Here's the obvious solution for homebuilders...they just need to take it up a level and transform an entire street or community...

"Housing Market Slump Forces Couple To Open Brothel"

Page Not Found - wcbstv.com

I'd like to read a good post by Tanta on this story!

Does Moody even consider themselves competent anymore to forecast this type of stuff? One would think they would look at their track record. They might have a better chance at the racetrack or Vegas.

Is there any methodology based on sales, pricing, market growth, number of units, median income, etc. that formed the basis of this prediction? Anything factual at all?

I'm confused.. has Moody's been denying that home sales have been declining since 2005? Or, are you guys just complaining since they haven't announced that we are well into one of the worst housing busts ever in history?

I expect them to stay optimistic.. even though I disagree.. but that doesn't mean they are liars.

Where have they explicitly denied that housing had slumped? (It doesn't count if they stated that they did not think the slump would continue since that deals with the future.. which, despite what some seem to think, isn't set in stone.)

ShortCourage

Expect to see brothels, shot houses and drug dens as solution.

Sex, booze and drugs always sell.

However, the police can generally seize such property. Then it is a court action to get it back.

That will really be interesting to a mortgage holder.

I see mention of the generational divide here every now and then. I can't help wondering if GenX or GenY will be much interested in the homes that were built over the past several years.

By the time inventory begins to move again, won't what's available then be the equivalent of shag carpet, earth tones and avocado green kitchens?

I didn't see anyone post on this yet, but maybe I missed it. Thornburg is supposedly looking to buy $3-4 billion in mortgage bonds, sparking a rally in financial stocks. Umm, where'd they get the financing? It seems just a bit ago they were selling assets to raise cash after being side-swiped by the credit crunch.

U.S. Stocks Advance on Thornburg's Plan to Buy Mortgage Bonds - Bloomberg.com

Sigh Never mind.. I need to research further before posting.

Thornburg May Buy Up to $4 Billion of Mortgage Bonds (Update1) - Bloomberg.com

" Surging defaults on U.S. mortgages spurred banks and Wall Street firms to cut off credit for home lenders and drove investors away from commercial-paper markets where Thornburg raises money. Goldstone said $546 million of fresh capital from a preferred-stock sale last week will help the company pounce on opportunities that cash-starved rivals can't afford.

We are going to be able to take advantage of this new market environment,'' Goldstone said.If we sold securities at discounts, we can buy them at those discounts.''

Thornburg's surviving competitors are retrenching amid the worst U.S. housing slump in 16 years. More than 100 have sought buyers or halted operations since the start of 2006, and Josh Rosner, managing director at investment research firm Graham Fisher & Co., estimates as many as 20 percent of the nation's home-loan officers and mortgage brokers will lose their jobs. "
. . .
" With the cash infusion from the preferred-stock sale, we have some excess liquidity to go back and do some selective buying,'' Goldstone said.I'm not calling a bottom, but I'm suggesting we have the wherewithal to survive another downturn in mortgage values if it were to occur.''

The cash also allows Thornburg to start lending again. The company had to delay delivery last month of about $230 million of promised loans. Thornburg started funding those loans last week, a process that may take 15 days, and new mortgages may be approved as early as this week, Goldstone said."

Oil up $1.30 today to $78.

If oil goes over $80 to an all-time high, how can the Fed cut?

Imported $80 oil cost the U.S. $1.25 billion per day.

A $450 billion annual trade deficit from oil alone. Before higher inflation from rate cuts.

It's not sustainable.

Moodys makes me moody.

Financial Times 9/10/2007
Rating agencies in line of fire over credit squeeze

FT.com / UK - Libya unveils eco-tourism project

4 Runner I'm w/farmer. We got enough dumb asses in Texas and a big one is moving back here from DC soon.

It seems the old media doesn't like to talk about the dollar much these days. As long as it is a slow decline into oblivion, nobody notices.

FFDIC, Bloomberg posted a short list of Hedge funds with losses also.

