Bits Bucket for February 22, 2015
Post off-topic ideas, links, and Craigslist finds here.
The Housing Bubble
Examining the home price boom and its effect on owners, lenders, regulators, realtors and the economy as a whole.
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Ashland, OR Sale Prices Dive 11% YoY As Housing Deflation Spreads
http://www.zillow.com/ashland-or/home-values/
Is it safe to say at this point that a Grexit has been successfully averted?
Greece bailout: Don’t be fooled by the idea that ‘Grexit’ is now impossible
Many experts think it’s only a matter of time, however often the can is kicked down the road, writes Martin Vander Weyer
Municipal police officers take part in a protest in front of the Greek parliament in Athens
Don’t be fooled by pronouncements that ‘Grexit’ is impossible
By Martin Vander Weyer
11:46AM GMT 21 Feb 2015
The euro is “an old-style marriage where divorce does not exist”, said EU commissioner Joaquin Almunia a decade ago, after a much-denied report that German officials had secretly discussed the dismantling of the single currency. Such a discussion would be “absurd”, declared the president of the Bundesbank; “complete nonsense,” agreed the then president of the European Central Bank (ECB). Their line has been repeated down the years: there is no exit. New members may enter – seven have done so since 2005 – but none, not even Greece, which should never have been allowed to join, may leave. And that’s the way it may have looked after Friday’s 11th-hour agreement on a four-month extension to Greece’s existing bail-out.
But fans of Wolf Hall might observe that “old-style marriage” never stopped old-style monarchs securing divorce or annulment whenever it suited. Students of monetary history know that very few currencies (other than the pound and the US dollar) have ever achieved the permanence that eurocrats claim for their creation. Currencies – and cross-border currency unions – are not stone-built institutions, but tools of commerce and exchange that reflect the politics of their time.
Scandinavian, Austro-Hungarian and Latin monetary unions created in the late 19th century dissolved after the First World War. The pegging of Comecon currencies to the Russian rouble ended when the Berlin Wall fell. The Slovaks, after their “Velvet Divorce” from the Czechs in 1993, changed currency twice before joining the euro in 2009. Lithuania, which joined in January, has had six changes of coinage since 1922.
So don’t be fooled by pronouncements that “Grexit” is impossible, and that following Friday’s deal, the euro in its current form is now “forever”, as former Commission president Romano Prodi declared. Grexit after the next stalemate, whenever it comes, would still be a huge political event – but no more than a technocratic challenge for the ECB, and you may be sure that a team of the bank’s brightest, with IMF officials in support, are working on a contingency plan to ease Greece out of the euro with the least possible contagion and market turmoil.
Many experts think it’s only a matter of time, however often the can is kicked down the road. One veteran Brussels insider, former EU economic affairs commissioner Henning Christopherson, gave the game away in a BBC interview on Friday when he answered “Absolutely” to the question “So you think Greece will exit but the euro will survive?” The body language of German finance minister Wolfgang Schäuble, a key voice in the stand-off with the new Greek government, suggests he’s thinking the same unthinkable thought.
…
“Municipal police officers take part in a protest…”
When the enforcers join the angry hoards the social chaos descent slope likely becomes steeper. Yep, better fuel those Lear jets while there’s still time; hehe.
Great end and pretend still in full swing. No one takes a loss.
Great end = Grextend
“Yep, better fuel those Lear jets while there’s still time”
At some point they have to pay those pesky locals a decent wage.
Unless we go full-on Elysium, which is probably the most accurate prediction for what the future holds for the 99%, AKA the Ratchet Refuse.
I can see 2Ban right now, looking up at the night sky, at Elysium, saying “I bet their tax rate is low, and they have no unions!”
Yeah let’s just hand the earth over to the lazy, nonproductive and the corrupt. Get it over with.
Don’t the rich already have everything Shillow?
Some of us still have to work for a living
30% gov workers in GReece
where’s Oxide & Patty?
My attitude is the Greeks don’t trust the politicians they elect. Having a grim, non-corrupt group of Nordics forcing austerity and order on the country is the less-bad choice than another hyperinflation or another coup. Membership in the Euro brings predictability, which is highly valuable.
The choices are two bad ones. A Hobson’s choice. A Catch-22. The trick is finding out which is the less-bad choice.
There are those who think inflicting austerity on the Greeks is counterproductive, and want the printing presses turned on for the drachma (the usual suspects). I think the Greeks were in a very bad situation and thought how much worse would Tsipras be? They were willing to try anything. But I think now, Tsipras understands the situation he and the country are in.
What useful purpose does inflicting austerity on the Greeks serve?
I’m trying to be open minded on this, but unless the purpose is to inflict punishment on a populace which collectively owes an unrepayable debt burden and doesn’t have the luxury of sovereign reserve currency status to enable it to turn to the electronic printing press to make good on debt repayment, I’m missing the point.
It brings to mind debtors prison from days of yore: How did locking someone up in jail help them make good on repaying their debt?
What useful purpose does inflicting austerity on the Greeks serve?
IMO austerity does not serve much good for anyone in the long run. And in observation, Euro austerity does not work and has not worked in the 5 year European experiment with it in countries such as Greece, Spain and Portugal.
Of course those countries needed to mend their ways somewhat however the creditors should be made to take a substantial haircut on their debt pushing too.
Writing off bad debts is an essential part of capitalism. And so is not killing the host. (see quote below) We live in an age where “capital” is now the only God, but healthy capitalism realizes a balance between capital, the people and labor.
(Greek Finance Minister) Varoufakis described the austerity measures as “trying to extract more milk from a sick cow by whipping it.”
“You will kill it. You will not get more milk out of it.”
“Austerity”, i.e. retiring debt and balancing a budget is always the answer to a collapsing economy and a net positive Lola.
“My attitude is the Greeks don’t trust the politicians they elect.”
You got that right …
“I think the Greeks were in a very bad situation and thought how much worse would Tsipras be? They were willing to try anything.”
Not quite, I think: rather, the situation has gotten so bad that enough of them said ‘we can’t continue with the status quo; let’s give these guys, who are more extreme than most of us are comfortable with, a chance to prove that they actually mean what they’re saying.’ And you might have missed the recent protests in *support* of the government’s brinkmanship, but they’re huge. Supposedly (this was before the extension, which still needs to be digested) Syriza’s approval rating had jumped to ~80%.
“But I think now, Tsipras understands the situation he and the country are in.” I think Tsipras understood it very well beforehand. What new information does he have? There are going to be bank runs. Merkel and Djisselbloem are intransigent. Half your country has been shoved under the poverty line and worse. No surprises here.
‘“Austerity”, i.e. retiring debt and balancing a budget is always the answer to a collapsing economy and a net positive.” If debt were being retired, I’d agree with you. But Greece has no credible path for getting out of debt with the current austerity program. You have a nation of millions being forced into debt slavery to make good loans that should never have been made, that were only ever made thanks to the connivance of a corrupt government and supranational banks. This is different than the universe of debt donks who, individually, are getting what they deserve. This is something deeply problematic.
Varoufakis has stressed repeatedly that his government intends to cut off noncompetitive government parasites and to persecute tax evaders. If they make good on this, I can’t see what there is to object to. If they don’t, things become ugly again. But there is a chance that they actually mean to do what they say. Varoufakis has been blogging for years, and has a long track record of personal writings that appear to bear the hallmarks of a conscientious and reasonable person. You can’t bank on this stuff but people can be forgiven for taking him seriously. Same as I don’t know Blue Skye from Adam, but when temperatures get above freezing I’m going to leave a couple of jars filled with water out overnight, because the sum of what he’s saying and how he’s saying it makes me think there’s some substance there.
WRAPUP 9-Greece, euro zone agree four-month loan extension, avert crunch
Fri Feb 20, 2015 5:03pm EST
* Euro zone agrees in principle to four-month loan extension
* Contingent on Greek policy plans to be detailed Monday
* Athens forced to climb down and accept strict oversight
* ECB says deal means no need for capital controls
By Jan Strupczewski and Renee Maltezou
BRUSSELS, Feb 20 (Reuters) - Euro zone finance ministers agreed in principle on Friday to extend Greece’s financial rescue by four months, averting a potential cash crunch in March that could have forced the country out of the currency area.
The deal, to be ratified once Greece’s creditors are satisfied with a list of reforms it will submit next week, ends weeks of uncertainty since the election of a leftist-led government in Athens which pledged to reverse austerity.
“Tonight was a first step in this process of rebuilding trust,” Jeroen Dijsselbloem, chairman of the 19-nation Eurogroup, told a news conference. “We have established common ground again to reach agreement on this statement.”
The agreement, clinched after the third ministerial meeting in two weeks of acrimonious public exchanges, offers a breathing space for the new Greek government to try to negotiate longer-term debt relief with its official creditors.
But it also forced radical young Prime Minister Alexis Tsipras into a major climbdown since he had vowed to scrap the bailout, end cooperation with the “troika” of international lenders and roll back austerity.
European Union paymaster Germany, Greece’s biggest creditor, had demanded “significant improvements” in reform commitments by Athens before it would accept an extension of euro zone funding.
The two main combatants around the table put a radically different gloss on the result.
