rodents fertilises the soil, encouraging decomposition of biological material that had been locked in suspended animation by the frost, releasing greenhouse gases into the atmosphere.”
http://www.breitbart.com/london/2014/12/19/claim-squirrels-cause-climate-change/
No burritos for the beavers today.
June Cleaver: Ward, I’m very worried about the Beaver.
Warmists gonna warm
“Warmists gonna warm”
Theodore “Beaver” Cleaver: Gee Wally, that’s swell.
Despite environmentalists’ worries, cattle don’t guzzle water or cause hunger—and can help fight climate change
http://www.wsj.com/articles/actually-raising-beef-is-good-for-the-planet-1419030738?mod=WSJ_hp_EditorsPicks
I just want to know what caused the Earth to warm up after the last ice age thousnds of years ago. It could not have been cars or industrial emissions.
Had to be the beavers
the wamer scientist get 130k plus bennies
non warmers need not apply
Where do I sign up? When I was studying real observational and experimental science (not the armchair type), ecologists made twelve bucks an hour. Now PR folk for the oil industry, that’s where all the money was, back in the day it were.
Don’t forget the scientists who shilled for the cereal companies back in the day!
Arctic pole ground squirrels……hmmmm.
How far down do you have to dig at the north pole to hit dirt?
How far down do you have to dig at the north pole to hit dirt?
The Lomonosov ridge, which is believe is ~1500m below the surface of the Arctic Ocean.
I guess those squirrels must not live at the North Pole.
Let’s assume for a minute that another real estate crash is on it’s way. Most indicators point to it being here now.
How are we to assume that Government around the world will suddenly stop propping up the markets? You all must realize that the Government in conjunction with the banking cartel will set a floor on housing prices at some point, right? Haven’t they proven this in the past already?
Don’t you think the stock market, bond market and real estate markets are all in a bubble? Do you think manipulating markets is good for public confidence in the markets? when people know the game is rigged they don’t want to play. Except for the professionals who know the game is rigged but seem to know when to get in and out better than the public does.They pay to play. Who do you think ends up paying for all these gains the professionals realize?
“… when people know the game is rigged they don’t want to play.”
Lie to them. Tell them the game is not rigged. Tell them you have their back. Tell them they are smart.
you got that right mr banker!
“Their only hope is that their confidence turns into your confidence, but credit and funding markets are impenetrable at this moment to such utter nonsense.”
Again …
1. Dumb ‘em down.
2. Prosper.
I don’t for one second question that everything is in a bubble. I also don’t question that it will eventually crash. The point I am making here is that after the crash what do you think the PTB will do? They will reflate again. Reflate everything; what else would they do? In order to maintain control they need to create an economy they can control, this is what they do.
So knowing that, why stand on the sidelines? This is the only economy that they will let us have and you know it, you know how it works, so why not use that system to your advantage?
I’m not advocating here. All I am stating is that this is just a replay of the lead-up to ‘08 (we can argue scope and magnitude but essentially the same thing), so why would you expect the aftermath to be different this time?
Maybe they will but prices have a very long way to fall before that ever happens.
You are thinking on the right path. First step is to be able to recognize the bubble. Most people cant even do that. Irrational exuberance seems to last a lot longer than u think it can. It happened last time around. I think there were people on here in late 2003 saying there was a bubble in housing. When did sh@t officially hit the fan, 2008? Most likely we are on the path to do it all over again because nothing has changed besides printing money to patch holes up. It can change on a dime too. I think that stock market investors think they will be able to just sell and get out and things will be ok. You go to bed one night thinking your portfolio is awesome and the next morning its down 30%.
I didn’t even know what a blog was in 2003.
‘why stand on the sidelines’
Good grief, I just pointed out that there are millions of FB’s who thought they were set and got wiped out. And that’s just housing in the US. I know, I take their junk to the dump all the time. You know what else I haul off? Piles of unpaid bills. You are running a theoretical mind exercise in which one can’t lose based on future money printing. That is plainly not the case, or there would have never been a single foreclosure or failed bank.
You know, if wall street and the Fed want to play their games with stocks, that’s one thing. But it’s positively immoral for this to be going on with an essential need like shelter. I refuse to take part in housing bubbles if only for this reason.
The government is a mighty enabler that is for sure, but a bubble takes credit maniacs (AKA debt donkeys). You know the parable about the straw that broke the donkey’s back. Millions of able bodied debt donkeys have already fallen from the ranks and millions more are just one credit card payment away from a broken back. Also, the donkey feedbags have been slowly filled with sawdust rather than corn and oats. Pretty soon it will show up that a bunch more lose their feedbags as oil, mining, the green energy industry, and probably banking operations trim. You need more and more donkeys, and stronger ones at that, to keep a bubble going. Less and weaker doesn’t work.
It can’t go on forever, so it won’t. It can bounce though, like a ball bouncing down a flight of stairs.
What year was this blog started? I thought it was late 2003 or 2004?
It was 10 years ago this month.
http://thehousingbubble.blogspot.com/2004_12_01_archive.html
cool I was close I guess. I notice a lot of the posts didn’t have comments. Is that how things started off? I think i was in gilbert, az when I started to read the blog. Things were just insane with home prices during that time. 10k / month gains in equity were not uncommon.
That’s odd, I even get Victoria Secret adds going back ten years!