Tudor, Caxton, Moore Posted Losses in August Turmoil (Update1) - Bloomberg.com

"Sept. 10 (Bloomberg) -- Hedge funds run by Paul Tudor Jones, Louis Bacon, Bruce Kovner and Barton Biggs lost at least 2.5 percent in August as global stocks fell and the yen unexpectedly rose against all major currencies, investors said."
. . .
" Jones's $10 billion Tudor BVI fund dropped 5.5 percent in August, according to investors in his Greenwich, Connecticut- based Tudor Investment Corp. Jones, 53, lost 1.5 percent for the year, compared with an average annual return of 24.2 percent since November 1986.

Moore, Traxis

Bacon's Moore Global Investment Fund Ltd. declined 5.7 percent through Aug. 28, according to clients of the 51-year-old manager. The fund, part of New York-based Moore Capital Management LLC, which oversees $13 billion, held onto a gain of 3.9 percent for the year.

Biggs, 74, a former chief strategist at Morgan Stanley who runs Traxis Partners LLC in New York, lost 2.5 percent for the month. That trimmed the $1.5 billion fund's increase for the year to 8.3 percent.

Kovner's Caxton Global Investment Ltd., which has $11 billion, fell 4.8 percent, leaving it up 1.5 percent in 2007. Kovner, 62, founder of New York-based Caxton Associates LLC, has returned an average of 29 percent a year since 1991.

Executives at the firms declined to comment on performance. On average, macro funds fell 2 percent in August, according to Chicago-based Hedge Fund Research Inc. Some of the returns were reported in the Financial Times earlier today."

Sounds like a bit more than the usual seasonality...?

US July machine tool demand plunges from June

WASHINGTON, Sept 10 (Reuters) - Demand for the machine tools that shape metal for products such as car engines and refrigerators dropped by more than a fifth in July from June, two groups said in a report on Monday.

[snip]

AMT President John Byrd attributed the steep monthly drop to the summer.

I am just struggling with the fact that a rate cut will trash the dollar, generate foreign capital flight and raise interest rates unless it is coordinated with other CB's...which seems unlikely or is this a head fake?

G-10's Trichet Says Economic Fundamentals Are `Solid' (Update1)

This situation calls for a close monitoring and observation,'' Trichet said.Nevertheless it is certainly the sentiment of central bankers and certainly all those around the table that bailing out bad investors would be the worst thing to do.''

[snip]

Wait and see remains the message,'' said Guillaume Menuet, an economist at Merrill Lynch International in London. There'sa reluctance to envisage an end to the tightening cycle just yet.''

From yesterday's FT Online:Hedge funds suffer August losses

They include Paul Tudor Jones, philanthropist and head of Greenwich, Connecticut-based Tudor Investment Corp; his friend and former colleague Louis Bacon of Moore Capital; Bruce Kovner, super-secretive head of Caxton Associates; and Matthew Tewksbury, who bought Wall Street trader Monroe Trout’s hedge fund business and renamed it after himself.

Jeffrey Gendell, who runs Tontine Associates from Greenwich, Connecticut, produced one of the worst results of all the big name managers with a 7.9 per cent drop in his $1bn Overseas fund – although it is still up 7.6 per cent this year. By contrast, his Financial Partners fund leapt 8.4 per cent in the month, one of the best performances – but remains down 37 per cent for the year, among the worst of all managers.

H-E-double toothpicks

JBA -
Baker Hughes (Howard Hughes Houston company) provides North American and International Rotary Rig Counts and other oil information.

BakerHughesDirect

What is that, like a 97% yoy decline for the week?! I sure that a certain amount of volatility could be expected with a short time period like a week, but...

Buyers shun new debt sales

`High-yield bond and loan investors have shunned new debt sales so far this month, extending a buyers’ strike for risky assets into the traditionally busy first week of September as concerns linger over the shaky state of the credit markets.

Just one $50m (€36m) bond issue was sold last week, marking the lowest new issue volume for the first week of September in more than a decade.

