Larry, I think you rode it on the way up more than anyone.... People trying to get out of contracts didn't ride a thing either... They came too late and got stuck with an overvalued contract... What a sh*thead...
Cancellation rates stabilized during the winter. A significant increase in cancellations for new home contracts would be a nail through the heart of the national home builders.
People can always get out of home buying contracts. A few years back when I was selling a home, someone backed out because I did not disclose that the electric company had an easement to cross the property to get to a telephone/electrical pole.
Cheap calls in a hot market always have takers- and the average American should use BK as a valid backstop to corporate america's voracious appetite for their money.
So now they cry that people don't want their homes- how about stop building them and start selling spec houses to buyers with real deposits- like 10%?
And another thing, provide nice deep discounts to buyers who are willing to step in after a failed transaction and take the house off the builders' books- oh wait that would be real business- not the fantasy of the last five years of cheap and easy money for everyone.
I think the loss will only get worse as time goes by, at least for another year or two, JMP Securities analyst, Alex Barron, said in an interview on Friday. Most of the builders are operating on very thin margins right now, as soon as they drop the price a little bit, they start losing money.
Kind of OT, but a HUGE indicator of just how much the RE market may be slowing...
The SRAR (Southland Regional Assoc of Realtors) is finally out with the statistics on the San Fernando Valley from Feb and March, after a long delay due to a change in the MLS system. WOW- all I can say is HOLY COW, the poop is going to hit the fan in the next couple months based on what I see here .
Closed sales are down again year over year, and prices are down a couple percent y/y. BUT, take a look at the sales opened (pendings). They absolutely fell off a cliff in March.
Single family pendings:
(I am approximating from the graph)
March 2005 / 2006 / 2007
1350 / 1160 / 838
Condo pendings:
495 / 490 / 288
The final sales stats for last month are already down to around the levels of the mid 90's. With pending sales so unbelievably low, I expect final sales numbers in the next couple months to be down near the levels of the early 90's during the worst of the depths of our last big RE bust. Of course, the million dollar question is, what does all this do to prices???
I'm with Allenm on this one. "Reserving" a house or condo for a couple thousand bucks is just a cheap call option. A builder's attempt to make it more than that is a joke. The builder was running his own scam when he wrote those options because he did it just to get a pre-sold percentage to take to the bank for financing. He knew perfectly well he did not have nmeaningful sales.
Hoist with their own petard.
How about looking at the insider sales rate for the Hovnanian officials-seems to be 40 to 1 ratio of sales to buy. Seems like they may be not as willing to ride the boom on the way down either.
"GAAP accounting is indirect. When not directly based on cash flows, accounting is based on complex judgments. These judgments are critical to the value of the enterprise.
CFC has made many such judgments, many of which are questionable. Areas of concern are:
The value of MSRs (Mortgage Servicing Rights). Currently held at about $17,000,000,000. This value is depends on assumptions about the future. I question whether the true value is even positive. The servicing margins are very small on the bulk of their servicing portfolio but their experience has deteriorated. For example, foreclosures are much higher than anticipated. I sense that their employees are already under strain and that their servicing is inadequate. This may be one reason for their recently announced top to bottom operational review. If the MSR value is exaggerated, this would cast doubt on past, current and future earnings.
Has CFC yet taken a charge for NEWC?
I believe their loss reserve assumptions have not caught up with their experience. For example, their ARM experience is just started. Mozilo stated that he sees no visible effect from resets per se. This is clearly a failure to recognize the situation, if not deliberate obfuscation. KPMG cant permit this to continue without grave danger to themselves. Look for major Q2 loss recognition or for KPMG to resign.
I dont believe that REOs (Real Estate Owned) are appropriately valued. I estimate that the total loss per foreclosure is about 40% of the loan amount. This is more than $500,000,000 based on current outstanding REOs alone.
I believe that 50% of loans have some degree of identifiable fraud. This would be higher for ARMs and no-docs. Of these, perhaps 10% will default. Of these defaults perhaps 50% will be tagged for rescission by MBS bond holders. Hence perhaps 2.5% of securitized loans will fall back on CFC. This is a huge liability as yet unrecognized.
I believe that loans held by CFC because they couldnt be sold at a reasonable price are overvalued. The fact that they wouldnt sell tells the true story.
I believe that new loan volume will shrink to 50% of its former level. It would shrink more if CFCs reform promises are kept. CFCs judgment that they will be a net winner from the mortgage upheaval is off the mark. At best, they fare better than many other lenders, not high praise since many are bankrupt.
I believe that CFCs reputation among customers, brokers, bond holders, employees, lenders (they service), regulators and capital markets is tarnished. This will have deleterious future effects. Mozilo partially acknowledged this with his token gesture of a pay cut.
I dont believe that CFC has recognized the effect of anticipated refinancings. CFC itself stated that 60% of ARMs would not qualify. What does this do to their portfolio size, to affordability, to future foreclosures, to housing prices?
"I actually like it. CA based builders usu know better than to overbuild because of this, but forgot."
Yeah, several years of people pounding on your doors trying to shove money in your hands will do that to you.
But while the prudent businessman knows that boom times don't last forever, and plans for it, management of publicly-traded corporations isn't well rewarded for being prudent; their incentive is to build more, sell more, make more, year after year.
Over-building is still alive and well in Southern California. Despite the abysmal sales figures of the last 6 months there are still many, many projects going forward. Just driving around the southland and you can see how many builders are still going full steam ahead.
"The bull market just keeps going, and the positive wealth effect on consumer spending is significant, which in turn is bullish for stocks, and so on! This is the greatest global boom of all times, so why wouldn't we have the greatest global bull markets in stocks and commodities of all times? "
Good, enthusiastic copy; you have a future in the PR industry. Unless you're already there.
You know, this guy is kind of like the TIME CUBE guy or poo-flinging monkeys at the zoo. They're funny if you go to them and watch them in their cages. But lose on the streets they are definately a PITA.
Funny thing, the bulls who trade among each other are pushing the price up, but the rationale is faulty. The temporary price increase is fake as there is no new money to take that bag. Unless you get a completely new buyer, the gains are fiction. The increases are a mirage.
Try to cash it all in and lock in those fake gains, and collapse.
The converts to the buy side are going, going, gone. And there are no new converts coming anymore. The remaining bears will not convert, and the push game has come to an end.
Who's buying Dow Jones at 55? No one with real money.
Hey Idiot, tell all of that to the 2000 New Century employees who lost their job this week. And while your at, why don't you go harrass those who lost their jobs at the 60 other subprime slime lenders that are now out of business.
The Dow has now been up 23 of 26 days, which has never happened before and is roughly a 4 standard deviation event. The probability of this bull run continuing at this pace much longer is roughly the same as Farting thru Silk being hit by lightening while golfing. Have a nice w/e.
Thanks, Outsider. I'm on my way out to enjoy my patio and a book for a while. If Mr. Flood's Party shows up again, just ignore him until I get a chance to go ahead and ban him.
Doomster: this is your last warning. I have a longer attention span than you do.
It's one thing when you are consistently wrong. Its quite another thing when you keeping on repeating yourself for a year and remanin wrong. It demonstrates your inability to absorb and process new information and your inability to change direction when you are confronted by a stone wall.
It's no crime to be lonely, ailing, renting, life long middle manager, but it's also not a pretty sight to look at either.
Your covered parking space privaleges are revoked.
[No, you are not allowed to copy from Larry Kudlow and paste into this blog's comments while pretending that you wrote that. What do you think, I can't use Google?]
SOME BEARS ARE NOT TURNING BULLISH...THEY ARE TURNING BULLS@#T:
1-Accuse the data collectors and data providers as being incompetent and conspiring to mislead and keep everyone misinformed. The world is burried under an avalanche of bad information.
2-Nitpick, twist and cherrypick the intentionally bad and misleading data until it supports your failed case that has been wrong for years. Correct the bad information.
3-Never admit that you have been wrong or made some mistakes, its the "irrational" market that's been wrong. You are smarter than the market.
4-Explain everything away and blame everyone and everything else
for your mistakes.
5-Keep everyone off balance and in the dark, that way you can flip/flop whenever its convenient for you to do so. When in doubt, talk louder.
Such BEARS exhibit certain psychological traits and behavioral patterns that do not inspire confidence and trust. They are in the wrong business, their skills are more suited to growing mushrooms.
We are not talking economics here, we are talking MENTAL INSTABILITY!
They will hibernate until the next spring and then emerge, dust-off their old B.S. ; put a little lipstick, rouge and a tight red-leather skirt on it and then recycle their stale old B.S. arguments again and again just like they have been doing for decades. Others will just be reduced to stuck-on-stupid, glooming and dooming Wart Doctors, who contribute nothing but cherry-picking and pointing at anything that supports their failed case and accusing all the other data as being the product of some kind of conspiracy.
The "tapped out consumer," their favorite black & white re-run, will get revived more times than Nick Nolte during a hellacious weekend.
Why is it a surprising that the economy continues to do well? There has been way too much drinking of the kool-aid around this blog vis-a-vis the housing market and the overweening desire to find data that will fit the hypothesis that the housing sector is poised to pull-down the overall economy. Macro and micro-economic data-mining for any little validation to thinly support the years-old lament that the current state of the economy is anything less than a boom evidently never gets old with some.
For a reality check look through the bear masks and see a fairly strong economic foundation: growing real wages, crazy-strong corporate profits, an export boosting weak dollar.
If one fixates on the troubles in housing, it is not too hard to find statistics that promise 45% declines, etc. What is missing in most of the discussion is that RFI is roughly 5%-6% of the economy, and the biggest problems are in a very narrow segment of the market - subprime lending, which is roughly 7% of the housing market. Hence, we are looking at 7% of 5% of the economy: 0.35%. If housing impacts 15% of the economy because of sympathetic spending, that roughs out to a 1% GDP decline. That is IF the doomsday bear scenario plays out as meticulously scripted which it has not.
One thing is certain: If you have been anything but long and strong you've been wrong (investing wise). From a trader's perspective, fighting the tape is always a losing battle. The trend remains up, momentum is positive, seasonal strength is upon us, and the bears and shorts have been vanquished.
Notice the strong run-up in home prices in preceding years (limiting the impact of modest near-term price declines for most consumers), the impact of demographics and second home buying (sure it's an asset, but it is also where many are deciding to spend their golden years), and the fact that interest rates are falling in tandem with housing prices (raising affordability), you have the makings of less dramatic outcome in housing.
While I enjoy the blog, I am amazed that so many so-called smart folks are so focused on such a narrow slice of the economy, and are shocked, shocked! that the economy has not fallen into the abyss.
A bit speculative, but Cringely claims to have some inside info...
And you can bet that these are generally better paying jobs than average since this is IBM.
Here's a choice quote: For two years Big Blue has been ramping up its operations in India and China with what I have been told is the ultimate goal of laying off at least one American worker for every overseas hire. The BIG PLAN is to continue until at least half of Global Services, or about 150,000 workers, have been cut from the U.S. division. Last week's LEAN meetings were quite specifically to find and identify common and repetitive work now being done that could be automated or moved offshore, and to find work Global Services is doing that it should not be doing at all. This latter part is with the idea that once extraneous work is eliminated, it will be easier to move the rest offshore.
If I remember correctly, folks can be banned from a blog by their isp address. Lots easier than whacking entries one at a time and eliminates one person from having multiple identities.
vader, Mr. Sock Jock apparently keeps wandering into another room of the frat house to find another ISP address. I hate to ban too wide a range, in case I get one of the good guys. But don't think I'm not capable of it.