‘I notice a lot of the posts didn’t have comments’
I didn’t enable comments until March of 2005, and even then I didn’t see the point, a friend suggested it. I had an earlier blog, started in October 2004. I used to send emails to people I knew about various subjects including the housing bubble. When I discovered blogs, I thought, instead of sending these messages around, why not post them in one place so they can just visit to see what I’m reading and saying. (I foolishly deleted that earlier blog.)
So thats why there weren’t earlier comments. The point was for these people I knew to be able to follow this subject. I figured after a year or so I would delete or abandon the HBB.
It is amazing that the mania has gone on for another 10 years.
It isn’t “amazing.” It’s due entirely to endless QE by the Fed that has promoted speculation, asset bubbles, and moral hazard. It won’t end well, but until price discovery returns to the market, the Ponzi will go on.
“You know what else I haul off? Piles of unpaid bills.”
Back when I was a repossessor I was always amazed at the number of unpaid bills that were piled-up in the vehicle’s glove compartment. I guess there’s a tipping point, and after that nobody gets paid.
“It was 10 years ago this month.”
Coincidentally, that’s when we became renters for life.
Yes they will prop again and again until they can’t.
With that said, does anyone believe this next downturn will be the last one to occur in the next 5-10 years? or otherwise known as the big one?
Prices are falling to their natural level regardless of obstacles or interferences.
The proof is right in front of you. It’s not working.
“It’s not working.”
…said Colin Kaepernick to Jim Harbaugh.
Most underrated QB in the league.
Most underrated QB in the league.
+1 How about that 90-yd dash?
1 of the many reasons he’s underrated. 2 minutes before that I was telling Mrs he’s the wryliest QB ever.
“Let’s assume for a minute that another real estate crash is on it’s way. Most indicators point to it being here now. ”
Please elaborate on the indicators you are referring to in your statement.
‘CEO Bernard Ebbers became very wealthy from the increasing price of his holdings in WorldCom common stock.[5] However, in the year 2000 the telecommunications industry was in decline. WorldCom’s aggressive growth strategy suffered a serious setback when, in July 2000, it was forced by the U.S. Justice Department to abandon its proposed merger with Sprint. [5] By that time, WorldCom’s stock price was decreasing and banks were placing increasing demands on Ebbers to cover margin calls on his WorldCom stock that were used to finance his other businesses (timber and yachting, among others).[5] In 2001, Ebbers persuaded WorldCom’s board of directors to provide him corporate loans and guarantees in excess of $400 million to cover his margin calls.[5] The board hoped that the loans would avert the need for Ebbers to sell substantial amounts of his WorldCom stock, as his doing so would result in a further decrease of the stock’s price, however, this strategy failed. In April 2002, Ebbers resigned as CEO and was replaced by John Sidgmore, former CEO of UUNET Technologies, Inc.
Beginning modestly during mid-1999 and continuing at an accelerated pace through May 2002, the company—directed by Ebbers (as CEO), Scott Sullivan (CFO), David Myers (Controller) and Buford “Buddy” Yates (Director of General Accounting)—used fraudulent accounting methods to disguise its decreasing earnings to maintain the price of WorldCom’s stock.[5]
The fraud was accomplished primarily in two ways:
Booking “line costs” (interconnection expenses with other telecommunication companies) as capital expenditures on the balance sheet instead of expenses.
Inflating revenues with bogus accounting entries from “corporate unallocated revenue accounts”.
In 2002, a small team of internal auditors at WorldCom worked together, often at night and secretly, to investigate and reveal $3.8 billion worth of fraud.[6][7][8] Soon thereafter, the company’s audit committee and board of directors were notified of the fraud and acted swiftly: Sullivan was dismissed, Myers resigned, Arthur Andersen withdrew its audit opinion for 2001, and the U.S. Securities and Exchange Commission (SEC) began an investigation into these matters on June 26, 2002 (see accounting scandal). Sidgmore was instrumental in turning around the ailing company and in revealing Ebbers’ fraud to regulators. Sidgmore died suddenly in December 2003 from acute pancreatitis.
By the end of 2003, it was estimated that the company’s total assets had been inflated by about $11 billion.[5] This made the WorldCom scandal the largest accounting fraud in American history until the exposure of Bernard Madoff’s $64 billion Ponzi scheme in 2008.
Bankruptcy
On July 21, 2002, WorldCom filed for Chapter 11 bankruptcy protection in the largest such filing in United States history at the time (since overtaken by the bankruptcies of both Lehman Brothers and Washington Mutual in a span of eleven days during September 2008). The WorldCom bankruptcy proceedings were held before U.S. Federal Bankruptcy Judge Arthur J. Gonzalez who simultaneously heard the Enron bankruptcy proceedings which were the second largest bankruptcy case resulting from one of the largest corporate fraud scandals.
http://en.wikipedia.org/wiki/MCI_Inc.
I post this for Ryan. In 1998, I took a job as a controller for a dotcom in Austin. Worldcom was out biggest customer. Soon after, I received my landlords mortgage bill and seeing that it was twice what I was paying in rent, began to consider there was a housing bubble. But that took time. I was a believer. We were all going to get rich on this new internet thing. But Worldcom was always late, really late, paying us. And we were hemorrhaging cash. I was asked, “what is our burn rate?” I replied, I just passed the CPA exam a few years ago and I can assure you burn rate is not an accounting term.