[snip]

In 2006, the same week saw more than $2.4bn of new debt hit the market.

Here's a way to beat the housing slump and keep 'the lead' in your pencils...

Mortage brokers turn unsold house into brothel

Home Unsold, Mortgage Brokers Open Brothel - CBS News

Moody's? Firm grasp of the obvious.
Is BenB an alumni?

So after looking at all the talking and facts, I am thinking there is not going to be an official Fed fund rate cut (still averaging at 5% not 5.25%) but another cut to the discount rate down to 5.25%. What do other think of this scenario?

JBA - making me work tonite huh?
Close your eyes Tanta. While I was over at CLUSTERFUCK Nation for its once a week Monday update I read, "What the mainstream media is missing now is the prospect of a really swift worsening of the problem as exports from the major oil producing nations fall off at a sharper rate than their production declines. This idea has been articulated best by Dallas geologist Jeffrey Brown over at The Oil Drum.com." Also: Jeff Vail's Energy Intelligence blog.

The Oil Drum 

Jeff Vail - Law, Energy, Geopolitics, and Organizational Theory

James Howard Kunstler

Dallas starting to see a trickle of layoffs outside the mortgage companies. Never a good sign and historically in Texas has ended very bloody.

Baron & Budd announces more job cuts - Dallas Business Journal:

Texas Instruments to lay off nearly 200 - Dallas Business Journal:

Don't count on long rates going up. If the housing slump/recession causes aggregate demand to fall (a given in my book) and there is a whiff of deflation then Ben Bernanke will become "Ben the Enabler" or "Benabler Bernanke". In a speech in 2002 he stated "The Congress has given the Fed the responsibility of preserving price stability (among other objectives), which most definitely implies avoiding deflation as well as inflation. I am confident that the Fed would take whatever means necessary to prevent significant deflation in the United States...The sources of deflation are not a mystery. Deflation is in almost all cases a side effect of a collapse of aggregate demand--a drop in spending so severe that producers must cut prices on an ongoing basis in order to find buyers...Because central banks conventionally conduct monetary policy by manipulating the short-term nominal interest rate, some observers have concluded that when that key rate stands at or near zero, the central bank has "run out of ammunition"--that is, it no longer has the power to expand aggregate demand and hence economic activity...when inflation is already low and the fundamentals of the economy suddenly deteriorate, the central bank should act more preemptively and more aggressively than usual in cutting rates...Like gold, U.S. dollars have value only to the extent that they are strictly limited in supply. But the U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost...A more direct method, which I personally prefer, would be for the Fed to begin announcing explicit ceilings for yields on longer-maturity Treasury debt (say, bonds maturing within the next two years). The Fed could enforce these interest-rate ceilings by committing to make unlimited purchases of securities up to two years from maturity at prices consistent with the targeted yields...if operating in relatively short-dated Treasury debt proved insufficient, the Fed could also attempt to cap yields of Treasury securities at still longer maturities, say three to six years. Link to entire speech Speech, Bernanke --Deflation-- November 21, 2002  Mark

You can only fake an economy for so long.

True, that. Excellent, ac.

A couple other comments on the Ben speech. His quotes:
1) "Thus, as I have stressed already, prevention of deflation remains preferable to having to cure it. If we do fall into deflation, however, we can take comfort that the logic of the printing press example must assert itself, and sufficient injections of money will ultimately always reverse a deflation." note he used the word MUST
2) "A more direct method, which I personally prefer, would be for the Fed to begin announcing explicit ceilings for yields on longer-maturity Treasury debt (say, bonds maturing within the next two years). The Fed could enforce these interest-rate ceilings by committing to make unlimited purchases of securities up to two years from maturity at prices consistent with the targeted yields." He prefered this method as a Fed Governor, does he prefer it as Chairman? note: commit to purchase UNLIMITED longer dated securities.
All of this should, in a free market, cause the dollar to collapse. However, Japan did the same thing (BOJ took short rates to .15% and 10 Year JGB rates to .60%) and the Yen did not collapse. As I recall there was coordinated central bank intervention to support the Yen. A collapsing Yen was good for no one. A collapsing dollar will be bad for all also. Therefore there will be coordinated central bank intervention to slow/cushion the fall of the dollar. An orderly dollar fall will not be so disruptive. Mark

...and the Yen did not collapse.

