Construction Spending Declines
Submitted by
CalculatedRisk on Fri, 11/30/2007 - 7:14am (98 comments)
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Where is everyone? I'm first?
The "smell test" on whether wide-scale mortgage mods will be effective:
Do they force write downs of debt by debtholders?
If not, its just posturing. Citibank lent Latin American countries money with which to pay the interest on its loans. This went on for years, and things got worse and worse. Finally JP Morgan took a huge write down and said no more new loans. Citi waited too long, but finally did the same. Some years later ('95) Latin America was booming.
CR,
Is this the first month with yoy decrease in total construction spending?
They are still over on the other thread debating the govermnent's proposal to freeze rates.
Happily for Ben, oil is under 90, gold is under 800, all those troublesome commodities are down so the threat of inflation is diminished. Except for copper of course which is up because the US economy is smokin'. This will make it very easy to cut rates to deal with that irritating little credit problem.
love CR's daily dose of doom doom doom. i'm going to sell my house for half price and move into a cave in siberia before the &*(# hits the fan.
Everyone is reassessing their puts, I suppose. I don't get why people are excited about banking stocks when the news is that banks will make less interest. Interesting market...
Richard, welcome to the dark side. If you haven't sold your house already, half price is all you will get.
Looks like the bears are now in hiding after the bulls were so last week. Or let's point at the following:
GDP growth 4.9%, inflation multi-year low and decelerating, inflation markets at breakdown (oil, PMs), interest rates at multi-year low, job market strong, stock market rebounding to new ATHs, exports soaring, US$ rebounding. This is the most bullish reading in some time and will easiliy overcompensate the housing slump.
The markets refute all the bear mantras like FED action leads to inflation or FED action irrelevant, recession/depression coming etc.
Jas made at least some more concrete prediction recently (courageous!), so I will do it here for 2008, too:
GDP growths >2.0%
unemployment +15%
No recession this decade.
O-Joe
REBear,
Overall construction spending has been down y/y since November of 2006. The pace of y/y decline had actually slowed, to -0.6% in October from a high (low?) of -5.1% in March.
By the way, this is a bad day for Q4 GDP. The PCE data should put a big dent in Q4 growth expectations. Construction spending will do a smaller amount of damage. Falling capital goods shipments from the durables report earlier this week also cut into Q4 GDP. At the beginning of November, the median estimate for Q4 was 1.5%. Given the news so far this week, we should be getting down toward zero now.
o-joe,
unemployment +15%
You sound like Jas
love CR's daily dose of doom doom doom. i'm going to sell my house for half price and move into a cave
That's wholly unsupportable. If commercial construction had surged the only change to this post would have likely been a closing sentence expressing puzzlement that the slowdown hadn't yet appeared. Sure some people read doom and gloom into the straight reporting but CR is to be lauded for his neutral biases presenting the data.
CR - any chance of a post re:the "Hope Now Alliance" (a/k/a the Paulson plan to 'freeze teaser rates')? Seems to be all the OT buzz over in the other thread.
Money quote from AP story on October consumer spending:
The 0.2 percent increase in spending would have been even weaker were it not that higher energy prices pushed inflation up. Excluding price changes, consumer spending did not rise at all in October after posting a meager 0.1 percent gain in September.
Thanks K Harris.
Schnaps
YES!! let's hear it from the Hope New Alliance or how to bailout MEWers with our tax money.
O-joe rally ends Monday?
GDP growth 4.9%, inflation multi-year low and decelerating, inflation markets at breakdown (oil, PMs), interest rates at multi-year low, job market strong, stock market rebounding to new ATHs, exports soaring, US$ rebounding. This is the most bullish reading in some time and will easiliy overcompensate the housing slump.
In the rear-view mirror the economy was doing great....
Continuing jobless claims are the highest in two years
Consumer spending is slowing.
Households have turned to the credits cards to service debt payments. Credit card debt is rising faster than PCE.
Income growth is weakening and negative after inflation.
The run on the shadown banking system (SIV, ABCP, etc) continues.
Beige books shows a slowing economy.
And, global imbalances continue to build.
When do you think the sheeple will realize that too-big-to-fail doesn't mean the stockholders get bailed out.
Sounds like the No Hope Alliance to me.
K Harris,
Good point. Its quite possible we are already in a recession. Certainly a repeat of October in November is possible -- while the weather factor is absent, the trends evident in October if anything have deteriorated in the past month. Domestic final demand in 3q with a proper deflator was probably close to 1.5%, so its not hard to imagine a negative number in 4q given the 3q inventory build that needs to be worked down.