I slowly lost faith. Then I started looking for clues it was a bubble and found them. AOL buying Time Warner. The widely promised broadband take-up that would make all these promises come true. We got the broadband years later, but that didn’t save that little company or all the people that poured cash into it. I left several months before the bankruptcy. My landlord lost all his houses to foreclosure.
How many FB’s have been recorded on this blog? Hundreds certainly, maybe thousands. And we are told there were/are millions. What did the Fed do for them? What floor did they find? My point is, the government and central bank will do what they do, but it doesn’t protect anyone really. They don’t care how many lives are ruined or life savings lost.
…. or just how far housing prices fall naturally.
Is there really going to be a second round of American Homes for Rent or hedge funds with such similar scam schemes once they’ve all gone belly up because they could not capture the appreciation they were banking on?
That model was flawed from the beginning and called as such here right from the get go. Now that those houses come on the market, in droves, prices drop, drop, drop. And the new homebuilders continue to build, build, build.
How does it go?
Inventory is exploding …
“Equity “investors” are happy that the Fed may be happy about the economy, even though there is nothing in actual markets (outside of stocks) to suggest that anything the Fed proclaims carries even the slightest validity. “
‘Inventory is exploding’
Which gets to an important point about Ryan’s questions. The central bank actions don’t happen in a vacuum. If house prices are “propped up”, the market responds by producing more. People start to make choices on a false market.
Let’s say some of this money makes its way into tech stocks in California. Up and away. Then those people have got to have a place to live. Up and away. But there’s not enough housing; lets build some sky boxes. Next thing you know, people are paying huge amounts for sky boxes as “investments”. They fully expect these investments to reap huge returns. Restaurants open, roads are built, school bonds issued. Oh, yes, the debt. If I’m making a bunch of money working for the Next Big Thing, why I can comfortably borrow to buy that expensive new car. Remember the guy in San Diego who referred to his yet to be delivered house as a new income?
I know readers here understand what I’m getting at. I recently posted some philosophy about the state. It said the state shouldn’t have the right to do what is unlawful for an individual. Let’s say I have a really good photo copier. And it is my true intention to create currency and loan it out to businesses with the purpose to stimulate the economy. I don’t even profit from it. If I’m caught, will the facts of my activities protect me from prosecution? I would ask the judge, what is the harm? Why is making money illegal? There must be a reason it’s a crime. If it’s a crime, there must be negative consequences.
Is only the state is allowed to make money at a whim? Can the state murder or steal? Can the state set up monopolies when it’s illegal for me to do so? The root of the matter in Ryan’s questions isn’t will the government do this or that. But why are they allowed to do so?
Is only the state is allowed to make money at a whim?
FWIW, at least in the USA, it’s the bankers (The Federal Reserve) who make money at a whim. The last time I checked, Uncle Sam has to collect taxes to pay his bills, and to borrow money (and pay interest on it) to cover any deficits.
Is it just the Fed? I thought banks were able to create money as well, through lending and with ever-diminishing reserves. I think this electronic money creation is a sleeper cell. I’ve often thought as well about the effect of electronic deposits/withdrawals/transfers on velocity. This has an effect on inflation,too, doesn’t it? I wrote a check the other day and it literally cleared my bank that same afternoon. It’s crazy fast.
“Please elaborate on the indicators you are referring to in your statement.”
Sure.
“Housing Is In Big Trouble”
http://truthingold.blogspot.com/2014/02/housing-is-in-big-trouble.html
From the article;
“If you want to sell your house because you understand the nature of the big lie being told, get it listed now and price it to move.”
Which sounds remarkably similar to the wise advice seen here that goes something like get what you can get for your house today because it’s going to be much much less tomorrow for many years to come.
“And the weekly index of mortgage purchase application took another big tumble this week, falling to 19 year lows and down 17% year over year. Mortgages, by the way, are the life blood of home sales. If applications to purchase homes are plummeting, so is true demand.”
Do you remember the great real estate crash of 2006-2010? “They” could not stop it. The floor came too little and too late for most people in most places. Would it be different this time?
My biggest worry is not that prices will stay up. Anyone who has followed this for the last few years knows beyond a doubt that the game from the last 3 years was unsustainable. Heck, they even printed stuff like that in the paper this time.
No, my big worry is that prices will drop again but you still won’t be able to buy one, either all going to a few select insiders or funds or some other scam insider way being kept off the market. All except the obvious dregs. There are lots of posters here who were ready to buy in the 2011-12 period who said they always lost out.
A good example of how difficult the housing market is: Ocwen. Loads of wall street money, big discounts on defaulted MBS’s, and they’ve lost most of their equity in just a few years. This at a time when house prices have gone up by huge percentages.
yep, I’m one of them (people who tried to buy a few years ago and were shut out by 100% cash flippers and specuvestors)…but next time if the locusts are out in force I may try dealing directly with the listing agent, they have a strong incentive to push an offer through if they don’t have to split the commission, from what I’ve read this has worked for some people. Am aware that there is some danger in this but maybe not so much more than when using a buyers agent since they are ALL working for the commission, not the buyer or seller.
Government in conjunction with the banking cartel will set a floor on housing prices at some point ??