“Being in government is a date with reality, and reality is often not as nice as a dream,” German Finance Minister Wolfgang Schaeuble told reporters, stressing Athens would get no aid payments until its bailout programme was properly completed.
“The Greeks certainly will have a difficult time to explain the deal to their voters,” the conservative veteran said.
…
What’s up lately with the Baltic Dry Index?
Markets
Baltic Dry Freight Index Plummets Amid Commodities Slump
Index Hits Lowest Level Since July 1989
A cargo vessel arrives at Port Kembla, Australia. Freight rates for ships carrying raw materials have fallen to lows not seen for decades. Photo: Bloomberg News
By Costas Paris
Feb. 5, 2015 6:59 a.m. ET
LONDON—The Baltic Dry Index, which tracks freight rates for ships carrying raw materials, has slumped to its lowest point in 29 years, hit by a shipping glut, falling commodity prices and declining import demand from China.
This week, the BDI fell to 577, its lowest level since July 1986, and a far cry from its peak of 11,793 in 2008.
The world’s fleet of dry-bulk ships far exceeds demand for the vessels that carry commodities such as iron ore and coal, with capacity estimated around 20% above demand over the past few years. Many ships ordered at a time of booming global trade before the 2008 financial crisis have come into service as economic growth has sputtered in the years since.
Add to this falling oil prices, which suppress freight rates, and less-rapid economic growth in China which is the world’s biggest commodities importer, “and you get the perfect storm for dry-bulk shipping, which will take a while to come out from,” said Aris Vlachopoulos, a senior freight consultant advising Singaporean and Greek shipping companies.
…
A one-word explanation may largely suffice: China
Why did Baltic Dry Index drop to its lowest point ever?
Wednesday, 18 February 2015 - 9:55am IST | Place: Mumbai | Agency: dna Web Team
The earlier lowest point was 554 in the August of 1986.
Baltic Dry Index (BDI), the measure of the freight costs of shipping, has fallen to its lowest point in 30 years on the back of the imminent economic slowdown in China.
According to Bloomberg data, on Tuesday, BDI dropped another 1.15% to close at 516 points. The index has already fallen over 34% year-to-date and nearly 55% over the past year.
The earlier lowest point was 554 in the August of 1986.
The global commodity trade is dominated by Chinese imports of key raw materials like coal and iron ore. In the wake of the slowdown in Chinese economy, the demand for these raw materials is falling and the cargo ships are running idle, leading to the fall , or freight rates.
Various reports ranging from International Monetary Fund to the World Bank, the Chinese economy is slowing down.
In January this month, China posted its weakest annual growth rates in 24 years.
The country even missed the official target and grew by only 7.4% last year. In the year before last, Chinese economy expanded by 7.7%.
The effect of this Chinese slowdown has impacted its international trade as well.
Its exports in January fell by over 3% and imports nosedived by 20%.
It is this fall in imports that is putting pressure on freight rates across the world and the subsequent fall in BDI.
Between its imports of iron and coal, China commands over 50% of the world’s demand for these two raw materials.
According to this report, the fall in Chinese imports is steepest since the economic slowdown of 2009.
Another reason for this fall in BDI is excess shipping capacity.
Shipping companies across the world went on a buying spree in wake of ever increase Chinese appetite for raw materials to fuel its economy.
However, the global economic slowdown of the past decade reversed the trend. The result was the fall in commodity prices because of lack of demand. Shipping companies, who were adding capacity at a fast pace to handle the growing demand were suddenly sitting with huge debts and idle ships.
By the time they got to the party, the boom was over.
Now, there’s all that smoldering debt, with sprinkles of fraud.
(Reuters) - “Privately-owned shipping company Copenship has filed for bankruptcy in Copenhagen after losses in the dry bulk market, its Chief Executive Michael Fenger told Reuters.”
(BBC) “The world’s largest ship fuel supplier, OW Bunker, has filed for bankruptcy after alleged fraud. The company’s troubles came to light earlier this week when it discovered suspected fraud by senior employees in a Singapore-based subsidiary. OW Bunker is Denmark’s third-largest company and supplies 7% of the world’s bunker fuel, used in shipping.”
(Reuters) “Nautilus Holdings Ltd, a Bermuda-chartered company that leases container ships, has filed for Chapter 11 bankruptcy protection in New York, becoming the latest victim of a depressed shipping industry. The company has about $770 million in debt, according to papers filed late Monday with the U.S. Bankruptcy Court in Manhattan.”
and the list goes on.
Everywhere there is fraud. In fact, the past two decades should be remembered as the Fraud Age.
Is oil headed down to $20/bbl? Or is it $10/bbl?
One-Minute Read
Oil price falls again – and ‘could hit $10 a barrel’
Oversupply, the failure of Opec and diminishing demand will push oil price down again, Bloomberg says
LAST UPDATED AT 11:53 ON Thu 19 Feb 2015
The oil price slipped downwards again this morning, losing more than $2 or almost four per cent, as markets prepared for data expected to show rising output from US wells.
Brent crude was trading at $58.85 a barrel at 11.30am, down from a two-month high of $63 on Tuesday.
The plunging oil price had gone into reverse in the previous two weeks, prompting some traders to suggest that the oil market had reached a bottom. But according to new analysis by Bloomberg, oil prices could be set to fall sharply again and could even reach $10 per barrel.
In his report, A. Gary Shilling argues that a combination of factors will push the oil price down again.
…
Energy
Get Ready for $10 Oil
Feb 16, 2015 6:00 PM EST
By A. Gary Shilling
At about $50 a barrel, crude oil prices are down by more than half from their June 2014 peak of $107. They may fall more, perhaps even as low as $10 to $20. Here’s why.
U.S. economic growth has averaged 2.3 percent a year since the recovery started in mid-2009. That’s about half the rate you might expect in a rebound from the deepest recession since the 1930s. Meanwhile, growth in China is slowing, is minimal in the euro zone and is negative in Japan. Throw in the large increase in U.S. vehicle gas mileage and other conservation measures and it’s clear why global oil demand is weak and might even decline.
Oil Prices
At the same time, output is climbing, thanks in large part to increased U.S. production from hydraulic fracking and horizontal drilling. U.S. output rose by 15 percent in the 12 months through November from a year earlier, based on the latest data, while imports declined 4 percent.
Something else figures in the mix: The eroding power of the OPEC cartel. Like all cartels, the Organization of Petroleum Exporting Countries is designed to ensure stable and above-market crude prices. But those high prices encourage cheating, as cartel members exceed their quotas. For the cartel to function, its leader — in this case, Saudi Arabia — must accommodate the cheaters by cutting its own output to keep prices from falling. But the Saudis have seen their past cutbacks result in market-share losses.
So the Saudis, backed by other Persian Gulf oil producers with sizable financial resources — Kuwait, Qatar and the United Arab Emirates — embarked on a game of chicken with the cheaters. On Nov. 27, OPEC said that it wouldn’t cut output, sending oil prices off a cliff. The Saudis figure they can withstand low prices for longer than their financially weaker competitors, who will have to cut production first as pumping becomes uneconomical.
What is the price at which major producers chicken out and slash output? Whatever that price is, it is much lower than the $125 a barrel Venezuela needs to support its mismanaged economy. The same goes for Ecuador, Algeria, Nigeria, Iraq, Iran and Angola.
Saudi Arabia requires a price of more than $90 to fund its budget. But it has $726 billion in foreign currency reserves and is betting it can survive for two years with prices of less than $40 a barrel.
Furthermore, the price when producers chicken out isn’t necessarily the average cost of production, which for 80 percent of new U.S. shale oil production this year will be $50 to $69 a barrel, according to Daniel Yergin of energy consultant IHS Cambridge Energy Research Associates. Instead, the chicken-out point is the marginal cost of production, or the additional costs after the wells are drilled and the pipes are laid. Another way to think of it: It’s the price at which cash flow for an additional barrel falls to zero.
Last month, Wood Mackenzie, an energy research organization, found that of 2,222 oil fields surveyed worldwide, only 1.6 percent would have negative cash flow at $40 a barrel. That suggests there won’t be a lot of chickening out at $40. Keep in mind that the marginal cost for efficient U.S. shale-oil producers is about $10 to $20 a barrel in the Permian Basin in Texas and about the same for oil produced in the Persian Gulf.
…
Gas is up 50 plus cents a gallon. The floor has been put in.
I wouldn’t be so sure of that. Crude has been falling through the $50/bbl number too frequently.
“…down from a two-month high of $63 on Tuesday.”
Oil dropped from $63 down to below $50 over the span of three days. On an annualized basis, the rate of decline was
((50/63)^(360/3)-1)*100% = -99.999999999%.
Dead cat bounce be over.
Gas is up 50 plus cents a gallon. The floor has been put in.
All they have to do is create a gasoline “shortage”. You know, take refineries offline for “maintenance”, drag their feet bringing back up and then don’t bring them back fully online. Cheap oil plus an artificial gasoline shortage equals a big win for the gasoline producers. What are you gonna do? Build your own refinery in your backyard?
There are only so many storage tanks on land and ships at sea where you can stash oil before the river of excess supply created by collapsed demand has nowhere else to flow without further price decline to a level where supply and demand equilibrate.
I’ve noticed some really stoopid attorney posting here on occasion (albeit not lately) who can’t grasp the fundamentals of supply and demand balance no matter how many times you explain it to him.