'freeze teaser rates'
Maybe we should call it the 'teaser freezer'.
Mind you, Private Non Res spending fell last October too. Then picked up into Nov-Sept.
I think this drop is more noteworthy than last year's drop though.
Hey, imagine the joy of those stated income folks! How hard is it to prove they won't have the inflated income they didn't document in the first place?
This Paulson deal is DOA.
Robert Coté said: "...Sure some people read doom and gloom into the straight reporting but CR is to be lauded for his neutral biases presenting the data."
When CR starts regularly giving equal weight on posting data, charts and pictures for the positive or flat housing markets, then it will be legitimate to refer to him as "neutral."
When he starts explaining that the San Diego housing market and the Detroit housing market are weak for different reasons and not because of a single unifying national trend, then he'll have earned the title of "neutral."
When he starts pointing out that most banks, mortgage brokers, and homebuyers aren't short-sighted, greedy financial illiterates, then he can be referred to as "neutral."
Until that time, his posts must be viewed in the light that he's the owner of a bearish blog. Kudlow has his slant, of course, but so does CR.
Sebastia
Everyone is reassessing their puts, I suppose. I don't get why people are excited about banking stocks when the news is that banks will make less interest. Interesting market...
probert | 11.30.07 - 10:47 am | #
probert,
This is very confounding to me as well. I can't understand how locking teaser rates, while staving off a foreclosure forthe borrower, doesn't harm the lender's position. The loan has lost value, hasn't it? Or, is the idea that the loss will be made up by the Federal Government? Is that the implication?
O-Joe,
Did you mean unemployment would increase by 15% of its current 4.7%?
You mean 5.4%, not 19.7%, correct??
"Or, is the idea that the loss will be made up by the Federal Government? Is that the implication?"
son of zinger | 11.30.07 - 11:14 am | #
that is what I am wondering about. Otherwise, what's the deal with Paulson mucking about?
from the ny fed:
Foreclosures on nonprime mortgage loans have been rising in the Second District and in other regions in the country. To shed light on the situation, the Federal Reserve Bank of New York is monitoring the condition of such loans in the District. The accompanying spreadsheets (for the United States, and New York and New Jersey and the two largest cities in each state) are derived from the LoanPerformance ABS Loan Level Database, which includes information on all securitized subprime and alt-A mortgage loans.
It is estimated that approximately 75 percent of subprime and 90 percent of alt-A mortgages originated in 2006 were securitized. Thus, the data summarized below represents a sizable portion of, but not all, alt-A and subprime loans. Additionally, for comparability, we restrict our analysis to first lien mortgages. That is, second mortgages and home equity lines of credit are not counted here. Information on a mortgage loan remains in the data set as long as the security into which it was placed remains active.
http://www.newyorkfed.org/regional/subprime.html
Seb,
Please give me a bullish case for the ABCP decline, now in its 16th straight week for -30.5% of outstanding at the end of July 2007 (total CP decline of -15.2%)...please!
I just noticed that Floyd Norris at the NYT has a piece about cancellations and their effect on home sales data. I know CR has talked about this a lot, but dont recall seeing anything about the fact that eventually cancellations start skewing the statistics in the opposite way than one expects (i.e. the stats will at some point indicate lower numbers of sales than really happened because sales of homes that were in a previous month but were canceled are not included a second time). Does anyone here know how to detect when that point is reached?
If this modification scam is even possible to work out, I am disgusted with it. Let's set the stage:
Person A, who bought in the bubble using an exotic mortage, pays low rate because they cannot afford a rate increase
New buyer B come s along and has to pay MUCH higher rates due to tight lending standards finally in place
Unless buyer B is an absolute moron without any ability to think, new buyer B should pay about 20-30% less for the home due to rate differential. Why would a new buyer pay MORE for the same house?
Doesn't this set up an instantaneous home price drop? Isn't this what the banks want to avoid? I guees they figure the stupid average american consumer will pony up the money to pay old bubble prices at new high 30 year fixed rate. Sick stuff.
CR, as I understand it, government construction spending (schools, hospitals, roads, bridges) is included in non-residential. All over the U.S. TODAY, government projects are being back-burnered. The budget problems of some govts. are so bad that some construction projects already underway may get axed or diminished. What's your take on outlook for govt. construction?
Look into the mirror. Since we all wondered who the bag holders are, well ... congratulations. We (taxpayers) are the newest bag holder. I expect higher inflation into 2008 and interest rates going into 2009. Expect some short term gain for long term pain.
