Boy - the smartest guys in the room just never figured the sheepz would just up and leave the corral if they didn't have any skin in the game did they? We're shocked - SHOCKED!
Excellent. I'm watching it now. Great overview for the layman.
I'm going to be extremely honest and confess: Not being an investor, and being relatively financially secure despite living very modestly, I feel strangely good about what's happening. Really, I know it makes me a terrible person. But it lifts my spirits. Yes, other people's uncomfortableness. Like I said, I'm horrible. But that's how I really feel. I feel like things are finally getting back down to reality, away from this artificial lifestyle people have been living. It's a good feeling, like a load being taken off.
The worse the economy gets, the better I feel. I know it's wrong, but that's how I really feel.
This is off topic, but, I feel the need to make a request/voice my concern.
Jas has clearly become disruptive and frankly, is nauseating. I find it impossible to sift through the comments, even with the great changes you've made. You have created a wonderful enviroment with fantastic information and I thank you again, but, it is unfortunate that this individual has honestly managed to destroy what you have worked so hard to create.
I live in SoCal. The other day I was on Redfin.com just searching around. The entire screen was green with little houses. It was absolutely mind numming.
I agree with Risk Capital. I feel badly for all of those folks who got suckered into sub-prime, Atl-A, and other dumb loans, but the bubble has absolutely made housing completely affordable in my area. Fortunately, I bought before the bubble, but I bought a home, not an investment. But there are a lot of good working people who have been completely priced out of the market because of the flood of out-of-staters looking for "investment" property to flip. Dumb! In a way, they're getting their comeuppances.
bacon dreamz, you don't know how often I hear the phrase "my area is immune". That is why I put it in quotes. We are still in the denial phase, and I've already heard one person say that if it's on 60 minutes, we are near the bottom. More denial.
Several years ago, Joel Slemrod and Matt Shapiro (former colleagues at the University of Michigan) estimated that only about 22% of the tax rebates provided during the last recession were directed to consumption, with the bulk going to savings and debt service. Given the much higher debt burdens today, I don't expect this instance to be much different. In the end, the U.S. economy will carry a larger amount of U.S. Treasury debt, and a somewhat smaller amount of mortgage and credit card debt than it would have in the absence of the fiscal stimulus.
I believe the agent who said that we are not yet 40% into the foreclosues in Stockton. One might argue that Stockton is probably on the front end of the national problem. If we get more than a weak recession, we could get 5X more foreclosures than we have now. Not quite at the bottom yet.
actually I'm not happy about other people's misfortune, rather, suddenly I feel like my own sense of misfortune is disappearing. I guess misery loves company.
Also, one of the links on that page is Andy Rooney saying that he doesn't think that we're in a recession and that he looks at the Wall Street Journal frequently but doesn't understand anything he reads.
I then Andy Rooney very eloquently illustrates the major problem facing the US economy today, though I suspect he doesn't realize it.
My area is certainly not immune. I have heard of two recent listings for nice places within a block of my home in Phoenix, and both are priced for early 2005.
By the way, Nikkei and U.S. futures are down. What is the over/under on rate cuts before the market opens tomorrow?
Unfortunately given the inconstancy of the current Fed we may need to clarify the rules - rate cut predictions should be expressed in total basis points, even if the Fed announces two or more separate cuts in the next twelve hours.
As a newbie could I ask for a few questions that I could take to the Colorado PERA meeting tomorrow? I may only get to ask one or two, but I want to get a feel for how deep their (my) hole is.
I haven't seen it yet. But listening to you all, I'm reminded of the time back during the Vietnam War when Walter Cronkite, on the CBS Evening News, essentially said he'd lost confidence in it.
Cronkite was a god in those days "Uncle Walter" to 100 million households; LBJ is said to have commented, "If I've lost Cronkite, I've lost Middle America."
"60 Minutes" is at best middle-of-the-road investigative reporting. It's not Uncle Walter. But it does have a certain credibility with Middle America. If "60 Minutes" carries the story -- well, could be something of an Uncle Walter moment. A tipping point, at least in the mindset of a good portion of Middle America that wasn't paying attention.
I watched it and felt it was very well done, if way too late. I wanted it to go on; I was sorry when it stopped. I can't say there was any new info that I haven't read here or on Irvine Housing Blog.
And by the way, I'm still trying to get over the blacked out IRS returns.
Thank god homeowners didn't have any skin in the game, otherwise they would be taking the loss directly. They can always trade in the Harley and the boat for a van to park down by the river.
I think the important part of tonight's show was the couple who talked about walking away from their property. Basically, that attitude of not having to honor the contract they signed, and basically willfully breaching it, seems to be taking hold rather quickly. They also announced how the only advice they got was to walk away. What was shocking was that this seemed to be based on the faulty assumption that home prices only go up, so that, pretty much, they were convinced of this concept, and when it turned out not true, they felt defrauded somewhat, and that somehow justified the walking away. I think if this attitude becomes pervasive, along with the other that home prices have a long way to fall, then we could have a much faster and deeper unwinding than previously thought this year. Scary stuff. Normally, Id say yes, on 60 minutes, must be the bottom, but Im not believing that at all.
In general, I think they did a great of distilling a lot of the elements of the mortgage meltdown into a story that most people can understand.
What did get my goat a little, however, was their continued emphasis of this problem as a "subprime" issue. There was nothing singularly subprime about the doubling of home prices in a 4 year period, and - consequently - the downfall will not be singularly subprime. Moreover, if prices drop more than 20%, even vanilla conforming loan mortage holders that bought near the top (when there were the most sales, mind you) will be underwater. If there are 30% price declines that are clearly evident, jingle mail will hit the prime Fannie/Freddie stuff with a vengeance.
I'm nervously wondering when they are going to fall, and just how many cards are stacked up.
I'm buying a safe this week. I'm making the switch to mostly cash and I'm going to start withdrawing a bit and stashing it away in the Bank of Sealy. I gotta move my funds around too. It's time to go liquid.
There's nothing wrong with Schadenfreude directed at realtors. ITs good.
The conspicuous displays of wealth and consumption by over-glorified RE clerks (realtors) and paper-pushing used-car salesmen (mortgage brokers) served to disincentivize useful work and investment endeavors.
Likewise with the mortgage brokers. These people need to be exposed along with their scam or more real wealth will be wasted on their fake enterprises.
Only with a downturn can people see the scams of realtors and mortgage brokers. And malinvestment be stopped. And America stop its slide and regain a more balanced economy. ITs good for America.
For a great explanation:
Americas inflated asset prices must fall By Stephen Roach chairman of Morgan Stanley Asia.
Remember it's good to see a scheming con artist out on his ass in the street. It's more than good; its FANTASTIC! And don't worry- the realtors who are really desperate for money in Cleveland/ Detroit / Florida have already figured out that they can go back to dancing on tables topless.
I just don't have two hours free to watch 60 minutes,but anyone who thinks we are close to a bottom has theirs resting on their shoulders.And do visit JJ's blog to say HI! so he doesn't get lonely.
this piece along with Cramers advice to just walk away is self reinforcing. i predict the HB's runup last wk will be met with another strong downleg below recent lows. it won't end until several public HB's go BK.
One way of measuring the over-valuation, and thus the "loss" in "value", so to speak, is to use a borderline high ratio like 3.0x median family income (this allows us to ignore renters). So, rough calculation, keeping only 1-2 significant digits and with small errors:
Median Family Income: $50K
3x income Median house pricepoint: $150K
Current median house price about $220K
Housing stock about 120M
Overvaluation by this measure: 120M * -$70K is about $8T
applying some fudge factors, like sticky prices, inflation, etc., it's reasonable nonetheless to imagine a decline in market values on the order of $5T.
Comparing to earners, this is averages to the order of $30K per taxpayer (between $20K and $40K).
I am sorry, while I do believe in honestly paying your debts it is usury for the Valdez family to be paying 11% on their overpriced home. They should walk away unless their lender agrees to something in the range of 7%.
Ive read your thread on intentional forclosure....although I still have reservations on how many who can afford their homes will walk away....I must admit I am surprised. You are right as usual. This is getting very scary when even the most bearish among us are proven wrong and overly optimistic.
Work continues late into night for State Of Union Address to America; any help, greatly appreciated ASAP: here's what we got so far:
Comrades,
We are joined together in unified worriment comparative to The First Great Depression -- which makes conveyance of this communiqué unsettling.
Americas impromptu titular heads have diagnosticated the conceivable probabilities associated with extreme distant possibilities of enervation in our future quotiental economy.
I surcease that as a transcendent nation composed of disimpassioned citizens, we will seize this challenging period as a time of opportunity which will help us to prosper in the future.
A great compatriot of ours once forewarned, over a tall glass of vodka: that which does not kill you makes you stronger.
Thus, we will become more vigorous, more virile, more robust -- togther during this impending period of synthetic derivative illiquidity, while our brothers in arms on the Wall Street Front, regroup, restructure and build new, stronger packages of securities which will be the envy of the modern and future world.
I goota get the fuc_ ouuta here, see yah later stronger.
Marcel Nadeau of Rehobeth, Mass., said he paid $29,385 to reseller RazorGator for a package that includes three hotel nights and breakfasts, transportation to and from the game, a gift package, and tickets for him and his two sons.
"I'm confident the Patriots will win," Nadeau said in explaining why he is willing to shell out the big bucks. But even if they don't, his next stop is already lined up: "On to Vegas we go."
I've already heard one person say that if it's on 60 minutes, we are near the bottom. More denial.
Remind them of the the S&L and Farm Crisis circa 1984-1989... we were 'on' 60 Minutes so often you'd have thought it was a week by week reality show... who is getting kicked of the farm this week.
The RE guy that said we aren't 40% into this thing is probably optimistic.
"the realtors who are really desperate for money in Cleveland/ Detroit / Florida have already figured out that they can go back to dancing on tables topless."
I really don't want to see the beer-gutted guy who showed me over-priced properties in South Boston dancing on tables AT ALL, much less topless.
Having been in the US domestic auto industry, i've seen too many highly educated professionals and hard-working people of all types inconvenienced by employment inerruptions. These were good people who worked hard and played by th rules and never tried to cheat anybody.
The out-of work realtors and mortgage brokers are inconvenient pond scum by comparison. Fringe economic actors who aren't nearly as important to teh national economy as their overblown sense of self-entitlement makes it out to be. If there weren't any serious bailouts for the former there is no way bailouts are deserved for the latter.
And the sooner the borrowers walk the sooner they can find more affordable place to live.
"For prices to return to the old norm, they would still need to fall 30 percent across much of Florida, California and the Southwest and about 20 percent in the Northeast. This could happen quickly, or prices could remain stagnant for years while incomes and rents caught up."
The "so what" of the NYT's article is that I think we are past the point of denial. Not everyone, but that was sort of a capitulation article. The first I have seen with the sense of total resignation.
For those of you who don't have the time or inclination to spend 15 minutes watching 60 Minutes, here's the link to the "House of Cards" transcript and the video:
I love when they are talking to Jerry Abbott from Caldwell Banker. He sits there with a blank face explaining how people were getting money back just for buying a house. Like realtors weren't getting their commissions and "helping along" these anxious buyers.
The innocent are going to be punished with the guilty.
Yeah, but that's not really part of the psychology of it. The psychology is more like, "I'm in a leaky boat; but now you're going to be in your own leaky boat, and you're going to know what it feels like... and this makes me feel better about my ability to survive."
The innocent are ALREADY being punished; have been since at least "Morning in America."
Have you seen the 3 and 6 month T-bills currently on Bloomberg? I hope that is a data error. How could they fall to less than a percent at this time of night?
Before you go congratulating 60 Minutes too much, remember they are at least 6 months too late in reporting this story.
I can sense a real backlash building among Americans aimed at MSM. Whether it's finance or political media, people are sick of the way media tries to push public opinion and events in a given direction, even while professing to be objective. All the media cheerleading we've heard for the stock market and real estate market over the past year is no different than the near-worship you are now seeing for Obama.
I'm convinced Hillary won in NH, the win that saved her career, mainly because of a voter backlash against the media that was attacking her in unison.
Of all the stupid MSN media coverage I've heard today, not one has suggested what is clear to me. Bill Clinton baited the media into attacking him, because he knows Hillary will benefit from another backlash.
I mean, come on. All of a sudden, the shrewdish politician of the last 50 years just went politically tone-deaf??
Average Joes know something is seriously wrong in the land of the free, and the MSM is part of the problem.
Two other factors primed purchase prices 2003-2005:
1) 2001-2003 Tax Cuts giving everyone $100~$300/mo more purchasing power
But we've seen weakness in real incomes since 2001 in part due to a steep rise in energy costs. Couldn't this, in combination with rising debt servicing costs, offset the tax cuts?
2) Mortgage rates -- even 30 year fixed -- declining significantly through 2004.
These probably primed the pump for the housing bubble, but historically there's not much relationship between house prices (or stock prices) and nominal interest rates (see Robert Shiller's work).
Quoting from John Kenneth Gailbraith's The Great Crash:
Farmers who had sold their land at a hansome price now condemmed themselves as it later sold for double treble or quadruple the original price, now on occasion got it back through a whole chain of subsequent defaults. Sometimes it was equipped with eloquently named streets, sidewalks, streetlamps and taxes many times its value.
I loved this line by the woman who announced she would just walk away from her mortgage. When she was challenged by the reporter: "But you signed a contract to repay it," she replied,
"Yeah, assuming prices kept going up."
She must have signed a slightly different mortgage contract than the one I did. I don't remember that clause at all.
However, watching the whole fiasco summed up in fifteen minutes really put her words into context. Yeah, she basically wants to scam her mortgage company. But so what? The mortgage company was scamming its investors, too.
There is a concept called "clean hands," and one of these people have them.
I Agree. If all the stock markets of the world can be dropped 5 percent by 7.1 billion in futures contracts, we are fragile indeed. There are trillions of derivatives out there.
Zigurrat posted: "For prices to return to the old norm, they would still need to fall 30 percent across much of Florida, California and the Southwest and about 20 percent in the Northeast. This could happen quickly, or prices could remain stagnant for years while incomes and rents caught up."
What "norm" would that be? 30-year fixed-rate mortgages can now be had for under 6% (my mortgage broker actually thinks he can get me 5%). This time ten years ago they were 7%, this time twenty years ago they were 10%.
The level of interest rates absolutely has an affect on affordability and the price "norm."
I like 60 minutes. I used to live in the same town as Andy Rooney. He'd drive around drunk in his fancy convertible.
12th percentile
he parks in my building on 57th st and and walks over to his office....
i see him on occasion... my valet's now him decently...
The first time I saw him I passed right by him you know, when you see someone you recognize as a friend, but can't place it....
He looked at me in that way of his...
All of a sudden, the shrewdish politician of the last 50 years just went politically tone-deaf??
I don't know... was it that shrewd of him to seek oral sex in the Oval Office from a cheap tart who didn't have the class to keep her mouth shut when she was done?