No one has any idea what is going on with oil. You might as well take Lola’s fashion advice.
No way $10 in the Permian Basin is correct.
Sure it is. Once the geology and field development costs are paid for, it’s all profit.
Oil is BIG. You can’t keep storing it. There are only so many tankers, tank farms, etc. Imagine opening the tap and storing water above ground on your property, and how quickly you would be overwhelmed. The same holds true for oil.
“Imagine opening the tap and storing water above ground on your property, and how quickly you would be overwhelmed.”
It’s mindlessly simple, making it hard to believe that some don’t get it.
Considering the Mid East is profitable at $6/barrel, I have a few ideas.
Considering the Mid East is profitable at $6/barrel, I have a few ideas.
And your “few ideas” are wrong HA and your statement is false. $6 a barrel is only close to the “lifting cost” of the oil and only in Saudi Arabia not the entire Mid-East. There is also the “finding cost” in the total upstream costs of oil production.
Saudi Arabia’s breakeven upstream costs of about $10 a barrel is the Mid-East’s cheapest, however they only supply about 13% of the world’s oil. The “Mid-East” as a whole including Saudi Arabia’s cost of production estimate is currently in the low to mid $20’s (up from about $17 in 2008) while producing about 30% of the world’s oil. 70% of the world’s oil’s cost of production is substantially higher.
Thus, your statement “the Mid East is profitable at $6/barrel” is totally wrong, bogus and applies to nothing in the reality of the global oil market. IOW a dimwit’s statement.
Once the geology and field development costs are paid for, it’s all profit.
Right. FYI, the “finding costs” of oil (the costs of exploring for and developing reserves of oil and gas and the costs to purchase properties or acquire leases that might contain oil and gas reserves) globally average much higher than the “lifting costs”. (the costs to operate and maintain oil and gas wells and related equipment and facilities to bring oil and gas to the surface)
I’ll be happy to give you and Shillow some fashion advice too.
http://www.cnbc.com/id/102326971
http://en.wikipedia.org/wiki/List_of_countries_by_oil_production
http://www.businessinsider.com/crude-oil-cost-of-production-2014-5
http://www.eia.gov/tools/faqs/faq.cfm?id=367&t=6
Data Lola data!
Santa Clara, CA Sale Prices Dive 7% YoY; Losses Mount For Homeowners
http://www.zillow.com/santa-clara-ca-95050/home-values/
Is the S&P500 Stock Market Index as badly overvalued as its detractors claim?
The Tell
The S&P 500 hasn’t been this highly valued in more than a decade
Published: Feb 21, 2015 11:52 a.m. ET
The index’s forward 12-month P/E ratio is at 17.1, its highest level since December 2014
FactSet
By Anora Mahmudova
Reporter
NEW YORK (MarketWatch) — So far, fourth-quarter earnings haven’t shined. Lackluster corporate results have managed to temper expectations for the S&P 500 companies, threatening to take some of the air out of the market.
Stocks, however, haven’t flinched. In fact, the S&P 500 and the Dow Jones Industrial Average hit fresh records Friday, inflating already lofty valuations.
According to FactSet, the 12-month forward price-to-earnings ratio on the S&P 500 has moved above 17 to its highest level since Dec. 31, 2004. Meaning, investors are willing to pay a multiple of 17 times next year’s projected earnings. And it isn’t as if stocks were cheap to start.
At the end of last year, forward P/E was 16.2. Since then, the ratio has expanded because prices have risen by about 2.5% while earnings estimates fell by more than 3%.
To be sure, high P/E ratios aren’t good predictors of pullbacks or crashes. But when stocks are overvalued, they tend to suffer sharper falls when corrections do happen. Think of it as piling on building blocks, higher and higher, until they come crashing down. It is no wonder that a few hedge fund heavyweights are dumping stocks (It is worth noting that even those who are said to be getting out of stocks may only be cutting exposures to stocks through, say, equity funds).
It appears that investors are pouring money into stocks because of lack of alternatives. That may not end well, cautions Kim Forrest, senior investment strategist at Fort Pitt Capital.
“[P/E] multiples are expanding because interest rates and inflation are falling. But just as disinflation, driven by oil plunge, is temporary, multiple expansion will end at some point too,” Forrest said. In other words, it may not be long until it all comes crashing down.
…
Hi PB,
I think it is overvalued. But I’ve been thinking the same for the past 5-6 years. I took my money out of stocks like 7 years back and have been waiting for a correction. But it has moved like 3 times UP. Lot of my peers are suddenly rich and I’m still sitting there counting pennies.
I’m still hopeful it will correct by at least 30%, which means Dow at 13-14K and that’s when I put my 401K back in stocks.
Would it happen? Or Dow goes to 30,000 now with all the printed money all over.
You have cash. They’ve got vapor.
Hold onto your cash. You’ll be glad you did.
I’ve been following ComboTechie’s Mantra all along:
Cash is King.
Getting worried now that it has been diluted so much that I’ve lost a lot by this printing and dilution.
Getting worried now that it has been diluted so much that I’ve lost a lot by this printing and dilution.
What options do you have? Buy overpriced assets with it?
With prices falling, you’ve gained.
The way I see it, the central banks are looking at one of two outcomes. Either print and have inflation with a marginal recovery. Or don’t print and have economic disaster. So, the print. And, they will continue to print and pretend inflation is low when it is not. So, you need to invest assuming they will continue to print.
How long can this printing scam continue? Answer … until a currency crisis happens. Sooner or later, we will have a currency crisis from the printing. But, when that happens, it is likely cash is trash. That is the other side of the coin.
There are not very many good options. Either sit on cash and watch the value of your money decrease. Or invest it to get some inflation profits. However, this will end badly … with the possibility that cash will be garbage in the next downturn. Good luck.
It’s collapsing demand either way.
Remember… Falling prices to dramatically lower and more affordable levels as a result of collapsing demand is positively bullish and good for the economy.
Remember … Housing Analyst, if you are broke and have nothing, then a collapse and deflation is positively bullish.
Falling prices are positively bullish and good for the economy irrespective of how much cash I have.
“However, this will end badly … with the possibility that cash will be garbage in the next downturn.”
Also don’t overlook the risk of another Fall 2008- or Fall 1987-type financial market meltdown when and if the Fed finally gets serious about taking away the punch bowl. Note that the stock market is priced appropriately for the assumption that the punch bowl will never, ever be taken away.
Professor Bear, I think we might see another 2008 event while the central banks are printing … in other words, while the punchbowl is there. I think the next crisis will be currency related .. at some point, excessive amounts of money printing will mean less faith in currency. This will be quite the show. Trick is not to get stuck with big cash when people lose faith in the currency. The second trick is investing the cash so you don’t take a big hit when the crisis starts.
No. “The trick” is to be in cash while this deflationary spiral gains traction.
With demand collapsing for all items, it’s much too late to liquidate.
“Trick is not to get stuck with big cash when people lose faith in the currency. The second trick is investing the cash so you don’t take a big hit when the crisis starts.”
You remind me of a guy at work who recently retired. He shifted his entire 401(K) balance into stocks in Spring 2008. Need I say more?
Oops…I meant to say “in Spring 2009″ (i.e. when Ben Bernanke’s asset price reflation program started)…I actually know a couple of guys at work who timed this perfectly. I’ll also mention that neither of them have kids, so if the market had lost another 50% instead of doubling over the next 12 months or so, it wouldn’t have been any big deal to their long-term financial health, as putting food on the table for one isn’t that hard.
Professor Bear, I think the next crisis will be far more complicated. A simple printing will not work if cash becomes less desirable. It will be a frightening time when inflation and collapse occur together. Gold will be dangerous to hold, so that is not an option.
In the meantime, cash is becoming increasingly valuable as the price declines accelerate.
Hold onto every dollar you’ve got. You’ll thank me later.
Wouldn’t you want to hold bonds in a deflationary period?
Of course.
Been doing taxes all day and had a look at stock market returns for the last couple years , if you were in cash you fell behind.
Stupid brokerage won’t have 1099 for 2 more days. PITA
With the central banks non-stop printing, deflation should not happen. Instead inflation … and a collapse when the currency market breaks from all the printing. That is my bet … an inflationary collapse. Cash will be garbage. So will many assets … but not all assets. Some assets will do very well. The rich are betting on high end real estate. We will see if they are right.
It shouldn’t but it is. Collapsing prices is the natural outcome.
Remember…. Hold onto every dollar you’ve got. You’ll be glad you did.
“Wouldn’t you want to hold bonds in a deflationary period?”
Yes, unless…
“The rich are betting on high end real estate. We will see if they are right.”
They will be right to the extent they are (collectively) steadfast with their use of high end real estate as an inflation hedge.
Given the recent unprecedented use of real estate investment to hedge against inflation during a period of deflationary fundamentals, this strikes me as unlikely, although my crystal ball is very cloudy, given the historically unprecedented nature of the Housing Mania.
Financial Times
The Short View
February 18, 2015 7:17 pm
The dangers in rising bond yields
James Mackintosh
No accompanying rise in economic hopes could be bad news for shares, writes James Mackintosh
Forget negative interest rates. Forget Greece. Outside Europe, markets have been dominated by major reversals: in bond yields, oil and within stock markets.