"The plan being floated by Treasury to temporarily freeze subprime mortgage rate resets makes compelling sense, in our opinion," Howard Shapiro, an analyst at Fox-Pitt, Kelton, writes in a note. "It is a necessary step to stabilize reeling mortgage markets and avoid a further downturn, as servicers struggle to cope with a cascade of current and potential foreclosures."
Still, at least one analyst is skeptical of a government-backed plan.
"At a time when many are claiming that there is a credit crisis, the government has come up with yet another idea to drive funds away from the markets," writes Richard Bove, an analyst at Punk Ziegel.
"The concept of forcing banks to keep bad loans on their books violates every precept of regulation in American banking," he writes. "Bad loans must be taken off the books to allow good loans to be made. Forcing banks to keep bad, low-return loans on the books is something that the banking regulators have never done."
Rate-Freeze Talk Lifts Lenders | Page 2 of 4 | Banks | Financial Articles & Investing News | TheStreet.com
Three years ago it was logically obvious that house prices could not inflate forever and everybody could not continue to get rich by buying houses, sucking cash out of them, and then selling them and buying other houses.
But predicting exactly when the great housing scam would run out of steam and collapse was not so easy.
By the same token it is logically obvious that we, as a nation, cannot continue to grow by borrowing and spending. We borrow and spend as individuals, and our government borrows and spends on our behalf.
Very little of the borrowed money is spent on tools for future production. Rather we spent it on plasma tvs and fancy cars and foreign wars and tax breaks for the wealthy. Meanwhile our infrastructure crumbles and industrial production is moved overseas.
Predicting when everything will fall apart in a way that is visible to the masses is not so easy. But it is just as obvious that a financial collapse is coming as it was obvious three years ago that the housing boom would turn to a bust. Both depended on the same concept for short term gains - borrow money and shuffle it around wildly, thus giving the temporary impression of growing wealth.
Seb insists: "When [CR] starts explaining that the San Diego housing market and the Detroit housing market are weak for different reasons and not because of a single unifying national trend, then he'll have earned the title of "neutral."
Even though it isn't his job? No mind, what CR does is show those nation and global issues that do affect both places wrt housing and the economy. I am sorry you are disappointed that CR doesn't do everything you want and isn't an expert in everything you find critical. I'l step in lightly for your edification. San Diego and Detroit both have mortgages with Countrywide and BofA and their notes have been pooled and tranched and distributed worldwide. This time is different in the very respect you fail to acknowledge. The new lending universe is indeed the same for both. I thought CR had explained this aspect most accurately. Perhaps you weren't listening.
if i were a paid up subprimer i would immediately default and cut my work hours to decrease income to fit into the bailout. and i would do it RIGHT NOW. the confusion and mere discussion of a bailout by gov't makes this a no brainer. i predict skyrocketing NOD's.
these are the death throes of a dying patient.
JJL, exactly. Most Americonsumers will buy a house based on the payment not the purchase price. The poorer their judgement the more likely they are to buy like this. So offering teaser payments to people with poor judgement is crazy stupid.
"Bernanke said he expects consumer spending will continue to grow and suggested the country can withstand the current problems without falling into a recession. But he indicated that consumers could turn more cautious as they try to cope with all the stresses"
More cautious? That would be a horrible development. We need consumers to be even more risk prone and the government is willing to do anything to prevent such a disastrous outcome.
Freezing interest rates on present mortgages will certainly encourage investors to look favorably upon MBSs for their next capital allocation.
So offering teaser payments to people with poor judgement is crazy stupid.
w | 11.30.07 - 11:38 am | #
No it wasn't, it was "silly."
And at least they weren't "snooty."
FT.com / Europe - ‘Snooty’ bankers blamed for crisis
energyecon said: "Please give me a bullish case for the ABCP decline, now in its 16th straight week for -30.5% of outstanding at the end of July 2007 (total CP decline of -15.2%)...please!"
There's not one. Just like there wasn't one for the LTCM collapse or the Orange County, CA bankruptcy. Yet neither event summoned a recession or even a near-recession, and neither will the current conditions.
To borrow phrases from some of our other favorite posters, this is how the Scamsters and Fraudsters keep the sheeple in-line, by making them afraid and by turning rational discussion turn into a shouting-match where the loudest side wins.
Banker summed up my sentiment on this in a recent post. Paraphrasing, he said that panic is generally a dumb course of action. Yet blogs like this that generate unreasoning fear encourage panic and the stupid decision-making that results.