Japan's a net creditor, not the world's largest debtor. Sorry, there's absolutely no valid comparison.

Point taken, in a free market I concur with you, but.. a collapsing dollar would be good for no one. Does Japan want their SUBSTANTIAL holdings here to collapse in value? I think not. Would there be coordinated central bank intervention to cushion/slow the decline? I think so. Dollar WILL decline, but it will be "orderly" Mark

Or gold will act as a commodity and drop off a cliff with a case of "Selling grandmas jewelry to pay off your debts"

TJ & Bear

...and the Yen did not collapse.

Japan's a net creditor, not the world's largest debtor. Sorry, there's absolutely no valid comparison.

Remember that Japan (and China) (the biggest holders of our debt) are both HUGE exporters to the US. If the dollar fall substantially/quickly then we buy substantially less from them, causing their economies to tank also. The value of their holdings here would fall and their sales to us would fall at the same time. In the event of a US consumer led recession they would already see a slowdown in demand from the US and would not want that exaserbated(sp?) by a precipitous fall in the dollar (causing their products to be more expensive here). Their (and our) central banks would coordinated to slow the dollar fall. Mark my words. China already manipulates the currency to keep demand up (prices down here for their products). Mark

how bad an average days on market of 108 is?

means nothing by itself, depends so much on other conditions. Still, put yourself in the seller's shoes; you've been waiting over three months,...

Dave S.

I agree with you that there are a lot of problems to be faced her in the US, the demographics being one. Japans demographics are about 10 years ahead of ours. See previous post with link to Fed reasearch paper on Japan. Their stock market bubble peaked and burst about 10 years ahead of ours. Our real estate bubble peaked 15 years after theirs. I believe that we will see an economic period over the next several years similar to Japan's of the past several years. The Fed under Bernanke will take similar action to what the BOJ did (lower rates and keep them there) to try and stimulate aggregate demand. In my opinion (I believe supported by the facts) much of the consumer demand of the past few years has been from the consumer levering up to unsustainable debt levels. Aggregate demand will not be "strong" until debt levels are reduced to sustainable levels. I believe that will take at least a few years. Even the Fed action of lower rates will not spur people to purchase excessively with debt levels so high. I agree the markets are currently still robust, and the Fed will not lower substantially until after a lot of the speculation has been "purged" from the system. That can happen VERY quickly! (1987, 1998 LTCM). I think many posters on this board realize that these "robust" markets are because of excessive leverage/speculation, and that when the leverage is taken out the markets will fall to more sustainable levels. Mark

Not sure the effect on gold. Global slowdown/recession (led by US) may cause disinflation/deflation - bad for gold. Central banks across the globe printing money to reinflate - good for gold. Not sure who wins that "tug of war". Highest quality, longest duration bonds would be the best bet if US/World react to slowdown as Japan did. I believe that it is a given that in a slowdown Central Banks around the globe will print money and lower rates as Japan did to inject liquidity into their economies to try and stimulate aggregate demand. Mark

farmer -
Check out East Texas around Palestine, TX. Contact my cousin George McIntyre w/Pace McDonald Century 21 in Palestine for land prices. Several realtors in that area have web sites you can view and prices are posted. Houses are dirt cheap as well. Two hours SE of Dallas and 40 south of Tyler.