Well, I would call it a higher bar rather than a floor…The clear intent IMO was the restore the balance sheets of the banks…
The govt-banking cartel cannot refrain from keeping interest rates low. Every financial participant in the runup to the last crash is throttled with unsettled derivatives liability. Lending good money (more less) after bad is the only way the cartel can pump up the leaking tire.
The long game is for the financiers to get not only the bad debt, but also the claims they could not make good on, off the books. They can only do this by transforming the fake money placeholders on the books into real money loans.
The claim: any large asset closing is a sham transaction, in which the bank proffers a symbolic representation of value in exchange for an annuity of consisting of real cash payments. The financiers are filling the vacuums where hard assets ought to reside.
Ayup, that’s a big ho-hum. My opinion, and I’m sticking to it.
“They’ll try and hide those losses as long as they can. But trust me on this one: all major funds have oil in a prominent place in their portfolios. And there’s a Bloomberg index that says the average share values of 76 North American oil companies, i.e. not just the price of oil, have lost 49% of their value since June. There will be Blood with a capital B.”
“But trust me on this one: all major funds have oil in a prominent place in their portfolios.”
And I suppose the guys who run the these major funds charge their clients some hefty fees in exchange for their priceless expertise?
The losses will be realized only after the bonus checks are cashed.
“Existing wells, those already drilled, will be allowed to be emptied, but then it’s over. Who’s going to continue to pump millions upon millions into something that’s a guaranteed loss? Nobody. And not only that, but lenders will start calling in their loans, and issue margin calls. “The average borrowing cost for energy companies in the U.S. high-yield debt market has almost doubled to 10.43% from an all-time low of 5.68% in June”, says BoAML.”
Mad Yellin will pump all the money.
Are the cups and thugs in NYC fighting over the $72 millions a Brooklyn high school kid made in stock markets?
America is a a 3rd world country…it happened much sooner than I expected.
You mean the nutter who murdered the two cops? FWIW, I’m not surprised it happened.
“Any attempt to create full employment by drawing labor into occupations where they will remain employed only so long as the [monetary and] credit expansion continues creates the dilemma that either credit expansion must continue indefinitely (which means inflation), or that, when it stops unemployment will be greater than it would be if the temporary increase in employment had never taken place.”
In the meantime, the deflationary spiral rages on.
“Any attempt to create full employment by drawing labor into occupations where they will remain employed only so long as the [monetary and] credit expansion continues …”
This sounds a lot like a borrowed-money economy.
“… creates the dilemma that either credit expansion must continue indefinitely (which means inflation), or that, when it stops unemployment will be greater than it would be if the temporary increase in employment had never taken place.”
Yep, that’s a borrowed-money economy aright.
We (”we”, as in “We are the world”), at some point, went from an earned-money economy to a borrowed-money economy.
The borrowed-money economy created a boom - an artificial boom but a boom nevertheless - and at the other side of this boom, at the other side of all this borrowed money, lies a bust.
And this bust is going to be huge because the boom - THE BOOM THAT WAS BORROWED - was huge.
Unless, of course, the boom can be kept going - and this reminds me of a cartoon showing a couple of economists discussing an equation on a chalkboard and one of them says to the other: “And at this point a miracle occurs”.
“This is why the Fed is so obsessed with creating inflation: because it renders these gargantuan debt loads more serviceable. In simplest terms, the Fed must “inflate or die.” It will willingly sacrifice the economy, and Americans’ quality of life in order to stop the bond bubble from popping.”
Bingo.
I thought they were two mathematicians who proved that two wrongs really do make a right.
Somebody has to lose. Those big pension funds, insurance companies, hedge funds, I don’t know who, but someone has to be left holding the bag.
The government seems to do it all it can to prevent the chickens coming home to roost as they properly should for speculators chasing yield to cover up their prior lies.
I wonder if Worldcom, would happen today, or Enron. Or would everyone agree to just paper it over with a wink and a nod.
Pensioners seem like an easy target. They were also the designated bagholders in the 1970s inflation episode.
If it was about economics Saudi Arabia would not be saying this, it is about economic warfare on Russia and Iran. Saudi Arabia is actually trying to jawbone prices lower. Unlike in 1986, when it actually had a capacity of 12 million barrels a day but was only producing two million barrels and actually flood the market, Saudi Arabia is actually producing all out and it is below ten million barrels a day. It has old and tired fields, it is lying about it reserves. With decline rates up to 45% a year, without high drilling rates fracking production is about to drop like a stone:
http://www.reuters.com/article/2014/12/21/us-oil-prices-saudi-idUSKBN0JZ05W20141221
“He blamed the fall in prices to half their levels of six months ago on speculators and what he called a lack of cooperation from non-OPEC producers.”
weren’t all these commodities jacked up by cheap money?
“With decline rates up to 45% a year, without high drilling rates fracking production is about to drop like a stone”
Hmmmm … but this means the oil remains in the ground, does it not?
If it were, say, a crop of some sort, something that had to be harvested or it would rot in the fields then I would think we were screwed. But the oil in the ground doesn’t rot.
Also, consider this:
The Debt may go poof but the infrastructure financed by the debt will remain. And if somebody can buy up the infrastructure at a big discount then his cost basis will be much lower that the original owner’s cost basis.