Sebastia
fixed income investors should run for the hills. if you were a foreign fixed income investor and your return just got slashed like this would u continue to lend money to US mkts? this will drive up interest rates.
the mountains of money that have been placed over the years in expectation of a certain return will fight this proposal. if they lose out, then we all lose out.
the real kicker here is the loss of confidence in the system and our gov't, Fed, and Wall st buddies cannot see this.
one last Hail Mary.
Did Paulson check with his bosses before he presented this? On the one hand...
Paulson, Banks in Talks to Stem Surge in Foreclosures (Update6) - Bloomberg.com
And on the other hand, what the white house has to say, from reuters:
White House-too soon to discuss subprime loan plan
| Reuters
Hey cathyp | 11.30.07 - 11:45 am |
Paulson could borrow a page or two from the German guy's book:
"Mr Steinbrück was critical of the management of Sachsen LB and IKB. It is clear that the management . . . didnt have the right management expertise. They had been unable to cope with the complexity of the products in which they were investing, he said. Crisis talks on IKBs future took place on Thursday but Mr Steinbrück said taxpayers would not foot a rescue bill. "
Sebastian, I like you and you are always a welcome counterpoint to the bearish tendencies here, but dems fightin' words.
CR is the most honest, even-tempered and mild-mannered blog host I've ever encountered. Views contrary to his are always treated with kindness and respect.
You want to see doom and gloom? Go over to housingpanic, denninger or Mish, there you will see true doom and gloom the likes of which will probably scare you back to whatever pocket of shangri-la you inhabit.
JJL has it exactly right. The rate freeze creates a disparity in purchasing/holding power between existing subprime borrowers and new ones. By providing an incentive for existing borrowers to stay in their homes, they artificially hold up prices. New borrowers cannot afford those prices, and the market fails to clear.
All these proposed government actions involve a transfer of wealth: lower Fed rates tax savers, frozen subprime teasers tax new home buyers, frozen withdrawals from state money funds tax those counties that remain.
Sebastian, in your view, is this mortgage debt debacle on the same scale as the LTCM meltdown? Is it as easily isolated and addressed?
What compares to many $trillions in suspect debt instruments at a time when leverage is at unprecedented levels and actual bank capital is, well, in an uncertain state?
this actually provides short sellers even more opportunity to take advantage of each stock mkt bounce. look at all the updown volatility this is causing in the mkts. these proposals will draw this mess out for years with an overall downtrend Japan style.
Look, so far Paulson hasn't accomplished anything more than to invite interested parties to a meeting and urged them to look for a blanket solution. All the rest of the so-called coverage is extrapolated from the Bair comments of several weeks ago.
There's nothing substantive to look at, report on, or criticise. Much as this looks like MLEC redux, tempting as it may have become to exercise the imagination, there's simply nothing to get your teeth into so far.
This is interesting to me because I haven't previously encountered this meme in the MSM...
Cure for pain
Banks are finally taking the tough medicine they need. Will the Fed get in their way?
By Peter Eavis, senior writer
NEW YORK (Fortune) -- At last, we have the beginnings of a cure for the credit crunch - though it could cause plenty of pain in the short run.
For instance, to strengthen their balance sheets, Citigroup and Freddie Mac this week raised substantial sums of new capital, even though such a move can hurt existing shareholders because their stakes get diluted.
In addition, banks have started to value their assets more appropriately, even if it means losses.
And they're showing a readiness to sort out messes that they'd previously hoped to keep off their balance sheets.
As encouraging as these first steps are, the road to a sounder financial system could still be undermined.
The biggest obstacle could be the Federal Reserve. If the Fed continues to cut interest rates - as looks likely - it would make it easier for banks to forgo or slow down some of the important changes they're making.
[snip]
I love how the perma-bulls believe the government's BS numbers. Yeah, sure, inflation is contained. Nevermind the devastating damage dealt to the dollar, ever-increasing prices in everything we need, wages flat to negative, lost jobs, etc. Nope, everything is fine because Big Brother - I mean the Fed, etc. - says it is. Sure, they don't bother counting food, energy, etc. into inflation costs, and sure their GDP calculations use an unrealistically low inflator deflator, and sure they have a funny way of counting the unemployed, and yes, we now consider burger flipping a "manufacturing" job, but everything is fine and they can be trusted completely!
I am sure O-Joe and the rest of the perma-bulls also enjoyed reading the tractor production reports from the fallen Soviet Union back in the day. Everything only goes up, comrade! A new, glorious future for all with free money forever and ever!