To get a sense of the scale of the rebound: the loss for holders of super-safe 10-year British Gilts over the past 13 days is approaching 4 per cent, the third-biggest loss over such a short period in the past two decades.
Japanese bondholders have lost less but, since yields bottomed in mid-January, their loss was the third-worst since May 2008. Yields have more than doubled. US Treasuries have performed similarly, while the eurozone has missed out, with a much smaller rise in German yields.
Bond yields rise for many reasons: higher expected growth, and so inflation; less demand for safety; a change in how central banks are expected to act, particularly around QE; more uncertainty about the future path of rates; or fears about government creditworthiness.
Judging by the reaction of shares, this yield rise was growth-driven. Cyclical stocks, those most sensitive to the economy, strongly outperformed the defensives best able to ride out hard times. This was not just about oil. As the chart shows, it was true even excluding the energy sector.
Yet, only a small part of the rise in yields seems to be down to rising inflation expectations. The 10-year US yield is up by 48bp since its low at the end of last month, even after the slight drop on Wednesday. About a quarter of the rise was down to higher inflation expectations; the rest was due to a rise in the “term premium” — the amount of the extra yield to compensate for uncertainty about the future path of interest rates.
Rebound time
Last month, the term premium reached its lowest since 1961, according to estimates by the New York Federal Reserve, and was negative. So it was due for a bounce. But a rise in the term premium does not provide the same positive signal about the economy as higher hopes of inflation.
If the term premium is on the way to normalising — as it might if the Fed embarks on a series of rate rises — there is a long way to go from its still slightly negative level to reach the long-run average of 1.6 per cent. Such a rise in yields without any accompanying rise in economic hopes could be very bad news for shares.
…
“The Great SIM Heist”
How Spies Stole the Keys to the Encryption Castle
American and British spies hacked into the internal computer network of the largest manufacturer of SIM cards in the world, stealing encryption keys used to protect the privacy of cellphone communications across the globe, according to top-secret documents provided to The Intercept by National Security Agency whistleblower Edward Snowden.
The hack was perpetrated by a joint unit consisting of operatives from the NSA and its British counterpart Government Communications Headquarters, or GCHQ. The breach, detailed in a secret 2010 GCHQ document, gave the surveillance agencies the potential to secretly monitor a large portion of the world’s cellular communications, including both voice and data.
Lots more:
https://firstlook.org/theintercept/2015/02/19/great-sim-heist/
Organized crime branches of our federal government(s).
So that means sanctions now against the U.S. and UK?
“If you have to borrow for 15 or 30 years, it’s not ‘affordable’ nor can you afford it.”
Exactly.
Worst Spying In World History – Worse Than Any Dystopian Novel – Is Occurring RIGHT NOW
Spying by the NSA is worse than in Nazi Germany
by Zero Hedge | February 22, 2015
We noted in 2012 that Americans are the most spied upon people in world history.
Top NSA officials previously said that we’ve got a “police state” … like J. Edgar Hoover – or the Stasi – on “super steroids”.
Spying by the NSA is also worse than in Nazi Germany:
The tyrants in Nazi Germany, Stalinist Russia and Stasi Eastern Europe would have liked to easedrop on every communication and every transaction of every citizen. But in the world before the internet, smart phones, electronic medical records and digital credit card transactions, much of what happened behind closed doors remained private.
Indeed, a former lieutenant colonel for the East German Stasi said the NSA’s spy capabilities would have been “a dream come true” for the Stasi.
NSA contractor Edward Snowden said in 2013 that NSA spying was worse than in Orwell’s book 1984. (See update below).
We noted at the time that the NSA is spying on us through our computers, phones, cars, buses, streetlights, at airports and on the street, via mobile scanners and drones, through our smart meters, and in many other ways.
And we learned that same year that the NSA is laughing at all of us for carrying powerful spying devices around in our pockets. And see this.
A security expert said the same year:
We have to assume that the NSA has EVERYONE who uses electronic communications under CONSTANT surveillance.
What’s happened since these statements were made? Spying has only gotten worse. The government is doing everything it can to completely destroy privacy.
Postscript: Nothing has changed … and it will keep on getting worse and worse unless we the people stand up for our rights against those who want to take our freedom away.
Update: Bill Binney is the high-level NSA executive who created the agency’s mass surveillance program for digital information. A 32-year NSA veteran widely regarded as a “legend” within the agency, Binney was the senior technical director within the agency and managed thousands of NSA employees.
Binney tells Washington’s Blog:
While the spying programs that we have heard about so far deal with the “who and what” and on occasion the “why” of what people on the planet are doing, Treasuremap is the NSA/GCHQ/etc. program to acquire and follow the movements of people (objective is to follow 4 billion folks) simultaneously in near real time. So, Treasuremap gives them the “when and where” aspects of individual lives.
All in all, this gives the participating governments (primarily the Five Eyes countries) unrestricted knowledge of individual lives.
Current surveillance is far beyond an Orwellian state.
Although on a much smaller scale, we need to remember that these type of activities were some of the primary “articles of impeachment” of president Nixon.
It’s okay, the true government has approved these methods. The oligarchs and plutocrats laugh at your antics but it’s all in good fun because they don’t really care about your private life at all. Your privacy is secure because you are lower than an ant. Don’t step out of line and get back to watching the moral degenerates and depraved drug addicts on the Oscars.
Like East Germany, the only way to live is with your head down, never making eye contact, never making waves.
“They attacked us on 9/11 because they hate our freedoms”
We are more free now than at any point in human history. Free to get fat and watch our phones or the oscars with our male or female spouse while high on opiates or pot. Free to not pay the mortgage and not get tossed out. Free to not cook our kids breakfast cause the school has got it covered.
Free to not pay the mortgage and not get tossed out.
Not where I live. Maybe in Floriduh.
There’s plenty in Colorado that haven’t paid in years.
I personally know 8 in CA, OR and WA who haven’t made a payment since 2007.
“I personally know 8 in CA, OR and WA who haven’t made a payment since 2007.”
Are they still working…generating income?
They are now.
Treasuremap is the NSA/GCHQ/etc. program to acquire and follow the movements of people (objective is to follow 4 billion folks) simultaneously in near real time.
All the bad guys have to do is turn off their cell phones.
Or better, like the smarter criminals, swap SIM cards.
Das Leben der Anderen (2008) Ofiziell Trailer
San Diego, CA Sale Prices Plunge 13% YoY; Crater 11% MoM As Housing Correction Ramps Up
http://www.zillow.com/san-diego-ca-92130/home-values/
‘It’s not so obvious yet in the data, but the Eagle Ford is a shadow of its former self, thinning out and fading around the edges. “No occupancy” signs once ubiquitous in the region have been replaced by “vacancy” signs. Hotel prices have dropped. Some former worker housing sites known as “man camps” have closed down.’
‘Zia and Zameer Ali’s Grand Eagle Ford Lodge in Tilden ran at 80 percent capacity a few months ago. Business was so good with rooms priced at $99 per night that they built more, growing from 44 cabins to 80. But the Grand Eagle Ford Lodge emptied out nearly as soon as crude oil prices fell Thanksgiving weekend.’
“It was like an instant. It was shocking,” said Zia Ali. “It was like a panic.”
‘While thousands of corporate layoff announcements have been made, those numbers don’t include the legion of people in the oil patch who work on contract. Contractors are often considered self employed and don’t qualify for unemployment insurance. Killough estimates 300 to 400 landmen in Texas are out of work. “And that’s just such a small portion of it,” Killough said.’
‘The phones have fallen quiet at Richard Collier’s Concan-based pipe business. “There can be some awfully lonely moments,” said Collier, who has been through four or five oil price dips over the years. “It’s not fun for anybody who’s in it right now. A lot of us are going to have a hard time. It’s not going to stop with me in the pipe business.”
http://www.expressnews.com/business/eagle-ford-energy/article/Once-booming-now-fading-in-the-Eagle-Ford-Shale-6094521.php#/0
The repercussions from this sort of bust don’t show up overnight. In the next year and a half is when we’re going to start seeing the real effects. The cocky auto dealers who were selling $70k diesel trucks like they were $5 lattes are going to be hurting BAD.
“It was like an instant. It was shocking,” said Zia Ali.
“How did you go bankrupt? Two ways. Gradually, then suddenly.” –Ernest Hemingway
CBS12 Investigation: Hundreds of abandoned homes owned and supported by City of West Palm Beach
Reporting by Al Pefley/CBS12
After a four month long investigation CBS12 has learned that more than 180 abandoned homes and buildings in West Palm Beach are actually owned by the city itself. The value of these properties is worth millions.
CBS12 reporter Al Pefley uncovered a list and maps of city owned properties left to rot. People living near these properties complained these empty buildings are magnets for crime and disease.
“When you ride through you look at this and you think the neighborhood is terrible,” said homeowner Sareatha Hill, “You see mices, you can see them when they run up the wall or whatever.”
So how did the city accumulate 180 vacant structures with many millions of dollars? More importantly, what can they do to get them back in the hands of people who will turn them from eyesore to a city asset?