Since individual Americans and the US government owe far more than we can pay back, wouldn't it be the right short term strategy to debase the dollar until our individual and collective debts are payable with cheap dollars.
I understand the argument about global wage competition, as well as the frightening possibility of hyperinflation. But given the short term focus of our politicians, wouldn't this be the expected result.
MR - currency devaluation is a longer-term strategy - if it is brought under control. In the short-term in produces inflation and economic uncertainty, and thus a lot of unemployment.
tj & the bear said: "These low interest rates are not the norm. They are as much an abberration as the housing prices themselves."
Let's assume for the sake of argument that that's true (although it may not be): Until rates return to the "norm", what's the problem? They're definitely going the "wrong" way for that now, and no telling how long before they start going back up.
Good book, and whether it was good luck or good analysis, he pointed out the tipping point for the Japanese economy was when (from my fallible memory) household debt/income reached 130%, which was when things began softening here, too (Q1 '07).
Thanks, all for your thoughtful comments to my questions.
A few other questions:
Hyperinflation is very unlikely, because this isn't an unsophisticated set of bankers.
Why wouldn't the politicians use fiscal policies to debase the currency, if they can't control the fed (if that is who you mean by bankers.
currency devaluation is a longer-term strategy - if it is brought under control. In the short-term in produces inflation and economic uncertainty, and thus a lot of unemployment. Are our leaders smart enough to understand this and take prudent action?
I'm not trying to pick a fight with anyone, but I'm trying to figure out how the long term plays out, and I think there are a lot of smart people here who can help me out.
Something about that young couple struck me as weird. Have they finished college? I didn't pick up many "smarts" while she was talking. She just seemed annoyed that now she had to sell. Hopefully she'll remember this little incident for a few decades.
Looking at the bigger picture, I think that the faster these clowns start sending in the jingle mail, the quicker housing fundamentals will return. The main problem continues to be affordability. Despite some modest declines, housing is still VERY unaffordable for any first time homebuyer.
MR;
In Germany, 1920's they debased the currency due to their heavy reparations debt. It was a proximate cause for the rise of Hitler and WWII. If the currency is debase, savers are punished. Worker demand higher wages, the price of mill is raised daily, Hugo Chavez makes speeches.
Sebastian, nothing wrong with your thinking about lower rates=higher house prices normally. In this instance, the relationship does not hold. Those lower rates basically go along with tighter credit standards and higher downpayment requirements, so effectively the lower rates only mitigate a portion of the credit crunch.
But if the overall environment other than rates were level, you'd be right. In reality, you are dead wrong. Prime interest rates are going down in part because of the rate cuts, but also because of a collapse in demand. (And rememember, to lenders loans are assets.) In effect, lenders are bidding up the declining pool of the truly creditworthy even while turning away many who would have qualified to purchase a loan over the last 4 years or so.
no way. the billions of writedowns of banks, foreclosures, implodes (220), CDO's, etc. have been going on starting last February and intensifying last summer.
regarding gold, i was being facetious. most ppl believe gold will crumble as this housing deflation continues. i don't.
Deflation/inflation. There are good arguments on both sides. It is not an easy prediction as much depends on how the politicians, regulators, central bankers, and markets react to the problem.
Could be some of both depending on the asset and money supply.
Bank of the Carolinas Corp. reported Thursday that it had a loss of $19,000 in the fourth quarter compared with net income of $681,000 in the fourth quarter of 2006.
Bank of the Carolinas also raised its loan-loss provision to $450,000 in the quarter compared with $182,000 a year ago
Corus Bankshares Inc., a Chicago-based bank specializing in condominium construction, said Friday that fourth-quarter net income plunged 96 percent, due in part to increases in the provision for loan losses. Net income was $1.9 million, or 3 cents a share, 44 cents a share below estimates, according to Thomson Financial. A year ago Corus earned $47.2 million, or 82 cents a share. Loan loss provisions increased to $33.5 million, up from $4.5 million a year earlier, the company said. Loan-quality issues are "contributing to significant declines in earnings," Corus said.
Fortis is reviewing the value of its subprime CDO portfolio on an ongoing basis,'' the company said in the statement yesterday.Even under very stringent coverage assumptions based on the most recent and presently available market information and data, Fortis's capital and solvency requirements would still be met.''
Fortis expects loan-loss provisions for the remaining part of the portfolio to remain within the guidance given in previous communications, the company said. Fortis, which has an asset- backed credit portfolio of 51 billion euros, is scheduled to report full-year earnings on March 7.
Countrywide posted its $1.2 billion loss as fallout from rising home loan defaults and the ongoing housing downturn hurt its loan originations and forced it to set aside millions of dollars in loan-loss provisions and write-downs.
The San Francisco bank holding company reported net income of $165.7 million, or $1.20 a share, compared with $226.4 million, or $1.61 a share, a year earlier.
The latest results included loan-loss provisions of $56 million because of increased reserves attributable to the home builder segment of its loan portfolio and litigation expenses of six cents a share related to its share of Visa Inc.'s $2.25 billion antitrust settlement with American Express Co. (AXP) as well as a $61 million gain from the sale of its retirement record-keeping business to Prudential Financial Inc. (PRU).
Year-ago results included a $78 million credit for California franchise tax refunds and adjustments as well as loan-loss provisions of $3 million.
The Salt Lake City financial services company said provisions for loan losses rose to $70 million from $55.4 million in the sequential third quarter and net loan and lease charge-offs grew to $26.7 million from the previous quarter's $18.1 million. Nonperforming assets rose to $283.9 million from $196.6 million.
Capital One Financial Corp.'s fourth-quarter net income dropped 42% on higher loan-loss provisions amid the slowing economy and consumer-credit crunch.
The financial-services company reported net income of $226.6 million, or 60 cents a share, down from $390.7 million, or $1.14 a share, a year earlier.
The latest results included a $1.9 billion provision for loan losses, including about $1.3 billion in charge-offs and an allowance build of $650 million, as well as $27.8 million in restructuring expenses.
Year-ago results included $513.2 million in loan-loss provisions.
MR-hyperinflation may not have a precise borderline vs high inflation, but, choosing an arbritary amount, for example 6% inflation is only "high inflation" in my book. Our imagined deficits for now are far less than 6% for example. "Hyperinflation" makes me think of big numbers like 25%/yr and worse.
Why wouldn't the politicians use fiscal policies to debase the currency, if they can't control the fed (if that is who you mean by bankers.
The best argument I can come up with is that people who are wealthy (like politicians) and have a lot of influence in political affairs would probably benefit in a deflationary environment - deflation, by definition, makes people with a lot of money wealthier.
But I do think there's a real threat we'll attempt to solve our problems by debasing our currency since we habitually look for "quick fixes" and that seems to be the most obvious one.
MOM said: "Sebastian, nothing wrong with your thinking about lower rates=higher house prices normally. In this instance, the relationship does not hold..."
MR-hyperinflation may not have a precise borderline vs high inflation, but, choosing an arbritary amount, for example 6% inflation is only "high inflation" in my book. Our imagined deficits for now are far less than 6% for example. "Hyperinflation" makes me think of big numbers like 25%/yr and worse.
I think what's far more important to hyperinflation is an ongoing acceleration in inflation, not the rate itself.
idoc--the time scale is years for housing. You need about a year for average people to even realize something happened. We're to that part a little early I bet. Then you'd usually need most of a second year for enough sellers to conceed the old highs are gone to get even modest moves down, imo. But this isn't just an average oversupply. And the news is traveling faster....we'll see.
So, the time scale is usually years, but the big public start was only in August.
Loan loss provisions increased to $33.5 million, up from $4.5 million a year earlier, the company said. Loan-quality issues are "contributing to significant declines in earnings," Corus said.
This is a company that will lose well over a billion dollars on condo construction loans, and stick the FDIC with most of it.
In Germany, 1920's they debased the currency due to their heavy reparations debt. It was a proximate cause for the rise of Hitler and WWII. Yes, I agree, but will that stop us from beggaring our neighbors?
The best argument I can come up with is that people who are wealthy (like politicians) and have a lot of influence in political affairs would probably benefit in a deflationary environment - deflation, by definition, makes people with a lot of money wealthier. This makes sense to me, but seems to lead to a severe disconnect between the politicians and the people, leading to a radical change in government?
Given the place of the great depression in our national narrative, wouldn't inflation be a better way for politicians to win elections? It would be a more subtle way to increase government revenues than tax increases. I could understand the horror of high inflation (or hyperinflation, what ever word you want to use) if we were Germany, but that doesn't seem to be a major fear in this country.
Don't want to be a troll, just want to get the benefit of the thinking of the smart people here.
I need to study this as a hobby, so thats a great direction I think; wish I knew more, but thats why the challenge is intriguing. I imagine CR & Tanta in black suits with a long list of suspects that are not worthy. Check out the link!
I watched 60 Minutes and yes, I think it is the tipping point in my middle America - the Inland Empire. Put the message in the mainstream media and see how many people will do what everyone else is doing. I found out today that the across-the-street neighbors are walking from their 650K house with 100% financing because the value has dropped so much. Can they afford it? Probably - I mistakenly receive their mail sometimes, addressed to the Xx and Xy Trust. I bet they are making a "business" decision. Want to take bets on how many other less sophisticated on this street (i.e., not enough assets for a trust) follow their example?
The Fed's last cut actually worked! 500 point Dow decline averted. High fives around the FOMC boardroom table!
Fast forward one week, two, or a handful...
Dow futures down 500 points on a Sunday night. Monday traders are glued to their screens, waiting for the news. Two possible outcomes:
1) No cut! Traders scream in agony, but the Fed says nothing. Finally, mid-day Greg Ip of the WSJ cites an unnamed Fed source on his blog -- "we can't cut everytime this happens." Despair, 500 points turns into 1000.
2) 75bp cut! Awesome! Traders bid prices up to flat, then the sellers come in. Down 500 points again. Traders "discover" the Fed can't guarantee stock prices. Beyond despair. 500 points turns into 2000.
Can't the Fed imagine the risks presented above? Maybe that's what this is, a colossal failure of imagination. Regardless, they are playing with fire, and its easy to imagine their 500 point "save" making things worse.
ok, since no one will answer my Q, i'll take a guess at it.
the short end of the UST curve tonite is plummeting as stock mkts in Asia are getting hit and money moves across the Pacific back home to the good ol USA?
MR - again, in the short-term devaluation produces inflation (in the price people pay for goods and services, at a rate that runs ahead of their wage increases) and unemployment. Unemployed people rarely vote for encumbents, and what politicians want most is to get re-elected.
I'm not opposed to inflation - I'm not a gold bug - but I think the last 60 years of economic development has shown that economies do best when prices are stable - at least for the economic horizon most people have, which is 2-4 years. If people start thinking that prices of anything - food, homes, stocks, cars, tvs, etc. - are going to swing wildly one way or another over the short-term, their behavior tends to alter in ways that isn't sensible for the long-term.
Blonde Vigilante writes:
MR
Perhaps you missed the reference to Hugo Chavez.He is currently causing inflation in Venezuela and not winning elections because of it.
You are absolutely correct, this went right over my head. I should do some reading on the political and economic situation in Venezuela.
I'm wondering, what aspects of the economic situation in Venezuela apply to the US. My ignorant impression is that the "zeitgeist" of that country is quite different from ours.
Stockton is my hometown and my dad still practices medicine there. He told me, in '04 and '05, that the nurses and office help (mostly Hispanic women single or divorced) were buying new houses worth more than my parents' house! I just didn't short DSL and CFC enough.
Those asparagus fields referenced in the 60 Minutes piece and other ag land that were developed were mostly owned by Japanese families some of which had been relocated during WWII. We knew some of those families and I went to school (Lincoln High) with some of the kids. Sort of a karmic payback, at least in that regard.
halbhh writes:
dryfly, see my back of envelope above.
halbhh | 01.27.08 - 9:54 pm | #
I read it - sounds reasonable. Okay maybe make a few allowances for range of 'income to price ratio'... say 2X for undesirable locations and 4X for highly desirable locations... and then throw in TJ's point that lotsa folks have seen little or noo income increase (what increases there are have been skewed to high earners)... and you have pretty slim justification for price increases in many if not most locales.
A great compatriot of ours once forewarned, over a tall glass of vodka: that which does not kill you makes you stronger.
Oh. I thought it was "stranger."
In the same vein, I thought (didn't everyone who's seen the Asia intradays think?) they'd be looking for another rogue trader. But a rouge trader might be the more creative option, or at least more fun.
But seriously, that 60Min report is more chilling the second time, even though regular CR folk are aware of its limitations. Bob Dobbs could be right that this is where middle America begins to depart from its assigned role.
If people start thinking that prices of anything - food, homes, stocks, cars, tvs, etc. - are going to swing wildly one way or another over the short-term, their behavior tends to alter in ways that isn't sensible for the long-term.
This makes good sense. If the goverment has any control at all, I wonder which way they will push asset prices. . .
This makes sense to me, but seems to lead to a severe disconnect between the politicians and the people, leading to a radical change in government?
Given the place of the great depression in our national narrative, wouldn't inflation be a better way for politicians to win elections? It would be a more subtle way to increase government revenues than tax increases. I could understand the horror of high inflation (or hyperinflation, what ever word you want to use) if we were Germany, but that doesn't seem to be a major fear in this country.
In a lot of ways inflation is a transfer of wealth from older generations to younger generations as savings are devalued and the relative value of wages go up. In fact that's part of the economic benefit of inflation -- people who can no longer live off of interest payments are forced to go back to work. More resources are mobilized; hence your 75-year-old former CEO Walmart greeter.
But in this country older people are more likely to vote than younger people, so they may favor a deflationary environment.
the short end of the UST curve tonite is plummeting as stock mkts in Asia are getting hit and money moves across the Pacific back home to the good ol USA?
idoc | 01.27.08 - 11:23 pm | #
D-P-, do we give the Fed too much deference? Maybe so.
Your scenario is plausible, logical, and not difficult to arrive at.
But, if you think about it from another perspective -- that the Fed is the linchpin of the banking cabal; read Rothbard's 'The Case Against the Fed' -- their surrendering at the first whiff of grapeshot is not surprising, and entirely within character.
Not to be paranoid, but the Fed Governors are nominated by their regional banks, and must spend a lot of time looking at things from the banks' perspective.
In a lot of ways inflation is a transfer of wealth from older generations to younger generations as savings are devalued and the relative value of wages go up.
its also a shift of wealth from the middle class to the wealthy (bankers) who get first crack at cheaper money.
But in this country older people are more likely to vote than younger people, so they may favor a deflationary environment.
You know a lot of middle aged to older folks with savings? I don't. WWII-Depression babies sure... Boomers? Not too many.
I know a bunch who have too much house and too much debt for where they are at in life though. Don't see how a vote for deflation helps them all too much.
its also a shift of wealth from the middle class to the wealthy (bankers) who get first crack at cheaper money.