Right...
I for one have gone from faith in our system to now seeing it as a joke. This rate freeze is a prime example. As one of many who works long hours to get ahead, at high cost to family and likely to health, I am embittered by the thought that perhaps I'd have been better off to be stupid and/or lazy and take risks with OPM. Perhaps it won't work, but we clearly are becoming a welfare state where all expect (correctly, it seems) to be bailed out by their bankrupt government (and our hard earned taxes) for any stupid decisions they make.
Seb,
You are playing a classic straw man game - and mischaracterizing content, tone and purpose - why waster your time here then?
O-Joe,
Did you mean unemployment would increase by 15% of its current 4.7%?
You mean 5.4%, not 19.7%, correct??
lama
Sorry too early for me~
stock market averages >+15%
unemployment
Sebastion,
Once upon a while ago, I chastised our host (before Tanta became co-host) for his lack of interest in GDP releases. I had nothing to do with whether the release was good or bad. I just need someplace for spencer to comment so I know what to think about GDP. Our host's answer was that he specializes in things that he understands well and which are of current importance. GDP, he seemed to imply, didn't meet the conditions.
Housing does meet the conditions. Our host(s) have rightly focused on housing and mortgages as important to economic and financial performance. Recently, that has not left much room for good news. There is not need to accuse them of bias just because, having decided to devote their attention largely to housing and mortgages, there has been little occassion to write about happy things.
If what has set you off the last couple of days is our host's failure to laud the rise in new home sales, I'm afraid you are just going to have to be upset. The home sales data were dismal, despite the one-time rise. Even if it weren't dismal, there is reason to expect a downward revision, as our host has explained.
I'm not sure arguments which, at their core, run along the lines of "stop saying what you are saying and say what I want you to say" do the world much good.
I don't think there was any ABCP drop in 1998 (LTCM).
http://pages.stern.nyu.edu/~igiddy/ABS/moodysabcp.pdf
page 16
Robert Coté said: "...Even though it isn't his job? No mind, what CR does is show those nation and global issues that do affect both places wrt housing and the economy. I am sorry you are disappointed that CR doesn't do everything you want and isn't an expert in everything you find critical...."
This is the ironic part: I learned about all this from studying the data and links that CR himself posted!!!
He's seen the information, has access to the data. He just doesn't devote any resources to it, except in the equivalent of obscure, hard-to-read footnotes and small-print.
Sebastia
Sebastian,
I don't recall CR or Tanta (it's their blog, yes?) advocating panic. Maybe some of the posters are, but it is unfair to ascribe that to the blog overall. After all, you are a poster here too. You are creating a straw man with these accusations.
It is possible look at bearish news and not panic. For me, it simply means being patient as a first time homebuyer and taking a conservative investment approach. It has worked well for me this past year. Just because someone is bearish doesn't mean they are automatically running for caves in Siberia.
There are some pretty well-respected names out there that are turning bearish these days.
idoc makes an excellent point. These politically driven market interventions will, in the end, suppress economic activity and then any eventual recovery, essentially giving us a Japan-style decline. And, in addition, we have other serious issues with the US economy that Japan didn't have at the time so our experience could actually be even worse, driving out much desperately needed foreign investment.
energyecon,
I think the article you quote is citing the very problem that had Fed officials, until the last couple of days, sounding tough. Plosser said that easier monetary policy could slow the process of "price discovery" by which he meant backs dumping their rotten assets.
Sebastien: " Yet blogs like this that generate unreasoning fear encourage panic and the stupid decision-making that results."
1) Who is panicking?
2)I don't think you will find a more reasoned set of fears than what you find here.
3)It is clear that the discussions at this blog have not deterred the general public, policy makers, and market participants one whit from making stupid decisions that are contrary to most of the positions at this blog.
4)I find it a bizzare inversion of reality that blogs like this have caused the current problems. Are you of the school, "ignorance is bliss"?
Sorry too early for me~
stock market averages >+15%
unemployment
Optimistic Joe
this is how OJoe reads gov't reports as well. sees what he wants to see.
BTW, how's your hedge fund doing?
I think Seb likes attention.
Seb wrote
"Yet blogs like this that generate unreasoning fear encourage panic and the stupid decision-making that results".
Looks like you just ran out of arguments there, so you need to resort to this ?
Unreasoning fear generated by CR+Tanta ? Nonsense ! I have not seen 1 claim made on this blog that was not backed up by data !