Bankruptcy can be a terrible thing to happen to some people but at the same time bankruptcys open up a lot of opportunities for those who know their way around in these areas. And if the cost of oil production infrastructure can be bought at a big discount then we’re not talking about sixty-dollar-a-barrel break-even point but instead the break-even point will be a lot lower.
At least this is how I understand the situation; I’m open to considering alternative viewpoints.
And if the cost of oil production infrastructure can be bought at a big discount then we’re not talking about sixty-dollar-a-barrel break-even point but instead the break-even point will be a lot lower.
That works for things like pipelines but not the actual wells with their sharp decline rates. Of course, since Obama blocked the XL pipeline a lot of the oil is being moved by railcar and not pipelines so there is less of that permanent type of investment to buy at a discount. It costs about nine million dollars to drill a fracking well and by the end of three years the well is producing virtually nothing. Within the first year production is down 45%. These are not your grandfather’s oil wells.
“It costs about nine million dollars to drill a fracking well and by the end of three years the well is producing virtually nothing. Within the first year production is down 45%.”
So what determines the cost? Is it the cost of labor? Does it take nine million dollars of labor to drill a fracking well?
Or is it the cost of infrastructure - much of it already in place (roads, railcars, pipelines, storage tanks, etc).
Plus, if you want to add in to the cost of infrastructure the cost of such things as discovering just where the oil is and the best way of getting it out - well, that’s already been paid for. This info shouldn’t have to be discovered more than once.
But you cannot turn oil production back on like you switch a light. Thus, oil prices may end up higher than before with oil production trying to catch up with demand. Of course, since it is not like a crop once the oil is produced it is gone. Even without the fall in prices shale oil production was going to peak within a few years since the prime spots have been produced.
It’s been stated many times on this blog that these type of wells have short production lifetimes and that constant drilling is needed in order to keep production going. And if this is true then it is the cost of drilling that determines whether or not production is profitable or not. So if the cost of drilling can be drastically reduced then a reduction in the cost of production will follow.
And the cost of drilling will be drastically reduced if the cost of the infrastructure involved in the drilling is drastically reduced. And this reduction of the cost of infrastructure will take place when the infrastructure will be sold off for pennies on the dollar as a result of bankruptcies.
But the oil in the ground doesn’t rot ??
Yep, and if and when the price starts back up, fracking will come right back into play…
Should so: Actually could flood the market
Saudis want to stop the Iran’s nuclear plans before everyone figures out that Saudi Arabia’s fields are in imminent terminal decline, Putin must be smiling, he knows the true condition of Saudi Arabia’s fields.
Sorry for seeming dull, but how does Putin know the true condition of the Saudi fields?
With overflowing tank farms, cratering demand and prices, why wouldn’t production fall?
As I posted yesterday, I guess you missed it:
While doing errands listening to the BBC, it was said that 12 million barrels of world oil production per day is now unprofitable. To put this into perspective the alleged glut is one million barrels per day. However, that number assumes the growth in US production per day of one million barrels which will not occur at prices anywhere near their present prices. 2/3 of the drilling is just to replace the rapid decline in production So we are exactly in balance just with the above facts.
However, since that estimate 650,000 barrels of production has shutdown in Libya due to Islamic rebels. (thanks Hillary and Susan Rice), thus we are now in deficit. Also, due to the low prices China has decided to put more oil in its strategic reserve, reasonable estimate is 200,000 barrels a day. So at these price levels we have a deficit of about 850,000 barrels a day, betting on a price rise is mild risk taking and not a gamble.
Meanwhile…
1st reported Salt Lake gas under $2.00 this morning - Sams Club & Costco at $1.98 and $1.99.
Wow…!!
Excellent! Will be in the SLC area tomorrow.
Bring-a-Crayon Dan,
Sat on a loss.
Bring-a-Crayon Dan,
Made a post for his boss.
All the blogs readers,
And all the blogs friends,
Couldn’t make sense of that post in the end.
“Saudi Arabia is …lying about it reserves.”
Too funny dan. The Saudis are just pumping their wells like before and you conclude that they are waging a war and lying about having reserves, with no factual basis.
Could this be classic denial behavior? The US and Russia are the ones that ramped up production, not Saudi Arabia. China is the one that set a false expectation of ever rising demand, not Saudi Arabia.
I have talked about Twilight in the Desert numerous times try reading it.
You post too much to ever waste time reading it the 1st time around, much less going back over. There might be some nuggets in there, but tone down your wildly inflated opinion of yourself and maybe some of us will pay a little more attention. As it is, I find you to be a crashing bore.
They attacked us on 9/11 because they hate our freedoms
“The wars in Iraq and Afghanistan and counterterrorism operations have cost the U.S. a combined $1.6 trillion since the Sept. 11 terrorist attacks, according to a new Congressional Research Service analysis.
Through fiscal 2014, which ended in September, Congress approved $815 billion for warfare in Iraq, $686 billion for Afghanistan and other operations against terrorism, $81 billion for other war-designated spending and $27 billion for Operation Noble Eagle air patrols over the U.S., according to the report posted on the agency’s internal website. The total includes $297 billion spent on weapon procurement and war repairs.