Inflation destroys the value of long-term loans. As I understand it the inflation of the 1970s was disasterous for a lot of US banks who borrow short and lend long. I always assumed the banks were behind the political support that allowed the unemployment rate to be deliberately pushed into double-digits.
its also a shift of wealth from the middle class to the wealthy (bankers) who get first crack at cheaper money.
idoc | 01.27.08 - 11:31 pm | #
They run from 'money' into inflating assets... and only convert those asset values back into money to consummate specific transactions with any cash remaining after transaction going back into appreciating assets ASAP.
You know a lot of middle aged to older folks with savings? I don't. WWII-Depression babies sure... Boomers? Not too many.
I know a bunch who have too much house and too much debt for where they are at in life though. Don't see how a vote for deflation helps them all too much.
It's different from the situation in Japan where there was far more in the way of savings, I admit.
I work with a lot of people maybe 10 years from retirement who still have almost everything in stocks.
The seventies was a tough time, I was in college at the time. I think employment was fairly good until interest rates were raised by Voelker (sp?) in the eighties. But, boy, real estate had quite a spike, if my memory doesn't deceive me.
MR writes:
The seventies was a tough time, I was in college at the time. I think employment was fairly good until interest rates were raised by Voelker (sp?) in the eighties. But, boy, real estate had quite a spike, if my memory doesn't deceive me.
MR | 01.27.08 - 11:42 pm | #
I was there for that too... fun, eh?
RE went up due to wage inflation... incomes shot up due to wage price spiral & RE followed. No reason to believe that will happen the same way again.
just how many hits can world mkts sustain? freezing redemptions is the pinnacle of insanity of investors. who is so stupid to put their money into these things?
I'm curious why you think the wage/price spiral won't go up again. If we debase the currency, won't it be cheaper for foreign businesses to make products here, especially if we can't afford to buy their products made in locations where currencies are appreciating.
I'm 15 years out from 'official' retirement dates and am half stocks - quarter cash and quarter bonds... Its a toss up which is the worse bet.
I've got a ways to go, but I've got the most conservative allocation of anyone I've talked to for my retirement account -- 100% short-term treasuries and money market stuff.
But that's partly to offset the risk of my non-retirement gambling account.
What worries me now is that a lot of the Baby Boomers approaching retirment I talk to say things like "I have to be in stocks because 4% a year won't be enough for me to reach my retirement goals."
I find this very disturbing. And inflation doesn't do much to help these people because the value of their investments are likely to decrease in such an environment (even if their dollar value increases).
It appears I'm more conservative than anyone. All my retirement is now in CDs of 3 months or less in a few currencies, and what has now become 300k worth of physical gold. I briefly held some Intel calls for a few days that were doing well out of the bernake bounce - but got stopped out as they fell back on friday. I just can't see how to go long anything at all right now. It all seems to be a bubble. All of it. Even ultra short ETFs seem risky. Will they pay out if they really coin it during a true meltdown?
I'm curious why you think the wage/price spiral won't go up again. If we debase the currency, won't it be cheaper for foreign businesses to make products here, especially if we can't afford to buy their products made in locations where currencies are appreciating.
Asia will fight back. In the 70s there was only Japan (smaller than the US in population and in economic size) fighting the US for 'good jobs'.
Now we face China (3 plus times our population) and India (3 plus times our population) but desperate to keep job growth accelerating. A weak dollar hurts them two ways (1) harder to export here and (2) more competition from US producers there... they will respond eventually. However they do it will continue to put pressure on US wages.
What a weaker dollar does is keep us working but we all work for less (in terms of 'price parity'). That is NOT bullish for real estate.
Markets are repricing, i.e. trying to find a sucker to buy at this level and save some hedge fund a few bucks. Corp buy backs and LBO drove the market above 10K, MEW drove it to 10K, FED's rates cut not going to keep it above 10K
What worries me now is that a lot of the Baby Boomers approaching retirment I talk to say things like "I have to be in stocks because 4% a year won't be enough for me to reach my retirement goals."
They need to re-asses their 'goals'. I might not have the most conservative investment strategy here but I'd bet no one out there can live as cheap as I can - not in my blue collar neighborhood in my small Midwestern town.
For grins - you can buy any house with in a five block radius of where I live for less than $200K... ANY house.
There are more than a few homes under $100K.
Property taxes are in the $1000 per year range.
On and on...
People on the coast have no idea how far down 'down' really is.
australia is celebrating australia day and everyone looks tan, fit and relaxed and are paying 8% on their floating mortgages and are relatively sanguine about paying more soon if interest rates rise (you can't fix for more than a few years here).
Sydney property with a view is still changing hands for millions, even though rental returns after expenses are a couple of percent. This place is a mine for china and I think most people feel that no matter if the world economy goes into recession and china gets wobbly, their internal economy is unstoppable now, so australia will continue to receive more & more money for handing over chunks of their almost limitless iron coal and uranium ore etc. Honestly it is a bit hard to disagree with them on this. Doesn't stop their stocks from tanking off some historic highs, but most don't seem to calculate their net worth daily so aren't that concerned.
Its why I've been sayin' 'most boomers aren't retiring'... they (we) will die with our boots on.
dryfly | 01.27.08 - 11:51 pm
sweeping floors at Walmart...
(by the way, when did active comment threads consistently run way over 100 comments on this blog? CR/Tanta are more popular than Daily Kos and Eschaton! [and make more sense])
Do you have any thoughts on TIPS? Stagflationary Mark at Illusion of Prosperity is confusing the bejeezus out of me with his TIPSy-ness. And I like holding onto my bejeezus. I've moved most of my savings into Vanguard's Treasury MM, btw (the pie is a soothing green when I log into my account).
Do either of you see any counterparty risk in the ultrashort ETFs?
Well, as I understand it, the biggest risk is that you won't get paid your gains for some period of time, which I could live with. Especially if the swaps are settled every day (I not sure if this is the case).
I'd be more worried about something dumb happening at ProShares or the money market assets just blowing up.
And yeah, I know what Richmond's like (I grew up there), but this is shocking. Many similar houses in that neighborhood w/ 30% to 50% drops after a last purchase less than 6 months ago. Wow...
Is it wrong to want to see the bottom drop out, just so we can start coming up with real solutions and not just window dressing designed to sedate the average American?
Hey Fubar, Thanks for the reminder and link. I'm watching CNBC TV18 on my HTPC now.
OT: Its strange - I've put a lot of effort into understanding a set of technologies and putting together the equipment and ahem, "unorthodox" skills to get just about any satellite signal that has a footprint on the USA. I get about 10,000 channels and felt pretty damn proud of it.
But, looks like the internet serves up - billions and billions of channels - and nothing "unorthodox" needed - and the real ones at that - I've watched CNBC TV-18 on my visits to Mumbai - that's the feed here damnit and at last, the picture and sound isn't too bad and it can ONLY GET BETTER !
Sigh.. another set of skills and knowledge base blown away by the net my FTA friends will be crushed
Had workmen in the house on Thursday/Friday and talked with them over the period.
Kind of reinforces my faith that Jefferson was right about the common sense of the average guy. The best response to the spending stimulus was "yeah, I'll spend fictitious money. Right."
Don't know how widespread the jingle mail will be, but amongst the flyover blue collars, I don't see it happening.
Way back in this thread (on topic) there were some suggestions that the 60-Minutes piece demonstrated capitulation. Don't think so.
Unless you've seen the For Sale signs in your neighborhood, it just a problem for "those folks" in Central CA who got themselves into this mess. "The folks around here ain't that stupid."
My impression is that what someone in NE Ohio thinks are boom times would be considered a depression out here in California.
LOL. Exactly.
BTW... parts of Eastern Ohio, Western PA & Upstate NY are the ONLY places I know that are a lot cheaper than where I live right now. I saw a list of the ten cheapest places in America and all came from those three states.
I think my county is being 'inflated' by high prices in dairy and corn darn gummit... and I didn't by farm land when it was cheap. Grrrrrrr!
As I understand it, most people these days expect to work longer but due to circumstances outside their control -- deteriorating health, etc. -- a vast number don't end up getting that option.
MY problem with gold...
While i can afford to buy a few contracts,sans margin, and request delivery, the delivery is really only a certificate(paper) placed in a vault somewhere that i'm not allowed to access...?
How fair is that? It's worse than art.
Now , I could go to canada, but them i'm breaking the law if i transport 300-400 ounces over the border.
As I understand it, most people these days expect to work longer but due to circumstances outside their control -- deteriorating health, etc. -- a vast number don't end up getting that option
Those in "flyover country" don't have to "jingle mail". Only a good number of those along the coasts do in order to bring the whole house of cards down. Middle America constitutes less than half the value of residential real estate; far less if you exclude the bubbliest cities.
sportsfan, the counterparty risk thing is clearly something that has crossed my mind -- especially since I have everything that I've got, plus a little borrowing, in SDS.
I think I may cash out of SDS and get back into gold/gold mining stocks after a one day/two day drop of 10-15-20% in the market.
The ballsy and logical thing to do, for me, would be to remain in SDS, riding the market down, until gold began moving up.
But, the counterparty risk thing is always in the back of my mind. I'll probably chicken out and move into gold right after a one day/two major correction.
My assumption is that the massive cross-default counterparty risk won't happen for six months/year. Just a guess on my part.
Dryfly, given developments of late, I gotta ask you:
Have you changed your opinion (correct me if I mis-represent it) from a few months back that U.S. consumers are highly unlikely to go Japanese and drastically curtail spending...???
That was a primary argument as to why we would not have deflation, if I recall correctly.
Sportsfan... lots of very strange sale histories in that neighborhood; there are waaay too many homes with last sales of Nov. or even Dec. '07 clustered in Richmond. Any reasonable explaination??? People buying sight unseen and realizing "partially remodeled" means "all plumbing and wiring conveniently removed"?
Those in "flyover country" don't have to "jingle mail". Only a good number of those along the coasts do in order to bring the whole house of cards down. Middle America constitutes less than half the value of residential real estate; far less if you exclude the bubbliest cities.
But it is still about half the population IF you include places like western NY, western PA, WVY, Ohio, southern Illinois... etc. There are a lot of hicks out there - somethin' the pollsters learn to their dismay every four years.
So if there are people looking for refuge in retirement... they need to look away from the bubbles. It will be many folks only hope.
I never bought into the concept myself and I'm not exactly sure 'why not,' but I just have an odd feeling about what they claim they are doing.
I suppose as long as markets remain liquid, it really doesn't matter what they are doing . . . until, of course, the day it does . . . and that may be a day of reckoning for all sorts of investment vehicles.
If you're still out there, one word -- Japan. ZIRP didn't do a damn for sustaining insane housing prices. They had everything else going for them, too -- limited land, highly restrictive zoning, strong cultural incentives, etc. I'm sure if you asked them, they'd say everyone wants to live there, too.
Besides, if lower rates justified higher prices, why haven't periods of consistently higher rates yielded lower prices?
Standard ratios have perpetuated historically due to many fundamental reasons. Unfortunately, this boom had nothing to do with fundamentals.
Dryfly, given developments of late, I gotta ask you:
Have you changed your opinion (correct me if I mis-represent it) from a few months back that U.S. consumers are highly unlikely to go Japanese and drastically curtail spending...???
Not until they are broke - really broke. I see little sign of it - not in the numbers, not anecdotally.
Should folks save? Yes. Are they really? No. Will they? That's debatable - I bet not until their CC are pried from dead cold fingers.
I'm on the phone right now with a japanese mortgage broker. trying to refi my home... he keeps saying that they don't give out mortgages to americans! But I want my 1% 30 year fixed!
tj, well said w/ respect to interest rates and house prices.
Seb, you must not have watched the 60-Minutes piece. It makes it pretty clear that low rates were a minor part of what drove this housing frenzy. It had a little bit more to do with lending standards (or lack thereof).
Oh lovely, now I can get my own little small town bubble as the coasters head in.
When my wife and I listed our old home in August and bantered around price, we toyed with listing in NYT, WashPost and Boston Globe w/talk about updated energy efficient home in small college town in farm country and listing at $450K. fortunately, I don't like toys anymore.
Those in "flyover country" don't have to "jingle mail".
A 20% drop on a 150k$ house, while nothing to sneeze at, is still within the range of numbers that most Americans can grasp. Work some OT, maybe moonlight waiting tables, add up the costs to move and repaint the kid's bedroom, and you'll end up staying put.
A 20% drop on a 600k$ house, well, that's something else altogether...
I don't expect Americans to suddenly embrace savings. I just expect them to learn a very healthy fear of debt. That's because folks who believed house prices were true house values spent themselves into a position of losing all they have. I'm not talking about the folks in the video who had no skin in the game to begin with. I'm talking about folks who had decent equity and spent it because they were led to believe they had boatloads.
Query for you. Got Veribanc report for my region and am going to move money to another bank.
Given their ratios and criteria, all things being equal, which deserves the greater weighting? Liquidity ratio, equity/asset ratio or Profitability ratio. My thought is that liquidity is probably worth more, but kind of in the dark.
You guys scare me. First of all, I can't imagine the Fed cutting again before the regularly-scheduled announcement. Second, I don't see how they can cut it anywhere near the levels (zero) that you are discussing. C'mon, we do want to keep reserve currency status, no?
I don't expect Americans to suddenly embrace savings. I just expect them to learn a very healthy fear of debt.
Only after they've been burned - really burned (as in see living standards decline as a result of their activities). The walk away jingle mail phenomenon just re-enforces debt as nothingburger.
We have a long way to go before the consequences are evident.
Are there any benefits to cutting to zero? I thought these current interest rates are historically low... so whattahell?
I heard 50+ year older co-worker mention, "just cut to zero, inflation doesn't exist" last week. I don't think he knows what he's talking about, but I don't know the implications myself.
ShortCourage writes:
You guys scare me. First of all, I can't imagine the Fed cutting again before the regularly-scheduled announcement. Second, I don't see how they can cut it anywhere near the levels (zero) that you are discussing. C'mon, we do want to keep reserve currency status, no?
ShortCourage | 01.28.08 - 1:09 am | #
I agree.
But that should give NO ONE comfort as I'm ALWAYS wrong about fed cuts.
Yeah dryfly, but it's not really the ones that are walking away unscathed that will turn the tide.
It's the long-time homeowners who traded their retirement and their kids college savings for a nice shiny kitchen and a fancy driveway. Those and the silly ones who put down their life savings in a 10%+ downpayment during the peak.
Also, the lenders tightening will have something to say about how much we spend in the next few years...
Also, the lenders tightening will have something to say about how much we spend in the next few years...
ShortCourage | 01.28.08 - 1:13 am | #
That's where the rubber meets the road. But it is also where fiscal & monetary stimulus can really shake things up... in an inflationary way.
BTW - I'm starting to see hints that DOD spending is increasing. Contracts working their way down to folks like me. An election year opening of the wallet maybe? It's about that time...
NegAm Recaste writes:
Probably the most striking exchange from the video:
....
Yeah, it struck me at first and then I said.. nahh - I see similar thinking ALLLL the time; there's no sense of shame, remorse, "sharam"- to use a Hindi/Urdu/Arabic word which has HUGE connotations; hmmm perhaps the word honor is the meaning of that word as used in the South or Western movies once upon a time; or chivalry in medieval times.