Bullish counterpoints are great in a discussion, but it would help your case significantly if you were to stick to data (and facts) !
One thing to consider in the upcoming jobs report:
The trend the past few months has been for proprietor's income to decelerate and drop; personal income to decelerate; and unemployment claims to rise; and now wages and salaries to slip.
All of the above are consistent with a retrenching of small business.
The household report does a better job of tracking small business jobs than the payrolls report. The former has shown a lot more weakness.
Further weakness in the household report would reinforce the idea that the small business sector of the economy is entering recession.
Well Seb may have a point there - if the steel toed bunny slippers of doom were ever pointed in my direction Siberia would look mighty inviting!
Yet blogs like this that generate unreasoning fear encourage panic and the stupid decision-making that results.
Seb, usually I try to ignore you, but your statement above is just too stupid to bypass. The market mess that weve got on our hands was created by irrational exuberance and bad (or no) decision making. CR and others here are simply trying to apply some intelligence so that we make informed decisions going forward.
Its the time and energy that CR and Tanta put into this that make it such an outstanding blog. Frankly, your statements, clearly lacking any attempt at intelligence, simply detract. We also need to laud CR for not blacklisting you, since IMO you make a great blog a little less so.
Im all for the bull case, but give us something to chew on (ala banker) rather than your senseless drivel. After all, at some point there will be a valid bull case, and I am sure many on this site will want to know the signs for how to recognize it.
k harris, my "issue" was as I stated: That CR doesn't deserve to be referred to as "neutral" on the subject of housing. His views may serve as a counter-balance to the bullish views of the NAR, for example, but that doesn't make him unbiased, and he certainly isn't.
Sebastia
don't forget today is the end of the fiscal year for many money center banks. stocks need to finish high.
Sebastian,
Surely you know that the LTCM collapse and the Orange County, CA bankruptcy were, though large events, extremely narrow in their impact.
The current debacle involves far more parties, far more money and is far more elusive to contain as a result.
LTCM and Orange County were "Tinker Toys" compared to reckless, trillions of dollars, accrued in mortgages on near fraudulent basis throughout the US. Nothing in US financial history compares to this malinvestment of capital.
I'm a big believer in the resilience of Americans. We'll get through this debacle and we'll learn from it. But, as a student of economic and investment history, I can't see anything comparable to these financial developments since the Depression. Do I think we'll have a depression? No. But I think it is silly to imagine that with banks cutting their lending while shoring up their balance sheets, with a big, unprecedented, chunk of people going through foreclosure and with an economy so heavily dependent on ever increasing consumer spending that we are not going to experience a painful adjustment.
The elements that propel growth are reversing themselves; credit, confidence and profit. If you can tell me what will reverse these trends (other than a simple cut by the Fed), I'm all ears.
Seb
i asked u before and i'll ask u again. if this blog is so biased as you say, then why do you stick around?
either 1. u have a bullish agenda to push upon us here such as a relationship with a hedge fund or 2. u actually learn something here.
which is it?
"Most Americonsumers will buy a house based on the payment not the purchase price."
That is a very interesting statement. That's how we buy cars, certainly. and it implies treating the purchase more as a lease or rental than a purchase. If that really is true of homes, them we have made a major national shift in attitudes toward home ownership - we no longer regard it as an investment and we think it is OK to buy "for a while' then just walk away. We rent at a level we can afford and have no regard for the obligations we signed on for. I think there is some truth in this; if not for all Americans, then for an increasing number. The current turmoil will go a long way toward popularizing this attitude.
I think we've given him enough attention, now.
wally
u are so right. this is a cultural shift in attitude towards responsibility. the financial pump monkeys have no idea how bad this will be for them in the long run.
It's amazing how much attention a bullish point of view can get here...
" 3. He enjoys being an agent provacateur.
I think we've given him enough attention, now."
Amen. He gets to be the bad boy and everybody crowds 'round. Nice ego grat.
But personally, I do get peeved when someone says, "Shut up, your opinions are harmful (but ours aren't)." We've had seven years of this from our administration, and look what a great job they've done for us.
Probert,
Sold off part of my Bank Put position today at a 1000%+ gain. Its not Paulson's plan that worries me, its the coming 50bp rate drop (made more likely by the Personal Income/Spending #s today), which will go straight to the Bank's bottom lines.