www.palestinerealtors.org

TJ & Bear,

Presented already - Action by foreign Gov't/Central Bank - China will not let the dollar fall vs. their currency. Can you give a reason? They are one of the largest holders of our debt and one of the biggest exporters to us. Their economy is largely dependent on exports to us. Japan also holds a lot of our debt and exports to us are a big part of their economy. A sharp/fast fall in the dollar would have repurcussions on both their economies. In the event of a US, and maybe worldwide slowdown, demand for their products (both China and Japan) will already be waning, and they will not want a precipitous fall in the dollar to reduce demand for their products due to being more expensive here. Japan currently has no overt policy, but if the fall is substantial I believe they will be on board with coordinated intervention. I understand your position and agree completely that the dollar will FALL, I just believe that it is in everyone's best interest to cushion the fall and make it "orderly". Why would CB's not intervene to make the descent orderly? They have done it in the past. Regarding your initial statement "That sounds an awful lot like homeowners saying "the government won't let real estate fall because that would be disastrous to the economy"". The government will let real estate fall somewhat, but will step in when the pain gets to a certain level. Remember the Resolution Trust Corp bailout of the S & L's? That was done by the government primarily to "shore up" real estate prices by providing liquidity to failed borrowers & lenders. I believe that the gov't will end up doing something similar this time when the pain gets to a certain level. Comments? 1) China CB intervening in currency; 2) RTC bailout

inOrlando-
Realtors in my N Dallas area claim average DOM at about 77 to 85 days. However my home purchased in '95 had been on the market well over a year and was a rental with a lawyer from hell as a tenant and an owner who had fled Texas for sunny California.
To me 108 isn't bad especially in the Florida markets of today. Are you aware of re-listings tactics whereby homeowners list with a new realtor making the DOM market start over from zero. Common in Texas markets because it's common in some areas here for homes to sit on market for six months and longer especially in smaller towns and rural settings with less of an employment base. My sister's lovely historical Longview, TX home recently took almost an entire year to sell after her divorce from a bankrupt oil man dirt bag (and there isn't much going wrong yet with Longview's economy). It's just a small down with a limited pool of buyers for historical homes.

Charles,

You stated: "I doubt there's a lot of risk of outright economic deflation, because that's something the Fed is unlikely to tolerate."
I agree totally. Ben stated as much in his speech in 2002.
My question is this: The US consumer has been spending more than he is earning (negative saving rate) for some time now. ALL of the consumption over his earnings has to come from somewhere, either borrowing to spend or withdrawing from savings to spend. Much of the borrowing came from MEW, and with house prices dropping that will dry up quickly. The remainig came primarily from credit cards. The easy availability of credit cards has been in part due to the securitization of credit card debt, much like CMO's and CDO's. With those markets drying up the Credit Card securitization will likely follow, causing debt to be less available. The savings balance of the average American (who is nearing retirememt) is not enough to support his retirement, so he needs to save more, not spend his savings. If he has no more available debt and can't afford to spend his savings, then where is the demand going to come from the US consumer? If he can't borrow, but spends his savings anyway, at some point the savings run out and then where does the demand come from? At some point consumption has to come in line with earnings (meaning consumption must fall relative to earnings). When that happens real (inflation adjusted)demand falls. When demand falls there is no inflation, and possibly deflation. When the demand falls, and there is a hint of deflation, the Fed will take rates to the ZLB very quickly, then lower rates out the curve. Mark

The latest from Bill Fleckenstein my hero.

Bush, Bernanke and a bad bailout

Bush, Bernanke and a bad bailout - MSN Money

When the demand falls, and there is a hint of deflation, the Fed will take rates to the ZLB very quickly, then lower rates out the curve.

Okay, just can't leave that alone.

IF the Fed goes that far, won't every other CB have to do exactly the same (according to your earlier comments)? What kind of world would we have with a global ZIRP???