I'm NOT berating or taking sides on any cultural aspects here. It just "IS" this way, particularly in Cali, IMO.
INcreasingly, I'm less concerned about keeping the reserve currency status and am looking at empire as just not what this country is about.
Reserve currency status causes a lot of distortion. I wouldn't lose any sleep if the USD was replaced with a basket of prominent currencies. It's about time.
homedad43, ignore all of that and only deposit less than $100,000 to keep your principal and interest safe. There is a relatively new $250,000 FDIC insurance rule (see FDIC's site and do not trust the bank for accurate information) for certain types of retirement deposits. If you have more than $100,000 to deposit then open accounts at another bank that is not affliated by ownership with your other bank(s). Monitor ownership of your bank(s) because if they merge or otherwise become affiliated your FDIC insurance coverage may be reduced. This blog has posted a wealth of information about FDIC insurance in the past and always go to FDIC's web site or call its 800 number for assistance. Again, do not trust what a bank tells you about your FDIC coverage. I have seen much pain and heartache during bank closings because customers "trusted" their banker's word.
Reserve currency. After all this? Niall Ferguson makes the argument that while the world needs pax americana, citizens (loose term) are not willing to put the boots on the ground to sustain it. That and the idea that empires founded on debt are kind of, well, vulnerable...
It seems like a long time I've made the mistake of overestimating the rectitude of the FED, prudence of congress; all while underestimating the consumer's stuff cult. But it's not a long time. Blink of an historical eye.
I'm NOT berating or taking sides on any cultural aspects here. It just "IS" this way, particularly in Cali, IMO.
I don't get it. I'm too lazy to move.
But if I did I'd move to a house so cheap that when I die my kids take out the crap they want and then set the place on fire (with my remains still inside it)... Viking or Hindu style.
Most of American history has been an unwillingness to put boots on the ground in other countries, unless there was clear national interest at stake.
As nation of immigrants, most came here just wanting to get the hell away from the rest of the world for whatever reason they had. The past 60 years only comprises about a quarter of our history. Not blink of an eye, perhaps...
Last Tuesday will be remembered as the Bernanke Flinch.
Anyone who thinks BS Bernanke is sweating, scared, or otherwise perturbed is severely mistaken.
This is Bernanke's chance of a lifetime - when he is presented the opportunity to employ what only yet has been mere theory. If anything, he awakes early every morning with the excitement of a child at Christmas. He has the world by the throat.
His autobiography will characterize this moment as "exhilarating."
Most of American history has been an unwillingness to put boots on the ground in other countries, unless there was clear national interest at stake
That's a distortion of history; Manifest Destiny is the generally used descriptor for the ideology that has guided the historical events and processes.
The particular events would be:
1. Annexation of the West ( oregon, Texas, Cali).
2. removal of the Indian tribes/nations.
3. Cuba
4. Philippines
5. Guam
6. Puerto Rico
7. Hawaii
The 60s and 70s issues in South America, SouthEast Asia are recent enough for you to know; the 2000+ version is in our faces right now.
Of course, national interest is a catch-all for rationalizing ones way out of it. Generally of course, national interest should end at the nose of their national interest on THEIR land. Unless of course your fist is bigger than theirs.
Its all ok but I wish it was stated for what it is - naked self-interest and fuck the rest; oh alright - naked national interest as it were.
I just saw the 60 Minutes spot. Nothing ground breaking, but a good Mortgage Fiasco 101. This thread still is about the 60 Mintues spot, right? Darn Trolls.
That's why I said "this year". I fully expect 0% when the depression hits full force. is this the part where the meek inherit the earth??
i can be meek. really really meek.
HA! I was just telling my better half yesterday that being meek gets you nowhere. Like the Cadillac commercial says, you wanna be the hammer or the nail?
Little ones ! And while we talk of little ones, lets keep the other little ones in frame - Nicaragua, Panama, Cambodia,hmmm what was that really little island that Reagan invaded - o yeah - Grenada.
Anyway, my point of contention is that the US hasn't shown much reluctance to put boots on the ground - proxies and irregular troops count of course and as you correctly point out, WHEN THEY ARE LITTLE GUYS. There's a word for taking on only the little guys..
Its MUCH more circumspect and thoughtful when it comes to taking on the BIG GUYS - twas ever thus.
btw, the phrase Manifest Destiny has a modern usage to describe the whole set of ideas, reflections... arghhh just check out the wikipedia link.
Boy - the smartest guys in the room just never figured the sheepz would just up and leave the corral if they didn't have any skin in the game did they? We're shocked - SHOCKED!
my god - I'm firzt....
Excellent. I'm watching it now. Great overview for the layman.
I'm going to be extremely honest and confess: Not being an investor, and being relatively financially secure despite living very modestly, I feel strangely good about what's happening. Really, I know it makes me a terrible person. But it lifts my spirits. Yes, other people's uncomfortableness. Like I said, I'm horrible. But that's how I really feel. I feel like things are finally getting back down to reality, away from this artificial lifestyle people have been living. It's a good feeling, like a load being taken off.
The worse the economy gets, the better I feel. I know it's wrong, but that's how I really feel.
CR-
This is off topic, but, I feel the need to make a request/voice my concern.
Jas has clearly become disruptive and frankly, is nauseating. I find it impossible to sift through the comments, even with the great changes you've made. You have created a wonderful enviroment with fantastic information and I thank you again, but, it is unfortunate that this individual has honestly managed to destroy what you have worked so hard to create.
My thanks, as always.
rc
I live in a neighborhood that is "immune" to the housing bust.
Please CR, just walk away!
Wow, 5 years or more in the media finally picks up on this scam.
I live in SoCal. The other day I was on Redfin.com just searching around. The entire screen was green with little houses. It was absolutely mind numming.
(I dont know if this will work but here's a link)
Redfin Redirect
anonymous expresses classic schadenfreude. at least he is honest about it.
ac, I have no mortgage to walk away from!
risk capital, I'll ask Jas to post fewer comments.
Best Wishes.
I live in a neighborhood that is "immune" to the housing bust.
welcome to orange county: "we are all jubprime now."
I agree with Risk Capital. I feel badly for all of those folks who got suckered into sub-prime, Atl-A, and other dumb loans, but the bubble has absolutely made housing completely affordable in my area. Fortunately, I bought before the bubble, but I bought a home, not an investment. But there are a lot of good working people who have been completely priced out of the market because of the flood of out-of-staters looking for "investment" property to flip. Dumb! In a way, they're getting their comeuppances.
ac, I have no mortgage to walk away from!
Don't let that stop you -- just mail the keys to the local sheriff.
What will the neighbors think otherwise?
bacon dreamz, you don't know how often I hear the phrase "my area is immune". That is why I put it in quotes. We are still in the denial phase, and I've already heard one person say that if it's on 60 minutes, we are near the bottom. More denial.
Best to all.
OT
From Dr. Hussman;
Hussman Funds - Weekly Market Comment: Broadening Instability - January 28, 2008
Several years ago, Joel Slemrod and Matt Shapiro (former colleagues at the University of Michigan) estimated that only about 22% of the tax rebates provided during the last recession were directed to consumption, with the bulk going to savings and debt service. Given the much higher debt burdens today, I don't expect this instance to be much different. In the end, the U.S. economy will carry a larger amount of U.S. Treasury debt, and a somewhat smaller amount of mortgage and credit card debt than it would have in the absence of the fiscal stimulus.
I believe the agent who said that we are not yet 40% into the foreclosues in Stockton. One might argue that Stockton is probably on the front end of the national problem. If we get more than a weak recession, we could get 5X more foreclosures than we have now. Not quite at the bottom yet.
actually I'm not happy about other people's misfortune, rather, suddenly I feel like my own sense of misfortune is disappearing. I guess misery loves company.
"I don't want to pay unless the price is going up."
Entitlement complex?
Don't know how many caught it, but the realtor in the interview used the dreaded 1T number. No little B's any more!!
Chris
Also, one of the links on that page is Andy Rooney saying that he doesn't think that we're in a recession and that he looks at the Wall Street Journal frequently but doesn't understand anything he reads.
I then Andy Rooney very eloquently illustrates the major problem facing the US economy today, though I suspect he doesn't realize it.
"Worth nothing on the dollar"
"Purchased by pension funds"
Wow. Just wow.
My area is certainly not immune. I have heard of two recent listings for nice places within a block of my home in Phoenix, and both are priced for early 2005.
By the way, Nikkei and U.S. futures are down. What is the over/under on rate cuts before the market opens tomorrow?
Unfortunately given the inconstancy of the current Fed we may need to clarify the rules - rate cut predictions should be expressed in total basis points, even if the Fed announces two or more separate cuts in the next twelve hours.
As a newbie could I ask for a few questions that I could take to the Colorado PERA meeting tomorrow? I may only get to ask one or two, but I want to get a feel for how deep their (my) hole is.
Thanks, all.
Subprime "Contained to planet earth"
on MSM no less...
I haven't seen it yet. But listening to you all, I'm reminded of the time back during the Vietnam War when Walter Cronkite, on the CBS Evening News, essentially said he'd lost confidence in it.
Cronkite was a god in those days "Uncle Walter" to 100 million households; LBJ is said to have commented, "If I've lost Cronkite, I've lost Middle America."
"60 Minutes" is at best middle-of-the-road investigative reporting. It's not Uncle Walter. But it does have a certain credibility with Middle America. If "60 Minutes" carries the story -- well, could be something of an Uncle Walter moment. A tipping point, at least in the mindset of a good portion of Middle America that wasn't paying attention.
In my neighborhood (90402), people are still trying to sell houses for $1400 a square foot...
I watched it and felt it was very well done, if way too late. I wanted it to go on; I was sorry when it stopped. I can't say there was any new info that I haven't read here or on Irvine Housing Blog.
And by the way, I'm still trying to get over the blacked out IRS returns.
Thank god homeowners didn't have any skin in the game, otherwise they would be taking the loss directly. They can always trade in the Harley and the boat for a van to park down by the river.
albrt,
Where do you see U.S. stock futures at this time of night?
I think the important part of tonight's show was the couple who talked about walking away from their property. Basically, that attitude of not having to honor the contract they signed, and basically willfully breaching it, seems to be taking hold rather quickly. They also announced how the only advice they got was to walk away. What was shocking was that this seemed to be based on the faulty assumption that home prices only go up, so that, pretty much, they were convinced of this concept, and when it turned out not true, they felt defrauded somewhat, and that somehow justified the walking away. I think if this attitude becomes pervasive, along with the other that home prices have a long way to fall, then we could have a much faster and deeper unwinding than previously thought this year. Scary stuff. Normally, Id say yes, on 60 minutes, must be the bottom, but Im not believing that at all.
World cnbc channel. Asia Squawk Box is usually what's on around now, and they show US stock futures along the top.
In general, I think they did a great of distilling a lot of the elements of the mortgage meltdown into a story that most people can understand.
What did get my goat a little, however, was their continued emphasis of this problem as a "subprime" issue. There was nothing singularly subprime about the doubling of home prices in a 4 year period, and - consequently - the downfall will not be singularly subprime. Moreover, if prices drop more than 20%, even vanilla conforming loan mortage holders that bought near the top (when there were the most sales, mind you) will be underwater. If there are 30% price declines that are clearly evident, jingle mail will hit the prime Fannie/Freddie stuff with a vengeance.
House of cards indeed.
I'm nervously wondering when they are going to fall, and just how many cards are stacked up.
I'm buying a safe this week. I'm making the switch to mostly cash and I'm going to start withdrawing a bit and stashing it away in the Bank of Sealy. I gotta move my funds around too. It's time to go liquid.
ron writes:
Subprime "Contained to planet earth"
on MSM no less...
Must be a CR reader...
There's nothing wrong with Schadenfreude directed at realtors. ITs good.
The conspicuous displays of wealth and consumption by over-glorified RE clerks (realtors) and paper-pushing used-car salesmen (mortgage brokers) served to disincentivize useful work and investment endeavors.
Likewise with the mortgage brokers. These people need to be exposed along with their scam or more real wealth will be wasted on their fake enterprises.
Only with a downturn can people see the scams of realtors and mortgage brokers. And malinvestment be stopped. And America stop its slide and regain a more balanced economy. ITs good for America.
For a great explanation:
Americas inflated asset prices must fall By Stephen Roach chairman of Morgan Stanley Asia.
FT.com / Comment / Opinion - America’s inflated asset prices must fall
Remember it's good to see a scheming con artist out on his ass in the street. It's more than good; its FANTASTIC! And don't worry- the realtors who are really desperate for money in Cleveland/ Detroit / Florida have already figured out that they can go back to dancing on tables topless.
I just don't have two hours free to watch 60 minutes,but anyone who thinks we are close to a bottom has theirs resting on their shoulders.And do visit JJ's blog to say HI! so he doesn't get lonely.
this piece along with Cramers advice to just walk away is self reinforcing. i predict the HB's runup last wk will be met with another strong downleg below recent lows. it won't end until several public HB's go BK.
What should the "normal" rate of yearly home price appreciation have been during the last 5 years or so?
An interesting back of envelope:
One way of measuring the over-valuation, and thus the "loss" in "value", so to speak, is to use a borderline high ratio like 3.0x median family income (this allows us to ignore renters). So, rough calculation, keeping only 1-2 significant digits and with small errors:
Median Family Income: $50K
3x income Median house pricepoint: $150K
Current median house price about $220K
Housing stock about 120M
Overvaluation by this measure: 120M * -$70K is about $8T
applying some fudge factors, like sticky prices, inflation, etc., it's reasonable nonetheless to imagine a decline in market values on the order of $5T.
Comparing to earners, this is averages to the order of $30K per taxpayer (between $20K and $40K).
"Can't Fight This Feeling."
uhhh, guys...
this is a country where one of the top show's on MSM tv is Wife Swap...
there is no Honor.
Take it on the run,... it ain't over
Do you think my landlord will be pissed if I mail my keys to a bank? I want in on this.
I am sorry, while I do believe in honestly paying your debts it is usury for the Valdez family to be paying 11% on their overpriced home. They should walk away unless their lender agrees to something in the range of 7%.
CR,
Ive read your thread on intentional forclosure....although I still have reservations on how many who can afford their homes will walk away....I must admit I am surprised. You are right as usual. This is getting very scary when even the most bearish among us are proven wrong and overly optimistic.
Keep up the good work you two.
will writes:
Do you think my landlord will be pissed if I mail my keys to a bank? I want in on this.
Thanks will... that was priceless...
Work continues late into night for State Of Union Address to America; any help, greatly appreciated ASAP: here's what we got so far:
Comrades,
We are joined together in unified worriment comparative to The First Great Depression -- which makes conveyance of this communiqué unsettling.
Americas impromptu titular heads have diagnosticated the conceivable probabilities associated with extreme distant possibilities of enervation in our future quotiental economy.