Its interesting, BB and Paulson come out with news on the same evening. Could it be coordinated?
we no longer regard it as an investment and we think it is OK to buy "for a while' then just walk away. We rent at a level we can afford and have no regard for the obligations we signed on for. I think there is some truth in this; if not for all Americans, then for an increasing number. The current turmoil will go a long way toward popularizing this attitude.
"Home consumers" rather than "homeowners."
Should be easy to keep herding.
We should acknowledge that efforts to stifle the speaker of unwelcomed news is not exclusive to Sebastian. When the IAEA reported nothing to worry about in Iraq, Cheney cast asparagus on IAEA. When real scientists pointed out the health problems associated with tobacco, the "junk science" movement was created to claim that all science is just some guys opinion. Those were conscious attempts to short-circuit bad news, but the impulse to kill the messenger is not always premeditated. Sometime, people just can't help themselves.
Dangit CR, we told ya to block those IP addresses from Florida!
Florida Schools Struggle to Pay Teachers as Investments Frozen
By David Evans
Nov. 30 (Bloomberg) -- School districts, counties and cities across Florida are scrambling to raise cash after being denied access to their deposits in a $15 billion state-run investment fund.
[snip]
The unthinkable and the unimaginable have just happened here in Florida,'' said Hal Wilson, chief financial officer of the Jefferson County school district, which kept its entire $2.7 million of cash in the fund.What we just experienced here is a classic run-on-the bank meltdown.''
Thousands of school districts, towns and fire departments across the U.S. keep their cash in state- and county-run pools. These public accounts, modeled after private money-market funds, are supposed to invest in safe, liquid, short-term debt such as Treasuries and certificates of deposit from highly rated banks.
[snip]
Standard & Poor's yesterday said it contacted state officials about whether the fund holds any money for debt service payments by local governments and whether that cash will be made available. The credit-rating company said it hadn't yet received information and was monitoring the situation.
The Florida fund has invested $2 billion in structured investment vehicles, or SIVs, and other debt tainted by the collapse of the subprime mortgage market, state records show. Connecticut, Maine, Montana and King County, Washington, are among other governments holding similar investments, in smaller quantities.
[snip]
j_bob said: "...Its the time and energy that CR and Tanta put into this that make it such an outstanding blog. Frankly, your statements, clearly lacking any attempt at intelligence, simply detract. We also need to laud CR for not blacklisting you, since IMO you make a great blog a little less so.
In praise of CR, he documents his posts and provides links to supporting data, a very valuable resource...but only if you study them carefully.
In further praise of CR, he's unlikely to ban me from this blog, because it would defeat his purpose. Without strong opposition from people like me the blog would deteriorate into one of "dittoheads" who simply parrot the bearish arguments without really understanding them. I don't believe that's what he wants.
I just think CR is biased, that's all. It probably isn't conscious, but that doesn't make him objective, either.
Sebastia
Seb
would u please answer my question from above?
Sebastian,
You could post the tag line of your most recent comment on any blog in existence. The point that you have left out is that your assessment of CR is biased. Everybody is biased, pretty much all the time. What seems to be the case here, though, is that you have picked out somebody who disagrees with you, but who makes a real effort not to show a bias, for an accusation of bias. The result is that you look like you are trying to get him to stop saying what he is staying has start saying what you want him to say.
jag said: "Surely you know that the LTCM collapse and the Orange County, CA bankruptcy were, though large events, extremely narrow in their impact..."
Not at the time they weren't,
that was only in retrospect. Once we get some distance from the current situation it'll be precisely the same thing. Nothing is ever new.
Sebastia
Re Rich @ 11:25 and the outlook for government construction projects...if you want to see an example, there's a bypass project near here that was shelved in the 1970s due to budgetary problems (remember the '70s?). What to do w/it? Since it ran through prime farmland, they sodded the whole damned thing - even the overpasses - and let it go. The locals now refer to it as "the goatpath".
You figure out why.
Seb
would u please answer my question from above?
idoc
Seb
why won't u answer my question?
I'm a relative newbie to the site and read for months before even thinking of making an entry...I also bounced around at least a dozen other sites - not to mention CNNMoney, Kiplinger, Smartmoney, etc. - and this site is both smart and balanced. I frankly find it refreshing not to see all of the ads for precious metals and bunkers.
It also does a good job of exposing some of the absolutely weird practices of the past number of years. We recently purchased a new house - yeah, I'm sure the value has dropped, but logistics demand it - and a new neighbor welcomed us to the neighborhood lauding how their housing values will never decline.
OY.
Sebastian Yet blogs like this that generate unreasoning fear encourage panic and the stupid decision-making that results.