The assessment is the agency’s first full update of war costs since March 2011. About 92 percent of the funds went to the Pentagon, followed by the State Department and the Department of Veterans Affairs. It includes war operations, training and equipping Iraqi and Afghan forces, diplomatic operations and medical care for wounded Americans over the past 13 years, the agency said in the report dated Dec. 8. It also includes most reconstructions costs.”
http://www.bloomberg.com/news/2014-12-19/wars-cost-to-the-u-s-since-the-sept-11-attacks-1-6-trillion.html
have cost the U.S. a combined $1.6 trillion since the Sept. 11 terrorist attacks, according to a new Congressional Research Service analysis ??
And, add to that all the money that is being spent to replace all the chit we blew up, wore out or just left behind…Then, all the expense of the military that returned 1/2 bagged or in a mental waste land…
“$1.6 trillion”
BHO by his lonesome has cost U.S. 9 trillion.
#FundamentalTransformationOfAmerica
The biggest bubble of all is the American lifestyle and imports, relative to the average American’s earnings and exports.
That one started to deflate in 2008, and has stayed deflated for younger Americans. Those in power had the federal government go deep in debt to keep the game going.
I’m not surprised that wages are not soaring as unemployment falls. Businesses can’t raise wages for workers because they can’t raises prices for customers (the same people), aren’t paying dividends, and want to keep executive and financial pay inflated. It just doesn’t add without debt.
“It just doesn’t add without debt.”
Oh, perhaps I can be of some help.
how long would it take to pay off a trillion dollars with no interest?
1 million a day for 2,739 years.
To pay of 18 trillion = 49,315 years
A trillion a year in new debt for past 6 years right?
( 1012 sec)/( 3.16 x 107 sec/yr) = 31,546 years!
and has stayed deflated for younger Americans ??
Yep…Its a huge problem because the things that you must have continue to rise in price meaning that in effect, you have a wage cut…
So ISIS is within mortar range of the green zone, anyone think we are winning this one?
http://www.iraqinews.com/iraq-war/mortar-shells-fall-green-zone-central-baghdad/
It was lost the moment we selected Bush jr.
+1…
“It was lost the moment we selected Bush jr.”
Didn’t the high court select Dubya?
Actually it could have worked if they had kept the former Iraqi army and officer cadre together instead of firing everyone and trying to build a new military from scratch… Hubris and a critical mistake did us in.
+1,000,000
When you invite members of the religion of peace into your country these things happen:
(IraqiNews.com) On Saturday, Swedish police announced that two car bombs exploded in the city of Malmo, Sweden’s third largest city, which is inhabited by Iraqi community.
The spokeswoman for the Malmo police, Linda Plame said in comments quoted by ‘BBC,’ and followed by IraqiNews.com, “The two explosions, which occurred on Saturday, did not lead to any injuries,” adding that, “One of the cars exploded near a building, while the second exploded in a nearby parking lot.”
Plame added, “It was not clear who was behind the blasts or whether they were committed by the same party,” pointing out that, “The police did not arrest anyone on the background of the two incidents.”
The city of Malmö has been witnessing a series of similar incidents in recent months.
Earlier this month, a court building in the center of the city was targeted, as well as police headquarters and the offices for the prosecution and detention centers; no one was hurt in that attack too.
Diversity is our strength.
Multiculturalism enriches us all.
http://news.yahoo.com/man-shouting-allahu-akbar-drives-crowd-france-injuring-211915875.html
The knit cap wearing dreadlock crowd won’t care until it comes to the hip section of a city near them.
Move along, nothing to see here.
#MulticulturalismFail
#ShariaLawByForce
Article for 2brony
“Illinois is like Greece in one obvious way: it overpromised and underdelivered on pensions and has little appetite for dealing with the problem, says Hal Weitzman of the University of Chicago Booth School of Business. This large Midwestern state, with a population of 13m (Greece has 11m, though a far smaller GDP than Illinois), has the most underfunded retirement system of any state and the largest pension burden relative to state revenue.
It also has the highest number of public-pension funds close to insolvency, such as the one looking after Chicago’s police and firemen. According to the Civic Federation, a budget watchdog, Illinois has piled up a whopping $111 billion in unfunded pension liabilities (see chart), in addition to $56 billion in debt for health benefits for pensioners. The state devotes one in four of its tax dollars to pensions, which is more than it spends on primary and secondary education.
Mainly as a result of this gargantuan pension debt, Illinois’s bond rating is the lowest of all the states, which means dramatically higher borrowing costs. When the state government failed to address pension underfunding in its budget for 2014, two credit-rating agencies, Fitch and Moody’s, cut the state’s bond rating, which in Moody’s case put Illinois on a par with Botswana.”
http://www.businessinsider.com/public-pensions-americas-greece-2014-12
On par with Botswana? And yet what is the real world result of this? They’ll still be able to borrow or they’ll get bailed out by the Feds. And business as usual…
They’ll still be able to borrow ??
Well sure…Just at higher rates which then means higher taxes and lower services with lower wages and more of the wealth & companies leaving Ill….It all hits a wall at some point…
or they’ll get bailed out by the Feds ??
No way…EVERY municipality would be standing in line with their hands out led by the Union pension funds that need the underfunded liability cured…
No, IMO, it will all come down to an ultimate Supreme Court ruling either in favor of the sanctity of the pension funds or not…Going to be massive fallout from this decision either way…
Always some pipe dream in the future. This has been going on forever. Never a reckoning for the pensions
Never a reckoning for the pensions ??