I surcease that as a transcendent nation composed of disimpassioned citizens, we will seize this challenging period as a time of opportunity which will help us to prosper in the future.
A great compatriot of ours once forewarned, over a tall glass of vodka: that which does not kill you makes you stronger.
Thus, we will become more vigorous, more virile, more robust -- togther during this impending period of synthetic derivative illiquidity, while our brothers in arms on the Wall Street Front, regroup, restructure and build new, stronger packages of securities which will be the envy of the modern and future world.
I goota get the fuc_ ouuta here, see yah later stronger.
where is stagmark.
CME Group - Home
That's Globex above.
Major World Indices - Yahoo! Finance
That's Asia.
Hope the links work. Never tried this before.
I don't know if Middle America is going to "get it" any time soon.
Expired
Marcel Nadeau of Rehobeth, Mass., said he paid $29,385 to reseller RazorGator for a package that includes three hotel nights and breakfasts, transportation to and from the game, a gift package, and tickets for him and his two sons.
"I'm confident the Patriots will win," Nadeau said in explaining why he is willing to shell out the big bucks. But even if they don't, his next stop is already lined up: "On to Vegas we go."
I've already heard one person say that if it's on 60 minutes, we are near the bottom. More denial.
Remind them of the the S&L and Farm Crisis circa 1984-1989... we were 'on' 60 Minutes so often you'd have thought it was a week by week reality show... who is getting kicked of the farm this week.
The RE guy that said we aren't 40% into this thing is probably optimistic.
"the realtors who are really desperate for money in Cleveland/ Detroit / Florida have already figured out that they can go back to dancing on tables topless."
I really don't want to see the beer-gutted guy who showed me over-priced properties in South Boston dancing on tables AT ALL, much less topless.
What should the "normal" rate of yearly home price appreciation have been during the last 5 years or so?
About the same as the growth in personal income.
dryfly, see my back of envelope above.
BTW:
Having been in the US domestic auto industry, i've seen too many highly educated professionals and hard-working people of all types inconvenienced by employment inerruptions. These were good people who worked hard and played by th rules and never tried to cheat anybody.
The out-of work realtors and mortgage brokers are inconvenient pond scum by comparison. Fringe economic actors who aren't nearly as important to teh national economy as their overblown sense of self-entitlement makes it out to be. If there weren't any serious bailouts for the former there is no way bailouts are deserved for the latter.
And the sooner the borrowers walk the sooner they can find more affordable place to live.
delayed 20mins-
INO.com Current Futures Trading Price Board - Intraday Prices, Charts, and Quotes for Futures and Commodities Markets
I think the magnitude of the problem hit MSM on the 23rd in this NY Times article.
They are talking about 30% further home price decreases in California.
ECONOMIC SCENE; Worries That the Good Times Were a Mirage - NY Times
"For prices to return to the old norm, they would still need to fall 30 percent across much of Florida, California and the Southwest and about 20 percent in the Northeast. This could happen quickly, or prices could remain stagnant for years while incomes and rents caught up."
It's still irritating that if you aren't willing to pay yesteryear's outrageous price...you're a "bottom-feeder".
where is stagmark.
Ponzimonetizacorupticapitalsm | 01.27.08 - 9:50 pm | #
He still responds at his website:
Illusion of Prosperity
check it out and say hi.
What should the "normal" rate of yearly home price appreciation have been during the last 5 years or so?
About the same as the growth in personal income.
Two other factors primed purchase prices 2003-2005:
1) 2001-2003 Tax Cuts giving everyone $100~$300/mo more purchasing power
2) Mortgage rates -- even 30 year fixed -- declining significantly through 2004.
The "so what" of the NYT's article is that I think we are past the point of denial. Not everyone, but that was sort of a capitulation article. The first I have seen with the sense of total resignation.
ponzi,
StagMark hasn't been around much, he did post around the 23rd or so on his blog Illusion of Prosperity
...
For those of you who don't have the time or inclination to spend 15 minutes watching 60 Minutes, here's the link to the "House of Cards" transcript and the video:
House Of Cards: The Mortgage Mess - 60 Minutes - CBS News
The worse the economy gets, the better I feel. I know it's wrong, but that's how I really feel.
Me too. Right up to the point I lose my job. The innocent are going to be punished with the guilty. A rising tsunami sinks all boats.
Bob_In_MA:
Futures:
Look on Bllomberg home page (siwtch to America on right and scroll down)
or
Dow Jones, Nasdaq, S&P 500, stock market data - CNNMoney.com
thx guys, had to get a new laptop, have'nt transfered the harddrive, so all my old link's were gone...
ty
I love when they are talking to Jerry Abbott from Caldwell Banker. He sits there with a blank face explaining how people were getting money back just for buying a house. Like realtors weren't getting their commissions and "helping along" these anxious buyers.
In MA they're now going to require criminal background checks on RE and mortgage brokers. It might be fun to see the results of that purge.
The innocent are going to be punished with the guilty.
Yeah, but that's not really part of the psychology of it. The psychology is more like, "I'm in a leaky boat; but now you're going to be in your own leaky boat, and you're going to know what it feels like... and this makes me feel better about my ability to survive."
The innocent are ALREADY being punished; have been since at least "Morning in America."
Have you seen the 3 and 6 month T-bills currently on Bloomberg? I hope that is a data error. How could they fall to less than a percent at this time of night?
Before you go congratulating 60 Minutes too much, remember they are at least 6 months too late in reporting this story.
I can sense a real backlash building among Americans aimed at MSM. Whether it's finance or political media, people are sick of the way media tries to push public opinion and events in a given direction, even while professing to be objective. All the media cheerleading we've heard for the stock market and real estate market over the past year is no different than the near-worship you are now seeing for Obama.
I'm convinced Hillary won in NH, the win that saved her career, mainly because of a voter backlash against the media that was attacking her in unison.
Of all the stupid MSN media coverage I've heard today, not one has suggested what is clear to me. Bill Clinton baited the media into attacking him, because he knows Hillary will benefit from another backlash.
I mean, come on. All of a sudden, the shrewdish politician of the last 50 years just went politically tone-deaf??
Average Joes know something is seriously wrong in the land of the free, and the MSM is part of the problem.
china down 4%,, didnt we do this last week end?
T-bills less than a percent? If not an error maybe thats all their worth. Which is an error in itself?
Two other factors primed purchase prices 2003-2005:
1) 2001-2003 Tax Cuts giving everyone $100~$300/mo more purchasing power
But we've seen weakness in real incomes since 2001 in part due to a steep rise in energy costs. Couldn't this, in combination with rising debt servicing costs, offset the tax cuts?
2) Mortgage rates -- even 30 year fixed -- declining significantly through 2004.
These probably primed the pump for the housing bubble, but historically there's not much relationship between house prices (or stock prices) and nominal interest rates (see Robert Shiller's work).
Maybe Rogue Trader has inspired imitators.
REO Speedwagon
top notch handle.
I like 60 minutes. I used to live in the same town as Andy Rooney. He'd drive around drunk in his fancy convertible.
Quoting from John Kenneth Gailbraith's The Great Crash:
Farmers who had sold their land at a hansome price now condemmed themselves as it later sold for double treble or quadruple the original price, now on occasion got it back through a whole chain of subsequent defaults. Sometimes it was equipped with eloquently named streets, sidewalks, streetlamps and taxes many times its value.
It's a bunch of typos. 30 year at 2.36%--I don't think so.
I loved this line by the woman who announced she would just walk away from her mortgage. When she was challenged by the reporter: "But you signed a contract to repay it," she replied,
"Yeah, assuming prices kept going up."
She must have signed a slightly different mortgage contract than the one I did. I don't remember that clause at all.
However, watching the whole fiasco summed up in fifteen minutes really put her words into context. Yeah, she basically wants to scam her mortgage company. But so what? The mortgage company was scamming its investors, too.
There is a concept called "clean hands," and one of these people have them.
Bloomberg T-bill data has now been corrected.
I'm curious what the folks here think the economic outlook will be in the 10 year horizon.
Clearly, almost all agree that there is terrific pain in the near and medium term.
But what do we do after the crash?
About the same as the growth in personal income.
Too bad there was no "growth" for most Americans.
oops ... now no longer corrected.
Good job, Becky. Great links.
If/when asia falls apart, who will be the scape goat this week? Rouge day trader?
yeah, thats a very odd movement in 3 mo and 6 mo yields. huge drop...
BV,
Caught a couple threads on that at Market Ticker forums, they're hoping it's a bad print...
Glassman;
I Agree. If all the stock markets of the world can be dropped 5 percent by 7.1 billion in futures contracts, we are fragile indeed. There are trillions of derivatives out there.
Zigurrat posted: "For prices to return to the old norm, they would still need to fall 30 percent across much of Florida, California and the Southwest and about 20 percent in the Northeast. This could happen quickly, or prices could remain stagnant for years while incomes and rents caught up."
What "norm" would that be? 30-year fixed-rate mortgages can now be had for under 6% (my mortgage broker actually thinks he can get me 5%). This time ten years ago they were 7%, this time twenty years ago they were 10%.
The level of interest rates absolutely has an affect on affordability and the price "norm."
Sebastia
MR,
Well... considering the size of the hole we've dug plus bad demographical trends, it could be over another decade before things truly turn up.
12th percentile writes:
REO Speedwagon
top notch handle.
I like 60 minutes. I used to live in the same town as Andy Rooney. He'd drive around drunk in his fancy convertible.
12th percentile
he parks in my building on 57th st and and walks over to his office....
i see him on occasion... my valet's now him decently...
The first time I saw him I passed right by him you know, when you see someone you recognize as a friend, but can't place it....
He looked at me in that way of his...
ps. His eyebrows are even BIGGER in perso
All of a sudden, the shrewdish politician of the last 50 years just went politically tone-deaf??
I don't know... was it that shrewd of him to seek oral sex in the Oval Office from a cheap tart who didn't have the class to keep her mouth shut when she was done?
Monday, January 28, 2008
11:36 - Stocks: Nikkei Loses More Than 2.5% On U.S. Jitters
09:45 - Stocks: Open Sharply Lower On Jitters Over U.S. Woes
yeah, asia picking up steam to the downside.
someone needs to call Bernanke and tell him to buy asia.
Sebastian,
These low interest rates are not the norm. They are as much an abberration as the housing prices themselves.
OK, you can all shoot me:
Since individual Americans and the US government owe far more than we can pay back, wouldn't it be the right short term strategy to debase the dollar until our individual and collective debts are payable with cheap dollars.
I understand the argument about global wage competition, as well as the frightening possibility of hyperinflation. But given the short term focus of our politicians, wouldn't this be the expected result.
I'm just asking.
seb
BB's rate cut last wk had the exact unintended effect. prices of homes and derivatives of them need to come DOWN.
Track Economic Index Trends and Graph Financial Industry Rates
Mortgage interest rates don't determine house price movement.
Hyperinflation is very unlikely, because this isn't an unsophisticated set of bankers.
Deflation is more of a concern since this was a credit bubble, and credit contraction can deflate asset prices, right?
gold up to 917.90. for all the doubters; how does it keep going up despite all the deflation of credit/debt over this last year?
The market is rattled because it is deathly afraid the Fed won't cut by at least 50 bs. pts. And if it doesn't, everybody says it's doom.
Did you hear that, Ben? DOOM!
MR - currency devaluation is a longer-term strategy - if it is brought under control. In the short-term in produces inflation and economic uncertainty, and thus a lot of unemployment.
tj & the bear said: "These low interest rates are not the norm. They are as much an abberration as the housing prices themselves."
Let's assume for the sake of argument that that's true (although it may not be): Until rates return to the "norm", what's the problem? They're definitely going the "wrong" way for that now, and no telling how long before they start going back up.
S.
MR, for one man's reasonable/plausible prognosis on how long the mess will last, take a gander at:
'The Second Great Depression; Starting 2007, Ending 2020'
Amazon.com: The Second Great Depression (9781591136880): Warren Brussee: Books
Good book, and whether it was good luck or good analysis, he pointed out the tipping point for the Japanese economy was when (from my fallible memory) household debt/income reached 130%, which was when things began softening here, too (Q1 '07).
OT The Asian markets are down again.
Major World Indices - Yahoo! Finance
This is not good.
Au contraire, Ella, it is EXCELLENT!
idoc, re deflation: house prices have just barely fallen so far. This is because the credit contraction is only a few months old.
Thanks, all for your thoughtful comments to my questions.
A few other questions:
Hyperinflation is very unlikely, because this isn't an unsophisticated set of bankers.
Why wouldn't the politicians use fiscal policies to debase the currency, if they can't control the fed (if that is who you mean by bankers.
currency devaluation is a longer-term strategy - if it is brought under control. In the short-term in produces inflation and economic uncertainty, and thus a lot of unemployment.
Are our leaders smart enough to understand this and take prudent action?
I'm not trying to pick a fight with anyone, but I'm trying to figure out how the long term plays out, and I think there are a lot of smart people here who can help me out.
Something about that young couple struck me as weird. Have they finished college? I didn't pick up many "smarts" while she was talking. She just seemed annoyed that now she had to sell. Hopefully she'll remember this little incident for a few decades.
Looking at the bigger picture, I think that the faster these clowns start sending in the jingle mail, the quicker housing fundamentals will return. The main problem continues to be affordability. Despite some modest declines, housing is still VERY unaffordable for any first time homebuyer.
MR;
In Germany, 1920's they debased the currency due to their heavy reparations debt. It was a proximate cause for the rise of Hitler and WWII. If the currency is debase, savers are punished. Worker demand higher wages, the price of mill is raised daily, Hugo Chavez makes speeches.
Sebastian, nothing wrong with your thinking about lower rates=higher house prices normally. In this instance, the relationship does not hold. Those lower rates basically go along with tighter credit standards and higher downpayment requirements, so effectively the lower rates only mitigate a portion of the credit crunch.
But if the overall environment other than rates were level, you'd be right. In reality, you are dead wrong. Prime interest rates are going down in part because of the rate cuts, but also because of a collapse in demand. (And rememember, to lenders loans are assets.) In effect, lenders are bidding up the declining pool of the truly creditworthy even while turning away many who would have qualified to purchase a loan over the last 4 years or so.
Front page of Reuters:
Emergency rate cut revives talk of "Bernanke put"
Emergency rate cut revives talk of Bernanke put
| Reuters
So how many points do we get cut tommorow morning if the markets don't recover?
halbhh
no way. the billions of writedowns of banks, foreclosures, implodes (220), CDO's, etc. have been going on starting last February and intensifying last summer.
regarding gold, i was being facetious. most ppl believe gold will crumble as this housing deflation continues. i don't.
idoc writes:
gold up to 917.90. for all the doubters; how does it keep going up despite all the deflation of credit/debt over this last year?
Same reason Treasury yields are down. Flight to quality.
MR,
Deflation/inflation. There are good arguments on both sides. It is not an easy prediction as much depends on how the politicians, regulators, central bankers, and markets react to the problem.
Could be some of both depending on the asset and money supply.