So you lost big on your small caps? The last time you came out with something like this was around the unfortunate collapse of New Century. If you aren't willing to read the prospectus or the remittance reports, you cannot fairly get angry when Tanta and CR do read the fundamental data.
What you are really saying is that Tanta and CR disagree with you, and that the market seems to be falling more in line with what they have been writing, and then you are leaping to the idea that somehow, Tanta and CR are driving the market. There ought to be some psychological description for this sort of thing. Projected megalomania, perhaps?
Keep in mind that some of the top regulators in the country are well on board with the "unreasoning panic". Also the Fed governors are on board their fearsome blogging ship of fate. I guess Tanta and CR have their mental transmission hats on and are beaming bad thoughts into their heads?
If you sat down and read some remittance reports from trusts, you would understand that this is not an unreasoning panic. As banks' capital bases erode, lending to nonfinancial businesses is impacted.
You are just making yourself look silly by comments like that. You owe them an apology, but you owe yourself much more. It is impossible to make money long term when you will not take responsibility for your losses as well as your gains. Think about it.
uh oh Seb. now u got MOM angry. i suggest u go over to her website and read her excellent analysis of the DATA today? u might actually learn something based on fact. the same goes for all u other bulls like James, Tennis, & O Joe.
MaxedOutMama
Congrats RThomas!
waly, idoc and mal about "Home consumers" rather than "homeowners."
Is it possible that there is some rational behavior behind it? I got amazed at how common relocating is in USA among friends from grad school. I thought before that only low earners relocated that frequently (that the case in my country of origin).
Now, why would you buy a house "for the long run" if you believe you'd likely relocate in 2 or 3 years? You can ask then "why would they buy at all, given that transaction costs are so high?" Well, maybe they want to avoid the social stigma of being a renter (mostly poor people rent in USA). I'm a renter myself, but I cannot care less about image.
Anyway, today I was wondering what did it come first? Wage slavery or monthly payments as a way to consume depreciating assets? Which one is justifying each?
Any thoughts?
Come on guys, let's lighten up on Sebastian. He lives in Raleigh and Raleigh is a very special ,and in many ways, idyllic place - immune from many of the nations problems (probably like Southern California for a long time). I grew up in Raleigh from 1942 to 1969 and have a positive bias. It is easy to have rose colored glasses when you live in a rose colored community. That is Seb's bias that he is probably does not recognise
Julia,
One of the big selling points of ARMS over the past few years went something like this:
"If you think you will sell the house in less than 5-7 years, an ARM makes more sense than a fixed."
Well, right now a 1 year ARM is gonna cost you 25 basis points than a 30 year fixed. And stooge number one Paulson's proposal will take away much of the profits from any banks stupid enough to offer them in the future.
That may force some rethinking of the whole mobility-based culture we have here in the US.
My father called me sugar tits as a kid. What an embarrassing thing for a father to call his son.
jag said: "Surely you know that the LTCM collapse and the Orange County, CA bankruptcy were, though large events, extremely narrow in their impact..."
Not at the time they weren't,
that was only in retrospect. Once we get some distance from the current situation it'll be precisely the same thing. Nothing is ever new.
Sebastian
Utter and complete nonsense. I was right in the middle of businesses directly impacted by both of those events (in Orange County's case it was with a security lending operation that ended up losing millions for Mellon Bank in the fallout) and, while there was much concern, for sure, there was NOTHING like the rolling, WORSENING, debacle here. Very few people, not intimately involved in either event, EVER got concerned about LTCM or Orange County.
In both of those cases "once we got away from them" amounted to about three months (at most) of "crisis". This matter is unraveling now for at least six times as long, worsening, and the issues involved are STILL hardly understood by the freakin PARTICIPANTS! The fallout reaches around the world.
This isn't "precisely the same" by any stretch of the imagination. But, by all means, go long for all you're worth. That you linger around here made me once think you had an iota of doubt about your being bullish...a sign of humility and maturity.
But when you blithely equate this event with LTCM and Orange County you reveal a depth of ignorance and arrogance that begs for a whipping, if, in fact, you have any significant wealth in equities.
CR, congrats on calling the now underway decline in commercial construction spending many, many moons ago (with a sound, data-supported posit).
Seb wrote
"Yet blogs like this that generate unreasoning fear encourage panic and the stupid decision-making that results".
I'm rather happy my unreasonable fear, stupid decision-making and panic have my stock portfolio up over 60% year to date.
How's yours Seb?
God bless you CR and Tanta.