Patients crasshopper…It may or may not be a reckoning for the pensions…They could prevail and it would be a reckoning for the bond holders or it could go the other way…Bottom line, its coming…It only take one big bond holder to dig their heals in…After that, we find out the answer…
States cannot file bankruptcy, they can only default on their debts. If Illinois defaults, it will get interesting because it might trigger credit downgrades in other states and the U.S. as a whole. Congress might be forced to hold their collective noses and bail out Illinois in order to protect the nation’s credit rating and the dollar.
States cannot file bankruptcy ??
But municipalities can…So, if all the municipalities or the majority of them file BK then in essence, the state did…
At least the rents are coming down for all those underwater pensioners…
A nation of broke @ss loosers
“more than half of today’s households will not have enough retirement income to maintain their pre-retirement standard of living, even if they work to age 65—which is above the current average retirement age—and annuitize all their financial assets, including the receipts from a reverse mortgage on their homes”
http://www.marketwatch.com/story/retirement-index-shows-many-still-at-risk-2014-12-17
“Printing money out of thin air does not increase wealth, it only increases claims on existing wealth.”
~Charles Hugh Smith
And “now is a good time to buy a house!”
A friend just did, $347,000 for 864 square feet ($400+ per s.f.), built in 1926
And he thinks he got a good “deal” on it
$347,000 for 864 square feet ($400+ per s.f.) ??
What zip ??
80209 Washington Park
House or condo ??
sfh, tiny lot, no driveway, don’t know if he has a garage facing the alley
“80209 Washington Park”
Is that the land of unsinkable housewives?
even if they work to age 65—which is above the current average retirement age
That “average” is going to get much, much higher. The real question is if ultra obese Americans will keel over before the qualify for the maximum SS benefit (currently age 70). I guess junk food and HFCS will help keep SS solvent as millions of chubby Americans will go to an early grave and will never collect a penny of their SS benefits,
That “average” is going to get much, much higher ??
As it probably should…Given todays life spans, medical technological pointing to even further increases it should be at least 67 or even a bit higher….
They’ve been running a net loss, those chubbier ever since they went out on SSI “disability”. There is no savings.
“The real question is if ultra obese Americans will keel over before the qualify for the maximum SS benefit (currently age 70). I guess junk food and HFCS will help keep SS solvent as millions of chubby Americans will go to an early grave and will never collect a penny of their SS benefits.”
If I ran a life insurance company I would select and target these people and sell to them retirement annuities;That’s because they will most likely die young.
But if they were healthy I would select and target them for life insurance policies - whole or term; That’s because they will probably die old.
http://www.nytimes.com/2014/12/21/upshot/of-kiwis-and-currencies-how-a-2-inflation-target-became-global-economic-gospel.html?action=click&pgtype=Homepage&module=c-column-middle-span-region®ion=c-column-middle-span-region&WT.nav=c-column-middle-span-region&_r=0&abt=0002&abg=0
“The Bank never ‘goes broke.’ If the Bank runs out of money, the Banker may issue as much more as needed by writing on any ordinary paper.”
~Monopoly board game rule book
This is no ordinary pulp,
No orrr-di-nary pay-perrrr.
If you had the certainty that ten to twenty percent of your electronic assets will be confiscated in the next five years would you get a loan or a HELOC?
Electronic assets? You mean they are going to take away my 50-inch flat screen, my BluRay and my wi-fi router?
A bunch of “investors” (bag holders) just got Corzined. Only this guy isn’t a bundler for the DNC, so the cops might actually be out looking for him.
http://www.businessinsider.com/currency-trader-vanishes-2014-12
“Don Wall, 77, a retired businessman from Cambridgeshire, is owed about £100,000 by JL Trading. “These are my life savings,”
Too bad you were so greedy Don, all eggs in one too good to be true basket.
It “was” your savings, until you threw it to the wind.
“Investors had been attracted through word of mouth with the promise of monthly returns on his currency trades of between one and three per cent.”
Step 1: Dumb them down.
A puke has been sufficiently dumbed down if he really - REALLY - expects to get a monthly return of between one and three percent.
And now let’s take a look at Step 2, which is prosper…
“Since about 2011, only investors with a minimum of $25,000 (£16,000) could join his investment “club”. One client had invested about £500,000 in the past 12 months and is unlikely to get his money back; another is said to have put in £1.2 million.”
This guy is a piker compared to what Wall Street has planned for social security and the privatization of retirement accounts. The best part is, the sheeple themselves will vote for their own fleecing by electing crony capitalists like Hillary or Jeb.
http://www.telegraph.co.uk/news/11305953/Trader-goes-missing-after-130m-of-clients-cash-disappears.html
If this guy was shrewd, he’s insured himself against any real attempt at prosecution by donating generously to the political elites in the US and UK.
Get ready for reparations, once the FSA has their Democrat permanent supermajority and can vote themselves bennies that the dwindling number of producers will have to pay for to ensure “equality” of outcomes.
http://www.businessinsider.com/us-leaves-typical-black-household-with-just-about-nothing-2014-12
“For the American middle class, home ownership is wealth, and without it, blacks weren’t able to save and build assets to pass on to the next generation.”
Minorities were (still are) drawn to HELOC loans like the moth is drawn to the flame, i.e., no self control. Equity? Lolz!