CBS12 Reporter Al Pefley talks to city officials about these abandoned structures, the thousands of tax dollars spent to police them, and what the future has in store for them in a CBS12 Investigative Report this Tuesday night on CBS12 News at 11.
http://www.cbs12.com/news/features/special-reports/stories/vid_88.shtml - 112k - Cached - Similar pages
3 days ago
All over the country things like this are known but being ignored or hidden.
Due to corrupt bankers, politicians, judges and lawyers, this country is in an almost unimaginable state of disrepair.
‘After a week here in FMC Lexington Satellite camp, a federal prison in Kentucky, I started catching up on national and international news. At mail call, a week ago, I received Richard Clarke’s novel, The Sting of the Drone, about characters involved in developing and launching drone attacks. I’m in prison for protesting drone warfare, so a kind friend ordered it for me.’
‘The “means-ends” question intensifies as both sides demonstrate increasingly high-tech ways to thwart and attack each other. One intelligence officer asks how his superior manages to draw the line between what is acceptable and what would be out of bounds when he issues orders that will “take out” presumed enemies.’
“It used to be the ‘Front Page Rule,’” the higher official responds. “Assume it will be on the front page of the Post someday and only do it if you could stand that level of exposure. But it’s amazing what has been on the front page without any real consequences: torture, illegal wiretaps, black sites. No one goes to jail. No one gets fired. So I don’t know anymore.”
“In June 2014 Kelly and another activist actually crossed onto Whiteman Air Force Base with a loaf of bread and a letter from Afghan youths, and requested to meet with the base commander. Her trial is scheduled for December 10, on a charge of trespassing bearing a maximum six month prison sentence as punishment.”
from her article in Wikipedia.
A loaf of bread?
35 years ago today
“Do you believe in miracles?”
February 21, 2015, 11:35 PM ET
Associated Press
The U.S. took the lead on Friday, Feb. 22, 1980, against the powerful Soviets on Eruzione’s goal midway through the third period. It was the last goal of the game as Craig stood tall in net.
The Americans finished the 4-3 upset to the sound of broadcaster Al Michaels’ call of, “Do you believe in miracles?” Two days later, the U.S. rallied to beat Finland 4-2 for the gold in a game the Americans had to win just to medal.
Not very well known story from U.S./ USSR exhibition hockey game at Madison Square Garden just before the 1980 Olympics in Lake Placid.
The Former KGB Guy, the Handgun, and the “Miracle On Ice”
Pete McEntegart
If Twitter had existed in 1980, you might have found this gem on the feed of U.S. Olympic hockey player Buzz Schneider: “Is that a gun in your pants? Or are you just a KGB agent?”
There was no Twitter back then, of course. Nor were there cell phones, websites, or a 500-channel cable universe. That’s one reason that the remarkable victory by a bunch of American college hockey players over the feared Soviet Red Army squad — aka “Miracle On Ice” — was able to sneak up on a country desperate for good news and become both an overnight and lasting sensation.
It’s also why the gun-on-the-ice story has been largely unknown until now. That un-called misconduct penalty is just one of the nuggets unearthed in National Geographic Channel’s three-night event The ‘80s: The Decade That Made Us. “The ‘80s” makes a convincing case that the Miracle On Ice helped snap America out of the gloomy ‘70s and launch it headlong into the go-go, glitzy ‘80s.
Schneider discovered the gun when he checked a Soviet player into the boards during a pre-Olympics exhibition game and the opponent’s jersey slid up, revealing the firearm. Though the weapon wasn’t actually intended to intimidate the American team. As U.S. goalie Jim Craig tells it, the packing “player” was a KGB agent who was traveling with the Soviet squad to keep its players from defecting to the West.
In fact, the only reason the KGB agent was on the ice at all was because the Soviets had no fear of the callow Americans, who averaged five years younger and 13 pounds lighter than the Red Army veterans they faced in Lake Placid. Thus the Soviets had so little respect for the American team that they let the KGB agent take a few shifts. It’d be like a pro basketball team letting one of their security guards log a few minutes against their opponent – and still winning by 20.
The Soviets had every reason to feel confident. They had swept the past four Olympics, routed an NHL All-Star team 6-0 to win the 1979 Challenge Cup and wiped the ice with the U.S. team 10-3 at Madison Square Garden in a final pre-Olympics tune-up. Though this was still the era of Olympic “amateurism,” the Soviet players were all on the Red Army payroll and essentially comprised the nation’s top pro athletes.
That didn’t do the Soviets much good on Feb. 22, 1980. Mark Johnson’s unlikely goal that beat the first-period buzzer to make it 2-2 set the stage for Mike Eruzione’s famous third-period game-winner in the 4-3 victory. Today it’s hard to decide what’s more unlikely: that a group of college kids could beat the world’s best professional team, or that the legendary game was broadcast not live but on tape-delay.
gawker.com/5994445/the-former-kgb-guy-the-handgun-and-the-miracle-on-ice - 117k -
Someone asked the other day if anyone of us would ever buy.
My answer: yes, if it ever pencils out.
My answer: yes, if it ever pencils out ??
There is more to value in home ownership than what comes out at the end of a pencil…
To underwater fools and scumbag realtors there is.
Like what?
Like being able to proudly proclaim your membership in the Ownership Society…
Let the realtor-speak begin….
Realtor Charged With Forgery
http://www.northwestgeorgianews.com/calhoun_times/news/local/local-real-estate-agent-faces-felony-charges/article_b70cbd10-95d9-11e4-baf0-b34949f3232a.html
Brick Realtor arrested after allegedly asking prostitute to arrange sex with teen
Richard Jones, 66, of Brick, was arrested Friday after allegedly attempting to set up a meeting to have sex with a 14-year-old girl, who turned out to be an under cover police officer, the Monmouth County Prosecutor’s Office said. (Monmouth County Prosecutor’s Office)
Rob Spahr
on September 26, 2014 at 6:54 PM, updated September 26, 2014 at 8:11 PM
FREEHOLD – A Brick Township-based real estate broker was arrested Friday after allegedly attempting to set up a meeting to have sex with a 14-year-old girl, who turned out to be an under cover police officer, the Monmouth County Prosecutor’s Office announced Friday afternoon.
Richard J. Jones, 66, of Brick Township, was charged with second-degree attempted sexual assault Friday afternoon following an investigation by the Monmouth County Prosecutor’s Office Special Victims Bureau and investigators from the Asbury Park, Englishtown and Wall Township police departments.
Authorities claim Jones – who is the owner and real estate broker of Century 21 Herbertsville Real Estate Company, Inc., on Herbertsville Road in Brick – attempted to use a local prostitute to facilitate a meeting to have sexual intercourse with a 14-year-old girl.
Jones was met by police when he arrived at the pre-arranged location where he expected to meet the 14-year-old girl, who was really an undercover police officer, authorities said.
After being arrested and charged with second-degree attempted sexual assault, Jones was transported to the Monmouth County Correctional Institution in Freehold Township on $125,000 bail with no 10-percent option, as set by Monmouth County Superior Court Judge Honora O’Brien Kilgallen. the prosecutor’s office said.
Kilgallen also ordered Jones to have no contact with the local prostitute he tried to persuade to facilitate the sexual liaison with a girl he believed was under age, authorities said.
If convicted, Jones faces a maximum sentence of 10 years in a New Jersey state prison and is subject to the provisions of Megan’s Law and Community Supervision for Life as part of his conditions for release, the prosecutor’s office said.
The case is assigned to Monmouth County Assistant Prosecutor Peter Boser, the director of the Special Victims Bureau.
…
Elderly San Diego realtor pleads guilty to purchasing underage sex
Posted: Jul 31, 2014 8:51 PM PDT Updated: Jul 31, 2014 8:51 PM PDT
SAN DIEGO (CNS) - A 70-year-old real-estate agent pleaded guilty Thursday in federal court in San Diego to prostitution-related crimes, admitting that he paid for sex with a 13-year-old girl on several occasions.
Michael E. Lustig of San Diego, who was indicted by a federal grand jury in October, entered his plea before U.S. Magistrate Judge Mitchell Dembin.
According to court records, sheriff’s investigators arrested Lustig in June 2012 during an operation targeting prostitution in Encinitas. After taking Lustig into custody, deputies seized two cellphones from him, which led to information that he had been in contact with two girls, ages 13 and 11.
Interviews with the minors revealed that Lustig had contacted them separately to engage in prostitution, prosecutors alleged.
Surveillance video from a motel in El Cajon showed Lustig entering a rented room with one of the girls and emerging about 45 minutes later.
Lustig contacted the minors repeatedly over a span of months, prosecutors said. Interviews with the girls confirmed that Lustig, known to them as “George,” had paid them for sex and that at least one of them had identified herself to him as a minor, according to the U.S. Attorney’s Office in San Diego.
In his plea agreement, Lustig admitted that he used a cellphone to contact the 13-year-old repeatedly between October 2011 and June 2012, seeking to pay her for sex. Lustig admitted that he later did engage in prostitution with the teen.
According to the plea agreement, Lustig admitted that on Oct. 15, 2011, he wrote the girl, asking, “Hey, is the bookstore open? I’m in desperate need of books rite now.” Lustig admitted in court that he was using a code word for sex.