I'm happy to delete the comments. I can't stand seeing them on an otherwise useful comment thread.
Oh please don't ban my IP addy I promise I'll post nothing but doom and gloom glass half empty wart doctored cherry picked negative subjects no matter how lunatic or years-wrong the source.
If you banned my IP I'd NEVER be able to post again, right?
Tanta, you can contact the ISP of the spammer and they will more than likey send him a warning letter. The second time he will probably get booted from the ISP. If anything is deemed threating you can subpoena the ISP for the physical address of the spammer and tak him to court very easily.
As long as you're just picking on me or CR you're fine, Tremulous. But you cannot pick on our guests, and you cannot plagiarize. Surely even you can figure out such simple rules, no?
Once again a big thank you for keeping the board civil. CR is about the only board I read on housing any more, as almost all the others have descended into an endless stream of flames and trolls. This is an important topic that deserves reasoned debate by adults from both sides. Thanks for taking on the messy job of making sure this remains the place to do that.
Has anybody seen my RECESSON? Huh, have you? I know it was here in 2001 or thereabouts. At least someone said it was, although almost NOBODY noticed it.
As long as youre looking, keep your eyes peeled for my 600,000 lost residential construction jobs too, cant seem to find any trace of those either.
Unemployment...no jobs...recession...soup kitchens...where are the jobs? ...my income isn't growing...poverty...depression... Buddy, can you spare a dime?...The Grapes of Wrath...Tobacco Road...outsourcing...globalization...its not fair...Bangladesh...redistribute...where's my BMW?...where's mine...
More downgrades on bonds, for the pool factor comment in the story they are saying only 10% of the mortgages written in that offering are still there? 90% gone in 4 years is awfully high.
Tanta's Landlord said: "It's one thing when you are consistently wrong. It's quite another thing when you keeping on repeating yourself for a year and remain wrong. It demonstrates your inability to absorb and process new information and your inability to change direction when you are confronted by a stone wall..."
More downgrades on bonds, for the pool factor comment in the story they are saying only 10% of the mortgages written in that offering are still there? 90% gone in 4 years is awfully high.
Yes, that's what they're saying. And no, it's not really unusual to see that fast a payoff in these things. In fact, they basically were designed to prepay like that; it's the whole point of putting people into 2/28s and 3/27s. The problem with those newer ones is that the prepayments have slowed down, and the DLQs shot up.
I looked at the performance of this Series 2006-B Pool 2 Fremont securities downgraded by Fitch and it looks absolutely horrible. These papers are backed by second liens and the cumulative losses (after only 8 months) are already 6.81%. It's almost certain that a few of the mezzanine tranches would be completely wiped and I wouldn't be surprised if the losses would end up in the senior AAA tranche. Fitch was terribly slow. It seems the problems were visible at least two months ago. And the SL-M8 tranche that had BBB+ original rating (downgraded to C) pays a paltry LIBOR+1.50%.
"For a reality check look through the bear masks and see a fairly strong economic foundation: growing real wages, crazy-strong corporate profits, an export boosting weak dollar."
BWAHAHAHAHAHA!!! A fairly strong economic foundation? LOL. Growing real wages? Where? Do you know anybody that has seen those since 2000?
Crazy strong corporate profits? To the extent that the pigmen can get the dead-fish analysts to lower the bar far enough, then yes, corporations will always win at beat-the-number. LOL. All of this achieved via the great illusion of rampant, under-reported inflation. I'll bet you think that the DOW is now in record territory don't you? Think again. In inflation adjusted dollars it is still in a bear market from 2000. Inflation is well contained, unless you need to drive, heat your home, eat, go to school, get medical care, buy a house, rent a house, etc. I guess a bike riding anorexic homeless person in great health experiences no problems with inflation. For everybody else, it's running around 10-12%
Export boosting a weak dollar? huh? Do you mean that a weak dollar may boost our exports someday? Have you looked at our massive trade and account deficits lately? The weak dollar sure is putting a nice dent in those numbers. ROFLMAO.
Listen, I wasn't always a bear but the pigmen turned me into one with this phony, serial bubble-laden, inflation juiced, manipulated, hollowed-out, M&A, negative savings, leveraged buyout, $360M-a-year hedge fund manager, pegged currency, GATA gold trashing economy. This is only good for the top 2%. Everybody else gets the shaft.
you may know, or if there are any CPA's lurking...
It would seem, with the dramatic increase in Heloc's and with AMT becoming a bigger issue, that this would increase significantly, the potential tax liability of those exposed due to the AMT rules on interest deductions. The question is how the CPA's are dealing with the issue and what if anything do they see potentially coming from the IRS to make sure that the deduction is not taken unless the heloc is used for home improvement (which, in the current environment, would seem not to be the case increasingly)???
Well, actually, there's only one thing wrong with how you feel...it must be wrong...which is that I completely agree with you.
Of the usurers, by the usurers, for the usurers.
But I sincerely believe that when the lenders are in power, and I believe they are, deflation is around the corner. Lenders get greedy and, well, things deflate. There isn't enough nitric oxide in the world to prevent it.
Today on this very blog you get first-hand anecdotal evidence of just how very naive and extremely hubristic some market bulls have become. The humble market participant is the long term market participant. All over the place you see bulls with the attitude that they should be handfed grapes from the stock market horn o plenty. This speaks to the fact that they're new to the stock markets.
Why do the soon fleeced sheeple feel it necessary to taunt? Is it, as jag suggests, simply an issue of self-esteem? This market is going to end badly. Unfortunately for the big brokerages, Ma and Pa are not really participating. Instead we got Johnny Six Pack with his new-found margin wealth. Thanks for coming out.
You know, I'm surprised that we're seeing so many cancellations so late in the game. It never ceases to amaze me how many people still don't know what time it is.
Does anyone aware of situation where buyer of a condo developement get out of their contract and get back their deposit? I am only aware of one case where NVR refund deposit to a group when the buyer claimed that the contract is too one-sided.
Alexandria-based real estate attorney Beau Brincefield Jr., who filed the lawsuit on behalf of the buyers, argued in court filings that the contracts allowed Reston-based NVR to walk away without recourse because the terms of the contract didn't set a date by which NVR had to go to settlement; freed NVR from liability for any damages; provided no remedy to the buyer if the builder didn't hold up his end of the bargain; and required the buyer to waive any right to "specific performance" of the contract, which meant that the buyers couldn't compel NVR to build and sell them the house.
"Unless both parties are bound, neither party is bound," Brincefield said in an interview, quoting from a decision in a contract dispute case rendered by the Virginia Supreme Court in the early 1900s.
NVR disagreed with Brincefield's assessment, saying that limitations on remedies do not undermine a contract's validity. NVR's attorneys argued that the contract did not lack mutuality, and that even if it did, mutuality was established after the company built the homes with upgrades and features as specified by buyers in their contracts.
The case was settled on the heels of NVR's announcement in October that it had seen four out of 10 home buyers cancel contracts during the third quarter and that it was revising its profit expectations for the rest of the year. Terms of the settlement were not disclosed.
An NVR spokesman declined to comment on the case. In court papers, however, the builder said: "While plaintiffs argue that NVR foisted a contract on them that somehow gave discretion to NVR as to its performance, the evidence will show that the plaintiffs entered into contracts in order to invest in a 'hot' real estate market, let NVR undertake performance, and then waited to see whether they would perform based on market conditions at the time of closing."
I know it was here in 2001 or thereabouts. At least someone said it was, although almost NOBODY noticed it.
Yeah, nobody noticed the NASDAQ lost almost 80% of its value. Nope, not a single person saw the DJI at 7300 in 2002, down over 35% from its previous 2000 highs. WorldCom, Enron...huh, never heard about 'em. I never heard anyone bitch about their 401k at company events. I also didn't talk with any unemployed programmers and web designers. Yep, completely missed by everyone. Especially considering the greater percentage invested in the stock market then compared to now.
What an idiot.
Actually, people I worked with were glued to their computer screens in horror every day from late 2000 to mid 2003. Have they forgotten? Don't think so. That's why fewer are invested today than in 1999.
"Actually, people I worked with were glued to their computer screens in horror every day from late 2000 to mid 2003. Have they forgotten? Don't think so. That's why fewer are invested today than in 1999."
You got that right.
Kinda reminds me of people in the depression who lost all their money when the banks crashed. After that, the banks had to have an advertising campaign to convince these people it was safe to put their money back IN the banks. How many people from that generation resorted to cash under the mattress? Once you've been burned, you're much more cautious.
If you have been anything other than long and strong you have dead wrong.
Great used of the past tense. The rear view mirror is a wonderful tool. Just remember that objects in mirror are often closer than they appear.
I assume you've been buying the same top performing money makers that worked so well in the 1970s. I did! Gold, silver, and oil? Oh yeah, prosperity baby! What a great economic [monetary] expansion we've had. Perhaps this is your way of telling me I should not have sold these traditional stores of weatlh back in 2006? I certainly didn't feel richer when I sold them. Nobody is really "supposed to" make money simply holding rocks. Right?
Is this why you are dumping your hard assets now? Just how bearish were you? Based on how much SPAM you are willing to regurgitate here, you must have bought a @#$%load of it at drastically higher prices. It is unfortunate that you can't find buyers for it. I just feel sorry for Tanta. She has to keep cleaning up your mess, lol.
He was very bullish (SPY, DIA, XLF) so he made a lot of money and expects to make a lot more money. Bulls make money.
Therefore, I should continue to be very bearish (oil, gold, silver), in hopes I could continue to make even MORE money than he makes. I'm having a hard time thinking that way right now, but maybe he's right. Bears make money.
Wasn't there also a saying about pigs? What was it? I can't remember. Maybe pigs are used to make spam? No, that isn't it. Or is it?
Thank goodness the government has a monetary printing press. So far they've managed to keep EVERYONE happy. The Fed truly makes money.
Who knew the Fed could bring so much prosperity to EVERYONE? I wonder if they've given any thought to printing even MORE money? It is a miracle! Why hasn't anyone ever done this before?
Sorry, feeling a bit sarcastic these days. No offense intended to the non-spamming bulls here. I don't claim I'm right. My crystal ball is just as cloudy as the next person's.
"I don't claim I'm right. My crystal ball is just as cloudy as the next person's."
I dumped the last of my stocks on Monday. The American Indians also had a saying - take what you need and leave the rest for somebody else. I still have my gold and silver bullion. More then likely our resident bull wants to sell in May and go away. Is that a black swan over there?
CR & Tanta - if the IP address lookup thingy doesn't work out, someone needs to contact the San Diego Zoo - I think a feces-throwing howler monkey has escaped.
I have a quick question... anyone know if the HBs are actually enforcing any of these contracts? I know they are TRYING to enforce them but from what I read it seems its too early to know if it will fly.
So stocks have made their longest run since 1927... Anyone have any idea what happened after that? I'm sure they continued to go up for the next decade.
This whole expansion since 2001 has been pretty much built on massive overleveraging of the US economy. Don't believe me? Look at the level of debt growth over the past 5 years. Look at the Fed Flow of Funds Report. Look at the debt to GDP ratio. It is monstrous.
Guess who benefits when easy money and leveraging occur in an economy? The people with assets. People with either stocks or real estate holdings.