The markets tried to help ‘em by increasing the qualifications for borrowers, but the folks like Clinton come along and dismantle these barriers with schemes like the Community Reinvestment Act. That line, “…build assets to pass on to the next generation” is laughable since the poor live in the perpetual present without a glimmer of thought regarding the future.
Community Reinvestment Act Led To Housing Bubble’s Lax Lending
http://www.businessinsider.com/the-cra-debate-a-users-guide-2009-6
Just look at the tax and lic fee in this case? Extortion what else can you call this?
Exclusive: Oneida Indian Nation opening new casino in Central New York
In exchange for exclusive casino rights in the 10 counties, the Oneida nation agreed to share, for the first time, 25 percent of its slot revenues with state and local governments. The Oneidas said then they expected to pay about $50 million per year from Turning Stone slots for the exclusive 10-county casino rights. Revenues from the Yellow Brick Road Casino will be part of that, said Oneida nation spokesman Joel Barkin.
Wilmot plans to open his casino in 2015 just outside of the 10-county region if he succeeds in obtaining a license from New York. He’ll have to pay New York $35 million for the license. He’ll also be required to pay an annual tax to New York estimated to be $79 million in the first year.
http://www.syracuse.com/news/index.ssf/2014/12/exclusive_oneida_indian_nation_opening_new_casino_in_cny.html
“… the Oneida nation agreed to share, for the first time, 25 percent of its slot revenues with state and local governments.”
(Why did the word “skim” leap heavily into my consciousness as I read this?)
“…exclusive casino rights …25% of its slot revenues with state and local governments”
How is that not a government monopoly now?
It’s not immoral if the NY government can collect revenue on it.
Bahahahaha … people are smart, well … maybe not this guy.
Bahahahahahahaha .. it’s not as there weren’t a few thousand sets of eyes on watching him and maybe - what? - maybe a dozen or so cameras? And then there’s the slo mo and instant replay and all that other nifty stuff, but nevertheless … well, see for yourself:
http://sports.yahoo.com/blogs/nfl-shutdown-corner/lions–raiola-stomps-on-bear-s-ankle-205337001.html
Everyone Must Check In
Region VIII montain p0rn
http://www.picpaste.com/IMG_20141220_104143_071-6qM5bg0m.jpg
http://www.picpaste.com/IMG_20141220_105254_299-uENI82eN.jpg
http://www.picpaste.com/IMG_20141220_113107_683-YMsWm35i.jpg
http://www.picpaste.com/IMG_20141220_113621_991-ZLHdHlBq.jpg
http://www.picpaste.com/IMG_20141220_115927_858-4bDDTzlF.jpg
Region VIII
Region IV
Rahm Emanuel’s son got mugged. Hey kid, be sure to thank pops for his contributions to turning Chicago into a corrupt Third World cesspool where the law-abiding are denied their Second Amendment rights.
http://www.chicagotribune.com/news/local/breaking/chi-rahm-emanuel-son-robbed-20141220-story.html
Just curious. Did they put out a description of the offenders? I didn’t hear of one. Maybe they don’t really want to catch them.
Two “youths.” Taboo and non-PC to get more descriptive.
“Two “youths.”
Did you sat yoots?
http://www.youtube.com/watch?v=eNZ1O2KTOOg - 398k -
Sunday funnies from TBP. Enjoy!
http://www.theburningplatform.com/2014/12/21/sunday-funnies-42/
Picure of Bill Clinton creeping on fundraiser’s (hot) daughter goes viral.
http://freebeacon.com/politics/bill-clinton-creeps-on-daughter-of-guy-who-tried-to-buy-new-york-senate-for-dems/
Don’t that just make Clinton supporters proud again, you know, to see the old pervert in chief still able to function in a hydraulic manner?
I long for the days when we had a President that was more interested in getting laid than destroying the US
I miss him
Wow, ‘ol slick has got it right this time. Don’t forget the selfie!
President Barack Obama
President Barack Hussein Obama
“Logically, QE dilutes the value of a currency by inflating the number of currency units in circulation, and, theoretically, should lead to price inflation. However, if all nations engage in monetary expansion, the effects of money printing on exchange rates may be effectively concealed by a balance of expansion. Or, as in the case of the US dollar, a currency with the status of world reserve currency may be expanded with relative impunity by the nation creating that currency, effectively exporting its inflation to the rest of the world that continues to sell to that nation, or trades in a monetary system based on that currency. “
“Exporting nations have engaged in competitive exchange rate reductions to gain or maintain competitiveness for their exports. A strong currency hurts export competitiveness but lowers the cost of imports. A weak currency raises the cost of living of residents who must buy imports - a common feature for nations that import oil, for example. There is a necessary balancing act between export competitiveness and consumer price inflation, regulated often through exchange rate manipulation. “
“The strategies that seem unique and strange, and contrary to tradition - rampant money printing, the monetizing of debt through central banks buying government bonds, ZIRP, NIRP, and the suppression of precious metal prices, are the necessary strategies of a new monetary system set up to cope with the problems arising from monetary excesses of the past. They are the new normal. “
Amy is ready when you are.
Go here for the latest of some of Amy’s RE offerings:
http://www.cntraveler.com/galleries/2013-05-22/photos-beautiful-abandoned-places
That’s not a nice way to talk about Amy’s underthings.
Got physically depreciating shadow inventory?