Japan did it and every other CB didn't "have to do exactly the same thing". However, Japan did it and with a lag many other CB's lowered rates substantially. We here in the US went to the ZLB for 3 years. Many people say that is the problem. Since the American consumer is the driver behind much of the world demand and the American consumer is about "tapped out" where will the demand come from? Can you answer the question I asked Charles above? I do believe that world demand will fall as the American consumer is forced to pull back at some point and that reduction in demand will have many CBs lowering rates to spur demand. If everybody is lowering rates/printing money then all currencies are "cheaper", but the relationship among currencies can stay essentially the same. The one that prints the most will fall relative to the others. I believe that will be the US, since we have more debt problems to try and print our way out of. Mark

MEW = Mortgage Equity Withdrawal. When a person Refis or takes a HELOC and "withdraws" equity from his home.

Charles, Agree on the expense ratio, anything above 30bp is outrageous, but many funds charge upwards to 75bp. Don't know of any charging 100bp, but the Fed goes by quarters and if they go to 75bp then some would yield 0% after fees. Agree the Fed can go lower if they want, but what is the differnce in 100bp and 75bp. The rates that count the most to the consumer (to stimulate demand) are out the curve anyway. Mark

WSJ 9/11/2007
August Divergence: Markets Go Up, but Hedge Funds Go Down

August Divergence: Markets Go Up, but Hedge Funds Go Down - WSJ.com

Charles,

Many "retail" MM funds have expense ratios that approach 75bps. I agree, outrageous! Check the Broker retail funds expense ratios. I remember when the FF rate was at 1% many of the funds were yielding 50bp (annual). They were buying CP at 1.25% less 75bp expense and paying 50bp net. Mark

TJ

Your reply:

The problem is that demographics will come into play exactly when the market should be bottoming, thereby threatening a second, more protracted downturn (ala Japan).

You and I are on almost exactly the same page. Mark

Charles,

Do some research on "beggar thy neighbor" currency policies of the 1920s. That stuff led to a collapse of international trade.

Do we have some of the same issues now? China? If our currency falls significantly, Japan?

Mark

MarketWatch

Washington Mutual sees '07 loss provision as high as $2.2 billion

(Haps in the WAMU hood yo might wanna move yo yayo to da betta hood - stop jocking my style)

Calculated Risk 

The Dallas Morning News 9/10/2007

Fears rising along with brazen home burglaries up 4.6%

Fears rising along with brazen home burglaries |
News for Dallas, Texas | Dallas Morning News
| Dallas News

TJ,
Your reply:
Again, no comparison, since Japan has never been the world's consumer of last resort.

IMO, Japan's experience is only relevant in exemplifying the concept of "pushing on a string" and the economic effects of changing demographics.

My reply:

We are the world's consumer. When we get "tapped out" (not sure exactly when that happens, but feel it is getting close) aggregate demand here and across the world falls. With demand falling, prices will fall, or at a minimum inflation will fall to lower levels. When that happens CBs around the world will lower rates aggressively (25bp to 50bp will have little/no impact, pushing on a string), with our Fed leading the way. Typically rates have to go somewhat below their previous lows before demand stimulation begins to occur. Short rates go to 1% (ZLB). The Fed lowers out the curve to get the 10 Years Treas to below it's previous low (approx 3.6%). The rate has to be below 3.6% to stimulate, so the 10 Yr Treas goes to around 3%. If bond rates fall, prices MUST RISE. A mathematical certainty. Not a huge return, but at least you make money in a bad market and have some $ left to invest when you can buy at lower prices. Mark

Mark 2:05, the term zugzwang is perfect. In chess, it describes a situation where a player would prefer not to make any move at all. I.e., every move he makes gets him in trouble.

And please forgive this delicious but tangential quote from Lasker, world champion for thirty years:

"On the Chessboard lies and hypocrisy do not survive long. The creative combination lays bare the presumption of a lie: the merciless fact, culminating in a checkmate, contradicts the hypocrite. Our little Chess is one of the sanctuaries, where this principle of justice has occasionally had to hide to gain sustenance and a respite, after the army of mediocrities had driven it from the marketplace."

zugzwang comes from chess. It's
specialist meaning is that having to
move forces you to weaken your position.
Chess purists (at least some of them)
feel it does NOT apply to a situation
where you would be ok if you didn't
have to make a move.