The hedge funds and speculators have so much money to play with courtesy of easy money and financial engineering that the stock market is rising alongside increasing debt to an absurd degree. Same thing happened in 1925-1929 and late 1980s japan also.
I've heard of threats of forcing a buyer to closing, but any smart person would put a contingency to get financing or sell residence in the contract. In any case exactly how do you force someone to buy something if they cannot get financing?
Then there is the case of lawyer fees eating into cash flow.
The Florida Supreme Court ruled in favor of the builders in enforcing contracts, but that only goes so far.
In any case, it is a good assumption that deposits will be forefitted.
""The issue is one paragraph in the purchase contracts. The documents state that if a buyer refuses to close, the developer has a choice of two remedies: Either keep the deposit money - or force a closing." "Buyers who signed sales contracts months or even years ago have seen their unbuilt properties decline in value in the current condo market slump. That's especially true for these two condo projects, which were completed well past the dates first promised. Both properties have been the subject of lawsuits by buyers upset over the buildings' delays and the quality of the workmanship."
"It's not clear how these lawsuits will turn out, but one thing's for sure: All the lawyers say their clients should have consulted with them before they signed the contracts. "I wish they had," Dieterle said. "I would have steered them away."
Buyers are faced with the choice of either potentially paying thousands in attorney fees to fight, or continue with the purchase of a property they say has dropped in so much in value, it's worth less than what first contracted for- for some a few years back. It's not a pretty choice" South Florida Real Estate Bubble
This sort of deal frenzy is more indicative of market tops than bottoms. Doubly so, in fact, because it involves the purveyors of business and financial news and data. Now that finance is far and away the stock market's biggest sector, a News Corp. takeover of Dow Jones could be seen as analogous to the infamous AOL-Time Warner deal at the peak of the tech bubble, if not in size, then in symbolism.
In the household survey, the one used to calculate the jobless rate, some 392,000 folks were estimated to have dropped out of workforce. If you're not pounding the pavement for a job, you are not counted as unemployed. Had they been, the jobless rate would have been up 0.2 percentage points.
According to the Liscio Report, eateries and health care continue to account for the bulk of new jobs; over the past year, these sectors, comprising 16% of employment, accounted for 37% of new jobs. Meanwhile, the housing downturn was apparent, with construction jobs falling by 11,000 and finance jobs by the same number. (Mortgage brokers, perhaps consider bartending school?)
The good news -- from the standpoint of the markets and the Federal Reserve, if not working stiffs -- is that the growth in average hourly earnings has slowed markedly to just a 3.7% annual rate. That's what Bernanke & Co. have been waiting to see, but they'll continue to stand pat when the Federal Open Market Committee meets on Wednesday.
As I said, only the usurers are awash in liquidity.
Why do I say usury? Well, because the interest rates collected from John and Jane Q. Public are usurious. Prime rate? I don't think so. Try credit card interest rates well into the 20's.
Asian nations took an ambitious step on Saturday toward pooling the region's vast foreign currency reserves so Asia can weather financial crises like the one that battered the continent a decade ago.
Few are predicting an imminent meltdown like the one in 1997, but bitter memories of plunging currencies, austere reforms and a slow road to recovery have pushed a now wealthy Asia to better safeguard its future.
From what I am hearing from the front lines, business dropped off a cliff after the second week in April in real estate.
The buyers are non-existant, the sellers are becoming more desparate, and the real estate agents more frustrated. The agents do not want additional listings due to the cost to advertise, I would have to agree with some of the CEO comments as to this season being a complete bust.
I am also hearing many big ticket retail stores are strugging, some on the verge of failure.
The information currently in the marketplace concerning a significant second half rebound is completely contrary to what the real economy seems to be suggesting.
The ISM numbers presented were quite positive, the only explanation that I can fathom is an inventory build and channel stuffing (one last gasp), I think this will contribute to the potential for a steep fall in coming months, I think it quite likely that the retail numbers take a dramatic turn down, and that consumer confidence & market psychology (leverage driven unwind) lead the parade into recession.
Could be a very difficult coming year.
CR, time to change your coin-flip odds chance of recession.
I'd be cautious about blaming the Fed for too much of this, because everything we are talking about is truly a global phenomenon. The Fed does not cast THAT big a shadow.
As for Arbogast's question, I am pretty much awash and most of my extended family is awash with liquidity. The only ones who aren't are the ones who live a high debt lifestyle, or who have other life situations that cause them extraordinary expenses. Luckily, the rest of us are so awash that we can take care of that last category.
In terms of my colleagues, those who have been willing to go the saving before borrowing route and who are willing to work and study hard have done extremely well in the last few years. Conversely, those who went on a spending binge are probably facing bankruptcy in the next few years.
My concern is that I see the diffusion of this vast "wall of money" through the general population as slowing and stopping. This is not a good thing for the economy.
Your role is to constantly re-energize the "wall of worry" needed for bull markets to climb. Loading up with puts at market bottoms also helps; you have yet to let us down.
In contrast, my role is very different. My job is to make money--bushels full of money.
Keep up the good work WART DOCTORS...so far, so good! I knew that I could count on you--again!
Let's face it, some folks were put on this planet to produce wealthy families...others are here to shovel shit in Petaluma.
For years farmers got free puts from government subsidies on the price of the grain they produce, and this produced a glut of grain, and created a ceiling on grain prices. But fewer farmers lost their farms as a result of the subsidies.
CR has pointed out that a bailout of homeowners will prolong the glut of unsold homes. But it may keep some owners in their homes who presently couldn't afford them otherwise. "Loose lending", and subsidized financing may keep house prices high and benefit the housing industry too. And taxpayers will pay for the program.
No, "This time the banks wont come round
And plow your houses down
On the great plains of ol Nebrasky-o. Or any place else.
The skeptics (aka alarmists and permabears) became even more emphatic after the sharp drop in equity prices that occurred in late February and early March. At that point, they were even talking of a new "global bear market," caused at least partly by a housing-led subprimogasm recession in the US.
But the US stock market, and much of the globe, has reversed course and boomed. The Dow Jones Industrial Average climbs to a new all-time high, and is up over 8% from its recent bottom on March 5, 2006.
On the earnings front, 68% of reporting companies had positive earnings surprises - a nice improvement from last quarter. While earnings growth has slowed to just 5.2% on a year-over-year basis, all the positive surprises suggest analysts are underestimating both micro- and macro-forces.
Global growth is on a tear as capitalism and freedom spread. Second, the mighty, muscular USS Economy refuses to be toppled. The global economy is experiencing its fourth year in a row of spectacular growth. Given the international focus of many US companies, this global growth is boosting returns even while the domestic economy slows.
Finally, based on overall corporate profits and a conservative estimate of the current discount rate the broad US stock market is 30% undervalued.
We just had a correction a few weeks ago...and those very same funny circus permabears told us, "1929...its another 1929. Or maybe dot.bom
Having failed with that, they have since moved on to some kind of "bubble" theory.
Some people simply can't learn...
I bet most of this same crowd also have more than just a little acid rain, Y2K, bird flu, 9-11 was an inside job, spotted owl and harmonic convergence running in their veins.
With inflation at nearly 1800%, unemployment at 80%, and GDP having been slashed in half over the years, a thriving Zim stock market seems, well, impossible. But the 12,000% year-over-year increase is well over the rate of inflation, so people are obviously getting rich and keeping their money safe . The Institute explains that the Austrian Business Cycle Theory has something to do with it.
The ZSE is growing some three times faster than consumer prices. This relative outperformance versus general prices is a result of stocks being a chief entry point for the flood of newly created money. Keep Zimbabwean dollars in your pocket, and they've already lost a chunk of their value by the next day. Putting money in the bank, where rates are pithy, is not much better. Investing in government bonds is the equivalent of financial suicide. Converting wealth into foreign currency is difficult; hard currency is scarce, and strict rules limit exchangeability. As for capital improvements, there is little incentive on the part of companies to invest in their already-losing enterprises since economic prospects look so bleak. Very few havens exist for people to hide their wealth from the evils created by Mugabe's policies. Like compressed air looking for an exit, money is pouring into shares of ZSE-listed firms like banker Old Mutual, hotel group Meikles Africa, and mobile phone firm Econet Wireless. It is the only place to go. Thus the 12,000% year over year increase in the Zimbabwe Industrials.
Though the government print more and more money and distributes it into the system via financial institutions such as banks, they are opting to put it into stocks rather than hold onto it. One day can cause its value to collapse, but the stock market is driven by demand. Therefore, all of the rich people, government officials, and banks are putting their money into stocks so that it doesn't lose value. Demand is high, so the price is too.
The everyday people of Zimbabwe don't see any benefit to this, though. Their masters may not see it for much longer either. Stock prices on the index are obviously inflated and unsustainable. It's only a matter of time before it comes crashing down, taking down many in its spiral.
I'd change my diaper but an astronaut stole my last one.
"But the US stock market, and much of the globe, has reversed course and boomed. The Dow Jones Industrial Average climbs to a new all-time high, and is up over 8% from its recent bottom on March 5, 2006."
Why don't you divide the S&P or the Dow by any commodity of your choice (Gold, oil, copper) and compare 1999 to the present. You'll be in for a surprise. You can always manufacture money, but not commodities.
How many of you commenting on this blog are awash in liquidity?
arbo - we all can be if we want to be. Talk to a loan broker lately?
Or buy a car?
Been asked if you want a new credit card? I even get WalMart asking if I want a 'special' Sam's Club Discover Card every time I go there... Me and the equally special 20 million they also ask every single day.
From what I am hearing from the front lines, business dropped off a cliff after the second week in April in real estate.
Risk capital, this is also exactly what the management of several public home builders have been saying on their recent quarterly earnings calls. The CEO's of Centex, Ryland, MDC, Standard Pacific and Meritage.
For years farmers got free puts from government subsidies on the price of the grain they produce, and this produced a glut of grain, and created a ceiling on grain prices. But fewer farmers lost their farms as a result of the subsidies.
Hey walt were you out there on the plains when the 80s farm crisis rolled through?
When the real shit hit the fan I'm not sure at all if the subsidies helped all that much. To a great extent they just became 'capitalized' into the prices for land & farm equipment... prices sufficiently high that even with subsidies they couldn't be covered.
Those free gov't puts proved to be a lot less protection that people thought.
How many of you commenting on this blog are awash in liquidity?
I have more liquidity than ever before, but I also have extraordinary expenses.
In the meantime, I have not had a meaningful raise in salary since 2000 (when I was hip deep in the dot.com mania) and my wife enjoys all the compensatory blessings of being a public school teacher.
Remember the days when an average family could make ends meet with one breadwinner?
For that matter, remember the days when middle-class Americans could go to college without having to go deeply into debt?
Liquidity is more than the money you have - it is the ease by which you can leverage (both availability & cost). For 'high liquidity' you need both conditions...
We got both conditions across many sectors of the economic spectrum... corporate equity firms to commercial real state to consumer loans. Everywhere you look, lotsa cheap credit is offered, and little is asked.
Remember the days when an average family could make ends meet with one breadwinner?
For that matter, remember the days when middle-class Americans could go to college without having to go deeply into debt?
number2son | 05.05.07 - 10:21 am | #
Both are still possible - just not possible on either coast. Need to visit Middle America to see where people can still live that way - if they choose.
Hey, Funny Circus Bear. Is your name Brian Wesbury? I assume it must be, because you are pasting text into the comments of this website without quotation marks or links that has appeared on a copyrighted website under the name of Brian Wesbury.