Bank of the Carolinas Corp. reported Thursday that it had a loss of $19,000 in the fourth quarter compared with net income of $681,000 in the fourth quarter of 2006.
Bank of the Carolinas also raised its loan-loss provision to $450,000 in the quarter compared with $182,000 a year ago
Corus Bankshares Inc., a Chicago-based bank specializing in condominium construction, said Friday that fourth-quarter net income plunged 96 percent, due in part to increases in the provision for loan losses. Net income was $1.9 million, or 3 cents a share, 44 cents a share below estimates, according to Thomson Financial. A year ago Corus earned $47.2 million, or 82 cents a share. Loan loss provisions increased to $33.5 million, up from $4.5 million a year earlier, the company said. Loan-quality issues are "contributing to significant declines in earnings," Corus said.
Fortis is reviewing the value of its subprime CDO portfolio on an ongoing basis,'' the company said in the statement yesterday.Even under very stringent coverage assumptions based on the most recent and presently available market information and data, Fortis's capital and solvency requirements would still be met.''
Fortis expects loan-loss provisions for the remaining part of the portfolio to remain within the guidance given in previous communications, the company said. Fortis, which has an asset- backed credit portfolio of 51 billion euros, is scheduled to report full-year earnings on March 7.
Countrywide posted its $1.2 billion loss as fallout from rising home loan defaults and the ongoing housing downturn hurt its loan originations and forced it to set aside millions of dollars in loan-loss provisions and write-downs.
The San Francisco bank holding company reported net income of $165.7 million, or $1.20 a share, compared with $226.4 million, or $1.61 a share, a year earlier.
The latest results included loan-loss provisions of $56 million because of increased reserves attributable to the home builder segment of its loan portfolio and litigation expenses of six cents a share related to its share of Visa Inc.'s $2.25 billion antitrust settlement with American Express Co. (AXP) as well as a $61 million gain from the sale of its retirement record-keeping business to Prudential Financial Inc. (PRU).
Year-ago results included a $78 million credit for California franchise tax refunds and adjustments as well as loan-loss provisions of $3 million.
The Salt Lake City financial services company said provisions for loan losses rose to $70 million from $55.4 million in the sequential third quarter and net loan and lease charge-offs grew to $26.7 million from the previous quarter's $18.1 million. Nonperforming assets rose to $283.9 million from $196.6 million.
Capital One Financial Corp.'s fourth-quarter net income dropped 42% on higher loan-loss provisions amid the slowing economy and consumer-credit crunch.
The financial-services company reported net income of $226.6 million, or 60 cents a share, down from $390.7 million, or $1.14 a share, a year earlier.
The latest results included a $1.9 billion provision for loan losses, including about $1.3 billion in charge-offs and an allowance build of $650 million, as well as $27.8 million in restructuring expenses.
Year-ago results included $513.2 million in loan-loss provisions.
MR-hyperinflation may not have a precise borderline vs high inflation, but, choosing an arbritary amount, for example 6% inflation is only "high inflation" in my book. Our imagined deficits for now are far less than 6% for example. "Hyperinflation" makes me think of big numbers like 25%/yr and worse.
Blonde Vigilante |
u forgot the ending:
and then WAR.
Why wouldn't the politicians use fiscal policies to debase the currency, if they can't control the fed (if that is who you mean by bankers.
The best argument I can come up with is that people who are wealthy (like politicians) and have a lot of influence in political affairs would probably benefit in a deflationary environment - deflation, by definition, makes people with a lot of money wealthier.
But I do think there's a real threat we'll attempt to solve our problems by debasing our currency since we habitually look for "quick fixes" and that seems to be the most obvious one.
F. Frederson
Did you fix your problem with greasemonkey?
Sorry about the bad typing. I get worked up when the price of MILK rises daily.
MOM said: "Sebastian, nothing wrong with your thinking about lower rates=higher house prices normally. In this instance, the relationship does not hold..."
Because it's different this time.
I'm never going to win this argument am I, LOL!
Good night, all.
Sebastia
MR-hyperinflation may not have a precise borderline vs high inflation, but, choosing an arbritary amount, for example 6% inflation is only "high inflation" in my book. Our imagined deficits for now are far less than 6% for example. "Hyperinflation" makes me think of big numbers like 25%/yr and worse.
I think what's far more important to hyperinflation is an ongoing acceleration in inflation, not the rate itself.
idoc--the time scale is years for housing. You need about a year for average people to even realize something happened. We're to that part a little early I bet. Then you'd usually need most of a second year for enough sellers to conceed the old highs are gone to get even modest moves down, imo. But this isn't just an average oversupply. And the news is traveling faster....we'll see.
So, the time scale is usually years, but the big public start was only in August.
rich
what's ur opinion of the HUGE drop in 3mo and 6mo yields tonite?
javascript/doc holiday - CR did.
This is a company that will lose well over a billion dollars on condo construction loans, and stick the FDIC with most of it.
In Germany, 1920's they debased the currency due to their heavy reparations debt. It was a proximate cause for the rise of Hitler and WWII. Yes, I agree, but will that stop us from beggaring our neighbors?
The best argument I can come up with is that people who are wealthy (like politicians) and have a lot of influence in political affairs would probably benefit in a deflationary environment - deflation, by definition, makes people with a lot of money wealthier.
This makes sense to me, but seems to lead to a severe disconnect between the politicians and the people, leading to a radical change in government?
Given the place of the great depression in our national narrative, wouldn't inflation be a better way for politicians to win elections? It would be a more subtle way to increase government revenues than tax increases. I could understand the horror of high inflation (or hyperinflation, what ever word you want to use) if we were Germany, but that doesn't seem to be a major fear in this country.
Don't want to be a troll, just want to get the benefit of the thinking of the smart people here.
Re: javascript/doc holiday - CR did.
How depressing!
I need to study this as a hobby, so thats a great direction I think; wish I knew more, but thats why the challenge is intriguing. I imagine CR & Tanta in black suits with a long list of suspects that are not worthy. Check out the link!
Bob Dobbs:
I watched 60 Minutes and yes, I think it is the tipping point in my middle America - the Inland Empire. Put the message in the mainstream media and see how many people will do what everyone else is doing. I found out today that the across-the-street neighbors are walking from their 650K house with 100% financing because the value has dropped so much. Can they afford it? Probably - I mistakenly receive their mail sometimes, addressed to the Xx and Xy Trust. I bet they are making a "business" decision. Want to take bets on how many other less sophisticated on this street (i.e., not enough assets for a trust) follow their example?
MR
Perhaps you missed the reference to Hugo Chavez. He is currently causing inflation in Venezuela and not winning elections because of it.
The Fed's last cut actually worked! 500 point Dow decline averted. High fives around the FOMC boardroom table!
Fast forward one week, two, or a handful...
Dow futures down 500 points on a Sunday night. Monday traders are glued to their screens, waiting for the news. Two possible outcomes:
1) No cut! Traders scream in agony, but the Fed says nothing. Finally, mid-day Greg Ip of the WSJ cites an unnamed Fed source on his blog -- "we can't cut everytime this happens." Despair, 500 points turns into 1000.
2) 75bp cut! Awesome! Traders bid prices up to flat, then the sellers come in. Down 500 points again. Traders "discover" the Fed can't guarantee stock prices. Beyond despair. 500 points turns into 2000.
Can't the Fed imagine the risks presented above? Maybe that's what this is, a colossal failure of imagination. Regardless, they are playing with fire, and its easy to imagine their 500 point "save" making things worse.
DP
I'm going to rename you Yogi, because you are "smarter than the average bear".
ok, since no one will answer my Q, i'll take a guess at it.
the short end of the UST curve tonite is plummeting as stock mkts in Asia are getting hit and money moves across the Pacific back home to the good ol USA?
MR - again, in the short-term devaluation produces inflation (in the price people pay for goods and services, at a rate that runs ahead of their wage increases) and unemployment. Unemployed people rarely vote for encumbents, and what politicians want most is to get re-elected.
I'm not opposed to inflation - I'm not a gold bug - but I think the last 60 years of economic development has shown that economies do best when prices are stable - at least for the economic horizon most people have, which is 2-4 years. If people start thinking that prices of anything - food, homes, stocks, cars, tvs, etc. - are going to swing wildly one way or another over the short-term, their behavior tends to alter in ways that isn't sensible for the long-term.
Blonde Vigilante writes:
MR
Perhaps you missed the reference to Hugo Chavez.He is currently causing inflation in Venezuela and not winning elections because of it.
You are absolutely correct, this went right over my head. I should do some reading on the political and economic situation in Venezuela.
I'm wondering, what aspects of the economic situation in Venezuela apply to the US. My ignorant impression is that the "zeitgeist" of that country is quite different from ours.
Thanks for responding to me.
MR
Idoc;
Reuters doesnt agree with Bloomberg and the time on Bloomberg is not updating.
Stockton is my hometown and my dad still practices medicine there. He told me, in '04 and '05, that the nurses and office help (mostly Hispanic women single or divorced) were buying new houses worth more than my parents' house! I just didn't short DSL and CFC enough.
Those asparagus fields referenced in the 60 Minutes piece and other ag land that were developed were mostly owned by Japanese families some of which had been relocated during WWII. We knew some of those families and I went to school (Lincoln High) with some of the kids. Sort of a karmic payback, at least in that regard.
gold up 10.40 to 921.10
yes, i'm the gold bot.
halbhh writes:
dryfly, see my back of envelope above.
halbhh | 01.27.08 - 9:54 pm | #
I read it - sounds reasonable. Okay maybe make a few allowances for range of 'income to price ratio'... say 2X for undesirable locations and 4X for highly desirable locations... and then throw in TJ's point that lotsa folks have seen little or noo income increase (what increases there are have been skewed to high earners)... and you have pretty slim justification for price increases in many if not most locales.
A great compatriot of ours once forewarned, over a tall glass of vodka: that which does not kill you makes you stronger.
Oh. I thought it was "stranger."
In the same vein, I thought (didn't everyone who's seen the Asia intradays think?) they'd be looking for another rogue trader. But a rouge trader might be the more creative option, or at least more fun.
But seriously, that 60Min report is more chilling the second time, even though regular CR folk are aware of its limitations. Bob Dobbs could be right that this is where middle America begins to depart from its assigned role.
If people start thinking that prices of anything - food, homes, stocks, cars, tvs, etc. - are going to swing wildly one way or another over the short-term, their behavior tends to alter in ways that isn't sensible for the long-term.
This makes good sense. If the goverment has any control at all, I wonder which way they will push asset prices. . .
This makes sense to me, but seems to lead to a severe disconnect between the politicians and the people, leading to a radical change in government?
Given the place of the great depression in our national narrative, wouldn't inflation be a better way for politicians to win elections? It would be a more subtle way to increase government revenues than tax increases. I could understand the horror of high inflation (or hyperinflation, what ever word you want to use) if we were Germany, but that doesn't seem to be a major fear in this country.
In a lot of ways inflation is a transfer of wealth from older generations to younger generations as savings are devalued and the relative value of wages go up. In fact that's part of the economic benefit of inflation -- people who can no longer live off of interest payments are forced to go back to work. More resources are mobilized; hence your 75-year-old former CEO Walmart greeter.
But in this country older people are more likely to vote than younger people, so they may favor a deflationary environment.
Those cme global flash quotes of the SP500 futures represent what exactly? It's over a 1000 now. Is taht equal to 10% or 1000 pts?
the short end of the UST curve tonite is plummeting as stock mkts in Asia are getting hit and money moves across the Pacific back home to the good ol USA?
idoc | 01.27.08 - 11:23 pm | #
Duck and cover...
D-P-, do we give the Fed too much deference? Maybe so.
Your scenario is plausible, logical, and not difficult to arrive at.
But, if you think about it from another perspective -- that the Fed is the linchpin of the banking cabal; read Rothbard's 'The Case Against the Fed' -- their surrendering at the first whiff of grapeshot is not surprising, and entirely within character.
Not to be paranoid, but the Fed Governors are nominated by their regional banks, and must spend a lot of time looking at things from the banks' perspective.
In a lot of ways inflation is a transfer of wealth from older generations to younger generations as savings are devalued and the relative value of wages go up.
its also a shift of wealth from the middle class to the wealthy (bankers) who get first crack at cheaper money.
Those cme global flash quotes of the SP500 futures represent what exactly? It's over a 1000 now. Is taht equal to 10% or 1000 pts?
Wut?
Here, maybe this will help:
S&P 500 INDEX (E-MINI) Mar 2008
I meant 10% or 10 points?
Blonde Vigilante
WTF?
Thanks ac, crossposting.
But in this country older people are more likely to vote than younger people, so they may favor a deflationary environment.
You know a lot of middle aged to older folks with savings? I don't. WWII-Depression babies sure... Boomers? Not too many.
I know a bunch who have too much house and too much debt for where they are at in life though. Don't see how a vote for deflation helps them all too much.
In case anyone is taking bets as to whether or not the Indians freak out again, here is the link from last week.
Indian Stock Market >> Sensex >> Nifty >> Stock Prices >> Stock Recommendations >> Hot Stocks >> Stock Market Investing >> BSE >> NSE >> Derivatives >> Market Statistics >> Most Active Shar cnbc...e_videohigh.php
I believe it was originally posted by AZ_Cowboy.
Do we know if that French Rouge Trades is in a cell with out internet access?
idoc.. From TF...
"those are bad quotes...3 & 6 discounts are up just slightly"
Bloomberg-what a low class act.
its also a shift of wealth from the middle class to the wealthy (bankers) who get first crack at cheaper money.
Inflation destroys the value of long-term loans. As I understand it the inflation of the 1970s was disasterous for a lot of US banks who borrow short and lend long. I always assumed the banks were behind the political support that allowed the unemployment rate to be deliberately pushed into double-digits.
its also a shift of wealth from the middle class to the wealthy (bankers) who get first crack at cheaper money.
idoc | 01.27.08 - 11:31 pm | #
They run from 'money' into inflating assets... and only convert those asset values back into money to consummate specific transactions with any cash remaining after transaction going back into appreciating assets ASAP.
Age old strategy they learn on Pappy's knee.
OT:
I just checked.. Sensex is only 3% down.
correction -4.28%
-K
No the heart of the problem is the derivatives industry.
You know a lot of middle aged to older folks with savings? I don't. WWII-Depression babies sure... Boomers? Not too many.
I know a bunch who have too much house and too much debt for where they are at in life though. Don't see how a vote for deflation helps them all too much.
It's different from the situation in Japan where there was far more in the way of savings, I admit.
I work with a lot of people maybe 10 years from retirement who still have almost everything in stocks.
The seventies was a tough time, I was in college at the time. I think employment was fairly good until interest rates were raised by Voelker (sp?) in the eighties. But, boy, real estate had quite a spike, if my memory doesn't deceive me.
I work with a lot of people maybe 10 years from retirement who still have almost everything in stocks.
I'm 15 years out from 'official' retirement dates and am half stocks - quarter cash and quarter bonds... Its a toss up which is the worse bet.
Probably need to keep the chain saw sharp rototiller running all the way through retirement.