…
Richard Box Pleads to Sex Crimes, Domestic Abuse
The Men’s Choir Singer Will Have to Register as a Sex Offender for the Rest of His Life
Friday, February 20, 2015
By Tyler Hayden (Contact)
A Mesa resident accused of abusing his wife, molesting his stepdaughter, and sexually assaulting another teen girl will be sentenced to jail next month and will be ordered to register as a sex offender for the rest of his life. Richard Box, 70, pleaded no contest on February 10 to felony sex crimes and domestic violence charges. His sentencing is scheduled for March 24.
Though Box originally faced nearly 20 years in prison when he was arrested in December 2013, his plea deal means he will now spend 365 days in Santa Barbara County Jail and serve five years of felony probation. If he violates the terms of his probation — stay away from the minor victims, attend a treatment program, and not initiate or maintain contact with females under the age of 18 — Box will be sentenced to 10 years in prison.
Disturbing reports of Box’s alleged crimes surfaced shortly after his arrest and were detailed in subsequent court hearings. Prosecutors claimed Box’s wife and stepdaughter — both from Thailand, where he owns property — were subjected to prolonged abuse and lived in constant fear.
They said the former realtor and men’s choir singer tried to rape his wife and forced his stepdaughter, who he was reportedly grooming as a sex slave, to live in a small closet under a stairwell. Neighbors and media tipsters complained of Box’s unsavory reputation around town, and his ex-wife and son openly discussed how “manipulative” and “terribly nasty” he was.
…
“end of a pencil…”
Like spending an extra half a million dollars.
Like not having to stand up to your wife or mother in law.
Chief Executive Officer Tim Riddle confirmed Thursday that the 191-year-old family business had filed Chapter 11 bankruptcy protection and will close its West Britannia Street facility in late May or early June.
Riddle blamed costly pension liabilities,
http://www.wcvb.com/money/silver-city-no-more-tauntons-reed-barton-files-for-bankruptcy/31378072
Public employees should act like public servants—because they are.
http://www.city-journal.org/2015/eon0220mm.html
Not fully funding their pension plan was a business decision.
And a good one at that.
Pay your employees with promises. It’s cheaper.
This is a bit of a long read, but it really gets into who and what ISIS is, and what it wants to accomplish. Not pretty, but I gather it is also looking for a sort of “rapture”. The author also lays out how to marginalize and defeat it. Of course, Washington is feeding right into its desires.
http://www.theatlantic.com/features/archive/2015/02/what-isis-really-wants/384980/
Thanks, will read the whole thing later today when I have time. BTW am also reading “The True Believer” by Eric Hoffer, written in 1951 but very relevant to ISIS, 911, etc., it had a resurgence in popularity after 911.
+1. A classic, must-read book. Goes a long way in explaining why lemmings vote for hope ‘n change and similar snake oil.
Don’t buy now. Buy later when prices crater sixty percent or more.
Absolutely. This is the truth. Say it.
We really need to buy a car, but I’ve been holding-off because the inflated prices are being guaranteed by the government. Housing, transportation, upper education and health care…all artificially inflated well beyond median income.
I’m planning to hang on to the cars we own now until the auto loan subprime bubble bursts, at which point there should be plenty of late-model used care inventory to choose from.
The Wall Street Journal
MARKETS
6:40 pm ET Feb 18, 2015
Debt
Does Subprime Lending Help or Hurt Borrowers?
By Alan Zibel
CONNECT
The question of whether subprime loans such as car loans, credit cards and personal loans benefit consumers is hotly debated among economists and consumer advocates.
With the mortgage crisis and housing bust still a fresh memory, a rise in lending to borrowers with poor credit is clearly something to watch carefully.
Consumer advocates are skeptical of the loan growth, saying that many borrowers with poor credit have demonstrated that they can’t handle debt responsibly. Many of these advocates encourage people to save money and exercise prudence with their finances rather than repeatedly borrow money.
“People are much too quick to say, ‘Of course everybody needs access to credit’,” says Lauren Saunders, associate director of the National Consumer Law Center, which advocates for low-income consumers. “Credit just can’t solve every problem, and it cannot make up for lack of income.”
Lenders, however, say such loans can be made responsibly. They say new loan-underwriting technologies help separate borrowers who are likely to repay their loans from those who aren’t.
Customers with poor credit shouldn’t be “just locked out of the market because their credit profile can read as risky,” says Sasha Orloff, chief executive of San Francisco-based LendUp, which has raised more than $20 million in venture-capital funding.
LendUp offers consumers the chance to improve their credit scores if they repay their loans. It helps borrowers do that by reporting their performance to credit-reporting companies. LendUp also lowers their interest rates if they pay their debts on time.
Many other Silicon Valley entrepreneurs also see a business opportunity in lending to the subprime consumer and say their products are better for borrowers than high-rate “payday” loans that are due two weeks after they are made.
Just last week, Oportun, a Redwood City, Calif.-based lender that markets itself to low-income Hispanic customers raised $90 million in equity.
Vouch Financial, another San Francisco-based startup lender, is making loans ranging between $500 and $7,500 to subprime borrowers and is offering rates of between 5% and 30%.
The company’s founder, Yee Lee, says it will be able to provide the lowest rates to customers who find friends or relatives to provide guarantees on parts of the loans, and he says there is ample demand for such lending.
“There’s just so many people who just really live close to the edge,” Mr. Lee says.
Subprime consumers tend to have far fewer lenders vying for their business and are thus much more prone to abusive practices, says Chris Kukla, senior counsel for government affairs at the Center for Responsible Lending in Durham, N.C.
These borrowers are “looking for the lender who is going to say yes,” Mr. Kukla says. “They have many fewer choices” than individuals with stronger credit.
…
What lessons were learned from the 2007 subprime mortgage lending collapse?
NONE, NADA, ZILCH!
Bailouts mean never having to learn from your past financial follies.
Auto Loan Surge Fuels Fears Of Another Subprime Crisis
January 23, 2015 5:44 PM ET
Jim Zarroli
All Things Considered
3 min 53 sec
Auto dealers are extending loans to a growing number of people with weak credit.
Joe Raedle/Getty Images
The number of Americans buying autos approached a record high last year. It’s one more sign of how much the economy is improving.
But there’s a big potential downside that’s evoking comparisons to the subprime mortgage boom. Auto dealers are extending loans to a growing number of people with weak credit, and more of them are having trouble making payments.
When Chris Westervelt moved from Texas to Alaska to take a job, he decided to trade in his Mazda for a car that could handle snow and ice.
“I started looking at vehicles that had four-wheel drive capabilities and I ended up settling on a Jeep Wrangler,” Westervelt says.
He went to a dealer and test drove a car. “They said, ‘Go ahead and take the Jeep home, you know, come back sometime tomorrow and, you know, we’ll get everything settled,’ ” Westervelt says. “So, after driving around a little and coming back, the store manager actually got a little aggressive with me. He’s like, ‘You’ve already put 200 miles on my Jeep. What am I going to do? I can’t resell this,’ ” Westervelt says.
Westervelt agreed to buy a car. But when he tried to negotiate the loan, he discovered that — thanks in part to a billing dispute with his cell phone company years before — his credit score was low.
The dealer “just said that, based on whatever merits that they judge on, that I did not meet their requirements,” Westervelt says.
He was offered a loan with an 18 percent interest rate, which he was able to bring down a bit after his mother cosigned the loan. The monthly payment was far more than he’d hoped to spend.
Economist Mark Zandi of Moody’s Analytics says more people like Westervelt are taking out auto loans. “We’re seeing a lot more lending and a lot more lending to people with lower credit scores — so-called subprime auto lending,” Zandi says.
He says the auto boom is one reason the economy is doing better — but it has come at a cost. The number of subprime borrowers missing payments is at its highest level since 2008.
Chris Kukla of the Center for Responsible Lending says the increase in auto lending has clear echoes of the subprime mortgage boom of the mid-2000s. It’s driven by investors seeking higher returns.
“Americans are borrowing more to buy a car and so in order to make it more ‘affordable,’ they have to stretch out those loan terms,” Kukla says.
…
“He says the auto boom is one reason the economy is doing better — but it has come at a cost. The number of subprime borrowers missing payments is at its highest level since 2008.”
In other words, the economy isn’t really doing better if we’re digging ourselves deeper in debt.
Tuesday, January 27, 2015
Subprime car loans latest, greatest investment
A title loan lender in St. Ann, Mo. The automobile is at the center of the biggest boom in subprime lending since the mortgage crisis, and similar to how a red-hot mortgage market once coaxed millions of borrowers into recklessly tapping the equity in their homes, the new boom is also leading people to take out risky title loans. (NEW YORK TIMES PHOTOS)
By Michael Corkery and Jessica Silver-Greenberg
NEW YORK TIMES SYNDICATE
Margaret Zollner, who says she was pressured by a car salesman into co-signing an auto loan for a friend, at her home in New York. (NYT) Enlarge photo
The loans were for used Dodges, Nissans and Chevrolets, many with tens of thousands of miles on the odometer, some more than a decade old.
They were also one of the hottest investments around.
So many asset managers clamored for a piece of a September bond deal made up of these loans that the size of the offering was increased 35 percent, to $1.35 billion. Even then, Santander Consumer USA received more than $1 billion in investor demand that it could not accommodate.