If you are Brian Wesbury, your reputation--such as it might be--is in some danger if you get well-known as a troll commenter on a respectable blog.
If you aren't Brian Wesbury, you'd best quit plagiarizing, as Mr. Wesbury might object to that.
Do you, can you, see the point, you bloody moron? Besides the fact that your posts are disruptive, rude, and childish, you are stealing other people's content. And using it to pretend that it is an intelligible response to this blog's original content. So you aren't just a troll, you're a thief. Unless you are, actually, Brian Wesbury, in which case you're just a jerk: you have your own venue for publication, and you don't need to clog up this blog's comment section with reprints of your material. If I cared about content that appeared on "RealClearPolitics," I'd go read that site. And if you're just unhappy that wingnut sites don't tend to supply comment threads for you to play in, well, take it up with the wingnuts. This blog isn't here to give you a place to spam, bud.
Other commenters: please note that responding to this idiot is responding to stolen content. All you have to do is find a grammatically correct and content-filled sentence in one of these posts (i.e., the part that isn't capitalized name calling) and pop it into Google to get the source. Until this dishonest hack starts using quotation marks and suppling links, engaging with him is doing a disservice to the original author of the content.
But of course he won't do that, because stripped of the theft of content he has nothing to say but name-calling.
Tanta,
Why not report it to the author? This person is obviously a lonely sociopath, but a nice legal letter might even slow him down a bit. He doesn't seem to be employed with anything else, so he'll have plenty of time to disrupt here.
Our little Republican striver lacks the background to see that beta and even gearing is no substitute for the K and t in Ke**rt. You can't catch up. But you can still aspire, if you know your place. Strive harder! Grow rich!
Alt Min,
Yes, it's hitting the middle class more each year as it's not properly indexed to inflation. It was originally intended for less than 1000 Americans and has crept up to millions of successful people.
On a different topic, the interest deduction is not what it once was as interest has been converted to principal over the last 6 years or so. That meshes with the arguement that lower rates and teaser rates has simply produced higher prices as the payments on a teaser ARM might not be much higher than the payments on a 30 year fixed on the same property if the price doubles.
I might do that someday. All I can say at the moment is that, having read the "original," I wouldn't swear in court about the originality of the original. I haven't got time to figure out how many derivations are going on here. I just want it to quit at this blog.
Does anyone think that our troll knows how to evaluate a source before he steals from it? Don't make me laugh that hard.
yes, that is what I was referring to with this part of the text,
"The buyers are non-existant, the sellers are becoming more desparate, and the real estate agents more frustrated. The agents do not want additional listings due to the cost to advertise, I would have to agree with some of the CEO comments as to this season being a complete bust."
The first comment though was what I have been hearing from the sales of existing homes and the realtors.
REBear,
I noticed that the 2's and 10's had inverted again as well last week.
The interesting movement of course, to me has always been the 5yr in relation to the 10 yr, potentially a spread trade put on by institutions causing the distortion.
MOM said: "...As for Arbogast's question, I am pretty much awash and most of my extended family is awash with liquidity...."
Include me and mine in there, too, along with friends and colleagues. And the "awash with liquidity" thing isn't just for the miserly and/or financially well-off among us.
Just the other day I got yet another low-interest credit-card offer...1.99% for the life of the balance on any transfers.
I could buy risk-free T-bills paying 4.75%+ with money borrowed at 1.99%, and make 276 bp a year indefinitely. I'd buy another house but they'd never raise my credit limit that high.
umber2son said: "Remember the days when an average family could make ends meet with one breadwinner?
For that matter, remember the days when middle-class Americans could go to college without having to go deeply into debt?..."
to which dryfly responded: "Both are still possible - just not possible on either coast. Need to visit Middle America to see where people can still live that way - if they choose..."
There's a glaring inconsistency in the "bearish" argument that America is losing high-paying jobs that aren't being replaced, while the prices of everything are going up beyond what a typical family can afford.
Who's charging (and receiving) those too-high prices?
Example: I noticed the other day that I had a couple of windows and an exterior doorframe on my house that had rot, and needed to be replaced.
The estimate I got was $3,000, with the labor portion for a crew of 3 estimated at...$640/day!
A couple of years back I had a leaking drain-pan in my shower---had to pull up all the old tile, replace the pan, and re-install new tile. One guy, 5 days work...$4,000, very little of it in materials.
Car repairs, dental work, large appliance repair...all expensive, and all the people doing them (Americans, right here in this country) are charging quite a bit for their labor.
So my question is, why can't I find any cheap labor for the things I need done, if the typical salary of the American labor force is being driven down by outsourcing, offshoring, greedy corporate executives who keep all the profits for themselves, etc., etc.?
Sebastian, other people don't get bids like that for repair work. The contractors must just not like you.
I have a relative who is a self-employed roofer. He works during that part of the year that one can work on roofs in the snow belt. He pays his own social security taxes, and buys his own expensive non-group health insurance. He insures his truck, and he insures against liability should a gust of wind hit him and he drops a pack of shingles on your kid or your dog. He has had four skin cancers removed from his face and neck, a common occurrence for fair-skinned people who work out in the sun all day. Should you decide that you really don't need new gutters this year, he won't get work. Should his suppliers decide to jack up the price of shingles this year, he'll pass that cost on to you.
What was your question again? How come roofers have to pay for car repairs, dental work, and having the dryer fixed, too?
"Just the other day I got yet another low-interest credit-card offer...1.99% for the life of the balance on any transfers."
Yep, it's fun to let debt run at lower than market interest rates while investments (or even that plain ol' savings account) racks up interest faster. Ha-ha, stupid bank.
But of course, maybe the bank ain't so stupid...sure they'll lose money on us, Sebastian, but they made that offer for some reason. There's gonna be some other person, maybe that's not as smart as you or I, or maybe some unexpected expenses hit that person, and that person is going to end up paying big interest.
After all, banks also offer those teaser rates on credit cards...you can just keep surfing them and keep your interest rates lower than the interest you earn on savings. The banks do that because there's some class of people who forget to or who are unable to switch, and get socked with higher interest rates.
It just seems like since the early 90s, it's gotten a lot more expensive to be stupid. It seems like there's more and more deals where smart people can clean up at the lender's expense, while the lender makes their money off the stupid.
As a relatively smart person, I benefit, but I don't know if it's a socially beneficial development.
"Remember the days when an average family could make ends meet with one breadwinner?"
They can today, if they want the smaller square feet of housing they got in the 1970s, the quality (or lack therof) of the medical care they got in the 70s, etc.
And the bullish troller may be annoying, but anytime you have a blog that quotes permabear Fleckenstein's "the boys in the boiler room say she's gonna blow!" kinda stuff, you're kinda asking for it.
The estimate I got was $3,000, with the labor portion for a crew of 3 estimated at...$640/day!
A couple of years back I had a leaking drain-pan in my shower---had to pull up all the old tile, replace the pan, and re-install new tile. One guy, 5 days work...$4,000, very little of it in materials.
What you pay & what he pockets are two different things. Remember he is 1099... he covers all his own expenses.
So even if there weren't A LOT of material, there was some. Plus he has tools & vehicle to pay for & maintain. Plus disposables (paint, nails, etc.).
Then he pays his own health care, covers his retirement, doesn't get a paid vacation from his 'employer'. Plus he pays what would have been the 'employer half' of 'his' FICA.
Whatever he has after that is equivalent to a typical working mans wage/salary...
So starting with that 4K - take away all that other stuff - my guess is he sees the equivalent of a salary of between $3K-$2.5K for THAT particular week. Then like the rest of us he pays FICA, Fed Tax & State Tax... like any other employee.
If he did that every week - five days a week - he'd be doing pretty well. That would give him a gross before tax of about $125K-150K a year.
Again that is if he can work/bill every normal working day of the year.
But I have buddies in this business and I can tell you they don't work 'billable hours' five days a week for 50 weeks a year. They are lucky if they can bill 50-60% of a normal working year at anything close to those kinds of rates... say three out of five days a week or two full weeks every month.
The rest of the time is spent getting work (bidding) or 'administrative' & 'logistical' (getting stuff & planning & prep)... stuff that costs them money but that they can't bill clients for directly - its rolled into to the rate the do bill which is why you had sticker shock.
Still that laborer who supposedly is seeing a theoretical income of say $125K to $150K if he was able to bill at 100% really sees maybe $62.5 to $90k per year billing 50% to 60% of his time... Its a decent income and better than a sharp poke in the eye but not quite what Wall Street bankers make.
And of course this is (was) during the greatest RE boom in history... wanna guess what he makes after the excess gets wrung out? My guess is a whole lot less.
You can find cheap labor - he might be it. I see them working weekends for cash inthe nice neighborhoods, usually for the people who know better but have the cash ... lawyers, judges, licensed contractors, state and county workers, etc.
A skilled onsite construction worker with a truck, tools, comp, insurance, vacation and prep time, making $23 per hour (to get to CA upper level comp rate) costs the employer about $50-60 per hour. $2,000-2,400 per week.
Maybe I should have written "awash in cash". It's not really liquidity, but cold hard cash. But then my family culture is largely debt-averse, and that builds up in time.
Larry, I think you rode it on the way up more than anyone.... People trying to get out of contracts didn't ride a thing either... They came too late and got stuck with an overvalued contract... What a sh*thead...
"They were willing to ride the real-estate boom on the way up, but some are not willing to ride it on the way down." Great Quote.
Cancellation rates stabilized during the winter. A significant increase in cancellations for new home contracts would be a nail through the heart of the national home builders.
People can always get out of home buying contracts. A few years back when I was selling a home, someone backed out because I did not disclose that the electric company had an easement to cross the property to get to a telephone/electrical pole.
Cheap calls in a hot market always have takers- and the average American should use BK as a valid backstop to corporate america's voracious appetite for their money.
So now they cry that people don't want their homes- how about stop building them and start selling spec houses to buyers with real deposits- like 10%?
And another thing, provide nice deep discounts to buyers who are willing to step in after a failed transaction and take the house off the builders' books- oh wait that would be real business- not the fantasy of the last five years of cheap and easy money for everyone.
mmmmm....
I think the loss will only get worse as time goes by, at least for another year or two, JMP Securities analyst, Alex Barron, said in an interview on Friday. Most of the builders are operating on very thin margins right now, as soon as they drop the price a little bit, they start losing money.
Kind of OT, but a HUGE indicator of just how much the RE market may be slowing...
The SRAR (Southland Regional Assoc of Realtors) is finally out with the statistics on the San Fernando Valley from Feb and March, after a long delay due to a change in the MLS system. WOW- all I can say is HOLY COW, the poop is going to hit the fan in the next couple months based on what I see here .
Closed sales are down again year over year, and prices are down a couple percent y/y. BUT, take a look at the sales opened (pendings). They absolutely fell off a cliff in March.
Single family pendings:
(I am approximating from the graph)
March 2005 / 2006 / 2007
1350 / 1160 / 838
Condo pendings:
495 / 490 / 288
The final sales stats for last month are already down to around the levels of the mid 90's. With pending sales so unbelievably low, I expect final sales numbers in the next couple months to be down near the levels of the early 90's during the worst of the depths of our last big RE bust. Of course, the million dollar question is, what does all this do to prices???