I work with a lot of people maybe 10 years from retirement who still have almost everything in stocks.
that is not good.
India is having another bad start of the week.
Hope it turns around.
Newsreaders sound glum.
No happy talk like CNBC New York.
MR writes:
The seventies was a tough time, I was in college at the time. I think employment was fairly good until interest rates were raised by Voelker (sp?) in the eighties. But, boy, real estate had quite a spike, if my memory doesn't deceive me.
MR | 01.27.08 - 11:42 pm | #
I was there for that too... fun, eh?
RE went up due to wage inflation... incomes shot up due to wage price spiral & RE followed. No reason to believe that will happen the same way again.
And when the hell will the media stop calling it a subprime problem?
that is not good.
idoc | 01.27.08 - 11:46 pm | #
Its why I've been sayin' 'most boomers aren't retiring'... they (we) will die with our boots on.
Error Page
just how many hits can world mkts sustain? freezing redemptions is the pinnacle of insanity of investors. who is so stupid to put their money into these things?
Dryfly,
Thanks for the memories. Ugh.
I'm curious why you think the wage/price spiral won't go up again. If we debase the currency, won't it be cheaper for foreign businesses to make products here, especially if we can't afford to buy their products made in locations where currencies are appreciating.
M
Mish's Global etc.
that Mish is such an optimistic soul.
I'm 15 years out from 'official' retirement dates and am half stocks - quarter cash and quarter bonds... Its a toss up which is the worse bet.
I've got a ways to go, but I've got the most conservative allocation of anyone I've talked to for my retirement account -- 100% short-term treasuries and money market stuff.
But that's partly to offset the risk of my non-retirement gambling account.
What worries me now is that a lot of the Baby Boomers approaching retirment I talk to say things like "I have to be in stocks because 4% a year won't be enough for me to reach my retirement goals."
I find this very disturbing. And inflation doesn't do much to help these people because the value of their investments are likely to decrease in such an environment (even if their dollar value increases).
can anyone help me with understanding this? ^AORD: Summary for ALL ORDINARIES- Yahoo! Finance
It was posted earlier as part of a list of indexs. (To many teenies to spell that one correctly)
I dont understand what is representing...
Thanks!
Funny thing about the absence of the decoupling -- you'd think other countries would learn how to be consumers by now, heh heh.
OffTopic: European hedge funds limiting redemptions.
Error Page
India's Sensex 17,686 down 670
ades
if u look in the components, it looks like Australia which hasn't opened yet.
This is almost criminal...
Reits? Dios mio... Whos catching these falling knives?
What's Hot…and Not - WSJ.com
It appears I'm more conservative than anyone. All my retirement is now in CDs of 3 months or less in a few currencies, and what has now become 300k worth of physical gold. I briefly held some Intel calls for a few days that were doing well out of the bernake bounce - but got stopped out as they fell back on friday. I just can't see how to go long anything at all right now. It all seems to be a bubble. All of it. Even ultra short ETFs seem risky. Will they pay out if they really coin it during a true meltdown?
I'm curious why you think the wage/price spiral won't go up again. If we debase the currency, won't it be cheaper for foreign businesses to make products here, especially if we can't afford to buy their products made in locations where currencies are appreciating.
Asia will fight back. In the 70s there was only Japan (smaller than the US in population and in economic size) fighting the US for 'good jobs'.
Now we face China (3 plus times our population) and India (3 plus times our population) but desperate to keep job growth accelerating. A weak dollar hurts them two ways (1) harder to export here and (2) more competition from US producers there... they will respond eventually. However they do it will continue to put pressure on US wages.
What a weaker dollar does is keep us working but we all work for less (in terms of 'price parity'). That is NOT bullish for real estate.
Justin:
I am almost as conservative as you.
Thanks idoc. Still cant figure out why everyone is way up? I mean way up...
^AORD: Components for ALL ORDINARIES - Yahoo! Finance
Markets are repricing, i.e. trying to find a sucker to buy at this level and save some hedge fund a few bucks. Corp buy backs and LBO drove the market above 10K, MEW drove it to 10K, FED's rates cut not going to keep it above 10K
ades, those quotes are from Friday.
AUS hasn't opened yet.
Even ultra short ETFs seem risky. Will they pay out if they really coin it during a true meltdown?
Yeah, those things are just money market accounts tied to swaps and so on. I worry they could go bust in a real credit market rout.
FT.com / Financials - Derivatives boom raises risk of bankruptcy
well this is a new one on me.
Now that rogue trading has been contained, I'm wondering which hedge fund will come unravelled on Monday.
What worries me now is that a lot of the Baby Boomers approaching retirment I talk to say things like "I have to be in stocks because 4% a year won't be enough for me to reach my retirement goals."
They need to re-asses their 'goals'. I might not have the most conservative investment strategy here but I'd bet no one out there can live as cheap as I can - not in my blue collar neighborhood in my small Midwestern town.
For grins - you can buy any house with in a five block radius of where I live for less than $200K... ANY house.
There are more than a few homes under $100K.
Property taxes are in the $1000 per year range.
On and on...
People on the coast have no idea how far down 'down' really is.
ades
its CLOSED.
australia is celebrating australia day and everyone looks tan, fit and relaxed and are paying 8% on their floating mortgages and are relatively sanguine about paying more soon if interest rates rise (you can't fix for more than a few years here).
Sydney property with a view is still changing hands for millions, even though rental returns after expenses are a couple of percent. This place is a mine for china and I think most people feel that no matter if the world economy goes into recession and china gets wobbly, their internal economy is unstoppable now, so australia will continue to receive more & more money for handing over chunks of their almost limitless iron coal and uranium ore etc. Honestly it is a bit hard to disagree with them on this. Doesn't stop their stocks from tanking off some historic highs, but most don't seem to calculate their net worth daily so aren't that concerned.
justin and ac,
Do either of you see any counterparty risk in the ultrashort ETFs?
sportsfan | idoc
Thanks! (i'm dumb)
Its why I've been sayin' 'most boomers aren't retiring'... they (we) will die with our boots on.
dryfly | 01.27.08 - 11:51 pm
sweeping floors at Walmart...
(by the way, when did active comment threads consistently run way over 100 comments on this blog? CR/Tanta are more popular than Daily Kos and Eschaton! [and make more sense])
Dryfly:
My impression is that what someone in NE Ohio thinks are boom times would be considered a depression out here in California.
I'll have to remember my coping skills; native Californians will have to learn; the Mexican and Chinese immigrants already have it down pat.
sweeping floors at Walmart...
In a lot of places those are the 'good jobs'... you don't want to know about the 'bad' ones.
ac,
Do you have any thoughts on TIPS? Stagflationary Mark at Illusion of Prosperity is confusing the bejeezus out of me with his TIPSy-ness. And I like holding onto my bejeezus. I've moved most of my savings into Vanguard's Treasury MM, btw (the pie is a soothing green when I log into my account).
Do either of you see any counterparty risk in the ultrashort ETFs?
Well, as I understand it, the biggest risk is that you won't get paid your gains for some period of time, which I could live with. Especially if the swaps are settled every day (I not sure if this is the case).
I'd be more worried about something dumb happening at ProShares or the money market assets just blowing up.
WOW. Last sale $352k in Nov 2007. Now listed for $170k. 50% haircut in 60 days???
331 S 19th, Richmond, CA 94804 | MLS# 40346961
And yeah, I know what Richmond's like (I grew up there), but this is shocking. Many similar houses in that neighborhood w/ 30% to 50% drops after a last purchase less than 6 months ago. Wow...
Is it wrong to want to see the bottom drop out, just so we can start coming up with real solutions and not just window dressing designed to sedate the average American?
Hey Fubar, Thanks for the reminder and link. I'm watching CNBC TV18 on my HTPC now.
OT: Its strange - I've put a lot of effort into understanding a set of technologies and putting together the equipment and ahem, "unorthodox" skills to get just about any satellite signal that has a footprint on the USA. I get about 10,000 channels and felt pretty damn proud of it.
But, looks like the internet serves up - billions and billions of channels - and nothing "unorthodox" needed - and the real ones at that - I've watched CNBC TV-18 on my visits to Mumbai - that's the feed here damnit and at last, the picture and sound isn't too bad and it can ONLY GET BETTER !
Sigh.. another set of skills and knowledge base blown away by the net my FTA friends will be crushed
-K
Do you have any thoughts on TIPS?
I haven't really looked into them.
Goodnight all. I need to be up for the emergency rate cut when the DOW opens up 100 points down.
Goodnight all. I need to be up for the emergency rate cut when the DOW opens up 100 points down.
Lets just get to zero already... this is getting tiresome...
Had workmen in the house on Thursday/Friday and talked with them over the period.
Kind of reinforces my faith that Jefferson was right about the common sense of the average guy. The best response to the spending stimulus was "yeah, I'll spend fictitious money. Right."
Don't know how widespread the jingle mail will be, but amongst the flyover blue collars, I don't see it happening.
Way back in this thread (on topic) there were some suggestions that the 60-Minutes piece demonstrated capitulation. Don't think so.
Unless you've seen the For Sale signs in your neighborhood, it just a problem for "those folks" in Central CA who got themselves into this mess. "The folks around here ain't that stupid."
My impression is that what someone in NE Ohio thinks are boom times would be considered a depression out here in California.
LOL. Exactly.
BTW... parts of Eastern Ohio, Western PA & Upstate NY are the ONLY places I know that are a lot cheaper than where I live right now. I saw a list of the ten cheapest places in America and all came from those three states.
I think my county is being 'inflated' by high prices in dairy and corn darn gummit... and I didn't by farm land when it was cheap. Grrrrrrr!
WSJ - A Larger Role for BOE?
Northern Rock Run Brings Call to Expand Central Bank's Power...
A Larger Role for BOE? - WSJ.com
dryfly,
As I understand it, most people these days expect to work longer but due to circumstances outside their control -- deteriorating health, etc. -- a vast number don't end up getting that option.
That Richmond house listed for $170K has an awfully strange sale price history:
11/08/2007 $352,408 602.0%/yr
01/22/2007 $75,000 -43.4%/yr
07/16/2004 $315,000 65.2%/yr
09/11/2003 $206,000 --
Gotta love that the Assessor has it valued at $424,475.
Gee, think the listing price has anything to do with the 'partly remodeled' part of the description?
MY problem with gold...
While i can afford to buy a few contracts,sans margin, and request delivery, the delivery is really only a certificate(paper) placed in a vault somewhere that i'm not allowed to access...?
How fair is that? It's worse than art.
Now , I could go to canada, but them i'm breaking the law if i transport 300-400 ounces over the border.
Greenberg on REITS and CRE:
http://www.marketwatch.com/news/story/herb-greenberg-why-office-real/story.aspx?guid={4918CE47-6330-4F9D-A93A-B92AA2256A13}&dist=hplatest
DryFly
For mega-grins: I can by ANY house w/in a one mile radius for less than $125k .... many,many,many homes are less than $75k
My montly nut for mtg,ins and taxes: $425
I pay more for the utilities IN my house than THE house (per month) - ouch
As I understand it, most people these days expect to work longer but due to circumstances outside their control -- deteriorating health, etc. -- a vast number don't end up getting that option
Then they need to learn where 'Ohio' is.
the delivery is really only a certificate(paper) placed in a vault somewhere that i'm not allowed to access...?
buy some bullion and stick it under your pillow.
homedad43,
Those in "flyover country" don't have to "jingle mail". Only a good number of those along the coasts do in order to bring the whole house of cards down. Middle America constitutes less than half the value of residential real estate; far less if you exclude the bubbliest cities.
squeezed
repost that link please.
sportsfan, the counterparty risk thing is clearly something that has crossed my mind -- especially since I have everything that I've got, plus a little borrowing, in SDS.
I think I may cash out of SDS and get back into gold/gold mining stocks after a one day/two day drop of 10-15-20% in the market.
The ballsy and logical thing to do, for me, would be to remain in SDS, riding the market down, until gold began moving up.
But, the counterparty risk thing is always in the back of my mind. I'll probably chicken out and move into gold right after a one day/two major correction.
My assumption is that the massive cross-default counterparty risk won't happen for six months/year. Just a guess on my part.
I pay more for the utilities IN my house than THE house (per month) - ouch
Rustbelt | 01.28.08 - 12:24 am | #
Kindred spirits.
I would do the same EXCEPT when I'm burning (free) wood. With the elm & ash disease there is no shortage of 'free wood'.
Dryfly, given developments of late, I gotta ask you:
Have you changed your opinion (correct me if I mis-represent it) from a few months back that U.S. consumers are highly unlikely to go Japanese and drastically curtail spending...???
That was a primary argument as to why we would not have deflation, if I recall correctly.
DJIA INDEX -0.5%
S&P 500\t-0.8%
NASDAQ 100 -0.9%
NIKKEI 225 -3.2%
HANG SENG -4.8%
I would say an emergency rate cut of 50-100bps should fix this. Just depends how many helicopters are available.
I second that squeezed!
who the heck made that stupid comment about Asians not leading?
In a lot of places those are the 'good jobs'... you don't want to know about the 'bad' ones.
I can always do the 5AM milking for my neighbor. The local slaughter house is always hiring as well. Both jobs normally filled by illegals.
With the FOMC meeting in the cards we'll have to have a tantrum!
jg,
Too soon! You don't want to transition until the miners truly decouple from stocks in general, otherwise you'd just be riding them down.
Sportsfan... lots of very strange sale histories in that neighborhood; there are waaay too many homes with last sales of Nov. or even Dec. '07 clustered in Richmond. Any reasonable explaination??? People buying sight unseen and realizing "partially remodeled" means "all plumbing and wiring conveniently removed"?
Shanghai down 7.4%
REO,
What idoc said, plus... pay in cash and don't tell anyone you have it!
Those in "flyover country" don't have to "jingle mail". Only a good number of those along the coasts do in order to bring the whole house of cards down. Middle America constitutes less than half the value of residential real estate; far less if you exclude the bubbliest cities.
But it is still about half the population IF you include places like western NY, western PA, WVY, Ohio, southern Illinois... etc. There are a lot of hicks out there - somethin' the pollsters learn to their dismay every four years.
So if there are people looking for refuge in retirement... they need to look away from the bubbles. It will be many folks only hope.
Thanks for the pointer, tj; you are right.
Maybe I'll just move 100% to my Vanguard Treasuries money market account, post-correction.
Good food for thought, sir.
Yep, it is going to be a fun morning, unless the hedgies step in over the next eight hours (a real possibility, always); S&P 500 futures down 1%, now:
Intraday Futures Prices - Markets Data Center - WSJ.com
jg, thanks for the response.
I never bought into the concept myself and I'm not exactly sure 'why not,' but I just have an odd feeling about what they claim they are doing.
I suppose as long as markets remain liquid, it really doesn't matter what they are doing . . . until, of course, the day it does . . . and that may be a day of reckoning for all sorts of investment vehicles.