Across the country, there is a booming business in lending to the working poor — those Americans with impaired credit who need cars to get to work. But this market is as much about Wall Street’s perpetual demand for high returns as it is about used cars. An influx of investor money is making more loans possible, but all that money may also be enabling excessive risk-taking that could have repercussions throughout the financial system, analysts and regulators caution.
…
Business
Next subprime bubble to burst: auto loans
By Catherine Curan
February 7, 2015 | 11:07pm
Next subprime bubble to burst: auto loans
Photo: Getty Images
Subprime auto loans are on the rise and, just like subprime mortgages, are claiming untold victims.
Samuel Perez, 32, is still dealing with fallout from his experience with a subprime loan five years ago, he told The Post.
Officials at Woodside, Queens, dealership Auto Palace offered him an 8.49 percent interest rate on a BMW, with a teaser rate of 6 percent after six months. Perez worked out a financing deal that included monthly payments and trading in an Audi and rolling its payments into the new car.
The rate never made it down to 6 percent since the BMW didn’t work properly, so Perez returned it. But the dealer wouldn’t give him back the Audi, which it had not paid off, or release him from the debt on the BMW, even though he’d never received title.
Perez found himself scrambling to borrow a car to get to work — while fending off bills on two cars he didn’t have, or own, which hurt his already low credit score, he told The Post.
This situation is not limited to small lenders, either — large banks are jumping into the fray.
Just last week, Ally Financial’s new chief executive hit the accelerator into the roughly $300 billion market for subprime auto loans.
…
It’s just despicable, what bankers and the government have done to this country. People are suckers, but that doesn’t mean predatory lending should be allowed.
“The king meanwhile decided on a cunning plan: he decided to circumvent parliament and began to issue tally sticks as he pleased (as an aside, one half of such a stick, which was given to the party advancing funds, had a handle and was called the “stock”, while the other half was called the “foil”. The term “stock” has evolved to describe shares in publicly listed corporations today). Not surprisingly, Charles was more than happy to exchange sticks of wood for gold and soon kicked off a sizable credit boom by vastly increasing his production of wooden sticks.”
“The frog is boiled slowly, so to speak. If the government had to actually raise taxes instead of borrowing the staggering sums of money it uses to keep its welfare/warfare programs running and keeping the vote buying mechanism well oiled, it would have to raise taxes by so much that it would face a rebellion. Instead government resorts to inflation. From the government’s perspective, money supply inflation is nothing but a cleverly disguised hidden tax. ”
“Politicians and bureaucrats are happy because there is very little restriction on their spending and there is nothing stopping them from buying votes or indulging in whatever pet projects they happen to dream up.”
“In a nation where the majority are debtors, inflation is the politically most palatable form of monetary policy. After all, everybody is focused on the short term (politicians and bureaucrats on their terms of office, consumers on their debt and their desire to buy more things they don’t need with money they don’t have, and so forth). Few people stop to consider that this policy means ruin in the long run. Over time, the middle and lower classes will see their real incomes and living standards shrink ever more, while the true beneficiaries of inflation – those who get first dibs on newly created fiat money – amass more and more wealth in a kind of reverse redistribution from later receivers.”
“Unfortunately, big established businesses are usually in bed with the State and are happy with the status quo as well – their main aim is to keep competition from upstarts at bay, so they are quite content with the various methods by which the market economy is hampered. They give lip service to the idea of truly free, competitive markets, but concurrently lobby for anti-competitive regulations all the time.”
http://davidstockmanscontracorner.com/a-brief-history-of-money-fiat-and-otherwise/
Stockman always seems to just prattle on and on grousing that everybody else is wrong and how terrible everything is without ever coming down on any real advice of what do do in the real world. Reminds me of someone else.
Maybe he assumes people are smart enough to make their own conclusions on what to do.
Diversify out of the Dollar and any other central bank currency. Precious metals, bitcoin, ammo, AR-15s, wine, and classic cars are ways for diversifying. Late 60s Mustang Mach 1. Snap them up.
Yeah, he assumes people are smart. That’s his whole racket.
Another neo-con success story.
http://www.telegraph.co.uk/news/worldnews/africaandindianocean/libya/11427306/Migrants-tell-of-deepening-chaos-in-Libya-Everyone-is-armed-now.html
As long as the oil flows, everything is ok.
Climate change is a fraud. It’s not real. The numbers are all fake. There, I posted it, can I haz some money now?
=====
“Wei-Hock “Willie” Soon, a favorite scientist of climate-change deniers for his theory attributing global warming to variations in the sun’s energy and not human activity, has accepted more than $1.2 million from the fossil-fuel industry in the last decade, the New York Times reports. He also failed to disclose that conflict of interest in most of his published papers. …The documents show that Dr. Soon, in correspondence with his corporate funders, described many of his scientific papers as “deliverables” that he completed in exchange for their money.”
http://gawker.com/paid-climate-change-skeptic-even-more-corrupt-than-prev-1687297073
“… a favorite scientist of climate-change deniers …”
“climate-change deniers”
If you dare question climate change then you are not labeled a questioner but instead are labeled a denier.
And it is not the change in climate that is being questioned - something that is changing all the time - but what is driving the change, a change of something that is subject to many variables. And these variables that influence change are in turn influenced by still more variables.
Still, there are those who believe they are somehow in the know who say that “the science is settled”. One really should sit back and enjoy a good laugh at anyone who would say such a thing at this.
I’m going to steal and idea from Richard Feynman in order to make a point:
One can learn how to play chess - learn the rules of chess - in maybe a half-an hour or so. The game starts out with thirty-two pieces but only six of these types of pieces vary from the other five types of pieces and hence the rules the govern these pieces vary from each other in only six ways.
So … logic would say that with these few pieces and these few variables one should easily become a Grand Master in a short period of time, and not only that, one should be able to easily predict the outcome of a game of chess the moment two players sit down and begin to play.
Are there any of you math guys out there in HBB land that would like to make a guess of just how many variations of chess games there are that could be played?
I have a chess board. I can tell you this; if you cheat, it’s game over.
“We have to offer up scary scenarios, make simplified, dramatic statements, and make little mention of any doubts we have. Each of us has to decide what the right balance is between being effective and being honest.”
Steven Schneider
Steve used to work for the NOAA. Then he didn’t.
And Chess is a simple game with complete information right there on the chess board. Try something more complex where you can’t see the other players’ cards, like poker.
Sure, but it’s OK to lie when you are playing poker.
Also OK to lie when selling real estate, provided you don’t get caught…
Still, there are those who believe they are somehow in the know who say that “the science is settled”. One really should sit back and enjoy a good laugh at anyone who would say such a thing at this.
It would probably be very difficult to find a climate scientist who says that the science is settled. There is currently a certain consensus, but that could be changed by further research.
If you questioned any of this you were a …
Holocaust or I mean climate-change denier
By Steve Straub -
Actual Climate Change pronouncements by scientists
1970) We’ll be in an ice age by 2000!
1976) Global Cooling will cause a world war by 2000!
1989) Global Warming and rising sea levels will wipe entire nations off the map by 2000!
1990) We have five to ten years to save the Rainforests!
1999) The Himalayan Glaciers will be gone in ten years!
2000) Snow will soon be a thing of the past!
2007) Global Warming will cause fewer hurricanes!
2008) The Arctic will be ice-free by 2013!
2012) Global Warming will cause more hurricanes!
2014 THE SCIENCE IS SETTLED!
“deliverables”
Apparently there are multiple markets for “deliverables”, so we should not take being published as a stamp of being correct. Remember that attacking someone who has a different view does nothing to prove your own theory.
How about explaining how your theory works?
Disclaimer: A grant from the American Society of Plastics helped fund my science education.
” a favorite scientist of climate-change deniers… has accepted more than $1.2 million from the fossil-fuel industry”
Exactly like the tobacco industry did back when they fought science. Buy some scientists, create the appearance of doubt.
Good, m-fcker. Your department is useless as tits on a boar, anyway. Betcha YOUR salary isn’t threatened, that’s for sure.
http://edition.cnn.com/2015/02/22/politics/jeh-johnson-nga-shutdown/
Sunday funnies courtesy of TBP:
http://www.theburningplatform.com/2015/02/22/sunday-funnies-51/
After prices have fallen and if there is a dollar collapse wouldn’t owning real estate, gold, stocks be better than holding cash in a TBTF bank?
How do you time this scenario?
Currencies don’t collapse on falling prices.
“Currencies don’t collapse on falling prices.”
And there it is.
It’s DEBT that collapses on falling prices. And since one person’s debt is another person’s money, it’s somebody’s money that collapses on falling prices.
If you are on the wrong end of this collapsing debt then you will be out some money. But if you are not on the wrong end of collapsing debt then you just may end up benefiting because lots of collapsing debt translates into lots of money going poof, and lots of money going poof will make for a scarcity of money, an absence of money.
And absence makes the heart grow fonder.
Bingo.
250K is not a lot of coverage and yes having 250K or less in several banks and credit unions can mitigate the loss if a bank fails. PCR is talking about the dollar collapse.
How does one protect himself?
It’s $500k if you’re married and the account is in both names at credit unions.
However it seems as though currencies could potentially collapse due to an excess of bailouts intended to mitigate debt collapse.