I'm with Allenm on this one. "Reserving" a house or condo for a couple thousand bucks is just a cheap call option. A builder's attempt to make it more than that is a joke. The builder was running his own scam when he wrote those options because he did it just to get a pre-sold percentage to take to the bank for financing. He knew perfectly well he did not have nmeaningful sales.
Hoist with their own petard.
How about looking at the insider sales rate for the Hovnanian officials-seems to be 40 to 1 ratio of sales to buy. Seems like they may be not as willing to ride the boom on the way down either.
Silly rabbits.
Thanks Neal... That just made me angry... The nerve of this guy, I hope he gets sued....
anyone who can comment about this:
"GAAP accounting is indirect. When not directly based on cash flows, accounting is based on complex judgments. These judgments are critical to the value of the enterprise.
CFC has made many such judgments, many of which are questionable. Areas of concern are:
Bill - you must be from CA ... the land of the non binding consumer real estate contract. They must not have them where Hov is from.
I actually like it. CA based builders usu know better than to overbuild because of this, but forgot.
"I actually like it. CA based builders usu know better than to overbuild because of this, but forgot."
Yeah, several years of people pounding on your doors trying to shove money in your hands will do that to you.
But while the prudent businessman knows that boom times don't last forever, and plans for it, management of publicly-traded corporations isn't well rewarded for being prudent; their incentive is to build more, sell more, make more, year after year.
Over-building is still alive and well in Southern California. Despite the abysmal sales figures of the last 6 months there are still many, many projects going forward. Just driving around the southland and you can see how many builders are still going full steam ahead.
Brutal, deb... absolutely brutal.
Can't wait to see April. This ought to be an interesting summer.
A contract is a contract. Imo the builders should take purchasers to the cleaners, drive them into bankruptcy if necessary.
The purchasers weren't playing the $5 table in Vegas, they were playing at the high-rollers' table and they should have known it.
Now the purchasers wish they hadn't joined the high-rollers' table after all.
A bit too late in the game for that.
[I warned you this morning about sock puppet spamming of this blog. It is not going to be tolerated. Tanta]
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"The bull market just keeps going, and the positive wealth effect on consumer spending is significant, which in turn is bullish for stocks, and so on! This is the greatest global boom of all times, so why wouldn't we have the greatest global bull markets in stocks and commodities of all times? "
Good, enthusiastic copy; you have a future in the PR industry. Unless you're already there.
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If someone thought a site was full of "lunatics" and losers (bears) who were morons why would they bother to ridicule them?
I mean, why bother?
Confident people don't waste time scolding fools, do they?
Then again, people with low self- esteem do so crave the recognition of their clear "superiority", don't they?
Even to the point of having to thump their chests like apes for such attention.
Sad.
You know, this guy is kind of like the TIME CUBE guy or poo-flinging monkeys at the zoo. They're funny if you go to them and watch them in their cages. But lose on the streets they are definately a PITA.
I think that the last 10 posts minus Bob Dobbs crosses the line from trolling to spamming.
More business for contract lawyers.
FCB, FTS and others,
Get help.
Funny thing, the bulls who trade among each other are pushing the price up, but the rationale is faulty. The temporary price increase is fake as there is no new money to take that bag. Unless you get a completely new buyer, the gains are fiction. The increases are a mirage.
Try to cash it all in and lock in those fake gains, and collapse.
The converts to the buy side are going, going, gone. And there are no new converts coming anymore. The remaining bears will not convert, and the push game has come to an end.
Who's buying Dow Jones at 55? No one with real money.
The suckers have left the building.
Hey Idiot, tell all of that to the 2000 New Century employees who lost their job this week. And while your at, why don't you go harrass those who lost their jobs at the 60 other subprime slime lenders that are now out of business.
Everything is great until it isn't.
don't feed the trolls
The Dow has now been up 23 of 26 days, which has never happened before and is roughly a 4 standard deviation event. The probability of this bull run continuing at this pace much longer is roughly the same as Farting thru Silk being hit by lightening while golfing. Have a nice w/e.
The last time Dow had this winning was back in 1929!
Know what happened that year?
[Also not the kind of thing Tanta's in the mood for.]
Tanta, you crack me up.
Okay, so according to CNNMoney, the Dow bull run is the longest in 80 yrs. 1927 to be exact.
Does that make anyone nervous besides me?
Thanks, Outsider. I'm on my way out to enjoy my patio and a book for a while. If Mr. Flood's Party shows up again, just ignore him until I get a chance to go ahead and ban him.
Doomster: this is your last warning. I have a longer attention span than you do.
It's one thing when you are consistently wrong. Its quite another thing when you keeping on repeating yourself for a year and remanin wrong. It demonstrates your inability to absorb and process new information and your inability to change direction when you are confronted by a stone wall.
It's no crime to be lonely, ailing, renting, life long middle manager, but it's also not a pretty sight to look at either.
Your covered parking space privaleges are revoked.
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SOME BEARS ARE NOT TURNING BULLISH...THEY ARE TURNING BULLS@#T:
1-Accuse the data collectors and data providers as being incompetent and conspiring to mislead and keep everyone misinformed. The world is burried under an avalanche of bad information.
2-Nitpick, twist and cherrypick the intentionally bad and misleading data until it supports your failed case that has been wrong for years. Correct the bad information.
3-Never admit that you have been wrong or made some mistakes, its the "irrational" market that's been wrong. You are smarter than the market.
4-Explain everything away and blame everyone and everything else
for your mistakes.
5-Keep everyone off balance and in the dark, that way you can flip/flop whenever its convenient for you to do so. When in doubt, talk louder.
Such BEARS exhibit certain psychological traits and behavioral patterns that do not inspire confidence and trust. They are in the wrong business, their skills are more suited to growing mushrooms.
We are not talking economics here, we are talking MENTAL INSTABILITY!
Oh, no. As soon as Tanta turns out the lights and leaves the room, the pests scurry back out from their hiding places.
Pathetic.
SOME PERMABEAR's WILL NEVER FLIP...
They will hibernate until the next spring and then emerge, dust-off their old B.S. ; put a little lipstick, rouge and a tight red-leather skirt on it and then recycle their stale old B.S. arguments again and again just like they have been doing for decades. Others will just be reduced to stuck-on-stupid, glooming and dooming Wart Doctors, who contribute nothing but cherry-picking and pointing at anything that supports their failed case and accusing all the other data as being the product of some kind of conspiracy.
The "tapped out consumer," their favorite black & white re-run, will get revived more times than Nick Nolte during a hellacious weekend.
"Oh, no. As soon as Tanta turns out the lights and leaves the room, the pests scurry back out from their hiding places."
If no one gives them any cheese, they'll leave a few turds on the floor and go away.
Why is it a surprising that the economy continues to do well? There has been way too much drinking of the kool-aid around this blog vis-a-vis the housing market and the overweening desire to find data that will fit the hypothesis that the housing sector is poised to pull-down the overall economy. Macro and micro-economic data-mining for any little validation to thinly support the years-old lament that the current state of the economy is anything less than a boom evidently never gets old with some.
For a reality check look through the bear masks and see a fairly strong economic foundation: growing real wages, crazy-strong corporate profits, an export boosting weak dollar.
If one fixates on the troubles in housing, it is not too hard to find statistics that promise 45% declines, etc. What is missing in most of the discussion is that RFI is roughly 5%-6% of the economy, and the biggest problems are in a very narrow segment of the market - subprime lending, which is roughly 7% of the housing market. Hence, we are looking at 7% of 5% of the economy: 0.35%. If housing impacts 15% of the economy because of sympathetic spending, that roughs out to a 1% GDP decline. That is IF the doomsday bear scenario plays out as meticulously scripted which it has not.
One thing is certain: If you have been anything but long and strong you've been wrong (investing wise). From a trader's perspective, fighting the tape is always a losing battle. The trend remains up, momentum is positive, seasonal strength is upon us, and the bears and shorts have been vanquished.
Notice the strong run-up in home prices in preceding years (limiting the impact of modest near-term price declines for most consumers), the impact of demographics and second home buying (sure it's an asset, but it is also where many are deciding to spend their golden years), and the fact that interest rates are falling in tandem with housing prices (raising affordability), you have the makings of less dramatic outcome in housing.
While I enjoy the blog, I am amazed that so many so-called smart folks are so focused on such a narrow slice of the economy, and are shocked, shocked! that the economy has not fallen into the abyss.
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Unemployment's at 4.5%, as of today. Etc. I don't mind so much having to read this stuff, as long as the numbers are right. Sheesh.
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Wow if that unemployment chart isn't proof positive that The Rapture is right around the corner, I DON'T KNOW WHAT IS BILLY.
IBM to layoff 100,000+ in the US?
I, Cringely . The Pulpit . Lean and Mean | PBS
A bit speculative, but Cringely claims to have some inside info...
And you can bet that these are generally better paying jobs than average since this is IBM.
Here's a choice quote:
For two years Big Blue has been ramping up its operations in India and China with what I have been told is the ultimate goal of laying off at least one American worker for every overseas hire. The BIG PLAN is to continue until at least half of Global Services, or about 150,000 workers, have been cut from the U.S. division. Last week's LEAN meetings were quite specifically to find and identify common and repetitive work now being done that could be automated or moved offshore, and to find work Global Services is doing that it should not be doing at all. This latter part is with the idea that once extraneous work is eliminated, it will be easier to move the rest offshore.
If I remember correctly, folks can be banned from a blog by their isp address. Lots easier than whacking entries one at a time and eliminates one person from having multiple identities.
vader, Mr. Sock Jock apparently keeps wandering into another room of the frat house to find another ISP address. I hate to ban too wide a range, in case I get one of the good guys. But don't think I'm not capable of it.
I'm happy to delete the comments. I can't stand seeing them on an otherwise useful comment thread.
Oh please don't ban my IP addy I promise I'll post nothing but doom and gloom glass half empty wart doctored cherry picked negative subjects no matter how lunatic or years-wrong the source.
If you banned my IP I'd NEVER be able to post again, right?
Tanta, you can contact the ISP of the spammer and they will more than likey send him a warning letter. The second time he will probably get booted from the ISP. If anything is deemed threating you can subpoena the ISP for the physical address of the spammer and tak him to court very easily.
To find out the ISP just do a IP lookup.
As long as you're just picking on me or CR you're fine, Tremulous. But you cannot pick on our guests, and you cannot plagiarize. Surely even you can figure out such simple rules, no?
http://www.arin.net/whois/
is the ip lookup fwiw.
Still most times, best to ignore. Life is too short.
I think SUBPOENABOI has a great suggestion. That way the identities and vested interests of all parties can be closely examined in a public forum.
Thank you for your astute contribution SUBPOENABOI.
Once again a big thank you for keeping the board civil. CR is about the only board I read on housing any more, as almost all the others have descended into an endless stream of flames and trolls. This is an important topic that deserves reasoned debate by adults from both sides. Thanks for taking on the messy job of making sure this remains the place to do that.
Has anybody seen my RECESSON? Huh, have you? I know it was here in 2001 or thereabouts. At least someone said it was, although almost NOBODY noticed it.
As long as youre looking, keep your eyes peeled for my 600,000 lost residential construction jobs too, cant seem to find any trace of those either.
Unemployment...no jobs...recession...soup kitchens...where are the jobs? ...my income isn't growing...poverty...depression... Buddy, can you spare a dime?...The Grapes of Wrath...Tobacco Road...outsourcing...globalization...its not fair...Bangladesh...redistribute...where's my BMW?...where's mine...
I honestly wonder what's on the guy's mind.