IIS 7.5 Detailed Error - 404.0 - Not Found greenberg-why-office-real/story.aspx? guid={4918CE47-6330-4F9D-A93A-B92AA2256A13}& dist=hplatest
go SRS!
jg
i would move it now. i did about 6 mo ago.
wouldn't u just hate to be Bernanke right about now?
Whats going on with that CRE story... Tuff to post... anyone have any ideas? I'd love to read it...
or is it just me and my mac that cant read it...
Sorry:
Greenberg
ades
Why office real estate is headed lower - MarketWatch
Sebastian,
If you're still out there, one word -- Japan. ZIRP didn't do a damn for sustaining insane housing prices. They had everything else going for them, too -- limited land, highly restrictive zoning, strong cultural incentives, etc. I'm sure if you asked them, they'd say everyone wants to live there, too.
Besides, if lower rates justified higher prices, why haven't periods of consistently higher rates yielded lower prices?
Standard ratios have perpetuated historically due to many fundamental reasons. Unfortunately, this boom had nothing to do with fundamentals.
Dryfly, given developments of late, I gotta ask you:
Have you changed your opinion (correct me if I mis-represent it) from a few months back that U.S. consumers are highly unlikely to go Japanese and drastically curtail spending...???
Not until they are broke - really broke. I see little sign of it - not in the numbers, not anecdotally.
Should folks save? Yes. Are they really? No. Will they? That's debatable - I bet not until their CC are pried from dead cold fingers.
Flip That House ... Oh-Hi-Ya style
$15k sturdy but run down 1,700 sf pre-1920 saltbox ... total gut (to the studs) rehab ... sell for $79k (w/ significant profit)
Eat that HGTV ... (LOL)
Don't laugh too hard ... I did it and I'm doing it again.
I'm on the phone right now with a japanese mortgage broker. trying to refi my home... he keeps saying that they don't give out mortgages to americans! But I want my 1% 30 year fixed!
Bad haloscan!
OK here is a tiny URL link to the Greenberg CRE story:
http://tiny.cc/FSJXG
Thanks gents!
(Or ladies, tho I dont know many ladies who would go by stinky:))
squeezed
ur lame.
tj, well said w/ respect to interest rates and house prices.
Seb, you must not have watched the 60-Minutes piece. It makes it pretty clear that low rates were a minor part of what drove this housing frenzy. It had a little bit more to do with lending standards (or lack thereof).
Way OT: For the insomniacs out there, here's CNBC India:
404 Not Found
Not as good as last Monday, but still fun to watch. Rumors that the Bank of China will take an $8B writedown.
idoc's link has the Greenberg story.
wouldn't u just hate to be Bernanke right about now?
Yes, but I'd rather it be me than him. IBs and hedgies may differ on that.
Monoliners may make financial crisis a while lot worse
Monoliners may make financial crisis a whole lot worse - Telegraph
AZ Cowboy,
damn you. I'm in love with the woman on this show.
Cowboy - is that feed a replay? Sure looks Deja Vu to me.
Dryfly @ 1232:
Oh lovely, now I can get my own little small town bubble as the coasters head in.
When my wife and I listed our old home in August and bantered around price, we toyed with listing in NYT, WashPost and Boston Globe w/talk about updated energy efficient home in small college town in farm country and listing at $450K. fortunately, I don't like toys anymore.
Those in "flyover country" don't have to "jingle mail".
A 20% drop on a 150k$ house, while nothing to sneeze at, is still within the range of numbers that most Americans can grasp. Work some OT, maybe moonlight waiting tables, add up the costs to move and repaint the kid's bedroom, and you'll end up staying put.
A 20% drop on a 600k$ house, well, that's something else altogether...
idoc writes:
wouldn't u just hate to be Bernanke right about now?
idoc | 01.28.08 - 12:37 am | #
Hey he still has a job...
Dryfly:
It's the new reality TV show, Disaster Video.
It will be in reruns until the end of the Writers strike.
whats wrong with Bloomberg? still haven't fixed that 3mo/6mo yield.
looks like that extra EEV i picked up on Th gonna work out just fine.
good nite all. will be a fun morning.
WHAT IF:
Bernanker doesn't cut?
No more funny money for you!
Any chance that's why the market is starting to tank?
re: home price vs. rents
there's a triplex on the market down the street listed for 145K, currently rented out at 1250/month.
new cookie cutters on the fringe our about 150K for 1600 sq foot. rent for about $900.
my flyover bubble is more like not happening.
"idoc writes:
whats wrong with Bloomberg? still haven't fixed that 3mo/6mo yield."
Maybe their IT staff in Bangalore all went AWOL to their broker's office to place sell orders and watch the carnage on the big screens.
maybe the markets will put in a big sympathy plummet to induce Bailout Ben to overreact and lower to 1%.
Havoc lets loose the dogs of regulation
Havoc lets loose the dogs of regulation - Times Online
dryfly, thanks for the response.
I don't expect Americans to suddenly embrace savings. I just expect them to learn a very healthy fear of debt. That's because folks who believed house prices were true house values spent themselves into a position of losing all they have. I'm not talking about the folks in the video who had no skin in the game to begin with. I'm talking about folks who had decent equity and spent it because they were led to believe they had boatloads.
Probably the most striking exchange from the video:
"Why pay a $3,200 payment on a 1,200 square foot home? It makes no sense."
"But that is what you agreed to do when you bought the house."
"Fine. If the value is going up. If the value is going down, it makes no sense because we will never be able to refinance and get a lower payment."
"You're saying essentially that you are going to stop making payments on it?"
"That's the only advice we have gotten so far. Walk away from the home. Why can't our mortgage company work with us?"
SPL: I don't think it's a matter of the Fed not cutting, it's more a question of will they cut enough.
I'm thinking WTH -- let'em cut it to 1% already so we can move on. It's going to get there this year anyway, so why not?
tj & the bear I'm thinking zero... lets just do this already....
FFDIC:
Query for you. Got Veribanc report for my region and am going to move money to another bank.
Given their ratios and criteria, all things being equal, which deserves the greater weighting? Liquidity ratio, equity/asset ratio or Profitability ratio. My thought is that liquidity is probably worth more, but kind of in the dark.
Thanks.
You guys scare me. First of all, I can't imagine the Fed cutting again before the regularly-scheduled announcement. Second, I don't see how they can cut it anywhere near the levels (zero) that you are discussing. C'mon, we do want to keep reserve currency status, no?
I don't expect Americans to suddenly embrace savings. I just expect them to learn a very healthy fear of debt.
Only after they've been burned - really burned (as in see living standards decline as a result of their activities). The walk away jingle mail phenomenon just re-enforces debt as nothingburger.
We have a long way to go before the consequences are evident.
Nikkei loses accelerate late on, closes down 4%
Are there any benefits to cutting to zero? I thought these current interest rates are historically low... so whattahell?
I heard 50+ year older co-worker mention, "just cut to zero, inflation doesn't exist" last week. I don't think he knows what he's talking about, but I don't know the implications myself.
ShortCourage writes:
You guys scare me. First of all, I can't imagine the Fed cutting again before the regularly-scheduled announcement. Second, I don't see how they can cut it anywhere near the levels (zero) that you are discussing. C'mon, we do want to keep reserve currency status, no?
ShortCourage | 01.28.08 - 1:09 am | #
I agree.
But that should give NO ONE comfort as I'm ALWAYS wrong about fed cuts.
ades,
That's why I said "this year". I fully expect 0% when the depression hits full force.
Yeah dryfly, but it's not really the ones that are walking away unscathed that will turn the tide.
It's the long-time homeowners who traded their retirement and their kids college savings for a nice shiny kitchen and a fancy driveway. Those and the silly ones who put down their life savings in a 10%+ downpayment during the peak.
Also, the lenders tightening will have something to say about how much we spend in the next few years...
Shortcourage:
INcreasingly, I'm less concerned about keeping the reserve currency status and am looking at empire as just not what this country is about.
Absolute perks to being the reserve currency but also a hell of a lot of pressure and downside too.
real rates are already negative. go to your local bank and see what they will give you for a 1 year CD.
Also, the lenders tightening will have something to say about how much we spend in the next few years...
ShortCourage | 01.28.08 - 1:13 am | #
That's where the rubber meets the road. But it is also where fiscal & monetary stimulus can really shake things up... in an inflationary way.
BTW - I'm starting to see hints that DOD spending is increasing. Contracts working their way down to folks like me. An election year opening of the wallet maybe? It's about that time...
NegAm Recaste writes:
Probably the most striking exchange from the video:
....
Yeah, it struck me at first and then I said.. nahh - I see similar thinking ALLLL the time; there's no sense of shame, remorse, "sharam"- to use a Hindi/Urdu/Arabic word which has HUGE connotations; hmmm perhaps the word honor is the meaning of that word as used in the South or Western movies once upon a time; or chivalry in medieval times.
I'm NOT berating or taking sides on any cultural aspects here. It just "IS" this way, particularly in Cali, IMO.
-K
INcreasingly, I'm less concerned about keeping the reserve currency status and am looking at empire as just not what this country is about.
Reserve currency status causes a lot of distortion. I wouldn't lose any sleep if the USD was replaced with a basket of prominent currencies. It's about time.
homedad43, ignore all of that and only deposit less than $100,000 to keep your principal and interest safe. There is a relatively new $250,000 FDIC insurance rule (see FDIC's site and do not trust the bank for accurate information) for certain types of retirement deposits. If you have more than $100,000 to deposit then open accounts at another bank that is not affliated by ownership with your other bank(s). Monitor ownership of your bank(s) because if they merge or otherwise become affiliated your FDIC insurance coverage may be reduced. This blog has posted a wealth of information about FDIC insurance in the past and always go to FDIC's web site or call its 800 number for assistance. Again, do not trust what a bank tells you about your FDIC coverage. I have seen much pain and heartache during bank closings because customers "trusted" their banker's word.
Reserve currency. After all this? Niall Ferguson makes the argument that while the world needs pax americana, citizens (loose term) are not willing to put the boots on the ground to sustain it. That and the idea that empires founded on debt are kind of, well, vulnerable...
It seems like a long time I've made the mistake of overestimating the rectitude of the FED, prudence of congress; all while underestimating the consumer's stuff cult. But it's not a long time. Blink of an historical eye.
FFDIC:
All things being equal then, I'll probably just keep it where it is. A lot closer to home than the other branches.
Thanks for the response.
I'm NOT berating or taking sides on any cultural aspects here. It just "IS" this way, particularly in Cali, IMO.
I don't get it. I'm too lazy to move.
But if I did I'd move to a house so cheap that when I die my kids take out the crap they want and then set the place on fire (with my remains still inside it)... Viking or Hindu style.
Added plus is it removes some inventory.
Countrywide CEO to relinquish $37.5 mln in payments
Countrywide CEO to give up $37.5 million in payments
| Reuters
And everyone thouhgt he wasn't a swell guy.
Kou Jie:
Most of American history has been an unwillingness to put boots on the ground in other countries, unless there was clear national interest at stake.
As nation of immigrants, most came here just wanting to get the hell away from the rest of the world for whatever reason they had. The past 60 years only comprises about a quarter of our history. Not blink of an eye, perhaps...
stuff cult
Great way of putting it.
Last Tuesday will be remembered as the Bernanke Flinch.
Anyone who thinks BS Bernanke is sweating, scared, or otherwise perturbed is severely mistaken.
This is Bernanke's chance of a lifetime - when he is presented the opportunity to employ what only yet has been mere theory. If anything, he awakes early every morning with the excitement of a child at Christmas. He has the world by the throat.
His autobiography will characterize this moment as "exhilarating."
Reserve currency status causes a lot of distortion.
No doubt. We wouldn't have been able to dig as deep a whole as we have if it were not for that. I can't wait to see it go.
homedad43 writes:
Kou Jie:
Most of American history has been an unwillingness to put boots on the ground in other countries, unless there was clear national interest at stake
That's a distortion of history; Manifest Destiny is the generally used descriptor for the ideology that has guided the historical events and processes.
The particular events would be:
1. Annexation of the West ( oregon, Texas, Cali).
2. removal of the Indian tribes/nations.
3. Cuba
4. Philippines
5. Guam
6. Puerto Rico
7. Hawaii
The 60s and 70s issues in South America, SouthEast Asia are recent enough for you to know; the 2000+ version is in our faces right now.
Manifest Destiny - Wikipedia, the free encyclopedia
Of course, national interest is a catch-all for rationalizing ones way out of it. Generally of course, national interest should end at the nose of their national interest on THEIR land. Unless of course your fist is bigger than theirs.
Its all ok but I wish it was stated for what it is - naked self-interest and fuck the rest; oh alright - naked national interest as it were.
-K
Screw ZIRP, can you guys imagine NIRP? (Negative rate policy?) The Fed could pay you to borrow, and your bank could charge you for your deposits.
Talk about stimulating inflation!
Next time I start losing in Reno, I'm going to complain to the manager that the game is absolutely NO FUN when I'm LOSING.
Unfortunately, I won't be able to just walk away without paying the dealer.
These people deserve to lose their homes. "
It makes no sense to keep paying so much money on a house that's going down in price." What a maroon.
People ARE just that stupid.
sk:
Manifest Destiny refers to the movement across the continental area, which covers #1 and 2 on your list. I was referring to the overseas actions.
However, you got me on the little ones i.e. Philippines, Guam etc. Frankly forgot about those. Rats.
Now I've got to go back and reread late 19th century history.
Rats.
Speed,
Yup. Once you accept human nature for what it is, it isn't hard to see where we're going.
homedad43,
The correct latter expression is "double rats".
I just saw the 60 Minutes spot. Nothing ground breaking, but a good Mortgage Fiasco 101. This thread still is about the 60 Mintues spot, right? Darn Trolls.
FFDIC
is ncua on a par with fdic?
Speed
Since youre considering going to Reno, read this first might save you a bundle.
speed, as you pointed out above, last week we discussed what to call that awful tuesday
i like your call...the ben flinch
at my house we've been calling it Tombsday cause the panic cut, sealed their (our) fate
That's why I said "this year". I fully expect 0% when the depression hits full force.
is this the part where the meek inherit the earth??
i can be meek. really really meek.
HA! I was just telling my better half yesterday that being meek gets you nowhere. Like the Cadillac commercial says, you wanna be the hammer or the nail?
However, you got me on the little ones
homedad43
Little ones ! And while we talk of little ones, lets keep the other little ones in frame - Nicaragua, Panama, Cambodia,hmmm what was that really little island that Reagan invaded - o yeah - Grenada.
Anyway, my point of contention is that the US hasn't shown much reluctance to put boots on the ground - proxies and irregular troops count of course and as you correctly point out, WHEN THEY ARE LITTLE GUYS. There's a word for taking on only the little guys..
Its MUCH more circumspect and thoughtful when it comes to taking on the BIG GUYS - twas ever thus.
btw, the phrase Manifest Destiny has a modern usage to describe the whole set of ideas, reflections... arghhh just check out the wikipedia link.
-K
-K
FFDIC- Don't ever think I said thanks for the links, present and past. Keep 'em coming!