Which brings me to my original question
After prices have fallen and if there is a dollar collapse wouldn’t owning real estate, gold, stocks be better than holding cash in a TBTF bank?
How does one protect himself?
Currency is increasingly valuable as prices continue to crater.
“After prices have fallen and if there is a dollar collapse wouldn’t owning real estate, gold, stocks be better than holding cash in a TBTF bank?”
You can’t have it both ways. Given dollar denominated asset prices, asset price collapse goes hand-in-hand with more valuable dollars that could (potentially) be used to snap up assets at fire-sale prices.
The wild card is another round of QE3 to screw the savers and make wreckless gamblers more than whole.
The key here is timing of events which are bipolar.
Why not position yourself so that you don’t have to worry much either way?
Why not position yourself so that you don’t have to worry much either way?
I am massive truckloads of cash in almost all banks and credit unions except 2. I own a commercial building which I bought in October 2010 for cash and I rent it to my own company. I sold all my stocks August of 2014 which were a very small portion of my overall portfolio.
How do I hedge myself?
How do I hedge myself?
Better food, more comfortable shoes, awesome trips and a lot of time with friends and family.
Hold onto it as prices continue to fall apart.
“Better food, more comfortable shoes, awesome trips and a lot of time with friends and family.”
Thanks for the advice. I saw loved ones around me dying early on in life so I made a choice to travel, and buy things I really wanted. I bought in life whatever I wanted but it did not take a whole lot of things to make me happy. At this stage in my life I have travelled to all the continents and most countries I wanted to visit. In a few more years I will be ready for the rocking chair at an early age.
I guess we are jaded in life at this point.
“The wild card is another round of QE3 to screw the savers and make wreckless gamblers more than whole.”
I’d bank on this. It’s QEinfinity.
I cannot seem to find my social contract - has anyone seen it? Muh social contract!
http://strike-the-root.com/wheres-my-contract
“Column by Paul Bonneau.
Exclusive to STR
Dear Senator Enzi,
I was reading Robert Higgs’ article Consent of the Governed? when I suddenly realized that I have misplaced my copy of my Social Contract. You know, the signed agreement between myself and the federal government, allowing the latter to rule me? I have looked everywhere and cannot find it.
Would you please make a copy of this agreement we made, and send it to me? I’d appreciate it, and apologize for any effort you have to expend in compensating for my absent-mindedness.
Of course, it must bear my signature. There is no such thing as a contract that was not voluntarily entered into, and the signature is the proof of that. Non-existence of a signed contract constitutes proof that the entire US Code, and all actions of Congress, are null and void.
In case you are thinking my ancestors somehow bound me to a Social Contract, I have seen no evidence of that; but if you can find it, including their signature, I would appreciate seeing it. There would still of course remain the little issue of whether people can forever bind their unborn descendants, but we can address that later.
If there is no such signed Social Contract, I would certainly consider signing one. Please send your proposed contract to me, and I will forward it on to my lawyer for consideration. If by any chance such proposal would include the US Constitution, I have to warn you that my lawyer and I will be considering its terms in the manner of current court interpretation (and not as the plain meaning of the words), since that is the way you interpret it. This interpretation will of course play into whether I decide to sign it. Also, we will have to negotiate on some points I find unacceptable, such as the existence of a Federal Reserve Bank, or the ability to war on and kill innocent men, women and children in foreign countries in my name and for my supposed benefit. And there are some other points of contention that must be addressed.
I have heard a few people claim that the 14th Amendment to the US Constitution is itself the Social Contract. Since it was not properly ratified, this cannot be so, and I consider it null and void; nor will I sign a Social Contract that consists of the 14th Amendment.
Senator, if there is any other basis than a voluntary agreement, for your ability to rule over me–for example, the exercise of brute force and violent coercion–please let me know.
Regards,
Paul Bonneau”
What does a former government employee and former government contractor do the moment he leaves? He moves to a low-tax right-to-work state.
[Or failing that, he just whines incessantly that he didn't move to a low-tax right-to-work state. ]
Hey Donk…
Or he stays in a high tax state and fully funds his Roth 401k, keeps his traditional 401k, and when he makes his career change (which is working 20 hour weeks) he moves to a low tax state, where he taps his 401k.
Less than 4 years to go before I can tap.
Hey Paul, the thing you signed is called a Voter Registration Card. Why don’t you help the Senator find a different job?
How does a voter registration card signature bind you forever to the government? Suppose you move to the next city? Suppose you were registered to vote from 1978 to 1982 and voted, but then quit from then on. And you moved your residential address many times. Does the voter registration card bind you to local government only, state government and local government, or local, state, and federal government? Where does it say that it binds you?
Link please?
“Link please?”
Surely you jest.
Where ever you are, claiming that the government is illegitimate won’t have traction. Here at least we have the peaceful means to replace the government.
Ah, thanks Cypher/Blue Sky, for the classic evasion.
Here is your quote
“You know, I know this steak doesn’t exist. I know that when I put it in my mouth, the Matrix is telling my brain that it is juicy and delicious. After nine years, you know what I realize?”
[Takes a bite of steak]
“Ignorance is bliss.”
I have no idea what you just said, really. You don’t like what’s going on in Washington, I think you should extend a little itty bitty effort against it.
You basically evaded my challenge and I brought out the metaphor from the movie, “The Matrix.” It EMs you did not watch tht movie. In essence, ignorance is bliss.
Since it was not properly ratified
racis
When the Soviet Union collapsed, did they turn over any U.S spys or defectors to the United States?
New York County(Manhattan), NY List Prices Tumble 11% YoY
http://www.zillow.com/new-york-county-ny/home-values/
No way. Manhattan real estate always goes up!
Is the Obama Administration now trying to recast itself as a defender of the middle class after screwing over same for the past seven years? And are the hope ‘n change lemmings of 2008 and 2012 really stupid enough to buy it? On second thought, disregard the second question - I already know the answer.
http://www.marketwatch.com/story/stockbroker-conflicts-cost-americans-billions-white-house-2015-02-19?link=MW_latest_news
Man o man Boots:
I was sitting here catching up on blog reading and you posted this yesterday - I am still on the floor laughing. I will with hold the imagery you note while at McD’s thank you!!
Comment by boots on the ground
2015-02-21 06:53:44
This is pretty cool, I have a front row seat to watch Colorado Department of Transportation firing off explosives doing avalanche mitigation just below Loveland Ski Area
Good thing I dropped a deuce at Mickey D’s, gonna be sitting h
America is not a country, America is a GAME
http://en.wikipedia.org/wiki/Barack_Obama_citizenship_conspiracy_theories
China Used More Concrete In 3 Years Than The U.S. Used In The Entire 20th Century
Niall McCarthy Contributor
12/05/2014 @ 8:19AM
China produces and consumes about 60 percent of the world’s cement — the Three Gorges Dam alone required 16 million tonnes of it. To put China’s massive 21st century construction splurge and concrete consumption into perspective, Bill Gates made a mind-blowing comparison.
According to his blog, between 2011 and 2013, China consumed 6.6 gigatons of concrete – that’s more than the U.S. used in the entire 20th century. Look at what the U.S. built between 1901 and 2000: all those skyscrapers, the Interstate, the Hoover Dam, the list goes on and on but all that concrete only amounted to 4.5 gigatons.
*Click below to enlarge (charted by Statista)
http://www.forbes.com/sites/niallmccarthy/2014/12/05/china-used-more-concrete-in-3-years-than-the-u-s-used-in-the-entire-20th-century-infographic/
China Used More Concrete In 3 Years Than The U.S. Used In The Entire 20th Century
This is astounding. And makes me think the commodity bust might be short lived. Because they did it with mostly cash? Because China’s debt/gdp ratio is still only 1/3 of USA’s after that kind of boom?
And we’re still flooding their country with cash for their crap?
The very rough math looks like China might start buying a lot of commodities again within a couple years. They have money and over 3 billion people.
In 2013, United States public debt-to-GDP ratio was 71.8%, according to the CIA World Factbook,[2] or 104.5%, according to the IMF including external debt.[3] The level of public debt in Japan 2013 was 243.2% of GDP, in China 22.4% and in India 66.7%, according to the IMF,[4] while the public debt-to-GDP ratio in 2013 was at 76.9% of GDP in Germany, 87.2% in the United Kingdom, 92.2% in France and 127.9% in Italy, according to Eurostat.[5] wiki
In the meantime, demand and prices for commodities of all types continues to crater. And as you know, falling prices to dramatically lower and more affordable levels is positively bullish and good for the economy.
They have money and over 1.3 billion people.
They’ve got nothing but overcapacity and a few trillion in depreciating misallocated capital Lola.
(China has) nothing but overcapacity and a few trillion in depreciating misallocated capital
Mr. Dull Lightbulb,
You should really try to understand the cycle of life and business.
Think of the two main concepts in your above sentence and think Zen.
Now realize that depreciating mis-allocated capital will eventually solve the problem of overcapacity.
How could it not Grasshopper?
Not until prices fall to dramatically lower and more affordable levels Lola.
Get with the program.
It’s been another outstanding and productive weekend on the HBB. Tune in tomorrow for more deflationary price trends and price data that is sure to cause angst for debtors.
Bright and early now.
RAIN!
phony scandals