Heaping scorn on people he despises is...well, it's the act of someone who has a very small, very small, let's see, very small opinion of himself.
Fitch Takes Various Actions on 4 Fremont Securitizations
More downgrades on bonds, for the pool factor comment in the story they are saying only 10% of the mortgages written in that offering are still there? 90% gone in 4 years is awfully high.
Tanta's Landlord said: "It's one thing when you are consistently wrong. It's quite another thing when you keeping on repeating yourself for a year and remain wrong. It demonstrates your inability to absorb and process new information and your inability to change direction when you are confronted by a stone wall..."
...Mom?!? Oh, my God!!!
Sebastia
I knew there was a relationship between Sebastien and the prolific bear batterer.
Or is it beer battered bear?
Thanks, Ben Newman. Don't worry; as soon as they figure out I'm enjoying myself they'll quit.
More downgrades on bonds, for the pool factor comment in the story they are saying only 10% of the mortgages written in that offering are still there? 90% gone in 4 years is awfully high.
Yes, that's what they're saying. And no, it's not really unusual to see that fast a payoff in these things. In fact, they basically were designed to prepay like that; it's the whole point of putting people into 2/28s and 3/27s. The problem with those newer ones is that the prepayments have slowed down, and the DLQs shot up.
so birth/death model added 49k construction jobs in April. After adjustment they came at -11k.
If you estimate that B/D model faulted on costructions by, say, 50%, then:
63k? Sounds correct... Sebastian?
I looked at the performance of this Series 2006-B Pool 2 Fremont securities downgraded by Fitch and it looks absolutely horrible. These papers are backed by second liens and the cumulative losses (after only 8 months) are already 6.81%. It's almost certain that a few of the mezzanine tranches would be completely wiped and I wouldn't be surprised if the losses would end up in the senior AAA tranche. Fitch was terribly slow. It seems the problems were visible at least two months ago. And the SL-M8 tranche that had BBB+ original rating (downgraded to C) pays a paltry LIBOR+1.50%.
"For a reality check look through the bear masks and see a fairly strong economic foundation: growing real wages, crazy-strong corporate profits, an export boosting weak dollar."
BWAHAHAHAHAHA!!! A fairly strong economic foundation? LOL. Growing real wages? Where? Do you know anybody that has seen those since 2000?
Crazy strong corporate profits? To the extent that the pigmen can get the dead-fish analysts to lower the bar far enough, then yes, corporations will always win at beat-the-number. LOL. All of this achieved via the great illusion of rampant, under-reported inflation. I'll bet you think that the DOW is now in record territory don't you? Think again. In inflation adjusted dollars it is still in a bear market from 2000. Inflation is well contained, unless you need to drive, heat your home, eat, go to school, get medical care, buy a house, rent a house, etc. I guess a bike riding anorexic homeless person in great health experiences no problems with inflation. For everybody else, it's running around 10-12%
Export boosting a weak dollar? huh? Do you mean that a weak dollar may boost our exports someday? Have you looked at our massive trade and account deficits lately? The weak dollar sure is putting a nice dent in those numbers. ROFLMAO.
Listen, I wasn't always a bear but the pigmen turned me into one with this phony, serial bubble-laden, inflation juiced, manipulated, hollowed-out, M&A, negative savings, leveraged buyout, $360M-a-year hedge fund manager, pegged currency, GATA gold trashing economy. This is only good for the top 2%. Everybody else gets the shaft.
Sebastien and Mommie Dearest sitting down to dinner of beer battered bear and bubbly in the former bear's cottage. Ahh, the memories of youth...
Tanta,
you may know, or if there are any CPA's lurking...
It would seem, with the dramatic increase in Heloc's and with AMT becoming a bigger issue, that this would increase significantly, the potential tax liability of those exposed due to the AMT rules on interest deductions. The question is how the CPA's are dealing with the issue and what if anything do they see potentially coming from the IRS to make sure that the deduction is not taken unless the heloc is used for home improvement (which, in the current environment, would seem not to be the case increasingly)???
I really don't know about that, Risk Capital, although I have been assured in the past that abuse of the HELOC deduction is approximately 100%.
I guess we'll have to wait for any of our CPAs to emerge from Friday night happy hour.
Darth Toll,
How do you really feel about these things?
Well, actually, there's only one thing wrong with how you feel...it must be wrong...which is that I completely agree with you.
Of the usurers, by the usurers, for the usurers.
But I sincerely believe that when the lenders are in power, and I believe they are, deflation is around the corner. Lenders get greedy and, well, things deflate. There isn't enough nitric oxide in the world to prevent it.
Today on this very blog you get first-hand anecdotal evidence of just how very naive and extremely hubristic some market bulls have become. The humble market participant is the long term market participant. All over the place you see bulls with the attitude that they should be handfed grapes from the stock market horn o plenty. This speaks to the fact that they're new to the stock markets.
Why do the soon fleeced sheeple feel it necessary to taunt? Is it, as jag suggests, simply an issue of self-esteem? This market is going to end badly. Unfortunately for the big brokerages, Ma and Pa are not really participating. Instead we got Johnny Six Pack with his new-found margin wealth. Thanks for coming out.
You know, I'm surprised that we're seeing so many cancellations so late in the game. It never ceases to amaze me how many people still don't know what time it is.
Darth Toll
"Growing real wages? Where?"
Oil-field workers striking it rich
Salaries jump as the number of recruits dwindles
404 Error, No such article | Chron.com - Houston Chronicle
Does anyone aware of situation where buyer of a condo developement get out of their contract and get back their deposit? I am only aware of one case where NVR refund deposit to a group when the buyer claimed that the contract is too one-sided.
Locked In, No Exit in Sight - washingtonpost.com
Alexandria-based real estate attorney Beau Brincefield Jr., who filed the lawsuit on behalf of the buyers, argued in court filings that the contracts allowed Reston-based NVR to walk away without recourse because the terms of the contract didn't set a date by which NVR had to go to settlement; freed NVR from liability for any damages; provided no remedy to the buyer if the builder didn't hold up his end of the bargain; and required the buyer to waive any right to "specific performance" of the contract, which meant that the buyers couldn't compel NVR to build and sell them the house.
"Unless both parties are bound, neither party is bound," Brincefield said in an interview, quoting from a decision in a contract dispute case rendered by the Virginia Supreme Court in the early 1900s.
NVR disagreed with Brincefield's assessment, saying that limitations on remedies do not undermine a contract's validity. NVR's attorneys argued that the contract did not lack mutuality, and that even if it did, mutuality was established after the company built the homes with upgrades and features as specified by buyers in their contracts.
The case was settled on the heels of NVR's announcement in October that it had seen four out of 10 home buyers cancel contracts during the third quarter and that it was revising its profit expectations for the rest of the year. Terms of the settlement were not disclosed.
An NVR spokesman declined to comment on the case. In court papers, however, the builder said: "While plaintiffs argue that NVR foisted a contract on them that somehow gave discretion to NVR as to its performance, the evidence will show that the plaintiffs entered into contracts in order to invest in a 'hot' real estate market, let NVR undertake performance, and then waited to see whether they would perform based on market conditions at the time of closing."
I know it was here in 2001 or thereabouts. At least someone said it was, although almost NOBODY noticed it.
Yeah, nobody noticed the NASDAQ lost almost 80% of its value. Nope, not a single person saw the DJI at 7300 in 2002, down over 35% from its previous 2000 highs. WorldCom, Enron...huh, never heard about 'em. I never heard anyone bitch about their 401k at company events. I also didn't talk with any unemployed programmers and web designers. Yep, completely missed by everyone. Especially considering the greater percentage invested in the stock market then compared to now.
What an idiot.
Actually, people I worked with were glued to their computer screens in horror every day from late 2000 to mid 2003. Have they forgotten? Don't think so. That's why fewer are invested today than in 1999.
THE LONGEST BULL RUN IN 80 YEARS
CNNMoney.com Market Report - May. 4, 2007
WITH NO END IN SIGHT.
We are in the middle of THE MOST BODACIOUS globally synchronized economic expansion the world has ever seen.
If you have been anything other than long and strong you have dead wrong.
Have things ever been this good in all of human history?
"Actually, people I worked with were glued to their computer screens in horror every day from late 2000 to mid 2003. Have they forgotten? Don't think so. That's why fewer are invested today than in 1999."
You got that right.
Kinda reminds me of people in the depression who lost all their money when the banks crashed. After that, the banks had to have an advertising campaign to convince these people it was safe to put their money back IN the banks. How many people from that generation resorted to cash under the mattress? Once you've been burned, you're much more cautious.
If you have been anything other than long and strong you have dead wrong.
Great used of the past tense. The rear view mirror is a wonderful tool. Just remember that objects in mirror are often closer than they appear.
I assume you've been buying the same top performing money makers that worked so well in the 1970s. I did! Gold, silver, and oil? Oh yeah, prosperity baby! What a great economic [monetary] expansion we've had. Perhaps this is your way of telling me I should not have sold these traditional stores of weatlh back in 2006? I certainly didn't feel richer when I sold them. Nobody is really "supposed to" make money simply holding rocks. Right?
Is this why you are dumping your hard assets now? Just how bearish were you? Based on how much SPAM you are willing to regurgitate here, you must have bought a @#$%load of it at drastically higher prices. It is unfortunate that you can't find buyers for it. I just feel sorry for Tanta. She has to keep cleaning up your mess, lol.
Stagflationary Mark
I think gold, silver, and oil would be a little to bearish for our resident bull he seems like a SPY, DIA, XLF or maybe EMM kind of guy to me.
Kevin,
So what you are saying, I think, is that...
He was very bullish (SPY, DIA, XLF) so he made a lot of money and expects to make a lot more money. Bulls make money.
Therefore, I should continue to be very bearish (oil, gold, silver), in hopes I could continue to make even MORE money than he makes. I'm having a hard time thinking that way right now, but maybe he's right. Bears make money.
Wasn't there also a saying about pigs? What was it? I can't remember. Maybe pigs are used to make spam? No, that isn't it. Or is it?
Thank goodness the government has a monetary printing press. So far they've managed to keep EVERYONE happy. The Fed truly makes money.
Who knew the Fed could bring so much prosperity to EVERYONE? I wonder if they've given any thought to printing even MORE money? It is a miracle! Why hasn't anyone ever done this before?
Sorry, feeling a bit sarcastic these days. No offense intended to the non-spamming bulls here. I don't claim I'm right. My crystal ball is just as cloudy as the next person's.
Stagflationary Mark
"I don't claim I'm right. My crystal ball is just as cloudy as the next person's."
I dumped the last of my stocks on Monday. The American Indians also had a saying - take what you need and leave the rest for somebody else. I still have my gold and silver bullion. More then likely our resident bull wants to sell in May and go away. Is that a black swan over there?
CR & Tanta - if the IP address lookup thingy doesn't work out, someone needs to contact the San Diego Zoo - I think a feces-throwing howler monkey has escaped.
You don't need IP address. The bodacious debuchery man is in fact Barry Ritholtz - nobody was reading his blog tonight...
Tanta,
Not only is your publisher quality professional writing and experience appreciated, it is quite advanced to the point some wouldn't even know.
You are loved my dear!
Healthy vibrations to you...
PT in SD
I have a quick question... anyone know if the HBs are actually enforcing any of these contracts? I know they are TRYING to enforce them but from what I read it seems its too early to know if it will fly.
Anyone know?
Never fails, just like the insurance companies, no problems as long as the money is rolling in, but when it's time to take a hit. Lets all cry foul...
Matt
theroxylandr
this was funny, thanks
So stocks have made their longest run since 1927... Anyone have any idea what happened after that? I'm sure they continued to go up for the next decade.
Holy shit cape crusader there really is a GED link on CR....
This whole expansion since 2001 has been pretty much built on massive overleveraging of the US economy. Don't believe me? Look at the level of debt growth over the past 5 years. Look at the Fed Flow of Funds Report. Look at the debt to GDP ratio. It is monstrous.
Guess who benefits when easy money and leveraging occur in an economy? The people with assets. People with either stocks or real estate holdings.
The hedge funds and speculators have so much money to play with courtesy of easy money and financial engineering that the stock market is rising alongside increasing debt to an absurd degree. Same thing happened in 1925-1929 and late 1980s japan also.
Yes, Samuel.
I hear again and again how the world is awash in liquidity.
How many of you commenting on this blog are awash in liquidity?
dry
I've heard of threats of forcing a buyer to closing, but any smart person would put a contingency to get financing or sell residence in the contract. In any case exactly how do you force someone to buy something if they cannot get financing?
Then there is the case of lawyer fees eating into cash flow.
The Florida Supreme Court ruled in favor of the builders in enforcing contracts, but that only goes so far.
In any case, it is a good assumption that deposits will be forefitted.
""The issue is one paragraph in the purchase contracts. The documents state that if a buyer refuses to close, the developer has a choice of two remedies: Either keep the deposit money - or force a closing." "Buyers who signed sales contracts months or even years ago have seen their unbuilt properties decline in value in the current condo market slump. That's especially true for these two condo projects, which were completed well past the dates first promised. Both properties have been the subject of lawsuits by buyers upset over the buildings' delays and the quality of the workmanship."
"It's not clear how these lawsuits will turn out, but one thing's for sure: All the lawyers say their clients should have consulted with them before they signed the contracts. "I wish they had," Dieterle said. "I would have steered them away."
Buyers are faced with the choice of either potentially paying thousands in attorney fees to fight, or continue with the purchase of a property they say has dropped in so much in value, it's worth less than what first contracted for- for some a few years back. It's not a pretty choice"
South Florida Real Estate Bubble
bailout is coming: House Financial Services Committee
Randall Forsyth in Barron's:
This sort of deal frenzy is more indicative of market tops than bottoms. Doubly so, in fact, because it involves the purveyors of business and financial news and data. Now that finance is far and away the stock market's biggest sector, a News Corp. takeover of Dow Jones could be seen as analogous to the infamous AOL-Time Warner deal at the peak of the tech bubble, if not in size, then in symbolism.
Forsyth again:
In the household survey, the one used to calculate the jobless rate, some 392,000 folks were estimated to have dropped out of workforce. If you're not pounding the pavement for a job, you are not counted as unemployed. Had they been, the jobless rate would have been up 0.2 percentage points.
According to the Liscio Report, eateries and health care continue to account for the bulk of new jobs; over the past year, these sectors, comprising 16% of employment, accounted for 37% of new jobs. Meanwhile, the housing downturn was apparent, with construction jobs falling by 11,000 and finance jobs by the same number. (Mortgage brokers, perhaps consider bartending school?)
The good news -- from the standpoint of the markets and the Federal Reserve, if not working stiffs -- is that the growth in average hourly earnings has slowed markedly to just a 3.7% annual rate. That's what Bernanke & Co. have been waiting to see, but they'll continue to stand pat when the Federal Open Market Committee meets on Wednesday.
As I said, only the usurers are awash in liquidity.
Why do I say usury? Well, because the interest rates collected from John and Jane Q. Public are usurious. Prime rate? I don't think so. Try credit card interest rates well into the 20's.
Is that usury?
Asian nations to pool foreign reserves
Business Week Online > File Not Found
Asian nations took an ambitious step on Saturday toward pooling the region's vast foreign currency reserves so Asia can weather financial crises like the one that battered the continent a decade ago.
Few are predicting an imminent meltdown like the one in 1997, but bitter memories of plunging currencies, austere reforms and a slow road to recovery have pushed a now wealthy Asia to better safeguard its future.
From what I am hearing from the front lines, business dropped off a cliff after the second week in April in real estate.
The buyers are non-existant, the sellers are becoming more desparate, and the real estate agents more frustrated. The agents do not want additional listings due to the cost to advertise, I would have to agree with some of the CEO comments as to this season being a complete bust.
I am also hearing many big ticket retail stores are strugging, some on the verge of failure.
The information currently in the marketplace concerning a significant second half rebound is completely contrary to what the real economy seems to be suggesting.
The ISM numbers presented were quite positive, the only explanation that I can fathom is an inventory build and channel stuffing (one last gasp), I think this will contribute to the potential for a steep fall in coming months, I think it quite likely that the retail numbers take a dramatic turn down, and that consumer confidence & market psychology (leverage driven unwind) lead the parade into recession.
Could be a very difficult coming year.
CR, time to change your coin-flip odds chance of recession.
I'd be cautious about blaming the Fed for too much of this, because everything we are talking about is truly a global phenomenon. The Fed does not cast THAT big a shadow.
As for Arbogast's question, I am pretty much awash and most of my extended family is awash with liquidity. The only ones who aren't are the ones who live a high debt lifestyle, or who have other life situations that cause them extraordinary expenses. Luckily, the rest of us are so awash that we can take care of that last category.
In terms of my colleagues, those who have been willing to go the saving before borrowing route and who are willing to work and study hard have done extremely well in the last few years. Conversely, those who went on a spending binge are probably facing bankruptcy in the next few years.
My concern is that I see the diffusion of this vast "wall of money" through the general population as slowing and stopping. This is not a good thing for the economy.
"AMERICA'S BEST YEARS ARE BEHIND; WE MUST LEARN TO REDUCE OUR EXPECTATIONS."
GOOD MORNING WART DOCTORS...
Your role is to constantly re-energize the "wall of worry" needed for bull markets to climb. Loading up with puts at market bottoms also helps; you have yet to let us down.
In contrast, my role is very different. My job is to make money--bushels full of money.
Keep up the good work WART DOCTORS...so far, so good! I knew that I could count on you--again!
Let's face it, some folks were put on this planet to produce wealthy families...others are here to shovel shit in Petaluma.
For years farmers got free puts from government subsidies on the price of the grain they produce, and this produced a glut of grain, and created a ceiling on grain prices. But fewer farmers lost their farms as a result of the subsidies.
CR has pointed out that a bailout of homeowners will prolong the glut of unsold homes. But it may keep some owners in their homes who presently couldn't afford them otherwise. "Loose lending", and subsidized financing may keep house prices high and benefit the housing industry too. And taxpayers will pay for the program.
No, "This time the banks wont come round
And plow your houses down
On the great plains of ol Nebrasky-o. Or any place else.
(My apologies to Eric Andersen)
Asia will sure introduce some kind of pan-Asia currency, and this is good. But it will take another 3 years, won't help this time...
PERMABEARS MISS THE BIG PICTURE:
The skeptics (aka alarmists and permabears) became even more emphatic after the sharp drop in equity prices that occurred in late February and early March. At that point, they were even talking of a new "global bear market," caused at least partly by a housing-led subprimogasm recession in the US.
But the US stock market, and much of the globe, has reversed course and boomed. The Dow Jones Industrial Average climbs to a new all-time high, and is up over 8% from its recent bottom on March 5, 2006.
On the earnings front, 68% of reporting companies had positive earnings surprises - a nice improvement from last quarter. While earnings growth has slowed to just 5.2% on a year-over-year basis, all the positive surprises suggest analysts are underestimating both micro- and macro-forces.
Global growth is on a tear as capitalism and freedom spread. Second, the mighty, muscular USS Economy refuses to be toppled. The global economy is experiencing its fourth year in a row of spectacular growth. Given the international focus of many US companies, this global growth is boosting returns even while the domestic economy slows.
Finally, based on overall corporate profits and a conservative estimate of the current discount rate the broad US stock market is 30% undervalued.
Funny Circus Bears
"My job is to make money--bushels full of money."
Is that you Ben?
We just had a correction a few weeks ago...and those very same funny circus permabears told us, "1929...its another 1929. Or maybe dot.bom
Having failed with that, they have since moved on to some kind of "bubble" theory.
Some people simply can't learn...
I bet most of this same crowd also have more than just a little acid rain, Y2K, bird flu, 9-11 was an inside job, spotted owl and harmonic convergence running in their veins.
Anony Blogging Circus Bears
Zimbabwe??
With inflation at nearly 1800%, unemployment at 80%, and GDP having been slashed in half over the years, a thriving Zim stock market seems, well, impossible. But the 12,000% year-over-year increase is well over the rate of inflation, so people are obviously getting rich and keeping their money safe . The Institute explains that the Austrian Business Cycle Theory has something to do with it.
The ZSE is growing some three times faster than consumer prices. This relative outperformance versus general prices is a result of stocks being a chief entry point for the flood of newly created money. Keep Zimbabwean dollars in your pocket, and they've already lost a chunk of their value by the next day. Putting money in the bank, where rates are pithy, is not much better. Investing in government bonds is the equivalent of financial suicide. Converting wealth into foreign currency is difficult; hard currency is scarce, and strict rules limit exchangeability. As for capital improvements, there is little incentive on the part of companies to invest in their already-losing enterprises since economic prospects look so bleak. Very few havens exist for people to hide their wealth from the evils created by Mugabe's policies. Like compressed air looking for an exit, money is pouring into shares of ZSE-listed firms like banker Old Mutual, hotel group Meikles Africa, and mobile phone firm Econet Wireless. It is the only place to go. Thus the 12,000% year over year increase in the Zimbabwe Industrials.
Though the government print more and more money and distributes it into the system via financial institutions such as banks, they are opting to put it into stocks rather than hold onto it. One day can cause its value to collapse, but the stock market is driven by demand. Therefore, all of the rich people, government officials, and banks are putting their money into stocks so that it doesn't lose value. Demand is high, so the price is too.
The everyday people of Zimbabwe don't see any benefit to this, though. Their masters may not see it for much longer either. Stock prices on the index are obviously inflated and unsustainable. It's only a matter of time before it comes crashing down, taking down many in its spiral.
Publius Pundit: The World's Best Performing Stock Market Archive
Circus Bears Soiling Themselves-
I'd change my diaper but an astronaut stole my last one.
"But the US stock market, and much of the globe, has reversed course and boomed. The Dow Jones Industrial Average climbs to a new all-time high, and is up over 8% from its recent bottom on March 5, 2006."
Why don't you divide the S&P or the Dow by any commodity of your choice (Gold, oil, copper) and compare 1999 to the present. You'll be in for a surprise. You can always manufacture money, but not commodities.
How many of you commenting on this blog are awash in liquidity?
arbo - we all can be if we want to be. Talk to a loan broker lately?
Or buy a car?
Been asked if you want a new credit card? I even get WalMart asking if I want a 'special' Sam's Club Discover Card every time I go there... Me and the equally special 20 million they also ask every single day.
Thats the point.
From what I am hearing from the front lines, business dropped off a cliff after the second week in April in real estate.
Risk capital, this is also exactly what the management of several public home builders have been saying on their recent quarterly earnings calls. The CEO's of Centex, Ryland, MDC, Standard Pacific and Meritage.
For years farmers got free puts from government subsidies on the price of the grain they produce, and this produced a glut of grain, and created a ceiling on grain prices. But fewer farmers lost their farms as a result of the subsidies.
Hey walt were you out there on the plains when the 80s farm crisis rolled through?
When the real shit hit the fan I'm not sure at all if the subsidies helped all that much. To a great extent they just became 'capitalized' into the prices for land & farm equipment... prices sufficiently high that even with subsidies they couldn't be covered.
Those free gov't puts proved to be a lot less protection that people thought.
How many of you commenting on this blog are awash in liquidity?
I have more liquidity than ever before, but I also have extraordinary expenses.
In the meantime, I have not had a meaningful raise in salary since 2000 (when I was hip deep in the dot.com mania) and my wife enjoys all the compensatory blessings of being a public school teacher.
Remember the days when an average family could make ends meet with one breadwinner?
For that matter, remember the days when middle-class Americans could go to college without having to go deeply into debt?
Liquidity is more than the money you have - it is the ease by which you can leverage (both availability & cost). For 'high liquidity' you need both conditions...
We got both conditions across many sectors of the economic spectrum... corporate equity firms to commercial real state to consumer loans. Everywhere you look, lotsa cheap credit is offered, and little is asked.
How is that not 'high liquidity'.
Remember the days when an average family could make ends meet with one breadwinner?
For that matter, remember the days when middle-class Americans could go to college without having to go deeply into debt?
number2son | 05.05.07 - 10:21 am | #
Both are still possible - just not possible on either coast. Need to visit Middle America to see where people can still live that way - if they choose.
Hey, Funny Circus Bear. Is your name Brian Wesbury? I assume it must be, because you are pasting text into the comments of this website without quotation marks or links that has appeared on a copyrighted website under the name of Brian Wesbury.
If you are Brian Wesbury, your reputation--such as it might be--is in some danger if you get well-known as a troll commenter on a respectable blog.
If you aren't Brian Wesbury, you'd best quit plagiarizing, as Mr. Wesbury might object to that.
Do you, can you, see the point, you bloody moron? Besides the fact that your posts are disruptive, rude, and childish, you are stealing other people's content. And using it to pretend that it is an intelligible response to this blog's original content. So you aren't just a troll, you're a thief. Unless you are, actually, Brian Wesbury, in which case you're just a jerk: you have your own venue for publication, and you don't need to clog up this blog's comment section with reprints of your material. If I cared about content that appeared on "RealClearPolitics," I'd go read that site. And if you're just unhappy that wingnut sites don't tend to supply comment threads for you to play in, well, take it up with the wingnuts. This blog isn't here to give you a place to spam, bud.
Yahoo! 404 - Page Not Found
Copyright and Intellectual Property Policy
Other commenters: please note that responding to this idiot is responding to stolen content. All you have to do is find a grammatically correct and content-filled sentence in one of these posts (i.e., the part that isn't capitalized name calling) and pop it into Google to get the source. Until this dishonest hack starts using quotation marks and suppling links, engaging with him is doing a disservice to the original author of the content.
But of course he won't do that, because stripped of the theft of content he has nothing to say but name-calling.
Tanta,
Why not report it to the author? This person is obviously a lonely sociopath, but a nice legal letter might even slow him down a bit. He doesn't seem to be employed with anything else, so he'll have plenty of time to disrupt here.
Our little Republican striver lacks the background to see that beta and even gearing is no substitute for the K and t in Ke**rt. You can't catch up. But you can still aspire, if you know your place. Strive harder! Grow rich!
Alt Min,
Yes, it's hitting the middle class more each year as it's not properly indexed to inflation. It was originally intended for less than 1000 Americans and has crept up to millions of successful people.
On a different topic, the interest deduction is not what it once was as interest has been converted to principal over the last 6 years or so. That meshes with the arguement that lower rates and teaser rates has simply produced higher prices as the payments on a teaser ARM might not be much higher than the payments on a 30 year fixed on the same property if the price doubles.
Why not report it to the author?
I might do that someday. All I can say at the moment is that, having read the "original," I wouldn't swear in court about the originality of the original. I haven't got time to figure out how many derivations are going on here. I just want it to quit at this blog.
Does anyone think that our troll knows how to evaluate a source before he steals from it? Don't make me laugh that hard.
eye opening video
Safe Haven | Will The Dow Jones Crash?
Treasury Yield Curve Inverts Amid Signs Inflation Is Moderating
Treasury Yield Curve Inverts Amid Signs Inflation Is Moderating - Bloomberg.com
umber2son,
yes, that is what I was referring to with this part of the text,
"The buyers are non-existant, the sellers are becoming more desparate, and the real estate agents more frustrated. The agents do not want additional listings due to the cost to advertise, I would have to agree with some of the CEO comments as to this season being a complete bust."
The first comment though was what I have been hearing from the sales of existing homes and the realtors.
REBear,
I noticed that the 2's and 10's had inverted again as well last week.
The interesting movement of course, to me has always been the 5yr in relation to the 10 yr, potentially a spread trade put on by institutions causing the distortion.
MOM said: "...As for Arbogast's question, I am pretty much awash and most of my extended family is awash with liquidity...."
Include me and mine in there, too, along with friends and colleagues. And the "awash with liquidity" thing isn't just for the miserly and/or financially well-off among us.
Just the other day I got yet another low-interest credit-card offer...1.99% for the life of the balance on any transfers.
I could buy risk-free T-bills paying 4.75%+ with money borrowed at 1.99%, and make 276 bp a year indefinitely. I'd buy another house but they'd never raise my credit limit that high.
Sebastia
umber2son said: "Remember the days when an average family could make ends meet with one breadwinner?
For that matter, remember the days when middle-class Americans could go to college without having to go deeply into debt?..."
to which dryfly responded: "Both are still possible - just not possible on either coast. Need to visit Middle America to see where people can still live that way - if they choose..."
There's a glaring inconsistency in the "bearish" argument that America is losing high-paying jobs that aren't being replaced, while the prices of everything are going up beyond what a typical family can afford.
Who's charging (and receiving) those too-high prices?
Example: I noticed the other day that I had a couple of windows and an exterior doorframe on my house that had rot, and needed to be replaced.
The estimate I got was $3,000, with the labor portion for a crew of 3 estimated at...$640/day!
A couple of years back I had a leaking drain-pan in my shower---had to pull up all the old tile, replace the pan, and re-install new tile. One guy, 5 days work...$4,000, very little of it in materials.
Car repairs, dental work, large appliance repair...all expensive, and all the people doing them (Americans, right here in this country) are charging quite a bit for their labor.
So my question is, why can't I find any cheap labor for the things I need done, if the typical salary of the American labor force is being driven down by outsourcing, offshoring, greedy corporate executives who keep all the profits for themselves, etc., etc.?
Sebastia
Sebastian, other people don't get bids like that for repair work. The contractors must just not like you.
I have a relative who is a self-employed roofer. He works during that part of the year that one can work on roofs in the snow belt. He pays his own social security taxes, and buys his own expensive non-group health insurance. He insures his truck, and he insures against liability should a gust of wind hit him and he drops a pack of shingles on your kid or your dog. He has had four skin cancers removed from his face and neck, a common occurrence for fair-skinned people who work out in the sun all day. Should you decide that you really don't need new gutters this year, he won't get work. Should his suppliers decide to jack up the price of shingles this year, he'll pass that cost on to you.
What was your question again? How come roofers have to pay for car repairs, dental work, and having the dryer fixed, too?
Tanta said: "What was your question again?"
"Where is all the cheap labor?"
It should be ubiquitous, but it's clearly not.
Sebastia
"Just the other day I got yet another low-interest credit-card offer...1.99% for the life of the balance on any transfers."
Yep, it's fun to let debt run at lower than market interest rates while investments (or even that plain ol' savings account) racks up interest faster. Ha-ha, stupid bank.
But of course, maybe the bank ain't so stupid...sure they'll lose money on us, Sebastian, but they made that offer for some reason. There's gonna be some other person, maybe that's not as smart as you or I, or maybe some unexpected expenses hit that person, and that person is going to end up paying big interest.
After all, banks also offer those teaser rates on credit cards...you can just keep surfing them and keep your interest rates lower than the interest you earn on savings. The banks do that because there's some class of people who forget to or who are unable to switch, and get socked with higher interest rates.
It just seems like since the early 90s, it's gotten a lot more expensive to be stupid. It seems like there's more and more deals where smart people can clean up at the lender's expense, while the lender makes their money off the stupid.
As a relatively smart person, I benefit, but I don't know if it's a socially beneficial development.
"Remember the days when an average family could make ends meet with one breadwinner?"
They can today, if they want the smaller square feet of housing they got in the 1970s, the quality (or lack therof) of the medical care they got in the 70s, etc.
And the bullish troller may be annoying, but anytime you have a blog that quotes permabear Fleckenstein's "the boys in the boiler room say she's gonna blow!" kinda stuff, you're kinda asking for it.
The estimate I got was $3,000, with the labor portion for a crew of 3 estimated at...$640/day!
A couple of years back I had a leaking drain-pan in my shower---had to pull up all the old tile, replace the pan, and re-install new tile. One guy, 5 days work...$4,000, very little of it in materials.
What you pay & what he pockets are two different things. Remember he is 1099... he covers all his own expenses.
So even if there weren't A LOT of material, there was some. Plus he has tools & vehicle to pay for & maintain. Plus disposables (paint, nails, etc.).
Then he pays his own health care, covers his retirement, doesn't get a paid vacation from his 'employer'. Plus he pays what would have been the 'employer half' of 'his' FICA.
Whatever he has after that is equivalent to a typical working mans wage/salary...
So starting with that 4K - take away all that other stuff - my guess is he sees the equivalent of a salary of between $3K-$2.5K for THAT particular week. Then like the rest of us he pays FICA, Fed Tax & State Tax... like any other employee.
If he did that every week - five days a week - he'd be doing pretty well. That would give him a gross before tax of about $125K-150K a year.
Again that is if he can work/bill every normal working day of the year.
But I have buddies in this business and I can tell you they don't work 'billable hours' five days a week for 50 weeks a year. They are lucky if they can bill 50-60% of a normal working year at anything close to those kinds of rates... say three out of five days a week or two full weeks every month.
The rest of the time is spent getting work (bidding) or 'administrative' & 'logistical' (getting stuff & planning & prep)... stuff that costs them money but that they can't bill clients for directly - its rolled into to the rate the do bill which is why you had sticker shock.
Still that laborer who supposedly is seeing a theoretical income of say $125K to $150K if he was able to bill at 100% really sees maybe $62.5 to $90k per year billing 50% to 60% of his time... Its a decent income and better than a sharp poke in the eye but not quite what Wall Street bankers make.
And of course this is (was) during the greatest RE boom in history... wanna guess what he makes after the excess gets wrung out? My guess is a whole lot less.
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You can find cheap labor - he might be it. I see them working weekends for cash inthe nice neighborhoods, usually for the people who know better but have the cash ... lawyers, judges, licensed contractors, state and county workers, etc.
A skilled onsite construction worker with a truck, tools, comp, insurance, vacation and prep time, making $23 per hour (to get to CA upper level comp rate) costs the employer about $50-60 per hour. $2,000-2,400 per week.
Would probably take $500 cash.
Maybe I should have written "awash in cash". It's not really liquidity, but cold hard cash. But then my family culture is largely debt-averse, and that builds up in time.